Coca-Cola FEMSA, S.A.B. de C.V. — FY2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023; filed April 12, 2024. This is an audited annual report, not a standalone fourth-quarter filing, and the supplied filing text does not provide clear Q4-only results. Financial statements are prepared under IFRS in nominal Mexican pesos; U.S. dollar amounts are convenience translations.
Business context
Coca-Cola FEMSA is the world’s largest Coca-Cola bottler by sales volume, serving approximately 272 million consumers across Mexico, Central America, Colombia, Brazil, Argentina and Uruguay. Its portfolio is led by Coca-Cola trademark beverages, alongside water, other non-carbonated drinks and selected beer and consumer products. It sold 4,047.8 million unit cases in 2023, up 7.8% year over year.
Key financial metrics
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Total revenues | Ps.245,088 million | Ps.226,740 million | +8.1% |
| Net sales | Ps.244,264 million | Ps.226,222 million | +8.0% |
| Gross profit / margin | Ps.110,860 million / 45.2% | Ps.100,300 million / 44.2% | Profit +10.5%; margin +100 bps |
| Net income attributable to parent | Ps.19,536 million | Ps.19,034 million | +2.6% |
| Consolidated net income | Ps.20,226 million | Ps.19,626 million | +3.1% |
| Operating cash flow | Ps.42,289 million | Ps.35,491 million | +19.2% |
| Cash used in investing activities | Ps.20,070 million | Ps.19,597 million | — |
| Cash used in financing activities | Ps.26,352 million | Ps.20,847 million | — |
| Cash and cash equivalents at year-end | Ps.31,060 million | Ps.40,277 million | Down Ps.9,217 million |
| Total indebtedness | Ps.65,214 million | Ps.78,669 million | Down Ps.13,455 million |
Margins and costs: Selling and administrative expenses were Ps.76,098 million, up 10.3%, and increased to 31.0% of revenue from 30.4%. Higher labor, marketing and maintenance costs contributed. Interest expense rose 9.3% to Ps.7,102 million; the effective tax rate increased to 30.5% from 25.4%. Cash and cash equivalents less reported indebtedness were approximately Ps.34,154 million net debt.
Balance sheet and debt: Total assets were Ps.273,520 million, total liabilities Ps.139,815 million and total equity Ps.133,705 million at year-end. Short-term debt was Ps.140 million and long-term debt Ps.65,074 million. Before giving effect to swaps, 92.8% of debt bore fixed rates and 7.2% variable rates; after swaps, the filing reports 27.1% variable-rate exposure. A hypothetical 100-basis-point increase in rates was estimated to add Ps.187 million to annual interest expense.
Material changes versus FY2022
- Volume growth, revenue-management initiatives and favorable price/mix lifted revenue; consolidated volume rose 7.8%. Average price per unit case declined 0.4% to Ps.58.54, primarily due to currency translation, partly offset by pricing and mix.
- Gross margin expanded 100 basis points, supported by top-line growth, lower packaging costs and hedging; higher sweetener costs were a partial offset. The company disclosed PET resin prices in U.S. dollars rose 32.5% and average sugar prices in U.S. dollars rose about 16.4% year over year.
- Mexico and Central America revenue increased 14.0% to Ps.149,362 million; South America revenue was nearly flat at Ps.95,726 million, with currency translation offsetting growth and favorable price/mix.
- Net income attributable to the parent rose more slowly than revenue, partly because of the higher effective tax rate, increased interest expense and a larger foreign-exchange loss.
- Operating cash flow improved, but cash declined, reflecting dividends and debt repayment, as well as exchange-rate and inflation effects. Capital expenditures, net, increased to Ps.21,396 million from Ps.19,665 million.
Outlook, risks and unusual items
- Capital spending: Management budgeted 2024 capital expenditures at 8%–9% of total revenues, mainly for manufacturing and distribution capacity, returnable packaging, IT and market presence. It expects internally generated funds to cover the budget; spending remains subject to market and other conditions.
- Dividends: The filing lists four 2024 payments of Ps.1.52 per unit for the 2023 fiscal-year dividend, totaling Ps.6.08 per unit. Payments are subject to the stated shareholder approvals and other conditions.
- Argentina and foreign exchange: Argentina is accounted for as hyperinflationary; its peso depreciated 356.3% against the U.S. dollar at year-end compared with year-end 2022. Currency translation and volatility affect reported results, costs and debt exposure.
- Principal operating risks: Dependence on The Coca-Cola Company for concentrate, brands and bottler agreements; raw-material and energy costs; water availability; competition and changing consumer preferences; beverage taxes, labeling and packaging rules; and cybersecurity, weather and political/economic risks.
- Franchise and water renewals: Bottler agreements for Colombia, Argentina and Panama are listed for renewal in 2024; certain Mexico and Guatemala agreements are listed for renewal in 2025. A Colombian natural-water concession expires in December 2024, with renewal to be sought. Agreements generally renew automatically unless a party gives notice of non-renewal.
- Contingencies: Recorded provisions for tax, labor and legal matters totaled Ps.3,270 million, down from Ps.3,887 million. The filing also reports Ps.134,254 million of unsettled lawsuits and uncertain tax positions assessed as less than probable but more than remote; management does not expect their ultimate resolution to materially affect consolidated results. Main possible Brazilian tax contingencies were approximately Ps.66,710 million. Brazilian tax matters of Ps.13,692 million were collateralized at year-end.
- Unusual accounting and audit focus: The auditor issued an unqualified opinion on the IFRS financial statements and effective internal controls. The critical audit matter was impairment testing for the Colombia cash-generating unit, involving significant assumptions on discount rates, revenue growth and margins. No goodwill impairment was recorded in 2023.
Important facts for investors to verify
- Review the full audited statements and notes for debt maturities, derivative exposures, and the distinction between debt before and after swap effects.
- Assess whether volume growth and pricing can sustain margins amid higher sweetener costs, taxes and other input-cost pressures.
- Track cash generation against the 2024 capital-spending plan, dividend payments and debt-service obligations.
- Monitor renewals of the 2024–2025 bottler agreements and the Colombian water concession, including any non-renewal notices or changed terms.
- Examine the status, collateral and potential cash impact of Brazilian tax disputes and other contingencies; recorded provisions are not the same as the larger possible claims disclosed.
- Consider the effect of Argentina’s hyperinflation and currency movements, and the company’s significant dependence on Mexico and Brazil, which together accounted for about 77.4% of 2023 revenue.