Fomento Economico Mexicano S.a.b. De C.v. ((FMX)) has held its Q4 earnings call. Read on for the main highlights of the call.
FEMSA’s recent earnings call painted a picture of robust financial health, underscored by plans for substantial capital returns to shareholders. While the company showcased strong financial performance, challenges such as declining traffic in Proximity Americas and a softer consumer environment in Mexico tempered the overall positive sentiment.
Double-Digit Growth and Margin Expansion
FEMSA reported impressive double-digit growth across its earnings line items, with notable margin expansion projected for the full year 2024. This growth was primarily driven by strong performances from Proximity Americas and Coca-Cola FEMSA, highlighting the company’s operational efficiency and strategic focus.
Capital Return and Shareholder Yield
FEMSA plans to return nearly MXN 66 billion ($3.2 billion) to shareholders in 2025, translating to a 10.4% yield at the current market capitalization. An additional MXN 41.4 billion ($2 billion) is earmarked for 2026, reflecting the company’s commitment to enhancing shareholder value through substantial capital returns.
Proximity Americas Revenue Growth
The Proximity Americas division experienced a 13.2% increase in total revenue, accompanied by a 230 basis point expansion in gross margin. This growth underscores the division’s strong commercial capabilities and the successful performance of its financial services.
Digital Ecosystem Expansion
FEMSA’s digital initiatives are gaining traction, with the Spin by OXXO platform reaching 8.6 million active users, marking a 24.9% year-on-year growth. Additionally, the SPIN Premia loyalty program saw a 27.5% increase, totaling 24.6 million active users, demonstrating the company’s successful digital ecosystem expansion.
Coca-Cola FEMSA Performance
Coca-Cola FEMSA reported double-digit increases across its income statement, including a 25% rise in income from operations. This performance was driven by disciplined revenue management and strategic capital expenditures, reinforcing the unit’s strong market position.
Traffic Decline in Proximity Americas
Despite overall growth, Proximity Americas faced a 2.8% decline in average traffic, attributed to a weaker consumer environment post-midyear elections. However, this was partially offset by a 6.8% increase in average ticket size, indicating resilience in consumer spending.
Challenges in European Operations
Proximity Europe reported modest revenue growth of 5.3% on a currency-neutral basis, with a 4.8% decline in operating income. This was due to challenging comparisons, highlighting the need for strategic adjustments in the region.
Consumer Environment in Mexico
The consumer environment in Mexico has softened significantly following the midyear elections, adversely affecting same-store sales for OXXO. This presents a challenge for FEMSA as it navigates the changing market dynamics.
Fuel Business Pressures
FEMSA’s fuel business in Mexico is experiencing distinct pressures beyond macroeconomic headwinds, impacting short-term results. This segment requires strategic attention to mitigate these challenges.
Forward-Looking Guidance
FEMSA’s guidance for the future remains optimistic, with plans to deploy MXN 107.4 billion (approximately $5.3 billion) in capital returns over 2025 and 2026. This strategic initiative aims to optimize the balance sheet and enhance long-term intrinsic value per share, with a focus on ordinary and extraordinary dividends and share buybacks.
In summary, FEMSA’s earnings call highlighted a strong financial performance with ambitious plans for capital returns, despite facing some regional challenges. The company’s strategic initiatives in digital expansion and shareholder value enhancement are poised to drive future growth, maintaining a positive outlook for stakeholders.