Mexico: Femsa's profit jumps 58% in Q4 2007 on higher beer sales

Fomento Economico Mexicano SAB, Latin America's largest beverage company, said fourth-quarter profit increased 58 percent on higher soft-drink sales in Mexico and Brazil and a December increase in beer prices, according to Bloomberg, February 19.

Net majority income climbed to 2.65 billion pesos ($243 million), or 74 centavos a local share, from 1.68 billion pesos, the Monterrey, Mexico-based brewer of Dos Equis and Tecate said today in a statement. Sales rose 10 percent to 38.8 billion pesos.

Earnings were ``driven by the recovery on Mexican operations,'' Tufic Salem, an analyst with Credit Suisse Group, wrote in a report before the earnings release. He also cited rising soft-drink sales in Argentina, Brazil and Venezuela.

Femsa rose 1.4 pesos, or 3.1 percent, to 45.89 pesos in Mexican stock exchange trading at 4:10 p.m. New York time. The stock has climbed 10 percent this year.

The beer unit had sales of 9.8 billion pesos, an 8.5 percent increase from a year earlier. Beer revenue in Mexico rose 7 percent to 7.15 billion pesos, while sales by volume rose 6 percent to 7.17 million hectoliters (189.4 million gallons). In Brazil, sales rose 8.7 percent to 1.93 billion pesos, and exports jumped 24 percent to 719 million pesos.

Oxxo Gains

Femsa's Oxxo unit, the largest convenience-store chain in Mexico, had sales of 11 billion pesos, an increase of 16 percent from a year eariler. Femsa boosted the net number of Oxxo stores by 326 in the quarter to end the year at 5,563 stores.

Femsa's operating income rose 22 percent to 5.8 billion pesos, and earnings before interest, taxes, depreciation and amortization -- a measure of cash flow known as Ebitda -- rose 16 percent to 7.8 billion pesos.

Analysts had estimated net income of 2.12 billion pesos, or 59 centavos a local share, the average of four forecasts compiled by Bloomberg. Sales were projected at 38.4 billion pesos. Net income was boosted by a 209 million-peso foreign- exchange gain, compared with a 90-million peso currency loss a year ago.

Femsa, which also makes Sol and Bohemia, began raising beer prices in December and said the increase would be about the same as the expected inflation rate in 2008. Economists surveyed by Mexico's central bank in December had forecast inflation of 3.86 percent. During the fourth quarter, Femsa's price per hectoliter of beer in Mexico rose 1 percent from a year ago.

Adding Capacity

Femsa said in November it plans to build a $275 million beer factory in the northern state of Chihuahua with annual capacity of 5 million hectoliters to meet rising demand. The plant, in the town of Meoqui, will begin operations in 2010. The company plans to spend $120 million to expand existing plants in the next three years, adding as much as 7 million hectoliters of brewing capacity.

Cascade Investment LLC, the private investment fund of Microsoft Corp. founder Bill Gates, bought $390 million of Femsa's shares during the fourth quarter, according to a U.S. Securities and Exchange Commission filing on Dec. 20. The purchase of 10.8 million of Femsa's American depositary receipts was equal to about a 3 percent stake.