Insight - FEMSA upbeat for full-year, despite "ugly" Q2
Fomento Económico Mexicano (FEMSA) has said it is optimistic about the rest of 2009, after what it has described as "a very ugly second quarter".
The Mexican company, which operates mainly in its domestic market, Brazil and the US, posted a 6.7% lift in net profits for its second quarter earlier today (27 July). Net profits for the first six months of 2009, however, were down by 6.7% year-on-year.
In a webcast after its results announcement, FEMSA highlighted the effect of the outbreak of swine flu in Mexico at the end of April as dragging on its domestic performance. Sales volumes for FEMSA Cerveza, the company's brewing division, fell in the country by 5.9% to 7m hectolitres in the three-month period.
"The official mandate to shut down the on-premise channel (in Mexico) for several days affected the industry across markets and, very relevantly, in the tourist destinations," said FEMSA's chairman and CEO, José Antonio Fernández. "This came on top of the already significant economy- and unemployment-driven headwinds, particularly in the manufacturing-heavy north of the country."
Fernández also highlighted foreign exchange headwinds, and high prices for raw materials, particularly for FEMSA Cerveza, as adding to the company's travails in the quarter.
Fernández said, however, that he remained "encouraged" by the quarterly figures. "Even when taking into account a sluggish business environment, GDP contractions approaching double digits in Mexico, and the one-off effect of the swine-flu outbreak, our results show a remarkable resiliency," he said.
"This year will go into the books as one of the tough ones, but we are well-positioned to ride the recovery as soon as the first signs of growth materialise in the US economy, with the added tailwinds of lower commodity prices."
As well as FEMSA Cerveza and Coca-Cola FEMSA, which posted a healthy set of first-half results last week, the holding company also owns the Oxxo Mexican convenience store chain operator, FEMSA Comercio.
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