MEXICO: Coca-Cola FEMSA Q1 profits hit by higher costs

• Q1 net profits falls by 7.7% to MXN2.4bn (US$195.6m)
• Net sales flat at MXN33.3bn
• Operating profits drop by 5.6% to MXN4.07bn  
• CEO says group on-course for FY targets 

Coca-Cola FEMSA has reported a drop in Q1 profits and flat sales as higher costs dampened its performance. 

The Mexico-based Coca-Cola bottler said earlier this week that net profits in the three months to the end of March were down by 7.7% to MXN2.4bn (US$195.6m), as sales held steady year-on-year, totalling MXN33.3bn. Operating profits also stumbled, dropping by 5.6% year-on-year to MXN4.07bn.

The firm highlighted rising labour costs in Venezuela and increased freight costs in Argentina as hitting the bottom line. Both higher labour and freight costs affected the company's performance in Brazil.

Coca-Cola FEMSA also suffered from a "negative translation effect" as a result of the devaluation of the Venezuelan bolivar, the Argentine peso and the Brazilian peso. Stripping out the currency challenge as well as the "non-comparable effect" of last year's purchase of Grupo Fomento Queretano, total sales in the quarter rose by 10.8%.

Volumes in the three-month period were up by 3.9%, driven by the still beverages operations and by the Jugos del Valle brand in Venezuela, Colombia and Mexico, in particular.

CEO Carlos Salazar Lomelin highlighted "tough weather conditions and a volatile currency environment" as influencing performance in the quarter. "Our operators delivered solid, profitable results thanks to local revenue management initiatives, solid market execution and the geographic diversification of our franchise territories," Lomelin added.

The firm also said that it paid $688.5m in the quarter to the Coca-Cola Co, to buy 51% of Coca-Cola Bottlers Philippines, a move that was confirmed in January.

To read the company's statement, click here.