FEMSA will not regret beer deal on 09 numbers

FEMSA will not regret beer deal on '09 numbers

FEMSA Cerveza, the beer division recently sold to Heineken by Fomento Economico Mexicano, saw results in 2009 bolstered by price rises, currency gains and a tax break in Brazil.

Beer volume sales in the group's home Mexico market fell by 1.7% for the 12 months to the end of December, FEMSA said in its results on Friday (12 February). Volume sales fell by 1.3% in Brazil.

The declines, although tempered by rises of 3% and 0.8% in Brazil and Mexico in the fourth quarter, will show FEMSA Cerveza's new owner, Heineken, that the firm's major beer markets have been far from immune to the economic downturn over the last year.

There are also signs that FEMSA Cerveza has been outperformed in Brazil by AmBev, the dominant market player and division of Anheuser-Busch InBev. AmBev has yet to report full-year numbers, but said Brazil beer volumes rose 9.5% in the nine months to the end of September.  

A cocktail of price rises, currency gains and a tax break helped FEMSA Cerveza to post attractive value sales and earnings figures, however.

FEMSA Cerveza net sales rose by 9% to MXN46.3bn (US$3.6bn) for the year, compared to MXN42.4bn in the same period of 2008. Sales growth in the fourth quarter slowed to 7.6%, reaching MXN12.4bn.

Full-year operating income grew by 12.7% to nearly MXN5.9bn.

Beer price rises per hectolitre enhanced sales, up by 6.4%, 18% and 28% in Mexico, Brazil and Export divisions respectively when translated into Mexican Pesos. Currency gains enhanced the price rises, with price per hectolitre rising by just 5% in Brazil in the local Real currency.

A reduced fourth quarter tax rate in Brazil, down to 30% from 41%, also boosted FEMSA Cerveza's bottom line.

But, it was soft drinks arm Coca-Cola FEMSA that drove a strong performance for parent group Fomento Economico Mexicano (FEMSA) over the year.

Coca-Cola FEMSA on Friday reported net sales for the 12 months to the end of December up by 24% to MXN102.7bn (US$7.9bn), compared to MXN82.9bn in 2008.

Net profits leapt by 52% to MXN8.5bn, boosted by a near four-fold increase in the fourth quarter, said the group, which is 54% owned by Fomento Economico Mexicano (FEMSA) and 31.6% owned by The Coca-Cola Co.     

Based on these numbers, it seems unlikely that FEMSA will have any regrets in offloading control of its beer busines to Heineken.

FEMSA has taken a 20% stake in Heineken, giving its access to a share of the brewer's global spoils, and has also freed up resources to push growth of Coca-Cola FEMSA.