KOF — Coca-Cola FEMSA, S.A.B. de C.V.

Coca-Cola FEMSA (KOF) Q4 2025 Earnings Call Summary

1. Key Financial Results and Metrics:

• Consolidated Volume: Increased by 1.3% to 1.09 billion unit cases.
• Total Revenues: Grew 2.9% to MXN 77.7 billion; currency-neutral revenues increased by 6%.
• Gross Profit: Increased 1.8% to MXN 36.3 billion; gross margin contracted by 60 basis points to 46.7%.
• Operating Income: Rose 13.3% to MXN 13.7 billion; operating margin expanded 160 basis points to 17.6%.
• Adjusted EBITDA: Increased 12.8% to MXN 18.2 billion; EBITDA margin expanded 210 basis points to 23.4%.
• Net Income: Increased 3% to MXN 7.5 billion, impacted by higher financial expenses and effective tax rate.

2. Strategic Updates and Business Highlights:

• Mexico Operations: Adjusted promotional strategies and affordability initiatives to address a weaker consumer environment. Coke Zero saw a 14% year-on-year growth. The company installed over 100,000 new cooler doors to enhance market execution.
• South America Performance: Brazil saw a 2.6% volume growth, with significant contributions from Coca-Cola Zero and Sprite Zero. The reopening of the Porto Alegre plant and digital initiatives contributed to strong market execution.
• Digital Initiatives: The rollout of the Juntos+ Advisor tool improved sales force efficiency and customer engagement across key markets.
• Sustainability: Achieved a record score in sustainability assessments, reinforcing the company's commitment to long-term value creation.

3. Forward Guidance and Outlook:

• 2026 Expectations: Anticipate low to mid-single-digit volume decline in Mexico due to the excise tax impact, while Brazil is expected to grow volumes in the low to mid-single digits. Overall, consolidated volume growth is projected to be flattish to slightly positive.
• Strategic Focus: Continue to leverage digital capabilities, enhance customer-centric culture, and maintain a disciplined approach to capital expenditures, with a CapEx to revenue ratio expected to decrease to 7%-7.5%.

4. Challenges and Points of Concern:

• Consumer Sentiment: A sluggish consumer environment in Mexico remains a concern, particularly with the implementation of the excise tax, which may affect pricing strategies and volume growth.
• Margin Pressures: Anticipated pressures on gross margins due to rising costs, particularly in aluminum, despite favorable conditions for other raw materials.
• Working Capital Issues: Significant outflows in working capital were noted, primarily due to accounts payable adjustments related to the implementation of a new ERP system.

5. Notable Q&A Insights:

• Volume Behavior: Sequential improvement in Mexico's volumes was noted, with December marking the highest month on record. However, early 2026 is expected to show continued challenges due to the excise tax.
• Pricing Strategy: Management is cautious about implementing further price increases in Mexico, given current consumer sensitivity and sluggish demand.
• Brazil's Competitive Position: The company is optimistic about maintaining strong market share in Brazil, driven by consistent investment and digital tools that enhance market execution.
• World Cup Opportunities: The upcoming FIFA World Cup is seen as a significant opportunity for brand engagement and consumption occasions, with various activations planned to capitalize on this event.

Overall, Coca-Cola FEMSA's Q4 2025 results reflect resilience in the face of challenges, with strategic initiatives aimed at sustaining growth and improving market position across its territories.