Summary of Coca-Cola FEMSA Q1 2026 Earnings Call

1Key Financial Results and Metrics

Volume: Increased 1.2% to 998 million unit cases, with declines in Mexico offset by growth in Central and South America.

Revenue: Grew 1.1% to MXN 70.9 billion; excluding currency headwinds, revenue increased 6.0%.

Gross Profit: Increased 4.5% to MXN 33.3 billion, with a gross margin expansion of 150 basis points to 46.9%.

Operating Income: Declined 2.3% to MXN 9 billion, with an operating margin contraction of 50 basis points to 12.7%.

Adjusted EBITDA: Increased 0.9% to MXN 13.4 billion, maintaining an adjusted EBITDA margin of 18.9%.

Net Income: Majority net income fell 15.5% to MXN 4.3 billion, primarily due to higher financial expenses.

2Strategic Updates and Business Highlights

Mexico: Faced challenges from an excise tax increase and soft consumer demand, but achieved a 0.6 percentage point value share gain in carbonated soft drinks (CSDs) and a 0.4 percentage point gain in non-alcoholic ready-to-drink (NARTD) beverages.

Central and South America: Strong performance with record volumes in Guatemala, Colombia, and Brazil, highlighting the benefits of geographic diversification.

Digital Initiatives: Continued investment in digital tools like Juntos+ Advisor, enhancing market execution and customer engagement.

Product Innovations: Focus on expanding Coke Zero and other non-carbonated beverages, with successful promotions linked to the FIFA World Cup.

3Forward Guidance and Outlook

Mexico: Despite the challenging first quarter, management remains optimistic about long-term growth, focusing on strengthening competitive positions and leveraging digital capabilities.

Volume Expectations: While the first quarter was tough, management refrained from adjusting annual volume guidance, indicating cautious optimism for recovery.

Cost Management: Plans to maintain a disciplined approach to pricing and operational efficiency amid ongoing cost pressures.

4Bad News, Challenges, or Points of Concern

Mexico's Performance: Volume declined 2.6% year-on-year, impacted by the excise tax and a soft consumer environment.

Operating Income Decline: Contraction attributed to severance costs, IT expenses related to new ERP implementation, and increased marketing and depreciation costs.

Financial Headwinds: Increased comprehensive financial expenses, including higher net interest expenses and foreign exchange losses.

Competitive Pressures: Concerns about maintaining market share in the face of excise tax impacts and competition, particularly in the traditional trade channel.

5Notable Q&A Insights

Cost Structure: Management indicated that the MXN 600 million contraction in operating income was due to severance, IT expenses, and unfavorable currency translation, with expectations for IT spending to normalize.

Regional Performance: Variability in performance across Mexico, with the Southeast region underperforming due to structural issues from government infrastructure projects.

Hedging Strategy: Management is cautious about taking positions for 2027 due to current volatility in raw materials and is focusing on maintaining a disciplined hedging strategy.

Venezuela Operations: Continued strong performance, but reconsolidation remains uncertain due to regulatory conditions. Overall, Coca-Cola FEMSA is navigating a challenging environment, particularly in Mexico, while leveraging growth opportunities in Central and South America and focusing on digital transformation and product innovation.