FEMSA Cash Flow Up 19.6% but Misses Revenue Expectations in 3Q24

Despite falling short of market expectations for overall revenue in the third quarter, Mexican retail and beverage conglomerate FEMSA surpassed analysts' forecasts for operational cash flow, reporting MX$28.9 billion—a 19.6% increase compared to the same period last year. FEMSA's 3Q24 results revealed total revenue of MX$196.8 billion, reflecting an 8.3% year-over-year growth, primarily driven by expansion across all its divisions.

“In terms of consolidated revenue, the figures were below consensus. However, operating profit and cash flow outperformed expectations,” said Marco Antonio Montañez, Director of Analysis and Strategy, Vector Casa de Bolsa.

FEMSA’s net income for the period stood at MX$5.9 billion, marking a 39.5% decline from MX$9.7 billion in the same quarter last year. This decline was attributed to a MX$3.87 billion impairment charge related to the divestment of its logistics business, Solistica. Without this charge, net profit would have remained relatively stable year-over-year, according to Montañez.

During a call with analysts, FEMSA outlined its growth strategy for its convenience store brand OXXO, forecasting the opening of around 1,100 new stores in 2025. The company also anticipates a 40% expansion in its Vara store format, recognizing significant growth potential in this area. Additionally, FEMSA detailed its plans for Colombia, where it expects a 25% increase in new store openings due to improved profitability. In contrast, the focus in Chile and Peru will be on enhancing store profitability rather than pursuing new expansions.

FEMSA is piloting a new program in Mexico that integrates OXXO convenience stores, OXXO Gas stations, and third-party food services, along with dedicated facilities for additional services like showers, rest areas, and mechanical services along major highways.

The company has opted to pause the expansion of its “Pronto” grocery stores to focus on other ongoing projects. Furthermore, it is evaluating the possibility of offering credit through its Spin by OXXO platform, with this initiative expected in the medium term.

During the call, FEMSA emphasized its commitment to maintaining investment levels that support operational efficiency and ensure a competitive edge across its sectors. While the company has successfully reduced leverage, management indicated that no extraordinary dividend payments are anticipated beyond the substantial increases already distributed in 2024. This cautious approach aims to uphold financial stability amid uncertainties, including the upcoming US presidential elections.