• Total Consolidated Volume Growth (Q4): 3.5%
• Total Consolidated Revenue Growth (Q4): 29.9%
• Total Consolidated Revenue Growth (Full Year): 10.9%
• Consolidated EBITDA Growth (Q4): 41.7%
• Consolidated EBITDA Margin (Q4): 21.8%
• Consolidated EBITDA Growth (Full Year): 14.9%
• Consolidated EBITDA Margin (Full Year): 20.5%
• Mexico Net Sales Growth (Q4): 15.4%
• Mexico Net Sales Growth (Full Year): 9.6%
• Mexico EBITDA Growth (Q4): 21.8%
• Mexico EBITDA Margin (Q4): 23%
• South America Revenue Growth (Q4): 99%
• South America Revenue Growth (Full Year): 15.4%
• South America EBITDA Growth (Q4): 95.1%
• South America EBITDA Margin (Q4): 18.9%
• US Net Sales Growth (Q4): 8.3%
• US Revenue Growth (Full Year): 6.7%
• US EBITDA Growth (Q4): 25.6%
• US EBITDA Margin (Q4): 19.2%
• Operating Cash Flow (Full Year): MXN38.3 billion
• CapEx Investment (Full Year): MXN16.3 billion
• Net Debt to EBITDA Ratio: 0.4 times

• Warning! GuruFocus has detected 7 Warning Signs with R.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Arca Continental SAB de CV (EMBVF) achieved a record-high consolidated EBITDA margin of 21.8% in Q4 2024, marking the highest in eight years.
• The company reported a 29.9% increase in total consolidated revenues for Q4 2024, with all regional operations delivering positive organic revenue growth.
• Digital initiatives have been successful, with 67% of traditional trade volume in Latin America now ordered through their B2B application, Twali.
• The Coca-Cola brand achieved its seventh consecutive year of growth, with Coca-Cola No Sugar experiencing double-digit volume growth in 2024.
• Arca Continental SAB de CV (EMBVF) was included in the Dow Jones Sustainability World Index for the first time, highlighting its commitment to sustainability.

Negative Points

• Total volume in South America declined by 5.5% for the full year, with Argentina experiencing a significant decline in Q4 2024.
• Despite strong financial performance, financial expenses more than doubled in Q4 2024 due to exchange rate fluctuations and hyperinflationary accounting in Argentina.
• The economic slowdown in Ecuador, driven by disruptions in oil production and climate-related events, continues to affect overall consumption.
• Volume for the full year in the United States experienced a slight decline of 0.4%, despite robust revenue growth.
• The company faces ongoing challenges in managing the complexity of its operations, particularly in expanding its multi-category strategy in Argentina.

Q & A Highlights

Q: Can you elaborate on the commercial initiatives in the US that drove margin improvements, and discuss the digitalization efforts in Mexico? A: (Arturo Gutierrez Hernandez, CEO) In the US, our margin improvements were due to a combination of pricing strategies, operational discipline, and effective management of raw materials and hedging. In Mexico, digital transformation is crucial, with our B2B platform, Twali, being widely adopted. This platform enhances our market leadership by providing AI-powered predictive ordering and loyalty programs, which are essential for maintaining our competitive edge.

Q: How does digitalization contribute to growth and profitability in 2025, and what are your financial expense expectations? A: (Arturo Gutierrez Hernandez, CEO) Digitalization enhances our core business by improving market reach and customer engagement through our platform, Twali. We aim to expand its penetration and incorporate features like credit and loyalty programs. (Emilio Jesus Marcos Charur, CFO) Financial expenses increased due to exchange rate impacts and hyperinflationary accounting in Argentina. We expect stability in the Mexican peso to mitigate future variations.

Q: What are your long-term margin targets for the US, and how is the alcoholic beverage category evolving in Latin America? A: (Arturo Gutierrez Hernandez, CEO) We aim to sustain margins in the US by focusing on profitable packages and supply chain efficiencies. In Latin America, our multi-category strategy includes beer, spirits, and groceries, with alcohol representing 75% of this effort. We see growth potential in these categories, particularly in traditional trade and on-premise channels.

Q: Can you discuss the strong volume growth in Mexico and the consumer environment? A: (Arturo Gutierrez Hernandez, CEO) Despite a challenging year, Mexico showed robust consumer demand, with significant growth in Q4. We expect continued growth, supported by investments in production and digital capabilities. The consumer environment remains resilient, and we are well-positioned to capture future demand.

Q: What is your outlook for volume growth by region in 2025, and how do you plan to maintain profitability? A: (Arturo Gutierrez Hernandez, CEO) We anticipate growth in all regions, with opportunities in Argentina, Ecuador, and Peru. Our strategy includes expanding cooler coverage and enhancing digital capabilities. (Emilio Jesus Marcos Charur, CFO) We aim to maintain margins by focusing on pricing, packaging, and operational efficiencies, targeting a 20% margin level.

Q: How do you plan to manage pricing in the competitive US market? A: (Arturo Gutierrez Hernandez, CEO) We use analytics to understand market dynamics and adjust our price pack architecture. Our strategy includes managing promotions and focusing on profitable packages, ensuring alignment with inflation while maintaining competitiveness.

Q: Can you provide more details on the growth of Coca-Cola No Sugar in different regions? A: (Arturo Gutierrez Hernandez, CEO) Coca-Cola No Sugar has shown strong growth, particularly in Mexico with a 20% increase in Q4, and in the US with nearly 8% growth. This product continues to drive consumer engagement and brand growth.

Q: What is your strategy for capital distribution to shareholders given your strong financial position? A: (Emilio Jesus Marcos Charur, CFO) Our capital allocation strategy remains focused on business investment and ordinary dividends. We may consider extraordinary dividends if no inorganic growth opportunities arise, maintaining an average payout ratio of 80% since 2020.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.