Coca-Cola Femsa S.A.B. DE C.V. - ADR

Solid Q3 results + record volumes (growth across all regions) - Volumes: +5.3% YoY to 1.1 billion unit cases, record for a third quarter, with growth across all regions. - Revenues: +10.9% YoY to MXN 79.7bn (currency-neutral +11.3%), mainly volume-driven with unfavorable mix and FX translation partially offsetting. - Margins: Gross margin +140 bps to 46.5% (benefits from lower sweetener & PET costs due to hedging and stronger operating currencies vs USD; partially offset by higher aluminum and mix). - Operating income: +15.4% YoY to MXN 11.9bn, op margin +60 bps to 14.9%, including MXN 1.1bn non-recurring Brazil insurance recovery (excl. it: operating margin ~13.6%, +7.4% operating income). - Adjusted EBITDA: +16.2% YoY to MXN 16.8bn, margin +100 bps to 21.1% (excl. insurance: EBITDA +10.6%, margin 19.7%).

Mexico & Central America: volume momentum, but profitability pressured (mix, FX, labor, freight) - Volumes: +4.8% YoY; revenues +8.3% to MXN 46bn (currency-neutral +9.3%). - Margins/profitability: Operating income -3.1% YoY, op margin down 170 bps to 14.3%—despite sequential improvement vs Q1/H1. - Key drags cited: - FX/operating foreign exchange loss (peso weakness impacting dollar-denominated payables late Sept). - Labor cost inflation (minimum wage compounding effects shifting from initially accretive to increasingly costly). - Freight expense up due to shipping more from Toluca to SE Mexico (and longer-term plant efficiency projects discussed). - Mix shift toward multi-serve (e.g., 3L and higher multi-serve share) helped volumes but hurt profitability/price mix. - What’s expected next: Q4 includes RGM initiatives started Aug and additional actions mid-November to offset FX and raw material impacts and protect margin recovery; management expects daily sales improving gradually/flat-to-prior months.

Brazil: strong share gains + volume growth; tax/workweek risk but mitigation via RGM - Volumes: +3.9% YoY (reported regional narrative), with Coca-Cola Zero +15% volume growth. - Share / portfolio: strong Zero Sugar momentum; Sprite close to 4pp market share; additional gains in energy and other categories. - Profitability: South America unit (incl. Brazil) shows strong op margin expansion; underlying improvements supported by operating leverage + lower raw material costs/hedging (aluminum higher is a partial offset). - Management view on fiscal changes: potential excise tax reform on CSDs—they’re hoping it’s neutral, but if not, they expect to apply full RGM pass-through. - Also cited risk: potential workweek scheduling change (industry-wide productivity impact; “cannot cover fully” so RGM will adjust).