February 27, 2019 / 11:57 PM / 7 months ago

UPDATE 1-Profit at Mexico's Femsa jumps almost six-fold in 4th quarter

(Adds details on earnings results)

By Daina Beth Solomon

MEXICO CITY, Feb 27 (Reuters) - Mexican bottler and retailer Fomento Economico Mexicano reported an almost six-fold jump in fourth-quarter net profit on Wednesday, driven by more shopping at its vast Oxxo convenience store chain and growth in its fuel division.

The conglomerate known as Femsa posted a 10.6 billion pesos ($539 million) net profit, compared with 1.8 billion pesos in the fourth quarter of 2017.

Femsa said the results benefited from a favorable comparison with the previous fourth quarter, when earnings sank due to a change in the reporting of results for Femsa’s Coca-Cola bottling unit in struggling Venezuela.

Femsa’s fourth-quarter revenue rose to 125.1 billion pesos in 2018 from 116.4 billion pesos a year earlier.

At Oxxo stores, which now number nearly 18,000 and are mostly in Mexico, Femsa said same-store sales rose 4.5 percent. Meanwhile financial services, including cash payments for utilities and online retailers, also registered growth. Both helped Oxxo’s gross margin expand to nearly 44 percent.

Robust sales have helped Femsa compensate for higher labor costs meant to discourage employee turnover, analysts said.

The company said it opened 1,422 net new stores in the year, a pace that analysts expect to continue this year.

On Tuesday, Femsa said it struck a deal with Anheuser Busch Inbev’s subsidiary Grupo Modelo to sell popular Mexican beers such as Corona and Pacifico, after a decade exclusively selling Heineken brands.

Same-store sales at Femsa’s fuel division, which includes 539 gas stations, grew 6.7 percent, while those at its pharmacies climbed 4.5 percent.

The latest results also included $715 million in December, when Femsa sold its majority stake in its Coca-Cola bottling operations in the Philippines to Coca-Cola Co.

Femsa’s Coca-Cola unit also posted higher sales in Central America, Colombia and Brazil, offsetting drops in Mexico and Argentina. However, higher costs for PET plastic along with negative exchange rate effects ate into the unit’s profits.

Femsa will host a call with analysts on Thursday morning.

Femsa Chief Executive Eduardo Padilla said he did not expect recent changes of president in Mexico and Brazil to dent sales.

“We continue to see a resilient, confident consumer in Mexico, and a resurgent one in Brazil,” he said in a statement. ($1 = 19.6650 pesos at end-December) (Reporting by Daina Beth Solomon Editing by Dave Graham and Lisa Shumaker)

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