Hello, and welcome to the FEMSA's Fourth Quarter 2023 Results Conference Call. My name is Melisa and I will be your coordinator for today's event. Please note this conference is being recorded and for the duration of the call, your lines will be on listen-only. However, you will have the opportunity to ask questions at the end of the presentation. [Operator Instructions] I'll now turn the call over to Juan Fonseca, Head of Investor Relations. Please go ahead.

Good morning everyone. Welcome to FEMSA's fourth quarter and full year 2023 results conference call. Today, we are joined by José Antonio Fernández, FEMSA's CEO and Executive Chairman of the Board; Paco Camacho, our Chief Corporate Officer; Eugenio Garza, our CFO; and Jorge Collazo, who Heads Coca-Cola FEMSA Investor Relations. The plan today is for José Antonio to open the conversation with some high level comments on the full year as well the senior organizational changes announced today. Then we'll [ph] get a bit more into our strategic progress and business trends, followed by Eugenio, who will focus on the results. Finally, we will turn it back to José Antonio for some closing remarks and open the call to your questions. José Antonio, please go ahead. José Antonio Fernández: Thank you, Juan. Good morning everyone. Let me begin by reflecting on a year that was like no other in recent memory, full of activity and new for the company. We kicked things off with the transformational announcement of FEMSA Forward, through which we focus on strategy -- our strategy on our three core business verticals of retail, what we call also Proximity and Health, Coca-Cola FEMSA, and Digital. We then proceeded to execute on most of its related transactions in record time and with great success, divesting our investment in Heineken through two successful transactions as well as our minority stake in Jetro Restaurant Depot, merging employee solutions with BradyIFS, while reducing our capital exposure to that asset. The effort is still ongoing as we are in the process of finalizing the remaining divestments. Furthermore, we are poised to begin deploying the capital allocation strategy announced last week that will allow us to increase our leverage towards our stated objective and to avoid capital idle -- to avoid to have…

Thank you, José Antonio. Good morning everyone. Let me begin with a couple of updates regarding FEMSA Forward. First, the Envoy-BradyIFS transaction announced in August successfully closed at the end of October and the new company is already operating as a single entity. Second, we have completed the process of carving out and transferring the distribution assets of OXXO and Coca-Cola FEMSA from Solistica to their respective operations. And they are now [Technical Difficulty] Solistica as well as other non-core operations as defined in FEMSA Forward. And finally, we have fine-tuned our capital allocation plans as we informed last week, putting us in a position to begin returning capital to shareholders as we begin to raise our leverage towards our stated objective of two times net debt-to-EBITDA ex-cost, which we expect to achieve within the -- within two to three years. Moving on to the results for the fourth quarter. Our numbers continued the positive trend seen during the first nine months of the year, fully consistent with our strategic priorities and making progress towards the targets set by each business unit long-range plan. Beginning with Proximity, like we did in our last call -- last quarter -- in our call last quarter, it's helpful to talk for a minute about their own long-range plan and there are four priorities around which it is built; strengthening the core, developing new growth avenues, developing multiple successful formats, and growing the footprint beyond Mexico. Looking at OXXO's fourth quarter results through this lens, we see they again made a strong progress, strengthen -- with same-store sales growth of 8.5% against a double-digit comparison base. This performance was again driven by a broad set of tailwinds, including stronger consumer demand for first, gathering and snacking occasions, solid commercial income dynamics, better segmentation at…

Thanks Paco. Good morning, everyone. As we continue to execute on our FEMSA Forward strategy, we've made some adjustments to the statements throughout the year to reflect the divestiture of our non-core businesses. During the fourth quarter, we recorded Alpunto and the third-party component of Solistica as discontinued operations. To maintain comparability, we modified our consolidated financial statements for the fourth quarter of 2022 to reflect this change. Let's begin with FEMSA's quarterly consolidated results. During the fourth quarter, total revenues increased 4.6% and EBITDA rose 3.6% compared to the fourth quarter of 2022. Net consolidated income decreased 20.7% and stood at MXN6.3 billion, resulting from higher gross profit and lower net interest expenses during the quarter. This was offset by a non-cash foreign exchange loss of MXN6.3 billion related to our U.S. dollar-denominated cash position and impacted by the depreciation of the Mexican peso and a MXN3.2 billion net loss from discontinued operations, mostly reflecting the accounting remeasurement from historical cost to fair value of FEMSA's investment in Solistica and Alpunto net of impairments. Shifting gears to our business unit results and starting with Proximity Americas. During the fourth quarter, we incorporated 514 stores, bringing our total to 1,408 new stores for 2024, which includes 1,087 new stores in Mexico and 321 in South America. This robust growth has propelled us beyond our annual growth target, renewing our confidence that our growth runway remains long for OXXO across all markets, and the opportunity for our multi-format strategy is equally compelling. OXXO same-store sales increased 8.5% in the fourth quarter, cycling strong double-digit growth from the same quarter of last year. This result was led by a 6.3% increase in average customer ticket and a 2.1% increase in traffic as the trend gradually reverts to more sustainable levels after eight…

Thank you very much. [Operator Instructions] Our first question comes from Ben Theurer from Barclays. Please go ahead.

Yes, good morning everyone and thanks for taking my question. Just wanted to follow-up a little bit on the performance at OXXO, the same-store sales composition in particular. Could you talk a little bit about the deceleration sequentially that you saw in store traffic? Because obviously, we had a fairly strong a fairly strong first nine months period with same-store sales growing somewhere in the mid-single-digits on the -- side. But now it kind of came down and even with the base comparison that wasn't too high. So, any color you can share on that, that would be much appreciated. Thank you.

Sure, Ben. I think it has to do mostly with the fact that we had a very strong fourth quarter last year related to the World Cup and other events coming due. So, there's a fair bit of that. So that -- call it, excess traffic from last year did not repeat. Having said that, the underlying trend in traffic, if you see the services category, that is coming up significantly. So, it's a little bit of the mix of both. And unfortunately, the average ticket continues to maintain at a much higher level than it did pre-pandemic given the change in customer taste. And I think that combination is what I think drove same-store sales to their fantastic performance throughout the year. But specifically, fourth quarter has to do with lapping of the World Cup and a change in the composition of that traffic.

And also just to add a couple of things and provide some more color on that. Structurally, the performance of the stores is very strong, and we saw very good performance across segments and across categories. And obviously, that also generates a strong performance in the traffic. So, we feel confident about the structural, the traffic trend being strong and as we enter into 2024.

Yes. I would just add, Ben, this is Juan. To be honest, I expected this to happen back in April. You remember at the call back in April, where I was already guiding people to not put a double-digit same-store sales number in their model. And then I was wrong for three quarters, but eventually, the math kind of catches up with you. I think you're also looking at what was a very long recovery post-COVID, right? I mean the traffic fell off a cliff in 2020, and it's been coming back. And there's a lot of -- as Paco was saying, I mean, segmentation at the stores and the drivers for growth are very much in place. But I think the mix that we see today is a more normal mix, quite frankly, and more -- looking forward, I think our mix is going to look more like what we reported today than the 6%, 7%, 8% that we were showing three or six months ago.

Thank you.

Thank you. Our next question is on Ricardo Alves with Morgan Stanley. Please go ahead.

Hello everybody. Thanks for the call. Question on the senior management change. If you could add more details, for instance, on the timing, particularly now in the middle of the FEMSA Forward just to make sure that everything is aligned with the Board and so forth? We also noticed that the part of the release, you mentioned that Eugenio will launch the implementation of the capital allocation elements. Can you tell us what that means exactly? Is that related to the buyback specific? And then it also states that Eugenio will remain as an adviser. And if that would be related to the second stage of the Envoy that we discussed at length last year or maybe new ventures in the U.S.? So, curious if you can elaborate to the extent possible, a little bit more on the CFO and the -- and Paco move as well, evidently very relevant for today? And a follow-up to that question would be on the shareholder return and on the buyback point that I mentioned, the doubling of the authorization, the $2 billion or whatever the number is, is pretty significant. But -- we all know that there has been very limited activity to no activity depending on the timeframe. So, now that the announcement is behind us, can you share with us the key hurdles or the accounting flexibility that you now seem to have overcome so that you are now really confident that you're going to be able to be active on the buybacks. Is there a timing for us to be expecting more activity there? So, just a little bit more granularity on the buyback component. Sorry for the long question. José Antonio Fernández: Well, I will start with the first part of the question, and we'll let Eugenio and Paco to explain the second part. But on the first part, we have agreed with Paco and Eugenio is that they will stay with us helping until the end of April. By then -- and starting next week, Martin Arias is already fully involved -- going to start fully involved and the transition of Eugenio and Martin will go very smoothly. At the same time, Eugenio, he offered us to continue as an adviser per project. And yes, there could be some projects that we could do of investments -- or new investments that we could do and obviously, to continue putting an eye and advising us on all the capital allocation strategy that we have designed and have presented to you recently. On the rest, I will ask Eugenio to explain.

Sure Ricardo. Yes, definitely, what I'm going to be more focused on over the next couple of months during the transition with Martin is on the implementation of the capital return portion of the capital allocation program we announced last week. So, it does have to do with share repurchases and continually monitoring the investments, both in organic, inorganic investments as we aim to reach that two times net debt-to-EBITDA over the next few months. So, to your question with regards to the timing of the share repurchases, with the announcement behind us, clearly now we will start to have an open to start to use that more heavily. What we will be asking the Shareholder Meeting in March is to increase the capacity that we currently have. But again, we have capacity currently in place to start to operate as soon as next week. So, we will be implementing that capital return strategy, as we mentioned in the release last week in a way that maximizes per share value from an intrinsic perspective in the long-term. So, that will be a combination of both share buybacks and extraordinary dividends. As you saw, we already started with our first one, and there will be additional ones to come. If indeed, we realize that through the operating environment, we're not able to reach the two times net debt-to-EBITDA on our own. So, those will be the levers that we will be pulling. Again, with me at the helm for the next couple of months and then with Martin and the rest of the team helping him going forward.

I would like to add, Ricardo, this is Juan. Since we did not have a call dedicated to the capital allocation release, so the fact that we're all here today, I understand that there may be some questions on -- yours is the first one on continuity, right? And so I would like to ensure that the strategy that was communicated last week is fully in place, that the two times net debt-to-EBITDA target is fully in place and there will be no deviation from that. So, I just wanted to put that out there because I know that the concern is going to be among investors. José Antonio Fernández: Yes.

That's helpful, gentlemen. Thank you so much.

Thanks Ricardo. José Antonio Fernández: Thanks.

Thank you. Our next question is from Álvaro García of BTG Pactual. Please go ahead. Álvaro García: Hi gentlemen. Thanks for the call. Eugenio, Paco all of that going forward. My question is on labor costs in Mexico. I know that FEMSA has a philosophy of paying more than The Street, paying more than competitors or similar outlets, and that's very much true of OXXO. And I'm just curious where we are in that process of upping pay for your employee base at OXXO? How much more difficult has it been to get that premium and what's your outlook for labor cost into 2024? Thank you.

Hi Álvaro, this is Paco. Good to hear from you. I will let start and then I will let the team provide further perspective. But I guess that what we need to keep in mind when it comes to cost management, particularly in OXXO, understanding that the labor costs -- specifically the labor cost during the last year was, I would say, a special situation versus other years because of its magnitude. But the reality what we need to keep in mind is that OXXO is extremely good at working consistently on making our operations more efficient. So, the team has been focused on making sure that all the verticals among the possibilities that they usually explore as part of the way they do their operations of the stores, continue to progress towards further efficiencies. And I guess that, that has to do with store management, that has to do with headcount, that has to do with how we look into the specific costs in the stores. So, this is just to reassure you that structurally speaking, and the way we approach this in the stores hasn't changed. We will continue to do so. And evidently, every time something like this comes, the teams double the efforts on maximizing the efficiency. But for 2024, we have included the increases in the plants and we are confident that we can deliver on those plans as we enter the year. Eugenio, do you want to add something on that?

I would add one thing, Álvaro, this is Juan. Just because we -- when you look at the numbers and you look at the OXXO P&L, we're making some comments about how the operating margin was impacted by, among other things, but largely by the labor cost situation. And so in terms of 2024, I just want to put out there -- hate to call it guidance, but our expectation is that operating margins for the year will be flat, right? That's kind of our base case. So, I think the year is going to start a little bit softer, and it's going to gather strength as the year goes by. But for the full 2024, our expectation is for operating margins to be flat for OXXO Mexico. And I think that's an important data point. Álvaro García: Okay, great. Thank you very much.

Gracias Álvaro. José Antonio Fernández: Gracias Álvaro.

Thank you. Our next question is from Héctor Maya of Scotiabank. Please go ahead. Héctor Maya: Thank you very much for taking my questions. So, I just wanted to know about your update of the FEMSA Forward plan. We saw that the execution and divestments have come ahead of time and it was succeeding expectations. So, just wanted to understand why you considered it was necessary to expand the timeline window for cash deployment by an additional year potentially? And would that be because maybe M&A opportunity to take longer to appear? Or is there a concern for either the economic or political environment in your operations that drove the decision to keep a relevant cash position for a little longer?

Hi Héctor. Thanks for your question, it's Eugenio here. Look, really, nothing has changed from what we said last year and we continue to reiterate it. We are going to get to two times net debt-to-EBITDA. We can get there in several ways. One is through special dividends. The other one is through share repurchases and the other one will be through organic and inorganic investments. At this point, yes, we're sitting on a pile of cash that's accumulated at a higher pace than we expected because of the success that we've had with the divestiture so far. There will be more of that cash both from the remaining sales of the remaining assets as well as the Jetro stake, which we sold in installments and the operations will also be generating cash. So, we are, I mean, painfully aware of the problem holding too much cash. Having said that, we want to deploy it in a smart way that maximizes long-term intrinsic per share value. So, I think still within the range of the same two to three years, we will get to the two times net debt-to-EBITDA. It makes us, to be honest, feel a little bit more comfortable holding on to the cash right now at 5% interest rates that we're investing it in rather than where it was two years ago. So, we're being patient as opportunities arise. But again, even if we do see inorganic opportunities, we've stated there will be in the core business verticals that we identified on the FEMSA Forward, and they will be financially-accretive to long-term intrinsic per share value. So, we want to maximize that flexibility that we have to invest across our businesses and in the best investment that we have, which is our own share and get to that two times net debt-to-EBITDA in due course. Héctor Maya: Thank you. That's very clear. And also the conversation around the hard discount category and private label has been very hot right now, very active. So, I just also wanted to understand if we could expect your strategy with Bara to become more aggressive in the future? And how relevant could private label become for your overall strategy and maybe even for OXXO?

So, Héctor, just to answer, this is Paco. Just to answer that very quickly and continue with the questions from the rest of the attendance. Look, as you know, and as we highlighted in the opening remarks, I mean, clearly, one of the strategies that we are following in Proximity, and we have stated before is performance. Bara is an important component of the multi-format vertical. Bara, we reported, has had very strong goals in 2023 and our intention is to continue strengthening that business in 2024 and in the years to come. Private label is a very important part of the question of that business. It has been performing really well. So, what we are doing and what we have explained we're intending to do in that business has nothing to do with the recent announcements on that part -- in that segment of the retail. But basically just following the strategy we have highlighted before. And to your point, I mean, clearly, private label is an important component. We are doing very well in that segment of the business in the results we posted and our intention is to continue doing the same in the years to come.

And again, with regards to your specific question on Bara, I mean-- Héctor Maya: Thank you very much.

Go ahead. Héctor Maya: I'm sorry.

No, I was just going to say on Bara, we're happy that the market is recognizing the value in hard discount, there's a long, long way in that format ahead. And again, we're happy that now the market has another view into how that business is performing, and that will continue to be friendly competitors in the market. José Antonio Fernández: Let me just add. I don't know if you are aware, we hired a new Director for that area [Indiscernible] who's an expert on this kind of multi-format and hard discount stores. And he is -- he has been here for the last three or four months already, and he is completely convinced that the potential of our Bara project is now ready to jump and to grow fast with -- under him. So, we are really looking for how to develop and to grow all over with Bara as we speak. Héctor Maya: Excellent. Very, very clear. Thank you very much. Thank you.

Thanks Héctor.

Thank you very much. Our next question is from Alan Alanis with Santander. Please go ahead.

Thank you very much for taking my question José Antonio, Paco, Eugenio, Juan and best of lucks to Paco and Eugenio. Let me put some context to the question first. I mean FEMSA's share is down 9% this morning in the first hour of trading. That's $4 billion of lost market cap. And I think that the market is reading three negative things on this. First, the uncertainty of the CapEx, and that will be my question, I'll come back to that in a moment. The second, the unexpected management changes. I mean, I'm to know Martin Arias, I think he's super competent and I'm sure he's going to do us a very good job, but the market doesn't know him yet and the results regarding the margin contraction in the disappointment same-store sales. I think what would be very useful in this call José Antonio and team is to elaborate a bit more in terms of how are you going to deploy $14 billion in the next five years of which you indicated that 72% of that is going to go to Mexico. That means that on average, you will be getting $2 billion invested in Mexico. How much -- how are you thinking about that in terms of in which -- which sectors? And how much of that money is going to also spin in the aspirations that you have for OXXO spin? That would be my question. Thank you so much.

Yes. Thank you, Alan, for your question. Look, I think that we need to go back to answer your question to go back to what we announced during FEMSA Forward because strategically speaking, we announced that we are committed to our three core verticals, basically retail, digital, and Coca-Cola FEMSA. So, you should expect that the discipline that we will have in terms of deploying capital is going to be fully aligned to this strategy that we announced. So, anything that we do will, first of all, be consistent with that. But second, importantly, we'll be extremely disciplined on how we select potential inorganic opportunities moving forward.

Yes. Let me add something on the CapEx. This is Juan. I mean if you look at across formats and a lot of what you see is going to be deployed in organic expansion. What we're seeing -- I mean, obviously in Mexico, we've talked about the runway, but what we're seeing in multi-format and what we're seeing in other geographies is very, very compelling opportunities to accelerate the pace of growth. Even today -- and we'll detail this over the next months and quarters, but even today, if you look across all retail formats, we are opening in the order of seven units per day, right? If you think about also here, OXXO here -- OXXO South America drug stores, OXXO Smarts, coffee drive-thrus, it's going to ramp up from an already very dynamic place. And that's really a big part of the CapEx numbers, right? I mean don't straight line horizontally, but rather straight line as a -- with a slope because that's what you're going to see. If you think about Colombia, we're about to accelerate significantly in Colombia. I was in Brazil a couple of weeks ago, the opportunity for Grupo Nós is fantastic. So, a lot of the CapEx is really going to take the form of stores and DCs and distribution assets. We've said in the past on the M&A front, we're looking for a potential entry model into the U.S. on convenience. That's -- everybody knows that. We've been looking for drug stores [ph] in Mexico that's proven a bit more elusive. And that's pretty much it in terms of what we've identified at this point. Do we like our flexibility? Sure. But it's mostly about organic growth, Alan. And I've done a lot of questions. We've done a lot of questions about the bigger CapEx numbers that we communicated last week. So, hopefully, this helps understand where that capital is going.

Yes. Thank you so much for that. And if you can just -- final question here. I mean, what would you -- what do you think investors are missing with such an abrupt stock reaction? And how important is that stock price for the controlling group, for management, and so forth. What is the market missing? If I -- maybe I missed the agnostic, the reason why the stock is down 9% today, but any color on that would be for -- clarifying and hearing you as managers and controlling shareholders? That will be all and thanks so much for taking my question. José Antonio Fernández: Alan, you know us very well, and you know that we all think long-term and we will continue being very disciplined on our strategy. FEMSA Forward has huge potential. Cash is king. We always have said that. You remember Eugenio saying that. And Eugenio also said that the opportunity is the queen, and we have to keep both, the cash -- some cash for doing new projects. Coca-Cola FEMSA hasn't been mentioned, but is going to invest largest CapEx in history because of lack of capacity, we lost volumes this year because we didn't have enough capacity in certain places. We have to fix that. So, we are going to have a huge investment in capacity in Coca-Cola in various countries. And obviously, we will still go looking for good opportunities on our three verticals. That's why we -- what our intention is there, we go all the way to two times EBITDA and divest as much as possible or repurchase as most as possible on shares because that -- giveback dividends because we don't like to have idle resources just getting a very low interest rates.

Yes. Thanks so much José Antonio. [Indiscernible] thanks guys.

Thanks Alan.

Thank you very much. [Operator Instructions] Our next question is from Thiago Bortoluci with Goldman Sachs. Please go ahead.

Yes. Good morning gentlemen. Thanks for taking my question. Let me just catch back one mention from Juan related to the target leverage of tons committed to that, no deviations, right? I think one of the reasons for the volatility we're seeing is lack of visibility on how you will get there, right? You are mentioning two times leverage. This might give you $7 billion, $8 billion in excess cash. But at the same time, we were mentioning you were committing to give back up to 6% of our market cap, which is 3%, right? How will we add back to two times? And where this incremental $4 billion, $5 billion might be going. This is the first question. And if I may just take advantage of José Antonio being in the call. José Antonio. today, you have two interim positions, right, the CEO and the CFO, how is the Board thinking about this and how important it might be to fill definitely dispositions in order to keep the plan moving forward? Those are the questions. Thank you very much.

I'll start with the first one, and then I'll turn it up to José Antonio. Yes, my math is a little bit different than yours, but ballpark is the same. I think to get times, we're talking about a number close to $6 billion, $6.5 billion in that neighborhood Thiago. And yes, 6% of the market cap as of last week was $3 billion. So, there is still some undefined allocation of resources. Having said that, we still believe we're going to get to two times and that excess amount plus the cash that will come in from the operations will be looked at very closely between organic, inorganic, and additional return to shareholders. So, it's going to be a mix of all of that, that will get us to two times. I understand the anxiety about not being at all spelled out in stone about where that additional $3 billion to $4 billion are going. But the commitment is to get them two times, while maximizing shareholder value. So, we don't have all the answers yet. What we can tell you is that at least the $3 billion will go to shareholder return at this point. And the rest, we will deal with it as opportunities arise.

And let me just comment on that before José Antonio. Another way of what Eugenio just said is -- and this is a question we've been getting, could there be some upside to the $3 billion? And I think Eugenio just said, in other words, yes. But like I said a few minutes ago, we really value our -- a little bit of flexibility. And so those questions will be answered over the next couple of years. José Antonio Fernández: And on the second question that you had, we have discussed this at length with the Board and we have agreed that on the CEO position, I am winning and open. I'm very happy to stay for at least 24 months as CEO and Chairman at the same time and making this effort. I'm enjoying it, and I will stay doing it. While we are going to start the process of looking for a new CFO, as you could imagine, it will take hopefully less than a year or maybe a year or 18 months at the most, but we will find a new CFO for the company. As we speak, we will start the process of looking for.

And then just to be more clear about this and I'm sure, Paco will have his own views. But I think in my personal decision to leave the company at this point, has more to do with kind of my personal interest. I think the skills that I brought to bear were put in place during the FEMSA Forward program over the past 18 months, and we and the team had, I mean, a lot of success doing it. And at least for me, it's on to the next project. So, nothing more than that, and I'll continue to be close to the company as an adviser over the next few years, hopefully.

Yes. And Thiago taking the opportunity also, this is Paco. Look, I'm extremely I'm extremely proud of what the team has accomplished in FEMSA developing the long range plan, having a clear perspective on what the future looks like. And in reality, my decision is something that didn't come -- I didn't take that lightly. I mean it's exclusively related to what I want to do with the next station [ph] in my professional career. FEMSA is an incredible company with a bright long-term perspective that I will certainly miss. I will miss the team. I will meet José Antonio, I will miss everybody here. And the prospects of our company, I believe, are brighter than ever. So, that made the decision even more difficult. But again, it's exclusively personal and FEMSA will always be a highlight in my over 35-year career in many big many companies and FEMSA clearly stays at the top of that.

Thank you. And we will also miss [Indiscernible]. Thank you very much Paco and Eugenio, thank you very much.

Thiago.

Thank you very much. Our next question is from Luis Willard with GBM. Please go ahead. Mr. Willard, please go ahead.

Hi, can you hear me?

Yes, we can.

Thank you. Perfect. So, my question is quite mundane and perhaps I'm reading this all wrong, but I just wanted to ask you if you could go over a bit on the changes that you mentioned on your remarks, Eugenio I think it was you, about the deconsolidation of operations? Because I mean, you're reporting on a consolidated basis of 4.6% growth in sales. But if you look at the -- each of the subsidiaries, that you break down, all of them in pesos grow except for health, all of them grow above that average. So, I just wanted to make sure that I'm reading this correctly in the year that perhaps there's some deconsolidation that's not registered in the base, but it is in the 4Q 2023 numbers. Is that correct? Or what am I missing on the -- let's say, undisclosed breakdown of that? Thank you.

Yes, Luis, we can touch base offline if you want, and walk you through the exact numbers. But there were, as you know, because of the peso, some currency mismatches depending on whether you're looking at it on a currency-neutral basis, or on a peso-basis, some numbers are weird, especially this quarter in a lot of alliance, including the non-cash items and the taxes. And then there is also the deconsolidation, as you well said. It doesn't move the needle that much, but at the margin, it does. We deconsolidated both the Alpunto business as well, the part of the Solistica business that is in the part of -- in the process of being divested right now. But yes, those averages do work out and the 4% number after all these adjustments is correct, despite the fact that the retail businesses and most of the other businesses are growing higher than that average.

All right. That was it. Thank you.

Thank you, Luis. José Antonio Fernández: Thank you, Luis.

Thank you. Our next question is from Luis [Indiscernible] with Santander. Please go ahead.

Hi guys. Thanks for taking my questions. And good luck Paco and Eugenio on the next projects. My question is a follow-up on what Álvaro asked about the margin pressure and I guess, particularly driven by the pressure on labor. I mean, could you talk a little bit about where exactly is that did that pressure come in the fourth quarter? Was it perhaps preparing for the minimum wage increases? Is it related to, I guess, the vacation or the pension reform that has an impact there? Or -- and you did mention that also part of it has to do with adjustments ahead of expected regulatory changes. I guess you meant perhaps the potential change in working hours. So, just trying to understand a little bit what drove the additional pressure in the fourth quarter? And I guess a related question to it is, Juan mentioned that and I appreciate the color on the margins being kind of maybe flat for this year, but maybe start soft and get better. Just trying to understand what would be the driver of the improvements in margin as we move towards the second half of the year? And I guess related to that, but also on Proximity, I mean, very strong margins on the European side of the equation. Just wondering what we saw there is kind of like a sustainable level that we should think going forward? Thanks.

Let me start, if you want, Luis, on the margin pressure in Proximity Americas. On a like-for-like basis, what you said is correct. I mean, we are contemplating -- we already obviously implemented all the changes related to labor reform, including vacations and whatnot, keeping up in place with just minimum wage increases and others. So, that is, I think, the driver of the like-for-like comparison. But you have to remember that on top of that, we are starting a multi-format business that is quite ambitious as well. So, there are a lot of staffing needs, new facilities that we're stacking up, et cetera, that are coming up as well as all the other costs, which, as you know, we don't capitalize on the balance sheet. So, it's a little bit of a mixed bag. On a like-for-like basis, explains, I would say, maybe half of the effect, but the other one has to do more with how we're ramping up for that. José Antonio Fernández: Yes. And I think the word you mentioned, Luis, preparing for -- obviously, there are still some uncertainties in terms of the lawmaking and some potential changes to the labor law that we're obviously all monitoring closely, but there's a lot of getting ready for 2024 that took place in 2023. And in the case of Europe, I mean, I think this was a very good quarter. I wouldn't necessarily expect all quarters to be that strong. There are some currency issues at work too. I mean if you look at the numbers in local currency, it's a high single-digit as opposed to a double-digit top line growth. But having said all that, there's no question that the team in Valora is executing very well in the midst of a challenging environment. So, very encouraging.

But again -- and this is Paco, Luis. I guess that the overarching element of all this is that structurally, the teams have done a terrific job both on this side in Americas, but also in Europe in terms of strengthening the operation itself to make it more efficient. And that's -- as you know, those are things that stay and that we need to keep in mind.

Great. And maybe as a follow-up, I know you've done most of the divestitures, at least the big ones. I mean, there's still a few non-core assets that you've mentioned in the past that you're willing to sell. Any updates on that? And can we expect that to perhaps being achieved this year as well?

Yes. We're cautiously optimistic that they will get done, I mean, much earlier than what we expected and probably faster than most people think. So, we're making good progress on that.

Great. Thanks a lot guys. José Antonio Fernández: Thank you, Luis.

Thank you very much. [Operator Instructions] And our next question is from Federico Galassi with TRG. Please go ahead.

Thank you guys for taking my question. One question related and you took this -- part of the answer, if you want. But the question is related to Mexico and same-store sales in the different formats that you have, you're talking about [Indiscernible], et cetera. But do you believe that this is more related with any format in particular? Or do you see some deceleration in the consumer in Mexico? Maybe the -- if you can explain -- is what are you seeing in the healthcare business when you have two quarters of -- again, in Mexico, two a quarter of negative center sales? That's the question. Thank you.

Did you say in Health, Federico?

That was the second question.

Second question.

I'm going to -- yes, sorry.

Sure. I mean the first part of the question, just with regards to Mexico, I mean, the consumer continues to be strong. I mean you're seeing it, again, on a lapping basis, maybe it's -- the traffic is not as strong. But on an absolute basis and compared to what we saw I mean, for a long time, the consumer continues to have cash available and at least with the everyday items that we sell at off, so we continue to see, I mean, strength there and the margin pressure, again, has to do more with what we just discussed on labor, and it's consistent throughout all formats. I wouldn't say specific to either a hard discount or Proximity. And then with regards to your second question on health, we are seeing a more aggressive competitive environment, generally speaking, in Mexico, expansion of stores of our competition continues to be at a very healthy pace. We're keeping up, but you're seeing a much healthier competitive environment and different value propositions propping up that are making the operating environment a little bit more challenging from a gross margin perspective.

Yes, Federico, just to add a couple of additional points, this is Paco. Look, I mean when you look at the results, Mexico posted very strong results. And when you look at OXXO, when you look at Coca-Cola FEMSA, we didn't talk a lot about digital, but we have a very good results. So, in general, the businesses are doing really well in Mexico. The situation with health is punctual, and it happens every now and then, you have a competitive situation or you have a specific plan that didn't go as you were thinking. In this case, I mean, really, as Eugenio said, it's something related to how active competition has been, honestly, is good news because that means that the market is healthy, that we are in an interesting segment of the market. And the teams are working on adjusting our strategies to phase up. Honestly, we are confident that the situation will get better. But again, we are not concerned on how the businesses are outperforming in Mexico on the contrary. We remain confident that 2024, even though we will have some headwinds as usual, but we'll deploy our LRPs, we'll deploy the plans, and we should expect good results.

Yes. And I would add, Federico, I mean, we mentioned it in the remarks, but Mexico and Colombia, on the health side, yes, there have been some issues in terms of competitive landscape and shift from institutional to retail in the case of Colombia. But in both cases, the strategies are defined, and we're starting to address that very, very diligently. So, hopefully, in the not-too-distant future, we'll have different things to report on those fronts.

Okay guys. Thank you so much.

Thank you. Thanks, everyone, for attending today, for your permanent interest in our company. Obviously, the team and I are always available for follow-ups and we'll be in touch. Thank you.

Thank you very much. That concludes today's conference. You may now disconnect. Hope [ph] you may stay on the line.