Good morning, everyone, and welcome to the Coca-Cola FEMSA's Fourth Quarter 2012 Earnings Conference Call. As a reminder, today's conference is being recorded. [Operator Instructions] During this conference call, management may discuss certain forward-looking statements concerning Coca-Cola FEMSA's future performance, and should be considered of good faith estimates made by the company. These forward-looking statements reflect management's expectations and are based upon currently available data. Actual results are subject to future events and uncertainties which can materially impact the company's actual performance. At this time, I will now turn the conference over to Mr. Héctor Treviño, Coca-Cola FEMSA's Chief Financial Officer. Please go ahead, Mr. Treviño. Héctor Treviño Gutiérrez: Good morning, everyone. And thank you for joining us, as always. Building on a strong third quarter and in line with our expectations for the second half of 2012, our operators delivered solid double-digit top and bottom line growth and margin expansion in both divisions for the fourth quarter, compensating for a tough start to the year and provisioned full year EBITDA margin expansion. During the fourth quarter of 2012, we continued to integrate the results of Grupo CIMSA and FOQUE in our Mexican operations, as Grupo Tampico's results are now fully comparable. Their performance contributed positively to our Mexico and Central America divisions and our consolidated results. Organically, the main drivers of our performance for the year were our operator's ability to leverage our new commercial model, execute at the point of sale and implement selective price increases to capture our industry's value potentials, as well as the strength of our multi-category beverage portfolio led by the continued popularity of brand Coca-Cola and innovation in our still beverage and water categories. In the fourth quarter, our reported consolidated revenues were close to MXN 40 billion, up 10% from last year,…

[Operator Instructions] Your first question comes from the line of Lauren Torres.

My question is a bit more strategic in nature. Coke FEMSA has come through a lot of changes just over the last 2 or 3 years with respect to consolidating the bottlers in Mexico, and now entering the Philippines. So, Héctor, I was just hoping you could just talk a bit about your bench strengths, directing investment spend. Now how should we think about how you'll be spending time and money, I guess developing this market? It seems like there's a lot to be done, particularly in the Philippines, but also with respect to consolidating Mexico. What's the timeline -- once again, how are you thinking about spending levels? I don't know if The Coca-Cola Company obviously comes into that discussion too, but if you could just round that out a bit, that'd be helpful. Héctor Treviño Gutiérrez: Let me start with Mexico. I think that one of the, I'd say, amazing events for the last -- for this past year, for 2012, is that our operations in Mexico have been able to integrate 3 different operations, and we are looking to do the fourth when we close Yoli without any problem. We separated the Northeast territory with one manager that we have in the Southeast because of the distances and the logistics and all of that. And both CIMSA and Queretano were basically integrated to the same operating subs [ph] that we have. We have been able to reduce the headcount of the operations importantly. And I think that the most important fact here in Mexico is that we have been able to integrate those operations without any union issue, without any problem in terms of the operations of these new territories. We are little by little improving the profitability to the levels that we were anticipating in our…

Okay. Yes. I guess the only follow-up is just to be clear on the structure of the deal that you have, in the Philippines, with The Coca-Cola Company, that -- those expenses, what you just mentioned, is more or less shared? Héctor Treviño Gutiérrez: Yes. Right now, as you know, we own 51% and they own 49%. And that we're only splitting those proportions while they are shareholders in the company. Once we exercise the call, assuming that we do that in the future, then we will be responsible for 100% of all of these expenses and CapEx and everything in the Philippines.

Your next question comes from the line of Lore Serra.

I guess I wanted to ask a couple things. Let me start in Venezuela. Héctor, a couple questions. I mean, if you could give us any sense of what your returnable mix is in Venezuela, and with the new efforts you're making, kind of how you're seeing that or how you're hoping to see that mix evolve? And if you can help us think through sort of how to think about what this means for the operation. In 2010, you guys did a really good job despite the turmoil in Venezuela, with a lot of the pricing, and I think you had some raw materials with yield exchange rates. Some -- if we think forward to at this time, do you have any raw materials with yield exchange rate? Do you see any risks that you'll be able to kind of contain or continue to be in the kind of pricing environment in Venezuela that you've been? And that would be my first question. Héctor Treviño Gutiérrez: Let me talk -- I think that, obviously, our focus is to try to do something similar to 2010. Obviously, our management team focus in what can we do with pricing and what can we do with this returnability process [ph]. Some of the facts that I think are important for you to know is -- or that you have read in the press, there is some scarcity of raw materials in Venezuela. So moving to returnable presentations in glass also help us in that front because as you can expect, when some of this countries -- where you have limitation on the reliability of dollars, importing some of the raw materials has caused problems in the past and there have been so much scarce. And so far we haven't stopped our production…

Do your operators see any risk to being able to put through the kind of pricing that you're talking about? Héctor Treviño Gutiérrez: Not so far, Lore. So far there is no regulation with respect to that. There is a lot of volatility in the marketplace right now because as soon as a country announces a depreciation of their currency, you immediately start seeing a lot of price movements even in raw materials. Now, Lore, and obviously, we need to try to cope with that.

Okay. And then just moving to Brazil for a second now, can you give any outlook there in terms of how you see your raw materials? I mean Ambev was talking about high-teens pressure in COGS. Now -- I mean they have a different hedging strategy. But is there anything you could tell us? I mean you're facing a very good environment in, I kind of think, most of your markets, right? Is there any -- except for Venezuela, obviously. Is there anything you're seeing in Brazil that would suggest that you're seeing that kind of pressure that Ambev was talking about this morning? Héctor Treviño Gutiérrez: Yes. I think that, from our perspective, I think that probably one of the differences has to do with aluminum. For us, as you know very well, sweeteners and PET are very important raw materials. We have expressed in the past that we do some hedging especially in Brazil and Colombia where sweeteners are very closely -- correlated to international prices. What we have done is to hedge those prices when the -- when our operators feel comfortable with the price of the raw material or the cost of their raw material. In general, I'd say that what we have been doing -- and this is a very simple strategy, Lore, and maybe you can argue that we are leaving some money on the table because prices right now are lower than -- the spot prices are lower than the hedges that we have. But as long as we can hedge our cost of raw materials below what we have the previous year, in a way we are avoiding having to move the prices of our products to the consumer. I don't know if I'm explaining myself. So when you have raw materials that are as important as sugar and PET, and you already have a price structure in the marketplace, and you can hedge those prices below what it cost the previous year, you would not have to increase prices to compensate for the volatility of those raw materials. So basically, that's where we have been moving. As I said, spot prices on sugar are lower today of what we have in our contracts for Brazil and Colombia, but we feel very confident in saying that obviously we don't know the future of the prices of sweeteners the rest of the year. But we are certain that we have hedged below the cost of what we have on 2012. And I've seen that, that gives us, when we have the price gap differential of our products versus our competitors, the fact that we can have those hedges give us some comfort that at least we don’t have the pressure to move our prices because of the volatility of raw materials. In the case of Ambev, I think that they are pretty much affected by aluminum can -- aluminum that, in our case, not that important but I'm not that familiar.

Okay. No, that's fine. That's fine. And just last question, quickly, I mean, in the press releases you talked about how much in Mexico or in Central America came from price versus volume. And it seemed like less came from price this quarter, a lot less than what happened in the third quarter. I just wanted to confirm that, and maybe it's just rounding in the numbers, but are you seeing any change in the pricing environment in Mexico? Héctor Treviño Gutiérrez: Yes. Lore, your appreciation is correct. I think that, in -- during the fourth quarter, we are lapping important increases over the previous year. And this quarter, volume was an important element. As always we continue to look for opportunities through some price segmentation and continue to increase prices. You know that we have always been on top of the pricing formulas, and we'll continue to look for opportunities, but this quarter we benefited from volume performance rather than pricing, especially on those territories.

Your next question comes from Alexandre Miguel. Alexandre Miguel - Itaú Corretora de Valores S.A., Research Division: So my question is related -- just to -- a follow-up on the raw material trend. You mentioned that you have hedged your needs for Brazil and Colombia. And just to make sure, you hedged already all your needs for the full year? That -- was that the case? And then you indicated costs would be below last year. Is that the case or you're still are somewhat exposed to the spot market? Héctor Treviño Gutiérrez: For Brazil and Colombia, I'll say that basically we are -- we have hedged around 75%, probably a little bit more than that, around -- between 75% and 80% of our needs for 2013. So we still have some exposure, say, between 20% and 25% of our needs in Brazil and Colombia. In Mexico, we do have some, these are not -- in Mexico, as you know, the prices are -- are not correlated to the financial markets, so we have agreed with some of the suppliers but the number is much lower because we do like -- for the next 3 months, we have agreed on some pricing on sugar. In the case of high fructose which are international suppliers, we have an amount that is slightly higher. Alexandre Miguel - Itaú Corretora de Valores S.A., Research Division: Okay. And in Mexico, can you comment a bit on the trend for the sugar price? Do you think we could see the same declines we are seeing in the spot markets internationally for the Mexican market? Or you think that the decline will be softer because the market is more controlled? Héctor Treviño Gutiérrez: In general, my expectation is that it's going to be softer because it’s…

And your next question comes from the line of Karla Miranda.

Héctor, I was wondering if you could give us a little more color of what should we expect in terms of margins for the South America division? I know that you're going to be working in Venezuela in order to offset the negative impact of the devaluation. And all the efforts been doing -- that you've been doing in Venezuela, in Colombia and Brazil, what should we look in for the end of the year? Héctor Treviño Gutiérrez: Karla, in general, I'll say that the environment for South America for next year will call for a small reduction in margins. What are the main elements there? We have an aggressive plan in Colombia to foster affordability of the products. We believe that we owe to all of our shareholders to have a better performance in Colombia, and for that, we need to increase per capita consumption in Colombia. We have discussed this in -- during several conferences, so we have a specific plan where we are spending in marketing, we are launching new presentations, we are launching returnable presentations to bring affordability. And that, the whole mix of that, you heard me in the previous conference call saying that 2013, for Colombia, is going to be a transformation year where we will spend some in the marketplace with the idea and the hope that in the following years we'll have better per capita. We have the impact of Venezuela that as you correctly pointed out, we are counting on our operators to compensate for the additional cost of raw materials that are dollarized and the impact of some of the cost of raw materials and salaries and everything. Argentina, I think that Argentina should have a good year. So far, during the beginning of the year, the weather has not…

Great. That was really helpful. And additionally, I was hoping if you can give us some sense of the CapEx for this year? Including all the investments you're planning to do in the Philippines.

[Operator Instructions] Your next question comes from the line of... Héctor Treviño Gutiérrez: Okay. Let me just answer that question, please, operator, and then we'll go with the following. CapEx for 2013, I'm looking at a -- somewhere around $800 million. I'll say that's slightly above the number that we presented -- the official number for 2013 -- 2012, excuse me, that we're around $750 million, mainly because of the 2 production plants, one in Brazil and one in Colombia that -- which -- we have started the one in Brazil, we would like to finish that by the end of the year. Colombia is a little bit behind schedule because of some authorization paperwork, but we are expecting that to be done. The Philippines, we mentioned that the CapEx for this year should be somewhere around $100 million to $120 million, that's in addition to this $800 million that I mentioned. Obviously, as I said in the previous question, that is going to be split -- the idea is to be funded by the Philippines operation alone, and in case some additional [indiscernible] should be contributed to the Philippines is going to be done in the 51:49 ownership that we share with The Coca-Cola Company. Operator we can follow up with the next question, please.

All right, your next question comes from Fernando Ferreira.

I just had a question on the Philippines operation, if we can expect some contribution already this year, in 2013, on the equity income line? Or you expect that mostly towards 2014 and beyond? Héctor Treviño Gutiérrez: I think that it's still too early to know, but I'll expect that this year would be more neutral, and then to expect some positive numbers for 2014. We just closed the transaction basically 1 month and 1 day ago. And even though we have some of the guys working there since August, we are starting with some of the strategies focusing on these 3 fronts that I mentioned, portfolio, route to market and supply-chain. The idea is to start collecting some of the so-called low-hanging fruits as soon as possible. That probably will have to be done more in the supply-chain, the other 2, route to market and portfolio are more transformative. Volumes during January were quite low, and I think that it has to do with a lot of inventory build up before the closing in December. February is looking better, with flat numbers compared to volume versus last year, but in terms of profitability, still very difficult to predict something, Fernando, but my expectation is that this year we're going to be more neutral and then 2014 we should be expecting some contribution to our numbers.

Ladies and gentlemen, your next question comes from Alex Robarts.

I guess for my question, I'd like to go back to Mexico on the volume kind of price outlook for this year. Just -- you basically had more price than volume last year, do you think that as you look out into this year, that kind of the ratio will continue? How are you seeing the volume trends right now, still versus sparkling? And related to this, the jug water, if I understood the press release, in Mexico, it is in a decreasing-year-on-year mode. I assume, if that's true, that's related to some of this restructuring that you're doing with the new territories. Could you give us a sense of when you might start to complete that process of where jug volumes, which is about almost 20% of your volume in Mexico, when that segment starts to get some positive growth? Héctor Treviño Gutiérrez: Yes, Alex. Volume and pricing. I think that, in general, Mexico, we will continue to have in total -- and I'll go into a second, into segmentation by categories. But in total, growing mid-single digits volume and keeping prices with inflation should be our target for this year. When you look at the sparkling drinks, in general, my expectation is that volumes should be growing low- to mid-single digits. Noncarbonated drinks in excess of 10%, double digits but more in the 10% to 12% range. And jug water in single-serve presentation is a difficult market, very competitive, we have good quarters and we have bad quarters, but in general I'd expect to have mid-single digits to low-double digits in water in single-serve presentations. Jug water, this is the fifth quarter that we have a decrease in volume. And that has to do with the strategy of converting that jug water business into a more profitable unit…

Right. And so the mid-single to low-single kind of guidance for jug water this year, that's a full-year number, right? I mean that's what you expect to book for the year? Or that's a rate that you expect to reach or achieve at some point this year? Héctor Treviño Gutiérrez: Yes. Alex, I think that on a total portfolio basis, look for, on an organic basis, to have a low to mid single-digit number volume growth, this is a good number for Mexico for 2013.

Your next question comes from [indiscernible].

This is [indiscernible] is here with me. Question on the competitive environment. I mean, we've seen this -- the Pepsi system starting to operate as a single entity very recently. Have you seen any change in that competitive environment in Mexico? And what do you anticipate? And let me tell you where the question is coming from, I think that the Pepsi system is going to focus a lot on, other than the Pepsi brand but also on the noncarbonated where they have some leading brands. Is there a risk, Héctor, that you might have to accelerate SG&A in the next year or next few years in order to contain these changes in the competitive environment, particularly for noncarbonated softdrinks? That will be the first question. Héctor Treviño Gutiérrez: Yes, Alan [ph]. Yes, you are referring to Mexico, obviously, and yes, they have been a bit more active in the marketplace, especially in key accounts. Whoever visits Mexico City have seen the Chapultepec Park now with the big Pepsi sign. For many years it was a Coca-Cola property. Some cinemas are also being moved, some restaurants and things like that. Honestly, at the end of the day, we haven't seen any movement on the market share and the numbers, a slight reduction on a very dominant position that we have in market share in colas, but very, very slight. I think that in the traditional trade, we have continued to see our operators working very well. They are starting to do some activities in the operation of sales [ph] but not important so far. I think that the point to highlight is that they are doing a lot of restructuring in their organization still. We have increased, very importantly, the -- our market share in isotonics where they have a…

Your next question comes from Marco Martinez [ph].

I was wondering if you could give more color about the great performance in the working capital figure at the end of the last year. In particular, we see that the suppliers figure increased importantly. Could you give more details about this? That will be very helpful. Héctor Treviño Gutiérrez: Yes, Marco. I think that, in general, that the movement that you are seeing has to do more with the integration of some of the new territories, that we are seeing the suppliers number going up. We always are very watchful of our cash flow needs and our working capital, but we -- once we have the integrations fully done, we shouldn't be seeing that kind of changes in the working capital.

I would now like to turn the call back over to Mr. Héctor Treviño for final remarks. Héctor Treviño Gutiérrez: Well thank you for your interest in our company. As always, Jose and his team are available to answer any remaining questions you may have today, and we hope to see you visit us in the future. Thank you.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect.