Good morning, everyone, and welcome to Coca-Cola FEMSA's Fourth Quarter 2013 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 that should be considered as 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 today. As many of you are aware, during the fourth quarter of 2013, we continue to face a difficult consumer environment, mainly in Mexico and Brazil and currency volatility across our Latin American market. Nevertheless, our balanced geographic portfolio and our revenue management initiatives enabled us to deliver organic currency neutral revenue growth of 12% for the quarter. Our reported consolidated total revenues reached close to MXN 43 billion in the fourth quarter, including the noncomparable effects of the results from Grupo Yoli in Mexico and the operations of Fluminense and Spaipa, which were integrated into our Brazilian franchise in September and November of 2013 respectively. Our consolidated gross profit margin was negatively affected by the devaluation of the currencies in our South American division and Mexico has applied to our U.S. dollar denominated input costs, which offset lower sugar and relatively flat PET prices in most of our franchise territories. With regard to our consolidated expenses, we continue to see higher labor and freight costs, especially across our South American division and more recently, freight costs pressures in our Mexican operations as well. As…

[Operator Instructions] And we'll go first to Alan Alanis with JPMorgan. Alan Alanis - JP Morgan Chase & Co, Research Division: The first question I have regarding working capital in 2013. I think -- I mean, you had a consumption of almost MXN 900 million during the year. How do you see this going forward for 2014, Hector? Héctor Treviño Gutiérrez: Yes, indeed, as always, we have paid a very strong attention to working capital. I don't think that there is anything to worry in these numbers. Basically, this is our reflection of 2 main issues. One, and most importantly, is the Venezuelan situation, where our inventories are increased because of the scarcity that we find in that environment. So if we were to have normal inventory levels out of that MXN 900 million that you had mentioned, I'd say between MXN 500 million to MXN 600 million have to go that situation in Venezuela, prior inventories of raw materials and the spare parts, because again, since there is scarcity in the marketplace, every opportunity we have to buy these products to basically have stability in our operations in terms of the ongoing operations and continuing operations. We have been taking those steps. The second element, Alan, is that we are incorporating the Spaipa [indiscernible], so that in September and November. So we have the working capital needs of those businesses and still on the revenue side, on the profitability side, they're still just starting to reincorporate -- the inventories and the accounts receivables and everything it's a one step change that you see. So I do not put a lot of attention to those issues and then I don't think that there is any strange other than the Venezuela situation that I just explained because of the scarcity that…

We'll take our next question from Lauren Torres with HSBC.

Just a follow-up on Mexico. Obviously, you're coming off at top of your last year, to explain that the price increase is based on the excise tax on beverages. Just curious, Hector, about -- how you think about full year? Is that 5% to 7% achievable for the year? And then I guess, thinking about it a little further, you talked about some initiatives. I wondered if that's enough to kind of keep margins stable for the year or how are you thinking about the environment in 2014? Do you have enough offsets to kind of get through it or is the consumer still tough right here and there's not a lot of opportunity to grow in the market, particularly from a profitability standpoint? Héctor Treviño Gutiérrez: Yes, I think that in general, I mean, as you can imagine, basically at the end of February, it's still kind of early to fully understand the impact of this tax initiative in Mexico. Our operators and our plan and our budget basically is work with this idea that the 5% to 7% reduction in volume is going to happen. As I mentioned in the last conference call, that calls for very strict costs control. We're estimating -- and I did mention this last time that we at this conference call. We are estimating that with 5% to 7% volume reduction, we'll have extra capacity in production plans and in distribution centers, and in all this supply-chain basically, some troughs. So we are adjusting a lot of our CapEx for this year. We are looking at the reduction in headcount. And as I mentioned during the last conference call, potentially closing down some production facilities also. And with those efforts, we believe that a reduction in that volumes of 5% to 7%, we will be able to maintain the profit margins. Obviously, it's 5% to 7%, obviously, the last unit cases that you sell are the most profitable. Those are the golden cases. So we need to do [indiscernible] cost control and cost reduction, be able to maintain margins. As our plans for the year is to do all the effort to even in spite of this volume reduction, we have maintained margins or probably, we will slightly [ph] margins.

And can I extend that question to Brazil? Obviously, you had a really tough fourth quarter, but you said year-to-date, things are looking better and I know weather has been a benefit. But for that market, do you think you are seeing some improving trends? Is it just more a result of the weather? Or do you think you're actually seeing some improvements in consumer levels? Héctor Treviño Gutiérrez: In general, what we're seeing in Brazil is very encouraging in the first 2 months, that -- during this mutual remarks up to [ph] weather. Like to think that a lot of [indiscernible] capabilities and all of the end of that year are adjusting our portfolio to the market in [indiscernible] coming back to the category in general. This is also a market share as last quarter. We are starting to see [indiscernible] of January, with some improvements in market share again. And in January and February, we are seeing 5 single-digit of volume growth, which is difficult to predict if that will stay for the rest of the year. We're seeing very, very encouraging result. Again, with margins and volumes at level, high-single digits the same that I mentioned to Mexico, but the reverse. This is golden cases that bring bunch of profitability in operations in Brazil and we are seeing that going forth in the expansions of margins, so far in January and February. [indiscernible] annually big months and then we have carnival. At World Cup there will also be an opportunity to collide with the consumer importantly. And one important trend, I like to mention here in Brazil. The market share that we lost during last year have a more to do with the fact that, generally, in the industry sparkling today where things growing importance or we…

We'll take our next question from Antonio Gonzalez with Credit Suisse. Antonio Gonzalez - Crédit Suisse AG, Research Division: Actually, I just have 2 questions. First one was on Venezuela. I saw in the recent development section of your press release that you talked about different exchange rates. I just wanted to make sure I got it completely right. Could you let us know what's the percentage of your raw material that you are importing at the official, and how much is the parallel exchange rate in Venezuela? And to the extent that it's possible, whether you have any comment on what would be the percentage going forward. And then I have a quick follow-up question. Héctor Treviño Gutiérrez: Sure. In Venezuela, we continue to face and that's related to the inventory question that we mentioned at the beginning with the working capital and the type of inventories in Venezuela. In Venezuela, we continue to export -- excuse me, to import 100% of our raw materials at the official exchange rate. It's taking very long for us to pay and a lot of patience for our suppliers because they can -- we have been expanding some of those payments for them because we entered all the process. We get authorization to import the raw materials, and then payment is sometimes delayed for -- well behind the official of the agreed payment dates. So far, the suppliers have been working well with The Coca-Cola Company, and we have been working obviously very closely with them for them to show support in these difficult times. They know that we are getting -- at some point in time, we are getting the dollars out of the Central Bank at the official exchange rate. And we -- we are basically asking for their patience…

We'll take our next question from Lore Serra with Morgan Stanley.

I actually wanted to ask 2 questions. I'm going to ask them one at a time. In Mexico, can you just confirm that, that 5% to 7% drop you're talking about for year-to-date, that's on an organic basis or does that include yearly in this period not in the year ago? And then just the question I really have is on the operating expenses. And I'm looking at the fourth quarter and the year numbers and the growth in operating expenses was really high, 18%. And I see the depreciation and amortization up a lot. I'm not sure why, and I don't know how much of that was the 18%. But I'm just trying to understand why the operating expenses went up so much last year. And then, as you look to this year, I would guess that you're going to see a pretty strong shift in the returnables, given that the pricing you've had to take. And that's higher cost to sort of to move around. So I'm wondering kind of how you're thinking about -- or where's the confidence coming from what in terms of the operating expense containment next year, given those 2 factors? Héctor Treviño Gutiérrez: Well, the trend for the 5% to 7%, it's what I mentioned and it's organic. We started January a little bit with the effect of the inventory buildup that we saw at the end of December. So that calls for a very bad December because, as I mentioned, December was a negative. In Mexico, October and November were more or less flat numbers. And then December was a negative number in volume. Including the fact that there was some inventory buildup because of the new tally of what's going on in general. So at the beginning of January, volumes were…

Okay, that's really helpful. And then just in Venezuela, I know the situation is very uncertain. If you could help us understand kind of -- with that extra inventory, how much days of supply do you think you have? And if you could also help us understand to how to think about this issue of the exchange rate. I mean, some of the companies are starting to translate at different rates, most of the [ph] are still at the 6.3 rate. I guess, your positioning is that as long as you can get it at 6.3, then you'll continue to translate at that rate. But at what point do you -- or what causes you to shift the assumptions -- not the assumptions, what you do for reporting purposes, because it seems like that that's going to happen at some point. I don't know. Is it just a matter of you stay at 6.3 until you can't get all the permits? Or how should we understand that issue? Héctor Treviño Gutiérrez: You're raising a very good point, a very sensible -- Let me try to be helpful here as always. We have been discussing the issue of the convert --- of the exchange rate that we need to use for the conversion of the financial stakes. We're using the 6.3 rate. We've discussed very thoroughly that with our auditors. We know that some other companies are using a different rate. We believe that in those cases, what we have seen are cases of companies that are not necessarily related to the whole industry. It's more like the Procter & Gamble and the -- and some [indiscernible]. And in some cases, they don't necessarily have manufacturing facilities for those products in Venezuela, so they need to import finished products from the…

We'll go next to Karla Miranda with GBM.

Hector, I was wondering if you can comment a little bit about pricing in South America. So far in 2013, it seemed that -- well, it didn't seem. It was a fact that the price increase implemented for local currencies weren't enough to offset the FX effect. So we -- I was wondering if we should witness further price increases in order to offset this negative devaluation of local currencies in South America? And second of all, I was wondering if you can comment about the effective tax rate for 2014? Héctor Treviño Gutiérrez: Yes, I think that in general, you will see in South America, other than Mexico, obviously because in Mexico we already spent and we increased. Prices are on 16%, which is much higher than inflation, but we have the tax -- the excise tax situation. We do believe that in South America, we need to increase prices with inflation. Sometimes the FX does not necessarily match the inflation numbers, and that's why -- when you see some distortions. But in general, our objective is to -- and we think that we have the flexibility to move price with inflation or none of our operations. And so I will not see -- I'm not seeing any pressure on it because of our competitors in the pricing front in Latin America. With respect to tax rate, we will see a slight increase in the effective tax rate. Somewhere close to 33% would be a good number. The slight increase is basically because of the tax reform in Mexico. There would be some expenses that are now not 100% tax deductible, and that will increase a little bit our tax rate. But remember, that in Brazil we have the probably the effect of this amortization of goodwill. And obviously, the effect of the new debt that we have now in the company reducing the tax burden for the company. But while you take into consideration all of these numbers, the effective tax rate will be somewhere around the 33%. Okay?

We'll take our next question from Luca Cipiccia from Goldman Sachs.

I also would like to go back a bit to Brazil. I think you made some comments before on the profitability you're expecting for 2014, but the line wasn't great. So maybe, if you can elaborate a bit more on that. And also on Brazil, as time has gone on, when would you think we may hear on incremental potential synergies on [ph]spy but the target initially was relatively low? So you've been a few months into the integration, into the conclusion of the transaction, so curious to know if there will be some news there? And lastly, given the volatility of the currency in Venezuela, in Argentina and the size of Brazil in the LatAm operation, is it plausible to think that you will maybe report the region separately at some point so that it's easier to track the progress on margin on top line and on the improvements as well with the integration. That would be my questions, please. Héctor Treviño Gutiérrez: Yes. I think that in general Brazil, we are seeing high single-digit volume growth numbers so far in January, February. And we expect somewhere between mid single-digit to high-single digits for the rest of the year. I think that we will see improvements in the margins in Brazil definitely. I believe that the reduction that we saw last year, we saw an important reduction in the EBITDA margins and EBIT margin and EBITDA margins. I don't know if we are going to break 100% of the reduction in margin, but certainly, we'll make a good inroad in integrating part of that. We are seeing that trend in January and February, and I think that it's important that you have that. Synergy wise, we are working very well with Fluminense integration. We are well on track. We…

For Brazil, specifically, you don't think you will isolate the numbers just for Brazil in the future? For profitability, growth and -- like you do for the region of the world today? Héctor Treviño Gutiérrez: No. We do not have plans to do that so far.

We'll go next to Fernando Ferreira with Bank of America Merrill Lynch.

I had 2 questions, actually. First one, can you comment when you look in the volumes in different categories in Mexico so far this year, are you seeing some shifts or growth in categories Like Water or Coca-Cola Light and diet presentations? Or you're seeing declines across the board? Héctor Treviño Gutiérrez: Yes, no. We are seeing certain trends where you have some of the America products declining on a faster pace. We are too seeing some improvements in the mix of non-calorie products. Then we give you basically -- although it's very small compared to other countries, Mexico, non-caloric 5%, somewhere around 3% to 4%. Now we think that number and obviously [indiscernible] we're seeing an increase of non-calorie products on the volumes on non-caloric 5% during those 2 months versus our reduction in [indiscernible] of an a little bit more than 7% decline that I mentioned. In total, the company's is between the 5% to 7%, but we are seeing non-calorics growing, Water growing, and basically seeing these and juices and nectars mainly because of the price changes that we've seen. Remember, that one that one of the strategy that we have is that Coca-Cola Light price parity will brand Coca-Cola because it's [indiscernible]. Coke Zero is sustained below the price of Coca-Cola because since it's not affected with the tax, we are staying with that price point, which is a different strategy again that Coca-Cola Light is not being taxed but we are increasing the price because of the premium-ness of that brand. So we are seeing some shift in the drinks of the different categories within the soft drink category.

And I have another question. I don't know if you already mentioned it. And I apologize if you did. But I want to understand also in Mexico, what's the strategy for branding, advertising this year? And also how do you think about SG&A. Do you see SG&A being sustained at the same levels we've seen for the last few years or will we have some extra support from the Coca-Cola Company in terms of advertising? Héctor Treviño Gutiérrez: I think that in general, Fernando, I think that we will be very cautious with the market -- with the expenses on marketing expenses. But in general, whenever we have this kind of situations in countries like the new tax in Mexico or a currency movement in Argentina, normally you see a continuation of the marketing the strategies because we believe those are the opportunities when you capture important inroads in the market. So my answer will be we are going to make purchase, but you will see similar levels of marketing expenses throughout the year. The only caveat for that in Mexico is that as we see volumes declining, remember that part of the investment that we do in coolers goes to the marketing side, which is a marketing asset that we use, and it's reflected there. Coolers, we will continue to invest, probably not at the same pace because we will have some extra capacity in the cooler, though we have already. So we'll see a lot of activity of redeploying the assets that we have to points of sale that are performing better. And that will call for a slight reduction on the marketing expense in Mexico just because of a lower level of marketing assets in the market. It is important that we bear in mind that in every crisis that we have had in Latin America in the past, the company continues to invest on these marketing assets and [indiscernible] advertisement. And we have benefit from that in the past. [indiscernible] work off -- that normally calls for low marketing expenses. Around the world, this is an event that Europe and America and Africa and Asia basically behind that. And generally, I'll say that we will not see the kind of operating expense growth that we saw here in the fourth quarter. As I mentioned, it was a little bit basic results. [indiscernible] marketing expenses in 2012 and we'll see a more normalized OpEx going forward.

We'll take our final question from Marco Montanez with Vector.

Could you share with us the -- what are the exchange rates for 2014 from the currencies in Argentina, Brazil and Venezuela, please? I mean, in particular, in the case of Argentina and Venezuela, do you have any stress scenario for the expected rates? And the second one, if I may, regarding the freight cost in Mexico, could you give us more color about it? Is there any regulatory impact or increase in the fuel prices? Héctor Treviño Gutiérrez: Let me go to the rate. They are basically -- budgeting process are exercises. These are exercises where we use some sensitivities and we do several analysis for the potential changes in that. And basically, we have, in our analysis, and we use ranges for that. We are assuming a 12.8 average exchange rate for Mexico that by now it's our economist estimation [ph] for the year. And of the real, we are somewhere around the level where it is right now, 2 35 to 2 40. And in the Venezuela exchange rate, we are using somewhere around the 9.8 exchange rate. But this is just again, just for budgeting purposes and in some scenario statistic. Very difficult to obviously predict what these numbers will be but more or less our estimate. But in Argentina, around 9 to 9.2 number that are now 9.7. Those are more like the averages that we have in the countries. I didn't follow on the second question. Were you referring to sugar? [indiscernible] If you can repeat second question.

Yes, of course. Regarding the freight cost in Mexico. I don't know if wanted to share it with us if there's any regulatory impact or increase in the fuel prices. I mean, at the end of the last year, there was some regulatory reforms in Mexico in order to have some changes in that activity. So well, I don't know if you can give us more color about it. Héctor Treviño Gutiérrez: Yes, I'm sorry. Now I understood. In terms of freight, we are seeing some -- it's modest -- there's a slight pickup in freight expenses, and it has 2 main variables. One has to do with the increase in fuel prices, but in Mexico, it's adjusted every month and it has been increasing importantly. And the other element of those smaller, it's also important to take into consideration our mix on returnable continues to increase because we are going behind this strategy of carving affordable prices with returnable presentation. Returnable -- the D&A of the returnable calls for going back and forth to the marketplace and the plants. And that would also imply some extra freight expense. There is nothing special in the regulatory front. That has been talks of limiting the size of the trucks. Nothing definitely. But remember that most of the freight that potentially could be affected by that is done third parties. So we'll assume that we'll adjust to whatever regulation there is in that front. But what we have in our P&L reflected in 2014, is a slight increase in freight, mainly as a result of fuel prices. And a little bit because of the increase in returnable mix.

This concludes today's question-and-answer session. I'd like to turn the call back to Mr. Treviño for closing remarks. Héctor Treviño Gutiérrez: Thank you for the interest in Coca-Cola FEMSA. And as always, Jose and Roland are available to answer any remaining question that you may have. And we look forward for another conference call in 1.5 months as this first quarter numbers are coming very soon. Thank you.

This does conclude today's conference. We thank you for your participation.