Coca-Cola FEMSA, S.A.B. de C.V. (KOF) Q1 2024 Earnings Report, Transcript and Summary

Hello, and welcome to Coca-Cola FEMSA First Quarter 2024 Conference Call. My name is Melissa, and I will be your coordinator for today's event. [Operator Instructions] I'll now turn the call over to Mr. Jorge Collazo, Investor Relations Director. Please go ahead.

Good morning to you all and welcome to this webcast and conference call to review our first quarter 2021 results. Joining me this morning is Ian Craig, our Chief Executive Officer; and Gerardo Cruz, our Chief Financial Officer. As usual, after prepared remarks we will open up the call for our question-and-answer session. Before we proceed, just a reminder for all participants to take note of our cautionary statement included in the earnings release that went out this morning. This conference call may include forward-looking statements and 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 that can materially impact the company's performance. With that, let me turn the call over to our CEO. Please go ahead, Ian. Ian Marcel Craig García: Thank you, Jorge. Good morning, everyone. Thank you for joining us this morning. Coca-Cola FEMSA showed another strong performance on top of the positive results achieved in 2023. As we mentioned in our previous earnings call in 2024 we are focusing on 3 key drivers: first, build on the growth momentum of our core business; second, take Juntos+ version 4.0 to the next level with the deployment of advanced AI capabilities; and third, continue fostering our customer-centric and psychologically safe culture for Coca-Cola FEMSA. During today's call, I will provide you with an update on the main developments of our business, our views on the operating environment and our strategic progress focusing on the 3 key drivers. Then Gary will walk you through each of our division's performance and provide updates on our progress regarding sustainability. With that, let me begin by summarizing our consolidated results for the first quarter. Our volumes accelerated sequentially to increase 7.3% year-on-year, surpassing 1-billion-unit cases. This increase was driven mainly by the strong performance achieved in Mexico, Brazil, Guatemala, Colombia, and most of our Central America South territories, with offset volume declines in Argentina, Uruguay and Panama. We continue to report volume growth across all beverage categories. Sparkling beverage volumes grew 7.5% driven mainly by brand Coca-Cola, which achieved 7.9% growth. Still beverages grew 5.4% and bottled water grew 12.1%. Total revenues for the quarter grew 11.2% reaching MXN 63.8 billion, driven mainly by solid volume growth, offsetting an unfavorable currency translation related to the appreciation of the Mexican peso as compared to most of our operating currencies. On a currency-neutral basis, our total revenues increased a solid 17.7%. Gross profit increased 11.7% to MXN 28.4 billion, leading to a slight margin expansion of 20 basis points to 44.6%. This increase was driven mainly by the operating leverage resulting from our solid top line performance and the appreciation of most of our operating currencies as compared with the U.S. dollar. These effects were partially offset by higher sweetener costs across our operations and the significant depreciation of the Argentine peso as compared with the previous year. Our operating income increased 11.6% to MXN 8.6 billion, with operating margin remaining flat at 13.5%. Our operating leverage, top line growth and cost and expense efficiencies enabled us to maintain flat margins despite increases in operating expenses, such as labor, freight, and maintenance. Notably, our comparison base includes a larger noncash foreign exchange gain due to the significant appreciation of the Mexican peso during the same period of the previous year. Adjusted EBITDA for the quarter increased 13.5% to reach MXN 11.9 billion, and EBITDA margin expanded 40 basis points to 18.7%. Finally, our majority net income increased 27.8% to reach MXN 5 billion. This increase was driven mainly by the operating income growth I previously described, coupled with a decrease in our comprehensive financing results. This decrease in comprehensive financial result was driven mainly by the significant appreciation of the Mexican peso during the first quarter of 2023, which generated a noncash foreign exchange loss of MXN 640 million in the year earlier period. Now expanding on our operations highlights for the first quarter. In Mexico, our volumes increased 6.9%, reaching 490.4-billion-unit cases. We continue to see a favorable macroeconomic backdrop driven by structural and demographic tailwinds, such as decreasing unemployment and continuously improving payrolls. For instance, Mexico's unemployment rates have declined from 5.5% in June 2020 to 2.6% in February 2024. While average wage in real terms has increased by almost 18% in 5 years. This environment, coupled with favorable weather and our initiatives to grow our core business are driving strong demand across our Mexico territory. Regarding share, we continue with gains in Cola, but have seen impact in flavors due to unavailability. Additionally, we saw share gains in water, energy, and sports drinks. To give you a sense of the strong demand we are seeing in Mexico, we achieved historic production records of 186-million-unit cases in March. However, despite our supply chain team's effort to add capacity, productivity and improve our customer service metrics, we still identified unserved demand during the quarter, mainly in the flavors category in the Southeast region of the country. To address this situation and consistent with our priorities, we are on track with our ambitious capacity buildup plan. On March 22, a new PET one-way line started production and only 3 days later, a new distribution center began operations in the valley of Mexico. Finally, as we mentioned on our previous earnings call, we began the rollout of our version 4.0 Juntos+ in Mexico during the first quarter of 2024. Our customers' adoption and feedback has exceeded expectations. In just the second month after its launch, we have more than 214,000 active buyers in this new version from a total of 490,000 monthly active purchasers in the country. Importantly, 36% of our traditional trade orders are already done digitally. We are confident that with these capacity expansions, coupled with our commercial plans and our customer-centric culture, we will continue driving positive results in Mexico. Moving on to Guatemala, our volume increased 17% as we continue outperforming with brand Coca-Cola, energy, and juice. During the previous earnings call, we mentioned that on a comparable basis, volume in the country has doubled since 2017, and we continue to see plenty of opportunities for continued strong growth. Regarding B2B, Guatemala is growing its monthly active buyers with the rollout of Juntos+ strengthening our digital relevance in the traditional trade. For instance, we have reached 68,000 monthly active purchasers, representing 50% penetration of our customer base. To continue supporting growth, we're also adding capacity in Guatemala. During the quarter, a new one-way bottling line started production, and we are on track to switch on a new returnable bottling line next June. Now moving on to our South America division. In Brazil, a resilient macro environment with controlled inflation and declining interest rates, coupled with favorable weather drove 10.4% volume growth during the quarter to reach 288.2-million-unit cases. We continue strengthening our competitive positions across key beverage categories. For instance, we reached record levels of share in the sparkling beverage category, driven mainly by gains in brand Coca-Cola. Notably, Coca-Cola Zero Sugar continues its impressive rate of growth in Brazil, growing 49.2% year-over-year. As we continue to focus on growing the form, our single-serve mix increased 0.4 percentage points versus the previous year, reaching 24.2%, while profitable emerging beverage categories accelerated driven mainly by Powerade, which grew 39.5% year-on-year. Similar to Mexico, strong demand tailwinds are putting our infrastructure under significant stress, and our supply chain team is taking both short-term and long-term actions aligned with our strategic priority to debottleneck our infrastructure to support our growth ambitions. Finally, on the digital front, we continued scaling version 4.0 of the Juntos+ app in Brazil with more than 65% of traditional trade orders now done digitally. In Colombia, despite a challenging environment driven mainly by stubborn inflation, our volumes increased 9.7% to reach 88.3-million-unit cases. Our team's focus on improving service and availability, coupled with our commercial initiatives is resulting in share gains across categories and channels. Among the initiatives to grow the core, we're expanding our refillable platform while focusing on single-serve mix growth and our Zero Sugar portfolio. As in other high potential markets, we are increasing capacity and streamlining our value chain. We expect to install 2 new lines this year, one will begin production during the first half of the year and the other before year-end. Finally, Argentina. As anticipated, the consumer environment during the first quarter worsened significantly leading to a 28% contraction in disposable income. This challenging start to the year, coupled with unfavorable weather, led our volumes in the country to decline 16.9%. However, despite the many uncertainties ahead, the team remains focused on the objectives set for the year, leverage affordability, drive cost and expense controls and increase productivity. We are focused on protecting the short term to emerge stronger in the long term. And although how to predict, we continue to expect gradual sequential improvements as the year progresses. As I previously mentioned, we are encouraged to start the year with positive momentum. We have robust plans for the year, and most importantly, we have the right team to execute them across our markets. Together with our partners at the Coca-Cola Company, we are prioritizing long-term sustainable growth. With that, I will hand the call over to Gary.

Thank you, Ian, and good morning to you all. As usual, let me summarize our division's results for the first quarter. In Mexico and Central America volumes increased 7.9% to reach 579.8-million-unit cases, accelerating sequentially driven by positive performance across most of the division territories. Revenues increased 12.6% to MXN 37.8 billion, driven mainly by volume growth and partially offset by unfavorable translation effects into Mexican pesos. Excluding these effects, revenues increased 14.1%. Our gross profit increased 12.4% to reach MXN 17.9 billion, resulting in a gross margin of 47.3%, a 10-basis point contraction year-on-year. We are offsetting higher sugar prices in the division with top line growth, the appreciation of the Mexican peso and favorable raw material hedging initiatives. Operating income increased 13.4% to MXN 5.7 billion, driven mainly by our gross profit performance and variable expense efficiencies. Our operating margin expanded 10-basis points to 15% as our gross profit growth was offset by an increase in operating expenses, such as labor, marketing and freight. Importantly, our comparison base includes a larger noncash foreign exchange gain driven by the significant appreciation of the Mexican peso during the first quarter of 2023. Finally, our adjusted EBITDA in the division grew 15.5% with a 60-basis point margin expansion to 20.5%. Moving on to South America. Volumes increased 6.6% to 428.8-million-unit-cases. We continue to see solid volume growth in Brazil and Colombia, increasing 10.4% and 9.7%, respectively. As Ian previously mentioned, this volume growth was partially offset by a 16.9% volume contraction in Argentina and a 3.6% decline in Uruguay. Our revenues for the division increased 9.3% to MXN 25.9 billion as our volumes and revenue management initiatives were partially offset by unfavorable currency translation effects into Mexican pesos, especially driven by the depreciation of the Argentine peso. When excluding currency translation, our total revenues in South America increased 23.4%. Gross profit in South America increased 10.5% or 27.4% on a currency-neutral basis, leading to a margin expansion of 40-basis points to reach 40.6%. This increase was driven mainly by the operating leverage resulting from top line growth and favorable raw material hedging strategies. However, these effects were partially offset by increases in raw material costs, such as sweeteners and the depreciation of the Argentine peso as applied to our U.S. dollar-denominated raw material costs. Operating income for the division increased 8.2% to MXN 2.9 billion. On a currency-neutral basis, operating income increased 27% and operating margin contracted 10 basis points to 11.3%. This margin performance was driven mainly by our gross profit growth, coupled with cost and expense efficiencies that were offset by margin pressures in Argentina. Finally, adjusted EBITDA in South America increased 10.1% to MXN 4.2 billion or 30.7% on a currency neutral basis. Regarding our comprehensive financial results for the quarter, as Ian previously mentioned, we recorded an expense of MXN 1.2 billion as compared to an expense of MXN 1.4 billion during the same period of the previous year. This decline was driven mainly by a foreign exchange loss of MXN 640 million registered during the same period of the previous year as compared to an MXN 26 million gain registered this year. In addition, we registered a decrease in interest expense, driven mainly by the payment at maturity of MXN 7.5 billion denominated bond. These effects were partially offset by a decline in interest income, driven mainly by a decline in interest rates, a loss in the market value and financial instruments and a lower gain in monetary position in inflationary subsidiaries. Finally, I want to take a moment to comment about sustainability. As we have mentioned in previous calls, one of our 6 strategic priorities is to foster a sustainable future. To this end, we are pleased to report that we have successfully allocated the proceeds from the $705 million green bond issued in September 2020. In accordance with its framework, these proceeds were allocated across eligible categories in climate action, water stewardship and circular economy. Moreover, we continue making efforts to enhance our sustainability reporting with our 2023 integrated annual report. We adopted the SASB standards and the new integrated format that includes the Global Reporting Initiative table or GRI, disclosures recommended by the task force on climate-related financial disclosures and the performance in details section. Among other report highlights regarding world without waste targets, we published a 33% usage of recycled resin on track to achieve our goal of incorporating 50% recycled resin in our PET bottles by 2030. In terms of water stewardship, we reported an industry-leading water use ratio of 1.42 liters per liter of beverage produced, demonstrating our commitment to efficient water management. As you all know, social initiatives are also an integral part of our sustainability strategy as we have benefited more than 359,000 people through our community development actions. Finally, regarding diversity and inclusion, we continue progressing towards our 2030 goal of including 40% of women in leadership positions, advancing to 29% in 2023. For more detailed information on our sustainability efforts and achievements, I encourage you to refer to our 2023 integrated annual report, which is available on our website. With that, operator, we are ready to open the call for questions.

[Operator Instructions]. Our first question is from Benjamin Theurer of Barclays.

I actually have just one very general question. I wanted to get your thoughts around the performance in Mexico and to a degree as well in the other markets. It has been very strong in terms of volume momentum and growth what you've been delivering over the last couple of quarters. And just wanted to understand if you could share a little more detail how much of that is around specific strategic initiatives as to marketing, et cetera were, what on the other hand is maybe just gaining back share that now you have the capacity you've been investing on, and you had a very long list of capital projects. So just to kind of conceptualize where the strong volume growth is coming from, particularly in markets like Mexico, which are to a degree saturated from a per capita consumption but still grow mid-single digits? Ian Marcel Craig García: Hello, Ben. How are you? Thanks for the question. I think we've also run 3 axis. First of all, are very favorable structural headwinds in our territories in Mexico. We always had a lot of people in our territories, but we didn't necessarily have all of the disposable income. And now we have full employment with people having real gains in disposable income. And these people are driving big increases in NARTD per capita consumption. At the same time, as you correctly recall, we have revamped our OBPPC strategy in the Cola's family size segment. We adjusted again our pricing and pack strategy in flavors as well. And all of these strategies are starting to show the fruits over the last year and are carrying on the momentum to this year. And finally, we also had favorable weather. So, I would stress the fact that we continue to increase per capita consumption in Mexico. So, if you recall, last year we increased our per capita around 2.6%, 3%, and we continue to increase weekly plus consumption. So, I understand the feeling that Mexico has high per capita, and it's true. But in all regions, there's a lot of increase in disposable income and that is translating into NARTD consumption, coupled with our share gains, and that explains the strong volumes right there. And of course there's the weather, right? It was also a quarter with favorable weather. We have to mention that impact as well positive.

Congratulations on those outstanding results.

Our next question is from Rodrigo Alcantara with UBS.

Well, the first one would be for Ian. No doubt it was a great quarter in terms of volume growth in Mexico and Brazil, particularly right. Just curious for 2024, what would be your priorities? If you can give us any update on your plans regarding multi-category efforts in Mexico and Brazil. That would be one question. And the other perhaps would be for Gary, would be on the potential for KOF perhaps paying extraordinary dividend. I mean you already know the ordinary right but in the absence of M&A, the potential for you to increase the payout. You are generating a lot of cash and that you're very, very cautious on this line. But just curious here regarding your latest thoughts on increasing the payout to the shareholders. Ian Marcel Craig García: Hello, thank you for your questions. I would quantify that our priority, number one, as we stated, is still to continue leveraging on the growth momentum of our core business. Multi-category is important. I mean it continues to grow very high double digits year-over-year, but it's still under 1.5% in Mexico and Brazil, excluding beer. So, it's still a small segment, although it's growing very well. So, I would say that the driver continues to be the growth in our core business. And for this year, we are very excited about the deployment of our advanced AI capabilities. And we are still in a small-scale format in both Brazil and Mexico where we're testing this out, but we're getting very good uplift. We're getting very good uplift in the rollout of Juntos+ 4.0 in Mexico. So, I would say that the main focus for the year is still continuing to grow, leverage the momentum of our core business and taking Juntos+ 4.0 to the next level in these 2 territories. So, it would be more on that side rather than the multi-category. Although that's growing very well. It still is a way until we get to the level where we need to be in multi-category.

Regarding capital allocation priorities, I would just like to highlight our priorities are the same as we've been discussing. We are prioritizing reinvesting in our business. As you have been seeing for the past few quarters, we're growing significantly, and we're trying to just solve the issues that we have with being able to supply a growing market demand. So, we're allocating our excess cash and expect to consume our excess cash position in building this capacity to support our operations. Secondly, also, one of our strategic priorities is to continue to look for opportunities for M&A operations to look to consolidate further the region. As you know, the market is performing quite well. So, this is a challenging situation, but we will obviously keep the market posted and let you know when we have an idea of what we're going to do in terms of dividends and capital allocation.

Our next question is from Felipe Ucros from Scotiabank.

I'll echo what my peers said and very impressive on the volume side. You already talked a little bit about Mexico. But I had a kind of deeper question on Guatemala. Who's drinking all that product [ work ] and you've been growing in a double digits for 6 years in a row. So obviously, you're executing incredibly well. But are there any other factors in the way here that are equally important? I mean, are consumer preferences changing? Is maybe the competition asleep at the wheel? Like what's going on in Guatemala that allows you to grow volumes at that kind of level for such a prolonged time? And I can do a follow-up on the distribution agreements. Ian Marcel Craig García: Thank you. You're right, Guatemala is a jewel of a territory. It has many things that are working in our favor. If you remember Guatemala, when we took over that market, it was probably around 2017, we must have been selling around 70-million-unit cases and Pepsi was the leader. And it has been really several effects going on there. Number one, a very stable environment of over 3%, 3.5% GDP growth year-over-year with very low inflation, stable currencies, increasing foreign exchange reserves, increasing remittances, urbanization. So, all of these trends and a very young population, the youngest one in Latin America, just make the Guatemalan consumer all the time more adept at increasing their NARTD consumption. That was the fact that we were under-indexing share, and now we're getting to where we need to be and share have driven over the 7 years, you were right to remember double-digit growth. And it doesn't -- we don't have a sense of Guatemala slowing down at all. Per capita in Guatemala are still way below Mexico, even way below Chiapas, they're probably around maybe 2-third of the way or a little less of where it could be next to our Chiapas territory right across the border. And you don't see any differences between those consumers and the Guatemalan consumers at all. So, it's a very young country. I think it's around $17 million more or less with increasing incomes, driving organization and just people there love Coca-Cola. So, it should continue to give us very positive results in the foreseeable future, which is why we continue to invest heavily in capacity there. Even with these growth rates that we're getting, even with that we still have unavailability issue. So, there's a lot of unmet demand. So only good news coming out of Guatemala and we expect that to continue. One last point there in Guatemala is a very high single-serve market in Guatemala. So almost nearly 40% of the volumes there are a single serve. It's an incredible market.

Very interesting. And just wondering before I do my other follow-up on Guatemala. Anything you can comment on the competitive environment in Guatemala? Because as you mentioned, it's one of the very few markets in Latin America where Coke was not the super dominant force and you've completely flipped that around in such a short amount of time. So, what's the competitive environment there like? Ian Marcel Craig García: Well, I mean, we have 2 very tough competitors, cbc with the Pepsi portfolio. And the [ brewery Diageo ] with a mix of proprietary portfolio and some Cadbury brands. And they're both very good competitors. Thankfully the market is expanding and although we continue gaining share, the economy and the market as a whole continues to expand for everyone.

Got it. And then the distribution agreements question I had, globally speaking, how is the processes moving from pilots into agreements? And then in particular, I was hoping you could hone in a little bit on Panama. Brewing beer has been having a lot of trouble in that country and I wonder how that may be related to your distribution agreement of beer in Panama and how you're performing there? Ian Marcel Craig García: In Panama, we have beer with Heineken in certain territories. It's not in all of the territories. With that, it takes our revenues to around 5%. So, it's still small for us. And in terms of distribution agreements, trade terms, partnerships, we continue to evolve across all of our territories. I mean multi-category revenues overall. I mean they're growing very, very high. It's just still a small portion. We're growing 46%. So, it's still very high growth, but very small Felipe. I would caution that we need that, we're working to get up to 5% of revenues until it's a relevant piece of the business, it will still be very small continue to our core Coca-Cola Company beverage portfolio.

[Operator Instructions] Our next question is from Ricardo Alves with Morgan Stanley.

I also wanted to explore the remarkable volume performance, but now perhaps going a little bit deeper in Brazil. I mean, your volume is up 10% or so. I mean not only if you can provide what the outlook for the rest of the year when you take into consideration comps going forward. But when we look back in the first quarter, January and February, soft drink production in Brazil was similar to what you had. I mean, it's not clear what March was, but so far, 10%. So, kind of in line with your number, which would imply a similar performance to the industry. But I'm not sure if I listened to the preliminary remarks correctly, but it seems that you made reference to gaining share in Brazil, I think that I heard colas, for instance. So, it seems to be a case where industry is very strong, but you're also gaining share here and there. So, if you could expand in Brazil, but in particular competition, the competitive environment, the share dynamics, where exactly you're grabbing share for us to have a better idea of how much is the industry, how much is your execution? That's the first question. And then the second question on Juntos+, I think that you made reference in the preliminary remark and also in one of the questions. But the 4.0 version of the app, if I'm not mistaken, you already had that rolled out in Brazil, again, if I'm not mistaken, for a couple of months before Mexico. So, I'm not sure if you have some learnings already from what you got in Brazil and what you can potentially achieve in Mexico. So just going a little bit deeper on why this new version in particular, could be game changer in nature? And then on that topic, perhaps if you can talk about integrating the app with other digital platforms, I think that this is an angle that could be very interesting, particularly when you're talking about loyalty program and premium, I think that you already have that in Brazil, but now going to Mexico. So, a little bit deeper on Juntos+ as well would be helpful. Ian Marcel Craig García: Thank you for the question. So, I think the first one was regarding how we show up in Brazil in terms of our relative competitive position. I don't know what other companies reported. They probably reported national numbers. What we can say in our territories, we are gaining share. We're gaining share in CSDs mainly driven by share in Cola and expansion of the Cola category. We're not gaining share in flavor. So, we're gaining sharing Colas and expanding that category. Then in NCBs, we're really gaining share across the board. Every segment of NCBs we're gaining share. And I think where we have pressure is in water, and we're slightly down in gear. So, it's a very positive picture in share in Brazil with records in Colas, records in CSDs. So overall, a very positive share picture in Brazil in our territories. I don't have a sense of the national figures Ricardo. Regarding Juntos+, you are right. Mexico and the rest of the KOF countries always benefit from Brazil, listing the heavy burden of rolling out all of the digital strategies for Coca-Cola FEMSA. So it's always tough to be the first one to roll out a new version in Brazil. We collected a lot of learnings there, which is why Mexico just went with very smooth sailing. And I think 3 key things explain the big uplift in Mexico. Number one version 4.0 closes any gaps we had versus other platforms out there in terms of both user experience and performance. So, it closes those gaps. And it brought along a loyalty program that did not exist in Mexico. And that loyalty program is generating a lot of buzz and interest and repurchase from our clients. So any time our clients are very savvy merchants and they digitally compared to what's out there in wholesalers and such. The fact that we now give them a loyalty program, always incentivizes them to stay within our platform because they generate points. So, we've been very pleasantly surprised on the loyalty program. And then finally, with regards to the AI capabilities, I would say that we're just in that test out phase, both in Brazil and Mexico. And that's what makes it very exciting for me because the results we're getting on those tests are very good. So, I think once we deploy this out in a more massive way, we will continue to see an uplift from the version 4.0. That does not mean that we are not getting an uplift as it is. We're already getting an uplift. And when you see the clients that use our version 4.0, even versus the chatbot or the sales force, we see an increase in the average ticket, and we see an increase in the number of SKUs. So overall, Ricardo its very positive for us to continue rolling out this version. And the final piece is we're working for the fourth quarter, end of the first and start of the fourth to roll out or to test out really our new sales force automation engine in Brazil. And that's probably the final pillar of our digital strategy that still needed to be upgraded, and that should start to be showing results at the end of the year and probably for 2025, it would be a big difference for our physical sales force. I hope that helps Ricardo.

Just to complement one thing, Ricardo, that you asked about the outlook for Brazil. I would just say that definitely the first quarter was, as you pointed out and Ian mentioned, very strong. We had a tailwind from temperatures now especially in January. It was a strong start of the year. But we maintain our outlook for the rest of the year. We are optimistic about Brazil, but the outlook remains to be around the mid-single-digit volumes for the full year in Brazil. So, we maintain that outlook, but definitely a positive start for Brazil this year. Ian Marcel Craig García: I would say it's clear that Brazil is back and moving along positive.

Our next question is from Fernando Olvera with Bank of America.

The first one is related to volumes. If you can comment what has been the performance so far in April in your different markets? And the second question, can you give us some color of how margins performed by country in South America?

Regarding your first question, I would say, April pretty much a continuation of the performance we have seen, which is encouraging. Obviously, giving inter-month performance is challenging. We have information for a little over 20 days. But so far, we haven't seen any significant changes to what the quarter was. So, we continue to see positive performance. The plans that we are executing across our territories are coming along well. So we see nothing really to flag with regards to April performance at this point in time, Fernando. Ian Marcel Craig García: Regarding margins, Fernando, the pressure since our budget that we see in margins comes from Mexico, given increased labor, maintenance and freight expenses that we have been seeing. [Audio Gap] this is not only in Mexico, but in all of our territories. So, we are working, especially in Mexico to try to close any margin [Audio Gap ] for the year, looking for savings initiatives mainly, but the rest of our operations were seeing in terms of profit, expecting to achieve our budget as we have projected it.

I couldn't hear the last part. Thanks for the comment about Mexico. But in South America, how margins performed in Brazil, Colombia after the solid top line growth?

We had a very good performance in South America margins excluding Argentina, and we made those remarks in the prepared remarks of the call. So, Argentina is a dragger for margins as could be expected, but the rest of South America showed great performance in margins during the first quarter.

Thank you very much. As we have no further questions left in the queue, I would like to turn the call back over to Mr. Collazo for any closing remarks.

Well, thank you very much, everyone, for your interest in Coca-Cola FEMSA and for joining us on today's call. As always, myself and the rest of the Investor Relations team, we are available to answer any remaining questions. And we look forward to speaking to all of you again very soon. Thank you, and have a great day.

Thank you very much. That concludes today's conference.