Fomento Económico Mexicano B de C : Investor Presentation (March 2020)

Investor Presentation - March 2020

Safe Harbor Statement

During this presentation management may discuss certain forward-looking statements concerning FEMSA's future performance that should be considered as good faith estimates made by the Company. These forward-looking statements reflect management expectations and are based upon currently available data. Actual results are subject to future events and uncertainties, which could materially impact FEMSA's actual performance.

2

Overview

Ownership

47%(1)		100%		15%

Coca-Cola's largest		Market leader and		The world's most
franchise bottler in
	fastest growing retail
		international brewer
the world by volume
	chain in Mexico

1	Represents 56% of shares with voting rights.	3

Leading Consumer Company in Latin America

				FEMSA Comercio		Coca-Cola	Logistics/
			Proximity		Health	Fuel
				FEMSA	Refrigeration
			Division		Division	Division
		Mexico
		Brazil
		Colombia
		Argentina
		Venezuela
		Chile
		Panama
		Costa Rica
		Uruguay
		Guatemala
		Nicaragua
		Peru
		Ecuador							4

Internal company data, YTD.

Creating Economic Value in the Last Decade

FMX Market Cap Evolution

(US$ MM)

28,993

9,999

2008	March 2020

CAGR 08 - Mar 2020: 11%

Financial Highlights1

	20192	20093	CAGR %
Revenue	506,711	156,316	12%
EBIT	47,152	20,292	9%
EBIT Margin	9.3%	13.0%
EBITDA	75,440	25,533	11%
EBITDA Margin	14.9%	16.3%
CAPEX	25,579	8,950	11%

1 Amounts expressed in millions of Mexican Pesos

2 Includes the effect of IFRS-16

3 Figures for 2009 are the arithmetical sum of Coca Cola FEMSA and FEMSA Comercio, therefore figures exclude sold businesses.

• Consistently strengthening our competitive position.
• Ability to operate in a rapidly changing economic environment.
• Strong brand portfolio and exceptional operational capabilities.

Source: Bloomberg, as of March 05, 2020	5

Increasing Cash to Shareholders Over Time…

…while retaining strategic and financial flexibility

Ordinary Dividend

(Millions of Mexican Pesos)

CAGR

18%

19%

Payout

Ratio 1,620

24%

1,620

34%

26%	4,600
2,600

40%	32%	42%
	6,684	6,684

6,200

47%

44%

8,355

7,350

41%	22%	40%
		9,692

9,221

8,636

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Net Debt /	1.1 x
EBITDA

0.7 x

-0.1 x

0.0 x

0.0 x

1.2 x

1.1 x

1.2 x

1.6 x

0.4 x

0.9 x

Note:	Dividend figures are in Mexican pesos. Payout ratio figures are the division of the dividend between previous year net majority income. 2010 net majority income	6

does not include Heineken transaction effect. 2011 and thereafter figures are under International Financial Reporting Standards ("IFRS").

An Increasingly Balanced Core Portfolio

Revenue Contribution

2009

34%

66%

2019

40%

60%

Coca-Cola FEMSA

FEMSA Comercio

EBITDA Contribution

2009

21%

79%

2019

40%

60%

7

Note:

Figures show the arithmetical sum of Coca Cola FEMSA and FEMSA Comercio for comparison purposes.

FEMSA Comercio Overview

Proximity		Health		Fuel
Division		Division		Division

Operates OXXO, the		Includes drugstores		Operates the OXXO GAS
	and related operations
largest C-store chain in			chain of retail service
	in Mexico and
the Americas by units			stations in Mexico
	South America

9

FEMSA Comercio Business Evolution

FEMSA Comercio EBITDA ($Millions of Pesos) and Business Evolution

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

-

	16,000
10,000	OXXO store
mark
OXXO store
mark

Surpass 1,000 openings per year

2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
						CAGR1						12%2

19%

CAGR1

1 Total FEMSA Comercio Annual EBITDA CAGR.	17%	10
2 2019 vs. 2018 EBITDA growth on a comparable basis (Adjusted for IFRS16)

FEMSA Comercio is finding growth in adjacent formats

Contribution for 2019

Revenue

EBITDA

	Fuel		Fuel
		6%
	17%
		Health
			15%
Health		Proximity
20%
	63%	Proximity
			79%

Note: Numbers as of December 31, 2019.

11

OXXO: A Format that Fits our Consumer's Needs

• Second largest retailer in terms of Revenues in Mexico
• Benchmark for SSS and sales density in Mexico
• Best-in-class margins and returns
• We open one new store every 6 hours on average
• Every day, approximately 14 million people make a purchase at an OXXO Store

12

Largest Store Chain in the Americas by Units

OXXO Stores as a Percentage of Mom & Pops in Mexico

				# OXXO stores in Mexico
				% mom & pops in Mexico							17,839	19,0891
												16,526	2.00%
											15,225		1.80%
										14,061
									12,853
								11,721					1.60%
							10,601
						9,561							1.40%
					8,426
7,334
									1.20%
														1.00%
														0.80%
															0.60%
2009		2010	2011	2012	2013	2014	2015	2016	2017	2018	2019

Number of Stores

1

19,089

Mexico			The Americas
			2
			19,330
3,450		11,900	11,254
	1,439	Others		5,875
			4,202	3,766	3,323	3,047
		5, 000
	2,011	Mexico

Other C-Stores

in Mexico

Note: For The Americas Section: Alimentation Couche-Tard includes US, Canada and Latin America as of February, 3, 2019.
Source: Company Information. 7-Eleven: US, Canada and Mexico Operations as of Dec 2018. Source: Company Information. Rest of the companies: Source: CS News	13
"Top 100 US Convenience Store Companies", Published July 2018. Mom & pops: Company and INEGI information.

1 OXXO stores in Mexico as of December 31, 2019. 2 Total OXXO stores in LatAm as of December 31, 2019.

Horizontal Growth: Plenty of Runway Ahead

19,089 stores in Mexico and counting

FEMSA Comercio has developed proprietary models to assist in identifying optimal

store locations, store formats and product categories

Tijuana1

Population: 1.6 mm

OXXO Penetration Level by Population

OXXO Stores: 789	Penetration	Population / OXXO
2,081 people/store
Medium	<10,000 per store
	Moderate	10,000-30,000 per store
	Low	>30,000 per store

Nuevo Leon1

Population: 5.1 mm

OXXO Stores: 1,652

3,099 people/store

19 Distribution Centers

Valley of Mexico1

Population: 25.1 mm

OXXO Stores: 2,789

9,002 people/store

Note: INEGI 2015 Inter Population Consensus Survey . FEMSA information as of December 31, 2019.	14
1OXXO stores as of December 31, 2019. Includes LATAM

Differentiated Approach to Fill Consumer Needs

THIRST

Quench your thirst immediately

CRAVING

Satisfy your sudden craving for a snack, a meal or drink

TIME OPTIMIZATION

Acquire one-stop products and services in a simple and fast way

BREAKFAST

Start your day with a practical breakfast

LUNCH

Satisfy your hunger with an on-the-go meal

GATHERING

Stop by for your party needs

DAILY

Take home your everyday grocery needs

REPLENISHMENT

Replenish your depleted grocery and non- food products

15

Fine-tuning Strategies to Drive Same-Store Sales and Profitability

Category Development	Category Development	Segmentation
-Services	-Prepared Food
+1,400 services offered in the store

16

FEMSA Comercio - Health Division South America

Providing a solid platform for continued growth across the region

• Operating more than 1,900 health related points of sale in Chile, Colombia and Ecuador.

• Strong brand recognition and industry leadership in Chile, Colombia and Ecuador

• Operational expertise will serve as a driver of profitability

• Region presents opportunities for further international and cross-format growth

17

Note: Numbers as of Decemebr 31, 2019.

FEMSA Comercio - Health Division Mexico

Aspiring to consolidate fragmented industry following OXXO game plan

• FEMSA Comercio now operates more than 1,250 drugstores in Mexico, or approximately 3% of industry units

• Current expected organic revenue growth of 10% in the Mexican operations

• Oxxo´s operational and logistics expertise will facilitate national expansion

• Standardizing business model across different regional brands

18

Note: Numbers as of December 31, 2019.

A Growing Footprint

FEMSA Comercio's Health Division is gradually becoming a key drugstore operator in

Latin America

LatAm Comparable Players by Number of Stores

3,161

1,907 1,988 2,073

1,515

1,023 1,079

2,168

2

3

1

3

3

1

1

1

Source:

1. 2019 Company Reports. FEMSA Comercio - Health Division includes drugstores and beauty stores.
2. 3Q17 Company Reports
3. LatAm Retail Pharma Map, ILACAD World Retail, points of sale as of March, 2015; Euromonitor

Health

Division

19

Gas Stations (OXXO GAS)

FEMSA is participating in the rapid transformation of Mexico's Fuel industry

• New changes to Mexican regulatory framework now allow FEMSA to participate directly in the Energy sector, particularly through petrol stations
• We concentrate mainly in the northern part of the country, but with a growing presence in 17 Mexican States

	Number of Stations	Footprint
546	(End of Quarter)
545
544			545
543
542
541
540	541	541
539	540

538539

537

536

Station 4Q18	1Q19	2Q19	3Q19	4Q19
Annual
Growth		1.1%

Note: Numbers as of December 31, 2019.

+

-

20

Gas Stations (OXXO GAS)

• High-growth,low asset-intensity,high-return business
• As of December 31, 2019 there were 545 OXXO GAS stations, representing around 4% of a highly-fragmented industry

Revenue

(Billions of Mexican Pesos)

Price	17.5	17.6	17.7	17.7	17.8
per
Liter2
	12.6		12.4	12.3	12.2
		10.9

4Q18

1Q19

2Q19

3Q19

4Q19

1. Volume in thousands of liters considering same stations with more than twelve months of operations.
2. Average price per liter in Mexican Pesos.

Same Station Volume1

448

421

4Q18

4Q19

(5.9%)

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Largest Coca-Cola Franchise Bottler in the World by Volume, Operating in Attractive Regions

• Strategic partner to the Coca-Cola system representing about 12% of Global Volume
• ~3.4 Billion Unit Cases 1
• +US$ 10.3 Billion in Revenues
• +260 Million consumers
• More than 1.9 Million points of sale
• +80,000 employees

Volume Mix

Ownership:

6.4%

15.2%

Mexico

Central America

Colombia

Brazil

Uruguay

Argentina

78.4%

Sparkling

Water

Still

23

Creating Economic Value During the Last Decade

KOF Market Cap Evolution

(US$ MM)

11,484

8,000

2008	March 2020

CAGR 08 - Mar 2020: 4%

Financial Highlights1

	20192	2009	CAGR %
Revenue	194,471	102,767	7%
EBIT	25,423	15,835	5%
EBIT Margin	13.1%	15.4%
EBITDA	37,148	19,746	7%
EBITDA Margin	19.1%	19.2%
CAPEX	11,465	6,282	6%

1 Amounts expressed in millions of Mexican Pesos

2 Includes the effect of IFRS-16

• Consolidate as a Multi-category Leader.
• Reach Full Operating Potential.
• Growth Through Innovation.
• Growth Through Acquisitions.
• Proactive Environment Management.

Source: Bloomberg, as of March 05, 2020.	24

Strategic partner to the Coca-Cola System

Over the past 25 years, we have travelled a successful journey by consolidating across territories and categories leveraging on our operational excellence and a disciplined approach to capital allocation

5,000
						2017
4,000				2013
					2018
			2012
3,000			2010		2016	2019
			2011
			2007
2,000			2008
1,000
0
	1994	2003	2010			2019
Volume (Mn UC)	306	1,451	2,500			3,369

Points of sale (Mn)	1.5	1.6	1.9
Revenues (USD bn)	3.2	5.5	10.3
EBITDA (USD bn)	.8	1.1	1.9

25

KOF's Strategic Framework continues to be the guide for the business…

…while their consumers and clients are at the center of everything they do.

Sustainability Strategy: Structure

We are committed to developing the capabilities needed to generate the economic, social, and environmental conditions required to operate today-and to grow in the future in harmony with our environment. That is how we understand sustainability.

We contribute to create economic and social value through our Strategic Sustainability Framework:

29

Selected Sustainability Achievements 2018

We are aware of the fact that our communities face challenges that are increasingly more complex.

Consequently, we know we need to evolve and strengthen our decision-making processes based on

criteria that simultaneously creates economic and social value, as defined by our mission.

• FEMSA and Coca-Cola FEMSA have been part of the FTSE4Good Index Series for 3 consecutive years.
• Coca-ColaFEMSA has been for seven consecutive years part of the Dow Jones Sustainability Index (DJSI) for Emerging Markets.
• FEMSA and Coca-ColaFEMSA have been for three consecutive years part of the DJSI Latin American Integrated Market Index (MILA).
• FEMSA and Coca-Cola FEMSA have been part of the Mexican Stock Exchange Sustainability Index for seven consecutive years.

30

Our Investment in Sustainability

At FEMSA we invest ~ 1% of our total consolidated revenue in sustainability every year.

Total Spending on Sustainability (by Pillar)

USD Millions

180

160

140

120

100

80

60

40

20

0

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Our Planet Our Community

Our People

• In MXN terms the investment made on Sustainability during 2015 grew compared to 2014 and during 2014 compared to 2013, but when translated to USD it decreases due to the depreciation of the MXN against the USD (December 31 for each year).

31

Going Forward

Focus on disciplined capital deployment to take advantage of balance sheet flexibility, targeting assets consistent with our business platform and set of capabilities.

Sustained organic growth at OXXO in Mexico, with compelling growth in new complementary drugstore and fuel operations, as well as medium-term objectives to test additional international markets.

Continue to drive organic revenue growth across markets, working in tandem with The Coca-Cola Company to enhance our portfolio by addressing evolving consumer preferences, and continue to pursue incremental territories that are structurally well suited to our skill set.

32

Financial Summary (Amounts in millions of Mexican Pesos)

	2014	% Var	2015	% Var	2016	% Var	2017	% Var	2018	% Var	(1)	% Var
	2019
Total Revenues	263,449	2%	311,589	18%	399,507	28%	460,456	15%	469,744	2%	506,711	8%
Income from Operations	29,983	0%	33,735	13%	37,427	11%	41,439	11%	41,576	0%	47,152	13%
% of Revenues	11%	-2%	11%	-5%	9%	-13%	9%	-4%	9%		9%
Operative Cash Flow	40,945	3%	46,626	14%	54,987	18%	61,418	12%	60,458	-2%	75,440	25%
% of Revenues	16%	1%	15%	-4%	14%	-8%	13%	-3%	13%		15%
CAPEX	18,163	2%	18,885	4%	22,155	17%	25,180	14%	24,266	-4%	25,579	5%
% of Revenues	7%	0%	6%	-12%	6%	-8%	5%	-1%	5%		5%
FEMCO
	2014	% Var	2015	% Var	2016	% Var	2017	% Var	2018	% Var	(1)	% Var
	2019
Total Revenues	109,624	12%	151,401	38%	209,166	38%	240,013	15%	266,133	11%	291,584	10%
Income from Operations	8,680	10%	11,105	28%	13,310	20%	14,331	8%	16,650	16%	21,041	26%
% of Revenues	8%	-2%	7%	-7%	6%	-13%	6%	-6%	6%		7%
Operative Cash Flow	11,756	11%	14,802	26%	18,306	24%	20,139	10%	23,157	15%	35,270	52%
% of Revenues	11%	-1%	10%	-9%	9%	-10%	8%	-4%	9%		12%
CAPEX	5,191	-9%	6,276	21%	8,405	34%	9,628	15%	11,123	16%	12,609	13%
% of Revenues	5%	-19%	4%	-12%	4%	-3%	4%	0%	4%		4%
OXXO SSS %growth	2.7	13%	6.9	156%	7.0	1%	6.4	-9%	5.2	-17%	5.0	-5%
KOF
	2014	% Var	2015	% Var	2016	% Var	2017	% Var	2018	% Var	(1)	% Var
	2019
Total Revenues	147,298	-6%	152,360	3%	177,718	17%	203,780	15%	182,342	-11%	194,472	7%
Income from Operations	20,743	-3%	22,645	9%	23,920	6%	26,175	9%	24,673	-6%	25,423	3%
% of Revenues	14%	2%	15%	6%	13%	-9%	13%	-5%	14%		13%
Operative Cash Flow	28,385	-1%	31,233	10%	35,495	14%	39,546	11%	35,456	-10%	37,148	5%
% of Revenues	19%	5%	20%	6%	20%	-3%	19%	-3%	19%		19%
CAPEX	11,313	-3%	11,484	2%	12,391	8%	14,612	18%	11,069	-24%	11,465	4%
% of Revenues	8%	2%	8%	-2%	7%	-7%	7%	3%	6%		6%
Volume (mill UC)	3,417.3	7%	3,435.6	1%	3,334.0	-3%	3,318.1	0%	3,321.8	0%	3,369.2	1%

33

1) Includes the effect of IFRS-16

Debt Profile - December 31, 2019

US Dollars

Euros

Other Currencies

Mexican Pesos

Currency	Average
Rate
7.8%
18.8%	3.9%
18.9%	1.8%
	1.7%

54.5%	8.1%

Rate

11%

Weighted

Average

89%

6.68%

Variable

Rate

Fixed

Rate

Maturity

2020

20212022

2023

2024

2025+

14.5%

4.2%.4%

44.6%

0.7%

33.6%

34

Contact Information	Stock Information
[e-mail]	Bolsa Mexicana de Valores (BMV): FEMSAUBD
www.femsa.com	New York Stock Exchange, Inc (NYSE): FMX
Phone: [phone]	ADR 10:1