Arca Continental B de C : 22 July 2022EBITDA grew 11.0% and revenue increased 16.5% in 2Q22

EBITDA GREW 11.0% AND REVENUE INCREASED 16.5% IN 2Q22

Monterrey, Mexico, July 22, 2022 - Arca Continental, S.A.B. de C.V. (BMV: AC*) ("Arca Continental" or "AC"), the second-largest Coca-Colabottler in Latin America, announced its results for the second quarter and first half of 2022 ("2Q22" and "6M22").

Table 1: Financial Highlights

DATA IN MILLIONS OF MEXICAN PESOS

			2Q22	2Q21	Variation %		Jan-Jun'22	Jan-Jun'21 Variation %
	Total Beverage Volume (MUC)	616.4	577.8	6.7	1,158.0	1,091.8	6.1
	Net Sales
	53,363	45,808	16.5	99,428	86,282	15.2
	EBITDA		10,436	9,399	11.0		18,963	17,081	11.0
	Net Income		4,222	3,130	34.9		7,316	5,715	28.0

Total Beverage Volume includes jug water

Net sales not including Revenues outside the territory (OT) in USA

EBITDA = Operating income + Depreciation + Amortization + Non Recurring Expenses

2Q22 HIGHLIGHTS

• Net Sales reached Ps. 53,363 million, 16.5% higher than 2Q21.
• EBITDA was Ps. 10,436 million for a margin of 19.6%, up 11% versus 2Q21.
• Net Income totaled Ps. 4,222 million, up 34.9% for a margin of 7.9%.

6M22 HIGHLIGHTS

• Net Sales reached Ps. 99,428 million, representing an increase of 15.2% versus 6M21.
• EBITDA totaled Ps. 18,963 million for a margin of 19.1%, 11% higher than 6M21.
• Net Income increased 28% to Ps. 7,316 million for a margin of 7.4%.

COMMENTS FROM THE CHIEF EXECUTIVE OFFICER

"By continuously improving the implementation of our commercial model, and with a clear focus on digital initiatives to enhance customer service at the point of sale, we grew net sales by 16.5% and net profit 34.9% in the quarter, reflecting the operating and financial discipline that we are known for, and the firm commitment of our associates in the face of a challenging environment," said Arturo Gutiérrez, CEO of Arca Continental.

"In the second half of 2022, we will keep deploying innovative strategies in the marketplace to meet the needs of customers and consumers, as well as actions to support our communities, against the backdrop of high inflation and disruptions in the supply chain", he added.

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CONSOLIDATED RESULTS

The figures presented in this report were prepared in accordance with International Financial Reporting Standards ("IFRS").

TABLE 2: CONSOLIDATED DATA

	2Q22	2Q21	Variation %	Jan-Jun'22	Jan-Jun'21		Variation %
Volume by category (MUC)
Colas	319.1	300.1	6.3	592.8	564.6		5.0
Flavors	111.8	103.8	7.7	217.8	201.5		8.1
Sparkling Total Volume	430.9	403.9	6.7	810.6	766.1		5.8
Water*	66.7	61.6	8.3	125.9	116.1		8.4
Still Beverages**	53.5	50.6	5.8	102.8	94.1		9.2
Volume excluding Jug	551.0	516.0	6.8	1,039.3	976.3		6.4
Jug	65.3	61.8	5.7	118.7	115.5		2.7
Total Volume	616.4	577.8	6.7	1,158.0	1,091.9		6.1
Income Statement (MM MXP)
Net Sales***	53,363	45,808	16.5	99,428	86,282		15.2
EBITDA	10,436	9,399	11.0	18,963	17,081		11.0
EBITDA Margin	19.6%	20.5%	-90 bp	19.1%	19.8%		-70 bp

• Includes all single-serve presentations of purified, flavored, and mineral water.
• Includes teas, isotonics, energy drinks, juices, nectars, fruit, and alcoholic beverages
• Net Sales not including Revenues outside the territory (OT) in USA

FINANCIAL ANALYSIS

INCOME STATEMENT

• Net sales for 2Q22 increased 16.5% to Ps. 53,363 million compared to 2Q21, mainly boosted by sales growth in Mexico and the U.S. In the first half of 2022, this figure reached Ps. 99,428 million, an increase of 15.2% compared to the previous year.
• Sales volume maintained its positive trend in 2Q22 posting an increase of 6.8%, excluding jug water, driven by increases of 8.3% and 6.7% in the water and sparkling categories, respectively.
• In 2Q22, cost of sales rose 18.9% as a result of the increase in raw material prices, notably PET, among others.

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• Consolidated gross profit increased to Ps. 23,663 million, up 13.6% versus 2Q21 and reflecting a gross margin of 44.3%. In the first half of 2022, gross profit reached Ps. 44,271 million for a margin of 44.5%, 100 basis points lower than in 2021.
• Selling and administrative expenses rose 13.4% to Ps. 15,696 million in 2Q22, maintaining our discipline in expense efficiency with a decrease in the ratio of expenses to sales of 120 basis points when compared to the previous year. In the first half of 2022, selling and administrative expenses reached Ps. 30,209 million, reflecting an increase of 11.6%, representing 30.4% in relation to sales, 100 basis points below 2021.
• In 2Q22, consolidated operating income reached Ps. 8,136 million, an increase of 16.5% versus 2Q21, for an operating margin of 15.2%, in line with 2Q21. In the first half of 2022, operating income rose 17.8% to Ps. 14,418 million for an operating margin of 14.5%, 30 basis points above 2021.
• Consolidated EBITDA for 2Q22 increased 11.0% to Ps. 10,436 million representing an EBITDA margin of 19.6%, down 90 basis points. For the first half of 2022, it reached Ps. 18,963 million, 11.0% higher than 2021 at a margin of 19.1%, which was 70 basis points below 2021.
• Comprehensive cost of financing for 2Q22 was a loss of Ps. 876 million, throughout the year, the Mexican peso has been recovering against the US dollar.
• In 2Q22, income tax reached Ps. 2,239 million, 29.0% higher than 2Q21, reflecting at an effective rate of 30.1%. For the first half of 2022, the effective rate was 30.1%, 60 basis points lower than in 2021.
• Arca Continental reported net income of Ps. 4,222 million for 2Q22, 34.9% above 2Q21, reflecting a margin of 7.9%. In the first half of 2022, net income totaled Ps. 7,316 million, resulting in a net margin of 7.4%.
  BALANCE SHEET & CASH FLOW STATEMENT
• As of June 30, 2022, the cash balance was Ps. 30,234 million and total debt was Ps. 50,234 million, for a net debt position of Ps. 20,000 million. Net Debt/EBITDA ratio was 0.5x.
• Net operating cash flow reached Ps. 15,273 million as of June 30, 2022.
• CAPEX for the period totaled Ps. 3,470 million, mainly allocated towards the purchase of coolers and returnable packaging to offer consumers affordable product options.

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Mexico

Arca Continental reports its information for three regions: Mexico, United States and South America, (which includes Peru, Argentina and Ecuador). Each region includes results for both beverage and complementary businesses.

TABLE 3: MEXICO DATA

		2Q22	2Q21	Variation %	Jan-Jun'22	Jan-Jun'21	Variation %
	Volume by Category (MUC)
	Colas	202.6	192.5	5.2	361.9	349.9	3.4
	Flavors	38.8	37.2	4.5	67.3	65.3	3.0
	Sparkling Total Volume	241.4	229.7	5.1	429.3	415.2	3.4
	Water*	36.4	34.0	7.0	63.9	58.4	9.5
	Still Beverages**	20.9	20.2	3.2	39.3	36.3	8.2
	Volume excluding jug	298.7	283.9	5.2	532.5	509.9	4.4
	Jug	63.6	60.1	5.7	114.7	111.5	2.9
	Total Volume	362.3	344.1	5.3	647.2	621.4	4.2
	Mix (%)
	Returnable	29.4	32.2	-2.8	30.0	32.6	-2.6
	Non Returnable	70.6	67.8	2.8	70.0	67.4	2.6
	Multi-serve	55.8	57.0	-1.1	56.2	57.9	-1.7
	Single-serve	44.2	43.0	1.1	43.8	42.1	1.7
	Income Statement (MM MXP)
	Net Sales	23,860	20,723	15.1	42,139	37,284	13.0
	EBITDA	5,795	5,451	6.3	9,764	9,296	5.0
	EBITDA Margin	24.3%	26.3%	-200 bp	23.2%	24.9%	-170 bp

• Includes all single-serve presentations of purified, flavored, and mineral water.
• Includes teas, isotonics, energy drinks, juices, nectars, fruit, and alcoholic beverages

OPERATING RESULTS FOR MEXICO

• In 2Q22, net sales for Mexico reached Ps. 23,860 million, an increase of 15.1% compared to 2Q21. For the first half of 2022 net sales increased 13.0% to Ps. 42,139 million.
• Sales volume grew 5.2% in the quarter to 298.7 MUC (excluding jug water) mainly driven by the water and sparkling categories which grew 7.0% and 5.1%, respectively. Average price per unit case, excluding jug, increased 8.1% to Ps. 74.17. In the first half of 2022, volume grew 4.4%, excluding jug.
• During 2Q22, EBITDA for Mexico rose 6.3% to Ps. 5,795 million, representing a margin of 24.3%, 200 basis points lower than 2Q21. In the first half of 2022, EBITDA reached Ps. 9,764 million, 5.0% higher than 6M21 at a margin of 23.2%.
• In June we registered a record month of sales volume, with over 100 MUCs for the first time in history, as a result of outstanding execution strategies at the point of sale.

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• During the quarter, most channels returned to pre-pandemic volume levels, with the largest opportunity being the on-premise channel, where we implemented initiatives, such as exclusive promotions, combo presentations to boost the performance of brands, promotional material and product sampling.
• The mix of single serve packages posted an increase of 1.1 percentage points during the quarter as a result of the solid performance of launches carried out in the sparkling category: 250ml one-way and the universal bottle in 500ml.
• In 2Q22, AC Digital in Mexico reached more than 50% of the traditional channel customers, representing around 19% of the operation's total volume.
• We focused on improving our advanced analytics capabilities, specifically to optimize promotions. Approximately 6% of promotional spend was migrated towards more efficient discounts.
• During 2Q22, we launched the pilot of an initiative called "Portafolio por Cliente", or "Portfolio per Customer", which is the evolution of our strategy of "Imperdonables", or "Must-Have SKUs". The goal is to have a personalized portfolio every month based on the needs of each customer. Great preliminary results showed 2.2% growth in sales and 6.3% higher market share.
• The universal bottle strategic initiative continued delivering growth, as it expanded to new territories. The universal bottle now represents 9% of the sales volume mix within the portfolio of returnables, which is an increase of 5 percentage points compared to last year.
• Bokados, in Mexico, posted double-digit increases in sales and EBITDA as a result of segmented price adjustments and focus on increasing coverage in the traditional channel. The modern channel posted the highest sales growth as a result of improved promotional strategies.

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