Arca Continental B de C : 9 February 2023EBITDA grew 9.4% with Revenue Up 7.1% in 4Q22

EBITDA GREW 9.4% WITH REVENUE UP 7.1% IN 4Q22

Monterrey, Mexico, February 9, 2023 - 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 fourth quarter and full year 2022 ("4Q22" and "12M22").

Table 1: Financial Highlights

	DATA IN MILLIONS OF MEXICAN PESOS
	4Q22	4Q21	Variation %	Jan-Dec'22	Jan-Dec'21 Variation %
Total Beverage Volume (MUC)	594.3	593.7	0.1	2,372.1	2,280.3	4.0
Net Sales	52,635	49,138	7.1	207,785	183,366	13.3
EBITDA	9,983	9,127	9.4	39,622	35,406	11.9
Net Income	3,956	3,187	24.2	15,503	12,282	26.2
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

4Q22 HIGHLIGHTS

• Net Sales were 7.1% higher than 4Q21, reaching Ps. 52,635 million.
• EBITDA increased 9.4% to Ps. 9,983 million for a margin of 19.0%.
• Net Income reached Ps. 3,956 million for an increase of 24.2% and a margin of 7.5%.

12M22 HIGHLIGHTS

• Net Sales grew 13.3% versus 12M21 to Ps. 207,785 million.
• EBITDA totaled Ps. 39,622 million for a margin of 19.1%, 11.9% higher than 12M21.
• Net Income increased 26.2% to Ps. 15,503 million for a margin of 7.5%.

COMMENTS FROM THE CHIEF EXECUTIVE OFFICER

"In 2022 we surpassed Ps. 200 billion in annual net sales for the first time in our company's history, closing the year at Ps. 207,785 billion, 13.3% higher than in 2021, with an 11.9% increase in EBITDA, as a result of the efforts and professionalism of our associates, who responded in an agile and effective manner to an environment of macroeconomic volatility, and, given every opportunity, boosted commercial execution with excellence, portfolio innovation and digitalization strategies to improve our service and attention to customers and consumers", stated Arturo Gutiérrez, CEO of Arca Continental.

"In 2023 we will continue implementing initiatives that create value and take advantage of the growth opportunities within our new collaboration framework with The Coca-Cola Company signed in 2022, including the expansion into new beverage categories while we advance on our route for sustainable growth, always seeking to make a positive difference in the communities we serve", 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
	4Q22	4Q21	Variation %	Jan-Dec'22	Jan-Dec'21	Variation %
Volume by category (MUC)
Colas	307.0	313.7	-2.1	1,223.3	1,187.6	3.0
Flavors	115.4	117.7	-1.9	441.8	428.9	3.0
Sparkling Total Volume	422.4	431.3	-2.1	1,665.2	1,616.5	3.0
Water*	68.3	60.0	13.9	267.5	240.3	11.3
Still Beverages**	50.0	49.5	0.9	206.5	196.7	5.0
Volume excluding Jug	540.7	540.8	0.0	2,139.1	2,053.5	4.2
Jug	53.6	52.9	1.3	233.0	226.9	2.7
Total Volume	594.3	593.7	0.1	2,372.1	2,280.3	4.0
Income Statement (M M M XP)
Net Sales***	52,635	49,138	7.1	207,785	183,366	13.3
EBITDA	9,983	9,127	9.4	39,622	35,406	11.9
EBITDA Margin	19.0%	18.6%	40 bp	19.1%	19.3%	-20 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 4Q22 increased 7.1% to Ps. 52,635 million compared to 4Q21. For the full year of 2022, net sales increased 13.3% to Ps. 207,785 million compared to 2021.
• In 4Q22 consolidated total sales volume rose 0.1%. In the twelve months of 2022, consolidated volume grew 4.2%, excluding jug water, to 2,139 MUC and was driven by volume growth across all our operations.
• Cost of sales in the fourth quarter increased 8.1% due to higher prices of raw materials, mainly PET and aluminum. In 12M22, cost of sales rose 14.5%.

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• Consolidated gross profit for 4Q22 grew 5.9% to Ps. 23,893 million, reflecting a gross margin of 45.4% for a dilution of 50 bps, primarily from increases in key input prices, which was partially offset by price increases and raw material hedging. In 12M22, gross profit reached Ps. 93,259 million for a margin of 44.9%, 50 basis points lower than in 12M21.
• Selling and administrative expenses rose 5.5% to Ps. 16,686 million in 4Q22, maintaining our discipline in expense control, decreasing the expenses to sales ratio 50 basis points when compared to 4Q21. For 12M22, selling and administrative expenses increased 11.0% to Ps. 63,858 million, representing 30.7% in relation to sales, 70 basis points below 12M21.
• In 4Q22, consolidated operating income reached Ps. 7,759 million, an increase of 23.0% compared to 4Q21, for an operating margin of 14.7%, 190 basis points above 4Q21. In 12M22, operating income rose 20.6% to Ps. 30,587 million for an operating margin of 14.7%, 90 basis points above 12M21 mainly from growth in sales and efficiencies in operating expenses.
• Consolidated EBITDA for 4Q22 increased 9.4% to Ps. 9,983 million representing an EBITDA margin of 19.0%, 40 bps above 4Q21. For 12M22, EBITDA increased to Ps. 39,622 million, 11.9% higher than 2021, representing a margin of 19.1%.
• Comprehensive cost of financing for 4Q22 was a loss of Ps. 836 million, from a higher exchange rate loss due to the appreciation of the peso versus the dollar. In 12M22, it reached Ps. 3,506 million, an increase of 6.5% due to higher interest expenses and a greater loss on monetary position in Argentina.
• Income tax for 4Q22 reflected an effective tax rate of 32.9% and totaled Ps. 2,315 million, 30.7% higher when compared to 4T21. For 12M22, the effective tax rate was 31.7%, for a total of Ps. 8,703 million.
• In 4Q22, net income increased 24.2% to Ps. 3,956 million for a net margin of 7.5%. For 12M22 net income reached Ps. 15,503 million, an increase of 26.2% and a net margin of 7.5%.
  BALANCE SHEET & CASH FLOW STATEMENT
• As of December 31, 2022, the cash balance was Ps. 27,761 million and total debt was Ps. 46,917 million, for a net debt position of Ps. 19,156 million. Net Debt/EBITDA ratio was 0.5x.
• Net operating cash flow reached Ps. 30,745 million as of December 31, 2022.
• CAPEX for 2022 was Ps. 9,755 million, mainly allocated towards improving execution at the point of sale with coolers and returnable packaging, while also strengthening production capabilities and logistics.

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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
	4Q22	4Q21	Variation %	Jan-Dec'22	Jan-Dec'21	Variation %
Volume by Category (MUC)
Colas	180.0	185.4	-2.9	747.9	730.8	2.3
Flavors	33.1	34.7	-4.6	135.9	137.1	-0.8
Sparkling Total Volume	213.1	220.2	-3.2	883.8	867.9	1.8
Water*	31.4	28.5	10.4	134.9	119.9	12.5
Still Beverages**	18.1	19.0	-4.9	77.9	75.8	2.8
Volume excluding jug	262.7	267.7	-1.9	1,096.6	1,063.6	3.1
Jug	51.6	50.9	1.4	225.4	219.2	2.8
Total Volume	314.2	318.5	-1.4	1,322.0	1,282.9	3.0
Mix (%)
Returnable	28.4	30.6	-2.3	29.4	32.0	-2.5
Non Returnable	71.6	69.4	2.3	70.6	68.0	2.5
Multi-serve	57.7	58.1	-0.5	56.7	57.9	-1.1
Single-serve	42.3	41.9	0.5	43.3	42.1	1.1
Income Statement (M M M XP)
Net Sales	22,231	20,252	9.8	89,334	78,642	13.6
EBITDA	4,698	4,556	3.1	20,591	19,252	7.0
EBITDA Margin	21.1%	22.5%	-140 bp	23.0%	24.5%	-150 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

• Net sales for Mexico increased 9.8% in 4Q22 reaching Ps. 22,231 million. For 12M22, net sales rose 13.6% to Ps. 89,334 million primarily due to selective price increases and the deployment of commercial initiatives which boosted volume growth.
• Sales volume for 4Q22 reached Ps. 262.7 MUC, excluding jug water, driven by the water category which grew 10.4%. For 12M22, volume, excluding jug water, reached 1,096.6 MUC, 3.1% higher than 12M21. Average price per unit case, excluding jug water, reached Ps. 78.04 in 4Q22, an increase of 10.0% driven by selective price adjustments and the execution of RGM initiatives.

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• During 4Q22, EBITDA for Mexico increased 3.1% to Ps. 4,698 million, representing a margin of 21.1%, a dilution of 140 basis points from the continued pressure in PET prices. For 12M22, EBITDA reached Ps. 20,591 million, an increase of 7.0% and representing a margin of 23.0%.
• In 2022, Mexico posted a 3.0% increase in volume versus 2021 and 4.9% versus 2019, reaching record volumes of 1,322 MUC. This was driven by the continuous innovation in products and packaging with the launch of 250-ml formats in the sparkling category, which contributed 41% of the growth in this category.
• During the fourth quarter, the supermarket and on-premise channels reported increases of 11.9% and 3.9%, respectively, primarily driven by commercial initiatives to promote product affordability and capturing new consumption occasions with a differentiated portfolio.
• The expansion of digital capabilities resulted in an increase of the number of customers that utilize our AC Digital platform, reaching a total of 214 thousand active customers, up 17% when compared to the previous quarter. By the end of 2022, this platform had captured approximately 38% of traditional channel volume.
• We continued our efforts to strengthen our analytics capabilities, which focused on optimizing promotional spend and improving key indicators in promotions and discounts and resulted in a higher ROI.
• During 4Q22 we launched Lemon Dou brand in the flavored alcoholic beverages category. In addition, we introduced new flavors of Topo Chico Hard Seltzer and continued the expansion in new territories.
• During the quarter, we deployed promotional activities of the 2022 FIFA World Cup that boosted growth of brand Coca-Cola, which increased 2.3%, posting its 5th consecutive year of volume growth at a compound annual rate of 1.4%.
• In 2022, we enhanced our advanced analytics capabilities for suggested order by identifying the potential of each customer. These modifications led to a 1.3% volume growth and a 3.3% increase in coverage of the suggested portfolio for customers where the use case was implemented.
• Bokados in Mexico posted single-digit sales growth and double-digit EBITDA growth in 4Q22, driven by our flexible pricing strategy, launching of new flavors of brand Prispas, and enhanced management of promotions and discounts. These initiatives drove growth in the traditional and modern channels of 7.3% and 2.2%, respectively.

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