Fomento Economico Mexicano S.A.B. de C.V.

Good morning, everyone, and welcome to FEMSA's first quarter 2023 results conference call. Today's call is being recorded. I would now like to hand the call over to Juan Fonseca, Investor Relations. Please go ahead, sir.

Good morning, everyone, and welcome to FEMSA's first quarter 2023 results conference call.

Today, we're joined by Paco Camacho, our Chief Corporate Officer, and Eugenio Garza. As always, we also have Jorge Collazo on the line, who leads Coke FEMSA's Investor Relations team. Today the plan is to have Paco share some higher-level strategic considerations, followed by an overview of performance trends during the quarter, and then Eugenio will provide comments on the quarter results. After the remarks, I will address some changes we have introduced to our disclosure that we hope you will find helpful, with some closing remarks by Paco, and then we will open the call to Q&A. Paco, please go ahead. Thank you, Juan, and good morning to everyone on the line. Before we get into the quarter, let me update you on our FEMSA, our commitment to achieve a focused platform built on retail, Coca-Cola FEMSA, and our digital ecosystem, and the progress we have made in the couple of months since we last spoke. As you know, we already reduced our investment in Heineken Group from approximately 14% to 8%. Assuming our related exchangeable bonds are converted in full. Following these transactions, we carried out a tender offer for some of our outstanding bonds, significantly reducing our financial debt and bringing us slightly below our leveraged target of two times net debt to Evita XCOF. That now stands at 1.8 times. Beyond these successful developments, we are progressing on the various tracks that will ultimately take us to the target structure in a value-conscious fashion. We'll keep you updated as we move along. As you remember, a big part of FEMSA Forward is about driving growth in our core verticals, and there was a lot of that in our first quarter. 2023 is also a good start, and we are excited about our momentum. This marks the eighth consecutive quarter that our proximity division has achieved double-digit top-line growth, and the fifth in a row for Coca-Cola Fence. While inflation was a factor, we are still proud of the way our teams find a way, time and again, to deliver dynamic growth, even as ours expands. What this also means is that OPSA and Coca-Cola FEMSA achieved double-digit growth this quarter, on top of double-digit growth period of last year. Double-clicking on the OPSA results, it is particularly encouraging to see that same-store sales grew by more than 18%, accelerating sequentially in both ticket and traffic. This is in contrast to softening retail trends in Mexico. To put this in perspective, we went back and looked at 20 years of top line and sales data for OXO. And these quarter growth rates are the highest for that period. Continuing with the positive news, we also have a good start to the year regarding new store growth, not only in Mexico, but across markets. with a stellar performance in Brazil, where our joint venture group and us opened almost 100 new access stores during the quarter. Our health division continues the stable trend we saw at the end of last year, where the difficult comparison based in Chile along with currency headwinds in the rest of our market. However, we managed to deliver record margins for the first quarter at the gross and EBITDA levels. For its part, our fuel business continues to see positive consumer dynamics and solid growth throughout its income statement. Regarding digital, the number of active users for SPIN more than tripled year-over-year to reach 4.2 million, while our premium loyalty program more than doubled to reach 12.7 million. 20% of OXA sales are now associated with the program. On the B2B front, we closed the position of NetPay earlier this month. So we continue to move steadily forward. Just as importantly, we continue to work on the seamless integration of the three verticals into our physical networks. Moreover, we tune the use cases, value propositions, unit economics, and monetization strategies for each of these products as we aim to ensure sustainable value creation for the ecosystem. In fact, just last week, we launched the national transition of FOXO-Premier into our coalition logistic program. This first partnership to be operational is with OxoGas, and it's off to a great start. The coalition platform represents an encouraging step towards the consolidation of our digital ecosystem, and we will keep you posted on new partnerships and developments. In terms of financial implications, It is still a bit early to incorporate a full P&L for the digital business into our disclosure. But during the quarter, we deployed close to 900 million pesos in growing this business. And we are expecting quarterly figures in that range for the next several quarters. Finally, let me talk a little bit about our logistics and distribution. As we have discussed before, the rapid growth of Envoy Solutions over the years materially increased its relevance as part of the FEMSA asset base, requiring in turn increased visibility in our disclosure. Therefore, we are now reporting Envoy Solutions on a standalone basis, and we are no longer breaking out the results of Latin America logistics operations from our consolidated results. As you know, we are exploring strategic alternatives for Envoy Solutions. But as long as we consolidate the results, we will continue to disclose them separately. Before I turn it over to Eugenio, I want to talk a little bit about our ongoing efforts to refresh and resize our board of directors. In our recent Annual General Meeting, our shareholders approved the nomination of 15 board members. a further reduction of two members from last year, and six fewer than in 2018. Beyond resizing, two of our directors are new to our board, and they bring significant experience and expertise in retail and digital. Governance is a key area of focus for SAMHSA, and we will keep you posted of any new developments. Finally, I want to thank and recognize our team's unit for performing at such a high level during the first quarter. As we said during our recent conversation around FEMSA Forward, the outlook of our company has never been as compelling and promising as it is today. And our Q1 performance is a solid first step along that path. And with that, let me turn it over to Eugenio.