Arca's report was positive. Volumes confirmed a sustained recovery, while expense efficiencies and a better sales mix boosted profitability more than expected
The figures reaffirm our positive outlook for the company, in view of the economic recovery, with a healthy financial structure, and a relatively more favorable geographic exposure
Profitability expansion of 190 bps. AC reported a solid 1Q21, with margin improvements in all regions, highlighting the performance in Mexico and the US. Consolidated volume advanced 0.4% (Mexico: +1.4%; US: -1.6%; South America: +0.0%), reaching 514.1 million unit cases, as a result of higher sales of Colas and Still Beverages, which offset a decline in Water ‒due to the preventive supply a year ago‒. As a result, revenues reached MXN 40.475 billion (+4.1% y/y), supported by above-inflation pricing initiatives, as well as recovery in the on-premise channel thanks to higher mobility. Consolidated EBITDA totaled MXN 7.681 billion (+15.7% y/y), due to a better sales mix, favorable raw-material hedging, efficiencies derived from its Northpoint plant, better promotion management, and to a greater extent, the company's cost and expense control strategy. In this way, AC achieved an EBITDA margin expansion of 190 bps y/y (Mexico: +270 bps; US: +200 bps; South America: +50 bps) to 19.0%, more than offsetting the impact of higher concentrate costs in Mexico. Finally, at the net level, a profit of MXN 2.585 billion (-3.5% y/y) was recorded, after lower FX gains and a higher effective tax rate (30.7% vs. 29.7% previously). Favorable outlook and low leverage. The report reaffirmed AC's favorable outlook this year, as its digital channel development efforts continue to pay off and will be an important growth driver going forward. Additionally, AC maintains an attractive valuation at 7.5x FV/EBITDA, and a solid financial structure (0.6x ND/EBITDA), which it could use to capture inorganic growth opportunities or increase shareholder distributions. We reiterate our BUY rating and PT of MXN 126.00.
Performance by Region
