Given the investments made and cost adjustments, what are the main strategic ambitions for 2026 and the next two years, and what is the update on shareholder distribution given the low leverage?

Strategic priorities remain growing the core business (Coke Zero, flavors, NCVs), capitalizing on Juntos+ AI capabilities across the four largest markets, and fostering a customer-centric culture. The company is being prudent with capital allocation, holding off on dividend strategy updates to assess cash flow behavior in H1 FY26 due to the Mexico excise tax. “We're holding on a little bit to see how cash flow behaves during the year. We'll certainly try to do our best to have the less disruption possible from this effect in our cash flow generation. But we're being a bit cautious, just waiting out and see how the first half of the year develops with the World Cup coming on and see how our projection for cash flow for the remainder of the year progresses.”

What are the drivers behind Brazil's strong performance and relative outperformance against competitors, and what caused the meaningful working capital outflow?

Brazil's strong performance is attributed to a consistent long-term growth model, leveraging a top-notch brand portfolio, consistent investment, wide distribution, and advanced digital enablers like Juntos+ Advisor. The working capital outflow was due to a base effect from a significant increase in accounts payable in Q4 FY24, caused by delays in the SAP/4HANA ERP rollout, which has since normalized. “Regarding working capital, it's exactly accounts payable, the effect that you're seeing, and it's an effect in the base. Just to remind everyone in the call, we are in the process of rolling out and deploying the implementation of our new ERP, SAP/4HANA. Due to delays last year, we had a significant increase in accounts payable that were a big effect in fourth quarter of '24.”

How comfortable is the company with implementing another round of price adjustments in Mexico to cover underlying cost inflation, and what is the visibility on gross margins and cost inflation for the next 12 months?

It's too early to consider another price increase in Mexico, as consumer elasticity is behaving as expected and the consumer is still sluggish post-excise tax. Gross margins in Mexico are expected to face some pressure in FY26 due to aluminum costs, despite benign sweetener and plastic prices. The company aims to offset this with fixed cost and expense controls to deliver near-flat EBIT margins. “From what I see today, I can tell you this, the elasticity is behaving as we have imagined. The consumer is still sluggish in Mexico. So it wouldn't be prudent to venture into an additional increase today.”

KOF

Coca Cola Femsa SAB DE CV (KOF) Q4 FY25 earnings call: guidance and Q&A

Earnings call· Dec 2025 (Q4 FY25)· Consumer Staples· Feb 24, 2026

Source: earnings call transcript

Executive summary

Coca-Cola FEMSA Q4 FY25 — Strong Volume Growth Despite Headwinds, Digital Enablers Drive Share Gains

Coca-Cola FEMSA navigated a challenging 2025 with sequential volume improvements culminating in record December performance, driven by strong execution and digital enablers in South America, particularly Brazil. While Mexico faced consumer softness and an excise tax increase, the company's agile response and focus on affordability and digital tools are expected to mitigate impacts, reaffirming its long-term sustainable growth model.

Highlights

Consolidated volume increased 1.3% in Q4 FY25 to 1.09 billion unit cases, with December marking the strongest month in company history.
Operating income increased 13.3% to MXN 13.7 billion, with operating margin expanding 160 basis points to 17.6%.
Brazil achieved its highest Q4 volume on record, with Coca-Cola Zero growing 44% and Sprite Zero 93% in FY25.
Juntos+ Advisor improved geo efficiency by 5.5 percentage points in Mexico and 9.2 percentage points in Brazil.
Full-year 2025 results demonstrated top and bottom line growth with resilient operating and adjusted EBITDA margins.

Concerns

Gross profit margin contracted 60 basis points to 46.7% in Q4 FY25 due to unfavorable mix, hedging positions, and fixed costs.
Mexico volumes contracted 0.9% year-on-year in Q4 FY25, with an expected low to mid-single-digit decline in FY26 due to the excise tax increase.
Normalized operating income (excluding insurance recoveries) declined 2.1% in Q4 FY25, resulting in an operating margin contraction of 90 basis points.
Comprehensive financial results recorded an expense of MXN 1.4 billion in Q4 FY25, up from MXN 980 million in Q4 FY24, driven by reduced interest income and higher interest expenses.

Guidance & targets

Category	Target	Timeline	Confidence
Mexico Volume Growth	low to mid-single-digit decline high materiality	FY26	High
Brazil Volume Growth	low to mid-single digits range medium materiality	FY26	Medium
Capex to Revenues Ratio	7% to 7.5% medium materiality	FY26	Medium
New Brazil Plant Start	around 2030 low materiality	FY30	Medium
Mexico Gross Margins	a bit of pressure medium materiality	FY26	Medium
Mexico EBIT Margins	as close to flat as possible medium materiality	FY26	Medium
Consolidated Volume Growth	flattish to slightly positive high materiality	FY26	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Consolidated Consolidated performance driven by revenue management initiatives, partially offset by unfavorable mix and currency translation. Operating income and Adjusted EBITDA positively impacted by insurance claims recovery. Volume: 1.09 billion unit cases (+1.3% YoY)Revenue (currency-neutral): +6% YoYGross Profit: MXN 36.3 billion (+1.8% YoY)Operating Income: MXN 13.7 billion (+13.3% YoY)Adjusted EBITDA: MXN 18.2 billion (+12.8% YoY)	MXN 77.7 billion	+2.9%	—	—
Mexico and Central America Revenue growth driven by revenue growth management initiatives, partially offset by unfavorable mix and currency translation. Gross margin expanded due to lower raw material costs. Operating income declined due to increased marketing, depreciation, and labor. Volume: Even YoYRevenue (currency-neutral): +3.3% YoYGross Profit: MXN 20.8 billion (+2.6% YoY)Operating Income: MXN 6.9 billion (-1.1% YoY)Adjusted EBITDA: +1.3% YoY	MXN 42.2 billion	+1.6%	—	—
Mexico Volume contraction improved sequentially, aided by price pack architecture adjustments and affordability initiatives. Coke Zero maintained solid growth.	—	-0.9%	—	—
Guatemala Volume growth achieved despite a decelerating macro environment and rising insecurity. Productivity initiatives implemented for a leaner operating model. Unit Cases: 48.9 million	—	+3.5%	—	—
South America Volume growth across all territories. Revenue driven by revenue management initiatives, offsetting unfavorable currency translation. Operating income and Adjusted EBITDA significantly impacted by insurance recovery in Brazil. Volume: 504.1 million unit cases (+3% YoY)Revenue (currency-neutral): +9.5% YoYGross Profit: +0.6% YoYOperating Income: MXN 6.8 billion (+32.8% YoY)Adjusted EBITDA: MXN 8.5 billion (+29.5% YoY)	MXN 35.4 billion	+4.6%	—	—
Brazil Volume growth driven by a historic December, strong market execution, and favorable weather. Gained share in all relevant categories. Plant in Rio Grande do Sul fully reopened in May.	—	+2.6%	—	—
Colombia Volume growth as macroeconomic environment gradually recovers and excise tax effects cycle. Portfolio initiatives adjusted price pack architecture. Coke Zero remains a growth engine.	—	+4.5%	—	—
Argentina Volume growth sustained through agile response to volatile environment, enhancing affordability and accelerating single-serve mix.	—	+3%	—	—

Capital programs

Brazil Manufacturing Capacity Expansion completed

Benefit:5 new production lines, 8.2% YoY increase in capacity

Increased manufacturing capacity by 8.2% year-on-year, supported by 5 new production lines.

Brazil Warehouse Capacity Expansion completed

Benefit:25,000 pallet positions, 6% YoY increase in capacity

Warehouse capacity increased by more than 25,000 pallet positions, representing a 6% increase year-on-year, achieved through a vertical automated warehouse located next to the Itabirito plant.

Medellin Distribution Center underway

Benefit:alleviate warehouse saturation and bring additional efficiencies

Expected to add another distribution center in Medellin in 2026.

Risks & headwinds

Mexico Excise Tax Increase FY26

large price increase

Mitigation:Adjustments to price pack architecture, affordability initiatives, increasing returnable pack offerings, productivity and cost control initiatives.

Soft Consumer Environment in Mexico FY25, continuing into FY26

weaker-than-expected consumer

Mitigation:Adjusted promotional grid, strengthened affordability initiatives, focus on recovering competitive position and protecting profitability.

Unfavorable Mix and Hedging Positions Q4 FY25

60 bps gross margin contraction

Fixed Costs (Labor, Depreciation) Q4 FY25

contributed to gross margin contraction

Mitigation:Expense controls such as maintenance and freight.

Guatemala Macro Environment Deceleration H2 FY25, continuing into FY26

volume growth at a lower-than-anticipated pace

Mitigation:Implemented productivity initiatives for a leaner operating model, initiatives to continue colas momentum and capture share in flavors.

Rising Insecurity in Guatemala H2 FY25, continuing into FY26

reductions in mobility

Mitigation:Focus on optimizing cost structure through disciplined expense management and operational excellence.

Aluminum Cost Pressure FY26

some pressure in gross margins

Mitigation:Aiming to compensate with fixed cost and expense controls to deliver near-flat EBIT margins.

What to watch in Q1 FY26

Mexico Volume Performance

next quarter

Current -0.9% in Q4 FY25

Target Impact of excise tax on Q1 FY26 volume

Why it matters

The excise tax increase in Mexico is a significant headwind, and its actual impact on Q1 FY26 volumes will indicate the effectiveness of mitigation strategies and consumer elasticity.

We continue with the same guidance for 2026, which is a low to mid-single-digit decline in Mexico simply because we had to transfer the impacts of the IEPS excise tax, and that was a large price increase that we had to transfer through for the IEPS tax. So we're not changing our guidance there, and we are seeing the impacts of that tax increase in the first quarter.

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Q&A highlights

What was the volume behavior in Mexico during Q4 FY25 and what are the early signs of consumer sensitivity to the new excise tax in Q1 FY26, and how is the company reacting?

Mexico volumes showed sequential improvement in Q4 FY25, with December being the strongest on record. However, the company maintains its FY26 guidance for a low to mid-single-digit decline due to the excise tax, and early Q1 FY26 signs show expected impacts, with elasticity behaving as imagined and the consumer remaining sluggish.

“We continue with the same guidance for 2026, which is a low to mid-single-digit decline in Mexico simply because we had to transfer the impacts of the IEPS excise tax, and that was a large price increase that we had to transfer through for the IEPS tax.”

asked by Ben Theurer · answered by Ian M. Craig García

3 min read 6 chapters

Detailed narrative

Mexico Market Dynamics & Strategic Response

Mexico experienced sequential volume improvements throughout 2025, culminating in a near-flat Q4 performance with a 0.9% contraction, and December marking the strongest month on record. Despite a soft consumer environment and the impact of a temporary unfavorable brand sentiment early in the year, the company implemented decisive measures including adjustments to price-pack architecture and revamped affordability initiatives, particularly in multi-serve refillable packs.

Coke Zero maintained solid growth at 14% volume, and the stills portfolio grew 7.4%, driven by Monster (+41%), FUZE Tea (+33%), and Santa Clara (+28%). The Mexico team's swift reaction to challenges, including cost control and productivity measures, helped recover competitive position and profitability.

For 2026, the company is prepared to navigate the excise tax increase and continued soft economic growth by bolstering its portfolio with affordability initiatives and increasing returnable pack offerings to defend household penetration.

Brazil's Record Performance & Digital Leadership

Brazil delivered a strong performance in Q4 FY25, with volumes increasing 2.6%, marking the highest fourth-quarter volume on record for the operation. This growth was driven by a historic December, outstanding market execution, higher average temperatures, and digital enablers. The company continued gaining share across all relevant non-alcoholic ready-to-drink categories, recovering most of the share lost due to the temporary plant closure in Rio Grande do Sul.

Coca-Cola Zero grew 44% and Sprite Zero achieved accelerated growth of 93% in FY25, with Sprite Zero now representing over 20% of total Sprite volume. The Juntos+ monthly active user base expanded beyond 303,000, and Juntos+ Premier loyalty customers increased 73% year-on-year.

Juntos+ Advisor improved sales force efficiency by over 9.2 percentage points to 95.6%.

South America Growth & Efficiency

The South America division saw overall volume growth of 3% in Q4 FY25, with all territories contributing. Colombia's volumes grew 4.5% as the macroeconomic environment gradually recovered, driven by portfolio initiatives to adjust price-pack architecture and the continued growth of Coke Zero.

Quatro became the #1 flavored sparkling beverage in Colombia. Argentina's volumes increased 3%, maintaining positive performance through agile responses to a volatile environment, enhancing affordability plans, and accelerating single-serve mix to 26.3%. Guatemala's volumes increased 3.5% despite a decelerating macro environment and rising insecurity, with a focus on gaining share through entry price points and developing stills categories.

Cost control measures and capacity investments across the region contributed to improved efficiencies.

Digital Transformation & AI Capabilities

Coca-Cola FEMSA is leveraging its Juntos+ AI capabilities and rolling out Juntos+ Advisor across its four largest markets. In Mexico, the rollout is complete, improving geo efficiency (visitation) by 5.5 percentage points to 96.5%, and strengthening customer relationships. In Brazil, Juntos+ Advisor increased efficiency by over 9.2 percentage points to 95.6%, supporting positive share performance.

The platform's ability to capture and process market information quickly through revenue growth management initiatives is seen as a strong position to address market challenges, including the excise tax in Mexico and the upcoming tax in Brazil.

Capital Allocation & Financial Flexibility

The company successfully priced a MXN 10 billion bond issuance in the Mexican market on February 12, through a dual tranche structure (MXN 7 billion at 9.12% fixed for 10 years, MXN 3 billion at TIIE plus 38 basis points for 3 years).

This issuance strengthens the financial position, extends the debt maturity profile, and provides financial flexibility, receiving the highest national credit ratings. While the company maintains a below 1x EBITDA leverage, it is taking a cautious approach to its dividend strategy for 2026, awaiting clarity on cash flow behavior due to the Mexico excise tax impact before providing further updates on shareholder remuneration.

Sustainability Achievements

Sustainability remains a core element of the company's long-term value creation strategy. Coca-Cola FEMSA's S&P Global Corporate Sustainability Assessment score increased by 11 points year-over-year to an all-time high of 81, leading to its inclusion in the 2026 Sustainability Yearbook as the highest-scoring company in its sector in the Americas.

The company also achieved a record score of 4.1 out of 5 in the FTSE4Good assessment and improved across other key evaluations, reflecting strong performance in climate action, water stewardship, and supplier management.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.