Mexican Coke bottler Arca reports rise in second-quarter profit

MEXICO CITY, July 17 Thu Jul 17, 2014 8:51am EDT

MEXICO CITY, July 17 (Reuters) - Arca Continental, Latin America's No. 2 Coke bottler, said on Thursday its second-quarter profit rose 3 percent, as cost-cutting helped offset a drop in sales caused by a tax on sugary drinks.

The company reported a profit of 1.935 billion pesos ($144 million), compared to 1.878 billion pesos in the year-earlier period.

Arca said the volume of drinks it sold fell 3.3 percent, but price increases helped revenue rise by 0.8 percent to 15.958 billion pesos.

Sales of fizzy drinks in Mexico have slumped this year since the government introduced junk-food and sugary drinks taxes that have raised prices for consumers.

Arca's rival, Coca Cola Femsa, has said it expects sales volumes in Mexico to drop between 5 and 7 percent this year as a result of a tax of 1 peso (8 cents) a liter on sugary drinks.

But Arca's report showed that sales volumes of all drinks, including water, were down from the year-earlier period, reflecting weak consumer spending in Mexico.

Mexico's central bank has cut interest rates to a record low of 3 percent, but its board members warned last week that domestic spending "still hasn't shown clear signals of recovery."

Shares in Arca Continental closed at 88.55 pesos on Wednesday. The shares are up 8.5 percent since the beginning of the year.

($1 = 12.9865 pesos at end June) (Reporting by Elinor Comlay; Editing by Paul Simao)

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