UPDATE 2-Mexico's Coca-Cola Femsa reports lower second-quarter profit

Wed Jul 23, 2014 10:23am EDT

(Adds detail on sales volumes, sugary drinks tax)

MEXICO CITY, July 23 (Reuters) - Mexican Coke bottler Coca-Cola Femsa said on Wednesday its second-quarter profit fell 4.6 percent in spite of higher sales as it faced restructuring charges and paid more interest on debt it took on to acquire businesses in Brazil.

Femsa reported a second-quarter profit of 2.68 billion pesos ($206 million), compared to a profit of 2.81 billion pesos in the year-earlier period.

The jump in revenue, an increase of 14.3 percent to 41.434 billion pesos, was helped by the company's acquisitions of two bottlers in Brazil, Spaipa and Fluminense, and another Mexican bottler, Yoli.

Those acquisitions also helped quarterly operating profit rise 11.7 percent to 5.742 billion pesos from 5.142 billion pesos a year earlier.

Excluding those three acquisitions, however, sales volumes fell 1.5 percent. The company attributed that drop to price increases because of a new tax on sugary beverages in Mexico.

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

Coke Femsa has said it expects sales volumes in Mexico to drop between five and seven percent this year as a result of the 1 peso (8 cents) a liter (34 ounces) tax on sugary drinks.

Excluding the integration of Yoli, Coke Femsa said its revenue fell 2.1 percent in Mexico. Latin America's No. 2 economy accounts for close to half of Coke Femsa's total revenue, even after a string of acquisitions outside of Mexico in the last few years.

Not all of Coke Femsa's recent acquisitions had a positive effect on quarterly results. The company recorded a 100-million-peso loss related to its participation in Coca-Cola's Philippines bottling operation and a bottler in Panama.

Coke Femsa also had financing expenses of 1.61 billion pesos in the second quarter, compared to 1.1 billion pesos a year earlier, and it took on a charge related to restructuring in Mexico. The company did not explain how it is restructuring in Mexico. ($1 = 12.9865 pesos at end June) (Reporting by Elinor Comlay; Editing by Meredith Mazzilli)

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