* 1st-qtr profit 2.434 bln pesos vs 2.637 bln a year ago
* Costs rise 5.3 pct
* Parent Femsa reports higher earnings
By Elinor Comlay
April 24 (Reuters) - Mexico’s Coca-Cola Femsa, Latin America’s biggest Coke bottler, said higher costs triggered a 7.7 percent drop in its first-quarter profit, sending its shares down more than 7 percent in morning trading.
The company, a joint venture of Coca-Cola Co and Mexican firm Femsa , reported on Wednesday that profit dropped to 2.434 billion pesos ($197 million) from 2.637 billion pesos a year earlier.
Higher freight and labor costs in some countries as well as increased marketing investment in South America dragged on earnings, the company said.
Coca-Cola Femsa shares fell as much as 7.1 percent to 204 pesos in morning trading, falling back from a record high close in the previous session. Mexico’s IPC stock index was down more than 1 percent.
The volume of bottled drinks sold increased 3.9 percent in the quarter but total revenue edged up less than 1 percent to 33.68 billion pesos, hurt by the strengthening of Mexico’s peso against other regional currencies in the quarter.
Still, the results did not dampen the company’s expectations for the year.
“We are confident that our operators’ skills, coupled with a benign commodity cost environment, will enable us to achieve our targets for the full year,” said Chief Executive Carlos Salazar in a statement.
Coca-Cola Femsa has been on a buying spree in the last two years, snapping up smaller, family-owned Coke bottlers in Mexico, and it also made its first foray outside of Latin America when it bought a stake in Coca-Cola Co’s bottling operations in the Philippines.
The Monterrey-based company could also consider acquiring some of Coca Cola Co’s operations in the United States, Chief Financial Officer Hector Trevino told analysts on a conference call.
Right now the company is focused on opportunities in Latin America as well as working on its business plan in the Philippines. However, Trevino added: “We (would) certainly analyze and take a hard look at the (US).”
Coke said last week it plans to refranchise some of its capital-intensive U.S. distribution business.
Separately, Femsa, which also operates the Oxxo chain of convenience stores, reported its first-quarter profit increased more than 12 percent.
Femsa also holds a 20 percent stake in Heineken, after selling its beer-making business to the Dutch company in 2010.
Oxxo stores, which primarily sell Coke products and Heineken beers, have expanded rapidly and the company told investors in February it is considering repeating its formula with fast food and drugstores.
Femsa shares were down 4.9 percent at 143.51 in early afternoon trading.
The company said separately that due to low rates globally, it is considering issuing more long-term debt. Femsa had net debt of 6.12 billion pesos at the end of March.