April 30, 2020 / 1:42 PM / in a month

Mexico's Femsa warns of beer shortage, after strong quarterly results

MEXICO CITY (Reuters) - Mexican conglomerate Femsa (FEMSAUBD.MX) posted robust first quarter results on Thursday, but warned that the coronavirus crisis has prompted the firm to scale back spending and caused a dwindling supply of beer that drives its convenience store sales.

FILE PHOTO: The logo of Femsa's Oxxo convenience store is pictured at one of its stores in Monterrey, Mexico August 26, 2018. REUTERS/Daniel Becerril

Juan Fonseca, director of investor relations, said brewers Heineken (HEIN.AS) and Grupo Modelo (GPMCF.PK) had suspended production in line with government directives to halt non-essential activity, with no clear signs of the timeline for re-opening.

“I don’t want people to just get off the call and run to the store, but right now we are probably looking at about 10 days of inventory,” he said in a call with analysts after the results.

Femsa said higher operating income at most units and exchange rate gains pushed profits to more than triple that of the year-ago period, beating analyst estimates.

The Monterrey-based bottler and retailer posted net profit of 7.79 billion pesos ($327.2 million) compared with 2.2 billion pesos in the first quarter last year.

Femsa also said revenue increased 5.5% to 122.28 billion pesos during the January-to-March period, with higher revenues at pharmacies and Femsa’s vast chain of Oxxo convenience stores, which are ubiquitous across Mexico.

Femsa’s gas stations had flat revenue, while its Coca-Cola bottling division reported revenue down 1.9%.

Looking ahead, the company said it is rethinking its plans for capital expenditures after spending 5.3 billion pesos in the first quarter, and would cut or defer “non-critical investments” due to uncertainty over the duration of the coronavirus pandemic, whose impact became clear in late March.

“A big part of the equation has to do with how long this will last,” Chief Executive Eduardo Padilla said.

Executives also said Femsa would likely slow its pace of store openings and postpone a dividend payment typically disbursed in May to later in the year.

Reporting by Daina Beth Solomon; Additional reporting by Noe Torres; Editing by Steve Orlofsky and Marguerita Choy

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