Fomento Economico Mexicano SAB de CV (FMX) 2002 Q1 法說會逐字稿

Good morning and welcome to the FEMSA 2002 1st quarter conference call. This conference is being recorded for a broadcast and all participants are in listen-only mode. We will open up for questions and answers after the presentation. During the call, we may discuss forward-looking statements concerning future performance and should be considered good faith estimates by the company. They reflect management expectations and based upon currently-available data. Actual results could materially impact the company's performance. I would like to turn it over to Fredericko Reyes.

Good morning and thank you for joining us in comments of the 2002 results. [INAUDIBLE] is joining us. Coca-Cola is joining us on the phone, and we will gladly answer your questions today. The conference call - let me start by making a commentary on the behavior of important economic variable that is provide context for FEMSA's quarterly results. The Mexican peso displays remarkable strength during the quarter, impacting operations in two main ways. It improves gross margin, but indirectly affected volume growth. This was true for the beer operations in Mexico. The strong peso continues to put pressure on local retail trade along the border with the United States. From the regional perspective, the Northwest had the weakest retail sales according to data. The southern regions appeared to show tentative signs of recovery in terms of income growth. The Mexican economy experienced a mild contraction during the 1st quarter, but general consumer price levels have displayed stability and the consumer trade outlook is favorable. We believe the recovery imminent in the north will be a crucial driver of expected growth for GDP in 2002. We expect it to follow economic activity in the United States and the normalization of trade between the two nations. We maintain the macroeconomic expectations for 2002 expressed in the last conference call, namely 1.5% growth in Mexican GDP and inflation of 5% and year end exchange rate of 9.5 pesos per dollar. For FEMSA in general, in spite of continued weaknesses, we posted solid growth and strong gains in profitabilities during the quarter. At the same time we remain focused on implementation and projects that will be the foundation for competitive advantage going forward. We would like to comment on the quarterly results of each of our divisions and femsa consolidation. Net sales grew by 3.3 percent per for the quarter. Combining a reduction of 2.2s are% in domestic volume with an increase of 3.3% in domestic volume. We will roll out between mid-February and mid-March in nominal terms. Prices for experts were not increased. Management fees increased by 11.6%, reflecting a favorable environment, as well as ongoing efficiency and cost containment initiatives. Capital was $69 million. For the full year 2002, we are maintaining the guidance in our last conference call. We expect volume to increase between 1 and 2%. The operating income growth between 4 and 6%. Export volume increases 5-7%. On the investment front, capital expenditures for the year are in the rank of $380 million funded with cash flow. These investments are destined for expansion. The division equipment market investments and ongoing new business systems. Regarding the new business system, the various components are progressing according to planned. However, we reiterate the full benefits of the transformation will only come together when every component is in place. As we said before, we expect to see tangible improvements from the different stages of presale during the next year. While the savings and benefits will begin to show during 2004. For Coca-Cola FEMSA, we encourage you to listen to the replay of the conference call that took lace earlier today. For more detailed discussions on operating performance. The company results for the 1st quarter of 2002, they increased 3.4% and 14.3% in Argentina. Consolidated income grew by 16%, bringing operating margin to 23.6% and representing an improvement of 2.5 percentage points over the quarter in 2001. Although the Argentina depreciated, the Argentinian peso versus the dollar impacts the results, costing $446 Mexican pesos in equity. You can find more details on the accounting on the press release and Coca-Cola FEMSA's press release as well. For the full year 2002, we are maintaining the guidance during the previous conference call and operating volume in Mexican territories in the range of 3-5% and 12-14% respectively. In light of the continued developments in Argentina, they are able to predict the short-term performance of operations. We will again abstain from predicting a specific guidance for the plan. We continue expansion of selling space. The chain opened 44 new stores in the 1st quarter for a total of 1823 units. This farther increases presence in Monterey, Guadalajara and Mexico City. Sales increased by 19.9% for the quarter and its operating income grew by 30.7%. These resulted from the combination of a strong operating income growth and the chain of 31%. A continued reduction of operating losses posted by the chain and e-commerce initiatives. Store sales were [INAUDIBLE], combined with reduced traffic. Guidance for the year 2002 is when management expects to open up 280 net new stores. Store sales for the chain are expected to grow in the range of 1-2% with growth expected to exceed 15%. Operating income growth for [Pepsi] as a whole is expected to reach 20%. The strength of the peso and a competitive environment ruling in lower domestic prices put pressure on the profitability of the business during the quarter. They were able to partially upset the decline in profitability and [INAUDIBLE] and initiatives. Net sales declined by 11.1%. Operating income fell by 31.5%. While beverage can sales declined, glass bottle sales increased, driven in part by Coca-Cola FEMSA whose eight-ounce glass presentation is having considerable success. Assuming the packaging business will be effective by a competitive and exchange rate scenario, package management believes they provide guidance through a more conservative outlook. Accordingly for the year 2002 revenues are expected to decline between 8 and 30%. On a consolidated basis, they increased by 6% for the quarter and operating income increased by 7.9%. Operating margin improved to 13.5% of total revenues, reflecting solid performance for the businesses. Consolidated expenditures were in line for the full year guidance of 500 to 600 million. Consolidated net debt [doubled] to 69 million, representing a [INAUDIBLE] relative to the balance of the end of 2001. We expect to conservatively manage our capital structure. Now we can turn to your questions.

Thank you, sir. The question and answer session will begin at this time. If you are using a speaker phone, pick up the hand set before pressing any numbers. If you have a question, press star 1 on your phone. If you wish to withdraw, press star 3. Your questions will be taken in the order received. Stand by for your first question. Our first question comes from Marco Vera. State your affiliation.

Good morning. I'm from Deutsch Bank. Can you give us to work with, more of an approximation pertaining the assumption for the time frame of the packaging businesses?

Um, your point is about the timing?

Yeah. An update on the potential timing of it.

Yes. We have been actively pursuing some of these possibilities. Unfortunately, none of them has been able to materialize yet. I'm not sure that I can give you a reasonable time expectation. There is a possibility that something might come out in the next two quarters, but I cannot really give any assurances on that. It's a complicated issue, although they are small businesses and each transaction is quite complicated in many ways. We hope that we can do something and we can announce something on the next one or two quarters, but I cannot -- I can't put myself in a position to give you any assurances that that will happen.

Sure. Secondly, regarding the commercial division, if I understand your press release well, your convenience store operating margin was 4.4%, but consolidated for the division because of barra losses and the dot-com was 3.7% s. That what I should read? If that is the case, my question would be -- are you guys sure that the projects, the upstarts that you are working [area] worth it and up to what point are you willing to carry the losses in those projects? Are you sure they are not out of synch with what really needs to add shareholder value?

I think it's a fair question. Let me try to respond. The main investments, they were expended and really behind us. I don't think that that is the continuation for those that are going to be an important draining of resources for the system. The big story is really past. We have seen limited success in those initiatives, and I can tell you we will be very careful whenever a decision comes to inject significant new resources to the projects. We will be extremely careful. There is nothing in the horizon that will indicate we will invest heavily in those projects in the future. The Barra project is a different thing. We believe that it's one that has a lot of potential. It can be very attractive if the formula is correctly defined. If we can put the right elements together to make the format successful. Right now, we still believe that we are on the -- how should I call it? Project development stage. We need to test more thouroughly the concepts before expanding in a more wider fashion. We are moving carefully and we are still believing the format has a lot of potential. The format actually draws in one of the strengths of our organization which is the managing of many small retail outlets. We think that we do very well. We think that we have a good competitive advantage to the position in that segment, but we want to be sure the formula that the elements of are the right ones and we continue fine tuning anything that is included from pricing, locations, the product mix and sku's. We are still fine tuning the concepts.

Okay. My final question is, I understand there are compensations between the antitrust commission and both brewers regarding practices in the market, and there is a forthcoming more formal solution. Have there been recommendations that have been made on the antitrust commission also implemented by the brewers so far?

No. Do we have the latest information on that?

It was a resolution in the sense that two years ago a request and we need to inform periodically the movement of our prices to the anti-trust commission. It's finished.

There is nothing new that we are aware of?

Okay. Thanks.

Our next question is from Barra Luis. State your affiliation and question.

Good morning. I have just a simple question. Out of the almost $600 million in planning cap-x, I was wondering if you can break it down by activity. Maintenance activities and the promotional activities and so on and so forth. Thanks.

Luis? This is Juan. I wanted to make the clarification. The number is for FEMSA consolidated. It's really $380 million for the year.

Great. I'm sorry. Would you be able to break it down by activity?

Yeah, basically manufacturing cap-x is around $140 million. The rest is market and related.

Okay. And regarding the cap-x, you are still following your strategy of the beer production line, and I was wondering if [you have] an estimate of how much capacity would you be able to increase by the strategies you were thinking of and perhaps going out of line in some of your factories?

The information, we could add 20% more than original capacity. In the next four years we are not participating in any new manufacturing facilities.

Okay. These would imply investments around the $140 million per year, right?

Yeah. Anticipation of growth for the economy, that is correct.

Thank you very much.

Our next question is from Lori [Tpera].

I'm from Morgan Stanley. I have a couple questions on beer. Let me start with the volumes. They are a bit weak in the quarter. You talked about the issues in terms of the timing of price increase and sluggishness in terms of the markets. Can you comment on whether or not the price increase is having an impact on volumes, and I know you don't like to release monthly volume trends, but can you state your confidence levels and volumes as you hit in the 2nd quarter of the year?

Hi, Lori. Indeed the price increase affects the volume. The first two months, we had possible growth and negative in March. That's what we tried to explain in the federal release. Last year the price increase started in March, but finished by mid-April. We had a some way of anticipation bite end of the quarter last year. That didn't happen this year because we were finished with the price increase in the month of March. Comparing March to March, that was a big impact. With the volume, the information with having the outlook with GP, we are confident we will have that last volume increase.

I guess what I'm asking is are you seeing growth into April?

Relatively to April, we do not have a sign that will assure we will have the 1-2%. What I mean is, I don't think that the April will tell us what will happen in the year. In fact, April is better than March.

Let me just ask a couple other questions. You mentioned in the press release and the conference call you are maintaining the guidance of 5% of operating profit growth for the [brewery] and you started with about 11.5%. I'm wondering whether or not you are expecting a slow down in terms of profitability over the rest of the year or maybe you are being conservative given the uncertain economy.

I can tell you we are not as low down, but we could maybe be a little bit conservative, but what is important is the relative importance of the 1st quarter and all the 1st quarters given the results in 35%. Even though it's encouraging what we were able to do in the 1st quarter, it's very difficult to estimate for the whole year.

Last question. Your non-cash charges in the brewery jumped markedly in the quarter, over 50%. You can give us a sense of why that increased and maybe also talk more generally speaking about your spending on this.

Certainly part of that increase is amortization over prior years investment and other non-cash items charge there, like the same participation or the equity participation over last year. Some provisions, and yes, the amortization contributed. It's reflected there.

Do you expect the trend to continue or is the 1st quarter higher than what you expect for the balance of the year?

We are expecting to increase for the year, but I cannot assure the percentage will be maintained for the year.

Thank you.

Your next question is from Robert Ford.

Good morning, guys. Bob ford from Merrill Lynch. My first question had to do with imports. Imports see to be a little bit of a problem in the quarter. Given the fact that you price more aggressively in the Northeast, how vulnerable are you and how much pressure will the weakening of the peso take off? In this particular quarter, [which] imports grow year on year and what market share did they have in your territories?

I don't know if I have these numbers with me? Do you have them?

I think that it's related to the imports. Let's say the economy that people are going day to day shopping in the other side. Official imports are still really low as a percentage of the total market. It's around 1% of the total market. Certainly in the specific cities are impacted.

I heard that it's probably direct importation up about 22% year on year despite the fact that it remains small. It sounds lying a big increase. Does that sound true to what you are experiencing?

Yes. Increases of double digits. Considering these are very low. The percentage could go high and certainly the peso has been really affected. Also what I have to add is that our price increase, even though we are talking about another price nationwide around 7%, I can it will you that the pricing in those areas, our price increase was much lower than that.

And the other question was with respect to the auditor, did you intend to retain your existing auditor given the problems they seem to be having these days? INAUDIBLE].

Yes. Let me answer the question. The answer is a no. Many other local accounting firms have moved from there. We have now officially will be audited by another firm. It's different than andersen. The Mexican accounting firm is one that is changing that affiliation and we are happy that that's the case.

The faces you interact with day to day, they will continue to be the same?

Yes. That's our understanding. That's correct.

Then I do realize you are investing heavily with brand equity and in systems, but given the amount of savings and the price increase you generated, are you happy with the level of operating leverage you are generating?

Certainly I can tell you that we will not be happy until we get to the point where they are producing much better performance and profitability, but we are really happy with the things we have been able to do. We are doing that in the process and maintaining levels of profitabilities.

When you made the changes that you made so far to sales organizations, how disrupted has that been and given -- I understand the northern border economy is harder hit in general, but you had much easier weather comparisons year on year. Is it fair to say that there has been somewhat of a market share shift in the quarter and if so, do you think it's something that you can recover? An opportunity that maybe occurred because of this disruption in the sales network?

It's two different questions you are asking. First, do we see a market share loss in the quarter? Our information doesn't show any loss of market share at all. We have two consecutive quarters that have it happen. We regained market shares. In the sense of where sales people as we are encouraged by the aptitude we obtained from people, resale has been helping the people to better understand and have a better understanding and direct information from what is happening in the field. What we are doing basically at this time is working more heavily in the definition of the distribution network. We are working on the timing and what could be the work houses that could be in some way consolidated and different areas. That hasn't been distorted.

Thank you very much.

Our next question is from Alex Roberts.

Two questions on beer. I'm interested to see the gross margin improvement and wondered if you can tell us between the peso impact and productivity gain, what was the rough weight? Was it more the peso or not? Give us color on what was going on as far as these gains and what you were doing in the distribution network.

In the gross margin, I don't have the same numbers as the improvement, but we can actual approximately about 30% of the cost is dollar-related. If you take that to the precision of the peso which is around 6% or 5-6%, then you can calculate on 100%. It could be one plus percent. Besides the effect of the real price increase. The distribution network is what shows in the works. The gross margin is showing the start of the operating expenses. Those savings have been part of the savings that are increases in the spending in the market.

Right. When I spoke about distribution, you mentioned the primary distribution network. I assume that is part of the cost of that?

Yes. Okay, in that part it's also helping working together with a specific area that has been [INAUDIBLE] three years ago. It's integrated to managing -- the primary distribution of beer.

Also some savings and the manufacturing part as we have mentioned in prior years, we had the important head count reduction and fully reflected in the cost.

So this is something you could really see in the coming quarters. A little bit higher level?

The strength of the peso is contained and we can actual the growth margin improvement is here to stay.

Good. Okay. Second question was really just about the exports. You have not moved up on the pricing. I know that you moved up somewhat last year and here in the States, the import market is doing very, very well. Domestic prices are going up. What's the thinking behind holing back on price increases.

We are not saying we will not increase prices. We did not in the 1st quarter. Our outlook will increase during the 2nd quarter and around 1.5%. The second part, the reasoning on the price increases doesn't have anything to do with trying to obtain market share. The other part, the potential part will have to see how it's finally closed. If all this is closed, we will have to look at it.

I think that if the Miller section goes on, the dynamics of the market within itself might not change too much. We are not bringing in a new big factory into the miller distribution system. It might provoke movements, but mostly in the long-term. I don't expect any major changes in the dynamics of the market for imports in the short-term.

Getting net income, there is a loss it seems the 1st quarter. I know you ave a minority stake, but can you comment on where Labat USA might be going in terms of net income.

We anticipate a positive income. Close to two-digit net income increase. What happened is that we were able to anticipate spending in certain programs and each represented a change in the price, spreading the standard in problems throughout the year.

Thank you.

Our next question comes from Pablo [Zuanic] --. State your affiliation.

JP Morgan. A couple questions on beer and also, where are the royalties affected on the P&L. Which division. I understand all the stores in Monterey are refilling Pepsi Cola products. Is there a plan to do that in Mexico City and all the cities surrounding Mexico.

They decided on Pepsi in Monterey. Really, because Pepsi was local and traffic was affected. That was the reason why it was-done. It was not really designed as an [INAUDIBLE], but reverse. It proved to be successful when we maintained traffic at [INAUDIBLE] surprise everybody, both entities ended up having a fairly good deal. The volume of Coke was maintained fairly, and Pepsi volume was increased. It was a good situation at the end. There no plans to distribute Pepsi in other cities in Mexico. It will be handled case by case depending on the competitive situation of the industry. The royalties right now are not significant yet. To be honest, I will need to ask where they will be [reflected], and right now they have not been significant. They ave investments in the launching and relaunching and development of the plan. I didn't [answer the] question. I don't know if you have already made this inquiry. There two components. They actually do the bottling and distribution. What comes up to the holding, it's reflected in the consolidated numbers. It's not yet assigned to the division that you see broken down.

That means Coke has no affect on that.

Coca-Cola and FEMSA cost --.

Very similar to the cost [percent] rate for flavors for the portfolio.

You will need to show it shows in the FEMSA numbers.

That's right. Not representative. It's very small.

It will represent another next.

Right. Okay. It would be nice if they knew what was going on in the beer division, a couple of questions. If I can come back to the question on the charges, the 56% year on year and 31% on a sequential basis, I understand that the specifics, but you are saying they are not explained increase. You can give us a more detailed sense of how the number is increasing so much.

What I said is that part of the increase is a substantial part equal to that. What I'm saying is that the other concept doesn't have to be exclusive.

Right. It is increasing and I suppose when you start amortizing, you close the deal with the point of sale this quarter, right? It increased so much and you have closed a lot in this quarter.

What I'm saying is that the amortization starts to reamortize and we closed the deal. What I'm saying is the increase doesn't have to do with this quarter. It has to do with the four prior quarters.

Okay. If I may ask you the same question a different way. If you are looking at the points of sale that you have, what would be the turn over of the -- 5% or 10% that would be renegotiated every year. Just to have a sense?

Just a bigger gross should be around every three years.

I mean if it's every three years, 33 percent per are renegotiated every year then?

Yeah. They renew more often and some of them are larger than that.

Right. Thanks. One last question. You bring down the volume in the southern region. Can you give us a flavor of that. In one I see you are growing faster than the north, but then you are saying you are not growing so fast in the north. Give us in terms of brands and regions. That would be helpful.

As we mentioned, the north region showed a negative growth. Central had a positive growth. The brands I can actual they are around 27% in the quarter. Carta Blanca 22%. Superior 17%. Lager 5%.

Thanks. Which did you see most growth?

I think it's Sol, the one as we mentioned in the earliest, we have been able to see the Sol campaign and it had an immediate impact on volume and also brand recognition.

Okay. Thank you very much.

Our next question is from Marco Vera.

It's a follow-up on a [question that] has been asked before regarding the price increase. I wanted to clarify. You stated before that the price increase is nationwide, but you said it was significantly less in the north. That's the same comment we get from competitors. The industry is still pricing the region and can you give us more detail as to the nominal price increases so far, north, central, and south?

I don't have a [specific] detail that. I'm not sure how much we can say. I can assure you it's not even, let's say, the same price increase levels as North, south, and central. There certain areas in the North that were increased above the average and other areas that we increased lower than the average. Certainly, in the borders where the price increase was minimal, and also there was a difference not only in the region, but also in representation. I can it will you that in the can presentation, it was also a lower percentage of price increase.

Okay. Is there something that is outstanding or an out liar within mexico as far as the highest price increase region?

I'm not sure I understood your question.

Is there something that stands out, a region or city within the country where you increase or the industry increased prices the most?

Not specifically. Maybe if you tried to [INAUDIBLE] center or maybe the south. It's difficult to it will you exactly. It's city by city looking to the specific reactions in the market. We didn't have a specific percentage to be increased everywhere.

Okay. Thank you.

Our next question is from --. State your affiliation.

Goldman Sachs. If I can go back to the subject of operating expenses in the beer division and Vitwo questions there. Can you comment on the non-exclusivity increase and what they consisted of in the period. If you can also broaden the topic to talk about the competitive selling environment for beer in Mexico, particularly with the sluggish volumes we are seeing. Are we seeing [INAUDIBLE] going forward as far as exclusives and other non-price or [INAUDIBLE]? Thank you.

There ups and downs. Specifically when you look at a quarter against last quarter, certainly we now have an amortization and the part that we start in this year. Also some market and spending that behave differently through the 1st quarter of last year. We don't see a trend for positive or to be defined in the terms of exclusivities. It could change quarter by quarter. In some cases as far as investments. Amortization certainly is helping us. I was explaining, it's more related to the investments that have been different increased the next three quarters. The level or percent quarter versus quarter is the one that could be different, quarter by quarter.

May I ask a follow-up question then? Can you talk about why spending on exclusivities increased last year then?

Okay. There several things. Part of that is related to a certain part of exclusivities are related to some anticipation to the retailer. In some ways that is also related to the price. Secondly, also related to the success of the retailer. It's related to volume. And the amortization also has to be done in relation to the volume actually sold by retailers. As we have been consent rated on investing in the more profitable exclusivities, that shows the reason why ad also the the growth of the chains, specifically the femsa chain that has been successfully growing and that also explains part of the investments.

Thank you very much.

Our next question comes from --.

Morgan Stanley. At the risk of really asked one too many questions on the same topic, I'm confused on the exclusivities. I thought the goal of the femsa beer was to keep the spending steady as a percentage of sales from 2001 to 2002. Has that changed?

No. I think what we should have said is that's our goal, and we have been successful in doing that. We never said that we will be looking at different aspects of the operating expenses. What we have been able, and I think part of it is we have been able to develop the capability of controlling and containing the cost of spending in the market.3 making a decision of what is the best way of using the money. Especially in exclusivities as we mentioned several times. We have been going away from the exclusivities. Not to say we are not investing, but we are considering very well how we invest in exclusivities and certainly the profitability is the primary criteria used when we are making a decision.

The marketing spending should be steady, but the non-cash amortization is jumping up materially and may stay there for the rest of the year. We can't break that down and understand how much is exclusivities and other things. Is it [fair] to say you are [allocating] a greater portion of marketing budget for exclusivities and is there anything else that's noise that's clouding the situation?

We were trying to [maintain] our operating expenses as a percentage of sales, or at least we can a [INAUDIBLE] in that sense we are not be affecting the margin. Additional savings or improvements in the gross margin will reflect in a better margin on sales.

But the question I'm asking is are you allocating a greater portion to exclusivities or activities? Was there something going on that's clouding that? That's the assumption you make from looking at the numbers. You are putting a greater number into exclusivities.

Our budget does show effect of the amortization to exclusivities. After the increase in the budget and the sales expenses, it's reflected because of exclusivities. In a relative term, we have done the investments in the past. It has to bite a bigger portion of the market budget. Also in some way you can that will that has been able to be funded with savings in areas as we were mentioning there in the distribution. We had been saving and some are being used in other market expense. We do not have to cut advertisement of marketing because of the increase of cost of exclusivities.

So you are saying you have increased exclusivities over the past year and funded through other savings. Are you seeing a reacceleration of the competitive pressures in the market place as a result of that activity?

Not yet.

Okay. I just wanted to ask another question on packaging. Obviously, the margins were tough in the quarter and you mentioned a number of reasons why they were tough in the quarter. Are you anticipating any profitability in terms of margin, rebound and the packaging division throughout the rest of the year?

No, Lori. We are trying to indicate guidance more on the conservative side. We believe that the industry is very competitive and tough and we are not expecting any rebound.

Thanks.

Our next question comes from Robert Ford.

Merrill Lynch. One important question I forgot to ask, and that is: help me understand what the brand strategy behind nationally promoting two different light lagers? You have national impact like the Grand Prix or Latin American World Series, and now you are pushing with the World Cup promotions. How do you minimize cannibalization and what is the vulnerable brand opportunity here?

As we mentioned, the decision is maintaining the brand portfolio is more related to the success of each brand, specifically in the relative region. Certainly when we advertise the grand prix, we have that on a specific region which is the Northeast, West, and the Northeast where the race happened. In the case of Sol, it's the most important region of influence for Sol is the Central and the South. Certainly the sponsorship of the national team gives us that advantage of having a spill over of promotion in the whole country. Certainly the benefits of volume of Sol are more related to the Central and the South. Maybe the one brand that's a little bit canniballized from the success of Sol is superior.

The races are in Mexico City in September, and it seems to be that you pick yourself off a little bit or promoting brands that may not be available at the point of sale nationally and paying national advertising. No?

In some cases, even though you are able to watch that in Mexico City, I [can tell you] that you [will] see the advertisement of Sol that you see. The local television Carta Blanca advertisements.

Fair enough. Thank you very much.

Our next question comes from Alex Roberts.

Just hopefully two quick follow-ups. You have given us before the stage at which the turn around and beer was happening while while talking about presale coverage and cooler placement. Youcan give an update on the numbers as far as what the status is at this point?

I can it will you that we are on target and budget in both cases. Just to remember, the outlook for year end is around 80% of our volume. We will have to have installed 30,000 new coolers.

So basically you prefer not to give us a sense during the year?

I think that the assurance that we are on target is given the confidence that, we are doing the things that we have been planned and work. I'm not so sure it will give you that much information to it will you that they have 3,000 coolers or whatever.

That's fine. Secondly, last conference call I asked about the potential synergies with Coca-Cola. Had there things that you were reviewing and looking at. Warehouse, distribution, permits and these kinds of things. Can you give us an update on that?

We have announced our decision not to proceed on the short-term to integrate the two companies. We think this is not the right time. This is not the moment. We will not move in that direction on the short-term.

Thank you.

Should you have further questions, press star 1 on your phones. At this time there no farther questions in queue.

Thank you for joining us. Thank you for being here with us on this conference call.