Coca-Cola Femsa SAB de CV (KOF) 2006 Q2 法說會逐字稿

Good day, everyone, and welcome to Coca-Cola FEMSA’s second quarter 2006 earnings results conference call. As a reminder, today’s conference is being recorded and all participants are in a listen-only mode. At the request of the Company, we’ll open the conference up for questions and answers after the presentation.

During this conference call, management may discuss certain forward-looking statements concerning Coca-Cola FEMSA’s future performance and it should be considered as good faith estimates made by the Company. These forward-looking statements reflect management expectations and are based upon currently available data. Actual results are subject to future events and uncertainties which can materially impact the Company’s actual performance.

At this time, I would now like to turn the conference over to Mr. Hector Trevino, Coca-Cola FEMSA’s Chief Financial Officer. Please proceed, Mr. Trevino.

Good morning, everyone. Thank you for joining us today. We are sorry that we are starting a little bit late but we had information that the queue line was long, so we decided to wait a little bit more to get more participation on the conf call.

Let me start. During the second quarter of 2006 our operations continued to report important consolidated top line growth, mainly driven by volume increases in the Coca-Cola brand. Consolidated carbonated soft drink volumes increased by more than 5%, led by brand Coca-Cola growth of almost 6%.

Non-carbonated volumes, excluding Still Water, increased by more than 8% from a low base, highlighting the successful innovative introduction of flavored water and juice-based waters. These results demonstrate strong operating execution despite tough comparable volumes year-over-year.

Strategic marketing support of the Coca-Cola brand during the World Cup soccer tournament, combined with increasing coverage and innovative flavored water brands in Mexico, Colombia and Argentina, and juice-based products in Central America, Brazil and Argentina made an important contribution to our top line growth.

Our higher consolidated volumes more than offset lower average prices per unit case, which were mainly driven by incremental volumes of multi-serve packages in Mexico and resulted in revenue growth of 3.9%. Likewise, our higher revenues more than offset similar cost increases in the value [inaudible] our territories in Central Mexico, as well as the devaluation of the local currency in some of our markets as applied to our dollar-denominated raw material costs.

This quarter, all the product territories contribute a [valuable] share of our top line growth. It is important to highlight that after a year of top line contraction due to a tough competitive environment, our Central American operations are regaining volume growth and pricing power, thanks to a more stable carbonated soft drink market and the incursion in the juice-based product line of business with the Hi-C brand.

Additionally, lower expenses per unit case in Mexico, Colombia, Central America and Brazil compensated for higher operating expenses in Argentina and Venezuela, keeping our operating income at similar levels to the second quarter of 2005. Our operating income margin declined 90 [sic - see presentation] basis points year-over-year, driven by raw material pressures outside of Mexico.

Our consolidated majority net income was MXN681m, 48% lower than the second quarter of 2005. This decline in our net income for the quarter was mainly driven by the unrealized foreign exchange loss resulting from the [inaudible] Mexican peso as applied to our net liability position denominated in foreign currencies, versus aforementioned gains recorded in the second quarter of 2005.

It’s important to highlight that, given the recent movements of the Mexican peso to similar levels of those as of March 2006, the effect of this unrealized loss has been reversed.

Now, let’s talk about our operations. As we anticipated, our Central American operations are back on the path to revenue growth after a tough year of top line contraction in 2005, producing good results that account for over 40% of our incremental profits for the year -- for the quarter.

Additionally, we recently implemented price increases across the region in a [inaudible] of approximately 5%. And in spite of these increases, our volumes continued to perform well, demonstrating the important combination of brand equity and good execution. We increased our participation in the growing non-carbonated segment, with our incursion in juice-based products with the Hi-C brand during the second quarter. This juice-based product accounted for close to 40% of the quarter’s volume growth.

The recent performance of our Central American territories underscores the operating leverage that we can achieve once we reactivate the top line. A clear example is our 25% operating income growth for the second quarter in the region.

Now, moving to Argentina, our operations posted a double-digit sales volume growth for the quarter, offset by strong consumption resulting from high salaries and inflation far outpacing our price. Argentina is the most concentrated operation within our portfolio, carrying the lowest SG&A per unit case thanks to our continuous cost-cutting strategies and our culture of innovation which extends across the entire value chain. This has enabled us to partially offset salary and transportation cost increases that impacted our results for the quarter.

In Venezuela volume growth in the flavored carbonated soft drink segment partially offset the volume decline in brand Coca-Cola and in the quarter we had 1.3% decrease in CSD volume. Despite the strong growth of Nestea, a ready-to-drink tea, which [inaudible] its volume over the year-earlier period, our non-carbonated beverage volumes decreased by 11%, driven by a decline in volumes of our [marketed] products.

Fuelled by consumers’ increased purchasing power, the quarter continued the trend to non-returnable presentations. Consequently, our sales volume of returnable packages fell by more than 20% for the quarter. This decrease more than offset incremental volumes from non-returnable presentations, resulting in 2.6% lower overall volume year-over-year.

However, the 7% average price increase reached in the quarter offset the decreased volumes, resulting in top line growth. Unfortunately, higher costs and expenses across the value chain more than offset this growth and led to a decline in profitability.

We have created a special team to focus on analyzing and recommending a tailored business model that fits the current situation. As part of this initiative, in the quarter we began taking out SKUs selectively, which will create benefits across the value chain from the procurement to distribution. As we have said in the past, this is a transitional year for our Venezuelan operations and it will take time to customize our business model to return to profitability. Please bear in mind that Venezuela represents less than 3% of our Company’s total EBITDA in the second quarter.

In Colombia, our operation posted 2% CSDs volume growth in the face of more than 11% volume growth in the second quarter of 2005. Brand Coca-Cola increased more than 9% and contributed to the majority of this growth, more than offsetting a decline -- a volume decline in flavor carbonated soft drinks.

Exceptionally high volume comparisons in connection with the [cross] plan aggressive introduction campaign last year contributed to the year-on-year decline in flavor carbonated soft drink volumes for the quarter. During this quarter we implemented price increases to the brand Coca-Cola products, reaching a 2% weighted average.

These price increases more than offset a packaging mix shift to larger presentations, which comprised the majority of our incremental volumes in the quarter. Additionally, our recently introduced zero calorie flavor Dasani brand water, combined with our existing Manatial brand bottled water, enabled us to almost double our volumes in single-serve water presentations for the quarter.

This growth more than offset the volume decline of our less profitable multi-serve bottled water presentations, resulting in a slight increase for the quarter.

Despite strong cost pressures, driven mainly by more than a 35% increase in sugar prices and higher packaging costs due to the shift in our packaging mix to non-returnable presentations, our gross profit grew 1.9% and our gross margin declined slightly.

Our quarterly operating income increased by more than 12% year-over-year as a result of operating leverage driven by our top line growth, and led to a modest margin expansion of 80 basis points.

In Colombia, we are reinforcing our pricing leadership in the industry, segmenting our factors and price initiatives according to geographic regions.

Finally, let’s move to our main operations - Mexico and Brazil. Our Mexican operations faced its toughest volume comparison of the year versus 8.4% volume growth in the second quarter of 2005. Bearing this in mind, we are very pleased with the performance of our Mexican operations in the first half of 2006. Our operators have implemented our revenue management and segmentation strategies on a regional basis, working to capture the most profitable volume, to execution strategies that, in our view, are sustainable and supported by the competitive advantage of our business model.

The majority of our incremental volumes in the quarter came from our territories outside of the Valley of Mexico. These territories comprise approximately 65% of our business in this country. Overall, brand Coca-Cola contributed approximately 75% of our incremental volumes. Flavor carbonated soft drinks accounted for more than 20%, driven by Fanta Naranja, Fanta and Mundet Multi-Flavors and flavor water brand Ciel Aquarius contributed to the balance.

The 3% year-over-year real price decline in our Mexican operations was driven by a shift in our packaging mix to multi-serve packages for brand Coca-Cola, Fanta Naranja and Mundet Multi-Flavors in the Valley of Mexico. The rest of our Mexican territories together registered a flat year-over-year weighted average price per unit case in real terms.

Sequentially, prices remained relatively stable during 2006. We implemented a weighted average price increase of 2% on a segmented basis nationally in nominal terms, particularly increasing prices in single-serve and multi-serve packages in June of 2006. We expect to benefit from this initiative in the third quarter of this year.

On the profitability front, our gross margins remained flat year-over-year, as a result of lower average sweetener and resin costs, which compensated for the 6% year-over-year devaluation of the Mexican peso versus the U.S. dollar as applied to our dollar-denominated costs. In Mexico our sweetener costs declined by approximately 3% year-over-year and our resin costs declined by over 4% during the same period in U.S. dollars.

At the SG&A level, our operating expenses remain well under control. In fact, they declined slightly [inaudible] a margin expansion. We believe that Mexico’s consumer dynamics remain solid and our execution strategies are working. This gives us confidence in our ability to continue capturing profitable growth going forwards.

As you have seen over the past three years, our Brazilian operations continued to perform well, generating revenue growth and posting sustainable profitability levels. Our financial information for the quarter and for the full year is not comparable with previous periods because we don’t assume the sales of the Kaiser brand and change the way we report in our financial statements.

So if we took back the sales of Kaiser brands in Sao Paulo, we have made significant progress. We have created a sales team that is fully dedicated to recapturing and developing new beer customers. We have made significant inroads in terms of execution. In the first quarter we more than doubled our point of sale coverage and now we are cleaning the distribution channel’s culture, just as we did with our sales team operation when we took over three years ago from Panamco, obviously looking for more profitable sales. Together with Kaiser, we are developing a differentiated product and packaging portfolio that we believe will foster continued growth.

For the quarter our Brazilian operations’ revenues increased 1.1% excluding beer as a result of sales volume increases, which more than offset lower average prices. The quarterly price decline was driven by a shift in our packaging mix, since more than 60% of our volume growth came from returnable presentations. It is consistent with our strategy of reinforcing our returnable base by offering more affordable products to our consumers and, at the same time, building brand equity and loyalty. We anticipate that this trend will continue going forward, increasing our returnable offering.

For the quarter our operation was [lapping] an 80% CSD volume growth for the second quarter 2005. As part of that, volumes were temporarily adversely impacted by social instability in Sao Paulo, resulting in a 3% incremental volume drop.

During the quarter we introduced several new packages in our flavor carbonated soft drink portfolio, which are primarily directed at teenagers to refresh the brands, while strengthening our position in this category. As with the rest of the countries in which we operate, the Brazilian market is getting more complex with consumer needs changing continuously. This is one of our competitive advantages where we have the most [trade] that we can deal with. Consequently, the number of SKUs has increased during this time.

Continuing the previous quarter’s trend, as part of our focus on profitable growth, our premium brands, driven again by Coca-Cola Light, posted more than 6% volume growth for the quarter. [Light], our premium brand, represents twice the size of our value protection brands. In the quarter brand Coca-Cola posted more than 6% volume growth on top of 17% growth in the second quarter of 2005.

Volumes of mineral water decreased 2% in the quarter, after two consecutive years of more than 20% growth. We are working with our Crystal plant to regain our strong volume track record of growth, exploring new value propositions that are compelling to our existing consumers while attracting new ones.

In the non-carbonated segment, we introduced a new juice-based product with the name Minute Maid Mais, complementing our non-carbonated portfolio and, at the same time, participating in a category with a lot of potential for growth. Given the complexity of our Brazilian market, as well as the rest of our markets, we are continually evaluating ways that we go to the market, seeking to make improvements to our distribution network that can improve results at both the top and bottom lines.

We believe it is now clear that we can achieve higher levels of profitability in Brazil from our greater operating leverage. Going forward, we see a number of opportunities to improve our results in all of the segments in which we participate.

On the financial front, our increased level of gross debt was driven by the depreciation of the Mexican peso against the U.S. dollar during the year, as applied to our debt balances in foreign currencies. Due to our de-leveraging in past years, we reduced our interest expenses by 15% year-over-year. We expect our gross debt levels to remain stable during the third quarter of 2006 and to decline towards the end of the year.

We have approximately the equivalent to 320m of bonds coming due in the fourth quarter. We expect to pay down an important amount and to refinance the balance.

Currently, around 47% of our debt is denominated in U.S. dollars and we will continue evaluating market conditions to adjust the currency and rate composition of our debt at a profit, taking advantage of lower rates while managing our currency risks.

Our continuous learning of consumption and buying demand dynamics in every market where we operate is letting us leverage our current structure to participate in more lines of business more aggressively, such as the case of beer in Brazil and juice-based products in Central America.

Sharing best practices across Latin America is letting us become more efficient in our manufacturing process, more powerful in our procurement practices, more experienced deploying marketing initiatives and better prepared to fulfill the needs of our 1.5m clients, to serve and stay close to almost 190m consumers.

I thank you for your confidence and support. Now I would like to open the call for any questions that you might have.

[OPERATOR INSTRUCTIONS]. Please stand by while we compile a list. Thank you for holding, and your first question comes from Andrea Teixeira from JP Morgan. Please proceed.

Hi. Good morning, Hector, good morning, everyone. Just regarding Brazil, can you elaborate more when you extrapolate the beer volumes? I understand that you said that the volumes were up 3%. Can you elaborate also regarding your market share in how Coke has been analyzing the non-carb business there as well? And the beer, if you can comment anything in terms of, obviously the beer volumes went down but what to expect towards the end of the year? Thank you.

Good morning, Andrea. In terms of our beer volumes in Sao Paulo, my comment is that basically we are in the initial stages of us retaking this sales effort. We are basically following a very similar strategy as the one that we used when we embarked on [inaudible] CSDs. If you remember, it is more than three years ago when we bought Panamco. CSD volumes were coming down importantly when we were building up all the structure for our sales. In other words, we were moving away from wholesalers and obvious [inaudible] and moving to a more -- to a better control of our direct sales in CSDs. And we are basically moving in that direction.

Because of that, beer volumes in Sao Paulo are coming down around the 12% level versus the same quarter of last year. But for me it’s very important to remind you that we are purposely moving away from some of these wholesalers and that obviously implies suffering a little bit on the volume, and we are moving to a more profitable volume -- or sales structure and that’s perfectly in tune with the strategy that we have.

So, I need to ask you to be patient, to start looking at some better volumes in beer in Sao Paulo, the same way that we were asking two years ago to be patient for CSDs to start turning around.

In the case of the soft drink business, Andrea - this is Alfredo Fernandez - we have remained more or less flat, a little higher in shelf sales, losing probably a little bit of market share volumes, around 0.5% in the volume side.

And your next question comes from Sohel Amir from Lucite Research. Please proceed.

Yes, good morning. My question was more or less regards to the package mix. There seems to be a decrease in emphasis on non-returnables. And I was just wondering how this affects your selling prices, margins going forward, and also is there some sort of a target mix that you plan on achieving? Thank you.

Hi. Yes, well, it depends on every market; the situation is different in Mexico. Our returnable base has been remaining stable and increasing, especially in the multi-serve packages, and we are building a strong presence in the countries like Brazil. As long as we have the appropriate differentiated price in one-way returnable packages, depending on the skill of the business, the profitability could be similar. The increasing purchasing capacity in countries like Argentina and Venezuela is letting consumers to go more toward one-way packages. That is the situation.

And your next question comes from Tufic Salem from Credit Suisse. Please proceed, sir.

Yes, good morning. My questions were related on commodity costs and if you can just give us an update about your outlook for sugar prices and PET prices for the next 12 months for the different markets in general?

Good morning, Tufic. Let me give you some general ideas on this. The difficult part to predict here is that sugar prices, because of the high correlation with oil prices because of the ethanol usage, especially in countries like Brazil, are every day more correlated to the cost of oil.

And that obviously presents to us certain volatility going forward and difficulty to predict that because, at the end of the day, if oil prices continue to increase, then obviously we will see some increases in our sweetener costs. In Brazil, very clearly it’s the country where we still have low prices compared to some of the other countries. We have -- if we take the average of the sweetener cost increase in this quarter versus the same quarter last year, it’s a 66% increase, which is oil prices. And that’s a very high impact on our profitability.

In Mexico and the other [half], during the quarter we saw a small decline in sweetener, the sweetener costs, in raw sugar and refined sugar. On the other hand, fructose costs increased a little bit in the costs during the quarter. But we still benefit from the fact that we were using a higher proportion of high fructose during this quarter versus the previous and versus a year ago.

So the full formula for us in Mexico in sweeteners is a reduction in sweetener costs. However, we are seeing some increases, important increases in Mexico in refined sugar prices during this third quarter. Again, it’s very difficult to predict the next 12 months because both PET costs and sweetener costs will be very high -- are very highly correlated towards prices now.

Our expectation is that we will continue to see in Mexico during the rest of this year a very stable sweetener cost for us, because we have the advantage of using high fructose, which really carries a big differential in cost to refined and raw sugar. [For the big difference], remember that last year PET prices peaked towards the fourth quarter. So if we were to stay with prices as they are presently, we’ll have a reduction in -- an important reduction in PET prices during the fourth quarter. But, again, it’s difficult to predict that because of, as you know, what is happening around the world with oil prices.

And your next question comes from Carlos Laboy from Bear Stearns. Please proceed, sir.

Good morning, everyone. Hector, you mentioned something about a differentiated product and package portfolio for Kaiser in Brazil. What does that mean? In other words, what are some of the differentiated packages you are looking at and how far along are you in rolling this out?

Carlos, we are still in the process of developing some of these new products. We have, as you probably know, we have hired new advisors to help us in the design of advertising campaigns. At this point in time, I would prefer not to discuss very openly some of the strategy because it has to do more with what is -- what we are going to do in the next -- in the near future. And probably next quarter we can disclose a little bit more detail on some of these strategies.

And your next question comes from Jose Yordan from UBS. Please proceed, sir.

Hi, good morning, everybody. My question was about the balance sheet. You have been -- I know that with all the changes in the exchange rate, all of your percentages of debt at different currencies changes significantly, but in the case of the U.S. dollar debt it went from 30 to almost 50. And I was just wondering whether all of that could be accounted for by the change in the exchange rate and the translation, or whether there were some shifts in some of the credits in the short term that you can comment on.

And then the second half of the question is whether -- what’s the main credit that you are thinking of paying during the fourth quarter? Is it dollars or in Mexican pesos? And if you can give us an idea of the amounts of the prepayment you expect in the fourth quarter, that would be great.

Yes, Jose, good morning. The main effect that we have is basically related to the foreign exchange. We -- basically we have been moving -- the policy that we have followed here in the Company is that we measure the value at risk that some of the portfolio management or insurance companies follow these indicators.

In other words, we try to predict with 95% certainty the variation of the exchange rate. And we are closely following the value that is at risk from our EBITDA generation quarter-by-quarter. So within those rates, which are very limited, we do some variations from -- especially from different currencies, not so much from interest rates, in fixed to floating. But we do some adjustments to our mix of currencies in our -- the debt.

During this quarter, as you saw, most of the currencies, Latin American currencies depreciated importantly as a result of our [inaudible] to quality from a lot of reforms around the world. We were also affected a little bit by some of the uncertainty related to the election process in Mexico, as I mentioned during the speech. If we take a picture of today, where the exchange rate, the Mexican peso versus the dollar exchange rate, is right now, we basically are back to levels similar to those of March.

So most of these exchange movements is -- which is unrealized loss is erased as of the present time. I don’t know where the exchange is going to end up towards the end of the quarter. But that’s what I wanted to mention, that basically the effect of the exchange rate of the dollar/peso versus -- as applied to our dollar-denominated loans.

Towards the end of the year we have basically two bonds that are maturing. One is for $200m in dollars. This is one of the Yankees, the original Yankee bonds that were issued by Coca-Cola FEMSA in -- 10 years ago in [inaudible]. And the other is a bond that we inherited from Panamco, which is denominated in [inaudible], which is this -- it’s peso that is adjusted by inflation.

So the value of that bond varies because of the -- obviously we adjust because of the inflation. And it is approximately $120m dollars versus [inaudible], the equivalent of that. So $120m of this amount that I mentioned is denominated in pesos.

My feeling, my personal feeling, Jose, is that towards the end, during the year we will end up with paying around $250m, the equivalent of that in -- reducing our debt balance by $250m. So we probably need to refinance part of this. Secondly, we need to refinance some of these maturities that are coming due in November.

And your next question comes from the line of Robert Wertheimer with Morgan Stanley. Please proceed, sir.

Hi, good morning. I actually just wanted to follow up on Jose’s question, because I am not sure I fully understand it. Did you refinance or borrow any more debt in dollars? Because I guess I hadn’t thought the sequential move in the currency was enough to change the mix that much.

And then the second question would just be simply on the other, other expenses, sort of below the line. Could you say what the nature of that was and what the cause of the increase was? Thanks.

No. We did a very small financing in Argentine pesos, for probably around the equivalent of around 29m -- equivalent to $29m during the quarter. The rest of this is basically that we have shifted some of the local currency financing towards dollars. And then the effect -- if you take a picture of the -- as of March 2006, we had around 30% of our indebtedness denominated in U.S. dollars. If we take a picture at the end of this quarter, it’s closer to 47%. So that explains, because of the exchange rate movement, most of the movement.

Again, what we do, and just to have it very clear, is within certain parameters of value at risk that we have because of the exchange rate fluctuation, we basically move as much as we can to dollars, because in the long term it will have the cheapest interest rate, just to remind everyone that we [hope] to lock up currencies. We have a higher interest rate than local currencies. So within that very controlled environment of risk, because of fluctuations on the exchange rate, we move as much as possible to dollars. And that’s what we were doing this quarter, so that we take advantage of the lower interest rate.

In the other expenses line, we took out some additional expenses related to -- and we have mentioned in the past that in the Valley of Mex -- in Mexico in general we are moving what we call to -- what we have called our go-to-market initiatives. That strategy basically goes -- or explains as follows. When you have a very efficient sales and distribution deal on the streets, it’s very difficult to extract additional efficiencies unless you start changing some of the way we go to the market. Well, this is what we are doing right now.

A few years ago we moved supermarkets and large clients from the, let me call it, traditional way of going to the market, even though it’s going to Brazil, towards a specialized distribution team. What we were trying to accomplish with that is that, as we got to the small [inaudible] where we -- the drop in price is very large, you continue with the same compensation scheme for yourselves -- the guys that attend that market, those clients end up getting a very large amount of volume because of the very large drop in prices.

So a few years ago we restructured the way to go to market to supermarkets towards specialized teams that have a totally different compensation scheme. Nowadays we are moving slightly further in that direction with the very large clients, including community stores. That will certainly bring benefits to the companies, in terms of savings, and what we pay as variable compensation for the sales team.

But initially, and that is what is reflected in this line, we have to indemnify some of these contracts. So in this line we do have some additional expenses related to this transformation that we are prepaying for the next year and half in Mexico.

[OPERATOR INSTRUCTIONS]. And your next question comes from Alex Robarts from Santander. Please proceed, sir.

Yes, hi. I guess I wanted to revisit your thinking on the concentrate price hike expected here in January in Mexico. I guess it’s becoming clear that this will happen definitively in Mexico. And the last official thought was that you’d compensate -- or you’d do a $20m decrease in the marketing starting in January.

And I guess it’s our understanding that you are not so much keen on that, and that you’d be looking for ways, and you are looking for ways, to try to get other compensation type of measures from Coca-Cola. Could you help us just to understand what are the things that you are thinking about, and just the timing of that going forward in Mexico next year?

Good morning, Alex. Let me tell you what we have -- we’ve been saying in this [track]. We have been, since the announcement of this [inaudible] price increase, we have been in close conversation with the Coca-Cola Company. We think that we have advanced, but we are not yet there in terms of getting 100% agreement on all terms of the discussions. I think that we are advancing; we are in very close conversations. You heard the Coca-Cola Company saying, also during the conference call, that they’re in discussions with us. We confirm that, it’s true. We are advancing. But at this point in time I don’t have anything to announce to you guys, as we have not concluded those discussions.

And your next question comes from Celso Sanchez from Citigroup. Please proceed, sir.

Hi, good morning. Just on Brazil, I was curious with respect to your comment, I believe you said premium products for you are about two times the value protection brands now. I believe that’s what you were referring to.

With respect to the flow meters that are supposed to begin, I think in about a month and a half’s time, do you -- are you seeing any benefits from that yet in the marketplace to this firmer pricing overall, or opportunities that are beginning to appear that will allow you to take pricing going forward? Your pricing structure [inaudible] seemed not to be reflecting that just yet. I wonder if perhaps you [inaudible] you expect in terms of firmer pricing going forward. Thanks.

Hi, Celso. This is Alfredo. Apparently the earlier conversation related to that topic there hasn’t been finalized. We certainly haven’t received any benefits from that. That could potentially happen at some point next year, but we cannot confirm that.

Yes, by the way, pricing dynamics that we have seen is a little bit of aggressiveness in the flavor side from low-price producers. Hopefully that situation is also balanced out with our more segmented strategies. But at this point in time, we don’t have any confirmation that that will take place.

At this time there are currently no more questions in queue. I would now like to turn the call over to Mr. Hector Trevino for closing remarks. Please proceed, sir.

Yes. Well, thank you very much for listening to the call. I just wanted to have one more idea here. We have been receiving a lot of questions regarding the competitive environment in Mexico. It’s very important that we bear in mind the following.

The Valley of Mexico has been going through a very difficult competitive period, because our competitors are focusing very large package presentations in this area, not so much in some of the other areas. However, if we look at the -- in any single measure of share of market, share of shares or revenues, or share of transactions, we have continued to gain share on a national scale. Even in the Valley of Mexico, where we have a very large price differential versus Pepsi-Cola and versus Big Cola and [Caritos].

Just to give you an idea, if we take the average prices on the cola segment of all presentations for Coca-Cola FEMSA versus all presentations for Pepsi -- all presentations for Big Cola, the price gaps, Coca-Cola is having a close to 55 premium to PepsiCo, and close to 100% premium to Big Cola.

Even with those price differentials, we are maintaining our share of revenues. We are losing a few points in the share of sales. But again, we continue to capture basically, or close, or very close to 100% of the single-serve segment, the most profitable segment for us.

I hope that this last comment clarifies some of the questions that have been -- we have been receiving about market share losses in Mexico in general, or in the Valley of Mexico in particular.

Thank you very much for your attention. And we will be in touch and Alfredo and Julieta will be available to answer any more questions in the future. Thank you.

Thank you for joining today’s conference. This concludes the presentation. You may now disconnect.