COCA-COLA FEMSA, S.A.B. de C.V.

United Mexican States

Calle Mario Pani No. 100,
Santa Fe Cuajimalpa,
Cuajimalpa de Morelos,
05348, Ciudad de México,

México

2017 FIRST QUARTER RESULTS

Mexico City, April 26, 2017, Coca-Cola FEMSA, S.A.B. de C.V. (BMV: KOFL, NYSE: KOF) (“Coca-Cola FEMSA” or the “Company”), the largest franchise bottler in the world by sales volume, announces results for the first quarter of 2017.

·         Revenues grew 38.4%, while comparable revenues grew 2.7% for the first quarter of 2017.

·         Operating income grew 24.1%, while comparable operating income grew 7.2% for the first quarter of 2017.

·         Operating cash flow increased 35.9%, while comparable operating cash flow grew 4.6% for the first quarter of 2017.

·         Earnings per share increased 145.5% to Ps. 2.84 in the first quarter of 2017.

“For the first quarter of 2017, we further accelerated towards excellence by delivering positive results. Our revenues and operating income increased 38.4% and 24.1%, respectively, as we focused on executing the right strategies across our geographically diversified footprint. These results were highlighted by the continuous growth of our Mexican operation, driven by our pricing flexibility and our strengthening portfolio—underscored by the successful launch of Coca-Cola Sin Azúcar. Additionally, we rolled out affordability initiatives across our operations, which enabled us to gain or maintain market share across our key markets, highlighting our Company’s ability to adapt to challenging consumer and macroeconomic environments to deliver solid results.

Moreover, we are encouraged by stabilization and signs of recovery in Brazil. As we smoothly integrated and began capturing planned synergies from Vonpar, we further consolidated the first full quarter of this newly acquired Brazilian territory. Importantly, we started consolidating the financial results of our Philippines operation beginning in February 2017. This operation’s encouraging performance is now positively contributing to our Company’s consolidated results.

We look forward to continuing to create value for our shareholders thanks to our talented team of professionals, our operating and financial discipline, and our ability to expand and consolidate our position as a truly diversified multi-category global beverage leader,” said John Santa Maria Otazua, Chief Executive Officer of the Company.

As we previously announced, since January 25, 2017, we control our operation in the Philippines. All decisions relating to the operation and management of this business, including its annual operations plan, are approved by a majority of its Board of Directors without requiring the affirmative vote of any director appointed by The Coca-Cola Company. Commencing February 1, 2017, we started consolidating the Philippines’ financial results in our financial statements. Our results for the first quarter of 2017 and our future results in 2017 will reflect a reduction in our share of the profit of associates and joint ventures, accounted for using the equity method, and will include the minority interest of this investment in non-controlling interest. As a result of this consolidation, we reclassified one-time income of Ps. 2,996 million in other non-operative expenses, net, in connection with the cumulative translation adjustment of our investment since 2013, related to the appreciation of the Philippine peso compared with the Mexican peso. We originally recorded this effect on other comprehensive income directly in stockholder’s equity.

Comparable means, with respect to a year-over-year comparison, the change in a given measure excluding the effects of (i) mergers, acquisitions and divestitures, (ii) translation effects resulting from exchange rate movements (iii) the results of hyperinflationary economies in both periods; and (iv) includes the results of Coca-Cola FEMSA Philippines Inc., as if the consolidation had taken place at the beginning of first quarter 2016. From our operations, only Venezuela qualifies as a hyperinflationary economy. In our “as reported” figures, our Venezuelan operation’s results were translated into Mexican pesos using the DICOM exchange rate published on March 31, 2017 of 709.7475 bolivars per US dollar.

Comparable figures:

Revenues: Comparable total revenues grew 2.7% driven by average price per unit case growth across most of our operations and volume growth in Mexico.

Transactions: The comparable number of transactions declined 5.0%. Our sparkling beverage portfolio’s transactions declined 5.2% driven mainly by declines in Brazil, Colombia and the Philippines, which offset growth in Mexico. Our still beverage category’s transactions decreased transactions by 2.1%, driven mainly by declines in Colombia and Brazil, which offset increases in Mexico, Argentina and the Philippines. Water transactions, including bulk water, decreased 10.5% driven by declines across most of our operations, which offset growth in Mexico and the Philippines.

Volume: Comparable sales volume declined 4.0% in the first quarter of 2017 as compared to the same period in 2016. Our sparkling beverage portfolio’s volume declined 4.4% driven mainly by contractions in Brazil, Colombia, Argentina and the Philippines; which offset growth in Mexico. Our still beverage category’s volume decreased 0.8%, driven by declines in Brazil and Colombia which offset growth in Mexico, Central America, and Argentina. Our personal water portfolio’s volume decreased 8.3% driven mainly by declines in South America and Central America, which offset growth in Mexico and the Philippines. Our bulk water portfolio’s volume remained flat driven by declines of Crystal in Brazil, Brisa in Colombia and Kin in Argentina which offset growth of Ciel in Mexico and Wilkins in the Philippines.

Gross profit: Comparable gross profit grew 4.4%. Our pricing initiatives, coupled with our currency and raw material hedging strategies offset higher sweetener prices and the depreciation in the average exchange rate of the Mexican peso, the Argentine peso and the Philippine peso, as applied to our U.S dollar-denominated raw material costs.

Operating Income: Comparable operating income grew 7.2% in the first quarter of 2017.

Operating cash flow: Comparable operating cash flow increased 4.6% in the first quarter of 2017.

(Continued on next page)

As reported figures

Revenues: Total revenues increased 38.4% to Ps. 51,357 million in the first quarter of 2017 driven by the results of the Vonpar acquisition in Brazil and the consolidation of our operation in The Philippines beginning in February. Total revenues were also driven by price increases above inflation in key territories such as Mexico and Brazil, supported by the positive translation effect resulting from the appreciation of the Brazilian real, the Colombian peso, the Argentine peso and despite the depreciation of the Venezuelan bolivar; all as compared to the Mexican peso.

Transactions: Reported total number of transactions increased 17.8% to 5,741.7 million in the first quarter of 2017 as compared to the same period in 2016.

Volume: Reported total sales volume increased 7.9% to 881.3 million unit cases in the first quarter of 2017 as compared to the same period in 2016.

Gross profit: Gross profit grew 31.8% to Ps. 22,297 million and gross margin declined 220 basis points to 43.4%.

Equity method: The reported share of the profits of associates and joint ventures recorded a gain of Ps. 46 million in the first quarter of 2017, compared to Ps. 59 million recorded in the first quarter of 2016, due mainly to a gain in our non-carbonated beverage joint ventures in Brazil and our stake in Coca-Cola FEMSA Philippines, Inc.; corresponding to January, prior to its consolidation.

Operating Income: Operating income increased 24.1% to Ps. 6,090 million and operating margin contracted 130 basis points to 11.9%.

Other non-operative expenses, net: Other non-operative expenses, net recorded income of Ps. 2,471 million, compared to expenses of Ps. 314 million during the first quarter of 2016, due mainly to the consolidation of Coca-Cola FEMSA Philippines, Inc. starting February 2017.

Comprehensive financing result: Our comprehensive financing result in the first quarter of 2017 recorded an expense of Ps. 1,286 million, compared to an expense of Ps. 1,270 million in the same period of 2016.

During the first quarter of 2017, we recorded an interest expense of Ps. 2,513 million, compared to Ps. 1,578 million in the first quarter of 2016. This increase was driven by i) additional debt related to the acquisition of Vonpar, ii) the appreciation of the Brazilian real compared to the Mexican peso as applied to our existing Brazilian real denominated interest expense and iii) the interest rate increase of swapping U.S. dollar denominated debt to Brazilian real and Mexican peso denominated debt.

Market value on financial instruments recorded a gain of Ps. 434 million due to the recent decrease of interest rates in Brazil as applied to our floating rate cross currency swaps.

Income tax: During the first quarter of 2017, reported income tax as a percentage of income before taxes was 17.1%, compared to 26.1% in the same period of 2016. This reduction was driven mainly by the one-time non-operative income recorded in connection to the consolidation of Coca-Cola FEMSA Philippines, Inc.

Net income: Reported consolidated net controlling interest income increased 145.5% to Ps. 5,887 million in the first quarter of 2017, resulting in reported earnings per share (EPS) of Ps. 2.84 (Ps. 28.40 per ADS).

Operating cash flow: Operating cash flow grew 35.9% to Ps. 9,554 million and operating cash flow margin contracted 40 basis points to 18.6%.

As of March 31, 2017, we had a cash balance of Ps. 13,030 million, including US$ 170 million denominated in U.S. dollars, an increase of Ps. 2,554 million compared to December 31, 2016. This increase was driven mainly by cash generation and the Philippines consolidation.

As of March 31, 2017, total short-term debt was Ps. 2,412 million and long-term debt was Ps. 79,036 million. Total debt decreased by Ps. 7,461 million, compared to year end 2016.This decrease was driven mainly by the positive effect of the Mexican peso’s appreciation applied to our U.S. dollar denominated debt. Net debt decreased by Ps. 10,015 million compared to year end 2016.

The weighted average cost of debt for the quarter, including the effect of debt swapped to Brazilian reals and Mexican pesos, was 10.40%. The following charts set forth the Company’s debt profile by currency and interest rate type; and by maturity date as of March 31, 2017.

Debt Maturity Profile

(1)      See page 14 for detailed information.

(2)      After giving effect to cross currency swaps.

(3)      Calculated by weighting each year’s outstanding debt balance mix.

(Mexico, Guatemala, Nicaragua, Costa Rica and Panama)

Comparable means, with respect to a year-over-year comparison, the change in a given measure excluding the effects of (i) mergers, acquisitions and divestitures, (ii) translation effects resulting from exchange rate movements (iii) the results of hyperinflationary economies in both periods; and (iv) includes the results of Coca-Cola FEMSA Philippines Inc., as if the consolidation had taken place at the beginning of first quarter 2016. From our operations, only Venezuela qualifies as a hyperinflationary economy. In our “as reported” figures, our Venezuelan operation’s results were translated into Mexican pesos using the DICOM exchange rate published on March 31, 2017 of 709.7475 bolivars per US dollar.

Comparable figures:

Revenues: Comparable total revenues from our Mexico and Central America division increased 9.4% in the first quarter of 2017, compared to the same period in 2016, driven by an average price per unit case increase and volume growth in Mexico, offset by a volume decline in Central America.

Transactions: Total transactions in the Mexico and Central America division grew 2.2%, totaling 2,680.4 million in the first quarter of 2017. Our sparkling beverage portfolio’s transactions increased 1.4%, driven mainly by 2.1% growth of brand Coca-Cola and 3.5% growth in our flavored sparkling beverage portfolio in Mexico, which was offset by a decline in Central America. Our still beverage category’s transactions increased by 7.5%, driven mainly by Mexico, which generated more than 20 million incremental transactions this quarter. Water transactions, including bulk water, increased 3.3% driven mainly by Mexico, which offset a decline in Central America.

Volume: Total sales volume increased 2.8% to 472.9 million unit cases in the first quarter of 2017, compared to the same period of 2016. In Mexico, our volume increased 3.7% while our volume in Central America decreased 6.0%. Our sparkling beverage category’s volume increased 2.0%, driven by growth of brand Coca-Cola in Mexico, while our core flavored sparkling portfolio of Fanta, Sprite and Fresca, drove flavors growth of flavors in Mexico. This growth was partially offset by a decline in the sparkling beverage category in Central America. Our still beverage category’s volume grew 15.9%, driven mainly by the performance of Vallefrut, the del Valle juice portfolio, Santa Clara dairy products, and Powerade in Mexico, while FUZE tea and Powerade drove growth in Central America. Our personal water portfolio’s volume declined 0.8%, driven by a decline in Central America, which offset growth in Mexico. Our bulk water portfolio’s volume grew 1.8% driven by growth in Ciel bulk water in Mexico.

Gross profit: Comparable gross profit grew 6.9% in the first quarter of 2017 as compared to the same period in 2016. Our pricing initiatives, combined with our currency hedging strategy were offset by higher prices of sweeteners and the depreciation of the average exchange rate of the Mexican peso as applied to our U.S. dollar-denominated raw material costs.

Operating income: Comparable operating income in the division increased 5.9% in the first quarter of 2017 as compared to the same period in 2016.

Operating cash flow: Comparable operating cash flow grew 3.5% in the first quarter of 2017 as compared to the same period in 2016.

As reported figures

Revenues: Reported total revenues increased 11.6% in the first quarter of 2017, driven by a combination of volume growth in Mexico and solid pricing initiatives.

Gross profit: Reported gross profit increased 9.0% in the first quarter of 2017 and gross profit margin reached 48.6%, a gross margin contraction of 110 basis points.

Operating income: Our reported operating income increased 6.3% in the first quarter of 2017 and our operating income margin reached 13.9%, contracting 70 basis points during the period. Our operating expenses in the division, as a percentage of sales, contracted 30 basis points, driven by expense control initiatives, mitigating pressure from higher diesel and gasoline prices. In this quarter, we only recorded the January 2017 results of Coca-Cola FEMSA Philippines Inc. in our share of the profit of associates in Mexico due to the consolidation of this operation.

Operating cash flow: Reported operating cash flow increased 6.2% in the first quarter of 2017, resulting in a margin contraction of 100 bps, reaching 19.7%.

(Colombia, Venezuela, Brazil and Argentina)

Comparable means, with respect to a year-over-year comparison, the change in a given measure excluding the effects of (i) mergers, acquisitions and divestitures, (ii) translation effects resulting from exchange rate movements (iii) the results of hyperinflationary economies in both periods; and (iv) includes the results of Coca-Cola FEMSA Philippines Inc., as if the consolidation had taken place at the beginning of first quarter 2016. From our operations, only Venezuela qualifies as a hyperinflationary economy. In our “as reported” figures, our Venezuelan operation’s results were translated into Mexican pesos using the DICOM exchange rate published on March 31, 2017 of 709.7475 bolivars per US dollar.

Comparable figures:

Revenues: Comparable total revenues decreased 1.5%, driven mainly by volume declines in all of our operations, which were not fully compensated for by an average price per unit case increase across our territories.

Transactions: Comparable transactions in the division declined 14.9% totaling 1,690.0 million in the first quarter of 2017. Our sparkling beverage portfolio’s transactions decreased 13.0%, driven by declines in all of our operations. Our still beverage category’s transactions decreased by 21.1% driven by decreases in Brazil and Colombia, which offset growth in Argentina. Water transactions, including bulk water, decreased 21.8%, driven by declines in all of our countries.

Volume: Comparable total sales volume in our South America division decreased 14.7% to 260.7 million unit cases in the first quarter of 2017 as compared to the same period of 2016. Our sparkling beverage category’s volume decreased 13.2%, driven by declines in all of our operations. Our still beverage category’s volume decreased 21.7%, driven by declines in Colombia and Brazil, which offset Cepita’s growth in Argentina. Our personal water category’s volume declined 20.8%, driven by Manantial in Colombia, Aquarius in Argentina and Crystal in Brazil. Our bulk water business’s volume declined 22.5%, driven mainly by Crystal in Brazil and Brisa bulk water in Colombia.

Gross profit: Comparable gross profit increased 2.6% as a result of our pricing initiatives, raw material hedges and the appreciation of the Brazilian real and the Colombian peso as applied to our U.S. dollar-denominated raw material costs which offset higher sugar prices and the depreciation of the average exchange rate of the Argentine peso as applied to our U.S. dollar-denominated raw material costs.

Operating income: Comparable operating income increased 6.4% as compared to the same period of the previous year.

Operating cash flow: Comparable operating cash flow increased 4.2% as compared to the same period of 2016.

As reported figures

Revenues: Reported total revenues grew 47.2% to Ps. 26,284 million in the first quarter of 2017 driven by the positive translation effect of the Brazilian real and the Colombian peso, as compared to the Mexican Peso; and the integration of Vonpar.

Transactions: Reported total number of transactions declined 10.4% to 2,016.7 million in the first quarter of 2017 as compared to the same period in 2016.

Volume: Reported total sales volume declined 11.3% to 316.1 million unit cases in the first quarter of 2017 as compared to the same period in 2016.

Gross profit: Reported gross profit increased 41.9% to Ps. 10,429 million in the first quarter of 2017 and gross profit margin contracted 140 basis points to 39.7%.

Operating income: Our reported operating income grew 37.1% to Ps. 2,870 million in the first quarter of 2017, driven mainly by the cancelation of contingency reserves in Brazil, resulting in a margin of 10.9%, a contraction of 80 basis points.

Operating cash flow: Reported operating cash flow grew 55.1% to reach Ps. 4,717 million in the first quarter of 2017, resulting in a margin of 17.9%, an expansion of 90 basis points.

(The Philippines)

Comparable means, with respect to a year-over-year comparison, the change in a given measure excluding the effects of (i) mergers, acquisitions and divestitures, (ii) translation effects resulting from exchange rate movements (iii) the results of hyperinflationary economies in both periods; and (iv) includes the results of Coca-Cola FEMSA Philippines Inc., as if the consolidation had taken place at the beginning of first quarter 2016. From our operations, only Venezuela qualifies as a hyperinflationary economy. In our “as reported” figures, our Venezuelan operation’s results were translated into Mexican pesos using the DICOM exchange rate published on March 31, 2017 of 709.7475 bolivars per US dollar.

Comparable figures:

Revenues: Comparable total revenues declined 6.4% during the first quarter of 2017, driven mainly by a volume decline resulting from adverse weather conditions.

Transactions: Comparable transactions in the division declined 4.6% in the first quarter of 2017. Our sparkling beverage portfolio’s transactions decreased 6.9%, driven by declines in colas and flavors. Our still beverage category’s transactions increased by 15.6% driven mainly by Minute Maid Fresh. Water transactions, including bulk water, increased 22.9% driven by Wilkins.

Volume: Comparable total sales volume in our Asia division decreased 2.7% in the first quarter of 2017 as compared to the same period of 2016. Our sparkling beverage category’s volume decreased 4.1% driven mainly by a decline in flavors and flat performance in colas. Our still beverage category’s volume, excluding powders increased 16.8% driven by the positive performance of Minute Maid Fresh and Powerade. Our personal water category’s volume increased 18.0%, driven by Wilkins Pure. Our bulk water business volume grew 1.6%, driven mainly by Wilkins.

Gross profit: Comparable gross profit remained flat despite volume and revenue contractions, as a result of a decrease in the price of sweeteners and PET resin, which was partially offset by the devaluation of the Philippine peso as applied to our U.S. dollar-denominated raw material costs.

Operating income: Comparable operating income increased 32.6% as compared to the same period of the previous year as a result of efficiencies derived from cost and expense management initiatives.

Operating cash flow: Comparable operating cash flow increased 11.4% as compared to the same period of 2016.

On March 2017, Coca-Cola FEMSA published its Sustainability Report 2016: Accelerating towards Excellence; providing information on progress towards its 2020 Sustainability Goals, and its alignment to the United Nations Sustainable Development Goals. More information on the company’s commitment to generate economic, social and environmental value is available at www.coca-colafemsa.com/sustainability.html

·         On March 14, 2017, Coca-Cola FEMSA held its Annual Ordinary General Shareholders Meeting during which its shareholders approved the Company’s consolidated financial statements for the year ended December 31, 2016, the annual report presented by the Board of Directors, the declaration of dividends corresponding to fiscal year 2016 and the composition of the Board of Directors and the Finance and Planning, Audit, and Corporate Practices Committees for 2017. Shareholders approved the payment of a cash dividend in the amount of Ps. 6,944 million, or the equivalent of Ps. 3.35 per share, to be paid in two installments as of May 3, 2017 and November 1, 2017.

·         On March 28, 2017, The Coca-Cola Company together with its bottlers in Latin America announced the closing of the acquisition of AdeS.

·         Coca-Cola FEMSA informs that Heineken announced in its first quarter 2017 trading update issued on April 19, that in view of its agreement to acquire Kirin’s beer business in Brazil, Heineken intends to leverage Kirin’s existing route to market with the Heineken portfolio in the future. Heineken's portfolio is currently being distributed through the Coca-Cola bottler system in Brazil under an agreement in effect until year 2022. Subsequently, on April 25, 2017 our Brazilian subsidiary received formal notice from Heineken communicating its intention to terminate its commercial relationship with us and the rest of the Coca-Cola system in Brazil.  In light that our agreement is still on effect, we are currently assessing next steps and possible actions; and in the meantime we will continue business as usual serving the market with Heineken products.

Our first quarter 2017 conference call will be held on April 26, 2017, at 12:30 P.M. Eastern Time (11:30 A.M. Mexico City Time). To participate in the conference call, please dial: Domestic U.S.: 888-204-4394 or International: 913-981-5533. Participant code: 8897993. We invite investors to listen to the live audio cast of the conference call on the Company’s website, www.coca-colafemsa.com. If you are unable to participate live, the conference call audio will be available at www.coca-colafemsa.com.

Coca-Cola FEMSA encourages the reader to refer to our quarterly filing to the Mexican Stock Exchange (Bolsa Mexicana de Valores or BMV) for more detailed information. This filing contains a detailed cash flow statement and selected notes to the financial statements, including segment information. This filing is available at www.bmv.com.mx  in the Información Financiera section for Coca-Cola FEMSA (KOF) and in our corporate website at www.coca-colafemsa.com/inversionistas/registros-bmv.

This news release may contain forward-looking statements concerning Coca-Cola FEMSA’s future performance, which should be considered as good faith estimates by Coca-Cola FEMSA. These forward-looking statements reflect management’s expectations and are based upon currently available data. Actual results are subject to future events and uncertainties, many of which are outside Coca-Cola FEMSA’s control, which could materially impact the Company’s actual performance. References herein to “US$” are to United States dollars. This news release contains translations of certain Mexican peso amounts into U.S. dollars for the convenience of the reader. These translations should not be construed as representations that Mexican peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated.

All the financial information presented in this report was prepared under International Financial Reporting Standards (IFRS).

In an effort to provide our readers with a more useful representation of our company's underlying financial and operating performance we are including the term “Comparable”. This means, with respect to a year-over-year comparison, the change in a given measure excluding the effects of (i) mergers, acquisitions and divestitures, (ii) translation effects resulting from exchange rate movements, (iii) the results of hyperinflationary economies in both periods, and (iv) includes the results of Coca-Cola FEMSA Philippines Inc., as if the consolidation had taken place at the beginning of first quarter 2016. Currently, the only operation that qualifies as a hyperinflationary economy is Venezuela. In preparing this measure, management has used its best judgment, estimates and assumptions in order to maintain comparability.

Earnings per share were computed based on 2,072.9 million outstanding shares (each ADS represents 10 local shares).

For reporting purposes, all corporate expenses, including the equity method recorded from our stake of the results of Coca-Cola FEMSA Philippines, Inc., were included in the results of the Mexico and Central America division. Starting on February 2013 and ending on January 2017 we incorporated our stake of the results of Coca-Cola FEMSA Philippines, Inc. through the equity method.

Stock listing information: Mexican Stock Exchange, Ticker: KOFL | NYSE (ADR), Ticker: KOF | Ratio of KOF L to KOF = 10:1

Coca-Cola FEMSA, S.A.B. de C.V. is the largest franchise bottler in the world by sales volume. The company produces and distributes trademark beverages of The Coca-Cola Company, offering a wide portfolio of 154 brands to more than 375 million consumers daily. With over 100 thousand employees, the company markets and sells approximately 4 billion unit cases through 2.8 million points of sale a year. Operating 66 manufacturing plants and 328 distribution centers, Coca-Cola FEMSA is committed to generating economic, social, and environmental value for all of its stakeholders across the value chain.  The company is a member of the Dow Jones Sustainability Emerging Markets Index, FTSE4Good Emerging Index, and the Mexican Stock Exchange’s IPC and Social Responsibility and Sustainability Indices, among other indexes.  Its operations encompass franchise territories in Mexico, Brazil, Colombia, Argentina, and Guatemala and, nationwide, in the Philippines, Venezuela, Nicaragua, Costa Rica, and Panama. For more information, please visit www.coca-colafemsa.com.

For additional information or inquiries contact the Investor Relations team:

·         Maria Dyla Castro | mariadyla.castro@kof.com.mx | (5255) 1519-5186

·         Jorge Collazo | jorge.collazo@kof.com.mx | (5255) 1519-5218

·         Tania Ramírez | tania.ramirez@kof.com.mx | (5255) 1519-5013

 (7 pages of tables to follow)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.