Arca Continental SAB de CV (PK) (USOTC:EMBVF)
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From Dec 2019 to Dec 2024

Mexican soft drink bottler Arca Continental SAB (AC.MX, EMBVF) said Wednesday its net profit rose 7% to 1.39 billion pesos ($119 million) for the second quarter on a pro forma basis that incorporates results for its newly merged operations as if they had been combined in 2010.

Arca and Continental merged in early June to create the second-biggest bottler of Coca-Cola Co. (KO) products in Latin America, and the fourth-biggest independent bottler in the Coke system world-wide.

Speaking on a conference call with investors, Arca Continental Chief Executive Francisco Garza said the company is likely to achieve more than the $80 million in synergies from the deal that it previously had forecast.

Garza added that the company already is reaping merger benefits from negotiations with suppliers for better prices and optimization of delivery routes.

Arca Continental expects to amortize about $2 million a month in merger-related expenses over the next five years.

The bottler's consolidated net sales grew 14% on a pro forma basis to MXN12.90 billion during the April-June period, driven by increased volume sales and a higher price per unit case.

Unit-case sales including jugs of water increased 11% to 351 million, aided by an expansion in cola and water sales in Mexico.

Mexico accounted for 288 million of the company's total quarterly unit case sales, a 10% increase versus the second quarter of 2010. Garza said the deployment of additional coolers during the quarter and the introduction of more returnable presentations helped boost that result.

The Mexican beverage industry as a whole benefited during the period from higher consumption due to unusually hot weather.

Garza said the third quarter has gotten off to a good start, leading him to predict the bottler will have an "excellent" year. On a pro forma basis, Arca Continental boosted net profit by 9% in the first half of the year to MXN2.15 billion and increased sales by 13.5% to MXN23.42 billion.

The company said its cost of goods sold increased 13% on a pro forma basis during the second quarter as a result of higher PET plastic and sugar prices, particularly in Argentina.

Garza said he sees plenty of room to expand sales in Ecuador by increasing per capita consumption there, and to raise sales in Argentina via market share gains.

The bottler achieved a 12% expansion in Ebitda and 20% sales growth at its South American operations during the second quarter on a pro forma basis.

Consolidated operating profit increased 20% on the year to MXN2.37 billion, for an operating margin of 18.4% on a pro forma basis, up 100 basis points.

Earnings before interest, taxes, depreciation and amortization, or Ebitda, rose 18% to MXN2.86 billion for a margin of 22.1%.

Arca Continental shares were up 1.4% to MXN62.86 in mid-session trade Wednesday.

-By Amy Guthrie, Dow Jones Newswires; (5255) 5980-5177, amy.guthrie@dowjones.com