UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

For the month of July 2020
Commission File Number 1-12260

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

(Translation of registrant’s name into English)

United Mexican States

(Jurisdiction of incorporation or organization)

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

México

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F X   Form 40-F     

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1)

Yes    No  X 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7)

Yes    No  X 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes    No  X 

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with

Rule 12g3-2(b): 82-__.

Coca-Cola FEMSA Announces Results for the Second Quarter and First Six Months of 2020

Mexico City, July 22, 2020, Coca-Cola FEMSA, S.A.B. de C.V. (BMV: KOF UBL, NYSE: KOF) (“Coca-Cola FEMSA”, “KOF” or the “Company”), the largest Coca-Cola franchise bottler in the world by sales volume, announces results for the second quarter and the first six months of 2020.

SECOND QUARTER OPERATIONAL AND FINANCIAL HIGHLIGHTS

John Santa Maria, Coca-Cola FEMSA’s CEO, commented:

“Our second quarter results underscore the tremendous effort and commitment of all of Coca-Cola FEMSA employees, as well as our organization’s ability to execute in the face of dire conditions. Our Mexico operation consistently delivered a resilient volume performance, while in Brazil and Colombia our volume improved significantly after a challenging start to the quarter. Moreover, our business in Guatemala continued to grow and we managed to strengthen our competitive position and our cash flow generation. Importantly, our rollout of digital initiatives and our ability to implement aggressive savings and efficiencies were crucial to expand margins in our Mexico and Central America division. As a result, despite significant currency headwinds and the overall challenging environment that mostly impacted our South America division, our consolidated operating cash flow margin for the quarter remained flat as compared to the previous year.

While many countries are starting to ease lockdowns and show early signs of recovery, the COVID-19 pandemic continues to have an important impact on people’s lives. Accordingly, at Coca-Cola FEMSA we have continued to support our employees and communities through several initiatives. Even in these times of immediate concern, we continue to focus on our long-term strategy. We are confident that we have the right objectives and capabilities to emerge a stronger Coca-Cola FEMSA, committed to creating sustainable value for all of our stakeholders for years to come.”

RECENT DEVELOPMENTS

COVID-19 Update

Other Recent Developments  

CONFERENCE CALL INFORMATION

CONSOLIDATED SECOND QUARTER RESULTS

Volume decreased 7.2% to 780.7 million unit cases, driven mainly by COVID-19 lockdowns and social distancing measures across our markets. This decrease was driven mainly by volume declines in South America, partially offset by a resilient performance in Mexico and Brazil and volume growth in Guatemala.

Total revenues decreased 10.2% to Ps. 43,075 million, driven mainly by volume declines, an unfavorable price-mix effect and the negative translation effect resulting from the depreciation of most of our operating currencies in South America as compared to the Mexican Peso. These factors were partially offset by pricing and revenue management initiatives across our territories. On a comparable basis, total revenues would have decreased 8.6%.

Gross profit decreased 13.7% to Ps. 19,075 million and gross margin contracted 180 basis points to 44.3%. A more favorable raw material environment, our revenue management initiatives and our currency hedging strategies were offset by i) unfavorable price-mix effects; ii) higher concentrate costs in Mexico; iii) higher concentrate costs in Brazil, related to the reduction of tax credits on concentrate purchased from the Manaus Free Trade Zone, due to the temporary decision to suspend such tax credits; and iv) the depreciation in the average exchange rate of most of our operating currencies as applied to our U.S. dollar-denominated raw material costs. On a comparable basis, gross profit would have decreased 12.5%.

Operating income decreased 19.1% to Ps. 5,130 million, and operating margin contracted 130 basis points to 11.9%. This decrease was driven mainly by a gross profit decline, partially offset by labor, maintenance and marketing expense efficiencies across our operations. In addition, the same period of the previous year included restructuring severance payments related to our Fuel for Growth efficiency program. On a comparable basis, excluding currency translation effects, our operating income would have decreased 17.6%.

Comprehensive financing result recorded an expense of Ps. 1,268 million, compared to an expense of Ps. 1,559 million in the same period of 2019.

This quarter the Company had a reduction in its interest expense, net, as compared to the same period of 2019. This decrease was driven mainly by the prepayment of our U.S. dollar-denominated bond due 2023, partially offset by new short-term financing incurred during the first quarter of 2020, as a preventive measure to reinforce the Company’s cash position. In addition, the Company recorded a foreign exchange gain of Ps. 8 million—driven mainly by the positive mark- to-market from cross currency swaps that were benefited by the appreciation of the Mexican Peso during the quarter. These effects were partially offset by our cash exposure in U.S. dollars that was negatively impacted by the appreciation of the Mexican Peso, as compared to the first quarter of the year. Finally, a gain of Ps. 81 million in monetary position in inflationary subsidiaries was recognized as compared to a loss of Ps. 36 million during the same period of 2019.

Income tax as a percentage of income before taxes was 32.6% as compared to 24.3% during the same period of the previous year. This increase was driven mainly by impairments recognized during the second quarter of 2020 as compared with the same period of the previous year, which included certain tax efficiencies and ongoing efforts to reduce non-deductible items across our operations.

Net income attributable to equity holders of the company reached Ps. 2,115 million as compared to Ps. 3,487 million during the same period of the previous year. This decline was driven mainly by impairments recognized in other non-operating expenses of Ps. 903 million related to our non-carbonated beverage joint venture in Brazil and our dairy joint venture in Panama. Earnings per share¹ were Ps. 0.13 (Earnings per unit were Ps. 1.01 and per ADS were Ps. 10.07.). 

CONSOLIDATED FIRST SIX MONTHS RESULTS

Volume decreased 3.8% to 1,574.3 million unit cases in the first six months of 2020 as compared to the same period of 2019, driven mainly by the enforcement of lockdowns and social distancing measures related to the COVID-19 pandemic during the second quarter.

Total revenues decreased 6.5% to Ps. 88,341 million in the first six months of 2020 as compared to the same period of 2019, driven mainly by an unfavorable price-mix effect, and an unfavorable currency translation resulting from the depreciation of most of our operating currencies into Mexican Pesos. These factors were partially offset by pricing and revenue management initiatives. On a comparable basis, total revenues would have decreased 2.8%.

Gross profit decreased 7.8% to Ps. 39,749 million in the first six months of 2020 as compared to the same period of 2019, and gross margin contracted 60 basis points to 45.0%. A more favorable raw material environment, our revenue management initiatives and our currency hedging strategies were offset by i) unfavorable price-mix effects; ii) higher concentrate costs in Mexico; iii) higher concentrate costs in Brazil, related to the reduction of tax credits on concentrate purchased from the Manaus Free Trade Zone, due to the temporary decision to suspend such tax credits; and iv) the depreciation in the average exchange rate of most of our operating currencies as applied to our U.S. dollar-denominated raw material costs. On a comparable basis, gross profit would have decreased 4.5%.

Operating income decreased 10.1% to Ps. 10,854 million in the first six months of 2020 as compared to the same period of 2019, and operating margin contracted 50 basis points to 12.3%. Labor, maintenance, and marketing expense efficiencies coupled with tax reclaims in Brazil, were offset mainly by a gross profit decline. In addition, the same period of the previous year included restructuring severance payments related to our Fuel for Growth efficiency program. On a comparable basis, operating income would have decreased 6.5%.

Comprehensive financing result recorded an expense of Ps. 3,467 million during the first six months of 2020 compared to an expense of Ps. 3,153 million in the same period of 2019.

Interest expense, net, recorded an increase during the first six months driven mainly by a one-time interest expense related to the prepayment of our U.S. dollar denominated bond due 2023, related to our successful debt refinancing initiatives performed during the first quarter. In addition, the Company incurred short-term financing, as a preventive measure to reinforce the Company’s cash position. These effects were partially offset by debt prepayments.

This increase was partially offset by a foreign exchange gain of Ps. 493 million, as our cash exposure to U.S. dollars was positively impacted by the depreciation of the Mexican Peso, and a gain in monetary position in inflationary subsidiaries of Ps. 175 million as compared to losses in the same period of 2019. 

Income tax as a percentage of income before taxes was 31.5% as compared to 28.2% during the first six months of the previous year. This increase was driven mainly by impairments recognized during the second quarter of 2020.

Net income attributable to equity holders of the company reached Ps. 4,658 million in the first six months of 2020 as compared to Ps. 6,088 million during the same period of the previous year. This decline was driven by a one-time increase in our interest expense of Ps. 1,475 million, due to the prepayment of our U.S. dollar-denominated bond due 2023 coupled with impairments recognized in other non-operating expenses of Ps. 903 million related to our non-carbonated beverage joint venture in Brazil and our dairy joint venture in Panama. Earnings per share¹ were Ps. 0.28 (Earnings per unit were Ps. 2.22 and earnings per ADS were Ps. 22.17). 

MEXICO & CENTRAL AMERICA DIVISION SECOND QUARTER RESULTS

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

Volume decreased 6.0% to 521.6 million unit cases, driven by a decrease in most of our markets, which were impacted by lockdowns and social distancing measures related to the COVID-19 outbreak. These declines were partially offset by volume growth in Guatemala.

Total revenues decreased 5.6% to Ps. 27,380 million, driven by volume declines and an unfavorable price-mix effect. These effects were partially offset by volume growth in Guatemala, pricing and revenue management initiatives, and a favorable currency translation effect from all of our operating currencies in Central America as translated into Mexican Pesos. On a comparable basis, total revenues would have decreased 8.8%.

Gross profit decreased 4.8% to Ps. 13,480 million and gross margin increased 40 basis points driven mainly by lower PET costs, our pricing initiatives and our currency hedging strategies. These factors were partially offset by an unfavorable price-mix effect and higher concentrate costs in Mexico. On a comparable basis, gross profit would have decreased 7.9%.

Operating income increased 3.7% to Ps. 4,696 million and operating margin expanded 160 basis points to 17.2% during the period, driven mainly by operating expense efficiencies as labor, maintenance and marketing expenses. In addition, the same period of the previous year included restructuring severance payments related to our Fuel for Growth efficiency program. On a comparable basis, operating income would have increased 1.8%.

SOUTH AMERICA DIVISION SECOND QUARTER RESULTS

(Brazil, Argentina, Colombia, and Uruguay)

Volume decreased 9.5% to 259.1 million unit cases, driven by a volume decrease across our territories as a result of lockdowns and social distancing measures related to the outbreak of COVID-19.

Total revenues decreased 17.3% to Ps. 15,695 million, driven mainly by a decrease in volumes, unfavorable price-mix effects and an unfavorable currency translation effect resulting from the depreciation of most of our operating currencies in the division as compared to the Mexican Peso. These effects were partially offset by pricing and revenue management initiatives. On a comparable basis, total revenues would have decreased 8.3%.

Gross profit decreased 29.5% to Ps. 5,595 million, and gross margin contracted 620 basis points to 35.6%. This is a result of volume declines and unfavorable price-mix effects, coupled with higher concentrate costs in Brazil related to the reduction of tax credits on concentrate purchased from the Manaus Free Trade Zone, due to our temporary decision to suspend such tax credits. In addition, our gross profit was impacted by the depreciation of the average exchange rate of all of our operating currencies in the division as applied to our U.S. dollar-denominated raw material costs. These effects were partially offset by declining PET costs and currency hedging initiatives. On a comparable basis, gross profit would have decreased 21.9%.

Operating income decreased 76.0% to Ps. 434 million, resulting in a margin contraction of 670 basis points driven mainly by a gross profit decline coupled with lower fixed expense absorption related to top-line declines and unfavorable price-mix effects. These effects were partially offset by labor and marketing expense efficiencies. On a comparable basis, operating income would have decreased 73.0%.

DEFINITIONS

Volume is expressed in unit cases. Unit case refers to 192 ounces of finished beverage product (24 eight-ounce servings) and, when applied to soda fountains, refers to the volume of syrup, powders and concentrate that is required to produce 192 ounces of finished beverage product.

Transactions refers to the number of single units (e.g. a can or a bottle) sold, regardless of their size or volume or whether they are sold individually or in multipacks, except for soda fountains, which represent multiple transactions based on a standard 12 oz. serving.

Operating income is a non-GAAP financial measure computed as “gross profit – operating expenses – other operating expenses, net + operative equity method (gain) loss in associates.”

Operating cash flow is a non-GAAP financial measure computed as “operating income + depreciation + amortization & other operating non-cash charges.”

Earnings per share are equal to “quarterly earnings / outstanding shares.” Earnings per share (EPS) for all periods are adjusted to give effect to the stock split resulting in 16,806,658,096 shares outstanding. For the convenience of the reader, as each KOF UBL Unit is comprised of 8 shares (3 Series B shares and 5 Series L shares), earnings per unit are equal to EPS multiplied by 8. Each ADS represents 10 KOF UBL Units.

COMPARABILITY

In an effort to provide our readers with a more useful representation of our company's underlying financial and operating performance, as of the first quarter 2020, we adjusted our methodology to calculate our comparable figures, no longer excluding hyperinflationary operations. Due to this change, our “comparable” term means, with respect to a year-over-year comparison, the change of a given measure excluding the effects of: (i) mergers, acquisitions, and divestitures; and (ii) translation effects resulting from exchange rate movements. In preparing this measure, management has used its best judgment, estimates, and assumptions in order to maintain comparability.

ABOUT THE COMPANY

Stock listing information: Mexican Stock Exchange, Ticker: KOFUBL | NYSE (ADS), Ticker: KOF | Ratio of KOFUBL to KOF = 10:1

Coca-Cola FEMSA files reports, including annual reports and other information with the U.S. Securities and Exchange Commission, or the “SEC,” and the Mexican Stock Exchange (Bolsa Mexicana de Valores, or the “BMV”) pursuant to the rules and regulations of the SEC (that apply to foreign private issuers) and of the BMV. Filings we make electronically with the SEC and the BMV are available to the public on the Internet at the SEC’s website at www.sec.gov, the BMV’s website at www.bmv.com.mx, and our website at www.coca-colafemsa.com.

Coca-Cola FEMSA, S.A.B. de C.V. is the largest Coca-Cola 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 129 brands to a population of more than 261 million. With over 80 thousand employees, the Company markets and sells approximately 3.4 billion unit cases through close to 2 million points of sale a year. Operating 49 manufacturing plants and 268 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, Dow Jones Sustainability MILA Pacific Alliance Index, FTSE4Good Emerging Index, and the Mexican Stock Exchange’s IPC and Social Responsibility and Sustainability Indices, among others. Its operations encompass franchise territories in Mexico, Brazil, Guatemala, Colombia, and Argentina, and, nationwide, in Costa Rica, Nicaragua, Panama, Uruguay, and Venezuela through its investment in KOF Venezuela. For further information, please visit www.coca-colafemsa.com.

ADDITIONAL INFORMATION

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

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. dollars amounts or could be converted into U.S. dollars at the rate indicated.

(6 pages of tables to follow)

⁽¹⁾              Except volume and average price per unit case figures.

⁽²⁾              Please refer to page 15 and 16 for revenue breakdown.

⁽³⁾              Includes equity method in Jugos del Valle, Leão Alimentos, and Estrella Azul, among others.

⁽⁴⁾              Includes equity method in PIASA, IEQSA, Beta San Miguel, IMER, and KSP Participacoes, among others.

⁽⁵⁾              The operating income and operating cash flow lines are presented as non-GAAP measures for the convenience of the reader.

⁽⁶⁾              Operating cash flow = operating income + depreciation, amortization & other operating non-cash charges.

⁽⁷⁾              Please refer to page 10 for our definition of “comparable” and a description of the factors affecting the comparability of our financial and operating performance.

⁽¹⁾              Except volume and average price per unit case figures.

⁽²⁾              Please refer to page 15 and 16 for revenue breakdown.

⁽³⁾              Includes equity method in Jugos del Valle and Estrella Azul, among others.

⁽⁴⁾              The operating income and operating cash flow lines are presented as non-GAAP measures for the convenience of the reader.

⁽⁵⁾              Operating cash flow = operating income + depreciation, amortization & other operating non-cash charges.

⁽⁶⁾              Please refer to page 10 for our definition of “comparable” and a description of the factors affecting the comparability of our financial and operating performance.

COCA-COLA FEMSA
CONSOLIDATED BALANCE SHEET
Millions of Pesos
Assets		Jun-20	Dec-19	% Var.		Liabilities & Equity		Jun-20	Dec-19	% Var.
Current Assets						Current Liabilities
Cash, cash equivalents and marketable securities						Short-term bank loans and notes payable		17,247	11,485	50%
		41,473	20,491	102%		Suppliers		16,213	19,832	-18%
Total accounts receivable		9,185	15,476	-41%		Short-term leasing Liabilities		493	483
Inventories		9,967	10,538	-5%		Other current liabilities		24,130	19,210	26%
Other current assets		9,833	10,291	-4%		Total current liabilities		58,083	51,010	14%
Total current assets		70,458	56,796	24%		Non-Current Liabilities
Non-Current Assets						Long-term bank loans and notes payable		74,039	58,492	27%
Property, plant and equipment		111,820	109,170	2%		Long Term Leasing Liabilities		817	900
Accumulated depreciation		(50,544)	(47,982)	5%		Other long-term liabilities		13,079	17,752	-26%
Total property, plant and equipment, net		61,276	61,188	0%		Total liabilities		146,018	128,154	14%
Right of use assets		1,225	1,381	-11%		Equity
Investment in shares		8,491	9,751	-13%		Non-controlling interest		5,829	6,751	-14%
Intangible assets and other assets		109,339	112,050	-2%		Total controlling interest		120,054	122,934	-2%
Other non-current assets		21,112	16,673	27%		Total equity		125,883	129,685	-3%
Total Assets		271,901	257,839	5%		Total Liabilities and Equity		271,901	257,839	5%
		June 30, 2020
Debt Mix		% Total Debt (1)	% Interest Rate Floating (1) (2)	Average Rate		Debt Maturity Profile
Currency
Mexican Pesos		68.0%	26.6%	7.3%
U.S. Dollars		13.2%	0.0%	2.8%
Colombian Pesos		2.1%	16.3%	4.6%
Brazilian Reals		13.8%	0.4%	9.1%
Uruguayan Pesos		2.4%	0.0%	12.1%
Argentine Pesos		0.6%	0.0%	37.7%
Total Debt		100%	9.7%	7.2%
(1) After giving effect to cross- currency swaps and financial leases.
(2) Calculated by weighting each year´s outstanding debt balance mix.
Financial Ratios		LTM 2020	FY 2019	Δ%
Net debt including effect of hedges (1)(3)		43,474	49,784	-12.7%
Net debt including effect of hedges / Operating cash flow (1)(3)		1.19	1.34
Operating cash flow/ Interest expense, net (1)		4.18	6.55
Capitalization (2)		45.7%	37.2%
(1) Net debt = total debt - cash
(2) Total debt / (long-term debt + shareholders' equity)
(3)  After giving effect to cross-currency swaps.

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.