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 October 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 Third Quarter and First Nine Months of 2020

Mexico City, October 26, 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 third quarter and the first nine months of 2020.

THIRD QUARTER OPERATIONAL AND FINANCIAL HIGHLIGHTS

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

“In the face of what is still a very complex operating environment, I am encouraged to see sequential improvements across our operations. These positive trends are driven not only by gradually recovering consumer mobility, but also by our portfolio initiatives, reinforced point-of-sale execution, and the tremendous effort and commitment from all of Coca-Cola FEMSA’s employees. Consequently, despite a 4.0% decline in revenues for the quarter, we managed to grow our operating income by 1.5%, while expanding our operating cash flow margin by 90 basis points. Importantly, driven by favorable raw material costs and a relentless focus on savings and efficiency, our Mexico and Central America division continued to improve its profitability, generating operating income growth of 5.9% and an operating cash flow margin expansion to reach 23.0%. Additionally, our South America division delivered a significant sequential recovery, driven mainly by our Brazilian operation’s strong volume growth.  

I am pleased with our business’ continued resiliency, as we continue to reinforce our portfolio to offer more affordability to our consumers and transform our operating capabilities to ensure our business’ profitable, long-term growth. We remain committed to generating economic value and positively contributing to society and the environment. I am confident that the structural measures we are putting in place will continue to provide solid short- and long-term results and opportunities.”

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RECENT DEVELOPMENTS

CONFERENCE CALL INFORMATION

CONSOLIDATED THIRD QUARTER RESULTS

Volume decreased 4.1% to 807.9 million unit cases, due mainly to COVID-19 lockdowns and social distancing measures across our markets. This decrease was driven mainly by volume declines in Mexico and Central America, partially offset by volume growth in Brazil, Guatemala, and Uruguay.

Total revenues decreased 4.0% to Ps. 46,734 million. This figure includes extraordinary other operating revenues related to an entitlement to reclaim tax payments in Brazil. Our revenues were impacted 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 remained flat.

Gross profit decreased 1.4% to Ps. 21,367 million, and gross margin expanded 120 basis points to 45.7%. A more favorable raw material environment, our revenue management initiatives, and our currency hedging strategies were partially offset by i) unfavorable price-mix effects; ii) 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; iii) higher concentrate costs in Mexico; 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 increased 2.1%.

Operating income increased 1.5% to Ps. 7,119 million, and operating margin expanded 80 basis points to 15.2%. This increase was driven mainly by labor, maintenance, and marketing expense efficiencies across our operations, coupled with tax reclaims in Brazil. In addition, the same period of the previous year included restructuring severance payments related to our Fuel for Growth efficiency program. This increase was partially offset by a gross profit decline. The total net amount of extraordinary tax effects in Brazil this quarter was Ps. 1,609 million. On a comparable basis, operating income would have increased 7.1%.

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Comprehensive financing result recorded an expense of Ps. 1,421 million, compared to an expense of Ps. 1,430 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 payment of our U.S. dollar-denominated bond due February 2020 and 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 gain of Ps. 117 million in monetary position in inflationary subsidiaries as compared to a gain of Ps. 103 million during the same period of 2019.

These effects were partially offset by a foreign exchange loss of Ps. 135 million, driven mainly by the appreciation of the Mexican Peso as applied to our dollar-denominated cash position.

Income tax as a percentage of income before taxes was 33.7% as compared to 25.9% during the same period of the previous year. This increase was driven mainly by extraordinary non-operating expenses and impairments recognized during the quarter.

Net income attributable to equity holders of the company reached Ps. 2,463 million as compared to Ps. 4,027 million during the same period of the previous year. This decline was driven mainly by an extraordinary non-operative expense related to the sale of Estrella Azul in Panama and an impairment recognized in our non-carbonated beverage joint venture in Brazil. Excluding extraordinary non-operating expenses effects, majority net income would have increased 6.2%. Earnings per share¹ were Ps. 0.15 (Earnings per unit were Ps. 1.17, and earnings per ADS were Ps. 11.72.).

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CONSOLIDATED FIRST NINE MONTHS RESULTS

Volume decreased 3.9% to 2,382.2 million unit cases in the first nine 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, partially offset by volume growth in Guatemala.

Total revenues decreased 5.3% to Ps. 135,015 million in the first nine months of 2020 as compared to the same period of 2019. This figure includes extraordinary other operating revenues related to an entitlement to reclaim tax payments in Brazil. Total revenues were impacted mainly by an unfavorable price-mix effect and an unfavorable currency translation resulting from the depreciation of all of our operating currencies in South America into Mexican Pesos. These factors were partially offset by pricing and revenue management initiatives. On a comparable basis, total revenues would have decreased 1.9%.

Gross profit decreased 5.3% to Ps. 61,088 million in the first nine months of 2020 as compared to the same period of 2019, and gross margin remained at 45.2%. A more favorable raw material environment, our revenue management initiatives, and our currency hedging position in most of our operations were offset by: i) an unfavorable price-mix effect; ii) higher concentrate costs in Brazil, related to the reduction of tax credits on concentrate purchased from the Manaus Free Trade Zone; iii) higher concentrate costs in Mexico; iv) and 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 2.3%.

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Operating income decreased 5.6% to Ps. 17,973 million in the first nine months of 2020 as compared to the same period of 2019, and operating margin contracted 10 basis points to 13.3%. 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 1.6%.

Comprehensive financing result recorded an expense of Ps. 4,889 million during the first nine months of 2020 compared to an expense of Ps. 4,566 million in the same period of 2019. Interest expense, net, recorded an increase during the first nine 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. 357 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. 288 million.

Income tax as a percentage of income before taxes was 32.3% as compared to 27.4% during the first nine months of the previous year. This increase was driven mainly by impairments recognized during the period.

Net income attributable to equity holders of the company reached Ps. 7,119 million in the first nine months of 2020 as compared to Ps. 10,095 million during the same period of the previous year. Earnings per share¹ were Ps. 0.42 (Earnings per unit were Ps. 3.39, and earnings per ADS were Ps. 33.89.).

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MEXICO & CENTRAL AMERICA DIVISION THIRD QUARTER RESULTS

Volume decreased 6.9% to 498.6 million unit cases, driven by lockdowns and social distancing measures related to the COVID-19 outbreak, as well as unfavorable weather conditions in Mexico. These declines were partially offset by volume growth in Guatemala.

Total revenues decreased 4.8% to Ps. 26,807 million, driven by volume declines and an unfavorable price-mix effect. These effects were partially offset by pricing and revenue management initiatives, and a favorable currency translation effect from our operating currencies in Central America as translated into Mexican Pesos. On a comparable basis, total revenues would have decreased 6.7%.

Gross profit decreased 0.6% to Ps. 13,303 million, and gross margin expanded 210 basis points to 49.6%, driven mainly by our pricing initiatives, lower PET costs, and our currency hedging strategies. These factors were partially offset by unfavorable price-mix effects, higher concentrate costs and 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 2.5%.

Operating income increased 5.9% to Ps. 4,336 million in the third quarter of 2020, and operating margin expanded 170 basis points to 16.2% during the period, driven mainly by operating expense efficiencies in 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 4.1%.

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SOUTH AMERICA DIVISION THIRD QUARTER RESULTS

Volume increased 0.9% to 309.3 million unit cases, driven by strong volume growth of 6.5% in Brazil and 3.4% volume growth in Uruguay, partially offset by volume declines in Argentina and Colombia.

Total revenues decreased 3.0% to Ps. 19,927 million. This figure includes extraordinary other operating revenues related to an entitlement to reclaim tax payments in Brazil. Revenues were impacted mainly by an unfavorable price-mix effect, volume contractions in Argentina and Colombia, and an unfavorable currency translation effect resulting from the depreciation of most of our operating currencies as compared to the Mexican Peso. These effects were partially offset by volume growth in Brazil and Uruguay and revenue management initiatives. On a comparable basis, total revenues would have increased 10.7%.

Gross profit decreased 2.6% to Ps. 8,064 million, and gross margin expanded 20 basis points to 40.5%. This margin expansion was driven mainly by lower PET costs, our revenue management initiatives, and a favorable currency hedging position. These factors were partially offset by an unfavorable price-mix effect, higher concentrate costs in Brazil, related to the reduction of tax credits on concentrate purchased from the Manaus Free Trade Zone, and the depreciation of the average exchange rate of all our local currencies in the division as applied to our U.S. dollar-denominated raw material costs. On a comparable basis, gross profit would have increased 10.9%.

Operating income decreased 4.6% to Ps. 2,783 million in the third quarter of 2020, resulting in a margin contraction of 20 basis points to 14.0%. This result includes operating expense efficiencies and tax reclaims in Brazil, unfavorable price-mix effects, and additional expenses related to tax reclaims in Brazil. These effects were partially offset by a reduction in severance expenses related to our Fuel for Growth efficiency program. The total net amount of extraordinary tax effects in Brazil this quarter was Ps. 1,609 million. On a comparable basis, operating income would have increased 12.2%.

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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 “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 14 and 15 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 9 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 14 and 15 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 9 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		Sep-20	Dec-19	% Var.		Liabilities & Equity		Sep-20	Dec-19	% Var.
Current Assets						Current Liabilities
Cash, cash equivalents and marketable securities						Short-term bank loans and notes payable		14,282	11,485	24%
		58,057	20,491	183%		Suppliers		16,640	19,832	-16%
Total accounts receivable		8,943	15,476	-42%		Short-term leasing Liabilities		556	483
Inventories		9,771	10,538	-7%		Other current liabilities		25,879	19,210	35%
Other current assets		10,663	10,291	4%		Total current liabilities		57,357	51,010	12%
Total current assets		87,434	56,796	54%		Non-Current Liabilities
Non-Current Assets						Long-term bank loans and notes payable		88,840	58,492	52%
Property, plant and equipment		110,883	109,170	2%		Long Term Leasing Liabilities		726	900
Accumulated depreciation		(50,978)	(47,982)	6%		Other long-term liabilities		12,797	17,752	-28%
Total property, plant and equipment, net		59,905	61,188	-2%		Total liabilities		159,720	77,144	107%
Right of use assets		1,293	1,381	-6%		Equity
Investment in shares		7,841	9,751	-20%		Non-controlling interest		5,594	6,751	-17%
Intangible assets and other assets		106,392	112,050	-5%		Total controlling interest		118,789	122,934	-3%
Other non-current assets		21,238	16,673	27%		Total equity		124,383	129,685	-4%
Total Assets		284,103	257,839	10%		Total Liabilities and Equity		284,103	257,839	10%
		September 30, 2020
Debt Mix		% Total Debt (1)	% Interest Rate Floating (1) (2)	Average Rate		Debt Maturity Profile
Currency
Mexican Pesos		57.1%	25.6%	6.9%
U.S. Dollars		27.7%	0.0%	2.3%
Colombian Pesos		1.1%	45.5%	4.2%
Brazilian Reals		11.4%	0.3%	9.1%
Uruguayan Pesos		1.8%	0.0%	11.8%
Argentine Pesos		0.9%	0.0%	37.6%
Total Debt		100%	7.5%	6.2%
(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)		38,743	49,784	-22.2%
Net debt including effect of hedges / Operating cash flow (1)(3)		1.05	1.34
Operating cash flow/ Interest expense, net (1)		4.94	6.55
Capitalization (2)		48.4%	37.2%
(1) Net debt = total debt - cash
(2) Total debt / (long-term debt + shareholders' equity)
(3)  After giving effect to cross-currency swaps.

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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.