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UPDATE 2-Mexico's Coke Femsa's sales rise, profit drops on acquisitions

MEXICO CITY, Feb 26 (Reuters) - A string of recent acquisitions helped to boost fourth-quarter sales volumes at Coca-Cola Femsa, Latin America's biggest Coke bottler, but the cost of financing the deals cut sharply into its profit.

Coke Femsa said on Wednesday quarterly profit fell by 29 percent, hurt by a jump in financing costs that was compounded by a weaker peso.

The company reported a profit of 3.066 billion pesos ($234 million) for the October-December period, down from 4.320 billion pesos the same period a year earlier.

The bottler recorded financing expenses of 1.9 billion pesos, up from 611 million pesos a year ago as net debt increased more than six times to 45.2 billion pesos.

Most of the debt increase was to finance acquisitions in Brazil, the company said.

A decline in the value of the peso compared to the dollar also contributed to the higher financing costs, since about one fifth of its debt is in dollars.

Coke Femsa, a joint venture between Coca-Cola Co and Mexican retailer Femsa, has been on an aggressive buying spree and last year acquired bottlers in Mexico, the Philippines and Brazil.

Those acquisitions helped Coke Femsa report an 8.5 percent jump in revenue to 43.24 billion pesos and higher sales volumes for Coke, bottled water and juices.

Excluding the acquisitions in Brazil and Mexico, sales volumes slipped 1.1 percent, the company said.

Some analysts expected the company to report a dip in sales volumes in Mexico, since the government implemented a 1 peso (8 cent) tax on sugary drinks last year.

Ratings agency Fitch on Monday said it expected Mexico's bottlers' volumes to decline between 5 and 7 percent as a result of the tax.

Coke Femsa did not give details of its Coke sales volumes in Mexico. Company executives will discuss the results on a call with analysts at 1000 local time (1600 GMT).

The company's shares fell as much as 3 percent to 127 pesos, compared to a 0.3 percent rise in Mexico's benchmark stock index the IPC.

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