MEXICO CITY--(BUSINESS WIRE)-- BECLE, S.A.B. de C.V. (“Cuervo”, “BECLE” or the “Company”) (BMV: CUERVO) today announced financial results for the quarter ended September 30, 2017.
All figures in this release are derived from the Interim Consolidated Financial Statements of the Company as of September 30, 2017 and for the three-month period then ended and are prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” of the International Financial Reporting Standard (IFRS), which have been published in the Bolsa Mexicana de Valores (BMV).
Third Quarter 2017 Highlights
- Net Sales increased by 24.3% to $5,765 million pesos;
- Volume increased 15.2%, with United States and Canada volumes growing 17.0%;
- Gross profit increased 20.7% to $3,292 million pesos;
- Operating profit decreased 5.3% to $1,143 million pesos due to pressure on production costs related to third party agave purchases, as well as the lower AMP in the prior year due to seasonality experienced during the third quarter of 2016. Operating profit during the first nine months of 2017 increased by 15.5% against the same period last year, which represents 27.2% of net sales.
- EBITDA decreased 6.4% to $1,243 million pesos. This resulted in an EBITDA margin of 21.6%. EBITDA year to date as of September grew 15.2%, which represents 29.0% of net sales value; and
- Consolidated net income increased 13.1% to $856 million pesos, resulting in earnings per share of $0.24.
All above mentioned increases and decreases have been determined in comparison to the corresponding period in the preceding year.
“We delivered strong third quarter net sales growth of 24.3% on volume growth of 15.2%. Volume growth was strong in all major regions and across categories. The US and Canada reported significantly accelerated growth as sales trends have begun to normalize after the effects of the price increase earlier this year, while Mexico growth remained robust. We are well positioned for the seasonally strong fourth quarter.”
Third Quarter 2017 Results
During the third quarter of 2017, volume growth was driven by 17.0% growth in the United States and Canada, a 6.3% increase in sales volumes in Mexico and a 36.3% increase in the Rest of World (RoW) region. Volume growth in the United States and Canada benefited from the normalization of sales trends following the January price increase, which had impacted volume during the first half of fiscal 2017. As a result, consolidated third quarter sales volumes were 4.7 million nine-liter cases, up 15.2% from 4.1 million nine-liter cases in the same period last year.
Volume by Region 3Q17 (in 000s nine-liter cases)
|REGION||3Q17||3Q16||(VAR.% YOY)||2Q17||(VAR.% QOQ)|
|US & CANADA||2,688||2,298||17.0%||3,876||-30.6%|
Net sales increased 24.3% to $5,765 million pesos compared to the same period in 2016, driven by the selective price increase and volume growth in all regions. In the third quarter of 2017, the US and Canada region represented 63.2% of total net sales for the Company. Net sales in this region increased 28.5% versus the same period last year, largely explained by volume growth and the January price increase, partially offset by the unfavorable effect of foreign exchange. In the same period, Mexico represented 22.6% of total net sales and net sales in the region increased by 22.8% over the prior year period. Finally, net sales of the RoW represented 14.2% of total net sales and increased its net sales by 10.4% over the third quarter of 2016.
Net Sales by Region 3Q17 (in MXN$ millions)
|REGION||3Q17||3Q16||(VAR.% YOY)||2Q17||(VAR.% QOQ)|
|US & CANADA||3,645||2,837||28.5%||5,080||-28.3%|
Volume of Jose Cuervo increased 24.3% compared the same period in 2016 and represented 33.4% of total volume for the third quarter of 2017. The Company’s Other Tequila brands represented 15.3% of total volume with volume increasing 14.3% compared to the prior year period. The Company’s Other Spirits brands represented 18.3% of total volume in the period and experienced a 15.8% increase in volume over the third quarter of last year. Volume of Non-alcoholic and Other represented 21.3% of total volume and volume increased by 6.7% compared to the prior year period. Finally, volume of ready-to-drink (RTDs) represented 11.8% of total volume and increased by 8.4% compared to the prior year period.
Volume by Category 3Q17 (in 000s nine-liter cases)
|CATEGORY||3Q17||3Q16||(VAR.% YOY)||2Q17||(VAR.% QOQ)|
|NON-ALCOHOLIC & OTHER||1,002||939||6.7%||1,398||-28.3%|
Net Sales of Jose Cuervo represented 36.7% of total net sales for the third quarter of 2017 and reported an increase in its net sales of 32.4% compared the same period in 2016. The Company’s Other Tequila brands represented 23.1% of total net sales and increased its net sales 18.6% compared to the prior year period. The Company’s Other Spirits brands represented 20.4% of total net sales in the period and reported a 25.7% increase in net sales compared to the third quarter last of year. Net sales of Non-alcoholic and Other represented 12.7% of total net sales and reported an increase in net sales of 21.6% compared to the prior year period. Finally, net sales of ready-to-drink (RTDs) represented 7.1% of total net sales and reported an increase of 7.9% compared to the prior year period.
Net sales by Category 3Q17 (in MXN$ millions)
|CATEGORY||3Q17||3Q16||(VAR.% YOY)||2Q17||(VAR.% QOQ)|
|NON-ALCOHOLIC & OTHER||733||603||21.6%||871||-15.8%|
Gross profit during the third quarter of 2017 increased 20.7% over the same period in 2016 to $3,292 million pesos. Gross margin as a percent of sales was 57.1% for the third quarter of 2017 compared to 58.8% for the third quarter of 2016. Gross margin was negatively impacted by higher input costs partially offset by a favorable pricing effect traceable to US and Mexico price increases, product mix and translation effect.
Advertising, marketing and promotion (AMP) increased 41.0% to $1,267 million pesos compared to the third quarter of 2016. As a percentage of net sales, AMP increased to 22.0% from 19.4% in the prior year period. The increase was primarily due to lower base of third quarter last year due to seasonality.
During the third quarter of 2017, operating profit decreased 5.3% to $1,143 million pesos compared to the same period last year. Operating margin as a percentage of sales decreased to 19.8% as compared to 25.9% in the prior year period. The decreased in operating margin reflects pressure in production cost due to third party agave purchases as well as the seasonality of AMP partially offset by decreases in selling and administrative (SG&A) costs and distribution costs, both as a percentage of revenue.
EBITDA in the third quarter of 2017 decreased by 6.4% to $1,243 million pesos compared to $1,328 million pesos during the third quarter of 2016. Year to date, EBITDA grew 15.2% when compared the prior year.
Net financial results and other were a benefit of $114 million pesos during the third quarter, mainly due to Mexican Peso devaluation against the US Dollar on the company’s cash position.
Consolidated net income in the third quarter of 2017 was $856 million pesos, a 13.1% increase compared to the prior year period. Earnings per share were P$0.24 in the third quarter of 2017.
Balance Sheet and Cash Flow
As of September 30, 2017, the Company did not experience material changes in its debt position, maintaining as the only long term debt the $500 million U.S. dollar bond due in 2025. Net cash was $9,547 million pesos at September 30, 2017, reflecting cash and equivalents of $18,677 million pesos relative to total debt of $9,130 million pesos.
Company’s total liabilities as of September 30, 2017 amounted to $16,009 million pesos, a decrease of 9.2% compared to December 31, 2016. This decrease is primarily explained by a reduction in trade accounts payable during the third quarter of 2017 (seasonality) as well as the changes derived from the peso appreciation.
During the third quarter of 2017, the Company invested $146 million pesos in capital expenditures.
The Company plans to host a conference call for investors at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) on Friday, October 27, 2017, to discuss the Company’s third quarter 2017 financial results. Interested parties may also listen to a simultaneous webcast of the conference call by logging onto the Company’s website at www.ircuervo.com in the Investor Relations – Standing News section.
Third Quarter 2017 Earnings Conference Call Details:
|Date:||Friday, October 27, 2017|
|Time:||8:00 a.m. Central Time (9:00 a.m. Eastern Time)|
|Mexico Toll-free||001 800 514 5965|
|Mexico City Local||+52 55 4777 2674|
|U.K. Toll-free||0 808 101 1147|
|U.K. London Local||+44 (0) 20 8150 0794|
For those unable to participate during the live broadcast, a replay of the webcast will be available for approximately 30 days following the call.
About the Company
BECLE, S.A.B. de C.V. is a globally renowned Company in the spirits industry and the world’s largest producer of tequila. Its extraordinary portfolio of over 30 spirit brands, some of them owned, some of them agency brands distributed only in Mexico, has been developed throughout the years to participate in key categories with high growth perspective, serving the world’s most relevant alcoholic beverage markets and attending key consumer preferences and tendencies. The portfolio strength of Cuervo is based in the profound legacy of its iconic brands internally developed as Jose Cuervo®, combined with complementary acquisitions such as Three Olives®, Hangar 1®, Stranahan’s®, Bushmills® or Boodles®, as well as a key focus on innovation, that during the years has helped Cuervo to internally develop renowned brands such as 1800®, Maestro Tequilero®, Maestro Tequilero® Dobel®, Centenario®, Kraken®, Jose Cuervo® Margaritas and B:oost®, among Cuervo’s brands, some of them are sold and distributed in more than 85 countries.
EBITDA is a measure used in the Company’s financial analysis that are not recognized under IFRS but are calculated from amounts that derive from the Company’s Financial Statements. We calculate EBITDA as net income plus depreciation and amortization, income tax expense, and interest expense, less interest income, plus foreign exchange loss (gain).
EBITDA is not a IFRS measure of liquidity or performance, nor is EBITDA recognized financial measures under IFRS. We believe that EBITDA can be useful to facilitate comparisons of operating performance between periods on a combined basis, but these metrics may be calculated differently by other issuers. EBITDA should not be construed as alternatives to (i) net income as an indicator of the Company’s operating performance or (ii) cash flow from operating activities as a measure of the Company’s liquidity.
This report contains certain forward-looking statements which are based on Cuervo’s current expectations and observations. Actual results obtained may vary significantly from these estimates. The information related to future performance contained in this press release should be read jointly with the risks included in the “Risk Factors” section of the Mexican prospectus filed with the Comisión Nacional Bancaria y de Valores (Mexican National Banking and Securities Commission). This information, as well as future statements made by Cuervo or by any of its legal representatives, either written or verbally, may vary significantly from the actual results obtained. These forward-looking statements speak only as of the date on which they are made, and no assurance can be made as to the actual results obtained. Cuervo undertakes no obligation and does not intend to update or review any of such projections and estimations, whether as a result of new information, future developments and other related events.
Profit and Loss Statement
Third Quarter Ended
Third Quarter Ended
Year over Year
|(Ps$ in millions, except per share amounts)|| |
% of net
% of net
|Cost of goods||2,473||42.9||1,911||41.2||562||29.4|
|Advertising, marketing & promotion||1,267||22.0||898||19.4||369||41.0|
|Selling and administrative||594||10.3||574||12.4||20||3.5|
|Other (income) expenses, net||107||1.9||(121)||-2.6||228||NM|
|Financial results, net||(114)||-2.0||81||1.7||(195)||NM|
|Profit before tax||1,257||21.8||1,126||24.3||131||11.6|
|Total income taxes||401||7.0||369||8.0||32||8.6|
|Consolidated net income||856||14.8||757||16.3||99||13.1|
|Net income to equity holders of the company||857||14.9||757||16.3||101||13.3|
|Other comprehensive income, net of income tax||(586)||-10.2||585||12.6||(1,171)||NM|
|Net comprehensive income||271||4.7||1,342||28.9||(1,071)||(79.8)|
|Depreciation & Amortization||100||121|
|Earnings per share||0.24|
|Shares (in millions) used in calculation of earnings per share||3,596|
|(Ps$ in millions)||September 30, 2017||December 31, 2016|
|Cash and cash equivalents||18,677||5,128|
|Accounts receivable, net||4,726||6,396|
|Other current assets||2,952||2,258|
|Total Current Assets||33,449||19,725|
|Property, plant and equipment, net||4,486||4,641|
|Intangible assets and trademarks, net||10,755||11,771|
|Total Long-Term Assets||24,875||25,963|
|Liabilities & Stockholders' Equity|
|Current installment of notes payable to Banks||132||53|
|Trade accounts payable||1,829||2,407|
|Total current liabilities||4,211||4,457|
|Long term debt, excluding current interest payable||8,998||10,207|
|Other long-term liabilities||104||95|
|Deferred income taxes||2,581||2,759|
|Total Long-Term Liabilities||11,798||13,179|
|Total controlling interest||42,285||28,022|
Total Stockholders' Equity
|Total Liabilities and Stockholders’ Equity||58,324||45,688|
Cash Flow Statement
|(Ps$ in millions,)|| |
Nine Months Ended
Nine Months Ended
|Income before income taxes:||3,360||3,642|
|Items relating to investing activities:|
|Depreciation and amortization||314||285|
|Loss on sale of property, plant and equipment||28||(10)|
|Investment in associates||(5)||0|
|Items relating to financing activities:|
|Trade accounts payable||(579)||251|
|Income taxes paid||(1,246)||(967)|
|Employee statutory profit||(1)||(11)|
|Changes in direct employee benefits||9||7|
|Net cash provided by operating activities||1,802||1,572|
|Other stockholders movements||(30)||0|
|Income from sale of property, plant and equipment||0||11|
|Cash surplus to be applied in financing activities||(315)||(457)|
|Cash inflow from increase in capital stock||1,722||1,206|
|Net cash provided by financing activities||13,390||(1,173)|
|Net increase in cash and cash equivalents||14,877||(59)|
|Impacts due to the fx rate on cash||(1,328)||1,411|
|Cash and cash equivalents:|
|At beginning of the period||5,128||4,139|
|At end of period||18,677||5,491|
|(Ps$ MM)|| |
|Plus: Depreciation and Amortization||100||121|
|Plus: Income taxes||401||369|
|Plus: Interest expense||107||87|
|Minus: Interest income||(29)||(7)|
|Plus: Foreign exchange loss (gain), net||(192)||1|
View source version on businesswire.com: http://www.businesswire.com/news/home/20171026006719/en/
BECLE, S.A.B. de C.V.
Luis Carlos de Pablo
ICR Investor Relations
Scott Van Winkle
Carlos Humberto Suarez
ICR Media Relations
Source: BECLE, S.A.B. de C.V.