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Fomento Económico Mexicano, S.A.B de C.V (NYSE:FMX)

Q3 2012 Earnings Call

October 25, 2012 11:00 am ET

Executives

Javier Gerardo Astaburuaga Sanjinés - Chief Financial Officer and Vice President of Strategic Development

Analysts

Alan Alanis - JP Morgan Chase & Co, Research Division

Lauren Torres - HSBC, Research Division

Antonio Gonzalez - Crédit Suisse AG, Research Division

Gabriel Vaz de Lima - Barclays Capital, Research Division

Lore Serra - Morgan Stanley, Research Division

Alexander Robarts - Citigroup Inc, Research Division

Operator

Good morning and welcome everyone to FEMSA's third quarter earnings results conference call. [Operator Instructions] During this conference call, management may discuss certain forward-looking statements concerning FEMSA's future performance and should considered as good faith estimates made by the company. These forward-looking statements reflect management's expectations and are based upon currently available data. Actual results are subject to future events and uncertainties, which may materially impact the company's actual performance. At this time, I will now turn the conference over to Javier Astaburuaga, FEMSA's CFO. Please go ahead, sir.

Javier Gerardo Astaburuaga Sanjinés

Thank you, Nancy. Good morning everyone. Welcome to FEMSA's third quarter 2012 results earnings conference call. Juan Fonseca and José Castro are with us today, as well, as always. As is customary on our calls, today we will focus on the consolidated figures for FEMSA, and on FEMSA Comercio's, results since many of you probably had the opportunity to participate in Coca-Cola FEMSA's conference call yesterday. As you have also, no doubt, seen or our detailed results, we will use this opportunity to focus on the highlights and main trends on our businesses.

As we mentioned in our release, during the third quarter, we saw both our core operations perform well. While Coca-Cola FEMSA experienced some margin pressure earlier in the year, in Q3 they, were able to capitalize on stable volumes, solid pricing and improving raw materials and foreign exchange dynamics. That led to achieve double-digit operating income growth for the business. For its part, FEMSA Comercio maintained its great space and also posted double-digit operating income growth on the back of consistent, balanced same-store sales growth, and an ever-improving level of execution.

As you know, at the end of March, we reported our 2011 quarterly and full year financial information under IFRS. This is to facility comparability. If you have any questions about these changes, please get in touch with Juan and our Investor Relations team, who will be glad to follow-up. In terms of our perception of the environment and the drivers for consumption, particularly in our key Mexican market, we continue to see encouraging trends that are consistent with what we saw in the first half of the year. Manufacturing activity and GDP growth remained healthy, and consumer confidence is near recent heights, while unemployment is under control. Inflation has continued to trend gradually higher, inching towards 5%, making it the one diverging variable. However, the overall economic environment in Mexico is positive and should continue this way for the remainder of the year, and perhaps beyond.

Looking briefly at the macro environment in other markets where we operate, the standouts, regarding GDP, are Colombia and Venezuela. All of them posting mid-single digits growth, in sharp contrast to Brazil and Argentina, where growth is almost 0. In terms of the inflation, Argentina and Venezuela continue to show levels in the double-digits, particularly related to labor, freight and transportation costs.

Moving on to disclose our consolidated quarterly numbers. Total revenues increased 18%, and income from operations grew 24%. On an organic basis, this is excluding the integration of the beverage operations of Grupo Tampico, CIMSA and FOQUE, total revenues and income from operations increased, also, a healthy 12% and 18% respectively. For the third quarter, the line labeled Participation in Heineken results represents FEMSA's 20% participation in Heineken's third quarter income, which was reported yesterday, using the average exchange rate for the euro during the third quarter.

Net income increased 21%. As we explained in our press release, this increase reflects growth in FEMSA's income from operations and incorporates the variation in FEMSA's 20% participation in Heineken's third quarter net income versus the figure reported for the third quarter last year. These factors more than compensated for a swing from a significant foreign exchange gain in the third quarter of 2011, to now a foreign exchange loss in the third quarter of 2012. This, driven largely by the effect of the devaluation of the Mexican peso on the U.S. dollar denominated component of our cash position in the third quarter of 2011. Our effective tax rate was 30.4% for the quarter.

In terms of our cash position during the third quarter, we went from having basically 0 net cash levels at the end of June, to a consolidated net cash position of MXN 3.1 million at the end of September, reflecting cash generation at both of our core businesses, basically.

And moving on to disclose our operations, and beginning with FEMSA Comercio, we opened 178 net new stores during the third quarter, reaching 1,019 total new net stores openings for the last 12 months. This number is in line with our expectations, which, as I mentioned last quarter, are to surpass 1,000 net new stores for the year, representing a level of store growth, which our current system is well equipped to manage. Revenues increased 16% during the quarter. Same-store sales were up again, approaching a healthy 8%, reflecting improvements in both average ticket, as traffic. Our average ticket rose slightly above 4%, aided by price increases taken in the first quarter by several of our suppliers for important categories. And our traffic increased slightly below 4%, continue to reflect progress in our management of category and purchase and location mix, and the continuous fine-tuning of our value proposition within the store.

For the quarter, the gross margin expanded 70 basis points, again, driven mainly by a positive mix shift due to the growth of higher-margin categories and a more effective collaboration and execution with our key supplier partners, including our achievement of certain sales objectives with some of these partners, and the corresponding benefit accrued to us. Additionally, we continued to have a more efficient use of promotion-related marketing resources and a better execution of our strategy of segmented pricing across markets. In terms of operating margin, this quarter, FEMSA Comercio posted an expansion of 50 basis points even in the face of incremental expenses relating to, among other things, the continued strengthening of FEMSA Comercio's organizational structure and the development of specialized distribution routes aimed at enabling our prepared food initiatives. Also, as is always the case, the rapid pace of store openings put some pressure on the selling expenses line, as the new stores generate expenses from day 1, while revenues take a while to get up to speed. Given that FEMSA Comercio's results are still running above our expected medium-term expectations of mid-single-digit same-store sales growth, and 10 to 20 basis points of expansion per year, it is likely that our full year results will come in ahead plan. However, as we have stated before, this should not signal a change in our medium-term expectations for next year and beyond.

And finally, moving to Coca-Cola FEMSA. Revenues for the quarter increased 20% versus the comparable period of 2011, as a result of double-digit total revenue growth in each division and the integration of our new territories in Mexico. On an organic basis, revenues for the quarter increased 10%. Operating income increased 27%, driven by double-digit operating income growth in this division, and including, as well, the integration of new territories in Mexico, while, on an organic basis, operating income increased 18% compared to the third quarter of 2011, reflecting improvement raw materials and foreign exchange dynamics as I already mentioned.

If you were unable to participate in the conference call yesterday, of Coca-Cola FEMSA, you can always access a replay of the webcast for additional details on the results.

Finally, in terms of more strategic developments, the brief module saying that we have made a good progress in our analysis of the opportunity we face in the Philippines, and the process continues to move in the right direction. As Hector Trevino mentioned during his call yesterday, we expect to make a decision before year and on this matter.

And so, we are once more in the final stretch of a year that has brought is a combination of opportunities and challenges, and we are excited to approach the final couple of months of 2012 with strong momentum across our businesses units and across our markets. And with that, I'd like, now, to open the call for questions. Operator, please?

Question-and-Answer Session

Operator

[Operator Instructions] And we will go to Alan Alanis with JPMorgan.

Alan Alanis - JP Morgan Chase & Co, Research Division

I have a question regarding the CapEx of OXXO. I mean, we're seeing the year-to-date base growing around 13% in the quarter, actually a little bit faster, around 14%, yet the number of stores opening will likely be smaller, this year, than last year. So two questions, I mean, where is this CapEx being redirected if it's not store openings? Javier, I mean, what's up with the latest in terms of your greenfield initiatives for fast food and so on. And the second question would be, how do you see the annual pace of openings in the next 2 to 3 years, or in the next 1 to 3 years, for OXXO? That would be my question for you.

Javier Gerardo Astaburuaga Sanjinés

Sure, Alan. The CapEx, as a proportional sales, has been relatively stable, between 5% to 6%. Both involving remobilization of the store base, but more driven by the opening of stores. And as you were mentioning, even though we're opening less, we're investing a little bit more. This has a lot to do with the opening of distribution centers in the year. We're basically going to open a couple of those. Also, we've invested, during the year, on a center for prepared food in Northwestern Mexico as well. And the core book is spending or investing behind the store base in terms of remobilization is also increasing as the store base gets a little bit taller. This is not a significant amount, yet, but it's also, I would say, having an influence in the growth of the CapEx. But all in all, a little bit, also, related to some of this effort that I mentioned in my opening remarks, about building a specialized distribution route system to precisely take care of prepared food initiatives, which is still in the early stages. But, again, that requires some investing ahead of the core of development of the category. So those will be my comments on the CapEx. And on the pace of openings of stores, as I mentioned as well, we feel pretty comfortable that the right balance, in terms of the number of stores that we feel comfortable with opening, year in year out, is around 1,000. Any number between 1,000 and 1,100 is the right number, we think, for the kind of organization that we have put in place to do that. While at the same time, we continue to develop the value proposition within the stores, which, as you can imagine, and know, brings a lot of complexity into the process of opening new stores. So 1,000, to 1,100 new openings for the next 2 to 3 years is a number that we feel comfortable with.

Alan Alanis - JP Morgan Chase & Co, Research Division

Okay. That's useful. And if I may, I'm getting that you have almost $800 million of cash at the FEMSA level, x the Coca-Cola FEMSA's cash, net cash. What's the latest, or any update, in the terms of thinking, in terms of how you will deploy capital going forward? I guess, that's a more strategic question, Javier.

Javier Gerardo Astaburuaga Sanjinés

Yes. It hasn't changed, really, that much. We think we're well, I would say, positioned after spending some months on developing some opportunities, as I have been mentioning on the front of some opportunities in what we call small box format around FEMSA Comercio, and some other opportunities around our logistic business as well. And we also have some other potential uses of cash. We feel confident that, having had this liquid position for the last couple of years, we may now get into a timeframe in which we feel comfortable that we're going to be able to allocate that capital in ideas that are pretty much aligned with the strategy of the business, as we have been reviewing this every quarter.

Operator

We'll move now to Lauren Torres with Hong Kong Shanghai Banking Corporation.

Lauren Torres - HSBC, Research Division

My question's also on OXXO. You've been doing very good same-store sales growth, high single-digits for the last several quarters. Just curious to get your impression, as we start to think about next year, how sustainable this type of growth rate is. And if you could also just talk about the components of this growth. It seems like it's been pretty balanced between store traffic and also ticket sales. So just curious to get any trends there, as far as how behavior has changed or stayed the same.

Javier Gerardo Astaburuaga Sanjinés

This has been a very good year, I should say, for OXXO. If you look at the performance of the different categories -- speaking a little bit about the categories, we have, I would say, everything, a little bit of everything. So categories which are softening a little bit because of consumer dynamics, as well as emerging categories which have been very favorable to the gross margin performance, because we have been able to, again, grow those categories in which we are able to capture to a bit more margin. So the balance between traffic, and I would say, ticket is really a reflection of, again, bringing to the stores with the knowledge that we have continuously get from consumer needs and trying to satisfy those in the best and more convenient way. We feel confident that the efforts that we have in place will, I would say, be enough to -- I'm not sure if to match this year's performance, but at least to continue in a positive trend. We think we still have a number of initiatives that we feel confident will still bring more people in to the store, because we're, again, expanding a number of, I would say, both products and services all across the country. Talking about financial services on one side, all the way to food offering, prepared food offering to the other, as well as continued efforts on, again, bringing innovation to the stores, which we are a preferred partner for a lot of our most important suppliers. So, the combination, a little bit, to bringing in innovation, new services, solutions for consumers to take advantage of the 3-minute stop in an OXXO. We feel confident that, again, that we will be bring to more people and to make them buy a little bit more stock [ph] or solve some of their needs. And again, as I'm saying, the long-term objective for same-store sales is, I would say, to continue to grow, I would say, hopefully above the general retail market in Mexico, that we have been able to do so, in the past years, very successfully. So, all in all, my take would be positive. Just with a caveat that some of the efforts that we're putting in place are more complex than others. So it's easier to design and test a proof-of-concept for a new product or solution than to roll it out to close to, now, 11,000 stores all across the country. So we still think we have a lot of opportunity in order to improve our speed to execution of new initiatives, and that would hopefully, sometime, translate to even a more stronger same-store sales. But for the time being, we think that the business is performing extremely well and we feel confident that we'll continue to do so, going forward.

Lauren Torres - HSBC, Research Division

Great, that's helpful. And if I could also ask, I'm not sure if I just missed it in your comments, when you talked about margin expansion at OXXO. Did you mention that you're trending ahead for this year? And I don't know if you made comments for next year, but just curious about -- I know you've provided some longer-term guidance on margin improvement, if that's still intact, as we think about next year.

Javier Gerardo Astaburuaga Sanjinés

Yes, sure. My comment was that on this year, we're definitely going to be above our long-term expectation, which is a moderate expansion of 10, maybe 20 basis points, at the EBIT line. This year, definitely, results up to September makes us very, very confident that we're going to well surpass that long-term strategic intent.

Lauren Torres - HSBC, Research Division

And for next year, that 10 to 20 is still the guidance?

Javier Gerardo Astaburuaga Sanjinés

Yes, yes. That still remains our long-term. That doesn't really change a lot for 2013.

Operator

We'll move next to Antonio Gonzalez with Credit Suisse.

Antonio Gonzalez - Crédit Suisse AG, Research Division

I just have two quick questions. First, is there anything that you can comment on -- we're hearing from many of the grocery retailers in Mexico that price competition is intensifying, both in perishables as well as in a couple of categories that, I guess, do not compete at all with OXXO. I wanted to ask, within perishables, would you be able to comment, at all, on how do you feel about these price gaps? And I guess you close these trends quite closely -- you're tracking them quite closely. Would you be able to mention how do you feel with respect to more price aggressiveness from these retailers and whether, to the extent that you can comment your strategy would be, to continue differentiating by adding new categories and value-added services to the store or do you foresee any event in which you will or you maybe already did lower prices in this category that do overlap with the large box retailers in Mexico? That would be my first question.

Javier Gerardo Astaburuaga Sanjinés

Sure, Antonio. We're really not very active in this category at all. And this is not one of the categories that people have in their minds when they're thinking about OXXO or a need to be satisfied. We are more kind of a last resource or a short trip to the store to buy some perishable that we were left out and we are in a hurry to really use it for supper or dinner, whatever. So we have been following, a little bit, the dynamics on the category. But as I'm tell you, this is not an important one for us, at least, so far. So I really do not have a point of view, again, on how intensive this degree of competition is turning out. We are still very much focused, again, on building a very well, I would say, diversified category of consumption location kind of outlet an OXXO should be. So perishables play a very, very little role in very, very few even stores. We don't have a really wide nationwide kind of offering on this category. So we are very, very tactical and selective on participating in this category. We have much more stronger efforts in things that I've mentioned already, which is expanding the lines of services that we provide to customers, both general services and financial services, through our relationships with, now, Bancomer and Banamex, all across our 10,000 stores in Mexico. And we are going to be bringing new banks, also, into the picture. And also, on our offering on prepared food which is, I would say, starting to develop very well, at least in the stores in which we have these capability of offering prepared food in a much more broader offering and with a much, I would say, wider variety than the one we had only a couple of years ago. So those will be my remarks here, Antonio.

Antonio Gonzalez - Crédit Suisse AG, Research Division

And secondly, if I may. I just want to ask very quickly. Is it reasonable, would you say, to assume that the cash balance that you have denominated in dollars will remain in dollars between now and whenever you have some strategic decision regarding, probably, the Philippines or some M&A transaction? Or is there any events in which you could, given the trend that the peso is having, reduce those dollar holdings?

Javier Gerardo Astaburuaga Sanjinés

No. We still feel comfortable with the currency mix we have on our cash balances. We build that, I would say, at very, very reasonable exchange rates, below MXN 12, a little bit more than a year ago. So we feel confident that, as I said a little while ago, that having the cash balances with the currency mix, as of today, is pretty consistent with our view on the potential use of that resource going forward. And that we feel confident that we will be able to allocate that cash into good opportunities for FEMSA to continue creating values. So we don't have anything in our minds in changing things as they are today, Antonio.

Operator

The next question comes from Gabriel Lima with Barclays.

Gabriel Vaz de Lima - Barclays Capital, Research Division

[indiscernible]

[Technical Difficulty]

Operator

And we'll move to the next question from Lore Serra with Morgan Stanley.

Lore Serra - Morgan Stanley, Research Division

I want ask one quick question and one broader question. The quick question is, can you just give us your updated timetable for the rollout of prepared foods in OXXO? And the more broad one is, yesterday on the call with KOF, Hector talked about how you would think about the Philippines as a beachhead for KOF to expand in Asia because of KOF's deep bench and desire to expand. And I'm going to ask this question, it's going to sound like I'm asking about Philippines, but I'm really not. I'm just right trying understand how investors or we should think about how you find good return opportunities in Asia, given that -- my perception is that margins are substantially below where you are in your current operations and costs [ph]. So as you think about investing in Asia, and like I said Philippines is part of that, but not really the whole thing. What compensates for the lower margins to make good return opportunities, or potentially good return opportunities because you haven't invested there yet, in Asia?

Javier Gerardo Astaburuaga Sanjinés

On the first one, as I mentioned, I mean, rolling out I would say a new product innovation, which is bar-coded and you can just scan it, because here it's very easy for us to do. Really, the complexity involving having the ability to prepare food and distribute it to the stores on a daily basis, store-in, store-out, and manage waste and the likes. I mean, I'm just preparing you to a very, maybe easy answer out of your question, which is, it's going to be a long-term initiative. It took us a number of years, really, to roll out the coffee initiative. And making coffee seems very easy for all of us early in the morning, even though we're a little bit sleepy. But doing it the way consumers want it, which is fresh, hot and affordable, it's not that easy. So this is a process that's going to take a long time. That's my answer. We don't really provide a framework for, not even on a yearly basis, but I'm telling you this is a multi-year effort in order to develop the capabilities outside of the store, the transportation abilities to the store and then the execution within the store. It's going to be a multi-year effort that we feel confident about, again, the early signs that we have. But it is going to take a long time to develop this. But we think this is a category which is still underdeveloped within the, I would say, vision of the store of the future we have. That, this is a great potential for the business, but it's going to take a long time to do it. The second one, I think, the one answer would be growth, and by growth, I mean profitable growth. We're looking at a region which has a lot of similarities to some of the Latin American economies in the '70s and '80s, by definition, I'm speaking about long-term returns. This is a region of the world in which we think our capabilities have a good fit on what is required to develop a much more developed and complex portfolio to execute in the marketplace. As I said, a number of years in Latin America and you might also have the impression of having a very narrow availability of packaging and products. We think that in Asia, there's a very, very big opportunity in taking advantage of emerging economies, with more people with purchasing power. And the Philippines particularly has a very, very solid start point in terms of the likeliness for people, for soft drinks with carbonated, and for the Coca-Cola brands for sure. So, all in all, I'm just saying we think we have the right set of capabilities. This is a growing region with emerging affordability of people and if we do act well, in terms, again, of segmenting the market the proper way, through the different stages of development of the markets, combining in an intelligent way, returnable glass and returnable PT, as well as one-ways. And both working on the personal servings and as well as the multi-serve kind of occasions. That's the kind of future we envision for Asia, and we want to be part of that experience.

Operator

And we'll go, again, to Gabriel Lima with Barclays.

Gabriel Vaz de Lima - Barclays Capital, Research Division

So I just had a follow-up question on the very first question regarding the cash use. You mentioned that you're looking to other formats, but you also mentioned the logistic business. So I just want to better clarify what you mean that when you're looking to opportunity in the logistic business.

Javier Gerardo Astaburuaga Sanjinés

Sure. We have a fairly large business within FEMSA. We don't speak much about that but this is north of $500 million. A lot of that is being served to our internal needs, and Coca-Cola FEMSA. We also provide freight services for Heineken as well. But it's, I would say, more than 50% of what we do is to third parties. And we have a very nice business which is very well run, and this is the largest one in Mexico in terms of private fleets and managing third party fleets, as well, for some customers. And we think we have an opportunity to expand a little bit. This is not, I would say, again, big investments, maybe, for the company. But we think we have some opportunity to expand, a little bit, the lines of services that we are providing there. And, basically, here and maybe Brazil -- here in Mexico I mean. And that's the kind of opportunities that I mentioned in terms of this category [ph] .

Gabriel Vaz de Lima - Barclays Capital, Research Division

Okay, that's interesting. And can you share with us the level of returns and profitability that you have in that business?

Javier Gerardo Astaburuaga Sanjinés

No, I think those business which are, as I said -- I mean, these are not the core businesses. What I can share with you is that these businesses perform well ahead of their cost of capital. So we feel confident about putting a little bit more capital into them. But, again, these are not the core businesses that we communicate with the market for FEMSA. But we feel confident that these are very well-run businesses. We don't talk too much about this, but these are businesses which are benchmarked against the best of its class in the region, both in the logistics one, as well as in the commercial refrigeration equipment business, which we have a fairly large business as well. Which is, as a matter of fact, the biggest one in the Americas. But even though we don't talk too much about those, you just saw that we just disposed the third business, which was non-core, the chemical one that we said we will in the past 2, 3 years. But this logistic business, as well as the commercial refrigeration equipment, are businesses which we think fits very fine, very nicely within that environment, from the capabilities of FEMSA. And, again, these are, even though smaller, as compared with the rest of the other one, we think there are opportunities and we would like to tackle those opportunities. That's why we're exploring and trying to develop opportunities to grow not only organically but also in a very, very moderate way. I should say that and reinforced that. We'd also like to do some nonorganic stuff in this business as well.

Gabriel Vaz de Lima - Barclays Capital, Research Division

Okay, very interesting. And still on the cash use, you mentioned in the last call you are looking in opportunities in Brazil, regarding OXXO. So do you have any update on that? Any thought on what kind of format you would come to Brazil if it would be through a JV or by yourself? Any update is helpful.

Javier Gerardo Astaburuaga Sanjinés

The only update is we continue to look at the retail landscape. We continue to look at potential opportunities. And as I said in the past, we would love to be in Brazil somehow, sometime. But we don't have, really, a clear blueprint that tells, that in a certain quarter we should be there doing something. So it's still in the stages of understanding better the market than trying to assess priorities in terms of what will be the best way to, sometime, being present in Brazil, in retail.

Operator

We'll take the next question from Alex Robarts with Citi.

Alexander Robarts - Citigroup Inc, Research Division

I had two questions. I guess, first of all, just thinking about the services component, right, of OXXO sales. The financial services piece seems to be accelerating. It looks like it looks Banamex was included in the portfolio. During the third quarter, you mentioned, I guess, there'll be some other banks to be included. I mean, you gave us a nice overview of prepared foods. I mean, obviously, banking services is not like the bar-coded type of concept, and it's more like the multi-year project thing. Can you kind of give us a view, kind of some comments on where you stand in the banking service initiative, the related economics and kind of do we expect this to perhaps overtake the other services over time, to really being kind of the main source of service-related revenue? So that's the first question. I guess the second one relates to Heineken. I mean, it looks like we're coming to the end of the year. I mean, April is when you have the choice and option to start selling the Heineken shares. And I'm not sure how much comment you could give us around this, but should we think about the Philippine transaction, if it happens, kind of changing the way you view the ownership of the Heineken shares? And any thoughts around that option to sell those shares, as it comes in April, would be very helpful.

Javier Gerardo Astaburuaga Sanjinés

First, on the services piece. This is kind of a two-function product. It should be a business by itself, which it is. Complexity, regarding the capability to really provide, even though the narrow services that we provide to consumers, customers in our stores on financial services, it requires a lot of training for people. And of course, we are certified and evaluated by authorities in Mexico. So it's not as -- I would say, it's something different from the food prepared kind of category. But it involves a high degree of complexity, again, because as you know, retail has a very high turnaround of people, so you have to have a permanent effort to keep trained people about, again, how solving consumer when they're trying to make a deposit or a payment of service, whatever. But it's an important category as well, to again, bring people into the store and while they are doing something, financial related, do something and buying a Coke or a beer or a snack. So it is a category, which is saying, at both these objectives of building margin, which is, I would say, good enough for us to see it as a category in which we would like to keep doing some efforts. But, at the same time, this is not necessarily the category that's going to move the needle. And as a matter of fact there's no single category that moves the needle for OXXO. So we need to work in a number of initiatives and financials, and financial services is just one of them. This is not something that, again, has a ramp-up core which is very, very short. It might not be as long, at least with the scope of services that we have decide to provide, as a fast food offering. But, anyway, it take some time to keep on bringing new banks. But, of course, we are starting with the big ones and then, I would say, the effect of the late entrants would not be as important as the early entrants. So those will be my comments on the financial services question. And on the second one, we have said this, and this is still our thinking. Both as an investor of FEMSA and as directors and the board of Heineken, we really need to have the long-term view for the company. So our decisions regarding, again, our recommendations to the board and our decisions regarding our holding in the shares, have a lot to do with how this investment for FEMSA will play out in the medium- to long-term. There are some dates starting next year, which, for us, is just a reminder that we will need to continue to assess the prospectives of the business, going forward, to make sure that we still make the right decisions for our shareholders, which, in the last 2.5 years, the decision that we made, we think, was a proper one, in terms of changing our investment mode in the Beer business, by exchanging our wholly-owned subsidiary into this 20% participation in Heineken. But, to tell you the truth, we feel confident that the performance of the business for the last 2.5 years, in which we have been investing in Heineken, have been very good. The market performance has been extremely well, we think. I mean, if you look at share price these days, as compared when we made the exchange or the merge, we feel confident. So the balance sheet of the company is, as you know, well-levered, both Coca-Cola FEMSA and FEMSA as well. So the Philippines is really not a factor. It's a starting point, as I mentioned, as Lori, in her question, also, remember those. That it's a starting point for what we might like to have as a broader participation in the Southeastern Asian market. So my, again, statement here would be, we need to look at this as the -- again, the investment in Heineken, for the long-term, for FEMSA, still has the characteristics. And this is a permanent effort that is done on a permanent basis. And the fact that next year we start to have some flexibility to start disposing some of those shares, really, doesn't translate into a critical day for us to either make a decision or have a big announcement to the market. Do not expect that at all. This is a process that has to be very thoughtful, and that this has to be very careful, and I'm sure you can appreciate that we really cannot share a lot of, again, what our decision regarding our investment in this company would look like. Because we think it's in the best interest of our shareholders to be very careful about what we decide, what we say and what we do about this. In fact, so we will still, as we have done in the past, determine our decisions on the potential return of our investment in Heineken, going forward. But, as I said, what I can tell you is, looking backwards, we feel very, very good about the decisions we have made in the past, and we hope that you have confidence that we would do the same going forward.

Alexander Robarts - Citigroup Inc, Research Division

Okay, fair enough. And just one clarification, Javier, on the financial services, I mean, on the banking services. Is the goal to kind of roll it out, really, all across the stores nationally or might you think about just kind of trying to get to certain penetration levels in certain regions?

Javier Gerardo Astaburuaga Sanjinés

No, it's a full -- it's a nationwide effort. The line of services which, today as I said, it's pretty narrow, that the intention is to deploy that to all the store base. Going forward, we might evolve into a more segmented approach. But, so far, it's really a very nationwide effort, all services present in all stores.

Operator

Ladies and gentlemen, that is all the time we have for questions today. I will now turn the conference back to Mr. Astaburuaga for posing additional remarks.

Javier Gerardo Astaburuaga Sanjinés

Thank you very much for participating in this call, and looking forward to seeing you in the next one. Bye now.

Operator

Ladies and gentlemen, if you wish to replay the webcast for this call you may do so at FEMSA's Investor Relations website. This concludes our conference for today. Thank you for your participation and have a nice day. All parties may now disconnect.

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