Alsea de CV : reports a Total Sales growth of 5.8% in the Third Quarter 2018

Alsea reports a Total Sales growth of 5.8% in the Third Quarter 2018

• Ø Total Sales growth of 5.8% in the third quarter

• Ø Rise of 3.8% in Same-Store Sales in the quarter

• Ø Increase of 7.7% in EBITDA in the third quarter, achieving a 20-basis points expansion in EBITDA margin

• Ø Net income growth of 35.9% in the third quarter

• Ø 3,588 total units in the portfolio, including 235 additional units compared with the third quarter of the prior year

MESSAGE FROM THE CHIEF EXECUTIVE OFFICER

Renzo Casillo, Chief Executive Officer of Alsea, said: "During the third quarter we had a total sales growth of 5.8% mainly due to the 14.2% growth in Spain and 8.5% in Mexico, coupled with the openings of this year and the good performance of those opened last year (run- rate), despite the challenges we have faced in countries like Argentina that impacted in 6.4pp on the consolidated sales growth. Given the slowdown shown in some of the countries and brands, mainly due to external factors, starting in September we began to implement an intense commercial plan in all countries, through which we have seen a positive reaction from the consumer, seeking to win market share and boost growth in same store sales for the last quarter of the year.

In Mexico, this week marked the third anniversary since the launch of our multi-brand loyalty program "Wow Rewards", already surpassing 3 million members; In this last quarter, we will include Domino's Pizza in all its digital platforms, having the entire brand portfolio of Alsea Mexico in the program. In Domino's Pizza, we will continue to promote our successful digital platform in all countries, which keeps on driving our same store sales and currently represents more than 20% of total orders. Also, we plan to close the fourth quarter with more than 35 additional openings in Mexico, between corporate and sub-franchises.

At Starbucks Mexico, we continue to promote the mobile application, which has grown its active member base by 28% compared to the previous year, resulting in one out of every four transactions to be done through the Starbucks Rewards program; in Chile we have already reached 180,000 users and during the month of November we will be launching the mobile application for the first time, which will accelerate the growth in active members. During this quarter, we managed to reach more than 1,000 Starbucks stores among the 5 countries where we operate this brand, strengthening the relationship as a key strategic partner in the region; This is the second brand, together with Domino's Pizza, with more than a thousand units in Alsea's portfolio. Our Archie's operation in Colombia presented positive same stores sales figures for second consecutive quarter, consolidating the better positioning achieved by the brand since its re-launch.

Finally, we will generate incremental orders through the delivery channel in all our brands and countries, this through our own delivery personnel and through alliances with third party aggregators. With this effort we hope to close the year with more than 670 units offering delivery service, this being more than double the units that had this capability last year (excluding Domino's Pizza).

On September 13, Alsea was included for the first time as part of the Dow Jones Sustainability Index (DJSI) in its regional index MILA (Integrated Latin American Market) Pacific Alliance 2018. This recognition confirms the company's leadership in terms of sustainability by being the first company in the sector "Restaurants and Entertainment Centers" to qualify for the MILA index in which Chile, Colombia, Mexico and Peru participate. This is an acknowledgment of the social, environmental and corporate governance efforts that our company has carried out over the years, placing us as one of the proudly leading Mexican companies in terms of sustainability not only nationally, but also internationally."

And finally, he added: "We recently announced that we have entered into advanced negotiations with Starbucks Coffee

Company to obtain full license and acquire the brand's operations in France and the Benelux countries, which means increasing the number of Starbucks stores in Alsea's portfolio around 25%. We believe that the knowledge we have developed on how to operate this brand since more than 16 years in 5 countries, combined with the best practices and potential synergies, will help us develop the brand successfully in these countries. This is a clear example of our expansion strategy, where we are continuously looking for new opportunities regarding inorganic growth, in order to strengthen our portfolio."

October, 2018

Mexico City, October 24, 2018. Alsea, S.A.B. de C.V. (BMV: ALSEA*), the leading Quick Service Restaurant (QSR), Coffee Shop, Casual Dining and Family Restaurant operator in Latin America and Spain, released its results for the third quarter 2018. This information is presented in nominal terms pursuant to International Financial Reporting Standards (IFRS).

CONSOLIDATED RESULTS FOR THE THIRD QUARTER OF 2018

The following table shows a condensed Income Statement in millions of pesos (except EPS). The margin for each item represents net sales and the percentage change for the quarter ended September 30, 2018, in comparison with the same period of 2017:

• (1) EBITDA is defined as operating income before depreciation and amortization.

  * Figures in million pesos, except EPS

• (2) EPS is earnings per share for the last 12 months.

SALES BY SEGMENT*

* 3Q18 figures

SALES

Net sales increased 5.8% to 11,086 million pesos in the third quarter of 2018, in comparison with 10,475 million pesos in the prior year. This increase was due mainly to the 3.8% growth in same-store sales and the addition of 205 units, for a total of 2,856 corporate units at the end of September 2018, which represents a growth of 7.7% over the same period of the prior year. The increase in sales was partially offset by the negative effect of the devaluation of the Argentinean peso against the Mexican peso, which impacted consolidated sales growth in 6.4 percentage points, coupled with a slowdown in consumption in South America and Spain.

Net Sales 3Q18 vs. 3Q17

* The percentage of same-store sales contribution is the effect on the total revenue base

The business portfolio in Mexico recorded growth of 2.8% in same-store sales, our brands in South America presented growth of 10.1% in same-store sales and our brands in Spain reported a (0.8)% decrease in same-store sales.

NUMBER OF UNITS*

* Total Units (corporate + sub-franchises)

EBITDA

As a result of good control in operating expenses, efficiencies were obtained that resulted in a 100-basis points improvement, going from 56.3% to 55.3%, which implies a growth of 4.0%, thus EBITDA rose 7.7% to 1,523 million pesos at the end of the third quarter of 2018, compared to 1,415 million pesos in the same period of the prior year. The increase in EBITDA of 108 million pesos is mainly attributable to a strict control of expenses that show a lower growth than the increase reported in sales, as well as to the growth in same store sales and unit openings. These benefits were partially offset by:

• • the increase related to tariff rates for certain products imported from the US,

• • the strategy of reducing personnel turnover implemented in several countries,

• • the extraordinary expenses related to the integration into our new operations center (COA),

• • the increase in energy fees, mainly in Argentina and Mexico, in the latter being partially offset by the benefit of managing clean energy (wind farms) in most of the units in the country.

• • and the negative effect of the devaluation of the Argentinean peso against the Mexican peso.

EBITDA margin increased 20 basis points as a percentage of sales, rising from 13.5% in the third quarter of 2017, to 13.7% in the same period of 2018.

NET INCOME

Net income in the quarter increased 82 million pesos over the same period in the prior year, closing at 311 million pesos, compared with 229 million pesos in the third quarter of 2017. This increase is mainly attributable to the growth of 60 million pesos in operating income, as well as the 20.5% decrease in the all-in cost of financing. This reduction is mainly due to the positive variation resulting from the revaluation of the liability related to the call and put options of the remaining 28.2% of Grupo Zena, the 170 basis points decrease in the tax rate, which was partially offset by the 82-million pesos increase in interest paid-net, coupled with a higher exchange rate loss in the quarter.

Net Income 3Q18 vs. 3Q17

+35.9%

RESULTS BY SEGMENT FOR THE THIRD QUARTER 2018

MEXICO

Alsea México Same-Store Sales Number of Units Sales

3Q 18

3Q 17

Var.

% Var.

2.8% 1.7%

110 bps

2,410 2,295

115

6,290 5,799

$491

Adjusted EBITDA* Adjusted EBITDA Margin*

1,425 1,294

$131

22.6% 22.3%

30 bps

- 5% 9% 10% -

*Adjusted EBITDA does not include administrative expenses, thus it represents the "Store EBITDA." ** Figures in million pesos.

In the third quarter of 2018, Alsea Mexico's sales represent 57% of Alsea's consolidated sales. Sales increased 8.5% to 6,290 million pesos, compared with 5,799 million pesos in the same period in 2017. This increase of 491 million pesos is mainly attributable to the opening of 86 corporate units and 29 subfranchises of the different brands over the last twelve months, reaching a total of 1,863 corporate units and 547 subfranchisees, the 2.8% growth in same store sales, which was mainly driven by the positive performance of our quick service restaurant brands, where Domino's Pizza continues presenting positive results and increased participation in the mobile application, as well as in the Casual Dining portfolio, which was benefitted by a growth in the number of transactions reported compared to the same period of the previous year and by the launch of the digital coupon strategy. The aforementioned increase was partially offset by the closure of 39 units with negative results during the first nine months of the year, in line with our objective to improve business profitability, as well as by the inefficiencies resulting from the transition process to the new operations center (COA), which caused