Arca Continental B de C : 21 July 2023EBITDA grew 8.4% and revenues increased 5.0% in 2Q23

EBITDA GREW 8.4% AND REVENUES INCREASED 5.0% IN 2Q23

Monterrey, Mexico, July 21, 2023 - Arca Continental, S.A.B. de C.V. (BMV: AC*) ("Arca Continental" or "AC"), the second-largest Coca-Colabottler in Latin America, announced its results for the second quarter and first half of 2023 ("2Q23" and "6M23").

Table 1: Financial Highlights

DATA IN MILLIONS OF MEXICAN PESOS

Total Beverage Volume includes jug water

Net sales not including Revenues outside the territory (OT) in USA

EBITDA = Operating income + Depreciation + Amortization + Non Recurring Expenses

2Q23 HIGHLIGHTS

• Net Sales increased 5.0% when compared to 2Q22, reaching Ps. 56,051 million.
• EBITDA grew 8.4% to Ps. 11,314 million for a margin of 20.2%.
• Net Income totaled Ps. 4,693 million, up 11.1%, reaching a margin of 8.4%.

6M23 HIGHLIGHTS

• Net Sales increased 7.3%, when compared with 6M22, to Ps. 106,735 million.
• EBITDA totaled Ps. 20,865 million, 10.0% higher than in 2Q22, for a margin of 19.5%.
• Net Income grew 15.1% to Ps. 8,423 million for a margin of 7.9%.

COMMENTS FROM THE CHIEF EXECUTIVE OFFICER

"We finished the first half of the year with positive results posting increases of 7.3% in revenues and 10.0% in EBITDA. These achievements were the outcome of investments in commercial capabilities, the accelerated digitization of the value chain, as well as the efforts of our associates and their determination to deliver excellence in our operation and at the point of sale.", stated Arturo Gutierrez, Chief Executive Officer of Arca Continental.

"At Arca Continental we share the conviction of operating a sustainable business model. We will continue investing in initiatives that generate shared value for the communities we serve, ensuring our profitable growth, and making a positive difference for people and the environment." He added.

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CONSOLIDATED RESULTS

The figures presented in this report were prepared in accordance with International Financial Reporting Standards ("IFRS").

TABLE 2: CONSOLIDATED DATA

• Includes all single-serve presentations of purified, flavored, and mineral water.
• Includes teas, isotonics, energy drinks, juices, nectars, fruit, and alcoholic beverages
• Net Sales not including Revenues outside the territory (OT) in USA

FINANCIAL ANALYSIS

INCOME STATEMENT

• Consolidated net sales in 2Q23 increased 5.0% (13.6% on a currency-neutral basis) to Ps. 56,051 million compared to 2Q22, as a result of pricing strategies and strong volumes in Mexico and South America. In the first half, net sales were Ps. 106,735 million, up 7.3% (15.6% on a currency-neutral basis) versus last year.
• Consolidated sales volume in 2Q23 grew 3.4% to 569.9 MUC, excluding jug water, mainly driven by growth in the personal water and still beverage categories, up 16.3% and 7.5%, respectively. As of June 2023, sales volume increased 3.8% to 1,078.6 MUC.
• Cost of sales in the quarter increased 1.9% stemming from better prices of raw materials, which were additionally benefited by a lower exchange rate compared to the previous year. In the first half, cost of sales increased 4.9% versus last year.

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• In 2Q23, consolidated gross profit increased 9.0% to Ps. 25,796 million, reflecting a gross margin of 46.0% and an expansion of 170 basis points, mainly driven by our price-pack strategy combined with better raw material prices. In the first half of the year, gross profit totaled Ps. 48,853 million, up 10.4% and representing a gross margin of 45.8%, 130 bps above 6M22.
• Selling and administrative expenses rose 6.8% to Ps. 16,768 million in 2Q23. In the first half of 2023, this figure rose 8.2% to Ps. 32,691 million and represented a ratio of expenses to revenues of 30.6%.
• In 2Q23, consolidated operating income was Ps. 9,159 million, 12.6% higher than 2Q22, representing an operating margin of 16.3% and an increase of 110 basis points. In the first six months of 2023 operating income rose 14.7% to Ps. 16,544 million for a margin of 15.5%, up 100 bps versus 6M22.
• Consolidated EBITDA in 2Q23 increased 8.4% (15.4% on a currency-neutral basis) to Ps. 11,314 million, representing an EBITDA margin of 20.2%, 60 basis points higher than 2Q22. In the first half of 2023, EBITDA reached Ps. 20,865 million, an increase of 10.0% (17.3% on a currency-neutral basis) for a margin of 19.5%, up 40 bps versus 6M22.
• Comprehensive financing result in 2Q23 was Ps. 930 million, stemming mainly from the increase in interest rates and an exchange loss from the cash position in dollars, partially offset by higher financial income. In the first half of 2023, the comprehensive financing result rose 1.5% to Ps. 1,822 million.
• In 2Q23, income tax reached Ps. 2,579 million, 15.1% higher than 2Q22, at an effective rate of 31.2%. In the first half of 2023, income tax increased 18.2% to Ps. 4,582 million, representing an effective tax rate of 31.0%.
• Arca Continental reported net income of Ps. 4,693 million in 2Q23, 11.1% above 2Q22, reflecting a net margin of 8.4%, up 50 bps versus 2Q22. In the first six months of 2023, net income totaled Ps. 8,423 million, up 15.1% versus 6M22, for a net margin of 7.9%.
  BALANCE SHEET & CASH FLOW STATEMENT
• As of June 30, 2023, the cash balance was Ps. 23,086 million and total debt was Ps. 45,984 million, for a net debt position of Ps. 22,898 million. Net Debt/EBITDA ratio was 0.55x.
• Net operating cash flow reached Ps. 14,555 million as of June 30, 2023.
• CAPEX for the period totaled Ps. 4,667 million, mainly allocated towards coolers, returnable bottles, as well as the expansion of production and distribution capacities.

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• During 2Q23, EBITDA rose 13.3% to Ps. 6,568 million and representing a margin of 24.7%, an expansion of 40 basis points. In the first six months of 2023, EBITDA increased 15.6% to Ps. 11,288 million, representing a margin of 23.4% for an expansion of 20 bps compared to 6M22.
• In June, we achieved record sales volume for this operation, reaching 105.9 MUC for the month.
• The modern trade posted a 6.0% volume increase while gaining 0.5 percentage points in value share, due to the expansion of the dual-pack strategy, while also boosted by the strong performance of Topo Chico.
• The colas category continued its positive performance with 0.6% growth in the quarter, driven mainly by new packaging options and flavor innovations from Coca-Cola Creations.
• In 2Q23, the water category grew due to the Topo Chico which increased by 20% and accounted for 86% of the category's growth, as a result of solid execution in the traditional and modern channels with a wider package portfolio to satisfy the high consumer demand.
• The stills beverage category was mainly boosted by isotonics which grew 19%, capitalizing on opportunities with the Powerade brand in the traditional channel, as well as the launching of the Flashlyte brand in three assorted flavors.
• The on-premise channel continued its positive trend with 3.9% growth, surpassing pre-pandemic volumes; however, there is upside opportunity in channels such as leisure and at work.
• Our efforts remained focused on increasing profitability, while capturing new consumption occasions by offering an affordable portfolio and making selective price adjustments.
• Bokados, our snacks business in Mexico, posted high single-digit sales growth, mainly driven by positive performances of the traditional and modern trade. We launched new products of Papa Molcajeteada ("seasoned potato chips") and Chicharrón Chile Limón ("chili lime flavored pork rinds") with the goal of capturing new consumption occasions through continuous product and flavor innovations.

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