Arca Continental B de C : Second Quarter 2021 Results

EBITDA GREW 14.1% WITH REVENUE UP 6.7% IN 2Q21

Monterrey, Mexico, July 16, 2021 - 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 2021 ("2Q21" and "6M21").

Table 1: Financial Highlights

	DATA IN MILLIONS OF MEXICAN PESOS
	2Q21	2Q20	Variation %	Jan-Jun'21	Jan-Jun'20 Variation %
Total Beverage Volume (MUC)	577.8	527.1	9.6	1,091.8	1,039.0	5.1
Net Sales	45,808	42,945	6.7	86,282	81,837	5.4
EBITDA	9,399	8,235	14.1	17,081	14,872	14.9
Net Income	3,130	2,335	34.0	5,715	5,013	14.0
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

2Q21 HIGHLIGHTS

• Net Sales reached Ps. 45,808 million, up 6.7% when compared to 2Q20.
• EBITDA rose 14.1% to Ps. 9,399 million, for an EBITDA margin of 20.5%, up 130 basis points.
• Net Income reached Ps. 3,130 million, up 34.0% and representing a net margin of 6.8%.

6M21 HIGHLIGHTS

• Net Sales reached Ps. 86,282 million, representing an increase of 5.4%.
• EBITDA rose 14.9% to Ps. 17,081 million for margin of 19.8%, 160 basis points higher than in 6M20.
• Net Income grew 14.0% to Ps. 5,715 million, representing a net margin of 6.6%, up 50 basis points.

COMMENTS FROM THE CHIEF EXECUTIVE OFFICER

"Thanks to our efforts to support customers during the pandemic, we capitalized on the recovery of consumption in key segments, as mobility restrictions and lockdowns were partially lifted, delivering sound financial results in the second quarter of 2021, with sales and EBITDA growing 6.7% and 14.1%, respectively," said Arturo Gutiérrez, Chief Executive Officer of Arca Continental.

"Our operational flexibility and the commitment of our associates were key factors to further improve our performance, adapting our portfolio to the needs of our customers and consumers, combined with a dynamic digital transformation. In the second half of the year, we will continue to face significant challenges in the market, and we are confident that our price-pack architecture, product portfolio, and financial discipline will continue to drive value creation," 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

	2Q21	2Q20	Variation %	Jan-Jun'21	Jan-Jun'20	Variation %
Volume by category (MUC)
Colas	300.1	291.6	2.9	564.6	546.6	3.3
Flavors	103.8	89.4	16.1	201.5	189.3	6.5
Sparkling Total Volume	403.8	381.0	6.0	766.1	735.9	4.1
Water*	61.5	45.7	34.4	115.9	105.8	9.5
Still Beverages**	50.7	39.2	29.3	94.3	80.7	16.9
Volume excluding Jug	516.0	465.9	10.7	976.3	922.5	5.8
Jug	61.8	61.1	1.1	115.5	116.5	-0.8
Total Volume	577.8	527.1	9.6	1,091.8	1,039.0	5.1
Income Statement (MM MXP)
Net Sales***	45,808	42,945	6.7	86,282	81,837	5.4
EBITDA	9,399	8,235	14.1	17,081	14,872	14.9
EBITDA Margin	20.5%	19.2%	130 bp	19.8%	18.2%	160 bp

• 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 for 2Q21 reached Ps. 45,808 million, and for the first six months of 2021 reached Ps. 86,282 million, increasing 6.7% and 5.4%, respectively (16.5% and 10.9% on a currency neutral basis), when compared to the same periods in 2020.
• Total volume (excluding jug water) for 2Q21 continued its positive trend, increasing 10.7% and driven by 34.4% and 29.3% growth in water and stills, respectively. In 6M21, consolidated volume grew 5.8%, excluding jug water.
• Cost of sales for 2Q21 increased 5.9%, mainly due to the increase in sales volume, which was partially offset by the effect of the dollar and Peruvian sol exchange rates.

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• In 2Q21, consolidated gross profit rose 7.6% to Ps. 20,821 million, representing a gross margin of 45.5%, 40 basis points higher than 2Q20. In 6M21, gross profit reached Ps. 39,228 million for a margin of 45.5%, 60 basis points higher than 6M20.
• Selling and administrative expenses remained at the same levels as 2Q20 at Ps. 13,847 million. The ratio of expenses to revenues was 30.2%, 200 basis points lower than 2Q20, reflecting our financial discipline. In 6M21, selling and administrative expenses reached Ps. 27,069 million, or 31.4% ratio of expenses to revenues.
• In 2Q21, consolidated operating income reached Ps. 6,985 million for an increase of 27.3% versus 2Q20, and an operating margin of 15.2%, 240 basis points higher than the previous year. In 6M21, operating income rose 30.0% to Ps. 12,244 million and an operating margin of 14.2%, up 370 basis points compared to 2020.
• Consolidated EBITDA in 2Q21 increased 14.1% to Ps. 9,399 million for an EBITDA margin of 20.5%, 130 basis points higher than 2Q20. In 6M21, EBITDA reached Ps. 17,081 million, up 14.9% and representing an EBITDA margin of 19.8%, 160 basis points higher than in 6M20. On a currency-neutral basis, EBITDA grew 21.1% in 2Q21 and 19.1% in 6M21.
• Comprehensive financing result for 2Q21 was a cost of Ps. 1,220 million, as a result of a higher foreign exchange loss when compared to the previous year due to the peso appreciation versus the dollar in 2021 vs 2020. In 6M21, the cost reached Ps. 1,803 million.
• In 2Q21, income tax reflected an effective tax rate of 30.7% to reach Ps. 1,736 million. In 6M21, the income tax was Ps. 3,170 million.
• Net income for 2Q21 was Ps. 3,130 million, 34.0% higher than 2Q20, reflecting a net margin of 6.8%, or 140 basis points above last year. In 6M21, it reached Ps. 5,715 million, reflecting a net margin of 6.6%, 50 basis points higher when compared to 2020.
  BALANCE SHEET & CASH FLOW STATEMENT
• As of June 30, 2021, cash balance was Ps. 30,613 million and total debt was Ps. 52,114 million, for a net debt position of Ps. 21,501 million. The Net Debt/EBITDA ratio was 0.6x.
• Net operating cash flow reached Ps. 13,619 million as of June 30, 2021.
• CAPEX for the period totaled Ps. 2,381 million, mainly allocated towards market investments, such as returnable packaging, coolers and distribution capabilities.

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Mexico

Arca Continental reports its information for three regions: Mexico, United States and South America, (which includes Peru, Argentina and Ecuador). Each region includes results for the beverage and complementary businesses.

TABLE 3: MEXICO DATA

	2Q21	2Q20	Variation %	Jan-Jun'21	Jan-Jun'20	Variation %
Volume by Category (MUC)
Colas	192.5	190.9	0.8	349.9	343.5	1.9
Flavors	37.2	33.8	9.8	65.3	62.8	4.1
Sparkling Total Volume	229.7	224.8	2.2	415.2	406.3	2.2
Water*	34.0	26.0	30.6	58.4	49.8	17.2
Still Beverages**	20.2	16.0	26.2	36.3	31.9	13.8
Volume excluding jug	283.9	266.8	6.4	509.9	488.0	4.5
Jug	60.1	59.9	0.5	111.5	112.2	-0.6
Total Volume	344.1	326.7	5.3	621.4	600.2	3.5
Mix (%)
Returnable	32.2	34.3	-2.0	32.6	33.4	-0.8
Non Returnable	67.8	65.7	2.0	67.4	66.6	0.8
Multi-serve	57.0	63.7	-6.8	57.9	59.5	-1.5
Single-serve	43.0	36.3	6.8	42.1	40.5	1.5
Income Statement (M M M XP)
Net Sales	20,723	17,938	15.5	37,284	33,072	12.7
EBITDA	5,451	4,891	11.5	9,296	8,000	16.2
EBITDA Margin	26.3%	27.3%	-100 bp	24.9%	24.2%	70 bp

• Includes all single-serve presentations of purified, flavored, and mineral water.
• Includes teas, isotonics, energy drinks, juices, nectars, fruit, and alcoholic beverages

OPERATING RESULTS FOR MEXICO

• In 2Q21, net sales for Mexico reached Ps. 20,723 million, an increase of 15.5%. Average price per unit case, excluding jug water, increased 8.2% to Ps. 68.63, mainly driven by recovery of mix in packages and channels.
• Sales volume grew 6.4% to 283.9 MUC (excluding jug water), signaling a recovery to pre-pandemic levels. When compared to 2Q19, volume rose 1.4% (excluding jug water).
• The positive volume performance for 2Q21 was mainly due to promotions and execution plans to boost the traditional channel, as well as the recovery of other channels such as supermarkets, on-premise, at work and entertainment, as stores reopened, and mobility restrictions were lifted.
• In 2Q21, EBITDA for Mexico increased 11.5% to Ps. 5,451 million, representing a margin of 26.3%, 100 basis points lower than 2Q20.

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• Mix of single serve packages increased 6.8 percentage points explained mainly by the increase in mobility which helped to capture additional volume across all channels, the most significant were on- premise, supermarket and traditional channels.
• In 2Q21, Topo Chico Hard Seltzer obtained positive results, capturing incremental volume and achieving coverage of over 66% at points of sale with alcoholic beverages. We continued capitalizing on new markets in Aguascalientes, San Luis Potosi, Los Cabos and Nuevo Laredo.
• We launched the new flavor Apple-Peach for the brands Joya and Sidral Mundet. Main packages launched were 600ml NRP, 2L NRP and 2.5L NRP.
• Mix of returnables in 2Q21 declined 2.0 percentage points explained by the strong performance of non- returnable categories, such as water and sports drinks. Performance of returnable flavors and still beverages continued their positive trend driven by the Universal Bottle initiative.
• During the quarter, we extended the reach of our AC Digital platform to all channels. This innovation provides our customers an easy to use and accessible platform to purchase our products directly from the platform (including Bokados), while receiving direct information regarding promotions, new offers and suggested orders.
• During 2Q21, Bokados snacks in Mexico posted a significant recovery with double-digit growth in both sales and EBITDA. Results were mainly driven by double-digit growth in the traditional channel, leveraged by the distribution of other packaged products, strong performance of the modern trade, and effective management of discounts and promotions.

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