FEMSA Forward - Focused Leadership in Retail, Beverages & Digital
February 15 2024 - 4:15PM
FEMSA Forward - Focused Leadership in Retail, Beverages &
Digital
Fomento Económico Mexicano, S.A.B. de C.V.
(“FEMSA” or the “Company”) (NYSE: FMX; BMV: FEMSAUBD, FEMSAUB) is
providing additional information regarding its future capital
allocation plans. These plans have been approved by the Board of
Directors of FEMSA and are an integral part of, and fully
consistent with, the FEMSA Forward strategy presented in February
of 2023.
Our capital allocation strategy is focused on
driving our long-term intrinsic per-share value. We believe we have
abundant attractive capital deployment opportunities. Over the next
five years we expect to invest capital in core organic growth
initiatives in excess of Ps. 237,000 million, with close to Ps.
170,000 million of that deployed in Mexico, where we are one of the
largest employers (over 280,000 employees), and taxpayers,
expecting to pay over Ps. 100,000 million in aggregate income taxes
for the period between fiscal 2023 and 2028. Considering the
remarkable speed and success with which the FEMSA Forward-related
divestments have been executed, and after accounting for our
expected organic and inorganic capital needs, we believe that
returning capital to shareholders should be an important part of
the overall strategy.
Capital allocation strategy overview and
parametersAs we look at the portfolio of investment
opportunities available to us, we will privilege organic
investments within our proven business models that can generate
returns well in excess our cost of capital, and with a relatively
low level of risk. We will also favor investments in initiatives
and capabilities with attractive risk-reward profiles that create
and drive, through market expansion and innovation, future value
creation opportunities. In addition, inorganic investments will be
focused on meeting the strategic objectives of our core verticals
and scrutinized to meet strict financial criteria: value creation
and cash flow generation.
Furthermore, subject to business performance and
capital deployment opportunities and beyond our ordinary dividend,
we will endeavor to return to shareholders an aggregate amount
equivalent to approximately six percent of FEMSA’s current public
market value over the next two to three years, through a
combination of additional dividends and share buybacks. This
capital return framework will have the overarching tenet of not
maintaining idle capital on the balance sheet, and maximizing
per-share value accretion as we strive to reach and maintain a 2x
Net Debt/EBITDA ex-KOF1 objective.
Return of capital initiatives for
2024FEMSA expects to use a combination of dividends and a
multi-year share buyback program to return capital to its
shareholders in 2024 and beyond. To this end, the Board of
Directors has approved to submit to the 2024 Annual Shareholders
Meeting the following proposals: i) Increase our ordinary dividends
by approximately 20% compared to 2023 on an aggregate basis by
paying four quarterly installments of Ps. 0.9161 per FEMSAUB unit
and Ps. 1.0993 per FEMSAUBD unit (Ps. 10.9931 per ADS); ii) pay an
additional dividend in four quarterly installments of Ps. 0.6418
per FEMSAUB unit and Ps. 0.7701 per FEMSAUBD unit (Ps. 7.7010 per
ADS), over and above the approved ordinary dividends, to be
disbursed on the same dates as the ordinary dividends; and iii)
double our maximum share buyback capacity from the currently
existing authorization.
Medium-term capital allocation
considerationsConsistent with our plans described above,
it is our intention to utilize a mix of the share buyback program
and additional dividends as needed. We intend to
continue to use these mechanisms in the medium term, focused on
per-share value accretion and maintaining our stated leverage
objective.
About FEMSAFEMSA is a company
that creates economic and social value through companies and
institutions and strives to be the best employer and neighbor to
the communities in which it operates. Across its business units,
FEMSA has more than 350,000 employees in 18 countries. FEMSA is a
member of the Dow Jones Sustainability MILA Pacific Alliance, the
FTSE4Good Emerging Index and the Mexican Stock Exchange
Sustainability Index: S&P/BMV Total México ESG, among other
indexes that evaluate its sustainability performance.
1 Net Debt / EBITDA ex-KOF: (Total Financial Debt ex-KOF + Lease
Liabilities ex-KOF – Total Cash ex-KOF) / (FEMSA Retail businesses
EBITDA + dividends received from Coca-Cola FEMSA).
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