Mexican bottler Arca reports 24% rise in Q4 net profit

MEXICO CITY (Reuters) -Mexican bottler Arca Continental reported a 24.2% increase in fourth-quarter net profit year-over-year, the company said in a statement on Thursday, pointing to price hikes and cost hedging that offset higher raw material costs.

Arca, which sells water and soft drinks in the United States and parts of Latin America, posted a net quarterly profit of 3.96 billion Mexican pesos ($202.78 million).

Arca said revenues rose 7.1% to 52.64 billion pesos ($2.70 billion), just shy of the Refinitiv estimate of 53.42 billion pesos. Price increases drove much of the revenue rise, as quarterly volumes were nearly flat.

The cost of sales was up 8.1% from the year-ago quarter, Arca said, due to higher costs for raw materials such as PET plastic used in containers and aluminum.

Arca Continental will keep increasing prices in 2023 to offset rising inflation, Chief Financial Officer Emilio Charur said during a call with investors. He noted that commodity prices now seem to be “cooling off.”

Consolidated sales growth for 2023 will be in the single digits, according to a statement shared by the company.

The Monterrey-based company also expects to squeeze the promised benefits from nearshoring – the movement of company operations closer to home, for Mexico – Charur said.

Earnings before interest, tax, depreciation and amortization (EBITDA), or core earnings, rose 9.4% to reach 9.98 billion pesos.

Chief Executive Arturo Gutierrez said in a statement the company would seek to “take advantage of growth opportunities” from an agreement with Coca-Cola signed last year, including “expansion into new beverage categories.”

Arca, which makes about two-fifths of its sales in Mexico and the United States, also operates in Peru, Ecuador, and Argentina.

($1 = 19.5089 pesos at end-December)

(Reporting by Noe Torres, Kylie Madry and Valentine Hilaire; Writing by Sarah Morland; Editing by Isabel Woodford and David Gregorio)