Fitch Ratings has affirmed Coca-Cola FEMSA, S.A.B. de C.V.'s (KOF) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) and senior unsecured debt at 'A'. The Rating Outlook on the IDRs was revised to Stable from Negative. Fitch has also affirmed KOF's Long- and Short-Term National Scale rating at 'AAA(mex)' and 'F1+(mex)', respectively, and the local bond issuances at 'AAA(mex)'. The Rating Outlook on the National Scale is Stable.
The Outlook revision to Stable reflects the direct linkage of KOF's ratings with those of Fomento Economico Mexicano, S.A.B. de C.V. (FEMSA, A/Stable). Fitch has revised FEMSA's Outlook to Stable due to the expectation of EBITDAR leverage improvement.
KOF ratings reflect its strong business position as the world's largest franchise bottler of Coca-Cola products by sales volume, with operations across Latin America, plus its solid financial position across the rating horizon. The company has a Standalone Credit Profile (SCP) of 'a-'. Based on Fitch's Parent and Subsidiary Rating Linkage Criteria, its ratings are equalized with those of its stronger parent company, FEMSA.
Key Rating DriversSolid Business Position: KOF's strong market share position is supported by an extensive and well-developed distribution network, the solid brand equity of Coca-Cola products, a diversified product portfolio and solid execution at the point of sale. Fitch believes these factors provide a competitive advantage and allow it to maintain its leading market positions in the long term.
KOF also is expected to strengthen its business position by focusing on its strategic priorities related to growing the core business, expanding the commercial platform (Juntos+), incorporating value-added acquisitions, increasing its infrastructure, spreading a customer-centric culture, and meeting sustainability targets.
Parent and Subsidiary Linkage: KOF's ratings are equalized with FEMSA's. Fitch follows the stronger parent path of our Parent and Subsidiary Linkage criteria and determined that there is a low legal incentive, a high strategic incentive, and a medium operational incentive for FEMSA to support KOF. This results in a top-down minus one notch rating approach from FEMSA's credit profile to determine KOF's ratings. However, since Fitch views KOF's SCP as one notch lower than FEMSA's, the criteria states that the rating of the subsidiary will be equalized with the parent's rating.
Stable Operating Performance: Fitch anticipates that KOF's revenue will grow by 4% to 5% between 2025 and 2027, despite expected challenges in key markets such as Mexico due to increased excise taxes on beverages with added sweeteners and uncertainty regarding a recovery in consumer spending. Revenue management strategies and positive trends in Central and South America operations are expected to support revenue growth. Fitch also projects an EBITDA margin of 18% for 2025-2027, driven by a stable cost environment for key raw materials, effective hedging strategies, and pricing initiatives.
FCF Negative in 2025: Fitch projects KOF's free cash flow (FCF) to be negative in 2025, given higher requirements of working capital, capex and dividends than previous years. We expect that positive FCF will resume in 2026 and onward as capex is adjusted in response to the expectation of lower volumes (only in 2026) and relatively stable dividends. Our base-case projection assumes that KOF's FCF will be close to MXN1.5 billion in the next two years, with annual capex decreasing to approximately MXN 22.5 billion and dividends reaching MXN 16.5 billion.
Low Leverage: Fitch expects that KOF's EBITDA leverage and EBITDA net leverage will be around 1.5x and 1.0x, respectively, in 2025-2027. This projection incorporates gradual debt reduction and EBITDA growth. The company's total debt is projected to be close to MXN76 billion with an EBITDA, as calculated by Fitch, of approximately MXN56 billion. Fitch considers that KOF has sufficient rating headroom to execute small to midsize debt-financed acquisitions.
Peer AnalysisKOF's ratings are equalized to FEMSA's at 'A', given high strategic, medium operational and low legal incentives for FEMSA to support KOF. KOF's SCP of 'a-' is higher than the rating of peer Embotelladora Andina S.A. (BBB+/Stable), given its larger size and scale and higher EBITDA generation from investment-grade countries.
KOF compares well with Arca Continental, S.A.B. de C.V. (A/Stable), but its EBITDA generation has greater exposure to countries in the 'B' or 'BB' category and it has maintained relatively higher leverage throughout the rating horizon. When compared with Coca-Cola Europacific Partners plc (BBB+/Stable), KOF's ratings benefit from lower leverage and higher EBITDA margins.
Key Assumptions-- Revenue growth averaging around 5% in 2025-2027;
-- EBITDA margin averaging around 18% in 2025-2027;
-- Capex averaging around MXN23.5 billion in 2025-2027;
-- Dividends averaging around MXN16.3 billion in 2025-2027;
-- FCF margin negative in 2025 and close to 1% in 2026-2027.
RATING SENSITIVITIESFactors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:
--A significant decline in KOF's revenue or profitability;
--Negative FCF through the rating horizon;
--Net leverage sustained above 2.5x;
--A downgrade of FEMSA's IDRs;
--A downgrade of Mexico's sovereign rating or Country Ceiling.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:
--Fitch does not foresee any positive rating action over the medium term.
Liquidity and Debt StructureAs of Sept. 30, 2025, KOF had MXN34.9 billion of cash and marketable securities compared to short-term obligations of MXN3.6 billion. Its long-term debt amortization profile is manageable with USD234 million due in 2026, USD462 million due in 2027, USD542 million due in 2028, USD299 million due in 2029, and USD2.7 billion afterward.
Issuer ProfileCoca-Cola FEMSA, S.A.B. de C.V. is the world's largest franchise bottler for The Coca-Cola Company by sales volume, with operations in Mexico, Guatemala, Nicaragua, Costa Rica, Panama, Colombia, Brazil, Argentina, Uruguay and through its investment in KOF Venezuela.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS Click here to access Fitch's latest quarterly Global Corporates Sector Forecasts Monitor data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included. ESG ConsiderationsThe highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
Coca-Cola FEMSA, S.A.B. de C.V.; Long Term Issuer Default Rating; Affirmed; A; Rating Outlook Stable
; Local Currency Long Term Issuer Default Rating; Affirmed; A; Rating Outlook Stable
; National Long Term Rating; Affirmed; AAA(mex); Rating Outlook Stable
; National Short Term Rating; Affirmed; F1+(mex)
----senior unsecured; Long Term Rating; Affirmed; A
----senior unsecured; National Long Term Rating; Affirmed; AAA(mex)
Contacts:
Primary Rating Analyst
Rogelio Gonzalez Gonzalez,
Senior Director
+52 81 4161 7034
rogelio.gonzalez@fitchratings.com
Fitch Mexico S.A. de C.V.
Prol. Alfonso Reyes No. 2612, Edificio Connexity, Piso 8, Col. Del Paseo Residencial,
Monterrey 64920
Secondary Rating Analyst
Maria Pia Medrano Contreras,
Senior Director
+52 55 5955 1615
mariapia.medrano@fitchratings.com
Committee Chairperson
Alberto Moreno Arnaiz,
Senior Director
+52 81 4161 7033
alberto.moreno@fitchratings.com
MEDIA RELATIONS: Maggie Guimaraes, São Paulo, Tel: +55 11 4504 2207, Email: maggie.guimaraes@thefitchgroup.com
Additional information is available on www.fitchratings.com
Applicable Model
Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).
Corporate Monitoring & Forecasting Model (COMFORT Model), v8.2.0 (1)
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