Producto integrador de aprendizaje
INTEGRANTES 1928502 Valdés Barrón Carla Yadira 1898048 Valdez Pedraza Sebastián 1908583 Valdez Rodríguez Shaira Alejandra 1886059 Vásquez Ávila Jesús Alberto 1993185 Velázquez García Ana 1913068 Villagómez Abrego Angélica Lizeth 1993350 Zapata Arevalo Ana Cristina
INTRODUCTION
The purpose of an audit is to enable auditors to form and to form a conclusion on the particular audit objectives and, where required, to issue an audit opinion. For this, is important to follow the legal requirements: The reliability of the accounts, which comprise the financial statements and the reports on implementation of the budget, seeks to establish whether the information is presented fairly, in all material aspects, and in accordance with the set of rules used as guidelines in the preparation of the financial statements; the legality and regularity of transactions underlying the accounts; and selected topics.The need for companies’ financial statements to be audited by an independent external auditor has been increasing in recent years as there are cases where misstatements on financial statements due to error and or fraud have led to the disappearance of important companies. For this reason, and to put what was learned into practice, the company Fondo Económico Mexicano S.A.B de C.V (FEMSA) was selected to carry out an analysis of its financial information. First, the background of the company will be presented, since it is important to know the nature of it. This will contain the history, especially the dates on which new acquisitions were made; the culture of the organization, which includes the mission, the vision and values. Important characters, being those who have a great influence on the management of the entity; The business core, referring to the main activity of the organization; The products and services that are the most relevant; and other important information as their location and value creation highlights.Later the principal financial statements for the year 2019 will be shown; Balance sheet, Income statement and Cash Flow. According to NIF A-3, these are the fundamental manifestations of financial information; They are the structured representation of the financial situation and development of an entity at a specific date or for a specific period. Its general purpose is to provide information on an entity about its financial position, the results of operations and the changes in its stockholders' equity or equity and in its resources. These must contain reliable, relevant, comparable and understandable information. Finally, an opinion will be given about these, exposing the economic health of the company and observations that are considered pertinent to prevent future material misstatements due to error or fraud. In addition, every member of the team will give his/her opinion in relation to the information obtained.
1 2 7 11 14 22 27 30 32 42 45 54
INDEX B A C K G R O U D
I N F O R M A T I O N
H I S T O R Y
O R G A N I Z A T I O N A L
V I S I O N
&
M I S S I O N ,
V A L U E S
I M P O R T A N T
C O R E
C U L T U R E :
C H A R A C T E R S
B U S I N E S S
I M P O R T A N T
P R O D U C T S
A N D
S E R V I C E S
L O C A T I O N
V A L U E
C R E A T I O N
F I N A N C I A L
H I G H L I G H T S
S T A T E M E N T S
C O N C L U S I O N S
I N D I V I D U A L
R E F E R E N C E S
C O N C L U S I O N S
Background Fondo also
Econรณmico known
as
multinational different
Mexicano, FEMSA,
company
approaches
satisfying
its
innovation,
clients
is
a
that
with with
generating
S.A.B
has
the
de
C.V,
Mexican several
purpose
excellence economic
of
and and
social value simultaneously. The entity also has
the
company
commitment and
in
to
this
be way
a
sustainable
preserve
the
resources so that the following generations can meet their needs.
1
HISTORY 1890
1903
The company started in 1890 when five entrepreneurs, Isaac Garza, Jose Calderon, Jose A. Muguerza, Francisco G. Sada, and Joseph M. Schnaider founded Cervecería Cuauhtémoc brewery in Monterrey, Nuevo León, located in Mexico. This company used count with a workforce of seventy two operators in charge of the production and with a capital of $100,000 pesos.
In 1903 FEMSA became the first mexican brewery to use metal caps. A couple of years later, a great opportunity appeared because the former king of Spain, Alfonso XIII, created a path to the company by appointing them to royal suppliers and authorizing the use of the spanish coat of arms in FEMSA’s labels. 2
1909 They reopened their previously under the name of Vidriera Monterrey. Later, in November of 1914 the General Pablo A. Gonzalez grabbed FEMSA and four years later, they constituted a “Sociedad Cooperativa de Ahorros e Inversiones para los Empleados y Operarios de la Cervecería Cuauhtémoc, S.A.” with the aim to help the employees by providing groceries, health care and education for their families, they wanted to provide benefits to every single person that worked in their company.
1921 Fabricas Monterrey S.A. de C.V., also known as Famosa, produced beer caps inside FEMSA’s plant and later they expanded and produced metallic cans. A few years later, the “Sociedad Cooperativa de Ahorros e Inversiones para los Empleados y Operarios de la Cervecería Cuauhtémoc, S.A.", changed its name to "Sociedad Cuauhtémoc y Famosa" or SCYF, as it is widely known”. On May 12th of 1930, VISA (Valores Industriales S.A.) became the company that contained: Cerveceria Cuauhtemoc, Famosa, Titan, and Malta into a single group. Ten years later, Almacenes y Silos S.A de C.V was created to store all the raw materials used inside Cerveceria Cuauhtemoc.
3
1942 As well, during the year of 1942 FEMSA also founded the steel Mil Hojalata y Lamina S.A and it became one of the largest companies in Mexico. The group continued growing and holding companies were created “VISA and ALFA”.
1977
1976 “Plásticos Técnicos Mexicanos” (PTM) was created, which manufactured plastic products and materials for the company, and in the same year a museum dedicated to art like painting and sculpture was opened called “Monterrey Museum” located inside the Cuauhtemoc Brewery.
OXXO arrived in Monterrey as they opened its first store, currently being one of the most important chains of convenience stores in Mexico.
4
1988-1993 In the year of 1988, FEMSA, was constituted as the major subsidiary of VISA. A partnership with the CocaCola company was created to accelerate the growth of their partnership in 1993, Coca Cola company bought 30% of the Coca-Cola FEMSA stock and a 19% of the stock was placed in the Mexican Stock Exchange and in the New York Stock Exchange.
2000 ORACLE and FEMSA Logistica created an internet based logistic services company and named it Solistica; three years later the company bought Panamerican Beverages Inc, Panamco. FEMSA became the leading bottling company of Coca-Cola products and the second one in the worldwide CocaCola system. In 2004, Coca-Cola FEMSA created an industrial park, a malt producer. In 2006, FEMSA got the control of the company “Kaiser”, a brazilian brewing company and a year later, Jugos del Valle was obtained which helped FEMSA to be positioned in the carbonate-free beverages area. FEMSA also created the “FEMSA Foundation” to help areas like education, science and technology for the sustainable use of water.
5
2009The Brisa bottled water business was purchased by the company in 2009 in the next year, FEMSA traded 100% of its beer stock shares for 20% of the Heineken. In the following years, FEMSA became present in various parts of the world, investing in the pharmacy segment with small and medium-sized pharmacy chains, as well as, creating a fuel division under the name of OXXO Gas.
6
ORGANIZATIONAL CULTURE
7
In
order
to
outline
have
its
goals,
audience,
and
development have
been
values
worth applies
how
been
mentioning all
help will
future the
In
the
growth
mission
addition,
that of
the what
the
company
approach
proposed,
within
levels
to it
its
developed.
balance
to
guide
strategies,
have
maintain
a
and
its and
vision
institutional which
work is
FEMSA
area.
help It
is
established group,
and
its observation is of vital importance.
8
MISSION
To generate economic value through designing, building and
scaling
company
to
mass
business
meet
its
models,
customers’
which daily
enable needs
the
in
a
distinguished and efficient manner. Likewise for the entity is essential to generate as well social value through the improvement
of
their
immediate
communities,
the
comprehensive development of their employees, and with value proposals that generate well-being.
VISION Reflects the desirable reality that the company would like to see, so it was established that FEMSA longs to be
the
best
owner,
partner
and
operator
of
their
businesses in the long term; to double the value of our business every 5 years; be leaders in the markets where they operate; and be the best employer and neighbor to the communities in which they operate.
9
VALUES
As mentioned, are a relevant part of the organization and provide the foundation for the development of standards on which the decisions and actions of the company are based. All levels workers seek to be: Integrity and respectful, is honest in his or her behavior and maintains a respectful and dignified treatment with all the people; Responsible, is committed, in other words, measures, acknowledge and takes responsibility of
his
or
her
actions;
Humble,
perceives
that
everyone
is
valuable and important, is always willing to collaborate and serve for the organization’s benefit; and Passionate in learning, Is
in
constant
allows
him
or
pursuit her
to
of
learning
develop
and
new
continuously
challenges in
a
that
dynamic
environment.
10
IMPORTANT CHARACTERS Chairman of the board Jose Antonio Fernandez Carbajal Currently serves as the president of the board of directors at FEMSA. He joined the company in the year of 1998, and he has been in his current position for nineteen years. Among the functions he carries out are: to call and draw up the agenda, as well as preside addition,
over he
and is
coordinate
the
responsible
for
meetings. the
In
proper
functioning of the Board and for the organization of the annual evaluations.He is also a member of the Board of Industrias PeĂąoles and Grupo Televisa, and co-chairs the Mexico Institute of the Woodrow Wilson Center.
Chief Executive Officer Eduardo Padilla Silva Mr. Padilla joined FEMSA in 1997 and was named to his current position in January 2018. Previously he
served
Officer CEO
as
of
Chief
FEMSA,
of
FEMSA
FEMSA’s
Director
Financial
CEO
of
Strategic of
and
Corporate
FEMSA
Comercio,
Procurement
Planning
and
and
Control.
As
Chief Executive Officer, he must make the most important
decisions
that
lead
will
the
and
direct
company
the to
strategies
achieve
its
objectives.
11
Vice-President of Corporate Development Javier Gerardo Astaburuga Sanjines He
joined
company
FEMSA have
Cerveza,
in
1982.
included
Director
of
His
roles
co-CEO Sales
of
for
in
the
FEMSA
Northern
Mexico, CFO of FEMSA Cerveza, and Chief Financial and Corporate Officer of FEMSA. He was appointed to his current position in April 2015.
Vice-president of Strategic Business Alfonso Garza Garza He started working in FEMSA in 1985 and held various positions including CEO of FEMSA Empaques. In 2012 he was appointed to his current position. He served as President of the Employers Confederation of Mexico for the state of Nuevo León (2011-2013), and has served
as
Chairman
National of
the
Vice Talent
President and
since
Culture
2009.
He
Committee
is of
Tecnológico de Monterrey, and member of the Board of Coca-Cola FEMSA and Tecnológico de Monterrey.
Chief Executive Officer of Coca-Cola FEMSA John Anthony Santa Maria Otazúa Was appointed to his current position in 2014, having joined Coca-Cola FEMSA in 1995. During his time working with the company he served in several
management
Operating Mexico
Officer
Division,
positions
(COO)
and
including
of
Strategic
the
Chief
company’s
Planning
and
Business Development Officer.
12
Vice-President of Administration and Corporate Control Jose Gonzalez Ornelas Mr. González joined FEMSA in 1973 and assumed his
current
position
in
2001.
His
previous
roles
have included CFO of FEMSA Cerveza, Director of
Planning
and
Corporate
Development
of
FEMSA, and CEO of FEMSA Logística. He serves as
Secretary
FEMSA’s Directors,
of
and and
the
Audit
Coca-Cola is
a
Committee FEMSA’s
member
of
of
both
Boards
of
Board
of
the
Productora de Papel, S.A.
Chief Executive Officer of FEMSA Comercio Daniel Alberto Rodriguez Cofre He was named to his current position in January 2016.
Previously,
in
the
year
of
2015,
he
joined
FEMSA as Chief Financial and Corporate Officer. As
well,
he
used
to
be
CFO
(Chief
Financial
Officer) and then CEO (Chief Executive Officer) of CENCOSUD (Centros Comerciales Sudamericanos S.A.), among other senior finance and management positions in Latin America, Europe and Africa. He is currently
a
member
of
the
Board
of
Coca-Cola
FEMSA and an alternate member of the Board of FEMSA.
13
CORE BUSIN ESS
14
Their participation in the retail industry
is
Comercio, different Division,
through which
has
divisions: Health
FEMSA three
Proximity
Division
and
Fuel Division.
15
PROXIMITY DIVISION FEMSA operates the largest chain of small-format stores in America under the name of OXXO. In the year of 2019, there were approximately 19,330 stores. Every day, approximately 13 million people make a purchase at an OXXO store in Mexico, Colombia, Chile, or Peru. Recently, it was invested in O’Sabor, which is specialized in making items such as tacos, tortas, and fresh sandwiches. Additionally, customers have the ability to pay for more than 5,000 services.
16
H E A L T H D IV IS IO N
Responds
to
the
healthcare
needs
of
the
communities
where the company operates. Through a growing network of drugstores and related operations, they distribute and sell
patented
and
generic
pharmaceutical
drugs,
beauty
products, medical supplies, and wellness and personal care products, among other categories.
17
FUEL DIVISION It operates the OXXO GAS brand of retail service stations across 17 states in Mexico, offering superior customer service and selling quality fuels (gasoline and diesel) and lubes.
18
Coca Cola FEMSA has consolidated a leading total beverage portfolio with options for every consumer taste and lifestyle. They have the privilege of serving more
than
261
million
people
through
1.9
million
points of sale in 9 countries in Latin America with a broad
portfolio
of
leading
brands
in
10
beverage
categories.
19
STRATEGIC BUSINESS These
provide
foodservice
logistics,
solutions
to
transportation, FEMsA's
core
cooling
systems,
businesses
and
and
other
companies, these businesses include:
20
It
is
worth
mentioning
that
FEMSA
is
working in the beer sector since they are shareholders
of
HEINEKEN,
a
company
with presence in more than 70 countries.
21
IMPORTANT PRODUCTS & SERVICES Proximity Division OXXO tries to understand daily and common quickly,
needs,
serving
dynamically,
products
reliably
and
responsibly. In consequence, it can be seen that its facilities are divided into four areas: Snacks, Beverages, Groceries
and
Cleaning
and
Personal Hygiene Products. However, 40
%
of
their
beverages services cell
like
and
sales beer.
airtime
phones,
fast
are
from
Likewise,
recharges food
and
for the
payment of various services such as tenures,
fines,
credits,
telephones,
plane and bus tickets, have become popular among their customers.
Health Division Farmacias YZA is one of the major pharmacy chains have
that
operate
24-hour
in
service,
Latin
America.
medical
office,
They car
service and home service in order to satisfy the needs of their customers in an efficient way. In Mexico, there are 1,200 subsidiaries in 16 different states.
22
Fuel Division As of the end of 2019, OXXO GAS remained the
largest
retail
participant
service
in
station
the
fragmented
market
in
Mexico,
operating 545 service stations out of a total of
approximately
country.
Its
12,500
presence
is
stations in
17
across
states
of
the the
republic.
Strategic Business As
the
largest
Strategic
company
Businesses
third-party
logistics
by
within
revenue,
(3PL)
the
FEMSA
Solistica
provider
that
is
a
serves
more than 4,000 clients in seven countries with personalized
and
Transportation,
comprehensive
Warehouse,
and
solutions other
in
Value-
added Services. It is worth mentioning that 30 percent
of
its
operations
are
with
FEMSA-
affiliated companies, as they transfer beverages from bottling and brewing plants to distribution centers
for
Coca-Cola
Femsa
y
Heineken.
As
well, it is in charge of transporting the OXXO’s merchandise to its points of sale.
23
Coca-Cola FEMSA Coca-Cola has become the leader among the different soft drinks, which is the result of an advertising strategy that has privileged the behaviors of the various social sectors, the interests, and forms of relationships of people.The most recognized products worldwide are its carbonated beverages (Coca-Cola), especially its presentation of 2.5 L
POPULAR BRANDS Sparkling beverage
Coca-Cola
Other presentations are: 235 ml., 354 ml. and 600 ml.
Is the best-selling beverage in history since 1886. It is the most famous brand in the world. It can found the orignal, light, with coffe and energy version of this drink
Sidral Mundet
Sparkling beverage
Has been the Mexican soft drink made with 1% pasteurized apple juice for 115 years. It is
It has two common presentations: 354 ml. and 600 ml.
another hydration option from their portfolio, low in sodium and with no artificial coloring. It can find the normal and the light version of this drink
24
Fanta Has 3 common presentation: 250 ml., 500 ml. and 600 ml.
Sparkling beverage Is the second brand with the most history in the Coca-Cola Company since 1940. Consumed by more than 130 million people everyday all over the world. It can be found the original and the light version of this drink.
Powerade
Sports drinks
It has three presentations: 250 ml., 500ml. and 1 L.
Innovative beverage for athletes that gives all the benefits of ION4
technology
with
great
flavor.
The
ION4
technology
replenishes 4 of the minerals lost while sweating: Sodium (Na), Potassium (K), Calcium (Ca) and Magnesium (Mg). It can also be found the light version of this drink.
Del Valle
Juices and Nectars
In MĂŠxico there are 2 presentations: 335 ml. and 413 ml.
Del Valle is a Mexican brand with more than 70 years that gives the goodness of fruit juice through its juices, nectars, pulp beverages and refreshing beverages. This brand has its roots in Mexico and is sold in countries like Brazil, Colombia, Venezuela and other countries in Central America. In addition, the Del Valle beverages are another option in their portfolio that can bring nutrition to daily diet.It can be found different presentations through the world, the examples given are the presentations available in Mexico. For example, a presentation that may be found in Colombia but not in Mexico is the following:
25
Santa Clara
Dairy Products
It has 3 presentation: 200 ml., 250 ml. and 1L.
Coca-Cola Femsa uses 100% pure cow milk and have a vapor-based ultra pasteurization process, unique in the market, that maintains the natural properties of the milk, and gives it its creaminess and flavor that makes the company extraordinary. The innovative packaging that it has, protects the milk from light and oxygen so that the quality is not altered. Contains vitamins A and D.
The flavors of the milk are: vanilla ice cream triple chocolate mints with chocolate whole, and light
Ciel Has 3 presentations: 354ml., 600 ml. and 1L.
Purified Water The human brain dehydrates before even notice and a good option is to keep drinking puridied water, at least 2 liters per day. Ciel is such an important company in Mexico, so much that in 2015, it held the 19.4% share of the bottled water market.
26
L O C A T I O N
FEMSA is an international Company that has created an impact in the business environment by opening themselves to new opportunities around the world, this company operates throughout different countries, which are Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, Guatemala, Mexico, Nicaragua, Panama, Peru, USA and Uruguay, which are 13 countries where FEMSA has been participating throughout the years in the business environment and they continue to keep growing. United States of America (Waxie & North American Corporation)
Mexico (FEMSA Comercio, Coca-Cola FEMSA, Solistica, Imbera, PTM) Venezuela (Coca-Cola FEMSA)
Colombia (FEMSA Comercio, Coca-Cola FEMSA, Solistica, Imbera)
Brazil (FEMSA Comercio, CocaCola FEMSA, Solistica, Imbera)
Ecuador (FEMSA Comercio )
Peru (FEMSA Comercio ) Chile (FEMSA Comercio )
Guatemala (Coca-Cola FEMSA), Nicaragua (CocaCola FEMSA, Solistica), Costa Rica (Coca-Cola FEMSA, Solistica), Panama (CocaCola FEMSA, Solistica)
Uruguay (Coca-Cola FEMSA)
Argentina (Coca-Cola FEMSA )
27
FEMSA GROUP General Anaya No. 601 Pte. Col. Bella VistaMonterrey, Nuevo Leรณn Mexico, C.P. 64410
Tel: (52) 81 8328-6000
FEMSA COMERCIO Edison No. 1235 Nte. Col. TalleresMonterrey, Nuevo Leรณn, Mexico, C.P. 64480
Tel: (52) 81 8389-2121 Fax: (52) 81 8389-2106
28
COCA-COLA FEMSA Mario Pani N° 100 Col. Santa Fé Cuajimalpa 05348, México, D.F. Mexico
Tel: (52) 55 1519-5000
FEMSA STRATEGIC BUSINESS General Anaya No. 601 Pte. Col. Bella Vista Monterrey, Nuevo León
Mexico, C.P. 64410 Tel: (52) 81 8328-6600 Fax: (52) 81 8328-660
29
Value creation highlights Economic Value For the year of 2019 FEMSA obtained a total of $506,711 millions (Mexican Pesos), 37% of their revenues are from operations in Coca-Cola FEMSA; 35% belongs to the Proximity Division; 9% of the revenues, Fuel Division;
Health
Division
contributes
with
11%; and the rest are obtained from other
Total Revenue by business unit Ps. 506,711
business.
Social and Environmental value FEMSA places great emphasis on conducting its operations
in
a
sustainable
manner,
that
is,
making a positive contribution to society and the
environment.For
their
reason,
they
implement inclusive labor practices, optimizing the use of natural resources, strengthening local supply
chains,
suppliers,
supporting
positively
and
transforming
developing communities,
and connecting effectively with customers.
30
Key Performance Indicators Key Performance indicators
2019
Organizational Climate
81/100
81/100
34.40
39.95
Energy Intensity
2018
Greenhouse gas emissions intensity Tons of equivalent CO2/ Total Revenues in PS.Million Water Efficiency (Liters of water used per liter of beverage produced) Corporate Volunteering Direct beneficiaries of FEMSA Foundation programs
1.77
3.38
1.52
1.59
461,200 Hrs
593,300 Hrs
1,657,786
1,423,985
31
FINANCIAL STATEMENTS
Fomento Econรณmico Mexicano, S.A.B. de C.V. has the responsibility of presenting its financial statements, which represent a formal record of the financial activities of the entity. The three basic financial statements of the company will be presented, which are: Balance sheet (also known as statement of financial position), that at a given date, reflects the financial and economic information of the company resumed in three elements as they are assets, liabilities and equity; Income Statement, which shows the net income or loss resulted from revenues, cost and expenses during a period of time; and Cash Flow that can be defined as the report of cash receipts and cash disbursements classified according to the entity's major activities (operating, investing and financing).
32
BALANCE SHEET (Statement of financial position) As already defined, it shows the information relative to a certain date on the entity's financial resources and obligations; therefore, the assets in order of their availability, revealing restrictions; the liabilities attending their enforceability, revealing their financial risks; as well as the stockholders' equity of said date. According to FEMSA’s Balance sheet, the company has as current assets; Cash and equivalents, the account includes cash on hand and in bank deposits and cash equivalents, which are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value; Investments, that are greater to three months but less than twelve months; Trade accounts receivables, which represent rights from sales and loan to employees (it can be added that 9% of trade accounts receivables are unrecoverable); Inventories (finished products, raw material, spare parts, work in process, inventories in transit); Recoverable taxes, that are mainly integrated by higher provisional payments of income tax during 2019; Other current financial assets includes restricted cash, derivative financial instruments and notes receivable; and Other current assets contain prepaid expenses, recoverable taxes, agreements with customers, licences, assets classified as held for sale. 33
On the other hand, the accounts for non current assets, those company resources that have a certain fixity, are the follow: Equity accounted investees (principal investees are Heineken and Coca-Cola FEMSA); Property, plant and equipment; Right-of-use assets are additions, additions from business combinations, disposals, remeasurements, depreciation and effects of changes in foreign exchange rates and restatement effects associated with hyperinflationary economies; Intangible assets like the right to produce and distribute Coca-Cola trademark products, goodwill, systems in developments and alcohol licenses; Deferred tax assets, which correspond to income tax credits arising from dividends received from foreign subsidiaries to be recovered within the next ten years; Other non current assets (agreement with customers, long term prepaid advertising expenses, guarantee deposits, prepaid bonuses, advances to acquire property, plant and equipment) and Other non current financial assets (non-current accounts receivable and investments). The total amount for assets was $637, 541 millions (Mexcian pesos). The liabilities represent all debts and obligations in charge of the company. In current liabilities, it can be found the accounts of: Bank loans and notes payable, which in this case are in short term (there are loans from Mexico, Colombia, Brazil, United States of America and Chile); Current portion of non-current debt; Current portion of lease liabilities; Interest payable; Trade payable; Accounts payable; Taxes payable; and Other current financial liabilities like sundry creditors, derivative financial instruments and other notes payable. Likewise, in the non current liabilities it can be found: Bank loans and notes payable, that are in a longterm; Lease liabilities; Post-employment benefits, in connection with pension, seniority and post- retirement benefits (these are different in every country); Deferred tax liabilities; and Other non current liabilities including contingencies and payable taxes. The total amount for liabilities was $311, 790 millions (Mexican pesos). 34
Finally, the equity , which can be defined as the value that would be returned to the share holders once all of the assets are liquidated and all the liabilities are paid off. In this balance sheet there are to accounts; Controlling interest that encompasses capital stock, additional paid-in capital, retained earning and other comprehensive income; and Non controlling interest, which includes the ownership of Coca Cola Femsa. The total amount for equity was $325,751 millions (Mexican pesos). As a result the sum of equity and liabilities was $637,541 millions (Mexican pesos) which, as it can be seen, is the same amount as the total of assets.
FEMSA'S Balance Sheet for the year 2019 35
Income Statement
Also called Profits and Loss Statement, is a summary of the revenues, costs and expenses a company has during a period of time. The first part of this financial statement is to analyze all the operations related to the sale of merchandise until determining the profit or loss of sale, in other words, finding the difference between the cost price and the sales price of all the merchandise sold. As it can been seen, the total net sales were of $504, 059 millions (Mexican pesos). The total net sales are as follow:
36
The graphic shows the core activities of the business units from which the Company generates its revenues, data obtained form Note 28. pp.120
The total amount for cost of the goods sold was $315, 230 millions (Mexican pesos). The result of substracting the cost of the goods sold from the net revenue was $191,481 millions (Mexcian pesos), this is called gross profit. The second part of this income statement consists of analyzing in detail the operating expenses, as well as the expenses and products that do not correspond to the main activity of the business and determine the net value that must be subtracted from the gross profit, in order to obtain the income before taxes. The accounts of administrative expenses, selling expenses, other income, other expenses, interest income, interest expenses, foregin exchange loss, monetary position gain, market value loss on financial instruments were taken into account. 37
As a result, the income before income taxes from continuing operations and share in the profit of equity accounted investees was $32,296 millions (Mexican pesos). To this total, it was substracted an amount of $4,248 millions (Mexican pesos) that resulted from the difference between income taxes and share in the profit of equity accounted investees. Finally, the net income of the year of 2019 was $28,048 millions (Mexican pesos).
FEMSA'S Income Statement for the year 2019
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Cash Flow This financial statement reports cash receipts and cash disbursements classified according to the entity’s major activities: operating, represent the cash flow form primary activities of a business; investing, represent the cash flow form the purchase or sale of assets (excluding the inventory); and financing, related to cash flow generated or spent on capital and debt together with the payments of interest and dividends. In the operating activities, FEMSA has reported; income before taxes from continuing operations, operating (income) expenses, non-operating expenses, depreciation, amortization, gain on sale of long-lived assets, disposal of long-lived assets, impairment of long-lived assets, share of the profit of equity accounted investees, interest income, interest expense, foreing exchange loss, monetary position and market value loss on financial instruments. As a result, it was obtained a net cash flow from operating activities of $72,266 millions (Mexican pesos). However this amount suffered some changes because of trade accounts receivable and other current assets, other financial assets, inventories, derivate financial instruments, trade accounts payable and other accounts, other non-current liabilities and employee benefits paid. So the net cash generated form operations was $73,529 millions (Mexican pesos). Is important to mention that were substracted $11,891 millions (Mexican pesos) for taxes reasons, in consequence, the amount corresponding to these activities was $61,638 millions (Mexican pesos). 39
Likewise, in investing activities can be found: acquisitions, equity accounted investees and other equity investments, partial disposal of investment in Heineken Group, disposal (purchase) of investments, interest received, derivative financial instruments, dividends received from equity accounted investees, property, plant and equipment acquisitions, proceeds from disposal of property, acquisition of intangible assets, investment in other assets, collections of other assets and investment in other financial assets. As a result, the net cash flow from investing activities was $14,132 millions (Mexican pesos). At last, the financing activities carried out were: proceeds from borrowings, payments of bank loans, interest paid, derivate financial instruments, dividends paid, acquisition of non controlling interest, interest paid derived from leases, payment of leases and other financing activities. The net cash flow generated by financing activities was $38,433 millions (Mexican pesos). It can be said that there was an increase in cash and equivalents of $9,073 millions (Mexica pesos). This was obtained by substracting the quantities of investing and financing activities to the net cash flow generated by operating activities. Is worth mention that cash and cash equivalents at the end of the period was $65,562 millions (Mexican pesos), as it was observed in the balance sheet. This was verified by adding the amount corresponding of cash and cash equivalents at the beginning of the period ($62,047 million) and the increase in cash ($9,073 millions). In addition $5,558 million (Mexican pesos) were subtracted due to effects of exchange rate changes and inflation effects on cash and cash equivalents held in foreing currency.
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Cash Flow for the year 2019 41
CONCLUSION In conclusion, it can be reached a generalized idea that FEMSA is a pillar and example for the economy, for what it is, for what it represents, and for how since its inception it ventured among various sectors of commerce and little by little it was generating a wide variety of jobs. Since when it started they only had 72 employees, which is certainly not that bad, however compared to what they have generated until today, it is an abysmal difference. Since they currently have more than three hundred thousand collaborators in 13 Latin American countries. Thus, it is the company that generates the most jobs at the national level, far above other national and international companies. So it can be said that, in recent years, FEMSA has become an important company in the commercial sector. The participation of the business in its different segments has allowed it to have a better understanding of the dynamics of consumers and their needs, which is an opportunity to quickly adapt to changing consumption conditions and thus maintain favorable and profitable growth. Unquestionably the growth of FEMSA has been explosive and visible to anyone, however going beyond the financial, a very important issue is how coherent the company is with its mission, vision and values. Which shows that the company has been fulfilling and is deeply rooted in its identity. For example, in general terms their mission is to generate business models that allow them as a company to have this closeness with the consumer and thus be able to understand and satisfy the current needs of consumers. From their vision, about being leaders in the markets they operate and how they seek to double the value of the company, there is not much to say, since the financial statements show this constant and gradual growth in the company, which indicates that they are complying its purpose. And as for their values, which are basically integrity, respect, honesty, responsibility, humility and passion. 42
Now, analyzing the financial statements presented for 2019, which were the balance sheet, the income statement and the cash flow, the company shows economic stability. Firstly, it is observed that there was a growth of 10.61% in its total assets because in 2018 this sum was $576,381 millions (Mexican pesos) while in 2019 there was a total of $637,541 millions (Mexican pesos). The total current assets decreased 2.83% ($5,028 millions) while fixed assets increased by 16.60%. On the other hand, their debts also increased by 29.46% in a period of one year; the current liabilities increased by 34.56% ($35,070millions) and the non-current liabilities also increased by 25.74% ($35,881 millions). The total equity suffered from a reduction of a 2.92% in the same period of time. However, it can be said that the company has liquidity, because when comparing current assets in relation to current liabilities, it is observed that the company's ability to meet its obligations with the assets it owns is acceptable. The measure used to support this opinion is the current ratio, which is 1.26 times (total current assets / total current liabilities). In other words, it means that for every peso of debt that the entity contracts, there are 1.26 pesos in assets to meet said debt. As well, the company is solvent, since the company can sustain its activities for a longer period of time. In the same way, it can be seen that there was a growth in total sales compared to last year, they increased by 7.50% (In 2018 the total net sales were $468,894 while in 2019 were $504,059). Coca-Cola FEMSA contributed 37.26% of these sales ($ 188,784), which was 2.30% more than in 2018. FEMSA Comercio (Proximity Division) also contributed to a large extent with 36.41%, which was 3.14% more than the previous year. Sales in other business segments also suffered from an increase, although not as noticeable as it was for Coca-Cola FEMSA and Proximity Division.
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In consequence, the cost of the goods sold also increased by 7.01 %, however, in the year of 2019 a gross profit of $191,481 millions was achieved. The other expenses and costs remained the same with respect to last year, except for selling expenses, which increased by 6.36%. This, together with the lack of income from discontinued operations, caused a decrease of 15.21% in the total income of the company for the year of 2019.These results must be taken into account, because in these last three years, a trend has been observed in the decrease of total income by approximately 13.25%. The net cash generated by operating activities from continuing operations in 2019 was $61,638 millions, which was 31.34 % more than in 2018 and 84.35% more than in 2017. The net cash (used in) generated by investing activities from continuing operations in 2019 was $14,132 millions, which was 75.28% less than in 2018.Net cash (used) generated by financing activities from continuing operations was $38,433 millions, in comparison to the previous year, it incremented a 67.02% because of the acquisition of non-controlling interest, interest paid derived from leases, payments of leases and other financing activities. The cash and cash equivalents at the end of the period was $65,562 millions (5.67% more than in 2018) Finally, it can be concluded that the consolidated financial statements of Fomento Econรณmico Mexicano S.A.B. de C.V. and subsidiaries, which comprise the consolidated statement of financial position as at December 31, 2019 and 2018, the related consolidated income statement, and consolidated statement of cash flows for each of the three years in the period ended as at December 31, 2019, were presented fairly in all material aspects. No evidence of mismanagement was found, since everything agrees.It can also be declared that the company is in good financial health.
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Individual Conclusions Ana Velázquez García 1993185: After analyzing the financial statements of the company, I can say that they reflect a solid business portfolio of leading companies in the beverage and retail industry and a solid financial profile at a consolidated level with manageable levels of gross debt and ample liquidity.
It can be seen that it is also a company that has committed to maintaining a philosophy of innovation and adoption of new technologies; The well-being of one of its most important assets and one of FEMSA's key competitive advantages has always been one of its priorities. Likewise, FEMSA's good practices are not only focused on the economic aspect, as they have also implemented programs to increase the educational level of the country, as well as social assistance through the OXXO rounding program, in which the profits, instead of being part of the income of the company, are donated to a philanthropic institution. However, there is an aspect to take into account as a possible material risk factor due to fraud, since the president of the board of directors, José Antonio Fernández, has been seen promoting the resignation of the current President Lopez Obrador, this through the payment of more than 16 million Mexican pesos to the “Servicio de Administración Tributaria” (SAT).
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His opinion in this regard was limited to commenting that populist policies participate in the poor state of the country's economy, due to the increase in debt and the fiscal deficit.It has been speculated that the reason for this is because the Mexican government has paid special attention to the economic support that the past administration granted to companies through “Fideicomisosâ€? and innovation support programs, administered by the Consejo Nacional de Ciencia y TecnologĂa (Conacyt). FEMSA, along with other companies, received a large amount of money, which was over budget. However, this cannot be visible in the financial statements, which is why the comment about the importance of this event. Therefore, it is important to carry out an audit, which can be defined as a systematic process where there exists an evaluation of the financial transactions and statement of a business. It is the set of mechanisms, rules and procedures implemented by an entity to guarantee the integrity of financial and accounting information, promote accountability and prevent fraud. It has as principal objective ensure that the recommendations issued are implemented by the competent authorities as this will result in improvements in the levels of effectiveness and efficiency in management and the strengthening of internal control. Ultimately, the process must be conducted in accordance with the highest ethical standards as is impartiality, integrity, responsibility and commitment, so the information is safe and situations like the one presented are avoided. 46
Ana Cristina Zapata Arevalo 1993350: Throughout this project i’ve understood in a clearer way how a company works and how each concept that was seen throughout this semester connected to the company, these concepts transform into elements that are essential to the function of a company and i’ve learned how FEMSA works in a more specific way. As we were analyzing the company’s background i’ve understood the importance of innovation in a clearer way, because since the company started, they keep looking for new opportunities constantly, they are known by their investment in Coca-Cola which lead them to new opportunities. FEMSA hasn’t closed their doors to the opportunities that could expand them even more, they manage oxxos, pharmacies and production companies internationally.Their achievements inside the market are very impressive since the moment they started, as we went through the company's history i got to know how the company has arrived to where they are now and the sacrifices they had do make to achieve their objectives and how they continued with past projects that were paused, the way this company evolutioned is very admirable, as well as their growth. FEMSA has used their experience to improve many areas of their company, from production to administration, they've understood how to manage their resources and invest in technology with the purpose of keep innovating.
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This company shows that it is in fact a leading company because of their achievements, this company contributes in a major way to the mexican economy and i personally think that it will continue to expand and create new job opportunities, and continue with their environmental responsibility, which is of great importance because of the products that Coca-Cola FEMSA provides, their environmental impact is a key factor because of this company's presence, because they manage several production plants, they have the responsibility to take care of the resources that they use to manufacture their products. Throughout this project we've analyzed different factor of the company, but one of the most important, through my point of view, is the financial elements, because they show us how the company is doing through a different point of view, in a more clear way through the financial situation of FEMSA, the company's financial situation through the analysis that was made shows that their 2019 performance beneficiated them, which once again proves that the company really is part of the leading companies of Mexico. This also proves that the company's actual administrative, financial and manufacturing systems are working as expected and achieving their objectives. The elements previously mentioned are essential, which means that every single aspect that goes through them has to be correct and verified, a company of this magnitude go through audits in order to verify each of this elements information, as well as to avoid any risks or misstatements that could appear in a future, which gives the company the accuracy needed to make the documentation official. FEMSA is a clear example of the impact that innovation has in the expansion of an organization and how it can lead to new paths and opportunities, this company will continue to grow nationally and internationally in the future with their type of administration that they are currently applying.
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Carla Yadira Valdes Barron 1928502: After researching all the information about FEMSA it surprised me how they started being just a little business comparing the huge enterprise they are now. I think is very smart from their part not to create only products, but businesses. It is well known that FEMSA has the number 1 brand of sodas that is Coca-Cola and for me as a consumer getting to know all the history behind the brand and making an investigation about the enterprise it really made me think that if you have a well administration of your resources your business can really grow and become an international one. We also investigate a lot of factors that make FEMSA what is it today. The social actions that FEMSA does for me are the most important ones that a company with social responsibility can do, and to give a percentage of their profits to good causes is very important for them to keep growing as a company in all aspects. As a consumer of FEMSA it really makes me happy how many jobs this company gives to many people around the world because is well known that in Mexico a lot of people don't get to have a job, but with huge companies like FEMSA this may change. While researching the financial statements of FEMSA I could notice that they have everything in order, and you can expext that from a huge company like FEMSA is. An audit is always going to be important to make in any company because with it the owners of these businesses can always have the certainty that none of their partners is commiting fraud or any type of crime with their company, and also they have to take into consideration that is very important that a well-skilled auditor carries out the audit so there will be no problems when makin the audit. To finish my conclusion I have to say that I am inspired by the history of FEMSA and I can say that anything you dream can come true. 49
Shaira Alejandra Vadez Rodriguez 1908583 After we researched the company FEMSA, I learned a lot about the different kinds of departments, divisions and sub-divisions a company that big can have. Also how the concepts we have learnt through the semester apply in our proyect to understand more how a company works. It's very interesting to see the inside of a company I buy things to almost everyday since I consume products from Coca-Cola FEMSA in a daily business and also almost always go to buy something to OXXO's convenience stores, and to see how that small business was created and where the money I spend goes. Also, how important internal controls are so a company can grow from a small business to become a large worldwide business like FEMSA is. FEMSA is a clear example that always innovating and always taking the right choices is one of the most important things to do when you're developing a business. FEMSA is a company thats aways innovating in their business, and they are always taking advatage of all the opportunities that they had. Like it happened with the partnership with Heineken, one of the most important beers in the world. Also their business OXXO is the most known convenience store in Mexico and in a lot of countries in America. They knew to to make OXXO a worldwide success. While watching their financial statements you can see that they have all their accounts in order, i'm guessing their audits must almost always come with a right outcome. It is very interesting to see the accounts from a company for us International Business students, since we constatly review companies, to see how everything works and have these kind of examples as an inspiration if we sometimes want to create our own business, seek to grow and innovate like FEMSA does. 50
Angélica Lizeth Villagómez Abrego: Looking back into all the processes that have been taken and done to get to the company my team and myself are evaluating nowadays, it is clear for me that success does not come from anything.This work made me realize the importance of Femsa in our day-to-day lives and how much I, in personal, consume its products. When we usually go to the store, we don't put much attention to all the hard work that is behind our favorite product being sold at a certain establishment,but if we take a second to think about it, we are not only buying donuts or soda or even water. As simple as it may look, there is a whole process and system behind and I think that to have these facts in mind is extraordinary, because everytime you know more and more about your surroundings.I have this theory that one doesn't ever know enough, and every day I prove this theory because every day I ñearn or acknowledge something new, it may not always be of vital importance but it is something more that you know. Now that I am studying business, I find myself learning constantly, when we talk about our favorite store, product, service, etc. We don't really know what's behind, but sometimes it's not really because we can't but because we don''t look into it.Learning about the beginnings of a company knowing what it will someday be its inspiring. We sometimes think that we need to start big in order to earn money but there are so many examples that prove this wrong, we can start selling gums or whatever it is you want to sell but, it doesn’t matter what you sell, a vital matter for your company to stay well is your financial statements. When I first entered to my career I had no idea what they were, I knew you had to keep information about the money to know if you are actually having profits but learning about this easy procedure to know your net revenue while also having every little department separated and having everything in order was amazing. If there is something that has stuck to my mind that important people in business have said is that you have to know how to read and do financial statements.Even though the topics and charts that we saw in this project are not quite new to me, I appreciate the learning because, as I said before, every time that you see something, a new information stucks to your mind and is of great use in a future. 51
JesĂşs Alberto VĂĄsquez Ă vila 1886059: Personally, I think the history of FEMSA is impressive to be able to observe from its beginnings, for example, from which values it was founded. And it is that for any person the success of this company is palpable and recognizable. But with this job, I had the opportunity to appreciate that a company of this level is not created by luck or overnight. If not, it implies many years of hard work and dedication, and that ability of its leaders to be able to take advantage of the circumstances and create paths of success, in areas of opportunity that they were observing throughout their trajectory until today. One of the things that I liked the most and caught my attention are the awards given to the company for being socially responsible, for actions carried out in four axes of the scheme that handle social responsibility, which is the quality of life in the company, health and well-being, bonding with the community and caring for the environment. And I think that even though not all the people who consume from this company are aware of this, it is a very important intrinsic value that the company contributes to itself. Obviously another of the most important things to observe in this project, is the way they manage their finances, I think it helped us a lot to see a practical example of a company of that size and how it organizes its balance sheet, income statement and the cash flow. And observing some of the financial aspects I was able to realize the amount of resources that the company allocates to technology and innovation and I believe that without a doubt it is one of the most important characteristics of its growth. 52
Sebastian Valdez Pedraza 1898048: It is one of Mexico's most important companies since its inception in 1890, it has been considered one of the most important companies in Mexico, and it is impressive to know that they only started with 70 workers, 2 people of administration and 100,000 pesos of capital and are now one of the greatest monopolies. FEMSA's growth in Latin America has been exponential. It provided products to consumers that were accepted by them at various alternative prices, ignored the economic crisis that was affecting the whole country, and invested all the capital. in products that go beyond a real need. The food and beverage industry is the most important internationally as it makes millions in profits and its brands are widely spread in the market. Monopolies place barriers to market entry, in this case through the costs and investment involved in implementing an adequate distribution system, that is, the limitations to access distribution channels limit entry to the relevant market. Femsa is one of the largest monopolies in Mexico and they are not only dedicated to the beverage or food market, but also to the many other highly concentrated markets generally dominated by a leading company (television, telecommunications, cement, airlines, beers, pharmaceuticals, tortillas , bakeries, drug distributors, etc.) that restricting competition will hurt consumers. 53
REFERENCES Accountingsimplified. (2020). What are Financial Statements?. October 20,2020, from Accountingsimplified web site: https://accountingsimplified.com/financial Expansión.(2020). VW, Femsa y Bimbo están entre las empresas beneficiadas por los fideicomisos. October 20, 2020, from Expansión web site:https://expansion.mx/empresas/2020/10/21/vw-femsa-ybimbo-estan-entre-las-empresas-beneficiadas-por-los-fideicomisos FEMSA. (2020). Annual Report. October 20, 2020, from FEMSA web site: http://www.annualreport.femsa.com/ FEMSA. (2020). Organization Culture. October 20, 2020, from FEMSA web site: https://www.femsa.com/en/ FEMSA. (2020). Corporate Governance. October 25, 2020, from FEMSA web site:https://www.femsa.com/en/about-femsa FEMSA (2020) "About us" November 2, 2020, from FEMSA website: https://www.femsa.com/en/about-femsa/about-us/ Haro, L. (2020). Quién es José Antonio Fernández Carbajal el hombre que quiere sacar a AMLO del poder. October 28, 2020, from Debate website: https://www.debate.com.mx/politica/Quien-es-Jose-AntonioFernandez-Carbajal-el-hombre-que-quiere-sacar-a-AMLO-del-poder20200613-0113.html Lara, E. & Lara, L. (2016). Primer curso de contabilidad. México: Trillas, pp.50-88 54