I am pleased to present to you the 2014 financial and operating results of our group.

2014 was a challenging year for both the beverages and sugar industries. Nevertheless, we were able to achieve our goals while modernizing our operations and sustaining portfolio innovations.

Faced with a difficult environment, due not only to slow economic recovery, but also to the effects of the excise tax on sugary beverages, the industry experienced negative impacts on volume sales nationwide.

Since late 2013 and within a macroeconomic environment that was already showing signs of deceleration, and briefly after the excise tax was officially announced, we made timely decisions that resulted in sustained adjustments to our cost base, allowing us to continue optimizing our operations. Consequently, by the end of 2014, we achieved financial and operational improvements, a trend we expect to continue into 2015 as the economy recovers.

In our sugar division, the investigation conducted by the United States Department of Commerce (USDOC) related to sugar subsidies and dumping, increased industry instability, and led to delays in sugar orders from the US during the second half 2014.

Despite these challenges, we remained committed to our original strategy and our plan to invest in the growth engines of our firm.

  • We modernized our infrastructure and processes to further increase competitiveness and profitability.
  • We continued optimizing the price-packaging architecture in the beverages division to sustain sales volumes and offer consumers attractive alternatives within an array of consumption occasions.
  • We continued investing in portfolio innovations at the beverages division, as exemplified by the launch of Epura Bebé and Barrilitos, to harness the potential of new markets and regions while focusing on GEPP's key brands and leveraging the relevance they have achieved over the past two years.
  • We implemented marketing campaigns and route-to-market initiatives to continue serving clients in the beverages division, maintaining the availability of GEPP's products at different consumption occasions, both through modern and traditional channels.
  • In the sugar division, we continued nvesting in the strategic imperatives that support our competitive advantage as a low cost producer. We continued optimizing energy co-generation and vertical integration in sugar cane fields. And we continued to advance the positioning of our Stevia business as a provider of value-added solutions focused on the changing needs of our industrial clients.

All of the above was accompanied by a series of difficult choices with costly implications, both social and economic, including: the sharp reduction in corporate staff in the beverages division at the beginning of 2014, and the implementation of our savings plan, which resulted in non-recurring costs that partially eroded profitability at the time.

Financial and Operating Results

In 2014, we managed to increase the total volume of beverages and bottled water by 0.4%, to 810 million eight ounce cases,. In the jug water segment, our volume was up 0.4 % to 804 million eight ounce cases. Timely innovation and price-packaging initiatives, allowed us to maintain moderate growth above the industry average during the year.

In the sugar division, volume sales increased 12% year-over-year, reaching more than 400 thousand metric tons in 2014.

In the face of a challenging environment, we saw positive growth in consolidated revenues, which increased by 2.6% to Ps. 34,333 million in 2014 (excluding income from the excise tax on sugary beverages).

Both the sugar and beverages divisions contributed to the increase in consolidated revenues. Our sugar division experienced double-digit revenues growth year-over-year and the beverages division saw positive yet moderate growth close to 0.8% (net of excise tax), despite the slow recovery of sales volumes and below-inflation prices maintained through the year to offset the effects of the excise tax.

We closed 2014 with a consolidated EBITDA margin of 7.5%, almost 120 basis points less than our 2013 consolidated margin. Flattish volume growth, in addition to non-recurring expenses related to the savings program in the beverages division, impacted overall profitability. GEPP achieved an EBITDA margin of 7.8% in 2014, or 9.1% after adjusting for non-recurring expenses related to the savings program.

We continue to strengthen the financial position of the Company, optimizing our balance sheet and improving debt ratios. Our consolidated net debt at the end of 2014 was Ps. 4,300 million, 30% lower than the Ps. 6,300 million of 2013.

The sustained strength of our balance sheet continues to be reflected in ongoing CAPEX investments, which are key to meeting our growth and profitability goals. During 2014, we continued support for critical initiatives investing more than Ps.1,800 million in modernization and innovation programs for both divisions.

Social Responsibility

Our work on Social Responsibility and Sustainability continues through various initiatives. We continued developing responsible production projects such as Energy co-generation in our Tala Mill, and Bottle Density Reduction in our beverages division. Moreover, we continued our social investments through several of the communities in which we operate. Our efforts focus on two key areas:

  • Education: through the System of Teaching Centers (Sistema de Centros Escolares).
  • Health: through our Pharmacy Projects and Health Tours (Caravanas de Salud).

We feel proud of the corporate governance best practices that we strove to maintain in 2014, particularly through the development and implementation of the new Code of Ethics in the beverages division, which will continue to dictate the way in which we operate while maintaining top- behavioral standards.

We hope to see a slightly more favorable macroeconomic environment in 2015, with gradual volume growth as well as a more stable cost structure translating into positive impacts on profitability. We will continue to strengthen our balance sheet and maintain healthy debt levels at the holding and at both subsidiaries.

We will maintain our portfolio strategy in the beverages division, launching new products, line and brand extensions, in addition to packaging innovations. And we will continue to expand coverage through the modern trade and traditional channels.

Mexico is going through a particular period of great challenge and transformation. At Cultiba, we are prepared and committed to embrace the market’s challenges and continue delivering on our goals, while playing an ever more competitive and successful role.

None of this would be possible without the daily efforts of our thousands of employees, to whom I express my sincere thanks. And I extend my appreciation to our customers and suppliers, partners and community for their trust and support.

Juan I. Gallardo Thurlow
Chairman of the Board
Information for investors

Organización Cultiba
Diana González Flores
Investor Relations
+52 (55) 5201-1947


Monte Cáucaso 915, fourth floor,
Colonia Lomas de Chapultepec
C.P. 11000, México, Distrito Federal
Tel. +52 (55) 5201-1900

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