Good morning, and welcome everyone to FEMSA's First Quarter 2019 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the presentation, there will be a question-and-answer session.

During this conference call, management may discuss certain forward-looking statements concerning FEMSA's future performance and should be considered as good faith estimates made by the company. These forward-looking statements reflect management expectations and are based upon currently available data.

Actual results are subject to future events and uncertainties, which can materially impact the company's actual performance. At this time, I will now turn the conference over to Eduardo Padilla, FEMSA's Chief Executive Officer. Please go ahead, sir..

our continuing and gradual shift from commission-based store teams to employee-based teams; two, higher secure cash handling costs driven by increased volume and higher operational costs; three, a tough comparison base in electricity tariffs; and number four, the continued organic growth of OXXO’s international operations, which have yet to reach the desired scale.

Moving on to FEMSA's Comercio Health Division, we added 23 drug stores during the quarter to reach 2,384 units across our territories at the end of March and 149 total net new stores for the last 12 months.

Revenues increased 2.4%, same-store sales increased an average of 1.3%, reflecting steady trends across our markets, which was partially offset by a negative currency translation related to a strong Mexican peso.

Gross margin contracted by 100 basis points in the first quarter reflecting a tough comparison base in our operations in South America, where gross margin expanded above trend in 2018; number two, new pricing regulations in Colombia; and number three, increased promotional activity in Chile.

In spite of this, the average operating margin contracted by only 10 basis points, reflecting improving trend in Mexico and cost efficiencies and tight expense control across our operations.

Thus far, FEMSA Comercio’s Fuel Division added one gas station during the first quarter to reach 540 units at the end of March and 73 net new service stations for the last 12 months, which represents a 16% year-over-year increase in our OXXO GAS network.

Same-station sales decreased 7.5% in the first quarter reflecting the broad disruption in the fuel distribution chain during January. Gross margin amounted to 10.2%, while operating margin reached 2.8% of total revenue, with operating expenses increasing almost 28%.

Above revenues, reflecting improved compensation levels were our in-station personnel as well as expenses related to the remodeling of our stations. Finally, moving on briefly to Coca-Cola FEMSA.

As Juan highlighted in the press release last Friday, Mexico and Central America delivered solid growth across the income statement and we were particularly encouraged by the strong volume growth in Chile and Brazil, which continues to signal an improving picture in that key market.

If you were unable to participate in Coke FEMSA’s conference call, you can access a replay of the webcast for additional details on the results. Coming up -- our first quarter results reflect positive consumption trends across many of our operations, in spite of adverse calendar effect as well as macro headwinds in some markets.

This makes us cautiously optimistic about the quarter but again the resilience of our businesses and our ability to execute our strategy to navigate market uncertainty.

Also we remain aware of our responsibility as we work to allocate our capital to high return opportunities being as disciplined as ever while we grow our platform across markets with a view on long-term economic and social value creation. And with that, we can open the call for your questions.

Operator?.

[Operator instructions]. Your first question will come from the line of Luca Cipiccia with Goldman Sachs..

Hi, Eduardo, good morning. Thanks for taking my question. I was hoping you could expand a bit on the OXXO gross margin performance, I think you attribute that to several factors.

If you can maybe clarify the contribution of each directionally? And also if we should see that this to be the new normal going forward and potentially even higher given operating leverage than your deal with Modelo.

If you could spend maybe some time on breaking down again the OXXO gross margin expansion and the prospects going forward, we’ve discussed it in the past but it would be great to have an update. And we’ve seen that progress continuing.

So any more color you could give us on that would be great?.

Very good, Luca. The Modelo arrangement, it just happened in April, so it is not yet reflected in numbers. So I will let Juan to clarify and go in detail in deeper way, your question about OXXO results..

Hey Luca, good morning. I think certainly this year it’s been in place for the last for the quarters and we still have this quarter and maybe one more quarter to go.

The consolidation of the coffee business has -- clearly we have a distortion because it helps the margin expansion and then of course it also puts some pressure on the SG&A and so the numbers are a little bit bigger than usual and that’s definitely a one-time thing.

But you raised a valid point that what we could probably follow, the structural margin expansion at the growth level has been higher now for a number of quarters and I would say that truly main drivers for this are the growth in financial services which continues to grow at roughly 20%, sometimes 20 plus as well as the commercial income, the division’s sustainability or even increasing ability to interact with suppliers and in a way become an extension of their marketing arms as more and more suppliers realize the benefit for using our stores to have their brands, to have promotions, to have SKUs as they may be launching.

So it does seem like it’s a bit more structural than we originally thought….

Sorry to interrupt.

Is that primarily a function of KO, the leverage that you’re gaining with suppliers, is this more of an execution driven or other variables because one would assume it should only stronger going forward, it should only get -- it's a natural growth?.

It’s more execution driven because the way to perform -- it’s a paradox because the bigger we are, the more agile the we are. And we can -- the more specific we can be in doing specific things in specific stores.

With that we can be, as Juan said, a stronger marketing arm for our suppliers and help them to target specific segmented actions to specific markets. So some of them -- some of it has to do with that..

Yes, I would maybe provide an example, not that long ago we were only able to do four week promotional period, right? So you would see the banner on top of the stores change every four weeks and that was pretty much it, and then IT was sort of involved and execution and eventually we became able to do a number of different transactions kind of on top of each other or simultaneous to each other.

This allows you to do, for example, a promotion for a given weekend, right? So if it's a Mother's Day or Valentine's Day or there's a specific sports event, the playoffs of the Mexican Soccer Tournament, that sort of thing, which are attractive for certain suppliers.

And they can launch a promotion without having to keep it in place for the full four weeks. So that's just one example of things that we're now able to do that we didn’t use to be. And then, of course, as you say, I mean, the scale itself is a big part of this.

And I think what you're implying, I think you're correct, as the bigger we continue to become directionally this should increase our ability to kind of capture this..

And if I may related to the question, we've seen some investments -- a number of investments that you've been making in payments, in small startups and sort of tech, digital initiatives.

Could you maybe help us understand how relevant these are prospectively? What type of focus, what type of infrastructure you're building around this? And how closely should we monitor it for the future of OXXO in Mexico?.

We as -- well fintech is become a major opportunity for us. And if we don't evolve, it could become a [indiscernible] because we rely a lot on the physical store.

So basically, what we're trying to do is how to have this traction that we already have the store level, how to become more digital and be through our efforts of being very close to our customers for fintech. And some of those bests are marginally better we’re betting for the stand to be in the play, and to connect with some of the players.

So the way look at we are trying to define an ecosystem but we don't know yet what shape it would take, but without doubt, it's very important for us to be a major player in that environment. I don’t know if you want to add any Juan..

I mean, just, the strength of the brand and I guess the trust that we are already receiving from our customers as a payment -- as a physical payments platform, already the aspiration is that we can migrate those to attributes to beyond the four walls of the store.

And although a lot has to be done on our side, the aspiration is that also could become an important player in the payment space beyond the kind of cash driven role that we're already playing today..

Next question comes from the line of Bob Ford with Bank of America Merrill Lynch..

Thank you and good morning, everybody. In the press release, you mentioned a change in the regulatory environment in pharma in Colombia.

Can you expand on that and maybe talk a little bit about how this influences your plans to grow there please?.

Hey Bob, it's Juan. Yes, I mean, there's certain SKUs that there's now more regulation in terms of the prices that you can charge for those. It's not a huge part of the portfolio and it's more than offset I would say by the dynamism of the growth that we're seeing in Colombia and the attractiveness of the market.

So, I would say, to answer the second part of your question, it absolutely does not kind of dampen enthusiasm about Colombia. In fact, I think this year it will be an important one at. Least our internal expectations are for very solid growth in that market. And I think the first quarter was probably a step in that direction.

But we will have to live with this incremental regulation on certain basket of products..

And then when it comes to kind of the split between your commission based or concessionaires and your full employees for stores, can you talk a little bit about where you are in that process and where you see the equilibrium?.

We release -- we have a domestic base. As we -- has been in the past, employee based stores execute better.

And the commissionaires, they are more entrepreneurs and use an entrepreneurial spirit to the stores that sometimes we use with employees and really it’s not really a mantra of doing one or the other fully, but it's according to the circumstances and the procedures that we seen in certain markets where a new experiment in a fully employed market, the commissionaires tend to have a more difficult time than us to finding employees.

So I really think it’s substantial construction and we don’t pretend to one go after the other totally, but it’s just about being very sensitive, understanding the market and sensing it better. And as I said in the past a fully employed market is in place.

Commissionaires, when they start losing the family members, it is very difficult for them to grab employees. So that's why we are getting and try to change the store to -- from the commissionaires to store employees..

And right now we're about 55 employees, 45 are commission based. But as Eduardo said, that it is not that not that it will ever get to 100 and zero, even if employee run stores have been growing in recent quarters and probably will continue to grow in the short-term..

And just to make sure I understand it.

It sounds like there's a component of you driving part of this conversion or the shift, but also your operators, right, as you mentioned that one of those -- some of them become -- they lose family members, they're just not going to be as effective in terms of the models as a concessioner?.

I think also the activities that take place at the store in terms of dealing with the profits and we have a bank and the Western Unions of the world and theclick and collect activity, it just becomes a little bit more complex, I guess, towork the store.

And so in our efforts to bring turnover numbers down as well and some another things that we've been working on, it's all become arguments in favor of in certain parts of the country in certain places, as Eduardo said, accelerating the shift towards employee base..

And your next question comes from the line of Benjamin Theurer with Barclays..

Just one question just on the Proximity Division, I got a little confused with what we’ve seen in the press release last year in terms of sales and stores actually being open and then looking at the 1Q ‘19 and even the reported numbers I'm missing about Ps. 1.1 billion.

So would be nice if you could clarify a little bit different between what was revenues reported last year versus then this year and also where did store count difference comes from as there been adjustment made, so that shift in general on that? And then within the traffic number I was surprised by the strength of store traffic.

Is that something you can quantify in regards to some of the new initiative i.e. with Amazon and so on? If you could elaborate a little bit on how that is going and what’s behind that store traffic that was surprisingly strong through the quarter? Thanks..

Hey Ben, it’s Juan.

On the first part of your question, I believe what you’re seeing is when we make the change from the Retail Division to the Proximity Division there were some operations that were shifted away from that division having to do with our two restaurant chain, bring coke in Mexico, specialties in the US as well part of bottle chain and discount format that we have in Central Mexico.

So that maybe the difference that you’re seeing and obviously we’ve been kind of getting some nitty-gritty offline to make sure that we’re in alignment.

The other part of the question in terms of traffic, yes I mean absolutely every time we add a service I'm sure that the Amazon thing is helping but it’s one of many, right? I think the one which is to grow the most and probably drive the most people to the store are probably the ones that we do under the financial services category.

But yes we’re seeing healthy mix of traffic..

We also think in the medium and long run the Modelo brands will also help us to build traffic in some of the areas where the Modelo brands were important. And that probably without doubt -- it will help to build traffic let’s say in the Central part of Mexico where the Modelo brands are stronger than Heineken’s..

And then just lastly on, any explanation why the average ticket was basically half of what inflationary levels are pointing to? Because all the other retailers we’ve seen on the reporting, they’ve all been somewhere in the 4-ish close to 5% on the ticket.

So has that mainly to do with some of the differences in purchasing because of Semana Santa or was it really something that you haven’t been as aggressive on pass through in terms of pricing to maintain that traffic?.

There’s accounting thing that we probably get to go with that. Whenever we do strong promotions the readiness is affected and that affects that ticket. But Juan will answer to it..

Yes I think one thing that has been happening then now for a while, is actually directly connected to what we were discussing earlier with the services category because the services, financial services in particular are growing at 20% plus now for a few years.

As you know, the average transaction for all of OXXO is kind of in the mid-30s in terms of pesos. But if you look at services transactions that's a much smaller transaction, right? I mean, if somebody comes in and just pays a bill, or just makes certain financial transaction, chances are that ticket is about a third of your normal ticket.

And so the faster we grow financial services, the more pressure that puts on the average ticket. But now we get compensated somewhat on the traffic side, because it's an incremental business to us though..

Okay. All right. Very clear. Well, thank you very much. And if we may have a little bit of detail as a follow up that would be much appreciate just to understand the moving pieces here that make …..

We’ll call you back up, yes. Thank you..

Sure..

Next question comes from a line of Antonio Gonzalez with Credit Suisse..

I wanted to come back to the payment investments that you've been making. Specifically, we've seen your investments in the local media being announced in Shopnet and Connect and so forth. And I wanted to see if you can give us a little bit more color on top of the previous question that you already answered.

And specifically, I was looking for the following.

First, I wanted to know if you feel comfortable sharing any differences in the functionalities and the competitive advantages that you see in these different companies you've invested in? Secondly, whether you think you should merge them at some point in order to have I guess a larger scale, payments effort? And then just lastly, I wanted to get a little bit of perspective, in this segment where all the retailers are investing heavily right, [indiscernible] and Walmart and so forth.

So I just wanted to get a sense of magnitude here. Do you think you need to speed up the pace of your payments efforts in order to remain relevant from a competitive standpoint? Or at this stage, do you see these just as a Juan has mentioned before, this is also just one of many services that you will be offering in the future? Thank you..

Well, let me try to start on the last one. I really think that we are really looking forward to redefine and define the ecosystem that we want to be around the stores. We are having more than 18,000 stores all over Mexico that gives us really a footprint that is very good to be connected with the consumer.

We understand that some of the investments that we do, we help them by giving them access to the stores, we might enhance the position just because of that. And we have to be very cautious that where we could understand well, how good will the platform means by itself and how good is the platform because there’s also value that gets to the platform.

So we are really doing this by really understanding and it's a very delicate process. I don't know if you want to add anything Juan..

Yes I mean I was just going to take a step back and talk a little bit about the entire digital strategy. I mean certainly digital is something that has gained us as we might imagine high level of focus from senior management and the amount of resources that are being deployed behind the digital strategy.

And I mean human and otherwise, it’s quite significant. But as you say, I mean, there are a number of retailers a number of players trying to kind of get it right, we do have as Eduardo saying a bit of a differentiating factor in terms of our own popularity and this physical number of interactions with a consumer which should work to our advantage.

But it covers everything from kind of the last mile situation, what -- for what type of transactions do we need to be working on last mile and there's some work that's being done there, the development of the new OXXO app, which as you know it's already kind of in the friends and family test phase here in Monterrey getting ready to be rolled out more broadly.

The aspiration, of course, is that our app eventually satisfies a number of needs, and becomes one that most of our customers should -- all of them eventually have on their smartphones.

So, a lot of things happening at the same time, as you know our investments into different fintech companies are not majority stakes at this point, they're not significant investments but we certainly own more than 50% of them, we'll see what happens down the road and there's probably more things to invest in. So very much work in progress.

But I think the message that I would like to leave with you and with everybody listening to the call, is that the sense of urgency and the level of resources that the company has put behind digital is probably higher than you might imagine. And then we're taking it very, very seriously..

Your next question will come from the line of Alan Alanis with UBS..

Thank you so much for taking my question. Hi, Eduardo and Juan. I want to sort of reconcile an answer that you gave previously regarding the ticket coming below inflation given the promotions Eduardo that you mentioned. And I want to connect it actually with the pricing action that Coca-Cola FEMSA and other staples in Mexico have been doing.

I mean, we've seen these food and beverage companies taking a lot of pricing in the year-over-year, this first quarter, so it's a bit of a surprise to see the ticket so much below inflation, that was previously asked.

Could you expand a bit more on those kinds of promotions and that should we read -- what should we read regarding the consumer demand for the remaining of the year in Mexico?.

Yes, Alan let me take a stand at this. For years now we've been working to map in real terms the ticket versus traffic equation for OXXO. Our average ticket has actually contracted over time. And this would be kind of a counter intuitive given how well all the numbers are performing.

And one thing that certainly has been happening I believe is as the number of stores has continued to grow, we know for a fact that consumers are splitting their purchases, right? So if you use to have one OXXO near your home or your office, you'd probably go to one in a given day but now you have one across from your home, one near your office and a couple along with commute.

And so the same consumer is coming to the store more than once a day and they’re making smaller purchases, right.

So I think that’s in addition to the comment about the services transactions being about a third of the average ticket, you have a consumer that used to come once and buy X and now he’s coming twice and he’s buying half X, each time already -- hopefully 0.6X or 0.7X each time that he comes.

So definitely a number of variables impacting the result but you always have to pull that when suppliers take pricing obviously we pass that through.

I mean one question that we get is when you have FX weakness and people expect inflation to be at certain level and it gets materialized, most of the time that suppliers kind of swallow the devaluation themselves. We never do that. We basically just pass the price increases through. So having that, hopefully this is useful.

We do see a robust consumer, we see a confident consumer, but we said in the beginning this was a better -- I think a better first quarter than some of us expected given the calendar shift. So that’s really what we’re looking at..

Got it that’s useful, now a quick follow up on the topic of the capitalization of leases, the Ps.

50 billion that you’re putting there as right of use, could you remind us give us some ballpark figures in terms of how many of the stores are leased that are included in that 50 billion versus the stores that you already owned before this accounting change?.

I would say 85% to 90% are leased and Alan one thing that really is -- we try to make a case also with accounting authorities but it was very difficult. Our leases -- the leases that we have in the solution centers are long-term leases and we are obliged to stay there 10, 15 year period that we stay. That the lease settled.

And -- but the stores, we don’t have that. In fact we can -- although we never do that because we’re almost not doing that because our value proposition is stable and we have a strong appeal to the consumer.

But I mean contract wise, we can get out of that store whenever we want and -- but even though in spite of that the accounting given now is to play the game differently with the distribution centers with the long-term lease where we are obliged to stay there or the stores, which are also pretty long-term.

I mean a normal contract for us is obviously 15 years. In the beginning I think the weighted average life of the lease was probably closer to 10, at this point. But it’s still a long time and that’s very relevant to the numbers that make it to our financials..

So just to be clear I mean basically you have to capitalize these leases despite you’re having the optionality of leaving each of the stores in case as the change in whatever traffic of the street or something changes where you would you require to move out, okay..

Yes because I think this practice helps to understand the long-term of the cases of the company. And I think that’s pretty much in line..

And you know it’s something that we’ve dealt with for years when for example we’ve interacted with rating agencies. If you're in markets where the counterparties for real estate transactions tend to be large REIT companies or REIT like entities with a lot of scale and leverage, maybe the dynamic is different.

And I know for a fact breaking a commercial lease in the US is a big deal. It's a big problem. But the flexibility that we have that Eduardo was describing, based on how attractive we are as a tenant, for landlords, that gives us a lot of flexibility in terms of exiting a lease, in the rare occasions where that becomes necessary..

And your next question comes from the line of Alvaro Garcia with BTG..

My question is on the other business line, which includes logistics and others, and there's been a couple of changes, given the new Proximity Division. We estimate revenues fell in peso terms, EBITDA a bit more maybe, I know, Brazil has a very heavy weight in this line item and some FX headwind there.

But I was wondering if you could discuss these results of this business unit, particularly in a little more detail? Thank you..

Yes, now, let me let me give you a little bit of information about that. I mean, basically, the -- within that other as you know we have the logistics business and we all have the refrigeration business. And there's a couple of things that have been happening.

On the logistics side, specifically, in Brazil, as you point out, it's obviously been a market with kind of ups and downs. And we are taking a couple steps back, our logistics operations really starts as a dedicated carrier business, right, moving 18 wheelers of beer across the land, and then 18 wheelers of Coca-Cola.

And it's now become a much more sophisticated operation where you have less than truckload operation becoming more relevant in specialized warehousing, transportation management. A number of aspects of logistics that are generally higher returns than the kind of legacy dedicated carrier operation.

And one thing that we're doing right now in Brazil is we're moving away from some of those legacy dedicated contract agreements precisely because we're shifting towards the most profitable parts of the business.

So some of the effects of that moving away from some contracts is manifesting our numbers this quarter, and probably has for the past couple quarters. Another element on the refrigeration side, as you might imagine, we have a lot of exposure to the coke system. We are the largest supplier of coolers to the coke system.

And certainly with refranchising in the US and some of the assets that have changed hands in recent years, the CapEx levels have come down, some bottlers are investing less than they used to in coolers and we're also seeing that hit our numbers a little bit. And it's also some of what you see this quarter.

So I would, in a nutshell, those two effects, which I would imagine, certainly the one in logistics is not structural. And we also would expect on the cooler side volume to pick off as bottlers kind of get their get their step back in terms of growth, but neither of these things really is kind of long-term. So those would be the comments on that..

Your next question comes from the line of Alex Robarts with Citigroup..

I wanted to just start off with the OXXO kind of top-line effects that you've been seeing along the border states. I know, in the last call with this lower VAT and doubling of the wages in those border states, I guess it's 10% or 15% of your stores, this area.

But could you walk us through how that had an impact in this first quarter that would be great, and how it related to your overall top-line growth? That's first question..

From the cost structure perspective, we were safe. I mean, the salary increases were not really what was published in the papers, because we were already paying well to the store employees..

Yes, I think, are you referring Alex, more to the kind of the top-line effect or the SG&A effect for us?.

Correct, top-line effect.

Just kind of wondering how those VAT and the higher salaries kind of had a net impact positive, neutral or negative on the top-line?.

Yes, for sure. I mean, if you have higher wages and lower taxes that are powerful levers for consumption.

So directionally I think you're absolutely right, when we look at the list of all the places that OXXO is kind of split into, certainly most of the highest performance places during the quarter are in the north and near the border crossings, which is normally a very dynamic part of the country.

And of course, right now, probably more so, because of what you're describing. So putting it in perspective, as you say it's probably about somewhere 10% to 15% of the store base. And so it is punching above its weight. But offset somewhat by some regions in the center and the south, that we're not benefited from that.

So, yes, in that case, we will take the benefit as it comes and hope that it lasts..

Okay, so it's fair to say that overall in those states, it was a net positive impact on the top-line.

Is that fair?.

Yes, that's fair to say..

Okay. That's helpful. And just secondly, I mean, I wanted to see if you could comment a little bit about what the energy bill might look for the stores now, as this year I understand a big chunk of the wind energy comes on grid. And electricity is one of your important cost components at OXXO.

And I guess what I'm understanding is that you go from about 40% renewable at the end of last year to I guess 80%, if I have my numbers, right, if you could confirm that? And secondly, is there going to be an impact on your overall energy bill, I mean is it going to be sourced at maybe on a front ended basis, more expensively, and then the cost comes down, if you could talk to that, and then maybe where we might be going in the outer years in the medium term with renewable energy? Thanks very much..

Hey Alex, you got the numbers right, so we are going to move from a little bit less than 4 at the end of last year to something like 80 by the end of this year. Most of that capacity coming online is not happen in the first quarter, it might happen in the next few months and quarters.

So first quarter actually had a tough comparison, I would say in terms of the drivers for pressure on the SG&A in the first quarter, energy was actually there even though we don’t expect it to be going forward. Now we need to keep in mind, the wind capacity gives us visibility and cost levels that are predictable.

Right now it’s definitely an advantage and I think as long as the price of oil remains high, we’re going to see kind of FX volatility that’s already useful to have the wind capacity.

I guess there are scenarios where it could become less of an advantage if the price of crude and just fossil energy were to come down for some reason then the delta becomes smaller but right now it’s definitely going to help us save some money probably from second quarter forward..

Your next question comes from the line of Ulises Argote with JPMorgan..

One quick one just from my side here, is there any way you could give some color on how the profitability would have evolved in nature of divisions if we look at the numbers under the old accounting, I mean before the implementation of IFRS 16? Thank you..

In a way the percentage numbers that we explained through my presentation, we believe that’s in line and specifically I mean Juan you want to?.

Yes hey Ulises I mean if you look at our tables, we provide you with both 2018 set of numbers as reported and comparable.

So the comparable are applying the changes of IFRS 16 and they have reported as basically without -- basically we reported them a year ago and some of the -- I mean the reason that we made the comparable column is because otherwise the numbers are not very helpful for you to understand what’s really happening in the underlying business.

And you will see some very dramatic in some cases increases in margins right, so you see double and triple-digit increases in operating and EBITDA margins. Now I would like to kind of remind everyone this adjustment is our best estimate that our accounting team prepared and of course you can use it as such.

It’s not a full 100% restating the numbers according to IFRS 16 but the idea here was to provide you with growth rates that actually mean something in terms of like as an example the 20 basis points of operating margin expansion at the Proximity Division gives you a much better idea of what happened than the 100 plus basis points expansion that we would have reported if we haven’t shown those set of numbers..

Next question comes from the line of Carlos Laboy with HSBC..

Juan and Eduardo, when you think of ecommerce, financial services, Modelo beers, there's so much activity evolution happening at OXXO.

How do you evolve the brand's image and proposition to the public in terms of how the brand is evolving itself? And on a related basis to that, any insight you can give us on how you will promote the awareness around the availability of the Modelo beers, and how you will use that to drive greater traffic into your stores deliberately?.

Well, really all the changes and also are changes that after the years you notice it, but in any given year everything so evolutionary that in a way the consumer and the connections that we have with all these visits that we have to stores, 12 million visits a day, it really helps us to get very much connected with the consumer and all this evaluation of a valuable position has been done at that way for the years.

The -- I don't know, let -- Juan will give you more details on that by his point of view.

But I would tell you the Modelo -- first of all what a great accomplishment for us to have these contracts with such competitive suppliers, the Heineken people and Modelo people have these contracts now in place has been a major accomplishment for us, because we had a view that was going to be very difficult after this long relation with Heineken.

And I will say probably at the beginning I would say probably Modelo didn’t believe that we are serious about it. I think now we are serious about it, we have done it, and I think so far they got a high experience they are the ones that are making the notice about it.

So in a way and it's like the consumer discovering that now they have our food flavors beers while before we didn't have it. So I think it is we are learning, they are learning, Heineken is learning. And I think everybody will be benefiting.

We don't really -- we have this in mind that the [indiscernible] also will grow because of these two great suppliers and working to enhance the category for us.

I know we want to add anything Juan?.

Yes, certainly over two parts of your questions Carlos, the second part is I think easier to answer just because challenging just on the scale of it kind of bringing in the Modelo portfolio will be --it's something that we've done before right, I mean, it's something that is more of the usual blocking and tackling in terms of finding the right space within the store and advertising the right way and having large suppliers compete against each other and take advantage of our network.

And as Eduardo mentioned, the fact that 10% of the population or equivalent of 10% of the country will buy something at our stores at any given day.

So the level of excitement is high internally and obviously, in terms of the Modelo team we believe and you begin to see it in social media, and as Eduardo was saying, people come in and they take pictures and they send it to their friends. And it becomes a trending topic that you can now find the Modelo brand. So that's been fun to watch.

And I'm sure it's going to be fun to see how that all impacts our numbers going forward.

In terms of the evolution into this next stage, which for the first time is taking us beyond the four walls and more into the kind of cyberspace and people's phones, it has been remarkable how as Eduardo was saying, it really is about looking for ways to understand what consumers are doing, and try to satisfy those evolving needs.

And when the consumer realizes it they're performing 10 different things at OXXO where they may be only used to perform one or two. And it wasn’t a quantum leap. It was just something that happened over time. The Mexican consumer is still very much a cash-driven consumer. The Mexico is a cash economy and that benefits us today.

But we're going to have to move fast to anticipate the gradual evolution that probably has to happen at some point where people will rely more and more on digital currencies and new wallets, and the notion of the super application, where you're using the same app for a number of different things.

And there are lots of examples in other countries of successful platforms. The companies that have approached it from the telco side from the ride hailing side, very different ways, but obviously, we hope and are working hard to make sure that we become one of them..

In the interest of time, we ask that you please limit yourself to one question at a time in order to allow for the maximum number of callers to ask their questions. And your next question comes from the line of Leandro Fontanesi with Bradesco..

Just two quick questions here.

The first one, can you just provide the exact amount that was reclassified due to IFRS 16? I know you mentioned about the historical figures, but if you could comment about the first quarter of ‘19, what was the amount? And the second question is regarding, you added only one store in the quarter, I understand that this was due also to the disruption that you had in the supply chain.

Just to comment going forward if we should see few stores opening coming back to the numbers we were seeing before? Thank you..

Well, regard to the Fuel Division, I think we probably have to define in the future, the near future, the amount of investment we have to make in order to source our store, our service stations and that is something that we are we believe -- we have to understand really what will be the rules of the game forward and to make those investments.

So I would say that in the Fuel Division that we have discover throughout the future.

And in terms of the IFRS?.

Yes, exactly what number are you looking for Leandro?.

I mean the amount that was reclassified under IFRS 16 in the first quarter ‘19.

Let's say the amount was added to EBITDA, the density of your EBITDA, like Coca-Cola sent the report in the first quarter release, what was the amount that was reclassified? I mean what would be your EBITDA if you didn’t have this IFRS 16 change?.

Okay so the other way, that’s important the way we calculate. I don’t have the number in front of me Leandro but can we call you back in a few minutes offline and then see if we can calculate that number. I mean should be straight forward calculation..

Sure, thank you..

Yes Leandro, I think it’s going to be more efficient. Thank you..

Ladies and gentlemen that is all the time we have for questions today. I will now turn the conference back to Mr. Padilla for additional remarks..

Well, now thank you very much for your attention and we look forward to seeing you in the next quarter..

Thank you guys. Have a good week..

And ladies and gentlemen if you wish to replay the webcast for this call you may do so at FEMSA’s Investors Relations website. This concludes our conference for today. Thank you for your participation and have a nice day. All parties may now disconnect..