[Abrupt Start].

[Technical Difficulty]. Moving on to discuss our operation, beginning with Proximity Americas. We added 559 units during the fourth quarter to reach 1,027 net new stores for the last 12 months. This includes 120 stores from our OK Market acquisition in Chile that we began consolidating during the second quarter.

In Mexico, we get up a little bit short of our target of 800 net additions, but the pace keeps improving. The pipeline is looking good for the next 12 months, and the productivity of our new stores continues to materially exceed that of previous new store cohorts.

OXXO same-store sales were up 11.4% for the fourth quarter, driven by an increase of 6.8% in average customer ticket and again, a strong 4.3% growth in traffic. This continues to reflect a pickup in the recovery pace of mobility and the gathering consumption location that has continued to perform at a very strong level.

Gross margin was 44.2%, continuing a recent trend where our fast-growing loyalty program and slightly lower contribution from financial services more than offset healthy commercial income dynamics.

Despite the margin pressure at the gross level, income from operation increased 17.4%, while operating margin increased 10 basis points compared to the same period of 2021 to reach 12.7%, driven by a structurally leaner expense structure and the resulting operating leverage.

At Proximity in Europe, we began consolidating Valora in early October, so we are showing 84 days of results. We closed the year with 2,766 outlets. Revenues came in at MXN 9.8 billion, reflecting a recovery in traffic and ticket driven by improved customer mobility.

Gross margin was 46.9% and operating margin was 3.4%, driven by the contribution of foodservice as well as the integration of recent acquisitions. At OXXO gas, revenues maintained the recent uptrend and increased 25.4% and same-station sales grew 19.7% relative to the fourth quarter of 2021 as vehicle mobility continued to improve.

Retail volumes were again supported by a robust pickup in corporate and wholesale activity. During the quarter, gross margin was 13.2%, while operating margin was 4.4%, reflecting tight expense control and improved operating leverage. Moving on to FEMSA's health operations.

During the third quarter, we expanded -- sorry, fourth quarter, we expanded our drug store count by 124 net additions to reach a total of 4,095 units across our territories at the end of December and 434 total net new stores for the last 12 months, exceeding our target for the year of over 400 new drug stores.

Revenues increased 1%, while same-store sales decreased an average of 4.5%. However, as was the case last quarter, it is important to note that on a currency-neutral basis, revenues grew 6.2% and same-store sales increased 8.3%, a solid performance across all of our operations.

Gross margin decreased 60 basis points in the quarter, mostly reflecting a negative mix effect that reflects the strong growth of our operations in Colombia partially offset by improved efficiency and more effective collaboration and execution with key supplier partners in Mexico.

However, operating margin expanded 40 basis points as tight expense controls across all our territories more than offset the impact from this lower gross margin.

Regarding our logistics and distribution business, revenues increased 34.2% relative to the fourth quarter of 2021, reflecting the steady pace of acquisitions made in the past 12 months by Envoy Solutions.

On an organic basis, total revenues increased 8.5%, reflecting the strong performance across Envoy Solutions segment, coupled with good demand dynamics in our operations in Latin America.

Operating margin contracted significantly to 2.5%, reflecting onetime provisions related to past due institutional customer accounts and obsolete inventories at Envoy Solutions as well as higher cost of slate of labor and transportation in certain markets.

Excluding these one-offs, provisions, operating margin would have been in line with recent trends. Finally, moving on to Coca-Cola FEMSA. They delivered a strong set of results to close an equally strong year. Total volume grew 4.6%, driven by growth in most of their territories.

Total revenues increased 14.9% and operating income grew 15.9% as operating margin expanded by 10 basis points to reach 14.7%. You can listen to the conference call today at 10 a.m. Mexico time. Now I will turn it back to Daniel for some final comments.

Daniel?.

Thank you, Eugenio. I just want to finalize by saying that I am proud of what our extraordinary team of more than 350,000 colleagues have achieved during 2022, representing the best of FEMSA company-wide commitment to long-term value creation.

As we look into 2023, I'm confident that the steps we have started to take to work our FEMSA Forward vision will position our company to maximize value creation as never before, leveraging the sign buses among our 3 core businesses as well as our strong team of professionals that I am sure will again be able to navigate any challenge that we come across in 2023 and beyond.

And with that, let us open the line for questions.

Operator, please?.

[Operator Instructions]. The first question comes from the line of Ben Theurer Calling from Barclays..

Congrats on the results. 1.5 if I may. And the half one is really related to some of the comments you made in press release about incremental acquisitions in Envoy. Just wanted to understand the strategy that you've laid out last week, Envoy being part of to be disposed assets or a business unit.

But then at the same time, you put in your press release that you've acquired 6 different smaller players that are adding on an annual basis, $200 million.

How should we think about the capital allocation, particularly into something that's supposedly for sale go forward? Are you going to continue to add here? Or is that still one-off that we're in the process that just happened to close in the fourth quarter?.

Thanks for your question. With regards to Envoy, I mean, as you know, part of the investment thesis there is that there's still a long runway of acquisitions to engage in there to create value by consolidating into the system. So that was no different of a strategy in the fourth quarter.

Given what we announced in terms of forward, our strategy for Envoy is again, to continue for the business to continue to be executing on this strategy. Having said that, the capital commitment from FEMSA would be relatively lower until we find an ultimate solution for the Envoy business.

So again, we're letting the business execute on its strategy, but the capital commitments coming from FEMSA as we look for strategic alternatives you should not expect those to be significant going forward as we look for strategic alternatives for the asset..

Okay. That make sense. And then if we take a look at the -- just the composition of same-store sales data, can you give us a little more color on what's been so supportive to traffic through during the quarter. Because a little over 4%, obviously, is a very strong number. It's above the last 12 months average.

So just to understand what you've done differently in the fourth quarter at the convenience stores to drive traffic?.

Yes, Ben, the fourth quarter is usually stronger in the convenience store because it's the holiday area. That's number one. Number two, as we highlighted in the comments, there is a significant recovery in terms of post-pandemic consumer behavior, and that is also helping.

And last but not least, in a number of our stores, we started the sale of the complete portfolio of beer and that also increased the traffic in the stores..

Yes, I think just complementing what Paco just said and this is Juan. As we mentioned in the Daniel's original remarks, the gathering location is certainly key in the fourth quarter. And to Paco's point, beer is a category that has been performing very, very well. We just finalized the last wave.

You remember the opening of the stores to the ADI portfolio, with Nuevo León a few weeks ago. World Cup, which even though it wasn't really as because of the timing of the matches some of them happened early in the morning and not a lot of people drink beer early in the morning.

But still, it all kind of came together to drive double-digit growth in that category, which is one of our most important.

And just overall, I think the team was working precisely because traffic I mean when we look at the past 24 months, we have been talking with you guys and with the market about how ticket has been performing very, very well, but traffic was coming up a little bit short.

And so the team at OXXO has been looking for ways to incentivize traffic through the levers that they have, pricing, promotional activity, further segmentation and it's working well. And I would even say it's moving into this year. We're off to a very strong start in '23.

The loyalty program, OXXO Premia is also beginning to add and we're talking about 1 out of 5 transactions at OXXO now being associated with the rewards program. So a lot of things coming together at the same time to, I think, combined to help this over 4 points of traffic, which is just fantastic, I think..

[Operator Instructions]. The next question comes from the line of Bob Ford calling from Bank of America..

We don't hear you, Bob..

We will go ahead and skip to the next person, who is Alan calling from Santander..

Can you hear me?.

Yes..

Perfect. Okay. I'm sorry, I'm going to misbehave. Just 2 quick questions. I mean, the first one is they focus on the traffic. But my quick question on the -- it's on the ticket. I mean, it's half of food inflation, it was 7%. If you can elaborate a bit on that why the average ticket is not -- is below inflation in Mexico.

But the most important question, I think, is more strategic. I mean, you've seen the share price move pretty much flat since Friday's conference call. And you're going to go and see investors next week in the United States and Europe.

Could you share your thoughts about what you ponder, what you've learned, what you've decided to communicate and what you will aim to achieve next week by meeting investors in all of these people regarding the reaction of the stock after the announcement.

And I think specifically regarding the capital allocation and the potential dividends ahead?.

All right. Alan, thank you for the questions. And just as for the traffic and the ticket side, and your comment on the inflation. I mean, clearly, these are variables that our team at OXXO manages according to what is happening in the market on the competitive side, what each of the categories in the store are doing from a supplier standpoint.

And clearly, the objective is always to keep oil prices below inflation. That's clearly the priority.

And second, the ticket continues to be benefited by the job that was done over the last several months regarding traditional categories that were added to the store like liquor, for example; second, the segmentation work that has been done by the team; and third, I would say, just a natural movement of what consumers are shopping.

So moving forward, just similarly to the traffic, there are a number of structural and fundamental things that improve over the last few months that we expect to continue benefiting from and that's why the traffic is behaving like that on the ticket side..

Yes. I think just -- Alan, I mean the ticket toward to what Paco just said, we pass through, as you know, we pass through the increases from our suppliers. So mix is a big part of it. And the number is a little bit different from just general CPI, it will basically mean that our mix is different from the CPI basket.

But we don't ever keep any of the price increase kind of swallow it ourselves, as you know, it's a full pass-through situation.

On your other question about what we're trying to achieve going on the road, I mean, obviously, what we communicated last week is relevant and meaningful, and it prompt a lot of questions, and it certainly deserves going and meeting with -- some of our biggest investors, we're going to be meeting with many of you guys and also with investors that for one reason or another have not been invested in FEMSA, but that historically should have or have been kind of because of the good fit between their portfolios and what our company is.

So I think it's an important couple of weeks that we're going to be knocking on doors and hopefully answering a lot of the questions, I think you kind of shaped your question or framed your question having to do with the share price. I mean obviously, the share price had a very nice reaction to the announcement. We've been monitoring volumes.

Volumes are double -- at least double what they normally ask. So clearly, there are investors that perform well and are now taking profits. But we're excited to get on the plane and talk about what we think is a super exciting message..

If I can just comment, Alan, just quickly on ticket, you have to remember also the services category, we picked up a couple of financial institutions that had not been present over the past fourth quarter. So that pickup in traffic with lower ticket resulted in part of that mix effect that Juan was talking about.

And with regards to the road show, just to complement also what Juan said, again, we heard you guys loud and clear last week and to our interactions with you guys over the week, that capital allocation going forward is a big topic that you guys would like to hear more about.

And again, we'll talk, again, not only in the roadshow, but to all of you throughout the -- throughout our interactions. And we recognize that, that is going to be a hot topic going forward.

However, as we said in the call last time, we intend to, I mean, give you more color as all these transactions that we intend to execute materialize, they're all subject to market conditions and other situations.

But the most important thing to keep in mind is that we have committed, number one, to the leverage target of 2x; and number two, not to be holding any inefficient amounts of cash at the holding company. So I hope that, that gives you as much color as we can right now.

But as we start to execute on a lot of these initiatives, we should be able to give you and pinpoint with more exact clarity how we're going to deal with the capital allocation going forward..

The next question comes from the line of Héctor Maya calling from Scotiabank..

Very, very quick ones, I promise. So you have mentioned that you want to build the platform for the traditional channel with OXXO and Coke.

So I would like to know how you will be executing that strategy to supply this channel mainly on how your OXXO trucks and Coca-Cola FEMSA red trucks would adopt their spaces and routes to go to mom and pops, what kind of products and categories would you be aiming to supply to them? How long until we start seeing this already happening at a full scale? And some details if possible on an integrated order system? And how much CapEx would be directed to this?.

All right. Héctor, thank you for the question. As we analyze the opportunities and the pain points of the traditional channel, there are certain things that they have been suffering from over the last several years, I would say. And we have talked this in some of the meetings we have had with you.

I mean, on the one hand, there is the disruption they have on the daily operations to go and shop for the products they sell in the store. They have a number of limitations in how they can shop for those. I mean sometimes they need to buy 1 unit, and they actually need to buy the whole case.

And evidently, those pain points have been exacerbated by the fact that now many times in the store, they have to receive 10 different trucks during the day. And there is only 1 person working in that needle store.

Now on top of that, as we started identifying opportunities, we saw that one clear element was the fact that they needed also evidently a good pricing, good service, additional financial services in the future.

And I mean, clearly, as we look at our businesses, on the one hand, Coca-Cola FEMSA with the tremendous knowledge of the traditional market with also with OXXO -- with tremendous relationship with the suppliers, knowledge on how to do the peaking as I explained once in terms of how many cases or how many products, how many units each individual store will need.

I mean those are know-how that have been developed over the years that are very, very important for these type of platforms. So -- and then on top of that, of these 2 knowledge centers, I would call them, and knowhow center that we have in Coca-Cola FEMSA.

And in OXXO, we have the digital business that we have been creating, which clearly with a spin and the financial possibilities that it opens to the traditional store. I mean, just today, for example, many of these small stores cannot accept credit card. They don't have access to credit. They need to pay in cash to their suppliers.

Sometimes, most of the times, customers and consumers, they need to pay cash to them. They cannot accept the service payment. So all those things can be enabled by the digital platform of FEMSA digital with the other 2 businesses serving as a connection point. So that's the intention that we have of building this omnichannel platform.

And evidently, there are ways in which that can work. There will be some categories that can go in a common truck. And there can be other categories. I mean clearly, Coca-Cola FEMSA, they can continue being delivered through the Coca-Cola FEMSA trucks. So this is a hybrid model that serves like pretty much like a marketplace through a super app.

And that's the intention that we have built in this platform. We know that on top of that, the other element that is important in this omnichannel platforms is the amount or the size of the portfolio that we can carry.

I mean, evidently through the categories that we have in OXXO with Coca-Cola FEMSA and other potential partners, we believe that we can represent a significant portion of the portfolio products that more retailers sell which is a very important component so that it shows one of the key pain points that they have today, together with the other ones I mentioned..

Maybe the only additional comment that I would like to make is that one of the advantages that we also have in both platforms, OXXO and Coca-Cola FEMSA is the capillarity. So that allows us really to pilot all what Paco just mentioned.

And then before we think in terms of escalating, we can learn, I mean, how we can really solve the pain points of the customers and what are the key elements that are relevant to them in terms of value proposition.

So I mean, that also I think it really helps us before we make any final decision in terms of how fast or how -- if you want, why the escalation would be..

So would it be fair to assume that we could be seeing this strategy play out in the next 1 or 2 years?.

Definitely..

The next question comes from the line of Marcella Recchia calling from Credit Suisse..

I have 2 quick ones as well. Basically, the first is for proximity Americas.

If -- what can we expect in terms of gross margin trends going forward as you continue accelerating the digital initiatives? And to what extent you also can continue managing that with efficiencies? And the second one, very quickly, you guys are now closing figures for proximity Europe, but without a comparison basis.

So can you just give us a color on how these figures reported compared to those from the year before?.

Marcella, this is Juan. I think on the gross margin question, I would think about stable margins. I mean we have been -- as we -- this quarter was another instance where we are still booking very conservatively the rewards, the loyalty program. We are assuming that all of the points are going to get utilized.

That is not really happening in practice, and we know that there's going to be a breakage number that is going to put some relief on the gross margin. So we are already getting to the point where some of the users points are beginning to expire. And remember that this is all very new. So a lot of things are happening for the first time.

But we're already beginning to see patterns of certain percentages that the points just expire, and that's obviously cash flow for us. That we're -- right now, we're assuming -- from an accounting perspective, we are assuming that it's not there.

Eugenio also mentioned a few minutes ago on the financial services, I think the overall trend we are getting back some of the banks that have for one reason or another, stopped using OXXO as a correspondent. But the general trend is that profitability is a little bit lower for financial services. So you get more volume at a slightly lower margin.

Those trends, I think, will continue. But on the other hand, you have commercial income which is coming back, right? Commercial income is an important driver of gross margin. I think COVID obviously disrupted commercial income in a big way, and we are seeing it come back.

We now have for all practical purposes, both brewers participating in commercial income, along with many other of our big suppliers. So I would say stable gross margins. In terms of modeling, I wouldn't expect any change there. Now in terms of Valora, you know the -- obviously Europe -- yes, Pac is going to talk about that..

Yes. So Marcella, thank you. It's good to hear from you. In Valora, what we can tell you is that for the total year, the sales grew double digits in the mid-teens. Gross profit also grew in the mid-teens. And in the EBIT line, it was about flat versus the previous year..

And I think margin-wise, I mean, we're showing an EBITDA margin of basically 12%, probably a little bit lower than the full year number that we had prior year. Obviously, they're dealing like we are everywhere else with inflation and with just an overall macro environment in Europe that is clearly not as good as it has been or we all wish it is.

So it's a tough macro environment, but still, the numbers and the fact that they're integrating a lot of the things they've recently bought food service, which is a higher-margin category. So yes, it's many reasons to be optimistic about that..

The next question comes from the line of Ricardo Alves calling from Morgan Stanley..

I'll limit myself to one question as required. The OXXO -- it's kind of related to the past question. OXXO returns, if you could talk about returns, particularly in the context of the efficiency gains that you achieved apparently in Mexico at the SG&A level.

How are you thinking about returns? I mean from our stance, it almost seems that OXXO might be running at all-time highs. So I just wanted to hear a little bit on that from the Mexico OXXO perspective.

And when you think about that in the context of your strategic review and considering that you have reached out, right, to all of your divisions, all the other country operations.

What is the upside for the other regions in terms of returns? Is there a way that you can compare or give us some numbers so that we can compare with the potential upside? Because it's really surprising what you did at the SG&A level probably mainly in Mexico and how could that be replicated in other places.

In the context of this big review, I would assume that you probably are thinking about the other regions as not only in terms of growth contribution that they could have to the overall business, but also returns..

Thank you, Ricardo. I mean let me comment and then you can complement to it. But I would say that, I mean, in terms of your question around returns, I mean, obviously, we are at a very high level. So I think in that regard, you are right.

And I think also, Ken, you mentioned during the last week call that, I mean in terms of additional value creation to open 1 stores in OXXO in Mexico, obviously, is one of the most profitable investment that we can make. So that is why we will continue doing so.

Having said that, I mean, when you think in the medium and long term, that is why we think that the growth outside of Mexico. And I would talk specifically regarding South America, I think that will give us, I mean, a nice way to, in the future, compensate the scale that Mexico has achieved.

So on a store level, as I also mentioned during the last call, we feel pretty comfortable that we have been achieving, I would say, at this stage, mainly in Colombia and in Chile, which give us, I mean, a nice way to escalate the business and speed up, I mean, the organic growth.

Obviously, in the case of Brazil, I mean, the value proposition is proven to be very successful. And Brazil will make a big difference, I mean, in terms of the scale of the business in South America. Peru is also doing well. But I mean, obviously, it's a much smaller operation compared with the other 3.

So I mean we are very positive in terms of the growth and in terms of the returns that we will achieve. But we recognize that we need to reach a certain level of scale, I mean, in terms of the number store and after that, you will take a while until we get there.

But I mean, very positive when you compare like-for-like, I mean, stores in Colombia with 1 store in Mexico. I mean I think we are very optimistic about that.

So Eugenio?.

Sure. Thank you, Daniel. Just to complement, you have to remember that during the pandemic, the business did a fantastic job in terms of curtailing some of the losses we had in same-store sales through better store efficiencies I mean, better supply chain dynamics, et cetera. And those learnings basically continued as traffic and ticket came up.

And on top of that, the expansion and the net new store expansion that we've been experiencing has been operating and what we call batting averages, which is what percentage of the new stores that we're opening are meeting the target sales per store as they mature and we are all-time high in terms of batting averages.

So we're being a lot more strategic and a lot more targeted in pinpointing the right points so that the net new stores that we're adding are being a lot more productive than the ones we were adding before plus, I mean, all the efficiencies that we gained during the pandemic, all the learnings about, I mean, opening hours, about shifts about changing supervision patterns, about inventory stocking segmentation, et cetera, have produced these all-time high ROICs at the store level and at the whole country level in Mexico.

And again, as Daniel said, in the rest of the country is Brazil being a perfect example, I think on a top line perspective, in terms of the product mix and the segmentation, those stores are performing much higher than what we expected originally.

So that is definitely the good news as we scale out and start to absorb some of the fixed costs of the distribution center and the rest of the supply chain dynamics, but that bodes well in terms of being able to achieve, I mean, tens -- I mean, hundreds of basis points of improvement in terms of ROIs in Brazil on a relatively quick basis.

The same can be said, I think now that we're expanding with the okay market acquisition in Chile and in Colombia, where still we have a lot of room to improve, be at scale to achieve, I mean, much higher returns and hopefully, at some point, be closer to the guidance of returns that we're getting in Mexico..

Ricardo, let me just -- this is Juan.

I mean, obviously following on what Daniel and Eugenio just said, scale being a big part of the, let's call it, secret sauce that eventually allows other very good things to happen when you kind of know what you're doing in terms of openings because we did say in the beginning Eugenio mentioned, we came a little bit short of the 800 target in Mexico.

But that doesn't mean that we're slowing down. I mean, we're so confident and we're looking at the productivity of the new stores and what the pipeline is looking like that the target for this year is closer to 900. So we're going to be opening again, getting towards the 1,000 stores targeted in Mexico.

But the thing I wanted to highlight is that we are getting also close to a point where we're opening in South America, almost 50% of what we're opening in Mexico, right? So that's obviously never happened before. So if in Mexico, we're somewhere between 800 and 900 in South America, obviously, the JV in Brazil, it's a JV.

But we're probably talking about somewhere between 300 and 400 new stores, if not a little bit more. So it's getting to the point where scale will be -- begin to be achieved in these countries. And that means you can have your distribution centers and then your absorption is so much better. And then you begin to have the ROIC.

You begin to close the gap. I think another place where this we can expect this to happen is not as dramatic. But when you look at the health division where you have Chile with certain scale on certain margins. And when you look at Colombia and Mexico and all kind of closing that gap and a big part of it has to do with scale.

So I just wanted to leave that out there because the numbers -- we're accelerating the openings and South America is definitely now beginning to move the needle..

Next question comes from the line of Álvaro García coming from BTG..

Two follow-ups. Firstly, on a follow-up on Héctor's question earlier, talking about the traditional channel. I think it would be helpful maybe to define exactly what Pronto is sort of -- and then sort of what the strategic rationale is of sort of helping out your competitors.

We'd always thought of OXXO eating into the traditional channel slowly, but surely sort of what the strategic rationale is there would be helpful. And then just a second follow-up on gross margin. I think you mentioned financial services is actually a drag.

We've always thought financial services was a higher-margin business with -- in the context of mix. So sort of what maybe -- zooming in on what happened this quarter, maybe waiting how much was spin and how much was financial services..

Yes, Álvaro, let me just start with the first one and then obviously, if anyone -- the rest of the team can complement me. But I would like to start by first saying that -- in general, there is a misconception on who is the competitor of OXXO.

I mean the traditional channel, all the small stores that are out there, they serve a purpose, they have certain categories that we don't carry. They have smaller surfaces usually. So the type of consumer -- the consumer that -- the consumer needs that take place in the small stores are different from us.

Now of course, there is some of them that are the same. But in general, again, I don't think that eventually, over the years, there will be only committed stores or there will be only traditional stores. These are trade types that can leave together and that has been the case over the years.

And I don't think that when you look at the traditional channel today, it has changed in terms of size versus how the size they had in the absolute before OXXO existed.

So I think that, that is important because at the end of the day, what Pronto is trying to achieve is basically help some of these traditional channels enable them with some of the pain points that I described before.

Reality is that, once again, and I want to use this example because it clearly highlights some of these very specific pain points that nobody else but probably also console. At mall store actually goes to this -- usually it's a wholesaler to get the products they need. Now there are some products that have a very low rotation.

So they probably sell one bottle of one specific category, let's say, Monster a month. But when they go to the wholesaler, they need to buy a full case. And if they don't buy a full case, they will not get the price that they want.

Now whereas when you look at OXXO, how we serve our stores through the supply chain systems that we have, we have a peaking system, and we delivered to our stores by unit, which is not an easy task, and that's why the wholesaler, they don't do it.

Now if we know that we have that capability, and we know that there are 1 million -- 1 million traditional stores in Mexico that need this pain point to be served, then we know that Pronto can help to actually enable these small stores for a better business. Now that doesn't mean that we are helping our competition.

No, I mean, we are just taking the opportunity to create value by serving or fixing a pain point of a very specific trade that will continue to exist. And then for the -- I guess Eugenio's comment was related to the fact that we brought back a couple of the financial institutions that we didn't have in the OXXO system in the previous months.

And the comment was related to that.

Eugenio, I don't know if you want to expand on that?.

Sure. Just to address, I mean, the question before was regarding the ticket. So clearly, financial services commissions drive more traffic, but a lower ticket. But your question, Álvaro, was more towards the impact on gross margin. And the impact on gross margin is clearly a financial services, it's a much higher gross margin than the mix.

Having said that, that during the quarter was offset by some of the trends that we're seeing related to the loyalty program in Spain that's kind of offsetting part of that improvement in mix from financial services. So the net effect is what you see in the results and what kind of is going.

The trend that Marcella's question earlier that Juan responded towards alluding to that we would be modeling a flattish gross margins going forward.

Having said that, to the extent that we start to see some breakage in OXXO Premia in a better engagement from the customer, more elasticity in terms of how many times he comes back, vis-a-vis, the point that he redeems, there could be some upside to that assumption..

The next question comes from the line of Thiago Bortoluci calling from Goldman Sachs..

I have 2 follow-ups here. And I'd like to explore a little bit the bottom line dynamics, right? So I believe there is this impact of this noncash tax effect on your net financial expenses that we clearly understand.

But it also seems to me that equity income brings a little bit softer than expected, right? And obviously, there are a few things that you account there. I would just like to get a better color from you on how the results from Brazil are trending, right? Obviously, I understand you are very early on and the store are maturing.

But is it fair to assume that most of the stores are already printing above breakeven? And what is the marginal level of returns and margins that you expect for Brazil? Is the first one.

And the second one, very quickly, just to make sure we understand all the dynamics, right? In the sense of our plan, you mentioned potential consolidated net income of , right? And I see you reported. Sorry if I'm not wrong here, what was the right change versus what you had to release....

Yes. If I understood the first question correctly, it was on the read-through on the equity consolidation part of net income and the trends that Brazil has in that.

Was that the first question, right? Did I get that correctly?.

That's right. Perfect..

Perfect. So first, let me just remind you that in that line, we also are passing through the results from Heineken. And if you recall, Heineken last year had an extraordinary gain given the consolidation of their Indian operation. So on a like-for-like basis, there was a steep contraction in the net income portion of that.

So that's what what's driving the movement in that specific line item. On Brazil, what I can tell you is that, again, both on the top line and at the store level, we're performing better than expected. We are still in heavy expansion mode. I mean, we are opening up, I mean, upwards of 100 or more stores per year.

So that is clearly -- I mean, still dragging in terms of the contribution, both from an operating income perspective as well as from a net income perspective. So I mean, that, of course, will change over time, and you will see that start to flow into that line item in the income statement going forward.

But at this point, it is not a significant contributor. The movement that you see there is mostly related to the Heineken. And then your second question is with regards to the difference between the net income that we, I mean, flashed last week in the FEMSA forward statement what you saw.

Just to remind you that the one we flashed last year was, I mean, unaudited. We continue to, I mean, work with our auditors to get the final audit one.

And there were some movements specifically on the tax line as we continue to, I mean, fine-tune adjustments on the deferred taxes and the current part of taxes that are creating some movement there, but nothing related to our operations.

It's just as we are fine-tuning our expectations on what the final tax number will be in our statements, which is now obviously in the report that you saw this morning..

The next question comes from the line of Bob Ford calling from Bank of America..

Eugenio, what's the CapEx budget for this year and next year for the retained businesses with the step up? And can you provide a breakdown of that by division and geography, please?.

Sure. Bob, I can give you a little bit more color. We do expect this year to be at that for the remaining businesses at about, I mean, EUR 1.7 billion of CapEx. The majority of it would be at the Proximity Division as we continue on the store expansion.

And there will be a step-up pickup in CapEx in the COF, and I'm sure Jorge and the [indiscernible] will talk to you about that a little bit more.

But in the cost businesses, we're seeing also a lot of growth given the long-term relationship model that we have with the Coca-Cola Company and how that is incentivizing us to -- I mean, to grow in all the categories, both of CapEx and including -- I mean, production lines but more importantly, more coolers, more bottles and cases and that.

So primarily, it would be proximity and cost driving most of the CapEx for this year. I don't know, Juan, Jorge or [indiscernible] if you have any more color on that..

Yes. Thanks, Eugenio. Just following up on that, I mean, there will be a higher CapEx year than we've had in a long time. It has to do, I think, partially with the fact that the businesses -- and I think, again, Coca-Cola expand I'm sure, but there was perhaps some underinvestment during COVID.

But also the fact that demand is so healthy and the businesses are growing at such a pace that it requires more lines, it requires more capacity. Focusing on kind of ex cost for a second. I think we can talk about proximity, probably about $750 million held about $100 million, and then maybe about $120 million for the other smaller businesses.

And then call us again with a bigger number than what they've done in the past. So it will take us to higher levels, but it's all driven by growth and demand from the business. So I think it's very positive..

That's helpful. And when we think about the investments you're making in Fintech.

How much of that is being capitalized versus expense?.

It's mostly being expensed, Bob, at this point. We're not capitalizing, I mean, any significant amounts in Fintech at this point..

We currently have no questions coming through. So I will hand over to your host to conclude today's conference..

Thank you for joining us today. Obviously, we've spoken a lot with you recently, and we look forward to seeing many of you in person next week. So that's it. You have a great weekend..

Thank you for joining today's call. You may now disconnect..