Good morning everyone and welcome to the Coca-Cola FEMSA Second Quarter 2020 Conference Call. As a reminder, today's conference is being recorded and all participants are in a listen-only mode. At the request of the company, we will open up conference for questions after the presentation.

During this conference call, management may discuss certain forward-looking statements concerning Coca-Cola FEMSA's future performance and should be considered as good faith estimates made by the company. Forward-looking statements reflect management's 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'd like to turn the conference over to Mr. John Santa Maria, Coca-Cola FEMSA's, Chief Executive Officer. Please go ahead Mr. Santa Maria..

first is WhatsApp for business, an automated chatbot-enabled order taking platform; second, our Juntos portal for digital order entry and engagement via an app or website; and third, our order tracking capability.

These enablers, which are fully integrated into our transactional system, allow for seamless order taking with operating efficiency and enhanced customer experience.

Brazil, our most advanced market has become our testing route with an accelerated rollout of WhatsApp completed last month to 260,000 customers from which 60,000 are now placing recurring orders. Initial results are better than expected in terms of volume, market share and order recovery.

For instance, the number of chatbot orders placed year-to-date represent close to 60 additional presellers on the street. Additionally, more than 90% of chatbot interactions do not require the assistance of a human agent, boosting our contact efficiency.

And our Wingman feature, which supports our preseller, if they miss a visit, is allowing us to recover approximately 25% of otherwise lost sales. Importantly through our Juntos portal, more than 50% of our orders are happening outside working hours, making the 24/7 objective -- or completing the 24/7 objective we have for this purpose on this tool.

Going forward as part of our accelerated pipeline, we expect to fully roll out enterprise WhatsApp in Mexico and Colombia during the second half of 2020 and a light version in Guatemala.

Moreover, our Juntos portal is already a reality today in Argentina and Brazil with light versions in place for Costa Rica, Colombia, Uruguay and Panama and we expect to roll it out in Mexico before year-end as well. In summary, I am optimistic about the way we continue to transform our organization and to invest in innovative capabilities.

I am confident that Coca-Cola FEMSA enjoys a resilient profile the right set of talent and the right capabilities to continue navigating in today's dynamic COVID-19 driven environment and most importantly, to succeed over the long term. With that, I will now hand the call over to Constantino..

one is the Estrella Azul dairy joint venture in Panama, as the outlook of that operation was negatively impacted by the pandemic. And on the other hand our Leão noncarbonated beverage joint venture with the Coca-Cola system in Brazil.

This impairment was driven by a change in the business model of this joint venture, going from a centralized production model to what we envision as a more profitable internalized model. Finally, I want to highlight Coca-Cola FEMSA's strength and resiliency, which is reflected in its robust liquidity position and strong cash flow generation.

As of June 30, 2020, our net debt to EBITDA ratio is 1.2 times and our cash position is more than MXN 43 billion. Our company has ample flexibility and it's within our priorities to implement the right protective measures while returning cash to our shareholders.

Accordingly, the first installment of our dividend was paid on May 5, representing a 37% increase versus the previous year's dividend.

Going forward, we will continue leveraging our expense controls and efficiencies, reevaluating and reprioritizing immediate needs while prudently managing our CapEx to continue strengthening our cash flow for the year. As we mentioned during the first quarter earnings call, we're confident that we're taking the right steps at the right moment.

Despite the fact that we expect the second quarter to be the most impacted, we remain confident that our conservative profile and resilient business model will enable us to continue our path towards our long-term objectives. And with that, I will now hand the call back to John for his final remarks. Thank you very much..

Thank you, Constantino. We are encouraged to see trends move in the right direction.

Despite the significant volatility and uncertainty faced during the first half of the year, we are on track to deliver on our strategy, satisfying our clients and consumers, deploying cutting-edge transformational initiatives and leveraging our disciplined approach to capital allocation while maintaining our solid financial position.

We are confident that we have the right objectives and capabilities to emerge as the stronger Coca-Cola FEMSA, committed to delivering sustainable value creation for all our shareholders and stakeholders for many years to come. Thank you for your continued trust and support. Operator, I would like to open the call to questions..

[Operator Instructions] And our first question will come from Isabella Simonato with Bank of America. Go ahead..

Thank you. Good morning. John and Constantino, hope everyone is fine. I have a couple of questions. First of all, Coca-Cola mentioned in their results that they were seeing July volumes down mid-single-digits, improving from what they saw throughout the second quarter.

Can you comment on how you're seeing the performance in your territories versus their indication for July, and how you're seeing the performance of each channel, now that own trade is reopened in most countries? That would be my first question.

The second question is can you elaborate a little bit on the beer performance in Brazil throughout the quarter in terms of how you saw volumes and prices throughout the months of the Q2? And finally, you highlighted a lot in the comments right how strong the balance sheet is, which is we totally agree and actually leverage is quite low.

What can we think in terms of capital allocation going forward, maybe dividends buybacks or CapEx? Thank you..

Okay. Isabella, I think what we have seen going sequentially forward is, we've seen, from March being the beginning of the pandemic, April being the worst month out there maybe an equivalent a little bit better than May. In June, overall our volumes were very low-single-digits.

Currently, June we saw -- at the end of the year -- at the end of the month we saw three of our markets already started growing being positive versus prior year, and we continue to see that trend. So, in July is looking at where things are is -- we're seeing continued stabilization in most of our markets and continued improvement.

So yes, we're working -- I mean our major markets, Mexico and Brazil. Mexico continues to improve towards low-single-digits. Brazil is already beginning to have a second phase of -- a second month of continued growth. Small market like Uruguay is starting to bounce back for us. Guatemala continues to grow.

And, Colombia is a market that looks like it's starting to go from double digits -- 20s down to low single-digits for July. So, we're seeing continued improvement in trends. In terms of channels, we were down in May probably to -- we lost about 15% of our client base. And most of that came from traditional trade or modern off-premise accounts.

We're seeing that come back. We see more growth in traditional trade. Proximity continues to be a very big factor in our recovery. Currently, our account base is not down to 15% we talked about, but it's down 10%. So, we're seeing continuous week-to-week openings of accounts and so we're seeing slow, but improving trends in on-premise.

Most of the on-premise channels that have been opened have been opened with some sort of social distancing requirements. So, the capacity utilization in restaurants or on-premise channels have been down to about 30% just by regulations at this point in time as we move through the pandemic.

And they're still although open they're not seeing a lot of traffic. So, that is a slow -- it's going to be a slow recovery. So, I think the channels for us is the one that continues to grow very fast around all our markets. It's the traditional mom-and-pop store at -- in each one of our countries.

Our modern channel is recovering at an initial boom at the beginning in April and then it's kind of backed off during May, June, but it's recovering. And what we're seeing is most of what we're selling today is really in multi-serve packages -- returnable multi-serve packages as affordability continues to become more important for consumers.

As what I or Constantino mentioned, we are starting to see growth of returnable packages of up to 25% or refillable packages in Brazil or 20% in Mexico. They're playing a very key role which combines various factors home consumption, affordability, and nearness for consumers at the traditional trade.

So -- and I think in terms of the beer perspective that you asked us for we continue to grow beer. And as Heineken said in their press release what we're seeing is very strong share gains in Brazil from our Heineken portfolio and we're also executing it very well. So, it's very consistent with what Heineken announced in the marketplace.

Going forward in terms of capital allocation, I think we have -- I think we are -- I think right now we are -- we have increased our dividend base and we'll continue to analyze what the dividend base looks like going forward. And if there's opportunity to even do something a little bit more aggressive with that probably next year.

But more importantly, I think what we're looking at is okay where are the internal investment capabilities and returnables continues to be one area which we're going to continue to invest aggressively in.

But it would maintain us within the parameter that we've been discussing with the markets over the last couple of years to between 5.5% and 6% of revenues which is what we usually customarily do. So, I don't think it's going to take us more than that.

So, I think what we will be in is in a very good position to leverage this up with an accretive acquisition as we go forward and as the opportunities emerge.

Constantino, would you want to add something to that?.

No, I would also want to highlight Isabella for example in Mexico we're starting -- well, there's two elements under the channel performance that I think are notably remarkable I would say in terms of the way they're behaving right now; definitely digital channels.

So, all the digital channels in the markets where we have a position there in a series of commercial initiatives were growing triple-digits and that is something that we will continue to see.

It's a natural progression of channel behavior and channel mix going forward and we continue to be much more competitive and define and execute and implement more capabilities along the lines of the digital channel growth on one hand. And then on the other hand, we're seeing a resurgence of our home channel home delivery channel in Mexico.

Home delivery channel in Mexico has grown 30%. I think it's an interesting discovery for us. Now that we have much more digital capabilities and we can enable that home market channel more through the digital capabilities, we believe there's an interesting opportunity for growth there with an enhanced portfolio versus what we've done historically.

And currently in Mexico, just to give you an idea we have around 1,000 home channel routes, and we are aggressively expanding that with a – with an ambition of finalizing this year with 1,500 home delivery channels, if we can.

So that's an interesting opportunity there that has become an interesting discovery as our consumers have changed their consumption occasions and move much more into home. So from that end, I think that's an interesting angle that we would like to comment. And on the beer performance as John said, I mean, Heineken covered it.

I think there's – to reiterate four elements. You need to have very strong brands with great brand equity which I – we believe Heineken has done a great job there. You need to have a remarkable execution, which we strongly believe that we have a fantastic platform for execution in the on-premise channel.

And you definitely need for the on-premise channel to start recovering and that is what is happening today. And as we continue to see re-openings in the on-premise channel, we should continue to sustain that type of performance on our beer portfolio in Brazil. I don't know, if that answers your question Isabella..

[Operator Instructions] We'll take our next question from Carlos Laboy from HSBC. Go ahead..

Yes. Good morning, everyone. John you mentioned that, Brazil has become an advanced market testing ground. I was hoping you could expand on that.

And on a related basis, how do you engage Chatbox, WhatsApp and these other digital orders taking tools to make sure that you're a better market developer as opposed to just a better order taker?.

Okay. Sure. Thanks, Carlos. How you doing? Yes, Brazil has turned out to be the most important, or at least the most advanced market that we have right now. And I would say that, behind them is Argentina and closely behind them is Mexico as we've continued to roll out. But in terms of what we're doing we have various tools.

Chatbox is one of them okay, and taking orders there we're up to about 8,0000 accounts right now in – so we're up to 116,000 customers in Chatbox in Brazil. We're targeting 250,000. But what's really amazing about this is that, first of all, we're getting most of the orders coming in outside of working orders – working times – worked on – work times.

Secondly, it's even coming in on the weekends, which is we have usually very poor service on. So in that sense, they're developing more markets and becoming more available. In terms of the adoption rate that we have, our adoption rate is probably 300% more than what we thought it was going to be.

And that is something that is extraordinary service in terms of customer centricity. They're adopting this very fast and extremely, extremely satisfied with what we're doing. Tied to that, we also have what is our order taking – order tracking capabilities.

So that in Brazil, not only are you ordering via Chatbox, but you're also tracking your order real-time on GPS, and when it will be getting there. And so we're putting together a set of tools, okay, that is allowing much higher customer satisfaction.

And I do think that customer satisfaction over the mid-term, long-term not only does it translate into share and preference, but it also translates into equity and premiums. So as we go forward Carlos, these tools – we continue to advance on these tools.

For example in Argentina now on our B2B URL-based system, we're also starting tests with Mercado Libre for QR payment systems, which started last month. So we're amplifying the portfolio of commercial tools available to retailers very fast.

And that, along with in-store execution that we're having with continuous coverages with Coke and continued merchandising and -- are combining that with our right execution daily capabilities, is becoming very, very powerful. And it's increasingly more powerful since you have these tools and your competitors don't have them yet.

I wouldn't say that it's something that's going to be over -- they'll be able to match it over time. But right now, the amount of work that's gone into this, the acceptance by the consumer and the systems and IT infrastructure that you require to have that is linked to your transactional systems is very large.

I don't know if I answered your questions but --.

Well, if I can piggyback on John's comments, Carlos, I think that you're highlighting something that we -- which we strongly believe in that we are a -- we're definitely not a bottler, but a market developer, as you pointed out. And achieving that status, we believe, is a combination of multiple variables.

Digital capabilities like the ones that we are exhibiting and testing in Brazil, in order for them to be further expanded, not only in Brazil then rolled out as we are in other markets, are just the evolution of a very strong basis of execution. We cannot forget that this continues to be a business of executing the fundamentals and the basics.

And a great demonstration of that is what we've done in Guatemala. I think that Guatemala, as you all know, is a country where we consolidated the two outstanding franchises that were not under Coca-Cola FEMSA.

And once we consolidated Guatemala, I think, that we have put into place what Coca-Cola FEMSA is famous for, right, understanding the market, an insights-driven organization that connects the dots, not only internally, but also externally with a customer focus. We then look at the operations from the inside out.

We see what can be improved internally, our operational model, our capabilities, people, taking care of our people, understanding where we can drive efficiencies and improve productivity within our manufacturing and distribution capabilities and then have a clear strategy that is properly executed in the market.

Just to give you an idea, year-to-date, despite the pandemic, Coca-Cola FEMSA and Guatemala has grown 8% versus previous year. We have grown six points in terms of NARTD share of value versus previous year. We've broken historical production records. We increased our pre-sell effectiveness by 22 points.

And we have increased the route to market productivity versus last year 37%. That means how many unit cases per truck per hour you put through your system. And that is definitely showing in the market and that is a fantastic example, I believe, of what we're capable of doing.

Then you add the digital overlay that we're trying in Brazil and we're consolidating in Brazil, where you are using your capabilities, not only to drive efficiencies, but also to drive much better customer service and customer engagement.

For example, the order tracking capabilities that we have in Brazil right now, allow for a traditional store in São Paulo to understand -- couple of hours in advance at what time precisely the truck is going to deliver the goods.

So he has everything ready and he doesn't lose any time, normally a couple of people in that type of store operating their business.

So all we're doing is, always with the customer focus in mind and then redefining our processes and redefining our architecture digitally to continue to deliver our excellence in operating model and operational capabilities across the full value chain.

At the end of the day what we pretend to do is to enhance value, not only for Coca-Cola FEMSA, but also for the customer and also for the consumer.

And I think a great example of that is our revenue management capabilities and our price back architecture and the depth and breadth of what our portfolio offering is in our -- in the countries where we operate.

So I just wanted to take advantage of your question, to be able to explain more our full operating model, which is a combination of our traditional capabilities, historical capabilities and the digitalization that we are embarking in right now I believe at the forefront of the industry..

Thank you..

And Carlos just to add on that in terms of market development. When you start looking at the amount of share gains that we're getting in Brazil also they've been consistent and they correlate very highly with the amount of increased customer connections that we're putting in place.

Obviously, that is servicing the market better and we're getting much more availability and we're getting better execution. So I think they're all connected. They're all connected..

And our next question will come from Alvaro Garcia with BTG. Please go ahead..

Hi. Hi, John, Constantino, Matias. Hope you're all well. My question is on concentrate pricing in Mexico. My understanding is that the three years' worth of concentrate price hikes in the previous agreement are now over as of July in Mexico. But we know this is a pretty dynamic agreement.

And obviously, Mexico is one of Coke's more defensive markets globally. So I was wondering if you can give us some insight as to whether or not these hikes might be over if concentrate prices might increase again in Mexico or if there are even conversations with Coca-Cola at the moment on this matter. Any color on this would be much appreciated.

Thank you..

Sure, Alvaro. As you said, I mean, concentrate increase is part of the way the relationship is built. It's the way we -- it's one of the elements that we have of important interaction with the Coca-Cola Company. And that is something that is part of our continuous conversations in the relationship and definitely in Mexico.

What I could tell you is that there will definitely be in the future the concentrate adjustment. I would give that a high level of certainty. And whenever that occurs we'll definitely be informing the market on that.

The magnitude of that on one hand of that increase, that potential increase and the impact it could have on our P&L is something that we're still discussing with the Coca-Cola Company. And at the same time, especially, on the impact of that potential increase we need to understand that our margins are a combination of multiple variables.

And we currently have very favorable raw material tailwinds on our end. We've done a lot of productivity inside the company. We have a great revenue management practice and we rely very strongly on data and analytics in order to define our price architecture going forward.

So we believe that there's not necessarily a direct impact from concentrate increase translating into margins if that eventually occurs okay? So that would be my answer to your question.

I think once more in the future we should anticipate some adjustments in concentrate pricing, the magnitude of them and the impact that they might have on our business are still need to be defined. The situation right now is extremely complex. We have a great relationship with the Coca-Cola Company.

I think it's one of the strengths of the business We currently are very pleased to see how quickly we have reprioritized initiatives along with the Coca-Cola Company and how aligned as a system we are today. And everything we have done has been together and in communication.

So we currently have a lot of system-wide global meetings, regional meetings, country meetings. We share best practices. And that is something that continues.

So there's an acknowledgment of the severity of the situation not only in Mexico, but in other markets from the part of the Coca-Cola Company and it's part of a healthy dialogue that we have every day amongst us. And we're evaluating many things.

I mean we – overall, we would like to have much more flexibility in terms of opening our distribution system the red truck to other products like we're experimenting in some places in Brazil with spirit distribution. That's definitely dependent on the conversations we have with the Coca-Cola Company.

So it's -- these are very interesting times right now. And definitely many interesting things will unfold in the near future. John I don't know if you want to comment on that..

No I just think Álvaro is -- incidents is part of the relationship right and incidents will be part of the relationship from here on forward. And I think the Coca-Cola Company rights are very clear on that, but also the Coca-Cola responsibility is very, very profound on that.

So knowing where we are in terms of where the sensitivity of the business is today the tremendously dynamic environment that we're finding to how difficult the environments are in different countries. I think they're very aware of that.

So I'd say, it's going to be something we're going to be talking about from here until the relationship ends if it ever ends. And so, that's part of the model right? So it's just the way it goes..

No that's very clear. That's nice to hear. It was nice to hear that sort of your margins and your business will be certainly taken into account if it were to ever happen. Thank you very much..

All right. You’re welcome..

Thank you Alvaro. Thank you so much..

And next we'll hear from Felipe Ucros with Scotiabank. Go ahead..

Thanks. Good morning John and Constantino, Matias thanks for the space for questions and hope you and your families are doing okay. I wanted to focus a little bit on the traditional channel.

You did have a couple of comments during the call discussing how the channel is reactivating and how peak closings happened throughout -- about the middle of the quarter and things are improving. But I wanted to ask you, if you could focus on the long-term consequences of those closures.

I imagine some smaller less professionalized shops might not open back up. Sometimes I think that it might lead to more concentration either bigger mom-and-pops or maybe some of those smaller ones that runs out of business might be captured by the modern trade.

So I wanted to see if you could explore kind of the consequences of this period of closings and what it might mean for the system. And then I was also wondering if you could discuss a little bit whether there's any advances on packaging development. There have been some articles about different drinks companies exploring paper-based packaging.

I don't know if this is something that you guys have explored. Obviously incredibly hard with carbonated drinks. But I wanted to see if there's any advances given the backlash on PET from the public whether there's an exploration of alternative packaging? Thank you..

Thank you Felipe. Listen just to give you a little bit more in the context of the traditional channel. We -- like I said, we're probably down 10% in terms of the total account base. And that's probably right now 150,000 accounts. 70% of those are probably on-premise accounts small on-premise accounts.

The way we see this okay is that, it's going to be probably of the 10% that we talked about maybe 2% of that or 3% of that will not make it back because they're too small to open they're undercapitalized or they're businesses that were probably on the margin in any case.

What is typical of Latin American crisis okay is that, given the crisis of closing businesses there's also a surge in opening up smaller businesses.

And we haven't necessarily seen that yet, but we expect that to happen with smaller shops coming on stream to offer services and that's just the way people go out there and try to make a living here in Latin America.

That being said, the traditional trade -- I think one of the things that is happening is, if you take away this temporary effect of COVID you are seeing more and more technology being put into the traditional trade either by what we're doing with omnichannel capabilities or what other players are doing to get there as well.

And so, the traditional trade is not as disadvantaged from a customer service perspective or from that matter from a consumer engagement perspective with their neighborhoods.

So I think when you look at that, that is a very powerful statement okay? And it's a very powerful position for that channel to be in versus your shopping formats and large format and modern channel stores. So I think over the long haul, I don't see that there is going to be a major disruption of the trends that are happening.

I think, from my perspective, they'll even flatten out between channels and channel mixes, because of what I just told you. As people continue to be -- I think one of the fundamental changes that we're seeing is people continue to be more at home proximity becomes even more important.

And as proximity becomes more important and you give the tools of the traditional trade to be able to deliver to the home, engage better with the house, I think they become very, very solid in terms of competitors.

And if you open that up further, to have the type of packaging, okay, that you would otherwise find in modern channels, it becomes even so much better for the traditional trade. Let me give you an example about that.

We traditionally do not have in the marketplace or in these channels, multi-packs, okay? But what Mexico is doing right now is they're offering bi-packs or two packs of a Coke and a flavor than a traditional trade, so they can go out there and deliver these to the home.

There's a slight discount to it, but these things which you would obviously find in your modern channels are now also being translated to your neighbourhood convenience geographic convenience. So there's a lot that's happening in the channel that I would say is, structurally in favour of the channel, not necessarily against the channel.

And I think that trend is something that would -- if I were looking at the channel going forward that would be one of the things that would fundamentally change my perspective of how the channels are going to be working in the future. And then we talked about the packaging development on paper containers.

And frankly, we haven't seen too much advances on that that I've seen..

Yeah. And to complement on packaging Felipe, I think that, yeah paper is definitely a challenge for carbonated drinks. There's definitely opportunity for there for the non-carbonated beverages. And our understanding is the Coca-Cola Company is extremely active on that front.

But let us not forget that on CSDs which is a core business, we have two very important initiatives that we're extremely focused on. First of all is the usage of recycling and recycled resin. And the increasing overtime that percentage of recycled resin is a huge commitment of our business.

And that continues to be the case regardless of fluctuations, in virgin resin cost. This is a commitment for us. And we support the World Without Waste initiative that the Coca-Cola Company has set and the objectives that for 2030, we should have at least 50% of all of our PET material using virgin resin -- using recycled resin, sorry.

And we're looking at that target as of 2025, not even 2030 in our case. And then on the other hand, one of our biggest platforms that we believe in, and it’s part of -- and its core -- its part of our core business, is the returnable packaging.

Returnable packaging is definitely something that is positive in terms of the environmental impact it has, in the environmentally friendly connotations that consumers are rediscovering around returnable packages. And that Coca-Cola FEMSA, probably the leading company or the leading company in the system in terms of returnables.

On a consolidated basis, returnables represent 35% of our CSD portfolio. In Mexico, we're usually at 35%, but under the pandemic, we're seeing it increase up to 45%. And in Colombia, Argentina, Uruguay, we're around 30%. Brazil we're lagging a little bit behind, but growing significantly double-digits 25%.

Our multi-serves have grown, during this period. And then we're moving beyond the 20% total mark of returnables. So we have a great and solid base in returnables. We believe it. We will continue to expand it. And it's also important to understand that we're very good at it. And we're very focused on getting better.

So returnables require a lot of water, so we're reducing the water usage on the returnable circuit or the returnable platform. Our turns per bottle are increasing and we have a lot of efforts and innovation efforts behind that.

We're also moving and breaking some paradigms, moving into universal bottles, so we can use and leverage the bottles for different brands. We used to have for example, a bottle per flavor per brand on returnables.

Now we're capable by using labels to use the same bottles and expand our portfolio very easily, which is better for us, better for the consumer and also better for the customer. So returnables is an interesting play.

It seems not very innovative because it's always been there but there is a lot of innovation behind the improvement and the expansion of the platform. So that is something that we also want to make sure that gets across. Hope that answers your question..

Yes, that's very good color. Thanks a lot.

If I can follow up on that, have you guys explored pushing returnables, not just as an affordable option but as an environmental option? I really haven't seen it in advertising but is that something you guys are exploring?.

Yes, absolutely. And there's a big initiative with the Coca-Cola Company around that. Returnables is something that younger consumers are discovering. I can talk about – my kids are teenagers and now they're starting to understand how returnables work.

And they – at least from an anecdotal point of view, young consumers tend to value a lot the environmental impact that returnables have which is seen as extremely positive. So yes, the Coca-Cola Company is working very hard on developing communication and raising the awareness of the benefits of returnable packaging beyond affordability, absolutely..

Good color. Thanks a lot, guys..

And we will take our final question from Marcella Recchia with Credit Suisse. Go ahead..

Hi, John. Hi, Constantino. Thank you for taking my question. I have two quick questions here. The first one is about your impairment charge in this quarter.

Do you have any expectation of further impacts going forward? And my second question would be about your initial thoughts about the pension reform impact for the company, if the proposal that was published yesterday was approved. Thank you very much..

Hi, Marcella, I'll take the first one and I'll leave John for the latter question and for his closing remarks, as we're reaching the hour.

Yes, as we mentioned, the impairment was basically on two businesses that we have, Estrella Azul in Panama, which is a dairy joint venture with the Coca-Cola Company; and on the other hand our Leão joint venture, which is a system joint venture in Brazil on noncarbonated beverages.

And in the case of Leão would be the only one that we could foresee future impacts going forward, as we're moving from a centralized business model to an internalized business model. So for all of you to understand Leão was a – is a business where – a portfolio of noncarbonated beverages.

It's manufactured in a central location and then distributed across the system in Brazil.

After a lot of analysis after understanding the current noncarbonated beverage, particularly nectar juices dynamics in Brazil and understanding our capabilities as bottlers in the system, we have – thinking about the system in Brazil has reached the conclusion that for some particular products it is much better and more competitive to internalize the production in the different bottler facilities, which is also the case for Coca-Cola FEMSA.

There's still discussions and understandings and strategic redefinitions of what the system could do with the Leão assets and the manufacturing capabilities that are there. There's a series of interesting initiatives and innovation that might be put out there in the future in Brazil, where Leão could play an interesting role.

So we're still defining that. So we could see more in the future. We have - we don't have a definite position right now of the future of that asset going forward but we'll definitely inform in due course if that is the case. And then I'll have John talk about the very recent pension reform status that was announced yesterday I believe..