Hello. Welcome to FEMSA fourth quarter 2022 results conference call. Please note this call is being recorded, and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask question at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. I will now hand you over to your host, Mr. Juan Fonseca, to begin today's conference. Thank you. Thank you, Ben. Good morning, everyone. Welcome to FEMSA's fourth quarter 2022 results conference call. Today, we are joined by Daniel Rodríguez, our CEO, Paco Camacho, our Chief Corporate Officer, and Eugenio Garza, our CFO. As always, we also have Jorge Collazo on the line, who leads Coca-Cola FEMSA's investor relations team. Today, we will discuss our fourth quarter results and our general expectations for 2023, followed by a Q&A session. The intention is to focus on these topics in the Q&A, certainly if there are additional questions about FEMSA Forward leftover from last week and the announcements that we made, we can talk about that too. Let me turn it over to Daniel. Please go ahead. Thank you, Juan. Hello to everyone on the call. We appreciate your participation today. As we mentioned briefly in our communication last week, we closed the year on a high note with a strong fourth quarter that boldly continued the positive momentum we have seen since the end of 2020. Last year presented significant challenges and headwinds, yet our teams were able to successfully navigate a volatile macro environment affected by supply chain disruptions and rising inflation across markets. Nevertheless, the distortion caused by the pandemic, the behavioral responses and the comparability issues resulting from it seem to finally be in the rearview mirror. This has allowed us to focus on fundamentals of the business and on e-executing our strategic priorities, which in turn resulted in another set of outstanding results across our businesses, headlined by strong top line growth of 23% and operating income growth of 12%. Underscoring the resilience of our platform and the operating excellence that our teams bring to work each and every day. In terms of the fourth quarter, we note the continued strength of operating trends at OXXO Mexico, where traffic again grew by several percentage points and contributed to our double-digit same-store sales increase. That also reflected good growth from important categories linked to the gathering consumer location, especially relevant during the holiday season. Beyond Mexico, Proximity continued to grow at a good pace in most markets, and we are reporting Valora results for the first time reflecting its consolidation in early October. FEMSA Health again delivered stable results against a demanding comparison base and foreign exchange headwind, while OXXO GAS had another strong quarter on the back of increased volume recovery and strong operating leverage. On the digital front, we continue to add OXXO Premia and Spin by OXXO customer at a solid pace, even as we focus on generating engagement and measuring those users that are interacting with our platform on a recurring basis. We're also making progress launching our loyalty coalition platform, where we recently announced an exciting partnership with Volaris, and we are working on much more to come. Coca-Cola FEMSA had a strong close to a year that saw them achieve a record set of results, driven by their excellent execution and leveraging their enhanced cooperation framework with the Coca-Cola Company to invest and grow the business. Finally, logistics and distribution had a strong quarter that was partially overshadowed by one-time charges at Envoy Solutions. This strong close to 2020 position us well to drive more growth in 2023. As we begin to execute the focus strategy laid out in our FEMSA Forward vision presented last week. We look forward to an exciting year and beyond. Now, I will let Eugenio elaborate on the numbers reported today. Eugenio, please go ahead. Thank you, Daniel, good morning to everyone on the line. Beginning with FEMSA's consolidated quarterly numbers, total revenues during the fourth quarter increased 23%, while income from operations increased 12.2% compared to the fourth quarter of 2021. On an organic basis, total revenues increased 13.5% and income from operations increased 9%. FEMSA's net income decreased 12.5% and reached MXN 8.8 billion, reflecting higher income from operations and a slight decrease in net interest expenses during the quarter. This was offset by a MXN 4.3 billion non-cash negative swing in foreign exchange losses related to FEMSA's U.S. dollar-denominated cash position, as impacted by the appreciation of the Mexican peso and a decrease in non-operating expenses, reflecting a demanding comparison base that included dividends received from our investment in Jetro Restaurant Depot last year. Moving on to discuss our operations, 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 came 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 growth 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 Europe, we began consolidating Valora in early October, 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 food service as well as the integration of recent acquisitions. At OXXO Gas, revenues maintained their 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 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, fourth quarter, we expanded our drugstore count by 124 net additions to re-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 drugstores. Revenues increased 1% while same-store sales decreased an average of 4.5%. 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. Operating margin expanded 40 basis points as tight expense controls across all our territories more than offset the impact from the slower growth 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 segments, coupled with good demand dynamics in our operations in Latin America. Operating margin contracted significantly to 2.5%, reflecting one-time off provisions related to past due institutional customer accounts and obsolete inventories at Envoy Solutions, as well as higher cost of labor and transportation in certain markets. Excluding these one-off provisions, operating margin would have been in line with recent trends. 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 10:00 A.M. Mexico time. 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's company-wide commitment to long-term value creation. As we look into 2023, I'm confident that the steps we have started to take toward our FEMSA Forward vision will position our company to maximize value creations as never before. Leveraging the synergies among our three core businesses, as well as our strong team of professionals that I am sure will again be able to navigate any challenge that we are come across in 2023 and beyond. With that, let us open the line for questions. Operator, please. Sure. Thank you. As a reminder, if you would like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. To withdraw your question, please press star two. The first question comes from the line of Ben Theurer calling from Barclays. Please go ahead. Good morning, everyone, thanks for taking my question. Concrete on the results, one and a half if I may. The half one is really related to some of the comments you made in your press release about incremental acquisitions at 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, at the same time, you put in your press release that you've acquired six 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 happens to close in the fourth quarter? Hi, Ben. Yeah, Go ahead. With him, okay. Hi, Ben, it's Eugenio Garza. 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, long way of acquisition to engage in there to create value by consolidating into the system. That was no different of a strategy in the fourth quarter. Given what we announced in terms of FEMSA Forward, our strategy for Envoy is again to continue the for the business to continue to be executing on this strategy. Having said that, the capital commitments 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 makes sense. Thank you very much. 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 being still supportive to traffic through during the quarter? You know, a little over 4% obviously is a very strong number. It's above the last 12 months ever. 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 stores because it's the holiday period. 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. 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. Yeah, I think just complementing what Paco just said. Thank you very much. This is Juan. As we mentioned in the various original remarks, the gathering location is sort of the key in the fourth quarter. To Paco's point, beer is a category that has been performing very well. We just finalized the last wave. You remember the opening of the stores to the ABI portfolio with Nuevo León a few weeks ago. World Cup, which even though it wasn't really asked 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. Still, it all kind of came together to drive double digit growth in that category, which is one of our most important. 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 had been performing very, very well, but traffic was coming up a little bit short. So the team at OXXO have been looking for ways to incentivize traffic through, you know, the levers that they have, pricing, promotional activity, further segmentation, and it's working well. You know, I would even say, it's moving into this year, we're off to a very strong start in 2023. The loyalty program, OXXO Premia, is also beginning to add, and we're talking about, you know, one out of five transactions are also now being associated with the, with the rewards program. So a lot of things coming together at the same time, to, I think, combine to help this four, you know, over four points of traffic, which is just fantastic, I think. Yeah. Perfect. Well, cheers to that. Thank you very much. Thanks, Ben. Ladies and gentlemen, for your information, if we can just imitate the Q&A session for one question per person, that will allow everyone to ask their question. Thank you very much for your understanding and cooperation. The next question comes from the line of Robert Ford calling from Bank of America. Please go ahead. We don't hear you, Bob. You might be on mute, Bob. I think we have lost Bob. He might call back probably. We will go ahead and skip to the next person, who is Alan. Alan is calling from Santander. Please go ahead. Thank you so much. Can you hear me? Yes. Yes. Perfect. Okay. I'm sorry. I'm gonna misbehave. Just two quick questions. I mean, the first one is, they focused on the traffic, but my quick question on the tickets. I mean, it's half of food inflation or 7%. If you can elaborate a bit on that, why the average ticket is not low inflation in Mexico. 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 gonna go and see investors next week in the United States and Europe. Could you share your thoughts about what you've pondered, 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 three people, regarding the reaction of the stock after the announcement, and I think specifically, regarding the capital allocation and the potential dividends ahead? Thank you. All right, Alan, thank you for the questions. Just as for the traffic and the ticket size and your comment on the inflation, I mean, clearly these are variables that our team at OXXO manages according to what is happening on the market on the competitive side, what each of the categories in the store are doing from a supplier standpoint. Clearly the objective is always to keep our prices below inflation. That's clearly the priority. Second, the ticket continues to be benefited by the job that was done over the last several months regarding additional categories that were added to the store, like liquor, for example. Second, the segmentation work that has been done by the team. Third, I would say just the natural movement of what consumers are shopping. Moving forward, just similarly to the traffic, there are a number of structural and fundamental things that improved over the last few months that we expect to continue benefiting from. That's why the traffic is behaving like that and the ticket size. Yeah. I think just to add on, I mean, on the ticket, as what Paco just said, we pass through, as you know, we pass through the increases from our suppliers. You know, mix is a big part of it. If, you know, the number is a little bit different from just general CPI, it will basically mean that our mix is different from the CPI basket. We don't, you know, we don't ever keep any of the price increase and swallow it ourselves. As you know, it's just a full pass-through situation. On your other question about, you know, what we're trying to achieve, going on the road. I mean, obviously what we communicated last week is relevant and meaningful and it prompts a lot of questions, and it certainly deserves, you know, going and meeting with some of our biggest investors. We're gonna be meeting with, you know, many of you guys, and also with investors that for one reason or another, have not been invested in FEMSA. That historically, you know, should have or have been, again, because of the good fit between their portfolios and what our company is. I think it's an important, you know, couple of weeks that we're gonna 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 are. Clearly there are investors that obviously, you know, performed well and are now taking profits. Yeah, we're excited to get on the plane and talk about what we think is a super exciting message. If I may just comment. If I may 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. That pickup in traffic with lower ticket resulted in part of that mix effect that Juan was talking about. With regards to the roadshow, just to complement also what Juan said, again, we heard you guys loud and clear last week and through our interactions with you guys over the week, that capital allocation going forward is a big, a big topic that you guys would like to hear more about. Again, we'll talk again, not only in the roadshow, but to all of you throughout through our interactions. 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. The most important thing to keep in mind is that we have committed one, to the leverage target of 2x, and number two, not to be holding any inefficient amounts of cash at the holding company. I hope that that gives you as much color as we can right now. But a s we start to execute on a lot of these, on a lot of these initiatives, we should be able to give you, and pinpoint with more exact clarity, how we're gonna deal with the capital allocation going forward. Great. I appreciate that. Thank you so much. The next question comes from the line of Héctor Maya, calling from Scotiabank. Please go ahead. Thank you. I thank you very much for taking my questions. Very, very quick ones, I promise. You have mentioned that you want to build a platform for the traditional channel with OXXO and TOFF. I would like to know how you'll be executing that strategy to supply the channel, mainly on how your OXXO trucks and Coca-Cola FEMSA's red trucks would adapt 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? Some details, if possible, on an integrated partner system and how much CapEx would be directed to this. Thank you. All right. Hector, 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. 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 their 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 one unit, and they actually need to buy the whole case. 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 one person working in that little 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. 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 tremendous relationship with the suppliers, knowledge of how to do the picking, as I explained one, in terms of how many, how many cases or how many products, how many units each individual store would need. I mean, those are know-how that have been developed over years that are very important for these type of platforms. And then on top of that, of these two knowledge centers, I would call them, and know-how centers that we have in Coca-Cola FEMSA and in OXXO, we have the digital business that we have been creating, which clearly, with the spend 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 time, customers and consumers, they need to pay in cash to them. They cannot accept service payment. All those things can be enabled by the digital platform of FEMSA Digital, with the other two businesses serving as a connection point. That's the intention that we have of building this omni-channel platform. 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, Coca-Cola FEMSA trucks. This is a hybrid model that serves like a, pretty much like a, like a marketplace through a super app. That's the intention that we have in this platform. We know that on top of that, the other element that is important in this omni-channel platform 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 the small retailers sell, which is a very important component, so that it solves 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, so OXXO and Coca-Cola FEMSA, is the capillarity. That allow us really to pilot all what Paco just mentioned. 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. I mean, that also I think it really help us before we make any final decision in terms of how fast or how, if you want, wide, the escalation would be. Thank you. Thank you very much. Would it be fair to assume that we could be seeing this strategy play out in the next one or two years? Definitely. Great. Thank you. Thank you very much for the color. The next question comes from the line of Marcella Recchia, calling from Credit Suisse. Please go ahead. Hi, gentlemen. Thank you for taking my questions. I have two quick ones as well. Basically, the first is for Proximity Americas. What can we expect in terms of gross margin trends going forward as you continue accelerating the digital initiatives? To what extent you also can continue managing that with efficiencies? The second one, very quickly, you guys are now disclosing figures for Proximity Europe, but without a comparison basis. Can you just give us a color on how these figures reported compares to those from the year before? Thank you so much. Hi, Marcella, this is Juan. I think on the gross margin question, I would think about stable margins. I mean, we have been, I believe, you know, 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 growth margin. We are already getting to the point where some of the, you know, users' points are beginning to expire. Remember that this is all very new, so a lot of things are happening for the first time. We are already beginning to see patterns of, you know, certain% that, you know, the points just expire, and that's obviously, you know, cash flow for us, right now we're assuming, you know, from an accounting perspective, we're assuming that it's not there. Eugenio also mentioned a few minutes ago on the financial services. I think the overall trend, you know, we are getting back some of the banks that have, for one reason or another, stopped using OXXO as a correspondent. The general trend is that profitability is a little bit lower for financial services. You get more volume at a slightly lower margin. Those trends I think will continue. On the other hand, you have commercial income, which is coming back, right? Commercial income is an important driver of growth 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, you know, participating in commercial income along with many other of our big suppliers. I would say, you know, stable growth margins. In terms of modeling, I wouldn't expect any change there. Now in terms of Valora, you know, obviously, you know, Europe. Yeah. Paco's gonna talk about that. Yeah. 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 at double digits in the mid-teens. Gross profits also grew in the mid-teens. In the EBIT line, it was about flat versus the previous year. I think margin-wise, I mean, we're showing an EBITDA margin of basically 12%, probably a little bit lower than the full year numbers 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, you know, we all wish it is. It's a tough macro environment. Still, and, you know, 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. Yeah, it, and, you know, for many reasons to be optimistic about that. The next question comes from the line of Ricardo Alves calling from Morgan Stanley. Please go ahead. Hello, everybody. Thanks for the call. I'll limit myself to one question as required. The OXXO... It's kind of related to the past question. OXXO returns, if we 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. Just wanted to hear a little bit on that from the Mexico OXXO perspective. 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, you know, 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 know, you're probably are thinking about the other regions as, you know, not only in terms of growth contribution that they could have to the overall business, but also returns. Thank you. Thank you, Ricardo. Go ahead. I mean, okay. Let me comment, then you can complement me. I will say that, I mean, in terms of your question around returns, I mean, obviously we are at a very high level. I think in that regard, you are right. I think also Eugenio mentioned during the last week call that, I mean, in terms of additional value creation to open one store in OXXO in Mexico obviously is one of the most profitable investment that we can make. 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 say specifically regarding, like South America, I think that will give us, I mean, a nice way to, in the future, compensate the scale that Mexico have achieved. On a store level, as I also mentioned during the last call, we feel pretty comfortable what 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 proving 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 three. 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 certain level of scale, I mean, in terms of the number of store and after that, it will take a while until we get there. I mean, very positive when you compare like for like, I mean, stores in Colombia with one store in Mexico, I mean, I think we are very optimistic about that. 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. Those learnings, basically, continued as traffic and ticket came up. On top of that, the expansion and the net new store expansion that we've been experiencing has been operating at 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. We are at all-time highs in terms of batting averages. 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. 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 ROIC at the store level and at the whole country level in Mexico. Again, as Daniel said, in the rest of the countries, Brazil being a perfect example, I think on the 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. That bodes well in terms of being able to achieve, I mean, 10s of, I mean, 100s of basis points of improvement in terms of ROIC in Brazil on a relatively quick basis. Same can be said, I think, now that we're expanding with the OK Market acquisition in Chile and in Colombia, where we're still have a lot of room to improve, to improve via the scale to achieve, I mean, much higher returns and hopefully at some point be closer to the kinds of returns that we're getting in Mexico. Yeah, Ricardo, let me just add. This is Juan. I mean, only 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, you know what you're doing. You know, 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. 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. We're gonna be opening. Again, getting towards the 1,000 stores target in Mexico. 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? That's obviously never happened before. If in Mexico we're somewhere between 800 and 900, in South America, only the JV in Brazil, it's a JV, but, you know, we're probably talking about somewhere between 300 and 400 new stores, if not a little bit more. It's getting to the point where scale will be begin to be achieved in these countries. That means, you know, 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, you know, we can expect this to happen is not as dramatic. When you look at the Health Division where you have Chile with certain scale and certain margins, and then you look at Colombia and Mexico and Ecuador kind of closing that gap, and a big part of it has to do with scale. I just wanted to leave that out there because, you know, the numbers we're accelerating the openings and South America is definitely now beginning to move the needle. That's very helpful. Thanks, everybody. Thanks, Ricardo. Next question comes from the line of Alvaro Garcia calling from BTG. Please go ahead. Hi, good morning. Good morning, gentlemen. Thanks for the space. Two follow-ups. Firstly, a follow-up on Hector's question earlier, talking about the traditional channel. I think it'd be helpful maybe to define exactly what Pronto is, and then sort of what the strategic rationale is helping out your competitors. You know, we'd always thought of OXXO eating into the traditional channel slowly but surely. What the strategic rationale is there would be helpful. Just a second follow-up on gross margin. I think you mentioned financial services is actually a drag. We've always thought financial services is, was a higher margin business with, you know, in the context of mix. Sort of what maybe zooming in on what happened this quarter, maybe weighting how much was Spin and how much was financial services? Thank you very much. Sure. Hi, Alvaro. Oh, go ahead. Go ahead Yeah. Alvaro, let me just start with the first one, and then obviously Eugenio and the rest of the team can complement. 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 channels, all the small stores that are out there, you know, they serve a purpose. They have certain categories that we don't carry in OXXO. They have smaller surfaces usually. The type of consumer, the consumer needs that take place in the smaller stores are different from us. Now, of course, there is some. Some of them that are the same, but in general, again, I don't think that eventually over the years there will be only convenience stores or there will be only traditional stores. These are trade types that can live together, and that has been the case over the years. I don't think that when you look at the traditional channel today, it has changed in terms of size versus The size they had in the absolute before OXXO existed. 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 and enable them with some of the pain points that I described before. Reality is that once again, I'm going to use this example because it clearly highlights some of these very specific pain points that nobody else but probably OXXO can solve. A small store actually goes to this, usually it's a wholesaler to get the products they need. There are some products that have a very slow rotation, so they probably sell one bottle of one specific category, let's say Monster, a month. When they go to the wholesaler, they need to buy a full case. If they don't buy a full case, they will not get the price that they want. Whereas when you look at OXXO and how we serve our stores through the supply chain system that we have, we have a picking system, and we deliver to our stores by unit, which is not an easy task, and that's why the wholesalers, they don't do it. If we know that we have that capability, and we know that there are 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. 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. I guess that 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. 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 to ticket. Clearly financial services commissions drive more traffic but a lower ticket. Your question, Alvaro, was more towards the impact on gross margin. On gross margin. Correct. The impact on gross margin is clearly, you know, financial services, it's a much higher gross margin than the mix. Having said that, during the quarter was offset by some of the trends that we're seeing related to the loyalty program, in seeing that kind of offsetting part of that improvement in mix from financial services. The net effect is what you see in the results, and what kind of is going, the trend that Marcelo's question earlier, that Juan responded to was alluding to that we will be modeling flattish gross margins going forward. Having said that, to the extent that, we start to see some breakage in OXXO Premia, and a better engagement, from the customer, more elasticity in terms of how many times he comes back vis-à-vis the points that he redeems, there could be some upside to that, to that assumption. Great. Thank you very much. Thanks, Alvaro. The next question comes from the line of Thiago Bortoluci calling from Goldman Sachs. Please go ahead. Yes. Hi, good morning, everyone, thanks for taking the questions. I have two follow-ups here, I want to explore a little bit the bottom line dynamics, right? Obviously there is this impact of this non-cash tax effect on our net financial expenses that we clearly understand. It also seems to me that equity income printed a little bit softer than expected, right? 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 in the stores are still maturing, is it fair to assume that most of the stores are already printing above breakeven? What is the marginal level of returns and margins that you expect for Brazil? This is the first one. The second one, very quickly, just to make sure we understand all the dynamics, right? On the front of our plan, you mentioned potential consolidated net income of MXN 29,257, right? I see you reported MXN 8,838. If I'm not wrong here, what was the slight change versus what you had previously released last week? Those are the questions. Thanks so much. 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. First, let me just remind you that in that line, we also are passing through the results from Heineken. If you recall, Heineken last year had an extraordinary gain given the consolidation of their Indian operation. On a like-for-like basis, there was a steep contraction in the net income portion of that. That's 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, I mean upwards of 100 or more stores per year. That-It's clearly, I mean, still dragging in terms of the contribution, both from an operating income perspective as well as from a net income perspective. 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. At this point, it is not a significant contributor. The movement that you see there is mostly related to the Heineken. Then my second question is with regards to the difference between the net income that we, I mean, flashed last week in the FEMSA Forward statement of 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 done. There were some movements, specifically on the tax lines 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. Nothing related to our operations. It's just that we are fine-tuning our expectations on what the final tax number will be in an audited statements, which is now obviously in the report that you saw this morning. That's super clear. Thank you very much. Thank you. The next question comes from the line of Robert Ford calling from Bank of America. Please go ahead. Hey, good morning, everybody, and thanks for taking my question. Eugenio, what's the CapEx budget for this year and next year for the retained businesses with the step up? Can you provide a breakdown of that by division and geography, please? Sure, Rob. I can give you a little bit more color. We do expect this year to be for the remaining businesses at about MXN 1.7 billion of CapEx. The majority of it would be at the Proximity division as we continue on the store expansion. There will be a speed bump pickup in CapEx in the KOF. I'm sure Jorge and the KOF team will talk to you about that a little bit more. In the KOF businesses, we're seeing also a lot of growth in CapEx, 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. Primarily, it would be Proximity and cost driving most of the CapEx for this year. I don't know, Juan, Jorge or Quique, do you have any more color on that? Yeah, no. Thanks, Eugenio. No, 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, like COVID expanded, I'm sure, but there was perhaps some underinvestment during COVID. Also the fact that, you know, 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-KOF for a second, I think we can talk about Proximity, probably about $750 million, Health about $100 million, then maybe about $120 for the other smaller businesses. KOF again with a bigger number than what they've done in the past. It will take us to higher levels, it's all driven by growth and demand from the business. I think it's very positive. it's helpful. Juan, 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, Rob, at this point. We're not capitalizing, I mean, any significant amounts in Fintech at this point. Awesome. Thank you very much. Thanks, Rob. We currently have no questions coming through. I will hand over to your host to conclude today's conference. No, I mean, thank you. 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. That's it. Have a great weekend. Thank you for joining today's call. You may now disconnect.