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Top Mexican companies' results take hit from Nicaragua crisis

Stock MarketsJul 30, 2019 08:51PM ET
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© Reuters. The logo of Mexico's Coca-Cola FEMSA, the world's biggest Coke bottler, is pictured at its headquarters in Monterrey

By Noe Torres and Ismael Lopez

MEXICO CITY/MANAGUA (Reuters) - Some of Mexico's largest companies operating in Nicaragua are counting the costs of a political crisis engulfing the Central American country since violent protests against President Daniel Ortega erupted in April last year.

The demonstrations, in which more than 300 people have died, have hit Nicaragua's fragile economy hard. Gross domestic product shrank by 3.8% in 2018, and the World Bank said in April economists expected the slump to deepen this year.

Three of Mexico's top companies - cement maker Cemex (MX:CEMEXCPO), bottler Coca-Cola (NYSE:KO) FEMSA and telecoms company America Movil - said in reporting their second quarter results that their operations in Nicaragua had suffered. Mexico's results season ended on Friday.

Cemex Latam Holdings (CN:CLH) said its Nicaragua business was being hurt by a downturn in the construction sector, which shrank 21% in 2018, according to central bank data.

"The crisis remains unresolved and continues to affect economic activity, including demand for cement," the Cemex subsidiary said in second quarter results, without giving details.

Coca-Cola FEMSA (MX:KOFUBL) reported a drop in its local business since the first quarter.

"Nicaragua is still a challenging environment to operate in," Constantino Spas, the company's chief financial officer, said in an earnings call with analysts.

Nicaraguan internal commerce fell 11.4% in 2018, according to the central bank. Experts consulted by Reuters highlighted tourism, the retail sector and manufacturing as some of the worst-affected sectors of the economy.

"We are living a crisis of confidence marked by uncertainty from consumers and investors," said Jose Adan Aguerri, president of Nicaragua's main business association COSEP.

America Movil (MX:AMXL) reported a 7.1% fall in its income from providing telecommunication services in Nicaragua in the second quarter. It also said it had lost 406,000 mobile phone subscribers in the country in the period.

To be sure, not all companies have been hit.

Wal-Mart (NYSE:WMT) de Mexico (MX:WALMEX), a subsidiary of U.S. retailer Wal-Mart Inc., said sales in Nicaragua had helped boost its income from Central America during the quarter.

Mexican dairy company Grupo Lala (MX:LALAB) reported that improving sales in both Nicaragua and Guatemala helped its quarterly sales for Central America rise 4.4% in dollar terms to 710 million pesos ($37.24 million).

"This is the first quarter (since) the crisis in Nicaragua showing early signs of top and bottom line recovery," Lala's vice president of finances Alberto Arellano told an earnings call.

Top Mexican companies' results take hit from Nicaragua crisis

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