Coca-Cola FEMSA, S.A.B. de C.V. (KOF) Cash Flow Statement

The OCF/NI ratio has remained above 1.0 in most quarters, with 2026Q2 at 1.97, indicating that reported earnings are well-backed by cash. The notable exception is 2025Q1 when OCF/NI dropped to 0.64, likely due to working capital outflows, but this appears temporary. The consistent premium of operating cash flow over net income suggests low accruals and a conservative revenue recognition approach, which is typical for a bottler with a direct-store delivery model.

The FCF trajectory is highly volatile, with negative quarters in 2025Q1 and 2025Q4, but the most recent quarter shows a strong rebound to $8.9B, a 11.6% FCF margin. This volatility appears driven by working capital changes, particularly in 2025Q4 where WC Chg was -$128.7B, likely a data anomaly or a one-time event. Excluding that quarter, FCF generation is solid, and the 2026Q2 FCF margin of 11.6% is above the peer average, suggesting KOF's distribution moat supports cash generation.

The capital intensity is consistent with a bottler that maintains a large returnable glass bottle infrastructure and a vast cooler network. The elevated CapEx in 2024Q4 (14.0% of revenue) may indicate a catch-up or expansion phase, but the recent quarters show a more normalized level around 5-6%. This suggests that KOF is balancing maintenance capex with growth investments, and the stable gross margin implies that these investments are not yet pressuring profitability.

The working capital line is the primary source of quarterly cash flow volatility. Positive contributions in 2026Q2 and 2024Q3 suggest efficient collections and inventory management, while negative swings in 2025Q1 and 2024Q4 indicate timing of payments or inventory build-up. The 2025Q4 figure of -$128.7B is anomalous and likely a data error, but even excluding that, the pattern suggests that KOF's cash conversion cycle is sensitive to seasonal demand and promotional activities. Investors should monitor this line for signs of structural deterioration.

Capital deployment is heavily skewed toward dividends, with no share repurchases in the last ten quarters. The dividend payments are substantial, but they are well covered by operating cash flow, which averaged over $10B in the last two quarters. The small acquisition activity suggests a disciplined M&A approach, consistent with management's historical strategy. The lack of buybacks may indicate that management sees better value in reinvesting in the business or maintaining a conservative balance sheet.

The cumulative gap between operating cash flow and net income is substantial, indicating that earnings are understated relative to cash generation, likely due to high depreciation and amortization (averaging $4B per quarter) and favorable working capital timing. This suggests that KOF's earnings quality is high, and the company is generating more cash than its income statement suggests. However, the gap may also reflect the heavy capital expenditure requirements, which are not fully captured in net income but are essential for maintaining the distribution network.