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The recent changes brought about by labor reform in Mexico have caused the majority of companies listed within the Mexican Stock Exchange (BMV) face higher operating costs due to an additional expense that implied an increase in salaries.
Of a total of 44 companies reviewed, and that are listed locally, 43.2 percent stated that they have been impacted by allocating greater resources for the increase in labor costs.
An example of the effect that the increases in labor expenses was that of Pacific Airport Groupwhere Raúl Revuelta, executive director, highlighted in the presentation of his quarterly results that, “on the expense side, these increased by 10.3 percent compared to the first quarter of 2023. Although we continue to focus on the maintenance fee cost controlthe current changes in the Labor legislation they affected all main cost lines”.
In this sense, the manager added that “the salary costs have been greatly affected, as well as other important personnel contracts, such as cleaning, safety and maintenance. In the future, we have spent higher costs that correlate with the airfield and terminal expansionin addition to a inflationary effect”.
For its part, José Antonio Fernández Carbajal, general director of FEMSA, He also indicated that, because his operating costs increased 21.7 percent to 24,444 million pesos during the first quarter of this year, the labor costs of the company with a vocation mainly in consumer products as bottled drinksincreased substantially.
So, Adolfo Castro, executive director of Grupo Aeroportuario del Sureste, He pointed out that, on the cost front, consolidated expenses increased almost 14 percent, which was driven mainly in Mexico, given a 20 percent increase in minimum wageInter alia.
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Superweight hit
Additionally, the appreciation of the Mexican currency that has been observed since last year, and remains in force, continues to undermine the profits derived from a exchange conversion.
“The Total sales in the United States in dollars decreased marginally by 0.4 percent, while sales in pesos totaled 32,433 million, with a reduction of 8.2 percent compared to 1Q23, affected by the weight appreciation against the dollar of 7.8 percent in the quarter,” reads the Chedraui report.
In this sense, Almudena Ruíz, director of variable income management at Finamex, He pointed out that the greatest difficulty in the reporting season continues to be the exchange ratesince there are companies impacted.
He explained that firms face growth in volumes and sales in foreign currency outside Mexicowhich makes them affected in the conversion to local currencyand therefore, leads to lower growth in the final consolidated report.
Likewise, 22.7 percent of companies indicate that they continue to face higher borrowing costs as a response to high interest rates and another 22.7 percent rate the Macroeconomic environment as challenging and uncertain, since they approach electoral periods.
Additionally, 20.5 percent of the CEOs of the publicly traded firmsis concerned about changes in economic growth reviews.
Pay attention to other factors
José Marcos Ramírez, executive director of Grupo Financiero Banorte, pointed out in his call with investors that, despite a more cautious business environment caused by the electoral periods in Mexico and the United States“we see good economic momentum…, with a stronger first half of the year, followed by a softer second half with some headwinds, such as lower government spending and potentially weaker external demand due to a deceleration of the global economy”.
According to the data collected, the development of geopolitical tensions It is also an element that 13.6 percent of the CEOs of the analyzed firms, belonging to the BMV, have in their sights.
On the other hand, 11.4 percent of senior executives perceive greater competition in some sectors of their businesseswhile 9.1 percent consider that it is necessary to define a better management of some resources such as water.
In this sense, from Finamex’s point of view, the round corresponding to the first quarter of 2024 was mixed, since 44 percent of the companies that belong to the index (MEXBOL) reported earnings per share (EPS) higher than estimated.
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