San Pedro Garza García / MX. (gr) During the third quarter of 2016 performance of Gruma S.A.B. de C.V. was in line with expectations for continued growth, delivering an upward double-digit growth trend across its financial results. This was supported again mainly by Gruma USA, which is moving forward on improving sales volume throughout the year while generating higher margins.
Gimsa continues to capture market share arising from the substitution of the traditional method, growing by a far faster rate than the tortilla industry in Mexico.
All together, on a consolidated basis, net sales increased 12 percent, operating profit and Ebitda rose 22 percent and 16 percent, respectively, and majority net income, 11 percent. Ebitda margin rose 50 bp to 16.3 percent.
Sales and Ebitda from non-Mexican operations represented 75 percent and 72 percent, respectively, of consolidated figures. The company reported 700 million USD of debt at quarter-end, a similar level than at the end of 2Q16, representing a Gross Debt/Ebitda ratio of 1.3 times.
Consolidated Financial Highlights
| MXN in millions | Q3/2016 | Q3/2015 | Change |
| Sales volume (thousand metric tons) | 991 | 968 | 2% |
| Net sales | 17’209 | 15’313 | 12% |
| Operating income | 2’423 | 1’990 | 22% |
| Operating margin | 14.1% | 13.0% | 110 bp |
| Ebitda | 2’806 | 2’412 | 16% |
| Ebitda margin | 16.3% | 15.8% | 50 bp |
| Majority net income | 1’535 | 1’383 | 11% |
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Consolidated results of operations
Sales volume increased 2 percent to 991 thousand metric tons, driven by all subsidiaries except Gruma Europe.
Net sales rose 12 percent to 17’209 million MXN, due principally to (1) the weakness of the Peso, which especially benefited sales from Gruma USA when stated in Peso terms; (2) the aforementioned sales volume growth; and (3) price increases, implemented to reflect higher raw material costs, especially at Gimsa.
Cost of sales as a percentage of net sales improved to 61.4 percent from 61.6 percent, driven mostly by better performance at Gruma USA, which improved 130 bp. In absolute terms, cost of sales increased 12 percent to 10’573 million MXN due mainly to (1) Peso weakness impacting particularly Gruma USA figures; (2) higher raw material costs arising from currency weakness; and (3) the aforementioned sales volume growth.
Selling, general and administrative expenses (SG+A) as a percentage of net sales increased to 25.3 percent from 24.9 percent due mainly to a higher proportion of Gruma USA in the consolidated figures. In absolute terms, SG+A rose 14 percent to 4’355 million MXN mainly in relation to the effect of the weaker Peso, and, to a lesser extent, to higher expenses particularly at Gimsa and Gruma Centroamérica.
Other income, net, was 141 million MXN compared to an expense of 85 million MXN, resulting in a benefit of 226 million MXN as (1) Gimsa reversed impairment losses related to the reopening of a plant in Central Mexico, a facility that had been closed since 1999; (2) Gimsa reported hedging gains on corn and natural gas; and (3) Gruma USA reported lower losses on energy and corn hedging.
Operating income grew 22 percent to 2’423 million MXN, driven primarily by better performance at Gruma USA and Gimsa and, the positive effect of Peso weakness. Operating margin rose to 14.1 percent from 13.0 percent, led mostly by Gruma USA.
Ebitda increased 16 percent to 2’806 million MXN. Ebitda margin expanded to 16.3 percent from 15.8 percent.
Net comprehensive financing cost was 46 million MXN, 42 million MXN less as the company reported larger gains on foreign exchange hedging related to corn purchasing at Gimsa.
Income taxes were 757 million MXN, 68 percent more resulting from higher pre-tax income and from the use of tax losses in Q3/2015. The effective tax rate was 31.8 percent.
Majority net income was 1’535 million MXN, 11 percent more, driven mostly by better operating performance, gains on hedging, and the reversal on an impairment loss from the reopening of a plant in Central México. The Peso weakness also contributed to the improvement in absolute terms.
