San Pedro Garza García / MX. (gr) Gruma S.A.B. de C.V. reports first quarter 2017 results. During the first quarter, Gruma showed continued growth at its operations with volume increases at all its subsidiaries other than Gruma Centroamérica. This volume growth, coupled with the Peso depreciation, allowed Gruma to generate better net sales, Ebitda, and net income figures.
Sales volume growth came mostly from Gimsa and Gruma USA, where we see markets for our products expanding, giving Gruma consolidated sales volume growth of 3 percent, while net sales and Ebitda improved 12 percent and 9 percent, respectively, supported especially by the strength of the Dollar at the U.S. operations.
Sales and Ebitda from non-Mexican operations represented 75 percent and 69 percent, respectively, of consolidated figures. The company reported 734 million USD of debt at quarter-end, 41 million USD less than at the end of 4Q16. Net Debt/Ebitda ratio was 0.9x.
Consolidated results of operations
Sales volume increased 3 percent to 973 thousand metric tons, mainly driven by Gimsa and Gruma Europe and, to a lesser extent, Gruma USA.
Net sales rose 12 percent to MXN 17’677 million, due principally to (1) the weakness of the Peso, which primarily benefited sales from Gruma USA when stated in Peso terms; (2) price increases at Gimsa, implemented to reflect higher input costs; and (3) the aforementioned sales volume growth.
Cost of sales as a percentage of net sales rose to 62.4 percent from 61.4 percent, driven mostly by Gimsa and Gruma USA. In absolute terms, cost of sales increased 14 percent to MXN 11’031 million due mainly to (1) Peso weakness at Gruma USA figures in particular, and higher input costs at Gimsa arising mostly from currency weakness; and (2) sales volume growth.
Selling, general and administrative expenses (SG+A) as a percentage of net sales decreased to 25 percent from 25.7 percent resulting from better absorption. In absolute terms, SG+A rose 9 percent to MXN 4’418 million mainly arising from the effect of the weaker Peso.
Other expense, net, was MXN 48 million compared to MXN 24 million, reflecting mark-to-market corn hedging losses at Gruma USA.
Operating income grew 7 percent to MXN 2’180 million, driven primarily by the positive effect of Peso weakness. Operating margin decreased to 12.3 percent from 12.8 percent, led mostly by Gruma USA and Gimsa.
Ebitda increased 9 percent to MXN 2’697 million. Ebitda margin declined to 15.3 percent from 15.6 percent
Net comprehensive financing cost was MXN 452 million, MXN 314 million more in connection with mark-to-market losses on foreign exchange rate hedging related to corn procurement at Gimsa.
Income taxes were MXN 432 million, 25 percent less due mostly to lower pre-tax income and lower effective tax rate, which was 25 percent. The low rate resulted from the use of tax-loss-carry forwards by Gruma Holding when receiving dividends from Gruma USA at an exchange rate that was higher than at the end of 1Q17.
Majority net income was MXN 1’282 million, 1 percent more.
