Mexico City / MX. (gb) Grupo Bimbo S.A.B. de C.V. announced its results for the third quarter 2015, the three months ended September 30. Highlights for the nine months ended September 30 (9M/2015): Net sales rose 17.2 percent, reflecting solid organic growth in Mexico, recent acquisitions and FX rate benefit. Gross margin expansion of 40 basis points was driven by lower average raw material costs in most regions and manufacturing and logistic savings in Mexico. Operating income increased 29.6 percent; margin expanded 70 basis points due to improved productivity in Mexico and lower restructuring expenses in the US. Consolidated Ebitda rose 25.5 percent; record Ebitda margins were registered in Mexico for the YTD and third quarter periods. Net majority income grew 30.2 percent, with a 30 basis point expansion in the margin.
Net sales in millions of Mexican Pesos (MXN)
Mexico: Cumulative net sales in Mexico rose 5.8 percent over the previous year, primarily driven by volume growth arising from a better consumption environment, product innovation, targeted promotions and client penetration, all of which supported higher sales in every channel and almost every category, with notable performance in cakes. In the third quarter specifically, volume performance in sweet baked goods and confectionery reversed their negative trend from the first half of the year.
North America: Net sales in the first nine months of the year grew 29.2 percent, reflecting an FX rate benefit of 16.7 percent and acquisitions made in previous periods. While pricing initiatives in the US during the first half of the year led to limited volume gains, growth has been notable in the sweet baked goods, breakfast and snacks categories.
Latin America: Net sales growth of 10.2 percent year to date was largely due to organic growth in some countries, the benefit of translating certain currencies into Mexican Pesos and the Supan acquisition in Ecuador, completed in 3Q/2014. Performance in local currencies was notable in Brazil and virtually every country in the Latin Centro division.
Europe: The UK operation acquired as part of the Canada Bread transaction contributed to the 12.6 percent increase in cumulative net sales in the region. In the case of Iberia, sales reflected competitive pricing dynamics in the bread category during the third quarter; nonetheless, breakfast and snacks outperformed.
Gross profit in millions of Mexican Pesos (MXN)
Consolidated gross profit for the first nine months of the year increased 18.0 percent, with a 40 basis point expansion in the margin to 53.4 percent, driven by lower average raw material costs in most regions. Of particular note in the third quarter, manufacturing and logistic savings in Mexico more than offset the higher FX rate that impacted average raw material costs, resulting in a 60 basis point expansion in the margin. Furthermore, lower average raw material costs in North America led to a significant 170 basis point margin improvement.
Profit before other Income and Expenses
Profit before other income + expenses increased 19.3 percent in the first nine months of the year. The 20 basis point expansion in the margin reflects lower operating expenses as a percentage of net sales in Mexico, which were partially offset by: i) in North America, higher general expenses arising from the Canada Bread acquisition; ii) in Latin America, higher administrative and distribution expenses due to IT investments across the region; and iii) in Europe, higher general expenses due to the acquisition in the UK related to the Canada Bread transaction and a new plant in Spain.
Operating Income
Consolidated operating income for the first nine months of the year rose 29.6 percent, with a 70 basis point expansion in the margin to 7.1 percent. This primarily reflected the aforementioned benefits in Mexico, coupled with lower restructuring expenses in the US (938 million MXN in 9M/2015 versus 1’625 million MXN in 9M/2014). These factors were somewhat offset by integration-related costs in North America, Europe and Latin America coming from the Canada Bread transaction, the acquisition in Ecuador, a new plant in the Latin Centro division and manufacturing investments in Argentina.
Comprehensive Financial Result
Comprehensive financing resulted in a 2’996 million MXN cost for the first nine months of the year, compared to a 2’161 million MXN cost in the same period of last year, or 836 million MXN higher. This reflects the incremental interest expense related to the Canada Bread acquisition, as well as a higher MXN/USD FX rate which increased the Peso value of US Dollar denominated interest expenses.
Net Majority income
On a cumulative basis, net majority income rose 30.2 percent, with a 30 basis point increase in the margin to 3.1 percent, attributable to operating performance and a lower effective tax rate of 35.9 percent versus 37.4 percent in the same period of last year. Earnings per share for the period totalled 1.04 MXN compared to 0.80 MXN in the same period of last year.
Ebitda
Cumulative Ebitda increased 25.5 percent, while the margin expanded 70 basis points to 10.3 percent, resulting in a record Ebitda margin in Mexico for the YTD and third quarter periods.
Financial Structure
Total debt at September 30, 2015 was 68.4 billion MXN, compared to 62.2 billion MXN at December 31, 2014. The increase was primarily due to a 16 percent US Dollar revaluation that increased the Mexican Peso value of US Dollar-denominated debt, although the Company has continued to pay down debt in line with its commitment to de-lever. Average debt maturity was 8.4 years with an average cost of 4.4 percent. Long-term debt comprised 85 percent of the total; 75 percent of the debt was denominated in US Dollars and 25 percent in Canadian Dollars. The total debt to Ebitda ratio was 3.1 times compared to 3.2 times pro forma Canada Bread at December 31, 2014. The net debt to Ebitda ratio was 3.0 times.
About Grupo Bimbo
Grupo Bimbo is the largest baking company in the world in terms of volume and sales. Grupo Bimbo has 166 plants and approximately 1’700 sales centers strategically located in 22 countries throughout the Americas, Europe and Asia. Its main product lines include fresh and frozen sliced bread, buns, cookies, snack cakes, English muffins, bagels, pre-packaged foods, tortillas, salted snacks and confectionery products, among others. Grupo Bimbo produces over 10’000 products and has one of the largest direct distribution networks in the world, with more than 2.5 million points of sale, more than 52’000 routes and more than 127’000 associates (Image: usp).
