Bimbo U.S. profits jump 47% in second quarter

by World Grain Staff
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MEXICO CITY, MEXICO — Operating income of the U.S. and Canada business of Grupo Bimbo SAB de CV jumped 47% in the second quarter that ended June 30.

At 1.52 billion pesos ($94 million), operating profit was up 47% from 1.033 billion pesos in the same period a year earlier. Net sales were 28.307 billion pesos ($1.769 billion), up 31%.

Contributing to the improved profitability for Bimbo Bakeries USA were lower restructuring charges (198 million pesos or $12.4 million), versus 607 million pesos in the same period a year earlier, partly offset by information technology integration-related costs at Canada Bread.

Bimbo had been incurring large restructuring charges quarter after quarter since its 2011 acquisition of the fresh baking business of Sara Lee Corp.

Expanded second-quarter sales in the U.S. and Canada reflected the acquisition of Canada Bread and Vachon (accounting for 12 percentage points) and the benefit of a strong U.S. dollar.

“Pricing initiatives taken in the quarter pressured overall volumes,” Bimbo said. “Still, the sweet baked foods, breakfasts and snack categories enjoyed growth."

For the six months ended June 30, operating income for the U.S. and Canada business was 1.862 billion pesos, up 65% from 1.127 billion pesos in the first half of 2014. BBU sales were 53.242 billion pesos ($3.327 billion), up 33% from 39.963 billion pesos.

Even with the jump in earnings in the second quarter, BBU operating margins of 5.4% lagged Mexico considerably, at 14.9%.

Net majority income of Grupo Bimbo in the second quarter was 1.747 billion pesos ($109 million), up 8% from the second quarter of 2014. Net sales were 53.093 billion pesos ($3.317 billion), up 18%.
A margin expansion of 130 basis points in Mexico reflected “efficiencies across the distribution and manufacturing, as well as lower general expenses and cost reduction initiatives taken during the period,” the company said.

For the six months ended June 30, Grupo Bimbo net majority income was 2,641 million pesos ($165 million), up 29%. Sales were 102.962 billion pesos ($6.434 billion), up 19%.

While boosting sales as measured in pesos, the stronger U.S. dollar had a negative impact on progress toward debt reduction. While the company paid $104 million in debt during the second quarter, outstanding debt as of June 30 was 64.2 billion pesos, compared with 62.2 billion as of Dec. 31, 2014. The company attributed the rise to a 6% U.S. dollar revaluation that increased the peso value of dollar-denominated debt.

“Average debt maturity was 8.5 years with an average cost of 4.4%,” Bimbo said. “Long-term debt comprised 84% of the total; 74% of the debt was denominated in U.S. dollars, 25% in Canadian dollars and 1% in Mexican pesos. The total debt to EBITDA ratio was 3.1 times compared to 3.2 times pro forma Canada Bread at Dec. 31, 2014. The net debt to EBITDA ratio was 2.9 times.”

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