Profits increase for Grupo Bimbo's North American business

by Josh Sosland
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BBU
Operating income of the North American business of Grupo Bimbo in the first quarter of 2017 was up 21% from the first quarter of 2016.
 
MEXICO CITY – Operating income of the North American business of Grupo Bimbo SAB de CV was 1.406 billion pesos ($74 million) in the first quarter ended March 31, up 21% from 1.163 billion pesos in the first quarter of 2016. Sales were 34.002 billion pesos ($1.789 billion), up 13% from 30.181 billion.

Bimbo attributed the jump in sales to favorable exchange rate moves. During the quarter, the value of the Mexican peso gained 10% relative to the U.S. dollar, strengthening results reported in pesos.

Excluding foreign exchange swings, the North American sales picture was mixed at best.

 

BBU
The total branded business remained flat but trended favorably, Bimbo said.
 
“Sales in strategic brands continued to rise, while the total branded business remained flat but trended favorably, supported by the mainstream category,” Bimbo said. “Notwithstanding these favorable developments, overall volumes declined as a result of continued pressure on the industry, soft performance in the non-branded business in the United States, the frozen business in the region and the premium category due to a more aggressive competitive environment.”

The operating income margin of the BBU business widened modestly to 4.1% from 3.9% in the first quarter of 2016.

BU
Bimbo closed its baking plant in Subury, Pa. in January.
 
Drags on operating margin included increased marketing expenses in North America aimed at growing strategic brands, Bimbo said. The closing of two baking plants in North America also was a factor. Bimbo had previously announced plans to close baking plants by the end of January 2017 in Lubbock, Texas, U.S., and Sunbury, Pennsylvania, U.S. Earlier in 2016, BBU closed its Hastings, Nebraska, U.S., baking plant, and in the second quarter of 2017 the company will shutter a baking plant in St-Côme-Linière, Quebec, Canada.

Consolidated net income of Grupo Bimbo in the first quarter was 985 million pesos ($52 million), down 31% from 1.428 billion pesos in the first quarter of 2016. Sales were 22.342 billion pesos ($1.176 billion), up 12% from 19.944 billion in the first quarter last year.

Bimbo said its adjusted EBITDA margin narrowed 120 basis points because of integration and restructuring expenses in North America, Iberia and Argentina. Profitability also tightened because of a higher effective tax rate.

BBU
Bimbo acquired Stonemill Bakehouse in March.
 
Bimbo said that during the first quarter the company acquired Grupo Adghal in Morocco, a baking company with about $11 million in annual sales. As previously reported, the company said it purchased Stonemill Bakehouse during the quarter, a baker of slow crafted baked bread.

Additionally, Bimbo said Diego Gaxiola will become Grupo Bimbo’s chief financial officer when Guillermo Quiroz retires Aug. 1.

Total debt to adjusted EBITDA was 2.6 times at the end of the first quarter, versus 2.8 times three months earlier.

 

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