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Bachoco Announces First Quarter 2009 Results

by 5m Editor
21 April 2009, at 9:52am

MEXICO - Industrias Bachoco S.A.B. de C.V. (Bachoco), the country's leading producer and processor of poultry products, has released its for the first quarter ended 31 March 2009.

Bachoco has once again achieved its highest quarterly sales – up 23.7 per cent on the same quarter of 2008. The growth was achieved across all main business lines: 28.2 per cent in chicken, 11.0 per cent in table eggs and 45.9 per cent in swine, as supply conditions improved in the market. Operating profit increased 102.5 per cent during the quarter, while EBITDA was 66.3 per cent higher at 654.3 million pesos (MXP) in Q1 2009 from MXP 393.3 million in Q1 2008. Earnings per share (EPS) was MXP 0.46 (US$ 0.39 per ADS) versus MXP 0.38 (US$ 0.32 per ADS) in Q1 2008.

CEO's Comments

Cristobal Mondragon, Bachoco's CEO, stated, "During the quarter, the Mexican economy continued slowing down following the global trend, and we continued to experience a further depreciation of the Mexican peso against the US dollar.

"In our industry, however, there was a favourable balance between supply and demand that allowed us to transfer part of our past cost increases to our prices in our main product lines. This, combined with our internal efforts to serve our clients properly by optimizing the product mix (we made adjustments to our supply relative to the same quarter of 2008), and improved efficiency, allowed us to increase total sales to a new historical record and achieve positive results in terms of operating and net income.

"In terms of EBITDA, we achieved a positive margin of 11.2 per cent, larger than the 8.3 per cent margin registered in Q1 2008.

"As we reported last quarter, our comprehensive financial cost continued to be affected by the depreciation of the Mexican peso against the US dollar given our hedging position. However, we have already restructured most of our derivative portfolio to mitigate this effect and expect minor effects in the second half of the year.

"We expect to continue delivering positive results in the second quarter of the year," concluded Mr Mondragon.

First Quarter 2009 Results

Net sales

Net sales for the first quarter were MXP 5,866.8 million, 23.7 per cent above the MXP 4,743.3 million reported in Q1 2008. This increase was mainly driven by higher sales in the main business lines: chicken sales rose 28.2 per cent, while table eggs sales increased 11.0 per cent, and swine sales rose 45.9 per cent.

Net sales (Q1 2009 versus Q1 2008; per cent)
Net Sales Q1 2009 Q1 2008
Chicken 79.0 76.2
Eggs 10.2 11.4
Balanced feed 5.8 7.8
Swine 1.0 0.9
Other lines 4.0 3.7
Total company 100.0 100.0

Operating results

Bachoco's first quarter gross margin was 18.8 per cent, higher than the 17.4 per cent reached in the same quarter of 2008. The increase in the gross margin is attributed to a 34.2 per cent increase in sales prices, which partially offset the 21.6 per cent increase in our cost of sales, mainly driven by higher cost inventories of corn and soy bean meal.

The Company had an operating profit of MXP 494.8 million, compared to an operating profit of MXP 244.4 million in the same quarter 2008. Said result represents an operating margin of 8.4 per cent for the first quarter 2009, compared to an operating margin of 5.2 per cent in the same period of 2008.

Operating expenses amounted to MXP 606.8 million. Even when operating expenses increased by 4.5 per cent during the first quarter, operating expenses as a percentage of sales decreased when compared to the same period of 2008.

EBITDA was positive and amounted to MXP 654.3 million, 66.3 per cent above the MXP 393.3 million recorded in the same period of 2008.

Taxes

Total taxes recognized by the Company during the quarter were MXP 67.1 million.

Comprehensive financial income (cost)

The Company's financial comprehensive cost amounted to MXP 119.8 million during the quarter, compared to a financial comprehensive income of MXP 30.6 million reported in the same quarter last year.

Net income

Net majority income for the first quarter was MXP 273.9 million, or MXP 0.46 per share (US$0.39 per ADS), compared to a net majority income of MXP 230.8 million, or MXP 0.38 per share (US$0.32 per ADS) reported in the same period 2008.

Balance sheet

Cash and cash equivalents were MXP 2,448.8 million as of 31 March 2009, compared with MXP 3,162.0 million reported on the same date of 2008. Said decrease was mainly driven by larger inventories. The total debt outstanding as of 31 March 2009 amounted to MXP 616.8 million.

Results by Business Segment

Chicken

Results for the chicken business line were strong during the first quarter. Sales of chicken products increased 28.2 per cent as chicken prices rose 30.0 per cent; however, this result was partially offset by a 1.3 per cent decrease in volume from the previous year. During this quarter the Company was able to transfer part of its cost increases to chicken prices.

Table Eggs

Sales of eggs increased by 11.0 per cent during the first quarter as egg prices rose 17.3 per cent from the previous year, but were partially offset by a 5.4 per cent decrease in volume mainly driven by the adjustment in the production level of the company.

Balanced Feed

The balanced feed business line remained affected by higher costs in the inventories of raw materials. Sales of balanced feed decreased by 8.0 per cent, while balanced feed prices increased by 19.6 per cent, but were offset by a strong decrease in volume sold of 23.1 per cent, as demand in the sector declined.

Swine

Demand and supply were stable during this quarter. Swine sales significantly increased by 45.9 per cent from Q1 2008, and were driven by a 50.3 per cent increase in swine prices, partially offset by a 2.9 per cent decrease in volume.

Other lines

Sales of other lines increased 30.1 per cent mainly due to higher by-product sales, such as poultry manure.

Outlook

Bachoco expects the peso-USD exchange rate to remain volatile, and the worldwide decrease in the costs of raw materials to benefit its cost of sales during 2009. The Company foresees a good balance between supply and demand in 2009's second quarter.

Industrias Bachoco S.A.B. de C.V. (also referred to in this report as Bachoco or the Company) is the largest poultry company in Mexico, with over 700 production and distribution facilities currently organized in nine complexes throughout the country. Bachoco's main business lines are: chicken, eggs and balanced feed, among others. The Company is also present in other businesses like swine, beef, margarine and turkey in Mexico. The Company's headquarters are in Celaya, Guanajuato, located in Mexico's central region.