On the money: Grupo Bimbo pledges $780m capex investment
Grupo Bimbo's chief executive Daniel Servitje told analysts that the company plans to invest US$780m in 2012
Mexican bakery giant Grupo Bimbo has said it will nearly double its capital expenditure this year to cut costs in the US and boost its international presence.
Speaking after Bimbo reported falling profits in 2011, chief executive Daniel Servitje told analysts the company plans to invest US$780m in 2012, compared with $400m last year, its largest capex budget to date.
"This will be a year of significant investment in further extending the market penetration of international operations, achieving synergies in the US and furthering our strategy of being a low-cost producer," Servitje said.
"In fact, the capex budget for Grupo Bimbo is the largest in our history. Much of that will be allocated to the manufacturing base but also investments in logistics and systems will happen across the board. These investments are part of the company strategy to advance towards our 2015 vision," he added.
The vision includes initiatives such as health and nutrition, ensuring a low-cost supply chain, a focus on the company's leadership and management model, and talent developments.
Bimbo's profits fell last year but sales increased 14.1%. The company blamed the lower earnings on higher raw material costs, integration expenses associated with the acquisition of Sara Lee's US and Spanish business and Fargo operations in Argentina, and the depreciation of the Mexican peso.
As a consequence, the group's gross margin fell to 51%, down from 51.9% in the year-ago quarter. Operating margin fell to 7% from 8.8%.
Looking ahead to this year, Servitje said: "We believe volumes will continue to strengthen over the year, while raw material prices are likely to remain volatile. In terms of our performance, there are some key things to consider, including the integration of the two acquisitions, which will enhance revenue and operating income, but will continue to be dilutive on a margin basis."
The company did not give any 2012 full-year guidance.
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