MEXICO: Grupo Bimbo FY income doubles on margin improvements
Grupo Bimbo profits surge
Grupo Bimbo, the world's largest baker, has booked a doubling of net profit in 2013, boosted by improved operating margins and a lower tax rate.
The company said net income jumped to MXN4.8bn (US$360.5m) from MNX2.02bn in the prior year. The bottom line was boosted by a lower tax rate, which dropped to 37.9% compared to 47.5% in 2012 and higher operating income.
Operating profit grew 41.7% to MXN10.47bn, with a 1.6 point expansion in margin, which rose to 5.9%.
The company also grew sales in the year. Revenues rose 1.7% to MXN173.1bn, as growth in the US and Mexico offset declines elsewhere in Latin America.
Last week, Bimbo moved to bolster its international business with a deal to buy Canada-based baker Canada Bread.
Click here for just-food's analysis of the planned acquisition.
GRUPO BIMBO REPORTS FOURTH QUARTER 2013 RESULTS
Mexico City, February 20, 2014 – Grupo Bimbo S.A.B. de C.V. (“Grupo Bimbo” or “the Company”) (BMV: BIMBO) today reported results for the fourth quarter and year ended December 31, 2013.
Fourth quarter sales rose 2.7% to Ps. 46.5 billion with good performance in Mexico and the United States; in Latin American, the unfavorable impact of FX fully offset solid results in local currencies. Excluding FX impact, growth would have been 4.5%. Consolidated gross margin expanded 160 basis points from the year ago period to 52.9%, reflecting lower average raw materials costs in Mexico and Iberia, which fully offset higher input costs in the United States and Latin America.
Profit margin before other income and expenses increased 90 basis points to 7.8% as a result of performance at the gross margin level, the benefit of synergies and efficiencies in the United States, and improvements in Latin America and Iberia operations; this was somewhat offset by higher expenses in the United States and Mexico, as well as a non-cash charge in Mexico.
Consolidated operating margin increased 60 basis points to 5.6%, reflecting the aforementioned factors, which more than offset integration costs in the United States and non-cash charges in the United States and Iberia. Net majority margin increased 230 basis points to 2.7%, reflecting operating improvements and a lower effective tax rate.
Net sales in the fourth quarter rose 4.2%, with pricing actions taken in certain categories during the period that had a negative impact on volumes. On a cumulative basis, sales rose 3.8%.
Net sales in dollar terms rose 2.8%, reflecting positive performance across all channels and increased market penetration in the sweet baked goods category partially offset by the impact of the California divestiture. For the full year, dollar sales rose 4.2%. Growth in pesos was 3.5% and 1.1% for the quarter and full year, respectively.
Every operation in the region generated positive growth in local currencies during the period, with Costa Rica, Chile and Honduras outperforming. Sales in pesos declined 1.8% compared to the year ago quarter, and 3.8% on a cumulative basis, reflecting the unfavorable impact of FX.
Sales rose 2% in euro terms reflecting good volume performance mainly in sweet baked goods and new product launches, despite the still challenging economic environment that put downward pressure on prices. The 6.9% decline in pesos for the quarter was due to the implementation of the ERP system in 2012, which resulted in an extraordinary high basis of comparison. Notwithstanding, peso sales for the full year rose 2.7% and in euro terms 3.7%.
Consolidated gross profit in the fourth quarter rose 5.8%, with a 160 basis points expansion in the gross margin to 52.9%. This reflected lower average raw materials costs in Mexico and Iberia, which fully mitigated higher raw material costs in the United States and Latin America. On a cumulative basis, consolidated gross margin expanded 1.6 percentage points to 52.3%.
Operating expenses as a percentage of sales in the fourth quarter increased 70 basis points to 45.1%. This primarily reflected: i) higher marketing expenses in Mexico and the United States; ii) a low basis of comparison as the operating expenses in 4Q 2012 benefited from a reclassification of the annual financial cost related to pension plans, in Mexico and the United States, to the interest expenses line; and iii) a non-cash impairment charge, Ps. $403 in Mexico and the United States. These factors were partially offset by: i) synergies and waste reduction initiatives in the United States (US$20 million); ii) operating improvements and no extraordinary charges in Latin America; and iii) a more efficient cost structure in Iberia. For the full year, operating expenses as a percentage of sales were almost unchanged at 44.7%, compared to 44.6% in 2012. Profit before Other Income & Expenses Profit before other income & expenses reflected performance at the gross profit level and the aforementioned effect of operating expenses, rising 16.4% in the period and 27.5% cumulatively. The margin expanded 0.9 and 1.5 percentage points respectively.
Operating income in the fourth quarter rose 15.8% while the margin expanded 60 basis points to 5.6%. This reflected the charges on the “Other Income & Expenses” line that included: i) Ps. 451 for integration costs in the United States (US$34 million); ii) Ps. 368 for a non-cash charge related to adjusting the current provision for MEPPs**; iii) Ps. 211 for a non-cash reserve for an account receivable of tax credits registered in Iberia, reflecting a more conservative approach towards the recovery of this benefit; and iv) Ps. 43 for integration costs in Latin America. On a cumulative basis, operating income for the full year totaled Ps. 10.5 billion, 41.7% higher than in 2012, with a 1.6 percentage point expansion in the margin to 5.9%.
Comprehensive Financing Result
Comprehensive financing resulted in a Ps. 811 million cost in the fourth quarter compared to a Ps. 875 million cost in the same period of last year. This reflected the benefit of a favorable comparison as explained by the aforementioned reclassification in 4Q 2012 of the annual financial cost of pension plans in Mexico and the United States, which was partially offset by an exchange loss of Ps. 59 million compared to a Ps. 13 million exchange gain in the prior year.
Net Majority Income
Net majority income increased substantially in the quarter, reflecting performance at the operating level and the lower effective tax rate of 27.0% compared to 82.2% in the year ago period. This reflects the benefit of the elimination of the deferred IETU tax (Impuesto Empresarial a Tasa Única) under Mexico’s new fiscal reforms. In addition, the year ago tax rate registered a tax charge to partially cancel deferred income tax benefits of previous fiscal losses in Brazil. On a cumulative basis, net majority income more than doubled, to Ps. 4.4 billion, while the net margin expanded 1.3 percentage points to 2.5%, reflecting performance at the operating level and the lower effective tax rate of 37.9% compared to 47.5% in 2012 for the aforementioned factors. Operating Income plus Depreciation and Amortization (EBITDA) EBITDA rose 22.7% to Ps. 4.9 billion in the quarter, while the margin expanded 1.7 percentage points to 10.7%, reflecting performance at the operating level as well as non-cash items. EBITDA for the full year increased 23.1% to Ps. 17.3 billion, with a 1.7 percentage point expansion in the margin to 9.8%.
The Company’s cash position as of December 31, 2013 totaled Ps. 2.5 billion, compared to Ps. 4.3 billion at the end of 2012. Total debt at December 31, 2013 was Ps. 40.3 billion, compared to Ps. 42.0 billion at December 2012. This reflected payments of Ps. 1.1 billion during the year. The average maturity of debt is five years with an average cost of debt of 4.6%. The total debt to EBITDA ratio was 2.3 times compared to 3.0 times at December 2012, reflecting the Company’s disciplined cash management and debt reduction strategy. Long-term debt comprised 80% of the total; separately, 95% of the debt was denominated in US dollars, maintaining a natural economic and accounting hedge on total debt, and in line with the Company’s strong cash flow in dollars.
Original source: Grupo Bimbo
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