Higher grain costs have hit half-year profits at Mexican poultry processor Industrias Bachoco.

The company said on Friday (29 July) that its net income reached MXN293.7m (US$25m) in the six months to the end of June, compared to MXN894m a year earlier.

The fall in first-half profits came as second-quarter net income dropped from MXN618m a year ago to MXN138.4m.

“Our second-quarter results were characterized by the challenge facing the poultry industry worldwide, higher grain costs,” CEO Rodolfo Ramos. “Given this is the largest component of the Company’s cost of sales, margins and profitability were affected despite efficiency improvements and hedging strategies.”

Nevertheless, Bachoco saw its top line improve in both the second quarter and the first six months of 2011.

Bachoco’s net sales increased 4.3% to MXN12.66bn. Over the second quarter, net sales rose 6.7% to MXN6.62bn.

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Ramos said: “Even with the increase in our cost of sales, the operating results for our business during the second quarter were positive. We capitalised on the higher demand for chicken and balanced feed products in the Mexican market, thereby achieving greater sales volume and revenues from these business lines.”

However, he added: “The Company’s egg business continued to be affected by a large oversupply in the Mexican market; therefore egg sales volume and prices declined in the second quarter.”