Industrias Bachoco Announces Third Quarter 2012 Results

CELAYA, Mexico, Oct. 24, 2012 /PRNewswire/ -- Industrias Bachoco S.A.B. de C.V., "Bachoco" or "the Company", announced today its unaudited results for the third quarter 2012 ("3Q12") and first nine months ("9M12) ended September 30, 2012. All figures have been prepared in accordance with International Financial Reporting Standard ("IFRS"), and are presented in nominal million Mexican Pesos ("Ps.").

HIGHLIGHTS (3Q12 vs. 3Q11)

  • Net sales increased 52.0%.
  • EBITDA margin reached 9.6%.
  • Earnings per share totaled Ps. 1.05 (Ps. 12.55 per ADS), compared to a net loss per share of Ps. 0.18 (-Ps. 2.10 per ADS) in 3Q11.

CEO COMMENTS

"Bachoco's third quarter results were sound, due to an adequate balance between supply and demand in the Company's main business lines, improvements in production efficiencies as a result of investments in productivity projects, as well as a reduction in operating expenses as a percentage of sales, which allowed Bachoco to offset cost increases, which have been driven by sustained raw materials price increases.

The Company was able to sell all of its chicken and egg production, and recovered a portion of price lags within these business lines.

In addition, Bachoco's U.S. complex continued to operate with positive results, with its integration into the Company in-line with Bachoco's overall strategy.

Furthermore, the Company successfully issued its first local bond during the third quarter, which will be mainly used to pre-pay some debt as well as to diversify and make the Company's debt structure more efficient. It is worth nothing that the Company's financial position remains strong, with negative debt net."

BOND ISSUANCE

On August 29, 2012, the Company announced a public issuance of local bonds ("Certificados Bursatiles") totaling Ps. 1,500 million, for a tenor of 5 years, maturing in 2017. The bonds issued by Bachoco will have an interest rate of 28-day TIIE + 0.60%.

EXECUTIVE SUMMARY

The following financial information is expressed in millions of nominal Mexican Pesos, with comparative figures for the same periods in 2011.


QUARTERLY

ACCUMULATED

In millions of pesos

3Q11

3Q12

Var.

2011

2012

Var.

Net sales

Ps. 

6,514.7

Ps. 

9,901.0

52.0%

Ps. 

19,173.8

Ps. 

28,642.7

49.4%

Net sales Mexico

6,514.7

7,758.4

19.1%

19,173.8

22,721.6

18.5%

Net sales in the U.S.

0.0

2,142.6

100.0%

0.0

5,921.1

100.0%

Cost of sales

5,955.1

8,342.6

40.1%

16,882.1

24,222.7

43.5%

Gross profit

559.6

1,558.4

178.5%

2,291.7

4,420.0

92.9%

Total expenses

708.0

839.9

18.6%

2,100.8

2,498.5

18.9%

EBITDA1

28.7

955.0

3231.0%

724.4

2,651.7

266.1%

Net majority income (loss)

(105.6)

627.5

N/A

190.2

1,604.9

743.7%

1Operating income plus depreciation and amortization.

The Company's 3Q12 net sales totaled Ps. 9,901.0 million, 52.0% higher than the Ps. 6,514.7 million reported in 3Q11. This resulted from strong increases in sales across all business lines. In particular, chicken sales increased year-over-year mainly as a result of the integration of Bachoco's U.S. subsidiary "OK Foods", which was consolidated in November 2011.

The Company's production costs continued to be negatively impacted by persistently high input costs, primarily grain and soybean meal.

Gross profit in 3Q12 was Ps. 1,558.4 million resulting in a gross margin of 15.7 % compared to a gross profit of Ps. 559.6 million with a margin of 8.6% in 3Q11. Meanwhile, gross margin totaled 15.4% in 9M12, compared to 12.0% in the same period 2011.

In 3Q12, total expenses represented 8.5% over total sales, compared to 10.9% over total sales in 3Q11.  This was as a result of strict expense control across all of Bachoco's operations.

EBITDA in 3Q12 reached Ps. 955.0 million, for a margin of 9.6%, compared to EBITDA of Ps. 28.7 million, for a margin of 0.4% in 3Q11. EBITDA margin in 9M12 was 9.3%, compared to 3.8% reported in the same period 2011.

The comprehensive financial result was income of Ps. 19.9 million in 3Q12, and Ps. 113.3 million in the first nine months 2012. This was mainly due to interest earned on the Company's cash position.


QUARTERLY

ACCUMULATED

In million of pesos

3Q11

3Q12

Var.

2011

2012

Var.

Financial income (expense) net

Ps. 

74.6

Ps. 

19.9

-73.3%

Ps. 

137.8

Ps. 

113.0

-18.0%

   Financial income 

94.3

64.5

-31.6%

192.3

207.3

7.8%

   Financial expense

19.7

44.6

126.4%

54.5

94.3

73.0%

Total taxes in 3Q12 reached Ps. 172.4 million; resulting from Ps. 117.0 million in income taxes and Ps. 55.3 million in deferred income taxes.

Net majority income was Ps. 627.5 million in 3Q12 (Ps. 1.05 per share), compared to a net majority loss of Ps. 105.6 (-Ps. 0.18 per share) reported in 3Q11. Meanwhile, net majority income in the first nine months 2012 was Ps. 1,604.9 million (Ps. 2.67 per share), compared to net majority income of Ps. 190.2 million (Ps. 0.32 per share) reported in the same period 2011.

BALANCE SHEET

Cash and equivalents as of September 30, 2012 totaled Ps. 4,526.0 million compared to Ps. 3,036.4 million reported as of December 31, 2011. Total cash increased during the quarter mainly due to the income from the bond issuance as well as cash generated by the Company.

As of September 30, 2012, total debt was Ps. 2,717.4 million pesos, compared to Ps. 1,837.4 million reported as of December 31, 2011. The Company's debt is broken down as follows:

In millions of pesos

As of Dec 31, 2011

As of Sep 30, 2012

Var.

Short term debt

Ps.    

1,453.0

Ps.       

1,141.7

-21.9%

Long term debt

384.4

1,575.7

309.9%

Total debt

1,837.4

2,717.4

47.9%

Net debt2

-1,199.0

-1,808.6

50.8%

2 Net debts equal to: total debt minus total cash and equivalents.

CAPITAL EXPENDITURES

Total CAPEX as of September 30, 2012 totaled Ps. 664.6 million, mainly allocated towards productivity projects and maintenance.

STOCK INFORMATION

As of September 30, 2012


Total Shares

600,000,000


Total free float

17.25%


Total shares in treasury (as of September 30, 2012)

67,441


Total shares in treasury (as of October 24, 2012)

299,761


Market cap (millions)

Ps.

15,546



BMV

NYSE

Ticker Symbol

Bachoco

IBA

Closing price as of September 30, 2012

Ps.

25.91

$24.06

Maximums closing price within the 52 weeks

Ps.

26.35

$ 24.06

Minimums closing price within the last 52 weeks

Ps.

20.30

$ 17.40

Pricing yield in 2012


16.2%

26.2%

ANALYST COVERAGE

INSTITUTION

ANALYST

CONTACT INFO

GBM- Grupo Bursatil Mexicano, Casa de Bolsa

Miguel Mayorga Tena

mmayorga@gbm.com.mx

BBVA Research – Food & Beverage Analyst

Fernando Olvera Espinosa de los Monteros

fernando.olvera@bbva.com

Actinver, Casa de Bolsa

Eduardo Fonseca Fons

efonseca@actinver.com.mx

COMPANY DESCRIPTION

Industrias Bachoco is the leader in the Mexican poultry industry, and one of the largest poultry producers globally.

The Company was founded in 1952, and became a public Company in 1997, via a public offering of shares on the Mexican and The New York Stock Exchange. Bachoco is a vertically integrated Company headquartered in Celaya, Guanajuato located in Central Mexico. Its main business lines are: chicken, eggs, balanced feed, swine, and turkey and beef value-added products. Bachoco owns and manages more than a thousand facilities, organized in nine productive complexes and 64 distribution centers in Mexico, and a productive complex in the United States. Currently the Company employs more than 25,000 people. In 2011, the Company reported net sales of Ps. 27.7 billion.

The Company is rated AA (MEX), representing high credit quality by Fitch Mexico, S.A. de C.V., and HR AA+ which signals that the Company and the offering both have high credit quality by HR Ratings de Mexico S.A. de C.V.

DISCLAIMER

The document contains certain information that could be considered forward looking statements concerning anticipated future events and performance of the Company. The statements reflect management's current beliefs based on information currently available and are not guarantees of future performance and are based on our estimates and assumptions that are subject to risks and uncertainties, including those described in our Annual Information Form, which could cause our actual results to differ materially from the forward-looking statements contained in this document. Those risks and uncertainties include risks associated with ownership in the poultry industry, competition for investments within the poultry industry, shareholder liability, governmental regulation, and environmental matters. As a result, there can be no assurance that actual results will be consistent with these forward-looking statements. Except as required by applicable law Industrias Bachoco, S.A.B. de C.V. undertakes no obligation to publicly update or revise any forward-looking statement.

APPENDICES TO FOLLOW

For reference, some figures have been translated in millions of U.S. dollars ("USD") using an exchange rate of $12.86, that correspond to the close of September 30, 2012, according to Mexico's National Bank.

  1. Consolidated Statement of Financial Position
  2. Consolidated Statement of Income
  3. Consolidated Statement of Cash Flows
  4. Derivatives Position Report

1.      Consolidated Statement of Financial Position

-Unaudited-



U.S. Dollar


As of Dec 31,

As of Sept 30,

As of Sept 30,

In million of pesos

2011

2012

2012 (1)

ASSETS




Cash and cash equivalents

$ 3,036

$ 4,526

$ 352

Total accounts receivable

2,333

2,129

166

Inventories

5,809

6,728

523

Other current assets

712

284

22

Total current assets

11,890

13,666

1,063

Net property, plant and equipment

11,755

11,557

899

Other non current assets

840

1,285

100

TOTAL ASSETS

$ 24,484

$ 26,508

$ 2,061

LIABILITIES




Notes payable to banks

1,453.0

1,141.7

89

Accounts payable

2,422

2,260

176

Other taxes payable and other accruals

606

722

56

Total current liabilities

4,481

4,123

321

Long-term debt

384.4

1,575.7

123

Other non current liabilities

58

62

5

Deferred income taxes

2,522

2,577

200

Total long-term liabilities

2,965

4,215

328

TOTAL LIABILITIES

$ 7,446

$ 8,338

$ 648

STOCKHOLDERS' EQUITY




Capital stock

1,393

1,393

108

Commission in shares issued

459

459

36

Repurchased shares

93

102

8

Retained earnings

13,975

15,279

1,188

Others accounts

1,059

873

68

Total majority stockholder's equity

16,978

18,105

1,408

Minority interest

60

64

5

TOTAL STOCKHOLDERS' EQUITY

$ 17,038

$ 18,170

$ 1,413

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$ 24,484

$ 26,508

$ 2,061

 

2.    Consolidated Statement of Income

-Unaudited-


Third Quarter

U.S. Dollar (1)


Accumulated

U.S. Dollar (1)

In million of pesos as of September 30:  

2011

2012

Var.

2012


2011

2012

Var.

2012

Net sales

$ 6,515

$ 9,901

52.0%

$         770


$ 19,174

$ 28,643

49.4%

$      2,227

Cost of sales

5,955

8,343

40.1%

649


16,882

24,223

43.5%

1,884

Gross profit

560

1,558

178.5%

121


2,292

4,420

92.9%

344

total expenses

708

840

18.6%

65


2,101

2,498

18.9%

194

Operating income

(148)

719

-584.2%

56


191

1,922

906.4%

149

EBITDA Result

29

955

3231.0%

74


724

2,652

266.1%

206

Other income (expense) net

(64)

64

-199.4%

5


(92)

17

-118.9%

1

Comprehensive financing (cost) income

75

20

-73.3%

2


138

113

-18.0%


Minority net income

0

(2)

-734.2%

(0)


(1)

(4)

322.2%

(0)

Income before income tax, asset tax

(138)

800

-681.6%

62


236

2,048

768.1%

150

Total income taxes

(32)

172

-634.0%

13


46

443

869.6%

9

Net majority income

(105)

628

-696.2%

49


190

1,605

743.7%

142

Net income

(106)

628

-694.3%

49


190

1,605

743.7%

142

Net income per share (EPS)

(0.18)

1.05

-696.2%

0.08


0.32

2.67

0.0%

0.24

weighted average shares outstanding

600

600

0.0%

600


600

600

0.0%

600











Gross margin

8.6%

15.7%


15.7%


12.0%

15.4%


15.4%

Operating margin

-2.3%

7.3%


7.3%


1.0%

6.7%


6.7%

EBITDA margin

0.4%

9.6%


9.6%


3.8%

9.3%


9.3%

Net margin

-1.6%

6.3%


6.3%


1.0%

5.6%


5.6%

3. Consolidated Statement of Cash Flow

-Unaudited-







U.S. Dollar


As of Sept 30,

As of Sept 30,

As of Sept 30,

In million of pesos

2011

2012

2012 (1)

NET MAJORITY INCOME BEFORE INCOME TAX

236

2,048

159

ITEMS THAT DO NOT REQUIRE CASH:

-

-

-

ITEMS RELATING TO INVESTING ACTIVITIES:

571

651

51

      Depreciation and others

533

730

57

      Income (loss) on sale of plant and equipment

37

63

5

      Other Items

-

(142)

(11)

ITEMS RELATING TO FINANCING ACTIVITIES:

38

55

4

      Interest income (expense)

38

55

4

      Other Items

-

-

-

NET CASH GENERATED FROM NET INCOME BEFORE TAXES

845

2,754

214

CASH GENERATED OR USED IN THE OPERATION:

(845)

(1,454)

(113)

   Decrease (increase) in accounts receivable

141

22

2

   Decrease (increase) in inventories

(974)

(1,234)

(96)

   Decrease (increase) in accounts payable

4

(152)

(12)

   Decrease (increase) in other liabilities

(16)

(91)

(7)

NET CASH FLOW FROM OPERATING ACTIVITIES

(1)

1,301

101

INVESTING ACTIVITIES




NET CASH FLOW FROM INVESTING ACTIVITIES

(551)

(342)

(27)

      Acquisition of property, plant and equipment

(548)

(665)

(52)

      Proceeds from sales of property plant and equipment

75

20

2

      Other Items

(79)

304

24

CASH FLOW SURPLUS (REQUIREMENTS OF) TO BE USED IN




FINANCING ACTIVITIES

(552)

959

75

Net cash provided by financing activities:

(367)

531

41

   Proceeds from loans

895

2,354

183

   Principal payments on loans

(715)

(1,485)

(115)

   Dividends paid

(300)

(300)

(23)

   Other items

(247)

(39)

(3)

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS

(911)

1,490

116

CASH AND INVESTMENTS AT THE BEGINNING OF YEAR

4,177

3,036

236

CASH AND INVESTMENTS AT END OF PERIOD

3,266

4,526

352

 

4.      Derivatives Position Report

Third Quarter 2012


Thousands of Mexican Pesos, as of September 30, 2012



Type of Financial
Instrument

Objective



Reasonable Value

Amounts Due
By Year




Notional

Value of the Related Commodity

Guaranties Required




3Q-2012

2Q-2012

3Q-2012

2Q-2012




Forwards and knock
out forwards.

Hedge and negotiation

$315,154

$12.86

$13.34

$   2,458

-$10,238

2012

The deals consider the possibility of margin calls but not another kind of guarantee







Futures for corn and Soybean meal

Hedge

$111,824

Month

Price

Month

Price

$15,892

$ 23,548

2012 and 2013



Corn

Corn





in USD per bushel

in USD per bushel







DEC-2012

$7.5625

JUL-2012

$6.7250







MAR-2013

$7.5950

SEP-2012

$6.2850







MAY-2013

$7.5650

DEC-2012

$6.3475







JUL-2013

$7.4900

MAR-2013

$6.4375







SEP-2013

$6.5900

MAY-2013

$6.4775









JUL-2013

$6.5175







Soybean Meal

Soybean Meal







In USD per ton

In USD per ton







DEC-2012

$486.90

AUG-2012

$429.50







JAN-2013

$483.90

SEP-2012

$424.00







MAR-2013

$468.40

OCT-2012

$416.30







MAY-2013

$447.00

DEC-2012

$413.10







JUL-2013

$435.40

JAN-2013

$408.10









MAR-2013

$387.70









MAY-2013

$373.90









JUL-2013

$371.80







SWAP, interest rate

Hedge

$330,939

TIIE to  28
days

4.8075%


$      490

$          -

2012 y 2013












































 

Notes:

  • The total financial instruments do not exceed 5% of total assets as of September 30, 2012.
  • A negative value means an unfavorable effect for the Company.
  • The notional value represents the net position as of September 30, 2012 at the exchange rate of Ps.12.86 per USD.

 

 

Third Quarter 2012














Thousands of Mexican Pesos, as of September 30, 2012


PROBABLE SCENARIO









Type of Financial Instrument

Reasonable Value

Value of the Related Commodity

Effect on the Income
Statement










as of September 30,

Reference Value

Effect on the Cash Flow(3)









2012

-2.5%

2.5%

5.0%

-2.5%

2.5%

5.0%









Forwards and knock out forwards(1)

$                 2,458

$12.54

$13.18

$13.50

 Direct 

-$5,421

$4,372

$3,918



































-5%

5%

10%


-5%

5%

10%









Futures of corn: (2)

$               15,892

$7.1844

$7.9406

$8.3188

 The effect will materialize as the inventory is consumed 

$12,205

$19,579

$ 23,266





















Futures of soybean meal: (2)

$462.56

$511.25

$535.59





















Options for corn and soybean meal (2)

$                       -









































-2%

-1%

1%


-2%

-1%

1%









SWAP interest rate(4)

$                    490

2.8075%

3.8075%

5.8075%

 Direct

-$  3,173

-$  1,341

$ 2,321


















































 


Third Quarter 2012

Thousands of Mexican Pesos, as of September 30, 2012

PROBABLE SCENARIO


Reasonable Value

Value of the Related Commodity

Effect on the Income Statement

Effect on the Cash Flow(3)

Type of Instrument

as of September 30,

Reference Value


2012

-50%

-25%

25%

50%

-50%

-25%

25%

50%

Forwards and knock out forwards(1)

$                2,458

$6.43

$9.65

$16.08

$19.29

 Direct 

-$155,119

-$76,330

$19,079

$ 38,369

 

Notes:

  • A negative value means an unfavorable effect for the Company.
  • Corn and soybean meal are presented in U.S. dollars per bushel in the case of corn and per short-tones in the case of soybean meal.
  • Even when table set above shows corn and soybean prices for contracts of December 2012, the effect on the Company's cash flow corresponds to the total positions effects.

(1) The reference value is the exchange rate of Ps. $12.86 per USD, as of September 30, 2012.

(2) The reference value is the Futures of corn for December 2012, is $7.5625 USD/bushel and Soybean meal for December 2012, $486.90 USD/ton.

(3) The Company has credit lines with the majority of its counterparts, so that the effect in cash flow is lower than the amount shown.

(4) The reference value is the 28 days TIIE rate of 4.8075%, as of September 30, 2012.

 

SOURCE Industrias Bachoco S.A.B. de C.V.



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