Industrias Bachoco Announces its 2010 Third Quarter Results

Oct 21, 2010, 17:30 ET from Industrias Bachoco, S.A.B. de C.V.

CELAYA, Mexico, Oct. 21 /PRNewswire-FirstCall/ -- Industrias Bachoco S.A.B. de C.V. ("Bachoco" or "the Company") (NYSE: IBA; BMV: Bachoco), Mexico's leading producer and processor of poultry products, announced today its unaudited results for the third quarter ended September 30th, 2010. All figures have been prepared in accordance with Mexican GAAP. Following Mexican Accounting Principles, all data is presented in nominal Mexican pesos.

Highlights:

  • The Company registered a 12.2% increase in total sales when compared with the same 2009 quarter.
  • Bachoco's EBITDA totaled Ps. 983.8 million, with a margin of 15.6% in 3Q10 vs an EBITDA margin of 3.6% in 3Q09.
  • EPS for the quarter were up at Ps. 1.06 (US$ 1.01 per ADS) compared to a net loss per share of Ps. 0.09 (US$ 0.08 per ADS) in 3Q09.

CEO's Comments:

Cristobal Mondragon, Bachoco's CEO, stated, "The third quarter of the year was traditionally the weakest quarter for our Company, but this quarter it was quite different. We had a good balance between supply and demand in our chicken business line, which allowed us to capitalize our productivity and supply efforts and achieve stronger results during the third quarter.

"Swine and balanced feed business lines had a good performance, resulting in strong results for this business lines.

"Our egg business line, on the contrary, was affected by lower demand, impacting the volume and sales of these products.

"As a result, we reach a two digit EBITDA for the quarter; and were able to reverse the net loss reported in 3Q09, registering a significant net profit for the quarter.

"Finally, I want to stress that our financial position remains solid with cash and cash equivalents of Ps. 3,778.4 million," concluded Mr. Mondragon.

THIRD QUARTER 2010 RESULTS

Net sales

3Q09 (%)

3Q10 (%)

Chicken

79.2

83.1

Eggs

 9.7

 7.6

Balanced feed

6.5

 5.4

Swine

 1.0

 1.3

Other lines

 3.6

 2.6

Total Sales

100.0%

100.0%

Net Sales

Net sales for the quarter amounted to Ps. 6,297.3 million, 12.2% above the Ps. 5,613.6 million reported in the same 2009 quarter. This increase was mainly driven by higher chicken and swine sales, which were partially offset by a decrease in eggs, balanced feed and other business lines sales.

Operating Results

Bachoco's third quarter gross profit was Ps. 1,490.6 million, with a margin of 23.7%, higher than 12.0% margin reported in 3Q09. This result is directly attributed to higher sales in our chicken business as well as lower cost of sales in our main business lines.

The Company registered an operating profit of Ps. 812.1 million, which is also greater than the operating profit of Ps. 35.3 million registered in the same 2009 quarter. The operating margin for the quarter was 12.9%.

EBITDA amounted to Ps. 983.8 million, above the Ps. 207.5 million reported in the same 2009 quarter.

Net Majority Income

Net majority income for the third quarter amounted to PS. 635.1 million, or Ps. 1.06 per share (US$1.06 per ADS), compared to a net majority loss of Ps. 53.1 million, or Ps. 0.09 loss per share (US$0.08 loss per ADS) reported in the same 2009 period.

RESULTS BY BUSINESS SEGMENT

Chicken

Sales of chicken products increased 17.7%, when compared to 3Q09, as a result of a 3.0% increase in volume and a 14.2% increase in chicken prices. This strong increase in sales is attributed to a better balance between supply and demand in the Mexican industry as well as a stronger demand for our chicken products.

Table Eggs

Sales of table eggs products decreased by 11.7% during the third quarter, as egg prices decrease 10.3% and volume fell by another 1.6%. This is the result of a lower demand for egg products and the oversupply registered by the industry.

Balanced Feed

Sales of balanced feed decreased 6.5% following a 5.9% decrease in prices and a 0.6% decrease in balanced feed volume sold; nonetheless the Company managed to improve its gross margin from the same quarter of 2009.

Swine

The swine business line registered a solid third quarter. Sales were sound and rose 36.9%, as swine prices increased 26.8% and volume sold rose 7.9% increase in the period. Demand for live swine was stronger during this quarter.

Other Lines

Sales of other lines decreased 18.6% when compared with the same quarter of 2009, as sales of by-products declined.

FIRST NINE MONTHS OF 2010

Net Sales

Net sales for the first nine months of 2010 amounted to Ps. 18,432.6 million, up 5.5% from the Ps. 17,471.5 million reported in the same 2009 period. The increase was mainly driven by the 9.3% increase in chicken sales and, 28.6% in swine sales, both of which were partially offset by the 9.3% decrease in table eggs sales and 7.4% decrease in balanced feed sales.

Net sales

Jan-Sep 2009(%)

Jan-Sep 2010(%)

Chicken

78.6

81.5

Eggs

10.0

 8.6

Balanced feed

 6.4

 5.6

Swine

 1.0

 1.2

Other lines

 4.0

 3.1

Total Sales

100.0%

100.0%

Operating Results

Bachoco's gross margin for the first nine months of the year was up 21.5%, compared to the 18.5% registered in the same 2009 period, and was mainly attributed to stronger results in our chicken business line.

The Company's operating profit was Ps. 1,937.1 million, compared to an operating profit of Ps. 1,388.7 million reached in the same period of 2009.

EBITDA amounting Ps. 2,449.4 million was, 30.7% higher than the Ps. 1,874.3 million recorded in the first nine months of 2009. EBITDA margin for the first nine months of 2010 was 13.3%.

Taxes

Taxes for nine months period were Ps. 402.7 million.

Net Majority Income

Net majority income for first nine months of the year was Ps. 1,527.7 million, or Ps. 2.55 per share (US$2.42 per ADS), compared to net income of Ps. 916.5 million, or Ps. 1.53 per share (US$1.45 per ADS) reported in the same 2009 period.

Balance Sheet

Liquidity is solid with cash and cash equivalents amounting to Ps. 3,778.4 million as of September 30, 2010. The total debt outstanding as of September 30, 2010 was Ps. 763.6 million.

Capital Expenditures

CAPEX during the nine months of 2010 amounted to Ps. 233.6 million, and was entirely financed with internally generated resources.

Exhibits:

A.- Consolidated Balanced Sheets

B.- Consolidated Statement of Income

C.- Consolidated Statement Cash Flow

D.- Derivatives Position Report

A.- Consolidated Balance Sheets

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

Condensed Consolidated Balance Sheets

U.S.D.

Mexican Pesos

2010(1)

2010(2)

2009(2)

As of September 30,

As of September 30,

ASSETS

Current assets

Cash and cash equivalents

$

299

Ps

3,778

Ps

2,260

Total accounts receivable

127

1,609

1,331

Inventories

347

4,388

4,413

Other current assets

-

-

-

Total current assets

774

9,775

8,004

Net property, plant and equipment

844

10,661

10,949

Other non current assets

28

353

554

TOTAL ASSETS

$

1,646

Ps

20,790

Ps

19,507

LIABILITIES

Current liabilities

Notes payable to banks

17

215

502

Accounts payable

99

1,245

1,255

Other taxes payable and other accruals

51

650

422

Total current liabilities

167

2,110

2,179

Long-term debt

43

549

547

Labor obligations

8

98

95

Deferred income taxes and others

168

2,117

1,932

Total long-term liabilities

219

2,764

2,574

TOTAL LIABILITIES

$

386

Ps

4,874

Ps

4,753

STOCKHOLDERS' EQUITY

Majority stockholder's equity:

Capital stock

182

2,295

2,295

Paid-in capital

59

745

744

Reserve for repurchase of shares

13

159

159

Retained earnings

882

11,139

10,592

Net majority income of the year

121

1,528

917

Deficit from restatement of stockholder's equity

-

-

-

Derivate financial instruments

-

-

-

Total majority stockholder's equity

1,256

15,866

14,706

Minority interest

4

50

48

TOTAL STOCKHOLDERS' EQUITY

1,260

15,916

14,754

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

1,646

Ps

20,790

Ps

19,507

(1) For reference, in millions of U.S. dollars using an exchange rate of $12.63

  Source: Mexico's National Bank, as of September 30, 2010.

(2) Millions of Mexican nominal pesos

B.- Consolidated Statement of Income

INDUSTRIAS BACHOCO, S.A.B. DE C.V.

Consolidated Statements of Income

-unaudited-

THIRD QUARTER

JANUARY - SEPTEMBER

U.S.D.

Mexican Pesos

U.S.D.

Mexican Pesos

2010(1)

2010(2)

2009(2)

2010(1)

2010(2)

2009(2)

Net sales

$

499

Ps

6,297

Ps

5,614

US

1,459

Ps

18,433

Ps

17,472

Cost of sales

381

4,807

4,938

1,146

14,469

14,238

Gross profit (loss)

118

1,491

676

314

3,964

3,233

Selling, general and administrative expenses

54

678

641

160

2,027

1,844

Operating income (loss)

64

812

35

153

1,937

1,389

  Other income (expense) net

(4)

(50)

(70)

(6)

(80)

(106)

Comprehensive financing (cost) income

3

42

(28)

6

75

(134)

  Interest income

4

50

33

10

123

107

  Interest expense and financing expenses

(1)

(18)

(23)

(5)

(57)

(67)

  Foreign exchange gain (loss), net

1

11

(18)

1

15

(37)

  Other financial income (expense) net

(0)

(0)

(20)

(0)

(6)

(137)

Income before income tax, asset tax

64

805

(63)

153

1,932

1,149

Total income taxes

13

169

(12)

32

403

224

  Income tax, asset tax

5

67

21

25

315

72

  Deferred income taxes

8

102

(33)

7

88

152

Net income

$

50

Ps

635

Ps

(51)

121

1,529

925

Minority net income

0

0

2

0

1

9

Majority net income

50

635

(53)

121

1,528

917

weighted average shares outstanding (in thousands)

600,000

600,000

599,954

600,000

600,000

599,930

Net majority Income per share (in U.S.D per ADS)

1.01

1.06

(0.09)

2.42

2.55

1.53

(1) For reference, in millions of U.S. dollars using an exchange rate of $12.63

  Source: Mexico's National Bank, as of September 30, 2010.

(2) Millions of Mexican nominal pesos

C.- Consolidated Statement Cash Flow

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

Consolidated Statement of Cash Flows

Mexican Pesos

U.S.D.

2010(2)

2009(2)

2010(1)

As of September 30,

As of September 30,

NET MAJORITY INCOME BEFORE INCOME TAX

$

153

Ps.

1,932

Ps.

1,149

ITEMS THAT DO NOT REQUIRE CASH:

15

188

237

     Other Items

15

188

237

ITEMS RELATING TO INVESTING ACTIVITIES:

39

494

455

     Depreciation and others

41

512

486

     Income (loss) on sale of plant and equipment

(1)

(17)

(22)

     Other Items

(0)

(1)

(9)

ITEMS RELATING TO FINANCING ACTIVITIES:

14

180

151

     Interest income (expense)

5

57

44

     Other Items

10

123

107

NET CASH GENERATED FROM NET INCOME BEFORE TAXES

$

221

Ps.

2,794

Ps.

1,992

CASH GENERATED OR USED IN THE OPERATION

(23)

(284)

(589)

  Decrease (increase) in accounts receivable

8

100

163

  Decrease (increase) in inventories

10

125

705

  Increase (decrease) in accounts payable

(38)

(477)

(727)

  Income taxes paid

(3)

(33)

(729)

NET CASH FLOW FROM FINANCING ACTIVITIES

$

199

Ps.

2,510

Ps.

1,403

INVESTING ACTIVITIES

NET CASH FLOW FROM INVESTING ACTIVITIES

(32)

(407)

(821)

     Acquisition of property, plant and equipment

(18)

(234)

(706)

     Proceeds from sales of property plant and equipment

(1)

(13)

(17)

     Other Items

(13)

(161)

(98)

CASH FLOW SURPLUS (REQUIREMENTS OF) TO BE USED IN

FINANCING ACTIVITIES

$

166

Ps.

2,103

Ps.

581

FINANCING ACTIVITIES

Net cash provided by financing activities:

(36)

(450)

180

  Proceeds from loans

87

1,099

1,800

  Principal payments on loans

(103)

(1,299)

(1,377)

  Dividends paid

(20)

(250)

(250)

  Other items

0

0

7

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS

101

1,276

288

CASH AND INVESTMENTS AT THE BEGINNING OF YEAR

198

2,503

1,972

CASH AND INVESTMENTS AT END OF PERIOD

$

299

Ps.

3,778

Ps.

2,260

(1) For reference, in millions of U.S. dollars using an exchange rate of $12.63

  Source: Mexico's National Bank, as of September 30, 2010.

(2) Millions of Mexican nominal pesos

D.- Derivatives Position Report

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

Thousands of Mexican Pesos, as of September 30, 2010

Quarter: 3

ANEXO 1

Type of Financial Instrument

Objective of the Instrument

Notional

Value of the Related Commodity

Reasonable Value

Amounts Due by Year

Guaranties Required

3Q-2010

2Q-2010

3Q-2010

2Q-2010

Forwards, knock out forwards, puts, collars and others under different amounts and conditions

Hedge and negotiation

$     114,302

$ 12.63

$12.89

$   4,491

$     2,450

88.0% in 2010 and 12.0% in 2011

Futures for corn and Soybean meal

Hedge

$       70,771

Corn for December 2010: $4.9575 USD/bushel.  Soybean meal; $306.90 USD/ton for December 2010 .

Corn for Sept  2010: $3.6275 USD/bushel.  Soybean meal;$259.40 for  December 2010

$ 14,296

$     3,634

2010

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

Options for corn

Hedge and negotiation

-$           386

-$      386

None of the financial instruments exceed 5% of total assets as of September 30, 2010.

A negative value means an unfavorable effect for the Company.

The notional value represents the net position as of September 30, 2010 at the exchange rate of Ps.12.63 per USD.

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

Thousands of Mexican Pesos, as of September 30, 2010

Quarter: 3

Table 2

Type of Financial Instrument

Reasonable Value as of Sept 30, 2010

Value of the Related Commodity-reference value

Effect on the Income Statement

Effect on the Cash Flow ***

-2.5%

2.5%

5.0%

-2.5%

2.5%

5.0%

Forwards, knock out forwards, puts, collars and others under different amounts and conditions*

$                       4,491

$12.31

$                 12.95

$                 13.26

Direct

$        1,633

$        8,535

$        1,770

-5%

5%

10%

-5%

5%

10%

Futures for corn and,

$               4.7096

$               5.2054

$               5.4533

Soybean

$                     14,296

$               291.56

$               322.25

$               337.59

The effect will materialize as the inventory is consumed

$      10,042

$      18,549

$      22,802

Options for corn**

-$                          386

-$       1,075

$           303

$           991

A negative value means an unfavorable effect for the Company.

** The reference value is the Futures  of corn for December, $4.9575 USD for bushel and of soybean meal for December 2010, $306.9 USD/ton.

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

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

IR Contacts:

Daniel Salazar, CFO

Claudia Cabrera, IRO

Ph. +52 (461) 618 3555

inversionistas@bachoco.net

In New York:

Grayling

Lucia Domville

Ph. (646) 284 9416

Lucia.Domville@us.grayling.com

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



RELATED LINKS

http://www.bachoco.com.mx