Bachoco Reports Quarterly Net Sales up Seven Per Cent29 April 2013
MEXICO - First-quarter 2013 sales and EBITDA were up compared to the same period last year for integrated poultry processor Bachoco. Due an outbreak of avian flu in this accounting period, the company recognised a one-time charge of more than 220 million pesos (MXP).
Industrias Bachoco S.A.B. de C.V. showed net sales have increased 7.0 per cent, EBITDA margin was 9.5 per cent and earnings per basic and diluted share totalled MXP1.06, or MXP12.76 per ADR.
Rodolfo Ramos Arvizu, Chief Executive Officer of Bachoco, stated: "In the first quarter of 2013, prices of our main raw materials stabilised with a downward trend; also, we observed a good balance between supply and demand across our main business lines.
"Based on those facts, Bachoco reported satisfactory results, with total sales up 7.0 per cent, with operating and EBITDA margins of 7.6 per cent and 9.5 per cent, respectively, as a result of our productivity and commercial efforts. In particular, we registered important improvements in operating expenses, which came in at 8.0 per cent over net sales, among the lowest percentages in the Company's history.
"On the other hand, we faced sanitary challenges, as some of our farms were affected by an outbreak of influenza H7N3, which only affects birds; we immediately reinforced our bio-security programmes, and executed several measures to mitigate negative effects in this regard and to assure our standard quality service to our customers. As of today, the outbreak of influenza is under control but not yet eradicated.
"Due to the influenza outbreak, in the first quarter, we recognised a one-time charge in our production cost of MXP220.8 million, mainly attributed to the loss of inventory.
"Finally, I would like to reiterate the strong financial position that the Company maintains, with negative net debt of MXP3,630.3 million at the end of the first quarter."
Net sales in 1Q13 totalled MXP 9,988.8 million, 7.0 per cent higher than the MXP9,337.6 million in net sales reported in 1Q12. The increase was mainly due to 21.4 per cent increase in sales of the company's US operations, which represent 22.7 per cent of the Company's total sales.
Cost of sales in 1Q13 totalled MXP8,509.8 million, 9.8 per cent higher than MXP7,750.7 million in cost of sales reported in 1Q12. Even when prices of our main raw materials stabilisd with a downward trend, they were slightly higher than in the first quarter of 2012.
The Company recognised a one-time charge of MXP220.8 million in the production cost resulting from the loss of inventories due to the outbreak of influenza in some Company's farms in the state of Guanajuato. As a result, gross profit in 1Q13 was MXP1,479.1 million, resulting in a gross margin of 14.8 per cent, compared to a gross profit of MXP1,586.9 million, with a gross margin of 17.0 per cent in 1Q12.
The Company continued implementing expense cuts and practised strict controls over all operating expenses. As a result, in 1Q13, operating expenses represented 8.0 per cent of net sales, which is among the lowest percentages recorded in the Company's history, compared to 8.6 per cent in 1Q12.
Beginning this quarter, and following NIIF provisions, the company includes other income and other expenses as part of our operating income within this MD&A. Other income (expense) includes the selling of unused assets as well as the selling of hens and other by-products. Bachoco records such sales as expenses when the sale price is lower than the book value of those assets.
In 1Q13, it recorded other income of MXP77.1 million, compared with MXP6.1 million of other income reported in 1Q12; this is mainly attributed to sale of some assets.
Operating income in 1Q13 totalled MXP761.1 million with a 7.6 per cent of operating margin, compared with MXP 779.6 million and 8.3 per cent of margin reported in 1Q12; the decrease is mainly due to MXP220.8 million of one-time charges as a consequence of the outbreak described previously in this report.
The Company reported net finance income of MXP19.3 million, 73.0 per cent lower than MXP71.3 million reported in 1Q12. The reduction is mainly due to interest paid in connection with the local Bond issuance, partially offset by interest earned on the Company's cash position.
Industrias Bachoco and all of its subsidiaries file separate income tax returns; as of 31 March 2013 total taxes were MXP140.1 million.
Net income was MXP635.1 million in 1Q13 or MXP 1.06 per share or MXP 12.76 per ADR, compared with a net income of MXP659.6 million, or MXP1.10 per share or MXP13.23 per ADR reported in 1Q12.
EBITDA in 1Q13 reached MXP944.3 million, representing a margin of 9.5 per cent, compared to EBITDA of MXP986.3 million in 1Q12 and 10.6 per cent of EBITDA margin.
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