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Bachoco Sees Sales Fall Profits Rise

30 April 2014

MEXICO - Mexican poultry company Industrias Bachoco saw sales fall in the first quarter of the year by 3.5 per cent to $9,643.4 million compared to the same quarter of 2013.

In the first quarter sales of the company’s US operations accounted for 19.7 per cent of total sales, while in the first quarter of 2013 they accounted for 22.7 per cent.

The decrease in sales was primarily attributed to lower prices on chicken products and feed, partially offset by increased sales volume.

During the quarter the cost of sales was $7,854.1 million, $655.7 million or 7.7 per cent less than the cost of sales in the same quarter of 2013. The fall in the cost of sales has been put down to a downward trend in the price of key raw materials.

As a result, the company achieved a gross profit of $1789.3 million, a gross margin of 18.6 per cent in the first quarter of 2014, 21 per cent higher than the gross profit in the first quarter of 2013 when the margin was 14.8 per cent.

Total expenditure in the 2014 quarter was $871.4 million, representing an increase of $76.4 million.

Bachoco said that the increase is primarily due to increased volume and higher selling expenses aimed at strengthening operational structure of the company.

In the first quarter of 2014 and 2013, total expenses as a percentage of net sales accounted for 9.0 per cent and 8.0 per cent respectively.

The caption "other income (expense), net" includes the sale of unused assets and the sale of chickens and other by-products. Sales recorded as expenses when the price of Information is below the book value of those assets.

Operating income in the quarter was $882.9 million, representing an operating margin of 9.2 per cent, a positive result when compared to an operating profit in 2013 of $761.1 million and an operating margin of 7.6 per cent, the company said.

Rodolfo Ramos Arvizu, Director General of Bachoco, said: "In the first quarter of 2014, the Mexican poultry sector saw a good balance between supply and demand.

“The US market after a weak start saw conditions improve throughout the quarter.

“Even though our volume sold increased compared to the first quarter of 2013, lower costs in our main raw materials led to a decline in prices of our main products, resulting in a decrease of 3.5 per cent in sales.

“Moreover, this decrease in the price of raw materials, more than offset the price reduction, resulting in an improvement in the operating performance of the company over the same quarter last year.

“According to the new tax regime in Mexico, from January 1, 2014, our operations in Mexico are subject to a higher rate of income tax, which produced a decline in our net income in the first quarter of 2014.

“The Company continues to be in a strong financial position, with negative net debt of more than $5.665 million.”

TheMeatSite News Desk

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