Industrias Bachoco Announces Fourth Quarter and Full Year Results for 2011
CELAYA, Mexico, Feb. 8, 2012 /PRNewswire/ — Industrias Bachoco S.A.B. de C.V. (“Bachoco” or “the Company”) (NYSE: IBA; BMV: Bachoco), announced today its unaudited results for the fourth quarter (“4Q11″) and full year 2011 ended December 31, 2011. All figures have been prepared in accordance with Mexico’s Generally Accepted Accounting Principles (“GAAP”), and are presented in nominal Mexican pesos.
Highlights
- The Company entered the U.S. poultry market through the acquisition of O.K. Foods (“O.K.”), an American Poultry company
- Bachoco reported the highest quarterly and annual net sales in the company’s history; this figure rose 34.4% in 4Q11 vs 4Q10 and 11.8% in 2011 vs 2010.
- The Company was largely affected by commodity price increases throughout 2011
QUARTERLY YEAR
--------- ----
In
millions 4Q11 4Q10 Var. 3Q11 2011 2010 Var.
Net sales 8,564.3 6,374.6 34.5% 6,514.7 27,738.1 24,807.2 11.8%
Cost of
sales 7,929.4 5,086.9 55.9% 5,957.1 24,817.3 19,555.8 26.9%
EBITDA 36.0 744.0 -95.2 29.5 718.6 3,207.7 -77.6%
Net
majority
profit,
(loss) -57.9 477.2 -112.1% -106.9 127.8 2,004.9 -93.6%
Net income
per share
(pesos) -0.10 0.80 -0.18 0.21 3.34
Executive Summary
Bachoco and the poultry industry in general continued experiencing large increases in production costs, driven by global increases in prices of corn, soybean meal, among other components of the production cost. This, combined with challenging economic conditions and high depreciation of the Mexican peso (“peso”) at the end of the year, lead Bachoco to post negative profit for the fourth quarter and weak results for the year 2011.
“During the fourth quarter we observed a strong demand for chicken meat, particularly towards the end of the quarter. We had increases in sales across all our business lines; as a result we reached record sales figures. Total sales rose 34.4% during the fourth quarter and 11.8% in 2011 over the previous year.
We were not able to fully transfer increases in our production costs to our customers, mainly due to: a strong supply of chicken coupled with weak demand for chicken during most of the year, and a 13.0% depreciation of the peso in 2011, resulting in a 2.9% negative operating margin for the quarter and 0.2% negative operating margin for year 2011.
Nonetheless, we were able to reach a positive EBITDA result for the quarter and for the year, as well as posting a net profit in year 2011.
We ended the year with a positive outlook for the Company, with positive results in both our Mexican and U.S. operations registered in December”, commented Mr. Rodolfo Ramos, CEO.
Bachoco continues to experience significant growth. In the fourth quarter we acquired O.K. Industries, an important American Poultry Company headquartered in Fort Smith, Arkansas. This was a very important step for the Company, as it represented its first incursion into the U.S. poultry industry.
This acquisition consisted of buying 100% of the Company including; two broiler processing plants, 2 further process plants, among other facilities. O.K currently processes around 2.5 million chickens per week; adding approximately 25.0% to Bachoco’s total production
Bachoco paid USD$ 93.4 million for O.K. Industries, paid with cash and debt. Under USGAAP and IFRS principles, we determine that this acquisition has generated a profit of around USD$ 100.0 million, which will be recognized on our Balance Sheet as of March 31, 2012, when we will report our results in accordance with IFRS.
We are also reaching new domestic customers by opening two distribution centers located in Baja California, with which we expect to increase our market share in that region.
As we have commented in many of our previous releases, our solid financial structure allows us to face adverse external conditions and take advantage of business opportunities that the industry offers. 2011 was a clear example of this successful strategy. We were able to grow within a challenging scenario and still maintain a solid financial structure. We believe that our performance, in general, is one of the best in the poultry industry world-wide.
Bachoco seeks to continue growing its business by seizing upon the opportunities present in the industry. We remain confident in our team, our world class business processes, high productivity standards and, above all, our most valuable asset: our well-recognized brands and products.
Quarterly breakdown of sales
Bachoco saw rising sales across all of its business lines during the fourth quarter. Chicken and Turkey product sales posted solid growth in December due to higher consumption of these products during the Christmas Season.
The Company’s 4Q11 net sales totaled Ps. 8,564.3 million, showing a 34.4% increase over the Ps. 6,374.6 million reported in 4Q10.
A stable chicken supply at the end of the fourth quarter, a strong demand due to seasonality factors, as well as, the partial integration of O.K. in the U.S. (November and December), lead the Company to reach a 36.9% increase in sales for the quarter, resulting from 8.9% increase in chicken prices and 25.7% growth in volume of chicken sold.
After several quarters of strong oversupply conditions in the Mexican table eggs market, our sales prices started to show a recovery. Fourth quarter sales of table eggs rose 14.7%, as a result of 21.7% increase in prices, this was partially offset by a 5.7% decrease in volume sold, compared to 4Q10.
Bachoco’s balanced feed business line also reported a good performance for the quarter; sales grew 38.9%, mainly driven by a 25.7% rise in prices, and a 10.5% rise in volume quarter-over-quarter.
The “other business lines” item includes swine, turkey and beef value-added products business lines, as well as by-products. As it is typical in the fourth quarter, turkey products sales had a solid growth with respect to the previous quarters. In 4Q11, sales of turkey products rose 16.9% with respect to 4Q10. Turkey products sales represented around 2.0% of the Company’s total sales for 4Q11.
For a second consecutive quarter, the Company’s beef business line showed a solid increase in sales, mainly driven by the integration of the newly acquired company in August of 2011, in the state of Nuevo León in Mexico. Even when it represented a large increase in beef sales from 4Q10 to 4Q11, this still represents less than 1.0% of Bachoco’s total sales.
Lastly, sales of swine remained stable with 3.3% growth in the fourth quarter of 2011 compared to the same quarter of 2010.
U.S. Complex
The integration of O.K with Bachoco started in November 2011. In the U.S., the Company had to face similar challenges than in the Mexican poultry industry; sharp increases in raw material prices, a large oversupply in the chicken market and a sluggish economy. O.K. overcame negative results and posted positive results in the second month of the integration process.
Operating Results
QUARTERLY YEAR
--------- ----
In
millions 4Q11 4Q10 Var. 3Q11 2011 2010 Var.
Net
sales 8,564.3 6,374.6 34.4% 6,514.7 27,738.1 24,807.2 11.8%
Mexico
operation 7,191.1 6,374.6 6,514.7 26,364.9 24,807.2
U.S.
operation
(1) 1,373.2 0.0 0.0 1,373.2 0.0
Cost of
sales 7,929.4 5,086.9 55.9% 5,957.1 24,817.3 19,555.8 26.9%
Gross
profit,
(loss) 634.9 1,287.7 -50.7% 557.6 2,920.8 5,251.4 -44.4%
Total
expenses 879.6 703.2 25.1 708.0 2,980.4 2,729.8 9.2%
(1) Only includes figures of November and
December of 2011.
Total cost of sales increased 55.9% for 4Q11 and 26.9% for year 2011, when compared to the same period of 2010. The production cost of chicken per unit was the most affected, it increased around 30.0% for the 4Q11 and 19.0% for year 2011, when compared with the same periods of 2010.
Gross profit declined 50.7% from 4Q10 to 4Q11 reaching Ps. 634.9 million in the fourth quarter, 7.4% of gross margin. Gross profit for the year totaled Ps. 2,920.8 million in 2011, with a gross margin of 10.5% this represented a 44.4% decline year-over-year, due to the fact that we were not able to fully transfer the cost increases to our customers.
QUARTERLY YEAR
--------- ----
In millions 4Q11 4Q10 Var. 3Q11 2011 2010 Var.
Operating
profit,
(loss) -244.7 584.5 -141.9% -150.4 -59.6 2,521.6 -102.4%
Operating
margin -2.9% 9.2% -2.3% -0.2% 10.2%
EBITDA 36.0 744.0 -95.2 29.5 718.6 3,207.7 -77.6%
EBITDA
margin 0.4% 11.7% 0.5% 2.6% 12.9%
------ --- ---- --- --- ----
Despite productivity achievements, control in expenses and sales increases across all of Bachoco’s business lines, the surge in commodity prices experienced throughout 2011, plus the integration of our new operation led the Company to post a negative operating result for the fourth quarter as well as for the whole 2011 year, but positive in EBITDA terms for the quarter and for the whole year.
Bachoco’s operating loss for 4Q11 was Ps. 244.7 million, compared to an operating profit of Ps. 584.5 million reached in 4Q10. While for the year 2011 operating losses totaled Ps. 59.6 million a sharp reduction compare to an operating income of Ps. 2,521.6 million, reported in 2010.
EBITDA results for the quarter were slightly positive; totaling Ps. 36.0 million, lower than Ps. 744.0 million reported in 4Q10. EBITDA for the year 2011 was Ps. 718.6 million, 77.6% less than Ps. 3,207.7 EBITDA reported in 2010.
We posted comprehensive financial income of Ps. 40.7 million in 4Q11, and income of Ps. 178.5 million in 2011 when compared to the same periods of 2010, this mainly as a result of foreign exchange gains.
Net income taxes for the quarter totaled a benefit of Ps. 73.7 million. We also posted a benefit in taxes of Ps. 29.1 million for the whole year.
QUARTERLY YEAR
--------- ----
In millions 4Q11 4Q10 Var. 3Q11 2011 2010 Var.
Net
majority
income,
(loss) -57.9 477.2 112.1% -106.9 127.8 2,004.9 -93.6%
Net
majority
margin -0.7% 7.5% -2.3% 0.46% 8.1%
Net income
per share
(pesos) -0.10 0.80 -0.18 0.21 3.34
Net income
per ADS*
(pesos) -1.16 9.54 2.16 2.56 40.10
---------- ----- ---- ---- ---- -----
* And ADS is equal to 12 Shares
-------------------------------
Net majority loss for the 4Q11 was Ps. 57.9 million (Ps. 0.10 per share), compared to a net majority income of Ps. 477.2 (Ps. 0.80 per share) reached in 4Q10. Net majority income for the year 2011 totaled Ps. 127.8 million (Ps. 0.21 per share), a decrease from Ps. 2,004.9 million (Ps. 3.34 per share) net majority income reached in 2010.
Liquidity and Debt
The Company’s financial structure remained solid; our cash and equivalents as of December 31, 2011, totaled Ps. 3,036.4 million, Ps. 1,140.8 million less when compared to the same period of 2010.
As of
September
As of December 31, 30,
------------------
In millions
of pesos 2011 2010 Var. 2011
Cash and
equivalents 3,036.4 4,177.2 -27.3% 3,276.8
Short-term
debt 1,463.9 139.9 946.6% 396.4
Long-term
debt 415.2 507.1 -18.1% 430.6
Liquidity
ratio 1.2 2.6 2.1
Debt ratio 0.30 0.23 0.23
---------- ---- ---- ----
The Liquidity ratio declined due to an increase in short-term debt, as the Company acquired a credit in U.S. dollars used for the acquisition of O.K. The year-period credit amounted to $ 75.0 million USD.
Total CAPEX for 2011 totaled Ps. 661.6 million, mainly allocated towards in productivity projects, and replacement of transport fleet.
Derivative Contracts
Bachoco entered into several short-term derivative transactions to provide some certainty in the purchasing of corn, soybean meal and U.S. dollars needs. During the fourth quarter we had some operations of Futures and Options in the purchases of corn and soybean meal as well as Forwards, Knockout Calls, Knockout Forwards and Puts for the purchases of U.S. dollars. For more detail, please see tables attached to this document.
Stock Information
As of December 31, 2011
-----------------------
Total Shares Outstanding (thousands) 600,000
Total free float 17.25%
Total shares in treasury 227,400
Market cap (Ps. millions) 13,380
BMV* NYSE**
Ticker Symbol Bachoco IBA
Closing price 22.30 19.07
------------- ----- -----
*Trading at the Mexican Stock Exchange, in Mexican pesos
per share
**Trading at the New York Stock Exchange, in U.S. dollars
per ADR, and ADR is equal to 12 shares
Company Description:
Industrias Bachoco is the leader of the Mexican poultry industry and an important player in Mexico’s food industry. Bachoco’s sales include chicken, table eggs, balanced feed, turkey, beef and swine. Founded in 1952, Bachoco is headquartered in Celaya, in the state of Guanajuato. Bachoco operates more than 800 facilities, organized in 9 complexes in Mexico and one Complex in the U.S. as well as a growing export business. Bachoco trades on both the Mexican and New York Stock Exchanges since 1997. The Company post around $2 billion dollars in sales at year.
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, whether as a result of new information, future events or otherwise.
INDUSTRIAS BACHOCO, S.A.B. DE C.V.
Consolidated Statements of Income
-Unaudited-
FOURTH QUARTER AS OF DECEMBER,
-------------- ---------------
U.S.D. Mexican Pesos U.S.D. Mexican Pesos
------ ------
2011(1) 2011(2) 2010(2) 2011(1) 2011(2) 2010(2)
------ ------ ------ ------ ------ ------
Net sales $613 Ps 8,564 Ps 6,375 US 1,986 Ps 27,738 Ps 24,807
Cost of sales 568 7,929 5,087 1,776 24,817 19,556
Gross profit (loss) 45 635 1,288 209 2,921 5,251
Selling, general and
administrative expenses 63 880 703 213 2,980 2,730
Operating income (loss) (18) (245) 585 (4) (60) 2,522
Other income (expense) net 5 74 (51) (1) (18) (132)
Comprehensive financing
(cost) income 3 41 47 13 179 122
Interest income 3 41 55 14 197 178
Interest expense and
financing expenses (1) (21) (13) (4) (58) (70)
Foreign exchange gain
(loss), net 1 13 (4) 4 55 11
Other financial income
(expense) net 1 8 9 (1) (15) 3
Income before income tax,
asset tax (9) (130) 580 7 101 2,512
Total income taxes (5) (74) 102 (2) (29) 504
Income tax, asset tax 0 7 178 5 71 493
Deferred income taxes (6) (81) (76) (7) (100) 11
Net income $(4) Ps (56) Ps 479 9 130 2,008
Minority net income 0 2 2 0 3 3
Majority net income (4) (58) 477 9 128 2,005
------------------- --- --- --- --- --- -----
weighted average shares
outstanding 600 600 600 600 600 600
Net majority Income per
share (0.08) (0.10) 0.80 0.18 0.21 3.34
----------------------- ----- ----- ---- ---- ---- ----
(1) For reference, in millions of U.S. dollars using an exchange rate of $13.97
Source: Mexico's National Bank, as of December 31, 2011.
(2) Millions of Mexican nominal pesos
Industrias Bachoco, S.A.B. de C.V.
Condensed Consolidated Balance Sheets
-Unaudited-
U.S.D. Mexican Pesos
------
As of
Dec 31, 2011(2) 2010(2)
As of Dec As of Dec
2011 31, 31,
---- ---------- ----------
ASSETS
Cash and cash equivalents $217 Ps 3,036 Ps 4,177
Total accounts receivable 175 2,446 1,638
Inventories 457 6,380 4,534
Other current assets - - -
Total current assets 849 11,862 10,350
Net property, plant and
equipment 790 11,032 10,587
Other non current assets 35 496 409
TOTAL ASSETS $1,674 Ps 23,390 Ps 21,346
--- ---
LIABILITIES
Notes payable to banks 105 1,464 140
Accounts payable 177 2,479 1,633
Other taxes payable and
other accruals 36 507 468
Total current liabilities 319 4,450 2,241
Long-term debt 30 415 507
Labor obligations 8 112 104
Deferred income taxes and
others 159 2,218 2,103
Total long-term liabilities 196 2,745 2,715
TOTAL LIABILITIES $515 Ps 7,195 Ps 4,956
--- ---
STOCKHOLDERS' EQUITY
Capital stock 164 2,295 2,295
Paid-in capital 53 745 745
Reserve for repurchase of
shares 11 154 154
Retained earnings 918 12,822 11,139
Net majority income of the
year 9 128 2,005
Others accounts (0) (4) -
Derivate financial
instruments - - -
Total majority stockholder's
equity 1,155 16,140 16,338
Minority interest 4 54 52
TOTAL STOCKHOLDERS' EQUITY 1,159 16,194 16,390
----- ------ ------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,674 Ps 23,390 Ps 21,346
--------------------- ------ --- ------ --- ------
(1) For reference, in millions of U.S. dollars using
an exchange rate of $13.97
Source: Mexico's National Bank, as of December 31,
2011.
(2) Millions of Mexican nominal pesos
Industrias Bachoco, S.A.B. de C.V.
Consolidated Statement of Cash Flows
-Unaudited-
Mexican Pesos
U.S.D. 2011(2) 2010(2)
As of Dec As of Dec
2011(1) 31, 31,
------ ---------- ----------
NET MAJORITY INCOME
BEFORE INCOME TAX $7 Ps. 101 Ps. 2,512
ITEMS THAT DO NOT
REQUIRE CASH: (9) (127) (407)
ITEMS RELATING TO
INVESTING ACTIVITIES: 56 781 684
Depreciation and
others 56 778 686
Income (loss) on sale
of plant and
equipment 0 5 1
Other Items (0) (3) (3)
ITEMS RELATING TO
FINANCING ACTIVITIES: 18 255 248
Interest income
(expense) 4 58 70
Other Items 14 197 178
NET CASH GENERATED
FROM NET INCOME
BEFORE TAXES $72 Ps. 1,011 Ps. 3,037
CASH GENERATED OR USED
IN THE OPERATION: (68) (948) (340)
Decrease (increase) in
accounts receivable (13) (178) (57)
Decrease (increase) in
inventories (62) (873) (21)
Decrease (increase) in
accounts payable 43 594 (88)
Decrease (increase) in
other liabilities (35) (491) (173)
NET CASH FLOW FROM
OPERATING
ACTIVITIES $4 Ps. 63 Ps. 2,697
INVESTING ACTIVITIES
NET CASH FLOW FROM
INVESTING ACTIVITIES (61) (854) (452)
Acquisition of
property, plant and
equipment (47) (662) (322)
Proceeds from sales of
property plant and
equipment (6) (84) (42)
Other Items (8) (108) (88)
CASH FLOW SURPLUS
(REQUIREMENTS OF) TO
BE USED IN
FINANCING ACTIVITIES $(57) Ps. (791) Ps. 2,245
FINANCING ACTIVITIES
Net cash provided by
financing activities: 66 919 (570)
Proceeds from loans 143 1,995 1,126
Principal payments on
loans (56) (777) (1,443)
Dividends paid (21) (300) (250)
Other items 0 2 (3)
NET INCREASE
(DECREASE) IN CASH
AND EQUIVALENTS (82) (1,141) 1,675
CASH AND INVESTMENTS
AT THE BEGINNING OF
YEAR 299 4,177 2,503
CASH AND INVESTMENTS
AT END OF PERIOD $217 Ps. 3,036 Ps. 4,177
(1) For reference, in millions of U.S. dollars
using an exchange rate of $13.97
Source: Mexico's National Bank, as of December
31, 2011.
(2) Millions of Mexican nominal pesos
Industrias Bachoco, S.A.B. de C.V.
Thousands of Mexican Pesos, as of December 31, 2011 Quarter: 4
Table 1
Amounts
Type of Financial Objective of Reasonable Due by Guaranties
Instrument the Instrument Notional Value of the Related Commodity Value Year Required
-------- -----------
4Q-
4Q-2011 3Q-2011 2011 3Q-2011
------- ------- ---- -------
Forwards, knock
out calls,
knock out
forwards and Hedge and 100% in
puts negotiation $9,332 $13.97 $13.88 $1,359 -$ 3,420 2012
--------------- ------------ ------ ------ ------ ------ ------------ --------
The deals
Corn: $5.9250 USD/ consider the
bushel for possibility
December 2011. of margin
Soybean meal: calls but not
Futures for corn $308.6 USD/ton another kind
and soybean meal for December 2011 -$ 3,357 of guarantee
Corn: $6.464 y
$6.546 USD/bushel
for March and May
2012. Soybean
meal: $313.1 y
$315.8 USD/tons
Options for corn Hedge and for March and
and soybean meal negotiation $1,593 Mayof 2012 $1,593 $- 2012
None of the financial instruments exceed 5% of total assets as of September 30, 2011.
A negative value means an unfavorable effect for the Company.
The notional value represents the net position as of December 31, 2011 at the exchange rate of Ps. 13.97
per USD.
Industrias Bachoco, S.A.B. de
C.V.
Thousands of Mexican Pesos, as of
December 31, 2011 Quarter: 4
Table 2
Reasonable
Value as of Effect on the
Type of Financial December 31, Value of the related commodity- Income Effect on the Cash Flow
Instrument 2011 reference value Statement ***
-------------------------------- ------------------------
-2.5% 2.5% 5.0% -2.5% 2.5% 5.0%
---- --- --- ---- --- ---
Forwads,
calls,knock out
calls, knock out
forwards and puts* $1,359 $13.62 $14.32 $14.67 Direct $1,126 $1,592 $1,826
-5% 5% 10% -5% 5% 10%
--- --- --- --- --- ---
Futures for corn
and,
soybean $- $- $- $- $- $- $-
The effect will
materialize as
the inventory
is consumed
Options for corn
and soybean meal** $1,593 $6.14 $6.79 $7.11
$297.45 $328.76 $344.41 $- $- $-
A negative value means an unfavorable effect for the Company.
* The reference value is the exchange rate of Ps. 13.97 per USD as of December 31, 2011
** The reference value is the Futures of corn for March 2012: $6.464 USD/bushel and soybean
meal for March 2012, $313.1 USD/ton.
Note: even when table set above shows corn and soybean prices for contracts of March 2012,
the effect on the cash flow corresponds to the total positions effects.
*** The Company has credit lines with the majority of its counterparts, so that the effect in
cash flow is lower than the amount shown.
SOURCE Industrias Bachoco, S.A.B. de C.V.