Bachoco Posts Five Per Cent Increase in Net Sales

MEXICO - The latest results of feed, meat and egg company, Industrias Bachoco, point to an almost 12 per cent increase in net sales for the latest quarter and of 5.2 per cent for the 2014 financial year, helped by lower maize prices, favourable exchange rates and a balanced market.
calendar icon 6 February 2015
clock icon 6 minute read

Industrias Bachoco, S.A.B. de C.V. has announced its unaudited results for the fourth quarter (4Q14) and 2014 year (2014) results ended 31 December 2014. All figures have been prepared in accordance with International Financial Reporting Standard, and are presented in nominal million Mexican pesos ($).

Comparing 2014 with 2013, net sales increased 11.9 per cent for the 4Q and 5.2 per cent for the year.

EBITDA margin was 15.0 per cent in the 4Q and 14.9 per cent for 2014 year, while earnings per basic and diluted share were $1.77 and $6.56 pesos for the 4Q and for the full year, respectively.

CEO's Comments

Rodolfo Ramos Arvizu, Chief Executive Officer of Bachoco, stated: “During the fourth quarter, we observed a good level of demand which, combined with a balanced supply for our main product lines in the markets in which we participate and the reduction trend in our main raw materials, allowed us to reach results above the fourth quarter of 2013, in terms of sales and profitability margins.

“For the whole year, we posted improvements in our total sales, as well as in our operating margins, compared to previous year. This was the result of external and internal conditions: on one side, corn prices, exchange rate and balanced demand-supply were stable most of the year; on the other side, as a result of initiatives the Company put in place, we achieved further efficiencies and remained close to our customers.

“These positive results further strengthened our financial structure; our net cash totalled more than $9,500 million pesos that will allow us to support the growing programmes we have implemented.

“Lastly, the Company's shares and ADRs had positive performance in both markets in which we participate: the NYSE and the BMV. We have observed a constant increase in the daily trading of our shares that shows the confidence that investors have placed in our Company.”

Executive Summary

The following financial information is expressed in millions of nominal pesos, except for amounts per share and per ADR, with comparative figures for the same periods of 2013.

In 4Q14, the Company’s net sales totalled $10,899.3 million, $1,161.0 million or 11.9 per cent more than $9,738.3 million reported in 4Q13. This is as a result of more volume sold and higher prices in the main product lines during the quarter; the increase in sales was partially offset with lower volume sold in the egg business line.

In 4Q14, sales by the US operations were strong and in line with our Mexico operation; it represented 20.5 per cent of our total sales compared to 21.3 per cent in 4Q13.

The cost of sales totalled $8,376.5 million, representing $147.6 million or 1.7 per cent less than $8,524.1 million reported in the same period of 2013. The decrease in the cost of sales, despite the increase in volume sold, is totally attributable to the lower cost of main raw materials, as well as higher efficiencies across production processes. The average cost per unit was around five per cent lower than the average cost per unit in 4Q13.

The Company’s gross profit in 4Q14 was $2,522.9 million, with a gross margin of 23.1 per cent; this result is larger than a gross profit of $1,214.3 million and a gross margin of 12.5 per cent reported in 4Q13.

Accumulated Results

In 2014, net sales totalled $41,766.5 million, $2,055.8 million more, or a 5.2 per cent increase in net sales, when compared to $39,710.7 million reported in 2013. The increase in net sales in 2014 is attributed to different factors: higher volume sold and stable demand in the company's main business lines, as compared with year 2013.

In 2014, sales of the US operations represented 20.1 per cent of our total sales, compared with 21.4 per cent in 2013. During 2014, the Company reduced slightly its volume produced in the US operation, mainly to increase efficiencies.

In 2014, the cost of sales totalled $32,520.4 million, 2.0 per cent or $656.2 million below the cost of sales in 2013 which totalled $33,176.6 million; the decline in the cost of sales is totally attributed to lower prices in our main raw materials, as well as productivity improvements.

These numbers guide Bachoco to post a gross profit of $9,246.1 million, which represented 22.1 per cent of gross margin in 2014, substantially higher than $6,534.1 million of gross profit and a margin of 16.5 per cent reached in 2013.

Total Sales, General and Administrative (SG&A) expenses in 2014 were $3,775.2 million, and 3,291.0 million in 2013; this represented an increase of $484.2 million or 14.7 per cent. The increase is mainly attributable to higher volume sold and additional expenses incurred in the implementation of projects to further improve the services we provide in our markets, as mentioned in previous quarters. Total SG&A expenses as a percentage of net sales represented 9.0 per cent in 2014 and 8.5 per cent in 2013.

In 2014, the company had other expenses of $100.3 million, compared with other income of $30.7 million reported in 2013; this is mainly attributable to losses in the sale of several unused assets during the year.

The operating income in 2014 totalled $5,370.7 million, a 12.9 per cent in margin or 64.0 per cent higher than $3,273.8 million of operating income, 8.2 per cent in margin, reported in 2013.

The net financial income in 2014 was $232.2 million higher when compared to net financial income of $118.4 million in 2013, mainly attributed to higher interest income resulting from higher levels of cash and lower interest expenses.

Total taxes in 2014 were $1,663.0 million. These taxes include $1,223.0 million of income tax and $440.0 million of deferred income taxes; this figure compares to total taxes of $1,350.4 million, which includes income taxes of $1,227.4 and deferred income tax of $123.0 million in 2013; the increase is attributed to a higher income and a higher tax rate in 2014 in Mexico.

As a result, Bachoco's net income in 2014 was $3,939.9 million, a 9.4 per cent net margin, which represents $6.19 pesos of earnings per share, while in 2013 net income totalled $2,041.8 million, a 5.1 per cent net margin, and $3.38 pesos of net income per share.

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 1,000 facilities, organised in nine production complexes and 64 distribution centres in Mexico, and a production complex in the United States. Currently, the Company employs more than 24,000 people.

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