Industrias Bachoco S.A.B. de C.V. , Mexico's leading producer and processor of poultry products, has announced its unaudited results for the second quarter and first half ended June 30, 2009. All figures have been prepared in accordance with Mexican GAAP. In line with the Mexican Accounting Principles, data is presented in nominal Mexican pesos.

The Company registered a 20.1 per cent increase in sales when compared with the same quarter of 2008, recording its highest sales level for any given quarter. Sales increased across all its business lines, and were particularly strong for chicken and eggs.

Earnings per share for the quarter were MXP1.16 (US$1.06 per ADS) versus MXP0.32 (US$0.30 per ADS) in Q2 2008.

CEO's Comments

Cristobal Mondragon, Bachoco's CEO, stated: "Even when the Mexican economy continued slowing down and is expected to record one of the worst performing quarters ever, the Company's performance remained strong and we continued delivering positive results to our holders by taking the opportunities the industry offered.

"The poultry market showed a good balance between supply and demand, which together with our focus on properly serving our market channels, allowed us to record the highest sales level in a quarter.

"Our operating margin improved and good results in the quarter were boosted by the good operating environment, a more stable Mexican peso, and the strategies implemented by the Company, such as productivity improvements, optimising sales mix and control of our expense.

"Furthermore, our comprehensive financial result also improved also during this quarter as a result of the restructuring of our derivatives portfolio and the maturity of most of the instruments we had in place," concluded Mr Mondragon.

Second Quarter 2009

Net sales

Net sales for the second quarter amounted to MXP5,991.1 million, 20.1 per cent above the MXP4,987.5 million reported in 2Q08. This increase was mainly driven by higher sales in the main business lines: chicken sales rose 20.0 per cent, while table eggs sales jumped 30.9 per cent, and balanced feed sales increased 11.3 per cent.

Operating results

Bachoco's second quarter gross margin was 24.3 per cent, higher than the 17.9 per cent reached in the same quarter of 2008. The increase in the gross margin is attributed to the 18.4 per cent increase in sale prices, which was partially offset by the 10.8 per cent increase in the cost of sales.

The Company had an operating profit of MXP858.6 million, compared to an operating profit of MXP311.6 million in the same quarter of 2008; the operating margin of 14.3 per cent in the second quarter 2009, was above the 6.2 per cent margin of the same 2008 period.

Operating expenses amounted to MXP596.7 million in the quarter. Even when operating expenses increased by 2.4 per cent during the quarter, operating expenses as a percentage of sales decreased to 10.0 per cent, when compared to the same period of 2008.

The EBITDA result was positive and amounted to MXP1,019.3 million, and was 121.4 per cent above the MXP460.3 million recorded in the same period of 2008.

Comprehensive financial income (cost)

The Company's financial comprehensive income was MXP13.6 million during the quarter, compared to a financial comprehensive cost of MXP47.5 million reported in the same quarter last year.

Net majority income

Net majority income for the second quarter totaled MXP695.7 million, or MXP1.16 per share (US$1.06 per ADS), compared to a net majority income of MXP194.4 million, or MXP0.32 per share (US$0.30 per ADS) reported in the same 2008 period.

Results by business segment

Chicken
Results for the chicken business line remained strong during the second quarter. Sales of chicken products increased 20.0 per cent as chicken prices rose 18.3 per cent and volume grew 1.4 per cent. During this quarter demand for chicken products was stable in the Mexican market.

Table Eggs
Sales of eggs significantly increased by 30.9 per cent during the second quarter as egg prices rose 31.7 per cent from the previous year, but were partially offset by a slight volume decrease of 0.6 per cent related to the production adjustment made by the Company. Demand for egg products remained strong in the Mexican market.

Balanced Feed
During the second quarter the balanced feed business showed signs of recovery. Sales of balanced feed increased 11.3 per cent, mainly due to an 8.9 per cent increase in prices and a 2.3 per cent increase in volume. This business line was strongly affected during the past quarters given the high cost of raw material prices.

Swine
Swine sales increased 0.3 per cent from Q2 2008, mainly driven by a 0.9 per cent increase in volume, which was partially offset by a 0.6 per cent decrease in swine prices.

Other Lines
Sales of other lines increased 19.4 per cent when compared with same quarter of 2008; The main products sold were by-product sales, such as poultry manure.

First Half of 2009

Net sales

Net sales for the first half of 2009 amounted to MXP11,857.9 million, and were 21.9 per cent above the MXP9,730.8 million reported in H1 2008. The increase was mainly driven by the 24.0 per cent increase in chicken sales, 20.2 per cent in table eggs sales, 19.8 per cent in swine sales and 1.7 per cent increase in sales of balanced feed.

Operating results

Bachoco's gross margin for the first half of the year was 21.6 per cent, higher than 17.7 per cent in H1 2008, and was mainly attributed to higher sales in all of our business lines. The Company's operating profit was MXP 1,353.4 million, compared to an operating profit of MXP 556.0 million reached in the same period of 2008. EBITDA was MXP1,673.6 million, 96.0 per cent more than the MXP853.7 million recorded in the H1 2008. EBITDA margin for the first half of 2009 was 14.1 per cent.

Net majority income

Net majority income for the first half of the year was MXP969.7 million, or MXP1.62 per share (US$1.47 per ADS), compared to net income of MXP425.2 million, or MXP0.71 per share (US$0.65 per ADS) reported in the same 2008 period.

Balance sheet

Liquidity is solid with cash and cash equivalents amounting to MXP2,802.4 million as of June 30, 2009. The total debt outstanding was MXP640.2 million as of June 30, 2009.

Capital expenditure

CAPEX during the first half of 2009 amounted to MXP223.0 million, and was entirely financed with internally generated resources.

Further Reading

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