Industrias Bachoco S.A.B. de C.V., Mexico’s leading producer and processor of poultry and food products, has announced its unaudited results for the second quarter (2Q11) and first half periods (1H11) ended 30 June 2011. All figures have been prepared in accordance with Mexico's Generally Accepted Accounting Principles (GAAP), and are presented in nominal Mexican pesos (MXP) per Mexican GAAP.

Among the highlights of performance on 2Q11 are that, compared to the same period last year, net sales rose 6.7 per cent to MXP6,616.8 million. Chicken sales rose 6.9 per cent and table egg sales declined 4.9 per cent in 2Q11.

EBITDA margin was 4.9 per cent for 2Q11, compared to 15.4 per cent reported for 2Q10, while earnings per share in 2Q11 reached MXP0.23 (US$ 0.24 per ADS), compared to MXP1.03 (US$1.06 per ADS) in 2Q10.

Comments from the Chief Executive Officer

Rodolfo Ramos, Bachoco's CEO, said: "Our second quarter results were characterised by the challenge facing the poultry industry worldwide, higher grain costs. Given this is the largest component of the Company's cost of sales, margins and profitability were affected despite efficiency improvements and hedging strategies.

"Even with the increase in our cost of sales, the operating results for our business during the second quarter were positive. We capitalised on the higher demand for chicken and balanced feed products in the Mexican market, thereby achieving greater sales volume and revenues from these business lines.

"The Company's egg business continued to be affected by a large over-supply in the Mexican market; therefore, egg sales volume and prices declined in the second quarter.

"Bachoco is focused on factors that will enable the Company to maximise its results. Through strict cost and expense controls, productivity improvements and enhanced sales efforts, the Company continues to work towards maintaining a healthy financial position while remaining the leader in the Mexican poultry industry. Furthermore, we believe that our hedging policy has helped us mitigate the effects of grain price increases and we expect to continue with the same strategy for the rest of the year," said Mr Ramos.

Second quarter results

Net sales for 2Q11 reached MXP6,616.8 million, an increase of 6.7 per cent when compared to MXP6,204.1 million reported in 2Q10. This was driven by the strong performance in the chicken and balanced feed businesses, partially offset by declines in sales of egg, swine and other business lines.

Gross profit totalled MXP865.1 million for 2Q11, 40.4 per cent below the MXP1,453.2 million reported for 2Q10. Gross margin was 13.1 per cent in 2Q11 compared to 23.4 per cent in 2Q10, due to a 21.1 per cent increase in cost of sales.

The Company's operating profit for 2Q11 totalled MXP149.5 million, which represented a sharp decrease from the MXP783.1 million reported for 2Q10. The operating margin for 2Q11 was 2.3 per cent, compared to 12.6 per cent in 2Q10, due to the aforementioned factors.

EBITDA reached MXP326.6 million for a margin of 4.9 per cent, which reflects a decrease from the MXP953.7 million and 15.4 per cent EBITDA margin reported in 2Q10.

Net income for 2Q11 was MXP138.6 million, or MXP0.23 per share (US$0.24 per ADS), compared to MXP618.0 million, or MXP1.03 per share (US$1.06 per ADS) reported in 2Q10.

Quarterly results by business line

Chicken products sales for 2Q11 increased 6.9 per cent compared to 2Q10, which resulted from a 6.5 per cent increase in sales volume and 0.4 per cent higher prices as demand for chicken products remained strong during the period.

Sales of table eggs declined 4.9 per cent during 2Q11 driven by a 3.1 per cent drop in sales volume and 1.8 per cent lower prices. This weaker performance reflects the oversupply that continues to affect the Mexican egg market.

The feed business experienced strong growth during 2Q11 with a 32.3 per cent increase in sales when compared to 2Q10, driven by a 13.0 per cent increase in balanced feed prices and 17.0 per cent greater sales volume.

Swine sales volume increased 2.8 per cent, however, given the increasing supply present in the Mexican market, the price of swine dropped 6.8 per cent which led to a decrease of 4.2 per cent in swine sales when compared to 2Q10.

First-half results

Net sales for 1H11 totalled MXP12,659.1 million; representing 4.3 per cent increase over 1H10. The growth in sales was driven by increases of 31.1 per cent in balanced feed sales, 5.3 per cent in chicken sales, and 0.9 per cent in swine sales volume. This was slightly offset by a 12.0 per cent decline in table egg sales, as well as an 18.6 per cent decrease in other business sales.

Gross profit totalled MXP1,728.3 million, 30.1 per cent below MXP2,473.1 million reported for 1H10. Gross margin reached 13.7 per cent in 1H11 compared to 20.4 per cent in 1H10. This result was attributed to a 13.1 per cent increase in total cost of sales.

The Company’s operating profit for 1H11 totaled MXP335.5 million, less than MXP1,125.0 million in 1H10. The operating margin for the first half of 2011 was 2.7 per cent, compared to 9.3 per cent in 1H10. EBITDA for 1H11 amounted to MXP689.1 million, 53.0 per cent below MXP1,465.7 million reported for 1H10. EBITDA margin declined from 12.1 per cent to 5.4 per cent 1H11.

During the first half of 2011, financial income of MXP63.2 million was reported, 48.4 per cent higher than MXP32.6 million in 1H10. The result is mainly attributed to greater interest income.

Total taxes for 1H11 reached MXP77.2 million.

Net income for the 1H11 totalled MXP293.7 million, or MXP0.49 per share (US$0.50 per ADS), compared to a net income of MXP894.0.million, or MXP1.49 per share (US$1.53 per ADS) reported in 1H10.

Further Reading

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