Bimbo U.S. profits down 73% in first quarter of 2012
by Josh Sosland
MEXICO CITY — Operating income of the United States business of Grupo Bimbo S.A.B. de C.V. was 242 million pesos ($18.3 million) in the first quarter ended March 31, down 73% from 895 million pesos in the first quarter of 2011. The steep profit decline came even as sales in the quarter surged to 17,861 million pesos ($1,354 million), up 62% from the first quarter last year. Bimbo attributed the decline in operating income to gross margin pressure, $12 million in integration related expenses (including expenses associated with four plant closings to enhance efficiency), $7 million from “the effects of the purchase price allocation of the Sara Lee acquisition” and investments Bimbo made to expand its distribution network.
The combined effect was to nearly eliminate the operating profit margin in the quarter, to 1.4% versus 8.1% in the first quarter of 2011 and compared with an operating margin of 8.5% in the first quarter of 2012 for Bimbo’s operation in Mexico. Overall, Bimbo said the inclusion of Sara Lee results, including integration expenses, caused consolidated corporate profit margins to narrow 3.4 percentage points.
Bimbo attributed the sales jump mostly to the inclusion of the North American Sara Lee bakery business in the 2012 quarterly results but also reflected 6.6 percentage points of sales gain from favorable exchange rate moves and pricing initiatives that “fully offset the decline in overall volumes.” Bimbo did not disclose in the earnings announcement the extent of volume erosion.
Group majority income of Grupo Bimbo was 601 million pesos ($45.6 million), down 47% from 1,411 million in the first quarter of 2011. Sales were 40,919 million pesos ($3,101 million), up 39%. In addition to sharply diminished profitability for Bimbo Bakeries USA, the consolidated profit decline also reflected higher raw material costs and the impact of a peso devaluation on the Mexico results, the company said.