Bimbo profitability showing signs of improvement

by Josh Sosland
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B.B.U. operating income triples, but margins remain thin.

MEXICO CITY — Operating income of the U.S. and Canada business of Grupo Bimbo S.A.B. de C.V. was 342 million pesos ($22 million) in the first quarter ended March 31, up 264% from 94 million pesos in the first quarter last year. Net sales were 24,935 million pesos ($1,628 million), up 35% from 18,415 million. The higher profits for the quarter were attributed by the company to lower costs associated with the company’s “reconfiguration and optimization strategy.” The company has invested heavily in plant closings and other cost savings initiatives in recent years. The costs totaled 439 million pesos ($29 million) during the first quarter, versus 594 million in the first quarter last year. First-quarter B.B.U. operating margins, while a thin 1.4%, were nearly tripled from 0.5% a year earlier.

The 35% surge in quarterly sales was largely due to the inclusion of the Canada Bread acquisition in the 2015 quarter (accounting for 21.5 percentage points of the gain). The strong value of the U.S. dollar relative to the peso was a factor too.

“While overall volumes remained under pressure due to still challenging market dynamics, sales growth in the sweet baked good and breakfast categories remained strong,” the company said.

U.S. and Canada EBITDA during the first quarter was 1,267 million pesos ($83 million), up 58% from 801 million during the first quarter last year. EBITDA margin widened to 5.1% from 4.4%.

Grupo Bimbo net majority income in the first quarter was 907 million pesos ($59 million), up 11% from 430 million pesos in the first quarter of 2014. Sales were 49,843 million ($3,254 million), up 20% from 41,558 million.

Bimbo’s most profitable division, its Mexico business, had operating income of 2,259 million pesos ($147 million), up 43% from 1,575 million pesos. Sales were 18,824 million pesos ($1,229 million), up 6%.

“Net sales during the first quarter posted the highest growth in the past two years, rising 6.3% from the year-ago period,” Bimbo said. “The company posted healthy performance across all channels and categories, most notably in bread, cakes, tortillas and cookies. These results were primarily driven by stronger execution at the point of sale, a wide array of commercial efforts and ongoing product innovation, along with an improvement in the overall consumption environment.”

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