B.B.U. income down sharply in quarter

by Eric Schroeder
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MEXICO CITY — Operating income of Bimbo Bakeries USA in the first quarter ended March 31 was 94 million pesos ($7.2 million), down 86% from 676 million pesos in the first quarter of 2013.

Sales were 18,415 million pesos ($1,405 million), up narrowly from 18,216 million pesos in the first quarter last year.

“Net sales in dollar terms declined 3.3%, of which approximately 2 percentage points reflected the negative impact of the California divestiture completed in July 2013, combined with weak consumption under further pressure from extreme winter weather and a more competitive market environment,” said Grupo Bimbo S.A.B. de C.V., the parent company of B.B.U. “The breakfast and snacks categories outperformed in the period.”

Operating margins in the United States narrowed to 0.5%, a 3.2 percentage point decline from the 3.7% operating margin in the first quarter last year.

At 0.5% the B.B.U. margins were far narrower than the 8.9% the company earned in Mexico. Profit margins were negative in Bimbo’s other regional segments, including a negative margin of 5.1% in Iberia (versus a negative margin of 8% last year) and 1% in Latin America (versus a negative 4.5% last year).

Consolidated net majority income of Grupo Bimbo in the first quarter was 513 million pesos ($39.2 million), down nearly 10% from 544 million pesos in the first quarter of 2013, reflecting operating performance and lower financing costs, as well as a lower effective tax rate of 38.8% compared to 45.4% in the year ago period.

Consolidated operating income fell in the first quarter, down 22.4% from the first quarter last year.

“This reflects charges on the ‘other income and expenses’ line, including: 1) 594 million pesos in integration costs in the United States (equivalent to $45 million, compared to $24 million in the year ago period) related to the asset strategy to close certain facilities and build and upgrade new facilities, as well as efforts to optimize the distribution network; and 2) a 49 million peso non-cash charge related to the write-off of certain assets from the closure of a Barcel facility in Mexico,” Grupo Bimbo said.

Consolidated sales were 41,979 million pesos ($3,204 million), up 1% from 41,674 million pesos.
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