Strong U.S. tortilla operations drive Gruma earnings, sales higher

by Eric Schroeder
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MEXICO CITY — Operating income of Gruma Corp., the U.S. and U.K. segment of Gruma S.A.B. de C.V., in the quarter ended Sept. 30, was 718 million pesos ($53 million), up 17% from 615 million pesos in the third quarter last year.

Sales were 7,617 million pesos ($562.2 million), up 3% from 7,424 million pesos. Sales volume also was higher, increasing 2% to 416,000 tonnes. The higher volume reflected a 5% increase in U.S. operations, which partially was offset by reductions in European operations due to extraordinary sales of corn during the third quarter of fiscal 2013, Gruma said.

“The increase in the U.S. corn flour operations was driven by some corn chip manufacturer’s organic growth, successful retail promotions and new tortilla customers,” Gruma said. “The U.S. tortilla operations rose due to organic growth and expansion of some Mexican food restaurant chains, introduction of dishes made with tortillas by non-Mexican food restaurant chains, and the increasing popularity and distribution of retail wheat flour tortillas, whose improved formula has been well accepted by consumers.”

Operating margins improved to 9.4% from 8.3%, while cost of sales as a percentage of net sales improved to 61.6% from 63.3%.

“Most of the improvement was driven by the U.S. tortilla operations, mainly from (1) the continued s.k.u. rationalization program combined with a sales mix improvement from focusing on high-margin products (as in the case of wheat tortillas and low-count corn tortilla presentations); and (2) lower raw material costs while prices were maintained.

“Europe also improved due mostly to lower raw material and packaging costs (while prices increased due especially to the change in the sales mix), and production efficiencies related mainly to packaging automation.”

Capital expenditures totaled $31 million during the third quarter, most of which were allocated to production capacity expansions in Mexico at a corn flour plant in Mexicali and a tortilla plant in Tijuana, as well as in the United States at a tortilla plant in Florida. Investment also was made in technology upgrades at Gruma Corp. and GIMSA, the company said.

Majority net income of Gruma S.A.B. de C.V. in the third quarter was 1,154 million pesos ($85.2 million), up sharply from 631 million pesos in the third quarter of 2013. Net sales were 12,665 million pesos, up 1% from 12,569 million pesos in the year earlier period.

Gruma said it improved its profitability and financial structure during the quarter by focusing on optimizing its product portfolio.
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