Gruma full steam ahead on European expansion

by Eric Schroeder
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MEXICO CITY — With two acquisitions in the past year, Gruma S.A.B. de C.V. has charted a course for its European operations that it hopes can bring similar margins to its U.S. operations.

At the end of March, Gruma agreed to pay €45 million ($48.3 million) to acquire Azteca Foods Europe, which produces tortillas for the catering and restaurant market and for the hypermarket.

Azteca Foods Europe, based in Toledo, Spain, produces 100,000 flour and corn tortillas an hour. The company has a network of customers and distributors in Spain and across Europe. The company’s export volume makes up 50% of its business.

The acquisition of Azteca comes less than a year after Gruma acquired Mexifoods Spain for $15 million. Mexifoods is a Spanish leader in the production and sale of wheat tortillas, corn tortillas, chips, tortilla chips and Mexican sauces with 25% market share.

In an April 23 conference call with analysts to discuss first-quarter results, Raul Cavazos, chief financial officer at Gruma, elaborated on Gruma’s European expansion.

“(Azteca Foods) was very superior for us since this company has a very good presence in Southern Europe, as well as in some areas in the Middle East and Northern Africa,” Mr. Cavazos said. “This company now is selling to 19 different countries, and they were competing with us.”

Mr. Cavazos said Gruma had explored a possible acquisition of Azteca Foods about five years ago, but at the time a potential transaction did not fit into Gruma’s sales strategy.

Now, Gruma intends to merge Mexifoods operations into Azteca Foods facility, which Mr. Cavazos said is larger and more efficient.

“(This) will allow us just to have synergies and to save expenses and costs,” Mr. Cavazos said. “As well as we will move some production that we already have on the Amsterdam plant to this new plant in Spain. And also that will allow us to be more efficient.”

Mr. Cavazos added the acquisition of Azteca was a strategic fit for Gruma, especially given the fact that a competitor was in the mix to acquire Azteca.

“If we didn’t participate in this acquisition, the gap in between us and this competitor was to be too high, and it would be more difficult just to compete with them,” he explained. “That’s why we acquired this company.”

Operating income of Gruma Corp. in the first quarter ended March 31 was 831 million pesos ($54 million), up 9% from 761 million pesos in the first quarter of fiscal 2014. Gruma Corp. is the U.S. and U.K. segment of Gruma S.A.B. de C.V.

Sales were 8,402 million pesos ($547.3 million), up 3% from 3,094 million pesos in the same period a year ago. Sales volume increased 4% to 424,000 tonnes.
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