Tortilla shelf space gains lift Gruma sales

by Eric Schroeder
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Gruma enjoyed increased penetration and shelf space gains in its U.S. tortilla operations.

MEXICO CITY — A number of factors stood out in lifting Gruma Corp.’s sales volume during the second quarter of fiscal 2015, including increased penetration and shelf space gains in its U.S. tortilla operations.

Operating income of Gruma Corp. in the second quarter ended June 30 was 1,023 million pesos ($63 million), up 29% from 792 million pesos in the second quarter of fiscal 2014. Gruma Corp. is the U.S. and U.K. segment of Gruma S.A.B. de C.V.

Sales were 8,980 million pesos ($554.3 million), up 4% from 8,600 million pesos in the same period a year ago. Sales volume increased 7% to 444,000 tonnes.

In commentary accompanying the release of its results, Gruma attributed the volume increase to both U.S. and European operations.

In the United States, Gruma said corn flour grew as a result of three factors: improved share through the better quality of its corn flour in comparison to other brands; increased consumption in restaurants; and better executed retail promotions at several supermarket chains.

Meanwhile, U.S. tortilla operations rose behind strength in the retail segment, where increased penetration, shelf space gains, product assortment optimization, new private label supply agreements at the expense of competitors, and the increasing popularity of some of the company’s tortillas were well accepted by consumers. Also contributing to strong U.S. tortilla operation results was improved performance in the food service segment, where Gruma benefitted from the expansion of some fast-food restaurant chains, the introduction and promotion of menu items made with tortillas by several restaurant chains, and additional business among food service distributors.

Elsewhere, the company’s European operations grew in connection with higher sales of grits and corn and with the recent acquisition in Spain, Gruma said.

Cost of sales as a percentage of net sales improved to 60.6% from 61.9% in the second quarter, driven mainly by U.S. tortilla operations, Gruma said.

In a July 23 conference call with analysts, Raul Cavazos, chief financial officer of parent Gruma S.A.B. de C.V., said Gruma has experienced its most rapid growth in the Midwest and Northeast regions of the United States. With that in mind, the company has been reviewing its investment plan for the company.

Raul Cavazos, c.f.o. of parent Gruma S.A.B. de C.V.

“We are now discussing about the possibility to eventually, in some point of time, sooner than later, we would be required to build another plant in that region just to supply that volume demand of our products,” Mr. Cavazos said. “That would result, in a very important way, in reductions on transportation expenses for the company since currently we are supplying from our Southeast and Southwest plants.”

Taking a look at the company’s capital expenditure program, Gruma said capital expenditures totaled $33 million during the second quarter of 2015 and were allocated mostly to technology upgrades at Gruma Corp. and GIMSA, capacity expansions at several tortilla plants in the United States and at the corn flour plant in Mexicali (northwest Mexico), and the construction of a tostada plant in Tijuana and a tortilla plant in Russia.

Majority net income of Gruma S.A.B. de C.V. in the second quarter was 1,081 million pesos ($66.5 million), down 5% from 1,134 million pesos in the second quarter of 2014. Net sales were 14,280 million pesos, up 16% from 12,297 million pesos. For the first half, majority net income was 2,064 million pesos, up 17% from 1,757 million pesos in fiscal 2014. Net sales were 27,802 million pesos, up 14% from 24,363 million pesos a year ago.
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