Gruma USA income up 2% in fiscal 2017

by Eric Schroeder
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Gruma tortillas - Mission and Guerrero
Gruma's gains in the tortilla business were driven by the retail channel.

MONTERREY, MEXICO — In the year ended Dec. 31, 2017, Gruma USA had operating income of 5,696 million pesos ($305.8 million), up 2% from 5,600 million pesos in 2016. For the fourth quarter ended Dec. 31, operating income increased 1% to 1,439 million pesos from 1,423 million.

Net sales at Gruma USA increased 1% in fiscal 2017 to 40,471 million pesos ($2,173.3 million) from 39,944 million pesos. For the fourth quarter, net sales fell 3% to 10,160 million pesos from 10,479 million.

Raul Cavazos, Gruma
Raul Cavazos Morales, c.f.o. of Gruma USA

“Gains in the tortilla business were driven by the retail channel, where volume benefits primarily from growth of some core products, some specialty products and healthier alternatives,” Raul Cavazos Morales, chief financial officer, said during a Feb. 22 conference call with analysts. “Higher volumes also reflect increased distribution at club stores and improved formulation of existing products, making them clean label. On the other hand, the food service channel was impacted by the company’s decision to reduce supply of some s.k.u.s (stock-keeping units) based on profitability.”

Gruma said operating margin improved to 14.1% from 14% during the full year and improved to 14.2% from 13.6% in the fourth quarter.

Cost of sales as a percentage of net sales improved to 55.5% from 58.1% in the fourth quarter, Gruma said, driven by a change in the sales mix toward higher margin s.k.u.s at the retail tortilla business, lower depreciation as accelerated depreciation was concluded during the third quarter of fiscal 2017 for assets of the current Dallas plant that will not be used at the new plant, and cancellation of liability insurance provisions to reflect actual expenses.

Gruma said it incurred $61 million in capital expenditures during the fourth quarter and $272 million for the full year. During the fourth quarter, the company allocated expenditures to the United States (in connection with the new tortilla plant in Dallas and the expansion of a tortilla plant in Florida), to Europe (in connection with a tortilla plant in Russia, the expansion of a tortilla plant in The Netherlands, and packaging automation at a flatbread plant in England) and to Mexico (for a tortilla plant near Puebla and technology upgrades at GIMSA).

Overall, majority net income at Gruma S.A.B. de C.V. in fiscal 2017 was 6,218 million pesos ($333.6 million), up 5% from 5,922 million pesos in fiscal 2016. EBITDA was 11,344 million pesos, up 3% from 10,964 million pesos, while sales increased 3% to 70,581 million pesos from 68,206 million pesos. 
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