MEXICO CITY — Operating income of the North America business of Grupo Bimbo S.A.B. de C.V. fell in the first quarter ended March 31 while sales moved higher on a constant currency basis.
Bimbo Bakeries USA operating income in the first quarter was 1,210 million pesos ($60 million), down 14% from 1,406 million pesos in the first quarter last year. Net sales were 31,983 million pesos ($1,712 million), down 6% from 34,002 million pesos a year earlier. Sales in dollar terms were up 2%.
“The improvement in dollar terms reflected price increases, good performance in the snacks category, strategic brands in the U.S. and the bread category in Canada, and to a lesser extent, the contribution from the integration of the U.S. operation of Bimbo Q.S.R.,” Bimbo said. “Nonetheless, continued pressure in the private label, premium and frozen categories continued to weigh on sales.”
Profitability was adversely affected by higher input costs, and Bimbo said operating income would have been worse but for cost reduction initiatives, including zero-based budgeting in North America.
In an April 27 conference call with investment analysts, Fred Penny, president of B.B.U., was asked about a voluntary separation program announced April 13.
“We expect to see approximately a 15% reduction in our salaried workforce as we get through the process,” he said. “But we are in the selection window right now, so we don't know exactly how that's going to come out.”
He said he expected the company to take a charge against earnings in the second quarter and to begin seeing cost savings in the third.
Net majority income of Grupo Bimbo was 1,271 million pesos ($68 million), up 28% from 996 million pesos in the same period last year. Sales were 67,154 million pesos ($3,594 million), up 1.6% from 66,080 million pesos.
The company’s operating income in Mexico jumped 19%, and sales there were up 11%.
Daniel Servitje, Bimbo c.e.o., expressed serious concern about Mexico’s political outlook.
“I would like to emphasize that although we continue to be positive about the global outlook for the year, we are at the same time cautious and concerned about the potential volatility and change in the direction of our country,” he said. “As you know, we will have the largest electoral process ever on July 1. These are not business as usual times. There’s much at stake for Mexico in this election. Our investment policy has always been prudent. Our geographic and revenue diversification remains a key strength as we don't rely on one country, but the current situation in Mexico demands a cautious stance.
“We are currently working on different fronts. We are reviewing and delaying part of our CapEx. We are tightening our cost structure in order to prepare ourselves for a volatile economic environment in Mexico in which our consumers and customers may be affected as well. We are following closely what the president candidates are saying and taking every measure to face the possible challenges ahead. As a Mexican company, we remain committed to our country, our communities and our associates.”