MEXICO CITY — Net sales rose 9% for the North American segment of Grupo Bimbo S.A.B. de C.V. in the third quarter, but a restructuring initiative in Canada had a negative effect on operating income.
Operating income of 1,989 million pesos ($100.9 million) was down 9% from 2,181 million pesos in the previous year’s third quarter in North America. Net sales of 36,293 million pesos ($1,840.3 million) were up from 33,160 million pesos.
Bimbo took a $17 million non-cash charge arising from the organizational restructuring initiative implemented in Canada and the United States coupled with restructuring investments coming from routes and manufacturing streamlining efforts across the region. Bimbo closed a baking facility of its subsidiary, Canada Bread Co., in Woodstock, N.B.
“Just like in the U.S. and the V.S.P. (voluntary separation program), we see this initiative leading to a leaner, stronger and less complex organizational structure that accelerates decision-making and enhances collaboration across our supply chain,” Daniel Servitje, chairman and chief executive officer of Grupo Bimbo S.A.B. de C.V., said of the restructuring program in Canada during an Oct. 25 earnings call. “All of this resulted in adjusted North American EBITDA growth of 8.2%.”
Savings from the V.S.P. helped to offset part of the pressure on higher commodity, energy and transportation costs in the third quarter in North America.
Sales in North America increased in part due to a foreign exchange rate benefit and a 2.8% increase in dollar terms. Solid volume performance came from strategic brands in the United States and in bread and snacks categories in Canada. The performance of the Sara Lee, Artesano, Thomas’ and Entenmann’s brands pleased Bimbo executives, said Fred Penny, president of Bimbo Bakeries USA.
“We had volume growth and some revenue growth on top of that in our strategic brands, and our total branded business was up slightly as well,” Mr. Penny said.
Bimbo in North America will continue to see volume pressure on non-branded business, he said.
“Some of that is just the category trend, and in addition, some of that is on a regional basis, some lost business, but overall we’re pretty pleased with the top-line performance in this quarter,” Mr. Penny said.
Companywide, Mexico City-based Grupo Bimbo S.A.B. de C.V. reported net majority income of 1,815 million pesos, up 6% from 1,710 million pesos in the previous year’s third quarter. Net sales of 72,390 million pesos were up 11% from 65,390 million pesos.
Grupo Bimbo S.A.B. de C.V. achieved its debt-to-EBITDA ratio target of less than 3x earlier than the company’s year-end goal, Mr. Servitje said. The ratio stood at 2.9x, which compared to 3.5x at the end of 2017.
In Mexico, operating income of 4,114 million pesos was up 11% from 3,715 million pesos behind strong volume performance and lower raw material costs. Sales rose 9% to 25,219 million pesos from 23,075 million pesos.
In Latin America, Bimbo suffered an operating loss of 126 million pesos, which compared to an operating loss of 61 million pesos in the previous year’s third quarter. Currency depreciations and a weaker consumption environment, mainly in Brazil and Argentina, affected results negatively. Sales of 6,522 million pesos were down 3.2% from 6,739 million pesos.
In Europe-Asia-Africa, an operating loss of 260 million pesos compared to an operating loss of 867 million pesos in the previous year’s third quarter. Sales of 6,506 million pesos were up 51% from 4,305 million pesos.
“While E.A.A. remains one of the smaller of the Bimbo regions in terms of sales, it is also the strongest in terms of growth rate, which shows how compelling these markets will be for us,” Mr. Servitje said. “The top-line expansion is mainly due to the integration of Bimbo Q.S.R. and Mankattan …”
Grupo Bimbo S.A.B. de C.V. recently acquired Mankattan Group, a baking company in China.
Over the first nine months of the fiscal year, Grupo Bimbo S.A.B. de C.V. reported net majority income of 3,293 million pesos, which was down 22% from 4,203 million pesos in the same time of the previous year, and net sales of 211,957 million pesos, up 8% from 196,584 million pesos.