MEXICO CITY — While operating earnings fell in 2018 for the North American business of Grupo Bimbo S.A.B. de C.V. from the year before, cost-cutting efforts of recent years paid off in the fourth quarter with solid gains in profitability. In the year ended Dec. 31, 2018, operating income was 5,100 million pesos ($285 million), down 34% from 7,701 million in 2017. Sales were 143,848 million pesos ($7,425 million), up 4.5% from 137,662 million.
In the fourth quarter, operating income in North America was 2,101 million pesos ($109 million), up 14% from 1,841 million in October-December 2017. Sales were 38,630 million pesos ($1,987 million), up 6% from 36,295 million. Fourth-quarter operating income overall at Grupo Bimbo was up 40% for the year, a jump the company attributed to strong sales and lower general expenses. The cost reductions included “those achieved from restructuring investments like the voluntary separation program (v.s.p.), along with route optimization efforts and zero-based budgeting.”
Specifically in North America, operating margins improved 30 basis points because of the efficiencies gain through the v.s.p. and an organizational restructuring in Canada.
“Impairment charges registered during the quarter were caused by the portfolio optimization initiatives being implemented across the U.S. and restructuring expenses were in part related to the closure of the Madison (Wis.) plant in the U.S.,” the company said.
The fourth-quarter sales gain mostly was due to a foreign exchange rate benefit, but sales were up 2% in dollar terms because of higher prices and growth of strategic brands in the United States “as well as solid performance in Canada, especially of the bread and salty snacks categories,” Bimbo sad. A partial offset was weakness in U.S. private label business.
Grupo Bimbo net majority income in 2018 was 5,808 million pesos ($302 million), up 25% from 4,630 million in 2017. Net sales were 288,266 million pesos ($14,983 million), up 8% from 267,515 million.
In the fourth quarter, net majority income was 2,515 million pesos ($131 million), up sharply from 427 million in the same period a year earlier. Sales were 76,309 million pesos ($3,966 million), up 8% from 70,931 million.