MEXICO CITY — Strong sales of buns, breakfast products, sweet goods and snacks helped lift third-quarter results of the North American business of Grupo Bimbo SAB de CV. Announcing quarterly results, Bimbo said the company gained market share in mainstream bread but also faced margin pressure because of cost inflation.
Operating income in North America was 3.4 billion pesos ($167 million), down 27% from a year earlier but more than double the 1.7 billion pesos of operating income in the third quarter of 2019. Operating margin in the third quarter in North America was 7.7%, down from 10% a year earlier but well above the 4.5% margins during the period in 2019. Net sales were 44.3 billion peso ($2.2 billion), down 4.6% from 46.4 billion pesos a year earlier but up 18% from 37.6 billion in 2019. In US dollar terms, third-quarter North American sales were up 6% from the year before.
Boosting sales during the quarter were pricing actions, trade spend optimization and price/mix, Bimbo said.
Bimbo attributed the narrowing of profit margins to higher inflation, including commodities, labor costs and shortages across the supply chain.
“This was partially offset by favorable branded mix and productivity benefits from past restructuring investments and cost saving initiatives,” the company said.
Daniel Servitje, chairman and chief executive officer, in a call with investment analysts Oct. 28, said despite difficult comparisons, the North American business “had a great quarter.”
“We implemented price increases late in the quarter, and given the outlook for 2022 with the significant inflation pressures we are expecting, we are expecting a second round of price increases and additional productivity,” he said.
Responding to a question about market share gains, Fred Penny, president of Bimbo Bakeries USA, discussed an environment conducive to strength in breakfast products and buns.
“We’re continuing to see fairly strong market share gains, not in every category, but most of our categories,” he said. “Breakfast, I think, is a reflection of the continued shift to consumption at home. Even though we’ve cycled the most significant impacts of the pandemic from a year ago in the quarter, I think that there is a continued trend of more consumption at home, and I think breakfast is one of the categories, along with buns, I would argue is another category where the trend seems to be continuing. So we feel good about that. Hopefully that will continue as we move into 2022.”
During the call, Diego Gaxiola, chief financial officer, offered preliminary guidance for Grupo Bimbo’s financial performance for 2022. He said sales are expected to grow mid-single digits. Despite a “tough comparison given remarkable results of 2021 and despite the high inflationary environment,” he said adjusted EBITDA should grow mid- to high-single digits and margins should expand. Capital expenditures of $900 million are targeted for the new year, he said.
Net majority income of Grupo Bimbo was 4 billion pesos ($196 million), up 12% from 3.6 billion in the third quarter last year. Net sales were 88.2 billion pesos ($4.33 billion), up 2.9% from 85.7 billion a year earlier and up 18% from 74.9 billion in 2019.
“I am very pleased with our third-quarter results,” Mr. Servitje said. “Despite challenging comparisons, the 6.5% pressure coming from (foreign exchange) rates, significant inflation and supply chain complexities, we have sequentially reported record sales and profits, and our free cash flow has been consistently growing. Our strong results are a reflection of our team’s dedication, global diversification, strong consumer demand, investments in our brands and pricing strategies.”
With the financial results, Bimbo said it has acquired Popcornopolis, a fast-growing popcorn brand “with a pristine reputation for quality.”
“Popcornopolis produces premium, ready-to-eat popcorn made with natural and best-in-class ingredients,” the company said. “This acquisition marks Grupo Bimbo’s entrance to the attractive popcorn category in the US, which is an excellent platform for innovation.”