MEXICO CITY — In the wake of announcing the closing of a baking plant in New Mexico, Grupo Bimbo SAB de CV said it is planning a restructuring of its North American businesses.

Brief comments about the restructuring were shared Feb. 19 in a call with investment analysts in connection with the release of Bimbo’s financial results for the fourth quarter of 2023. During the call, the company also issued initial guidance for 2024, projecting a generally positive but uneven year ahead.

Operating income of the North America business of Grupo Bimbo in 2023 was 11.18 billion pesos ($660 million), down 66% from 33.26 billion pesos in 2022. The segment’s operating margin fell to 5.8% from 16.2% the year before. Net sales were 192.53 billion pesos ($11.3 billion), down 6% from 205.67 billion pesos in 2022 but up 7% excluding the effects of foreign currency swings.

Skewing the comparisons were the effects of a non-cash benefit of 14.4 billion pesos in the fourth quarter of 2022 in connection with a multi-employer pension plan liability reversal. The 2022 benefit similarly also skewed full-year comparisons for BBU and Grupo Bimbo’s financial results.

In the fourth quarter, BBU’s operating income fell to 1.98 billion pesos ($120 million), down from 19.34 billion in the fourth quarter last year. The company’s operating margin fell to 4% from 33%. Net sales were 49.5 billion pesos ($2.9 billion), down 15% from 57.97 billion pesos in the fourth quarter last year and down 4.2% excluding the effects of currency swings.

Excluding the effects of the MEPPs, margins in North America tightened by 130 basis points. While most of the narrowing was attributed to the strong Mexican peso raising the cost of product imported from Mexico, Bimbo said cost inflation, mostly related to labor, and restructuring expenses associated with the closing of the Albuquerque plant contributed as well. Offsets were favorable price realization, falling ingredient prices and improving productivity across the supply chain, Bimbo said.

“The food industry has been facing consumption headwinds from consumer pressure,” said Daniel Servitje, chairman and chief executive officer. “As we look ahead, we expect some of this pressure to dissipate particularly as a result of lapping the reduction of SNAP benefits. We are excited about our innovation, particularly in breakfast heated goods and sliced bread. We have received positive feedback as we have gained traction.”

Plans for the restructuring program were announced by Diego Gaxiola, group chief financial officer.

“We will begin to implement a transformational program designed to improve our North American business and ultimately reach our full potential,” Gaxiola said. “We strongly believe these investments will better align and focus resources to drive growth and protect profitability while continuing to create long-term value for our shareholders, as has been the case with past restructuring initiatives.”

Servitje said Bimbo restructuring efforts are “aligned with our proactive approach to identifying opportunities that resonate with our philosophy and strategy to be a sustainable, highly productive and deeply humane company.”

Asked by an analyst for more details about the program, Servitje said Bimbo was constantly evaluating and instituting “best-in-world practices.”

“And we have a footprint in the US that is a lot of local bakeries and a lot of acquisitions,” he said. “So we’ll continue to look at specific opportunities that we have to optimize our footprint always. I won’t go into anything specific, but know that we’re making investments in our business and our decisions to better serve our retailers and to continue to deliver high quality and order fill for our consumers and customers. So it’s always in play for us, and we’re always looking to optimize our footprint in the US.”

In January, Bimbo announced plans to close its Albuquerque plant, blaming volume losses and the facility’s age for making “this bakery inconducive to our company growth plans.”

Net majority income of Grupo Bimbo in 2023 was 15.48 billion pesos ($910 million), down 67% from 46.9 billion pesos in 2022. Net sales were 399.88 billion pesos ($23.4 billion), up 0.3% from 398.71 billion pesos in 2022 and up 11%, excluding the effects of foreign exchange movements. Results in 2022 include an extra week in North America. Excluding MEPPs and the divestiture of the company’s Ricolino business, net income was down 0.9% and margins narrowed 10 basis points.

In the fourth quarter, Bimbo’s net majority income was 3.26 billion pesos ($190 million), down 89% from 30.23 billion in the final quarter a year earlier. Fourth-quarter net sales were 101.88 billion pesos ($6 billion), down 7% from 109 billion pesos the year before, but up 1.6%, excluding foreign exchange effects.

Excluding the effects of the extra week in North America in 2022, net sales were up 0.2% in the quarter and 8% for the year.

For the new year, Servitje was generally upbeat about Bimbo’s prospects but offered words of caution as well.

“Looking into 2024, while we continue to see the benefit of lower commodities, this year will be marked by a transitional phase as we navigate through a diverse consumer environment, witnessing a blend of cautiousness in certain markets and resilience in some others,” he said. “Emphasizing the significance and importance of diversification, our company is strategically positioned to navigate this environment.”

He identified the US restructuring as a “key focus” in the new year.

Taking a step back, Servitje said the past four years, since before the start of the pandemic, have been a period of “outstanding effort and resilience.” Over this period, he noted the company has grown 37% in peso terms, has grown even more in dollar terms and has widened EBITDA margins by 2.2 percentage points.

Grupo Bimbo in 2024 is forecasting top-line growth of low- to mid-single digits “as we continue to invest behind our strong brands, deliver accretive innovation to our consumers and leverage the power of our frontline execution,” Gaxiola said. Adjusted EBITDA growth also is expected in low- to mid-single digits.

Tailwinds in 2024 are expected from more attractive commodity pricing, productivity benefits from past restructuring and capital investments, Gaxiola said.

“We will continue to optimize our portfolio, improve the efficiency of our supply chain and digitalize our business, which will enable us to expand our margin in the long term,” he said.

Bumps may be encountered on the road to low- to mid-single digit growth, Gaxiola said.

“The first half of ’24 will be more complicated,” he said. “In fact, several metrics were at record levels, including sales growth and EBITDA margin expansion, which was 40 basis points in the first half of last year. So for the first half, we expect a slight margin contraction. And for the second half of the year, we expect to see a higher top-line growth and a recovery on our margins.”

Capital spending, which has surged in recent years at Bimbo, may be dialed back slightly in 2024, Gaxiola said, predicting spending levels in the range of $1.8 billion to $2 billion, versus $2 billion in 2023.

During the analyst call, Mark J. Bendix, executive vice president, offered insights about how the BBU business has been performing, its outlook and the effects of changing consumer behavior.

“Volumes in our branded categories have been soft, but we anticipate that trend to change,” Bendix said. “Organic sales growth will be stronger in the back half as the laps get easier as we get into the back half of the year. Some of the consumer pressures that Daniel talked about have existed with the elimination of the stimulus benefits, resumption of student loan payments impacted us in the back half as well and which both of those will provide year-over-year benefit in the second half of 2024.

“As a DSD (direct-store delivery) company, we have an advantaged speed of execution. And while we have driven a lot of productivity in our operating expense, we’re also simultaneously investing in operating expense to drive distribution and growth in the business, which will improve some of the trends. We see the categories rebounding in the second half mostly and the headwinds that we have on commodities limited in the back half, and we continue to invest in pull marketing to ensure that we resonate with consumers. We’re also ensuring our investments enable us to be where the consumers are, with growth in the away-from-home channel, coupled with growth in mass and club.”

In introductory comments, Servitje highlighted several milestones achieved in 2023, including reaching $22.5 billion in net sales and $3.1 billion in adjusted EBITDA. He said the company strengthened its revenue growth management capabilities, completed six acquisitions and strengthened its debt profile.