Production costs leads to weak Q4, fiscal year results for Industrias Bachoco
Industrias Bachoco S.A.B. de C.V. announced its unaudited results for the fourth quarter and full year 2011 ended December 31, 2011. Bachoco reported the highest quarterly and annual net sales in the company's history; this figure rose 34.4% in 4Q11 vs 4Q10 and 11.8% in 2011 vs 2010. However, Bachoco and the poultry industry in general continued experiencing large increases in production costs, driven by global increases in prices of corn, soybean meal, among other components of the production cost. This, combined with challenging economic conditions and high depreciation of the Mexican peso at the end of the year, lead Bachoco to post negative profit for the fourth quarter and weak results for the year 2011.
Bachoco's operating loss for 4Q11 was Ps. 244.7 million, compared to an operating profit of Ps. 584.5 million reached in 4Q10. While for the year 2011 operating losses totaled Ps. 59.6 million a sharp reduction compare to an operating income of Ps. 2,521.6 million, reported in 2010. The company's 4Q11 net sales totaled Ps. 8,564.3 million, showing a 34.4% increase over the Ps. 6,374.6 million reported in 4Q10.
"During the fourth quarter we observed a strong demand for chicken meat, particularly towards the end of the quarter, said Rodolfo Ramos, CEO. “We had increases in sales across all our business lines; as a result we reached record sales figures. Total sales rose 34.4% during the fourth quarter and 11.8% in 2011 over the previous year.
We were not able to fully transfer increases in our production costs to our customers, mainly due to: a strong supply of chicken coupled with weak demand for chicken during most of the year, and a 13.0% depreciation of the peso in 2011, resulting in a 2.9% negative operating margin for the quarter and 0.2% negative operating margin for year 2011,” he added.
Nonetheless, the company was able to reach a positive EBITDA result for the quarter and for the year, as well as posting a net profit in year 2011.
Bachoco continues to experience significant growth. In the fourth quarter it acquired O.K. Industries, headquartered in Fort Smith, Ark. This acquisition consisted of buying 100% of the Company including; two broiler processing plants, 2 further process plants, among other facilities. O.K currently processes around 2.5 million chickens per week; adding approximately 25.0% to Bachoco's total production
“This was a very important step for the company, as it represented its first incursion into the U.S. poultry industry,” said Ramos. “Bachoco paid USD$ 93.4 million for O.K. Industries, paid with cash and debt. Under USGAAP and IFRS principles, we determine that this acquisition has generated a profit of around USD$ 100.0 million.”
Bachoco also opened two distribution centers located in Baja California, with which it expects to increase market share in that region.
Source: Industrias Bachoco