Industrias Bachoco 2Q net income plummets

by Meat&Poultry Staff
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CELAYA, Mexico — Industrias Bachoco SAB de CV, Mexico's leading producer and processor of poultry and food products, announced for the second quarter ended June 30 net income was Ps. 138.4 million (US$11.8 million), or Ps. 0.23 per share (US$0.24 per ADS), compared to Ps. 618.0 million (US$53 million), or Ps. 1.03 per share (US$1.06 per ADS) reported in 2Q10.

Net sales increased 6.7 percent to Ps. 6,616.8 million (US$565,53 million), which was driven by the strong performance in the chicken and balanced feed businesses, partially offset by declines in sales of egg, swine and other business lines.

Chicken sales for the quarter increased 6.9 percent; table egg sales declined 4.9 percent; EBITDA margin was 4.9 percent, compared to 15.4 percent reported for 2Q10; and Earnings per share reached Ps. 0.23 (USD$ 0.24 per ADS), compared to Ps. 1.03 (USD$1.06 per ADS) in 2Q10.

"Our second quarter results were characterized by the challenge facing the poultry industry worldwide, higher grain costs,” said Rodolfo Ramos, CEO. “Given this is the largest component of the company's cost of sales, margins and profitability were affected despite efficiency improvements and hedging strategies.”

Even with the increase in the company’s cost of sales, the operating results for its business during the second quarter were positive. “We capitalized on the higher demand for chicken and balanced feed products in the Mexican market, thereby achieving greater sales volume and revenues from these business lines,” he said.

The company's egg business continued to be affected by a large oversupply in the Mexican market; as a result, egg sales volume and prices declined in the second quarter.

The balanced feed business experienced strong growth during 2Q11 with a 32.3 percent increase in sales when compared to 2Q10, driven by a 13.0 percent increase in balanced feed prices and 17.0 percent greater sales volume.

Swine sales volume increased 2.8 percent, however, given the increasing supply present in the Mexican market, the price of swine dropped 6.8 percent which led to a decrease of 4.2 percent in swine sales when compared to 2Q10.

Net income for the 1H11 totaled PS. 293.7 million (US$25.10 million), or Ps. 0.49 per share (US$0.50 per ADS), compared to a net income of Ps. 894.0.million (US$76.41 million), or Ps. 1.49 per share (US$1.53 per ADS) reported in 1H10. Net sales for the first half totaled Ps. 12,659.1 million (US$1,081.95 million); representing 4.3 percent increase over 1H10. The growth in sales was driven by increases of 31.1 percent in balanced feed sales, 5.3 percent in chicken sales, and 0.9 percent in swine sales volume. This was slightly offset by a 12.0 percent decline in table egg sales, as well as an 18.6 percent decrease in other business sales.

EBITDA for 1H11 amounted to Ps. 689.1 million (US$58.90 million), 53.0 percent below Ps. 1,465.7 million (US$125.27 million) reported for 1H10. EBITDA margin declined from 12.1 percent to 5.4 percent 1H11.

Industrias Bachoco is the leader of the Mexican poultry industry and an important player in Mexico's food industry. Its main product lines are chicken, table eggs, balanced feed and swine. Bachoco is based in Celaya, in the state of Guanajuato in central Mexico with operations that span the country including 60 distribution centers, and a growing export business. For the year ended Dec. 31, 2010, the company reported net sales of more than US$ 2 billion.
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