Poultry over-supply drags on Bachoco Q4 earnings

by Erica Shaffer
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CELAYA, Mexico – Volatility in the Mexican peso and an oversupply of chicken weighed Industrias Bachoco’s fourth-quarter performance.

For the period ending Dec. 31, 2015, the company reported net income of $451.5 million ($24.4 million), or 0.75 pesos ($.04) per diluted share, compared with 1.067 billion pesos ($57.8 million), or 1.77 pesos ($.096) per diluted share, in the year-ago quarter. 

Rodolfo Ramos Arvizu, Industrias Bachoco
Rodolfo Ramos Arvizu, CEO of Industrias Bachoco

“Conditions prevailing in the poultry industry in the third quarter continued throughout the fourth quarter of 2015,” Rodolfo Ramos Arvizu, CEO, said in an earnings release. “We observed an important increase in supply in Mexico, creating an over-supply condition, which put pressure on prices.

“In the US markets, we also observed lower prices, mainly in leg quarters, as compared with the equivalent quarter of 2014,” Arvizu said. “Even though we observed a stronger supply in our main product lines, we also saw a good level of demand in the Mexican markets during the fourth quarter enabling us to sell the largest volume for a quarter.”

Sales by the company’s US operations increased during the quarter to 24.7 percent of total sales, up from 20.5 percent reported a year ago.

“For the quarter, our total sales increased and the volume in all our main product lines continued growing in both markets,” Arvizu said. “Overall, we increased our total sales by 6.9 percent.

“On the other side, volatility in the Mexican peso had an effect in our cost of sales in Mexico during the quarter; as a result, our operating margins were lower when compared with the fourth quarter of the previous year.

“Our US operation continues delivering positive results while recording historical volume sold of chicken for 2015,” Arvizu concluded.

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