Industrias Bachoco Announces its 2010 Third Quarter Results

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Oct 21, 2010, 05:30 ET

CELAYA, Mexico, Oct. 21 /PRNewswire-FirstCall/ -- Industrias Bachoco S.A.B. de C.V. ("Bachoco" or "the Company") (NYSE: IBA; BMV: Bachoco), Mexico's leading producer and processor of poultry products, announced today its unaudited results for the third quarter ended September 30^th, 2010. All figures have been prepared in accordance with Mexican GAAP. Following Mexican Accounting Principles, all data is presented in nominal Mexican pesos.

Highlights:

The Company registered a 12.2% increase in total sales when compared with the same 2009 quarter.
Bachoco's EBITDA totaled Ps. 983.8 million, with a margin of 15.6% in 3Q10 vs an EBITDA margin of 3.6% in 3Q09.
EPS for the quarter were up at Ps. 1.06 (US$ 1.01 per ADS) compared to a net loss per share of Ps. 0.09 (US$ 0.08 per ADS) in 3Q09.

CEO's Comments:

Cristobal Mondragon, Bachoco's CEO, stated, "The third quarter of the year was traditionally the weakest quarter for our Company, but this quarter it was quite different. We had a good balance between supply and demand in our chicken business line, which allowed us to capitalize our productivity and supply efforts and achieve stronger results during the third quarter.

"Swine and balanced feed business lines had a good performance, resulting in strong results for this business lines.

"Our egg business line, on the contrary, was affected by lower demand, impacting the volume and sales of these products.

"As a result, we reach a two digit EBITDA for the quarter; and were able to reverse the net loss reported in 3Q09, registering a significant net profit for the quarter.

"Finally, I want to stress that our financial position remains solid with cash and cash equivalents of Ps. 3,778.4 million," concluded Mr. Mondragon.

THIRD QUARTER 2010 RESULTS


Net sales	3Q09 (%)	3Q10 (%)
Chicken	79.2	83.1
Eggs	9.7	7.6
Balanced feed	6.5	5.4
Swine	1.0	1.3
Other lines	3.6	2.6
Total Sales	100.0%	100.0%

Net Sales

Net sales for the quarter amounted to Ps. 6,297.3 million, 12.2% above the Ps. 5,613.6 million reported in the same 2009 quarter. This increase was mainly driven by higher chicken and swine sales, which were partially offset by a decrease in eggs, balanced feed and other business lines sales.

Operating Results

Bachoco's third quarter gross profit was Ps. 1,490.6 million, with a margin of 23.7%, higher than 12.0% margin reported in 3Q09. This result is directly attributed to higher sales in our chicken business as well as lower cost of sales in our main business lines.

The Company registered an operating profit of Ps. 812.1 million, which is also greater than the operating profit of Ps. 35.3 million registered in the same 2009 quarter. The operating margin for the quarter was 12.9%.

EBITDA amounted to Ps. 983.8 million, above the Ps. 207.5 million reported in the same 2009 quarter.

Net Majority Income

Net majority income for the third quarter amounted to PS. 635.1 million, or Ps. 1.06 per share (US$1.06 per ADS), compared to a net majority loss of Ps. 53.1 million, or Ps. 0.09 loss per share (US$0.08 loss per ADS) reported in the same 2009 period.

RESULTS BY BUSINESS SEGMENT

Chicken

Sales of chicken products increased 17.7%, when compared to 3Q09, as a result of a 3.0% increase in volume and a 14.2% increase in chicken prices. This strong increase in sales is attributed to a better balance between supply and demand in the Mexican industry as well as a stronger demand for our chicken products.

Table Eggs

Sales of table eggs products decreased by 11.7% during the third quarter, as egg prices decrease 10.3% and volume fell by another 1.6%. This is the result of a lower demand for egg products and the oversupply registered by the industry.

Balanced Feed

Sales of balanced feed decreased 6.5% following a 5.9% decrease in prices and a 0.6% decrease in balanced feed volume sold; nonetheless the Company managed to improve its gross margin from the same quarter of 2009.

Swine

The swine business line registered a solid third quarter. Sales were sound and rose 36.9%, as swine prices increased 26.8% and volume sold rose 7.9% increase in the period. Demand for live swine was stronger during this quarter.

Other Lines

Sales of other lines decreased 18.6% when compared with the same quarter of 2009, as sales of by-products declined.

FIRST NINE MONTHS OF 2010

Net Sales

Net sales for the first nine months of 2010 amounted to Ps. 18,432.6 million, up 5.5% from the Ps. 17,471.5 million reported in the same 2009 period. The increase was mainly driven by the 9.3% increase in chicken sales and, 28.6% in swine sales, both of which were partially offset by the 9.3% decrease in table eggs sales and 7.4% decrease in balanced feed sales.


Net sales	Jan-Sep 2009(%)	Jan-Sep 2010(%)
Chicken	78.6	81.5
Eggs	10.0	8.6
Balanced feed	6.4	5.6
Swine	1.0	1.2
Other lines	4.0	3.1
Total Sales	100.0%	100.0%

Operating Results

Bachoco's gross margin for the first nine months of the year was up 21.5%, compared to the 18.5% registered in the same 2009 period, and was mainly attributed to stronger results in our chicken business line.

The Company's operating profit was Ps. 1,937.1 million, compared to an operating profit of Ps. 1,388.7 million reached in the same period of 2009.

EBITDA amounting Ps. 2,449.4 million was, 30.7% higher than the Ps. 1,874.3 million recorded in the first nine months of 2009. EBITDA margin for the first nine months of 2010 was 13.3%.

Taxes

Taxes for nine months period were Ps. 402.7 million.

Net Majority Income

Net majority income for first nine months of the year was Ps. 1,527.7 million, or Ps. 2.55 per share (US$2.42 per ADS), compared to net income of Ps. 916.5 million, or Ps. 1.53 per share (US$1.45 per ADS) reported in the same 2009 period.

Balance Sheet

Liquidity is solid with cash and cash equivalents amounting to Ps. 3,778.4 million as of September 30, 2010. The total debt outstanding as of September 30, 2010 was Ps. 763.6 million.

Capital Expenditures

CAPEX during the nine months of 2010 amounted to Ps. 233.6 million, and was entirely financed with internally generated resources.

Exhibits:

A.- Consolidated Balanced Sheets

B.- Consolidated Statement of Income

C.- Consolidated Statement Cash Flow

D.- Derivatives Position Report

A.- Consolidated Balance Sheets

Industrias Bachoco, S.A.B. de C.V.
*Condensed Consolidated Balance Sheets*

	U.S.D.		Mexican Pesos
	2010(1)		2010(2)		2009(2)
			As of September 30,		As of September 30,
ASSETS
Current assets
Cash and cash equivalents	$	299	Ps	3,778	Ps	2,260
Total accounts receivable		127		1,609		1,331
Inventories		347		4,388		4,413
Other current assets		-		-		-
*Total current assets*		774		9,775		8,004
Net property, plant and equipment		844		10,661		10,949
Other non current assets		28		353		554
TOTAL ASSETS	$	1,646	Ps	20,790	Ps	19,507

LIABILITIES
Current liabilities
Notes payable to banks		17		215		502
Accounts payable		99		1,245		1,255
Other taxes payable and other accruals		51		650		422
*Total current liabilities*		*167*		*2,110*		*2,179*
Long-term debt		43		549		547
Labor obligations		8		98		95
Deferred income taxes and others		168		2,117		1,932
*Total long-term liabilities*		*219*		*2,764*		*2,574*
TOTAL LIABILITIES	$	386	Ps	4,874	Ps	4,753
STOCKHOLDERS' EQUITY
Majority stockholder's equity:
Capital stock		182		2,295		2,295
Paid-in capital		59		745		744
Reserve for repurchase of shares		13		159		159
Retained earnings		882		11,139		10,592
Net majority income of the year		121		1,528		917
Deficit from restatement of stockholder's equity		-		-		-
Derivate financial instruments		-		-		-
*Total majority stockholder's equity*		*1,256*		*15,866*		*14,706*
Minority interest		4		50		48
TOTAL STOCKHOLDERS' EQUITY		1,260		15,916		14,754
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,646	Ps	20,790	Ps	19,507
(1) For reference, in millions of U.S. dollars using an exchange rate of $12.63
Source: Mexico's National Bank, as of September 30, 2010.
(2) Millions of Mexican nominal pesos

B.- Consolidated Statement of Income

INDUSTRIAS BACHOCO, S.A.B. DE C.V.

Consolidated Statements of Income

-unaudited-

THIRD QUARTER

JANUARY - SEPTEMBER

U.S.D.

Mexican Pesos

U.S.D.

Mexican Pesos

2010(1)

2010(2)

2009(2)

2010(1)

2010(2)

2009(2)

Net sales

499

6,297

5,614

1,459

18,433

17,472

Cost of sales

381

4,807

4,938

1,146

14,469

14,238

Gross profit (loss)

118

1,491

676

314

3,964

3,233

Selling, general and administrative expenses

678

641

160

2,027

1,844

Operating income (loss)

812

153

1,937

1,389

Other income (expense) net

(4)

(50)

(70)

(6)

(80)

(106)

Comprehensive financing (cost) income

(28)

(134)

Interest income

123

107

Interest expense and financing expenses

(1)

(18)

(23)

(5)

(57)

(67)

Foreign exchange gain (loss), net

(18)

(37)

Other financial income (expense) net

(0)

(20)

(0)

(6)

(137)

Income before income tax, asset tax

805

(63)

153

1,932

1,149

Total income taxes

169

(12)

403

224

Income tax, asset tax

315

Deferred income taxes

102

(33)

152

Net income

635

(51)

121

1,529

925

Minority net income

Majority net income

635

(53)

121

1,528

917

weighted average shares outstanding (in thousands)

600,000

599,954

600,000

599,930

Net majority Income per share (in U.S.D per ADS)

1.01

1.06

(0.09)

2.42

2.55

1.53

(1) For reference, in millions of U.S. dollars using an exchange rate of $12.63

Source: Mexico's National Bank, as of September 30, 2010.

(2) Millions of Mexican nominal pesos

C.- Consolidated Statement Cash Flow

Industrias Bachoco, S.A.B. de C.V.
*Consolidated Statement of Cash Flows*
			Mexican Pesos
	U.S.D.		2010(2)		2009(2)
	2010(1)		As of September 30,		As of September 30,

NET MAJORITY INCOME BEFORE INCOME TAX	$	153	Ps.	1,932	Ps.	1,149
ITEMS THAT DO NOT REQUIRE CASH:		15		188		237
Other Items		15		188		237
ITEMS RELATING TO INVESTING ACTIVITIES:		39		494		455
Depreciation and others		41		512		486
Income (loss) on sale of plant and equipment		(1)		(17)		(22)
Other Items		(0)		(1)		(9)
ITEMS RELATING TO FINANCING ACTIVITIES:		14		180		151
Interest income (expense)		5		57		44
Other Items		10		123		107

NET CASH GENERATED FROM NET INCOME BEFORE TAXES	$	221	Ps.	2,794	Ps.	1,992

CASH GENERATED OR USED IN THE OPERATION		(23)		(284)		(589)

Decrease (increase) in accounts receivable		8		100		163
Decrease (increase) in inventories		10		125		705
Increase (decrease) in accounts payable		(38)		(477)		(727)
Income taxes paid		(3)		(33)		(729)

NET CASH FLOW FROM FINANCING ACTIVITIES	$	199	Ps.	2,510	Ps.	1,403

INVESTING ACTIVITIES

NET CASH FLOW FROM INVESTING ACTIVITIES		(32)		(407)		(821)
Acquisition of property, plant and equipment		(18)		(234)		(706)
Proceeds from sales of property plant and equipment		(1)		(13)		(17)
Other Items		(13)		(161)		(98)

CASH FLOW SURPLUS (REQUIREMENTS OF) TO BE USED IN
FINANCING ACTIVITIES	$	166	Ps.	2,103	Ps.	581

FINANCING ACTIVITIES

Net cash provided by financing activities:		(36)		(450)		180
Proceeds from loans		87		1,099		1,800
Principal payments on loans		(103)		(1,299)		(1,377)
Dividends paid		(20)		(250)		(250)
Other items		0		0		7

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS		101		1,276		288

CASH AND INVESTMENTS AT THE BEGINNING OF YEAR		198		2,503		1,972

CASH AND INVESTMENTS AT END OF PERIOD	$	299	Ps.	3,778	Ps.	2,260

(1) For reference, in millions of U.S. dollars using an exchange rate of $12.63
Source: Mexico's National Bank, as of September 30, 2010.
(2) Millions of Mexican nominal pesos

D.- Derivatives Position Report

Industrias Bachoco, S.A.B. de C.V.
Thousands of Mexican Pesos, as of September 30, 2010								Quarter: 3
ANEXO 1
Type of Financial Instrument	Objective of the Instrument	Notional	Value of the Related Commodity		Reasonable Value		Amounts Due by Year	Guaranties Required
			3Q-2010	2Q-2010	3Q-2010	2Q-2010
Forwards, knock out forwards, puts, collars and others under different amounts and conditions	Hedge and negotiation	$ 114,302	$ 12.63	$12.89	$ 4,491	$ 2,450	88.0% in 2010 and 12.0% in 2011
Futures for corn and Soybean meal	Hedge	$ 70,771	Corn for December 2010: $4.9575 USD/bushel. Soybean meal; $306.90 USD/ton for December 2010 .	Corn for Sept 2010: $3.6275 USD/bushel. Soybean meal;$259.40 for December 2010	$ 14,296	$ 3,634	2010	The deals consider the possibility of margin calls but not another kind of guarantee
Options for corn	Hedge and negotiation	-$ 386			-$ 386
None of the financial instruments exceed 5% of total assets as of September 30, 2010.
A negative value means an unfavorable effect for the Company.
The notional value represents the net position as of September 30, 2010 at the exchange rate of Ps.12.63 per USD.

Industrias Bachoco, S.A.B. de C.V.
Thousands of Mexican Pesos, as of September 30, 2010								Quarter: 3
Table 2
Type of Financial Instrument	Reasonable Value as of Sept 30, 2010	Value of the Related Commodity-reference value			Effect on the Income Statement	Effect on the Cash Flow ***
		-2.5%	2.5%	5.0%		-2.5%	2.5%	5.0%
Forwards, knock out forwards, puts, collars and others under different amounts and conditions*	$ 4,491	$12.31	$ 12.95	$ 13.26	Direct	$ 1,633	$ 8,535	$ 1,770
		-5%	5%	10%		-5%	5%	10%

Futures for corn and,		$ 4.7096	$ 5.2054	$ 5.4533
Soybean	$ 14,296	$ 291.56	$ 322.25	$ 337.59	The effect will materialize as the inventory is consumed	$ 10,042	$ 18,549	$ 22,802
Options for corn**	-$ 386					-$ 1,075	$ 303	$ 991
A negative value means an unfavorable effect for the Company.
** The reference value is the Futures of corn for December, $4.9575 USD for bushel and of soybean meal for December 2010, $306.9 USD/ton.
*** The Company has credit lines with the majority of its counterparts, so that the effect in cash flow is lower than the amount shown.
*** The Company has credit lines with the majority of its counterparts, so that the effect in cash flow is lower than the amount shown.

IR Contacts:
Daniel Salazar, CFO
Claudia Cabrera, IRO
Ph. +52 (461) 618 3555
[email protected]

In New York:
Grayling
Lucia Domville
Ph. (646) 284 9416
[email protected]