Industrias Bachoco Announces Second Quarter 2012 Results

News provided by

Industrias Bachoco S.A.B. de C.V.

Jul 25, 2012, 05:00 ET

CELAYA, Mexico, July 25, 2012 /PRNewswire/ -- Industrias Bachoco S.A.B. de C.V. ("Bachoco" or "the Company") (NYSE: IBA; BMV: Bachoco) announced today its unaudited results for the second quarter of 2012 ("2Q12"). All figures have been prepared in accordance with International Financial Reporting Standard ("IFRS"), and are presented in nominal million Mexican pesos.

HIGHLIGHTS (2Q12 vs. 2Q11)

  • Net sales increased 42.1%
  • EBITDA margin reached 7.0%
  • Earnings per share totaled Ps. 0.53 (Ps. 6.36 pesos per ADS), compared to Ps. 0.23 (Ps. 2.80 pesos per ADS) in 2Q11

COMMENT FROM THE CEO

"For the second quarter, Bachoco's poultry and balanced feed business lines demonstrated a proper balance between supply and demand. On the contrary, the egg business line experienced oversupply conditions and high production costs which narrowed margins in this business line when compared to the same period in 2011. Bachoco incorporated into the category of "other business lines" sales of live swine which were also affected by oversupply conditions in the second quarter of 2012.

Generally speaking, we can conclude that Bachoco obtained favorable operating results year over year (2Q12 vs 2Q11), however, when compared to 1Q12, results were lower. 

Our second quarter results were largely attributed to a reduction in operating expenses as a percentage of net sales as well as operating efficiencies in all of the Company's business processes. Our performance was affected by volatility stemming from increases in the price of soybean meal, one of Bachoco's key production cost components, as well as by the volatility of the Mexican peso versus the U.S. dollar.

The Company's financial position remains solid and in line with the strategic plan laid out for 2012."

EXECUTIVE SUMMARY

The following financial information is expressed in millions of nominal Mexican pesos, with comparative figures for same periods of 2011.

QUARTERLY

ACCUMULATED

In millions of pesos

2Q11

2Q12

Var.

1H11

1H12

Var.

Net sales

Ps. 

6,616.8

Ps. 

9,404.0

42.1%

Ps. 

12,659.1

Ps.

18,741.7

48.0%

Net sales Mexico

6,616.8

7,494.2

12,659.1

14,963.3

Net sales US

0.0

1,909.8

0.0

3,778.4

Cost of sales

5,749.8

8,127.3

41.3%

10,927.0

15,880.0

45.3%

Gross profit

867.0

1,276.8

47.3%

1,732.1

2,861.6

65.2%

Total expenses

715.5

857.3

19.8%

1,392.8

1,658.6

19.1%

EBITDA1

328.5

663.0

101.8%

692.9

1,696.6

144.9%

Net majority income

140.0

316.8

126.3%

295.5

977.4

230.8%









1Operating income plus depreciation and amortization

The Company's 2Q12 net sales totaled Ps. 9,404.0 million, 42.1% higher than the Ps. 6,616.8 million reported in 2Q11. This resulted from increased sales throughout all business lines: 

  • In particular, an increase in chicken sales of 48.3% in 2012 vs. 2011, due to the integration of the subsidiary "OK Foods" (production facility in the US), which was consolidated into Bachoco in November of 2011.
  • Table egg sales were up 12.7% in 2Q12 vs. 2Q11, as a result of a 10.6% increase in prices (prices were down 13.0% when compared to 1Q12) and a 1.9% rise in volume sold.
  • Bachoco's balanced feed business line rose 5.1%, as a result of a 14.5% price increase, partially offset by an 8.2% decline in sales volume as a result of more supply and higher commodity prices.
  • The line item "other business lines", which includes swine, turkey and beef value-added products, as well as by-products, grew 37.7%. This increase was mainly due to the growth in value-added beef products, resulting from the integration of the newly acquired plant located in Monterrey during the second half of 2011, as well as higher by-product sales.

Production costs per unit increased around 18% during 2Q12 vs. 2Q11, as a result of higher input costs, primarily in corn, soybean meal, as well as the volatility of the exchange rate in the Mexican peso.

Gross profit for 2Q12 was Ps. 1,276.8 million resulting in a gross margin of 13.6%, compared to a gross profit of Ps. 867.0 million with a margin of 13.1% registered in 2Q11. Meanwhile, the gross margin was 15.3% in the first half of 2012, compared to 13.7% in the first half of 2011.

EBITDA for 2Q12 reached Ps. 663.0 million with a margin of 7.0%, compared to an EBITDA of Ps. 328.5 million with a margin of 5.0% reported in 2Q11.

EBITDA margin for the first half of 2012 was 9.1%, compared to 5.5% reported in 1H11.

The comprehensive financial result was and income of Ps. 21.8 million in 2Q12, and Ps. 93.1 million in the first half of 2012. This was mainly due to interest earned on the Company's cash.

Total taxes for the 2Q12 reached Ps. 85.2 million.

Net majority income was Ps. 316.8 million in 2Q12 (Ps. 0.53 pesos per share), compared to a net majority income of Ps. 140.0 (Ps. 0.23 pesos per share) reported in 2Q11.

Meanwhile net majority income for the first half of 2012 was Ps. 977.4 million (Ps. 1.63 pesos per share), compared to a net majority income of Ps. 295.5 million (Ps. 0.49 pesos per share) reported in the same period of 2011.

BALANCE SHEET

The Company's financial structure remained solid; cash and equivalents as of June 30, 2012, totaled Ps. 3,804.4 million, compared to Ps. 3,036.4.7 million reported as of December 31, 2011. 

Total CAPEX as of June 30, 2012 totaled Ps. 461.5 million, mainly allocated towards productivity projects and maintenance.

STOCK INFORMATION

AS OF JUNE 30, 2012

Total Shares

600,000,000

Total free float

17.25%

Weighted average shares Outstanding (2Q12)

597,842,895

Total shares in treasury (as of June 30, 2012)

1,650,481

Total shares in treasury (as of July 25, 2012)

0

Market cap (millions)

Ps.

14,999

BMV*

NYSE**

Ticker Symbol

Bachoco

IBA

Closing price as of June 30, 2012

Ps.

25.0

US$21.76

RECENT EVENTS

  • On May 18 and July 12 of 2012, the Company paid the installments of the dividends approved at the Annual Stockholders Meeting held on April 25, 2012. The gross rate per installment was Ps. 0.25 pesos per share.
  • In late June 2012, the SENASICA (National Health Service, Food Safety and Food Quality) in Mexico reported an outbreak of H7N3 avian influenza in two municipalities in the state of Jalisco. This virus does not affect humans. In Bachoco's case in particular, none of the Company's farms are located within the quarantine area. No presence of the virus has been detected in any of the Company's farms.

CURRENT ANALYST COVERAGE
Grupo Bursatil Mexicano (GBM)
BBVA Bancomer






Consolidated Statement of Financial Position

Industrias Bachoco, S.A.B. de C.V.


-Unaudited-





U.S. Dollar

As of Dec 31,

As of June 30,

As of June 30,

In million of pesos

2011

2012

2012 (1)

ASSETS


Cash and cash equivalents

$         3,036

$           3,804

$              285

Total accounts receivable

2,333

1,966

147

Inventories

5,809

6,202

465

Other current assets

712

342

26

Total current assets

11,890

12,314

923

Net property, plant and equipment

11,755

11,660

874

Other non current assets

840

1,456

109

TOTAL ASSETS

$       24,484

$        25,431

$           1,906

LIABILITIES


Notes payable to banks

1,453

1,919

144

Accounts payable

2,422

2,197

165

Other taxes payable and other accruals

606

782

59

Total current liabilities

4,481

4,898

367

Long-term debt 

384

373

28

Other  non current liabilities

58

57

4

Deferred income taxes

2,522

2,522

189

Total long-term liabilities

2,965

2,952

221

TOTAL LIABILITIES

$         7,446

$           7,850

$              588

STOCKHOLDERS' EQUITY


Capital stock

1,393

1,391

104

Commission in shares issued

459

459

34

Repurchased shares

93

64

5

Retained earnings

13,975

14,652

1,098

Others accounts

1,059

954

71

Total majority stockholder's equity

16,978

17,519

1,313

Minority interest

60

62

5

TOTAL STOCKHOLDERS' EQUITY

$       17,038

$        17,581

$           1,318

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$       24,484

$        25,431

$           1,906

(1)  For reference, in millions of U.S. dollars using an exchange rate of $13.34.


         Source: Mexico's National Bank, as of June 30, 2012. 










  








Consolidated Statement of Income





Industrias Bachoco, S.A.B. de C.V.





-Unaudited-







SECOND QUARTER

U.S. Dollar (1)

FIRST HALF

U.S. Dollar (1)

In million of pesos as of June 30:

2011

2012

2012

2011

2012

2012

Net sales

$           6,617

$           9,404

$               705

$         12,659

$         18,742

$           1,405

Cost of sales

5,750

8,127

609

10,927

15,880

1,190

Gross profit

867

1,277

96

1,732

2,862

215

Selling, general and administrative expenses

716

857

64

1,393

1,659

124

Operating income

151

419

31

339

1,203

90

Operating margin

2.3%

4.5%

4.5%

2.7%

6.4%

6.4%

Other income (expense) net

1

(40)

(3)

(28)

(46)

(3)

Comprehensive financing (cost) income

34

22

2

63

93

Minority net income

(0)

1

0

(1)

(2)

(0)

Income before income tax, asset tax

187

402

30

373

1,248

87

Total income taxes

47

85

6

78

271

7

Net majority income

140

317

24

295

977

80

Net income

140

317

24

295

977

80

Net income per share (EPS)

0.23

0.53

0.04

0.49

1.63

0.13

weighted average shares outstanding

599,867,670

597,842,895

597,842,895

599,844,575

598,092,694

598,092,694








EBITDA Result

328.5

663.0

50

693

1,697

127

EBITDA margin

5.0%

7.0%

7.0%

5.5%

9.1%

9.1%

(1)  For reference, in millions of U.S. dollars using an exchange rate of $13.34.






         Source: Mexico's National Bank, as of June 30, 2012. 






















  






Consolidated Statement of Cash Flows

Industrias Bachoco, S.A.B. de C.V.

-Unaudited-





U.S. Dollar

As of June 30,

As of June 30,

As of June 30,

In million of pesos

2011

2012

2012 (1)

NET MAJORITY INCOME BEFORE INCOME TAX

373

1,248

94

ITEMS THAT DO NOT REQUIRE CASH:

-

-

-

ITEMS RELATING TO INVESTING ACTIVITIES:

365

413

31

      Depreciation and others

354

494

37

      Income (loss) on sale of plant and equipment

12

12

1

      Other Items

-

(93)

(7)

ITEMS RELATING TO FINANCING ACTIVITIES:

25

32

2

      Interest income (expense)

25

32

2

      Other Items

-

-

-

NET CASH GENERATED FROM NET INCOME BEFORE TAXES

763

1,693

127

CASH GENERATED OR USED IN THE OPERATION:

429

(392)

(29)

   Decrease (increase) in accounts receivable

88

176

13

   Decrease (increase) in inventories

216

(584)

(44)

   Decrease (increase) in accounts payable

43

(214)

(16)

   Decrease (increase) in other liabilities

84

230

17

NET CASH FLOW FROM OPERATING ACTIVITIES

1,193

1,302

98

INVESTING ACTIVITIES


NET CASH FLOW FROM INVESTING ACTIVITIES

(638)

(573)

(43)

      Acquisition of property, plant and equipment

(307)

(462)

(35)

      Proceeds from sales of property plant and equipment

62

16

1

      Other Items

(393)

(127)

(10)

CASH FLOW SURPLUS (REQUIREMENTS OF) TO BE USED IN


FINANCING ACTIVITIES

555

729

55

Net cash provided by financing activities:

(405)

(54)

(4)

   Proceeds from loans

154

854

64

   Principal payments on loans

(65)

(410)

(31)

   Dividends paid

(150)

(150)

(11)

   Other items

(344)

(348)

(26)

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS

160

768

58

CASH AND INVESTMENTS AT THE BEGINNING OF YEAR

4,177

3,036

228

CASH AND INVESTMENTS AT END OF PERIOD

4,337

3,804

285

(1)  For reference, in millions of U.S. dollars using an exchange rate of $13.34.


         Source: Mexico's National Bank, as of June 30, 2012. 






DERIVATIVES POSITION REPORT:


























Industrias Bachoco, S.A.B. de C.V.









Second Quarter 2012










Thousands of Mexican Pesos, as of June 30, 2012







Type of Financial Instrument

Objective

Reasonable Value

Amounts Due By Year


Notional

Value of the Related Commodity

Guaranties Required


2Q-2012

1Q-2012

2Q-2012

1Q-2012


Put spread, knock out forwards and puts.

Hedge and negotiation

$     487,130

$13.34

$12.80

-$10,238

$ 2,805

2012

The deals consider the possibility of margin calls but not another kind of guarantee







Futures for corn and Soybean meal

Hedge

$133,431.00

Month

Price

Month

Price

$ 23,548

$ 2,613

2012 and 2013

Corn

Corn


in USD per bushel

in USD per bushel


JUL-2012

$6.7250

MAY-2012

$6.4400


SEP-2012

$6.2850

JUL-2012

$6.4325


DEC-2012

$6.3475

SEP-2012

$5.6325


MAR-2013

$6.4375




MAY-2013

$6.4775




JUL-2013

$6.5175




Soybean Meal

Soybean Meal


In USD per ton

In USD per ton


AUG-2012

$429.50

MAY-2012

$388.70


SEP-2012

$424.00




OCT-2012

$416.30




DEC-2012

$413.10




JAN-2013

$408.10




MAR-2013

$387.70




MAY-2013

$373.90




JUL-2013

$371.80




Options for corn and Soybean meal

Hedge and negotiation

$               -


$        -

-$    331











































Following the Company's show two probable scenarios for its financial instruments: a "probable" scenario and a "stress" scenario:





















Industrias Bachoco, S.A.B. de C.V.






Second Quarter 2012






Thousands of Mexican Pesos, as of June 30, 2012


 

PROBABLE SCENARIO

Type of Financial Instrument

Reasonable Value

Value of the Related Commodity

Effect on the Income Statement


as of June 30,

Reference Value

Effect on the Cash Flow(3)

2012

-2.5%

2.5%

5.0%

-2.5%

2.5%

5.0%

Put spread, knock out forwards and puts.(1)

-$               10,238

$13.01

$  13.67

$  14.01

 Direct 

-$22,416

$  1,940

$ 14,118





-5%

5%

10%

-5%

5%

10%

Futures of corn: (2)

$               23,548

$6.3888

$7.0613

$7.3975

 The effect will materialize as the inventory is consumed 

$ 16,034

$ 31,061

$ 38,575






Futures of soybean meal: (2)

$408.03

$450.98

$472.45





Options for corn and soybean meal (2)

$                       -










































Industrias Bachoco, S.A.B. de C.V.







Second Quarter 2012








Thousands of Mexican Pesos, as of June 30, 2012




STRESS SCENARIO

Reasonable Value

Value of the Related Commodity

Effect on the Income Statement

Effect on the Cash Flow(3)

Type of Instrument

as of June 30,

Reference Value

2012

-50%

-25%

25%

50%

-50%

-25%

25%

50%

Put spread, knock out forwards and puts.(1)

-$               10,238

$6.67

$10.01

$16.68

$20.01

 Direct 

-$247,989

-$129,408

$75,509

$              158,917

Derivatives position notes::

  • The total financial instruments not exceed 5% of total assets as of June 30, 2012.
  • A negative value represents an unfavorable effect for the Company.
    The notional value represents the net position as of June 30, 2012 at the exchange rate of Ps.13.34 per dollar.
  1. The reference value is the exchange rate of Ps. $13.34 per US dollar as of June 30, 2012.
  2. The reference value is the Futures of corn for Jul 2012, $6.7250 USD/bushel and Soybean meal for Aug 2012, $429.50 dollar/ton.
    Even when table set above shows corn and soybean prices for contracts of July and August 2012, the effect on the cash flow
  3. The Company has credit lines with the majority of its counterparts, so that the effect in cash flow is lower than the amount shown.

SOURCE Industrias Bachoco S.A.B. de C.V.

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