Industrias Bachoco SAB de CV
BMV:BACHOCOB
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
72.9
92
|
| Price Target |
|
We'll email you a reminder when the closing price reaches MXN.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Industrias Bachoco SAB de CV
You don't have any saved screeners yet
Good morning. My name is Hilda, and I will be your conference operator today. At this time, I would like to welcome everybody to the First Quarter 2019 Industrias Bachoco Earnings Conference Call. [Operator Instructions]
I will now turn the call over to Ms. Maria Jaquez. Maria, you may begin.
Thank you, Hilda. Good morning, everyone, and welcome to Bachoco's First Quarter 2019 Conference Call. We released our financials yesterday after market close. If you need a copy of the release, please visit our website or request it from our Investor Relations department.
This morning's call contains certain information that could be considered forward-looking statements regarding anticipated future events and performance. These statements reflect management's current beliefs based on information currently available and are not guarantees of future performance and are based on our estimates and assumptions that are subject to risk and uncertainties, including those described in our annual report or 20-F, which could make our current results differ materially from the forward-looking statements discussed in this call.
Except as required by applicable law, Industrias Bachoco undertakes no obligation to publicly update or revise any future forward-looking statements, whether as a result of new information or future events otherwise. Lastly, unless otherwise indicated, the amounts mentioned in this conference will be figures of 2019 with comparative figures for the same period of 2018 in Mexican pesos.
As a reference, the exchange rate as of March 31, 2019 was 19.41 pesos per U.S. dollar.
Here with me are our CEO, Mr. Rodolfo Ramos; and our CFO, Mr. Daniel Salazar.
Now I will give the call to Mr. Ramos.
Thank you, Maria, and good morning, everyone. This was a challenging first quarter with a very difficult [ comparation ]
[Technical Difficulty]
Thank you, Maria, and good morning, everyone. This was a challenging first quarter with a very difficult [ comparation ] as our results we reported in the third quarter of '18 were historically with most of the conditions that we have been observing during the third and the fourth quarter of 2018 prevailed for most of the first quarter of 2019.
In Mexico, in general, we observed the poultry industry growing around its normalize rates. However, we continued to see a soft demand mainly in our traditional markets that kept prices down.
We consider that some uncertainties remain and an expected slowdown in the Mexican economy growth has negatively affected the commercial dynamics in the traditional markets, in particular.
At the end of 2018, it was expected that the Mexican economy would grow in 2019 around 2%. However, the expectation now is to see growth below 1.5% even when we see nothing significant negative effect on our modern markets. We are observing a cautioned traditional market consumer.
In our U.S. operation, we continued observing pressure on commodity prices, mainly at the beginning of the quarter, with the trend going up towards the end of the quarter, which make us believe that the recovery of the recovery of the industry in that geography may come faster than expected.
Regarding our raw materials, corn and soybean meal prices remained stable during the quarter, while, on the average, the Mexican peso depreciated 2.6% versus the U.S. dollar.
As a result of the conditions above, our total volume increased 1.2% of our volume sold growing the most of our main product lines, mainly in the balanced feed segment, that showed higher improvement year-over-year. However, pressure in prices, as mentioned above, led us to a decrease in total sales of 6.4% for the first quarter of '19 when compared with the same quarter of 2018, which, as we mentioned above, yielded us good results.
We reported an EBITDA (sic) [ net income ] of MXN 302.5 million with the a 4.6% EBITDA margin on earnings per basic and diluted shares of MXN 0.5 for the quarter.
The company remained in a healthy financial condition as we have reached a net cash level of MXN 12,434.7 million, which will allow us to continue the support of our growth plans.
Now Daniel will join us for a discussion of the financial results. Thank you.
Thank you, Rodolfo, and good morning, everyone. As a result of the conditions Rodolfo mentioned before, our company's first quarter '19 net sales totaled MXN 14,323.6 million, MXN 979.4 million or 6.4% less than the MXN 15,303 million reported in the first quarter of '18.
This decrease was mainly as a result of lower prices in our poultry segment.
For the first quarter, sales in our U.S. operations represented 28% of our net sales, above the 27.5%, we reported in the same quarter of 2018.
The total cost of sales was MXN 12,515.7 million for the quarter representing an increase of 3.6%. The increase in costs of the quarter was mainly due to our Mexican operations, partially due to higher volume sold and partially to higher unit cost.
Gross profit for the quarter was MXN 1,807.9 million with a gross margin of 12.6%, a lower margin when compared with the 21% reported in the same period of 2018 mainly as a result of lower prices.
Total SG&A for the quarter was MXN 1,474.4 million, representing 10.3% of our total sales, an increase of 6.4% compared with the 1 quarter of '18 in absolute terms. SG&A is mainly affected by increase in the food prices, particularly in our Mexican operations.
Operating margin in first quarter of '19 was 2.3% compared with 11.9% reached in the same period of 2018.
Our EBITDA margin was 4.6% for the quarter, a reduction when compared with the 13.7% in the first quarter of '18.
For the quarter, we had a net financial income of MXN 76 million compared to financial expenses of 90 -- MXN 93.8 million for the same period of 2018. This income was a result of less financial expenses, mainly due to an FX valuation.
Our total taxes were MXN 108.7 million for the quarter, lower than the MXN 476.8 million recognized in the same quarter of 2018. This decrease was due to a lower profit before taxes.
All of the above led us to a positive net income of MXN 302.5 million for the quarter, resulting in a 2.1% net margin. This profit is lower than the MXN 1,260.9 million we reported in the first quarter of '18. The net income per share was MXN 0.5 for the quarter.
Now going into our balance sheet. We kept a healthy financial structure with a net cash level of MXN 12,434.7 million when compared with the net cash of MXN 13,420.9 million we had in the end of the year of 2018. The decrease in cash was a result of paying some of our credit and important reduction in accounts payable.
Our CapEx was MXN 409.2 million, an increase of MXN 105.2 million when compared to the same period of 2018.
CapEx for the quarter was used mainly to support our organic growth and maintenance of our facilities at high levels of productivity.
In our 2019 Annual Shareholders meeting we had this week, the company announced the paying of a cash dividend in the amount of MXN 1.4 per share or MXN 16.8 per ADR.
Well, that is it. Thank you, and I will now turn the call back to Rodolfo for final comments.
Thanks, Daniel. Now we are entering into the second quarter, which is historically a good quarter for the year. In Mexico, we are observing a balanced supply and demand with improvements in demand levels that led us to prices increases, which led us to believe that this quarter would behave according to the seasonality.
Regarding the U.S., we continue observing price increases as meat oversupply conditions are softened. We still have opportunities to improving our productivity levels in both geographies as well as in our SG&A.
We are very focused on capitalizing on benefits in this regard. We expect to continue with our CapEx above maintenance levels for the next quarter.
We will continue focusing on those things we can control and managing the other ones as best as we can depending on the market condition in our industries.
With that, we will now take your questions.[Operator Instructions] We have a question from H�ctor Maya from Santander.
I just wanted to know if you could share with us some color regarding chicken prices in Mexico per month? And if you could confirm you just saw a little bit of a rebound in chicken prices in April?
The prices in the first quarter started very, very soft and at the end of the quarter, we had a very important recovery of those prices. April, as you mentioned, has been -- we can consider as a normalized price for the month of April. So we are expecting a second quarter according to the seasonality. That normally is the best quarter of the year.
The next question comes from Ulises Argote from JP Morgan.
Two quick questions here. The first one, given the reported EBITDA margin for this quarter, do you still feel confident in reaching the lower part of your EBITDA margin guidance as you have commented before? Or can we expect, I don't know, any changes there in terms of the guidance?
Do you want to answer it, Daniel?
Yes, Rodolfo. Well. As Rodolfo mentioned and we have seen a much better recovery for this -- for the beginning of the second quarter. So in this regard, we can expect a similar year. It is difficult to predict that the year will be at the same EBITDA margins that we observed from the last year, but we can say that we think that with the second quarter good results that -- as we have seen at the beginning of the quarter we can expect a very similar yield for the whole year.
And in addition, I can say that, right now, the prices that we -- the prices that we saw in the first quarter help us to increase the demand runout. Chicken is the best cost-efficient protein source in the country. And I think we have some tailwinds in terms of pricing because of the other proteins are more expensive than chicken. So we are expecting a good demand for the rest of the year for chicken. It is difficult to predict, but I think we have some indicators that can tell us that we are going to have a good demand in the chicken sector.
We have only -- an additional comment. This comment that we referred is mainly in the Mexican market, we have seen a much better recovery in the Mexican market than in the U.S. market even so that both markets are currently showing an improvement.
Perfect. Very clear. And then the second one, maybe a bit related to what you were commenting, Rodolfo. Maybe if you could share your thoughts on how the current situation with the African swine flu could affect like pricing and consumption dynamics for chicken and the other proteins, both in Mexico and the U.S.?
Both the markets are communicated somehow, so I can tell you that if China continues with spreading the outbreak out of control, for sure that's going to affect positively the chicken market because the cheapest protein and the most economic protein is going to be chicken. And there's some supply of chicken that can help to balance that deficit of pork meat in the China market. So I think all the markets are going to be affected somehow even if China allows to the U.S. operation to export to China, right now it is banned for the main continent. So I think there is possibilities to -- for -- to have that market, too. So it's going to affect all the other industry even in Mexico and in the United States.
[Operator Instructions] The next question comes from Rafael Romero from GBM.
Could you elaborate a bit more on the dynamics that's has been in the U.S., especially regarding your comment on the improvement by the end of the quarter?
Daniel, because I couldn't hear the question but...
Neither are we. So, Rafael, can you repeat, please and with higher voice?
Yes, can you hear me now?
Yes.
So my question was could you elaborate a bit more on dynamics you're seeing in the U.S., especially regarding the comment of an improvement by the end of the quarter? That'll be my first question.
Prices here in the United States haven't responded to the seasonality, too. Normally, the prices start to increase in the month of March or April and that is the normal dynamic of pricing here in the U.S. operations. And we are seeing, again here, a normal situation with that trend. So we are expecting a faster-than-expected recovery in the prices. At the end of the year, the beginning of the first quarter, we were a little bit negative with the production and oversupply of chicken than we saw in the last quarter because of the replacement and everything. So right now, we are seeing a better balance between demand and the offer, so we are more positive in terms of the trends of the industry here.
Perfect. Very clear. And my second question is, in the last 3 quarters of [indiscernible] how the supply in Mexico has reacted to the [indiscernible] and have you seen any material change?
Can you answer that, Daniel, because I have a problem with the audio here.
Yes. Well, in the meantime, the same situation. We are following the historical seasonality of the year. For that reason, we have seen a very important recovery of the year. But we don't say that we have -- we have seen a much better recovery than before. So for the duration, we expect, in the case of the Mexican operation, a better response from the second quarter -- even from the second quarter of the last year. So we will have a 2-digits EBITDA margin result for the Mexican operations, we expect.
[Operator Instructions] We have a question from Will Ballard from Aviva.
I just wanted to ask, when you mentioned the accounts payable has reduced very materially, so it looks like it's down 25% year-on-year, and yet we look at both your inventory and accounts receivable, if anything, your accounts receivable have increased slightly. Could you please comment on your cash flow dynamic with regards to this and the rationale behind the changes?
Go ahead, Daniel.
Yes. Well, basically, the first quarter typically we have the same variations because, at the end of the year, we use to stop paying our vendors the last week of the year. So in the first quarter, we basically paid those liabilities. For that reason, we reduced significantly our accounts payable. In the case of our accounts receivable, it is also the same. Probably, the only additional issue that we have -- are facing right now is the value-added tax recovery because we have an increase of probably 1 or 2 months in our receivables in that regard.
[Operator Instructions] There are no further questions. I would like to turn the call over to Mr. Rodolfo Ramos for any final remarks.
Thank you. Thank you very much -- and thank you very much for all for joining us this morning. If you have any further questions, please contact our Investor Relations area, who will be glad to assist you. Thank you very much.
This concludes today's conference call. You may now disconnect.