Industrias Bachoco SAB de CV
BMV:BACHOCOB
US |
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
|
US |
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
|
US |
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
|
US |
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
|
US |
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
|
US |
American Express Co
NYSE:AXP
|
Financial Services
|
|
US |
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
|
US |
Visa Inc
NYSE:V
|
Technology
|
|
CN |
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
|
US |
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
|
US |
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
|
US |
Coca-Cola Co
NYSE:KO
|
Beverages
|
|
US |
Target Corp
NYSE:TGT
|
Retail
|
|
US |
Walt Disney Co
NYSE:DIS
|
Media
|
|
US |
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
|
US |
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
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.
Johnson & Johnson
NYSE:JNJ
|
US | |
Estee Lauder Companies Inc
NYSE:EL
|
US | |
Exxon Mobil Corp
NYSE:XOM
|
US | |
Church & Dwight Co Inc
NYSE:CHD
|
US | |
Pfizer Inc
NYSE:PFE
|
US | |
American Express Co
NYSE:AXP
|
US | |
Nike Inc
NYSE:NKE
|
US | |
Visa Inc
NYSE:V
|
US | |
Alibaba Group Holding Ltd
NYSE:BABA
|
CN | |
3M Co
NYSE:MMM
|
US | |
JPMorgan Chase & Co
NYSE:JPM
|
US | |
Coca-Cola Co
NYSE:KO
|
US | |
Target Corp
NYSE:TGT
|
US | |
Walt Disney Co
NYSE:DIS
|
US | |
Mueller Industries Inc
NYSE:MLI
|
US | |
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Welcome to the Second Quarter 2018 Industrias Bachoco Earnings Conference Call. My name is Richard, and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded.
I will now like to turn the call over to Maria Jaquez, Maria you may begin.
Thank you. Good morning, and welcome to Bachoco's Second Quarter 2018 Conference Call. We released our financials yesterday after the market closed. 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 reflects management's current beliefs based on information currently available and are not guarantees of future performance that are based on our estimates and assumptions that are subject to risks and uncertainties, including those described on our annual report, Form 20-F, which could make our current results to differ materially from the forward-looking statements discussed in this call. Except as required by the applicable law, Industrias Bachoco undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Lastly, unless otherwise indicated, the amounts mentioned in this conference will be figures of 2018 with comparative figures for the same period of 2017 in Mexican pesos. As a reference, the exchange rate at June 30, 2018, was MXN 0.1987 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. In our businesses, the second quarter used to be the strongest of the year. This time, it was not the case. For this quarter, we saw an increase in cost of our main raw materials, mainly for soybean meal, that increased its cost more than 10% in U.S. dollar terms as compared with the second quarter of '17. And on a smaller scale, we also saw an increase in the cost of corn. In Mexico, we observed a good level of demand for the quarter. Our balance, supply and demand conditions and prices reacted accordingly with the tone of second quarter. In particular, we saw an improvement in our table egg business line compared with prices 1 year ago. However, the higher raw material cost in U.S. dollar terms I mentioned and a depreciation of the Mexican pesos, so far around 4%, consequence of internal and external uncertainty factors impacted our sales cost and the performance of all of our business lines, even when we absorbed part of the increases through efficiencies in our processes. In the U.S., the demand situation was different for the quarter. We observed lower prices of white meat, which is not typical for this season. These conditions in combination with higher raw material costs impacted our margins in this geography as well.
On the other hand, the integration of other [indiscernible] quality foods allow us to capture some benefits of the downside of the market and allow us to slightly soften the impact in margins. The aforementioned condition left us with a lower result when compared to the same period of 2017. And when -- and with a relatively flat EBITDA margin when compared to the previous quarter or 2018.
However, our total sales for the quarter increased 7.3% when compared to the same period of 2017. And we reached a positive result with an EBITDA of MXN 1,976 million and a margin of 12.2%, lower than the 17.2% EBITDA margin for the same quarter of 2017. If you look at the first half of 2018, results are in line with our plans for the year. We reached net sales of MXN 31,516.6 million, which is 9.4% higher than the first 6 months of 2017, an EBITDA margin of 13%, very similar to the EBITDA margin for the same period of 2017. At the bottom line, we reached MXN 4.72 earnings per share for the first semester of 2018, an improvement when compared to MXN 3.96 earnings per share of the equivalent period of 2017. Our balance sheet continues to be strong, as we reached a net cash level of MXN 14,043 million, which will enable us to continue supporting our growth plan.
At this point, I will turn the call over to Daniel for a discussion of the financial results.
Thank you, Rodolfo. And good morning, everyone. As a result of the condition Rodolfo mentioned as before, our company's second quarter of '18 net sales increases 7.3% in the quarter as compared with the second quarter of '17. The increase is a result of [ prior ] volume sold but mainly due to better prices in poultry and balanced feed. This led us to an increase in sales of 9.4% for the first half of the year as compared with the same period of 2017. In the quarter, sales of the U.S. operations represented 28.7% of the total sales, an increase from the 24.7% we reported in the equivalent quarter of 2017. This is mainly a result of the integration of the acquisition of Albertville Quality Foods. Cost of sales in the second quarter was MXN 13,108.3 million and MXN 25,194.1 million in the first half of the year.
This represents an increase of 14% for the quarter and 9.6% for the net income per -- sorry for the year. The increase was due to higher raw material cost in dollar terms and a depreciation of the Mexican peso versus the U.S. dollar. From this increase, about 1.5% was due to the consolidation of our U.S. operation for dollar to Mexican pesos and about 2.2% due to the volume growth.
The remaining was due to higher cost unit -- unit cost due to higher raw material cost. Gross profit for the quarter was MXN 3,105.3 million, with a gross margin of 19.2%, a decrease of 14.1% over the gross profit reported in the second quarter of '17.
For the first half of the year, we reached a gross profit of MXN 6,322.5 million, with a margin of 20.1%. This amount is 8.9% higher than the gross profit reached in the first half of 2017.
The total SG&A for the second quarter of 2018 was MXN 1,489.1 million and MXN 2,874.6 million for the first half of the year, representing an increase of 14.8% and 12.3%, respectively, when compared to the same period of the previous year. This increase is mainly due to our net energy increases in Mexico, which affect our transportation cost as well as a salary improvement in order to compensate the inflation rate we experienced in 2017.
SG&A are also increasing as a consequence of Albertville Quality Foods and La Perla integration, as we did not have these expenses 1 year ago. Operating income for the second quarter of 2018 totaled MXN 1,656.4 million and operating margin of 10.2%, lower than the 15.4% margin rate in the second quarter of 2017.
The operating income for the first semester of 2018 was MXN 3,478.9 million and operating margin of 11%, nearly the same operating margin of 11.3% reached in the same period of 2017.
The EBITDA margin for the second quarter was 12.2%, lower than the 17.2% EBITDA margin of the second quarter of '17.
For the first half of the year, the EBITDA margin was 13%, very similar to the 13.2% reached in the same period of 2017.
In the second quarter of this year, the net financial income was MXN 562.1 million and MXN 468.4 million in the first half of 2018, both higher than those for the same period of 2017. Those increases are mainly attributed to exchange gains due to our cash position in U.S. dollars and the peso depreciation and higher interest rate churns. Our total taxes were MXN 641.8 million for the quarter, slightly lower when compared to the total taxes that's reported in the same period of 2017.
For the first half of 2018, our total taxes were MXN 1,109.6 million, higher than the income taxes for the same period of 2017. All the above led us to a net income of MXN 1,576.7 million for the quarter, with a net margin of 9.7%. This income is 8.5% lower than the net income reached in the second quarter of 2017.
For the first half of 2018, the net income totaled MXN 2,837.6 million, with a net margin of 9%, which is 19.4% higher than the net income of the first half of '17. The net income per share was MXN 0.0262 for the quarter and MXN 0.0472 for the first half of 2018. Net income per share for the first half of '18 is 19.2% higher than the net income per share in the first half of '17.
Going into our balance sheet, we keep a highly financial structure, with an increase in total assets of 4.4% when compared to the year-end of 2017.
Our net cash was MXN 14,043.3 million at the end of the quarter, higher than the net cash level that we had at the beginning of the year. Our CapEx was MXN 780.5 million. We keep our plan on spending around MXN 1,010 million by the end of this year. Those projects will support our value growth and maintain our facilities at the high-level of productivity.
Thank you, everyone, and I will turn the call back to Rodolfo for final comments.
Thank you, Daniel. As we are entering into the third quarter, we are observing prices trending down in Mexico that is usual for the season. We expect the poultry industry continue with the normalized growth rate in both the markets in which we participate. On the other hand, we are seeing prices of raw materials going down in dollar terms in crops in Mexico and in United States are -- because of the crops are evolving well there and here in Mexico.
We will be following this closely to make proper decisions in line with our hedging policy. We expect to speed up and continue with our CapEx above maintenance levels. As you know, at the beginning of this quarter, we had the presidential elections in Mexico. It was a smooth process, which is reducing volatility factors, and the Mexican peso has recovered to its previous levels versus the U.S. dollar. This will also improve our cost in Mexico. Even when we observe adverse conditions, we consider to be a solid poultry company with a experienced management team, focused and attending to our markets, defined processes and a healthy balance sheet that would allow us to successfully face those conditions. 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] Our first question comes from Ulises Argote from JPMorgan.
One quick question here from my side. Can you please share with us more color in terms of your expectations for the second half in the U.S. operations? You mentioned complicated pricing environment during the quarter. Are you seeing this trend continuing? Do you expect a reversal? How can we think about this going forward?
Well, normally the second half in the U.S. operation used to be less profitable than the first one. And probably it's the case that we could expect for the rest of the year. And remember that this is the first year that we have the whole year with acquisition with Albertville Quality Foods. In that regards, as Rodolfo mentioned, it somehow compensated a little bit our results in the other side of the business, and we expect to having this situation for the rest of the year because we can't buy the raw materials in lower prices.
Okay. That's great. And just a quick follow-up there from my side. Can you give us any update on your M&A strategy given the still growing cash position that we're seeing from your operations?
Well, our M&A strategy remains the same. We're looking for opportunities in other [ parts ] in Mexico very actively and in U.S. in poultry. But it's difficult to predict as to close a transaction in any time, but we are continuing being very active in that regard.
Our next question comes from [ Pedro Leduc ] from [ Newfoundland ] Capital.
On the remarks for Mexico, you mentioned seasonally weaker chicken prices. Do you believe this has anything to do perhaps with more imports? We're seeing U.S. prices coming down fast either from that or from Brazil or something in the local demand-supply dynamics that's causing this. And then together, I appreciate your commenting about lower feed costs. But in your view is it going to be enough to compensate in a way that we should expect, let's say, flat margins in the second half of '18 compared to the second half of '17? You had like about 8.5% second half of last year. Or should we expect some incremental pressure here?
The input for the quarter, specifically in the month of May, the inputs coming from the United States were lower than the inputs a year ago. So the impact in prices for this third quarter are more in terms of the domestic production, not the effect of the imports from U.S. and Brazil. Brazil has been growing in the participation of the Mexican market. Right now in terms of volume, it's around close to 2%. And in terms of value, it's more than 35% because we are importing breast meat from Brazil and leg [ orders ] from the States. In terms -- the other thing is that in Mexico the volatility is in the market of live chicken and public markets, which is -- it's a very important share of our sales. And that part is -- normally in this time of the year is the most affected for several conditions, mainly demand conditions. The other sectors of channels of the markets are in good shape.
And the second part of the question, what we expect from second half of the year in the Mexican operation? As we have seen in this month, the effect in the prices has been very high. So we could expect to have, I could say, similar and probably lower results than the second half that we had in the last year. For that [ duration ] -- it is difficult to predict what will happen in the third quarter and the fourth quarter. But -- and you mentioned that how we see to translate the impact in the prices. With the supply condition that Rodolfo mentioned, it is difficult to predict how it would be. But in that regard, I would say that we expect probably lower results in the second half than the previous year.
Our next question on the line comes from Miguel Tortolero from GBM.
My first question is regarding the U.S. Could you give us any color of what would have been the sales growth in the U.S. if we exclude the effect of the Albertville acquisition? And also the second one on volumes, I know it is not completely comparable, but could you comment a little bit on the performance of volumes in Mexico during the quarter?
The sales growth was because of Albertville. We did an -- expand the legacy facilities there. So the volume increase is just of the Albertville Quality Foods. And in Mexico, our sales -- in terms of sales was -- 2.4% was the increase in the sales of our Mexican operations.
And in terms of volume is basically the same.
We have a follow-up question from [ Pedro Leduc ].
Just quickly. This second quarter we had a substantial gain on the financial line. I'm just wondering if you guys could share a little more color of what led to it and if there is anything that's opened or will be reversed from this gain in the third quarter onwards?
Okay. This comes basically, Pedro, from our net cash position in U.S. dollar terms. From the beginning of the year, we increased our mix in dollar terms up to 50% -- around to 50% of the total cash position in U.S. dollar terms. That's the reason. And probably more than that is actually used for the national growth in the second and third quarters. So -- and we are also reducing this position. Right now, we are around MXN 0.65 and 0.35 in US dollar term. So basically the gains, I would say, half of that will not be more exposed in the future.
[Operator Instructions] Our next question comes from Thiago Albuquerque from Onyx.
Just wanted to -- if you could clear for us about -- with the result in Mexico in terms of sales between volumes and prices. We have seen that growth in the Mexican operation was quite low at 1.5% during this quarter. Just wanted to understand what the result was in terms of lower prices or even volumes going down or growing just a little bit?
Well, in terms of sales, our Mexican operations increased 2.4% of the total sales. In terms of volumes, in the whole business lines was flat. And in chicken, we have an increase of 1.1% in terms of volume. So we had a small reduction in feed. So that makes us flat our total volume, but in chicken, we increased our production more or less in line with the Mexican industry. That allow us to maintain higher prices. Because this quarter the price was higher than the same period over the last year, but the problem was the input cost of our raw materials and the exchange rate of the dollar. For that reason, the final EBITDA was lower than the same quarter, but prices were about the prices that we had the previous -- the same period last year. And the price was 2.8% higher than the same period over the last year.
Our next question on the line comes from Miguel Ulloa from [indiscernible] Bancomer.
Just a quick one regarding the domestic production here in Mexico. Going forward, do you foresee incremental pressures or do you foresee a longer period of oversupply? Or it's too early to say something like that?
It's -- the oversupply that we are seeing in this quarter, I mean, the third quarter is normal. And it's an oversupply because the demand is a little bit lower. And in terms of productivity and volume of production, it's slightly better than the rest of the year. And the problem is the demand factor, which is normal. We are seeing a totally normal behavior of the -- for the third quarter. We are entering with a little bit higher cost. We are going to try to do our best effort in order to impact those costs and the prices, but we are seeing, I can say, a normal quarter -- third quarter.
Okay. And a follow-up, if I may, regarding sustainable CapEx for the coming years. What level do you feel comfortable for the next 5 years, we're talking about USD 100 million, USD 120 million or something like that?
Yes, we expect to maintain this level of CapEx for the coming years, I would say at least for the next 2 to 3 years.
And at this time, I see we have no questions in queue.
Okay. Thank you, everyone, for joining us this morning. If you have any further questions, please contact our Investor Relation area, who will be glad to assist you with your questions. Thank you very much.
Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.