Industrias Bachoco SAB de CV
BMV:BACHOCOB
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.
Good morning. My name is Hilda, and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2022 Industrias Bachoco Earnings Conference Call. [Operator Instructions] Thank you for your attention. I will now turn the call over to Maria Jaquez. Maria, you may begin.
Thank you. Good morning, and welcome to the Bachoco's Second Quarter 2022 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 reflect management's current beliefs based on information currently available and are not guarantees of the future performance and are based on our estimates and assumptions that are subject to risks 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 laws Industrias Bachoco undertakes no obligation to publicly update or revise any forward-looking statements, 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 2022 with comparative figures for the same period of 2021 in Mexican pesos. As a reference, the exchange rate as of June 30, 2022, was MXN 20.14 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 second quarter behaving according to the usual seasonal patterns of the poultry industry as it is typically the strongest of the year. In Mexico, even when we continue with high inflation rates according to Banxico, the economy is expected to show some growth by the end of the year around 1.77%. During the quarter, the Mexican peso appreciated slightly on the average when compared with the equivalent period of 2021. In the U.S., according to the BPO of economic analysis, Macroeconomic trends are similar as inflation rates remain high as well as the economic growth is expected to be moderated compared to the past years.
Regarding raw materials, we kept observing negative impacts on corn and soybean meal prices, particularly corn, has shown an increased around 24% in terms of cost for the quarter. In terms of poultry market. For the quarter, we observed good levels of demand, both in Mexico and in the United States, which had allowed pricing to offset the negative impact of cost. We didn't see neither other supply conditions nor high inventory levels in the industry in general.
Regarding our Other segments, while we exist with the -- while the existing challenges of our pork business remain, we are being able to perform well with the integration of RYC Alimentos, even when we think there are a lot of opportunities to capture in this front. We are confident that the talent team that is leading this endeavor is heading us to the right direction. The condition mentioned before and keeping our SG&A under 10% of our total sales had allowed us to reach an EBITDA of MXN 4,212.5 million with a margin of 15.9% for the quarter.
If you look at the first half of 2022, we reached a net sales of MXN 50,799.1 million, which is 26% higher than the first 6 months of 2021, achieving an EBITDA margin of 15.2% higher compared to the EBITDA margin for the same period of 2021. The company remained in a healthy financial condition as we reached a net cash level of MXN 17,904.5 million, which allow us to continue supporting our growth.
Now Daniel will join us for a discussion for the financial results.
Thank you, Rodolfo, and good morning, everyone. As a result of the conditions mentioned before, our company's second quarter 2022 net sales totaled MXN 26,432.1 million, MXN 5,571.1 million or 26.7% higher than the MXN 20,860.9 million reported in the second quarter of '21. This increase was able to higher volumes sold in our other segments as part of the consolidation of RYC Alimentos and higher prices across our main business lines, so we're offsetting the negative impact of higher raw materials costs.
Total cost of sales for the quarter was MXN 20,518.5 million representing an increase of 21.4% when compared to the MXN 16,901.1 million over the same period of 2021. In terms of our first half of the year, cost of sales increased 24.1% versus the same period of 2021. In both cases, around 90% of the increase was due to a higher unit cost.
Gross profit for the quarter was MXN 5913.6 million with a gross margin of 22.4% higher than when compared to the MXN 3,959.8 million and 19% reported in the same period of 2021. For the first half of the year, we reached a gross profit of MXN 11,040.1 million with a margin of 21.7%. This amount is higher than the gross profit of MXN 8,177.9 million and 20.3% margin risk in the first half of 2021. Total SG&A for the second quarter was MXN 2,123.3 million, representing 8% for our total sales, which compares to the MXN 1,729.2 million and 8.3% total sales achieved in the second quarter. For the first half of the year, we reported SG&A of MXN 4,122.4 million or 8.1% of total sales, while in the same semester of 2021 third quarter at MXN 3,366.5 million and 8.4% of total sales.
Operating income for the second quarter of 2022 totaled MXN 3,831 million and operating margin of 14.5% higher than MXN 2,088.8 million and 10% margin reached in the second quarter of 2021. Operating margin in the first half of '22 was 13.7% compared to 11.6% reached the same period of 2021.
Our EBITDA margin was 15.9% for the quarter an increase when compared with 11.7% in the second quarter of '21, while the first half of the year of 2022 and 2021 EBITDA margins were 15.2% and 13.3%, respectively.
For the quarter, we had a net financial income of MXN 157.9 million and a net financial expense of MXN 77.9 million for the first half of the year compared to the net financial expenses of MXN 97 million and net financial income of MXN 222.64 million for the same period of 2021. Our total taxes were MXN 1,054.1 million for the quarter compared to the MXN 548.7 million recognized in the same quarter of 2021.
For the first half of 2022, our total taxes were MXN 1,832.6 million higher than the income taxes of MXN 1,352.6 million for the same period of 2021.
All the above led us to a positive net income of MXN 2,934.7 million for the quarter, resulting in an 11.1% net margin compared to MXN 1,443.2 million and 6.9% margins reported in the second quarter of '21. For the first half of 2022, the net income totaled MXN 5,062.7 million with a net margin of 10%, which is higher than the MXN 3,517.8 million of net income of 8.7% margin of the first quarter of '21.
Going into our balance sheet, we kept a healthy financial structure with a net cash level of MXN 17,904.6 million when compared with a net cash of MXN 16,530.3 million we had at the end of the year of 2021. This has allowed us to keep with our CapEx allocation plan for the first half of 2022, we reported a capital expenditure of MXN 1,908.8 million, an increase of 46% when compared to the same period of 2021.
That's all, and thank you, everyone. I will now turn the call back to Rodolfo for final comments.
Thanks, Daniel. Now we are entering the third quarter, which historically is the weakest of the year. According to this seasonality we started to observe pressure in prices on the traditional markets in Mexico and also a slowdown in the commodity prices in the United States. Besides the effect of the ongoing conflict between Ukraine and Russia, we expect the main raw materials to behave with volatility depending on the evolution of the crops in the United States and in Mexico. In this regard, we will maintain our policy to hedge corn and soybean meal, no more than 3 months in advance. As we consider it has been an efficient strategy for our businesses. We will continue with our CapEx deployment above maintenance level towards organic growth and productivity.
We will also be very focused on the integration of RYC Alimentos in order to capture the identified synergies. We are certain that our financial discipline will allow us not only to grow organically but to keep looking for new opportunities in terms of M&A.
With that, we will now take your questions.
[Operator Instructions] We have a question from Luis Willard from GBM.
Congratulations on the results. So I was wondering if you could talk about the integration of RYC. I know the environment is challenging right now, but it seems to be a very relevant bed from peer side. And if you could share with us siting long-term, how can -- how much -- how much else can RYC and the pork business aid to your sales and EBITDA growth in the future?
Right now, the total sales is around MXN 3,000 million, which is 3% of our total sales. And we expect -- right now, we expect in the short-term the growth of this company has been -- we are expecting to have a 5% to 6% per year. But in the medium-term, we are expecting to add a couple of more points to this figure. So we are expecting to have an expansion of this company around 8% year-over-year, which is a little bit above the level of the growth of the whole company of Bachoco, which is around 3.5%, 4% per year in terms of volume.
This integration has allowed us to expand our further process businesses. And we start with some stores as this company has some stores in the Puebla area. And we are looking that business as an expansion of the -- the future expansion of the company because at this moment, we are not participating in this segment of the market. The other good thing of this company into their [indiscernible], they have a very good department of innovation and development of new products. So I think this is a very good opportunity to increase our presence in the value-added segment of the industry.
And the third business that they have is the trade -- they have been very successful in just marketing some commodities here in Mexico with a margin. So it's a different business model, but it's an opportunity to expand these capabilities too. And the last, but not the least, is the integration with SASA. Right now, we have a pork production that can add a lot of synergies in that regards.
Thank you, Rodolfo. So in a nutshell, it's okay to assume that top line growth, at least volume growth coming from this acquisition should help the consolidated volumes like around 1%, something like that in the next, let's say, 3 or 4 years?
Yes. yes, right now it's 3%. I think in the future, it can be a little bit more because we are going to consolidate our value-added segment. So it's going to -- in the future, we are maybe that's not for sure, but we are not going to track RYC as a plant or as an independent company, we are going to integrate that sales to our value-added business.
[Operator Instructions] At this moment we show no further questions in queue. My apologies. We have a question from Fernando Olvera from Bank of America.
I have one, basically, can you give us an outlook that's coming to in the process of the [indiscernible] the controlling shareholders and there is any change [indiscernible]. And that's the first 1 and I have a follow-up.
Hello, Fernando. Well, right now, we have no further information, no additional information besides what it was already published. What we already know is that the offer or has asked for the authorization for the Mexican authorities for the initiation of the offer, but we don't have any other information.
Okay. Great. Daniel, very helpful. And my second question is regarding the Poultry business in Mexico. I mean thinking about volumes, I mean, in which channels did you see the main weakness this quarter? And how do you expect volumes to behave in the second half of the year?
Well, as I mentioned, the second half of the year normally is the weakest half. In terms of volumes, we are seeing a very good balance between offer and demand. In the month of June, we had and the industry had some problems with the supply of hatching eggs So that is going to keep some pressure in the volumes for the second half of the year. So we are expecting a normalized third quarter, which is normally the prices are lower than the second quarter and with a recovery in the last part of the year. So we are seeing a normalized second half of the year in the Poultry segment.
Okay. Great. And regarding the second quarter, I mean, can you comment what was the performance by channel?
Well, yes, the traditional market was very good. But I can tell you, in line with the seasonality of the second quarter, which traditionally is a good one. The retail channel was in line to -- but with the less -- the margin in that China was a little bit lower than the other one. And as you know, we are participating in the control of the inflation program here in Mexico. And we are making an effort in that regard in the retail channel.
[Operator Instructions] We have a question from Hector Areliz from Rainbow Fund.
Just to expand a little bit on the last comment you guys made. How much pressure has there been from the Mexican government to help mitigate some of the impacts from this higher inflationary environment, specifically on the chicken side. If you can comment a little bit more on that, I would greatly appreciate it.
Yes. We have been participating in the meetings with the federal government. And we are participating in two sides the egg industry and in the chicken and the poultry industry. And this is just for the whole chicken and in the retail segment. And they understood very clearly that the impact of the inflation and the inflation is caused mainly by the raw material prices. And in that regard, they've announced some programs in order to increase the production, the domestic production of grains, some subsidies to the gasolines and things like that and make us a little bit more efficient in terms of the cost of production, but we are reflecting or we reflect the increases in the cost of the raw materials.
For this third quarter, we are seeing a little bit of reduction in the -- at least in the Chicago border trade cost on the corn. Right now, the [ voucher ] is below the $6 mark. When the second quarter, we had prices very close to the $8 mark. So right now, I think the pressure and the cost is going to be a little bit less, and we can just keep the prices on those channels and the retail and in those products for the third quarter of the year with no impact.
[Operator Instructions] And at this moment, I don't see further questions. I would like to hand the call back to Mr. Rodolfo Ramos for final remarks.
Well, okay. Thank you very much for all of you 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. Have a nice day.
Thank you. This concludes today's conference call. You may now disconnect.