Grupo Bimbo SAB de CV

BMV:BIMBOA

Earnings Call Transcript 2022-Q1

[Operator]

Good day, everyone, and welcome to Grupo Bimbo's First Quarter Results Conference Call. If you need a copy of the press release issued earlier today, it is available on the company's website at www.grupobimbo.com/en/investors/reports/quarterly reports.

Before we begin, I would like to remind you that this call is being recorded and that the information discussed today may include forward-looking statements regarding the company's financial and operating performance. All projections are subject to risks and uncertainties, and actual results may differ materially. Please refer to the detailed note in the company's press release regarding forward-looking statements.

I will now turn the call over to Mr. Daniel Servitje, Chairman and Chief Executive Officer of Grupo Bimbo. Please go ahead, sir.

[Daniel Servitje Montull, executive]

Good afternoon, everyone, and thank you for joining us. Connected on the line today is our CFO, Diego Gaxiola; BBU's President, Fred Penny and several members of our finance team.

We had a very strong start to the year. Top line performance was exceptional, as we reached a record level of sales for the first quarter and gained market share in several categories. Our volumes grew across all organizations as a reflection of the high demand we are experiencing and that our brands are resonating with our consumers. The salty snacks, buns and rolls, snack cakes, pastries and confectionery categories outperformed, as did our Mexico and Latin America regions and our QSR business.

We also reached historic levels of first quarter profits. However, we are experiencing expected margin pressure from a highly inflationary environment globally. More specifically, we are seeing increases in commodities, freight and labor costs as well as shortages across the supply chain in the U.S., U.K. and Canada. We have been leveraging many tools to offset rising inflation, including price increases, revenue growth management strategies, category and product mix, and also pursuing many productivity initiatives. We will continue this approach throughout the year, and we will also continue to proactively look for restructuring opportunities across the value chain, and we'll continue to deploy our digital transformation strategy.

Just a few days after our last earnings call, the global environment changed dramatically with Russia's invasion of Ukraine. So I would like to discuss our presence there and decisions we have made. We have a plant in Russia and 1 in Ukraine, which primarily serve quick service restaurants. Together, they account for less than 0.5% of our consolidated net sales.

Our priority and biggest concern is the well-being of our associates in both countries, and we are helping them through different actions to protect their safety. They will continue to receive support from us through these difficult times. We decided to suspend sales of our Bimbo brand and hold new investments in Russia as well as new capital and marketing investments in the country. The byproduct of these conflicts is commodity price volatility, which Diego will talk about shortly. We will continue to monitor the situation very closely and update you with any changes.

On a very different topic yesterday, we announced that we signed an agreement to sell Ricolino, our confectionery business. We founded Ricolino in 1970. And today, it is the leading player in the confectionary industry in Mexico and exports its products to 17 countries, including Central America and more importantly, the U.S. The strategic rationale behind this decision is that we are focusing on our core businesses, grain-based foods. We plan to continue to grow and further consolidate our position as the largest baking company in the world. We sold Ricolino at highly accretive multiples to Mondelez, a company that can take our beloved brands and associates to new levels.

I deeply thank and recognize the hard work of our nearly 6,000 associates that have done an outstanding job to make Ricolino the leading player in Mexico. We reaffirm our commitment to Mexico as well. In fact, we will be investing half of our global CapEx for the year in several projects in the country, such as a new plant in Monterrey, new baking lines in Tijuana and one of the fastest bun lines in the world located in Toluca.

And lastly, I would like to highlight a specific sustainability accomplishment. Our Brazilian organization is now operating with 100% renewable electric energy. And with this, 93% of our global operations are using renewable energy and 21 countries now use clean energies. I believe this is a metric that very few food companies have on their company. I hope you have received our invitation to a brief call on May 18, where we will be sharing our new sustainability strategy.

Now reviewing the quarterly results by region. North America had a very strong quarter, with net sales growing 15.8% in dollar terms. The branded business continued to perform very well, led by bread, buns, bun and rolls, sweet baked goods and snacks. We grew share in most of our categories despite a very difficult operating environment. We successfully implemented productivity initiatives and a second price increase across our portfolio, while experiencing volume growth and market share gains as we continue to be the first choice of our consumers in most categories.

Our adjusted EBITDA margin in the region contracted 180 basis points, mainly due to rising commodity, freight and labor inflation. This was partially offset by a favorable branded mix and productivity benefits from past restructuring investments as well as cost-saving initiatives. We are cautiously optimistic about the future as we face a dynamic and evolving environment, including labor shortages, inflation and consumer spending uncertainty. However, we are laser focused on what we can control and believe we will overcome these challenges and succeed in the year.

In Mexico, sales improved by 19.5% attributable to volume growth, favorable product mix and price increases. Every channel posted double-digit growth, as did most categories, most notably, snack cakes, sweet baked goods, bread, cookies, confectionery and salted snacks. Our increased presence and execution at the point of sale and favorable consumption trends also helped boost the results. Adjusted EBITDA margin contracted 10 basis points, mainly reflecting higher commodity prices, but it was almost fully offset by productivity savings across the supply chain.

In EAA, excluding FX effect, sales increased 21.1%. This was a result of our double-digit growth across every organization, namely Iberia, U.K. and the QSR business, coupled with the contribution from the acquisition of Modern Foods and Kitty Bread in India. The adjusted EBITDA margin contraction of 120 basis points resulted from the higher cost of sales, the higher inflationary environment and a labor strike impacting our distribution in Spain, which has already been resolved.

Finally, moving on to Latin America. Net sales, excluding the FX effect, increased 25.1%. This was driven by strong volumes in most countries and favorable price mix across our 3 organization and the acquisition of Aryzta's QSR business in Brazil. Despite challenging conditions in several countries, our adjusted EBITDA margin expanded 370 basis points, reaching the highest level for the first quarter at 9.6%, attributable to our turnaround efforts in Brazil, which resulted in EBITDA gains for the third consecutive quarter and in Argentina as well. This has been a result of a deep business reengineering and expansion programs.

Colombia, Central America and the rest of our Latin Central division continued to post excellent results as well as other countries in our Latin Sur division. These extraordinary results are a consequence of the hard work of our teams and the focus to continue capturing the opportunities generated by the market. We are simplifying our portfolio and implementing cost control initiatives in several countries to continue strengthening our profitability. Going forward, we will keep our focus on rebuilding and expanding our distribution to further strengthen our profitability in the region.

I would like now to turn over the call to Diego, who will walk you through our financials. Please, Diego, go ahead.

[Diego Cuevas, executive]

Thank you, Daniel. Good afternoon, everyone, and thank you for joining us today. I would like to start with a summary of our financial results for the quarter, which were outstanding, especially when we consider the tough comparison from the strong results in the first quarter of 2021, overall inflation and the complicated operating environment in several countries. Our net sales reached historic levels for our first quarter, posting a nearly 18% growth. On the other hand, our adjusted EBITDA margin contracted as expected 70 basis points, mainly due to the higher commodity prices and a high overall inflationary environment across our geographies. This will continue throughout the rest of the year.

We are working on several actions to offset the rising inflation, including price increases, revenue growth management strategies, our product mix, productivity initiatives, and we will continue to proactively look for restructuring opportunities across the different markets. Operating margin contracted 150 basis points mainly due to the higher cost of sales and a higher inflationary environment globally, coupled with a lower noncash benefit of $73 million related to the adjustment to the MEPP liability to reflect current interest rates level, which compares to the $109 million noncash benefit that we had during the first quarter of 2021. Excluding this mix effect, operating income would have increased 13%.

We have also achieved substantial and sustainable productivity savings coming from capital and restructuring investments we have made in the past, which enable distribution efficiencies, automation improvements and integrated system solutions. Our financing cost decreased by almost 8%, reflecting lower interest expense. And our cumulative effective tax rate stood at 34%, which continues to reflect a benefit from our turnaround businesses, which have been performing substantially better than the previous years. As a result, the net effect of these factors yielded an improvement in net majority income of more than 10% and the margin contraction of 30 basis points to close at 4.8%. Our return on equity closed at a record level of 15.8%.

Turning to our balance sheet. Thanks to our strong operating results, we closed the quarter with a net debt to adjusted EBITDA ratio of 1.8x. Our total debt declined by almost MXN 2 billion as compared to December 2021. This was partly due to the positive effect from the FX rate. Our short-term debt decreased to 7% of the total as we have the outstanding $198 million bond, which we paid in January with the proceeds of our committed revolving credit facility. Our net operating working capital, which mainly considers accounts receivables, inventories and suppliers, has improved significantly by 1.4 days over the first quarter of 2021, which is the equivalent to MXN 770 million. And this was mainly due to the improvement in accounts payable.

Now going deeper on Daniel's comments on commodity prices. Our main raw materials are wheat packaging and fats and oils. As of the end of the first quarter, we had already hedged 85% of our needs for 2022. And we continue to do so according to our policy, which goes from 4 months up to 18 months. This strategy is aimed at providing visibility to each operation in order for them to plan their commercial and pricing strategy on a timely basis.

I would like to touch now on our guidance under Ricolino divestiture that we announced yesterday. This transaction strengthens our financial profile as it is highly accretive with an enterprise value to sales multiple of almost 2.7x. This enhances our long-term focus in our core categories. We will be using the proceeds to pay down debt for our CapEx plans and other general corporate purposes. We reaffirm our commitment to Mexico, where we will be investing around $750 million during the year, a record level that endorses our confidence in the country.

I will now update our guidance for 2022. Without the effect of Ricolino as according to the accounting standards, beginning in the second quarter, we will be adjusting 2021 results to make it comparable by reporting the Ricolino results as a discontinued operation. Well, thanks to the strong top line performance in the different markets in which we operate, we are upgrading our initial guidance from a high single-digit to a low double-digit growth. Considering this updated top line growth and the high inflationary environment that we're facing, we maintain the range of adjusted EBITDA at mid- to high single digit. So as you can see, we still expect to see some margin pressure in 2022, as we shared with you in the previous call.

In terms of our expectation for the effective tax rate, there is no change to our guidance. And we continue to expect a low to mid-30s effective tax rate. As you can see, despite the inflationary environment, we continue to see a strong 2022 as our volumes and sales continue to exceed our expectations. Our CapEx plan is ramping up. We continue to expect around $1.5 billion for the year. Although the first quarter looks lower, this is because it takes time for some projects to mature. And also, we have been facing some delays from suppliers related to the global supply chain disruptions that are happening. We continue to be fully committed to seizing the opportunity to increase our capacity given the ongoing high demand for our products.

I hope this was clear and we can now proceed with the Q&A session.

[Operator]

[Operator Instructions] Our first question will come from Luis Yance with Compass.

[Luis Yance, analyst]

Daniel and Diego, congrats on the outstanding results you just reported. A few questions from my side. The first one, I guess, more for Diego, on the guidance that you just presented. Just wonder if you could give us a little bit more detail on the expected margin pressure. I understand you're well hedged for this year. So I guess relative to your expectation 3 months ago when you were kind of expecting kind of flattish margins. Just wondering where are those additional pressures coming from versus your initial? Is it mainly on the labor side on the freight side that perhaps you're not as hedged as you are in the commodity side? Or even on the commodity side, perhaps towards the end of the year, you were in this hedge and perhaps the sharp price increases we're seeing now you start seeing the effect. So that will be my first question, just to get a sense of that. And then also, I guess a related question is whether your updated guidance assumes any additional price increases beyond what you already have put in place? And if so, just to get a sense of which regions you feel you need to do a little bit more.

[Diego Cuevas, executive]

Yes. Yance, I will probably take the first part of the question and probably Fred or Daniel, if it's okay for you, you can take the pricing part. So regarding the guidance, as you can see, our top line has been above our initial expectation, but also inflation has been -- will be higher than what we were expecting some months ago, particularly with the Russia Ukraine conflict, that all commodities have gone up. So today, the expectation on the cost of sales is higher than what we had a couple of months ago. And that's why we're maintaining the EBITDA expectation in absolute terms, higher revenues and, of course, a slightly higher contraction in margins. So that's the main effect then and what changes the actual price of commodities.

[Fred Penny, executive]

Diego, I'll be happy to take the pricing question, at least from a North America perspective. We're in the process of and we're in the process of implementing another round of pricing, given what I would call extraordinary run-up in many of our input costs. And I think it's important to note that not all of our input costs are hedgeable, if you will. And so in some cases, we're seeing significant run-ups in the short term that we're going to have to deal with in the back half of the year. In addition to that, beyond the pricing, I would say that we're aggressively going after any and all productivity opportunities, mix management, revenue growth management. I think Daniel and Diego mentioned it. So we're looking at everything, but I do think it's important to know that the inflation pressures are across the board, and they're not limited to just commodities, and we've got to continue to manage through that. As I think so far, we've pretty effectively done.

[Luis Yance, analyst]

Great. And how about the other regions, in particular, Mexico, you've been very successful on the pricing side. And I guess we heard some comments this morning that AMLO is looking to reach a deal with private companies to limit price increases on basic items by rolling out price controls in the future. Just wondering if you could comment on that. Have you been part of those discussions? Any thoughts about that and how you would approach pricing initiatives in Mexico.

[Diego Cuevas, executive]

Daniel, do you want to take that one?

[Daniel Servitje Montull, executive]

Sorry, someone cut me in the phone and I'm back. I don't have the question. Please, could you repeat it?

[Luis Yance, analyst]

Sure. Yes. I mean after the comments you guys made about U.S. pricing. I was just wondering about pricing in Mexico, which has been quite strong. But given just thinking about going forward, what's the thought about that, especially given what AMLO mentioned recently about discussing with private companies, some limitations on price increases, et cetera. Any thoughts about that, whether you've been on those conversations? And how should we think about pricing in this environment in Mexico in particular.

[Daniel Servitje Montull, executive]

Yes. Thank you very much. I think I'll try to answer it in 2 parts. The first part is that we have been able to price according to the cost increases that we have had in our P&L so far. And the reaction in terms of the consumer reaction to our prices has been relatively good, and we've been able to manage this past price increases. Regarding the future, we have been talking with the government in a very preliminary way in understanding what are the things that they want to accomplish in this new scheme that -- it's going to be detailed and finished in the coming days or weeks. And they are concerned on 24 basic commodities.

One of the products that they're looking for trying to see how it can be sort of impacted in a lesser way to consumers is via the banned bread, the white bread. And this is something that we are just starting in conversations with the government. So we don't know very much about it. And we are participating as all the other companies that were invited to talk with the government. And we'll see what comes next. But I just want to mention that is a concern of one of the products that we have, not the full line of items in our company.

[Luis Yance, analyst]

Great. That's great, the detail. Could you remind us how much, roughly speaking, is white bread as a percentage of sales in Mexico?

[Daniel Servitje Montull, executive]

We don't detail specifically based on our products. It's a relevant product. But as a whole, in the portfolio, it's not a big.

[Luis Yance, analyst]

Okay. Great. And my last question, switching to Ricolino. I know you guys mentioned that the use of proceeds, paying down debt and, I guess, CapEx and other issues. So I guess the question on investors' mind is also distribution to shareholders. Anything you can comment about potentially, using part of it as special dividend or perhaps increasing the amount of the buyback that could come after you receive those proceeds.

[Daniel Servitje Montull, executive]

Do you want to take that, Diego?

[Diego Cuevas, executive]

Yes, sure. Luis, as we have mentioned, we will be using the proceeds to pay down debt, which is mainly some bank facilities that we have outstanding as of the end of the first quarter. As part of the other general corporate purposes, it's still early to tell. But definitely, we will use some of the cash to form the buyback program. And closer to the date on being able to conclude this transaction, we will have a clarity if there is a potential dividend to be paid.

[Daniel Servitje Montull, executive]

[ We just fixed ] our focus, as Diego mentioned, will be on lowering our debt execution. Yes. Basically, that's going to be the main part.

[Operator]

Our next question will come from Ben Theurer with Barclays.

[Benjamin Theurer, analyst]

Perfect. Daniel and Diego, contracts on the result. 2 quick ones. Just wanted to ask you if you could elaborate a little bit on what you've been doing, particularly in Mexico to bring the SG&A cost down so significantly in contrast to what sales growth was. So just to understand what initiatives you've been doing, particularly in the first quarter and how much more room you have for the remainder of the year also in light of all the gross margin pressure you're obviously seeing and you're kind of implying within your guidance, but just to understand the magnitude of savings you might have on the SG&A side. That would be my first question.

[Daniel Servitje Montull, executive]

Well, on a very general matter, let me tell you that the growth in volume and sales allow us to leverage significantly our fixed cost in the business. And that's -- in general terms, what we have been facing. We have been implementing over the past years a lot of changes in the digital side. We have better tools now in disposition for our sales team. And we are always tweaking on how we can be more productive at the distribution and alternating our accounts, especially the small ones. But all in all, it's been a good quarter, and the company is working at a high level of capacity utilization.

[Benjamin Theurer, analyst]

Okay. Perfect. And then I know you don't give too many details, but just maybe conceptually, can you talk about the level of profitability the Ricolino business used to be? Was that in line with just the general Mexico level of profitability? Was it a bit higher? Was it a bit lower? Just to understand as well around that context what profitability might look like going forward, just given the fact that you're not going to deal it -- treat it as a discontinued operation.

[Daniel Servitje Montull, executive]

Diego?

[Diego Cuevas, executive]

Ben, and for the time being -- yes, yes. Ben, this information is currently not public. And that we have to comply with our confidentiality agreements. So unfortunately, we are not able to provide any color on the margins or any more details on Ricolino for the time being. Once that we close the transaction, we will share more detailed information.

[Benjamin Theurer, analyst]

Okay. Just to understand, when do you expect this to close?

[Diego Cuevas, executive]

Between the third and the fourth quarter once we have the approval of the antitrust in Mexico.

[Operator]

Our next question will come from Ricardo Alves with Morgan Stanley.

[Ricardo Alves, analyst]

Couple of questions. A follow-up on the very strong top line, particularly in Mexico, you mentioned double-digit growth across all channels. But is there one channel that is standing out or maybe a category or even intra category kind of mix improvement? I ask this also because of Ricolino. I don't know what level of impact that higher confectionery items could have had in your mix. So any more qualitative color on the Mexico's top line performance would be helpful. On the top line performance in the U.S., just wondering from the comments that you've made before that you are, as we speak, implementing pricing or higher prices already, if you were concerned at all with potential consumer elasticity, if that's demand destruction or disruption is a concern going forward? Appreciate the time.

[Daniel Servitje Montull, executive]

Yes. I mean just very broadly, I would say that the food service part of our business as the economy recoups its pace and the COVID effect allows people to move more freely has been the winner as well as the convenience store sectors. Those will be the 2 that are growing the fastest. And also the sweet baked goods have been very good so far for us.

[Fred Penny, executive]

Then on the second one, second question. Yes, I'll take it, Ricardo. Thanks for the question. To date, we've not seen any significant elasticity impacts from the pricing actions we had to put into the market. I will say that the additional pricing we're being forced to take now, given the significant inflation is a watch out. And we're monitoring that and we will be monitoring closely by category for potential impacts. And if we see that, we're going to have to react. But so far, overall, I would say across our categories, our top line has held up fairly well. Obviously, the consumers are feeling very pressured on inflation across the board, whether it be gasoline or wood cost, et cetera. So I think like many companies, we're going to have to monitor it closely as we prepare to deal with it if we have to.

[Operator]

Our next question will come from Alvaro Garcia with BTG Pactual.

[Alvaro Garcia, analyst]

Diego, Daniel. My first question is on Ricolino and congrats on the deal. I was wondering, and it has to do with sort of what you plan to do with your capital. I was just wondering, Diego, if you could remind us what your target leverage might be? I think you've mentioned 2 times in the past, but I was wondering if you have any specific data point to share? And my second question is on multi-employer pension plans. We've seen higher rates. And I was just wondering if -- given this higher rate environment, if there's a particular opportunity that you feel you can capitalize on in terms of taking some of these MEPPs early and taking them out at these levels?

[Diego Cuevas, executive]

Alvaro. Regarding our target on the leverage ratio. I mean on the long run, we are remaining on being between 2 to 2.5x net debt to adjusted EBITDA. In 2022, we expect to be within this target, probably slightly below around 2x, considering the inflow from the sale of Ricolino. And in your second question regarding the MEPPs, you're completely right. We have been analyzing several opportunities. And in fact, we did take an opportunity in the first quarter. We had an offset from the positive impact in the P&L just from the interest rates. It was offset by restructuring plan. It's a small one. It's not a big. So that's why also we continue to have more than $70 million of positive effect on our results. And we will continue to monitor very closely the opportunities that we have in all the different MEPPs plans.

[Alvaro Garcia, analyst]

That makes a lot of sense because the magnitude of the interest rate would increase -- would have sort of implied a bigger MEPPs inflow. So that makes a lot of sense.

[Operator]

Our next question will come from Alan Alanis with Santander.

[Alan Alanis, analyst]

Sure. A couple of questions. One of them regarding Ricolino as well. I mean the production and the distribution of Ricolino is separate from the rest of the Bimbo operations. Which other businesses do you have with separate production facility and distribution? I guess, Barcel is one of them. Is there any other businesses that are like noncore or not part -- integral part of your production and distribution. That would be the first question. And I guess the implicit question there is, are you open to sell other businesses that are not part of your core?

[Daniel Servitje Montull, executive]

Alan, what we have is basically focused is on becoming a sole grain-based food company, a global one and one that really takes the possibilities of our baking assets as well as our salted snacks assets better in the future. So when you're saying core, that's what we're talking about. And no, we don't have any assets. We are not a conglomerate. We were not even a sort of a broad food company that's operating in many categories. We were just operating in 3. And now we are laser focused on 2. And we believe that we have now the -- this is something that we've been working on for years. And we're very glad that we were able to get us through the finish line in such -- as we believe in such a great manner in valuing this Mexican company.

In a way that I personally I believe it's the way that the Mexican food companies should be valued. There is a tremendous disparity in value between the multiples of the international companies and the ones based in Mexico. And I think that you might be able to register to understand that the value that we were able to unlock basically attests to the strength of our capabilities in distribution, our strong brands that we've been able to develop and the connections that they have with our consumers. So I mean, this is a major step in the company and one that we're very happy and also that because of seeing our colleagues that being able to achieve this deal, it's a very well-thought decision and one that really allow us now to increase our depth in the -- in this grain-based foods business very clearly.

[Alan Alanis, analyst]

Yes. No, that makes a lot of sense. Congratulations. I mean you sold it for 2.6x sales when your stock is trading under 1x sales. So I mean, definitely, you were able to do a fantastic transaction. And yes, I mean, everybody can see that companies like Mondelez are trading at 2x the [ EV ] with that multiple of companies like Bimbo, so well said. Last question. I mean, we're seeing a lot of global companies right now raising prices all across the board in the beer space, in the soft drink space, a double-digit basis, and we're still seeing positive volumes. In your experience, Daniel, I mean, how do you see this evolving? I mean we're starting to see a lot of weakness in other -- in discretionary items and so forth. But I guess the specific question is, have you seen this before where you can -- where all of these staples companies are taking double-digit pricing and you're still seeing volumes growing? How long can it last? And what are the different scenarios that you're seeing for the next couple of years in your business?

[Daniel Servitje Montull, executive]

Great question, Alan. And let me tell you that I've been in this business for over 40 years. And this is something that I've never seen before. And yes, we're -- we have been in inflationary times. We have -- we do business in companies that have different inflationary scenarios, and we're well accustomed to navigating through them. But this is quite special because it's mostly global. And we are navigating through these new times. Still, the demand is pretty high and it might cool off. But so far, we're seeing that it's mostly there are pockets in places that they are not as, I would say, as active as others, but this is sort of a new territory for us. And we're asking our teams to be very close to the market and to prepare and to react as best as they can.

[Alan Alanis, analyst]

That's very useful, and it's consistent with what we're seeing also in the sight. Congratulations on the results and on the transaction with Ricolino.

[Operator]

Our next question will come from Felipe Ucros with Scotiabank.

[Felipe Ucros Nunez, analyst]

Yes. Daniel and Diego, congrats on another good set of results and obviously on the transaction. So my first question relates to the transaction. I imagine Ricolino was still coming out of a pandemic, right? Its categories are slightly more discretionary than others that you have. So I imagine that sales may have still been a little bit depressed. I'm just wondering if the $500 million that was reported at sales for Ricolino, does that reflect the normalized sales number? Or was that still a depressed number?

[Daniel Servitje Montull, executive]

I mean we -- yes, we were very much hit during the first year of COVID. With Ricolino, we started to see a rebound last year. And the business was performing very good in, I would say, on all aspects of the P&L lately. So it's a business that's doing very, very, very well. And that will be my comment.

[Felipe Ucros Nunez, analyst]

Okay. But any comment on whether the $500 million was a normalized number or simply a trailing number?

[Daniel Servitje Montull, executive]

Diego? I think it's -- that's the last year, right?

[Diego Cuevas, executive]

Yes, that's the number for 2021, Daniel. And Felipe, yes, we could say it's a normalized. Number was even better than 2019 and of course, very, very high as compared to 2020.

[Daniel Servitje Montull, executive]

And this includes mostly -- the revenues are in Mexico, but there is a percentage of those revenues that occurred in the other geographies, just so you know.

[Felipe Ucros Nunez, analyst]

No. Okay. That gives us a lot of color, knowing that it was above 2019. So it was fairly recovered at this point. Maybe another one on EAA in Latin America. This is the third quarter of accelerating sales in neutral FX terms in these 2 regions. So very, very strong results in those 2. But obviously, there's also some M&A impact in there. So just wondering how that trend has been. If you kind of exclude the inorganic portion, does it look as strong? Or is the trend still accelerating, I guess, is the better question?

[Daniel Servitje Montull, executive]

You have the number, Diego, on the impact of the acquisition? I don't think it's very relevant, right?

[Diego Cuevas, executive]

Yes, it is not relevant, and I don't have the numbers here.

[Felipe Ucros Nunez, analyst]

Okay. That's fair. Not a problem. If it's not very relevant, it doesn't change the numbers very much. And then maybe my last one. Are you guys -- and it's probably more directed to Fred. But Fred, obviously, a lot of companies are trying to push through price increases in the U.S. And there's a history that maybe doesn't apply to Bimbo, but it has applied to other companies in the sector at different points in time. There's been points where the retailers have kind of pushed back a little on price increases. So just wondering if you could give us some color on how retailers are accepting kind of this wave of price increases from everyone, obviously, because it's not just being booked.

[Fred Penny, executive]

Well, I guess I'd say that everyone is in business today is experiencing fairly extraordinary inflation pressures and labor issues, et cetera, that are fairly well documented. So I think the markets and the retailers recognize the pressures that we're facing because they're facing the same ones. That to my earlier comment, we're putting another pricing into the market in the near term here because we have to. And hopefully, we're going to be able to execute that effectively. But I think in general, so far, I think the markets have recognized the need to deal with the extraordinary inflation pressures that we're all facing. And so we'll see how it goes on the next round. But so far, I think the markets have been receptive.

[Felipe Ucros Nunez, analyst]

No. Great color on that. And congrats again, guys, on the transaction.

[Diego Cuevas, executive]

Yes. Felipe, just very quickly, let me go back to the question regarding the normalized revenues of Ricolino, if you want to call it like that. Just to give you a little bit more color, 2021 was substantially higher than 2019 well before the pandemic. Well, so the number that we put out on the press release on this $500 million is the highest number on sales. So it has no negative effect from the pandemic.

[Felipe Ucros Nunez, analyst]

Yes, that's exactly where I was going with that. I just wanted to make sure we could say very definitively that it was an excellent multiple, and it definitely is. So congrats again, guys.

[Operator]

Our next question will come from Barbara Halberstadt with JPMorgan.

[Barbara Virginia Halberstadt, analyst]

Most of them have actually been answered already. So I just wanted to make 2 follow-ups. One, in terms of the working capital, you actually had an improvement. So I was just wondering if you continue to see this trend throughout the year? Or how should we be thinking about working capital needs for the remainder of 2022? And then the second question, on your capital structure, I understand that you're receiving the proceeds to repay debt. Just trying to think about which parts of the -- of your amortization structure would be more focused on if there's any particular instrument that you're intending to retire.

[Diego Cuevas, executive]

Barbara, regarding the working capital, yes, it has continued to improve. I think there is still room for improvement, not as big as the one that we have seen in the last 3 years. As you know, we implemented a lot of supply chain finance programs, including North America, which was very big and created a very strong positive effect on our working capital. We're implementing best practices in the different geographies, particularly Latin America for improving the way we do the collection. Today, we're most really focused on optimizing the level of inventories because of some supply chain disruptions that we have been facing. So we're probably taking a little bit more cautious position in terms of inventory. So we do not expect a big improvement on this line for 2022.

In the first quarter, just to remind you, we typically burned a little bit of cash from working capital because every fourth quarter is when we see the strongest jump on accounts payable. So we feel optimistic about the potential, but again, not as material as it was in the past 2, 3 years. Regarding your second question on the instruments that we plan to prepay once we get the resources from the Ricolino transaction. So it's mainly bank facilities. As of the end of the first quarter, we have close to $400 million of debt from bank facilities, including the revolving credit facility and some other debt at the subsidiary level. It's not exactly that we're going to be paying 100% of this, but we're mainly -- whatever we use of the proceeds to pay down debt is going to be bank facility.

[Operator]

Our next question will come from Sergio Matsumoto with Citigroup.

[Sergio Matsumoto, analyst]

Yes. Daniel, Diego and Fred. My question is going back to the transaction and more on a strategic point of view. Is it fair to say that there may be a strategic pivot to perhaps strengthening the core categories? I mean, Daniel, you kind of talked about this in detail. And when you put together the divestiture of Ricolino and the CapEx program this year, that's a lot more -- a lot higher than previous years. That would make sense. But I'm just wondering if the growth that came -- that was led by M&A from the past, is that a strategy that you would kind of put at the rest for the time being? Or if you could discuss any color around that?

[Daniel Servitje Montull, executive]

Yes, thank you. I have read some of the comments that you and others in the call have written. And there's -- it's always -- I see this question on -- lingering on the M&A strategy of the past. And I want to maybe spend some time to give you a little bit more of light because I personally believe that the analysts and communities is not necessarily looking it at from the angle that I see it or that I believe that you should see it. And this is an important question. First, I have to tell you that what we did in the past was done in order to pursue a very clear strategy of taking advantage of a fragmented market, whereby we could -- by putting up some rather larger acquisitions. We could consolidate our market position in the U.S. and then afterwards in some other countries by making these acquisitions that were quite large compared to our size then.

It's -- and I get the sense that -- believe that this is sort of in our blood. And it's not in our blood, it's -- because we have thought about them very deeply and they allow us to be where we are. And after we did these acquisitions, we have to work tirelessly years and years and years to fix ailing businesses, to invest in bakeries that have not been invested in many, many years and to fix distribution systems that were outmoded or, well, not taken care of. And that explains the essence of Grupo Bimbo. Grupo Bingo is a company that always has its, I would say, goals very clearly. And that has a long-term vision on how to develop the markets where we are in. And we play for the long haul.

That's -- if you don't like the long haul, well, that's who we are. But we are very clear on what we want to achieve and we want to create value for our shareholders. And as these big acquisitions happen, what we find then is that there are many opportunities for inorganic growth, but they are smaller insights from what they were before. And that's where we are. We continue to be active in the market, as you have seen in the past year, and we will look at a lot of opportunity in front of us. And we -- if they fit with our strategy, if they provide growth in the future or strong synergies, we will look more closely at it.

[Sergio Matsumoto, analyst]

Yes. I understand that. Daniel. That's clear. And I guess it appears that right now, you're in that phase where more on the fixing of the businesses and the distribution systems, as you mentioned. And along this line, I just wanted to ask my follow-up in Brazil and the broader LatAm business, very nice turnaround there. Any comment on short-term gains that you're seeing today and perhaps some longer-term opportunities that remain in LatAm.

[Daniel Servitje Montull, executive]

LatAm, as you know, Sergio, it's a very volatile region. We have leaped through many ups and downs. And we -- I mean what you saw this quarter is exceptional. And we're working on improving our performance in all markets and regions. We're investing heavily there as well in CapEx. And the opportunities are there. But I mean I have to tell you that having lead through this region, we just -- we might see some volatility coming on in the regions. But we are much better preferred than where we were before.

[Operator]

Our next question will come from Luis Willard with GBM.

[Luis Willard Alonso, analyst]

And again, congratulations on the results. I think most of them have also been answered. I would just pick your brain as to -- I mean, the uptick in your sales guidance for this year, given all that you've mentioned throughout the call, appears to be more from the side of stronger volumes, especially in Mexico and in the U.S. Do you agree with that one? And do you see that changing or evolving for the year as you implement more pricing?

[Daniel Servitje Montull, executive]

Will you take that, Diego?

[Diego Cuevas, executive]

Yes, Daniel. Luis, I would say not only for Mexico, Luis. For all the different regions, the guidance that we provided is based on the combination of volume growth together with price increases. And I mean, we see in the environment that we're living, we feel confident that we're going to be able to achieve this upgraded guidance.

[Luis Willard Alonso, analyst]

Correct. So specifically, the question is compared to the previous guidance is taking what we saw in the first quarter, we're probably seeing a bit more, I would say, not a defensive is a word or robust volumes that probably you anticipated in the previous guidance. Is that a correct assumption, Diego?

[Diego Cuevas, executive]

It is a correct assumption. Yes, both volumes are past our expectation and that's why we were able to deliver almost the 18% growth in the top line in the first quarter.

[Operator]

This concludes the question-and-answer section. At this time, I would like to turn the floor back to Mr. Daniel Servitje for any closing remarks.

[Daniel Servitje Montull, executive]

Well, thank you very much for, I would say, a very lively and rather a long session. I hope that you found it interesting as we did it. And as always, we're happy to entertain any comments or questions you might have with our Investor Relations team. Thanks. I hope to see you soon. Thank you very much.

[Operator]

Thank you. This does concludes today's presentation. You may disconnect your line at this time, and have a nice day.