Grupo Bimbo SAB de CV
BMV:BIMBOA
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 |
60.93
89.25
|
| 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.
Grupo Bimbo SAB de CV
You don't have any saved screeners yet
Good morning, everyone, and welcome to Grupo Bimbo's Fourth Quarter 2017 Results Conference Call. If you need a copy of the press release issued yesterday, it is available on the company's website at www.grupobimbo.com.
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.
Thank you very much, Chad. Good morning, and thank you for joining us. I am here with of our CFO, Diego Gaxiola; our BBU President, Fred Penny; and several members of our finance team.
I will start by saying that 2017 was a transition year in terms of reinvestment and positioning our company for long-term value creation. We captured strategic opportunities to enter 10 new countries through the acquisitions of Harvest Gold in India, a very attractive market for us over the long term; Adghal Group in Morocco; and most recently, East Balt Bakeries, now Bimbo QSR, which expanded our leadership in a high-growth channel.
In 2017, we also set a record for the number of clients served on a frequent and regular basis through our DSD system, with more than 3 million points of sale reached globally. Sales grew mainly on the back of continued organic growth in Mexico, combined with the contribution of these acquisitions. However, raw material costs were higher in Mexico, as were integration expenses, particularly related to the Donuts Iberia integration.
2017 was a year of a deep and meticulous industrial transformation, having successfully and orderly integrated 32 plants into our manufacturing footprint and closed 10, resulting in the creation of a lean and efficient foundation for a global business.
So from a short-term perspective, we can see the impact of these expenditures, but in the medium term, we expect to see the benefits to our margins as these investments yield positive results.
The year was also marked by several challenges -- challenging circumstances, including global political and economic uncertainty and natural disasters in many countries. Internally, we faced the restructuring of our frozen business, issues in our Rotherham plant in the U.K., and solving problems in our Chinese plant that disrupted our operations in the country for some weeks.
I will now provide some detail on regional performance during 2017 and our outlook for 2018. In Mexico, sales rose almost 11% over the last year, driven by volume growth, price increases slightly below inflation and a favorable price mix. The sweet baked goods, salty snacks, and bread and buns categories outperformed. We experienced growth across all our channels, most notably the convenience and the traditional channels. On the operating side, higher raw material costs arising from a stronger U.S. dollar and hedges in place put pressure on margins. And effect, we expect to gradually lessen over the course of 2018, as did a onetime income from a land disposal during 2016.
Moving on to North America. Sales grew almost 1% in dollar terms on a cumulative basis and almost 3% during the quarter, mainly driven by good performance in the snacks category and the strategic brands in the U.S. Continued pressure in the private label, premium and frozen categories continued to weight on overall sales. Our total branded business grew in the U.S. In particular, contributions came from our Sara Lee, Thomas and Ball Park bread brands. Our sweet baked goods category also did well, with notable strength in our Entenmann's snack portfolio as well as Bimbo and Marinela.
We are quite excited about our recent acquisition of a former Aryzta Bakery, located in Cicero, Illinois. The acquisition will support the continued growth of our sweet baked goods products. It also optimizes our distribution costs, increases our capacity in the country and enhances productivity, thereby increasing profitability.
In Canada, while the market remains highly competitive, our snack, cakes and bread categories posted positive results. We are also pleased to note the conclusion of the integration of the business that has been underway since we did the acquisition.
Key restructuring activities during this time, such as bakery closures and system conversions, have made the business stronger. On the operating side in North America, we benefited from commodity deflation over the full year. But keep in mind that this will not be the case in 2018, and we already started to see this shift in the fourth quarter.
In this context, we are looking for opportunities to address our higher input cost. With pricing, we're focused on growing our strategic brands. We continue to invest in innovation, and we will leverage Bimbo QSR and Bimbo Frozen, to profitably expand our client reach and drive efficiency across the supply chain.
In Latin America, sales declined 1.7% in peso terms, which reflects our decision to change the accounting method in Venezuela. Excluding this effect, sales and volume increased in the region, with good performance in most of the countries where we operate. This was notable in Argentina, where we are pleased to report a positive EBITDA in the second half of the year, thanks to investments in manufacturing and stronger go-to-market execution.
For the region, EBITDA margin remained flat, as results were also affected by Venezuela, a market which had previously contributed positively. For the whole region, we continue to feel optimistic for this coming year, as we focus our efforts on product portfolio optimization and increasing the distribution reach within the traditional channel.
And last, but not least, Europe, Asia and Africa delivered 48% sales growth, mainly on the back of the acquisitions of Bimbo QSR, Ready Roti, Adghal and Donuts Iberia. Organic sales were affected by the operational challenge I mentioned earlier in China and the U.K. In Iberia, we achieved record market share in Portugal and gained market share as well in Spain, but sales were somewhat slower due to integration-related process. For this region, we spent almost MXN 1.3 billion on the integration, most of it for Donuts Iberia. The integration has been complex due to the characteristics of the region. And although we are still some months away from completing it, we are already starting to see good results in all areas.
Furthermore, as you saw on our press release, the incorporation of Bimbo QSR results in a different business mix, due to the nature of the business, which has a higher cost of goods sold, but it generates a positive contribution to our EBITDA.
As you know, last week, we signed an agreement to acquire Mankattan Group in China. Mankattan is a key player in the baking industry with 4 plants and presence in 4 large urban markets in the country. It represents a highly complementary acquisition, and we expect that when it closes, it will strengthen our position to become a leading player in the second largest economy in the world and unlock important synergies with our existing businesses as we continue to grow within this market.
I will now ask Diego, our CFO, to provide some additional details on our financials.
Thank you, Daniel, and good morning, everyone. 2017 was an important year for our transformation path, continuous innovation initiatives, and our pursuit for the groundwork to boost our profitability going forward. An important part of these investments are recognized as an expense, which negatively affected our operating profit, and together with the exchange rate pressure, created a decline of 60 basis points in our operating margin as compared to 2016.
As for our financing costs, we saw an increase of 25%, mainly due to the effect of having recognized MXN 650 million of profit related to the monetary asset position in Venezuela in the previous year, and to a lower extent, higher interest expenses, due to the increased debt level that totaled MXN 94.3 billion.
Furthermore, we had a higher effective tax rate of 52.6%, which is 22.6 points higher than the compare -- as compared with the Mexican statutory tax rate of 30%. So I would like to walk you through the main reasons.
First, in the fourth quarter, we recognized a onetime noncash impact of MXN 706 million, arising from the recent implementation of the tax reform in the U.S. It is important to note that going forward, this tax reform will generate a positive effect in cash flow for the company.
Second, operating losses in some subsidiaries continued to put some pressure, as we are not recognizing a deferred tax in all of the subsidiaries. So as they start to generate earnings, our tax rate will improve substantially. We were also affected by higher inflationary effects on the monetary position in Mexico, and lastly, higher tax rates in some countries, particularly by earnings growth in the U.S., which still had a tax rate of around 35%. Important to mention that due to the U.S. fiscal reform, this tax rate difference will have a positive effect on our consolidated tax rate going forward. As a result, net majority income for the full year declined by 21.5% with a margin contraction of 60 basis points.
Moving on to our balance sheet. Our debt position was higher, mainly because of the acquisitions completed during the year. Our total debt to adjusted EBITDA ratio closed at 3.5x, while the pro forma ratio, including Bimbo QSR, was 3.3x. We remained committed to deleveraging our balance sheet as we go forward.
As you know, in mid-November, we successfully issued a 30-year USD 650 million bond at a 4.7% fixed rate. This transaction further supports our strategy to drive the expansion of Grupo Bimbo's industry leadership, while enhancing our financial profile by increasing the average tenor of our debt to 11.4 years and maintaining health and flexibility in our balance sheet.
And lastly, our free cash flow in the period, considering EBITDA less debt service, taxes, working capital and CapEx, and excluding acquisitions, totaled a positive free cash flow generation of USD 290 million. CapEx during the year was approximately USD 607 million, of which 70% was allocated to our manufacturing footprint, mainly focused on increasing our production efficiency.
For 2018, we expect CapEx to be in the range of $800 million to $850 million, as we continue to invest in increasing and modernizing our production capabilities, enhancing our distribution network, and rolling out digital transformation projects.
Now at this point, we are ready to open it to any questions you may have.
[Operator Instructions] The first question comes from Luca Cipiccia with Goldman Sachs.
I wanted to ask 2, in particular. First on the discussion around the tax rate. I appreciate that's maybe the pretty dry question. But I was hoping you could help us anchor some expectation within realistic ranges of what we should project for 2018, considering both the benefit of the U.S. new tax regime as well as if not return to profitability of LATAM and Europe, but actually it seems a reduction of the losses? I appreciate that's difficult, but also hope you appreciate from your side in the last couple of years, 3 years has been really hard starting from a level of 50%, 52%, which I think was in the fourth quarter. It would really be helpful if you could give us some -- what are you're budgeting for, what are you seeing, what type of level seem to be realistic? That's my first question. Then I would have a follow-up.
Yes, Lucas. Well, let me just try to explain the parting from the 53% effective tax rate that we have for 2017. If we take out the onetime negative effect that we had from the deferred tax, that was approximately 6 percentage points, as I mentioned, MXN 703 million, we will come to 47% effective tax rate. Now we will start to see, as I also mentioned, a positive effect that the U.S. instead of being higher than the 30%, it's going to be now lower tax rate than the average. And of course, also because of the growth that we have seen and that we continue to take from the U.S. operation, this will have another positive effect on the expected effective tax rate. The last positive effect that we think will be less negative for 2018 is the expectation that we have on inflation for Mexico. So considering -- basically considering these 3 effects and every -- leaving everything else at the same level, we will arrive to a low-40s effective tax rate for 2018. Now going forward, with a positive brand that we're seeing in operations, some subsidiaries that still have losses, the -- that pressure will also be lower, and so we expect to see the rate more in the mid- to high-30s, probably more in 2019 going forward.
So the low 40s includes the improvements or the reduced losses that you're projecting for LATAM and Europe?
Yes, to a slight extent.
Okay. Understood. And then the second question is actually more on the North American margins. I guess this is a point we always go back to. And if you could give us some indications on both restructuring investments for 2018, what type of progresses and profitability you are seeing? How much of -- some of initiatives that seems to have been very successful in Mexico can be translated or accelerated in North America. Also in the light of the fact that you mentioned out 2017 was a transitional year and you were setting the stage for possibly better results in 2018. This being said, we've been hearing more recently from a lot of U.S. food companies about incremental challenges in 2018 from higher wages, cost pressures of different kinds, some of their investment of the tax benefit. So how do you reconcile maybe some of the momentum that you may have in premier business in the U.S. with top line that we continue to see to be fairly low with some of this sort of broader cost challenges that seem to be consistent across a lot of the food companies, at least from what we've been hearing so far this year?
Fred, can you help us with it?
Yes, sure. I'll be happy to take that. Luca, just first the comment on North American EBITDA margin, before I address the main parts of your question. From an operating standpoint, the North American EBITDA margin -- margins on the year and on the quarter were positive, and there were nonrecurring charges that explain, I would say, the bulk of the decline. So put that on a side. The market overall, I would say, remains challenging. But there are opportunities in certain categories for growth. One, I would say specifically would be the sweet baked goods category, which is as a total category, is putting up good numbers up. And we're very pleased with our performance inside of that category. Inflation is a -- will be a challenge in 2018, as we go forward, both in ingredients and in a more general sense to your point on wages, as an example. We're taking pricing in the quarter in Q1 to address the inflation challenges. And then, I guess, lastly, I would say the other thing we continue to be very focused on, as we've been over the last several years, is driving productivity and cost reductions across our entire business. And we continue to look aggressively for opportunities to take more cost out and make the overall operation more efficient. And so I think those are the key factors that would lead us to feel optimistic that we can continue to improve the results of our business.
And meaning that on that basis, you think 2018 can be an year of margin improvement in North America, again?
Well, I would certainly hope that, that's what we can do. It's going to be a more challenging year, but we're -- I guess, I would say we're certainly working very hard to do that.
The next question will be from Lauren Torres with UBS.
I guess one of the follow-up to Lucas question. And again, I understand and appreciate the comment on last year being a transitional year, but we've seen many years of pretty big M&A activity from Bimbo, and I think you've made comments before that this should settle a bit, meaning we'll focus on organic growth, and looking at category trends in your respective markets. So I guess more of a general and strategic question on, how you see, I don't know if you could address this across the markets, organic growth is trending? There's been a lot of noise on the numbers, but maybe on a like-for-like basis, we could talk a little bit about something a bit more consistent here. Like I said, a very general question, but as some of the M&A activity quiets a bit, just curious to get your perspective. But I don't know if you're prepared to want to give margin targets by regions, but just trying to get a feel for how you're thinking about that going into this year.
Yes, Lauren. We certainly haven't taken our eye at the organic growth that we require in each market, and that's basically the focus of all our businesses. And I will say that, just as the -- my opening comments on the number of stores that we're serving on a DSD basis, it's a testament of how focused we are on not taking our eye on the ball on execution and on pursuing all the opportunities that we can take in growing our business in each and every of the -- of all the markets. So we have different teams focused on integration and most of the effort is on the day-to-day business where the opportunities that the local teams pursue. So organic growth is in -- clearly, it's the #1 priority in our minds. And we will have a less interest in integrations and in acquisitions as well. So you will see more, I would say, comments on what's happening on the day-to-day business and the plans for the year. This year, we're starting to see a rebound in some of markets -- in some of the markets in LATAM as we mentioned. Mexico still up till now, and this might change obviously as the results of the elections happen, but as of now, we're seeing a strong consumer demand, and we have a good business in our plate. And we also hope finally that in the countries that have finished or finishing their integrations, most notably, Canada and Iberia, we're -- we can start seeing the benefits of the new entities. That I would say would be my take on your comment.
Great. And maybe if I could just ask a quick follow-up. I know you specified on the U.S. But with respect to your cost environment in Mexico this year, how are you thinking about it? And I think you did mention your release talking about some of the pressure on the cost side abating a bit this year. How do you see that playing out?
Yes, we -- I mean, all in all, is -- as of this time of the year, it's stable. And although there is a little bit of more inflation than there was 2 years ago, we're pricing a little, very little. And we're also taking some cost out of the different businesses as productivity projects unfold. So I would say that's the summary of the business in these coming months and what has happened so far in the year.
The next question comes from Luis Miranda with Santander.
A couple of questions. The first one, Daniel, you already talked about the consumer environment in Mexico and pricing initiatives. But just wanted to -- if you just could elaborate a little bit more for -- in the short term, I understand we would be expecting top line to be more driven by volume rather than pricing, if I understand correctly. And are you expecting that to have additional technical price increases throughout the year, if possible? And if you could elaborate a little bit of the performance of Brazil either in top line or profitability in the fourth quarter.
Yes. The business as of now, it's doing very well, and we, obviously, would have to react with the circumstances if the economy, if the exchange rate abruptly change. But we are not foreseeing these at least in the coming months, but we don't know what's going to happen afterwards. Regarding Brazil, we had, I would say, a better year. We also are seeing some of the effects of the labor reform are changing the nature of the business. We saw an increasing in the number of labor lawsuits in the later part of the quarter. And now we are seeing a drop in the labor lawsuits as the new law came into effect. We also took the decision of moving away from the Panettiere business in the Brazil business, which impacted us -- our sales. But in the long run, we feel confident that we made the right decision. So all in all, that business is very much in transition, but it's heading in the right direction.
And if I may follow-up, just with regards to the integration in Europe, then the total number of the integration cost of the EUR 70 million hasn't changed. And if just -- if we consider first and second half of the year, how should we expect those charges to be back to, I mean, most of them were accurate in 2017, but the remaining of 2018?
Yes. This integration has been probably one of the most complex ones that we have faced, given the nature of the countries, specifically, Spain. But it has been done very, very, very well. And we're, maybe a few months later than we had expected, in terms of where we could start seeing the benefits of the synergies going through. We're expecting around EUR 10 million for this quarter in terms of integration costs, and a delay of the synergies as I mentioned. But for the long run, we have done the right things, and we have reached good agreements with the unions. So that I believe is putting us in a good place in that market for the long haul. So that's basically our outlook for the Iberia business, which by the way, is the most relevant part of the EAA business.
The next question will be from Alex Robarts with Citi.
I wanted to perhaps start on this CapEx guidance that you're laying out for us. And it's interesting to see, and we appreciate the range of $800 million to $850 million. I just looked back at some of the early notes and it seemed to me that you had been previously guiding for this year, around $650 million. I just wondered, it sounds like this is an important increase, not only in absolute terms, but if I see it from last year, your CapEx would go up to kind of around 5.5% of sales this year from under 5% last year. And I'm wondering if you could help us just -- give just understand the allocation here. How much is maintenance, how much is the optimization element that you talk about? And perhaps maybe, there's an additional amount around East Balt and what the requirements there may need? I mean, I have the impression that the last time you really upped up the CapEx initiatives was 3, 4 years ago, and there was an idea of modernizing plants. I mean, is this a new cycle that you're entering in of modernizing your production footprint? And so that's the first question.
Yes, Alex. As I mentioned in the press -- in the conference talk a few minutes ago, I don't know how many food companies you know that have basically embarked on a year of shutting down 10 plants and also integrating 32. At least for us, it's quite significant. And the businesses that we acquired with the standards of Grupo Bimbo in terms of efficiency, safety, product safety, it requires us to really take a long view on these investments because we're basically caretakers of the business for the long run, and to make the decisions that are good for our customers and consumers. So all in all, I would say that we're very happy, not only with the restructuring that we're doing, but also the way we're enhancing the capabilities of each and all of our manufacturing plants that we want to keep for the long haul. And as a percentage of the number of depreciation, we have been more or less stable in the last years. But we're seeing also opportunities to drive productivity that we didn't find a few years ago, as technology changes, and we discover new opportunities that we didn't have before. So I would say that we're very confident about what we are doing there. And the other part is that the business that we are bringing now together as Bimbo QSR has already some commitments of new lines and new plants in different markets and countries that also required us to invest in additional capacity as well as other places where we're also building up plants for either new high-speed lines or new plants as well. And we will comment on those as they basically unfold. So all in all, this range depends also on how these projects get to be materialized as well as how we handle our -- or the year progresses in terms of our goals and budget objectives in terms of EBITDA. So that at the end of the day what we definitely want is also to have a lower debt to EBITDA ratio. And I don't know if, Diego, you want to add to this.
Yes, probably being a little bit more specifically, typical expectation of the previous guidance was to be more in the range of $650 million to $700 million. The increase, as Daniel mentioned, it's coming mainly from the increased CapEx for the expansion of the QSR business. Second, I would say, we are finding more productivity projects that have a very good payback, and this will help to continuously increase the margins and the profitability of the company. And finally, I would say that we're putting a little bit more CapEx than typically into some IT projects. In particular, we're going faster with the migration to the cloud. So this is also going to demand a little bit more in the year.
That's super helpful, guys. I just wanted to understand then, I mean, would it be fair to say that you are going to -- the absolute amount kind of peaks in this range? And then kind of in 2019 and 2020, maybe it comes down? Or it's too early to really kind of start talking about the medium term?
Basically, I mean, the message is that the demand of CapEx in sales is not the reason for going up. What we have for this year is the good news of finding additional productivity projects and what we mentioned regarding the QSR.
Got it. Okay. The second and last question really is just a follow-up to something that we've discussed on this call with you before. And it's the update on the Zero Based Budgeting initiatives. We've talked about, I guess, you first kind of launched them and talk -- and spoke about them 2 years ago at Bimbo Day. And I know that you've got the ball rolling toward -- in the second half of last year. And I'm just wondering if you could give us an update of where you are in that multi-year program? And maybe an idea of how much has been captured and how much can be captured?
Alex, regarding that, I would say that, for the end of 2018, according to the plan that we have, we're probably going to be like 2/3 in advance to the total amount that we were expecting from the Zero Based Budget initiatives.
The next question will come from Botir Sharipov with HSBC.
One question more on health and wellness space in the U.S. and what you guys are seeing there? And what have you learned from your organic Eureka! brand rollout that you've done over the past couple of years in the U.S.? And how will that forms your future rollouts? And I guess, in terms of health and wellness trends as well, both in retail and food service channels?
Daniel, I can take that. Botir, I'll take a shot at it. We're participating in the U.S. in the organic segment, which I'm sure you're aware has shown pretty strong growth, and we're putting more effort into our organic business, including converting some of our core premium bread brands to organic offerings. And so it's a clear focus of ours. And we're also putting some effort into, I guess, the terminology in the industry would be clean label or in the food industry in general, which is a big consumer demand. And so we're working in both of those spaces, and particularly in our -- in more of our premium products.
The next question will come from Julie Chariell with Bloomberg.
I wanted to come back to the issue of integration costs. Because it does seem as though the burden there is lifting for the most part in 2018. So I am wondering if you could help us with some numbers with the integration costs in North America and Europe last year. Can you give us the total number in 2017 and then the total expected number in 2018?
This is Tania. Yes, definitely for 27 -- for 2018 expectation, you should definitely be expecting for the whole group a decline in restructuring expenses. You know we don't give specific guidance, but for 20 -- for region-by-region, North America should definitely remain the same amount, as we continue to work on our manufacturing footprint and the system integration process. So the decline in restructuring expenses will be coming more from the -- from Iberia, so the EAA region and also from Canada.
Okay. Great. And any further commentary on M&A? It was obviously quite active in 2017. And I'm wondering if there are further plans in any particular regions or product categories, including QSR, for 2018?
Yes. Well, we just announced the one in China, which is quite relevant for our strategy in that key country. And the rest I would say would be probably not as significant. We are not basically putting a much emphasis in these. As always we will always review whatever opportunities arise, but our most important objective is now start seeing a deleverage in our numbers.
[Operator Instructions] The next question will come from [ Miguel ] [indiscernible].
Maybe I would like to ask you, if you can give us some color regarding the net leverage for this year? As you mentioned, it is now close to 3.3x or 3.2x. But if you can give us some color, it will be helpful.
The -- it has been already mentioned. We are fully committed to start to see a deleverage for 2018. We ended the year at 3.5x on a pro forma basis. Considering the EBITDA missing from the QSR part, we are at 3.2x. And we're targeting to be at or slightly below 3x by the end of the year.
Our next question is from Rafael Shin with Morgan Stanley.
I have a very good quick question on the gross margin in the U.S., if you kind of allow me to have a better understanding. It seems that the margin reconstruction is coming mainly from the incorporation of Bimbo QSR. I think can you give us an idea of how the gross margin looks without them? And whether -- because it seems that you are growing in a lot of categories that have higher margin, but you still keep showing some margin contraction. So I just wanted to have a better idea of what's happening with the gross margin, excluding Bimbo QSR.
Sorry, Rafael. Let me probably start with the second question. In terms of the margin contraction that we saw on -- the gross margin contraction that we saw for the year, mainly it has to do, first, with the exchange rate pressure that we have because of the hedges. So we still haven't seen the benefit of a stronger peso. And that will start to happen in the coming quarters. Also important to mention and to understand that in the fourth quarter and in the next 3 quarters, we will start to see kind of a shift in the composition of the P&L because of the acquisition of Bimbo QSR. It's a business that has substantially higher cost of sales, and of course, substantially lower expenses. At the end, it's accretive for the margin. But it will start to put some pressure to the cost of sales and relief to the AGMA.
Yes. Sorry, just to clarify, I was talking about what's happening in the gross margin in the U.S. specifically or North America.
Fred.
Excluding the amounts of -- did you guys say it's coming from your promotional activity, maybe some channels, you're being a little bit more aggressive and maybe some categories. So just trying to understand where is this pressure coming from?
Sure. Rafael, so in the quarter, the margin rate is slightly down. And you're going to see -- it's partly the answer that Diego had given relative to QSR, that is also part of the North America number. So -- then you also have some mix effect that you're going to see -- that's driving the rate. But you should see the trend forward would be consistent with past trends.
Okay. No. The thing is like, excluding Bimbo QSR, it seems that you are growing in sweet baked goods and other categories that, in theory, I guess, have higher gross margin. Again, with Bimbo QSR, it seems that there's still seeing some pressure. Is that coming because of promotions, discounts? Are you being a little bit more aggressive on the pricing? Is there any other specific reason?
Yes, I -- Rafael, I'm sorry. I'm not sure I'm following your question. I can tell you that for Bimbo -- for BBU, for the U.S. business, for the year, our gross margin was slightly up. And what's been -- what's driving that is there's some mix in that. We've talked in past calls about our strategic brand focus, and those are margin-positive. And we've talked in past calls also about our efforts to improve the efficiency of our trade promotions.
And Rafael, this is Diego. Let me add, what you are seeing in the fourth quarter, as we already mentioned, we did have a decrease of 40 basis in the gross margin in the North American region, and the main explanation of this is a QSR affect that we are seeing in the quarter, which is material. And as I said, we can expect something similar going forward.
Ladies and gentlemen, this concludes our question-and-answer session. At this time, I would like to turn the floor back over to Mr. Daniel Servitje for any closing remarks.
Well, thank you all for your time today. And as always, please do not hesitate to contact us with any further comments or questions you may have. Thank you very much.
Thank you. This concludes today's presentation. You may disconnect your lines at this time, and have a nice day.