October 29, 2008—Industrias Bachoco, Mexico’s leading producer and processor of poultry products, reported an operating loss of Ps. 243.6 million, compared to an operating profit of Ps. 500.5 million reached in the same quarter of 2007.
CEO Cristobal Mondragon said demand for chicken was particularly weak during the third quarter, which combined with the increased production by the industry, resulted in oversupply in the company’s markets. He also pointed to ongoing increases in raw materials costs which hurt margins.
The company’s EBITDA was also negative in the quarter and amounted to Ps. 92.7 million, compared with a positive EBITDA of Ps. 645.2 million reached in the same period of 2007.
The comprehensive financial cost was negatively impacted by a Ps. 235.5 million charge in the quarter mainly due to the effect of financial instruments related to the exchange rate and raw materials.
Net income per share for third quarter was a negative result of Ps. 0.17 per share (US$0.18 per ADS), compared to net income per share of Ps. 0.62 (US$0.67 per ADS) reported in the same 2007 period.
Chicken sales decreased 3.8% during the third quarter as a result of an 8.6% decrease in chicken prices, while volume sold increased 5.2% from the previous year.
Sales of table eggs were strong, increasing by 25.1% during the quarter. As a result of improvements in product mix, the company's egg prices climbed 28.3%, and partially offset the 2.6% decrease in volume sold.
Bachoco recently disclosed the effects of the financial volatility on its financial position, stating that the mark-to-market of the financial derivative instruments owned by the company had an impact of approximately US$50 million as of October 13, 2008.
