Industrias Bachoco recently announced its unaudited results for the third quarter of 2020 and the nine-month period of 2020, which ended September 30, 2020.
Highlights of Bachoco's performance include that net sales increased by 19.5% in the third quarter of this year and by 8.5% in the nine-month period.
On the other hand, operating expenses were 8.8% of the sales percentage in this third quarter and 9.4% in the nine months to date of the year. EBITDA margin was 10.0% in the quarter and 6.4% in the year’s aggregate.
Bachoco reported that earnings per share in the third quarter of 2020 were MXN1.38 (US$0.065) and MXN4.93 in these first nine months of the year.
Reactivation of the national economy
Rodolfo Ramos, CEO of Bachoco, said that as economic activities have reactivated in the country, there is “an improvement in demand that resulted in a better balance between supply and demand, mainly in Mexico.” This allowed the company good prices in the period,” which is unusual in a third quarter.”
According to Ramos, this balance between supply and demand, coupled with a strong and diversified share in the Mexican market, “enabled us to achieve an increase in total sales of 19.5% for the quarter compared with the same period of 2019.”
Regarding costs, the depreciation of the Mexican peso against the U. S. dollar had a negative impact during the quarter on the value of the raw materials. However, Ramos said that Bachoco is well positioned to benefit from local grain crops, a good strategy to reduce the cost of raw materials.
“As a result, our cost of sales increased 18.9% compared to the same quarter of 2019.” In addition, Bachoco managed to keep sales, general and administrative expenses under control of 8.8% of sales, compared to 9.8% in the same period of 2019.
Another important aspect of the quarter was the integration of Sonora Agropecuaria (SASA) into the financial results . Thus, “our operating profits for the quarter was MXN1.485 billion, which is 25.6% higher than the MXN1.182 billion reported earlier.
Financial information
Bachoco's net sales in the third quarter of 2020 were MXN18.292 billion, which is MXN2.98 billion or 19.5% higher than the reported sales in the same period of 2019.
In the same period, sales of operations in the United States accounted for 28.3% of total sales, the same level as in the third quarter of 2019. In this case, the effect of the price was greater than that of the volume.
On the other hand, gross profit was MXN3.185 billion in the third quarter, higher than MXN2.606 billion in the same quarter of 2019, and gross margin was 17.4% compared to 17.0%, respectively.
In addition, operating income was higher than in the third quarter of 2019, attributable to a higher price and volume sold, mainly because of the consolidation of Sonora Agropecuaria.
Next year
“It is very difficult to predict what will happen next year. It usually takes 4 to 6 months to pass the cost increase to the market, so it is difficult to forecast for now, particularly on the demand side. It's not going to be a 100% normal year," said the CEO of Bachoco. It will depend on the balance of supply and demand. “We know the supply trend, but we cannot predict demand.”
In terms of supply, Bachoco's competitors have their own strategies in terms of volume, but chicken meat is the best protein alternative, being the most affordable and of the best quality. The thing is that “the poultry protein share is increasing at the expense of other proteins on the market, in total as an industry. Per capita consumption is on the rise, even in economic crises, such as the current one.
Good times for the swine industry
The swine industry in Mexico is very active in exports to China. Prices “have been very good in the last month,” said Ramos. Although volatility in the live pork market is very high, prices are very good.
“We are in balance between live production and process and export prices. These are good times with exports to China, Japan, and even the U.S. These are good times for the swine industry.”
