Industrias Bachoco announced its unaudited results for the first quarter of 2020 that ended on March 31st, 2020, comparing figures for the same period of 2019.
In the first quarter of 2020, net sales grew 9.9% compared to the same period in 2019. The EBITDA margin was 6.0%, with MXN$947.3 (US$39.7), compared to 4.6% in the first quarter of 2019 and earnings per share was MXN3.61 pesos in this period.
Rodolfo Ramos, Bachoco’s CEO, stated: "We ended the first quarter of the year with good results, growing in terms of volume in both Mexico and the United States. Even when we observed a weak demand at the beginning of the year, the industry was able to regain balance during the remaining period."
Sales in Mexico and the United States
Ramos added that Bachoco achieved a 6.3% increase in the volume sold and an increase in net sales of close to 10%, compared to the first quarter of 2019.
Total sales of were MXN15.7 billion, which represents a 9.9% improvement over the net sales recorded in the same period of 2019. In Mexico, this increase was of 7.3%, while in the United States it was 16.4%. This was the result of an increase in volume of the main product lines, as well as an increase in prices in the poultry sector.
In the first quarter, sales from the United States operation were MXN4.67 billion pesos, which represents a 29.7% of total sales, compared to 28% in the first quarter of 2019.
Raw materials and expenses
Regarding the price of the main raw materials, Ramos said, "they were stable in terms of dollars, however, the volatility at the end of the quarter in the exchange rate of the Mexican peso against the U.S. dollar did not allow us to capture the whole benefit."
"We managed to keep our selling, general and administrative (SG&A) expenses under control, as it represented 10% of total sales, a slightly lower rate compared to the same period in 2019," he added. For example, the company has reduced the mileage for product distribution, which, together with better fuel prices, has represented savings. Furthermore, approximately half of Bachoco's staff members are working from home, so they have lowered expenses, as well as travel expenses.
Bachoco is keeping a healthy financial condition, reaching a net cash level of MNX16.52 billion, "which will allow us to continue supporting our growth plans," said the CEO.
COVID-19 impact
At the end of the quarter, Mexico began to experience some of the impacts of the COVID-19 pandemic. There was even an increase in demand caused by panic purchases. Many people overstocked chicken and eggs.
At the beginning of the second quarter, Ramos said that they have already started to see changes in the dynamics of consumption. The foodservice sector is the most affected in this regard, although for Bachoco this market represents only 5% of the business, so the liquidity problems of some of its clients who have requested more credit from them, have not affected them much. "However, I believe that we have the capacity and flexibility of both, people and facilities, to adapt to changes and challenges," said Ramos.
The other sectors have worked well, but Bachoco expects demand to drop in this second quarter due to the difficult economic situation, loss of jobs and income, although they stressed that it is difficult to predict what will happen. However, people who used to eat away from home, now dine at home. Retail is still the most important channel.
"As a result, we will remain focused on efficiency in all of our processes, which will allow us to supply our markets and customers to the best of our ability," added the Bachoco CEO.
The Bachoco brand as an opportunity
When asked if this situation could represent an opportunity to grow in Mexico, Ramos said that all situations are opportunities to grow. However, he emphasized that the brand is what is valued most, since the consumer looks for safe products. The Bachoco brand becomes something important, especially if we consider that it is the leading poultry brand in Mexico.
On the other hand, within the food service sector, many restaurants are offering home delivery. This type of service becomes increasingly important and represents an opportunity. "The food service segment is in a better position, so we are trying to give them more ideas to increase sales."
Bachoco at 100%
Ramos emphasized that Bachoco’s personnel remains safe. Dedicated bus runs with personnel are going 50% of capacity, measuring the temperature of workers on boarding the bus, and distributing face masks and the necessary protective material.
Bachoco's CEO said that so far, "they work at 100% capacity" and have seen no impact in that regard. The same applies to their facilities in Alabama, Oklahoma and Georgia in the U.S.
United States chicken imports
Low prices for American chicken at the end of the last quarter and the beginning of this quarter have led to the export of leg quarters to Mexico. However, Ramos said that, according to their observations, this effect has only been seen in the border belt and that this chicken has not reached the country inland, further south. "We have not seen any major effect in this regard."
The devaluation of the peso was also said to have helped offset this impact.