May 2, 2014
Mexico''s Bachoco sees profits rise despite sales fall
Poultry giant Industrias Bachoco saw sales fall in the first quarter of the year by 3.5% to US$9.64 billion compared to the same quarter of 2013, Wall Street Journal reports.In the first quarter sales of the company''s US operations accounted for 19.7% of total sales, while in the first quarter of 2013 they accounted for 22.7%.
The decrease in sales was primarily attributed to lower prices on chicken products and feed, partially offset by increased sales volume.
During the quarter the cost of sales was US$7,854.1 million, US$655.7 million or 7.7% less than the cost of sales in the same quarter of 2013. The fall in the cost of sales has been put down to a downward trend in the price of key raw materials.
As a result, the company achieved a gross profit of US$1789.3 million, a gross margin of 18.6% in the first quarter of 2014, 21% higher than the gross profit in the first quarter of 2013 when the margin was 14.8%.
Total expenditure in the 2014 quarter was US$871.4 million, representing an increase of US$76.4 million.
Bachocosaid that the increase is primarily due to increased volume and higher selling expenses aimed at strengthening operational structure of the company.
In the first quarter of 2014 and 2013, total expenses as a percentage of net sales accounted for 9.0% and 8.0% respectively.
Operating income in the quarter was US$882.9 million, representing an operating margin of 9.2%, a positive result when compared to an operating profit in 2013 of US$761.1 million and an operating margin of 7.6%, the company said.
Rodolfo Ramos Arvizu, director general of Bachoco, said, "In the first quarter of 2014 the Mexican poultry industry observed a good balance between supply and demand. In our US market, after a weak start of the year, conditions improved through the quarter.
Even when our total volumes improved when compared to first quarter 2013, the lower cost in our main raw materials, drove our main product prices down so that net sales posted a decrease of 3.5%. On the other hand, lower raw material prices more than compensated the price reduction; as a result, our operating performance improved with respect to the same quarter of previous year.
In accordance with the new tax regime in Mexico, as of January 1, 2014, our Mexican operation is subject to a higher tax rate, which negatively impacted our net income in the first quarter. However, despite these conditions, we achieved higher earnings per share.
Furthermore, Bachoco maintains a very solid financial position with a negative net debt of $5,665 million."