Industrias Bachoco Announces Third Quarter 2018 Results

CELAYA, Mexico, Oct. 24, 2018 /PRNewswire/ -- Industrias Bachoco, S.A.B. de C.V., "Bachoco" or "the Company", (NYSE: IBA; BMV: Bachoco) announced today its unaudited results for the third quarter ("3Q18") and accumulated ("9M18") 2018 results ending September 30, 2018. All figures have been prepared in accordance with International Financial Reporting Standard ("IFRS") ,and are presented in nominal million Mexican Pesos ("$").

HIGHLIGHTS- 2018 vs. 2017

• Net sales decreased 0.7% in 3Q18 compared to 3Q17.
• EBITDA margin was 0.5% for 3Q18 vs 10.2% in 3Q17.
• Earnings per basic and diluted share were negative by $0.32 for 3Q18, vs a positive result of $1.66 in 3Q17.

CEO COMMENTS
Mr. Rodolfo Ramos Arvizu, Chief Executive Officer of Bachoco, stated: "We faced a more than expected, challenging third quarter in our Mexico and U.S. operations.

"In Mexico, as it is typical for a 3^rd quarter, we observed a lower demand, and our prices were affected negatively, even more than we expected and on the other hand, we also saw higher cost of sales. The combination of those two conditions caused an important adjustment in our margins.

"In the U.S. industry we observed oversupply conditions for all main animal proteins which continued pushing poultry prices to low levels, impacting margins also in our U.S. operation.

"Our EBITDA margin for the quarter was 0.5%, which was lower than the EBITDA margin of the third quarter of 2017. As a result, our EBITDA for the nine months of the year was 9.1%, lower when compared to 12.2% EBITDA margin of the same period of 2017.

"Despite the challenging conditions of this quarter, our financial structure continues strong.  We ended the quarter with a net cash position of $12,382.6, and the fundamentals of our company remain in place.

"We are confident that our financial discipline, our focus on capturing efficiencies and being close to our customers, will allow us to improve our results as soon as industry conditions recover and we will be able to take advantage of the opportunities that may arise in the future."

EXECUTIVE SUMMARY
The following financial information is expressed in millions of nominal pesos, except for amounts per share or per ADR, with comparative figures for the same period in 2017.

The Company's 3Q18 net sales totaled $14,114.4 million, $101.8 million or 0.7% less than the $14,216.2 million reported in 3Q17.  The decrease is mainly a result of lower prices and less volume sold in our other business segment when compared to 3Q17.

In 3Q18, the sales of our U.S. operations represented 30.1% of our total sales; this compares with 30.2% it represented in 3Q17 of our total sales.

In 3Q18, the cost of sales totaled $12,955.6 million, $1,223.2 million or 10.4% higher than $11,732.3 million reported in 3Q17. This increase was mainly due to higher unit cost and higher volume sold in our poultry business.

The gross profit was $1,158.9 million with a gross margin of 8.2% in 3Q18.  This profit is lower than the gross profit of $2,483.9 million and gross margin of 17.5% reported in 3Q17.

Total SG&A expenses in 3Q18 were $1,499.1 million, $152.3 million or 11.3% more than the $1,346.7 million reported in 3Q17. Total SG&A expenses as a percentage of net sales represented 10.6% in 3Q18 compared to 9.5% in 3Q17.

This item mainly includes the sale of unused assets as well as hens and other by-products. We record such sales as expenses when the sale price is below the book value of those assets.

In 3Q18 we reported other income of $79.7 million, compared with other income of $23.7 million reported in 3Q17.

Operating income in 3Q18 was negative by $260.5 million with a negative operating margin of 1.8%, a decrease when compared to operating income of $1,160.9 million and a 8.2% operating margin reported in 3Q17.

The less operating income is mainly attributed to lower gross profit than in 3Q17.

In 3Q18, the Company reported a negative net financial income of $63.6 million, compared to income of $193.2 million reported in the same period of 2017; mainly due to higher financial expense and FX valuation.

Total taxes for the 3Q18 were negative by $136.6 million, compared with total taxes of $356.2 million in the same period of 2017.  The decrease in taxes was due to lower operating result.

¹ In pesos
² in pesos, an ADR equal to twelve shares
³ In thousands of shares

The net income for 3Q18 was negative by $187.5 million, representing a basic and diluted income loss of $0.32 pesos per share, compared with a net income of $997.9 million, which represented $1.66 pesos of basic and diluted income per share in 3Q17. This income represents a negative net margin of 1.3% and 7.0% for 3Q18 and 3Q17, respectively.

EBITDA in 3Q18 reached $76.2 million, representing an EBITDA margin of 0.5%, compared to an EBITDA of $1,449.6 million in 3Q17, with an EBITDA margin of 10.2%.

During the first 9M18, net sales totaled $45,631.1 million, $2,613.7 million or 6.1% more than the $43,017.4 million reported in the same period of 2017. The sales increase is mainly attributed to higher volume sold and higher prices, mainly in poultry.

In 9M18, sales of our U.S. operations represented 29% of our total sales, compared with 27.3% in 9M17.

In 9M18 the cost of sales totaled $38,149.7 million, $3,421.9 million or 9.9% higher than the $34,727.8 million reported in 9M17.

As a result, we reached a gross profit of $7,481.4 million and a gross margin of 16.4% in 9M18, which was lower than the $8,289.6 million of gross profit and margin of 19.3% reached in the same period of 2017.

Total SG&A expenses in 9M18 were $4,373.7 million, $468.1 million or 12.0% more than the $3,905.6 million reported 9M17. Total SG&A expenses as a percentage of sales represented 9.6% in 9M18 compared to 9.1% in 9M17.  

In 9M18 we had other income of $110.7 million, compared with other income of $36.6 million reported in 9M17.

The operating income in 9M18 was $3,218.4 million, which represents an operating margin of 7.1%, which is lower than the operating income of $4,420.7 million and an operating margin of 10.3% in 9M17.

The net financial income in 9M18 was $404.8 million, this was higher when compared to net financial income of $220.3 million in 9M17.

Total taxes were $973.0 million as of September 30, 2018.  These taxes include $670.7 million of income tax and $302.3 million of deferred income taxes. This figure compares to total taxes of $1,267.4 million, which includes income taxes of $1,192.4 and $74.9 million of deferred income taxes in 9M17.

All the above resulted in a net income of $2,650.1 million or 5.8% of net margin for the 9M18, which represents $4.40 pesos of earnings per share; while in the 9M17, the net income totaled $3,373.6 million, or 7.8% of the net margin and $5.62 pesos of net income per share.

EBITDA in 9M18 reached $ 4,155.7 million, representing an EBITDA margin of 9.1%, compared to an EBITDA of $5,244.7 million in 9M17, with an EBITDA margin of 12.2%.

Cash and equivalents as of September 30, 2018 totaled $17,186.4; $53.7 million less than the level we had on December 31, 2017.

Total debt as of September 30, 2018 was $4,803.8 million, which is lower when compared to $5,249.0 million reported as of December 31, 2017.

Net cash as of September 30, 2017 was $12,382.6 million, which is higher when compared to the net cash of $11,991.1 million as of December 31, 2017.

Total CAPEX for the 9M18 was $1,329.0 million and $2,937.6 million in 9M17. This was primarily allocated towards organic growth and productivity projects across all of our facilities.

APPENDICES
For reference, some figures have been translated into millions of U.S. dollars ("USD") using an exchange rate of $18.72 per USD $1.00, which corresponds to the rate at the close of September 30^th, 2018, according to Mexico's National Bank.

• Consolidated Statement of Financial Position
• Consolidated Statement of Income
• Consolidated Statement of Cash Flows
• Derivatives Position Report

CONFERENCE CALL INFORMATION

The Company will host its third quarter 2017 earnings call, on Thursday, October 25^th, 2018. The earnings call will take place at 9:00 am Central Time (10:00 am ET). 

To participate in the earnings call, please dial:

Toll free in the U.S.: 1 (888) 771-4371
Toll free in Mexico: 001 866 779 0965
Toll Local Mexico: 52 55 6722 5257
Toll in the Brazil: 0800 761 0710

A current list of available local and international free phone telephone numbers: http://web.meetme.net/r.aspx?p=12&a=UtyckerBybFIgy

Confirmation Number:47683709

COMPANY DESCRIPTION

Industrias Bachoco is the leader in the Mexican poultry industry, and one of the largest poultry producers globally. The Company was founded in 1952, and became a public company in 1997, via a public offering of shares on the Mexican and The New York Stock Exchange. Bachoco is a vertically integrated company headquartered in Celaya, Guanajuato located in Central Mexico. Its main business lines are: chicken, eggs, balanced feed, swine, and turkey and beef value-added products. Bachoco owns and manages more than a thousand facilities, organized in nine production complexes and 64 distribution centers in Mexico, and a production complex in the United States. Currently the Company employs more than 27,000 people.

The Company is rated AAA (MEX), the highest rating awarded by Fitch Mexico, S.A. de C.V., and HR AAA which signals that the Company and the offering both have the highest credit quality by HR Ratings de Mexico S.A. de C.V.

DISCLAIMER

The document contains certain information that could be considered forward looking statements concerning anticipated future events and performance of the Company. The statements reflect management's current beliefs based on information currently available and are not guarantees of future performance and are based on our estimates and assumptions that are subject to risks and uncertainties, including those described in our Annual Information Form, which could cause our actual results to differ materially from the forward-looking statements contained in this document. Those risks and uncertainties include risks associated with ownership in the poultry industry, competition for investments within the poultry industry, shareholder liability, governmental regulation, and environmental matters. As a result, there can be no assurance that actual results will be consistent with these forward-looking statements. Except as required by applicable law, Industrias Bachoco, S.A.B. de C.V., undertakes no obligation to publicly update or revise any forward-looking statement.

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SOURCE Industrias Bachoco, S.A.B. de C.V.