Price increases boost Gruma Corp.'s sales

by Jeff Gelski
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MONTERREY, MEXICO — Gruma Corp. reported net sales grew 12% to NP4,214 million ($395.6 million) in the first quarter ended March 31. The growth was connected to price increases in both its tortilla and corn flour businesses implemented late in 2006 to offset higher raw material costs, according to the company. A 2% rise in first-quarter sales volume padded sales growth to a lesser extent. Operating income increased 38% to NP205 million ($18.8 million).

Gruma may implement more U.S. price increases in the tortilla division this year, but the increases may not come until the second half of the year, said Rogelio Sanchez of Gruma/GIMSA in an April 26 earnings conference call.

Lilia Gomez of Gruma/GIMSA said any price increases would be selective in that, "We’re looking at that very closely to see what kind of product and what kind of region, depending on the trade competition product pricing."

Gruma Corp., a subsidiary of Gruma, S.A.B. de C.V. that operates in the United States, manufactures and distributes corn flour, corn tortillas, wheat tortillas and related products.

Companywide, net sales for the Monterrey-based Gruma S.A.B. de C.V. increased 12% to NP8,050 million in the first quarter. Net income was NP260 million, 1% lower than the net income of the previous year’s first quarter.

First-quarter sales at GIMSA increased 14% to NP2,019 million in connection with price increases implemented in September and December. GIMSA, another subsidiary, engages principally in the production, distribution and sale of corn flour in Mexico.

A tortilla pact in Mexico currently keeps GIMSA from raising prices again, but the pact will mature Aug. 15, said Raul Pelaez, chief financial officer for Gruma/GIMSA.

Mr. Sanchez said, "What we will try to do is try to increase prices in order to offset the prices of corn. And at that time (in August), we will have to see at what level prices of corn will be."

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