Grupo Bimbo S.A.B. de C.V - 2010
October 1, 2010
For Mexico City-based Grupo Bimbo S.A.B. de D.V. operations in the United States, 2010 has been a year for consolidating gains from recent acquisitions, most notably the January 2009 acquisition of the U.S. baking business of George Weston Ltd., and strengthening its financial position and product reach.
Market analysts last year expressed concern over Grupo Bimbo’s debt load in the wake of its acquisition of Weston’s U.S. baking business. But in recent months, the company made great strides toward retiring that debt and has been recognized for doing so.
Grupo Bimbo in June was given a foreign currency issuer default rating of BBB by Fitch Ratings. Fitch also gave Bimbo a local currency issuer default rating of BBB. Fitch’s national scale long-term rating for Bimbo is AA+.
“The ratings are based on the company’s leadership position in the global bakery business, strong brand recognition and positioning in markets where it operates and its distribution network, which allows it to reach more than 1 million points of sale through more than 39,000 sales routes,” Fitch said. Bimbo performed well during the recession even though sales growth was modest, the analyst continued. “The integration process of the Weston Foods operations has been smooth and efficient, and expected savings from synergies are now higher than initially projected.”
Grupo Bimbo noted by July 2010 it had repaid $1 billion in debt, including $200 million due this year and the prepayment of another $800 million in debt maturing in 2012.
“By prepaying and refinancing the company’s obligations more than 18 months in advance, the average maturity of Grupo Bimbo’s debt increased from 3.1 years to more than five years,” the company said.
In the company’s most recent fiscal quarter, the second 2010 quarter ended June 30, Grupo Bimbo at the corporate level realized net majority income of NP1,254 million, down 12% from NP1,431 million in the same period a year earlier. Sales rose marginally to NP28,781 million from NP28,686.
Operating profit for Grupo Bimbo in the United States during the second quarter of fiscal 2010 was NP1,121, down 9% from NP1,233 million a year earlier. Sales fell 4% to NP12,202 million from NP12,694 million.
“Net sales declined 3.9% in peso terms over the year-ago period primarily due to the impact of currency translation,” Grupo Bimbo said. “In dollar terms, sales rose 2.1% from the second quarter of 2009. This reflected higher volumes that offset a decline in prices resulting from a tough competitive landscape and consumers’ search for value. The best-performing lines were Sandwich Thins, the breakfast category and premium breads, as well as the national launch of the Bimbo bread brand that helped to drive the volume performance.”
During a July 22 conference call, Daniel Servitje, Bimbo’s chief executive officer, said U.S. second-quarter results were in line with expectations.
“With consumer confidence down, unemployment still near record highs and average prices down on a comparative basis, we were still able to generate sales growth of about 2% in dollar terms,” he said.
Mr. Servitje pointed to Bimbo initiatives in the United States, including the construction of a new baking plant in Topeka, Kas., which he said would “enhance our capacity to service a new region,” and the national launch of the Bimbo brand, which he said was progressing as expected. CP