Bimbo U.S. profits down in year

by Josh Sosland and Allison Gibeson
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MEXICO CITY — Operating profit in the United States for Grupo Bimbo S.A.B. de C.V. in 2010 was $3,739 million pesos ($308.4 million), down 12% from 4,261 million pesos during 2009. Sales were 47,875 million pesos (3,949.9 million), down 4% from 49,852 million pesos in 2009.

For the fourth quarter operating profit in the United States was 598 million pesos ($49.3 million), down 24% from 787 million pesos during the same quarter of the previous year. Sales for the quarter were 12,075 million pesos ($997 million), down 3% from 12,445 million pesos during the same quarter of the previous year.

In the fourth quarter, Bimbo bread, Marinela sweet baked foods and the Thomas’ lines generated volume growth in the United States. Overall U.S. volumes remained stable as the company implemented price increases in the fourth quarter to offset raw material costs.

In a Feb. 25 conference call with investment analysts, Daniel Servitje, Bimbo’s chief executive officer, said the U.S. results were “in line with the trends we had been seeing the whole year.”

“The economy is continuing to recover, albeit slowly, and consumer confidence seems to be moving up,” he said. “Prices this quarter were level with last year, although we did make adjustments in Q4 that are now fully filtering through.”

Highlights identified by Mr. Servitje for the fourth quarter were the results for the Thomas brand and Bimbo bread, which was launched nationwide earlier in the year.

“That line is now getting additional visibility with our major league sponsorship of the Philadelphia Union soccer team,” Mr. Servitje said. He attributed 80% of the decline in operating income in the fourth quarter to higher commodity costs and “peso conversion effects.”

Mr. Servitje described Bimbo’s acquisition of Sara Lee’s fresh baking business as “on track” with an anticipated closing before the end of June.

In questions and answers during the call, Guillermo Quiroz, Bimbo’s c.f.o., appeared to affirm earlier comments by company executives about capital investment plans.

“We will be expecting around $400 million in capex, and this is a significant hike from last year, which I believe was around $290 million,” he said. “Allocation will be mostly to manufacturing assets and those will happen mostly in Brazil, the U.S. and, well, all across the board at the end of the day, but those would be probably the two key countries where we will be investing.”

Overall net majority income for the year at Grupo Bimbo was 5,395 million pesos ($445.2 million), down 9% from 5,956 million pesos during 2009. Sales for the year were 117,163 million pesos ($9,669.1 million), up 1% from 116,353 million pesos in 2009. Majority income for the fourth quarter was 1,373 million pesos ($113.3 million), down 22% from 1,758 million pesos during the same quarter of the previous year. Sales for the fourth quarter were 30,431 million pesos ($2,512 million), up 2% from 29,959 million during the same quarter of the previous year.

“Although price increases were implemented in Mexico, the U.S. and in some countries in Latin America at the end of the fourth quarter, the full impact of these initiatives is expected to be seen in the first quarter of 2011,” Bimbo said.

Consolidated operating income for 2010 was 12,393 million pesos, down 5.5% from 11,393 million pesos in 2009.

“Operating income reflected the impact of higher sales and distribution expenses intended to support market penetration and volume performance,” Bimbo said. “Additionally, the company registered one-time expenses of 346 million pesos in Latin America and 222 million pesos in Mexico.”

In the Mexico division, operating profit for the year was 8,031 million pesos ($663.04 million), up 6% from 7,500 million pesos during the previous year. Sales for the division were 57,870 million pesos ($4,777.7 million), up 4% from 55,388 million pesos during 2009.

In Latin America, the company had a loss of 342 million pesos ($28.22 million), which compared with an operating income of 303 million pesos during the previous year. Sales for the year were 14,207 million pesos (1,172.9 million), up 4% from 13,606 million pesos during the previous year.

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