Ingredient costs weigh on Gruma Corp. profits

by Josh Sosland
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MEXICO CITY — Operating income of Gruma Corp. in the second quarter ended June 30 was NP161 million ($13.8 million), down 51% from NP332 million in the second quarter of 2010. Net sales were NP5,544 million ($474.8 million), up 10%.

With volumes flat, Gruma attributed the sales gains to price increases implemented in February and March in the United States and Europe in reaction to higher raw material costs.

The price increases, though, were not sufficient to protect the company’s profit margins. Operating income as a percentage of sales tumbled to 2.9% from 6.6% in the second quarter last year.

Elaborating on sales volume trends, Gruma said U.S. tortilla shipments were down 2% from a year ago because of weakness in the food service segment. By contrast, the company saw a 3% gain in U.S. corn flour operations, reflecting good demand from snack manufacturers. Also strong in the quarter were shipments in Europe.

In the six months ended June 30, Gruma Corp. operating income was NP444 million ($38 million), down 33% from NP660 million. Sales were NP716 million ($61.3 million), up 4%.

Overall net income of Gruma S.A.B. de C.V. was NP106 million ($9.1 million), compared with a loss of NP172 million in the second quarter last year. Net sales were NP13,104 million ($1,122 million), up 13% from NP11,545 million in the same period a year earlier.

Gruma has made great progress in shoring up the company’s balance sheet. Stockholders’ equity at the end of June was NP15,207 million, up 45% from NP10,467 million at the end of June 2010. Long-term debt at the end of the quarter was NP8,736 million, down 52%.

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