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INDUSTRIAIND BACH : Industrias Bachoco Announces Second Quarter 2011 Results

07/28/2011 | 05:35pm US/Eastern
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CELAYA, Mexico, July 28, 2011 /PRNewswire/ -- Industrias Bachoco S.A.B. de C.V. ("Bachoco" or "the Company") (NYSE: IBA; BMV: Bachoco), Mexico's leading producer and processor of poultry and food products, announced today its unaudited results for the second quarter ("2Q11") and first half periods ("1H11") ended June 30, 2011. All figures have been prepared in accordance with Mexico's Generally Accepted Accounting Principles ("GAAP"), and are presented in nominal Mexican pesos per Mexican GAAP.

Highlights (2Q11 vs. 2Q10):

    --  Net sales for 2Q11 rose 6.7% to Ps. 6,616.8 million
    --  Chicken sales rose 6.9% in 2Q11
    --  Table egg sales declined 4.9% in 2Q11
    --  EBITDA margin was 4.9% for 2Q11, compared to 15.4% reported for 2Q10
    --  Earnings per share in 2Q11 reached Ps. 0.23 (USD$ 0.24 per ADS),
        compared to Ps. 1.03 (USD$1.06 per ADS) in 2Q10

Comments from the Chief Executive Officer:

Rodolfo Ramos, Bachoco's CEO, stated: "Our second quarter results were characterized by the challenge facing the poultry industry worldwide, higher grain costs. Given this is the largest component of the Company's cost of sales, margins and profitability were affected despite efficiency improvements and hedging strategies.

"Even with the increase in our cost of sales, the operating results for our business during the second quarter were positive. We capitalized on the higher demand for chicken and balanced feed products in the Mexican market, thereby achieving greater sales volume and revenues from these business lines.

"The Company's egg business continued to be affected by a large oversupply in the Mexican market; therefore egg sales volume and prices declined in the second quarter.

"Bachoco is focused on factors that will enable the Company to maximize its results. Through strict cost and expense controls, productivity improvements and enhanced sales efforts, the Company continues to work towards maintaining a healthy financial position while remaining the leader in the Mexican poultry industry. Furthermore, we believe that our hedging policy has helped us mitigate the effects of grain price increases and we expect to continue with the same strategy for the rest of the year. "

SECOND QUARTER 2011 RESULTS

Net Sales

Net sales for 2Q11 reached Ps. 6,616.8 million, an increase of 6.7% when compared to Ps. 6,204.1 million reported in 2Q10. This was driven by the strong performance in the chicken and balanced feed businesses, partially offset by declines in sales of egg, swine and other business lines.

Operating Results

Gross profit totaled Ps. 865.1 million for 2Q11, 40.4% below the Ps. 1,453.2 million reported for 2Q10. Gross margin was 13.1% in 2Q11 compared to 23.4% in 2Q10, due to a 21.1% increase in cost of sales.

The Company's operating profit for 2Q11 totaled Ps. 149.5 million, which represented a sharp decrease from the Ps. 783.1 million reported for 2Q10. The operating margin for 2Q11 was 2.3%, compared to 12.6% in 2Q10, due to the aforementioned factors.

EBITDA reached Ps. 326.6 million for a margin of 4.9%, which reflects a decrease from the Ps. 953.7 million and 15.4% EBITDA margin reported in 2Q10.

Net Income

Net income for 2Q11 was Ps. 138.4 million, or Ps. 0.23 per share (US$0.24 per ADS), compared to Ps. 618.0 million, or Ps. 1.03 per share (US$1.06 per ADS) reported in 2Q10.

QUARTERLY RESULTS BY BUSINESS LINE

The following chart illustrates Bachoco's sales by business line as a percentage of Total Net Sales:



    SALES BREAKDOWN BY PRODUCT LINE


    Business Line                      2011
    -------------
    CHICKEN                              82%
    EGGS                                  7%
    BALANCED FEED                         7%
    SWINE                                 1%
    OTHER LINES                           3%
    TOTAL COMPANY                       100%
    -------------                       ---

Chicken

Chicken products sales for 2Q11 increased 6.9% compared to 2Q10 which resulted from a 6.5% increase in sales volume and 0.4% higher prices as demand for chicken products remained strong during the period.

Eggs

Sales of table eggs declined 4.9% during 2Q11 driven by a 3.1% drop in sales volume and 1.8% lower prices. This weaker performance reflects the oversupply that continues to affect the Mexican egg market.

Balanced Feed

The balanced feed business experienced strong growth during 2Q11 with a 32.3% increase in sales when compared to 2Q10, driven by a 13.0% increase in balanced feed prices and 17.0% greater sales volume.

Swine

Swine sales volume increased 2.8%, however, given the increasing supply present in the Mexican market, the price of swine dropped 6.8% which led to a decrease of 4.2% in swine sales when compared to 2Q10.

Other Business Lines

Sales of other business lines declined 12.9% when compared to 2Q10. By-product sales continued to decline during the period.

FIRST HALF 2011 RESULTS

Net Sales

Net sales for 1H11 totaled Ps. 12,659.1 million; representing 4.3% increase over 1H10. The growth in sales was driven by increases of 31.1% in balanced feed sales, 5.3% in chicken sales, and 0.9% in swine sales volume. This was slightly offset by a 12.0% decline in table egg sales, as well as an 18.6% decrease in other business sales.

Operating Results

Gross profit totaled Ps. 1,728.3 million, 30.1% below Ps. 2,473.1 million reported for 1H10. Gross margin reached 13.7% in 1H11 compared to 20.4% in 1H10. This result was attributed to a 13.1% increase in total cost of sales.

The Company's operating profit for 1H11 totaled Ps. 335.5 million, less than Ps. 1,125.0 million in 1H10. The operating margin for the first half of 2011 was 2.7%, compared to 9.3% in 1H10.

EBITDA for 1H11 amounted to Ps. 689.1 million, 53.0% below Ps. 1,465.7 million reported for 1H10. EBITDA margin declined from 12.1% to 5.4% 1H11.

Comprehensive Financial Result

During the first half of 2011, financial income of Ps. 63.2 million was reported, 48.4% higher than Ps. 32.6 million in 1H10. The result is mainly attributed to greater interest income.

Taxes

Total taxes for 1H11 reached Ps. 77.2 million.

Net Income

Net income for the 1H11 totaled PS. 293.7 million, or Ps. 0.49 per share (US$0.50 per ADS), compared to a net income of Ps. 894.0.million, or Ps. 1.49 per share (US$1.53 per ADS) reported in 1H10.

Balance Sheet

Total cash and cash equivalents amounted to Ps. 4,337.2 million as of June 30, 2011, compared to Ps. 3,590.6 million at June 30, 2010. The total debt outstanding in 2011 was Ps. 735.4 million compared to Ps. 790.3 million as of June 30, 2010.

Capital Expenditures

CAPEX for 1H11 amounted to Ps. 285.8 million, and was financed entirely by internal resources.

Recent Events

Bachoco Declared Cash Dividend - On April 28, 2011, Industrias Bachoco, S.A.B. de C.V. announced that during the Company's Annual Shareholder Meeting, The Board of Directors approved a cash dividend payment for 2011 for the amount of Ps. 0.50 per share outstanding and Ps. 6.00 per ADS (equal to 12 Shares).

FINANCIAL TABLES FOLLOW


    Industrias Bachoco, S.A.B. de C.V.
    Condensed Consolidated Balance Sheets
    -Unaudited-

                              U.S.D.               Mexican Pesos
                                                   -------------
                              2011(1)           2011(2)           2010(2)
                                       As of June 30,      As of June 30,
                                          --------------      --------------
    ASSETS
    Cash and cash equivalents    $370  Ps         4,337    Ps       3,591
    Total accounts receivable     130             1,524             1,578
    Inventories                   388             4,545             4,012
    Other current assets            -                 -                 -
    Total current assets          889            10,406             9,181
    Net property, plant and
     equipment                    902            10,557            10,789
    Other non current assets       34               395               418
    TOTAL ASSETS               $1,824  Ps        21,358    Ps      20,388
                               ------            ------            ------

    LIABILITIES
    Notes payable to banks         26               307               465
    Accounts payable              143             1,676             1,457
    Other taxes payable and
     other accruals                39               458               734
    Total current liabilities     208             2,441             2,656
    Long-term debt                 37               429               325
    Labor obligations              11               127               106
    Deferred income taxes and
     others                       171             1,999             2,017
    Total long-term
     liabilities                  218             2,555             2,449
    TOTAL LIABILITIES            $427  Ps         4,995    Ps       5,106
                                  ---             -----             -----

    STOCKHOLDERS' EQUITY
    Capital stock                 196             2,295             2,295
    Paid-in capital                64               745               745
    Reserve for repurchase of
     shares                        13               155               159
    Retained earnings           1,095            12,822            11,139
    Net majority income of
     the year                      25               292               893
    Deficit from restatement
     of stockholder's equity        -                 -                 -
    Derivate financial
     instruments                    -                 -                 -
    Total majority
     stockholder's equity       1,393            16,309            15,231
    Minority interest               5                53                52
    TOTAL STOCKHOLDERS'
     EQUITY                     1,397            16,363            15,282
                                -----            ------            ------
    TOTAL LIABILITIES AND
     STOCKHOLDERS' EQUITY      $1,824  Ps        21,358    Ps      20,388
    ---------------------      ------ ---        ------   ---      ------

    (1) For reference, in millions of U.S. dollars using an exchange rate
    of $11.71
          Source: Mexico's National Bank, as of June 30, 2011.
    (2) Millions of Mexican nominal pesos


    INDUSTRIAS BACHOCO, S.A.B. DE C.V.
    Consolidated Statements of Income
    -Unaudited-

                                                       SECOND QUARTER
                                                       --------------
                                               U.S.D.          Mexican Pesos
                                                               -------------
                                              2011(1)     2011(2)     2010(2)
                                               ------      ------      ------


    Net sales                                    $565   Ps  6,617   Ps  6,204
    Cost of sales                                 491       5,752       4,751
    Gross profit (loss)                            74         865       1,453
    Selling, general and administrative
     expenses                                      61         716         670
    Operating income (loss)                        13         150         783
       Other income (expense) net                   0           1         (30)
    Comprehensive financing (cost) income           3          34          35
       Interest income                              5          55          39
       Interest expense and financing
        expenses                                   (2)        (18)        (19)
       Foreign exchange gain (loss), net           (0)         (3)         (0)
       Other financial income (expense) net         -           -          16
    Income before income tax, asset tax            16         185         789
    Total income taxes                              4          46         171
       Income tax, asset tax                        1          14         202
       Deferred income taxes                        3          32         (32)
    Net income                                    $12   Ps    139   Ps    618
    Minority net income                             0           0           0
    Majority net income                            12         138         618
    weighted average shares outstanding
     (in thousands)                               600         600         600
    Net majority Income per share (in
     U.S.D per ADS)                              0.24        0.23        1.03
    ---------------------------------            ----        ----        ----



                                                       FIRST HALF
                                                       ----------
                                              U.S.D.          Mexican Pesos
                                                              -------------
                                              2011(1)     2011(2)     2010(2)
                                               ------      ------      ------


    Net sales                               US  1,081  Ps  12,659  Ps  12,135
    Cost of sales                                 933      10,931       9,662
    Gross profit (loss)                           148       1,728       2,473
    Selling, general and administrative
     expenses                                     119       1,393       1,348
    Operating income (loss)                        29         336       1,125
       Other income (expense) net                  (2)        (28)        (30)
    Comprehensive financing (cost) income           5          63          33
       Interest income                              9         107          73
       Interest expense and financing
        expenses                                   (2)        (25)        (39)
       Foreign exchange gain (loss), net           (1)         (6)          4
       Other financial income (expense) net        (1)        (13)         (6)
    Income before income tax, asset tax            32         371       1,127
    Total income taxes                              7          77         233
       Income tax, asset tax                       10         120         248
       Deferred income taxes                       (4)        (43)        (15)
    Net income                                     25         294         894
    Minority net income                             0           1           1
    Majority net income                            25         292         893
    weighted average shares outstanding
     (in thousands)                               600         600         600
    Net majority Income per share (in
     U.S.D per ADS)                              0.50        0.49        1.49
    ---------------------------------            ----        ----        ----

    (1) For reference, in millions of U.S. dollars using an exchange rate
    of $11.71
         Source: Mexico's National Bank, as of June 30, 2011.
    (2) Millions of Mexican nominal pesos


    Industrias Bachoco, S.A.B. de C.V.
    Consolidated Statement of Cash Flows

    -Unaudited-                                       Mexican Pesos
                                                      -------------
                                   U.S.D.           2011(2)         2010(2)
                                             As of June       As of June
                                 2011(1)                30,             30,
                                     ------    -----------     -----------

    NET MAJORITY INCOME
     BEFORE INCOME TAX                $32   Ps.       371   Ps.     1,127
    ITEMS THAT DO NOT
     REQUIRE CASH:                    (20)           (232)            (61)
    ITEMS RELATING TO
     INVESTING ACTIVITIES:             32             378             330
          Depreciation and
           others                      30             354             341
          Income (loss) on sale
           of plant and
           equipment                    2              25              (9)
          Other Items                  (0)             (1)             (1)
    ITEMS RELATING TO
     FINANCING ACTIVITIES:             11             132             112
          Interest income
           (expense)                    2              25              39
          Other Items                   9             107              73

    NET CASH GENERATED
     FROM NET INCOME
     BEFORE TAXES                     $55   Ps.       648   Ps.     1,508

    CASH GENERATED OR USED
     IN THE OPERATION:                  2              28             384
       Decrease (increase) in
        accounts receivable             7              85              77
       Decrease (increase) in
        inventories                    (1)            (11)            501
       Decrease (increase) in
        accounts payable                4              43            (264)
       Decrease (increase) in
        other liabilities              (8)            (89)             71

    NET CASH FLOW FROM
     OPERATING ACTIVITIES             $58   Ps.       676   Ps.     1,892

    INVESTING ACTIVITIES

    NET CASH FLOW FROM
     INVESTING ACTIVITIES             (26)           (306)           (382)
          Acquisition of
           property, plant and
           equipment                  (24)           (286)           (203)
          Proceeds from sales of
           property plant and
           equipment                   (5)            (62)             (7)
          Other Items                   4              42            (171)

    CASH FLOW SURPLUS
     (REQUIREMENTS OF) TO
     BE USED IN FINANCING
     ACTIVITIES                       $32   Ps.       370   Ps.     1,510

    FINANCING ACTIVITIES

    Net cash provided by
     financing activities:            (18)           (210)           (422)
       Proceeds from loans             13             154             770
       Principal payments on
        loans                          (6)            (65)           (944)
       Dividends paid                 (13)           (150)           (125)
       Other items                    (13)           (148)           (124)

    NET INCREASE
     (DECREASE) IN CASH
     AND EQUIVALENTS                   14             160           1,088

    CASH AND INVESTMENTS
     AT THE BEGINNING OF
     YEAR                             357           4,177           2,503

    CASH AND INVESTMENTS
     AT END OF PERIOD                $370   Ps.     4,337   Ps.     3,591

    (1) For reference, in millions of U.S. dollars using an exchange rate
    of $11.71
         Source: Mexico's National Bank, as of June 30, 2011.
    (2) Millions of Mexican nominal pesos

Derivatives Position Report


    Industrias Bachoco, S.A.B. de C.V.
    Thousands of Mexican Pesos, as of June 30, 2011


                                                    Quarter: 2
    Table 1


                          Objective
      Type of Financial     of the
       Instrument         Instrument    Notional

      Put spread, knock
       out forwards and   Hedge and
       puts               negotiation   $217,644

      Futures for corn
       and soybean meal     Hedge             $-
      Options for corn    Hedge and
       and soybean meal   negotiation    $12,143



      Value of the Related Commodity

      2Q-2011                    1Q-2011
                   $11.71               $11.89

                            Corn: $6.9325 USD/
                              bushel for May
                             2011 and $7.0100
                              USD/bushel for
                                July 2011 .
      Corn: $6.29 USD/         Soybean meal:
       bushel for Jul         $370.70 USD/ton
       2011. Soybean         for May 2011 and
       meal: $334.50 USD/     $375.10 USD/ton
       ton for Aug 2011.      for July 2011.
      ----------------     -------------------
      Soybean meal:
       $334.50 USD/ton
       for Aug 2011.
      ----------------



                                Amounts
      Reasonable                 Due by     Guaranties
       Value                     Year        Required
      2Q-2011       1Q-2011
                                89% 2011
                                 and 11%
      -$      988     $5,830        2012

                         The deals
                      consider the
                       possibility
                         of margin
                         calls but
                       not another
                           kind of
               $-     $3,319        2011      guarantee

      -$      853       $141        2011

    -None of the financial instruments exceed 5% of total assets as of
    June 30, 2011.
    -A negative value means an unfavorable effect for the Company.
    -The notional value represents the net position as of June 3o, 2011
    at the exchange rate of Ps. 11.71 per USD.


    Industrias Bachoco, S.A.B. de C.V.
    Thousands of Mexican Pesos, as of June 30, 2011


                                                    Quarter: 2
    Table 2

                              Reasonable Value
      Type of Financial       as
       Instrument             of June 30, 2011
       ----------             ----------------
      Put spread, knock out
       forwards and puts*    -$                            988

      Futures for corn and,                                 $-
      soybean**

      Options for soybean
       meal                  -$                            853



      Value of the Related Commodity-reference
       value
      ----------------------------------------
     -2.5%                       2.5%             5.0%
    ----                         ---              ---
              $11.42          $12.00           $12.30
     -5%                           5%              10%
             $5.9755         $6.6045          $6.9190
             $316.39         $353.25          $367.37

             $316.39         $353.25          $367.37



      Effect on the Income         Effect on the Cash Flow ***
                                   ---------------------------
       Statement                      -2.5%             2.5%        5.0%
       ---------                      ----              ---         ---
      Direct                -$       9,678           $9,851     $18,448
                                        -5%               5%         10%
                                       ---              ---         ---
      The effect will
       materialize as the
       inventory is
       consumed                         $-               $-          $-


                            -$       1,547  -$          226        $304

    A negative value means an unfavorable effect for the Company.
    * The reference value is the exchange  rate of Ps. 11.71 per USD as
    of June 30, 2011
    ** The reference value is the Futures of corn for Jul 2011, $6.29
    USD/bushel and soybean meal for Aug 2011, $334.50 USD/ton.
       Note: even when table set above shows corn and soybean prices  for
       contracts of July and August 2011, the effect on the cash flow
       corresponds to the total positions effects.
    *** The Company has credit lines with the majority of its
    counterparts, so that the effect in cash flow is lower than the
    amount shown.

Company Description:

Industrias Bachoco is the leader of the Mexican poultry industry and an important player in Mexico's food industry. Its main product lines are chicken, table eggs, balanced feed and swine. Founded in 1952, Bachoco is headquartered in Celaya, in the state of Guanajuato in central Mexico with operations that span the country including 60 distribution centers, and a growing export business. Bachoco trades on both the Mexican and New York Stock Exchanges under the ticker IBA and BACHOCOB.MX For the year ended December 31, 2010, the Company reported Net Sales of over US$ 2 billion.

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, whether as a result of new information, future events or otherwise.

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

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