Gruma B de C : Quarterly financial report

Quarterly Financial Information

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[105000] Management commentary

Management commentary [text block]

FOURTH QUARTER 2022 RESULTS

HIGHLIGHTS

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GRUMA, S.A.B. de C.V., is one of the world's leading tortilla and corn flour producers. With leading brands in most of its markets, GRUMA has operations in the United States, Mexico, Central America, Europe, Asia and Oceania.

Disclosure of management's objectives and its strategies for meeting those

objectives [text block]

Our strategy is to focus on our core business-corn flour and tortilla-as well as to expand our product portfolio towards the flatbreads category in general. We will continue taking advantage of the increasing popularity of Mexican food and, more importantly, tortillas, in the U.S., European, Asian and Oceanian markets. We will also continue taking advantage of the adoption of tortillas by the consumers of several regions of the world for the preparation of different recipes other than Mexican food. Our strategy includes the following key elements:

Expand in the Tortilla Market in the United States: We believe that the size and growth of the tortilla market in this country still offer us significant opportunities for expansion, mainly in the retail channel, looking to continuously innovate our products with emphasis on healthy alternatives based on the preferences of our customers.

Enter and Expand in the Tortilla, Flatbread Markets and Flavored Corn Chips in Europe, Asia and Oceania: We believe that markets in other continents such as Europe, Asia and Oceania offer us significant opportunities. We believe our current operations will enable us to better serve our customers in those regions, with fresher products and respond more quickly to their needs.

Gradually Enter the Flat Bread and Flavored Corn Chips Markets in the United States and Mexico.

Maintain MISSION® and GUERRERO® Tortilla Brands as the First and Second National Brands in the United States and Position our Mission Brand in Other Regions of the World: We intend to achieve this by increasing our efforts at building brand name recognition, and by expanding and having presence in more supermarket chains.

Encourage Transition from the Traditional Cooked-Corn Method to the Corn Flour Method as Well as New Uses for Corn Flour: GRUMA introduced the corn flour method for the production of tortilla and other corn-based products to the market. We believe that there is still much growth potential and that the transition from the Traditional Method to the corn flour method of making tortillas and other corn-based products, is the primary opportunity for increased corn flour sales, particularly in Mexico. We continue working in expanding the use of corn flour in the manufacture of different types of products.

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Invest in our Core Business and Focus on Optimizing Operational Matters: We intend to focus our capital expenditure program on our core business to enable us to meet future demand, consolidate our leading position in the industry and continue generating returns to the shareholders above our cost of capital.

Disclosure of entity's most significant resources, risks and relationships [text block]

Our financial condition and results of operations may be influenced by some of the following factors:

• level of demand for tortillas and corn flour;
• increase or decrease in the Hispanic population in the United States;
• increases in Mexican food consumption by the non-Hispanic population in the United States; and use of tortillas in non-Mexican cuisine in the United States, Europe, Asia and Oceania;
• costs and availability of corn and wheat flour;
• costs of energy and other related products;
• acquisitions, plant expansions and divestitures;
• effects of government initiatives and policies;
• effects from variations of interest rates and exchange rates;
• volatility in corn and wheat prices and energetics costs;
• competition from tortilla manufacturers, especially in the United States;
• competition in the corn flour business; and
• general economic conditions in the countries where we operate and worldwide.

Disclosure of results of operations and prospects [text block]

FOURTH QUARTER 2022 RESULTS

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HIGHLIGHTS

CONSOLIDATED RESULTS OF OPERATIONS 4Q22 versus 4Q21

For comparative purposes, it is worth noting that during this quarter, performance at Gruma USA and Gruma Asia and Oceania, reflected the extraordinary effect of one additional week of operations, in line with the closing of their fiscal year-end accounting, which occurs every six years.

Sales volume increased 3% to 1,116 thousand metric tons compared to 4Q21 driven mainly by the U.S. division and GIMSA, in addition to having an extraordinary extra week of operations at GRUMA´s U.S division. Excluding this effect, volume would have marginally increased by 0.5% relative to a year ago.

Net sales increased 26% to US$1.6 billion due to (1) transferring incremental costs and expenses to the top line of the income statement, (2) the extraordinary effect of an additional week of operations at Gruma USA during 4Q22; and (3) higher sales volume. Sales from non-Mexican operations represented 74% of consolidated figures.

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