Industrias Bachoco reports profit loss despite highest annual sales

Mexican poultry producer, Industrias Bachoco, has reported the highest quarterly and annual net sales in the company’s history; this figure rose 34.4% in 4Q11 vs 4Q10 and 11.8% in 2011 vs 2010.

Bachoco and the poultry industry in general continued experiencing large increases in production costs, driven by global increases in prices of corn, soybean meal, among other components of the production cost. This, combined with challenging economic conditions and high depreciation of the Mexican peso (“peso”) at the end of the year, lead Bachoco to post negative profit for the fourth quarter and weak results for the year 2011.

“During the fourth quarter we observed a strong demand for chicken meat, particularly towards the end of the quarter. We had increases in sales across all our business lines; as a result we reached record sales figures. Total sales rose 34.4% during the fourth quarter and 11.8% in 2011 over the previous year.

We were not able to fully transfer increases in our production costs to our customers, mainly due to: a strong supply of chicken coupled with weak demand for chicken during most of the year, and a 13.0% depreciation of the peso in 2011, resulting in a 2.9% negative operating margin for the quarter and 0.2% negative operating margin for year 2011.

We ended the year with a positive outlook for the Company, with positive results in both our Mexican and US operations registered in December”, commented Rodolfo Ramos, CEO.

“Bachoco continues to experience significant growth. In the fourth quarter we acquired OK Industries, an important American poultry company headquartered in Fort Smith, Arkansas. This was a very important step for the Company, as it represented its first incursion into the US poultry industry.

This acquisition consisted of buying 100% of the company including; two broiler processing plants, two further process plants, among other facilities. OK currently processes around 2.5 million chickens per week; adding approximately 25.0% to Bachoco’s total production.

Bachoco paid USD$ 93.4 million for OK Industries, paid with cash and debt. Under USGAAP and IFRS principles, we determine that this acquisition has generated a profit of around USD$ 100.0 million, which will be recognized on our Balance Sheet as of March 31, 2012, when we will report our results in accordance with IFRS.

We are also reaching new domestic customers by opening two distribution centers located in Baja California, with which we expect to increase our market share in that region.”

Source: Industrias Bachoco