Industrias Bachoco reports net loss of 58M Mexican pesos in Q4, compared with net loss of 477M pesos in year-ago period amid record net sales of 8.56B pesos

CELAYA, Mexico , February 9, 2012 (press release) – Industrias Bachoco S.A.B. de C.V. ("Bachoco" or "the Company") (NYSE: IBA; BMV: Bachoco), announced today its unaudited results for the fourth quarter ("4Q11") and full year 2011 ended December 31, 2011. All figures have been prepared in accordance with Mexico's Generally Accepted Accounting Principles ("GAAP"), and are presented in nominal Mexican pesos.

Highlights

* The Company entered the U.S. poultry market through the acquisition of O.K. Foods ("O.K."), an American Poultry company

* Bachoco 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.

• The Company was largely affected by commodity price increases throughout 2011

Executive Summary

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.

Nonetheless, we were able to reach a positive EBITDA result for the quarter and for the year, as well as posting a net profit in year 2011.

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

Bachoco continues to experience significant growth. In the fourth quarter we acquired O.K. 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 U.S. poultry industry.

This acquisition consisted of buying 100% of the Company including; two broiler processing plants, 2 further process plants, among other facilities. O.K 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 O.K. 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.

As we have commented in many of our previous releases, our solid financial structure allows us to face adverse external conditions and take advantage of business opportunities that the industry offers. 2011 was a clear example of this successful strategy. We were able to grow within a challenging scenario and still maintain a solid financial structure. We believe that our performance, in general, is one of the best in the poultry industry world-wide.

Bachoco seeks to continue growing its business by seizing upon the opportunities present in the industry. We remain confident in our team, our world class business processes, high productivity standards and, above all, our most valuable asset: our well-recognized brands and products.

Quarterly breakdown of sales

Bachoco saw rising sales across all of its business lines during the fourth quarter. Chicken and Turkey product sales posted solid growth in December due to higher consumption of these products during the Christmas Season.

The Company's 4Q11 net sales totaled Ps. 8,564.3 million, showing a 34.4% increase over the Ps. 6,374.6 million reported in 4Q10.

A stable chicken supply at the end of the fourth quarter, a strong demand due to seasonality factors, as well as, the partial integration of O.K. in the U.S. (November and December), lead the Company to reach a 36.9% increase in sales for the quarter, resulting from 8.9% increase in chicken prices and 25.7% growth in volume of chicken sold.

After several quarters of strong oversupply conditions in the Mexican table eggs market, our sales prices started to show a recovery. Fourth quarter sales of table eggs rose 14.7%, as a result of 21.7% increase in prices, this was partially offset by a 5.7% decrease in volume sold, compared to 4Q10.

Bachoco's balanced feed business line also reported a good performance for the quarter; sales grew 38.9%, mainly driven by a 25.7% rise in prices, and a 10.5% rise in volume quarter-over-quarter.

The "other business lines" item includes swine, turkey and beef value-added products business lines, as well as by-products. As it is typical in the fourth quarter, turkey products sales had a solid growth with respect to the previous quarters. In 4Q11, sales of turkey products rose 16.9% with respect to 4Q10. Turkey products sales represented around 2.0% of the Company's total sales for 4Q11.

For a second consecutive quarter, the Company's beef business line showed a solid increase in sales, mainly driven by the integration of the newly acquired company in August of 2011, in the state of Nuevo León in Mexico. Even when it represented a large increase in beef sales from 4Q10 to 4Q11, this still represents less than 1.0% of Bachoco's total sales.

Lastly, sales of swine remained stable with 3.3% growth in the fourth quarter of 2011 compared to the same quarter of 2010.

U.S. Complex

The integration of O.K with Bachoco started in November 2011. In the U.S., the Company had to face similar challenges than in the Mexican poultry industry; sharp increases in raw material prices, a large oversupply in the chicken market and a sluggish economy. O.K. overcame negative results and posted positive results in the second month of the integration process.

Operating Results

Total cost of sales increased 55.9% for 4Q11 and 26.9% for year 2011, when compared to the same period of 2010. The production cost of chicken per unit was the most affected, it increased around 30.0% for the 4Q11 and 19.0% for year 2011, when compared with the same periods of 2010.

Gross profit declined 50.7% from 4Q10 to 4Q11 reaching Ps. 634.9 million in the fourth quarter, 7.4% of gross margin. Gross profit for the year totaled Ps. 2,920.8 million in 2011, with a gross margin of 10.5% this represented a 44.4% decline year-over-year, due to the fact that we were not able to fully transfer the cost increases to our customers.

Despite productivity achievements, control in expenses and sales increases across all of Bachoco's business lines, the surge in commodity prices experienced throughout 2011, plus the integration of our new operation led the Company to post a negative operating result for the fourth quarter as well as for the whole 2011 year, but positive in EBITDA terms for the quarter and for the whole year.

Bachoco's operating loss for 4Q11 was Ps. 244.7 million, compared to an operating profit of Ps. 584.5 million reached in 4Q10. While for the year 2011 operating losses totaled Ps. 59.6 million a sharp reduction compare to an operating income of Ps. 2,521.6 million, reported in 2010.

EBITDA results for the quarter were slightly positive; totaling Ps. 36.0 million, lower than Ps. 744.0 million reported in 4Q10. EBITDA for the year 2011 was Ps. 718.6 million, 77.6% less than Ps. 3,207.7 EBITDA reported in 2010.

We posted comprehensive financial income of Ps. 40.7 million in 4Q11, and income of Ps. 178.5 million in 2011 when compared to the same periods of 2010, this mainly as a result of foreign exchange gains.

Net income taxes for the quarter totaled a benefit of Ps. 73.7 million. We also posted a benefit in taxes of Ps. 29.1 million for the whole year.


Net majority loss for the 4Q11 was Ps. 57.9 million (Ps. 0.10 per share), compared to a net majority income of Ps. 477.2 (Ps. 0.80 per share) reached in 4Q10. Net majority income for the year 2011 totaled Ps. 127.8 million (Ps. 0.21 per share), a decrease from Ps. 2,004.9 million (Ps. 3.34 per share) net majority income reached in 2010.

Liquidity and Debt

The Company's financial structure remained solid; our cash and equivalents as of December 31, 2011, totaled Ps. 3,036.4 million, Ps. 1,140.8 million less when compared to the same period of 2010.

The Liquidity ratio declined due to an increase in short-term debt, as the Company acquired a credit in U.S. dollars used for the acquisition of O.K. The year-period credit amounted to $ 75.0 million USD.

Total CAPEX for 2011 totaled Ps. 661.6 million, mainly allocated towards in productivity projects, and replacement of transport fleet.

Derivative Contracts

Bachoco entered into several short-term derivative transactions to provide some certainty in the purchasing of corn, soybean meal and U.S. dollars needs. During the fourth quarter we had some operations of Futures and Options in the purchases of corn and soybean meal as well as Forwards, Knockout Calls, Knockout Forwards and Puts for the purchases of U.S. dollars. For more detail, please see tables attached to this document.

Company Description:

Industrias Bachoco is the leader of the Mexican poultry industry and an important player in Mexico's food industry. Bachoco's sales include chicken, table eggs, balanced feed, turkey, beef and swine. Founded in 1952, Bachoco is headquartered in Celaya, in the state of Guanajuato. Bachoco operates more than 800 facilities, organized in 9 complexes in Mexico and one Complex in the U.S. as well as a growing export business. Bachoco trades on both the Mexican and New York Stock Exchanges since 1997. The Company post around $2 billion dollars in sales at year.

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