Industrias Bachoco reports Q1 net earnings of 659.7M Mexican pesos, up 3.4% from year-ago period; net sales fall 3.5% to 9.64B pesos

Nevin Barich

CELAYA, Mexico , April 29, 2014 (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 first quarter 2014 results ("1Q14") ended March 31, 2014. All figures have been prepared in accordance with International Financial Reporting Standard ("IFRS"), and are presented in nominal million Mexican Pesos ("$").

HIGHLIGHTS- 1Q14 vs 1Q13

Net sales decreased 3.5% in 1Q14.

EBITDA margin was 11.5% for 1Q14 up from 9.5% in 1Q13.

Earnings per basic and diluted share totaled $1.10 or $13.2 per ADR for 1Q14 compared with $1.06 or $12.76 per ADR for 1Q13.

CEO COMMENTS

Mr. Rodolfo Ramos Arvizu, Chief Executive Officer of Bachoco, stated: "In the first quarter of 2014 the Mexican poultry industry observed a good balance between supply and demand. In our US market, after a weak start of the year, conditions improved through the quarter.

Even when our total volumes improved when compared to first quarter 2013, the lower cost in our main raw materials, drove our main product prices down so that net sales posted a decrease of 3.5%. On the other hand, lower raw material prices more than compensated the price reduction; as a result, our operating performance improved with respect to the same quarter of previous year.

In accordance with the new tax regime in Mexico, as of January 1, 2014, our Mexican operation is subject to a higher tax rate, which negatively impacted our net income in the first quarter. However, despite these conditions, we achieved higher earnings per share.

Furthermore, Bachoco maintains a very solid financial position with a negative net debt of $5,665 million."

EXECUTIVE SUMMARY

The following financial information is expressed in millions of nominal pesos, except for amounts per share or per ADR, with comparative figures for the same period in 2013.

The Company's 1Q14 net sales totaled $9,643.4 million, $345.3 million or 3.5% below the $9,988.8 million reported in 1Q13. In 1Q14, sales of our U.S. operations represented 19.7% of total sales, compared with 22.7% in 1Q13.

The reduction in sales is mainly attributed to lower prices mainly in chicken and balanced feed, partially offset by higher volume sold of these products.

GROSS PROFIT

In 1Q14 the cost of sales totaled $7,854.1 million, $655.7 million or 7.7% lower than $8,509.8 million reported 1Q13; the decrease in cost of sales is mainly attributed to the decline in prices of our main raw material.

As a result, the Company reached a gross profit of $1,789.3 million and a gross margin of 18.6% in 1Q14; this profit is 21.0% higher, compared to a gross profit of $1,479.1 million, and a gross margin of 14.8% in 1Q13.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A")

Total SG&A expenses in 1Q14 reached $871.4 million, $76.4 million or 9.6% more than the $795.0 million reported 1Q13. This increase is mainly attributed to larger volume sold and higher expenses as we strengthened our operating structure.

Total SG&A expenses as a percentage of net sales represented 9.0% in 1Q14 compared to 8.0% in 1Q13.

OTHER INCOME (EXPENSE), NET

In 1Q14, the amount was an expense of $35.0 million, compared with other income of $77.1 million reported in 1Q13; the negative variation is mainly attributed to losses in the sale of several unused assets.

OPERATING INCOME

Operating income in 1Q14 totaled $882.9 million, which represents an operating margin of 9.2%, a positive comparison when compared to operating income of $761.1 million and a 7.6% operating margin in 1Q13.

The increase in operating income is mainly due to higher gross profit, resulting from higher volume and lower cost of sales in 1Q14.

NET FINANCIAL INCOME

In 1Q14, the Company reported net financial income of $50.8 million, compared to income of $19.3 million reported in the same period of 2013. The increase is mainly as a result of higher interest income and lower interest expenses.

TAXES FOR THE PERIOD

As we have stated in previous releases, Industrias Bachoco and all of its subsidiaries file separate income tax returns. In this regard, Bachoco, S.A. de C.V., the Company's main subsidiary is subject to a higher tax rate of 30% effective January 1, 2014 (before it was 21%), as a result of the Mexican Tax Reform approved in 2013.
As a result, total taxes were $274.1 million as of March 31, 2014, compared with total taxes of $140.1 million in the same period of 2013.

NET INCOME

For 1Q14 the Company recorded a net income of $659.7 million, representing a net income of $1.10 pesos per share; compared with a net income of $637.7 million, which represented $1.06 pesos of net income per share in 1Q13. This variation is mainly attributed better operating results and larger net financial income.

Net margin was 6.8 and 6.4% for 1Q14 and 1Q13, respectively.

EBITDA AND ADJUSTED EBITDA

EBITDA in 1Q14 reached $1,106.1 million, representing an EBITDA margin of 11.5%, compared to EBITDA of $944.2 million in 1Q13, with an EBITDA margin of 9.5%.

The adjusted EBITDA in 1Q14 reached $1,141.0 million, representing an adjusted EBITDA margin of 11.8%, compared to adjusted EBITDA of $867.1 million in 1Q13, with an adjusted EBITDA margin of 8.7%.

BALANCE SHEET DATA

Cash and equivalents as of March 31, 2014 totaled $8,121.4 million, up $400.4 million or 5.2% from $7,721.0 million as of December 31, 2013.

Total debt as of March 31, 2014 was $2,456.7 million, compared to $2,067.8 million reported as of December 31, 2013, mainly as a result of higher short-term bank debt.

Net debt as of March 31, 2014 was negative $5,664.7 million, compared with a negative net debt of $5,653.2 million as of December 31, 2013.

CAPITAL EXPENDITURES

Total CAPEX was $290.4 million in 1Q14, mainly allocated toward productivity projects across all of our facilities and growing capacity.

STOCK INFORMATION

CONFERENCE CALL INFORMATION

The Company will host its first quarter 2014 earnings call, on Friday, May 2, 2014. The earnings call will take place at 10:00 am Central Time (11:00 am ET).

Toll free in the U.S.: +1-(888)-771-4371

Toll free in Mexico: +001-866-779-0965

A current list of available local and international free phone telephone numbers: https://www.yourconferencecenter.com/AlternateNumbers/alternatenumbers.aspx?
100374&t=A&o=UEpUWNRbUybgxq

Confirmation Number: 37157226

Visit the following link to access the webcast:

http://www.media-server.com/m/p/68tqyc5p

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