Milling & Baking News - March 5, 2013 - 14

Financial Results 

With ‘new opportunities in the
marketplace,’ B.B.U. sales up
MEXICO CITY — While profits were
under pressure for the full year and
the final quarter of 2012, the U.S. business of Grupo Bimbo S.A.B. de C.V.
enjoyed sales gains late in the year
because of marketplace changes, the
company said.
Operating income of the United
States business of Grupo Bimbo S.A.B.
de C.V. totaled 1,118 million pesos ($89.4
million), down 68% from 3,500 million

pesos in 2011. Net sales were 78,927 million pesos ($6,312 million), up 47% from
53,810 million pesos in 2011.
In the fourth quarter, U.S. operating
income was 506 million pesos ($40.5
million) down 26% from 681 million
pesos in the fourth quarter the year
before. Sales were 20,447 million pesos
($1,636 million), up 6% from the same
period in 2011.
The U.S. operating margin in 2012

was 1.4%, versus 6.5% in 2011. But
in the fourth quarter, the margin was
2.5%, versus 3.5% in the fourth quarter
of the year before.
While not commenting directly on
B.B.U. operating profits in the earnings announcement, the company said
integration expenses in the United
States totaled $56 million, a figure
greater than the operating income total of less than $41 million.
Regarding the 6% rise in fourthquarter sales, Bimbo noted an additional month of Sara Lee operations
in 2012 versus 2011 partly accounted

Servijte ‘pleased’ with performance,
foresees integration progress in ‘13
MEXICO CITY — “We feel confident about the position the new
B.B.U. is taking in the current market environment,” said Daniel Servitje, president and chief executive officer of Grupo Bimbo S.A.B. de
C.V. Mr. Servitje said he was “pleased with the performance this year”
of Bimbo Bakeries USA.
Mr. Servitje gave the brief comments during a Feb. 22 conference
call with investment analysts in connection with Bimbo’s fourth-quarter financial results.
“I anticipate building on our momentum this year as our integration efforts progress, we leverage a common I.T. platform, continue
with our waste reduction initiatives, and maintain a targeted focus on
category growth,” Mr. Servitje said.
He referenced two “state-of-the-art” baking plants under construction by B.B.U. in the United States, located in Rockwall, Texas,
(east of Dallas) and Lehigh Valley, Pa., (in the Philadelphia
area). The plants will be operating later this year, he said.
As previously reported, operating income of the United States
business of Grupo Bimbo S.A.B. de C.V. totaled 1,118 million pesos ($89.4 million) in fiscal 2012, down 68% from 3,500 million
pesos in 2011. Net sales were 78,927 million pesos ($6,312 million), up 47% from 53,810 million pesos in 2011.
In the fourth quarter, U.S. operating income was 506 mil- Servitje
lion pesos ($40.5 million), down 26% from 681 million pesos
in the fourth quarter the year before. Sales were 20,447 million pesos
($1,636 million), up 6% from the same period in 2011.
During the conference call, Fred Penny, executive vice-president of
B.B.U., commented on the auctions of Hostess Brands, Inc. assets, to
be conducted in coming weeks. In response to an analyst’s question
he again did not rule out Bimbo participation in the auctions, even
though the company has not been named a stalking horse bidder in
any of the four planned auctions.
“For the question relating to the Hostess auction process, I believe
we have mentioned on previous calls that there may be some assets
that could make some strategic sense for us,” he said. “We continue
to evaluate those assets, as the process unfolds. But, beyond that, I
don’t think we should be speculating on how that auction process
may actually unfold. We’ll just have to see how that plays out.”
Mr. Penny, who during the call was named successor to Gary Prince
as B.B.U. president, effective June 1, was complimentary of work done
by B.B.U. employees to fill the marketplace vacuum created when
Hostess ceased operations in mid-November.
“I’d like to comment on what our teams in the U.S. operations accomplished in a very short amount of time, upon the Hostess exit,” he
said. “They worked tirelessly and did an unbelievable job in responding

14 / March 5, 2013 Milling & Baking News

to what the marketplace needed when Hostess vacated markets, both
for current and new customers. And, it really was a tremendous piece
of work, and it’s a real testament to the people that we have. I would
say if you were to look at (SymphonyIRI) data, our share improvements
were in the range of 2 to 3 percentage points, which would be consistent with our overall share position in the market.”
In comments on non-U.S. markets, Mr. Servitje said Bimbo has
made significant moves to shore up its business in Brazil, where “results are clearly not meeting our expectations,” he said.
“Sales momentum in that market had already been slowing for
most of the year due to the weaker consumption environment in the
country,” Mr. Servitje said. “This led to lower absorption of fixed costs
and a negative impact on our margin. We had an unsatisfactory performance. We have undertaken a turnaround process starting with a
change in management. This new team will take on a comprehensive restructuring process that will focus most notably
on revamping our I.T. systems and strengthening our distribution models, particularly in the small-store channel. As part of
this process, we decided to register two one-time, non-cash
(accounting) charges in the quarter, the first related to the
restructuring of the distribution network and the second for a
cancellation of deferred income tax benefits. We believe these
measures are an important step in getting the operation back
on track to where it should be.”
Looking ahead into 2013, Mr. Servitje expressed concern about the
consumer environment, especially in Spain, Portugal and Brazil.
“Gross margins are likely to come under pressure with the rise
in commodity prices,” he said. “That said, we expect sales trends
to continue their positive trajectory and that our integration efforts
combined with continued operational improvements will generate
healthier margins going forward.”
Areas of focus in 2013 for Grupo Bimbo laid out by Mr. Servitje
will be:
 Debt reduction
 Improving operations in Brazil and Iberia
 Integration progress in the U.S. (Sara Lee) and Argentina
(Fargo), while capitalizing on U.S. momentum
 Implementing waste reduction initiatives companywide with any eye toward becoming a low-cost operator
 Addressing external risk factors such as commodity
movements where purchasing and hedging policies play
a role
 Emerging consumer trends Bimbo’s research and development teams are evaluating. MBN

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Milling & Baking News - March 5, 2013

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