Milling & Baking News - November 6, 2018 - 18

Financial Results

MEXICO CITY - Net sales rose 9%
for the North American segment of
Grupo Bimbo S.A.B. de C.V. in the
third quarter, but a restructuring initiative in Canada had a negative effect
on operating income.
Operating income of 1,989 million pesos ($100.9 million) was down 9% from
2,181 million pesos in the previous year's
third quarter in North America. Net sales
of 36,293 million pesos ($1,840.3 million)
were up from 33,160 million pesos.
Bimbo took a $17 million non-cash
charge arising from the organizational
restructuring initiative implemented in
Canada and the United States coupled
with restructuring investments coming
from routes and manufacturing streamlining efforts across the region. Bimbo
closed a baking facility of its subsidiary,
Canada Bread Co., in Woodstock, N.B.
"Just like in the U.S. and the V.S.P.
(voluntary separation program), we
see this initiative leading to a leaner,
stronger and less complex organizational structure that accelerates decision-making and enhances collaboration across our supply chain," Daniel
Servitje, chairman and chief executive
officer of Grupo Bimbo S.A.B. de C.V.,
said of the restructuring program in
Canada during an Oct. 25 earnings call.
"All of this resulted in adjusted North
American EBITDA growth of 8.2%."
Savings from the V.S.P. helped to offset part of the pressure on higher commodity, energy and transportation costs

in the third quarter in North America.
Sales in North America increased
in part due to a foreign exchange rate
benefit and a 2.8% increase in dollar terms. Solid volume performance
came from strategic brands in the
United States and in bread and snacks
categories in Canada. The performance of the Sara Lee, Artesano, Thomas' and Entenmann's brands pleased Bimbo
executives, said Fred Penny,
president of Bimbo Bakeries USA.
"We had volume growth
and some revenue growth
on top of that in our strategic
brands, and our total branded business was up slightly
as well," Mr. Penny said.
Bimbo in North America
will continue to see volume
pressure on non-branded
business, he said.
"Some of that is just the
category trend, and in addition, some of that is on a
regional basis, some lost business, but overall we're pretty
pleased with the top-line performance
in this quarter," Mr. Penny said.
Companywide, Mexico City-based
Grupo Bimbo S.A.B. de C.V. reported
net majority income of 1,815 million
pesos, up 6% from 1,710 million pesos
in the previous year's third quarter.
Net sales of 72,390 million pesos were
up 11% from 65,390 million pesos.

For Lancaster, Bantam Bagels fits
'right in our sweet spot'
WESTERVILLE, OHIO - Lancaster Colony Corp., the maker of Marzetti salad
dressings, Sister Schubert's dinner rolls
and Flatout flatbreads, landed a key partner in its recently announced acquisition
of Bantam Bagels - Starbucks.
"Starbucks has been really happy with
the product, and we can see why," said
David A. Ciesinski, chief executive officer
of Lancaster Colony Corp., during an Oct.
25 earnings call. "... This important brand
platform allows us entry into a really strategic fast-growing food service player."
Based in New York City, Bantam Bagels, L.L.C. produces frozen mini stuffed
bagels and mini stuffed pancakes for
distribution to retail and food service
channels. The products are offered in
most Starbucks locations nationwide,
18 / November 6, 2018

Milling & Baking News

according to Lancaster Colony, which is
paying $34 million to buy the business.
"What excites us about this is as a platform, both the brand and the product,
play right in the sweet spot of where a lot
of growth is," Mr. Ciesinski said. "If you
think of the grocery store ... it's a $3.5 billion
category that in the last year is growing at
about five points. And if you look at the last
three years in compounded growth in that,
it's somewhere around 4%. So it is a highly
relevant, big, fast-growing category, and
it's a product that we know how to make.
So today, we don't have a brand platform
that reaches into that segment, and the Bantam platform does exactly that.
"And it's able to play across a range
of different occasions, so it's available in
cream cheese, but they also have a s.k.u.,

In Mexico, operating income of 4,114
million pesos was up 11% from 3,715
million pesos behind strong volume
performance and lower raw material
costs. Sales rose 9% to 25,219 million
pesos from 23,075 million pesos.
In Latin America, Bimbo suffered
an operating loss of 126 million pesos, which compared to an operating loss of 61 million pesos in the
previous year's third quarter. Currency depreciations and a weaker
consumption
environment,
mainly in Brazil and Argentina, affected results negatively. Sales of 6,522 million pesos
were down 3.2% from 6,739 million pesos.
In Europe-Asia-Africa, an
operating loss of 260 million
pesos compared to an operating loss of 867 million pesos
in the previous year's third
quarter. Sales of 6,506 million
pesos were up 51% from 4,305
million pesos.
"While E.A.A. remains one
of the smaller of the Bimbo
regions in terms of sales, it is
also the strongest in terms of
growth rate, which shows how
compelling these markets will
be for us," Mr. Servitje said.
Over the first nine months of the fiscal year, Grupo Bimbo S.A.B. de C.V.
reported net majority income of 3,293
million pesos, which was down 22%
from 4,203 million pesos in the same
time of the previous year, and net sales
of 211,957 million pesos, up 8% from
196,584 million pesos. MBN
BIMBO BAKERIES USA

Restructuring costs weigh on
Bimbo earnings in North America

or a handful of s.k.u.s, actually, that are
filled with eggs. And so it plays into the savory space as well. So, for us, it's a baked
product, it's a baked product that's frozen,
and it's a baked product that's frozen and
served in retail. So, across all of the capabilities, it feels like it's right in our sweet spot."
Lancaster Colony Corp. intends to
operate Bantam Bagels similarly to its
most recently acquired business, Angelic
Bakehouse, granting the founders "a fair
amount of autonomy," Mr. Ciesinski said.
In the first quarter ended Sept. 30,
Lancaster Colony had net income of
$39,028,000, equal to $1.42 per share
on the common stock, up 3.3% from
$29,386,000, or $1.07, in the prior-year
period. Net sales totaled $235,455,000, up
5.9% from $223,441,000.
Retail segment operating income was
$33,948,000, up 3.3% from $32,869,000 in
the comparable quarter, on net sales of
$162,748,000, up 0.4% from $162,144,000. MBN
bakingbusiness.com / world-grain.com

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Milling & Baking News - November 6, 2018

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