Industrias Bachoco Announces Fourth Quarter 2020 Results and Full Year 2020 Results

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Industrias Bachoco (NYSE: IBA) reported robust financial results for the fourth quarter and full year of 2020. Net sales surged by 21.1% to $18,328.6 million in 4Q20, and 11.6% to $68,791.3 million for the year. EBITDA reached $2,451.3 million in 4Q20 with a margin of 13.4%, while earnings per share were $1.22 for the quarter and $6.12 for the year. The company faced rising costs due to raw material price increases but managed to offset these through operational efficiencies. Net income in 4Q20 was $720.3 million, a substantial increase from $149.8 million in 4Q19.

Positive

Net sales increased by 21.1% in 4Q20 and 11.6% for the full year 2020.
EBITDA for 4Q20 reached $2,451.3 million, up 379.6% year-over-year.
Earnings per share rose to $1.22 in 4Q20 and $6.12 for the full year.
Gross profit increased by 96.3% to $3,856.3 million in 4Q20.

Negative

Net financial loss of $1,168.2 million in 4Q20, significantly higher than $192 million in 4Q19 due to currency exchange losses.
Costs of sales rose by 9.9% in 4Q20, impacting overall profitability.
Other expenses increased in 2020, mainly attributed to COVID-related costs.

02/03/2021 - 05:15 PM

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 (“4Q20”) and full year (“2020”) ending on December 31^st, 2020. All figures have been prepared in accordance with International Financial Reporting Standard (“IFRS”) and are presented in nominal million Mexican Pesos (“$”).

HIGHLIGHTS 2020

Net sales increased 21.1% in 4Q20 and increased 11.6% in year 2020 vs equivalent periods of 2019.
EBITDA margin was 13.4% for 4Q20 and 8.2% for the whole year.
Earnings per basic and diluted share totaled $1.22 for 4Q20 and $6.12 for the year.

CEO COMMENTS

Mr. Rodolfo Ramos Arvizu, Chief Executive Officer of Bachoco, stated: “2020 was an historically challenging year. We faced unprecedent conditions that tested our capabilities for adapting fast to new market conditions while being efficient. Despite the uncertainty that brought this year, our solid financial structure and our operating discipline allowed us to end 2020 with positive results in terms of profitability while attending all our markets.

During the last quarter of 2020, we observed some adjustments in demand as a result of remaining lockdown conditions, in some sectors. However, we consider that the industry was as well in line with that reading, allowing a good balance between supply and demand which resulted in competitive prices for this time frame.

On the other hand, in the U.S., we kept observing challenging conditions that continued to negative affect commodity prices particularly on white meat and leg quarters.

As a result of the aforementioned conditions, we reported an increase in total sales of 21.1% in 4Q20 when compared to 4Q19. For the full year, we reached an increase of 11.6% vs 2019. This was a result of higher prices in our main business lines as well as more volume sold in our Others segment.

Regarding cost of sales, during 4Q20 we started to observe some of the negative effects of the increase in grain and soybean meal prices. However, efficiencies in our productive processes allowed us to partially offset some of that increase.

In terms of volume sold, our Others segment, particularly swine, reached an important increase for the quarter when compared to the same period of 2019 driven by the integration of SASA.

Our EBITDA was $2,451.3 million which is $1,940.2 million higher than the EBITDA of the same quarter of 2019. For the fourth quarter, our EBITDA margin was 13.4% and our earnings per basic and diluted share was $1.22.

For the full year of 2020, we continued delivering positive results. We increased total sales by 11.6%, with an EBITDA margin of 8.2% and earnings per share of $6.12.

Our financial structure remained solid and allowed us to keep with our growth plans even under the uncertain conditions observed in 2020. Our CAPEX for the year was $2,305.9 million which is 11.4% higher than the amount invested in 2019. This with a net cash position of $16,529.9 million.

Particularly under this difficult time that the world is facing, we continue to be very focused on safely serving our markets and customers as we are aware that we play an important role in the nourishment of our consumers as well as in the family’s economy of our collaborators."

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 2020.

QUARTERLY RESULTS

NET SALES BY GEOGRAPHY
In millions of pesos	4Q20	4Q19	Change
	$	$	$	%
Net Sales	18,328.6	15,134.6	3,193.9	21.1
Net sales in Mexico	13,780.5	10,908.1	2,872.4	26.3
Net sales in the U.S.	4,548.0	4,226.5	321.6	7.6

NET SALES BY SEGMENT
In millions of pesos	4Q20	4Q19	Change
	$	$	$	%
Net Sales	18,328.6	15,134.6	3,193.9	21.1
Poultry	16,173.4	13,661.2	2,512.2	18.4
Other	2,155.2	1,473.4	681.8	46.3

NET VOLUME SOLD BY SEGMENT

In tons				Change
	4Q20	4Q19	Volume		%
Total sales volume:	585,064.0	575,274.6	9,789.3		1.7
Poultry	447,604.7	452,487.2	(4,882.6)		(1.1)
Others	137,459.3	122,787.4	14,671.9		11.9

The Company’s 4Q20 net sales totaled $18,328.6 million; $3,193.9 million or 21.1% more than $15,134.6 million reported in 4Q19. The increase is a result of higher prices in our main business lines and higher volume sold in Others.

In 4Q20, sales of our U.S. operations represented 24.8% of our total sales compared to 27.9% in 4Q19.

GROSS PROFIT
In millions of pesos	4Q20	4Q19	Change
	$	$	$	%
Cost of sales	14,472.3	13,170.6	1,301.6	9.9
Gross profit	3,856.3	1,964.0	1,892.3	96.3
Gross margin	21.0%	13.0%	-	-

In 4Q20, cost of sales was $14,472.3 million; $1,301.6 million or 9.9% higher than $13,170.6 million reported in 4Q19. This increase was mainly due to higher unit cost in our main business lines as we start to observe some of the effects of the increase in prices of our main raw materials.

The Company´s gross profit in 4Q20 was $3,856.3 million, higher than the gross profit of $1,964.0 million in 4Q19, with a gross margin of 21.0% for 4Q20 vs 13.0% in 4Q19.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (“SG&A”)
In millions of pesos	4Q20	4Q19	Change
	$	$	$	%
Total SG&A	1,617.8	1,701.7	(83.9)	(4.9)

Total SG&A expenses in 4Q20 were $1,617.8 million; $83.9 million lower than the $1,701.7 million reported in 4Q19. Total SG&A expenses as a percentage of net sales represented 8.8% in 4Q20 and 11.2% in 4Q19.

OTHER INCOME (EXPENSE), NET
In millions of pesos	4Q20	4Q19	Change
	$	$	$	%
Other income (expense), net	(128.0)	(74.4)	(53.6)	72.1

This item mainly includes the sale of unused assets as well as hens and other by-products. We record such sales as expenses when the sale price is below the book value of those assets.

In 4Q20, we recorded other expenses of $128.0 million, compared with other expenses of $74.4 million reported in 4Q19.

OPERATING INCOME
In millions of pesos	4Q20	4Q19	Change
	$	$	$	%
Operating income	2,110.5	188.0	1,922.5	1,022.9
Operating margin	11.5%	1.2%	-	-

Operating income in 4Q20 totaled $2,110.5 million; $1,922.5 million higher than the Operating income of $188.0 million reported in 4Q19. This represents an operating margin of 11.5% for 4Q20, versus 1.2% operating margin in the same period of 2019. The increase in operating income is mainly attributed to higher prices in our main business lines, and higher volume sold in our Others segment.

NET FINANCIAL INCOME
In millions of pesos	4Q20	4Q19	Change
	$	$	$	%
Net Financial Income	(1,168.2)	(192.0)	(976.1)	508.4
Financial Income	(1,105.1)	(93.3)	(1,011.8)	1,084.9
Financial Expense	63.1	98.8	(35.7)	(36.2)

In 4Q20, the Company reported net financial loss $1,168.2 million, compared to a financial loss of $192 million reported in the same period of 2019. The result was mainly attributed to higher exchange rate loss due to the appreciation of the Mexican peso vs the U.S. dollar.

TAXES FOR THE PERIOD
In millions of pesos	4Q20	4Q19	Change
	$	$	$	%
Total Taxes	222.0	(153.8)	375.9	(244.3)
Income tax	479.6	314.5	165.1	52.5
Deferred income tax	(257.6)	(468.3)	210.8	(45.0)

Total taxes for the 4Q20 were $222.0 million favorable, compared with negative total taxes of $153.8 million of the same period of 2019. This is attributed to higher operating income in 4Q20.

NET INCOME
In millions of pesos	4Q20	4Q19	Change
	$	$	$	%
Net income	720.3	149.8	570.5	380.9
Net margin	3.9%	1.0%	-	-
Basic and diluted earnings per share¹	1.22	0.24	1.0	n/a
Basic and diluted earnings per ADR²	14.61	2.91	11.7	n/a
Weighted average Shares outstanding³	599,820	599,967	-	-

¹ In pesos
² in pesos, one ADR equals to twelve shares
³ In thousands of shares

The net income for 4Q20 was $720.3 million, representing $1.22 pesos of earnings per share, compared with a net income of $149.8 million, which represented a $0.24 pesos of earnings per share in 4Q19. This increase is mainly attributed to higher operating results. Net margin in 4Q20 was 3.9% compared to 1.0% reported in 4Q19.

EBITDA
In millions of pesos	4Q20	4Q19	Change
	$	$	$	%
Net income	730.2	145.5	584.7	402.0
Income tax expense (benefit)	222.0	(153.8)	375.9	(244.3)
Result in associates	(9.9)	4.3	(14.2)	(330.8)
Net finance (income) expense	1,168.2	192.0	976.1	508.4
Depreciation and amortization	340.8	323.1	17.7	5.5
EBITDA	2,451.3	511.1	1,940.2	379.6
EBITDA Margin (%)	13.4%	3.4%	-	-
Net revenues	18,328.6	15,134.6	3,193.9	21.1

EBITDA in 4Q20 reached $2,451.3 million representing an EBITDA margin of 13.4%, compared to an EBITDA of $511.1 million in 4Q19, with an EBITDA margin of 3.4%.

ACCUMULATED RESULTS

NET SALES BY GEOGRAPHY
In millions of pesos	2020	2019	Change
	$	$	$	%
Net Sales	68,791.3	61,655.2	7,136.0	11.6
Net sales in Mexico	49,302.4	44,723.5	4,578.9	10.2
Net sales in the U.S.	19,488.8	16,931.7	2,557.1	15.1

NET SALES BY SEGMENT
In millions of pesos	2020	2019	Change
	$	$	$	%
Net Sales	68,791.3	61,655.2	7,136.0	11.6
Poultry	61,359.1	55,653.0	5,706.1	10.3
Other	7,432.1	6,002.2	1,429.9	23.8

NET VOLUME SOLD BY SEGMENT

In metric tons				Change
	2020	2019	Volume		%
Total sales volume:	2,296,229	2,254,819	41,410		1.84
Poultry	1,772,528	1,739,448	33,081		1.9
Others	523,700	515,371	8,329		1.62

In 2020, net sales totaled $68,791.3 million; $7,136.0 million or 11.6% more than the $61,655.2 million reported in the same period of 2019.

In 2020, sales of our U.S. operations represented 28.3% of our total sales, compared with 27.5% in 2019.

OPERATING RESULTS
In millions of pesos	2020	2019	Change
	$	$	$	%
Cost of Sales	57,711.7	51,557.4	6,154.3	11.9
Gross Profit	11,079.6	10,097.9	981.7	9.7
Total SG&A	6,376.3	6,116.6	259.7	4.2
Other Income (expense)	(439.2)	(4.7)	(434.5)	9,176.3
Operating Income	4,264.1	3,976.5	287.5	7.2
Net Financial Income	868.6	381.3	487.4	127.8
Income Tax	1,430.3	1,125.0	305.4	27.1
Net Income	3,702.4	3,232.8	469.5	14.5

In the 2020, the cost of sales totaled $57,711.7 million; $6,154.3 million or 11.9% higher than $51,557.4 million reported in the 2019.

As a result, we reached a gross profit of $11,079.6 million and a gross margin of 16.1% in 2020, when compare to $10,097.9 million of gross profit and a gross margin of 16.4% reached in the same period of 2019.

Total SG&A in 2020 were $6,376.3 million; $259.7 million or 4.2% higher than the $6,116.6 million reported in 2019. In 2020 total SG&A expenses as a percentage of net sales represented 9.3% in 2020 and 9.9% in 2019.

In 2020 we had other expenses of $439.2 million, compared with other expenses of $4.7 million reported in 2019. The main variance was related to COVID expenses during 2020.

The operating income in 2020 was $4,264.1 million, which represents an operating margin of 6.2%, an increase from an operating income of $3,976.5 million with an operating margin of 6.4% in 2019.

The net financial income in 2020 was $868.6 million higher when compared to a net financial income of $381.3 million in 2019.

Total taxes were $1,430.3 million as of December 31^st, 2020. These taxes include $1,097.0 million of income tax and $333.3 million of deferred income taxes. This figure compares to total taxes of $1,125.0 million in 2019.

All the above resulted in a net income of $3,702.4 million or 5.4% of net margin in 2020, which represents $6.12 pesos of earnings per share; while in the 2019 the net income totaled $3,232.8 million, 5.2% of net margin and $5.37 pesos of net income per share.

EBITDA

In millions of pesos

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