Industrias Bachoco, S.A.B. de C.V.

First-quarter 2022 net sales were Mex$24,367 million, up Mex$5,009.4 million or 25.9% from Mex$19,357.6 million a year ago. Cost of sales rose 27.1% to Mex$19,240.5 million, leading to gross profit of Mex$5,126.5 million and gross margin of 21.0%, versus Mex$4,218 million and 21.8% in Q1 2021. SG&A was Mex$1,999.1 million, or 8.2% of sales, operating margin was 12.9%, EBITDA margin was 14.4% versus 15.1%, and net income was Mex$2,128 million, with net margin of 8.7%; EPS was Mex$3.60 versus Mex$3.51 last year. CapEx was Mex$915.2 million, up from Mex$555.7 million, partly due to RYC Alimentos integration, and the annual shareholders’ meeting approved a cash dividend of Mex$1.64 per share, or Mex$19.68 per ADR. The company did not provide formal next-quarter or full-year financial guidance, but said it expects commodity volatility to remain high, with pricing likely to stay strong while raw-material costs are difficult to predict.

Rodolfo Ramos framed the quarter as a period of significant cost pressure from corn and soybean meal, but said the company focused on what it can control: efficiency, sales mix, market share, and integrating RYC Alimentos. He emphasized improvements in the U.S. operation after prior labor shortages, and said Bachoco has been able to offset some input inflation through hedging, operating efficiencies, and pricing. His tone was cautious but constructive, repeatedly noting uncertainty in commodity markets while expressing confidence in the company’s discipline and ability to keep profitability relatively normalized over time.

Daniel Salazar quantified the quarter’s performance and stressed that revenue growth was not enough to offset inflation in inputs. He cited net sales of Mex$24,367 million, gross profit of Mex$5,126.5 million, gross margin of 21.0%, SG&A of Mex$1,999.1 million, EBITDA margin of 14.4%, net income of Mex$2,128 million, and EPS of Mex$3.60. He also noted net financial expenses of Mex$235.7 million versus net financial income of Mex$319.6 million last year, driven by peso movements, and CapEx of Mex$915.2 million, with part of the increase tied to RYC Alimentos assets. On capital returns, he said the annual meeting approved a cash dividend of Mex$1.64 per share, or Mex$19.68 per ADR.

Analysts focused on Bachoco’s long-term growth and margin trajectory, the impact of inflation on demand, bird flu exposure, the government’s anti-inflation plan, and the proposed tender offer by the controlling family. Management said long-term EBITDA should remain “very close” to historical levels and that pricing should remain strong, but raw-material costs are hard to forecast. On demand, they said chicken should hold up because it is the cheapest protein, while also noting the market may be tighter because of constrained meat supply and hatchability issues. On the tender offer, management said it is an external process, the company has no additional information yet, and the board’s independent directors would be the ones to opine once the offer is formally authorized; they also said the process could take one to two months at least.