Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Grupo Bimbo SAB de CV (BMBOY, Financial) reported a 7.4% increase in net sales, showcasing strong performance across diverse geographies and categories.
- The company achieved a record adjusted EBITDA margin of 14.7% for the third quarter, driven by strong volume growth and favorable mix effects.
- In Mexico, Grupo Bimbo SAB de CV (BMBOY) achieved a strong EBITDA margin of nearly 22%, with positive volume contributions and lower commodity costs.
- The Europe, Asia, and Africa region reported a remarkable adjusted EBITDA margin expansion of 240 basis points, resulting from solid sales performance and efficiencies throughout the supply chain.
- Grupo Bimbo SAB de CV (BMBOY) continues to expand its global footprint with strategic acquisitions, including Pagnifique in Uruguay and Wickbold in Brazil, enhancing its portfolio and market presence.
Negative Points
- The North American market faced a challenging environment with a 4% decline in top-line sales, attributed to weak consumer consumption and strategic exits from non-branded businesses.
- Despite lower commodity costs, the adjusted EBITDA margin in North America contracted by 140 basis points due to strategic investments and one-time charges related to bakery closures.
- Grupo Bimbo SAB de CV (BMBOY) announced the closure of five bakeries, which may lead to short-term operational disruptions and costs.
- The Latin American region experienced a challenging consumption environment, particularly in Colombia and Chile, impacting overall performance.
- The company's net debt increased due to strategic investments and currency depreciation, with a net to adjusted EBITDA ratio of 2.8 times, slightly above the comfort zone.
Q & A Highlights
Q: Can you comment on the promotional activity in the US and the outlook going forward? Also, explain the difference between EBIT and EBITDA margins.
A: (Mark Bendix, Executive Vice President) We are focusing on offering more value through promotions and price reductions, but the response isn't as strong as in previous years. We're using our RGM process to evaluate promotions and meet consumer needs. (Diego Cuevas, CFO) The higher decrease in EBIT margin compared to EBITDA is mainly due to increased depreciation and amortization, and a small charge from Mets.
Q: What is Grupo Bimbo's comfortable level of leverage, and will you continue with the share buyback program?
A: (Diego Cuevas, CFO) We are comfortable with a leverage around 2.5 times. Although slightly above that now, we have a conservative capital structure and strong debt maturity profile. We have bought back 55 million shares this year and will continue the buyback program conservatively.
Q: Can you provide an update on the competitive landscape in North America, particularly in bread, rolls, and buns?
A: (Mark Bendix, Executive Vice President) We've exited several non-strategic private label businesses, and our core branded business is improving. We've grown unit share in bagels, sweet baked goods, and snacks. Competition remains rational, and we're focused on innovation and cost management.
Q: Could you elaborate on the strong performance in Europe, Asia, and Africa (EAA) and the sustainability of margins?
A: (Rafael Romero, CEO) The EAA margins are sustainable due to organic growth and accretive acquisitions. The region has high per capita consumption and strong growth, which aligns with our strategic goals. (Diego Cuevas, CFO) Most growth is organic, with inorganic contributions enhancing margins.
Q: What are the strategic plans for Grupo Bimbo's branded business in China?
A: (Rafael Romero, CEO) The business environment in China is challenging, but our quick service restaurant business is strong. We see some channels responding well to branded initiatives, and 2025 will focus on building on our presence in various categories.
Q: Can you provide insights into the hedging position on raw materials for the end of the year and next year?
A: (Diego Cuevas, CFO) We are nearly fully hedged for the fourth quarter and have hedged about a third of our needs for 2025, expecting a positive effect. The impact won't be as significant as in 2024, but we anticipate continued benefits.
Q: What is causing the weakness in Chile and Colombia, and how do you see this improving?
A: (Rafael Romero, CEO) In Chile, the competitive environment is challenging, especially in modern trade. In Colombia, weak consumption and new food taxes impact us. However, we see sequential improvements and are optimistic about future growth in both markets.
Q: Should we expect net debt to stabilize after recent growth?
A: (Diego Cuevas, CFO) Assuming the completion of two pending acquisitions, we may see additional pressure on leverage. However, we expect to start deleveraging after 2025, maintaining a long-term view on growth and debt management.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
