Grupo Bimbo Q3 profits rise but Argentina and Brazil drag down LATAM performance

By Kacey Culliney

- Last updated on GMT

Grupo Bimbo quarterly report Q3 profits up, LATAM down
Grupo Bimbo has reported strong net sales and profits for its third-quarter but performance in Latin America was dragged down by 'political and market turmoil' in Brazil and Argentina, its CEO says.

The bakery major posted a net profit rise of 6.1%, tallying up MXN$1.81bn (US$89.2m) for the third-quarter (Q3) of 2018. Total net sales were up 10.7% at MXN$72.3bn (US$3.5bn) thanks to strong performances in Mexico and North America where regional net sales were up 9.3% and 9.4% respectively.

However, Latin American net sales dropped 3.2% with Grupo Bimbo citing foreign exchange rate pressures and challenging economic conditions in Brazil and Argentina as important factors.

Daniel Servitje, chairman and CEO of Grupo Bimbo, said the company had faced some clear “macroeconomic challenges”​ in Latin America for the quarter.

“The big story was Brazil and Argentina, where political and market turmoil coupled with the depreciation of currencies had a significant impact on almost every sector, as well as on consumer confidence overall,”​ Servitje told investors on last week's earnings call.

Argentina and Brazil woes or promise?

Earlier this year, Argentina was granted a $50bn International Monetary Fund loan​ – the largest in the IMF organization's history – to help shift it out of its fragile economic position.

Servitje said that during Q3, Bimbo had closed two of its plants in Argentina, along with one in Canada, that should “translate to important benefits in the future”​.

However, just recently, the company unveiled an upgraded bakery facility in San Fernando​ after spending $31m expanding production lines and at the time said Argentina remained a “competitive operation”​.

Brazil, whilst economically more stable – coming out of its severe crisis that started in 2014 – just recently voted in far-right candidate Jair Bolsonaro as president, following months of tense build-up. The country also experienced a nationwide trucker strike in May that had severe implications for many industries, including food and beverage.

Bimbo told us in April, however, that Brazil remained “very significant”​ for the company​, as it launched a line of sprouted grain breads in the market.

Mexico, Colombia, Guatemala and Costa Rica strong

By contrast, Servitje said Grupo Bimbo delivered “strong, top line results”​ and saw “healthy volume growth”​ across all categories and channels in Mexico.

“The convenience channel outperformed, and the reformulation of Gansito and good results of Nito, Oroweat and Bracel brands also contributed,”​ he said.

Grupo Bimbo said the solid Q3 performance in Mexico had also been helped by lower raw material costs.

Strength in the country continued despite concerns raised by the company earlier this year around potential volatility​ related to July's presidential election.

The bakery major also reported a significant net sales surge of 51.1% in the Europe-Asia-Africa (EAA) region, owing largely to the July completion of its acquisition of China's second-largest wholesale bakery major The Mankattan Group.

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