Well see an environment that will continue with commodities
at high prices relative to the past, but more stable compared with the recent past
Grupo Bimbo SAB, the world’s largest breadmaker, doesn’t plan any major acquisitions until 2014 as the company seeks to first obtain cost savings from its latest purchases, Chief Executive Officer Daniel Servitje said.
“This year is going to be a year particularly focused within the company on processing the integrations of the acquisitions we did last year,” Servitje said in an interview yesterday at a summit in Los Cabos, Mexico. “There could be one here or there, but of a relatively small size.”
Bimbo, based in Mexico City, bought Argentina’s Alimentos Fargo SA, which had annual sales of about $150 million, in September. In October, it won approval to buy Sara Lee Corp. (SLE)’s North American bakeries for $675 million and agreed to buy Sara Lee’s bakery unit in Spain andPortugal for about $150 million.
Bimbo can reduce costs by requiring the factories it acquired to use the same processes as their new owner, Servitje said at the B-20 summit. That should improve profit margins in the second-half 2012 compared with 2011, he said.
“In the long term, today we’re leading players worldwide in breadmaking, and we want to continue that leadership, which implies maintaining a level of organic growth and, here and there, also important non-organic growth,” Servitje said.
Bimbo’s first-quarter profit margin, excluding interest, taxes, depreciation and amortization, fell to 10.5 percent from 12.2 percent a year earlier, the company said April 26.
Profit margins were also hurt by prices for commodities such as wheat that are priced in dollars, which prompted cost increases as the peso weakened. The peso sank 9.5 percent against the dollar last month, the most among major currencies, as concern Europe’s debt crisis is worsening prompted investors globally to avoid higher-yielding assets.
Wheat prices may fall as global supplies of the grain are “adequate” and as economic concerns cut demand, Rabobank International said today in a report.
“We’ll see an environment that will continue with commodities at high prices relative to the past, but more stable compared with the recent past,” Servitje said.
Wheat futures for December delivery surged 3.3 percent to $6.725 a bushel today on the Chicago Board of Trade.
After selling $800 million in dollar-denominated bonds in January and 5 billion pesos ($361 million) in Mexican bonds in February, Bimbo doesn’t need more debt sales, Servitje said.
“It’s our intention to reduce our leverage from what we have today,” he said. “Our refinancing was very opportune, at good rates, and that gives us a lot of security in the company’s long-term plans.”
Mexican companies that are sound financially are still attracting investment in the debt market, he said.
“While before it was difficult to be a Latin American company, now it’s an advantage,” he said.
Bimbo fell 0.6 percent to 30.79 pesos at the close in Mexico City.