Grupo Bimbo S.A.B. de C.V. (ADR) ((MX:BIMBOA)) has held its Q2 earnings call. Read on for the main highlights of the call.
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During the recent earnings call, Grupo Bimbo S.A.B. de C.V. (ADR) expressed a generally positive sentiment, highlighting robust global performance, strategic innovations, and acquisitions, particularly in Latin America and EMEA regions. Despite facing challenges in North America, the company remains optimistic about future margin improvements and strategic investments.
Strong Global Performance
Grupo Bimbo reported a significant acceleration in sales growth, achieving record performance outside the U.S. in both sales and EBITDA margin. The company’s innovation rate surpassed 12%, with 99% of daily consumption products now free from artificial flavors and colorants, showcasing its commitment to healthier options.
Resilience in Mexico
In Mexico, sales grew by 3% despite a softer consumer environment, reaching a new all-time high. The company achieved a record high margin of 20.3%, attributed to a favorable mix and lower cost of sales, demonstrating resilience in its home market.
Latin America Momentum
Excluding FX effects, Latin America set a record for second-quarter net sales, with double-digit growth in regions like Brazil and El Salvador. The adjusted EBITDA margin expanded by 100 basis points, reflecting strong momentum in the region.
Expansion in Europe, Asia, and Africa
Sales in Europe, Asia, and Africa increased by nearly 7%, driven by acquisitions and strong performance in the Bimbo QSR business unit, as well as in India, Romania, and the U.K., highlighting the company’s successful expansion strategy.
Acquisition of Don Don
Grupo Bimbo successfully closed the acquisition of Don Don, a key player in Southeast Europe’s baking industry. This acquisition is expected to be accretive to earnings, further strengthening the company’s position in the region.
Challenges in North American Market
Sales in North America declined by more than 4%, reflecting continued softness in U.S. consumption due to value-seeking behavior and strategic exits from certain non-branded clients, posing a challenge for the company.
Continued Pressure on EBITDA Margin
The overall EBITDA margin contracted due to challenges in the North American market, although some sequential improvement was noted, indicating potential for recovery.
Weaker Results in China
The branded business in China showed weakness, compounded by minimum wage increases and the phaseout of wage subsidies in Romania, affecting overall performance in these regions.
Forward-Looking Guidance
Looking ahead, Grupo Bimbo anticipates mid-single-digit growth in sales for the full year, revised down from previous expectations due to currency impacts. The adjusted EBITDA margin is expected to be flat or slightly contracted. CapEx guidance has been lowered, and the net leverage ratio is forecasted to close the year around 3x. The company expects sequential improvements in North America’s EBITDA margin, driven by operational enhancements, and aims for a Health Star rating of 3.5 stars or higher for its bread, buns, and breakfast portfolio by year-end.
In summary, Grupo Bimbo’s earnings call reflected a positive outlook despite challenges in North America and China. The company is focused on strategic growth through innovation and acquisitions, with a strong emphasis on improving margins and expanding its global footprint. Investors can expect continued resilience and strategic investments as Grupo Bimbo navigates the evolving market landscape.