Grupo Bimbo S.A.B. de C.V. Historical News Enrique Mendoza | Sr. Analyst Food & Beverages [email protected] Last updated on April 29, 2021 Ext. 1693 Actinver: (55) 1103 6600 BIMBO (Outperform): Positive 1Q-2021, Above Expectations The company posted very strong results in the 1Q21 that surpassed our expectations, and we anticipate a positive stock price reaction following the report. While we recognize that the 1Q21 marks the end of the period of margin expansion, the stock is trading at 6.35x EV/EBITDA, the lowest valuation level in history, representing a 19% discount vs its 3-year average. Full report here
April 21, 2021 Food & Beverage Sector: Consistently Delivering Positive Results The earnings season has arrived, for Food & Beverage companies we expect positive results for Q1 2021 that should also continue into Q2. We remain broadly optimistic in Mexican F&B stocks - as increased risk appetite might work as a speed limit to US equities, we see attractive opportunities in Mexican-based companies with material exposure to the US economy like GRUMA (58% of revenues), BIMBO (53% of revenues), and AC (37% of revenues). On the other hand, the end of the pandemic should boost FEMSA’s future results and we expect it to be the consumer staple with the largest growth figures over the coming years. Full report here
February 25, 2021 BIMBO (Outperform): Positive 4Q; Strong Sales And Cost Control BIMBO closed the year with a very strong performance, figures for the quarter surpassed our expectations in each and every line. We highlight the double-digit growth in dollar sales in North America, the better than expected commodity costs and better productivity savings. In addition, the net debt declined by 8%QoQ reaching the lowest leverage of the past 10 years. It was also pleasant to receive a better than expected guidance for 2021. Full report here
October 22, 2020 BIMBO (Outperform): Positive Q3 On Further Gains In Mkt. Share BIMBO posted a positive report that beat market expectations at all fronts. We would anticipate a positive market reaction. Net revenues climbed by 14.6% in line with our expectations. The increase is mainly explained by an 8.5% growth in dollar- denominated sales in North America. While we expected increases in raw material costs, BIMBO still enjoyed from a lower cost of sales and also lower indirect cost due to previous investments. The net debt/EBITDA also improved to 2.23x from
Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com 2.82x in the 3Q19. BIMBO modified its guidance 2020: While the management still expects a top-line growth in low double-digits and EBITDA growth in mid-to-high teens, now it expects a tax rate in the mid-to-high 30’s (high 30’s – low 40’s previously) and US$550 – 600M CAPEX (US$650 – 750M previously). Full report here
October 20, 2020 Food & Beverage: Q3 Preview—Expecting A Healthy Recovery The pandemic crisis has had very different effects for companies in the food and beverage sector for both, their operating results and their stock prices as well. While food companies have been favored by higher demand for their products, beverage companies have had negative effects on volumes and product mixes. For the Q3 2020, we expect demand for food to remain high, favoring the volumes of BIMBO, GRUMA, and LALA. The volumes of soft drink companies, although they would continue to fall, would show a clear recovery from what was observed in the Q2. In the case of beverage companies, we expect double-digit growth in EBITDA for AC (e. 6), which we believe should give a clear boost to its share price. Full report here
July 28, 2020
BIMBO (Outperform): Positive 2Q20 Report, Above Expectations Continues registering sequential improvements in all fronts, especially in Mexico, EAA, and North America. We continue to be positive in the name after the report, coupled with the appealing valuation. The company has increased its expectations for 2020, as a result of the strong 1H2020, the base guidance was an increase in sales at a high single-digit and EBITDA at double-digit and Tax rate to continue between 38%-42%. The new guidance incorporates the positive 1H2020 and the expectations to remain at the same trend; as a result, the company is expecting a low double-digit growth at sales, increasing at mid to high teens at the EBITDA, and Tax rate to remain in the rage of 38% - 42%. Full report here
June 19, 2020
BIMBO (Mkt. Perform): Prepays US$400 Million Debt Prepaid USD$400 M from the credit withdraw of USD$720 M. The rationale behind the loan was to increase the company's liquidity and to strengthen the balance sheet to face the pandemic. However, 1Q20 results were above expectations and the same trend will continue during a toughest 2Q20. As a result, BIMBO decided to prepay 55% of the loan. It is worth mentioning that the company continues with a strong cash position and with USD$1.7 Bn still available for its outstanding debt. Following the news, we are materializing our “Outperform” call following BIMBO’s +33% return since mid-February against a 16% decline from the Mexbol index. We are now rating this name as “Market Perform”. For the
2 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com time being, we are leaving our assumptions for 2020 unchanged: 8%/10%/15% YoY growths in Sales/EBITDA/EPS, respectively.
April 30, 2020
BIMBO (Outperform): Annual Shareholders Meeting The company will pay a dividend of P$0.50 per share, payable on May 12th, a yield of 1.4%. Also, the company increased the buyback program in P$10,000 m to reach P$15,200 million.
April 28, 2020
BIMBO (Outperform): 1Q20: Positive Report, Well Above Expectations The company continues with a strong delivery, despite COVID-19 issues. The Top-line was boosted by volume growth in all regions and a positive FX effect, as the majority of the hard currencies appreciated vs. the MXN. We need to highlight the positive results in North America, Mexico, and Latin America, with significant improvements in the last region due to Brazil's performance. Sales, EBITDA, and net income increased by 7.0%, 11.4%, 42.3%, respectively, excluding the non-cash charge of MEPPs liabilities. The Net Debt/EBITDA continues at a manageable level of 2.8x. Full report here
April 21, 2020 1Q20: Previews For F&B & Consumer Discretionary
We expect the Food & Beverage sector to be limited impact by the COVID -19 lockdown. However, some names such as BIMBO, GRUMA, and CUERVO expected to be negatively impacted by the weak demand in Asia, Europe, the US, and South America. In the Discretionary Consumption industry, we expect a significant decline in sales for some companies due to the closure of the stores/ units during the 1Q120. Full report here
March 26, 2020 BIMBO (Outperform) Disposed US$720 M from its revolving credit.
BIMBO disposed US$720 million of its committed revolving credit facility, which has a total value of US$2 billion. The disposed credit line has increased the maturity by 3 years. These resources will be used to refinance the remaining US$200 million of the 2020 notes, while the remainder will be used for increasing the Company's liquidity, prioritizing flexibility and financial strength for the current environment At this moment, Grupo Bimbo has US$1.3 billion available in its committed credit facility for future disposals. The company's Net Debt to EBITDA continues to be below 3x.
3 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com
February 21, 2020 BIMBO (Outperform, PT P$41.79) 4Q19: Positive report, excluding negative FX effect and one-off expenses
Bimbo continues with sequential improvements in all fronts and especially in Mexico and Europe, Asia and Africa. We are positive in the name after the report and the extraordinary appealing valuation. The Company reported a limited sales decrease of 1.5% due to negative FX, excluding the FX effect net sales grew 2.5%. Mexico, sales posted a 3.6% YoY growth, driven by higher volumes across most of the categories. BIMBO’s gross margin and EBIT registered a 2.5% and a 1.9% decline, as a result of higher raw material prices and substantial restructuring investments in North America coupled with extraordinary expenses in Brazil. The Adj. EBITDA posted a 1.7% YoY increase and a 40 margin expansion, boosted by the IFRS16 adjustments. Net profit posted a 27.4% YoY decline, negatively impacted by FX losses (P$158 M), the one-time expense from the USD$600 M liability management transaction of 2020 note, and the implementation of IFRS-16. The bottom-line was impacted by a higher tax rate (42.3% in 4Q19 vs. 38.8% in 4Q18). It is worth noting that the company continues to reduce the leverage from 2.6x to 2.4x Net debt to EBITDA.
February 14, 2019 BIMBO (Outperform, PT P$41.79) Expands its operations to Kazakhstan
Grupo Bimbo, through its subsidiary Bimbo QSR, announced a joint venture with Food Town, an exclusive buns supplier and franchisee of McDonald’s in Kazakhstan. Grupo Bimbo will hold 51% after the pertinent approvals that are expected to take place during the 1Q20. No further detail has been disclosed.
October 25, 2019 BIMBO (Outperform, PT P$41.80) 3Q19: Neutral report, below consensus expectations Non-cash charges continue to impact the company’s results
The Company reported a limited sales increase, 3.6% YoY, as all the regions reported positive figures.
4 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com Mexico, sales posted a +2.1% YoY, boosted by volume. North America, revenues increased 3.4%, driven by the positive FX effect. Europa, Africa & Asia region, top-line increased 1.6% YoY, despite a negative FX effect. BIMBO’s EBIT reported a –1.5% decline, as a result of adjustments of the Multiemployer Pension Plans (MEPP’s) of US$48.0 M The EBITDA reported a 16.1% YoY increase, boosted by strong results in Mexico and North America. Full report here
October 15, 2019 Previews Food & Beverage Low expectations for the 3Q Earnings Results. Partially offset by USD appreciation vs. MXN
During the 1H19 of the year, the industry performed below expectations in the majority of the cases. For the 2H19, the trend continues almost on the same path, as the consumer remains cautious given uncertainty from the new administration’s policies. We expected a weak earnings quarter as a result of low single-digit growth, on the back of higher prices rather than volume. We only expect a couple of names to surpass market expectations, such as AC, ALSEA, BACHOCO, and SPORTS. Although the sales growth is not expected to be significant, we forecast a higher growth rate (at least high single-digits) at the EBITDA and EPS level. We expect weak results for companies such as KOF, BIMBO, and CUERVO. Even though the companies are going to report a low sales growth figure, we are going to see a limited improvement, at the EBITDA level. Even though Cuervo is facing an easy comparable base at the EBITDA level, we do not foresee any improvement due to higher prices in raw material and the USD appreciation vs. the MXN. Full report here
October 2, 2019 BIMBO (Buy, PT P$44.00) Acquires Spanish facility
Bimbo has agreed to aquire "Paterna" a plant from Cerealto Siro Foofs in Valencia, Spain. We see the acquisition as positive for the company's operations as the main proportion of the EAA region (Europe, Africa & Asia) comes from Spain. At this moment, the company has not disclosed any information about the size of the facility or
5 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com payment. The acquisition of one plant should not change our company's recommendation of Price target. It is crucial to highlight that we will be able to know the size of the transaction until the results of the 4Q19.
August 13, 2019 Argentina’s first round general elections Consumption, our first glance on the impact on mexican companies
Recalling last Sunday’s Argentinian first round of the presidential elections, in which the markets anticipated positive results for Mauricio Macri towards his presidential re-election process. However, the results gave a negative surprise, giving a victory to Alberto Fernandez by a relevant 15% difference (47.4% of the volte vs. Macri’s 32.3%). Mr. Fernandez represents the populist left-leaning party. From the list of our Mexican covered companies, there are six with a significant portion of their operations in Argentina. In the following table we show their exposure to this market as a percentage of total sales and EBITDA, as well as the impact their share prices had on Monday 12, 2019, following the news:
At this moment we have ran our earnings models for the aforementioned companies in order to determine the potential negative impact in the case the exchange rate (ARS/P$) stands at the current level. Note that, on Monday 12, 2019, the Argentinian peso (ARS) registered a sharp 17% depreciation against the U.S. dollar to ARS 53.00 / US$, and of -16% vs. the Mexican peso.
LAB, we have a P$22.00 PT and should reduce until P$19.00. AGUA, we have a P$21.50 PT and should reduce until P$20.00. ALSEA, we have a P$43.00 PT and should reduce until P$41.00.
6 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com AC, we have a P$120.00 PT and should reduce until P$118.00. KOF, we have a P$130.00 PT and should reduce until P$128.00. BIMBO, we have a P$44.00 PT and should reduce until P$43.70.
There was an important difference in the votes of the primary elections in Argentina, reason why the MERVAL (Argentinian stock index) plummeted 48% in US$-terms in Monday’s trading season. However, it is important to mention that the second round will take place on October 27th. If Alberto Fernandez’s victory materializes, we will then revise our price targets for all the aforementioned companies. Although Genomma Lab declined 6.9% in today’s session, we would expect further volatility ahead until the second round of the general elections. In the cases of AGUA, ALSEA, AC, KOF & BIMBO, we believe that, at current price levels, their shares have almost fully incorporated the Argentinian negative effect in their operations. That being said, we are maintaining unchanged our recommendations at this point, as follows: AGUA, AC, KOF, BIMBO, and LAB at Buy; ALSEA at Hold.
July 23, 2019 BIMBO (BUY, PT P$44.0) Results 2Q19 - Neutral Report due to a significant slowdown in the Mexican Operation
On a comparable basis, considering last year same period VSP adjustments (approx. P$2,000m) and IFRS-16, EBITDA should’ve posted flat figures; we consider IFRS-16 is adding approximately P$685m of depreciation. Bimbo reported an almost flat figure at the top-line, 0.6% YoY, mainly due to the appreciation of the MXN vs. all currencies and weak volume in Mexico and North America. Mexico, sales remained flat YoY, boosted by price increases YoY, as volume posted negative figures due to a weak consumption environment. North America, revenues decreased 2% YoY due to a negative FX effect and negative volume. EAA, top-line increased 5% YoY, despite a negative FX; positive results came on the back of the Mankattan acquisition. BIMBO reported 54% YoY EBITDA increase, which resulted in a 380 bps margin expansion to end at 10.6%. Mexico, EBITDA declined 8% YoY, and margin recorded a 130 bps contraction, reaching 16.4%. Negative results came on the back of a weak consumption environment and higher raw material prices. North
7 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com America, recorded an 11% YoY increase, and margin posted a 110 bps expansion to end at 9.8%; the aforementioned results were due to operating efficiencies originated by the VSP. EAA, reached P$337m vs. a net loss during last year, posting a 5.1% EBITDA margin vs. a - 0.8% from 2Q18. Finally, net profit posted a 525% YoY increase, due to the VSP adjustments; on a comparable basis, net income should’ve posted a 44% YoY decrease. Finally, tax rate was lower, 34% vs. 50% from last year.
July 12, 2019 Food & Beverage, and Others 2Q19 Previews: Deceleration? Limited growth for the earnings results
We expect limited growth during 2Q19e earnings season for the Food & Beverage, and Others Industries. We estimate that just a couple of names will be able to perform positively, considering the recent ratings and outlook reductions on Mexico by the rating agencies. Also, our Economic team had reduced its GDP growth from 1.7% to 1.5% for 2019e. Consumption indicators such as consumer confidence, ANTAD data, unemployment claims, foreign direct investment, and others are performing below expectations. For the quarter, we expect sales to be driven by price increases rather than volume, as in the majority of the companies’ volumes will be negative. We do not expect a positive effect linked to the FX as the MXN appreciated vs. all related hard currencies. Full report here
July 3, 2019 Food & Beverage Update Reducing Price Targets in Bimbo and KOF while our Buy recommendations continues unchanged.
We are reducing our PT in Bimbo from P$44.0 to P$43.0 and for KOF from P$135.0 to P$130.0. Despite the target reduction both companies continue with a BUY recommendation. We have reduced our growth expectation for the consumption industry towards the second half of the year, while also anticipating limited growth for 2020. Also, our Economic team recently reduced its growth expectations for GDP (1.5% vs. 1.7%) – and today they made a slight reduction in the expected inflation rate from 4.0% to 3.9%. These are two names (Bimbo & KOF) that should be slightly negatively impacted in terms of sales performance
8 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com due to the lower growth expectations. We believe Bimbo and KOF will continue to post positive growth rates, yet at a moderate pace for 2019 and 2020, when compared to our previous assumptions. BIMBO: Our sales CAGR has been reduced from 5.0% to 4.7% in 2019-2024 and now we expect flat EBITDA margins of 10% vs. a slightly improvement for 2020. KOF: Our sales CAGR has been reduced from 8% to 7.5% in 2019-2024 and in EBITDA margin we expect a limited 10 bps expansion due to a better performance in Brazil. It is important to highlight that despite the price reduction, we continue with a positive view in the both companies with a BUY recommendation.
May 2, 2019 BIMBO (BUY, PT P$51.0) 1Q19 Report — Positive Results
BIMBO keeps posting solid results, boosted by North America, Mexico and EAA figures. We expect a positive reaction during the coming days. We are increasing our PT from P$44.0 to P$51.0, and we reiterate our BUY recommendation. The Company reported 4% YoY sales increase, we believe BIMBO has been able to maintain the consumers’ attention despite a challenging quarter for the industry. Mexico, sales grew 4% YoY, driven by bread, buns and cakes categories. North America, revenues increased 3%, boosted by higher prices coupled with an FX benefit. EEA, top-line climbed 6% YoY, due the Mankattan acquisition combined with a FX benefit. BIMBO reported 24% YoY EBITDA increase, which resulted in a 190 bps margin expansion to reach an 11.5% margin; it’s important to mention administrative expenses decreased mainly by the IFRS-16 effect. The EBITDA growth and margin expansion was despite the increase of the raw materials costs in the majority of the regions. Finally, net profit posted a 2% YoY growth, despite higher financial expenses due to higher rates and the negative impact of the IFRS-16, P$2,039m vs. P$1,610m. It is also important to mention that the company was subject to a lower tax rate during this quarter 35% vs. 40% from last year’s same period. Company Net Debt / EBITDA decreased from 2.8x to 2.6x.
April 10, 2019 Previews 1Q19 Food & Beverage and Others
9 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com With a Slow Start of the Year: Social Programs Haven't Boosted the Companies' Figures
We expect a weak 1Q19 earnings season for the Food & Beverages industry, and others sector. Although some names will perform positively. We have noticed that consumption in Mexico during the first quarter of the year has not developed as our forecasts; consumers are not yet spending money from the social programs. We believe that the real scope of the new social programs will begin during the second half of the year. Positive reports: among the reports in this season that we believe could be outstanding or above consensus' expectations are BIMBO, HERDEZ, AC, and SPORT. Neutral reports: due to the slow performance of the economy during the quarter, we expect that AGUA, KUO, LALA, GRUMA, KIMBER, and CUERVO will post neutral results. Negative reports: companies that can surprise on the negative side could be BACHOCO and KOF. Full report here
February 22, 2019 BIMBO (BUY, PT P$44.0) 4Q18 First Pass: Strong Report, Mexico and North America Continue Unstoppable
BIMBO results came in above ours and the consensus’ expectations. We expect a positive reaction during tomorrow’s trading session. Mexico and North America operation continue with a strong pace; Europe, Asia and Africa (EEA) recorded significant improvements. The Company reported 8% YoY sales increased boosted by Mexico and North America positive performance. The Mexican sales grew 9% YoY, driven by volume increases in all categories. North America revenues increased 6%, boosted by higher prices coupled with a 4% benefit from FX. BIMBO reported 31% YoY EBITDA increase, which resulted in a 200 bps margin expansion to reach an 11.6% margin, although raw materials costs increased YoY. Mexico adj. EBITDA grew 13.7% YoY, margin recorded a 80 bps expansion to end at 20.3%; positive results came on the back of top-line solid performance, despite higher distribution costs. North American operation recorded a 17.2% YoY growth, margin posted a 90 bps expansion reaching 9.9%, partially offset by restructuring investments and sales positive performance. EEA made the expected turn around with a 1.3% EBITDA margin vs. a -15% from 4Q17. Finally, net profit posted 489% YoY growth, due to a lower tax rate, 39% vs. 75% from 4Q18, as a result of no
10 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com impact of the VSP program, and despite higher financial costs. Company Net Debt / EBITDA declined from 3.4x to 2.8x due to the prepayment of USD$123.
February 12, 2019 Food & Beverages, and Others 4Q18 Previews Expecting Weak Results
We expect a negative 4Q18 earnings season for the Food & Beverage, and Others sector. We believe that sales will be driven by price, while volumes will post negative figures in most cases. A double adverse effect will impact results in their cost structure, namely higher cost in raw materials in USD terms, and a depreciation of the MXN vs. the USD of 4%. Full report here
October 25, 2018 BIMBO (BUY, 2019e PT P$44) Positive Report
BIMBO results came in above ours and the consensus’ expectations. Mexico and U.S. operation continues with a positive trend, and Europe, Asia and Africa (EEA) began to improve. Bimbo reported 10.7% YoY sales increase, boosted by the positive performance in Mexico, U.S. and EAA operations. It is important to mention the largest operation, U.S., continued with positive sales volume. Bimbo reported 15.1% YoY EBITDA increase, which resulted in a 40 bp margin expansion. The main positive driver was Mexico; EEA continues with a significant recovery as the region reported a positive 1.1% EBITDA margin vs. -15.3% during the last year. Finally, the EPS posted 6.2% YoY growth, mainly affected by higher financial costs due to higher rates, and the MXN depreciation vs. the USD, compared to 3Q17. October 11, 2018 3Q18 Preview: Food & Beverage, and Others A Challenging Earning Season for the Industry
We expect a neutral to negative 3Q18 earnings results for the Food & Beverage and Others sectors. We believe the high comparison base, coupled with the uncertainties about the Mexican and Brazilian presidential elections have impacted the consumption in both countries and the majority of the companies under our coverage. Some of the companies’ top-line results are expected to be
11 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com benefited due to the depreciation of the MXN vs. the USD such as: AC, GRUMA, LALA, HERDEZ, BIMBO, BACHOCO, CUERVO and KUO. Full report here
July 25, 2018 BIMBO (BUY, PT P$45.0) 2Q18 Results: Weak Report due to North America and EAA Issues
The company reported an 11.2% sales increase that came- in-line with our projection and above Consensus’ forecast; sales were boosted by the higher prices in the domestic market and positive trend in the North American business. EBITDA reported a -22.3% decline, EBITDA margin suffered a significant contraction, (320 bps) to end the quarter at 7.2%. The Latin American division continued to report negative figures due to the unfavorable performance in Brazil. Mexican and North America operations reported EBITDA margins of 17.8% and 2.9% (without the USD$105 the North America margin would be 8.6%), respectively. Europe recorded improvements, showing a -0.7% margin, a significant improvement from the -7% in the 2Q17. Net income reported an 86.9% decline, due to higher financial cost, higher tax rate (45% vs 50%), and the aforementioned operating results.
July 24, 2018 BIMBO (BUY, PT P$45) 2Q18 Result will be published after the Market Close
We continue to be positive on the domestic market, but we infer the expected increase in sales will come on the back of higher prices; we expect a +10% sales increase. For the North American operation, we expect an increase in sales also boosted by the depreciation of the MXN vs. the USD.
12 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com In the European region we expect an impressive result due to the consolidation of EBB and a positive recovery in the PanRico acquisition. Thus, we expect a 220 bps contraction at the EBITDA margin to end at 10.8%. The main positive driver will be the European region as we foresee a turn a turn from a –7% to a 5% EBITDA margin due to the last two acquisitions. In the case of the Mexican operation, we foresee an EBITDA margin expansion of 50 bps to reach 17.8%. We continue to foresee a challenging environment in Latin-America; primarily in Argentina and Brazil due to the recent economic and political changes. Net profit will show a –39% YoY decrease, we expect the same tax rate of 45%.
June 29, 2018 BIMBO (HOLD, PT P$45.0) Concludes China Acquisition
Yesterday the company announced that it has completed the acquisition of Mankattan Group, a relevant player in the Chinese market. The final resolution includes the regulatory approvals. Its important to highlight that the Chinese market is one of the largest bread markets in the world and for Bimbo this means an important opportunity to continue to increase its presence in Asia. Bimbo has not disclosed any figure related to the transaction, we believe the acquisition was at least at 1.5x P/Sales and 11x EV/EBITDA.
June 27, 2018 BIMBO (HOLD, PT P$45.0) The US Region Successfully Completes VSP; Adjusting Our Estimates as Well.
Bimbo Bakeries USA (BBU) has successfully completed its Voluntary Separation Program (VSP) in the U.S.. As a result, the company will be able to reduce approximately 600 job positions. Bimbo will have to register an US$ 100m non-cash charge in the 2Q18 to account for the cost of worker’s severance packages. However, we expect a positive impact in Bimbo’s long-term results. Change in Estimates. Unrelated to this, we are also adjusting our estimates to account for a difficult price outlook in the medium-term. We are reducing our projections from a 5.5% top-line 2018- 2023 CAGR to 4.9%, given our expectation for lower price increases during 2019-21 in Mexico, the most profitable
13 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com region for the company (59.7% of total EBITDA), bearing in mind high price adjustments in the most recent quarters, which could limit the company’s flexibility going forward. We are also reducing our EBITDA CAGR for 2018-2023 from 9.2% to 8.8%, for the same reasons mentioned above. Given the aforementioned, we are reducing our 2018 PT from P$49.0 to P$45.0. We calculate a 10.5x 2018 EV/EBITDA multiple, similar to the three year average level. We reiterate our HOLD recommendation.
May 24, 2018 BIMBO (BUY, PT P$49) Upgrading to BUY from HOLD due to an Attractive Valuation
Currently Bimbo’s share price has declined 9% in the last month and 12% in the last 12 months. Today it trades below 8.0x EV/EBITDA L12M; this multiple represents a 35% discount vs. the average of the last 3 years. We understand the company could be negatively affected by a further depreciation of the MXN vs. the USD, as a result of the volatility created by the presidential elections in Mexico. However, in the long term we believe the MXN should return below P$18 per dollar, despite the winner of the four possible candidates. We believe Bimbo should trade at 9.0x EV/EBITDA 2018, resulting in a PT of P$49.0, considering a 5.3% sales CAGR from 2018-2023 and a 7.7% EBITDA CAGR from 2018-2023, which also means a 12% EBITDA margin.
April 27, 2018 BIMBO (HOLD, PT P$49): Positive Report, Recent Acquisition Continued to Add Value Company sales reported an increase of 0.4% YoY, in-line with our expectations mainly impacted by the negative effect of the depreciation of the USD vs. the MXN. The results came in below consensus’ expectations. EBITDA: recent integration all around the world had started to play a favorable roll in the company’s profitability, although raw material prices have continued to increase in most of the local currencies, the company was able to expand the EBITDA margin by 10bps. EBITDA margin expansions came from all the regions excluding North America. Net income reported below our expectations as the comprehensive financial result increased 10% vs. last year due to an increase in debt to acquire businesses. Despite
14 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com the increase in interest expense, the company was able to decrease its Net Debt/ EBITDA from 3.5x to 3.2x and currently the average debt maturity is 11.1 years with an average cost of 5.2%.
April 13, 2018 Food & Beverage 1Q18 Estimates We Foresee a Weak Earnings Season due to the MXN Appreciation
We expect a neutral to negative 1Q18 results for the Food & Beverage sector. We believe the high comparison base and the strong 7.7% appreciation of the MXN vs. the USD, will play against most of the companies top-line figures. Most companies in our coverage universe should report during the last two weeks of April. Among the reports we believe will be outstanding or above consensus’ expectations are Sports, Cuervo, Bachoco, KOF & Gruma. These will continue to benefit from strong domestic consumption, while Kof’s will be boosted by positive dynamics in Brazil, and Cuervo for the recent price increases. Since most of the companies increased prices in a 6-7% range during the last part of 2017 and the beginning of 2018, sales will be driven by higher prices rather than volume. Companies such as AC, BACHOCO, LALA and KOF will see sales boosted by new subsidiaries. Full report here
April 5, 2018 BIMBO (HOLD, PT P$49) Signed a Green Energy contract with INVENERGY
The company signed an agreement with INVENERGY to acquire 100 MW from the Santa Rita Park, in Texas, which will reduce 260,000 tons of CO2 by 2019. Furthermore, with this green energy contract, the company will be completely sustainable for the U.S. operation, once the Santa Rita Park begins operations. As a result, the company will reach 75% of clean energy generation. The company’s goal is to consume 100% green energy by 2020. After this announcement our company valuation continues to be HOLD with a P$49 PT by the end of 2018.
February 23, 2018 BIMBO (HOLD, PT P$49)
15 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com Mixed report, Mexican operation was able to partially offset the FX-limited results of other regions.
BIMBO filed a mixed 4Q17 report that came below ours and consensus’s expectations. Margin contractions continue to be a main issue over the company since the last year (2016). After fine-tuning our earnings model, we continue with our current P$49 PT for 2018 and due to the limited potential return we also leave our recommendation unchanged at HOLD. Reported figures for the quarter include revenues growing 3.0% YoY, EBITDA increase 11.7% YoY and net profit growing 395% YoY; these results were -1.9%, 29.8% and -43.2% relative to our estimates. It is worth noting that Net Profit benefited from one-off record linked to MEPP’s.
February 13, 2018 BIMBO (HOLD, PT P$49) Acquired a Chinese Company, Mankattan.
Through a press release Bimbo mentioned the acquisition of Mankattan, the second most important bakery in China. Currently Bimbo has not disclosed any relevant information regarding the acquisition. Some Chinese papers mention the Mankattan company owns 3% of the market share. We estimate the whole Chinese operation could represent 2.3% of total sales. And if Bimbo pays 1x P/Sales, the company leverage should increase to 3.5x Net Debt to EBITDA, which is also the maximum allowed level according to the covenants, and the same historical level during the Canada bread acquisition in 2014.
February 9, 2018 4Q17 Preview Food & Beverage. Only Some Names Will Shine in 4Q17 Earnings
Food & Beverage sector. We believe the high comparison
16 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com base and the impact of the earthquakes in Mexico will continue to weigh mostly to the operations in Southern Mexico. Also, the appreciation of the peso will not play in favor for the companies’ top-line figures. Most companies in our coverage universe should report during the last two weeks of February. Among the reports we believe will be outstanding or above consensus’ expectations are SPORTS, GRUMA, and KOF. These will continue to benefit from strong domestic consumption, while KOF’s will be boosted by positive dynamics in Brazil. Since most of the companies increased prices in a 5-6% range during the first half of 2017, sales will be driven by higher prices rather than volume. Companies such as AC, BACHOCO, LALA and KOF will see sales boosted by new subsidiaries, even though all of them are expected to report gross margin contractions due to higher prices in raw materials and the new subsidiaries’ lower profitability. Full report here
January 23, 2018 BIMBO (HOLD, PT P$49.0) Downgrading to HOLD
After a positive short-term return in the stock and in advance of a weaker-than-expected consumer to show up in 4Q17 results, we have decided to take profits in the short term and wait and see if election-driven consumption warrants an eventual return to this name later bin the year. We are downgrading Bimbo from buy to HOLD while we reduce our PT from P$51.0 to P$49.0. We foresee significant slowdown in the Mexican consumer for BIMBO’s products in the 4Q17, and believe this could carry on throughout the year. If the MXN continues its depreciation vs. the USD this will impact margins in Mexico, while the U.S. operation has already been affected by higher raw material prices in USD terms and there seems to be no sign of a reversal anytime soon. Our estimates already consider that the integration of East Balt Bakeries will bring significant improvement for the company’s U.S. operation, and in addition the U.S. tax reform will effectively translate into a lower tax rate. Keep in mind that BIMBO’s balance will show further debt increases in the upcoming quarterly results, given the acquisition of EBB. We look for ND/ EBITDA to 2.7x, compared to 2.5x previously.
October 27, 2017 BIMBO (BUY, PT P$54.0) FX played against North America’s Figures
17 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com
Sales reported a 0.9% YoY growth to the end at P$65,390m, in-line with expectations Mexico and Europe posted a 12.2% YoY and a 10.4% YoY increase in sales, respectively. In the other hand North America and Latin America made a negative performance with a 3.8% and 12.8% decline, respectively. Is important to highlight the North America operation reported the first sale increase in the year in USD term, just as we forecasted in our company update. Otherwise in Latin America’s revenues increased in all local currencies but the FX played against. EBITDA reported a 9.7% YoY declined to end at P$7,110m, mainly due to the negative figures in the European region and higher raw materials cost in Mexico – the consolidate EBITDA margin contracted by 140bps. EBITDA at the Mexican operation reported an 8.3% YoY increase, but posted a 60bps contraction due to higher raw material costs. North America division finished with an 8.7% YoY declined and 50bps margin erosion due to higher distribution costs. European division posted negative figures due to the €35m Panrico cost integration. Latin America surprised with a 15.2% YoY hike, mainly by a better performance in key region such as Brazil. Net income reported a 32.7% YoY declined due to aforementioned pressures, higher tax rate (44.9% vs. 42.5% in the 3Q16)as a result of a better performance in the US operation.
October 26, 2017 BIMBO (BUY, PT P$54.0) 3Q17 Results Scheduled for Today AMC
We continue to be positive in the domestic market, but we infer the expected increase in sale will come in the back of higher prices, we expect a 8% sales growth. For the North American operation our expectation calls for the first increase in USD the L12M with a 2% in term of USD and flat in MXN due to the appreciation of the MXN vs. the USD. In the European region we expect a limited but positive performance. Thus, we expect a 3.6% YoY EBITDA growth, a flat margin of 12.1% vs. last year figure, the main negative driver will be on the back of the European operation due to the integration cost, which will generate a negative EBITDA margin. In the case of the Mexican operation we foresee an EBITDA margin contraction due to the cost raw material which has the FX value of the last 6 month. We continue to foresee a challenging environment in Latin-America; primarily in
18 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com Argentina due to the recent economic and political changes, Brazil will continue to show marginal improvements. Net profit will show a negative performance due to the higher interest payments in terms of pesos plus the higher expected tax rate of 45% vs 42% in the last year.
October 17, 2017 BIMBO (BUY, PT P$54) Concludes EBB Acquisition
Today Bimbo has announced the final agreement of the Acqusition on East Balt Bakeries (EBB) with a total amount fo USD$650m after received regulatory approvals. We forecast the EBB will add 3% to sale and 5% to EBITDA as the margin is arounf 16.7% above 11% of the Holding also we expect the EBB will finally turn in black numbers the European EBITDA. Also is expected to boost the North America figures.
October 13, 2017 Food & Beverage 3Q17 Previews The Tough Comparison Base has Begun. We expect neutral to negative
3Q17 results for most companies in the sector. We believe due to the high comparison base and meteorological phenomena in the US and Mexican market the results will be negatively impacted. During this quarter the appreciation of the MXN vs. hard currencies will not play in favor for the companies’ top-line figures. Most of our coverage universe sectors are expected to report during the last two weeks of October. However our South American coverage will release information until November. Among the reports we believe will be outstanding or above consensus expectations in the 3Q17 are GRUMA and SPORTS. These companies will continue to reap the fruits from the strong behavior of the domestic consumption, although most of the companies increased prices in a 5-6% range during the first half of the year, so the expected increase in sales will be on the back of higher prices rather than volume.
19 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com 3Q17 results Expectations— Food & Beverages & Others Sal es EBITDA Net Income 3Q16A 3Q17E % Chg 3Q16A 3Q17E % Chg 3Q16A 3Q17E % Chg *Andina 422,830 463,161 10% 66,081 68,337 3% 23,586 14,739 -38% *CCU 356,818 395,810 11% 51,208 62,261 22% 17,248 16,368 -5% AC 24,427 36,660 50% 5,330 6,615 24% 2,100 3,550 69% Bachoco 12,612 14,537 15% 1,233 1,508 22% 991 991 0% Bimbo 64,785 67,140 4% 7,874 7,894 0% 1,967 2,087 6% Cuervo 4,930 6,924 15% 1,609 2,260 13% 437 1,000 -10% Femsa 100,325 118,670 18% 13,469 16,754 24% 6,691 17,438 161% Gruma 17,209 19,725 15% 2,806 3,177 13% 1,535 1,381 -10% Herdez 4,543 4,775 5% 753 743 -1% 212 214 1% Kimber 8,719 9,199 5% 2,351 2,309 -2% 1,206 1,063 -12% Kof 42,351 49,404 17% 8,180 9,200 12% 2,265 2,736 21% Lala 13,701 15,811 15% 1,483 2,088 41% 736 1,119 52% Maseca 4,513 4,863 8% 754 811 8% 554 438 -21% Sport 352 429 22% 65 80 24% 11 14 21% Total 298,468 348,138 17% 45,908 53,439 16% 18,704 32,031 71% Source: Actinver * Figures in billions of Chilean Pesos
September 28, 2017 BIMBO (BUY PT P$54.0) It’s Time to Turn the Oven On
In recent weeks we upgraded our recommendation to BUY from SELL with a P$54.0 PT for 2018, an 26% upside. The main drivers of this bullish view are the recent acquisitions; primarily East Balk Bakery (EBB) that operates in 11 countries, out of which 8 are new for Bimbo. This comes in addition to our positive expectation for the recovery of the North American business and for the Mexican operation to continue with a strong pace. These two regions represent 82% of sales and 97% of EBITDA. Key Value Drivers for the coming 18 months. The recent acquisitions should prove to be accretive both on an operating point of view, and also valuation-wise; we are turning bullish on the company also looking at the 26.8% retreat the stock has suffered since July 22th of 2016. Our sales and EBITDA estimates call for double digit growth in 2018 despite the expected consolidation costs. We are expecting an 11% sales growth from 2018 over 2017. For the EBIT and EBITDA we are expecting 17% and 18% increases respectively. This implies a 10.4% EBITDA margin which means a 70bps expansion mainly boosted by the new acquisition —- EBB.
July 26, 2017 BIMBO (SELL, PT P$49.0) North America Issues Continue
BIMBO filed a weak 2Q17 report which was slightly off our expectations, but well below the consensus. Margin contractions continues to be a company issue since the
20 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com last year, the non-recurring cost of the European operation are expected to be one-timers. After fine-tuning our earnings model, we have reduced our PT from P$50.0 to P$49.0. Considering that the market has fully incorporated the accretive acquisition of East Balt Bakeries announced just a few days ago (stock is up 4% since the deal was disclosed), we have decided to reduce our rating from Buy to SELL due to the limited potential return to our PT by the YE-2017. Reported figures for the quarter include revenues growing 7.4% YoY, EBITDA up 0.8% YoY and net profit declining 21.4% YoY; these results were -0.8%, -8.0% and 6.2% relative to our estimates.
July 25, 2017 BIMBO (BUY, PT P$50.0) Preview, Negative 2Q17
We continue to expect a positive outlook in the domestic market, we infer the expected increase in sales will come on the back of higher prices, we expect an 8% sales growth. For the North American operation, we foresee a decline in sales (-2%) in USD-terms, but as the company reports in Mexican pesos we expect a flat figure. In the European region we expect a limited but positive performance in euros and in MXN will remain at the same pace as MXN appreciated 0.1% vs. Euro. Thus, we expect a 10% EBITDA margin, a 160 bps contraction vs. last year figure, the main negative performance will be in the Mexican operation, despite prices had experienced a limited increase, the depreciation continues to play a negative role against the company’s margins, but we continue to foresee certain improvements in the U.S. operation due to the benefit of the low cost of its raw material. We still expect a challenging environment in Latin -America; primarily in Argentina due to the recent economic and political changes, Brazil will continue to show marginal improvements. Net profit will show a positive performance despite the higher interest payments due to the depreciation of MXN vs. USD.
July 24, 2017 BIMBO (BUY, PT P$50.0) Announced it will acquire East Balt Bakeries for USD$650m
Bimbo (BUY, PT P$50): Announced it will acquire East Balt Bakeries for USD$650m. After fine-tuning our earnings
21 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com model we have decided to increase our PT to P$50.0 from the previous P$48, and in-line with the same increase we upgrade our hold rating to BUY. East Balt is a bakery focused on the foodservice business, with operations in 11 countries, 8 of which would be new to Bimbo. The acquired company reported USD$420m in sales during the last 12m and generated USD$70m in EBITDA, which means a 16.7% EBITDA margin vs. 10.2% of Bimbo during the last 12 months. This means incremental sales and EBITDA of 2.7% and 4.1% for Bimbo, and confirms the immediately accretive nature of the acquisition, as stated by the company itself. In-line with company’s comments, we believe the leverage will increase until 2.8x by the year end from our previous expectation of 2.4x. We expect the company will close the transaction during the 3Q17 and we expect to begin consolidation during the 4Q17. The transaction multiples are: 1.55x P/sales, 13.3x P/E and 9.3x EV/EBITDA. These compare favorably to Bimbo’s current EV/EBITDA of 9.6x and P/E of 38.3x. The transaction is all-cash and free of debt; it will be paid by an existing committed long-term revolving credit facility.
July 17, 2017 Food & Beverage and Others 2Q17 Previews The Positive Trend Should Continue
We expect positive 2Q17 results for most companies in the sector. We believe that even a high comparison base should not be a match for the strong expected results, although the depreciation of the MXN vs the USD was limited against last quarters. Most of the sectors under our coverage universe are expected to report during the last two weeks of July. However, our South American coverage will release information until August. Among the reports we believe will be outstanding or above consensus expectations in 2Q17 are: AC, LALA, HERDEZ and SPORTS. These companies will continue to reap the fruits from the strong behavior of the domestic consumption, although most of the companies increased prices in a 5-6% range during the first quarter, so the expected increase in sales will have an important component of price over volume.
June 16, 2017 BIMBO (HOLD, PT P$48.0) With a Limited Potential to our Price Target.
22 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com We are downgrading our Buy recommendation to HOLD, due the limited potential return to our PT. Our price target stays at P$48.0/share. Grupo BIMBO current multiples trade at 9.7x EV/EBITDA 2017e, 34.2x P/E 2017e and 1.9x P/BV 2017e, all of them trade in line to the five years average. The North American operations continue to face a slowdown; just as the last four quarters, and we expect this to continue for the remaining of 2017.
May 26, 2017 BIMBO (HOLD, PT P$48) Acquired 65% of an Indian Baked Goods Company
Bimbo announced the acquisition of Ready Roti, an Indian baked goods company, leader in New Delhi. Bimbo bought 65% of the equity. Ready Roti sales reached USD $48 m in 2016, adding 0.4% to BIMBO’s total sales. The company will consolidate the operation into the European region. Additionally, four plants. We continue with our HOLD recommendation and P$48.0 PT for year-end 2017.
April 27, 2017 BIMBO (HOLD, PT P$48.0) Weak Report; the U.S. Operation Continues its Negative Trend
BIMBO filed a negative 1Q17 report, slightly off our expectations but well below the consensus. After fine- tuning our earnings model, we continue with our P$48.0 PT with a HOLD rating for YE-2017. Reported figures for the quarter included revenues growing 16.5% YoY, EBITDA up 2.8% YoY and net profit declined of 28.2% YoY; these results were 2.1%, -5.4% and –4.0% relative to our estimates.
April 26, 2017 BIMBO (HOLD, PT P$48.0) 1Q17 Results Due Today AMC
We are positive in the domestic market, but we infer the expected increase in sale will come in the back of higher prices, we expect a 15% sales growth. For the North American operation we foresee a declined in sales (-2%) in USD-terms, but as the company reports in Mexican peso we expect a 11% growth. In the European region we
23 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com expect a positive performance as the 12 months cycled has not completed since the acquisition of Iberia Donuts (PanRico). It is important to note that FX will boost sales due to the company’s exposure to the Canadian and USD (~13%USD), and in lesser extent to the European operations. However margins will show limited expansion in the North America operation but in the Mexican we will continue to see contractions due to the appreciation of the USD vs. MXN. Thus, we expect an 9.6% EBITDA margin, 5bps contraction vs. last year figure due to a less volumes in North America and higher prices in raw materials in the Mexican operation. We foresee a complicated environment in Latin-America; primarily in Argentina due to the recent economic and political changes, Brazil will continue to show marginal improvements. Net profit will show a positive performance due to the appreciation of the MXN vs. the USD in QoQ. As an important portion of the debt is denominated in USD.
April 6, 2017 BIMBO (BUY, PT P$52.0) Changes in the Finance Management Direction.
Mr. Guillermo Quiroz Abed will retire after 18 years in Bimbo and will be effective August 1st, 2017. Mr. Diego Gaxiola will incorporate as the new Chief Finance Officer during June 1st, to ensure a smooth transition. Mr. Gaxiola has more than 20 years of experience in the sector.
February 24, 2017 BIMBO (BUY, PT P$52.0) Weak Report, Other Expenses and U.S. Performance Impacted Results
BIMBO filed a neutral 4Q16 report slightly off our expectations but well below the consensus. After fine tuning our earnings model we have reduced our PT from P$57 to P$52, yet we continue with our BUY rating unchanged. The revision mostly reflects lower than expected performance in North American operations, as in 4Q16 sales increased ( 12.7%) only due to the FX, but in dollar terms declined ~7%; volume and prices seem to have gone without significant improvement, although the company did record a 10bp EBITDA margin improvement due to lower cost in raw materials. Reported figures for the quarter include revenues growing 15.7%YoY, EBITDA up 24.4%YoY and net profit decline of 71.4% YoY due to other
24 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com expenses and a higher tax rate, 50% vs 40% of last year; these were –1.1%, -13.8% and –95.6% relative to our estimates.
February 23, 2017 BIMBO (BUY, PT P$57.0) Will Report After the Close of the Market
We continue to observe a strong consumption performance in the domestic market, along with the North America region, which basically will be the driver of this report due to the FX impact. Also the European region wil be boosted by the acquisition of PanRico. It is important to note that FX will boost sales due to the company’s exposure to the Canadian and USD (~20%USD), and in lesser extent to the European operations. However margins will show limited expansion due to the decline in raw material prices as they are linked to the USD. Thus, we expect an 11% EBITDA margin, 1.5pp contraction vs. last year figure due to a less volumes in North America and higher prices in raw materials in the Mexican operation. We foresee a complicated environment in Latin-America; primarily in Argentina due to the recent economic and political changes, Brazil will continue to show marginal improvements. Net profit will show a decline due to a higher tax rate, 42%.
November 22, 2016 BIMBO: (BUY, PT P$57.0) Facing a Limited Impact with a Stronger Dollar
BIMBO will be one of the companies with a limited negative impact due to the Mexican peso depreciation vs the US dollar, following the outcome of the US Presidential election. Companies that will be benefited are those with a high revenue exposure to the USD, a hedge in their raw materials and a low amount of debt pegged to the dollar. Bimbo has some of this elements, but will also face a negative impact due to the high exposure to the US dollar in terms of debt and also, its Mexican division (32% of consolidated sales) will be affected as 25% of its cost structure is linked to the USD and its sales are entirely denominated in Mexican pesos. After fine-tuning our earnings model, we have decreased our price target from P$60.0 to $57.0, yet we continue with our BUY rating given that the potential return is still attractive. One of the negative implications is its debt, in which 60% is
25 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com denominated in USD, 23% in Canadian dollars, 7% in Euros and a mere 10% in Mexican Pesos. We estimate Net Debt will increase by 9.8% at the close of 2016, only by the impact of the US dollar, which means Net Debt to EBITDA ratio will increase from the current 2.7x to 3.0x by years end.
26 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com