MEXICO CITY — Even after raising prices, Grupo Bimbo S.A.B. de C.V. built market share in the United States in the fourth quarter ended Dec. 31, 2018, said Daniel Servitje, Bimbo’s chief executive officer.
“We implemented price increases and experienced growth in our strategic brands such as Sara Lee bread, Entenmann’s Little Bites and Barcel snacks,” he said in a Feb. 22 conference call. “We achieved market share gains in the sweet baked goods and mainstream bread categories in the U.S. as well as in the bread and snacks categories in Canada. However, these results continued to be pressured by the decline in the private label category.”
As previously reported, 2018 operating income in North America was 5,100 million pesos ($285 million), down 34% from 7,701 million in 2017. Sales were 143,848 million pesos ($7,425 million), up 4.5% from 137,662 million. In the fourth quarter, operating income in North America was 2,101 million pesos ($109 million), up 14% from 1,841 million in October-December 2017. Sales were 38,630 million pesos ($1,987 million), up 6% from 36,295 million.
Bimbo’s adjusted EBITDA margin in North America expanded 90 basis points in the fourth quarter.
“This was achieved by the top-line growth, along with the benefits from past investments, such as the V.S.P. (voluntary separation program) in the U.S. and the organizational restructuring initiative in Canada, which more than offset the commodity, energy and transportation pressure as well as restructuring expenses in part related to the closure of the Madison, Wis., plant in the U.S. and an impairment charge related to some trademarks due to a strategic portfolio rationalization initiative to drive growth and profitability in our core to top-performing brands,” Mr. Servitje said. “Looking ahead, we expect continued inflation pressure from commodities, energy and transportation in the region. To offset this, we will leverage our revenue growth management processes to drive efficiencies in promotional strategies, improve our product mix and increase productivity through our supply chain optimization initiative.”
Fred Penny, president of Bimbo Bakeries USA, said management is pleased with fourth-quarter results.
“We were successful this year in managing the inflationary headwinds through a combination of pricing, favorable mix and our productivity efforts,” he said. “And looking forward, we really have to continue to do the same thing. I think the commodity and other inflation headwinds are going to continue from what we see today. In fact, they may be a bit more significant in certain input costs. And so we’re going to have to continue to look for additional pricing efficiencies and trade promotion efficiencies and, obviously, continue to work hard, which the team has done a great job of this year on driving wastes out of our business and driving productivity across the supply chain.”
Asked whether other baking companies also have raised prices, Mr. Penny offered an indirect response.
“If you look at Nielsen and I.R.I. data, you would see pricing movement in certainly most of the categories we participate in,” he said. “No one is immune from the inflationary pressures that are out there. So everybody has to deal with them as best as they can.”
Capital investment decisions at Grupo Bimbo are not driven by considerations of what may drive the company’s share price higher in the near term, Mr. Servitje said, responding to an analyst question. Instead, such decisions reflect management’s impressions of how the moves will “affect the performance of our business in the future,” he said.
“We will continue with this path whenever we see opportunities to create that stronger, more sustainable business whenever and whatever it happens,” he said. “And that’s why we announced these three closures of U.S. bakeries this year, and that’s why we are consolidating our business in Beijing into one more efficient plant. And we will continue to look on whenever we see opportunities to do that, even though they might not bring us positive numbers in the next quarter or this year.”
Grupo Bimbo net majority income in 2018 was 5,808 million pesos ($302 million), up 25% from 4,630 million in 2017. Net sales were 288,266 million pesos ($14,983 million), up 8% from 267,515 million.
In the fourth quarter, net majority income was 2,515 million pesos ($131 million), up sharply from 427 million in the same period a year earlier. Sales were 76,309 million pesos ($3,966 million), up 8% from 70,931 million.
Mr. Servitje said Bimbo ended the year with record sales, gross profit, operating income and adjusted EBITDA.
Bimbo shares trading on the Mexican Bolsa moved solidly higher Feb. 22 following the release of the financial results the previous evening. The Bimbo stock price closed at 37.65 pesos on Feb. 22, up 1.83 pesos, or 5%, from the close of 35.82 a day earlier.