Securities and Exchange Commission

Washington, D.C. 20549 

 

FORM 6-K

 

Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934

 

FOR THE THIRD QUARTER ENDED AS OF SEPTEMBER 30, 2018

 

BACHOCO INDUSTRIES

(Translation of Registrant’s name into English)

 

Avenida Tecnológico #401

38010 Celaya, Guanajuato, Mexico

(Address of principal office)

 

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

 

(Check One) Form 20-F x Form 40-F ¨

 

(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing information to the Commission pursuant to Rule 12g-3-2(b) under the Securities Exchange Act of 1934.)

 

(Check One) Yes ¨ No x

 

(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b). 82_

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Industrias Bachoco, S.A.B. de C.V. (Registrant)  
/s/ Daniel Salazar Ferrer, CFO  

 

Date: October 24, 2018

 

 

Industrias Bachoco Announces Third Quarter 2018 Results

CELAYA, Mexico, Oct. 24, 2018 /PRNewswire/ -- Industrias Bachoco, S.A.B. de C.V., "Bachoco" or "the Company", (NYSE: IBA; BMV: Bachoco) announced today its unaudited results for the third quarter ("3Q18") and accumulated ("9M18") 2018 results ending September 30, 2018. All figures have been prepared in accordance with International Financial Reporting Standard ("IFRS") ,and are presented in nominal million Mexican Pesos ("$").

HIGHLIGHTS- 2018 vs. 2017

CEO COMMENTS
Mr. Rodolfo Ramos Arvizu, Chief Executive Officer of Bachoco, stated: "We faced a more than expected, challenging third quarter in our Mexico and U.S. operations.

"In Mexico, as it is typical for a 3rd quarter, we observed a lower demand, and our prices were affected negatively, even more than we expected and on the other hand, we also saw higher cost of sales. The combination of those two conditions caused an important adjustment in our margins.

"In the U.S. industry we observed oversupply conditions for all main animal proteins which continued pushing poultry prices to low levels, impacting margins also in our U.S. operation.

"Our EBITDA margin for the quarter was 0.5%, which was lower than the EBITDA margin of the third quarter of 2017. As a result, our EBITDA for the nine months of the year was 9.1%, lower when compared to 12.2% EBITDA margin of the same period of 2017.

"Despite the challenging conditions of this quarter, our financial structure continues strong. We ended the quarter with a net cash position of $12,382.6, and the fundamentals of our company remain in place.

"We are confident that our financial discipline, our focus on capturing efficiencies and being close to our customers, will allow us to improve our results as soon as industry conditions recover and we will be able to take advantage of the opportunities that may arise in the future."

EXECUTIVE SUMMARY
The following financial information is expressed in millions of nominal pesos, except for amounts per share or per ADR, with comparative figures for the same period in 2017.

QUARTERLY RESULTS


NET SALES BY GEOGRAPHY





In millions of pesos


3Q18

3Q17

Change



$

$

$

%

Net sales


14,114.4

14,216.2

(101.8)

(0.7)

Net sales in Mexico


9,865.0

9,918.5

(53.5)

(0.5)

Net sales in the U.S.


4,249.4

4,297.7

(48.3)

(1.1)






NET SALES BY SEGMENT





In millions of pesos


3Q18

3Q17

Change



$

$

$

%

Net sales


14,114.4

14,216.2

(101.8)

(0.7)

Poultry


12,844.8

12,970.1

(125.4)

(1.0)

Others


1,269.7

1,246.1

23.6

1.9

 

NET VOLUME SOLD BY SEGMENT





In tons


3Q18

3Q17

Change



$

$

$

%

Net sales


539,823

541,710

(1,886.6)

(0.3)

Poultry


441,135

422,278

18,856.7

4.5

Others


98,688

119,432

(20,743.3)

(17.4)

The Company's 3Q18 net sales totaled $14,114.4 million, $101.8 million or 0.7% less than the $14,216.2 million reported in 3Q17. The decrease is mainly a result of lower prices and less volume sold in our other business segment when compared to 3Q17.

In 3Q18, the sales of our U.S. operations represented 30.1% of our total sales; this compares with 30.2% it represented in 3Q17 of our total sales.

GROSS PROFIT





In millions of pesos


3Q18

3Q17

Change



$

$

$

%

Cost of sales


12,955.6

11,732.3

1,223.2

10.4

Gross profit


1,158.9

2,483.9

(1,325.0)

(53.3)

Gross margin


8.2%

17.5%

-

-












In 3Q18, the cost of sales totaled $12,955.6 million, $1,223.2 million or 10.4% higher than $11,732.3 million reported in 3Q17. This increase was mainly due to higher unit cost and higher volume sold in our poultry business.

The gross profit was $1,158.9 million with a gross margin of 8.2% in 3Q18. This profit is lower than the gross profit of $2,483.9 million and gross margin of 17.5% reported in 3Q17.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A")

In millions of pesos







3Q18

3Q17

Change



$

$

$

%

Total SG&A


1,499.1

1,346.7

152.3

11.3

Total SG&A expenses in 3Q18 were $1,499.1 million, $152.3 million or 11.3% more than the $1,346.7 million reported in 3Q17. Total SG&A expenses as a percentage of net sales represented 10.6% in 3Q18 compared to 9.5% in 3Q17.

OTHER INCOME (EXPENSE), NET

In millions of pesos


3Q18

3Q17

Change



$

$

$

%

Other income (expense), net


79.7

23.7

56.0

235.7

This item mainly includes the sale of unused assets as well as hens and other by-products. We record such sales as expenses when the sale price is below the book value of those assets.

In 3Q18 we reported other income of $79.7 million, compared with other income of $23.7 million reported in 3Q17.

OPERATING INCOME





In millions of pesos


3Q18

3Q17

Change



$

$

$

%

Operating income


(260.5)

1,160.9

(1,421.3)

(122.4)

Operating margin


-1.8%

8.2%

-

-

Operating income in 3Q18 was negative by $260.5 million with a negative operating margin of 1.8%, a decrease when compared to operating income of $1,160.9 million and a 8.2% operating margin reported in 3Q17.

The less operating income is mainly attributed to lower gross profit than in 3Q17.


NET FINANCIAL INCOME





In millions of pesos


3Q18

3Q17

Change



$

$

$

%

Net Financial Income


(63.6)

193.2

(256.8)

(132.9)

Financial Income


294.1

208.8

85.3

40.8

Financial Expense


357.7

15.6

342.1

2,191.4

In 3Q18, the Company reported a negative net financial income of $63.6 million, compared to income of $193.2 million reported in the same period of 2017; mainly due to higher financial expense and FX valuation.

TAXES FOR THE PERIOD





In millions of pesos


3Q18

3Q17

Change



$

$

$

%

Total Taxes


(136.6)

356.2

(492.8)

(138.4)

Income tax


(208.4)

515.1

(723.5)

(140.5)

Deferred income tax


71.8

(158.9)

230.7

(145.2)

Total taxes for the 3Q18 were negative by $136.6 million, compared with total taxes of $356.2 million in the same period of 2017. The decrease in taxes was due to lower operating result.

NET INCOME





In millions of pesos


3Q18

3Q17

Change



$

$

$

%

Net income


(187.5)

997.9

(1,185.4)

(118.8)

Net margin


(1.3)%

7.0%

-

-

Basic and diluted income per share1


(0.32)

1.66

(2.0)

-

Basic and diluted income per ADR2


(3.79)

19.91

(23.7)

-

Weighted average Shares outstanding3


600,000

600,000

-

-

1 In pesos
2 in pesos, an ADR equal to twelve shares
3 In thousands of shares

The net income for 3Q18 was negative by $187.5 million, representing a basic and diluted income loss of $0.32 pesos per share, compared with a net income of $997.9 million, which represented $1.66 pesos of basic and diluted income per share in 3Q17. This income represents a negative net margin of 1.3% and 7.0% for 3Q18 and 3Q17, respectively.

EBITDA





In millions of pesos


3Q18

3Q17

Change



$

$

$

%

Net controlling interest income


(189.7)

995.6

(1,185.3)

(119.1)

   Income tax expense (benefit)


(136.6)

356.2

(492.8)

(138.4)

   Result in associates


2.3

2.3

(0.1)

(2.8)

   Net finance (income) expense


63.6

(193.2)

256.8

(132.9)

   Depreciation and amortization


336.6

288.8

47.9

16.6

EBITDA


76.2

1,449.6

(1,373.5)

(94.7)

EBITDA Margin (%)


0.5%

10.2%

-

-

Net sales


14,114.4

14,216.2

(101.8)

(0.7)

EBITDA in 3Q18 reached $76.2 million, representing an EBITDA margin of 0.5%, compared to an EBITDA of $1,449.6 million in 3Q17, with an EBITDA margin of 10.2%.

ACCUMULATED RESULTS






NET SALES BY GEOGRAPHY





In millions of pesos


9M18

9M17

Change



$

$

$

%

Net Sales


45,631.1

43,017.4

2,613.7

6.1

Net sales in Mexico


32,510.5

31,254.5

1,256.0

4.0

Net sales in the U.S.


13,120.6

11,762.9

1,357.7

11.5






NET SALES BY SEGMENT





In millions of pesos


9M18

9M17

Change



$

$

$

%

Net Sales


45,631.1

43,017.4

2,613.7

6.1

Poultry


41,335.4

38,919.5

2,415.9

6.2

Other


4,295.7

4,097.9

197.8

4.8


NET VOLUME SOLD BY SEGMENT






In tons




Change



9M18

9M17

Volume

%

Total sales volume:


1,637,861

1,615,409

22,452

1.39

Poultry


1,294,632

1,262,101

32,530

2.58

Others


343,229

353,308

(10,079)

(2.9)







During the first 9M18, net sales totaled $45,631.1 million, $2,613.7 million or 6.1% more than the $43,017.4 million reported in the same period of 2017. The sales increase is mainly attributed to higher volume sold and higher prices, mainly in poultry.

In 9M18, sales of our U.S. operations represented 29% of our total sales, compared with 27.3% in 9M17.

ACCUMULATED OPERATING RESULTS





In millions of pesos


9M18

9M17

Change



$

$

$

%

Cost of Sales


38,149.7

34,727.8

3,421.9

9.9

Gross Profit


7,481.4

8,289.6

(808.2)

(9.7)

Total SG&A


4,373.7

3,905.6

468.1

12.0

Other Income (expense)


110.7

36.6

74.0

202.0

Operating Income


3,218.4

4,420.7

(1,202.3)

(27.2)

Net Financial Income


404.8

220.3

184.5

83.8

Income Tax


973.0

1,267.4

(294.3)

(23.2)

Net Income


2,650.1

3,373.6

(723.4)

(21.4)

In 9M18 the cost of sales totaled $38,149.7 million, $3,421.9 million or 9.9% higher than the $34,727.8 million reported in 9M17.

As a result, we reached a gross profit of $7,481.4 million and a gross margin of 16.4% in 9M18, which was lower than the $8,289.6 million of gross profit and margin of 19.3% reached in the same period of 2017.

Total SG&A expenses in 9M18 were $4,373.7 million, $468.1 million or 12.0% more than the $3,905.6 million reported 9M17. Total SG&A expenses as a percentage of sales represented 9.6% in 9M18 compared to 9.1% in 9M17.

In 9M18 we had other income of $110.7 million, compared with other income of $36.6 million reported in 9M17.

The operating income in 9M18 was $3,218.4 million, which represents an operating margin of 7.1%, which is lower than the operating income of $4,420.7 million and an operating margin of 10.3% in 9M17.

The net financial income in 9M18 was $404.8 million, this was higher when compared to net financial income of $220.3 million in 9M17.

Total taxes were $973.0 million as of September 30, 2018. These taxes include $670.7 million of income tax and $302.3 million of deferred income taxes. This figure compares to total taxes of $1,267.4 million, which includes income taxes of $1,192.4 and $74.9 million of deferred income taxes in 9M17.

All the above resulted in a net income of $2,650.1 million or 5.8% of net margin for the 9M18, which represents $4.40 pesos of earnings per share; while in the 9M17, the net income totaled $3,373.6 million, or 7.8% of the net margin and $5.62 pesos of net income per share.

EBITDA





In millions of pesos


9M18

9M17

Change



$

$

$

%

Net controlling interest profit


2,640.3

3,369.1

(728.8)

(21.6)

   Income tax expense (benefit)


973.0

1,267.4

(294.3)

(23.2)

   Result in associates


9.9

4.5

5.4

118.7

   Net finance (income) expense


(404.8)

(220.3)

(184.5)

83.8

   Depreciation and amortization


937.4

824.0

113.3

13.8

EBITDA


4,155.7

5,244.7

(1,088.9)

(20.8)

EBITDA Margin (%)


9.1%

12.2%

-

-

Net sales


45,631.1

43,017.4

2,613.7

6.1

EBITDA in 9M18 reached $ 4,155.7 million, representing an EBITDA margin of 9.1%, compared to an EBITDA of $5,244.7 million in 9M17, with an EBITDA margin of 12.2%.

BALANCE SHEET


BALANCE SHEET DATA





In millions of pesos


Sept, 2018

Dec. 31, 2017

Change



$

$

$

%

TOTAL ASSETS


51,076.7

50,557.4

519.3

1.0

Cash and cash equivalents


17,186.4

17,240.1

(53.7)

(0.3)

Accounts receivable


3,602.4

3,627.2

(24.8)

(0.7)

TOTAL LIABILITIES


13,852.1

14,879.5

(1,027.4)

(6.9)

Accounts payable


3,329.7

3,739.5

(409.8)

(11.0)

Short-term debt


3,257.8

3,695.1

(437.3)

(11.8)

Long-term debt


1,546.0

1,554.0

(8.0)

(0.5)

TOTAL STOCKHOLDERS' EQUITY


37,224.6

35,677.9

1,546.7

4.3

Capital stock


1,174.4

1,174.4

0.0

0.0

Cash and equivalents as of September 30, 2018 totaled $17,186.4; $53.7 million less than the level we had on December 31, 2017.

Total debt as of September 30, 2018 was $4,803.8 million, which is lower when compared to $5,249.0 million reported as of December 31, 2017.

Net cash as of September 30, 2017 was $12,382.6 million, which is higher when compared to the net cash of $11,991.1 million as of December 31, 2017.

CAPITAL EXPENDITURES

In millions of pesos


9M18

9M17

Change



$

$

$

%

Capital Expenditures


1,329.0

2,937.6

(1,608.6)

(54.8)

Total CAPEX for the 9M18 was $1,329.0 million and $2,937.6 million in 9M17. This was primarily allocated towards organic growth and productivity projects across all of our facilities.

STOCK INFORMATION







As of September 30, 2018

Total Shares





600,000,000

Total free float





26.75%

Market cap (millions of pesos)





$55,854

SHARE PRICE



Mexican Stock Exchange


The New York Stock Exchange


Ticker Symbol: Bachoco


Ticker Symbol: IBA


In nominal pesos per Share


In U.S. Dollar per ADR





Month

High

Low

Close


High

Low

Close

Sep-18

93.09

84.00

84.02


61.65

57.07

59.32

Aug-18

94.99

90.73

92.41


61.73

57.07

58.31

Jul-18

96.75

92.46

92.46


58.34

53.52

54.22

Jun-18

97.97

90.18

95.19


63.84

53.00

57.75

May-18

97.44

90.48

91.10


61.63

54.89

54.86

Apr-18

97.03

92.41

96.35


63.84

59.80

62.07

Mar-18

96.47

92.37

95.30


62.67

58.83

61.95

Feb-18

94.06

89.88

91.66


61.46

57.41

58.01

Jan-18

98.16

93.03

95.65


63.83

57.88

61.94









Source: Yahoo Finances

ANALYST COVERAGE


Institution

Analyst name

E-mail

ACTINVER

José Antonio Cebeira

jcebeira@actinver.com.mx

BBVA BANCOMER

Miguel Ulloa

miguel.ulloa@bbva.com

GBM

Miguel Tortolero

matortolero@gbm.com.mx

MIRANDA-GR

Martin Lara

martin.lara@miranda-gr.com

JPMORGAN

Ulises Argote

ulises.argote@jpmorgan.com

INVEX

Giselle Mojica

gmojica@invex.com

SANTANDER

Luis Miranda

lmiranda@santander.com.mx

APPENDICES
For reference, some figures have been translated into millions of U.S. dollars ("USD") using an exchange rate of $18.72 per USD $1.00, which corresponds to the rate at the close of September 30th, 2018, according to Mexico's National Bank.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 

-Unaudited-





In U.S. Dollar

September 30,

December 31,

In million pesos

2018

2018

2017*





TOTAL ASSETS

$        2,728.5

51,076.7

50,557.4





Total current assets

1,526.5

28,576.2

28,225.0

   Cash and cash equivalents

918.1

17,186.4

17,240.1

   Total accounts receivable

192.4

3,602.4

3,627.2

   Inventories

359.0

6,719.9

6,669.5

   Other current assets

57.0

1,067.5

688.2





Total non current assets

1,201.9

22,500.5

22,332.4

   Net property, plant and equipment

937.9

17,556.7

17,320.0

   Other non current Assets

264.1

4,943.8

5,012.3





TOTAL LIABILITIES

$            740.0

13,852.1

14,879.5





Total current liabilities

429.7

8,043.9

9,185.7

   Notes payable to banks

174.0

3,257.8

3,695.1

   Accounts payable

177.9

3,329.7

3,739.5

   Other taxes payable and other accruals

77.8

1,456.5

1,751.2





Total long-term liabilities

310.3

5,808.1

5,693.8

   Long-term debt 

82.6

1,546.0

1,554.0

   Other  non current liabilities

10.4

194.9

296.4

   Deferred income taxes

217.3

4,067.3

3,843.4





TOTAL STOCKHOLDERS' EQUITY

$        1,988.5

37,224.6

35,677.9





Capital stock

62.7

1,174.4

1,174.4

Commission in shares issued

22.1

414.5

414.4

Repurchased shares

-

-

-

Retained earnings

1,851.0

34,651.1

32,861.1

Others accounts

48.9

915.8

1,169.1

Non controlling interest

3.7

68.8

59.0





TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$        2,728.5

51,076.7

50,557.4





*Audited




CONSOLIDATED STATEMENT OF INCOME

Third Quarter Results, ended September 30:

-Unaudited-





U.S. Dollar



In millions pesos

2018

2018

2017

Net sales

$       754.0

14,114.4

14,216.2

Cost of sales

692.1

12,955.6

11,732.3

Gross profit

61.9

1,158.9

2,483.9

SG&A

80.1

1,499.1

1,346.7

Other income (expenses), net

4.3

79.7

23.7

Operating income 

-           13.9

-260.5

1,160.9

Net finance income

(3.4)

(63.6)

193.2

Income tax 

-             7.3

-136.6

356.2

Net Income

-$         10.0

-187.5

997.9





Non-controlling interest

0.12

2.3

2.3

Net controlling interest profit

-           10.1

-189.7

995.6

Basic and diluted earnings per share

-           0.02

-0.32

1.66

Basic and diluted earnings per ADR

-           0.20

-3.79

19.91

Weighted average Shares outstanding1

600,000

600,000

600,000





EBITDA Result

$            4.1

76.2

1,449.6





Gross margin

8.2%

8.2%

17.5%

Operating margin

-1.8%

-1.8%

8.2%

Net margin

-1.3%

-1.3%

7.0%

EBITDA margin

0.5%

0.5%

10.2%





1 In thousands












CONSOLIDATED STATEMENT OF INCOME

Accumulated results, for the nine months ended September 30.

-Unaudited-





U.S. Dollar



In millions pesos

2018

2018

2017

Net sales

$   2,437.6

45,631.1

43,017.4

Cost of sales

2,037.9

38,149.7

34,727.8

Gross profit

399.6

7,481.4

8,289.6

Selling, general and administrative expenses

233.6

4,373.7

3,905.6

Other income (expenses), net

5.9

110.7

36.6

Operating income 

171.9

3,218.4

4,420.7

Net finance income

21.6

404.8

220.3

Income tax 

52.0

973.0

1,267.4

Net income

$       215.2

2,650.1

3,373.6





Non-controlling interest

0.5

9.9

4.5

Net controlling interest profit

142.1

2,640.3

3,369.1

Basic and diluted earnings per share

0.24

4.40

5.62

Basic and diluted earnings per ADR

2.82

52.8

67.38

Weighted average Shares outstanding1

599,993

599,993

599,973





EBITDA Result

$       222.0

4,155.7

5,244.7





Gross margin

16.4%

16.4%

19.3%

Operating margin

7.1%

7.1%

10.3%

Net margin

5.8%

5.8%

7.8%

EBITDA margin

9.1%

9.1%

12.2%





1 In thousands




CONSOLIDATED STATEMENT OF CASH FLOWS

In million of pesos

-Unaudited-






U.S. Dollar

September 30,


2018

2018

2017





NET MAJORITY INCOME BEFORE INCOME TAX

$       193.5

3,623.2

4,640.9









ITEMS RELATING TO INVESTING ACTIVITIES:

19.3

362.1

519.4

      Depreciation and others

50.1

937.4

824.0

      Income (loss) on sale of plant and equipment

1.1

20.3

27.1

      Other Items

(31.8)

(595.6)

(331.8)









NET CASH GENERATED FROM NET INCOME BEFORE TAXES

212.9

3,985.2

5,160.3

CASH GENERATED OR USED IN THE OPERATION:

(114.7)

(2,147.3)

(662.6)

   Decrease (increase) in accounts receivable

5.9

111.2

357.3

   Decrease (increase) in inventories

2.7

50.0

(694.1)

   Increase (decrease) in accounts payable

(30.9)

(578.0)

851.7

   Other Items

(92.4)

(1,730.6)

(1,177.6)





NET CASH FLOW FROM OPERATING ACTIVITIES

98.2

1,837.9

4,497.7





NET CASH FLOW FROM INVESTING ACTIVITIES

(18.9)

(353.5)

(3,808.2)

      Acquisition of property, plant and equipment

(71.0)

(1,329.0)

(4,649.4)

      Proceeds from sales of property plant and equipment

0.7

12.8

23.5

      Other Items

51.4

962.7

817.7





CASH FLOW SURPLUS (REQUIREMENTS OF) TO BE USED IN
FINANCING ACTIVITIES

79.3

1,484.4

689.5





Net cash provided by financing activities:

(82.2)

(1,538.1)

(594.5)

   Proceeds from loans

172.9

3,237.5

5,274.4

   Principal payments on loans

(184.6)

(3,456.1)

(4,244.9)

   Dividends paid

(45.5)

(852.0)

(780.0)

   Other items

(25.0)

(467.4)

(844.0)

Net increase (decrease) in cash and equivalents

(2.9)

(53.7)

95.0





Cash and investments at the beginning of year

$       920.9

17,240.1

15,651.5

CASH AND INVESTMENTS AT END OF PERIOD

$       918.1

17,186.4

15,746.5









DERIVATIVES POSITION REPORT











Third Quarter 2018










Thousands of Mexican Pesos, as of September 30, 2018








TYPE OF FINANCIAL
INSTRUMENT

OBJECTIVE

NOTIONAL

VALUE OF THE RELATED COMMODITY

REASONABLE VALUE

AMOUNTS DUE
BY YEAR

GUARANTIES
REQUIRED

2Q-2018

2Q-2018

2Q-2018

2Q-2018

Forward Vanilla

Hedge

$   392,842

$   18.72


$   19.87


$-10,992

$ 22,128

in 2018

The deals
consider the
possibility of
margin calls but
not another kind
of guarantee

Futures for corn and
soybean meal

Hedge

$   316,859

 CORN 

 CORN 

$    5,430

-$22,830

92% in 2018
and 9% in 2019

 In USD per Bushel 

 In USD per Bushel 

 month 

 price 

 month 

 price 

Dec-18

$3.563



Sep-19

$3.850





Sep-18

$   3.595

 SOYBEAN MEAL 

 SOYBEAN MEAL 

 In USD per ton 

 In USD per ton 

 month 

 price 

 month 

 price 

Dec-18

$309.0



Jan-19

$309.4

Aug-18

$   331.0

Mar-19

$308.6

Sep-18

$   330.9

May-19

$306.9



Jul-19

$308.3



Aug-19

$309.1



Sep-19

$309.7



Oct-19

$309.0



Dec-19

$309.3



Options of Corn

Hedge

$     80,545

 CORN 

 CORN 

$    1,416

$ 27,537

71%  in 2018
and 29% in
2019

 In USD per Bushel 

 In USD per Bushel 

 month 

 price 

 month 

 price 



Sep-18

$3.5950

Dec-18

$3.563

Dec-18

$   3.713

Mar-19

$3.680

Mar-19

$   3.813

May-19

$3.758



Jul-19

$3.813



Options of soybean
meal

Hedge

$     38,155

 SOYBEAN MEAL 

 SOYBEAN MEAL 

-$    3,021

-$   2,884

48% in 2018
and 52% in
2019

 In USD per ton 

 In USD per ton 

 month 

 price 

 month 

 price 



Aug-18

$   331.0



Sep-18

$   330.9



Oct-18

$   330.3

Dec-18

$309.0

Dec-18

$   329.9

Jan-19

$309.4

Jan-19

$   328.0

Mar-19

$308.6

Mar-19

$   323.1

May-19

$306.9



 Jul-19

$308.3


















-The total financial instruments do not exceed 5% of total assets as of September 30, 2018.

-The notional value represents the net position as of September 30, 2018 at the exchange rate of Ps. 18.72 per one dolar.

-A negative value means an unfavorable effect for the Company.

Third Quarter 2018




Thousands of Mexican Pesos, as of September 30, 2018



PROBABLE SCENARIO

TYPE OF FINANCIAL
INSTRUMENT

REASONABLE
VALUE

VALUE OF THE RELATED COMMODITY

EFFECT ON THE
INCOME STATEMENT

EFFECT ON THE CASH FLOW(3)

Reference Value (1)

-2.5%

2.5%

5.0%

-2.5%

2.5%

5.0%

Forwards Vanilla

-$     10,992

$18.25

$19.19

$19.65

 Direct 

-$ 20,813

-$   1,171

$     8,650



-5%

5%

10%


-5%

5%

10%

Futures of Corn: (2)

$      5,430

$3.384

$3.741

$3.919

 The effect will
materialize as the
inventory is consumed 

-$10,413

$21,273

$   37,116

Futures of Soybean Meal: (2)

$293.6

$324.5

$339.9

Options for Corn

$      1,416

$3.384

$3.741

$3.919

$   2,797

$      654

$     1,310

Options of Soybean Meal

-$      3,021

$293.6

$324.5

$339.9

-$   4,929

-$   1,113

$        795










(1)The reference value is the exchange  rate of Ps. $18.72 per USD as of September 30, 2018.

(2)The reference values are; the future of corn for Dec 2018, $3.5625 USD/bushel and the future of soybeanmeal for Dec 2018, $309.0  USD/ton.

    'All the evaluations are performed according with the corresponding future, here only the first month futures are shown.

(3)The Company has credit lines with the majority of its counterparts, so that the effect in cash flow is lower than the amount shown.

-A negative value means an unfavorable effect for the Company.

Third Quarter 2018








Thousands of Mexican Pesos, as of September 30, 2018





STRESS SCENARIO 

TYPE OF FINANCIAL
INSTRUMENT

REASONABLE
VALUE

VALUE OF THE RELATED COMMODITY

EFFECT ON THE
INCOME
STATEMENT

EFFECT ON THE CASH FLOW

Reference Value

-50%

-25%

25%

50%

-50%

-25%

25%

50%

Forward Vanilla

-$              10,992

$9.36

$14.04

$23.40

$28.08

 Direct 

-$207,413

-$109,203

$87,218

$185,428

CONFERENCE CALL INFORMATION

The Company will host its third quarter 2017 earnings call, on Thursday, October 25th, 2018. The earnings call will take place at 9:00 am Central Time (10:00 am ET).

To participate in the earnings call, please dial:

Toll free in the U.S.: 1 (888) 771-4371
Toll free in Mexico: 001 866 779 0965
Toll Local Mexico: 52 55 6722 5257
Toll in the Brazil: 0800 761 0710

A current list of available local and international free phone telephone numbers: http://web.meetme.net/r.aspx?p=12&a=UtyckerBybFIgy

Confirmation Number: 47683709

COMPANY DESCRIPTION

Industrias Bachoco is the leader in the Mexican poultry industry, and one of the largest poultry producers globally. The Company was founded in 1952, and became a public company in 1997, via a public offering of shares on the Mexican and The New York Stock Exchange. Bachoco is a vertically integrated company headquartered in Celaya, Guanajuato located in Central Mexico. Its main business lines are: chicken, eggs, balanced feed, swine, and turkey and beef value-added products. Bachoco owns and manages more than a thousand facilities, organized in nine production complexes and 64 distribution centers in Mexico, and a production complex in the United States. Currently the Company employs more than 27,000 people.

The Company is rated AAA (MEX), the highest rating awarded by Fitch Mexico, S.A. de C.V., and HR AAA which signals that the Company and the offering both have the highest credit quality by HR Ratings de Mexico S.A. de C.V.

DISCLAIMER

The document contains certain information that could be considered forward looking statements concerning anticipated future events and performance of the Company. The statements reflect management's current beliefs based on information currently available and are not guarantees of future performance and are based on our estimates and assumptions that are subject to risks and uncertainties, including those described in our Annual Information Form, which could cause our actual results to differ materially from the forward-looking statements contained in this document. Those risks and uncertainties include risks associated with ownership in the poultry industry, competition for investments within the poultry industry, shareholder liability, governmental regulation, and environmental matters. As a result, there can be no assurance that actual results will be consistent with these forward-looking statements. Except as required by applicable law, Industrias Bachoco, S.A.B. de C.V., undertakes no obligation to publicly update or revise any forward-looking statement.



CONTACT: Maria Guadalupe Jaquez, IR, Maria.jaquez@bachoco.net; Andrea Eugenia Guerrero Flores, andrea.guerrero@bachoco.net, T. +52(461)618 3555