Increased financing costs and higher tax rates caused a plunge in net profit for Mexican bread titan Grupo Bimbo in the fourth quarter (Q4) of 2012.
Net profit for Q4 slumped 80.7% to 176m pesos ($13.8m) down from 914m pesos ($71.6m) from Q4 2011.
EBITDA for the quarter dipped 7.3% and for the year declined 1.5% to 14.1bn pesos.
Operating performance and higher financing costs had meant the company was subject to a higher effective tax rate, Grupo Bimbo said.
It said tax roughly doubled for the quarter - up to 82% compared to 40.3% last year – and the firm received a tax charge in the period. The charge was to partially cancel deferred income tax benefits given the recovery of previous fiscal losses in Brazil will take longer than initially expected.
Financing costs were also up to 869m pesos ($68.1m) in Q4 prompted by increased interest expense, reclassification of pension fund expenses in Mexico and the US (previously expensed as an operating item) and a lower exchange gain.
‘Largely in line with trends on previous quarters’
For Q3 2012, the bread titan reported an equally sharp net profit slump of 83%. However, net profit totalled a much higher 369m pesos ($28.9m) for the quarter – just over double what the company recorded for Q4.
“Performance in the period was largely in line with the trends noted during previous quarters of the year,” it said.
It said volumes had recovered in the US but this had been offset by a lower than expected performance in Brazil. The bread titan said there was a “soft consumption environment” in the country and increased expenses due to readjustments in Bimbo’s distribution strategy.
Sales up still
In line with Q3, sales were up, this time by 8.9% to 45.3bn pesos ($415.6m). Grupo Bimbo reported organic growth within this, driven by Mexico and Latin America and from the integration of Sara Lee operations in the US, Ilberia and Fargo in Argentina.
The company’s debt was lower at 42.3bn pesos for December 31 2012, reflecting payments of 2.0bn pesos made during the course of the year.