Mexican breadmaker Bimbo cuts outlook on strong peso

By Kylie Madry and Aida Pelaez-Fernandez

MEXICO CITY (Reuters) -Mexican breadmaker Grupo Bimbo lowered its sales and earnings guidance for 2023 as it deals with the strong appreciation of the peso, which also hurt second-quarter results released on Tuesday.

Bimbo cut its annual sales forecast to low-to-mid single-digit growth, Chief Financial Officer Diego Gaxiola said in a call with analysts, down from a previous projection of mid-to-high single-digit growth.

“Compared to our initial sales guidance, we have an impact of more than six percentage points” due to the strength of the peso, Gaxiola said.

The peso has climbed 13% against the U.S. dollar so far this year.

Expected earnings before interest, tax, depreciation and amortization (EBITDA) in the year are also now seen at mid-to-high single-digit growth, Gaxiola added, down from an earlier forecast of high single-digit growth.

Earlier on Tuesday the firm, which sells buns, cakes, cookies, bagels and tortillas across 34 countries, reported that revenues increased 4% to a second-quarter record of 100.37 billion pesos ($5.86 billion) following price hikes, which were also offset by the peso’s strength.

Sales in the firm’s U.S. and Canada region, which makes up about half of its revenue, dipped almost 2% in pesos, though they rose nearly 12% in U.S. dollars.

Sales in Mexico, however, grew in all categories after price increases.

The strong peso also partially contributed to a nearly 30% drop in quarterly net profit, falling to 4.30 billion pesos, Bimbo said.

The hit was largely due to a non-cash benefit on Bimbo’s pension plan in the year-ago quarter, but even excluding the $90 million pension effect, the strong local currency, combined with higher interest rates, caused financing costs to more than double.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) for the quarter rose 7.8% to 14.00 billion pesos.

($1 = 17.1156 pesos at end-June)