High raw material prices and costly integration of Sara Lee operations led to a sharp net profit slump for Mexican bread titan Grupo Bimbo in the third quarter (Q3).
Net profit plunged 82% from the previous year to 369m pesos ($28.3m) and operating income represented a 56.1% drop at 1.4bn pesos ($107m).
Investments in Sara Lee operations across the US, particularly the distribution network, continued to hit the firm in Q3, it said, with operating expenses up 43.6% on the year before.
Grupo Bimbo took control of Sara Lee operations in the US, Spain and Portugal as well as Fargo operations in Argentina following a $959m buyout in 2011.
Dollar-linked raw material costs also impacted business in Mexico and Latin America, it said.
Despite this slump, sales were up across the board. The bread major pulled in 43.4bn pesos ($3.3bn) for the third quarter (Q3) in consolidated sales, up 34.7% from Q3 2011.
While Sara Lee integration proved costly for the quarter, it also drove growth in the US, it said.
Net sales in the US surged 65.3% compared to Q3 2011, and represented 19.9bn pesos ($1.5bn).
Just over half of this business was generated by the integration of Sara Lee operations, Grupo Bimbo said, along with a more favorable dollar-peso exchange rate.
“Consumption remained soft, leading to weak volume recovery and lower average prices. Nonetheless, the sweet baked goods and breakfast categories generated growth in the period,” it said.
Latin America saw a 20.4% surge in net sales up to 5.5bn pesos ($421m) but there was a deceleration in volumes across the region; “primarily in Brazil where the consumption environment was weaker”.
Mexico noted a 7.9% increase in net sales, up to 17.7bn pesos ($1.3bn) and the firm reported stable volume growth across all channels and categories in this market.