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Grupo Bimbo’s Sara Lee buy: The profits and strains

By Kacey Culliney , 27-Jul-2012

Grupo Bimbo has been balancing sales surges and expenses following Sara Lee buy
Grupo Bimbo has been balancing sales surges and expenses following Sara Lee buy

Mexican bread titan Grupo Bimbo has said expenses from its Sara Lee buy last year have led to a slight drop in Q2 earnings despite healthy sales.

On Wednesday, the group posted a 0.9% drop in profits for the second quarter (April-June) to 887.9m pesos ($66.2m) from 895.5m ($66.8m) in Q2 2011.

This dip came amid a healthy 43% sales surge for Q2 as it pulled in 43.3bn pesos ($3.2bn), “thanks to the acquisition of Sara Lee operations”.

The bread firm took control of Sara Lee operations in the US, Spain and Portugal as well as Fargo operations in Argentina under the acquisition agreement after its $959m buyout in 2011.

However, the bread giant said that higher operating and financial costs generated from this offset sales gains for the quarter.

Overall financial costs were 606m pesos ($45.2m) pushed up by increased debt and higher interest expenses in addition to increased operating investments.

Sharp US sales

The firm reported significant sales in US for Q2, with an 80% rise to 20.7bn pesos ($1.5bn) “most of which was due to the Sara Lee acquisition and the rest to the effect of a stronger dollar on sales in peso terms”.

Grupo Bimbo has been investing in expansion strategies across the US with its acquired brand.

In April this year it expanded distribution of Sara Lee Breads to the Northeast markets in the US, to Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island and Vermont. It also widened the existing distribution network of Sara Lee breads in the Mid-Atlantic region.

Grupo Bimbo has been positioning many of the current Sara Lee products as healthier choices, following the removal of artificial colours, flavours and preservatives, it said.

While US sales were strongest, Latin America revenues surged by 33% to 5.5bn pesos ($410.5m), with Mexico posting a 12% rise for Q2 pulling in 17.1bn pesos ($1.3bn).

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