Reporting its financial results for the second quarter of 2016, the business said volume sales of corn flour were up 3% year on year in its Gruma USA division.
The growth was driven by three factors, according to the business: Higher sales to snack producers; share gains through better quality and service; and higher sales to food service distributors and wholesalers following growth at independent Mexican food restaurants.
Foodservice tortilla sales dip
However, volume sales of the firm’s US tortilla business fell 3%, which Gruma attributed to the food service channel.
The company said it had stopped supplying some SKUs to focus on higher-margin products, adding that sales had also been impacted by a weaker performance of some foodservice customers.
The decline in tortilla sales had driven a 1% drop in Gruma USA net sales to Ps.9,346m ($498m) in Q2. Gruma said higher average prices for tortillas had helped offset corn flour price reductions that had been implemented last autumn to reflect lower corn costs.
Gruma consolidated Q2 results
Sales volume: +2% to 981,000 metric tons
Net sales: +14% to Ps.16,348m ($872m) benefitting from weakness of the peso
Operating income: +19% to Ps.2,191m ($117m)
EBITDA: +18% to Ps.2,642m ($141m)
EBITDA margin: up from 15.7% to 16.2%
US operating income rose 13% to Ps.1,313m ($70m) and operating margin rose from 12.3% to 14% - mainly from improvement in cost of sales. EBITDA increased 9% to Ps.1,595m ($85m), with EBITDA margin rising to 17.1% from 15.5%.
Growing demand for corn flour from Gruma’s US operations contributed to an 8% year on year increase in volume sales at GIMSA – Gruma’s corn flour business – to 486,000 metric tons.
Net sales grew 11% to Ps.4,382m ($234m), partly a result of price increases brought in during December 2015 and June 2016 to reflect higher corn costs.
The business said sales had also benefitted from factors including greater use of corn flour by tortilla makers in Central Mexico; more competitive corn flour prices; higher sales to medium and small wholesalers driven by improved customer service; and higher sales to government channels.
Gruma added that its commercial initiatives continued to focus on growing distribution and availability, product quality and promotion of different corn flour types.
EBITDA remained flat at Ps.759m ($40m), while EBITDA margin fell from 19.3% to 17.3%.
Corn flour volume sales were down 5% year on year to 101,000 metric tons in the Europe division, which the company said was a result of comparisons with “extraordinary” sales during 2Q15. Tortilla sales volume increased 6%.
Net sales declined 7% to Ps.1,355m ($72m) due to the sales volume reduction and depreciation of sterling, which affected most of the company’s tortilla operations.
EBITDA decreased 14% to Ps.114m ($6m) on EBITDA margin down to 8.4% from 9.1%.
Aggressive competition in Honduras was the key reason for an 11% drop in volume sales at the Centroamérica division, reported Gruma. Net sales rose 6% to Ps.1,075m ($57m), mainly due to peso depreciation.