Bimbo temporarily shutters Wuhan plant, posts FY revenue just shy of Wall Street expectations

By Gill Hyslop

- Last updated on GMT

Daniel Servitje, chairman and CEO of Grupo Bimbo. Pic: Grupo Bimbo
Daniel Servitje, chairman and CEO of Grupo Bimbo. Pic: Grupo Bimbo

Related tags Grupo bimbo coronavirus earnings report

In a conference call with analysts, the Mexican bakery giant’s chairman and CEO Daniel Servitje said the closure – although temporary – is expected to affect figures for Q1 2020.

“We have 10 plants in China, and one of them is in Wuhan, which serves our QSR customers. This plant is temporarily closed, and operations will resume once the Chinese authorities give their approval to resume business in Wuhan,”​ he said.

“Although, we do expect softness during the first quarter of 2020, considering these circumstances, we are confident about our future growth and profitability in the EAA region.”

The company posted a 2.5% revenue growth for the 12 months ended December 31, 2019, achieving nearly MXN 292bn ($15.31bn) – just shy of Wall Street expectations of MXN 294.65bn ($15.45bn) – compared to MXN 288.27bn ($15.11bn) last year.

According to Servitje, growth was driven by Bimbo’s operations in Mexico and EAA (Europe, Africa and Asia), and solid performance from its snacks category globally.

The Mexico business saw increases in volume across most categories and every channel. Certain categories – including buns, cookies and cakes – and the convenience channel outperformed the year prior.

Flexible portfolio of offerings

“We are constantly working on becoming more competitive, making our products more accessible to our consumer base, and creating a flexible portfolio of offerings to adjust to market and consumer needs,”​ he said.

Bimbo achieved a 13 fold increase in EBITDA in the EAA region, bolstered by the acquisition of Donuts Iberia, the launch of natural crustless bread and the strong performance of Bimbo QSR.

Conversely, North America – Bimbo’s largest market – saw flat sales versus the prior year, buoyed by strong growth in the sweet baked goods and the snack categories overall.

“In Canada, we captured additional market share, driven by strength in the bread buns and rolls, and English muffins categories,”​ said Servitje. Offsetting these gains was the company’s portfolio optimisation initiative implemented in Q2 2019.

“This initiative resulted in temporary volume softness, as we eliminated close to 16% of our branded SKU, SKUs across premium bread, mainstream bread, and breakfast categories.”

Aggressive restructuring efforts

Bimbo has recently undertaken a spate of strategic acquisitions, closures and realignments in its quest to become a more agile company.

“Our continued focus on becoming a linear company as well as aggressive restructuring efforts were necessary enabled us to grow EBITDA in almost every region,”​ said Servitje

It streamlined its manufacturing footprint during the year by closing seven plants globally, but reinvesting to drive growth with new distribution centres in Mexico and Latin America, as well as five plants in EAA and Latin America.

It also expanded its operations to Kazakhstan, expanding its global leadership to 33 countries.

Strategic bold-on acquisitions included Mankattan in China and Nutra Bien in Chile. It also completed the acquisition of Lender’s, the largest refrigerated and frozen bagel player in the US.

“We are pleased to add this iconic brand to Grupo Bimbo's portfolio, and we fully expect this business to be complementary and accretive to our existing powerful bagel business.”

‘Deeply humane company’

2019 was a milestone year for Bimbo’s sustainability commitments.

The Mexican bakery behemoth received the Rabobank Award for Leadership in Sustainability; signed the National Agreement for the New Plastic Economy; launched over 140 sustainable vehicles with a commitment to increase this fleet to 4,000 electric delivery vehicles by 2024; and presented advances of its renewable energy strategy.

“Regarding our sustainability initiatives, 2019 was a year where we reached several milestones in our commitment to the environment, having signed agreements related to food waste, electric energy and plastics,”​ Servitje told analysts.

“We are actively working on these initiatives to achieve our purpose of building a sustainable, highly-productive, and deeply humane company.”

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