July 27, 2012

Mexican poultry producer, Industrias Bachoco, has revealed mixed figures of its unaudited results for the April-June period of 2012.

"For the second quarter, Bachoco's poultry and balanced feed business lines demonstrated a proper balance between supply and demand," the company's CEO commented in a statement. "On the contrary, the egg business line experienced oversupply conditions and high production costs which narrowed margins in this business line when compared to the same period in 2011. Bachoco incorporated into the category of "other business lines" sales of live swine which were also affected by oversupply conditions in the second quarter of 2012."

"Generally speaking, we can conclude that Bachoco obtained favourable operating results over year (Q2, 2012 versus Q2, 2011), however, when compared to Q1, 2012, results were lower.

"Our second quarter results were largely attributed to a reduction in operating expenses as a percentage of net sales as well as operating efficiencies in all of the company's business processes. Our performance was affected by volatility stemming from increases in the price of soy meal, one of Bachoco's key production cost components, as well as by the volatility of the Mexican peso versus the US dollar.

"The company's financial position remains solid and in line with the strategic plan laid out for 2012," the CEO concluded.

The Company's Q2, 2012 net sales totalled MXN9,404.0 million (US$30 million), 42.1% higher than the MXN6,616.8 million (US$493 million) reported in Q2, 2011. This resulted from increased sales throughout all business lines in particular, an increase in chicken sales of 48.3% in 2012 versus 2011, due to the integration of the subsidiary "OK Foods" (production facility in the US), which was consolidated into Bachoco in November of 2011.

Table egg sales were up 12.7% in Q2, 2012 versus. Q2, 2011, as a result of a 10.6% increase in prices (prices were down 13.0% when compared to Q1, 2012) and a 1.9% rise in volume sold.

In late June 2012, the SENASICA (National Health Service, Food Safety and Food Quality) in Mexico reported an outbreak of H7N3 avian influenza in two municipalities in the state of Jalisco. Bachoco has reported that none of the company's farms are located within the quarantine area. No presence of the virus has been detected on any of their farms.