April 13, 2018 / 1:32 AM / 2 years ago

UPDATE 1-Mexican breadmaker Bimbo sees better profitability, margins in 2018

(Adds comments from CFO Gaxiola)

By Anthony Esposito

MEXICO CITY, April 12 (Reuters) - Mexican breadmaker Grupo Bimbo expects to see higher margins and profitability by the end of 2018, Chief Financial Officer Diego Gaxiola told Reuters on Thursday.

The expected improvement comes after Bimbo’s gross margin contracted 60 basis points to 53.4 percent in 2017 due to higher raw material costs in Mexico, reflecting a stronger dollar.

Gaxiola said in an interview he could not give a specific guidance for margins or profitability.

In recent years, Bimbo has expanded its reach across the world into China, India and Morocco, while increasing its U.S. footprint. It bought U.S. firm East Balt Bakeries for $650 million last year and this year acquired Chinese breadmaker Mankattan.

The company will see its consolidated tax rate fall by 6 percentage points due to the fiscal reform in the United States, Gaxiola said. Bimbo’s consolidated tax rate was 53 percent at the end of 2017.

The tax rate for Bimbo’s U.S. operation fell to 21 percent from 35 percent due to the tax reform, said Gaxiola.

Bimbo issued a $500 million bond on Thursday, saying it would use the funds to refinance existing debt and pay for acquisitions and capital expenditures.

Gaxiola said the money will help pay for its Mankattan acquisition.

The bond deal will receive a 50 percent equity treatment from rating agencies.

“This is going to help us speed up the deleveraging process,” said Gaxiola.

He added that the company was facing some price pressure in the United States.

“We’re working together with our customers in order to see if we’re able pass through some price increase,” said CFO.

Shares in Bimbo closed 3.92 percent higher on Thursday. (Reporting by Anthony Esposito Editing by Christine Murray and Sandra Maler)

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