a n n u a l r e p o r t
65 YEARS ADDING VALUE
Industrias Bachoco S.A.B. de C.V.
Bachoco´s
PROFILE
Industrias Bachoco is leader in the Mexican poultry industry and one of the ten
largest poultry producers globally.
The Company was founded in 1952 and became a public company in 1997, via a
public offering of shares on the Mexican and the New York stock exchanges.
Bachoco is a vertically-integrated company with operations in Mexico and the US
with its headquarters located in Celaya, Guanajuato, Mexico. Its main business lines
are: chicken, table eggs, balanced feed, swine, and others, including further process
products of turkey and beef.
Currently the Company is rated AAA (MEX), the highest rating awarded by Fitch
Mexico, and HR AAA which signals that the Company and their bonds both have the
highest credit quality by HR Ratings de Mexico S.A. de C.V.
Bachoco owns and manages:
Enrique Robinson Bours
Honorary President of the Board of
Directors and Co-founder
10
processing
PLANTS
+ than1000
farms
9
further
processing
plants
22
feed
mills
26
hatcheries
+ than 80
DISTRIBUtION
CEnters
the company
employs more
than 27,000 PEople
index
Highlights
Message to Shareholders
CEO’s Letter
Report from the Board of Directors
Audit and Corporate Practices Committee
Report from the Audit and Corporate Practices Committee
Highlights to Investors
Board of Directors
Senior Management Team
65 years Adding Value
Social Responsibility
Consolidated Financial Statements
1
2
4
6
7
8
10
11
12
13
14
16
highlights
2016
52,020.3
9,385.2
4,797.6
5,777.0
3,951.2
6.58
78.90
18.0%
9.2%
11.1%
7.6%
2015
46,229.0
9,381.5
5,053.5
5,873.4
3,819.5
6.36
76.30
20.3%
10.9%
12.7%
8.3%
I
O
P
E
R
A
T
N
G
D
A
T
A
In U.S. Dollar 1
2017
2,952.7
$
$
536.5
269.1
326.8
252.0
0.42
5.03
18.2%
9.1%
11.1%
8.5%
2017
58,050.0
10,547.1
5,291.3
6,424.1
4,954.4
8.25
98.97
18.2%
9.1%
11.1%
8.5%
In millions pesos
Net sales
Gross profit
Operating income
EBITDA Result
Net income
EPS in pesos
Earnings per ADR en pesos
Gross margin
Operating margin
EBITDA margin
Net margin
1 One dollar equal to $19.66 pesos
I
I
A
T
A
D
L
A
C
N
A
N
F
F
O
T
N
E
M
E
T
A
T
S
In millions pesos
TOTAL ASSETS
Cash and cash equivalents
Inventories
TOTAL LIABILITIES
Notes payable to banks
Accounts payable
Long-term debt
TOTAL STOCKHOLDERS´ EQUITY
Capital stock
Retained earnings
In U.S. Dollars1
2017
$
$
$
2,571.6
876.9
240.5
756.8
187.9
241.1
79.0
1,814.7
59.7
1,646.4
2017
50,557.4
17,240.1
4,727.3
14,879.5
3,695.1
4,740.4
1,554.0
35,677.9
1,174.4
32,367.9
December 31,
2016
45,090.5
15,659.8
3,970.7
13,374.3
3,097.5
4,545.2
950.4
31,716.2
1,174.4
28,245.0
2015
40,446.6
15,290.1
3,404.3
12,667.2
1,631.9
4,597.1
2,495.1
27,779.4
1,174.4
24,749.6
5%
5%
6%
84%
NET SALES
CHICKEN
EGG
BALANCED
FEED
OTHERS
Y
H
P
A
R
G
O
E
G
Y
B
S
E
L
A
S
USA
28%
MÉXICO
72%
1
ANNUAL REPORT 2017
EMPLOYEES
2017
27,397
2016
25,725
2015
25,231
message to
SHAREHOLDERS
In year 2017, we celebrated 65 years of presence in the
poultry industry and 20 years as a public company [... ]Our goal
is to keep our position in Mexico as the leader of the poultry
sector and to be one of the main players worldwide, [... ]
Javier Bours Castelo
Chairman of the Board of Directors
Dear Shareholders of Industrias Bachoco:
2017 was a year that started under adverse macroeconomic expectations in Mexico and with high volatility
on the Mexican peso exchange rate. However, conditions improved along the year, the GDP grew 2.3% in
2017 and, on average, the Mexican peso slightly depreciated vs the US dollar. The inflation rate in 2017 was
6.77%, a relatively high value compared with previous year values.
In the Mexican poultry industry, it is expected that chicken production continued growing 3.3%, a normalized
growth level. In general, we saw a good balance between supply and demand for most of the year, with some
over-supply conditions in the fourth quarter. It is expected imports of chicken from the US declined in 2017,
this change in trend reflects the capacity and competitiveness of the Mexican industry. After oversupply
conditions for nearly one year in the table eggs business line, conditions improved substantially in the second
semester of the year.
In the US, the poultry industry grew 2.4% above its normalized growth levels; however, a good balance
between supply and demand was observed for most of the year.
On the cost side, the US poultry industry continued to capitalize the benefits of a good grain crop, allowing
stable raw materials costs in dollar terms. In Mexico, prices of raw material costs were relatively stable for
most of the year.
In Mexico, we increased our total sales in our main product lines, reinforcing our presence in all the commercial
channels we participate in.
Regarding our US operation, it continued yielding positive results and moving from commodity to value
added products. In March, we announced a recall of approximately 1 million pounds of breaded chicken
products produced at our Oklahoma City plant. We identified and isolated the problem and took immediate
actions to increase quality control measures in this plant. We have been working intensively to restore the
confidence of our customers for products produced in this facility.
We continue working on our growth plans for the company. We increased our CAPEX to more than $3,500
million, focusing mainly on organic growth projects, and productivity projects along our supply chain.
In 2017, we materialized two acquisitions:
ANNUAL REPORT 2017
2
The first one, through our subsidiary OK Foods, we acquired Alabama-based
“Albertville Quality Foods (AQF)”, a company that produces and sells value
added further processed products, with sales of around $270 million USD a
year. With this acquisition, we will continue the growth of our US operation,
mainly with further processed products.
The second one, through our subsidiary Campi Alimentos S.A. de C.V, we
acquired “La Perla”, a Pet Food company located in the Mexican state of
Queretaro and with the capacity to produce dry pet food, wet food and Pet
Food Treats. With this acquisition, we are increasing significantly our Pet Food
capacity, a product line in which we have had satisfactory results so far, and in
which we see an interesting future.
We are integrating these companies into our normal operations and capturing
the opportunities and synergies we have identified.
In September of last year, we were challenged by natural disasters in both
Mexico and the US. While there were no material damages in our facilities,
those events affected the economical dynamic in important regions of
Mexico. This caused a temporary lower demand in Mexico, resulting in over
supply conditions; conditions that changed at the end of the year.
Our company focused on providing immediate assistance to our employees
and their families affected by these unfortunate events, and to help those
affected by donating prepared foods directly and through some of the food
chains we work with, in coordination with Mexican authorities. Also, we
continue our operations for keeping the supply of our food products to all
the regions we attend, either affected or not by these events.
In August, we successfully issued bonds for $1,500 million, through the public
issuance of bonds in the Mexican debt capital markets for a tenor of 5 years,
maturing in 2022. This reflects the confidence the financial community has in
our company.
In year 2017, we celebrated 65 years of presence in the poultry industry and
20 years as a public company, trading in the Mexican Bolsa and in the NYSE.
When we went public, our total sales were nearly $0.5 billion USD a year, 20
years later our total sales were more than $3.0 billion USD.
We finished 2017 with very satisfactory results, as we reached historically high
net sales, EBITDA and earnings per share, among other parameters.
Our financial structure continued strong as we ended the year with a net
cash of nearly $12,000 million, which will allow us to continue supporting our
short and long-term growth plans.
3
ANNUAL REPORT 2017
As always, these results were possible with the
support of our management team and staff,
integrated by more than 27,000 people.
We know we still have many opportunities
to improve our performance, as well as many
challenges and uncertainties to face, but we are
confident in the hard work and commitment of
our staff to reach the Company´s goals.
I would like to remind you of the commitment
that we have with all of you; Our goal is to
keep our position in Mexico as the leader of the
poultry sector and to be one of the main players
worldwide, while continuing to grow our business
with profitability, delivering positive results and
maintaining the solid financial structure that
always characterizes us.
Javier Bours Castelo
Chairman of the Board of Directors
CEO’s
letter
Dear Shareholders:
All figures discussed below are information for 2017 with comparative figures
of 2016. It was prepared under IFRS accounting principles, and is presented in
millions of pesos unless otherwise indicated.
According to the Mexican National Poultry Association estimates, in 2017
chicken volume produced in Mexico grew within its normalized growth range,
during most part or the year we observed a good balance between supply and
demand, except in the last quarter in which natural disasters affected important
regions in Mexico, events that had an impact on demand which was fulfilled
by the end of the year. Regarding table egg industry, we observed oversupply
conditions during the first semester, those conditions changed during the
second half of the year when we observed a good balance between supply
and demand.
We continue with our growing plans regarding our Balance Feed business line,
particularly on pet food where we consider there are good opportunities that
we can capture.
Regarding the US poultry industry, according to USDA sources, chicken volume
produced in the US grew 2.4%, slightly above it’s normal rate of 1.0 to 1.5%
without showing oversupply conditions.
During 2017, we kept consolidating several projects; from projects directed to
increase our production capacity along our entire supply chain, identifying and
eliminating bottle necks, projects to increase or maintain our facilities at the
highest levels of efficiency within the industry, to projects that allow us to move
towards our goal of being close and to better understand and attend to their
needs.
Our financial position, in particular our derivatives position, remained healthy
throughout 2017; We continue with a very disciplined practice in this sense.
2017 & 2016 RESULTS
Net sales in 2017 totaled $58,050.0 million, $6,029.7 million more or a 11.6%
increase in net sales, when compared to $52,020.3 million reported in 2016. This
increase was mainly due to higher volume sold and price increases in poultry.
Rodolfo Ramos Arvizu
Director General
In 2017, sales of our US operation represented
28.4% of our total sales, compared with 25.8% in
2016.
The Company’s sales on poultry increased 12.0%,
while “Others” increased 7.8%; both as a result
of higher volume and prices when compared
to 2016. Particularly on poultry we reached an
increase of 3.3% in volume sold and 8.7% increase
in prices, this last one, mainly due to a higher mix
of value added products in our U.S operation.
Cost of sales totaled $47,503.0 million, 11.4%
higher than the $42,635.1 million reported in
2016. The increase in cost of sales was mainly
attributed to more volume sold and higher
inflation rate in Mexico and a mix effect, due to
a higher percentage of value added products in
our US operations.
These numbers allowed us to post a gross profit
of $10,547.1 million, which represented 18.2%
of gross margin; slightly higher than $9,385.2
million of gross profit and a margin of 18.0%
reached in 2016.
Total SG&A expenses in 2017 were $5,423.4
million, an increase of $575.5 million or 11.9%
ANNUAL REPORT 2017
4
when compared to $4,847.9 million in 2016. Total SG&A expenses as a
percentage of net sales represented 9.3% in 2017 and 9.3% in 2016.
In 2017, we had other income of $167.6 million, compared with other income
of $260.2 million reported in 2016. This is mainly attributed to gains in the sale
of several unused assets during the year.
The operating income in 2017 totaled $5,291.3 million with a margin of 9.1%,
higher than the $4,797.6 million of operating income and 9.2% margin as
reported in 2016.
In 2017, we reached an EBITDA of $6,424.1 million, representing an EBITDA
margin of 11.1%, compared to an EBITDA of $5,777.0 million in 2016, with a
margin of 11.1%.
Net financial income was $747.6 million, a decrease when compared to the net
financial income of $797.0 million in 2016.
Total taxes were $1,084.4 million. This includes $1,711.5 million income tax
and a favorable effect of $627.1 million on deferred taxes. This figure compares
to total taxes of $1,643.4 million which includes income tax of $1,260.5 and
$382.9 million of deferred tax in 2016. In fourth quarter of 2017, we recognized
a favorable effect on deferred taxes as a result of the fiscal change approved by
the U.S authorities at the end of the year.
As a result, net income in 2017 was $4,954.4 million, an 8.5% net margin, which
represents earnings per share of $8.25 pesos, while in 2016, net income totaled
$3,951.1 million with a 7.6% net margin, and $6.58 pesos of earnings per share.
Cash and equivalents as of December 31, 2017 totaled $17,240.1 million, an
increase of $1,580.3 million or 10.1% more than the $15,659.8 million of cash
and equivalents reported as of December 31, 2016.
Total debt as of December 31, 2017 was $5,249.0 million, compared to total
debt of $4,047.9 million reported as of December 31, 2016. As a result, our net
cash as of December 31, 2017 totaled $11,991.1 million, compared with a net
cash of $11,611.9 million as of December 31, 2016.
Capex in 2017 totaled $3,513.4 million, this includes assets from acquisitions
made that year, an increase when compared to $2,459.7 million reported in
2016. In 2017, the Company continued with the implementation of new
projects oriented toward organic growth and productivity improvements.
Rodolfo Ramos Arvizu
Chief Executive Officer
In 2017, we reached an
EBITDA of $6,424.1
million, representing and
EBITDA margin of 11.1%,
compared to an EBITDA
de $5,777.0 million in
2016, with a margin of 11.1%.
5
ANNUAL REPORT 2017
report from
THE BOARD OF DIRECTORS
As Chairman of the Board of Directors of Industrias Bachoco, and
pursuant to the provisions of Section IV of Article 28 of the Securities
Market Law, I hereby inform you of the following:
This Board of Directors reviewed and approved the Chief Executive
Officer’s report which supports the performance of management
for fiscal year 2017, and it was based on the independent auditor’s
Opinion.
The Board believes that the CEO’s report was prepared in accordance
with the Financial Reporting Standards and reflects the Company’s
financial position and its operating results.
We believe that the Company’s policies, accounting and reporting
principles followed are adequate and consistent with the Audited
Financial Statements.
This Board directed the Company to continue acting in strict
accordance with IFRS principals.
We determined that during year 2017, the Company did not
engage in unusual operations or other activities different from the
normal course of the business. No exemptions were granted to
any member of the Board, executive officers or any other member
of the Company to take advantage of business opportunities for
themselves or in favor of third parties.
Lastly, the Board presented in the Annual Ordinary Shareholders’
Meeting the report of the Auditing and Corporate Practices
Committee, the Chief Executive Officer’s report, the report on
prompt compliance with tax obligations, and the report on the
principal accounting and information policies and criteria followed
by the Company in the preparation of its financial statements for
fiscal year 2017.
Javier Bours Castelo
Chairman of the Board of Directors
ANNUAL REPORT 2017
6
audit and corporate
PRACTICES COMMITTEE
Bachoco has an Auditing and Corporate Practices Committee to support
the Board of Directors, which is comprised of three Independent Directors
and one Property Shareholder Director. This Committee was last ratified
on the Annual and General Ordinary Shareholders´ Meeting on April 26,
2017.
AUDIT COMMITTEE AND CORPORATE PRACTICES MEMBERS
Guillermo Ochoa Maciel (President)
Humberto Schwarzbeck Noriega
Avelino Fernandez Salido
Ricardo Aguirre Borboa
7
ANNUAL REPORT 2017
annual report
OF THE PRESIDENT OF THE AUDIT AND CORPORATE
PRACTICES COMMITTEE TO THE BOARD OF DIRECTORS
In accordance with the terms of the Mexican Market Security Law (LMV),
this report is issued by the President of the Audit and Corporate Practices
Committee of Industrias Bachoco S.A.B. de C.V. (the “Society”).
This report has been submitted to the Audit and Corporate Practices
Committee of the Company, which validated content, scope and conclusions
for the Board of Directors approval and through the Board, its validation in
the Annual and General Ordinary Shareholders’ Meeting of the Company
that will take place in April 2018.
In the exercise of the Committee functions, and in attention of its
responsibilities, the Committee has counseled with the Chief Financial
Officer, the Internal Audit Manager and, the Chief Executive Officer of the
Society.
The resolutions adopted by the Audit Committee have been informed timely
and submitted to the consideration of the Board of Directors by means of
the respective report submitted to this ultimate superior social entity in
the corresponding meetings. A file has been integrated from each meeting,
including the reports and other relevant documents.
Regarding Corporate Practices:
We concluded that the Officers performance was aligned with the Company’s
objectives. We reviewed the CEO and senior officers and compensation
packages were granted. We verified that there was no existence of any grant
or exceptions to Directors, senior officers, or other employees of the Company.
In 2017, the total transactions in connection to related parties represented
less than 3.5% of the Company’s net sales. After an exhaustive review of
the transactions carried out with related parties, we concluded that they
were conducted in fair-market terms. We reviewed policies and guidelines
related to the use of goods that constitute the equity of the Company and
its subsidiaries, by any related parties, as well as policies for granting of loans
or any type of credit or guarantees. We analyzed and assessed the services
provided by the independent experts, when it was required.
Regarding Internal Audit Function:
The Audit and Corporate Practices Committee has remained involved with
the needs of the internal audit area to make sure they have the necessary
human and material resources for the suitable performance of its function.
The evaluations carried out by the Internal Audit, the external auditors,
and the General Director have been reviewed, and it is concluded that the
internal control processes provide reasonable
security to prevent or detect errors or material
irregularities in the normal course of social
operations, although
these processes are
constantly improving and the corresponding
revisions continue.
Regarding Financial Information:
The Financial Statements of the Company
were discussed quarterly with the executives
responsible for their preparation and review,
there were no significant observations to the
information presented. Before being forwarded
to the Mexican Stock and Exchange, the Financial
Statements were reviewed by the Committee
for its approval or ratification by the Board
of Directors.
In each quarterly Committee´s
meeting, reports to the Stock Exchange were
analyzed and approved, having made the
observations or suggestions of the case and
recommending to the Board of Directors its
approval (or ratification) in each case regarding its
public disclosure. During the period in question,
Financial Statements corresponding to 2017
fiscal year were reviewed and discussed, and did
not submit observations and/or qualifications, in
consequence, the Committee recommended its
approval by the Board of Directors for submission
to the Shareholders´ Meeting.
Regarding External Audit Performance:
The services of Galaz, Yamazaki, Ruiz
Urquiza, S.C. (Deloitte) continued to be
used as External Auditors of the Company.
The fees corresponding to 2017 were duly
revised and approved. The Audited Financial
Statements as of December 31, 2017 were
received on the part of the External Auditor.
The Audit Committee concludes that the
performance of Galaz, Yamazaki, Ruiz
Urquiza, S.C. (Deloitte) as External Auditors
of the Company and of its partners in charge
ANNUAL REPORT 2017
8
of the respective audit, is appropriate and that the communication
between such Committee and the auditors referred herein is
consistent. The External Auditors confirmed their independence.
Regarding Accounting and Self-Regulatory Policies:
The main accounting policies followed by the Company were reviewed and
approved in terms of the information received by reason of new regulations.
During the period, the updates proposed by the Administration to various
self-regulatory policies were reviewed, on which were favorably expressed
for submission to the Board of Directors. The accounting policies, criteria,
and information observed by the Company are adequate and sufficient.
Conclusions:
The recommendations of the Audit and Corporate Practices Committee
have been, or are being addressed by the Administration of the company.
During the reported period, the Audit and Corporate Practices Committee
from Shareholders, Directors, relevant executives,
did not receive
employees and in general from any third party,
any remarks about accounting, internal controls
and other matters related to the Internal or
External Audit, other than those issued by the
management during the preparation or revision
of the respective documentation; no complaints
were received about any
irregular matters
regarding the Administration. The Audit and
Corporate Practices Committee has followed,
within its competence and in accordance with
the instructions received, the resolutions of the
Board of Directors and the Shareholders ‘ Meeting
during the reporting period. From all the above,
the Audit and Corporate Practices Committee
has fulfilled the functions stated in Article 42,
paragraph II of the LMV, during the reporting
period.
OPINION OF THE AUDIT COMMITTEE TO THE BOARD OF DIRECTORS ON THE ANNUAL REPORT OF THE CHIEF EXECUTIVE
OFFICER
After having listened and analyzed the CEO´s report for the fiscal year ended on December, 31, 2017, prepared in terms and
for the purposes of the stated of Article 44, section XI of the Security Market Law, in relation to Article 172 of the General Law
of Business Corporations and based on the reports of the External Audit presented to the Committee, the Audit and Corporate
Practices Committee has determined that: (i) the accounting and information policies and criteria followed by the Company are
adequate and sufficient, taking into account the Company´s particular circumstances; (ii) these accounting policies and criteria
have been consistently applied in the information presented by the CEO; (iii) as consequence of the previous numerals (i) and (ii),
the information presented by the CEO reflects the Company´s financial situation and results for the fiscal year 2017.
Based on the above, under the terms and for the purpose of the provisions of the Article 42, paragraph II, section e) of the LMV,
the Audit and Corporate Practices Committee recommend to the Board of Directors the approval of the CEO`s annual report for
fiscal 2016, for its presentation to the Annual and General Ordinary Shareholder´s Meeting of the Company.
Guillermo Ochoa Maciel
President of Bachoco´s Audit and Corporate Practices
Committee
9
ANNUAL REPORT 2017
highlights
TO INVESTORS
in 2017
THE COMPANY'S SHARES
AND ADRS REACHED
A YIELD OF 10.5%
ON THE BMV AND OF
16.9% ON NYSE
bachoco
IN THE STOCKS
- 600 million shares
- One single class (Class B)
- Full rights
- An ADR equals 12 shares
- 26.75% of float
- An estimated $56,172 million pesos in
market capitalization
The founding
family holds
73.25%
of total shares
By two Trusts:
- Control Trust with 52.00%
- Underwriting Trust with 21.25%
SHARE PRICES
Bolsa Mexicana de Valores
In pesos per Share
The New York Stock Exchange
In dollars per ADR
Year
High
Low Average
Close
Year
High
Low Average Close
2017
2016
2015
2014
2013
102.00 79.53
62.51
85.65
59.23
89.73
44.71
68.55
28.80
45.25
88.51
77.34
71.74
56.62
38.27
93.62
84.75
70.05
62.00
44.16
2017
2016
2015
2014
2013
67.61
55.65
63.49
61.24
43.08
46.20
41.17
45.64
40.37
27.02
56.39
49.68
54.09
50.84
35.92
57.30
49.02
49.23
49.88
40.27
Source: Yahoo Finance
ANNUAL REPORT 2017
10
board of
DIRECTORS
Bachoco’s Board of Directors is comprised of eight Proprietary Shareholder
Directors, four Alternate Shareholder Directors, and four
Independent
Proprietary Directors. This board was last ratified on April 26, 2017. The Board’s
main duties include the following:
Determine policies, general strategies, and the organization and
PROPRIETARY SHAREHOLDERS DIRECTORS
Javier Bours Castelo (Chairman of the Board),
Jose Gerardo Robinson Bours Castelo, Jesus
Enrique Robinson Bours Muñoz, Jesus Rodolfo
Robinson Bours Muñoz, Arturo Bours Griffith,
management criteria that guide the activities of the Company.
Octavio Robinson Bours, Ricardo Aguirre Borboa
Prepare and develop programs to optimize resource management and the
operation of the business, such as budgets and financial planning.
After considering the Auditing and Corporate Practices Committee’s
opinion, approve the internal control and guidelines of the internal
auditing of the Company.
Authorize acquisitions or disposing, as well as the granting of guarantees
or the taking of liabilities for a value equal to or higher than five per cent
of the consolidated assets of the Company, except for investments in debt
securities or bank instruments; provided such are made in accordance
with the policies approved by the Board for such purposes.
Review and authorize operating results and work plans, and the overall
compensation of the Company’s senior officers.
and, Juan Salvador Robinson Bours Martinez.
INDEPENDENT PROPRIETARY DIRECTORS
Avelino Fernandez Salido, Humberto
Schwarzbeck Noriega, Guillermo Ochoa Maciel
and, David Gastelum Cazares.
ALTERNATE SHAREHOLDERS DIRECTORS
Jose Eduardo Robinson Bours Castelo alternate
of Javier Bours Castelo and Jose Gerardo
Robinson Bours Castelo.
Jose Francisco Robinson Bours Griffith, alternate
of Octavio Robinson Bours and Arturo Bours
Griffith.
Guillermo Pineda Cruz, alternate of Jesus Enrique
Robinson Bours Muñoz and Jesus Rodolfo
Robinson Bours Muñoz.
Gustavo Luders Becerril, alternate of Juan
Salvador Robinson Bours Martinez and Ricardo
Aguirre Borboa.
HONORARY MEMBERS OF THE BOARD
Enrique Robinson Bours Almada, Mario Javier
Robinson Bours Almada, Juan Bautista Salvador
Robinson Bours Almada.
SECRETARY OF THE BOARD
Eduardo Rojas Crespo
11
ANNUAL REPORT 2017
senior management
TEAM
1
2
3
4
5
6
7
8
Rodolfo Ramos Arvizu / Chief Executive Officer
R. Trent Goins / Director of U.S. Operations
Ernesto Salmon Castelo / Director of Operations
Andrés Morales Astiazaran / Director of Sales
Daniel Salazar Ferrer / Chief Financial Officer
Augusto Franco Gomez / Director of Marketing
Ismael Sanchez Moreno / Director of Human Resources
Alejandro Elias Calles Gutierrez / Director of Purchasing
ANNUAL REPORT 2017
12
65 years
adding value
Bachoco was born 65 years ago, currently, is
considered the largest poultry company in Mexico and one
of the top producers worldwide, constantly growing on
infrastructure, with a wide range of products and a well-
recognized brand which gives Bachoco solid presence in the
market.
This can only be achieved by consistently adding value and
satisfying our groups of interest expectations.
We constantly look for ways to add value to our products and
processes in order to keep our vision of being present every day
in the consumer´s nourishment.
13
ANNUAL REPORT 2017
TOGETHER FOR
OUR BACHOCO TEAM
We consolidated the Bachoco Welfare program by
focusing on three specific areas: Occupational
Welfare, Personal Welfare and Social Welfare.
Through this program, the company seeks more
people join our initiatives and perceive the value
of belonging to a company focused on taking care
of the life quality of its collaborators.
TOGETHER FOR
OUR PLANET
The interaction we have with the
environment is a key aspect in which we
seek to contribute in a positive way. Proof
of these efforts are the water treatment
plants in our production centers.
Social Responsibility
Bachoco’s Social Responsibility
program is based on 5 essential
cornerstones seeking to achieve an
integral approach for the
improvement of collaborators,
surrounding communities and the
environment. We work hard every day
to achieve these goals and 2017 was
evidence of it.
TOGETHER FOR
OUR BUSINESS
We define strategic lines in which we
focus our efforts. Following those
strategic lines, we consolidated
programs such as the deployment of
Bachoco´s Cultural Model, the
Corporative University and Bachoco
Welfare, thinking always of our people.
TOGETHER FOR
OUR COMMUNITY
Our commitment and collaboration with
neighboring communities constitutes one
of our working areas. Beyond providing
support in natural disaster situations, we
also developed initiatives that contribute to
the community improvement.
TOGETHER FOR
OUR PRODUCTS
Our work in safety and food
quality is a continuous task and
we consolidated it through the
certification in SQF (Safe Quality
Food).
ANNUAL REPORT 2017
14
CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Auditors
Consolidated Statements of Financial Position
Consolidated Statements of Income and Other Comprehensive Income
Consolidated Statements of Cash Flows
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S
21
INDUSTRIAS BACHOCO, S.A.B. DE C.V. AND SUBSIDIARIES
Consolidated Statements of Profit and Loss and Other Comprehensive Income
Years ended December 31, 2017, 2016 and 2015
(Thousands of pesos, except share and per share amount)
Net revenues
Cost of sales
Gross profit
General, selling and administrative expenses
Other income (expenses), net
Operating income
Finance income
Finance costs
Net finance income
Profit before income taxes
Income taxes
Profit for the year
Note
23
23
30
29
29
21
2017
2016
2015
$
58,050,025
(47,502,959)
52,020,303
(42,635,071)
46,229,049
(36,847,508)
10,547,066
9,385,232
9,381,541
(5,423,379)
167,642
(4,847,858)
260,202
(4,323,374)
(4,640)
5,291,329
4,797,576
5,053,527
1,087,641
(340,091)
747,550
969,174
(172,154)
797,020
593,845
(147,292)
446,553
6,038,879
5,594,596
5,500,080
1,084,444
1,643,433
1,680,560
$
4,954,435
3,951,163
3,819,520
Other comprehensive income (loss) items:
Items that may be reclassified subsequently to profit or loss:
Currency translation effect
(197,636)
755,218
Items that will not be reclassified subsequently to profit or loss:
Actuarial remeasurements
Income taxes related to actuarial remeasurements
22
Other comprehensive income
(17,377)
5,213
(209,800)
14,888
(4,466)
765,640
502,332
(25,944)
7,783
484,171
Comprehensive income for the year
Profit attributable to:
Controlling interest
Non-controlling interest
Profit for the year
Comprehensive income attributable to:
Controlling interest
Non-controlling interest
Comprehensive income for the year
$
$
$
$
$
4,744,635
4,716,803
4,303,691
4,948,242
6,193
3,946,634
4,529
3,812,840
6,680
4,954,435
3,951,163
3,819,520
4,738,442
6,193
4,712,274
4,529
4,297,011
6,680
4,744,635
4,716,803
4,303,691
Weighted average outstanding shares
599,997,696
599,979,844
599,631,383
Basic and diluted earnings per share
26
$
8.25
6.58
6.36
See accompanying notes to consolidated financial statements.
22
INDUSTRIAS BACHOCO, S.A.B. DE C.V. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2017, 2016 and 2015
(Thousands of pesos)
Cash flows from operating activities:
Profit for the year
Adjustments for:
Deferred income tax recognized in profit or loss
Current income tax recognized in profit or loss
Depreciation
Goodwill impairment loss
Loss (Gain) on disposal of plant and equipment
Interest income
Interest expense
Unrealized foreign exchange loss on loans
Note
2017
2016
2015
$
4,954,435
3,951,163
3,819,520
21
21
14
15
29
29
(627,090)
1,711,534
1,075,788
-
41,890
(857,109)
255,997
82,600
382,904
1,260,529
925,748
-
(157,245)
(646,334)
172,154
270,850
192,070
1,488,490
769,270
38,619
90,279
(489,934)
147,292
33,300
Subtotal
6,638,045
6,159,769
6,088,906
Derivative financial instruments
Accounts receivable, net
Due from related parties
Inventories
Current and non-current biological assets
Prepaid expenses and other current assets
Assets held for sale
Trade payable and other accounts payable
Due to related parties
Income taxes paid
Employee benefits
15,129
162,906
3,967
(461,783)
70,941
875,307
7,205
(350,299)
(134,714)
(1,405,256)
57,946
(7,064)
(1,144,991)
1,154
(562,905)
(539,395)
82,324
3,320
(43,707)
24,338
(997,028)
34,801
5,425
521,603
(3,518)
(448,404)
(256,969)
(401,711)
(1,465)
629,631
38,595
(2,087,286)
43,375
Net cash provided by operating activities
5,479,394
3,010,616
4,128,182
Cash flows from investing activities:
Payments for acquisition of property, plant and equipment
(2,126,361)
(2,792,252)
(1,909,771)
Proceeds from sale of plant and equipment
Restricted cash
Investment in securities at fair value through profit or loss
Other assets
Interest collected
Bussiness acquisition including advance payment
Loans granted to related parties
Collection of principal of loans granted to related parties
35,175
(24,058)
(157,549)
2,125
857,109
(2,494,862)
-
144,562
278,340
(19,236)
272,322
4,583
646,334
-
-
44,513
71,427
(25,771)
(317,030)
(55,698)
489,934
(190,595)
(189,075)
-
Net cash used in investing activities
(3,763,859)
(1,565,396)
(2,126,579)
Cash flows from financing activities:
Payment for repurchase of shares
Proceeds from issuance of repurchased shares
Dividends paid
Dividends paid to non-controlling interest
Proceeds from borrowings
Principal payment on loans
Interest paid
(1,800)
-
(780,000)
(1,081)
5,378,915
(4,246,100)
(255,997)
(4,157)
5,224
(779,960)
(1,114)
2,320,500
(2,670,474)
(172,154)
(40,612)
54,289
(899,162)
(878)
3,903,200
(2,231,596)
(147,292)
Net cash provided by (used in) financing activities
93,937
(1,302,135)
637,949
Net increase in cash and cash equivalents
1,809,472
143,085
2,639,552
Cash and cash equivalents at January 1
14,661,968
14,020,491
11,028,054
Effect of exchange rate fluctuations on cash and cash equivalents
(383,230)
498,392
352,885
Cash and cash equivalents at December 31
$
16,088,210
14,661,968
14,020,491
See accompanying notes to consolidated financial statements.
23
DEPOSITARY BANK
BNY MELLON
BNY Mellon Shareowner Services
shrrelations@cpushareownerservices.com
T.US: 888 BNY ADRS
T. 201 680 68 25
Proxy Services
shareowner@bankofny.com
Toll Free: 1.888.269.2377
T. (212)815.37.00
INDEPENDENT AUDITORS
Deloitte Touche Tohmatsu /Galaz, Yamazaki,
Ruiz Urquiza, S.C.
T. +52 (442) 238.29.34
CORPORATE HEADQUARTERS
Industrias Bachoco S.A de C.V.
Av. Tecnológico 401
Celaya, Guanajuato
38030, México
T.+52 (461) 618.35.00
F. +52 (461) 611.65.02
INVESTOR RELATIONS
María Guadalupe Jáquez
Andrea Guerrero
T. +52 (461) 618.35.55 (México)
inversionistas@bachoco.net
Financial Statements Consolidated 2017
The digitalized version of the Annual Report 2017 of Bachoco, as well as the Consolidated Financial Statements with their respective
notes are available at the following addresses:
Annual Report 2017 (PDF)
https://corporativo.bachoco.com.mx/wp-content/uploads/2018/03/Annual-Report-2017.pdf
Consolidated Financial Statements 2017 (PDF)
https://corporativo.bachoco.com.mx/wp-content/uploads/2018/03/Financial-Statements-2017.pdf
www.bachoco.com.mx
Industrias Bachoco S.A.B. de C.V.