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
Sustainability
Summary
70 Years by Your
Side
Consolidated Financial
Statements
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
in Celaya, Guanajuato,
Mexico. Its main business lines are: chicken, table
eggs, balanced feed, pork, and further process
products of beef and turkey.
located
Bachoco owns and manages more than a thousand
farms, 9 processing plants, 9 further processing
plants, 2 swine processing plants, 23 feed mills,
22 hatcheries, and more than 80 distribution
centers. At the date of this report The Company
employs more than 31,000 people.
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.
Industrias Bachoco is leader in the Mexican
poultry industry and one of the ten largest
poultry producers globally.
Sales
82%
6%
CHICKEN
EGG
5%
BALANCED
FEED
7%
OTHERS
by Geography
75%
MEXICO
25%
UNITED STATES
2021 2020 2019
32,058
29,780
28,218
OPERATING DATA
In U.S. Dollars1
December 31,
In millions pesos
2021
2021
2020
2019
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 equals to $20.51 pesos
$ 3,983.4
$ 81,699.1
68,792.0
61,655.2
650.5
287.3
13,342.4
5,891.9
358.6
$ 7,355.7
$ 240.6
0.41
4.94
16.3%
7.2%
9.0%
6.0%
4,934.1
8.45
101.36
16.3%
7.2%
9.0%
6.0%
11,084.4
10,097.9
4,301.5
6,036.7
3,972.1
6.56
78.74
16.1%
6.3%
8.8%
5.8%
3,976.5
5,263.0
3,232.8
5.37
64.40
16.4%
6.4%
8.5%
5.2%
STATEMENT OF FINANCIAL DATA
In U.S. Dollars1
December 31,
In millions pesos
2021
2021
2020
2019
TOTAL ASSETS
$ 3,217.4
$ 65,888.8
58,475.0
55,702.5
Cash and cash equivalents
Inventories
TOTAL LIABILITIES
Short-term debt
Accounts payable
Long-term debt
1,013.0
310.9
20,776.8
19,242.3
19,182.7
6,376.0
5,688.3
4,710.2
$ 863.2
$ 17,704.7
14,548.2
15,442.2
97.2
488.3
-
1,993.9
1,057.6
3,440.4
10,015.3
5,753.1
5,158.8
-
1,460.4
1,488.2
TOTAL STOCKHOLDERS´ EQUITY
$ 2,354.2
$ 48,284.1
43,926.8
40,260.3
Capital stock
Retained earnings
57.3
1,174.4
1,174.4
1,174.4
2,137.5
43,839.2
39,607.8
36,424.4
1 One dollar equals to $20.51 pesos
06 2021 Annual Report | Bachoco
Bachoco | 2021 Annual Report
07
SALESEMPLOYEESNET Dear Shareholders of Industrias Bachoco:
2021, a year in which some challenges due to COVID-19 pandemic
persisted, to which was added the uncertainty and increases in raw
material prices. However, the poultry industry was able to stabilize and,
in certain way, make progress in recovering performance levels prior to
the pandemic.
According to data from the National Institute of Statistics, Geography
and Informatics (INEGI for its abbreviation in Spanish), in terms of GDP,
Mexico, as worldwide economy, managed to show growth compared to
2020. For Mexico, this increase was 4.8%. However, in terms of inflation,
Mexico registered 7.36%, exceeding the 3.0% average obtained in the
two previous years.
Regarding the US, according to information from the Federal Reserve,
GDP growth was 5.6%, compared to the contraction of 2.3% observed in
2020 for this geography. On the other hand, for 2021 inflation in the US
was placed at 5.5%, which is above the 1.35% average obtained in the two
previous years.
Under these conditions, in terms of the industry in which we compete,
we were able to observe a good balance between supply and demand
during most of 2021. This allowed us to be in a good position to face the
increases in raw material that we saw most of the year and that resulted
in increase of 18.5% in cost of sales compared to 2020.
In terms of revenue, our total net sales grew by 18.8% compared to 2020.
In particular, sales of our poultry segment grew 16.8% while the others
segment, with the integration of SASA, achieved an increase of 34.6%
compared to 2020.
With a high focus on improving our product mix, operating efficiencies
and financial discipline, we managed to achieve an EBITDA margin of
9.0% for 2021, which places us within the long-term normalized range.
We maintain our commitment and contribution
to our society. This was recognized by MERCO by
placing us as one of the ten best food companies
in Mexico.
Javier Bours Castelo
Chairman of the Board of Directors
Likewise, I would like to reiterate our focus on maintaining our leadership position
in the markets in which we participate while continuing to grow our business
with profitablility, providing positive results and maintaining the solid financial
structure that has always characterized us.
Javier Bours Castelo
Chairman of the Board of Directors
In 2021 we reinforced our commitment to the growth of the company,
reporting an increase in capital investments of 26.4% compared to the
previous year. These investments were focused on organic growth projects,
as well as productivity projects throughout our production chain. These
strategies will allow us to continue to get closer to our customers and
continue to consolidate ourselves in the market.
In line with our goal of continuing to generate and seek for opportunities
regarding efficiency and growth, in December 2021, COFECE authorized
the purchase of 100% of the shares of RYC Alimentos. This acquisition was
finalized in January 2022. With this agreement, we believe that we are on
the right path towards consolidating ourselves as a relevant multiprotein
company not only domestically but also worldwide, so we are sure that this
will be an additive integration to our portfolio.
Our financial structure remained solid. We ended 2021 with net cash of
$18,782.9 million, which will allow us to continue with our growth plans and at
the same time, face the uncertainties and volatilities of the poultry industry.
On the other hand, we maintain our commitment and contribution to our
society. This was recognized by MERCO by placing us as one of the ten best
food companies in Mexico. Likewise, our CEO, Rodolfo Ramos Arvizu, once
again ranked as one of the most respected CEOs in the country, ranking
20th on the list.
Without a doubt, the support of our management team and our staff has led
us to obtain the results and stability that have characterized Bachoco over
the years. Their commitment is, and always has been, invaluable to us. We
know that we still have a long way to go and challenges to face, but we trust
in the hard work and commitment of our staff to successfully achieve the
Company’s objectives.
Dear Shareholders:
All figures discussed below are information of 2021 with comparative figures of 2020. It was prepared
under IFRS accounting principles and is presented in millions of pesos unless otherwise indicated.
2021 & 2020 RESULTS
Net sales in 2021 totaled $81,699.1 million,
$12,907.1 million more or a 18.8% increase
in net sales, when compared to $68,792.0
million reported in 2020. The 80% of this
increase comes from the Poultry segment
and was largely the result of optimizing our
product mix in both Mexico and the United
States, which allowed us to obtain better
prices compared to 2020.
In 2021, sales from our operation in the US
represented 24.9% of total revenue, compared
to the 28.3% reported in 2020. This was due to
higher sales growth in the Mexican market.
On the operating segments view, compared to
2020, Poultry sales grew 16.8% while Others
grew 34.6%. This last one was mainly driven by
SASA recorded sales for the entire year, while
in 2020, their sales were only recorded for the
second semester corresponding to the period
in which the business agreement was finalized.
Cost of sales totaled $68,356.7 million, 18.5%
higher than the $57,707.6 million reported in
2020. The increase in cost of sales is mainly
attributed to the impact of the escalation
in prices of raw materials such as grain and
soybean meal, both in dollar terms and Mexican
pesos.
Despite the volatility of the commodity markets,
the combination of prices and cost increases
allowed us to achieve a gross profit of $13,342.4
million, with a gross margin of 16.3%; higher than
the $11,084.4 million of gross profit and margin
of 16.1% achieved in 2020.
In 2021, sales from our operation in the US represented 24.9% of total revenue,
compared to the 28.3% reported in 2020. This was due to higher sales growth
in the Mexican market.
Rodolfo Ramos Arvizu
Chief Executive Officer
SG&A in 2021 were $7,127.8 million, an increase
of $707.4 million or 11.0% compared to $6,420.4
million in 2020. SG&A as a percentage of net
sales represented 8.7% in 2021 and 9.3% in
2020.
In 2021, we had other expenses of $322.8
million, a level very similar to the $362.5 million
reported in 2020.
Operating income in 2021 was $5,891.9 million,
a margin of 7.2%, a better result compared to
$4,301.5 million and a margin of 6.3% in 2020.
In 2021, we reached an EBITDA of $7,355.7
million, a margin of 9.0%, higher when
compared to the EBITDA of $6,036.7 million
obtained in 2020, with a margin of 8.8%.
On the other hand, net financial result was
$849.9 million, slightly below the $882.2 million
obtained in 2020. This is largely due to the
relative stable exchange rate that we observed
during 2021.
Total taxes were $1,807.6 million. This includes
$1,790.6 million for income tax and $17.0 million
for deferred taxes. This figure compares to total
taxes of $1,211.6 million, which includes income
taxes of $1,321.1 and $109.4 million of favorable
deferred taxes in 2020.
As a result, profit for the year attributable to
controlling interest in net income in 2021 was
$5,056.6 million, with a net margin of 6.0%,
which represents earnings per share of $8.45
pesos, compared to $3,935.7 million, 5.8%
margin and $6.56 earnings per share achieved
in 2020.
Cash and equivalents as of December 31,
2021, totaled $20,776.8 million, an increase of
$1,534.5 million or 7.9% more than the $19,242.3
million reported as of December 31, 2020.
Total debt as of December 31, 2021, was
$1,993.9 million, compared to total debt of
$2,518.0 million reported as of December 31,
2020. 75% of the 2021 debt corresponds to the
current debt securities, which expire in 2022.
As a result, our net cash as of December 31,
2021 which totaled $18,782.9 million, compared
to the net cash of $16,724.3 million as of
December 31, 2020. This increase allows us to
continue having the financial capacity for the
Company’s growth strategies.
Capital investments in 2021 totaled $3,479.49
million, an increase of 26.4% compared to the
$2,752.3 million reported in 2020. In 2021, the
company continued with the implementation of
new projects oriented towards organic growth
and productivity improvements, with which we
reinforce our commitment to be closer to the
final consumer.
Rodolfo Ramos Arvizu
Chief Executive Officer
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 2021, 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,
reporting principles
accounting and
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 2021,
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.
in the
Lastly, the Board presented
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 2021.
Javier Bours Castelo
Chairman of the Board of Directors
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
the
corresponding revisions continue.
improving and
Regarding Financial
Information:
The Financial Statements of the Company
the
were discussed quarterly with
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 2021, the total transactions in
connection to related parties represented
less than 2.3% 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
Bachoco has an Audit 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
28, 2021.
AUDIT COMMITTEE AND
CORPORATE PRACTIES MEMBERS
Guillermo Ochoa Maciel (President)
Humberto Schwarzbeck Noriega
Avelino Fernandez Salido
Ricardo Aguirre Borboa
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 2022.
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.
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 did not receive
from Shareholders, Directors, relevant executives, 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.
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
2021 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. We worked with Deloitte
to insure the compliance, from both Deloitte and
the Company, of the regulation issued by the
Mexican Authorities (Comision Nacional Bancaria
y de Valores), regarding the “Circular Unica de
Auditores Externos”, (External Audit Regulation).
The fees corresponding to 2021 were duly revised
and approved. The Audited Financial Statements
as of December 31, 2021 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 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
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, 2021, 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 2021.
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 2021, 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
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 September 22, 2021. The
Board’s main duties include the following:
Determine policies, general strategies, and the organization and management
criteria that guide the activities of the Company.
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.
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,
Octavio Robinson Bours, Ricardo Aguirre Borboa 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.
SECRETARY OF THE BOARD
Daniel Salazar Ferrer
Rodolfo Ramos Arvizu
Chief Executive Officer
Daniel Salazar Ferrer
Chief Financial Officer
Ernesto Salmón Castelo
Director of Mexico Operations
Alejandro Elias Calles Gutiérrez
Director of Purchasing
Arturo García Sánchez
Director of Human Resources
Drew McGee
Director of US Operations
In our 70-year history we have grown and positioned ourselves as a multiprotein
company that strives to drive sustainable development within its sphere of influence.
We have reaffirmed this commitment by creating the Sustainability Committee, which
comprises the Senior Management team and is tasked with defining strategies and
rolling out programs that create value for our business, our people, our communities
and our planet.
We Strengthen Our Business
Our commitment to improve food quality for families and nutrition has motivated us
to diversify our business lines and drive continuous improvements to our operational
processes. This has helped us meet the needs of the market through products that
comply with highest quality and safety standards.
We have redesigned our Code of Ethics to encompass a global approach throughout
our business lines, in addition to consolidate social measures to raise awareness of
these changes among our employees.
97% of employees from the Bachoco OK Foods Business Unit
reaffirmed their commitment to the Code of Ethics
We Promote Our Talent
We have a team of more than 31,000 talented and committed people who, every single
day, help us to maintain our leadership within the industry and motivate us to continue
achieving milestones in every area.
In order to recognize the value that each of our employees brings to the company, we
offer them best-in-class working conditions, as well as opportunities for continuing
education, helping them grow both professionally and personally.
We have bolstered our prevention protocols and measures in conjunction with a team
of healthcare professionals to ensure business continuity and guarantee the safe return
to work for all our employees. We have also created internal communication campaigns
dealing with prevention, in addition to rolling out measures to promote and facilitate
vaccination of our employees.
To the end of 2021, 74% of our employees were fully
vaccinated against COVID-19
We Take Care of Our Planet
We are responsible for looking after nature because this is where the vast majority of
our resources come from. To do so, we promote strategies to ensure these resources
are used properly, in addition to streamlining the environmental performance of our
operations.
Some measures we have taken include the adoption of materials and technologies that
help us to mitigate the environmental impact we have in the areas of waste, water and
emissions. We have also reaffirmed our commitment to the Five Freedoms of Animal
Welfare at all our farms.
We have decreased the amount of plastic we use by 20
tons by rolling out a new laminated film for our packaging
We Contribute to Our Community
We forge partnerships with a wide range of organizations in order to join forces to create
programs that boost nutrition and healthy eating while driving social development and
engagement with the communities in which we operate.
The Bachoco Nourishing Together Half Marathon has helped us have a positive impact
on a number of areas. Through this race, we raise funds to help tackle food security
issues in Mexico, in addition to promoting healthy eating habits and sports.
Thanks to the 2021 Bachoco Half Marathon, we helped
refurbish 5 community kitchens coordinated by the DIF
DEPOSITARY BANK
Bank of New York Mellon
Shareholder Correspondence Address:
BNY Mellon Shareowner Services
P.O. Box 505000
Louisville, KY 40233-5000
Overnight correspondence Address:
BNY Mellon Shareowner Services
462 South 4th Street, Suite 1600
Louisville, KY 40202
T. US and Canada: 1-888-269-2377
T. 201-680-6825
E-mail: sharerelations@cpushareownerservices.com
Website: www.mybnymdr.com
INDEPENDENT AUDITORS
Deloitte Touche Tohmatsu/ Galaz, Yamazaki, Ruiz Urquiza, S.C.
T. (442) 238.29.46
CORPORATE HEADQUARTERS
Industrias Bachoco S.A de C.V.
Av. Tecnológico 401
Celaya, Guanajuato
38030, México
T. (461) 618.35.00
INVESTOR RELATIONS
María Guadalupe Jáquez
Andrea Guerrero
T. (461) 618.35.55 (México)
inversionistas@bachoco.net
In Bachoco we are very proud that in this 2022, we
reached 70 years of being part of the table of our
consumers.
In 1952, in Ciudad Obregon, Sonora, the brothers
Juan, Javier, Enrique and Alfonso Robinson Bours
began to sell table eggs with a farm of 1,000 bird
stock. After seeing their dream evolve, in 1971 they
decided to explore the chicken and pork business.
To date, the commitment of the founding family has
been to generate value and create differentiators
that would allow Bachoco to consolidate itself
as what it is today, one of the most recognized
brands in Mexico and one of the most relevant
poultry companies in the world.
Today, Bachoco has managed to expand not only
to the United States, but also to expand to other
proteins like processed pork, beef, balanced feed
and pet food.
We can proudly say that we work every day to
achieve our vision of being the most important
in Mexico and
multi-protein food company
internationally relevant, focused on the nutrition
of the population and providing superior services
to our customers based on quality, sustainability
and excellence in everything we do.
In this way, we seek to be the best value alternative
for our consumers and shareholders.
Galaz, Yamazaki,
Ruiz Urquiza, S.C.
Paseo de la Reforma 505, piso 28
Colonia Cuauhtémoc
06500 Ciudad de México
México
Tel: +52 (55) 5080 6000
www.deloitte.com/mx
Independent Auditors’ Report to the
Board of Directors and Stockholders of
Industrias Bachoco S.A.B. de C.V. and
Subsidiaries
(In thousands of Mexican pesos)
Opinion
We have audited the consolidated financial statements of Industrias Bachoco, S.A.B. de
C. V. and its subsidiaries (the “Entity”), which comprise the consolidated statements of financial position
as of December 31, 2021, 2020 and 2019, and the consolidated statements of profit and loss and other
comprehensive income, consolidated statements of changes in stockholders’ equity and consolidated
statements of cash flows for the years then ended, and notes to the consolidated financial statements,
including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Entity as of December 31, 2021, 2020 and 2019, and
its consolidated financial performance and its consolidated cash flows for the years then ended in
accordance with International Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board (“IASB”).
Basis for Opinion
We conducted our audits in accordance with International Standards on Auditing (“ISAs”). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit
of the Consolidated Financial Statements section of our report. We are independent of the Entity in
accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional
Accountants (“IESBA Code”) together with the Code of Ethics issued by the Mexican Institute of Public
Accountants (“IMCP Code”), and we have fulfilled our other ethical responsibilities in accordance with the
IESBA Code and the IMCP Code. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Other Matter
The accompanying consolidated financial statements have been translated into English for the
convenience of readers.
Key Audit Matter
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in the
context of our audit of the consolidated financial statements as a whole, and in the forming our opinion,
thereon and we do not provide a separate opinion on these matters. We have determined that the matter
described below is the key audit issue which should be communicated in our report.
Deloitte se refiere a Deloitte Touche Tohmatsu Limited, sociedad privada de responsabilidad limitada en el Reino Unido, y a su red de firmas miembro, cada una de ellas como una entidad legal
única e independiente. Conozca en www.deloitte.com/mx/conozcanos la descripción detallada de la estructura legal de Deloitte Touche Tohmatsu Limited y sus firmas miembro.
Valuation of goodwill and intangible assets of the Ok Foods - Albertville Quality Foods Inc. cash-
generating unit—Refer to Notes 3. e), j), and 15 to the consolidated financial statement.
As of December 31, 2021, the carrying amount of the Entity’s’ goodwill was $1,688,607, of which
$1,204,889 was allocated to the Ok Foods - Albertville Quality Foods, Inc. cash generating unit (“AQF
CGU”).
The recoverable amount of the AQF CGU was determined based on its value in use, which used
projections of estimated cash flows. The significant assumptions used in projecting estimated cash flows
were the revenue growth rate and annual discount rate. A change in the revenue growth rate or annual
discount rate could have a significant impact on the recoverable amount of the AQF CGU. The recoverable
amount of the AQF CGU exceeded its carrying value, and therefore, no impairment was recognized for
the year ended December 31, 2021.
We identified the valuation of the AQF CGU goodwill and intangibles as a key audit matter due to the
significant judgment made by Management relating to the revenue growth rate and annual discount rate
used in projecting estimated cash flows. This included considering the effects that remain from the
coronavirus pandemic (COVID-19), the inflation and the slowdown in economic growth, which caused
contractions of the demand in the US market. This required a high degree of auditor judgment and
increased effort, including involvement of our valuation specialists, in performing audit procedures to
evaluate the reasonableness of the methodology used, the revenue growth rate and annual discount rate.
Our audit procedures related to the revenue growth rate and annual discount rate used to project
estimated cash flows in determining the recoverable amount of the AQF CGU included the following,
among others:
• We obtained an understanding and evaluated the Entity’s methodology for determining the
recoverable amount of the AQF CGU, including the process for developing revenue growth rate
and annual discount rate.
• We tested the effectiveness of controls over Management’s evaluation of revenue growth rate and
annual discount rate used in the projected estimated cash flows.
• We compared the sales of the current year with sales from the previous year, and also compared
actual results obtained in previous years with the results historically budgeted.
• We evaluated the reasonableness of the revenue growth rate and annual discount rate
assumptions by comparing them to (i) historical information; and (ii) information obtained from
external sources (expectation of analysts and industry reports).
• With the assistance of our valuation specialists, we evaluated the reasonableness of (1) the
valuation methodology and the current market data used by Management to determine the
revenue growth rate and annual discount rate, and (2) developed an independent range of the
recoverable amount of the AQF CGU.
• We evaluated whether the projected estimated cash flows were consistent with evidence obtained
in other areas of the audit.
• We evaluate the sensitivity analysis prepared by the Entity considering a decrease or increase in
the revenue growth rate and in the annual discount rate.
3
Information Other than the Consolidated Financial Statements and Auditor’s Report Thereon
Management is responsible for the information other than the consolidated financial statements (the
“other information”). The other information will comprise the information that will be incorporated in the
Annual Report that the Entity is obliged to prepare pursuant to Article 33 Fraction I, clause b) of Title
Four, First Chapter of the “General Provisions Applicable to Issuers and Other Stock Market Participants”
in Mexico, together with the Instructions Guide accompanying those provisions (collectively, the
“Provisions”). The Annual Report is expected to be made available to us after the date of this audit
report.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information identified above when it becomes available and, in doing so, consider whether the other
information is materially inconsistent with the consolidated financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated. When we read the Annual Report,
we will issue the declaration surrounding the reading of the annual report required by Article 33 Fraction
I, clause b) number 1.2. of the Provisions. If, based on the work we have performed, we conclude that
there is a material misstatement therein, we are required to communicate the matter.
Responsibilities of Management and Those Charged with Governance for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Entity’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless Management either intends to liquidate the Entity or
to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity’s consolidated financial
reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of these consolidated financial statements.
3
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
-
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or
the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Entity's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
- Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Entity’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Entity to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Entity to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
4
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Galaz, Yamazaki, Ruiz Urquiza, S.C.
Member of Deloitte Touche Tohmatsu Limited
L.C.C. Alberto Del Castillo Velasco Vilchis
April 25, 2022
5
Assets
Current assets:
Cash and cash equivalents
Investment in securities at fair value through profit or loss
Investment in securities at fair value through other comprehensive income
Derivative financial instruments
Accounts receivable, net
Due from related parties
Inventories
Current biological assets
Prepaid expenses and other current assets
Assets held for sale
Total currents assets
Non-current assets:
Property, plant and equipment, net
Right-of-use assets
Non-current biological assets
Deferred income tax
Goodwill
Intangible assets
Other non-current assets
Total non-currents assets
INDUSTRIAS BACHOCO, S.A.B. DE C.V. AND SUBSIDIARIES
Consolidated Statements of Financial Position
December 31, 2021, 2020 and 2019
(Thousands of pesos)
Note
2021
2020
2019
Liabilities and equity
Note
2021
2020
2019
7
8
8
8
9
20
10
11
12
13
14
24
11
21
15
16
17
$ 19,136,443
10,841
1,559,823
69,862
5,108,167
291
6,375,990
2,769,612
2,757,123
57,436
37,845,588
17,286,374
1,018,322
937,715
-
4,366,019
686
5,688,338
2,012,668
1,221,255
54,630
32,586,007
18,662,765
186,284
315,761
18,098
3,867,110
13,674
4,710,207
2,043,237
1,227,196
52,916
31,097,248
21,763,402
680,210
2,358,137
213,739
1,688,607
704,374
734,704
28,143,173
19,733,822
678,845
1,991,530
261,934
1,650,716
753,224
818,922
25,888,993
18,556,646
822,732
1,818,911
245,272
1,578,994
772,640
810,048
24,605,243
Current liabilities:
Short-term debt
Current portion of long-term debt
Derivative financial instruments
Trade payable and other accounts payable
Lease liabilities
Income tax payable
Due to related parties
Total current liabilities
Long term liabilities:
Long-term debt, excluding current installments
Lease liabilities
Deferred income tax
Employee benefits
Total long term liabilities
Total liabilities
Equity:
Capital stock
Share premium
Reserve for repurchase of shares
Retained earnings
Effects of derivatives classified as hedging instruments
Foreign currency translation reserve
Actuarial remeasurements, net
Equity attributable to controlling interest
Non-controlling interest
Total equity
Commitments
Contingencies
Susequent events
500,081
1,493,830
-
10,015,256
279,809
360,898
185,429
12,835,303
-
371,671
3,841,475
656,252
4,869,398
848,061
209,499
194,181
5,753,137
278,981
815,082
80,842
8,179,783
1,460,405
440,730
3,874,980
592,294
6,368,409
3,440,399
-
-
5,158,827
149,538
82,665
76,704
8,908,133
1,488,208
653,512
3,904,493
487,810
6,534,023
17,704,701
14,548,192
15,442,156
1,174,432
414,070
1,199,423
43,839,229
(49,751)
1,501,440
(272,527)
47,806,316
477,744
48,284,060
1,174,432
413,423
1,266,469
39,607,821
(267,352)
1,391,534
(268,692)
43,317,635
609,173
43,926,808
1,174,432
414,516
1,308,367
36,424,411
(19,771)
1,073,925
(195,905)
40,179,975
80,360
40,260,335
$
18
18
8
19
24
21
20
18
24
21
22
25
22, 25
27
28
31
Total assets
$
65,988,761
58,475,000
55,702,491
Total liabilities and equity
$
65,988,761
58,475,000
55,702,491
See accompanying notes to consolidated financial statements.
202120202019NoteNet revenues$81,699,068 68,792,002 61,655,245 Cost of sales23(68,356,654) (57,707,566) (51,557,351) Gross profit13,342,414 11,084,436 10,097,894 General, selling and administrative expenses23(7,127,780) (6,420,397) (6,116,620) Other expenses, net30(322,779) (362,527) (4,734) Operating income5,891,855 4,301,512 3,976,540 Finance income291,117,406 1,173,520 991,632 Finance costs29(267,523) (291,329) (610,368) Net finance income849,883 882,191 381,264 Profit before income taxes6,741,738 5,183,703 4,357,804 Income taxes211,807,638 1,211,611 1,124,978 Profit for the year$4,934,100 3,972,092 3,232,826 Other comprehensive income (loss) items:Items that may be reclassified subsequently to profit or loss:Currency translation effect$109,906 317,609 (199,746) Net effects of derivatives classified as hedging instruments217,601 (247,581) (19,464) Items that will not be reclassified subsequently to profit or loss:Actuarial remeasurements22(5,478) (103,982) (107,897) Income taxes related to actuarial remeasurements1,643 31,195 32,370 Other comprehensive income323,672 (2,759) (294,737) Comprehensive income for the year$5,257,772 3,969,333 2,938,089 Profit attributable to:Controlling interest26$5,065,554 3,935,672 3,219,931 Non-controlling interest(131,454) 36,420 12,895 Profit for the year$4,934,1003,972,0923,232,826Comprehensive income attributable to:Controlling interest$5,389,226 3,932,913 2,925,194 Non-controlling interest(131,454) 36,420 12,895 Comprehensive income for the year$5,257,772 3,969,333 2,938,089 Weighted average outstanding shares26599,730,270 599,818,022 599,971,832 Basic and diluted earnings per share26$8.45 6.56 5.37 See accompanying notes to consolidated financial statements.INDUSTRIAS BACHOCO, S.A.B. DE C.V. AND SUBSIDIARIESConsolidated Statements of Profit and Loss and Other Comprehensive IncomeYears ended December 31, 2021, 2020 and 2019(Thousands of pesos, except share and per share amount)
INDUSTRIAS BACHOCO, S.A.B. DE C.V. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Years ended December 31, 2021, 2020 and 2019
(Thousands of pesos)
Attributable to controlling interest
Capital stock
Retained earnings
Accumulated other comprehensive income
Note
Capital
stock
Share
premium
Reserve for
repurchase of
shares
Retained
earnings
Effects of derivatives
classified as hedging instruments
Foreign
currency
translation reserve
Actuarial
remeasurements
net
Total
Non-controlling
interest
Total
equity
Balance at January 1, 2019
$
1,174,432
414,470
562,047
34,792,320
(307)
1,273,671
(120,378)
38,096,255
69,450
38,165,705
25
25
25
25
4
25
25
5
5
Dividends paid
Dividends paid to non-controlling interest
Reserve for repurchase of shares
Repurchase and sale of shares
Comprehensive income for the year:
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Balance at December 31, 2019
Dividends paid
Dividends paid to non-controlling interest
Reserve for repurchase of shares
Repurchase and sale of shares
Increase in non-controlling interest in acquired business
Comprehensive income for the year:
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Balance at December 31, 2020
Dividends paid
Dividends paid to non-controlling interest
Reserve for repurchase of shares
Repurchase and sale of shares
Other capital movements
Increase in non-controlling interest in acquired business
Comprehensive income for the year:
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Balance at December 31, 2021
See accompanying notes to consolidated financial statements.
-
-
-
-
-
-
-
-
-
-
46
-
-
-
-
-
747,840
(1,520)
-
-
-
(840,000)
-
(747,840)
-
3,219,931
-
3,219,931
1,174,432
414,516
1,308,367
36,424,411
-
-
-
-
-
-
-
-
-
-
-
(1,093)
-
-
-
-
-
-
(39,482)
(2,416)
-
-
-
-
(791,744)
-
39,482
-
-
3,935,672
-
3,935,672
1,174,432
413,423
1,266,469
39,607,821
-
-
-
-
-
-
-
-
-
$
1,174,432
-
-
-
647
-
-
-
-
-
414,070
-
-
(34,068)
(32,978)
-
-
-
-
-
1,199,423
(851,619)
-
34,068
-
(16,595)
-
5,065,554
-
5,065,554
43,839,229
-
-
-
-
-
(19,464)
(19,464)
(19,771)
-
-
-
-
-
-
(247,581)
(247,581)
(267,352)
-
-
-
-
-
-
-
217,601
217,601
(49,751)
-
-
-
-
-
-
-
-
(840,000)
-
-
(1,474)
-
(1,985)
-
-
(840,000)
(1,985)
-
(1,474)
-
(199,746)
-
(75,527)
3,219,931
(294,737)
12,895
-
3,232,826
(294,737)
(199,746)
(75,527)
2,925,194
12,895
2,938,089
1,073,925
(195,905)
40,179,975
80,360
40,260,335
-
-
-
-
-
-
317,609
317,609
-
-
-
-
-
(791,744)
-
-
(3,509)
-
-
(1,879)
-
-
494,272
(791,744)
(1,879)
-
(3,509)
494,272
-
(72,787)
3,935,672
(2,759)
36,420
-
3,972,092
(2,759)
(72,787)
3,932,913
36,420
3,969,333
1,391,534
(268,692)
43,317,635
609,173
43,926,808
-
-
-
-
-
-
-
109,906
109,906
1,501,440
-
-
-
-
-
-
(851,619)
-
-
(32,331)
(16,595)
-
-
(2,023)
-
-
-
2,048
(851,619)
(2,023)
-
(32,331)
(16,595)
2,048
-
(3,835)
5,065,554
323,672
(131,454)
-
4,934,100
323,672
(3,835)
(272,527)
5,389,226
47,806,316
(131,454)
477,744
5,257,772
48,284,060
Note202120202019Cash flows from operating activities:Profit for the year$4,934,100 3,972,092 3,232,826 Adjustments for:Deferred income tax recognized in profit or loss2117,017 (109,443) 60,677 Current income tax recognized in profit or loss211,790,621 1,321,054 1,064,301 Bargain purchase gain of domestic business acquisition 4- (90,889) Depreciation and amortization141,463,799 1,735,146 1,286,443 Depreciation of right-of-use assets 343,367 307,757 302,804 Intangible impairment loss165,459 - 73,733 Loss (gain) on disposal of property, plant and equipment95,341 12,987 (85,937) Interest income earned29(597,610) (705,986) (991,632) Interest expense and financial expense29265,982 291,038 330,119 Unrealized foreign exchange loss (gain) on loans34,146 320,880 (139,830) Subtotal 8,352,222 7,054,636 5,133,504Derivative financial instruments(46,442) 212,279 (11,528) Accounts receivable, net(811,965) (335,742) (306,588) Due from related parties395 12,988 (13,575) Inventories(685,817) (850,655) (133,572) Current and non-current biological assets(1,125,369) (145,670) (66,582) Prepaid expenses and other current assets(1,536,093) 32,866 (95,201) Assets held for sale(2,806) (1,714) (3,848) Trade payable and other accounts payable4,265,240 320,821 (38,542) Due to related parties104,587 4,138 (70,810) Income taxes paid(2,161,321) (590,836) (1,302,902) Employee benefits60,123 104,484 184,992 Net cash provided by operating activities6,412,754 5,817,595 3,275,348 Cash flows from investing activities:Payments for acquisition of property, plant and equipment(3,479,493) (2,346,415) (2,199,600) Proceeds from sale of property, plant and equipment29,772 23,802 197,059 Investment in securities at fair value through profit or loss1,007,481 (832,038) 363,784 Investment in securities at fair value through other comprehensive income(622,108) (621,954) (315,761) Other assets84,080 (26,569) 24,244 Interest collected597,610 705,986 991,632 Net cash used in investing activities(2,382,658) (3,097,188) (938,642) Cash flows from financing activities:Payment for repurchase of shares25(46,392) (15,594) (10,729) Proceeds from issuance of repurchased shares2514,061 12,085 9,255 Dividends paid25(851,619) (791,744) (840,000) Dividends paid to non-controlling interest(2,023) (1,879) (1,985) Proceeds from borrowings181,709,080 4,030,700 4,839,000 Principal payment on loans18(2,267,280) (6,762,222) (4,808,163) Interest paid on lease24- (53,639) (37,797) Interest paid29(234,134) (237,399) (292,322) Payment of lease liability24(358,987) (386,710) (325,207) Net cash used in by financing activities(2,037,294) (4,206,402) (1,467,948) Net increase (decrease) in cash and cash equivalents1,992,802 (1,485,995) 868,758 Cash and cash equivalents at January 117,286,37418,662,76517,901,845Effect of exchange rate fluctuations on cash and cash equivalents(142,733) 109,604 (107,838) Cash and cash equivalents at December 31$19,136,44317,286,37418,662,765See accompanying notes to consolidated financial statements.INDUSTRIAS BACHOCO, S.A.B. DE C.V. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 2021, 2020 and 2019(Thousands of pesos)
INDUSTRIAS BACHOCO, S.A.B. DE C.V. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Years ended December 31, 2021, 2020 and 2019
(Thousands of Mexican pesos, except amounts per share)
(1) Reporting entity
Industrias Bachoco, S.A.B. de C.V. and subsidiaries (hereinafter, “Bachoco” or the
“Company”) is a publicly traded company and was incorporated on April 17, 1980, as a legal
entity. The Company’s registered address is Avenida Tecnológico 401, Ciudad Industrial,
Celaya, Guanajuato, Mexico.
The Company is engaged in breeding, processing and marketing poultry (chicken and eggs),
swine and other products (primarily balanced animal feed). Bachoco is a holding company that
has control over a group of subsidiaries (see note 5).
The shares of the Company are listed on the Mexican Stock Exchange (BMV for its Spanish
acronym) under the ticker symbol “Bachoco,” and in the New York Stock Exchange
(“NYSE”), under the ticker symbol “IBA” (see note 31 b).
(2) Basis of preparation
a)
Statement of compliance
The consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standard
Board (“IASB”).
On April 25, 2022, the accompanying consolidated financial statements and related notes were
authorized for issuance by the Company’s Chief Financial Officer, Mr. Daniel Salazar Ferrer,
for review and approval by the Audit Committee, Board of Directors and stockholders. In
accordance with Mexican General Corporate Law and the Company’s bylaws, the
stockholders are empowered to modify the consolidated financial statements after their
issuance should they deem it necessary.
Business continuity
The consolidated financial statements have been prepared by Management assuming that the
Company will continue to operate as a going concern.
b) Basis of measurement
The accompanying consolidated financial statements were prepared on the historical cost basis
(historical cost is generally based on the fair value of the consideration given in exchange for
goods and services), except for the following items in the consolidated statement of financial
position, which are measured at fair value:
• Derivative financial instruments for trading and hedging, and investment in securities at
fair value through profit or loss and investment in securities at fair value through other
comprehensive income
2
• Biological assets
Fair value is defined as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date,
regardless of whether that price is directly observable or estimated using another valuation
technique. In estimating the fair value of an asset or a liability, the Company takes into
account the characteristics of the asset or liability if market participants would take those
characteristics into account when pricing the asset or liability at the measurement date.
In addition, for financial reporting purposes, fair value measurements are categorized into
Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are
observable and the significance of the inputs to the fair value measurements in its entirety,
which are described as follows:
Level 1 inputs are quoted prices in active markets for identical assets or liabilities.
Level 2 inputs are inputs, other than quoted prices included within Level 1, which are
observable either directly or indirectly.
Level 3 inputs are unobservable inputs.
c)
Functional and presentation currency
These consolidated financial statements are presented in thousands of Mexican pesos (“pesos”
or “$”), the official currency of Mexico, which is the currency in which the Company’s
accounting records are maintained and functional currency for most of its subsidiaries, except
for foreign subsidiaries for which the U.S. dollar is the functional currency as well as the
currency in which accounting records are maintained.
For disclosure purposes, in the notes to the consolidated financial statements, “thousands of
pesos” or “$” means thousands of Mexican pesos, and “thousands of dollars” means thousands
of U.S. dollars.
When deemed relevant, certain amounts are included between parentheses as a translation into
thousands of dollars, into thousands of Mexican pesos, or both, as applicable. These
translations are performed for the convenience of the reader at the closing exchange rate
issued by Bank of Mexico, which is $20.51, $19.95 and $18.89 pesos to one U.S. dollar as of
December 31, 2021, 2020 and 2019, respectively.
d) Use of estimates and judgments
The preparation of the consolidated financial statements in conformity with IFRS requires
Management to make judgments, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Estimates and significant assumptions are reviewed on an ongoing basis. Changes in estimates
are recognized in the period in which they occur and in any future periods affected.
The following are the critical accounting estimates and assumptions in the application of the
Company’s accounting policies, which are significant to the amounts recognized in the
consolidated financial statements.
3
Critical accounting judgments
i. Fair value of biological assets
The Company estimates the fair value of biological assets as the price that would be received
or paid in an orderly transaction between market participants at the measurement date. As part
of the estimate, the Company considers the maturity periods of such assets, the necessary time
span for the biological assets to reach a productive stage, as well as future economic benefits
obtained.
The balance of current biological assets includes hatching eggs, growing pigs and growing
poultry, while the balance of non-current biological assets includes poultry in its different
production stages, and breeder pigs.
Non-current biological assets are valued at production cost less accumulated depreciation or
accumulated impairment losses, as there is no observable or reliable market for such assets.
Additionally, the Company believes that there is no reliable method for measuring the fair
value of non-current biological assets. Current biological assets are valued at fair value when
there is an observable market, less estimated selling expenses.
ii. Business combinations or acquisition of assets
Management uses its professional judgment to determine whether the acquisition of a group of
assets constitutes a business combination or acquisition of assets in accordance with IFRS.
This determination may have a significant impact in how the acquired assets and assumed
liabilities are accounted for, both on initial recognition and subsequent thereto.
iii. Aggregation of operating segments
The Company’s chicken and egg operating segments are aggregated to present one reportable
segment (Poultry) as they have similar products and services, production processes, classes of
customers, methods used for distribution, the nature of the regulatory environment in which
they operate, and similar economic characteristics as evidenced by similar five-year trends in
average gross profit margins. These factors are evaluated at least annually.
iv.Discount rate estimation to calculate the present value of future minimum rent payments
The Company estimates the discount rate to be used in determining the lease liability, based
on the incremental borrowing rate (“IBR”).
The Company uses a two-level model, with which it determines the elements that make up the
discount rate: (i) reference rate, and (ii) credit risk component. In such model, Management
also considers its policies and practices to obtain financing, distinguishing between
borrowings obtained at the corporate level (that is, by the holding company), or at the level of
each subsidiary. Finally, for real estate leases, or in which there is significant and observable
evidence of their residual value, the Company estimates and evaluates an adjustment for the
characteristics of the underlying asset, taking into account the possibility that such asset may
be granted as collateral or guarantee against the risk of default.
4
v.Estimate of the term of the lease contracts
The Company defines the term of the leases as the period for which there is a contractual
payment commitment, considering the non-cancellable period of the contract, as well as the
renewal and early termination options that are reasonably certain to be exercised. The
Company participates in lease agreements that do not have a defined mandatory term, a
defined renewal period (if it contains a renewal clause), or annual automatic renewals.
Accordingly, to measure the lease liability, the Company estimates the term of the contracts
considering their contractual rights and limitations, the business plan, as well as Management's
intentions for the use of the underlying asset.
Additionally, the Company considers the early termination clauses of its contracts and the
probability of exercising them, as part of its estimation of the lease term.
Key sources of estimation uncertainty on the application of accounting policies
i.Assessments to determine the recoverability of deferred tax assets
On an annual basis the Company prepares financial projections to determine if it will generate
sufficient taxable income to utilize its deferred tax assets associated with deductible temporary
differences, including tax losses and other tax credits.
ii.Useful lives and residual values of property, plant and equipment
Useful lives and residual values of intangible assets and property, plant and equipment are
used to determine amortization and depreciation expense of such assets and are determined
with the assistance of internal and external specialists, as deemed necessary.
Useful lives and residual values are reviewed periodically at least once a year, based on the
current conditions of the assets and the estimate of the period during which they will continue
to generate economic benefits to the Company. If there are changes in the related estimate,
measurement of the net carrying amount of assets and the corresponding depreciation expense
are affected prospectively.
iii.Measurements and disclosures at fair value
Fair value is a measurement based on the price a market participant would be willing to
receive to sell an asset or pay to transfer a liability, and is not a measure specific to the
Company. For some assets and liabilities, observable market transactions or market
information may be available. For other assets and liabilities, observable market transactions
and market information may not be available. However, the purpose of a measurement at fair
value in both cases is to estimate the price at which an orderly transaction to sell the asset or to
transfer the liabilities would be carried out among the market participants at the date of
measurement under current market conditions.
When the price of an identical asset or liability is not observable, the Company determines the
fair value using another valuation technique which maximizes the use of relevant observable
information and minimizes the use of unobservable information. As the fair value is a
measurement based on the market, it is measured using the assumptions that market
participants would use when they assign a price to an asset or liability, including assumptions
about risk.
5
iv.Impairment of long-lived assets and goodwill
The carrying amount of long-lived assets is reviewed for impairment when situations or
changes in circumstances indicate that it is not recoverable, except for goodwill which is
reviewed on an annual basis. If there are indicators of impairment, a review is carried out to
determine whether the carrying amount exceeds its recoverable value and whether it is
impaired. The recoverable value is the highest of the asset’s fair value, less selling costs, and
its value in use which is the present value of the future estimated cash flows generated by the
asset. The value in use calculation requires the Company to estimate the future cash flows
expected to arise from the asset and/or from the cash-generating unit and an appropriate
discount rate in order to calculate present value.
v.Employee retirement benefits
The Company uses assumptions to determine the best estimate for its employee retirement
benefits. Assumptions and estimates are established in conjunction with independent actuaries.
These assumptions include: demographic hypotheses, discount rates and expected increases in
remunerations and future employee service periods, among others. Although the assumptions
are deemed appropriate, a change in such assumptions could affect the value of the employee
benefit liability and the results of the period in which it occurs.
vi.Expected credit losses on accounts receivable
The expected credit losses on financial assets are estimated using a provision matrix based on
the Company's historical experience of credit losses, adjusted for factors that are specific to
each of the Company's customer and debtor groups, general economic conditions and
Management's assessment both current and forecast conditions as of the reporting date,
including the value of money when applicable.
vii.Contingencies
A contingent liability is defined as:
• A possible obligation that arises from past events and whose existence can only be
confirmed by the occurrence or non-occurrence of one or more uncertain future events not
wholly within the control of the Company, or
• A present obligation that arises from past events but is not recognized because:
a. it is not probable that an outflow of resources embodying economic benefits
will be required to settle the obligation; or
b. the amount of the obligation cannot be measured with sufficient reliability.
The assessment of such contingencies requires the exercise of significant judgments and
estimates on the possible outcome of those future events. The Company assesses the
probability of loss arising from lawsuits and other contingencies with the assistance of its legal
advisors. These estimates are reconsidered periodically at each reporting period.
6
viii. Uncertainties
Pandemics or disease outbreaks, such as the novel coronavirus (“COVID-19”), may alter
consumption and trade patterns, supply chains, and production processes, which could affect
the Company’s business and results of operations.
e) COVID
In March 2020, the World Health Organization declared the COVID-19 a Global pandemic.
As a result, measures established by the federal, state and local authorities in Mexico and the
United, that required the forced closure of certain activities considered non-essential
(businesses, non-essential government agencies, educational sector, among others) which
negatively affected the operations of some of the Company's customers.
Currently globally we continue to experience the impacts of the COVID-19 pandemic, the
variants and their peak waves of contagion challenged us. During 2021, the start of the global
vaccination campaign and the knowledge generated to manage the disease painted an
encouraging picture with a view to reactivating economic and social activities and, in general,
life as it was known before its arrival. Authorities in Mexico and the United States continued
to impose restrictive measures on mobility and economic reopening, although greater
flexibility was undoubtedly observed as a result of progress in vaccination. This led to greater
economic activity even in non-essential sectors.
During 2021 and 2020, Management performed an analysis to measure the financial impact on
the Company derived from the possible effects of COVID 19, which included the following:
•
• Review of potential impairment of non-financial assets (including goodwill, right-of-use
assets and property, plant and equipment) - Based on medium and long-term projections, a
possible impairment in goodwill has not been identified in long-lived assets, except for
intangible assets where an impairment of $5,459 was recognized in the United States
subsidiary.
Inventory valuation - The Company has not had an impairment in the price of chicken and
eggs. The Company qualified as an essential activity for which it has kept operations
working normally, reinforcing sanitary measures in all work centers, in this way it has
fulfilled its commitments to its customers. During 2020, the Hotel sector was the most
affected in sales volume, for which the Company directed the volume to other channels
such as self-services, rotisserie chains , public market and live chicken. During 2021, the
Hotel sector improved, but without reaching pre-pandemic levels.
In the acquisition of raw materials, even when there was volatility in the dollar exchange
rate, the prices of the main raw materials such as corn and soybean paste were not affected
in terms of cost and supply due to the pandemic, in some other raw materials were delayed
in shipments mainly due to logistical problems of ships in the ports of China, but without
significantly affecting the Company's productive activities.
•
• Provision for expected losses - The estimate for expected credit losses was reviewed and
based on this analysis, Management considered that the allowance for doubtful accounts is
sufficient to support an increase in credit risk for certain clients. During certain months of
the year 2021 and 2020, the level of the accounts receivable portfolio increased based on
agreed terms and continues to be recovered considering the payment plans.
7
• Measurement at fair value - investments recognized at fair value consider all relevant
market factors for their proper valuation.
• Breaches of agreements – The Company has fulfilled its commitments to suppliers and
customers due to the fact that, as an essential sector, it has maintained its operations
working normally, complying with the health protocols established by the competent
authorities and due to its solid financial position.
• Going concern - The Company qualified as an essential activity in the markets it operates
in and continues to operate normally with full operations in its farms, plants, distribution
centers, logistics, supply chain and offices, despite partially working remotely in some of
its corporate locations. Management has also implemented strict additional measures to
guarantee the well-being of clients, suppliers and workers, as well as the quality and safety
of its products, working in coordination with the health authorities and attending to all the
recommendations issued by them.
• Labor relations have not been affected and no changes were made to contractual
agreements with employees as the Company continues to operate normally.
• Liquidity risk management - The Company has sufficient liquidity to continue assuming its
•
•
current and long-term commitments.
Insurance recoveries related to business interruptions - The Company has insurance
policies to cover business continuity, however, it is not expected that they will be used
because it will continue to operate normally as it is considered to be an essential activity.
Income tax considerations - So far, no adverse tax impact is anticipated as a result of the
pandemic.
As the products that the Company manufactures and its industry is considered essential, there
were no significant adverse effects on its consolidated position and financial performance
resulting from COVID-19.
As the date of issuance of the consolidated financial statements, the Company does not
consider that it should substantially modify its budgets and / or financial projections or
recognize significant losses in the valuation of its monetary and non-monetary assets.
However, there is no guarantee that in the future the financial situation could be affected if the
negative effects of the disruption to the national and global economy are significantly altered.
f)
Labor Reform in Mexico
On April 23, 2021, various labor and tax provisions regarding labor subcontracting were
published, which implied the elimination of the group's service providers, except in specific
cases. Due to the foregoing, the Company in July 2021 carried out the employer substitution
for the transfer of personnel from its service providers to its operating companies in which the
employees directly participate, all these subsidiaries of Industrias Bachoco S.A.B. of C.V.
Due to the above in July the merger of these service providers with Bachoco S.A. de C.V. was
carried out. As a result of the merger, there were no significant tax effects or significant effects
on the labor liabilities of the pension plan.
8
g)
Issuance of new IFRS
i. New and amended IFRS that affect reported balances and/or disclosures in consolidated
financial statements
In the current year, the Company adopted a series of new and amended IFRS issued by the
IASB which went into effect on January 1, 2021, as it relates to its consolidated financial
statements.
Phase 2 of the interest rate benchmark reform (IBOR- Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16)
Interbank rates benchmark such as LIBOR, EURIBOR, and TIBOR, which represent the cost
of obtaining unsecured funds, have been questioned about their viability as long-term funding
benchmarks. The changes in the reform of the interest rates benchmark in its phase 2, refer to
the modifications of financial assets, financial liabilities and lease liabilities, requirements for
hedge accounting and disclosure of financial instruments. These improvements are effective as
of January 1, 2021 with retrospective application, without it required to redo the comparative
periods.
With respect to modifying financial assets, financial liabilities and lease liabilities, the IASB
introduced a practical expedient that involves updating the effective interest rate.
On the other hand, with regard to hedge accounting, the hedge relationships and
documentation must reflect the modifications to the hedged item, the hedging instrument and
the risk to be hedged. Hedging relationships must meet all criteria for applying hedge
accounting, including effectiveness requirements.
Finally, with respect to disclosures, entities must disclose how they are managing the
transition to alternative benchmark rates and the risks that may arise from the transition; in
addition, they must include quantitative information on financial assets and non-derivative
financial liabilities, as well as non-derivative financial instruments, that continue under the
reference rates subject to the reform and the changes that have arisen to the risk management
strategy.
Its adoption had not material impact on the disclosures or the amounts reported in these
consolidated financial statements.
Initial impact of concessions applied to Income under IFRS 16 due to issues related to
COVID-19 after june30, 2021, amendment to IFRS 16
In March 2021, the IASB issued COVID-19 Related Rent Concessions beyond June 30, 2021
(amendment to IFRS 16). When the IASB published the amendments to IFRS 16 in May
2020, the lessor was allowed to apply the practical expedient of the rental concessions for any
reduction in the payment of leases affecting the original payments before or as of June 30,
2021. Due to the nature of the COVID-19 pandemic, the amendment extended a practical
expedient to apply those original payments before or on June 30, 2022.
9
The practical expedient allows a tenant to decide not to assess whether a COVID-19 related
rent is a lease modification. A lessee who makes this election should account for any change
in rent payments resulting from the granting of rents related to COVID-19 applying IFRS 16
as if the change were not a modification to the lease.
The practical file applies only to rental concessions that occur as a direct consequence related
to COVID-19 and only if the following conditions are met:
- The change in lease payments results in consideration that is substantially the same as,
or less than, the lease consideration immediately prior to the change.
- Any reduction in lease payments only affects payments due on or before June 30, 2022
(a rental concession meets this condition if it results in a reduction in payments before
June 30, 2022 increases lease payments that extend beyond June 30, 2022); and
- There is no substantive change in any other clause or condition of the lease.
The Company has not had any material impact for these amendments to IFRS 16 because it
did not have any applicable rental concessions.
ii. New IFRS issued but not yet effective
As of the date of these consolidated financial statements, the Company has not applied the
following new and revised IFRS that have been issued but are not yet effective.
IFRS 17
Insurance Contracts
IFRS 10 and IAS 28 (amendments) Sale or contribution of assets between an investor and its
Amendments to IAS 1
Amendments to IFRS 3
Amendments to IAS 16
Amendments to IAS 37
Annual improvements to
IFRS 2018-2020 cycle
Amendments to IAS 1 and the
IFRS practice statements 2
Amendments to IAS 8
Amendments to IAS 12
associate or joint venture
Classification of liabilities as current or non-current.
Definition of a business
Property, Plant and Equipment - before being used
Onerous contracts - costs of fulfilling a contract
Amendments to IFRS 1 First adoption of International
Financial Reporting Standards,
IFRS 9 Financial
Instruments, IFRS 16 Leases and IAS 41 Agriculture
Disclosure of accounting policies
Definition of accounting estimates
Deferred taxes related to assets and liabilities arising
from a single transaction.
10
IFRS 17 Insurance Contracts
IFRS 17 establishes the principles for the recognition, measurement, presentation and
disclosure of insurance contracts and replaces IFRS 4 - Insurance contracts.
IFRS 17 describes a general model, which is modified for insurance contracts with direct
participation features, which is described as the variable rate approach. The general model is
simplified if certain criteria are met when measuring the liability for remaining coverage using
the premium allocation method.
The general model will use current assumptions to estimate the amount, timing and
uncertainty of future cash flows and will explicitly measure the cost of that uncertainty, taking
into account market interest rates and the impact of options and guarantees of the insured.
In June 2020, the IASB issued the amendments to IFRS 17 to address the concerns and
implementation of the changes that were identified after IFRS 17 was published. The
amendments defer the date of initial application of IFRS 17 (incorporating the amendments) to
the annual report beginning on or after January 1, 2023. At the same time, the IASB issued a
Temporary Extension of Exemption to Apply IFRS 9 (Amendments to IFRS 4) that extends
the expiration date of the temporary exception to apply IFRS 9 to IFRS 4 for annual periods
beginning on or after January 1, 2023.
IFRS 17 should be applied retrospectively unless it is not practical, in which case the
retrospective approach will be modified, or the fair value approach will be applied.
In accordance with the transition requirements, the date of initial application is the beginning
of the annual reporting period in which the entity first applies the Standard and, the transition
date is the beginning of the period immediately preceding the date of the initial application.
Amendments to IFRS 10 and IAS 28 Sale or contribution of assets between an investor and
its associate or joint venture
The amendments to IFRS 10 and IAS 28 treat with situations where there is a sale or
contribution of assets between an investor and its associate or joint venture. Specifically, the
amendments establish that gains or losses resulting from the loss of control of a subsidiary that
does not contain a business in a transaction with an associate or a joint venture that is
accounted for using the equity method, are recognized in profit or loss. of the parent only to
the extent that the participation of unrelated investors in that associate or joint venture.
Similarly, profit and losses resulting from the remeasurement of investments retained in any
former subsidiary (that has become an associate or a joint venture that is accounted for using
the equity method) at fair value, are recognized in profit. or loss of the former parent, only to
the extent of the participation of unrelated investors in the new associate or joint venture.
The effective date of the amendments has not yet been set by the IASB; however, early
application is permitted.
11
Amendments to IAS 1 Classification of Liabilities as Current and Non-Current
The amendments to IAS 1 affect only the presentation of liabilities as current and non-current
in the statement of financial position and not the amount or timing at which any asset, liability,
income or expense is recognized, or the information disclosed about those items.
The amendments clarify that the classification of liabilities as current and non-current is based
on the rights to exist at the end of the reporting period, specify that the classification is not
affected by expectations about whether the entity will exercise the right to defer settlement of
the liability, explain that rights exist if there are covenants to be met at the end of the reporting
period, and introduce a definition of ‘arrangement’ to make it clear that the arrangement refers
to the transfer of cash from the counterparty, equity instruments, other assets or services.
The amendments are applied retrospectively for annual periods beginning on or after January
1, 2023, with early application permitted.
Amendments to IFRS 3 - Reference to the Conceptual Framework
The amendments update IFRS 3 so that it can refer to the 2018 Conceptual Framework instead
of the 1989 Framework. They also added a requirement that, for obligations within the scope
of IAS 37, a buyer applies IAS 37 to determine whether the acquisition date is a present
obligation or exists as a result of a past event. For liens that are within the scope of IFRIC 21 -
Liens, the buyer applies IFRIC 21 to determine whether the obligation gives rise to a liability
to pay the lien that occurred at the acquisition date.
Finally, the amendments add an explicit statement that the buyer will not recognize a
contingent asset acquired from a business combination.
The amendments are effective for business combinations for which the acquisition date is on
or after the initial period of the first annual period beginning on or after January 1, 2022. With
an option for early application if the entity also applies all other updated references (published
together with the Conceptual Framework) at the same time or early.
Amendments to IAS 16 - Property, Plant and Equipment - before Intended Use.
The amendments prohibit the deduction from the cost of an asset of property, plant or
equipment of any revenue from selling the asset after it is ready for use, for example, revenue
while the asset is being brought to the location and the necessary refurbishment is being
carried out to make it operable in the manner intended by management. Accordingly, an entity
should recognize those sales revenues and costs in profit or loss. The entity measures the costs
of these items in accordance with IAS 2 Inventories.
The amendments clarify the meaning of ‘testing whether an asset is functioning properly’. IAS
16 now specifies this as an assessment in which the physical and technical performance of the
asset is capable of being used in the production or supply of goods or services, for rental or
other, or administrative purposes.
12
If not presented separately in the statement of comprehensive income, the financial statements
must disclose the amounts of revenues and costs in income related to items that are not an
outflow from the entity's ordinary activities in the line item(s) in the statement of
comprehensive income where revenues and costs are included.
The modifications are applied retrospectively, but only to items of property, plant and
equipment that are brought to the location and condition necessary for them to be able to
operate as Management intends on or after the beginning of the period in which the entity's
financial statements in which the modifications are first applied.
The Company shall recognize the cumulative effect of the initial application of the
amendments as a balance sheet adjustment to retained earnings (or an appropriate component
of equity) at the beginning of the earliest period presented.
The amendments are effective for annual periods beginning on January 1, 2022 with an option
for earlier application.
Amendments to IAS 37 - Onerous Contracts - Costs of Fulfilling a Contract
The amendments specify that the ‘costs of fulfilling’ a contract comprise ‘costs directly related
to the contract’. Costs that relate directly to a contract consist of incremental costs and costs of
fulfilling a contract (e.g., labor or materials) and the allocation of other costs that relate
directly to fulfilling a contract (such as the allocation of depreciation to items of property,
plant and equipment to fulfill the contract).
The amendments apply to contracts in which the entity has not yet complied with all of its
obligations at the beginning of the annual reporting period in which the entity applies the
amendments for the first time. Comparatives should not be restated. Instead, an entity should
recognize the cumulative effect of the initial application of the amendments as a balance sheet
adjustment to retained earnings or such other component of equity, as appropriate, for the date
of initial application.
The amendments are effective for annual periods beginning on or after January 1, 2022, with
an option for earlier application.
Annual Amendments to IFRS standards 2018-2020
The Annual Amendments include amendments to four standards.
IFRS 1 First-time Adoption of International Financial Reporting Standards, the amendment
provides additional relief for a subsidiary that adopts for the first time after its parent with
respect to accounting for cumulative translation differences. As a result of the amendments, a
subsidiary using the IFRS 1: D16(a) exception may now elect to measure the cumulative
translation effects of foreign operations at the carrying amount that is included in the parent's
consolidated statements, based on the parent's date of transition to IFRS, if there were no
adjustments for consolidation procedures and for the effects of business combinations in
which the parent acquired the subsidiary. A similar election is available for an associate or
joint venture that uses the exception in IFRS 1: D16(a).
13
The amendment is effective for periods beginning on or after January 1, 2022, with an early
adoption option.
IFRS 9 Financial Instruments, the amendment clarifies that when applying the ‘10%’ test to
assess whether a financial liability should be derecognized, an entity includes only the paid
fees or received between the entity (the borrower) and the lender, including paid fees or
received by the entity or the lender. The amendments are applied prospectively to
modifications or changes that occur on or after the date the entity first applies the amendment.
The amendment is effective for annual periods beginning on or after January 1, 2022, with an
option for earlier application.
IFRS 16 Leases, the amendments eliminate the figure of reimbursement for leasehold
improvements. As the amendments to IFRS 16 are only in respect of an illustrative example,
no commencement date has been established.
IAS 41 Agriculture, the amendments remove the requirement in IAS 41 for entities to exclude
cash flows for tax purposes when measuring fair value. This aligns the fair value measurement
in IAS 41 with the requirements of IFRS 13 Fair Value Measurement to be consistent with
cash flows and discount rates and allows preparers to determine whether cash flows and
discount rates are used on a pre-tax or after-tax basis as is more appropriate to estimate fair
value. The amendments are applied prospectively, i.e., the fair value measurement on or after
the initial date of application of the amendments applied to the entity.
The amendments are effective for annual periods beginning on or after January 1, 2022, with
an option for initial adoption.
Amendments to IAS 1 and the IFRS practice statements 2 Disclosure of Accounting Policies
The amendments change the requirements to IAS 1 with respect to the disclosure of
accounting policies. The amendment replaces the terms “significant accounting policies” with
“information on material accounting policies”. Information on accounting policies is material
when it is considered that, together with other information included in the financial statements
of an entity, they may influence the decisions of the primary users of the financial statements
in general use and that they are made in the basis of those financial statements.
The supporting paragraphs in IAS 1 are amended to clarify accounting policy information that
relates to immaterial transactions, other events or conditions that are themselves material.
To support these modifications, the IASB has developed guidance and examples to explain
and demonstrate the application of the “4-step materiality process” described in the IFRS
practice 2 statements.
The amendments to IAS are effective for the annual periods beginning on January 1, 2021,
with the option of early application and are applied prospectively. The amendments to the
IFRS Practice 2 statements do not contain an effective date or transition requirements.
14
Amendments to IAS 8 Definition of accounting estimates
The amendments replace the definition of a change in accounting estimates. Under the new
definition, accounting estimates are “monetary amounts in the financial statements that are
subject to measurement uncertainty”.
The definition of a change in accounting estimates was deleted. However, the IASB
maintained the concept of changes in an accounting estimate in the standard with the
following clarifications:
• A change in an accounting estimate is the result of new information or a new development
and is not the correction of an error.
• The effects of a change in an input or a valuation technique used to develop an accounting
estimate are changes in accounting estimates if they do not result from a correction of
prior period errors.
The IASB added two examples (Example 4-5) to the IAS 8 Implementation Guide that
accompanies the standard. The IASB has removed one example (example 3) as it could cause
confusion from the amendments.
The modifications are effective for the annual periods beginning on January 1, 2023 for
changes in accounting policies and changes in accounting estimates that occur on or after the
beginning of said period with the option of early application.
Amendments to IAS 12 Deferred taxes related to assets and liabilities arising from a single
transaction.
The amendments introduced an additional exception aside from the initial recognition
exemption. In the amendments, an entity does not apply the initial recognition exception for
transactions that give rise to taxable and deductible temporary differences.
Depending on the applicable tax law, taxable and deductible temporary differences may occur
on initial recognition of an asset and a liability in a transaction that is not a business
combination and does not affect accounting or taxable profit. For example, it may occur with a
recognition of a lease liability and the corresponding right-of-use asset applying IFRS 16
Leases at the commencement date of a lease.
Following the amendments to IAS 12, an entity is required to recognize deferred tax assets and
liabilities, with the recognition of any deferred tax assets being subject to the recoverability
criteria.
The IASB also adds an illustrative example to IAS 12 that explains how the amendments
apply.
The amendments apply to transactions that occur on or after the first comparative period of the
period presented. Additionally, at the beginning of the first comparative period an entity
recognizes:
15
• A deferred tax asset (to the extent that it is probable that taxable income is available
against the deductible temporary difference) and a deferred tax liability for all taxable and
temporary deductions associated with:
• Right-of-use assets and lease liabilities
• Decommissioning, restoration and similar liabilities that correspond to amounts
recognized as part of the costs related to the asset.
The cumulative effect at the beginning of the application of the amendments as an adjustment
in the opening balances of retained earnings (or some other component of capital, as
applicable) to date.
The amendments are effective for the annual periods beginning on January 1, 2023, with the
option of early application.
The Company is in process of determining its conclusions, however, does not expect the
adoption of the standards to have a material impact on the consolidated financial statements in
future periods.
(3) Significant accounting policies
The significant accounting policies set out below have been applied consistently to all periods
presented in these consolidated financial statements.
a) Basis of consolidation
i. Subsidiaries
Subsidiaries are entities controlled by the Company. The financial statements of subsidiaries
are included in the consolidated financial statements from the date that control commences
until the date that control is lost (see note 5).
The consolidated financial statements include the financial statements of the subsidiary
companies up to December 31 of each year. Control is achieved when the Company:
• Has power over the investee
•
It is exposed, or has rights, to variable returns derived from its participation in the
investee
• Has the ability to use his power to affect his returns
Profits and losses of subsidiaries acquired or sold during the year are included in the
consolidated statements of profit and loss and other comprehensive income from the
acquisition date to the disposal date.
Where necessary, the financial statements of subsidiaries are adjusted to align their accounting
policies with the Company’s consolidated accounting policies.
ii. Transactions eliminated in consolidation
Intercompany balances and transactions, and any unrealized gains and losses arising from
transactions between consolidated companies have been eliminated in preparing these
consolidated financial statements.
16
iii. Non-controlling interest
Non-controlling interests in subsidiaries are identified separately from the Company's capital
in them. Non-controlling shareholders' interests that are current ownership interests that entitle
their holders to a proportionate share of the net assets at liquidation may be initially measured
at fair value or the proportionate share of non-controlling interest in the fair value of the
identifiable net assets of the acquiree. The choice of measure is made acquisition by
acquisition. Other non-controlling interests are initially measured at fair value.
Post-acquisition, the carrying amount of non-controlling interests is the amount of those
interests at initial recognition plus the participation of non-controlling interests in subsequent
changes in capital. Total comprehensive income is attributed to non-controlling interests even
if this results in non-controlling interests having a negative balance.
iv. Business combinations
Business combinations are accounted for using the acquisition method. For each business
combination, any non-controlling interest in the acquiree is valued either at fair value or
according to the proportionate interest in the acquiree’s identifiable net assets.
In a business combination, the identifiable assets acquired and the liabilities assumed are
recognized at their fair value on the date of acquisition, except that:
• Deferred tax assets or liabilities and assets or liabilities related to employee benefit
agreements are recognized and measured in accordance with IAS 12 and IAS 19,
respectively.
• Liabilities or equity instruments related to share. The acquiree's payment agreements or
the Company's share-based payment agreements entered into to replace the acquiree's
share-based payment agreements, are measured in accordance with IFRS 2 in the
acquisition date.
• Assets (or groups of assets) that are classified as held for sale in accordance with IFRS 5
are measured in accordance with that standard.
Goodwill is originally valued at cost and represents any excess of the transferred consideration
over the net assets acquired and liabilities assumed. If the net amount of identifiable acquired
assets and assumed liabilities as of the acquisition date exceeds the sum of the consideration
transferred, the amount of any non-controlling interest in the acquired entity and the fair value
of the prior shareholding of the acquirer in the acquired entity (if any), any excess is
immediately recognized in the consolidated statement of profit and loss and other
comprehensive income as a bargain purchase gain.
Transaction costs, other than those associated with the issuance of debt or equity securities,
that the Company incurs related to a business combination are expensed as incurred.
The payable contingent considerations are measured at fair value at the acquisition date. If the
contingent consideration is classified as equity, then it is not re-measured and settlement is
accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent
consideration are recognized in profit and loss.
17
b) Foreign currency
i. Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of the
Company at the dates of the transactions. Monetary assets and liabilities denominated in
foreign currencies at the reporting date are translated to the functional currency at the
exchange rate at that date. The foreign currency gain and loss on monetary items is the
difference between amortized cost in the functional currency at the beginning of the period,
adjusted for interest and principal payments during the period, and the amortized cost in
foreign currency translated at the exchange rate at the end of the reporting period.
Non-monetary items that are measured at historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction.
ii. Translation of foreign operations
Assets and liabilities, including goodwill and fair value adjustments arising on acquisition, of
foreign operations whose functional currency differs from the reporting currency, are
translated into Mexican pesos at the exchange rates at the reporting date. Income and expenses
are translated to pesos at the average exchange rate of the period of the transactions.
Foreign currency differences associated with translating foreign operations into the reporting
currency (Mexican peso) are recognized in other comprehensive income and presented in the
foreign currency translation reserve in stockholders’ equity.
Exchange differences on monetary items receivable or payable to a foreign business, whose
settlement is neither planned nor likely to occur in the foreseeable future (therefore, they are
part of the net investment in the business business), that are initially recognized in other
comprehensive income and reclassified from equity to income when the total or partial
disposal of the net investment is made. For the years ended December 31, 2021, 2020 and
2019 the Company did not enter into such transactions.
c)
Financial instruments
i. Financial assets
Classification of financial assets
The Company classifies and measures its financial assets under the following criteria:
• The Company's debt instruments are subsequently measured at amortized cost if the
financial asset is maintained in a business model whose objective is to hold financial
assets with the objective of obtaining contractual cash flows; and the contractual terms of
the financial asset give rise on specific dates to cash flows that are only principal and
interest payments on the amount of the principal.
• Furthermore, debt instruments are subsequently measured at fair value through other
comprehensive income if the financial asset is maintained within a business model whose
objective is met by obtaining contractual cash flows and selling financial assets; and the
contractual terms of the financial asset give rise, on specific dates, to cash flows that are
only principal and interest payments on the outstanding amount of the principal.
• By default, all other financial assets are subsequently measured at fair value through profit
and loss.
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Recognition and derecognition of financial assets
Assets are initially recognized on the date of the contract in which the Company becomes a
member of the contractual provisions of the instruments and they are initially valued at their
fair value. Transaction costs that are directly attributable to the acquisition or issuance of
financial assets and liabilities (other than financial assets at fair value through profit or loss)
are added to or reduced from the fair value of the financial assets or liabilities, where
applicable, at initial recognition. Transaction costs directly attributable to the acquisition of
financial assets and liabilities at fair value through profit or loss are recognized immediately in
profit or loss.
All regular purchases or sales of financial assets are recognized and derecognized on a trade
date. Regular purchases or sales are purchases or sales of financial assets that require the
delivery of assets within the period established by the regulation or usual practices in the
market.
All recognized financial assets are subsequently measured in full, either at amortized cost or
fair value, according to the classification of financial assets.
Financial assets of the Company include cash and cash equivalents, investment in securities at
fair value through profit or loss and through other comprehensive income, derivative financial
instruments and trade receivables.
The Company initially recognizes accounts receivable and cash equivalents on the date that
they arise. All other financial assets (including assets measured at fair value through profit and
loss) are initially recognized on the trading date, which is the date that the Company becomes
a party to the contractual provisions of the instrument.
The Company derecognizes a financial asset when the contractual rights to cash flows from
the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction
in which all the risks and rewards of ownership of the financial asset are substantially
transferred.
Financial assets and liabilities are offset and the net amount is presented in the consolidated
statement of financial position solely if the Company has a legal right to offset the amounts
and intends either to settle them on a net basis of financial assets and liabilities or otherwise
realize the asset and settle the liability simultaneously.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and demand deposits or investments with
original maturities of three months or less from the acquisition date, which are subject to an
insignificant risk of changes in their fair value and are used by the Company in the
management of its short-term commitments.
Receivables
Receivables are financial assets with fixed or determinable payments that are not quoted in an
active market. Such assets are recognized initially at fair value plus any directly attributable
transaction costs. Subsequent to initial recognition, receivables are measured at amortized
cost. Receivables comprise trade, due from related parties and other receivables.
19
Impairment of financial assets
The Company evaluates whether its financial assets accounted for at amortized cost and at fair
value through other comprehensive income are impaired on the basis of losses due to expected
credit losses.
The amount of expected credit losses is updated on each reporting date to reflect changes in
credit risk since the initial recognition of the respective financial instrument.
The Company recognizes lifetime expected credit losses for commercial accounts receivable,
contract assets and accounts receivable for leases. The expected credit losses on these financial
assets are estimated using a provision matrix based on the Company's historical experience of
credit losses, adjusted for factors that are specific to the debtors, the general economic
conditions and Management’s assessment, of both the current and forecast conditions at the
reporting date, including the time value of money when appropriate.
For all other financial instruments, the Company recognizes the lifetime expected credit loss
when there has been a significant increase in credit risk since the initial recognition. However,
if the credit risk in the financial instrument has not increased significantly since the initial
recognition, the Company measures the provision for losses for that financial instrument in an
amount equal to the 12-month expected credit losses.
The Company considers a significant increase in credit risk to have occurred when the
financial investment asset’s credit rating falls to the level of speculation, or when the rating
provided by external ratings agencies has decreased by more than 2 levels with respect to the
level at which it was acquired. Additionally, the Company considers that default has occurred
when a financial asset is more than 90 days past-due, unless there is reasonable and reliable
information demonstrating that a later default criterion is more appropriate.
ii. Financial liabilities
Debt and/or equity instruments are classified as financial liabilities or as equity according to
the substance of the contractual agreement and the definitions of liability and equity.
All financial instrument liabilities are initially recognized on the trade date, which is the date
that the Company becomes a party to the contractual provisions of the instrument.
The Company derecognizes a financial instrument liability when its contractual obligations are
met, cancelled or expire.
The Company has the following non-derivative financial instrument liabilities: short-term and
long-term debt, and trade and other payables and accounts payable to related parties.
The aforementioned financial liabilities are originally recognized at fair value, plus costs
directly attributable to the transaction. Subsequently, these financial liabilities are measured at
amortized cost using the effective interest method or at fair value through profit or loss during
their contractual term.
20
iii. Derivative financial instruments
The Company participates in a variety of derivative financial instruments to manage its
exposure to exchange rate risks, including currency forward contracts.
Derivative financial instruments entered into for fair value hedging or for trading purposes are
initially recognized at fair value; any attributable transaction costs are recognized in profit and
loss as incurred. Until 2019, government grant was recognized initially as a liability, and
subsequently was recognized to profit and loss as the related obligation is settled. Subsequent
to the initial recognition, such derivative financial instruments are measured at fair value, and
changes in such value are immediately recognized in profit and loss unless the derivative is
designated and is effective as a hedging instrument, in which case, its recognition in profit and
loss will depend on the nature of the hedging.
Fair value of derivative financial instruments that are traded in recognized financial markets is
based on quotes issued by these markets; when a derivative financial instrument is traded in
the “Over the Counter” market, the fair value is determined based on internal models and
market inputs accepted in the financial environment.
A derivative with a positive fair value is recognized as a financial asset, while a derivative
with a negative fair value is recognized as a financial liability. Derivatives are not offset in the
financial statements unless the Company has both the legal right and the intention to offset. A
derivative is presented as a non-current asset or a non-current liability if the remaining
maturity of the instrument is more than 12 months and it is not expected to be realized or
settled within 12 months. Other derivatives are presented as current assets or current liabilities.
The Company analyzes if there are embedded derivatives that should be segregated from the
host contract and accounted for separately if the economic characteristics and risks of the host
contract and the embedded derivative are not closely related.
A separate instrument with the same terms as those of the embedded derivative meets the
definition of a derivative, and the combined instrument is not measured at fair value through
profit and loss. Changes in fair value of the separable embedded derivatives are immediately
recognized in profit and loss.
iv.Hedge Accounting
The Company designates certain derivatives as hedging instruments with respect to foreign
currency risk with fair value hedges, cash flow hedges or hedges of net investments in foreign
operations. Firm commitments that hedge foreign currency risk are accounted for as cash flow
hedges.
At the beginning of the hedge relationship, the Company documents the relationship between
the hedging instrument and the hedged item, together with its risk management objectives and
its strategy to carry out various hedging transactions. In addition, at the beginning of the hedge
and on an ongoing basis, the Company documents whether the instrument is effective to offset
changes in the fair values or cash flows of the hedged item attributable to the hedged risk,
which is when the hedging relationships comply with all of the following coverage
effectiveness requirements:
21
• There is an economic relationship between the hedging instrument and the hedged item;
• The effect of credit risk does not dominate the value of the changes resulting from the
economic relationship; and
• The coverage ratio of the coverage ratio is the same as that resulting from the amount of
the hedged item that the Company actually covers and the amount of the hedging
instrument that the Company actually uses to cover that amount of the hedged item.
If the hedging instrument no longer meets the effectiveness requirement related to the hedging
relationship, but the risk management objective for that designated hedging relationship
remains the same, the Company adjusts the hedging relationship (that is, rebalances) so that it
meets the qualification criteria again.
The Company designates the entire change in the fair value of a forward contract (that is, it
includes the forward elements) as the hedging instrument for all its hedging relationships that
involve forward contracts.
The Company designates only the intrinsic value of option contracts as a hedged item, that is,
excluding the time value of the option. Changes in the fair value of the option are recognized
in other comprehensive income and are accumulated in the cost of the hedge reserve. If the
hedged item is related to the transaction, the fair value is reclassified to profit or loss when the
hedged item affects the profit or loss. If the hedged item is related to the period of time, then
the accumulated amount in the cost of the hedge reserve is reclassified to profit or loss in a
rational manner: the Company amortizes the accumulated hedge reserve to profit or loss using
the straight-line method. These reclassified amounts are recognized in profit or loss on the
same line as the hedged item. If the hedged item is a non-financial item, the accumulated
amount in the cost of the hedge reserve is eliminated directly from equity and is included in
the initial carrying amount of the recognized non-financial item. In addition, if the Company
expects that part or all of the accumulated loss in the cost of the hedge reserve will not be
recovered in the future, that amount will be reclassified immediately to results.
v. Capital stock
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance
of ordinary shares are recognized as a deduction from equity, net of any tax effects.
Stock repurchase
When share capital recognized as equity is repurchased, the amount of the consideration paid,
which includes directly attributable costs, net of any tax effects, is recognized as a deduction
from equity. Repurchased shares are classified as treasury shares and are presented in the
reserve for repurchase of shares. When treasury shares are sold or are re-issued subsequently,
the amount received as well as the resulting surplus or deficit on the transaction is recognized
in equity.
d) Property, plant and equipment
i. Recognition and measurement
Property, plant and equipment, except for land, are recorded at acquisition cost less
accumulated depreciation and any accumulated impairment losses. Land is measured at the
acquisition costs less any accumulated impairment losses.
22
Acquisition cost includes the purchase price, as well as any cost directly attributable to the
acquisition of the asset, including all costs directly attributable to bringing the asset to the
location and condition necessary for it to be capable of operating in the manner intended by
Management.
When components of an item of property, plant and equipment have different useful lives,
they are accounted for as separate items (major components) of property, plant and equipment.
An item of property, plant and equipment is derecognized at the time of disposal or when no
future economic benefits are expected to arise from the continued use of the asset. Gains or
losses on the sale of an item of property, plant and equipment are determined by comparing
the proceeds from the sale with the carrying amount of property, plant and equipment, and are
recognized net under “other expenses, net” in profit and loss for the year.
ii.Subsequent costs
The replacement cost of an item of property, plant and equipment is capitalized if the future
economic benefits associated with the cost are expected to flow to the Company and the
related cost is reliably determined. The carrying amount of the replaced item is written off
from the accounting records. Maintenance and repair expenses related to property, plant and
equipment are expensed as incurred.
iii. Depreciation
Depreciation is calculated over the cost of the asset less its residual value, using the straight
line method, based on the estimated useful life of the assets. Depreciation is recognized in
profit and loss beginning from the time when the assets are available for use.
Below are the estimated useful lives for 2021, 2020 and 2019:
Buildings
Machinery and Equipment
Vehicles
Computers
Furniture
Average
useful Life
46
19
11
8
11
The Company has estimated the following residual values as of December 31, 2021, 2020 and
2019:
Buildings
Machinery and Equipment
Vehicles
Computers
Furniture
e) Goodwill
Residual Value
9%
8%
5%
0%
2%
Goodwill arises as a result of the acquisition of a business over which control is obtained and
is measured at cost less cumulative impairment losses; it is subject to annual tests for
impairment.
23
f)
Intangible assets
They are mainly comprised of trade names and customer relationships derived from the
acquisition of businesses in the United States of America. The cost of intangible assets
acquired through a business combination represents their fair value at the acquisition date and
they are recognized separately from goodwill. Subsequently, they are valued at cost less
amortization and accumulated impairment losses.
Intangible assets are classified as having a definite or indefinite life. Those with a defined life
are amortized under the straight-line method during their estimated life and when there are
impairment indicators, they are tested for impairment. The amortization methods and the
useful life of the assets are reviewed and adjusted, if necessary, at the date of each
consolidated statement of financial position. Amortization is charged to income in the general
expenses category. Those with an indefinite life are not amortized, but are subject to
impairment tests at least annually.
g) Biological assets
Biological assets whose fair value can be measured reliably are measured at fair value less
costs of sale, with any change therein recognized in profit and loss. Costs of sale include all
costs that would be necessary to sell the assets, excluding finance costs and income taxes.
The Company’s biological assets consist of growing poultry, poultry in its different production
stages, hatching eggs, breeder pigs, and growing pigs.
When fair value cannot be reliably, verifiably and objectively determined, assets are valued at
production cost less accumulated depreciation, and any cumulative impairment loss.
Depreciation related to biological assets forms part of the cost of inventories and current
biological assets and is ultimately recognized within cost of sales in the statement of profit and
loss and other comprehensive income.
Depreciation of poultry and breeder pigs is estimated based on the expected future life of such
assets and is calculated on a straight-line basis.
Poultry in its different production stages
Breeder pigs
Expected average
useful life
(weeks)
40-47
156
Biological assets are classified as current and non-current assets, based on the nature of such
assets and their purpose, whether for commercialization or for reproduction and production.
24
h) Leased assets
The Company evaluates whether a contract is or contains a lease at the beginning of the
contract term. A lease is defined as a contract that grants the right to control the use of an
identified asset, for a specified period, in exchange for consideration. The Company
recognizes a right-of-use asset and a corresponding lease liability, with respect to all the lease
agreements in which it operates as lessee, except in the following cases: short-term leases
(defined as leases with a term of lease less than 12 months); low-value asset leases (defined as
asset leases with an individual market value of less than 5 thousand dollars); and, the lease
contracts whose payments are variable (without any fixed contractually defined payment). For
these contracts that exclude the recognition of a right-of-use asset and a lease liability, the
Company recognizes rental payments as a straight-line operating expense during the lease
term.
The right-of-use asset is made up of discounted lease payments at present value; direct costs of
obtaining a lease; advance lease payments; and the dismantling or asset removal obligations.
The Company depreciates the right-of-use asset over the shorter period of the lease term and
the useful life of the underlying asset; In this sense, when a purchase option in the lease is
likely to be exercised, the right-of-use asset depreciates over its useful life. Depreciation
begins on the start date of the lease.
The lease liability is measured at initial recognition by discounting future minimum income
payments at present value according to a term, using a discount rate that represents the cost of
obtaining financing in an amount equivalent to the value of the contract's income, for the
acquisition of the underlying asset, in the same currency and for a period similar to the
corresponding contract (incremental borrowing rate). When the contract payments contain
non-lease components (services), the Company has chosen not to separate them and to
measure all payments as a single lease component; however, for the rest of the asset classes,
the Company measures the lease liability only considering the payments of components that
are rents, while the services implicit in the payments are recognized directly in results as
operating expenses.
To determine the term of the lease, the Company considers the mandatory term, including the
probability of exercising any right to extend the term and / or an early termination.
Subsequently, the lease liability is measured by increasing the book value to reflect the interest
on the lease liability (using the effective interest method) and reducing the book value to
reflect the rental payments made.
When there are modifications to the lease payments for inflation, the Company remits the
lease liability from the date the new payments are known, without reconsidering the discount
rate. However, if the modifications are related to the term of the contract or change in
circumstances that results in a change in the assessment of the exercise of a purchase option,
the Company re-evaluates the discount rate in the measurement of the liability. Any increase
or decrease in the value of the lease liability subsequent to this re-measurement is recognized
by increasing or decreasing to the same extent, as the case may be, the value of the right-of-
use asset.
25
Finally, the lease liability is derecognized at the time the Company pays all of the contract's
payments. When the Company determines that it is probable that it will exercise an early
termination from the contract that merits a cash outlay, said consideration is part of the re-
measurement of the liability mentioned in the preceding paragraph; however, in those cases in
which the early termination does not imply a cash outlay, the Company pays the lease liability
and the corresponding right of use asset, recognizing the difference between the two
immediately in the consolidated statement of income.
i)
Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of inventories
is based on average cost, and includes expenditures incurred for acquiring inventories,
production or transformation costs, and other costs incurred for bringing them to their present
location and condition.
Agricultural products derived from biological asses are processed chickens and commercial
eggs.
Net realizable value is the estimated selling price in the ordinary course of business, less the
costs necessary to make the sale.
Cost of sales represents cost of inventories at the time of sale, increased, if applicable, by
reductions in inventory to its net realizable value, if lower than cost, during the year.
The Company records the necessary reductions in the value of its inventories for impairment,
obsolescence, slow movement and other factors that may indicate that the use or performance
of the items that are part of the inventory may be lower than the carrying value.
j)
Impairment
Non-financial assets
The carrying amounts of the Company’s non-financial assets, other than inventories,
biological assets and deferred tax assets, are reviewed at each reporting date to determine
whether there is any indication of impairment. If any such indication exists, then the
recoverable amount of the asset is estimated or cash generating units, as the lowest between its
value in use and the fair value less cost of sale. Goodwill and indefinite-lived intangible assets
are tested annually for impairment on the same dates.
The Company defines the cash generating units and also estimates the periodicity and cash
flows that they should generate. Subsequent changes in the group of cash-generating units, or
changes in the assumptions that support the cash flow estimates or the discount rate could
impact the carrying amounts of the respective asset.
The main assumptions for developing estimates of recoverable amounts are the estimates the
future cash flows expected to arise from the cash-generating unit and a suitable discount rate
in order to calculate its present value. The Company estimates cash flow projections
considering current market conditions, determination of future prices of goods and volumes of
production and sales. In addition, for the purposes of the discount and perpetuity growth rates,
the Company uses indicators of market and expectations of long-term growth in the markets in
which it operates.
26
The Company estimates a discount rate before taxes for the purposes of the goodwill
impairment test that reflects the risk of the corresponding cash-generating units and that
enables the calculation of present value of expected future cash flows, as well as to reflect
risks that were not included in the cash flow projection assumptions and premises. The
discount rate that the Company estimates is based on the weighted average cost of capital. In
addition, the discount rate estimated by the Company reflects the return that market
participants would require if they had made a decision about an equivalent asset, as well as the
expected generation of cash flow, time, and risk-and-return profiles.
The Company annually reviews the circumstances which led to an impairment loss arising
from cash-generating units to determine whether such circumstances have been changed and
that may result in the reversal of previously recognized impairment losses. An impairment loss
in respect of goodwill is not reversed. For other long-lived assets, an impairment loss is
reversed only to the extent that the asset’s carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation or amortization, if the
impairment loss had not been recognized.
Impairment losses are recognized in profit and loss. Impairment losses recognized in respect
of cash-generating units are allocated first to reduce the carrying amount of any goodwill
allocated to the cash-generating unit (or group of CGUs), and subsequently to reduce the
carrying amount of the other long-lived assets within the cash-generating unit (or group of
CGUs) on a pro rata basis.
k) Held-for-sale assets
Held for sale assets mainly consist of foreclosed assets. Foreclosed assets are initially recorded
at the lower of fair value less costs to sell or the net carrying amount of the related account
receivable.
Immediately before being classified as held-for-sale, assets are valued according to the
Company’s accounting policies in accordance with the applicable IFRS. Subsequently, held-
for-sale assets are recorded at the lower of the carrying amount and fair value less costs to sell.
Impairment
initial classification of held-for-sale assets and subsequent
remeasurement gains and losses are recognized in profit and loss. Recognized gains shall not
exceed cumulative impairment losses previously recognized.
losses on
l) Other assets
Other long-term assets primarily include advances for the purchase of property, plant and
equipment, investments in insurance policies and security deposits.
The Company owns life insurance policies of some of the former stockholders of Bachoco
USA, LLC (foreign subsidiary). The Company records these policies at their net cash
surrender value which approximates its fair value (see note 17).
m) Employee benefits
The Company grants to its employees in Mexico and abroad, different types of benefits as
described below and as detailed in note 22.
27
i.Defined contribution plan
A defined contribution plan is a post-employment benefit plan under which an entity pays
fixed contributions to a separate entity and has no legal or constructive obligation to pay
further amounts. Obligations for contributions to defined contribution plans are recognized as
an employee benefit expense in profit and loss in the periods during which the related services
are rendered by employees. Prepaid contributions are recognized as an asset to the extent that
the Company has the right to a cash refund or a reduction in future payments is available.
Contributions to a defined contribution plan due more than 12 months after the end of the
period in which the employees render the service are discounted at present value.
ii. Defined benefit plan
A defined benefit plan is a post-employment benefit plan other than a defined contribution
plan. It is funded by contributions made by the Company and is intended to meet the
Company’s labor obligations to its employees.
The Company´s net obligations in respect of defined benefit plans is calculated separately for
each plan, estimating the amount of the future benefit that the employees have earned in return
for their service in the current and prior years; that benefit is discounted to determine its
present value, and is reduced by the fair value of the plan assets. The discount rate is the yield
at the end of the reporting period on high quality corporate bonds (or governmental bonds in
the instance that a deep market does not exist for high quality corporate bonds, which is the
case in Mexico) that have maturity dates approximating the terms of the Company´s
obligations and that are denominated in the currency in which the benefits are expected to be
paid. Net interest is calculated by applying the discount rate at the beginning of the period to
the net defined benefit liability or asset. Defined benefit costs are categorized as follows:
•
•
Service cost (including current service cost, past service cost, as well as gains and losses
on curtailments and settlements)
Net interest expense or income
The Company presents service cost as part of operating income in the consolidated statements
of profit or loss and other comprehensive income (loss). Gains and losses for reduction of
service are accounted for as past service costs.
The calculation is performed annually by a qualified actuary using the projected unit credit
method. When the calculation results in a benefit to the Company, the recognized asset is
limited to the present value of any economic benefits available in the form of refunds from the
plans or reductions in future contributions to the plans. When the benefits of a plan are
modified or improved, the portion of the improved benefits related to past services by
employees is recognized in profit and loss on the earlier of the following dates: when there is a
modification or curtailment to the plan, or when the Company recognizes the related
restructuring costs or termination benefits.
Remeasurement adjustments, comprising actuarial gains and losses, the effect of changes to
the asset ceiling (if applicable) and the return on plan assets (excluding interest), are reflected
immediately with a charge or credit recognized in other comprehensive income in the period
in which they occur. Remeasurement recognized in other comprehensive income is reflected
immediately in equity and is not reclassified to profit or loss.
28
iii. Short-term benefits
Short-term employee benefits are valued on a non-discounted basis and are expensed as the
respective services are rendered.
A liability is recognized for the amount expected to be paid under the short-term cash bonus
plans or statutory employee profit sharing (PTU for its acronym in Spanish), if the Company
has a legal or constructive obligation to pay such amounts as a result of prior services rendered
by the employee, and the obligation may be reliably estimated.
iv. Termination benefits from constructive obligations
During 2019 and 2020 the Company recognizes, as a defined benefit plan, a constructive
obligation from past practices. The liability accrues based on the services rendered by the
employee. Payment of this benefit is made in one installment at the time that the employee
voluntarily ceases working for the Company.
n) Provisions
A provision is recognized if, as a result of a past event, the Company has a present legal or
constructive obligation that can be estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation.
When the effect of time value of money is significant, the amount of the provision is the
present value of the disbursements expected to be necessary to settle the obligation. The
discount rate applied is determined before taxes and reflects market conditions at the reporting
date and takes into account the specific risk of the relevant liability, if any. The unwinding of
the present value discount is recognized as a financial cost.
o)
Interests in joint operations
A joint operation is a joint arrangement whereby the parties that have joint control of the
arrangement have rights to the assets, and obligations for the liabilities, relating to the
arrangement. Joint control is the contractually agreed sharing of control of an arrangement,
which exists only when decisions about the relevant activities require unanimous consent of
the parties sharing control.
The Company as a joint operator recognizes, in relation to its interest in a joint operation: its
assets, including its share of any assets held jointly; its liabilities, including its share of any
liabilities incurred jointly; its revenue from the sale of its share of the output arising from the
joint operation; its share of the revenue from the sale of the output by the joint operation, and
its expenses, including its share of any expenses incurred jointly.
The Company accounts for the assets, liabilities, revenues and expenses relating to its interest
in a joint operation in accordance with the IFRSs applicable to such assets, liabilities, revenues
and expenses.
29
The Company has joint operations derived from the agreements for the development of its
biological assets. For such operations, the Company accounts for its biological assets, its
obligations derived from technical support, as well as the expenses it incurs with respect to the
joint operations. The live poultry produced by the joint operation is ultimately used internally
by the Company and may be sold by the Company to third parties. As a result, the joint
operation itself does not generate any revenues with third parties.
p) Revenues
Revenues from the sale of goods in the course of ordinary activities are measured at the fair
value of the consideration received or receivable, net of returns, trade discounts and volume
rebates. Revenues are recognized when persuasive evidence exists, usually in the form of an
executed sales agreement, that control over the product has been transferred to the customer. If
it is probable that discounts will be granted and the amount can be measured reliably, the
discount is recognized as a reduction of revenue.
The Company generally does not accept sales returns. No asset is recognized for product
returns, due to the fact that such products are not expected to be sold or recovered in another
manner given that they are perishable. To the extent sales returns occur, the product returns
are made simultaneously with the delivery and acceptance of the product (same day).
The Company has concluded that all performance obligations are satisfied at the time of
delivery of the product to the customer.
The Company has a variety of credit terms for its various distribution channels, all of which
have short terms, consistent with market and industry practices. Accordingly, there are no
financing components. A significant portion of sales in Mexico are collected in cash on
delivery.
q) Financial income and costs and dividend income
Financial income comprises interest income from funds invested, fair value changes on
financial assets at fair value through profit or loss and foreign currency exchange gains.
Interest income is recognized in profit and loss, using the effective interest method. Dividend
income is recognized in profit and loss on the date that the Company´s right to receive the
payment is established.
Financial costs comprise interest expense for borrowings, foreign currency exchange losses
and fair value changes on financial assets at fair value through profit and loss.
Borrowing costs that are not directly attributable to the acquisition, construction or production
of a qualifying asset are recognized in profit and loss using the effective interest method.
Borrowing costs directly attributable to the acquisition, construction or production of
qualifying assets, which are assets that necessarily take a substantial period of time to get
ready for their intended use or sale, are added to the costs of those assets, until such time as
the assets are substantially ready for their intended use or sale. Investment income earned on
the temporary investment of specific borrowings pending their expenditure on qualifying
assets is deducted from the borrowing costs eligible for capitalization.
Exchange gains and losses are reported on a net basis.
30
r)
Income taxes
Income tax expense is comprised of current and deferred tax. Current income taxes and
deferred income taxes are recognized in profit and loss provided they do not relate to a
business combination, or items recognized directly in equity or in other comprehensive
income.
Current income tax is the expected tax payable or receivable on the taxable income or loss for
the fiscal year, which can be applied to taxable income from previous years, using tax rates
enacted or substantively enacted in each jurisdiction at the reporting date, plus any adjustment
to taxes payable with respect to previous years. Current income tax payable also includes any
tax liability arising from the payment of dividends.
Deferred income tax is recognized in respect of temporary differences between the carrying
amounts of assets and liabilities and the amounts used for tax purposes.
Deferred income tax is not recognized for:
•
the initial recognition of assets or liabilities in a transaction that is not a business
combination and did not affect either accounting or taxable profit or loss;
• differences related to investments in subsidiaries to the extent that it is probable that the
Company is able to control the reversal date, and the reversion is not expected to take place
in the near future.
•
taxable temporary differences arising from the initial recognition of goodwill.
Deferred income tax is determined by applying the tax rates that are expected to apply in the
period in which the temporary differences will reverse, based on the regulations enacted or
substantively enacted at the reporting date.
The measurement of deferred income tax assets and liabilities reflect the tax consequences
derived from the manner in which the Company expects to recover or settle the carrying
amounts of its assets and liabilities.
In determining the amount of current and deferred income tax, the Company takes into
account the impact of uncertain tax positions and whether additional taxes and interest may be
due. The Company believes that the balance for its income tax liabilities are appropriate for all
tax years subject to be reviewed by the tax authorities based on its assessment of several
factors, including the interpretation of the tax laws and prior experience.
A deferred income tax asset is recognized for unused tax losses, tax credits and deductible
temporary differences to the extent that it is probable that future taxable profits will be
available against which they can be utilized. Deferred income tax assets are reviewed at each
reporting date and are reduced to the extent that it is not probable that the related tax benefit
will be realized.
31
s)
Earnings per share
The Company presents information on basic and diluted earnings per share (“EPS”) related to
its ordinary shares. Basic EPS is computed by dividing the profit and loss attributable to the
holders of the Company’s common shares by the weighted average number of outstanding
ordinary shares during the period, adjusted for treasury shares held. Diluted EPS is determined
by adjusting the profit and loss attributable to the holders of the ordinary shares and the
outstanding weighted average number of ordinary shares, adjusted for treasury shares held, for
the potential dilutive effects of all ordinary shares, including convertible instruments and
options on shares granted to employees. At December 31, 2021, 2020 and 2019, the Company
has no outstanding instruments that imply the existence of potential ordinary shares, for which
reason basic and diluted EPS are the same.
t)
Segment information
An operating segment is a component of the Company: i) that is engaged in business activities
from which revenues and expenses may be obtained and incurred, including revenues and
expenses related to transactions with any of the other components of the Company, ii) whose
results are reviewed periodically by the chief operating decision maker for the purpose of
resource allocation and assessment of segment performance, and iii) for which discrete
financial information exists.
The Company discloses reportable segments based on operating segments whose revenues
exceed 10% of the combined revenues from all segments, whose absolute value of profit or
loss exceeds 10% of the combined absolute value of profit or loss from all segments, whose
assets exceed 10% of the combined assets from all segments, or that result from the
aggregation of two or more operating segments that share similar economic characteristics and
meet the aggregation criteria under IFRS (note 2 d) iii. ).
u) Costs and expenses by function
Costs and expenses in the consolidated statements of profit and loss and other comprehensive
income were classified by their function. The nature of costs and expenses is presented in Note
23.
v)
Statement of cash flows
The Company presents cash flows from operating activities by using the indirect method, in
which the income or loss is adjusted by the effects of items that do not require cash flows,
including those related to investing or financing activities.
The Company classifies all interest received from its investments and accounts receivable as
investment activities, and all interest paid as financing activities.
(4) Business and asset acquisitions
Acquisition of Sonora Agropecuaria, S.A. de C.V.
On June 26, 2020, the Company acquired 54.80% of voting stock of Sonora Agropecuaria,
S.A. de C.V. The operating results are included in the consolidated financial statements as of
that date. Sonora Agropecuaria, S.A. de C.V. is dedicated to the processing and distribution of
pigs, and has operations in the states of Sonora, Jalisco, Guanajuato, Mexico City and
Yucatan, Mexico. The purchase price paid as a capital contribution amounted to $215,000.
32
The purchase of Sonora Agropecuaria, S.A. de C.V. benefits the “Other” segment as it will
allow it to accelerate the pace of growth and continue advancing in the process of diversifying
other animal proteins.
The assets acquired and the assumed liabilities of Sonora Agropecuaria, S.A. de C.V. were
recognized based on the best estimate of their fair value at the acquisition date.
The fair value of the assets was determined using cost and market approaches. The cost
approach, which estimates the value based on the current replacement cost of an asset by
another asset of equal usefulness, was used mainly for plant and equipment. The market
approach, in which the value of an asset is based on available market prices for comparable
assets, was used mainly for real estate.
Due to their liquidity or short-term maturities, as appropriate, the Company concluded that
Sonora Agropecuaria, S.A. de C.V.’s pre-acquisition carrying amounts for cash equivalents,
accounts receivable, inventories, other current assets, accounts payable and other current
liabilities approximate their fair value at the acquisition date.
Identifiable assets acquired and liabilities assumed
The following is a summary of the recognized amounts of acquired assets and assumed
liabilities at the date, compared to the consideration paid:
Current assets, other than inventories
Inventories
Property, plant and equipment
Total assets
Current liabilities
Deferred income tax
Acquired net identifiable assets
Controlling interest
Non-controlling interest
Consideration paid
Bargain purchase gain (note 30)
$
$
Acquisition value
349,834
123,959
383,680
857,473
(263,365)
(35,916)
558,192
305,889
252,303
215,000
90,889
At the acquisition date, the non-controlling interest is measured on the basis of the
proportional participation of the acquiree's identifiable net assets.
33
The bargain purchase gain arises because the net of fair value of the assets at the acquisition
date exceeds the amount of the consideration transferred. The business strategies followed by
the acquiree in the past resulted in a high cost structure and limited opportunity for improving
profitability, resulting in a fair value of the business below that of its component parts. For this
reason, a gain was recognized in other expense, net (see note 30) in the consolidated statement
of profit or loss and other comprehensive income.
Had the acquisition occurred on January 1, 2020, consolidated revenues and consolidated
profits for the year ended December 31, 2020 would have totaled $70,337,002 and
$3,991,092, respectively. In determining these amounts, Management assumed that the
provisional adjustments to fair value recognized at the date of acquisition would have been
similar if the acquisition had occurred on January 1, 2020.
Costs related to acquisition.
During 2020, the Company incurred costs related to the acquisition of Sonora Agropecuaria,
S.A. de C.V. of $1,704 corresponding to external legal fees and due diligence costs, which are
included in other expenses in the Company’s consolidated statement of profit and loss and
other comprehensive income.
(5) Subsidiaries of the Company
A list of subsidiaries and the Company’s shareholding percentage in such subsidiaries as of
December 31, 2021, 2020 and 2019 are presented below:
Name
Shareholding percentage in subsidiaries
Bachoco, S.A. de C.V.
Bachoco USA, LLC. & Subsidiary
Campi Alimentos, S.A. de C.V.
Induba Pavos, S.A. de C.V.
Bachoco Comercial, S.A. de C.V.
PEC LAB, S.A. de C.V.
Aviser, S.A. de C.V.
Operadora de Servicios de Personal, S.A. de C.V.
Secba, S.A. de C.V.
Servicios de Personal Administrativo, S.A. de C.V.
Sepetec, S.A. de C.V.
Wii kit RE LTD.
Proveedora La Perla S.A. de C.V.
Sonora Agropecuaria, S.A. de C.V.
Country
Mexico
U.S.
Mexico
Mexico
Mexico
Mexico
Mexico
Mexico
Mexico
Mexico
Mexico
Bermuda
Mexico
Mexico
December 31,
2020
99.99
100.00
99.99
99.99
99.99
64.00
99.99
99.99
99.99
99.99
99.99
100.00
100.00
54.80
2021
99.99
100.00
99.99
99.99
99.99
64.00
-
-
-
-
-
100.00
100.00
54.84
2019
99.99
100.00
99.99
99.99
99.99
64.00
99.99
99.99
99.99
99.99
99.99
100.00
100.00
-
The main subsidiaries of the group and their activities are as follows:
- Bachoco, S.A. de C.V. (“BSACV”) (includes four subsidiaries which are 51% owned, and
over which BSACV has control). BSACV is engaged in breeding, processing and marketing
poultry goods (chicken and eggs).
34
- Bachoco USA, LLC. holds the shares of OK Foods, Inc. and, therefore, all operations
controlled by the Company in the United States of America. The primary activities of Bachoco
USA, LLC and its subsidiary are comprised of the production of chicken products and
hatching eggs, mostly marketed in the United States of America and, to a lesser extent, in
other foreign markets.
- Campi Alimentos, S.A. de C.V., is engaged in producing and marketing balanced animal
feed and pet treats, mainly for sales to third parties.
- The main activity of Bachoco Comercial, S.A. de C.V. is the distribution of turkey, beef and
pig value-added products.
- The main activity of Induba Pavos, S.A. de C.V. and Proveedora La Perla, S.A. of C.V.is the
leasing of property, plant and equipment to its related parties.
- PEC LAB, S.A. de C.V. is the holding of the shares of Pecuarius Laboratorios, S.A. de C.V.
Its main activity consists of the production and distribution of medicines and vaccines for
animal consumption.
- Aviser, S.A. de C.V., Operadora de Servicios de Personal, S.A. de C.V., Secba, S.A. de C.V.,
Servicios de Personal Administrativo, S.A. de C.V. and Sepetec, S.A de C.V. until July 2021,
were engaged in providing administrative and operating services rendered to their related
parties. Derived from the requirements of the Labor Reform in Mexico (see note 2f), in July
2021 these companies merged with Bachoco, S.A. de C.V., subsisting this as a merging
company, which acquires all the debts and responsibilities of the merged companies,
subrogating the merged company in all its commercial, civil, labor, fiscal rights and
obligations and of any other nature without exception.
- Wii kit RE LTD. in Bermuda, it is a Class I reinsurance company that provides insurance
coverage to its affiliates.
- Sonora Agropecuaria, S.A. DE C.V., in Mexico, it is dedicated to the pig processing and
distribution. During 2021 the company merged Interswine S. de R.L. de C.V., Agropecuaria
Sasapork S.P.R de R.L. de C.V., Cerdo Industrializado S.A. de C.V., Productora
Industrializada S.A. of C.V. and Whitecaps S.A. de C.V., subsisting Sonora Agropecuaria,
S.A. of C.V. as a merging. The transaction was recorded in accordance with that is described
in the accounting policies, causing no impact on the Company's consolidated financial
statements.
None of the Company’s contracts or loan agreements restrict the net assets of its subsidiaries.
(6) Operating segments
Reportable segments have been determined based on a product line approach. Intersegment
transactions have been eliminated. The poultry segment consists of chicken and egg
operations. The information included in the “Others” segment corresponds to operations of
swine, balanced feed for animal consumption and other by-products that do not meet the
quantitative thresholds to be considered as reportable segments.
35
Inter-segment pricing is determined on an arm’s length basis comparable to those which
would be used with or between independent parties in comparable transactions. The
accounting policies of operating segments are as those described in note 3 t).
Below is the information related to each reportable segment. Performance is measured based
on each segment’s income before taxes, in the same manner as it is included in Management
reports that are regularly reviewed by the Company’s Board of Directors, which has been
identified as being responsible for making operational decisions, allocating resources and
evaluating the performance of the operating segments.
a) Operating segment information
Year ended December 31, 2021
Net revenues
Cost of sales
Gross profit
Finance income
Finance costs
Income before taxes
Income taxes
Net income attributable to controlling
interest
Property, plant and equipment, net
Goodwill
Intangible assets
Non-current biological assets
Total assets
Total liabilities
Purchases of property, plant and equipment
Depreciation and amortization
Depreciation of right-of-use assets
Intangible impairment loss
Poultry
$ 71,647,726
59,195,273
12,452,453
879,142
214,780
6,052,051
1,655,934
Other
10,051,342
9,161,381
889,961
238,264
52,743
689,687
151,704
4,394,865
19,943,697
1,600,592
704,374
2,308,577
58,387,628
16,592,293
3,298,794
1,306,665
331,127
5,459
670,689
1,819,705
88,015
-
49,560
7,497,233
1,008,508
180,699
157,133
12,240
-
Total
81,699,068
68,356,654
13,342,414
1,117,406
267,523
6,741,738
1,807,638
5,065,554
21,763,402
1,688,607
704,374
2,358,137
65,884,861
17,600,801
3,479,493
1,463,798
343,367
5,459
Total revenues
Intersegments
Net revenues
Poultry
revenues
71,660,739
(13,013)
71,647,726
Other
revenues
10,090,925
(39,583)
10,051,342
Total
revenues
81,751,664
(52,596)
81,699,068
$
$
36
Year ended December 31, 2020
Poultry
Other
Net revenues
Cost of sales
Gross profit
Finance income
Finance costs
Income before taxes
Income taxes
Net income attributable to controlling
interest
Property, plant and equipment, net
Goodwill
Intangible assets
Total assets
Total liabilities
Purchases of property, plant and equipment
Depreciation and amortization
$ 61,323,853
51,165,650
10,158,203
998,654
260,570
4,626,582
1,060,876
3,532,589
17,146,405
1,562,404
753,224
51,081,829
13,144,941
1,978,818
1,542,031
7,468,149
6,541,916
926,233
174,866
30,759
557,121
150,735
403,083
2,587,417
88,312
-
7,393,171
1,403,251
773,463
193,115
Total
68,792,002
57,707,566
11,084,436
1,173,520
291,329
5,183,703
1,211,611
3,935,672
19,733,822
1,650,716
753,224
58,475,000
14,548,192
2,752,281
1,735,146
Total revenues
Intersegments
Net revenues
Poultry
revenues
61,332,013
(8,160)
61,323,853
Other
revenues
7,506,962
(38,813)
7,468,149
Total
revenues
68,838,975
(46,973)
68,792,002
$
$
Year ended December 31, 2019
Poultry
Other
Net revenues
Cost of sales
Gross profit
Finance income
Finance costs
Income before taxes
Income taxes
Net income attributable to controlling
interest
Property, plant and equipment, net
Goodwill
Intangible assets
Total assets
Total liabilities
Purchases of property, plant and equipment
Depreciation and amortization
$ 55,653,027
46,456,076
9,196,951
860,140
529,226
3,854,474
993,652
2,849,145
16,440,851
1,490,978
772,640
49,533,440
14,066,224
1,811,086
1,171,200
6,002,218
5,101,275
900,943
131,492
81,142
503,330
131,326
370,786
2,115,795
88,016
-
6,169,051
1,375,932
258,241
115,243
Total
61,655,245
51,557,351
10,097,894
991,632
610,368
4,357,804
1,124,978
3,219,931
18,556,646
1,578,994
772,640
55,702,491
15,442,156
2,069,327
1,286,443
37
Poultry
revenues
55,656,645
(3,618)
55,653,027
Other
revenues
6,037,772
(35,554)
6,002,218
Total
revenues
61,694,417
(39,172)
61,655,245
$
$
Total revenues
Intersegments
Net revenues
b) Geographical information
When submitting information by geographic area, revenue is classified based on the
geographic location where the Company’s poultry segment customers are located. Segment
assets are classified in accordance with their geographic location. Geographical information
for the “Others” segment is not included below because the operations are carried out entirely
within Mexico.
Year ended December 31, 2021
Domestic
poultry
Foreign
poultry
Operations
between
geographical
segments
Total
$
51,287,149
20,490,145
(129,567)
71,647,726
1,420,262
888,315
17,602,324
212,833
-
2,341,373
1,387,759
704,374
-
-
-
-
2,308,577
19,943,697
1,600,592
704,374
Year ended December 31, 2020
Domestic
poultry
Foreign
poultry
Operations
between
geographical
segments
Total
$
41,835,033
19,573,023
(84,203)
61,323,853
1,185,308
806,222
14,659,461
212,536
-
2,486,944
1,349,868
753,224
-
-
-
-
1,991,530
17,146,405
1,562,404
753,224
Net revenues
Non-current assets other than
financial instruments, deferred
tax assets, post-employment
benefit assets, and investments
in insurance policies:
Non-current biological assets
Property, plant and equipment,
net
Goodwill
Intangible assets
Net revenues
Non-current assets other than
financial instruments, deferred
tax assets, post-employment
benefit assets, and investments
in insurance policies:
Non-current biological assets
Property, plant and equipment,
net
Goodwill
Intangible assets
38
Year ended December 31, 2019
Domestic
poultry
Foreign
poultry
Operations
between
geographical
segments
Total
$
38,778,025
16,931,735
(56,733)
55,653,027
1,058,126
760,785
13,799,774
212,833
-
2,641,077
1,278,145
772,640
-
-
-
-
1,818,911
16,440,851
1,490,978
772,640
Net revenues
Non-current assets other than
financial instruments, deferred
tax assets, post-employment
benefit assets, and investments
in insurance policies:
Non-current biological assets
Property, plant and equipment,
net
Goodwill
Intangible assets
c) Major Customers
In Mexico, the Company’s products are traded among a large number of customers, without
significant concentration with any specific customer. Therefore, in 2021, 2020 and 2019, no
customer represented over 10% of the Company’s total revenues.
As of December 31, 2021, 2020 and 2019, the Company did not have operations with an
individual customer that represented a significant concentration in the United States of
America, more than 10% of the total income of the Company.
(7) Cash and cash equivalents
The consolidated balances of cash and cash equivalents as of December 31, 2021, 2020 and
2019 are as follows:
Cash and banks
Investments with maturities less
$
than three months
Restricted cash
Total cash and cash equivalents
$
2021
14,586,467
4,519,265
19,105,732
30,711
19,136,443
December 31,
2020
12,941,334
4,305,998
17,247,332
39,042
17,286,374
2019
13,106,862
5,513,276
18,620,138
42,627
18,662,765
Restricted cash corresponds to the minimum margin required by the intermediary for the
Company’s derivative financial instruments on commodities in order to meet future
commitments that may stem from adverse market movements affecting prices on the open
positions as of December 31, 2021, 2020 and 2019.
39
(8) Financial instruments and risk management
The Company is exposed to market risks, liquidity risks and credit risks for the use of
financial instruments, for which reason it exercises its risk management.
This note presents information on the Company’s exposure to each one of the aforementioned
risks, as well as the Company’s objectives, policies and processes for the measurement and
management of financial risks.
Risk management framework
The philosophy adopted by the Company seeks to minimize risks and, therefore maximize
business stability, focusing decisions on creating an optimum combination of products and
assets that produce a risk – return ratio more in agreement with the risk profile of its
stockholders.
In order to establish a clear and optimal organizational structure with respect to risk
management, a Risk Committee has been established which is the specialized body in charge
of defining, proposing, approving and implementing the objectives, policies, procedures,
methodologies and strategies, as well as the determination of the maximum limits of exposure
to risk and contingency plans.
At December 31, 2021, 2020 and 2019, the Company has not identified the existence of
embedded derivatives.
Some of the Company’s derivative financial instruments as of December 31, 2021, 2020 and
2019 meet the requirements to be treated as hedging instruments for accounting purposes
(11,238, 319,506 and 24,352 thousand U.S. dollars of notional amounts).
As of December 31, 2021 and 2019, the Company has no derivative trading instruments. Some
of the Company’s derivative financial instruments as of December 31, 2020 are recognized in
earnings through profit or loss for accounting purposes (60,000 thousand U.S. dollars of
notional amounts).
Management by type or risk
a)
Categories of financial assets and liabilities
The Company’s financial assets and liabilities are shown below:
40
2021
December 31,
2020
2019
$ 19,136,443 17,286,374 18,662,765
10,841
1,018,322
186,284
1,559,823
74,148
3,102,203
291
211,278
69,862
937,715
71,431
2,704,058
686
193,689
-
315,761
65,545
2,523,092
13,674
173,488
18,098
$ (1,993,911) (2,517,965) (4,928,607)
(8,977,051) (5,049,103) (4,491,171)
(803,050)
(76,704)
(651,480)
(185,429)
(719,711)
(80,842)
(194,181)
-
-
Financial assets
Cash and cash equivalents
Investment in securities at fair value
through profit or loss
Investment in securities at fair value
through other comprehensive income
Investments in life insurance
Trade receivables
Due from related parties
Other long-term receivables
Derivative financial instruments
Financial liabilities
Current and non-current financial debt
Trade payables, sundry creditors and
expenses payable
Current and non-current lease liabilities
Due to related parties
Derivative financial instruments
b)
Credit risk
Credit risk is defined as the potential loss of a portfolio of an amount owed to the Company
due to lack of payment from a debtor, or for breach by a counterparty with which derivative
financial instruments and investment in securities at fair value through profit or loss and other
comprehensive income transactions are conducted.
The risk management process contemplates the use of derivative financial instruments, which
are exposed to a market risk, as well as counterparty risk.
Measurement and monitoring of counterparty risk
In terms of valuation and monitoring of Over the counter (“OTC”) derivative financial
instruments and investments in securities, the Company currently measures its counterparty
risk by identifying the Credit Valuation Adjustment (“CVA”) and Debit Valuation Adjustment
(“DVA”).
For investments in securities denominated in Mexican pesos, the financial instruments
valuation models used by price vendors incorporate market movements and credit quality of
issuers, thereby implicitly including the counterparty risk of the transaction in the fair value
measurement; therefore, the position in investment in securities includes the counterparty risk
and no additional adjustment is carried out. The price of the instruments obtained from the
price vendor is the mid-point between the bid price and the ask price (the “mid-price”).
41
Investments in securities denominated in a foreign currency, not listed in Mexico, are recorded
at prices contained in the broker's statements of account. The Company validates these market
prices using Bloomberg, which incorporate market movements and the credit quality of
issuers; thereby implicitly including the counterparty risk of the transaction and no related
adjustment is carried out. The prices obtained from Bloomberg are mid prices.
Trade accounts receivable and other accounts receivable measurement and monitoring
It is the policy of the Company to establish an allowance for doubtful accounts to cover the
balances of accounts receivable that are not likely to be recovered. To set the required
allowance, the Company considers historical losses, assesses current market conditions, as
well as customers' financial conditions, accounts receivable in litigation, price differences,
portfolio aging and current payment patterns.
The impairment assessment of accounts receivable is performed on a collective basis, as there
are no accounts with individually significant balances. The Company's products are marketed
to a large number of customers without any significant concentration with a specific customer.
As part of the objective evidence that an account receivable portfolio is impaired, the
Company considers past experiences with respect to collection, increases in the number of
overdue payments in the portfolio exceeding the average loan period, as well as observable
changes in national and local economic conditions that correlate to defaults.
The Company has a credit policy under which each new customer is analyzed individually in
terms of its creditworthiness before offering it payment terms and conditions. The Company's
review includes internal and external assessments, and in some cases, bank references and a
search in the Public Registry of Properties. For each customer, purchase limits are established,
which represent the maximum credit amount. Customers that do not meet the Company's
credit references can solely conduct transactions in cash or through advance payments.
The allowance for doubtful accounts includes trade accounts receivable that are in process of
legal recovery, which amount to $157,012, $143,278 and $140,304 as of December 31, 2021,
2020 and 2019, respectively. The reconciliation of movements of the allowance for doubtful
accounts, and the analysis of past-due accounts receivable but not impaired, are presented in
note 9.
The Company receives credit enhancements on credit lines granted to its clients, which consist
of real and personal property, such as land, buildings, houses, vehicles, letters of credit, cash
deposits and others. As of December 31, 2021, 2020 and 2019, the fair value of such credit
enhancements, determined by an appraisal at the time the credit lines were granted, is
$667,322, $180,513 and $663,500, respectively.
The fair value of trade accounts receivable is similar to the carrying amount, as the terms
granted under credit lines are of a short term nature and do not include significant finance
components.
42
Investments
The Company limits its exposure to credit risk investing solely with counterparties that have
been rated on a well-recognized credit rating scale or are deemed to be investment grade.
Management constantly monitors credit ratings, and as it invests solely in securities with high
credit ratings, it is not expected that any counterparty will fail to fulfill its obligations.
Financial guarantees granted
It is the Company’s policy to grant financial guarantees solely to 100% owned subsidiary
companies.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure, which as of
the reporting date is as follows:
Cash and cash equivalents
Investments in securities at fair value
$
through profit or loss
Investment in securities at fair value
through other comprehensive income
Investments in life insurance
Accounts receivable net of guarantees
received
Derivative financial instruments
$
c)
Liquidity risk
December 31,
2021
2020
19,136,443 17,286,374 18,662,765
2019
10,841
1,018,322
186,284
1,559,823
74,148
937,715
71,431
315,761
65,545
2,717,920
2,646,450
69,862
2,046,754
18,098
-
23,497,567 22,031,762 21,295,207
Liquidity risk is defined as the potential loss stemming from the impossibility to renew
liabilities or enter into other liabilities under normal terms, the early or forced sale of assets or
the need to grant unusual discounts in order to meet obligations, or by the fact that a position
cannot be disposed of, acquired or covered promptly through the establishment of an
equivalent contrary position.
Liquidity risk management process considers the management of the assets and liabilities
included in the consolidated statements of financial position (Assets Liabilities Management -
ALM) in order to anticipate funding difficulties because of extreme events.
Monitoring
The risk management and financial planning areas of the Company, measure, monitor and
report to the Risk Committee liquidity risks associated with the ALM and prepare limits for
the authorization, implementation and operation thereof, as well as contingent action measures
in case of liquidity requirements.
43
Liquidity risk caused by differences between current and projected cash flows at different
dates are measured and monitored, considering all asset and liability positions of the Company
denominated in local and foreign currency. Similarly, funding diversification and sources to
which the Company has access are evaluated.
The Company quantifies the potential loss arising from early or forced sale of assets or sale at
unusual discounts to meet its obligations in a timely manner, as well as by the fact that a
position cannot be disposed of, acquired or covered timely through the establishment of a
contrary equivalent position.
Liquidity risk monitoring considers a liquidity gap analysis, scenarios for lack of liquidity and
use of alternative sources of financing.
Below are the contractual maturities of the financial liabilities, including estimated interest
payments. As of the date of the consolidated financial statements, there are no financial
instruments which have been offset or recognized positions that are subject to offsetting rights.
Maturity table
Trade payables, sundry creditors
and expenses payable
Due to related parties
Lease liabilities
Financial debt, maturities at
variable rates
In pesos
Interest
Total financial liabilities
Trade payables, sundry creditors
and expenses payable
Due to related parties
Derivative financial instruments
Lease liabilities
Financial debt, maturities at
variable rates
In U.S. dollars
In pesos
Interest
Total financial liabilities
December 31, 2021
1 to 3 years
3 to 5 years
Less than 1
year
8,977,051
185,429
279,809
1,993,911
85,854
11,522,054
-
-
324,630
-
-
324,630
-
-
47,041
-
-
47,041
December 31, 2020
1 to 3 years
3 to 5 years
Less than 1
year
5,049,103
80,842
194,181
278,981
-
-
-
379,926
778,050
279,510
85,340
6,746,007
-
1,460,405
44,613
1,884,944
-
-
-
60,804
-
-
-
60,804
$
$
$
$
44
Less than 1
year
December 31, 2019
1 to 3 years
3 to 5 years
Trade payables, sundry creditors
and expenses payable
Due to related parties
Lease liabilities
Financial debt, maturities at
variable rates
In U.S. dollars
In pesos
Interest
Total financial liabilities
$
$
4,491,171
76,704
149,538
-
-
598,040
2,831,191
609,208
134,535
8,292,347
-
1,488,208
207,643
2,293,891
-
-
55,472
-
-
-
55,472
At least on a monthly basis, Management evaluates and advises the Board of Directors on its
liquidity. As of December 31, 2021, the Company has evaluated that it has sufficient resources
to meet its obligations in the short and long term; therefore, it does not consider having
liquidity gaps in the future and it will not be necessary to sell assets to pay its debts at unusual
discounts or at out-of-market prices.
d) Market risk
Market risk is defined as the potential loss arising from the portfolio of derivative financial
instruments and investment in securities for changes in risk factors that affect the valuation of
short or long positions. In this sense, the uncertainty of future losses resulting from changes in
market conditions (interest rates, foreign currency, prices of commodities, among others),
which directly affects movements in the price of both assets and liabilities, is detected.
The Company measures, monitors and reports all financial instruments subject to market risk,
using sensitivity measurement models to show the potential loss associated with movements in
risk variables, according to different scenarios on rates, prices and types of change during the
period.
Monitoring
Sensitivity analyses are prepared at least monthly and are compared with the limits
established. Any excess identified is reported to the Risk Committee.
Stress tests
At least monthly, the Company conducts stress tests calculating the value of the portfolios and
considering changes in risk factors observed in historical dates of financial stress.
i. Commodities price risk
With respect to risks related to commodities designated in a formal hedging relationship, the
Company seeks protection against downward variations in the agreed-upon price of corn
and/or sorghum with the producer, which may represent an opportunity cost as there are lower
prices in the current market upon receiving the inventory, and to hedge the risk of a decline in
prices between the receipt date and that of inventory consumption.
45
Purchases of corn and/or sorghum are formalized through an agreement denominated
"Forward buy-sell agreement", which has the following characteristics:
• Transaction date
• Number of agreed-upon tons
• Harvest, state and agricultural cycle from which the harvest originates
• Price of product per ton, plus quality award or penalty
Agricultural agreements that result in firm commitments are linked to two corn and/or
sorghum agricultural cycles, and in contracting purchases, both contracting cycles and dates
are itemized as follows:
• Fall-winter Cycle - The registration window period is at the discretion of the Mexican
Food Safety (SEGALMEX, for its Spanish acronym) formerly Agency of Services for
Distribution and Development of Agricultural Markets (ASERCA, for its Spanish
acronym), which is usually between December and March, while the fall-winter cycle
harvest period takes place during May, June and July. However, corn and/or sorghum
harvest could lengthen up to one month or several months, depending on the weather
conditions, such as drought and frost.
• Spring-summer Cycle - The registration window period is at the discretion of
SEGALMEX; the spring-summer cycle usually takes place during the July and August and
the harvest depends on each state of the country and is highly variable.
During 2021 and 2020 the Company did not participate in any program. As of December 31,
2019 the Company participated in the ASERCA program as buyer of the corn and / or
sorghum crops, for which the Company had to prove that a risk management instrument was
maintained against market price fluctuations, based on the foregoing, the Company entered
into “put” options with maturities in March 2020 , July, September and December 2021, 2020
and 2019, with companies listed on the Chicago Mercantile Exchange. As of December 2019,
the gain on valuation was $574 (30 thousand dollars).
As of December 31, 2021 and 2020, the Company did not receive any subsidy. During 2019
there is a subsidy of $50,730 by ASERCA for the purchase of hedging "puts" to the consumer.
The Company participated in the "Agriculture by Contract" program with ASERCA, where
contracts for the purchase of "put" options are registered with companies listed on the Chicago
Mercantile Exchange and the benefit of this program is the recovery of the breach of Call
hedge purchased, in turn, by the producer with ASERCA. The benefit under this scheme
benefit as of December 31, 2019 was $1,802. During 2021 and 2020, no benefits have been
realized under this scheme.
With respect to the risk in commodities that are not designated in a formal hedging
relationship and to which the Company is exposed, sensitivity tests on corn and sorghum
futures agreements are performed, considering different (bullish and bearish) scenarios. The
results of these sensitivity analyses are presented in paragraph g) of this note.
ii. Chicken price risk
The Company is exposed to financial risks mainly related to changes in the price of chicken.
The Company presently does not anticipate that the price of chicken will decrease to a level
that represents a risk to the Company in the future; therefore, as of December 31, 2021, 2020
and 2019, it has not entered into any derivative financial instrument or other agreement for
managing the risk related to a decrease in the chicken price.
46
The Company reviews chicken prices frequently in order to evaluate the need of having a
financial instrument to manage the risk of price increases.
iii. Exchange risk
The Company is exposed to the effects of exchange rate volatility, mainly in relation to
Mexican pesos/dollars exchange rates on the Company’s assets and liabilities, including:
investments in securities and derivative financial instruments hedging commodities, which are
denominated in a currency other than the Company’s functional currency. In this regard, the
Company has implemented a sensitivity analysis to measure the effects that currency risk may
have over the assets and liabilities described.
The Company protects itself from exchange rate risk through economic hedging with
derivative financial instruments, which cover a percentage of its estimated exposure to
exchange rate volatility in relation to projected sale and purchase transactions. All instruments
entered into as economic hedges of foreign exchange risk have maturities of less than one year
from the contract date.
As of December 31, 2021, 2020 and 2019, the Company entered into derivative financial
instrument positions as economic hedges to mitigate exchange rate risks.
iv. Foreign currency position
The Company has financial instrument assets and liabilities denominated in foreign currency
on which there is an exposure to currency risk.
Below is the foreign currency position that the Company has as of December 31, 2021, 2020
and 2019.
2021
December 31,
2020
2019
Dollars
Mexican
Pesos
Dollars
Mexican
Pesos
Dollars
Mexican
Pesos
447,316
9,174,451
479,325
9,562,534
569,569 10,759,165
19,318
396,212
40,424
806,459
4,576
86,447
76,168
3,572
1,562,206
73,268
546,374 11,206,137
47,003
2,683
569,435
937,715
53,517
11,360,225
16,716
2,160
315,761
40,809
593,021 11,202,182
-
(277,467) (5,690,856) (107,224)
(39,000)
-
(6,558)
(161,088)
(285,321) (5,851,944) (152,782)
416,653
5,354,193
261,053
(7,854)
(2,139,115) (120,699) (2,280,003)
(778,050) (149,878) (2,831,191)
(144,224)
(7,635)
(130,828)
(3,047,993) (278,212) (5,255,418)
5,946,764
8,312,232
314,809
Assets
Cash and cash equivalents $
Investment in securities at
fair value through profit
or loss
Investment in securities at
fair value through other
comprehensive income
Accounts receivable
Total assets
Liabilities
Trade accounts payable
Financial debt
Lease liabilities
Total Liabilities
Net asset position
$
47
The Company performs a sensitivity analysis related to the potential effects of changes in
exchange rates on its financial information. These results are shown in paragraph g) of this
note. This analysis represents the scenarios that Management considers reasonably possible of
occurring.
The following is a detail of exchange rates effective during the fiscal year:
Average exchange rate
Dollars
$
2021
20.29
2020
21.49
2019
19.25
Spot exchange rate at
December 31,
2020
19.95
2019
18.89
2021
20.51
The exchange rate at the date of issuance of the consolidated financial statements is $20.30.
v. Interest rate risk
The Company is exposed to fluctuations in interest rates for certain financial instruments, such
as its investments in financial instruments, bank loans and debt securities. This risk is
managed taking into account market conditions and the criteria of its Risk Committee and
Board of Directors.
Interest rate fluctuations impacted mainly bank loans by changing either their fair value (fixed
rate debt) or the future cash flows (variable rate debt). Management does not have a formal
policy to determine how much of the Company's exposure to interest rates should be at fixed
or variable. However, at the time of obtaining new loans, Management uses its judgment
considering technical analyses and market forecasts to decide whether fixed or variable rate
instruments would be more favorable during the terms of such instruments.
To monitor this risk, the Company performs sensitivity tests at least monthly to measure the
effect of the change in interest rates in the instruments described in the preceding paragraph,
which are summarized in subsection g) of this note.
e)
Financial instruments at fair value
The amounts of accounts payable and accounts receivable approximate their fair value because
of their nature and short-term maturities.
The table below summarizes the fair value of the financial instruments that are recognized at
amortized cost, together with the carrying amount included in the consolidated statements of
financial position:
Liabilities
recorded at
amortized cost
Financial debt
Carrying
amount
Fair
value
Carrying
amount
Fair
value
Carrying
amount
Fair
value
2020
$ 1,993,911 1,994,423 2,517,965 2,550,758 4,928,607 4,952,445
2019
2021
48
f)
Fair value hierarchy
The fair value of financial assets and liabilities is determined as follows:
• The fair value of the financial assets and liabilities that have standard terms and
conditions and are traded in active liquid markets, which are determined by reference
to quoted market prices (market approach), therefore, these instruments are considered
Level 1 hierarchy according to the classification of fair value hierarchy described in
note 2 b).
• The fair value of derivative financial instruments of the Company (commodities) is
determined based on the future prices of the Chicago Stock Exchange, so these
instruments are considered Level 2 hierarchy.
The following table summarizes financial instruments carried at fair value:
Level 1
Level 2
Level 3
Total
As of December 31, 2021
Investment in securities at fair value through
profit or loss
$
10,841
-
Investment in securities at fair value through
other comprehensive income
Derivative financial instruments
1,559,823
-
$ 1,570,664
-
69,862
69,862
-
-
-
-
10,841
1,559,823
69,862
1,640,526
As of December 31, 2020
Investment in securities at fair value through
profit or loss
Investment in securities at fair value through
other comprehensive income
Derivative financial instruments
Level 1
Level 2
Level 3
Total
$ 1,018,322
937,715
-
$ 1,956,037
-
-
(194,181)
(194,181)
-
-
-
-
1,018,322
937,715
(194,181)
1,761,856
Level 1
Level 2
Level 3
Total
As of December 31, 2019
Investment in securities at fair value through
profit or loss
$
186,284
-
Investment in securities at fair value through
other comprehensive income
Derivative financial instruments
315,761
-
502,045
$
-
18,098
18,098
-
-
-
-
186,284
315,761
18,098
520,143
Information regarding the hierarchy of fair value measurements related to financial liabilities
that are not recognized at fair value, but for which disclosures are required, is summarized
below:
As of December 31, 2021
Financial debt - bank institutions
Financial debt – debt securities
Level 1
Level 2
Level 3
Total
$
-
(1,494,177)
$ (1,494,177)
(500,246)
-
(500,246)
-
-
-
(500,246)
(1,494,177)
(1,994,423)
As of December 31, 2020
Financial debt - bank institutions
Financial debt – debt securities
As of December 31, 2019
Financial debt - bank institutions
Financial debt – debt securities
49
Level 1
Level 2
Level 3
Total
$
-
(1,491,458)
$ (1,491,458)
(1,059,300)
-
(1,059,300)
-
-
-
(1,059,300)
(1,491,458)
(2,550,758)
Level 1
Level 2
Level 3
Total
-
$
(1,496,635)
$ (1,496,635)
(3,455,810)
-
(3,455,810)
-
-
-
(3,455,810)
(1,496,635)
(4,952,445)
g)
Quantitative sensitivity measurements
The following are sensitivity analysis for the most significant risks to which the Company is
exposed as of December 31, 2021, 2020 and 2019. These analyses represent the scenarios that
Management believes are reasonably possible of occurring in future periods and were
evaluated in accordance with the policies of the Company’s Risk Committee.
i. Derivative Financial Instruments related to exchange rate and commodities risks
As of December 31, 2021, the Company has taken positions on derivative financial
instruments to hedge exchange rate risks and commodities.
A 15% increase in the Mexican peso with respect to the U.S. dollar as of the end of 2021,
2020 and 2019 would have resulted in a valuation gain of $34,443, $506,705 and $16,824 on
the fair value of the Company’s exchange rate derivative financial instruments position. On
the other hand, a decrease of 15% in the aforementioned rate would have resulted in an
additional valuation loss during the respective periods of $34,698, $1,405,538 and $31,133.
The following table shows the Company’s sensitivity to an increase and decrease of 15% for
2021, 2020 and 2019 in the “bushel” price of corn and short ton price of soybeans.
Effect of Increase
Effect of Decrease
2021
2020
2019
2021
2020
2019
Loss (profit) for
the year
$
(37,847)
(87,711)
(121,762) $
20,919
(12,530) 100,490
ii. Interest rate risk
As described in Note 18, the Company has financial debt denominated in pesos and dollars,
which bear interest at variable rates based on TIIE and LIBOR, respectively.
The following table shows the Company’s sensitivity to an increase and decrease of 50 basis
points for 2021, 2020 and 2019, in the variable rates to which the Company is exposed.
Effect of Increase
Effect of Decrease
2021
2020
2019
2021
2020
2019
Loss (profit) for the
year
$
8,291
13,390
24,465 $
(8,291)
(13,390)
(24,465)
50
iii. Exchange risk
As of December 31, 2021, 2020 and 2019, the Company's net monetary liability position in
foreign currency was $5,354,193, $8,312,232 and $5,946,764, respectively.
The following table shows the Company’s sensitivity of an increase and decrease of 30% for
2021, 2020 and 2019, in exchange rate, which would have an effect in the result from foreign
currency position.
Effect of Increase
Effect of Decrease
2021
2020
2019
2021
2020
2019
Loss (profit)
for the year $
(1,606,255)
(2,493,673)
(1,784,045) $ 1,606,255 2,493,673 1,784,045
(9) Accounts receivable, net
As of December 31, 2021, 2020 and 2019, accounts receivable are as follows:
Trade receivables
Allowance for doubtful accounts
Income tax receivable
Recoverable value-added tax and
other recoverable taxes
$
$
2021
3,162,920
(60,717)
121,315
December 31,
2020
2,772,418
(68,360)
190,110
2019
2,595,978
(72,886)
187,912
1,884,649
5,108,167
1,471,851
4,366,019
1,156,106
3,867,110
Past-due but not impaired portfolio
Below is a classification of trade accounts receivable according to their aging as of the
reporting date, which has not been subject to impairment:
Past due at 60 days
Past due by more than 60 days
2021
8,079
8,443
16,522
December 31,
2020
18,811
98,054
116,865
$
2019
20,463
47,573
68,036
The Company believes that non-impaired amounts that are past-due by more than 60 days can
still be collected, based on the historical behavior of payments and analysis of credit ratings of
customers.
Reconciliation of movements in allowance for doubtful accounts
Balance as of January 1
Increase in allowance
Amounts written off
Currency translation effect
$
Balance as of December 31, $
2021
(68,360)
(706)
8,436
(87)
(60,717)
2020
(72,886)
(1,826)
6,458
(106)
(68,360)
2019
(79,937)
(57)
7,030
78
(72,886)
51
As of December 31, 2021, 2020 and 2019 the Company has receivables in legal proceedings
(receivables for which legal counsel is seeking recoverability) of $157,012, $143,278 and
$140,304, respectively.
To determine the recoverability of an account receivable, the Company considers any change
in the credit quality of the account receivable from the date of authorization of the credit line
to the end of the reference period. In addition, the Company estimates that the credit risk
concentration is limited as the customer base is very large and there are no related party
receivables or receivables from entities under common control.
Expected credit losses
The Company recognizes expected credit losses for life for trade accounts receivable, which
are estimated using a provision matrix based on the Company's historical experience of credit
losses, adjusted for factors that are specific each of the Company’s customer and debtor
groups, general economic conditions and an assessment of both the current and forecast
conditions at the reporting date, including the time value of money when appropriate. During
2017 the estimated credit losses were based on the incurred loss model.
The expected credit losses for 2021, 2020 and 2019 in trade accounts receivable under IFRS 9
were estimated at $37,249, $25,962 and $50,753, considering the balances of the portfolio and
the different customer groups of the Company.
The Company decided to maintain its previously recorded estimated reserve for doubtful
accounts for its subsidiaries, according to balances shown in the reconciliation of movements
in the estimate of doubtful accounts shown above, although such amounts were higher than the
expected credit losses in 2021, 2020 and 2019, as described in the previous paragraph.
(10) Inventories
As of December 31, 2021, 2020 and 2019, inventories are as follows:
Raw materials and by-products
Medicine, materials and spare parts
Balanced feed
Processed chicken
Commercial eggs
Processed beef
Processed turkey
Other processed products
Total
$
$
2021
2,775,890
1,344,944
467,359
1,552,946
63,764
167,582
1,620
1,885
6,375,990
December 31,
2020
2,410,275
1,110,559
380,121
1,575,985
55,364
151,402
2,472
2,160
5,688,338
2019
1,836,783
877,837
330,238
1,554,115
56,599
47,954
4,482
2,199
4,710,207
Inventory consumption for the years ended December 31, 2021, 2020 and 2019 was
$54,103,917, $44,747,933 and $39,823,395, respectively (note 23).
The adjustment to the net realizable value of certain inventories during 2021, 2020 and 2019
was for $39,975, $57,074 and $35,328, respectively.
52
(11) Biological assets
For the years ended December 31, 2021, 2020 and 2019, biological assets are as follows:
$
Balance as of January 1, 2021
Increase due to purchases
Sales
Net increase due to births
Production cost
Depreciation
Transfers to inventories
Other
Balance as of December 31, 2021
$
$
Balance as of January 1, 2020
Increase due to purchases
Sales
Net increase due to births
Production cost
Depreciation
Transfers to inventories
Other
Balance as of December 31, 2020
$
$
Balance as of January 1, 2019
Increase due to purchases
Sales
Net increase due to births
Production cost
Depreciation
Transfers to inventories
Other
Balance as of December 31, 2019
$
Current
biological
assets
2,012,668
429,551
-
377,449
42,518,242
-
(42,628,413)
60,115
2,769,612
Current
biological
assets
2,043,234
686,756
-
264,386
35,585,551
-
(36,786,599)
219,340
2,012,668
Current
biological
assets
2,073,526
510,403
-
267,773
32,894,675
-
(33,651,137)
(52,003)
2,043,237
Non-current
biological
assets
1,991,530
840,112
(46,866)
3,083,747
2,335,691
(2,784,562)
(3,083,747)
22,232
2,358,137
Non-current
biological
assets
1,818,911
797,039
20,966
2,507,769
1,877,418
(2,565,283)
(2,507,769)
42,479
1,991,530
Non-current
biological
assets
1,721,728
701,764
(73,409)
2,378,419
1,761,456
(2,262,245)
(2,378,419)
(30,383)
1,818,911
Total
4,004,198
1,269,663
(46,866)
3,461,196
44,853,933
(2,784,562)
(45,712,160)
82,347
5,127,749
Total
3,862,145
1,483,795
20,966
2,772,155
37,462,969
(2,565,283)
(39,294,368)
261,829
4,000,198
Total
3,795,254
1,212,167
(73,409)
2,646,192
34,656,131
(2,262,245)
(36,029,556)
(82,386)
3,862,148
The “Other” category includes the change in fair value of biological assets that resulted in a
decrease of $48,338 and $31,701 in 2021 and 2020, and increase of $35,487 in 2019.
53
The Company is exposed to different risks relating to its biological assets:
•
•
•
•
•
Future excesses in the offer of poultry products and a decline in the demand growth of
the chicken industry may negatively affect the Company’s results.
Increases in raw material prices and price volatility may negatively affect the
Company’s margins and results.
In addition, in the case of the Company’s operations in the United States of America, the
cost of corn and grain may be affected by an increase in the demand for ethanol, which
may reduce the market’s available corn inventory.
Operations in Mexico and the United States of America are based on animal breeding
and meat processing, which are subject to sanitary risks and natural disasters.
Hurricanes and other adverse climate conditions may result in additional inventory
losses and damage to the Company’s facilities and equipment.
(12) Prepaid expenses and other current assets
As of December 31, 2021, 2020 and 2019, prepaid expenses and other current assets are as
follows:
Advances to suppliers of inventories
Prepaid expenses for services
Prepaid expenses for insurance and
sureties
Other current assets
Total
2021
2,163,450
264,208
95,441
234,024
2,757,123
$
$
December 31,
2020
613,188
303,345
2019
628,286
280,950
74,565
230,157
1,221,255
128,178
189,782
1,227,196
(13) Assets held for sale
As of December 31, 2021, 2020 and 2019, assets held for sale are as follows:
Buildings
Land
Other
Total
2021
24,786
31,793
857
57,436
$
$
December 31,
2020
24,208
29,563
859
54,630
2019
22,394
29,563
959
52,916
The Company recognized gains (losses) on sales of these assets of ($31), $510 and $2,311
during 2021, 2020 and 2019, respectively.
54
(14) Property, plant and equipment
As of December 31, 2021, 2020 and 2019, property, plant and equipment are comprised as
follows:
Cost
Land
Buildings and construction
Machinery and equipment
Transportation equipment
Computer equipment
Furniture
Leasehold improvements
Construction in progress
Total
Accumulated depreciation
Buildings and construction
Machinery and equipment
Transportation equipment
Computer equipment
Furniture
Total
Cost
Land
Buildings and construction
Machinery and equipment
Transportation equipment
Computer equipment
Furniture
Leasehold improvements
Construction in progress
Total
Accumulated depreciation
Buildings and construction
Machinery and equipment
Transportation equipment
Computer equipment
Furniture
Total
$
$
$
$
$
$
$
$
Balance as of
January 1,
2021
1,655,428
12,821,193
17,116,908
2,445,634
151,117
205,933
8,037
1,675,894
36,080,144
Additions Disposals
21,342
626,606
1,528,891
399,687
11,345
17,162
-
874,460
3,479,493
-
(3,039)
(274,090)
(175,643)
(1,078)
(9,728)
(703)
-
(464,281)
Currency
translation
effect
2,632
48,859
86,276
1,021
1,636
355
-
2,235
143,014
Balance as of
December 31,
2021
1,679,402
13,493,619
18,457,985
2,670,699
163,020
213,722
7,334
2,552,589
39,238,370
Balance as of
January 1
2021
(5,836,750)
(9,267,337)
(965,535)
(130,187)
(146,513)
(16,346,322)
Depreciation
for the year
Disposals
(262,839)
(923,114)
(183,530)
(11,532)
(12,082)
(1,393,097)
2,360
204,221
121,112
977
9,092
337,762
Currency
translation
effect
(12,611)
(58,202)
(762)
(1,433)
(303)
(73,311)
Balance as
of December
31, 2021
(6,109,840)
(10,044,432)
(1,028,715)
(142,175)
(149,806)
(17,474,968)
Balance as of
January 1,
2020
1,553,499
12,340,405
15,866,952
2,111,999
134,481
190,289
3,598
1,459,922
33,661,145
Additions Disposals
102,847
686,270
1,240,779
462,344
13,784
21,325
4,439
220,493
2,752,281
(5,900)
(297,490)
(145,320)
(130,089)
(244)
(6,463)
-
-
(585,506)
Currency
translation
effect
4,982
92,008
154,497
1,380
3,096
782
-
(4,521)
252,224
Balance as of
December 31,
2020
1,655,428
12,821,193
17,116,908
2,445,634
151,117
205,933
8,037
1,675,894
36,080,144
Balance as of
January 1
2020
(5,750,971)
(8,253,772)
(856,429)
(107,016)
(136,311)
(15,104,499)
Depreciation
for the year
Disposals
(299,865)
(1,048,758)
(204,384)
(21,721)
(15,575)
(1,590,303)
229,718
96,589
96,553
160
5,863
428,883
Currency
translation
effect
(15,632)
(61,396)
(1,275)
(1,610)
(490)
(80,403)
Balance as
of December
31, 2020
(5,836,750)
(9,267,337)
(965,535)
(130,187)
(146,513)
(16,346,322)
55
Cost
Land
Buildings and construction
Machinery and equipment
Transportation equipment
Computer equipment
Furniture
Leasehold improvements
Construction in progress
Total
Accumulated depreciation
Buildings and construction
Machinery and equipment
Transportation equipment
Computer equipment
Furniture
Total
$
$
$
$
Balance as of
January 1,
2019
1,378,090
11,943,476
15,182,044
1,792,273
136,183
178,455
4,350
1,501,697
32,116,568
Additions Disposals
209,752
472,095
891,008
474,960
3,828
17,684
-
-
2,069,327
(30,677)
(7,478)
(92,623)
(154,116)
(3,257)
(5,295)
(752)
(38,065)
(332,263)
Currency
translation
effect
(3,666)
(67,688)
(113,477)
(1,118)
(2,273)
(555)
-
(3,710)
(192,487)
Balance as of
December 31,
2019
1,553,499
12,340,405
15,866,952
2,111,999
134,481
190,289
3,598
1,459,922
33,661,145
Balance as of
January 1
2019
(5,536,825)
(7,505,222)
(829,664)
(98,034)
(128,647)
(14,098,392)
Depreciation
for the year
Disposals
(230,450)
(874,447)
(134,708)
(13,635)
(12,151)
(1,265,391)
2,199
65,136
106,955
3,145
4,109
181,544
Currency
translation
effect
14,105
60,761
988
1,508
378
77,740
Balance as
of December
31, 2019
(5,750,971)
(8,253,772)
(856,429)
(107,016)
(136,311)
(15,104,499)
Carrying amounts, net
2021
Land
Buildings and construction
Machinery and equipment
Transportation equipment
Computer equipment
Furniture
Leasehold improvements
Construction in progress
Total
$
$
1,679,402
7,383,779
8,413,553
1,641,984
20,845
63,916
7,334
2,552,589
21,763,402
December 31,
2020
1,655,428
6,984,443
7,849,571
1,480,099
20,930
59,420
8,037
1,675,894
19,733,822
2019
1,553,499
6,589,434
7,613,180
1,255,570
27,465
53,978
3,598
1,459,922
18,556,646
Additions of property, plant and equipment in 2020 include assets acquired through business
combinations of $383,680 that consist of the following:
Land
Buildings and construction
Machinery and equipment
Transportation equipment
Computer equipment
Furniture
Construction in progress
Total
$
$
62,050
231,264
73,332
4,825
1,761
1,115
9,333
383,680
Depreciation expense during the years ended December 31, 2021, 2020 and 2019 was
$1,393,097, $1,590,303 and $1,265,391, respectively, which was charged to cost of sales and
operating expenses, see note 23.
56
(15) Goodwill
Balances at beginning of the year
Foreign currency effects
Balances at end of year
2021
$ 1,650,716
37,891
$ 1,688,607
2020
1,578,994
71,722
1,650,716
2019
1,631,771
(52,777)
1,578,994
The recoverable amount of the cash-generating unit is determined based on a calculation of its
value in use, which uses projections of the estimated cash flows based on financial budgets
approved by Management for a determined projection period, which are discounted using an
annual discount rate.
Projections of the cash flows during the budgeted period are based on sales projections which
include increases due to inflation, as well as the projection of expected gross margins and
operating margins during the budgeted period. Cash flows that exceed such period are
extrapolated using an annual stable growth rate, which is the long-term weighted average
growth rate for the market in which the cash-generating unit operates. For the years ended
December 31, 2021, 2020, and 2019, no goodwill impairment loss was determined.
The assumptions and balances of each cash-generating unit are as follows:
Cash-generating unit
Bachoco - Istmo and Peninsula regions
Campi
Ok Farms - Morris Hatchery, Inc. Arkansas
Ok Farms - Morris Hatchery Inc. Georgia
Ok Foods- Albertville Quality Foods, Inc.
Cash-generating unit
Bachoco - Istmo and Peninsula regions
Campi
Ok Farms - Morris Hatchery, Inc. Arkansas
Ok Farms - Morris Hatchery Inc. Georgia
Ok Foods- Albertville Quality Foods, Inc.
2021
Final
balance of
the year
Projection
period
(years)
212,833
88,015
68,019
114,851
1,204,889
1,688,607
5
5
5
5
5
2020
Final
balance of
the year
Projection
period
(years)
212,833
88,015
66,162
111,715
1,171,991
1,650,716
5
5
5
5
5
$
$
$
$
Annual
discount
rate
(%)
12.63%
12.63%
3.26%
3.26%
10.00%
Annual
growth
rate
(%)
3.00%
3.00%
0.00%
0.00%
3.40%
Annual
discount
rate
(%)
12.95%
12.95%
3.43%
3.43%
3.43%
Annual
growth
rate
(%)
3.00%
3.00%
0.00%
0.00%
0.00%
Cash-generating unit
Bachoco - Istmo and Peninsula regions
Campi
Ok Farms - Morris Hatchery, Inc. Arkansas
Ok Farms - Morris Hatchery Inc. Georgia
Ok Foods- Albertville Quality Foods, Inc.
57
2019
Final
balance of
the year
Projection
period
(years)
$
$
212,833
88,015
62,647
105,780
1,109,719
1,578,994
5
5
5
5
5
Annual
discount
rate
(%)
12.84%
12.84%
5.22%
5.22%
5.22%
Annual
growth
rate
(%)
3.00%
3.00%
0.00%
0.00%
0.00%
As of December 31, 2021, the percentage by which the recoverable amount of each cash-
generating unit exceeds its carrying amount is shown below:
Cash-generating unit
%
Bachoco - Istmo and Peninsula regions
Campi
Ok Farms- Morris Hatchery Inc. Arkansas
Ok Farms- Morris Hatchery Inc. Georgia
Ok Foods- Albertville Quality Foods, Inc.
49%
130%
183%
60%
4%
Management considers that any possible reasonable change in the key assumptions (revenue
growth rate and annual discount rate), on which the recoverable amount is based, would not
cause the carrying amount of the cash-generating units to be less than their recoverable
amount.
The Company performed a sensitivity analysis considering a decrease in the revenue growth
rate of 200 basis points and an increase of 200 basis points in the annual discount rate, as a
result of this analysis, the Company concluded that for all cash-generating units there is no
impairment to recognize, except Ok Foods-Albertville Quality Foods, Inc. which would have
an impairment.
(16) Intangible assets
The balances as of December 31, 2021, 2020 and 2019 for $704,374, $753,224 and $772,640
are mainly comprised of trade names and customer relationships derived from the purchase
through its subsidiary OK Foods, Inc. Customer relationships are generally amortized over 15
years based on the pattern of revenue expected to be generated from the use of the asset.
Indefinite life intangible assets are initially recorded at their fair value and are not amortized,
but they are reviewed for impairment at least annually or more frequently if impairment
indicators arise.
During 2021, an impairment of $5,459 was determined in one of the commercial brands due to
the decrease in sales. During 2019 the Company ended a relationship with clients for which an
intangible asset was recognized. The Company does not expect to do future business with
those clients resulting in an impairment in intangible assets from customer relationships of
$73,733, which was charged to the results of the fiscal year as other expenses.
58
a)
Intangible assets consist of the following:
2021
2020
2019
Amortizable intangible assets
Customer relationships
Accumulated amortization
Impairment loss
Total net amortizable intangible assets
Trade names not subject to amortization
Impairment loss
Total intangible assets
$
$
968,012
(290,404)
-
677,608
32,225
(5,459)
704,374
941,582
(219,702)
-
721,880
31,344
-
753,224
891,553
(74,859)
(73,733)
742,961
29,679
.
772,640
b) Reconciliation between the carrying amounts at the beginning and at the end of the
intangible assets
Carrying amounts
Balance as of January 1, 2021 $
Additions
Impairment loss
Currency translation effect
Balance as of December 31,
2021
Accumulated amortization
Balance as of January 1, 2021
Additions
Amortization expense
Balance as of December 31,
2021
Total intangible assets
$
Customer
relationships
Trade names
not subject to
amortization
Total
941,582
-
-
26,430
31,344
-
(5,459)
881
972,926
-
(5,459)
27,311
968,012
26,766
994,778
(219,702)
-
(70,702)
(290,404)
677,608
-
-
-
(219,702)
-
(70,702)
-
26,766
(290,404)
704,374
59
Customer
relationships
Trade names
not subject to
amortization
Total
Carrying amounts
Balance as of January 1, 2020 $
Additions
Currency translation effect
Balance as of December 31,
2020
Accumulated amortization
Balance as of January 1, 2020
Additions
Amortization expense
Balance as of December 31,
2020
Total intangible assets
$
817,820
-
123,762
29,679
-
1,665
847,499
-
125,427
941,582
31,344
972,926
(74,859)
-
(144,843)
(219,702)
721,880
-
-
-
-
31,344
(74,859)
-
(144,843)
(219,702)
753,224
Customer
relationships
Trade names
not subject to
amortization
Total
Carrying amounts
Balance as of January 1, 2019 $
Additions
Impairment loss
Currency translation effect
Balance as of December 31,
2019
Accumulated amortization
Balance as of January 1, 2019
Additions
Amortization expense
Balance as of December 31,
2019
Total intangible assets
$
1,014,361
-
(73,733)
(122,808)
30,905
-
-
(1,226)
1,045,266
-
(73,733)
(124,034)
817,820
29,679
847,499
(95,911)
-
21,052
(74,859)
742,961
-
-
-
-
29,679
(95,911)
-
21,052
(74,859)
772,640
60
(17) Other non-current assets
Other non-current assets consist of the following:
Advances for purchase of property, plant
and equipment
Investments in life insurance (note 3 (l))
Security deposits
Other long-term receivable
Intangible assets in process
Other
Total non-current assets
2021
December 31,
2020
2019
$
$
367,023
74,148
24,511
211,278
1,616
56,128
734,704
472,828
71,431
23,476
193,689
2,996
54,502
818,922
495,015
65,545
21,545
173,488
2,841
51,614
810,048
(18) Financial debt
a)
Short-term financial debt is as follows:
Loan in the amount of 70,000 thousand dollars, maturing in
January 2020, at LIBOR (3) rate plus 0.62 percentage points. $
Loan denominated in pesos, maturing in January 2020, at
TIIE (1) rate plus 0.50 percentage points.
Loan in the amount of 80,000 thousand dollars, maturing in
February 2020, at LIBOR6 (4) rate plus 0.35 percentage
points.
Loan denominated in pesos, maturing in February 2020, at
TIIE (1) rate plus 1.05 percentage points.
Loan denominated in pesos, maturing in May 2020, at TIIE
(1) rate plus 1.05 percentage points.
Loan denominated in pesos, maturing in June 2020, at TIIE
(1) rate plus 0.50 percentage points.
Loan in the amount of 39,000 thousand dollars, maturing in
January 2021, at LIBOR (3) rate plus 0.60 percentage points.
Loan denominated in pesos, maturing in February 2021, at
TIIE (1) rate plus 0.90 percentage points.
Loan denominated in pesos, maturing in December 2022, at
TIIE (1) rate plus 0.29 percentage points.
Total short-term debt
$
2021
December 31,
2020
2019
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,322,176
50,000
1,509,015
449,572
99,678
9,958
778,050
70,011
-
-
500,081
500,081
-
848,061
-
3,440,399
The annual weighted average interest rate of short-term loans denominated in pesos for 2021,
2020 and 2019 was 5.28%, 6.71% and 9.24%, respectively. The average interest rate for loans
outstanding as of December 31, 2021, 2020 and 2019 was 5.68%, 5.50% and 8.77%,
respectively.
The annual weighted average interest rate of short-term loans denominated in dollars for the
years 2021, 2020 and 2019 was 0.73%, 1.61% and 2.36%, respectively. As of December 31,
2021, there are no current short-term loans, the average interest rate for loans outstanding as of
December 31, 2020 and 2019 was 0.75%, 2.37%, respectively.
61
(1)
(2)
(3)
(4)
TIIE (for its acronym in Spanish) = Interbank Equilibrium Rate
FIRA (for its acronym in Spanish) = Agriculture Trust Funds
LIBOR= London Interbank Offered Rate
LIBOR6= London InterBank Offered Rate (6 months)
b) Long-term debt consists of the following:
2021
December 31,
2020
2019
Loan denominated in pesos, maturing in May 2021, at
TIIE (1) plus 1.05 percentage points.
Debt securities (subsection (d) of this note)
Total
Less current maturities
$
-
1,493,830
1,493,830
(1,493,830)
Long-term debt, excluding current maturities
$
-
209,499
1,460,405
1,669,904
(209,499)
1,460,405
-
1,488,208
1,488,208
-
1,488,208
The annual weighted average interest rate on long-term debt for 2021, 2020 and 2019 was
4.90%, 6.49% and 8.53%, respectively. The average rate for outstanding loans as of December
31, 2021, 2020 and 2019 was 5.43%, 4.91% and 8.26%, respectively.
(1) TIIE (for its acronym in Spanish) = Interbank Equilibrium Rate
(2) FIRA (for its acronym in Spanish) = Trust Established in Relation to Agriculture
During 2021 the Company did not make early payments on its long-term debt, during 2020
and 2019 the Company made early payments on its long-term debt of $17,877 and $51,000,
payment of commissions for early termination was not required.
As of December 31, 2021, 2020 and 2019, unused lines of credit amounted to $9,935,420,
$6,919,625 and $3,325,981, respectively. In all such years, the Company did not pay any fee
for undrawn balances.
The amount of future unearned interest is $56,280.
Interest expense on total loans during the years ended December 31, 2021, 2020 and 2019,
amounted to $104,179, $159,169 and $250,820, respectively, (note 29).
Certain bank loans establish certain affirmative and negative covenants, as well as the
requirement to maintain certain financial ratios, which have been met as of December 31,
2021, among which are:
a) Provide financial information at the request of the bank.
b) Not to contract liabilities with financial cost or grant loans that may affect payment
obligations.
c) Notify the bank regarding the existence of legal issues that could substantially affect
the financial situation of the Company.
d) Not to perform substantial changes to the nature of the business, or in structure or
Administration.
62
e) Not to merge, consolidate, separate, settle or dissolve except for those mergers in
which the Company or surety are the merging company and do not constitute a
change in control of the entities of the group to which the Company or the surety
belong at the date of the agreement.
c)
Issuance of debt securities
On August 25, 2017, a second issuance of debt securities was carried out for a total amount of
$1,500,000 with ticker symbol: “BACHOCO 17” for a term of 1,820 days, equivalent to 65
periods of 28 days, approximately five years, with 15,000,000 debt securities and a par value
of $100 pesos per certificate.
From the date of issuance, and while the debt securities have not been paid, they will accrue
annual gross interest on their face amount, at an annual interest rate, which is calculated by
adding 0.31 percentage points at the 28-day TIIE, and in the event the 28-day TIIE is not
published, at the nearest term published by the Bank of Mexico. The debt issue that expired in
2017 accrued a gross interest on its nominal value, at an annual interest rate, which was
calculated by adding 0.60 percentage points to the 28-day TIIE.
The payment of the debt securities is carried out at the expiration of the contractual term of
each issuance. Direct costs arising from debt issuance or contract are deferred and paid as part
of financial expense using the effective interest rate through the term of each transaction. Such
costs include commissions and professional fees.
(1) UDIS = Investment units
Derived from the issuance of debt securities, the Company is subject to certain requirements,
affirmative and negative covenants similar to those of its financial debt indicated above, with
which they comply as of December 31, 2021.
d) Reconciliation of liabilities arising from financing debt
Balance as of January 1
Changes that represent cash flows
Proceeds from borrowings
Principal payment on loans
Changes that do not represent cash flows
Other
Balance as of December 31
2021
$ 2,517,965
December 31,
2020
4,928,607
2019
5,037,600
1,709,080
(2,267,280)
4,030,700
(6,762,222)
4,839,000
(4,808,163)
34,146
$ 1,993,911
320,880
2,517,965
(139,830)
4,928,607
63
(19) Trade accounts and other accounts payable
Trade payables
Sundry creditors and expenses payable
Provisions
Statutory employee profit sharing
Retained payroll taxes and other local
taxes
Direct employee benefits
Interest payable
Others
$
$
December 31,
2020
2021
8,122,486
854,565
74,146
291,744
359,379
311,367
1,436
133
10,015,256
4,516,424
532,679
24,099
62,075
375,086
232,083
10,575
116
5,753,137
2019
3,972,460
518,711
64,154
86,710
275,214
213,345
28,060
173
5,158,827
Note 8 discloses the Company’s exposure to the exchange and liquidity risks related to trade
accounts payable and other accounts payable.
In December 2009, the National Water Commission (CNA, for its Spanish acronym) imposed
credits and fines to the Company for supposed infractions made by the Company in water
administration for exploitation of livestock. The Company has recognized a provision for the
amount that it expects to be probable to pay.
During 2021 the Company the Company recognized a provision for the amount that it
considers likely to disburse due to ongoing litigation with a high probability of unfavorable
resolution.
Bachoco USA, LLC. is involved in claims with the United States of America Department of
Labor and the Unites State Immigration and Customs Enforcement, and various other matters
related to its business, including workers’ payment claims and environmental issues. As of
December 31, 2021, 2020 and 2019 the Company has not recorded any provision because the
Administration considers that it is likely that there will be a favorable outcome of the
litigation.
(20) Transactions and balances with related parties
a) Transactions with Management
Compensation
The following table shows the compensation paid to the directors and executives for services
provided in their respective positions for the years ended December 31, 2021, 2020 and 2019:
Compensation
December 31,
2021
73,721
2020
57,429
$
2019
52,635
64
b) Transactions with other related parties
Below is a summary of the Company’s transactions and balances with other related parties,
which are comprised of affiliates that are under common control:
i.Revenues and balances receivable to related parties
Sales of products to:
Vimifos, S.A. de C.V.
Frescopack, S.A. de C.V.
Taxis Aéreos del Noroeste,
S.A. de C.V.
Alimentos Kowi, S.A. de
C.V.
Sonora Agropecuaria, S.A.
DE C.V.
Transaction value
December 31,
2020
2021
2019
Balance as of
December 31,
2020
2021
$
5,921
4,055
53
31
9,323 $
58
42
284
400
-
-
63
51
662
832
934
-
6,697
123,756 178,624
128,727
188,981 $
$
7
286
337
291
-
686
12,494
13,674
-
-
-
2019
785
58
-
ii.Expenses and balances payable to related parties
Transaction value
December 31,
2020
2021
2019
2021
Balance as of
December 31,
2020
2019
Purchases of food, raw materials
and packing supplies
Vimifos, S.A. de C.V.
Frescopack, S.A. de C.V.
Pulmex 2000, S.A. de C.V.
Qualyplast, S.A. de C.V.
Alimentos Kowi, S.A. de C.V.
Sonora Agropecuaria, S.A. de C.V.
Granja, Rab S.A. de C.V.
Fertilizantes Tepeyac, S.A. de
C.V.
EBIPAC S.A.P.I. de C.V.
GASBO, S.A. de C.V.
Purchases of vehicles, tires and
spare parts
Maquinaria Agrícola, S.A. de C.V. $
Llantas y Accesorios, S.A. de C.V.
Autos y Accesorios, S.A. de C.V.
Autos y Tractores de Culiacán,
S.A. de C.V.
Camiones y Tractocamiones de
Sonora, S.A. de C.V.
Agencia MX-5, S.A de C.V.
Alfonso R. Bours, S.A. de C.V.
Cajeme Motors S.A. de C.V.
Airplane leasing expenses
Taxis Aéreos del Noroeste, S.A. de
$ 440,379
103,778
17,870
6,971
-
-
75,747
411,129
143,849
21,414
1,184
-
4,425
-
582,458 $
148,210
20,667
244
907
3,374
-
41,219
65,542
5,609
-
-
-
3,187
58,836
9,554
2,407
251
-
-
-
399,480
41,001
3,583
-
-
-
-
-
-
-
-
-
42,601
40,194
42,554
48,129
38,947
10,776
32
412
267
-
-
-
-
4,614
3,413
5
6,378
339
31,753
42,857
11,519
726
336
164,306
410
4,926
442
91,098
63
2,651
287
270,968
904
187
183
59,602
27
604
120
2,636
6
50
44
41,399
26,233
3,976
-
-
-
-
-
-
-
5
4,213
124
149
149
9
49
89
C.V.
$
1,435
-
24,971
55
$ 185,429
-
80,842
307
76,704
65
As of December 31, 2021, 2020 and 2019, balances payable to related parties correspond to
current accounts denominated in pesos that bear no interest and are payable on a short-term
basis.
(21) Income Tax
Under the tax legislation in Mexico and the United States of America in effect through
December 31, 2021, entities are subject to pay income tax (ISR, by its Spanish acronym).
a)
ISR
The Company and each of its subsidiaries file separate income tax returns (including its
foreign subsidiary, which files income tax returns in the United States of America, based on its
fiscal year ending in April of every year). For the years ended December 31, 2021, 2020 and
2019, the applicable rate under the general tax regime in Mexico is 30%. The applicable rate
during 2021, 2020 and 2019 for the Company’s US subsidiary is 21% (plus state taxes).
As of December 31, 2021, 2020 and 2019, BSACV, the Company’s primary operating
subsidiary is subject to the agriculture, cattle-raising, forestry and fishing regime of the ISR
law, which is applicable to entities exclusively dedicated to such activities. The ISR Law
establishes that such activities are exclusive when no more than 10% of an entity’s total
revenues are generated from something other than those activities or from industrialized
products.
b) Tax charged to profit and loss
For the years ended December 31, 2021, 2020 and 2019, the income tax (benefit) expense
included in profit and loss is as follows:
Operation in Mexico:
Current ISR
Deferred ISR
Foreign operations:
Current ISR
Deferred ISR
Total ISR expense
2021
1,790,621
257,020
2,047,641
-
(240,003)
1,807,638
December 31
2020
1,321,021
341,131
1,662,152
33
(450,574)
1,211,611
$
$
2019
1,066,160
324,415
1,390,575
(1,859)
(263,738)
1,124,978
66
Total income tax expense
The income tax expense attributable to income before income taxes differed from the amount
computed by applying the ISR rate of 30% in 2021, 2020 and 2019 due to the items listed
below:
|
2021
Percentage
ISR
December 31,
2020
Percentage
ISR
ISR
$ 2,022,521
30% $ 1,555,111
30% $ 1,292,925
2019
Percentage
30%
(379,311)
(6%)
(196,379)
(4%)
(168,822)
(4%)
Expected expense
Increase (decrease)
resulting from:
Net effects of inflation
(Non-taxable income)
Non-deductible
expenses
Effect of rate
difference of foreign
subsidiary
Effect from non-
deductible employee
benefits
Effect of tax incentive
Effect of carryback tax
losses in the United
States of America (1)
Bargain purchase gain
of domestic business
acquisition
Other
0%
1%
2%
(1%)
-
-
(2%)
26%
29,503
0%
7,641
0%
11,027
42,516
1%
20,907
0%
48,658
145,301
(54,523)
3%
(1%)
115,496
(69,920)
2%
(1%)
70,202
(60,861)
-
1,631
Income tax expense $ 1,807,638
-
-
-
(190,144)
(4%)
-
(27,267)
(3,834)
27% $ 1,211,611
0%
-
(0%)
(0%)
(68,151)
23% $ 1,124,978
(1)
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted.
The most significant provisions of the CARES Act that will materially affect the Company’s accounting
for income taxes includes a five-year carryback allowance for taxable net operating losses generated in
tax year 2018 through 2020 and a technical correction to the Tax Cuts and Jobs Act, enacted on
December 22, 2017, that disallowed the carrying back of taxable net operating losses to offset prior
years’ taxable income. The deadline to request this refund is October 2022, it is expected that the
Company will request it before that date.
c) Deferred income tax
The Company and each one of its subsidiaries determine the deferred taxes that are reflected at
a consolidated level on stand-alone basis. BSACV, the main operating subsidiary of the
Company, is subject to tax payment under the agriculture, cattle-raising, forestry and fishing
regime, in which the tax base for ISR is determined on collected revenues minus paid
deductions.
The tax effects of temporary differences, tax losses and tax credits that give rise to significant
portions of deferred tax assets and liabilities as of December 31, 2021, 2020 and 2019 are
detailed below:
67
2021
December 31,
2020
33,873
31,692
2,476
917,737
-
-
60,946
45,386
17
1,092,127
218,204
469,946
860
9,865
178,356
-
1,157
878,388
213,739
2,207
199,087
16,690
60,354
-
1,696
648
-
-
280,682
-
-
-
-
2,872
7,655
8,221
18,748
261,934
2019
2,481
164,019
26,020
56,163
616
1,113
-
-
-
250,412
-
-
4,593
-
-
547
-
5,140
245,272
December 31,
2021
2020
2019
1,948,897
201,835
85,053
31,993
62,503
2,330,281
2,053,059
593,754
2,558,209
952,322
-
-
1,282
13,130
6,171,756
3,841,475
1,090,676
-
1,037
606,935
144,861
1,843,509
1,097,422
-
-
271,772
63,314
1,432,508
1,820,929
497,655
2,915,222
286,844
5,147
188,919
-
3,773
5,718,489
3,874,980
1,696,300
445,198
2,667,824
332,392
584
190,900
-
3,803
5,337,001
3,904,493
Deferred tax assets
Accounts payable
Employee benefits
PTU payable
Tax loss carryforwards
Inventories
Property, plant and equipment
Other provisions
Tax incentives to be credited in the
United States of America
Other items
Total deferred tax assets
Deferred tax liabilities
Inventories
Property, plant and equipment
Prepaid expenses
Goodwill
Intangible assets
Other provisions
Derivative financial instruments
Total deferred tax liabilities
Net deferred tax assets
Deferred tax assets
Accounts payable
Employee benefits
PTU payable
Tax loss carryforwards
Other provisions
Total deferred tax assets
Deferred tax liabilities
Inventories
Accounts receivable
Property, plant and equipment
Prepaid expenses
Goodwill
Intangible assets
Other items
Derivative financial instruments
Total deferred tax liabilities
Net deferred tax liability
$
$
$
$
68
d) Unrecognized deferred tax liabilities
Deferred taxes related to investments in subsidiaries have not been recognized as the
Company is able to control the moment of the reversal of the temporary difference, and the
reversal is not expected to take place in the foreseeable future. Deferred income tax on
investments in subsidiaries not recognized as of December 31, 2021, 2020 and 2019 amounts
to $1,414,628, $1,802,451 and $1,919,720, respectively. The Company's policy has been to
distribute accounting profits when the respective taxes have been paid and in the case of
foreign profits, such tax may be duly credited in Mexico.
e) Movement in temporary differences during the fiscal year
Recognized
in profit
and loss
Acquired or/
Recognized
directly in
equity
Accounts payable
Employee benefits
PTU payable
Tax loss carryforwards
Other provisions
Goodwill
Intangible assets
Inventories
Accounts receivable
Property, plant and equipment
Prepaid expenses
Derivative financial instruments
Tax incentives to be credited in
the United States of America
Other items
Net deferred tax liability
$
January 1,
2021
(1,092,883)
(199,087)
(17,727)
(667,289)
(137,854)
5,147
188,919
1,820,929
497,655
2,913,526
289,716
11,994
-
-
$
3,613,046
(889,150)
(41,472)
(69,802)
(258,865)
19,020
4,293
(14,891)
443,845
96,099
105,961
663,466
2,293
(45,386)
1,606
17,017
January 1,
2020
Recognized
in profit
and loss
$
(1,099,903)
(164,060)
(26,020)
(327,935)
-
(62,767)
584
190,900
1,695,684
445,198
2,666,752
336,985
8,163
(35,027)
8,293
(314,628)
1,551
(74,804)
4,371
(12,248)
114,135
52,457
177,372
(47,269)
Accounts payable
Employee benefits
PTU payable
Tax loss carryforwards
Interest carryforwards
Other provisions
Goodwill
Intangible assets
Inventories
Accounts receivable
Property, plant and equipment
Prepaid expenses
Derivative financial
instruments
Net deferred tax liability
$
3,803
3,659,221
8,191
(109,443)
December
31, 2021
(1,982,770)
(233,527)
(87,529)
(949,730)
(123,449)
9,865
178,356
2,271,263
593,754
3,028,155
953,182
14,287
(45,386)
1,265
3,627,736
December
31, 2020
(1,092,883)
(199,087)
(17,727)
(667,289)
-
(137,854)
5,147
188,919
1,820,929
497,655
2,913,526
289,716
11,994
3,613,046
(737)
7,032
-
(23,576)
(4,615)
425
4,328
6,489
8,668
-
-
-
-
(341)
(2,327)
Acquired or/
Recognized
directly in
equity
(1,143)
-
-
(24,726)
(1,551)
(283)
192
10,267
11,110
-
69,402
-
-
63,268
69
Recognized
in profit
and loss
Acquired or/
Recognized
directly in
equity
Accounts payable
Employee benefits
PTU payable
Tax loss carryforwards
Other provisions
Goodwill
Intangible assets
Inventories
Accounts receivable
Property, plant and equipment
Prepaid expenses
Derivative financial
instruments
$
January 1,
2019
(1,511,013)
(53,398)
(20,536)
(59,883)
(78,230)
(3,879)
233,749
1,639,156
366,825
2,503,223
647,480
-
Net deferred tax liability
$
3,663,494
f)
Tax on assets and tax loss carryforwards
410,152
(197,728)
(5,484)
(273,479)
15,436
4,391
(34,220)
64,120
78,373
184,454
(310,495)
3,803
(60,677)
December
31, 2019
(1,099,903)
(164,019)
(26,020)
(327,935)
(62,767)
584
190,900
1,695,684
445,198
2,666,711
336,985
958
87,107
-
5,427
27
72
(8,629)
(7,592)
-
(20,966)
-
-
56,404
3,803
3,659,221
As of December 31, 2021, tax loss carryforwards expire as shown below. Amounts are
indexed for inflation as permitted by Mexican income tax law:
Amount as of December 31, 2021
Year of expiration /
Year
2017
2018
2019
2020
2021
Tax loss
carryforwards
$
$
57,372
204,879
1,285,521
1,584,611
1,050,678
4,183,061
maturity
2027
2028
2029
2030
2031
(22) Employee benefits
a) Employee benefits in Mexico
Defined contribution plans
The Company has a defined contribution plan which receives contributions from both the
employees and the Company. Employees can make contributions from 1% to 5% of their
wage and the Company is obligated to make contributions as follows: i) 20% of employee
contributions for employees with 1 - 4.99 years of service, ii) 40% of employee contributions
for employees with 5 – 9.99 years of service, and iii) 100% matching contributions for
employees with 10 or more years of service or when the employee reaches 40 years of age,
regardless of the years of service.
70
When an employee retires from the Company he/she has the right to receive the contribution
he/she has made to the plan, and i) if the employee retires between the first and the 4.99 year
of services, he/she does not have the right to receive the contribution made by the Company,
ii) if he/she retires on the fifth year of services he/she has the right to receive 50% of the
contributions made by the Company and, for each additional service year, the employee has
the right to receive an additional 10% of the contributions made by the Company.
During 2021, 2020 and 2019 there were not the expenses for paid contributions to defined
contribution plans, other than those mandated by Mexican law.
The Company makes payments equivalent to 2% of the integrated wage of its workers to the
defined contribution plan for the retirement saving fund system established by Mexican law.
The expense for this concept was $84,093, $72,121 and $66,134, in 2021, 2020 and 2019,
respectively.
Defined benefits plan
The Company has a defined benefit pension plan covering non-unionized personnel in
Mexico. The benefits are based on the age, years of service and the employee’s payment. The
retirement age is 65 years, with a minimum of 10 years of services, and there is an option for
an anticipated retirement option, in certain circumstances, at 55 years of age. The Company’s
policy to fund the pension plan is to make contributions up to the maximum amount that can
be deducted for ISR.
According to the Mexican Federal Labor Law, the Company is obligated to pay a seniority
premium as a retirement benefit if an employee retires and has of least 15 years of services,
which consists of a sole payment of 12 days for each worked year based on the last wage,
limited to the two minimal wages established by law.
The Company recognizes constructive obligations from past practices. Such constructive
obligations are associated with service time the employee has worked for the Company. The
payment of this benefit is disbursed in a single installment at the time the employee
voluntarily stops working for the Company. As of 2021 this constructive obligation no longer
exists, the accounting effect is recognized net in the result of the year.
The plans in Mexico expose the Company to actuarial risks such as interest rate risk, longevity
risk and salary risk:
Interest risk
Longevity risk
Salary risk
71
A decrease in the interest rate for the governmental bonds will
increase the plan’s liability.
The present value of the defined benefit plan liability is
calculated by reference to the best estimate of the mortality of
plan participants both during and after their employment. An
increase in the life expectancy of the plan participants will
increase the plan’s liability.
The present value of the defined benefit plan liability is
calculated by reference to the future salaries of plan participants.
As such, an increase in the salary of the plan participants will
increase the plan’s liability.
The projected net liability presented on the consolidated statements of financial position is as
follows:
Present value of unfunded obligations
Present value of funded obligations
Total present value of benefit obligations
(“PBO”)
Plan assets at fair value
Projected liability, net
i. Composition and return of plan assets
2021
656,252
121,643
December 31,
2020
592,294
163,651
$
2019
487,810
148,392
777,895
(121,643)
656,252
$
755,945
636,202
(163,651) (148,392)
487,810
592,294
Actual return of the plan assets
2021
2020
2019
Composition of the plan
assets
2020
2019
2021
5.90%
11.28%
12.67%
58%
63%
62%
21.55%
9.47%
15.65%
42%
100%
37%
100%
38%
100%
Fixed income
securities
Variable income
securities
Total
ii. Movements in the present value of PBO
PBO as of January 1
Benefits paid by the plan
Service cost
Interest cost
Actuarial losses recognized in other
comprehensive income
Past service cost – plan amendments
PBO as of December 31
2021
755,945
(27,743)
25,890
33,115
6,497
(15,809)
777,895
2020
636,202
(78,149)
38,987
53,343
2019
500,072
(54,932)
30,108
50,421
105,562
-
110,533
-
755,945
636,202
$
$
72
iii. Movements in the fair value of plan assets
Plan assets at fair value as of January 1
Transfer of assets to fund defined
contribution benefit plan
Benefits paid by the plan
Expected return on plan assets
Actuarial profits in other comprehensive
income
Fair value of plan assets as of December 31
$
iv. Expense recognized in profit and loss
2021
163,651
2020
148,392
$
-
(56,287)
13,260
-
-
13,678
1,019
121,643
1,581
163,651
2019
197,247
(39,079)
(32,027)
19,615
2,636
148,392
Current service cost
Interest cost, net
2021
2020
2019
$
$
25,890
19,855
45,745
38,987
39,665
78,652
30,108
30,806
60,914
v. Actuarial gains and (losses)
Amount accumulated as of January, 1
Recognized during the year
Amount accumulated as of December,
31
$
$
2021
(383,126)
(5,478)
2020
(279,144)
(103,982)
2019
(171,247)
(107,897)
(388,604)
(383,126)
(279,144)
vi. Actuarial assumptions
Primary actuarial assumptions at the consolidated financial statements date (expressed as
weighted averages) are as follows.
Discount rate as of December, 31
Rate for future salary increases
Social security wage increase rate
2021
9.50%
4.50%
3.50%
2020
7.75%
4.50%
3.50%
2019
8.75%
4.50%
3.50%
The assumptions related to mortality are based on statistics and experiences over the Mexican
population. The average expected life of an individual that retires at 65 years of age is 17.13
years for men and 10.92 years for women (Experience Chart of Demographic Mortality for
Active EMSSA 1997).
73
vii. Historical information
Present value of defined benefit obligation
Plan assets at fair value
Plan deficit
$
Experience adjustments arising from plan liabilities $
$
Experience adjustments arising from plan assets
$
2021
777,895
(121,643)
656,252
(6,497)
1,019
December 31,
2020
755,945
(163,651)
592,294
(105,562)
1,581
2019
636,202
(148,392)
487,810
(110,533)
2,636
viii.Sensitivity analysis of the defined benefits obligations as of December 31, 2021, 2020 and
2019
2021
Discount rate 9.50%
Rate increase (+ 1%)
Rate decrease (- 1%)
2020
Discount rate 7.75%
Rate increase (+ 1%)
Rate decrease (- 1%)
2019
Discount rate 8.75%
Rate increase (+ 1%)
Rate decrease (- 1%)
Pension
plan
Seniority
premium
Constructive
obligation
Total
PBO
$ (551,682)
$ (541,855)
$ (561,819)
(226,213)
(222,957)
(229,562)
-
-
-
(777,895)
(764,812)
(791,381)
Pension
plan
Seniority
premium
Constructive
obligation
Total
PBO
$ (531,251)
$ (511,884)
$ (554,180)
(203,282)
(200,058)
(206,605)
(21,412)
(21,209)
(21,619)
(755,945)
(733,151)
(782,404)
Pension
plan
Seniority
premium
Constructive
obligation
Total
PBO
$ (442,133)
$ (434,134)
$ (450,391)
(173,401)
(170,812)
(176,067)
(20,668)
(20,490)
(20,852)
(636,202)
(625,436)
(647,310)
ix. Expected cash flows
Total
2022-2031 $
776,766
x. Future contributions to the defined benefits plan
The Company does not expect to make contributions to the defined benefit plans in the
following financial year.
74
b) Foreign employee benefits
Defined contribution plans
Bachoco USA, LLC. (foreign subsidiary) has a defined contribution retirement 401(k) plan,
covering all employees who meet certain eligibility requirements. The Company contributes to
the plan at the rate of 50% of employee’s contributions up to a maximum of 2% of the
individual employee’s contribution. The cumulative contribution expense for this plan was
$28,825, $16,418 and $14,919 for the year ended December 31, 2021, 2020 and 2019,
respectively.
Equity-based compensation
Bachoco USA, LLC. has a deferred payment agreement with certain key employees. Amounts
payable under this plan are vested after 10 years from the date of the agreement. The benefit
value of each unit is equal to the increase in the initial book value from the date of the
agreement to the conclusion of the vesting period. Under the agreement, 26,000 units were
outstanding as of December 31, 2021, 2020 and 2019, all of which were fully vested. The total
liability under this plan totaled $48,887, $44,994 and $32,874 as of December 31, 2021, 2020
and 2019, respectively. The expense recognized for this plan for the year ended December 31,
2021, 2020 and 2019 was $2,505, $4,678 and $1,772, respectively.
c)
PTU
Industrias Bachoco, S.A.B de C.V. has no employees. Each of the subsidiaries of the
Company that has employees in Mexico is required under Mexican laws to pay employees, in
addition to their payment and benefits, statutory employee profit sharing in an aggregate
amount equal to 10% of each subsidiary’s taxable income. The accrued liability as of
December 31, 2021, 2020 and 2019 is shown in note 19, Trade payable and other accounts
payable.
(23) Costs and expenses by nature
Cost of sales
General, selling and administrative
expenses
Inventory consumption
Wages and salaries
Freight
Maintenance
Other utility expenses
Depreciation
Depreciation of right-of-use assets
Leases (1)
Other
Total
2021
68,356,654
2020
57,707,566
2019
51,557,351
7,127,780
75,484,434
6,420,397
64,127,963
6,116,620
57,673,971
54,103,917
9,735,452
5,428,050
2,340,899
1,800,952
1,393,097
343,367
156,612
182,088
75,484,434
44,747,933
8,507,124
5,037,768
2,006,848
1,402,459
1,590,303
307,757
119,592
408,179
64,127,963
39,823,395
7,561,229
5,047,007
1,715,820
1,595,993
1,265,391
302,804
96,825
265,507
57,673,971
$
$
$
$
(1)
Leasing expense in 2021, 2020 and 2019 includes contracts classified as low value or those with terms less
than twelve months.
75
(24) Leases
a) As of December 31, 2021, 2020 and 2019, the leased assets with recognized right of use
are comprised as follows:
Right-of-use
assets
Buildings and
construction
Machinery and
equipment
Transportation
equipment
Computer
equipment
Total
Depreciation of
right-of-use
assets
Buildings and
construction
Machinery and
equipment
Transportation
equipment
Computer
equipment
Total
Total right-
of-use assets
$
$
Right-of-use assets
Balance as of
January 1,
2021
Additions
Modifications
and disposal
Anticipated
termination
Balance as of
December 31,
2021
$
469,387
42,249
(3,949)
43,145
550,832
447,424
52,143
4,343
125,251
629,161
349,208
24,595
(1,818)
68,132
440,117
19,392
1,285,411
$
3,603
122,590
(1,492)
(2,916)
(2,600)
233,928
18,903
1,639,013
Balance as of
January 1, 2021
Depreciation
for the year
Currency
translation effect
Balance as of
December 31,
2021
$
(153,987)
(114,957)
(1,632)
(270,576)
(236,330)
(121,266)
(2,222)
(359,818)
(206,627)
(102,245)
(6,186)
(315,058)
(9,622)
(4,899)
(606,566)
(343,367)
1,170
(8,870)
678,845
(13,351)
(958,803)
680,210
Balance as
of January
1, 2020
Additions
Modifications
and disposal
Balance as of
December 31,
2020
Buildings and
construction
Machinery and equipment
Transportation equipment
Computer equipment
Total
$
$
380,011
447,179
283,332
15,014
1,125,536
101,272
39,020
4,767
2,572
147,631
(11,896)
(38,775)
61,109
1,806
12,244
469,387
447,424
349,208
19,392
1,285,411
76
Depreciation of right-of-
use assets
Buildings and
construction
$
Machinery and equipment
Transportation equipment
Computer equipment
Total
Total right-of-use
assets
$
$
Balance as
of January
1, 2020
Depreciation
for the year
Currency
translation
effect
Balance as of
December 31,
2020
(97,736)
(116,391)
(84,120)
(4,557)
(302,804)
822,732
(58,148)
(119,740)
(126,211)
(3,658)
(307,757)
1,897
(199)
3,704
(1,407)
3,995
(153,987)
(236,330)
(206,627)
(9,622)
(606,566)
678,845
Right-of-use assets
Balance as of
January 1
Additions
Buildings and construction $
Machinery and equipment
Transportation equipment
Computer equipment
Total
$
320,528
370,410
219,132
12,340
922,410
59,483
76,769
64,200
2,674
203,126
Depreciation of right-of-use assets
Buildings and construction
Machinery and equipment
Transportation equipment
Computer equipment
Total
Total right-of-use assets
Balance as of
December 31,
2019
380,011
447,179
283,332
15,014
1,125,536
Balance as of
December 31,
2019
$
$
$
(97,736)
(116,391)
(84,120)
(4,557)
(302,804)
822,732
b)
The movements in liabilities for these lease contracts were as follows:
Lease
liabilities
Balance as
of January
1, 2021
Additions
Modifications
and disposals
Anticipated
termination
Payment
Interest
paid
Currency
translation
effect
Balance as of
December
31, 2021
$
Buildings and
construction
Machinery and
equipment
Transportation
equipment
Computer
equipment
Total
Current Lease
liabilities
Long term
lease liabilities $
$
310,014
42,249
(3,953)
77,022
(129,306)
15,414
(11,806)
299,634
238,650
52,143
4,359
105,831
(128,212)
11,779
(33,421)
251,129
162,392
24,595
(1,835)
20,287
(96,167)
4,415
(19,966)
93,721
8,655
719,711
3,603
122,590
-
(1,429)
919
204,059
(5,302)
(358,987)
240
31,848
(1,119)
(66,312)
6,996
651,480
(278,981)
-
-
-
-
-
(828)
(279,809)
440,730
122,590
(1,429)
204,059
(358,987)
31,848
(67,140)
371,671
77
Lease liabilities
Buildings and
construction
Machinery and
equipment
Transportation
equipment
Computer equipment
Total
Current Lease
liabilities
Long term lease
liabilities
Balance as
of January
1, 2020
Additions
Modifications
and disposals
Payment
Interest
paid
Currency
translation
effect
Balance as of
December 31,
2020
$
280,277
101,272
31,213
(121,909)
17,903
1,258
310,014
308,710
39,020
(19,990)
(143,240)
26,143
28,007
238,650
204,258
9,805
803,050
4,767
2,572
147,631
$
57,473
1,560
70,256
(115,851)
(5,710)
(386,710)
9,228
365
53,639
2,517
63
31,845
162,392
8,655
719,711
(149,538)
(123,276)
-
-
-
(6,167)
(278,981)
$
653,512
24,355
70,256
(386,710)
53,639
25,678
440,730
Lease liabilities
Buildings and
construction
Machinery and equipment
Transportation equipment
Computer equipment
Total
$
$
Current Lease liabilities
Long term lease liabilities $
Balance as of
January 1,
2019
Additions Payment
Interest
paid
Currency
translation
effect
Balance as
of December
31, 2019
320,528
370,410
219,132
12,340
922,410
-
-
59,297 (113,097)
63,662 (124,435)
(82,381)
64,129
(5,294)
2,674
189,762 (325,207)
-
-
-
-
17,423
11,933
8,070
371
37,797
-
-
(3,874)
(12,860)
(4,692)
(286)
(21,712)
-
-
280,277
308,710
204,258
9,805
803,050
(149,538)
653,512
c)
The detail of the maturity of the long-term lease liabilities is shown below:
2023
2024
2025
Subsequent
$
$
213,141
78,918
32,571
47,041
371,671
d) During 2021, 2020 and 2019, an amount of $37,996, $36,153 and $19,116 was charged
as expense for rental contracts with a term of less than one year and $118,616, $83,439 and
$77,709 for rental contracts with insignificant amounts, a total of $156,612, $119,592 and
$96,825, respectively (note 23).
(25) Stockholders’ equity and reserves
a) Capital risk management
An adequate capital risk management allows ongoing business continuity and the
maximization of the return towards the Company’s investors, which is why the Company has
taken actions that ensure the Company maintains an adequate balance of the funding sources
that build its capital structure.
Within its activities in risk management, the Company ensures that the ratio between financial
debt and EBITDA of the last 12 months does not exceed 2.75 times and that the interest
coverage ratio is at least 3 to 1.
78
During 2021, 2020 and 2019 these ratios were below the thresholds established by the
Company’s Risk Committee.
b) Common stock and premiums
As of December 31, 2021, 2020 and 2019, the Company’s capital stock is represented by
600,000,000 Series “B” registered shares with a par value of $1 peso per share.
The Robinson Bours family owned 439,500,000 shares through two family trusts: the
placement trust and the control trust, which collectively represented 73.25% of the Company’s
total shares. The remaining 26.75% represents the floating position:
Shareholding integration
as of December 31, 2021,
2020 and 2019
Shares (1)
Position
439,500,000 73.25%
312,000,000 52.00%
127,500,000 21.25%
160,500,000 26.75%
Familiar Trusts
- Control Trust
- Placement Trust
Floating Position (2)
(1) All Series B shares with voting power.
(2) Operating at the BMV and the NYSE.
Based on the information provided to the Company, as of December 31, 2021, stockholders
with 1% or more interest in the Company, in addition to the family trusts, are as follows:
GBM Fondo de Inversión Total, S.A. de C.V.
Norges Bank Investment Management (Norway)
Renaissance Technologies LLC
Tweedy, Browne Company LLC
Shares
12,908,807
8,488,994
7,749,588
6,736,874
Position
2.15%
1.41%
1.29%
1.12%
c) Other comprehensive income items
i. Foreign currency translation reserve
This concept is related to the translation of the Company’s U.S. operations from their
functional currency (U.S. dollar) to the reporting currency, the Mexican peso.
ii. Actuarial remeasurements
Actuarial remeasurements are recognized as other components of comprehensive income and
are related to variations in actuarial assumptions that generate actuarial gains or losses as well
as adjust the actual yields from plan assets from the net interest cost calculated over the net
defined benefits liability balance. Actuarial remeasurements are presented net of income tax
within other comprehensive income in the consolidated statement of changes in stockholders’
equity, the amount of these actuarial remeasurements net of taxes as of December 31, 2021,
2020 and 2019 amounts to $272,527, $268,692 and $195,905, which includes a deferred tax
effect of $116,074, $114,430 and $83,236, respectively.
79
iii. Derivatives classified as hedging instruments
Derivatives classified as hedging instruments, are a hedge of the exposure to the variability of
cash flows that is attributable to a particular risk associated with a recognized asset or liability
or a forecasted transaction that may affect the income statement.
A cash flow hedge, which meets all the hedging criteria, is accounted for as follows:
• A portion of the gain or loss of the hedging instrument that is determined to be effective is
recognized in other comprehensive income; and
• The ineffective portion of the gain or loss of the hedging instrument is recognized
immediately in the income statement.
The amount of cash flow hedges as of December 31, 2021, 2020 and 2019 amounts to
$49,751, $267,352 and $ 19,771, respectively.
d) Reserve for repurchase of shares
In 1998, the Company approved a stock repurchase plan in conformity with the Mexican
Securities Trading Act and created a reserve for that purpose of $180,000 charged to retained
earnings in such year.
On April 28, 2021, pursuant to a resolution at the General Ordinary Stockholders’ Meeting, an
amount of $1,224,000 was approved to be used in the reserve for acquisition own shares.
The following table shows the movements of the reserve for acquisition of shares during the
years ended December 31, 2021, 2020 and 2019:
Balance as of January 1
(+) Total shares purchased
(-) Total shares sold
Balance as of December 31
2021
152,768
649,543
(182,768)
619,543
2020
100,396
212,860
(160,488)
152,768
2019
86,928
133,488
(120,020)
100,396
The net amount of repurchase and treasury share sale transactions was of ($32,331), ($3,509)
and ($1,474), during the years ended December 31, 2021, 2020 and 2019, respectively.
As of December 31, 2021, the Company has 619,543 treasury shares.
e) Dividends
During the years ended December 31, 2021, 2020 and 2019, the Company has declared and
paid the following dividends:
On April 28, 2021, the Company declared a payment of dividends in cash at nominal value of
$851,619 or $1.42 pesos per outstanding share. The payment was made in two equal
installments, on May 19 and July 14, 2021.
On April 22, 2020, the Company declared a payment of dividends in cash at nominal value of
$791,744 or $1.32 pesos per outstanding share. The payment was made in two equal
installments, on May 12 and July 7, 2020.
80
On April 24, 2019, the Company declared a payment of dividends in cash at nominal value of
$840,000 or $1.40 pesos per outstanding share. The payment was made in two equal
installments, on May 14 and July 9, 2019.
Dividends that the Company pays to stockholders are subject to ISR solely insofar as such
dividends exceed the balance in its net tax income account (“CUFIN”) consisting of income in
which ISR is already paid by the Company. The ISR paid on dividends corresponds to a tax
payable by legal entities and not by individuals. However, as a result of changes to the income
tax law described in note 20(a), beginning on January 1, 2014, a new withholding tax of 10%
for resident individuals in Mexico and for all residents in foreign countries who receive
dividends from entities was established. Such tax is considered a withholding tax by the entity
that pays the dividends. This tax will be applicable only to the income generated from period
2014. Thus, the Company must update its CUFIN from income generated up to December 31,
2013 and must calculate a new CUFIN with the income generated from January 1, 2014.
The Company obtains most of its revenue and net income from BSACV. For fiscal years 2021,
2020 and 2019, net income of BSACV, accounted for 63%, 61% and 63%, respectively, of
consolidated net income. Dividends for which BSACV pays ISR will be credited to the
Company’s CUFIN account, and accordingly, any future liabilities arising from ISR will be
incurred when such amounts are distributed as dividends to the stockholders.
f)
Tax balances of stockholders’ equity
CUFIN
IBSA individual
IBSA Consolidated
$
Balance as
2013
5,858,638
6,189,929
Balance
from2014
Total
11,676,526
26,957,219
17,535,164
33,147,148
The restated amount as of December 31, 2021, on tax bases of the contributions made by
stockholders (“CUCA”), totaling $3,382,568, may be refunded to them tax-free, to the extent
that such amount is the same or higher than equity.
(26) Earnings per share
The basic and diluted earnings per share for the years ended December 31, 2021, 2020 and
2019 are $8.45, $6.56 and $5.37, respectively. The calculation of earnings per share was based
on income attributable to ordinary stockholders of the Company (net income attributable to
controlling interest) $5,065,554, $3,935,672 and $3,219,931 for the years ended December 31,
2021, 2020 and 2019, respectively.
The average weighted number of common outstanding in 2021, 2020 and 2019 was
599,730,270, 599,818,022 and 599,971,832 shares, respectively.
The Company has no ordinary shares with potential dilutive effects.
81
(27) Commitments
• Bachoco USA, LLC has self-insurance programs for health care costs and workers’
payments. The subsidiary is liable for health care claims up to $7,179 (350 thousand
dollars) each year per plan participant and workers’ payments claims up to $20,510 (1,000
thousand dollars) per event. Self-insurance costs are recorded based on the aggregate of the
liability for reported claims and an estimated liability for claims incurred but not reported.
The provision for this concept is recorded in the accompanying consolidated statement of
financial position within current liabilities amounting to $107,842 (5,258 thousand dollars),
$89,576 (4,490 thousand dollars) and $81,737 (4,327 thousand dollars) as of December 31,
2021, 2020 and 2019, respectively. Additionally,
the consolidated statement of
comprehensive income includes expenses relating to self-insurance plans of $188,413
(9,286 thousand dollars), $164,356 (7,648 thousand dollars) and $126,376 (6,565 thousand
dollars) for the years ended December 31, 2021, 2020 and 2019, respectively. The
Company is required to maintain letters of credit on behalf of the subsidiary of $59,479
(2,900 thousand dollars) during 2021, $57,855 (2,900 thousand dollars) during 2020 and
$54,781 (2,900 thousand dollars) during 2019, to secure self-insured workers' payments.
• The Company has entered into grain supply agreements with third parties as part of the
regular course of its operations.
• The Company has entered into certain contracts with suppliers under which advanced
payments are rendered in order to assure the supply of materials and services.
(28) Contingencies
a)
Insurance
The Company has established a risk management program under a best practices methodology
that assures the main risks of the business with the objective of reducing losses due to relevant
claims. The Company set up a captive reinsurance company to complement its risk
management strategy. Notwithstanding the foregoing, since all the exposures are not covered,
there is a risk that the loss or destruction of certain assets may have a significant adverse effect
on the Company’s operations and financial situation.
b) Lawsuits
The Company is involved in a number of lawsuits and claims arising from the regular course
of business. In the opinion of the Company’s Management, they are not expected to have
significant effects on the Company’s financial position, operating results and future
consolidated statements of cash flows.
c) Tax contingencies
In accordance with tax laws, Mexican authorities are empowered to review transactions
carried out during the five years prior to the most recent ISR return filed. For the operations in
the United States of America, the authorities of that country are empowered to review
transactions carried out during the three years prior to the due date of the most recent annual
tax return. The Company has not identified factors that may indicate the existence of a
contingency.
82
(29) Financial income and costs
Interest income
Income from interest in accounts
receivable
Foreign exchange gain, net
Financial income
Effects of valuation of derivative financial
instruments
Foreign exchange loss, net
Interest expense and financial expenses on
2021
591,046
2020
698,962
2019
988,005
$
6,564
519,796
7,024
467,534
1,117,406 1,173,520
3,627
-
991,632
(1,541)
-
(291)
-
(8,029)
(272,220)
financial debt
Interest paid on lease
Other financial expenses
Financial costs
Financial income, net
(30) Other expenses
$
(104,179) (159,169) (250,820)
(37,797)
(31,848)
(129,955)
(41,502)
(267,523) (291,329) (610,368)
849,883
381,264
(53,639)
(78,230)
882,191
2021
2020
2019
Other income
Sale of scrap of biological assets, raw
materials, by-products and other
Bargain purchase gain of domestic
business acquisition (note 4)
Total other income
Other expenses
Cost of disposal of biological assets, raw
materials, by-products and other
Other
Total other expenses
Total other expenses, net
$
1,076,605
866,027
1,203,836
-
1,076,605
90,889
956,916
-
1,203,836
(910,366)
(489,018)
(1,399,384)
(322,779)
$
(825,415)
(494,028)
(1,319,443)
(362,527)
(944,848)
(263,722)
(1,208,570)
(4,734)
(31) Subsequent events
a) Business acquisition agreement
On January 24, 2022 the Company acquired 100% of the shares of RYC Alimentos “RYC”, it
is dedicated to multiprotein processing and marketing with production centers in the state of
Puebla, Mexico;
that was approved by Federal Economic Competition
Commission (COFECE, for its Spanish acronym). The purchase price was $1,251,516.
transaction
The agreement contemplates the acquisition of 2 plants located in Puebla, Puebla, as well as
its scheme of approximately 21 stores located in 4 states of the Mexican Republic (Puebla,
Oaxaca, Veracruz and Tlaxcala).
83
At the date of the consolidated financial statements, the Company is still in the process of
determining the fair value of the net assets acquired in accordance with the requirements of
IFRS 3.
b)
Intention to launch Tender Offer for Bachoco’s Shares
On March 25, 2022, the Company announces that a vehicle (the “Offeror”) in which current
shareholders of the Robinson Bours family participate, communicated to Bachoco’s Board of
Directors its intention to initiate the process to launch a voluntary tender offer for up to all of
the outstanding shares of Bachoco, including shares represented by American Depositary
Receipts (ADRs), which are not owned directly or indirectly by such shareholders or their
affiliates, representing approximately 27% of the outstanding capital of Bachoco.
The tender offer will be subject to various corporate and regulatory requirements, including
registration before the Mexican Securities, Exchange Commission, filing with the US
Securities and Exchange Commission and the authorization of the Board of Directors of
Bachoco. This offer, as of the date of these consolidated financial statements, has not started
and no formal document has been filed on it.
Subsequent to the tender offer closing, the offeror intends to delist the outstanding shares on
the markets where its shares are listed, including the New York Stock Exchange and the Bolsa
Mexicana de Valores, and to deregister the shares under the US Securities Exchange Act of
1934, as amended.
c) Russia-Ukraine conflict
On February 24, 2022, a large-scale military invasion of Ukraine by Russian troops was
reported. Although the duration and impact of the ongoing military conflict are highly
unpredictable, the conflict in Ukraine could lead to market disruptions, including significant
volatility in commodity prices, credit and capital markets, increased energy and other input
costs, and supply chain disruptions. We continue to monitor the situation in Ukraine and
globally and assess its potential impact on our business.