INDUSTRIAS
BACHOCO
WE ARE
Everyday by your side
Annual Report
2022
—
HIGHLIGHTS
INDEX
AUDIT AND CORPORATE
PRACTICES COMMITTEE
SENIOR MANAGEMENT
TEAM
OPINION OF THE AUDIT
COMMITTEE TO THE
BOARD OF DIRECTORS
SOCIAL
RESPONSIBILITY
HIGHLIGHTS TO
INVESTORS
CONSOLIDATED
FINANCIAL
STATEMENTS
BOARD OF
DIRECTORS
MESSAGE TO
SHAREHOLDERS
CEO’S
LETTER
REPORT FROM
THE BOARD OF
DIRECTORS
004
011
016
013
017
014
018
015
005
007
010
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Bachoco | Annual Report 2022
—02
The Company was founded in 1952 and became a public
company in 1997, via a public offering of shares on the Mexican
and the New York stock exchanges.
Bachoco is a vertically-integrated company with operations
in Mexico and the US with its headquarters located in Celaya,
Guanajuato, Mexico. Its main business lines are: chicken, table
eggs, balanced feed, pork, beef and turkey.
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 100 distribution centers.
At the date of this report The Company employs more than
34,000 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.
PROFILE
BACHOCO’S
—
—
Industrias Bachoco is leader in the
Mexican poultry industry and one of the
ten largest poultry producers globally.
Bachoco | Annual Report 2022
—03
Bachoco | Annual Report 2022
—04
HIGHLIGHTS
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
$ 5,068.7
864.1
429.8
522.7
$ 310.0
0.52
6.27
17.0%
8.5%
10.3%
6.1%
2022
In millions pesos
OPERATING DATA
2022
2021
2020
$ 98,890.7
16,857.9
8,385.9
10,198.6
6,047.8
10.20
122.41
17.0%
8.5%
10.3%
6.1%
81,699.1
13,342.4
5,891.9
7,355.7
4,934.1
8.45
101.36
16.3%
7.2%
9.0%
6.0%
68,792.0
11,084.4
4,301.5
6,036.7
3,972.1
6.56
78.74
16.1%
6.3%
8.8%
5.8%
1 One dollar equals to $19.51 pesos
In U.S. Dollars1
December 31,
$ 3,719.6
1,029.3
421.0
$ 1,008.1
60.6
455.5
154.3
$ 2,711.5
60.2
2,508.2
2022
In millions pesos
STATEMENT OF FINANCIAL DATA
2022
2021
2020
$ 72,568.8
20,080.9
8,214.1
$ 19,667.5
1,181.5
8,886.8
3,010.5
52,901.3
1,174.4
48,934.6
65,988.8
20,776.8
6,376.0
17,704.7
1,993.9
10,015.3
-
48,284.1
1,174.4
43,839.2
58,475.0
19,242.3
5,688.3
14,548.2
1,057.6
5,753.1
1,460.4
43,926.8
1,174.4
39,607.8
1 One dollar equals to $19.51 pesos
In U.S. Dollars1
December 31,
TOTAL ASSETS
Cash and cash equivalents
Inventories
TOTAL LIABILITIES
Notes payable to banks
Accounts payable
Long-term debt
TOTAL STOCKHOLDERS’ EQUITY
Capital stock
Retained earnings
SALES BY GEOGRAPHY
United States
26%
Mexico
74%
EMPLOYEES
34,098
32,058
29,780
2022
2021
2020
NET SALES
Chicken
80%
Egg
5%
Balanced Feed
5%
Others
10%
Report from the
Board of Directors
Audit and Corporate
Practices Committee
Opinion of the
Audit Committee
Highlights
Investors
Board of
Directors
Senior
Management
Team
Social
Responsibility
Consolidated
Financial
Statements
CEO’s
Letter
Message to
Shareholders
Highlights
Board of
Directors
Report from the
Board of Directors
Audit and Corporate
Practices Committee
Opinion of the
Audit Committee
Highlights
Investors
Senior
Management
Team
Social
Responsibility
Consolidated
Financial
Statements
CEO’s
Letter
Message to
Shareholders
Highlights
Dear Shareholders of Industrias Bachoco:
2022 was a year of overcoming challenges and delivering positive results. Like we
mentioned in our quarterly reports, prices for corn and soybean meal reported record
highs during most part of the year which had a significant negative impact in our cost of
sales across our operations. Nonetheless, Bachoco kept its commitment by delivering
high quality animal protein products to our customers who have always been key to our
Company´s success.
In that same line, we continued taking solid steps towards our growth strategy. In January
2022, we announced we concluded the purchase of 100% stock of RYC Alimentos. This
is a multiprotein meat processor and distributor with national coverage that participates
in all the distribution channels with fresh and value-added products of beef, pork and
chicken. This acquisition also allowed us to enter into the owned stores segment.
Moreover, we were able to integrate to our team RYC’s valuable talent who has been an
important piece towards capturing the synergies initially identified.
Also, in December 2022 we announced we reached an agreement to acquire Norson
Holding, a vertically integrated pork producer and exporter, with operations in Sonora,
Mexico. As of the date of this report, this transaction is being reviewed by Mexican
antitrust authorities (COFECE). We look forward to completing this process as soon as
possible as we consider it will be a perfect fit with our SASA and RYC operation.
SHAREHOLDERS
MESSAGE TO
—
—
Bachoco | Annual Report 2022
—05
As important as our financial results is
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.
As a result of the aforementioned, and by managing our sales mix, our total net sales grew by
21.0% compared to 2021 which allowed us to offset the 20% increase in cost of sales. Ultimately,
for 2022, we were able to achieve a double-digit EBITDA margin of 10.3%. Within the high end
of the last five years.
Despite the increase in working capital is mainly due to an increase on inventory, value
resulting from more expensive raw materials costs, our financial structure remained solid. We
ended 2022 with net cash of $15,888.8 million, which will allow us to continue with our growth
plans and at the same time, face the uncertainties and volatilities of the protein industry.
As important as our financial results is 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 was ranked as one of the most respected
CEOs in the country.
In order to reinforce our culture of ethics and integrity within the Company, in 2022 we revised
and updated our Code of Ethics. Particularly, we focused on the creation of a Human Rights
and Conflict of Interest Policies which will be deployed in 2023.
2022 not only brought positive results, but also brought some changes in our organization.
We said goodbye to our Purchasing Director, Mr. Alejandro Elias who retired during the year.
We also welcomed Ms. Stephanie Petite who is now the first woman to fill an Executive Officer
position in Bachoco. Also, Mr. Fernando Ramírez and Mr. James Young joined the Executive
team leading the positions of Commercial and Marketing Strategy Director and Bachoco OK
Foods CEO respectively. We are sure that each one of these members, in their own way, will
bring value to the Company and we wish them the best of success.
In that same line, on February of 2023, we announced that Bachoco’s CEO, Mr. Rodolfo Ramos,
would be retiring effective in April 2023. For him, I would like to reiterate my gratitude and
recognition for his hard and valuable work during the 43 years he was part of Bachoco’s team.
During that time, I had the opportunity to watch him grow not only professionally but as a natural
team leader.
Assuming the CEO role is Mr. Ernesto Salmon. I would like to welcome Mr. Salmón who has
been part of Bachoco’s team since 1991 and, most recently, held the position Mexico Operations
Director. Likewise, I am confident that with Ernesto’s expertise and drive, as well as the executive
team, the Company will continue to grow towards the business our family envisioned one day
when they dreamt about Bachoco back then in Obregon Sonora in 1952.
Javier Bours Castelo
Chairman of the Board of Director
Bachoco | Annual Report 2022
—06
Board of
Directors
Report from the
Board of Directors
Audit and Corporate
Practices Committee
Opinion of the
Audit Committee
Highlights
Investors
Senior
Management
Team
Social
Responsibility
Consolidated
Financial
Statements
CEO’s
Letter
Message to
Shareholders
Highlights
Bachoco | Informe Anual 2022
—07
Dear Shareholders:
All figures discussed below are information of 2022 with comparative figures of 2021. It was
prepared under IFRS accounting principles and is presented in millions of pesos unless otherwise
indicated.
In 2022 we started seeing macroeconomic improvements in some areas. In México, where more
than 70% of our net sales are generated, according to INEGI, the economy grew 3.1% and Mexican
peso appreciated by 4.9% vs the U.S. dollar by year-end. However, inflation rate was 7.82%
which is above the already high level reported in 2021 of 7.36%. Regarding the U.S. according
to information from the Federal Reserve, economy grew 0.9% and inflation rate remained at the
5.7% range reported in 2021.
According to the Mexican National Poultry Association estimates, in 2022, chicken produced
in Mexico is expected to grow around 2.7% while table eggs production showed an estimated
decrease of around 1.5%. Regarding the US poultry industry, according to the USDA, chicken
volume produced grew 2.9% in 2022, which is above its normalized growth rate. Per capita
consumption of chicken increased in both markets.
On the other hand, during the majority of 2022, we observed high prices for corn and soybean
meal both in U.S. dollars and Mexican peso terms, when compared to 2021 values. In this regard
we made important efforts on trying to offset that negative impact thru operational efficiencies
and sales mix.
LETTER
CEO’s
—
Board of
Directors
Report from the
Board of Directors
Audit and Corporate
Practices Committee
Opinion of the
Audit Committee
Highlights
Investors
Senior
Management
Team
Social
Responsibility
Consolidated
Financial
Statements
CEO’s
Letter
Message to
Shareholders
Highlights
Bachoco | Annual Report 2022
—08
2022 & 2021 RESULTS
Net sales in 2022 totaled $98,890.7 million, $17,191.6 million more or 21.0% increase
in net sales, when compared to $81,699.1 million reported in 2021. Sales from our
operation in the US represented 25.5% of total revenue, compared to the 24.9%
reported the previous year.
On the operating segment view, from the 21.0% increase compared to 2021, 9.6% comes
from Poultry in México; 6.0% comes from our U.S. operation and the remaining 5.5%
from our Others segment.
Volume from our Poultry segment showed a slight decrease vs 2021 both in México and
the U.S. following demand seasonality. Particularly in Mexico, we managed to improve
the value of our sales mix while transferring some of the increases of our cost of sales
to our net price. On the other hand, in the U.S. market, during most part of the year,
we observed high commodity prices mainly for breast meat, leg quarters and WOGS
following also the behavior of raw materials costs.
About our Others segment, in 2022, we consolidated the results from RYC alimentos. In
that regard, volume sold from total Others increased 8.2%. The majority of that growth
came from the mentioned integration.
Cost of sales totaled $82,032.8 million, 20.0% higher than the $68,356.7 million reported
in 2021. 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.
Despite the volatility of the commodity markets, our focus on efficiencies allowed us to
achieve a gross profit of $16,857.9 million, with a gross margin of 17.0%; higher than the
$13,342.4 million of gross profit and margin of 16.3% achieved in 2021.
Total SG&A in 2022 were $8,506.3 million, an increase of $1,378.5 million or 19.3%
compared to $7,127.8 million in 2021. SG&A as a percentage of net sales represented
8.6% in 2022 and 8.7% in 2021. This increase was mainly driven by items impacted by
high inflation rates both in Mexico and the U.S. such as fuel, energy and salaries.
In 2022, we had other income of $34.3 million, compared to other expenses of $322.8
reported in 2021.
Board of
Directors
Report from the
Board of Directors
Audit and Corporate
Practices Committee
Opinion of the
Audit Committee
Highlights
Investors
Senior
Management
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Social
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Financial
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Shareholders
Highlights
Bachoco | Annual Report 2022
—09
As a result, Operating income in 2022 was $8,385.9 million, a margin of 8.5%. This represents a 42.3% increase
compared to the $5,891.9 million and a margin of 7.2% achieved in 2021.
In 2022, we reached an EBITDA of $10,198.6 million, a margin of 10.3%, 38.7% higher when compared to the EBITDA
of $7,355.7 million obtained in 2021, with a margin of 9.0%.
In 2022 we reported net financial expenses of $301.7 million, compared with net financial income of $849.9 million
obtained in 2021.
Total taxes were $2,036.4 million. This includes $1,188.0 million for income tax and $848.4 million for deferred
taxes. This figure compares to total taxes of $1,807.6 million, which includes income taxes of $1,790.6 and $17.0
million of deferred taxes in 2021.
As a result, the profit for the year attributable to controlling interest in 2022 was $6,114.2 million, with a net margin
of 6.1%, which represents earnings per share of $10.20 pesos, compared to $5,065.6 million, 6.0% margin and $8.45
earnings per share achieved in 2021.
Cash and equivalents as of December 31, 2022, totaled $20,080.6 million, a decrease of $696.2 million vs the
$20,776.8 million reported as of December 31, 2021.
Total debt as of December 31, 2022, was $4,192.0 million, compared to total debt of $1,993.9 million reported as of
December 31, 2021. As a result, our net cash as of December 31, 2022 totaled $15,888.8 million, compared to the
net cash of $18,782.9 million as of December 31, 2021. An important part of that decrease was related to higher
inventories mainly as a result of the increase in raw materials value.
Capital investments in 2022 totaled $4,840.8 million, an increase of 39.1% compared to the $3,479.5 million
reported in 2021. In 2022, the company continued with the implementation of new projects oriented towards
organic growth and productivity improvements.
Rodolfo Ramos Arvizu
Chief Executive Officer
Board of
Directors
Report from the
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Investors
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CEO’s
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Shareholders
Highlights
This Board of Directors reviewed and approved the
Chief Executive Officer’s report which supports the
performance of management for fiscal year 2022, and
it was based on the independent auditor’s Opinion.
The Board believes that the CEO’s report was prepared
in accordance with the Financial Reporting Standards
and reflects the Company’s financial position and its
operating results.
We believe that the Company’s policies, accounting
and reporting principles followed are adequate and
consistent with the Audited Financial Statements.
This Board directed the Company to continue acting in
strict accordance with IFRS principals.
We determined that during year 2022, 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
FROM THE BOARD
OF DIRECTORS
REPORT
—
to take advantage of business opportunities
for themselves or in favor of third parties.
Lastly, the Board presented in the Annual
Ordinary Shareholders’ Meeting the report
of the Auditing and Corporate Practices
Committee, the Chief Executive Officer’s
report, the report on prompt compliance
with tax obligations, and the report on the
principal accounting and information policies
and criteria followed by the Company in the
preparation of its financial statements for
fiscal year 2022.
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:
Javier Bours Castelo
Chairman of the Board of Director
Bachoco | Annual Report 2022
—10
Board of
Directors
Report from the
Board of Directors
Audit and Corporate
Practices Committee
Opinion of the
Audit Committee
Highlights
Investors
Senior
Management
Team
Social
Responsibility
Consolidated
Financial
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CEO’s
Letter
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Shareholders
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ANNUAL REPORT OF THE PRESIDENT OF
THE AUDIT AND CORPORATE PRACTICES
COMMITTEE TO THE BOARD OF
DIRECTORS
—
AUDIT AND
CORPORATE
PRACTICES
COMMITTEE
Bachoco has an Audit and Corporate Practices
Committee to support the Board of Directors,
which is comprised of three Independent
Directors This Committee was last ratified on
the Annual and General Ordinary Shareholders´
Meeting on April 27, 2022.
_AUDIT COMMITTEE AND CORPORATE
PRACTICES MEMBERS
Guillermo Ochoa Maciel (President)
Humberto Schwarzbeck Noriega
Avelino Fernandez Salido
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 2023.
In the exercise of the Committee functions, and in attention of its responsibilities, the Committee
has counseled with the Chief Financial Officer, the Internal Audit Manager and the Chief Executive
Officer of the Society.
The resolutions adopted by the Audit Committee have been informed timely and submitted to the
consideration of the Board of Directors by means of the respective report submitted to this ultimate
superior social entity in the corresponding meetings. A file has been integrated from each meeting,
including the reports and other relevant documents.
_ Regarding Corporate Practices:
We concluded that the Officers performance was aligned with the Company’s objectives. We
reviewed the CEO and senior officers and compensation packages were granted. We verified that
there was no existence of any grant or exceptions to Directors, senior officers, or other employees
of the Company. In 2022, the total transactions in connection to related parties represented less
than 1.90% 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.
Bachoco | Annual Report 2022
—11
Board of
Directors
Report from the
Board of Directors
Audit and Corporate
Practices Committee
Opinion of the
Audit Committee
Highlights
Investors
Senior
Management
Team
Social
Responsibility
Consolidated
Financial
Statements
CEO’s
Letter
Message to
Shareholders
Highlights
_ Regarding Internal Audit Function:
The Audit and Corporate Practices Committee has remained involved with
the needs of the internal audit area to make sure they have the necessary
human and material resources for the suitable performance of its function.
The evaluations carried out by the Internal Audit, the external auditors, and
the General Director have been reviewed, and it is concluded that the internal
control processes provide reasonable security to prevent or detect errors
or material irregularities in the normal course of social operations, although
these processes are constantly improving and the corresponding revisions
continue.
_ Regarding Financial Information
The Financial Statements of the Company were discussed quarterly with
the executives responsible for their preparation and review, there were
no significant observations to the information presented. Before being
forwarded to the Mexican Stock and Exchange, the Financial Statements
were reviewed by the Committee for its approval or ratification by the Board
of Directors. In each quarterly Committee´s meeting, reports to the Stock
Exchange were analyzed and approved, having made the observations or
suggestions of the case and recommending to the Board of Directors its
approval (or ratification) in each case regarding its public disclosure. During
the period in question, Financial Statements corresponding to 2022 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 2022 were duly revised and
approved. The Audited Financial Statements as of December 31, 2022 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 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.
Bachoco | Annual Report 2022
—12
Board of
Directors
Report from the
Board of Directors
Audit and Corporate
Practices Committee
Opinion of the
Audit Committee
Highlights
Investors
Senior
Management
Team
Social
Responsibility
Consolidated
Financial
Statements
CEO’s
Letter
Message to
Shareholders
Highlights
After having listened and analyzed the CEO´s report for the fiscal year ended on December,
31, 2022, 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 2022.
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
2022, for its presentation to the Annual and General Ordinary Shareholder´s Meeting of
the Company.
—
OPINION OF THE AUDIT COMMITTEE TO THE
BOARD OF DIRECTORS ON THE ANNUAL
REPORT OF THE CHIEF EXECUTIVE OFFICER
Guillermo Ochoa Maciel
President of Bachoco´s Audit and Corporate Practices Committee
Bachoco | Annual Report 2022
—13
Board of
Directors
Report from the
Board of Directors
Audit and Corporate
Practices Committee
Opinion of the
Audit Committee
Highlights
Investors
Senior
Management
Team
Social
Responsibility
Consolidated
Financial
Statements
CEO’s
Letter
Message to
Shareholders
Highlights
Source: Yahoo Finance
Ticker symbol: Bachoco | In pesos per-Share
600 million shares
One single class (Class B)
Full rights
An ADR equals 12 shares
12.3% of float
An estimated $50,706 million pesos in
market capitalization
In 2022, the Company´s shares and ADRs reported increases
in yield of 16.26% on the BMV and of 19.86% on NYSE.
BACHOCO IN THE STOCKS
Control Trust with
52.0%
Underwriting
Trust with
21.3%
Edificios del
Noroeste, S.A. de C.V.
14.4%
86.31
78.00
82.40
92.44
98.16
LOW
AVERAGE
CLOSE
HIGH
64.93
67.16
58.76
65.38
63.50
76.29
72.97
69.22
80.46
88.29
84.51
72.69
74.85
81.43
64.52
2022
2021
2020
2019
2018
YEAR
Ticker symbol: IBA | In dollars per-ADR
The New York Stock Exchange
53.44
47.60
52.70
56.34
63.84
37.36
38.30
28.67
40.07
38.08
45.55
43.23
38.95
50.10
55.23
50.99
42.54
45.16
52.00
39.56
2022
2021
2020
2019
2018
Bachoco | Annual Report 2022
—14
HIGHLIGHTS
TO INVESTORS
SHARE PRICES
The founding
family holds
87.7%
of total shares:
Bolsa Mexicana de Valores
LOW
AVERAGE
CLOSE
HIGH
YEAR
Board of
Directors
Report from the
Board of Directors
Audit and Corporate
Practices Committee
Opinion of the
Audit Committee
Highlights
Investors
Senior
Management
Team
Social
Responsibility
Consolidated
Financial
Statements
CEO’s
Letter
Message to
Shareholders
Highlights
Board of
Directors
Report from the
Board of Directors
Audit and Corporate
Practices Committee
Opinion of the
Audit Committee
Highlights
Investors
Senior
Management
Team
Social
Responsibility
Consolidated
Financial
Statements
CEO’s
Letter
Message to
Shareholders
Highlights
_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
Bachoco’s Board of Directors is comprised of eight Proprietary Shareholder Directors,
four Alternate Shareholder Directors, and four Independent Proprietary Directors.
This board was last ratified on April 27, 2022. 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.
—
—
—
—
BOARD
OF DIRECTORS
Bachoco | Annual Report 2022
—15
MANAGEMENT
TEAM
SENIOR
—
Rodolfo Ramos Arvizu
Chief Executive Officer
Stephanie Petit
Director of Purchasing
Fernando Ramirez
Martin del Campo
Director of Commercial Strategy
Daniel Salazar Ferrer
Chief Financial Officer
Arturo Garcia Sanchez
Director of Human Resources
Ernesto Salmon Castelo
Director of Mexico Operations
James Young
Director of US Operations
Bachoco | Annual Report 2022
—16
Board of
Directors
Report from the
Board of Directors
Audit and Corporate
Practices Committee
Opinion of the
Audit Committee
Highlights
Investors
Senior
Management
Team
Social
Responsibility
Consolidated
Financial
Statements
CEO’s
Letter
Message to
Shareholders
Highlights
Report 2022
Bachoco
SUSTAINABILITY
—
Bachoco | Annual Report 2022
—17
Since its founding more than 70 years ago, at Bachoco, we are commited to
bring nutritious, healthy, and delicious food to the family table. Fulfilling this
promise and enhancing its scope has inspired us to continuously improve our
processes and develop sustainable strategies to create shared value with all our
stakeholders.
In 2022, we ranked 55 in the MERCO (Corporate
Reputation Business Monitor) Ranking of 100
Companies with the Best Corporate Reputation in
Mexico
We raised MXN 2,083,540 in the 2022 Edition of the
Bachoco Half Marathon
We Imparted 274,040 Hours of Workforce Training in 2022
80% of the Materials Used in our Packaging
Products are Recycled
_We Strengthen our Business
In order to meet our consumers’ and customers’ needs, we continually work on
improving the quality of the products we sell and diversifying our business portfolio,
thus fulfilling our promise to contribute to family health and nutrition.
As part of our efforts to strengthen our integrity and transparency culture, in 2022,
we created two fundamental policies to meet our objectives: the Conflicts of Interest
Policy and the Human Rights Policy, which will become efective in 2023.
_We Contribute to Our Community
We believe that we can make a profound change by working together. Hence, we
collaborate with civil organizations, companies and government agencies to implement
programs contributing to community development and well-being.
At Bachoco, we implement initiatives centered on addressing food shortages in Mexico,
as an example is the Bachoco’s Half Marathon. Through this marathon organized to
promote a social cause, we encourage physical activity and raise funds to rehabilitate,
adapt and build school and community kitchens.
_We Empower our People
Our employees’ talent and dedication to meeting our business objectives are one of
Bachoco’s key differentiators. As part of our commitment to our people, we work daily to
create initiatives that promote a positive and safe work environment where our employees
feel recognized and can develop their full potential.
Our training and development program offers options for employees to acquire valuable
information, update and certify their expertise, and sharpen their skills and knowledge. At
Bachoco, we have also implemented solid health and safety practices and protocols focused
on risk prevention in our operations centers.
_We Take Care of Our Planet
Caring for our planet has driven us to promote the development of projects with a
sustainable approach and to adopt green practices and technologies in our operations
that allow us to efficiently streamline our use of natural resources and improve our
environmental performance.
In all our farms, we work with experts who supervise our breeding practices to ensure
the animals’ full development and enjoyment of the five fundamental freedoms
throughout their lifetimes.
For additional information, please consult our full Sustainability Report, at the following:
https://en.bachoco.com/sustainability/
Board of
Directors
Report from the
Board of Directors
Audit and Corporate
Practices Committee
Opinion of the
Audit Committee
Highlights
Investors
Senior
Management
Team
Social
Responsibility
Consolidated
Financial
Statements
CEO’s
Letter
Message to
Shareholders
Highlights
Bachoco Annual Report 2022
18
CONSOLIDATED
FINANCIAL
STATEMENTS
—
_Report of Independent Auditors
_Consolidated Statements of Financial Position
_Consolidated Statements of Income and Others
Comprehensive Income
_Consolidated Statements of Changes in Stockholders Equity
_Consolidated Statements of Cash Flows
_ Notes to the Consolidated Financial Statements
Board of
Directors
Report from the
Board of Directors
Audit and Corporate
Practices Committee
Opinion of the
Audit Committee
Highlights
Investors
Senior
Management
Team
Social
Responsibility
Consolidated
Financial
Statements
CEO’s
Letter
Message to
Shareholders
Highlights
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, 2022, 2021 and 2020, 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, 2022, 2021 and 2020, 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.
Galaz, Yamazaki,
Ruiz Urquiza, S.C.
Av. Antea No. 1090 Piso 7
Edificio Business Park Torre 2
Col. Jurica
76100 Querétaro, Qro.
México
Tel: +52 (442) 238 2900
www.deloitte.com/mx
2
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 statements.
As of December 31, 2022, the carrying amount of the Entity’s’ goodwill was $2,627,663, of which
$1,146,143 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, 2022.
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 of the avian flu, 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.
4
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, actions
taken to eliminate threats or safeguards applied.
5
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 an affiliate of Deloitte Touche Tohmatsu Limited
L.C.C. Alberto Del Castillo Velasco Vilchis
April 24, 2023
Assets
Note
2022
2021
2020
Liabilities and equity
Note
2022
2021
2020
Current assets:
Current liabilities:
Cash and cash equivalents
7
$
18,698,892
19,136,443
17,286,374
Short-term debt
18
$
1,181,532
500,081
848,061
Investment in securities at fair value through profit or loss
8
206,737
10,841
1,018,322
Current portion of long-term debt
18
-
1,493,830
209,499
Investment in securities at fair value through other comprehensive income
8
1,143,994
1,559,823
937,715
Derivative financial instruments
8
-
-
194,181
Derivative financial instruments
8
31,264
69,862
-
Trade payable and other accounts payable
19
8,886,810
10,015,256
5,753,137
Accounts receivable, net
9
5,953,904
5,108,167
4,366,019
Lease liabilities
24
350,562
279,809
278,981
Due from related parties
20
637
291
686
Income tax payable
21
52,724
360,898
815,082
Inventories
10
8,214,122
6,375,990
5,688,338
Due to related parties
20
195,617
185,429
80,842
Current biological assets
11
3,377,910
2,769,612
2,012,668
Total current liabilities
10,667,245
12,835,303
8,179,783
Prepaid expenses and other current assets
12
2,349,582
2,757,123
1,221,255
Assets held for sale
13
56,754
57,436
54,630
Long term liabilities:
Total currents assets
40,033,796
37,845,588
32,586,007
Long-term debt, excluding current installments
18
3,010,483
0
1,460,405
Lease liabilities
24
219,023
371,671
440,730
Non-current assets:
Deferred income tax
21
4,883,507
3,841,475
3,874,980
Property, plant and equipment, net
14
24,578,494
21,763,402
19,733,822
Employee benefits
22
887,238
656,252
592,294
Right-of-use assets
24
602,386
680,210
678,845
Total long term liabilities
9,000,251
4,869,398
6,368,409
Non-current biological assets
11
2,661,991
2,358,137
1,991,530
Deferred income tax
21
458,114
213,739
261,934
Total liabilities
19,667,496
17,704,701
14,548,192
Goodwill
15
2,627,663
1,688,607
1,650,716
Intangible assets
16
589,715
704,374
753,224
Equity:
25
Other non-current assets
17
1,016,684
734,704
818,922
Capital stock
1,174,432
1,174,432
1,174,432
Total non-currents assets
32,535,047
28,143,173
25,888,993
Share premium
414,070
414,070
413,423
Reserve for repurchase of shares
1,224,000
1,199,423
1,266,469
Retained earnings
48,934,600
43,839,229
39,607,821
Effects of derivatives classified as hedging instruments
(174,911)
(49,751)
(267,352)
Foreign currency translation reserve
1,283,999
1,501,440
1,391,534
Actuarial remeasurements, net
22, 25
(364,344)
(272,527)
(268,692)
Equity attributable to controlling interest
52,491,846
47,806,316
43,317,635
Non-controlling interest
409,501
477,744
609,173
Total equity
52,901,347
48,284,060
43,926,808
Commitments
27
Contingencies
28
Susequent events
31
Total assets
$
72,568,843
65,988,761
58,475,000
Total liabilities and equity
$
72,568,843
65,988,761
58,475,000
See accompanying notes to consolidated financial statements.
INDUSTRIAS BACHOCO, S.A.B. DE C.V. AND SUBSIDIARIES
Consolidated Statements of Financial Position
December 31, 2022, 2021 and 2020
(Thousands of pesos)
2022
2021
2020
Note
Net revenues
$
98,890,655
81,699,068
68,792,002
Cost of sales
23
(82,032,790)
(68,356,654)
(57,707,566)
Gross profit
16,857,865
13,342,414
11,084,436
General, selling and administrative expenses
23
(8,506,312)
(7,127,780)
(6,420,397)
Other income (expenses), net
30
34,342
(322,779)
(362,527)
Operating income
8,385,895
5,891,855
4,301,512
Finance income
29
859,189
1,117,406
1,173,520
Finance costs
29
(1,160,915)
(267,523)
(291,329)
Finance (costs) income, net
(301,726)
849,883
882,191
Profit before income taxes
8,084,169
6,741,738
5,183,703
Income taxes
21
2,036,377
1,807,638
1,211,611
Profit for the year
$
6,047,792
4,934,100
3,972,092
Other comprehensive (loss) income items:
Items that may be reclassified subsequently to profit or loss:
Currency translation effect
$
(217,441)
109,906
317,609
Net effects of derivatives classified as hedging instruments
(125,160)
217,601
(247,581)
Items that will not be reclassified subsequently to profit or loss:
Actuarial remeasurements
22
(131,167)
(5,478)
(103,982)
Income taxes related to actuarial remeasurements
39,350
1,643
31,195
Other comprehensive income
(434,418)
323,672
(2,759)
Comprehensive income for the year
$
5,613,374
5,257,772
3,969,333
Profit attributable to:
Controlling interest
26
$
6,114,154
5,065,554
3,935,672
Non-controlling interest
(66,362)
131,454
-
36,420
Profit for the year
$
6,047,792
4,934,100
3,972,092
Comprehensive income attributable to:
Controlling interest
$
5,679,736
5,389,226
3,932,913
Non-controlling interest
(66,362)
131,454
-
36,420
Comprehensive income for the year
$
5,613,374
5,257,772
3,969,333
Weighted average outstanding shares
26
599,380,457
599,730,270
599,818,022
Basic and diluted earnings per share
26
$
10.20
8.45
6.56
See accompanying notes to consolidated financial statements.
INDUSTRIAS BACHOCO, S.A.B. DE C.V. AND SUBSIDIARIES
Consolidated Statements of Profit and Loss and Other Comprehensive Income
Years ended December 31, 2022, 2021 and 2020
(Thousands of pesos, except share and per share amount)
Reserve for
Foreign
Actuarial
Capital
Share
repurchase of
Retained
Effects of derivatives
currency
remeasurements
Non-controlling
Total
Note
stock
premium
shares
earnings
classified as hedging instruments
translation reserve
net
Total
interest
equity
Balance at January 1, 2020
$
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
Dividends paid
25
-
-
-
(791,744)
-
-
-
(791,744)
-
(791,744)
Dividends paid to non-controlling interest
-
-
-
-
-
-
-
-
(1,879)
(1,879)
Reserve for repurchase of shares
-
-
(39,482)
39,482
-
-
-
-
-
-
Repurchase and sale of shares
25
-
(1,093)
(2,416)
-
-
-
-
(3,509)
-
(3,509)
Increase in non-controlling interest in acquired business
4
-
-
-
-
-
-
-
-
494,272
494,272
Comprehensive income for the year:
Profit for the year
-
-
-
3,935,672
-
-
-
3,935,672
36,420
3,972,092
Other comprehensive income
-
-
-
-
(247,581)
317,609
(72,787)
(2,759)
-
(2,759)
Total comprehensive income for the year
-
-
-
3,935,672
(247,581)
317,609
(72,787)
3,932,913
36,420
3,969,333
Balance at December 31, 2020
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
Dividends paid
25
-
-
-
(851,619)
-
-
-
(851,619)
-
(851,619)
Dividends paid to non-controlling interest
-
-
-
-
-
-
-
-
(2,023)
(2,023)
Reserve for repurchase of shares
-
-
(34,068)
34,068
-
-
-
-
-
-
Repurchase and sale of shares
25
-
647
(32,978)
-
-
-
-
(32,331)
-
(32,331)
Other capital movements
5
-
-
-
(16,595)
-
-
-
(16,595)
-
(16,595)
Increase in non-controlling interest in acquired business
5
-
-
-
-
-
-
-
-
2,048
2,048
Comprehensive income for the year:
Profit for the year
-
-
-
5,065,554
-
-
-
5,065,554
(131,454)
4,934,100
Other comprehensive income
-
-
-
-
217,601
109,906
(3,835)
323,672
-
323,672
Total comprehensive income for the year
-
-
-
5,065,554
217,601
109,906
(3,835)
5,389,226
(131,454)
5,257,772
Balance at December 31, 2021
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
Dividends paid
25
-
-
-
(982,984)
-
-
-
(982,984)
-
(982,984)
Dividends paid to non-controlling interest
-
-
-
-
-
-
-
-
(1,881)
(1,881)
Reserve for repurchase of shares
-
-
24,577
(24,577)
-
-
-
-
-
-
Other capital movements
-
-
-
(11,222)
-
-
-
(11,222)
-
(11,222)
Comprehensive income for the year:
Profit for the year
-
-
-
6,114,154
-
-
-
6,114,154
(66,362)
6,047,792
Other comprehensive income
-
-
-
-
(125,160)
(217,441)
(91,817)
(434,418)
-
(434,418)
Total comprehensive income for the year
-
-
-
6,114,154
(125,160)
(217,441)
(91,817)
5,679,736
(66,362)
5,613,374
Balance at December 31, 2022
$
1,174,432
414,070
1,224,000
48,934,600
(174,911)
1,283,999
(364,344)
52,491,846
409,501
52,901,347
See accompanying notes to consolidated financial statements.
Capital stock
Retained earnings
Accumulated other comprehensive income
Attributable to controlling interest
INDUSTRIAS BACHOCO, S.A.B. DE C.V. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Years ended December 31, 2022, 2021 and 2020
(Thousands of pesos)
Note
2022
2021
2020
Cash flows from operating activities:
Profit for the year
$
6,047,792
4,934,100
3,972,092
Adjustments for:
Deferred income tax recognized in profit or loss
21
848,375
17,017
(109,443)
Current income tax recognized in profit or loss
21
1,188,002
1,790,621
1,321,054
Bargain purchase gain of domestic business acquisition
4
-
-
(90,889)
Depreciation and amortization
14
1,812,739
1,463,799
1,735,146
Depreciation of right-of-use assets
351,032
343,367
307,757
Intangible impairment loss
16
18,930
5,459
-
Loss of property, plant and equipment
28,977
95,341
12,987
Interest income earned
29
(859,189)
(597,610)
(705,986)
Interest expense and financial expense
29
524,942
265,982
291,038
Unrealized foreign exchange loss on loans
18,104
34,146
320,880
Subtotal
9,979,704
8,352,222
7,054,636
Derivative financial instruments
(86,562)
(46,442)
212,279
Accounts receivable, net
134,420
(811,965)
(335,742)
Due from related parties
(346)
395
12,988
Inventories
(1,553,220)
(685,817)
(850,655)
Current and non-current biological assets
(903,103)
(1,125,369)
(145,670)
Prepaid expenses and other current assets
429,632
(1,536,093)
32,866
Assets held for sale
682
(2,806)
(1,714)
Trade payable and other accounts payable
(1,763,906)
4,265,240
320,821
Due to related parties
10,188
104,587
4,138
Income taxes paid
(2,301,112)
(2,161,321)
(590,836)
Employee benefits
98,925
60,123
104,484
Net cash provided by operating activities
4,045,302
6,412,754
5,817,595
Cash flows from investing activities:
Payments for acquisition of property, plant and equipment
(4,496,985)
(3,479,493)
(2,346,415)
Proceeds from sale of property, plant and equipment
101,252
29,772
23,802
Investment in securities at fair value through profit or loss
(195,896)
1,007,481
(832,038)
Investment in securities at fair value through other comprehensive income
415,829
(622,108)
(621,954)
Other assets
(280,715)
84,080
(26,569)
Interest collected
859,189
597,610
705,986
Bussiness acquisition
4
(1,182,880)
-
-
Net cash used in investing activities
(4,780,206)
(2,382,658)
(3,097,188)
Cash flows from financing activities:
Payment for repurchase of shares
25
-
(46,392)
(15,594)
Proceeds from issuance of repurchased shares
25
-
14,061
12,085
Dividends paid
25
(982,984)
(851,619)
(791,744)
Dividends paid to non-controlling interest
(1,881)
(2,023)
(1,879)
Proceeds from borrowings
18
4,676,000
1,709,080
4,030,700
Principal payment on loans
18
(2,496,000)
(2,267,280)
(6,762,222)
Interest paid on lease
24
-
-
(53,639)
Interest paid
29
(502,673)
(234,134)
(237,399)
Payment of lease liability
24
(366,483)
(358,987)
(386,710)
Net cash provided by (used in) financing activities
325,979
(2,037,294)
(4,206,402)
Net (decrease) increase in cash and cash equivalents
(408,925)
1,992,802
(1,485,995)
Cash and cash equivalents at January 1
19,136,443
17,286,374
18,662,765
Effect of exchange rate fluctuations on cash and cash equivalents
(28,626)
(142,733)
109,604
Cash and cash equivalents at December 31
$
18,698,892
19,136,443
17,286,374
See 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, 2022, 2021 and 2020
(Thousands of pesos)
INDUSTRIAS BACHOCO, S.A.B. DE C.V. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Years ended December 31, 2022, 2021 and 2020
(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”/”IAS”), as issued by the International Accounting
Standard Board (“IASB”).
On April 24, 2023, 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.
Going concern
The consolidated financial statements have been prepared by Management assuming that the
Company will continue to operate as a going concern.
Convenience translation
The accompanying consolidated financial statements and its notes have been translated into
English for the convenience of readers.
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:
2
• 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
• 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 $19.51, $20.51 and $19.95 pesos to one U.S. dollar as of
December 31, 2022, 2021 and 2020, 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.
3
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.
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 5 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.
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.
6
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 which in the progressive reactivating economic and social activities.
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 2022, 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 $18,930 and $5,459, was recognized during 2022
and 2021, respectively, in the United States subsidiary, see note 16.
• 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 2022 there were no significant impacts,
during 2021, the Hotel sector improved, but without reaching pre-pandemic levels and
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 2022, 2021 and 2020 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, during
2020 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 2022 there were
no significant impacts, 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.
• Measurement at fair value - investments recognized at fair value consider all relevant
market factors for their proper valuation.
7
• 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.
The impact of COVID-19 on the Company's operational and financial performance during
2022 and 2021 improved compared to 2020. In addition, the Company continues with the
necessary measures to mitigate the residual risks caused by the pandemic.
In October 2022, the Company participated in the Opening Agreement Against Inflation and
High Costs (“APECIC” for its Spanish acronym) that was signed between the Federal
Executive and some companies, under which Bachoco assumed its commitment to maintain
prices of some of its basic basket products only in the self-service channel and until December
31, 2022, guaranteeing their health, safety and quality at all times.
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.
8
Due to the above in July 2021 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.
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, 2022, as it relates to its consolidated financial
statements.
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.
Its adoption has not had any material impact on the disclosures or on the amounts reported in
these consolidated financial statements.
Amendments to IAS 16 - Property, Plant and Equipment - Economic benefits before the
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.
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.
9
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.
Its adoption has not had any material impact on the disclosures or on the amounts reported in
these consolidated financial statements.
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 adoption of these amendments had no impact on the Company's consolidated financial
statements.
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).
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.
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.
10
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 adoption of these amendments had no impact on the Company's consolidated financial
statements.
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
associate or joint venture
Amendments to IAS 1
Classification of liabilities as current or non-current.
IFRS practice statements 2
Disclosure of accounting policies
Amendments to IAS 8
Definition of accounting estimates
Amendments to IAS 12
Deferred taxes related to assets and liabilities arising
from a single transaction.
Amendments to IAS 1
Classification of debt with covenants.
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.
In December 2021, the IASB issued Initial Application of IFRS 17 and IFRS 9 Comparative
Information (Amendments to IFRS 17) to address implementation challenges that were
identified after IAS 17 was published. The amendments address challenges in presenting
comparative information.
11
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.
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 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.
12
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 1 are effective for the annual periods beginning on January 1, 2022,
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.
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.
13
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:
• 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.
Amendments to IAS 1 Amendments to IAS 1 Classification of debt with covenants
The amendments modify the information that an entity provides when its right to defer
payment of a liability for at least twelve months is subject to compliance with agreements. The
modifications also responded to the concerns of interested parties about the classification of
such liability as current or non-current.
The amendments to IAS 1 are effective for the annual periods beginning on January 1, 2024.
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
14
The Company reassesses whether or not it controls an investee if facts and circumstances
indicate that there are changes to one or more of the three elements of control listed above.
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.
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.
15
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.
The Company applies accounting for business combinations using the predecessor method in
an entity under common control. The predecessor method consists of incorporating the book
values of the acquired entity, which includes the goodwill recorded at the consolidated level
with respect to the acquired entity. Any difference between the consideration paid by the
Company and the book value of the net assets acquired at the subsidiary level is recognized in
equity.
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.
16
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, 2022, 2021 and
2020 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.
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.
17
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.
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.
18
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.
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. 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.
19
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:
• 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.
20
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.
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 income (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.
21
Below are the estimated useful lives for 2022, 2021 and 2020:
Average
useful Life
Buildings
46
Machinery and Equipment
19
Vehicles
11
Computers
8
Furniture
11
The Company has estimated the following residual values as of December 31, 2022, 2021 and
2020:
Residual Value
Buildings
9%
Machinery and Equipment
8%
Vehicles
5%
Computers
0%
Furniture
2%
e)
Goodwill
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.
f)
Intangible assets
They are 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.
22
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.
Expected average useful life
(weeks)
Poultry in its different production stages
40-47
Breeder pigs
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.
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.
23
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.
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, processed pork,
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.
24
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.
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 losses on 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.
25
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.
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.
26
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.
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.
On December 27, 2022, the decree was published by means of which articles 76 and 78 of the
Federal Labor Law (“LFT” for its acronym in Spanish) for Mexico were amended, which will
take effect on January 1, 2023. The main changes caused by this labor reform consider the
increase in the minimum annual vacation period for workers who have more than one year of
service.
The Company evaluated the accounting impacts generated by this labor reform and
determined that the increases in the vacation and vacation premium provision, as a result of
the increase in vacation days, were not significant as of December 31, 2022.
iv. Termination benefits from constructive obligations
Until 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.
27
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.
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.
28
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.
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.
29
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.
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, 2022, 2021 and 2020, 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. ).
30
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
a)
Acquisition of RYC Alimentos, S.A. de C.V.
On June 24, 2022, the Company acquired 100.00% of voting stock of RYC Alimentos, S.A. de
C.V., which is dedicated to the processing and distribution of multiproteins with operations in
the states of Puebla, Oaxaca Veracruz and Tlaxcala, Mexico. The purchase price paid in cash
was $1,251,516.
The purchase of RYC Alimentos, S.A. de C.V. benefits the Company, within the “Other”
segment which as it will allow 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 RYC Alimentos, 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
RYC Alimentos, 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:
31
Acquisition value
Current assets, other than inventories
$
429,756
Inventories
265,188
Property, plant and equipment
343,841
Total assets
1,038,785
Current liabilities
(725,190)
Deferred income tax
(68,798)
Acquired net identifiable assets
244,797
Consideration paid
1,251,516
Goodwill (note 15)
$
(1,006,719)
Current assets are comprised of cash equivalents, accounts receivable and other current assets,
for $68,636, $188,224 and $172,896, respectively; and current liabilities are comprised of
trade payable and other accounts payable, and other liabilities for $588,889 and $136,301,
respectively.
Goodwill arises because the consideration transferred exceeds the fair value of the net assets
acquired and the liabilities assumed on the acquisition date.
If the acquisition had occurred on January 1, 2022, then consolidated revenues and
consolidated profits for the year ended December 31, 2022 would have totaled $98,890,655
and $6,047,792, respectively. When 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, 2022.
Costs related to acquisition.
During 2022 and 2021, the Company incurred costs related to the acquisition of RYC
Alimentos, S.A. de C.V. of $8,678 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.
b)
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.
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.
32
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:
Acquisition value
Current assets, other than inventories
$
349,834
Inventories
123,959
Property, plant and equipment
383,680
Total assets
857,473
Current liabilities
(263,365)
Deferred income tax
(35,916)
Acquired net identifiable assets
558,192
Controlling interest
305,889
Non-controlling interest
252,303
Consideration paid
215,000
Bargain purchase gain (note 30)
$
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.
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 income (expense), net (see note 30) in the consolidated
statement of profit or loss and other comprehensive income.
33
If the acquisition had 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. When 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, 2022, 2021 and 2020 are presented below:
Name
Shareholding percentage in subsidiaries
December 31,
Country
2021
2021
2020
Bachoco, S.A. de C.V.
Mexico
99.99
99.99
99.99
Bachoco USA, LLC. & Subsidiary
U.S.
100.00
100.00
100.00
Campi Alimentos, S.A. de C.V.
Mexico
99.99
99.99
99.99
Induba Pavos, S.A. de C.V.
Mexico
99.99
99.99
99.99
Bachoco Comercial, S.A. de C.V.
Mexico
99.99
99.99
99.99
PEC LAB, S.A. de C.V.
Mexico
64.00
64.00
64.00
Aviser, S.A. de C.V.
Mexico
-
-
99.99
Operadora de Servicios de Personal, S.A. de C.V.
Mexico
-
-
99.99
Secba, S.A. de C.V.
Mexico
-
-
99.99
Servicios de Personal Administrativo, S.A. de C.V.
Mexico
-
-
99.99
Sepetec, S.A. de C.V.
Mexico
-
-
99.99
Wii kit RE LTD.
Bermuda
100.00
100.00
100.00
Proveedora La Perla S.A. de C.V.
Mexico
100.00
100.00
100.00
Sonora Agropecuaria, S.A. de C.V.
Mexico
54.84
54.84
54.80
RYC Alimentos, S.A. de C.V.
Mexico
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).
- 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.
34
- 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.
- RYC Alimentos, S.A. de C.V. in Mexico, it is dedicated to the processing and distribution of
multi-proteins, mainly pork, beef and chicken.
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.
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.
35
a)
Operating segment information
Year ended December 31, 2022
Poultry
Other
Total
Net revenues
$
84,373,464
14,517,191
98,890,655
Cost of sales
69,183,402
12,849,388
82,032,790
Gross profit
15,190,062
1,667,803
16,857,865
Finance income
720,216
138,973
859,189
Finance costs
1,038,215
122,700
1,160,915
Income before taxes
7,476,958
607,211
8,084,169
Income taxes
1,877,563
158,814
2,036,377
Net income attributable to controlling interest
5,599,395
514,759
6,114,154
Property, plant and equipment, net
21,664,244
2,914,250
24,578,494
Non-current biological assets
2,549,763
112,228
2,661,991
Goodwill
1,532,929
1,094,734
2,627,663
Intangible assets
589,715
-
589,715
Total assets
61,325,726
11,243,117
72,568,843
Total liabilities
15,551,498
4,115,998
19,667,496
Purchases of property, plant and equipment
3,377,387
1,463,441
4,840,828
Depreciation and amortization
1,408,348
404,391
1,812,739
Depreciation of right-of-use assets
268,082
82,950
351,032
Intangible impairment loss
18,930
-
18,930
Poultry
revenues
Other revenues
Total
revenues
Total revenues
$
84,556,581
14,660,900
99,217,481
Intersegments
(183,118)
(143,708)
(326,826)
Net revenues
$
84,373,463
14,517,192
98,890,655
Year ended December 31, 2021
Poultry
Other
Total
Net revenues
$
71,647,726
10,051,342
81,699,068
Cost of sales
59,195,273
9,161,381
68,356,654
Gross profit
12,452,453
889,961
13,342,414
Finance income
879,142
238,264
1,117,406
Finance costs
214,780
52,743
267,523
Income before taxes
6,052,051
689,687
6,741,738
Income taxes
1,655,934
151,704
1,807,638
Net income attributable to controlling interest
4,394,865
670,689
5,065,554
Property, plant and equipment, net
19,943,697
1,819,705
21,763,402
Non-current biological assets
2,308,577
49,560
2,358,137
Goodwill
1,600,592
88,015
1,688,607
Intangible assets
704,374
-
704,374
Total assets
58,387,628
7,601,133
65,988,761
Total liabilities
16,592,293
1,112,408
17,704,701
Purchases of property, plant and equipment
3,298,794
180,699
3,479,493
Depreciation and amortization
1,306,665
157,133
1,463,798
Depreciation of right-of-use assets
331,127
12,240
343,367
Intangible impairment loss
5,459
-
5,459
36
Poultry
revenues
Other revenues
Total
revenues
Total revenues
$
71,660,739
10,090,925
81,751,664
Intersegments
(13,013)
(39,583)
(52,596)
Net revenues
$
71,647,726
10,051,342
81,699,068
Year ended December 31, 2020
Poultry
Other
Total
Net revenues
$
61,323,853
7,468,149
68,792,002
Cost of sales
51,165,650
6,541,916
57,707,566
Gross profit
10,158,203
926,233
11,084,436
Finance income
998,654
174,866
1,173,520
Finance costs
260,570
30,759
291,329
Income before taxes
4,626,582
557,121
5,183,703
Income taxes
1,060,876
150,735
1,211,611
Net income attributable to controlling interest
3,532,589
403,083
3,935,672
Property, plant and equipment, net
17,146,405
2,587,417
19,733,822
Goodwill
1,562,404
88,312
1,650,716
Intangible assets
753,224
-
753,224
Total assets
51,081,829
7,393,171
58,475,000
Total liabilities
13,144,941
1,403,251
14,548,192
Purchases of property, plant and equipment
1,978,818
773,463
2,752,281
Depreciation and amortization
1,542,031
193,115
1,735,146
Poultry
revenues
Other revenues
Total
revenues
Total revenues
$
61,332,013
7,506,962
68,838,975
Intersegments
(8,160)
(38,813)
(46,973)
Net revenues
$
61,323,853
7,468,149
68,792,002
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.
37
Year ended December 31, 2022
Domestic
poultry
Foreign
poultry
Operations
between
geographical
segments
Total
Net revenues
$
59,136,046 25,367,292
(129,874)
84,373,464
Non-current assets other than
financial instruments, deferred
tax assets, post-employment
benefit assets, and investments
in insurance policies:
Property, plant and equipment,
net
19,337,610
2,326,634
-
21,664,244
Non-current biological assets
1,557,757
992,006
2,549,763
Goodwill
212,833
1,320,096
-
1,532,929
Intangible assets
-
589,715
-
589,715
Year ended December 31, 2021
Domestic
poultry
Foreign
poultry
Operations
between
geographical
segments
Total
Net revenues
$
51,287,149 20,490,145
(129,567)
71,647,726
Non-current assets other than
financial instruments, deferred
tax assets, post-employment
benefit assets, and investments
in insurance policies:
Property, plant and equipment,
net
17,602,324
2,341,373
-
19,943,697
Non-current biological assets
1,420,262
888,315
-
2,308,577
Goodwill
212,833
1,387,759
-
1,600,592
Intangible assets
-
704,374
-
704,374
Year ended December 31, 2020
Domestic
poultry
Foreign
poultry
Operations
between
geographical
segments
Total
Net revenues
$
41,835,033 19,573,023
(84,203)
61,323,853
Non-current assets other than
financial instruments, deferred
tax assets, post-employment
benefit assets, and investments
in insurance policies:
Property, plant and equipment,
net
14,659,461
2,486,944
-
17,146,405
Non-current biological assets
1,185,308
806,222
-
1,991,530
Goodwill
212,536
1,349,868
-
1,562,404
Intangible assets
-
753,224
-
753,224
38
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 2022, 2021 and 2020, no
customer represented over 10% of the Company’s total revenues.
As of December 31, 2022, 2021 and 2020, 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, 2022, 2021 and
2020 are as follows:
December 31,
2022
2021
2020
Cash and banks
$
9,665,255
14,586,467
12,941,334
Investments with maturities less
than three months
9,001,025
4,519,265
4,305,998
18,666,280
19,105,732
17,247,332
Restricted cash
32,612
30,711
39,042
Total cash and cash equivalents
$
18,698,892
19,136,443
17,286,374
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, 2022, 2021 and 2020.
(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.
39
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, 2022, 2021 and 2020, the Company has not identified the existence of
embedded derivatives.
Some of the Company’s derivative financial instruments as of December 31, 2022, 2021 and
2020 meet the requirements to be treated as hedging instruments for accounting purposes
(188,296, 11,238 and 319,506 thousand U.S. dollars of notional amounts).
As of December 31, 2022 and 2021, 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:
December 31,
2022
2021
2020
Financial assets
Cash and cash equivalents
$ 18,698,892
19,136,443
17,286,374
Investment in securities at fair value
through profit or loss
206,737
10,841
1,018,322
Investment in securities at fair value
through other comprehensive income
1,143,994
1,559,823
937,715
Investments in life insurance
71,981
74,148
71,431
Trade receivables
3,781,629
3,102,203
2,704,058
Due from related parties
637
291
686
Other long-term receivables
207,314
211,278
193,689
Derivative financial instruments
31,264
69,862
-
Financial liabilities
Current and non-current financial debt
$ (4,192,015)
(1,993,911)
(2,517,965)
Trade payables, sundry creditors and
expenses payable
(7,055,762)
(8,977,051)
(5,049,103)
Current and non-current lease liabilities
(569,585)
(651,480)
(719,711)
Due to related parties
(195,617)
(185,429)
(80,842)
Derivative financial instruments
-
-
(194,181)
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.
40
The risk management process of credit risk contemplates the use of derivative financial
instruments and investments at fair value through profit and loss, 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”).
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 $159,613, $157,012 and $143,278 as of December 31, 2022,
2021 and 2020, 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.
41
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, 2022, 2021 and 2020, the fair value of such credit
enhancements, determined by an appraisal at the time the credit lines were granted, is
$667,322, $667,322 and $180,513, 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.
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:
December 31,
2022
2021
2020
Cash and cash equivalents
$
18,698,892
19,136,443
17,286,374
Investments in securities at fair value
through profit or loss
206,737
10,841
1,018,322
Investment in securities at fair value
through other comprehensive income
1,143,994
1,559,823
937,715
Investments in life insurance
71,981
74,148
71,431
Accounts receivable net of guarantees
received
3,322,258
2,646,450
2,717,920
Derivative financial instruments
31,264
69,862
-
$
23,475,126 23,497,567 22,031,762
c)
Liquidity risk
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.
42
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.
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
December 31, 2022
Less than 1
year
1 to 3 years
3 to 5 years
Trade payables, sundry creditors
and expenses payable
$
7,055,762
-
-
Due to related parties
195,617
-
-
Lease liabilities
350,562
178,171
40,852
Financial debt, maturities at
variable rates
In pesos
1,181,532
3,010,483
-
Interest
433,294
529,690
-
Total financial liabilities
$
9,216,767
3,718,344
40,852
December 31, 2021
Less than 1
year
1 to 3 years
3 to 5 years
Trade payables, sundry creditors
and expenses payable
$
8,977,051
-
-
Due to related parties
185,429
-
-
Lease liabilities
279,809
324,630
47,041
Financial debt, maturities at
variable rates
In pesos
1,993,911
-
-
Interest
85,854
-
-
Total financial liabilities
$
11,522,054
324,630
47,041
43
December 31, 2020
Less than 1
year
1 to 3 years
3 to 5 years
Trade payables, sundry creditors
and expenses payable
$
5,049,103
-
-
Due to related parties
80,842
-
-
Derivative financial instruments
194,181
-
-
Lease liabilities
278,981
379,926
60,804
Financial debt, maturities at
variable rates
In U.S. dollars
778,050
-
-
In pesos
279,510
1,460,405
-
Interest
85,340
44,613
-
Total financial liabilities
$
6,746,007
1,884,944
60,804
At least on a monthly basis, Management evaluates and advises the Board of Directors on its
liquidity. As of December 31, 2022, 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.
44
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 - 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 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 2022, 2021 and 2020 the Company did not participate in any program as buyer of the
corn and / or sorghum crops and did not receive any subsidy
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, 2022, 2021
and 2020, it has not entered into any derivative financial instrument or other agreement for
managing the risk related to a decrease in the chicken price.
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.
45
As of December 31, 2022, the Company has positions of derivative financial instruments on
exchange rate hedging (40,000 thousand dollars of notional), During 2021 and 2020, 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, 2022, 2021
and 2020.
December 31,
2022
2021
2020
Dollars
Mexican
Pesos
Dollars
Mexican
Pesos
Dollars
Mexican
Pesos
Assets
Cash and cash equivalents
$
557,318 10,873,274
466,221
9,562,193
479,325
9,562,534
Investment in securities at
fair value through profit
or loss
10,596
206,737
529
10,841
40,424
806,459
Investment in securities at
fair value through other
comprehensive income
58,636
1,143,994
76,052
1,559,823
47,003
937,715
Accounts receivable
3,820
74,528
3,572
73,268
2,683
53,517
Total assets
630,370 12,298,533
546,374
11,206,125
569,435 11,360,225
Liabilities
Trade accounts payable
(136,256) (2,658,358)
(277,467)
(5,690,856) (107,224) (2,139,115)
Financial debt
-
-
-
-
(39,000)
(778,050)
Lease liabilities
(6,362)
(124,128)
(7,854)
(161,088)
(6,558)
(130,828)
Total Liabilities
(142,618) (2,782,486) (285,321)
(5,851,944) (152,782) (3,047,993)
Net asset position
$
487,752
9,516,047
261,053
5,354,181
416,653
8,312,232
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
Spot exchange rate at
December 31,
2022
2021
2020
2022
2021
2020
Dollars
$
20.11
20.29
21.49
19.51
20.51
19.95
The exchange rate at the date of issuance of the consolidated financial statements is $17.99.
46
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
Carrying
amount
Fair
value
Carrying
amount
Fair
value
Carrying
amount
Fair
value
2022
2021
2020
Financial debt
$ 4,192,015 4,200,741
1,993,911 1,994,423
2,517,965 2,550,758
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:
47
Level 1
Level 2
Level 3
Total
As of December 31, 2022
Investment in securities at fair value through
profit or loss
$
206,737
-
-
206,737
Investment in securities at fair value through
other comprehensive income
1,143,994
-
-
1,143,994
Derivative financial instruments
-
31,264
-
31,264
$ 1,350,731
31,264
-
1,381,995
Level 1
Level 2
Level 3
Total
As of December 31, 2021
Investment in securities at fair value through
profit or loss
$
10,841
-
-
10,841
Investment in securities at fair value through
other comprehensive income
1,559,823
-
-
1,559,823
Derivative financial instruments
-
69,862
-
69,862
$ 1,570,664
69,862
-
1,640,526
Level 1
Level 2
Level 3
Total
As of December 31, 2020
Investment in securities at fair value through
profit or loss
$ 1,018,322
-
-
1,018,322
Investment in securities at fair value through
other comprehensive income
937,715
-
-
937,715
Derivative financial instruments
-
(194,181)
-
(194,181)
$ 1,956,037
(194,181)
-
1,761,856
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:
Level 1
Level 2
Level 3
Total
As of December 31, 2022
Financial debt - bank institutions
$
-
(1,187,098)
-
(1,187,098)
Financial debt – debt securities
(3,013,643)
-
-
(3,013,643)
$ (3,013,643) (1,187,098)
-
(4,200,741)
Level 1
Level 2
Level 3
Total
As of December 31, 2021
Financial debt - bank institutions
$
-
(500,246)
-
(500,246)
Financial debt – debt securities
(1,494,177)
-
-
(1,494,177)
$ (1,494,177)
(500,246)
-
(1,994,423)
Level 1
Level 2
Level 3
Total
As of December 31, 2020
Financial debt - bank institutions
$
-
(1,059,300)
-
(1,059,300)
Financial debt – debt securities
(1,491,458)
-
-
(1,491,458)
$ (1,491,458) (1,059,300)
-
(2,550,758)
48
g)
Quantitative sensitivity measurements
The following are sensitivity analysis for the most significant risks to which the Company is
exposed as of December 31, 2022, 2021 and 2020. 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, 2022, 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 2022,
2021 and 2020 would have resulted in a valuation gain of $695,381, $34,443 and $506,705 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 $277,292, $34,698 and $1,405,538.
The following table shows the Company’s sensitivity to an increase and decrease of 15% for
2022, 2021 and 2020 in the “bushel” price of corn and short ton price of soybeans.
Effect of Increase
Effect of Decrease
2022
2021
2020
2022
2021
2020
Loss (profit) for
the year
$ (427,646)
(37,847)
(87,711) $
148,512
20,919
(12,530)
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 2022, 2021 and 2020, in the variable rates to which the Company is exposed.
Effect of Increase
Effect of Decrease
2022
2021
2020
2022
2021
2020
Loss (profit) for the
year
$
20,960
8,291
13,390 $
(20,960)
(8,291)
(13,390)
iii. Exchange risk
As of December 31, 2022, 2021 and 2020, the Company's net monetary liability position in
foreign currency was $9,516,047, $5,354,181 and $8,312,232, respectively.
The following table shows the Company’s sensitivity of an increase and decrease of 30% for
2022, 2021 and 2020, in exchange rate, which would have an effect in the result from foreign
currency position.
Effect of Increase
Effect of Decrease
2022
2021
2020
2022
2021
2020
Loss (profit)
for the year $ (2,854,818)
(1,606,243)
(2,493,673) $ 2,854,818
1,606,243
2,493,673
49
(9)
Accounts receivable, net
As of December 31, 2022, 2021 and 2020, accounts receivable are as follows:
December 31,
2022
2021
2020
Trade receivables
$
3,836,040
3,162,920
2,772,418
Allowance for doubtful accounts
(54,411)
(60,717)
(68,360)
Income tax receivable
843,213
121,315
190,110
Recoverable value-added tax and
other recoverable taxes (1)
1,329,062
1,884,649
1,471,851
$
5,953,904
5,108,167
4,366,019
(1)
Includes the tax refund requested during 2022 in the United States of America for $483,400, with respect
to the Coronavirus Aid, Relief, and Economic Security Act (“CARES”), see note 21.
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:
December 31,
2022
2021
2020
Past due at 60 days
72,817
8,079
18,811
Past due by more than 60 days
14,938
8,443
98,054
$
87,755
16,522
116,865
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
2022
2021
2020
Balance as of January 1
$
(60,717)
(68,360)
(72,886)
Increase in allowance
(617)
(706)
(1,826)
Amounts written off
6,800
8,436
6,458
Currency translation effect
123
(87)
(106)
Balance as of December 31,
$
(54,411)
(60,717)
(68,360)
As of December 31, 2022, 2021 and 2020 the Company has receivables in legal proceedings
(receivables for which legal counsel is seeking recoverability) of $159,613, $157,012 and
$143,278, 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.
50
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.
The expected credit losses for 2022, 2021 and 2020 in trade accounts receivable under IFRS 9
Financial Instruments were estimated at $47,470, $37,249 and $25,962, 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 2022, 2021 and 2020, as described in the previous paragraph.
(10) Inventories
As of December 31, 2022, 2021 and 2020, inventories are as follows:
December 31,
2022
2021
2020
Raw materials and by-products
$
3,193,841
2,775,890
2,410,275
Medicine, materials and spare parts
1,600,533
1,344,944
1,110,559
Balanced feed
576,497
467,359
380,121
Processed chicken
2,324,794
1,552,946
1,575,985
Commercial eggs
61,833
63,764
55,364
Processed beef
150,505
167,582
151,402
Processed pork
262,570
-
-
Processed turkey
13,310
1,620
2,472
Other processed products
30,239
1,885
2,160
Total
$
8,214,122
6,375,990
5,688,338
Inventory consumption for the years ended December 31, 2022, 2021 and 2020 was
$64,998,326, $54,103,917 and $44,747,933, respectively (note 23).
The adjustment to the net realizable value of certain inventories during 2022, 2021 and 2020
was for $61,175, $39,975 and $57,074, respectively.
51
(11) Biological assets
For the years ended December 31, 2022, 2021 and 2020, biological assets are as follows:
Current
biological
assets
Non-current
biological
assets
Total
Balance as of January 1, 2022
$
2,769,612
2,358,137
5,127,749
Increase due to purchases
510,564
1,001,615
1,512,179
Sales
-
(287,245)
(287,245)
Net increase due to births
904,091
3,495,308
4,399,399
Production cost
50,857,104
2,746,934
53,604,038
Depreciation
-
(3,111,127)
(3,111,127)
Transfers to inventories
(51,744,783)
(3,495,308)
(55,240,091)
Other
81,322
(46,323)
34,999
Balance as of December 31, 2022
$
3,377,910
2,661,991
6,039,901
Current
biological
assets
Non-current
biological
assets
Total
Balance as of January 1, 2021
$
2,012,668
1,991,530
4,004,198
Increase due to purchases
429,551
840,112
1,269,663
Sales
-
(46,866)
(46,866)
Net increase due to births
377,449
3,083,747
3,461,196
Production cost
42,518,242
2,335,691
44,853,933
Depreciation
-
(2,784,562)
(2,784,562)
Transfers to inventories
(42,628,413)
(3,083,747)
(45,712,160)
Other
60,115
22,232
82,347
Balance as of December 31, 2021
$
2,769,612
2,358,137
5,127,749
Current
biological
assets
Non-current
biological
assets
Total
Balance as of January 1, 2020
$
2,043,234
1,818,911
3,862,145
Increase due to purchases
686,756
797,039
1,483,795
Sales
-
20,966
20,966
Net increase due to births
264,386
2,507,769
2,772,155
Production cost
35,585,551
1,877,418
37,462,969
Depreciation
-
(2,565,283)
(2,565,283)
Transfers to inventories
(36,786,599)
(2,507,769)
(39,294,368)
Other
219,340
42,479
261,829
Balance as of December 31, 2020
$
2,012,668
1,991,530
4,000,198
The “Other” category includes the change in fair value of biological assets that resulted in a
increase of $85,006 in 2022 and decrease of $48,338 and $31,701 in 2021 and 2020,
respectively.
52
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, 2022, 2021 and 2020, prepaid expenses and other current assets are as
follows:
December 31,
2022
2021
2020
Advances to suppliers of inventories
$
892,383
2,163,450
613,188
Prepaid expenses for services
386,775
264,208
303,345
Prepaid expenses for insurance and
sureties
84,011
95,441
74,565
Notes receivable (1)
818,287
-
-
Other current assets
168,126
234,024
230,157
Total
$
2,349,582
2,757,123
1,221,255
(1)
The account receivable corresponds to a loan granted to a legal entity, which is documented with a
promissory note with interest due in May 2023.
(13) Assets held for sale
As of December 31, 2022, 2021 and 2020, assets held for sale are as follows:
December 31,
2022
2021
2020
Buildings
$
24,123
24,786
24,208
Land
31,612
31,793
29,563
Other
1,019
857
859
Total
$
56,754
57,436
54,630
The Company recognized gains (losses) on sales of these assets of $912, ($31) and $510
during 2022, 2021 and 2020, respectively.
53
(14) Property, plant and equipment
As of December 31, 2022, 2021 and 2020, property, plant and equipment are comprised as
follows:
Cost
Balance as of
January 1,
2022
Additions
Disposals
Currency
translation
effect
Balance as of
December 31,
2022
Land
$
1,679,402
202,220
(410)
(4,700)
1,876,512
Buildings and construction
13,493,619
1,179,094
(11,520)
(87,418)
14,573,775
Machinery and equipment
18,457,985
2,458,979
(330,092)
(154,108)
20,432,764
Transportation equipment
2,670,699
628,478
(131,806)
(1,920)
3,165,451
Computer equipment
163,020
33,266
(8,327)
(2,861)
185,098
Furniture
213,722
29,047
(8,409)
(541)
233,819
Leasehold improvements
7,334
2,553
-
-
9,887
Construction in progress
2,552,589
307,191
-
(8,958)
2,850,822
Total
$
39,238,370
4,840,828
(490,564)
(260,506)
43,328,128
Accumulated depreciation
Balance as of
January 1
2022
Depreciation
for the year
Disposals
Currency
translation
effect
Balance as
of December
31, 2022
Buildings and construction
$
(6,109,840)
(305,006)
8,407
26,377
(6,380,062)
Machinery and equipment
(10,044,432)
(1,199,787)
240,147
122,968
(10,881,104)
Transportation equipment
(1,028,715)
(242,860)
96,365
1,440
(1,173,770)
Computer equipment
(142,175)
(19,479)
7,936
2,720
(150,998)
Furniture
(149,806)
(21,921)
7,480
547
(163,700)
Total
$
(17,474,968)
(1,789,053)
360,335
154,052
(18,749,634)
Cost
Balance as of
January 1,
2021
Additions
Disposals
Currency
translation
effect
Balance as of
December 31,
2021
Land
$
1,655,428
21,342
-
2,632
1,679,402
Buildings and construction
12,821,193
626,606
(3,039)
48,859
13,493,619
Machinery and equipment
17,116,908
1,528,891
(274,090)
86,276
18,457,985
Transportation equipment
2,445,634
399,687
(175,643)
1,021
2,670,699
Computer equipment
151,117
11,345
(1,078)
1,636
163,020
Furniture
205,933
17,162
(9,728)
355
213,722
Leasehold improvements
8,037
-
(703)
-
7,334
Construction in progress
1,675,894
874,460
-
2,235
2,552,589
Total
$
36,080,144
3,479,493
(464,281)
143,014
39,238,370
Accumulated depreciation
Balance as of
January 1
2021
Depreciation
for the year
Disposals
Currency
translation
effect
Balance as
of December
31, 2021
Buildings and construction
$
(5,836,750)
(262,839)
2,360
(12,611)
(6,109,840)
Machinery and equipment
(9,267,337)
(923,114)
204,221
(58,202)
(10,044,432)
Transportation equipment
(965,535)
(183,530)
121,112
(762)
(1,028,715)
Computer equipment
(130,187)
(11,532)
977
(1,433)
(142,175)
Furniture
(146,513)
(12,082)
9,092
(303)
(149,806)
Total
$
(16,346,322)
(1,393,097)
337,762
(73,311)
(17,474,968)
54
Cost
Balance as of
January 1,
2020
Additions
Disposals
Currency
translation
effect
Balance as of
December 31,
2020
Land
$
1,553,499
102,847
(5,900)
4,982
1,655,428
Buildings and construction
12,340,405
686,270
(297,490)
92,008
12,821,193
Machinery and equipment
15,866,952
1,240,779
(145,320)
154,497
17,116,908
Transportation equipment
2,111,999
462,344
(130,089)
1,380
2,445,634
Computer equipment
134,481
13,784
(244)
3,096
151,117
Furniture
190,289
21,325
(6,463)
782
205,933
Leasehold improvements
3,598
4,439
-
-
8,037
Construction in progress
1,459,922
220,493
-
(4,521)
1,675,894
Total
$
33,661,145
2,752,281
(585,506)
252,224
36,080,144
Accumulated depreciation
Balance as of
January 1
2020
Depreciation
for the year
Disposals
Currency
translation
effect
Balance as
of December
31, 2020
Buildings and construction
$
(5,750,971)
(299,865)
229,718
(15,632)
(5,836,750)
Machinery and equipment
(8,253,772)
(1,048,758)
96,589
(61,396)
(9,267,337)
Transportation equipment
(856,429)
(204,384)
96,553
(1,275)
(965,535)
Computer equipment
(107,016)
(21,721)
160
(1,610)
(130,187)
Furniture
(136,311)
(15,575)
5,863
(490)
(146,513)
Total
$
(15,104,499)
(1,590,303)
428,883
(80,403)
(16,346,322)
December 31,
Carrying amounts, net
2022
2021
2020
Land
$
1,876,512
1,679,402
1,655,428
Buildings and construction
8,193,713
7,383,779
6,984,443
Machinery and equipment
9,551,660
8,413,553
7,849,571
Transportation equipment
1,991,681
1,641,984
1,480,099
Computer equipment
34,100
20,845
20,930
Furniture
70,119
63,916
59,420
Leasehold improvements
9,887
7,334
8,037
Construction in progress
2,850,822
2,552,589
1,675,894
Total
$
24,578,494
21,763,402
19,733,822
Additions of property, plant and equipment in 2022 and 2020 include assets acquired through
business combinations of $343,841 and $383,680 that consist of the following:
2022
2020
Land
$
94,864
62,050
Buildings and construction
100,393
231,264
Machinery and equipment
111,293
73,332
Transportation equipment
23,853
4,825
Computer equipment
9,263
1,761
Furniture
3,115
1,115
Construction in progress
1,060
9,333
Total
$
343,841
383,680
Depreciation expense during the years ended December 31, 2022, 2021 and 2020 was
$1,789,053, $1,393,097 and $1,590,303, respectively, which was charged to cost of sales and
operating expenses, see note 23.
55
(15) Goodwill
2022
2021
2020
Balances at beginning of the year
$
1,688,607 1,650,716
1,578,994
Business combination occurred
during the year (note 4)
1,006,719
-
-
Foreign currency effects
(67,663)
37,891
71,722
Balances at end of year
$
2,627,663 1,688,607
1,650,716
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. For the years ended December 31, 2022, 2021, and 2020, no goodwill
impairment loss was determined.
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.
The assumptions and balances of each cash-generating unit are as follows:
2022
Cash-generating unit
Final
balance of
the year
Projection
period
(years)
Annual
discount
rate
(%)
Annual
growth
rate
(%)
Bachoco - Istmo and Peninsula regions
$
212,833
5
13.99%
3.00%
Campi
88,015
5
13.99%
3.00%
RYC
1,006,719
5
13.99%
7.60%
Ok Farms - Morris Hatchery, Inc. Arkansas
64,702
5
3.99%
1.00%
Ok Farms - Morris Hatchery Inc. Georgia
109,251
5
3.99%
1.00%
Ok Foods- Albertville Quality Foods, Inc.
1,146,143
5
11.00%
3.00%
$
2,627,663
2021
Cash-generating unit
Final
balance of
the year
Projection
period
(years)
Annual
discount
rate
(%)
Annual
growth
rate
(%)
Bachoco - Istmo and Peninsula regions
$
212,833
5
12.63%
3.00%
Campi
88,015
5
12.63%
3.00%
Ok Farms - Morris Hatchery, Inc. Arkansas
68,019
5
3.26%
0.00%
Ok Farms - Morris Hatchery Inc. Georgia
114,851
5
3.26%
0.00%
Ok Foods- Albertville Quality Foods, Inc.
1,204,889
5
10.00%
3.40%
$
1,688,607
56
2020
Cash-generating unit
Final
balance of
the year
Projection
period
(years)
Annual
discount
rate
(%)
Annual
growth
rate
(%)
Bachoco - Istmo and Peninsula regions
$
212,833
5
12.95%
3.00%
Campi
88,015
5
12.95%
3.00%
Ok Farms - Morris Hatchery, Inc. Arkansas
66,162
5
3.43%
0.00%
Ok Farms - Morris Hatchery Inc. Georgia
111,715
5
3.43%
0.00%
Ok Foods- Albertville Quality Foods, Inc.
1,171,991
5
3.43%
0.00%
$
1,650,716
As of December 31, 2022, 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
32%
Campi
98%
RYC
49%
Ok Farms- Morris Hatchery Inc. Arkansas
189%
Ok Farms- Morris Hatchery Inc. Georgia
173%
Ok Foods- Albertville Quality Foods, Inc.
42%
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.
(16) Intangible assets
The balances as of December 31, 2022, 2021 and 2020 for $589,715, $704,374 and $753,224
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 2022, the Company ended the relationship with two clients that had been capitalized,
since they did not register sales, resulting in an impairment in the intangible asset for customer
relations of $14,910, an impairment of $4,020 was also determined since the Company
decided not to renew one of its brands. Due to the above, the total impairment recognized
during 2022 of intangible assets was $18,930.
57
During 2021, an impairment of $5,459 was determined in one of the commercial brands due to
the decrease in sales.
a)
Intangible assets consist of the following:
2022
2021
2020
Amortizable intangible assets
Customer relationships
$
897,274
968,012
941,582
Accumulated amortization
(314,090)
(290,404)
(219,702)
Impairment loss
(14,910)
-
-
Total net amortizable intangible assets
568,274
677,608
721,880
Trade names not subject to amortization
25,461
32,225
31,344
Impairment loss
(4,020)
(5,459)
-
Total intangible assets
$
589,715
704,374
753,224
b)
Reconciliation between the carrying amounts at the beginning and at the end of the
intangible assets
Customer
relationships
Trade names
not subject to
amortization
Total
Carrying amounts
Balance as of January 1, 2022 $
968,012
26,766
994,778
Additions
-
-
-
Impairment loss
(14,910)
(4,020)
(18,930)
Currency translation effect
(70,738)
(1,305)
(72,043)
Balance as of December 31,
2022
882,364
21,441
903,805
Accumulated amortization
Balance as of January 1, 2022
(290,404)
-
(290,404)
Additions
-
-
-
Amortization expense
(23,686)
-
(23,686)
Balance as of December 31,
2022
(314,090)
-
(314,090)
Total intangible assets
$
568,274
21,441
589,715
58
Customer
relationships
Trade names
not subject to
amortization
Total
Carrying amounts
Balance as of January 1, 2021 $
941,582
31,344
972,926
Additions
-
-
-
Impairment loss
-
(5,459)
(5,459)
Currency translation effect
26,430
881
27,311
Balance as of December 31,
2021
968,012
26,766
994,778
Accumulated amortization
Balance as of January 1, 2021
(219,702)
-
(219,702)
Additions
-
-
-
Amortization expense
(70,702)
-
(70,702)
Balance as of December 31,
2021
(290,404)
-
(290,404)
Total intangible assets
$
677,608
26,766
704,374
Customer
relationships
Trade names
not subject to
amortization
Total
Carrying amounts
Balance as of January 1, 2020 $
817,820
29,679
847,499
Additions
-
-
-
Currency translation effect
123,762
1,665
125,427
Balance as of December 31,
2020
941,582
31,344
972,926
Accumulated amortization
Balance as of January 1, 2020
(74,859)
-
(74,859)
Additions
-
-
-
Amortization expense
(144,843)
-
(144,843)
Balance as of December 31,
2020
(219,702)
-
(219,702)
Total intangible assets
$
721,880
31,344
753,224
59
(17) Other non-current assets
Other non-current assets consist of the following:
December 31,
2022
2021
2020
Advances for purchase of property, plant
and equipment
$
591,742
367,023
472,828
Investments in life insurance (note 3 (l))
71,981
74,148
71,431
Security deposits
28,167
24,511
23,476
Other long-term receivable
207,314
211,278
193,689
Intangible assets in process
64,073
1,616
2,996
Other
53,407
56,128
54,502
Total non-current assets
$
1,016,684
734,704
818,922
(18) Financial debt
a)
Short-term financial debt is as follows:
December 31,
2022
2021
2020
Loan denominated in pesos, maturing in March 2023, at
TIIE (1) rate plus 0.50 percentage points.
$
70,343
-
-
Loan denominated in pesos, maturing in June 2023, at TIIE
(1) rate plus 0.45 percentage points.
50,054
-
-
Loan denominated in pesos, maturing in September 2023, at
TIIE (1) rate plus 0.48 percentage points.
361,012
-
-
Loan denominated in pesos, maturing in December 2023, at
TIIE (1) rate plus 0.48 percentage points.
500,124
-
-
Loan denominated in pesos, maturing in June 2023, at TIIE
(1) rate plus 0.50 percentage points.
199,999
-
-
Loan in the amount of 39,000 thousand dollars, maturing in
January 2021, at LIBOR (2) rate plus 0.60 percentage points.
-
-
778,050
Loan denominated in pesos, maturing in February 2021, at
TIIE (1) rate plus 0.90 percentage points.
-
-
70,011
Loan denominated in pesos, maturing in December 2022, at
TIIE (1) rate plus 0.29 percentage points.
-
500,081
-
Total short-term debt
$
1,181,532
500,081
848,061
The annual weighted average interest rate of short-term loans denominated in pesos for 2022,
2021 and 2020 was 8.15%, 5.28% and 6.71%, respectively. The average interest rate for loans
outstanding as of December 31, 2022, 2021 and 2020 was 10.52%, 5.68% and 5.50%,
respectively.
The annual weighted average interest rate of short-term loans denominated in dollars for the
years 2022, 2021 and 2020 was 0%, 0.73%, 1.61% and 2.36%, respectively. As of December
31, 2022 and 2021, there are no current short-term loans, the average interest rate for loans
outstanding as of December 31, 2020 was 0.75%.
(1)
TIIE (for its acronym in Spanish) = Interbank Equilibrium Rate
(2)
LIBOR= London Interbank Offered Rate
60
b)
Long-term debt consists of the following:
December 31,
2022
2021
2020
Loan denominated in pesos, maturing in May 2021, at
TIIE (1) plus 1.05 percentage points.
$
-
-
209,499
Debt securities (subsection (d) of this note)
3,010,483
1,493,830
1,460,405
Total
3,010,483
1,493,830
1,669,904
Less current maturities
-
(1,493,830)
(209,499)
Long-term debt, excluding current maturities
$
3,010,483
-
1,460,405
The annual weighted average interest rate on long-term debt for 2022, 2021 and 2020 was
8.22%, 4.90% and 6.49%, respectively. The average rate for outstanding loans as of December
31, 2022, 2021 and 2020 was 10.33%, 5.43% and 4.91%, respectively.
(1) TIIE (for its acronym in Spanish) = Interbank Equilibrium Rate
During 2022 and 2021 the Company did not make early payments on its long-term debt,
during 2020 the Company made early payments on its long-term debt of $17,877, payment of
commissions for early termination was not required.
As of December 31, 2022, 2021 and 2020, unused lines of credit amounted to $9,333,620,
$9,935,420 and $6,919,625, respectively. In all such years, the Company did not pay any fee
for undrawn balances.
c)
Maturities of long-term debt are as follows:
Year
Amount
2025 $ 3,010,483
The amount of future unearned interest is $857,593.
Interest expense on total loans during the years ended December 31, 2022, 2021 and 2020,
amounted to $236,200, $104,179 and $159,169, 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,
2022, 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.
61
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.
d)
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” with a maturity 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 Mexican pesos per certificate.
In 2022, the issue of Stock Certificates with the ticker symbol: "BACHOCO 17" matured and
was redeemed in accordance with the contractual terms of the issue.
On August 5, 2022, a third issuance of debt securities was carried out for a total amount of
$3,000,000 with ticker symbol: “BACHOCO 22” with a maturity of 1,092 days, equivalent to
39 periods of 28 days, approximately three years. With 30,000,000 debt securities and a par
value of $100 Mexican 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 0.07 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
2022 accrued a gross interest on its nominal value, at an annual interest rate, which was
calculated by adding 0.31 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, 2022.
e)
Reconciliation of liabilities arising from financing debt
December 31,
2022
2021
2020
Balance as of January 1
$
1,993,911
2,517,965
4,928,607
Changes that represent cash flows
Proceeds from borrowings
4,676,000
1,709,080
4,030,700
Principal payment on loans
(2,496,000)
(2,267,280)
(6,762,222)
Changes that do not represent cash flows
Other
18,104
34,146
320,880
Balance as of December 31
$
4,192,015
1,993,911
2,517,965
62
(19) Trade accounts and other accounts payable
December 31,
2022
2021
2020
Trade payables
$
6,437,102
8,122,486
4,516,424
Sundry creditors and expenses payable
618,660
854,565
532,679
Provisions
506,141
74,146
24,099
Statutory employee profit sharing
527,874
291,744
62,075
Retained payroll taxes and other local
taxes
412,355
359,379
375,086
Direct employee benefits
369,278
311,367
232,083
Interest payable
15,245
1,436
10,575
Others
155
133
116
$
8,886,810
10,015,256
5,753,137
Note 8 discloses the Company’s exposure to the exchange and liquidity risks related to trade
accounts payable and other accounts payable.
During 2022 and 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, 2022, 2021 and 2020 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, 2022, 2021 and 2020:
December 31,
2022
2021
2020
Compensation
$
62,376
73,721
57,429
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:
63
i.Revenues and balances receivable to related parties
Transaction value
Balance as of
December 31,
December 31,
2022
2021
2020
2022
2021
2020
Sales of products to:
Vimifos, S.A. de C.V.
$
4,327
5,921
4,055 $
637
284
400
Frescopack, S.A. de C.V.
73
63
53
-
-
-
Taxis Aéreos del Noroeste,
S.A. de C.V.
-
51
31
-
-
-
Alimentos Kowi, S.A. de
C.V.
6
662
832
-
7
286
Sonora Agropecuaria, S.A.
DE C.V.
-
-
123,756
-
-
-
$
4,406
6,697
128,727 $
637
291
686
ii.Expenses and balances payable to related parties
Transaction value
Balance as of
December 31,
December 31,
2022
2021
2020
2022
2021
2020
Purchases of food, raw materials
and packing supplies
Vimifos, S.A. de C.V.
$
635,106
440,379
411,129 $
131,391
41,219
58,836
Frescopack, S.A. de C.V.
237,448
103,778
143,849
29,050
65,542
9,554
Pulmex 2000, S.A. de C.V.
29,323
17,870
21,414
9,753
5,609
2,407
Qualyplast, S.A. de C.V.
823
6,971
1,184
-
-
251
Alimentos Kowi, S.A. de C.V.
370
-
-
370
-
-
Sonora Agropecuaria, S.A. de C.V.
-
-
4,425
-
-
-
Granja, Rab S.A. de C.V.
15,922
75,747
-
-
3,187
-
Fertilizantes Tepeyac, S.A. de
C.V.
113,646
399,480
-
4,135
32
-
EBIPAC S.A.P.I. de C.V.
47,123
41,001
-
7,424
412
-
GASBO, S.A. de C.V.
4,430
3,583
-
173
267
-
Purchases of vehicles, tires and
spare parts
Maquinaria Agrícola, S.A. de C.V. $
-
-
-
-
-
5
Llantas y Accesorios, S.A. de C.V.
48,279
42,601
42,554
3,764
4,614
6,378
Autos y Accesorios, S.A. de C.V.
25,736
40,194
48,129
2,130
3,413
339
Autos y Tractores de Culiacán,
S.A. de C.V.
14,265
31,753
42,857
110
726
336
Camiones y Tractocamiones de
Sonora, S.A. de C.V.
208,695
164,306
91,098
7,147
59,602
2,636
Agencia MX-5, S.A de C.V.
82
410
63
21
27
6
Alfonso R. Bours, S.A. de C.V.
3,950
4,926
2,651
54
604
50
Cajeme Motors S.A. de C.V.
290
442
287
31
120
44
Airplane leasing expenses
Taxis Aéreos del Noroeste, S.A. de
C.V.
$
6,651
1,435
-
64
55
-
$
195,617
185,429
80,842
As of December 31, 2022, 2021 and 2020, balances payable to related parties correspond to
current accounts denominated in pesos that bear no interest and are payable on a short-term
basis.
64
(21) Income Tax
Under the tax legislation in Mexico and the United States of America in effect through
December 31, 2022, 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, 2022, 2021 and
2020, the applicable rate under the general tax regime in Mexico is 30%. The applicable rate
during 2022, 2021 and 2020 for the Company’s US subsidiary is 21% (plus state taxes).
As of December 31, 2022, 2021 and 2020, 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, 2022, 2021 and 2020, the income tax (benefit) expense
included in profit and loss is as follows:
December 31
2022
2021
2020
Operation in Mexico:
Current ISR
$
1,188,002
1,790,621
1,321,021
Deferred ISR
184,435
257,020
341,131
1,372,437
2,047,641
1,662,152
Foreign operations:
Current ISR
-
-
33
Deferred ISR
663,940
(240,003)
(450,574)
Total ISR expense
$
2,036,377
1,807,638
1,211,611
65
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 2022, 2021 and 2020 due to the items listed
below:
|
December 31,
2021
2020
2019
ISR
Percentage
ISR
Percentage
ISR
Percentage
Expected expense
$
2,425,251
30% $ 2,022,521
30% $ 1,555,111
30%
Increase (decrease)
resulting from:
Net effects of inflation
(465,226)
(6%)
(379,311)
(6%)
(196,379)
(4%)
(Non-taxable income)
Non-deductible
expenses
11,761
0%
29,503
0%
7,641
0%
Effect of rate
difference of foreign
subsidiary
(22,427)
(0%)
42,516
1%
20,907
0%
Effect from non-
deductible employee
benefits
144,357
2%
145,301
3%
115,496
2%
Effect of tax incentive
(6,264)
(0%)
(54,523)
(1%)
(69,920)
(1%)
Effect of carryback tax
losses in the United
States of America (1)
-
-
-
-
(190,144)
(4%)
Bargain purchase gain
of domestic business
acquisition
-
-
-
-
(27,267)
(0%)
Other
(51,075)
(1%)
1,631
0%
(3,834)
(0%)
Income tax expense $
2,036,377
25% $ 1,807,638
27% $ 1,211,611
23%
(1)
On March 27, 2020, in United States of América, 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 Company requested the return during 2022, see note 9.
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, 2022, 2021 and 2020 are
detailed below:
66
December 31,
2022
2021
2020
Deferred tax assets
Accounts payable
$
61,730
33,873
2,207
Employee benefits
-
31,692
199,087
PTU payable
854
2,476
16,690
Tax loss carryforwards
420,053
917,737
60,354
Property, plant and equipment
28,255
-
1,696
Other provisions
12,454
60,946
648
Tax incentives to be credited in the
United States of America
-
45,386
-
Other items
9,029
17
-
Total deferred tax assets
532,375
1,092,127
280,682
Deferred tax liabilities
Inventories
1,280
218,204
-
Employee benefits
65,700
-
-
Property, plant and equipment
-
469,946
-
Prepaid expenses
7,281
860
2,872
Goodwill
-
9,865
-
Intangible assets
-
178,356
-
Other provisions
-
-
7,655
Derivative financial instruments
-
1,157
8,221
Total deferred tax liabilities
74,261
878,388
18,748
Net deferred tax assets
$
458,114
213,739
261,934
December 31,
2022
2021
2020
Deferred tax assets
Accounts payable
$
1,221,919
1,948,897
1,090,676
Employee benefits
232,131
201,835
-
PTU payable
164,586
85,053
1,037
Tax loss carryforwards
194,074
31,993
606,935
Other provisions
150,970
62,503
144,861
Other items
1,431
-
-
Total deferred tax assets
1,965,111
2,330,281
1,843,509
Deferred tax liabilities
Inventories
2,773,642
2,053,059
1,820,929
Accounts receivable
716,909
593,754
497,655
Property, plant and equipment
2,886,706
2,558,209
2,915,222
Prepaid expenses
304,967
952,322
286,844
Goodwill
-
-
5,147
Intangible assets
162,710
-
188,919
Other items
-
1,282
-
Derivative financial instruments
3,684
13,130
3,773
Total deferred tax liabilities
6,848,618
6,171,756
5,718,489
Net deferred tax liability
$
4,883,507
3,841,475
3,874,980
67
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, 2022, 2021 and 2020 amounts
to $1,035,095, $1,414,628 and $1,802,451, 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
January 1,
2022
Recognized
in profit
and loss
Acquired or/
Recognized
directly in
equity
December
31, 2022
Accounts payable
$
(1,982,770)
697,863
1,258
(1,283,649)
Employee benefits
(233,527)
98,970
(31,874)
(166,431)
PTU payable
(87,529)
(77,911)
-
(165,440)
Tax loss carryforwards
(949,730)
316,648
18,955
(614,127)
Other provisions
(123,449)
(41,286)
1,311
(163,424)
Goodwill
9,865
(9,258)
(607)
-
Intangible assets
178,356
(7,578)
(8,068)
162,710
Inventories
2,271,263
516,079
(12,420)
2,774,922
Accounts receivable
593,754
123,155
-
716,909
Property, plant and equipment
3,028,155
(150,431)
(19,273)
2,858,451
Prepaid expenses
953,182
(640,934)
-
312,248
Derivative financial instruments
14,287
(10,603)
-
3,684
Tax incentives to be credited in
the United States of America
(45,386)
45,386
-
-
Other items
1,265
(11,725)
-
(10,460)
Net deferred tax liability
$
3,627,736
848,375
(50,718)
4,425,393
January 1,
2021
Recognized
in profit
and loss
Acquired or/
Recognized
directly in
equity
December
31, 2021
Accounts payable
$
(1,092,883)
(889,150)
(737)
(1,982,770)
Employee benefits
(199,087)
(41,472)
7,032
(233,527)
PTU payable
(17,727)
(69,802)
-
(87,529)
Tax loss carryforwards
(667,289)
(258,865)
(23,576)
(949,730)
Other provisions
(137,854)
19,020
(4,615)
(123,449)
Goodwill
5,147
4,293
425
9,865
Intangible assets
188,919
(14,891)
4,328
178,356
Inventories
1,820,929
443,845
6,489
2,271,263
Accounts receivable
497,655
96,099
-
593,754
Property, plant and equipment
2,913,526
105,961
8,668
3,028,155
Prepaid expenses
289,716
663,466
-
953,182
Derivative financial instruments
11,994
2,293
-
14,287
Tax incentives to be credited in
the United States of America
-
(45,386)
-
(45,386)
Other items
-
1,606
(341)
1,265
Net deferred tax liability
$
3,613,046
17,017
(2,327)
3,627,736
68
January 1,
2020
Recognized
in profit
and loss
Acquired or/
Recognized
directly in
equity
December
31, 2020
Accounts payable
$
(1,099,903)
8,163
(1,143)
(1,092,883)
Employee benefits
(164,060)
(35,027)
-
(199,087)
PTU payable
(26,020)
8,293
-
(17,727)
Tax loss carryforwards
(327,935)
(314,628)
(24,726)
(667,289)
Interest carryforwards
-
1,551
(1,551)
-
Other provisions
(62,767)
(74,804)
(283)
(137,854)
Goodwill
584
4,371
192
5,147
Intangible assets
190,900
(12,248)
10,267
188,919
Inventories
1,695,684
114,135
11,110
1,820,929
Accounts receivable
445,198
52,457
-
497,655
Property, plant and equipment
2,666,752
177,372
69,402
2,913,526
Prepaid expenses
336,985
(47,269)
-
289,716
Derivative financial
instruments
3,803
8,191
-
11,994
Net deferred tax liability
$
3,659,221
(109,443)
63,268
3,613,046
f)
Tax on assets and tax loss carryforwards
As of December 31, 2022, tax loss carryforwards expire as shown below. Amounts are
indexed for inflation as permitted by Mexican income tax law:
Amount as of December 31, 2022
Year
Tax loss
carryforwards
Year of expiration /
maturity
2017
$
56,658
2027
2018
13,681
2028
2019
252,518
2029
2020
19,719
2030
2021
1,247,032
2031
2022
692,869
2032
$
2,282,477
(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 between 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.
69
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 5th 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 2022, 2021 and 2020 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 $98,333, $84,093 and $72,121, in 2022, 2021 and 2020,
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
A decrease in the interest rate for the governmental bonds will
increase the plan’s liability.
Longevity risk
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.
Salary risk
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.
70
The projected net liability presented on the consolidated statements of financial position is as
follows:
December 31,
2022
2021
2020
Present value of unfunded obligations
$
887,238
656,252
592,294
Present value of funded obligations
83,891
121,643
163,651
Total present value of benefit obligations
(“PBO”)
971,129
777,895
755,945
Plan assets at fair value
(83,891)
(121,643)
(163,651)
Projected liability, net
$
887,238
656,252
592,294
i. Composition and return of plan assets
Actual return of the plan assets
Composition of the plan
assets
2022
2021
2020
2022
2021
2020
Fixed income
securities
6.09%
5.90%
11.28%
58%
58%
63%
Variable income
securities
(1.58%)
21.55%
9.47%
42%
42%
37%
Total
100%
100%
100%
ii. Movements in the present value of PBO
2022
2021
2020
PBO as of January 1
$
777,895
755,945
636,202
Acquisition employee benefits
39,041
(27,743)
(78,149)
Benefits paid by the plan
(78,711)
(27,743)
(78,149)
Service cost
49,364
25,890
38,987
Interest cost
73,923
33,115
53,343
Actuarial losses recognized in other
comprehensive income
113,535
6,497
105,562
Past service cost – plan amendments
(3,918)
(15,809)
-
PBO as of December 31
$
971,129
777,895
755,945
iii. Movements in the fair value of plan assets
2022
2021
2020
Plan assets at fair value as of January 1
$
121,643
163,651
148,392
Transfer of assets to fund defined
contribution benefit plan
(38,306)
-
-
Benefits paid by the plan
-
(56,287)
-
Expected return on plan assets
12,886
13,260
13,678
Actuarial profits in other comprehensive
income
(12,332)
1,019
1,581
Fair value of plan assets as of December 31
$
83,891
121,643
163,651
71
iv. Expense recognized in profit and loss
2022
2021
2020
Current service cost
$
49,364
25,890
38,987
Interest cost, net
61,037
19,855
39,665
$
110,401
45,745
78,652
v. Actuarial gains and (losses)
2022
2021
2020
Amount accumulated as of January, 1
$
(388,604)
(383,126)
(279,144)
Recognized during the year
(131,167)
(5,478)
(103,982)
Amount accumulated as of December,
31
$
(519,771)
(388,604)
(383,126)
vi. Actuarial assumptions
Primary actuarial assumptions at the consolidated financial statements date (expressed as
weighted averages) are as follows.
2022
2021
2020
Discount rate as of December, 31
9.25%
9.50%
7.75%
Rate for future salary increases
4.00%
4.50%
4.50%
Social security wage increase rate
3.50%
3.50%
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).
vii. Historical information
December 31,
2022
2021
2020
Present value of defined benefit obligation
$
971,129
777,895
755,945
Plan assets at fair value
(83,891)
(121,643)
(163,651)
Plan deficit
$
887,238
656,252
592,294
Experience adjustments arising from plan liabilities $ (118,834)
(6,497)
(105,562)
Experience adjustments arising from plan assets
$
(12,333)
1,019
1,581
viii.Sensitivity analysis of the defined benefits obligations as of December 31, 2022, 2021 and
2020
2022
Pension
plan
Seniority
premium
Constructive
obligation
Total
PBO
Discount rate 9.25%
$ (671,370)
(299,759)
-
(971,129)
Rate increase (+ 1%)
$ (660,897)
(295,384)
-
(956,281)
Rate decrease (- 1%)
$ (681,999)
(304,261)
-
(986,260)
72
2021
Pension
plan
Seniority
premium
Constructive
obligation
Total
PBO
Discount rate 9.50%
$ (551,682)
(226,213)
-
(777,895)
Rate increase (+ 1%)
$ (541,855)
(222,957)
-
(764,812)
Rate decrease (- 1%)
$ (561,819)
(229,562)
-
(791,381)
2020
Pension
plan
Seniority
premium
Constructive
obligation
Total
PBO
Discount rate 7.75%
$ (531,251)
(203,282)
(21,412) (755,945)
Rate increase (+ 1%)
$ (511,884)
(200,058)
(21,209) (733,151)
Rate decrease (- 1%)
$ (554,180)
(206,605)
(21,619) (782,404)
ix. Expected cash flows
Total
2023-2032 $
1,377,132
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.
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
$31,071, $28,825 and $16,418 for the year ended December 31, 2022, 2021 and 2020,
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, 2022, 2021 and 2020, all of which were fully vested. The total
liability under this plan totaled $10,835, $48,887 and $44,994 as of December 31, 2022, 2021
and 2020, respectively. The expense recognized for this plan for the year ended December 31,
2022, 2021 and 2020 was $45,418, $2,505 and $4,678, respectively.
73
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, 2022, 2021
and 2020 is shown in note 19, Trade payable and other accounts payable.
(23) Costs and expenses by nature
2022
2021
2020
Cost of sales (2)
$
82,032,790
68,356,654
57,707,566
General, selling and administrative
expenses
8,506,312
7,127,780
6,420,397
$
90,539,102
75,484,434
64,127,963
Inventory consumption
$
64,998,326
54,103,917
44,747,933
Wages and salaries
11,368,634
9,735,452
8,507,124
Freight
5,962,121
5,428,050
5,037,768
Maintenance
2,698,428
2,340,899
2,006,848
Other utility expenses
2,270,284
1,800,952
1,402,459
Depreciation
1,789,053
1,393,097
1,590,303
Depreciation of right-of-use assets
351,032
343,367
307,757
Leases (1)
184,416
156,612
119,592
Claims expenses
187,289
-
-
Other
729,519
182,088
408,179
Total
$
90,539,102
75,484,434
64,127,963
(1)
Leasing expense in 2022, 2021 and 2020 includes contracts classified as low value or those with terms less
than twelve months.
(2)
During 2022, the presence of an H5N1 avian influenza outbreak was detected in some Company farms in
the states of Sinaloa, Nuevo León, Sonora, Coahuila and Yucatán. The financial effects derived from this
contingency that were recorded in the cost of sales were $157,010, due to the slaughter of birds and
destruction of eggs.
(24) Leases
a)
As of December 31, 2022, 2021 and 2020, the leased assets with recognized right of use
are comprised as follows:
Right-of-use assets
Balance as of
January 1, 2022
Additions
Modifications
and disposal
Anticipated
termination
Balance as of
December 31, 2022
Buildings and
construction
$
550,832
49,554
29,607
62,923
692,916
Machinery and
equipment
629,161
11,288
54,556
5,150
700,155
Transportation
equipment
440,117
63,702
(26,005)
10,416
488,230
Computer equipment
18,903
4,573
3,502
-
26,978
Total
$
1,639,013
129,117
61,660
78,489
1,908,279
74
Depreciation of
right-of-use assets
Balance as of
January 1, 2022
Depreciation for
the year
Currency
translation effect
Balance as of
December 31, 2022
Buildings and
construction
$
(270,576)
(136,264)
1,439
(405,401)
Machinery and
equipment
(359,818)
(135,547)
861
(494,504)
Transportation
equipment
(315,058)
(74,328)
1,516
(387,870)
Computer equipment
(13,351)
(4,893)
126
(18,118)
Total
$
(958,803)
(351,032)
3,942
(1,305,893)
Total right-of-
use assets
$
680,210
602,386
Right-of-use assets
Balance as of
January 1, 2021 Additions Modifications
and disposal
Anticipated
termination
Balance as of
December 31, 2021
Buildings and
construction
$
469,387
42,249
(3,949)
43,145
550,832
Machinery and
equipment
447,424
52,143
4,343
125,251
629,161
Transportation
equipment
349,208
24,595
(1,818)
68,132
440,117
Computer equipment
19,392
3,603
(1,492)
(2,600)
18,903
Total
$
1,285,411
122,590
(2,916)
233,928
1,639,013
Depreciation of
right-of-use assets
Balance as of
January 1, 2021
Depreciation for
the year
Currency
translation effect
Balance as of
December 31, 2021
Buildings and
construction
$
(153,987)
(114,957)
(1,632)
(270,576)
Machinery and
equipment
(236,330)
(121,266)
(2,222)
(359,818)
Transportation
equipment
(206,627)
(102,245)
(6,186)
(315,058)
Computer equipment
(9,622)
(4,899)
1,170
(13,351)
Total
$
(606,566)
(343,367)
(8,870)
(958,803)
Total right-of-
use assets
$
678,845
680,210
Right-of-use assets
Balance as of
January 1,
2020
Additions
Modifications
and disposal
Balance as of
December 31, 2020
Buildings and construction
$
380,011
101,272
(11,896)
469,387
Machinery and equipment
447,179
39,020
(38,775)
447,424
Transportation equipment
283,332
4,767
61,109
349,208
Computer equipment
15,014
2,572
1,806
19,392
Total
$
1,125,536
147,631
12,244
1,285,411
Depreciation of right-of-use
assets
Balance as of
January 1, 2020
Depreciation
for the year
Currency
translation
effect
Balance as of
December 31,
2020
Buildings and construction
$
(97,736)
(58,148)
1,897
(153,987)
Machinery and equipment
(116,391)
(119,740)
(199)
(236,330)
Transportation equipment
(84,120)
(126,211)
3,704
(206,627)
Computer equipment
(4,557)
(3,658)
(1,407)
(9,622)
Total
$
(302,804)
(307,757)
3,995
(606,566)
Total right-of-use assets
$
822,732
678,845
75
b)
The movements in liabilities for these lease contracts were as follows:
Lease
liabilities
Balance as
of January
1, 2022
Additions Modifications
and disposals
Anticipated
termination
Payment Interest
paid
Currency
translation
effect
Balance as of
December
31, 2022
Buildings and
construction
$
299,634
49,554
35,045
53,312
(153,522)
14,900
112
299,035
Machinery and
equipment
251,129
11,288
58,257
4,186
(134,818)
3,775
(5,864)
187,953
Transportation
equipment
93,721
63,702
(21,233)
4,555
(73,333)
3,445
903
71,760
Computer
equipment
6,996
4,573
3,789
-
(4,810)
148
141
10,837
Total
$
651,480
129,117
75,858
62,053
(366,483)
22,268
(4,708)
569,585
Current Lease
liabilities
(279,809)
(70,753)
-
-
-
-
-
(350,562)
Long term
lease liabilities $
371,671
58,364
75,858
62,053
(366,483)
22,268
(4,708)
219,023
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
$
310,014
42,249
(3,953)
77,022
(129,306)
15,414
(11,806)
299,634
Machinery and
equipment
238,650
52,143
4,359
105,831
(128,212)
11,779
(33,421)
251,129
Transportation
equipment
162,392
24,595
(1,835)
20,287
(96,167)
4,415
(19,966)
93,721
Computer
equipment
8,655
3,603
-
919
(5,302)
240
(1,119)
6,996
Total
$
719,711
122,590
(1,429)
204,059
(358,987)
31,848
(66,312)
651,480
Current Lease
liabilities
(278,981)
-
-
-
-
-
(828)
(279,809)
Long term
lease liabilities $
440,730
122,590
(1,429)
204,059
(358,987)
31,848
(67,140)
371,671
Lease liabilities
Balance as
of January
1, 2020
Additions Modifications
and disposals
Payment
Interest
paid
Currency
translation
effect
Balance as of
December 31,
2020
Buildings and
construction
$
280,277
101,272
31,213
(121,909)
17,903
1,258
310,014
Machinery and
equipment
308,710
39,020
(19,990)
(143,240)
26,143
28,007
238,650
Transportation
equipment
204,258
4,767
57,473
(115,851)
9,228
2,517
162,392
Computer equipment
9,805
2,572
1,560
(5,710)
365
63
8,655
Total
$
803,050
147,631
70,256
(386,710)
53,639
31,845
719,711
Current Lease
liabilities
(149,538)
(123,276)
-
-
-
(6,167)
(278,981)
Long term lease
liabilities
$
653,512
24,355
70,256
(386,710)
53,639
25,678
440,730
c)
The detail of the maturity of the long-term lease liabilities is shown below:
2024
$
84,787
2025
59,481
2026
33,903
Posterior
40,852
$
219,023
76
d)
During 2022, 2021 and 2020, an amount of $36,283, $37,996 and $36,153 was charged
as expense for rental contracts with a term of less than one year and $148,133, $118,616 and
$83,439 for rental contracts with insignificant amounts, a total of $184,416, $156,612 and
$119,592, 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.
During 2022, 2021 and 2020 these ratios were below the thresholds established by the
Company’s Risk Committee.
b)
Common stock and premiums
As of December 31, 2022, 2021 and 2020, the Company’s capital stock is represented by
600,000,000 Series “B” registered shares with a par value of $1 peso per share.
On November 16, 2022, the Company announced that after the completion of the acceptance
and settlement processes of the tender offer initiated by a vehicle in which current
shareholders of Bachoco participated, as offeror (the “Offeror”), for up to all of the
outstanding Series "B" shares of Bachoco, including shares represented by American
Depositary Receipts (ADRs), owned by the public and not owned directly or indirectly by the
Offeror or its affiliates, corresponding to approximately 26.75% of Bachoco's outstanding
capital stock as of the date of the offer, 86,589,532 shares representing Bachoco's capital stock
participated in the U.S. offer and the Mexico offer, and were effectively accepted by the
Offeror. As a result of the foregoing, the Offeror, including affiliates and related parties,
would directly or indirectly own 87.68% of Bachoco's capital stock.
As a result of this transaction, our Capital Stock, was distributed as follows:
Shareholding integration as of December 31,
After the transaction
Before the transaction
2022
2021 y 2020
Shares (1)
Position
Shares (1)
Position
Familiar Trusts
439,500,000
73.25%
439,500,000
73.25%
- Control Trust
312,000,000
52.00%
312,000,000
52.00%
- Placement Trust
127,500,000
21.25%
127,500,000
21.25%
Edificios del Noroeste
S.A. de C.V.
86,589,532
14.43%
-
-
Floating Position (2)
73,910,468
12.32%
160,500,000
26.75%
(1)
All Series B shares with voting power.
(2)
Operating at the BMV and the NYSE.
77
Based on the information provided to the Company, as of December 31, 2022, stockholders
with 1% or more interest in the Company, in addition to the family trusts, are as follows:
Shares
Position
Edificios del Noroeste S.A. de C.V.
86,589,532
14.43%
MetLife Investment Management, LLC
38,300,000
6.38%
GBM Administradora de Activos, S.A. de C.V.
S.O.S.I.
13,395,252
2.23%
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, 2022,
2021 and 2020 amounts to $364,344, $272,527 and $268,692, which includes a deferred tax
effect of $155,427, $116,074 and $114,430, respectively.
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, 2022, 2021 and 2020 amounts to
$174,911, $49,751 and $267,352, 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 27, 2022, 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.
78
The following table shows the movements of the reserve for acquisition of shares during the
years ended December 31, 2022, 2021 and 2020:
2022
2021
2020
Balance as of January 1
619,543
152,768
100,396
(+) Total shares purchased
-
649,543
212,860
(-) Total shares sold
-
(182,768)
(160,488)
Balance as of December 31
619,543
619,543
152,768
The net amount of repurchase and treasury share sale transactions was of $0, ($32,331) and
($3,509), during the years ended December 31, 2022, 2021 and 2020, respectively.
As of December 31, 2022, the Company has 619,543 treasury shares.
e)
Dividends
During the years ended December 31, 2022, 2021 and 2020, the Company has declared and
paid the following dividends:
On April 27, 2022, the Company declared a payment of dividends in cash at nominal value of
$982,984 o $1.64 pesos per outstanding share. The payment was made in two equal
installments, on May 18 and July 13, 2022.
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.
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 2022,
2021 and 2020, net income of BSACV, accounted for 59%, 63% and 61%, 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.
79
f)
Tax balances of stockholders’ equity
CUFIN
Balance as
2013
Balance
from2014
Total
IBSA individual
$
5,266,972
13,354,542
18,621,514
IBSA Consolidated
5,777,487
32,700,092
38,477,579
The restated amount as of December 31, 2022, on tax bases of the contributions made by
stockholders (“CUCA”), totaling $3,643,650, 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, 2022, 2021 and
2020 are $10.20, $8.45 and $6.56, respectively. The calculation of earnings per share was
based on income attributable to ordinary stockholders of the Company (net income attributable
to controlling interest) $6,114,154, $5,065,554 and $3,935,672 for the years ended December
31, 2022, 2021 and 2020, respectively.
The average weighted number of common outstanding in 2022, 2021 and 2020 was
599,380,457, 599,730,270 and 599,818,022 shares, respectively.
The Company has no ordinary shares with potential dilutive effects.
(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 $6,829 (350 thousand
dollars) each year per plan participant and workers’ payments claims up to $19,510 (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 $100,984 (5,176 thousand dollars),
$107,842 (5,258 thousand dollars) and $89,576 (4,490 thousand dollars) as of December
31, 2022, 2021 and 2020, respectively. Additionally, the consolidated statement of
comprehensive income includes expenses relating to self-insurance plans of $196,291
(9,761 thousand dollars), $188,413 (9,286 thousand dollars) and $164,356 (7,648 thousand
dollars) for the years ended December 31, 2022, 2021 and 2020, respectively. The
Company is required to maintain letters of credit on behalf of the subsidiary of $44,843
(2,280 thousand dollars) during 2022, $59,479 (2,900 thousand dollars) during 2021 and
$57,855 (2,900 thousand dollars) during 2020, 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.
80
(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.
(29) Financial income and costs
2022
2021
2020
Interest income
$
849,761
591,046
698,962
Income from interest in accounts
receivable
9,428
6,564
7,024
Foreign exchange gain, net
-
519,796
467,534
Financial income
859,189
1,117,406
1,173,520
Effects of valuation of derivative financial
instruments
(13,686)
(1,541)
(291)
Foreign exchange loss, net
(622,287)
-
-
Interest expense and financial expenses on
financial debt
(236,200)
(104,179)
(159,169)
Interest paid on lease
(22,269)
(31,848) (53,639)
Other financial expenses
(266,473)
(129,955)
(78,230)
Financial costs
(1,160,915)
(267,523)
(291,329)
Financial income, net
$
(301,726)
849,883
882,191
81
(30) Other income (expenses)
2022
2021
2020
Other income
Sale of scrap of biological assets, raw
materials, by-products and other
$
1,579,098
1,076,605
866,027
Bargain purchase gain of domestic
business acquisition (note 4)
-
-
90,889
Total other income
1,579,098
1,076,605
956,916
Other expenses
Cost of disposal of biological assets, raw
materials, by-products and other
(1,148,230)
(910,366)
(825,415)
Other
(396,526)
(489,018)
(494,028)
Total other expenses
(1,544,756)
(1,399,384)
(1,319,443)
Total other income (expenses), net
$
34,342
(322,779)
(362,527)
(31) Subsequent events
a)
Business acquisition agreement
On December 2, 2022, the Company announced that it reached an agreement to acquired
100% of the shares of Norson Holding S. of R.L. of C.V, a vertically integrated pork producer
and exporter, located in Sonora, Mexico.
As of the date of this report, this agreement is being reviewed by Mexican antitrust authorities
(COFECE). Once authorized, more details of the transaction will be disclosed.
b)
NYSE delisting reques
On March 28, 2023, Industrias Bachoco, S.A.B. de C.V. announced that its Board of
Directors, considering, among other things: the results of the tender offer concluded on
November 2022, by Edificio del Noroeste, S.A. de C.V., a vehicle controlled by the Robinson
Bours Family, which together with its affiliates and related parties in the aggregate, at this date
hold more than 97% of the outstanding shares issued by Bachoco; the low trading volume in
the United States of America; the relatively low participation in the American Depositary
Receipts ("ADRs") program and the benefits of maintaining the ADRs program against the
costs related thereto, resolved, consistent with the processes initiated more than a year ago, to
initiate the processes to delist its ADRs from the New York Stock Exchange ("NYSE") and
terminate its ADRs program.
In addition, it is anticipated that in the near future, Bachoco will take such actions as necessary
to deregister and terminate its obligations to prepare and file reports under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Neither the delisting from the
NYSE nor the termination of its registration under the Exchange Act is expected to affect the
continued listing of Bachoco's shares on the Bolsa Mexicana de Valores, S.A.B. de C.V.
and/or the registration of such shares with the Mexican Securities Commission (Comisión
Nacional Bancaria y de Valores).
82
As part of the delisting process announced on March 28 2023, Bachoco filed a Form 15F,
before the U.S. Securities and Exchange Commission (“SEC”) on April 24, 2023, with the
effect of immediately suspending its Exchange Act reporting obligations.
_DEPOSITARY BANK
BNY 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. International +1-201-680-6825
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
38010, México
T. (461) 618.35.00
_INVESTOR RELATIONS
María Guadalupe Jáquez
Andrea Guerrero
T. México (461) 618.35.55
inversionistas@bachoco.net