MESSAGE TO THE SHAREHOLDERS OF GRUPO HERDEZ,
Our results-based approach allowed us once again to hit new records in net sales and profits. We sold 20,065 million pesos, 10.4 percent more than the previous year while operating and net profits grew by 18.1 and 36.0 percent, respectively. EBITDA increased by 17.0 percent, with an expansion in the margin from 90 basis points to 16.4 percent.
In the Preserves segment, we reached 10.5 percent growth in net sales, with an outstanding performance in home-style salsas, pasta and tea. The success of the Herdez “Presume tu Salsa” (Show off your Salsa) campaign was particularly remarkable and one of the main catalysts of the performance in the salsa category.
This initiative is an example of our focus on innovation as a mechanism to strengthen ties with our consumers. Five new Herdez salsas—created to reclaim the essence of our country’s regional flavors through the recipes of our end consumers—will be launched in 2018.
Our resilience in the Frozen segment overcame some important challenges. We achieved growth in net sales of 11.2 percent and the EBITDA margin expanded 5.6 percentage points to 9.6 percent, benefitting primarily from the recovery in Nutrisa. Same store sales grew 9.0 percent and we sold 29.1 million liters of yogurt ice cream. At the same time, we sold 214 million Helados Nestlé popsicles, driven by product innovation and diversification of sales channels.
As a reflection of these results, we were chosen as the best supplier for the H-E-B chain and as the best supplier in Innovation in Marketing Plans by the National Wholesale Grocers Association (Asociación Nacional de Mayoristas Abarroteros).
These exceptional results have made Grupo Herdez’ financial situation the best in years. In May, we restructured our short-term debt with the successful issuance of stock certificates among a large number of investors. All current debt is denominated in pesos, the majority being long term and at fixed interest rates.
The cost-bearing debt less cash to consolidated EBITDA ratio was 1.5 times.
We invested 641 million pesos in fixed assets, being the most important projects the installation of the new line of bottled salsas in San Luis Potosí, which will enable us to face the growing demand in this category in the national and international market, and the investment in Helados Nestlé to strengthen distribution.
Return on equity reached 13.7 percent, 3.5 percentage points higher than in 2016, while return on invested capital was 12.2 percent, with a growth of 1.3 percentage points compared to the previous year.
Stock yield during 2017 was 20.2 percent, surpassing three-fold the 6.4 percent of the food and beverage sector on the Mexican stock market and 8.1 percent of the IPC index.
Focused on a Better World
This year, Mexicans demonstrated the enormous power of teamwork and Grupo Herdez joined in the reconstruction of Mexico, supporting earthquake victims along three main lines of action:
- We donated 100 tons of products and 19,000 liters of Nutrisa brand bottled water.
- We donated 9 million pesos to the Carlos Slim Foundation—which the Foundation matched peso for peso—towards the reconstruction of education and health centers.
- Our employees volunteered at collection centers and to rebuild schools and homes.
Saber Nutrir, meanwhile, continued to focus on mitigating food security problems in rural communities, directly benefitting more than 456 families and 25 communities in Estado de México and Chiapas, during the year.
One of the main objectives of 2017 was to guarantee access to drinking water, a basic necessity for proper family nutrition. To address this, we built secure water systems for 119 families in six Chiapas communities.
To help activate the generation of income in communities, we promoted the creation of ten groups for the commercialization of eggs, meat and vegetables.
In terms of the environment, our tuna boat, El Duque, was the first tuna vessel in the country to earn the Certificate of Environmental Quality awarded by the Secretariat of the Environment and Natural Resources (SEMARNAT, for its initials in Spanish).
To close, I would like to thank each and every one of the 9,523 employees who make up Grupo Herdez for their efforts and dedication, our suppliers, clients and consumers who choose us every day, and to you, our shareholders, for the confidence you have placed in us.
This year’s achievements remind us that we are a great team, share the same focus on results and are moved by an irrepressible collective spirit.
Kind regards,
Héctor Hernández-Pons Torres
Chairman of the Board and Chief Executive Officer
