Overview
- Consolidated net sales grew by 10.4 percent to a record $20,065 million pesos.
- Consolidated operating margins and EBITDA were 13.9 percent and 16.4 percent, respectively, both with an expansion of 90 basis points.
- Majority net income reached a record $1,046 million pesos, 45.8 percent higher than 2016, with a margin of 5.2 percent, partially benefitted by a lower deferred tax liability in the United States.
Net Sales
Consolidated net sales grew by 10.4 percent to $20,065 million pesos, due mainly to price increases in Preserves and the improved performance of the Frozen division.
Institutional, wholesale and traditional were the best performing channels. By category, pasta, salsa and vegetables exceeded the average growth of the portfolio, driven by price increases and innovation initiatives, such as new product launches, marketing campaigns to promote responsible consumption, and the co-creation of new products with the end consumer.
In the Frozen division, net sales grew by 11.2 percent, due mainly to: i) solid performance in Nutrisa, driven by growth in same store sales and traffic; ii) diversification of sales channels in Helados Nestlé; and iii) the performance of recently launched products, such as the Danesa 33 varieties.
Exports grew by 6.2 percent as a result of the weak performance of volumes in the third quarter.
In 2017, the Preserves segment represented 80 percent of net sales, Frozen 14 percent and Exports the remaining 6 percent.
Gross Profit
Gross profit margin was 39.3 percent, a contraction of 60 basis points compared to the previous year, mainly due to the increase in costs denominated in pesos and dollars.
General Expenses
General expenses represented 25.9 percent of net sales, an improvement of 1.3 percentage points compared to the previous year, mainly explained by a decrease of 5.3 percentage points in the Frozen segment and greater cost absorption in Preserves.
Operating Income
Operating income rose to $2,790 million pesos, a growth of 18.1 percent over the previous year, with an expansion of 90 basis points in the operating margin to 13.9 percent. The above due to the improvement in Frozen together with lower general expenses in Preserves.
Comprehensive Financing Result
The net financing cost amounted to $497 million pesos, 6.8 percent higher than the previous year, derived from an additional $62.5 million pesos in net interest paid.
Investments in Associates
For 2017, investments in associates were $834 million pesos, 39.2 percent higher than in 2016 due mainly to a strong organic performance by MegaMex together with the extraordinary benefit explained earlier. Without this effect, investments in associates would have grown by 14.0 percent.
MegaMex Consolidated Income (100 percent)
In 2017, net sales rose to $12,168 million pesos, an increase of 12.3 percent compared to the previous year, driven by a solid performance in the guacamole and salsa categories across all sales channels.
For the same period, the gross margin reached 30.2 percent, 1.9 percentage points lower than the previous year due to a 15.4 percent cost increase, mainly attributed to avocado. The EBIT margin dropped 80 basis points to 11.9 percent and the EBITDA margin was 15.0 percent.
Consolidated Net Profit
The consolidated net margin for the year was 10.8 percent, 2.0 percentage points higher than in 2016, while the majority net margin improved 1.3 percentage points to reach 5.2 percent.
Earnings before Interest, Taxes, Depreciation, Amortization and other Non-Cash Charges (EBITDA)
Cumulative EBITDA amounted to $3,295 million pesos, representing growth of 17.0 percent, with a margin of 16.4 percent. The above represented an expansion of 90 basis points compared to 2016.
Capital Expenditure (CAPEX)
Capital expenditure for the year was $641 million pesos, destined mainly to the expansion of production capacity for salsas and to new freezers for the Frozen segment.
Financial Structure
As of December 31, 2017, the Company’s cash position rose to $1,485 million pesos, while debt ended at $6,351 million pesos. As a result of the debt restructuring process executed during the year, the average maturity of the Company’s debt stands at 6.0 years, of which 100 percent is denominated in Mexican Pesos, and 97 percent is long-term.
The consolidated net debt to EBITDA ration remained at 1.5 times, while net debt to consolidated shareholders’ equity was 0.28 times.
Cash Flow
At year end, cash flow from operations amounted to $2,043 million pesos, $658 million pesos higher than in 2016.