Mexico’s Grupo Bimbo eyes price hikes as inflation hurts margins

The logo of Mexican breadmaker Grupo Bimbo is pictured on a delivery truck in Monterrey, Mexico, August 8, 2018. REUTERS/Daniel Becerril

MEXICO CITY, April 26 (Reuters) – Mexican breadmaker Grupo Bimbo’s(BIMBOA.MX)first-quarter net profit rose, boosted by strong sales, but higher raw material costs cut into its margins.

Bimbo also said it was eyeing price increases to offset spiking supplier costs, especially in Mexico, where its executives have had preliminary talks with the government about bread prices, Chief Executive Daniel Servitje said on a conference call with analysts.

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With inflation running double the central bank’s target of 3% plus or minus one percentage point, Mexican President Andres Manuel Lopez Obrador said on Monday the government will present a plan to control inflation on food items in a week.

Mexican authorities are especially concerned about the prices of 24 key commodities, said Servitje.

Grupo Bimbo, which offers some 100 brands, posted a 17.8% increase in sales to 93.32 billion pesos, which it said was driven by a “favorable price mix.”

Bimbo on Monday signed an agreement to sell its confectionery business Ricolino for around $1.3 billion to chocolate maker Mondelez International Inc (MDLZ.O). read more

The sale will close between the third and fourth quarter of 2022 and profits from the transaction will be used to start new projects, especially in Mexico, Servitje said.

Bimbo said in its results statement the deal would help it focus on its bread and snacks businesses.

The Mexican firm also said it expects to announce a plan to improve sustainability on May 18.

The breadmaker suspended operations in its Ukrainian plant at the end of February to ensure the safety of its 150 workers there, citing the ongoing crisis with Russia. read more

($1 = 19.8911 pesos at end-March)

Additional reporting by Carolina Pulice and Kylie Madry; Editing by Christian Plumb and Chris Reese

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