Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA) Q2 2020 Earnings Conference Call - Final Transcript

Jul 28, 2020 • 10:00 am ET

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Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning. My name is. Hilda, and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2020 Industrias Bachoco Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you for your attention.

I will now turn the call over to Maria Jaquez. Maria, you may begin.

Executive
Maria Jaquez

Thank you, Hilda. Good morning and welcome to Bachoco's second quarter 2020 conference call. We released our financials yesterday after market close. If you need a copy of the release, please visit our website or request it from our Investor Relations department. This morning's call contains certain information that could be considered forward-looking statements regarding anticipated future events and performance. These statements reflect management's current beliefs, based on information currently available and are not guarantees of future performance and are based on our estimates and assumptions that are subject to risks and uncertainties, including those described in our Annual Report on Form 20-F, which could make our current results differ materially from the forward-looking statement discussed in this call. Except as required by applicable law, Industrias Bachoco undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Lastly, unless otherwise indicated, the amounts mentioned in this conference will be figures of 2020, with comparative figures for the same period of 2019 in Mexican pesos. As a reference, the exchange rate as of June 30, 2020 was 22.96 pesos per U.S. dollar. Here with me are our CEO, Mr. Rodolfo Ramos and our CFO, Mr. Daniel Salazar.

Now, I will give the call to Mr. Ramos.

Executive
Rodolfo Ramos Arvizu

Thank you, Maria, and good morning everyone. Like we stated yesterday in our press release, during the second quarter of 2020, we faced unprecedented challenges in our operations in Mexico and in United States, due to COVID-19 pandemic, making this an atypical quarter and mostly likely an atypical year. We observed two main effects related to confident measures both in Mexico and in the United States. On one hand, we saw a contraction in our foodservice channel as a result of the restaurants and hotels being closed or partially closed. On the other hand, we observed a contraction in the demand across our business line, mainly driven by the economic growth slowdown. Banxico estimates that the contraction in Mexico GDP for the second quarter was about 15%. The aforementioned conditions, in combination with the poultry industry growing at a normalized rate, created an oversupply conditions, which put pressure on prices for most of the quarter.

Regarding our cost of sales, prices of our main raw materials in dollar terms were at the low level for most part of the quarter. However 22% depreciation of the Mexican peso offset that benefit in our Mexican operation. This effect also had an impact in the consolidation of our U.S. operation results.

Regarding our