Overview of performance in the year
In 2016, Grupo Herdez achieved a double-digit growth of 11.2% in net sales.
In the Preserves segment, the results were driven by a balanced combination of pricing and volume performance with most of the sales channels outperforming.
In the Frozen division, Helados Nestlé® continued to report double-digit growth while Nutrisa® reported a sequential improvement towards the end of the year.
At MegaMex, whose results are registered in the Equity Investment in Associates line, we registered a 37.9% growth, when compared with 2015.
Net Sales
Consolidated net sales totaled MXN 18,180 million in 2016, an 11.2% growth over the year ago period. In Mexico core, sales rose 9.8% to MXN 14,431 million, on a balanced combination of pricing and volume performance with commercial execution, optimized shopping experience at the point of sale, adequate pricing strategies and manufacturing efficiencies driving solid performance in the most important categories of the portfolio, including home-style salsas, mole, mayonnaise, pasta and tomato purée.
The Frozen division rose 21.1% to MXN 2,591 million mainly due to an optimized product portfolio, growth in all sales channels, new products and two additional months of sales at Helados Nestlé when compared to 2015.
Exports grew 7.3% affected by the inventory adjustments registered in the fourth quarter.
Gross Profit
Consolidated gross margin in the year was 39.9%, a decline of 1.6 percentage points compared to 2015, as a result of the impact of higher dollar-denominated costs that was partially offset by pricing actions implemented throughout the year.
Sales, General and Administrative Expenses (SG&A)
Consolidated SG&A as a proportion of net sales was 27.2%, compared to 26.2% registered in the year ago period. This is the result of 60 basis points increase in the Preserves division, mainly due to higher advertising and sales expenses. It is important to highlight that at the Frozen division, SG&A as a proportion of sales remained practically flat, as a result of higher advertising and distribution expenses at Helados Nestlé®, that were offset by the significant reduction of SG&A towards the end of the year at Nutrisa.
Earnings before Interest and Taxes (EBIT)
Consolidated EBIT totaled MXN 2,363 million with a margin of 13.0%, 60 basis points higher than in 2015. Excluding the impact of the write-off registered in 2015, EBIT margin would have declined 2.2 percentage points mainly due to gross margin pressure.
Comprehensive Financial Result
The Company registered a net financing cost of Ps. 465 million, practically unchanged when compared to 2015 benefited by the foreign exchange gain registered in the year.
Consolidated Net Income
Consolidated net income was MXN 1,593 million with a margin of 8.8%, 90 basis points higher than in 2015. Excluding the effect of the write-off, consolidated net income would have lowered 8.6%.
Mayority Net Income
Majority net income was MXN 717 million with a margin of 3.9%, 1.5 percentage points higher than in 2015.
Excluding the write-off, majority net income for the year would have decreased 14.5%, with a margin contraction of 1.2 percentage points.
Earnings before Interest, Taxes, Depreciation, Amortization and other non-cash items (EBITDA)
EBITDA totaled MXN 2,816 million, 2.5% lower than in the same period of last year. The margin declined 2.2 percentage points to 15.5% reflecting consolidated gross margin pressure and lower margins at the Frozen division.
Capital Expenditures (CAPEX)
Net CAPEX totaled MXN 985 million. Funds were mainly allocated to ongoing investments in the distribution center in Los Mochis, Sinaloa, new freezers for Helados Nestlé®, new stores at Nutrisa®, and the expansion of the salsa line in San Luis Potosí.
Cash Flow from Operations
Cash flow from operations totaled MXN 1,385 million.
Financial Structure
At December 31, 2016, the Company’s consolidated cash position totaled MXN 920 million. Interest-bearing liabilities were MXN 7,475 million, while excluding corporate debt was MXN 6,035 million.
Consolidated net debt to EBITDA was 2.3 times while net debt to consolidated stockholders’ equity was 0.46 times.
After year end, the Company secured derivative financial instruments to increased the fixed rate portion of the debt, that currently accounts for 89% of the total.