MEXICO – Grupo Bimbo, the Mexico-based bakery giant, plans to spend up to US$2bn on capital investment in 2023 in part to meet the demand for its products, Diego Gaxiola, the company’s CFO has said.

The investment is up by 67% from the US$1.2b spent on capital expenditure in capex in 2022, according to the CFO.

Gaxiola’s comments came as Bimbo reported its financial results for 2022 where the company reported rising net sales, operating income, and net majority income

Speaking on a conference call with analysts to discuss the figures, Gaxiola said that the higher capex is partly due to the carry-over effect of 2022 and also because of the opportunities the company is seeing to increase its capacity, given the demand for the products in the marketplace.

He added that increasing the capacity is 100% related to top-line growth. He also revealed that the company has been a little bit more aggressive in investing in some profitability projects that will not help the top line but will help to be more efficient and have an expansion on our margins.

In 2022, Bimbo generated net sales of MXN398.71bn (US$21.75bn), a 17.7% year on year rise which the company said was a record.

The Dempster’s brand owner pointed to “strong price/mix and volume across every region”. It also benefited from M&A, including the acquisition of UK business St.Pierre Groupe.

Inflation to have an impact on results

Gaxiola pointed out that the company expects inflation to continue to have “an impact on our results” in the first half of 2023 “which will gradually lessen and we will see tailwinds during the second half of the year.

He reflected that higher raw material costs meant Bimbo’s annual gross margin fell from 53.5% to 51.5% in 2022.

To navigate the inflation, Fred Penny, the outgoing head of Bimbo Bakeries USA suggests that at least for the first half of 2023, the company will undergo surgical promotion activities as well as invest in branding and marketing standpoint and innovation.

 “In the second half, and particularly in the fourth quarter of last year, we had the biggest pressure in commodities,” CEO Daniel Servitje said.

“Although commodities during the fourth quarter came down, we’re seeing the effect of the cost of commodities around six months before, let’s say around half of 2022 when commodities were still at record levels.”

However, Bimbo’s CEO commended the company’s resilience saying that “all-in-all” the company’s sales volumes had been “strong”.

Penny further indicated that the company had seen some impact in the US but insisted the group had managed to increase market shares.

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