¨
|
REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
¨
|
SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
Title of each class
|
Name of each exchange on which
registered
|
|
American
Depositary Shares, each representing twelve Series B
Shares.
|
New
York Stock Exchange
|
Large
accelerated filer ¨
|
Accelerated
filer x
|
Non-accelerated
filer ¨
|
U.S.
GAAP ¨
|
International
Financial Reporting
|
Other x
|
Standards
as issued by the International
|
||
Accounting
Standards Board ¨
|
Page
|
||||
PART
I
|
3
|
|||
ITEM
1.
|
IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
|
3
|
||
ITEM
2.
|
OFFER
STATISTICS AND EXPECTED TIMETABLE
|
3
|
||
ITEM
3.
|
KEY
INFORMATION
|
3
|
||
A.
|
Selected
Financial Data
|
3
|
||
B.
|
Capitalization
and Indebtedness
|
6
|
||
C.
|
Reasons
for the Offer and Use of Proceeds
|
6
|
||
D.
|
Risk
Factors
|
6
|
||
ITEM
4.
|
INFORMATION
ON THE COMPANY
|
12
|
||
A.
|
History
and Development of the Company
|
12
|
||
B.
|
Business
Overview
|
16
|
||
C.
|
Organizational
Structure
|
26
|
||
D.
|
Property,
Plants and Equipment
|
26
|
||
ITEM 4.A.
|
UNRESOLVED
STAFF COMMENTS
|
27
|
||
ITEM
5.
|
OPERATING
AND FINANCIAL REVIEW AND PROSPECTS
|
28
|
||
A.
|
Operating
Results
|
32
|
||
B.
|
Liquidity
and Capital Resources
|
40
|
||
C.
|
Research
and Development, Patents and Licenses, etc.
|
41
|
||
D.
|
Trend
Information
|
41
|
||
E.
|
Off-Balance
Sheet Arrangements
|
41
|
||
F.
|
Tabular
Disclosure of Contractual Obligations
|
41
|
||
G.
|
Safe
Harbor
|
41
|
||
ITEM
6.
|
DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES
|
42
|
||
A.
|
Directors
and Senior Management
|
42
|
||
B.
|
Compensation
|
48
|
||
C.
|
Board
Practices
|
48
|
||
D.
|
Employees
|
48
|
||
E.
|
Share
Ownership
|
49
|
ITEM
7.
|
MAJOR
STOCKHOLDERS AND RELATED PARTY TRANSACTIONS
|
49
|
||
A.
|
Major
Shareholders
|
49
|
||
B.
|
Related
Party Transactions
|
50
|
||
C.
|
Interests
of Experts and Counsel
|
51
|
||
ITEM
8.
|
FINANCIAL
INFORMATION
|
51
|
||
A.
|
Consolidated
Statements and Other Financial Information
|
51
|
||
B.
|
Significant
Changes
|
52
|
||
ITEM
9.
|
THE
OFFER AND LISTING
|
53
|
||
A.
|
Offer
and Listing Details
|
53
|
||
B.
|
Plan
of Distribution
|
55
|
||
C.
|
Markets
|
55
|
||
D.
|
Selling
Shareholders
|
57
|
||
E.
|
Dilution
|
57
|
||
F.
|
Expenses
of the Issue
|
57
|
||
ITEM
10.
|
ADDITIONAL
INFORMATION
|
57
|
||
A.
|
Share
Capital
|
57
|
||
B.
|
Memorandum
and Articles of Association
|
57
|
||
C.
|
Material
Contracts
|
66
|
||
D.
|
Exchange
Controls
|
66
|
||
E.
|
Taxation
|
67
|
||
F.
|
Dividends
and Paying Agents
|
72
|
||
G.
|
Statement
by Experts
|
72
|
||
H.
|
Documents
on Display
|
72
|
||
I.
|
Subsidiary
Information
|
72
|
||
ITEM
11.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
73
|
||
ITEM
12.
|
DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES
|
74
|
||
A.
|
Debt
Securities
|
74
|
||
B.
|
Warrants
and Rights
|
74
|
||
C.
|
Other
Securities
|
75
|
||
D.
|
American
Depository Receipts
|
75
|
PART
II
|
75
|
|||
ITEM
13.
|
DEFAULT,
DIVIDEND ARREARAGES AND DELINQUENCIES
|
75
|
||
ITEM
14.
|
MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
|
75
|
||
ITEM
15.
|
CONTROLS
AND PROCEDURES
|
75
|
||
ITEM
16.
|
[RESERVED]
|
77
|
||
ITEM
16.A.
|
AUDIT
COMMITTEE FINANCIAL EXPERT
|
77
|
||
ITEM
16.B.
|
CODE
OF ETHICS
|
77
|
||
ITEM
16.C.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
77
|
||
ITEM
16.D.
|
EXEMPTIONS
FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
|
78
|
||
ITEM
16.E.
|
PURCHASES
OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS
|
78
|
||
ITEM
16.F.
|
CHANGES
IN REGISTRANT’S CERTIFYING ACCOUNTANT
|
78
|
||
ITEM
16.G.
|
CORPORATE
GOVERNANCE
|
78
|
||
PART
III
|
82
|
|||
ITEM
17.
|
FINANCIAL
STATEMENTS
|
82
|
||
ITEM
18.
|
FINANCIAL
STATEMENTS
|
82
|
||
ITEM
19.
|
EXHIBITS
|
82
|
||
INDEX
OF EXHIBITS
|
82
|
|
·
|
economic,
weather and political conditions;
|
|
·
|
raw
material prices;
|
|
·
|
competitive
conditions; and
|
|
·
|
demand
for chicken, eggs, turkey, balanced feed and
swine.
|
ITEM
1.
|
Identity
of Directors, Senior Management and
Advisers
|
ITEM
2.
|
Offer
Statistics and Expected Timetable
|
ITEM
3.
|
Key
Information
|
A.
|
Selected
Financial Data
|
|
·
|
In
preparing the Consolidated Financial Statements, we followed Mexican FRS,
which differ in certain respects from U.S. GAAP. Note 21 to the
Consolidated Financial Statements provides a description of the main
differences between Mexican FRS and U.S. GAAP as they apply to us; a
reconciliation from Mexican FRS to U.S. GAAP of total stockholders’
equity, net income, and a condensed statement of cash flows under U.S.
GAAP as of December 31, 2007 and 2008 and for the years ended
December 31, 2006, 2007 and 2008. Our financial statements
were prepared pursuant to Bulletin B-10, as superseded by Mexican FRS
B-10, as well as Bulletin B-12, as superseded by Mexican FRS B-2, both
issued by the Mexican Institute of Public Accountants. See the summary on
Mexican FRS B-10 in “Presentation of information”
above.
|
As of and for the year ended December 31,
|
||||||||||||||||||||||||
2004
|
2005
|
2006
|
2007
|
2008
|
2008(2)
|
|||||||||||||||||||
Income Statement Data
|
(in millions of constant pesos as of December 31, 2007 for years 2004 – 2007 and in
millions of nominal pesos for year 2008)(1)
|
(millions of U.S.
dollars)(1)
|
||||||||||||||||||||||
Mexican
FRS:
|
||||||||||||||||||||||||
Net
revenues
|
Ps. | 14,836.7 | Ps. | 15,617.7 | Ps. | 15,551.0 | Ps. | 18,219.6 | Ps. | 20,125.3 | 1,456.8 | |||||||||||||
Cost
of sales
|
12,032.4 | 11,234.2 | 12,053.0 | 14,477.9 | 17,482.5 | 1,265.5 | ||||||||||||||||||
Gross
profit
|
2,804.3 | 4,383.5 | 3,498.0 | 3,741.8 | 2,642.9 | 191.3 | ||||||||||||||||||
Operating
income
|
952.4 | 2,378.1 | 1,425.4 | 1,496.3 | 230.1 | 16.7 | ||||||||||||||||||
Comprehensive
financing income (loss)
|
(79.8 | ) | (74.0 | ) | 61.4 | 19.1 | (1,,369.2 | ) | (99.1 | ) | ||||||||||||||
Majority
net income (loss)
|
788.3 | 1,908.4 | 906.2 | 1,270.9 | (879.0 | ) | (63.6 | ) | ||||||||||||||||
Majority
net income (loss) per Share(3)
|
1.3 | 3.2 | 1.5 | 2.1 | (1.5 | ) | (0.1 | ) | ||||||||||||||||
Majority
net income (loss) per ADS(4)
|
15.8 | 38.2 | 18.1 | 25.4 | (17.5 | ) | (1.3 | ) | ||||||||||||||||
Dividends
per Share(5)
|
0.46 | 0.44 | 0.61 | 0.59 | 0.59 | 0.05 | ||||||||||||||||||
Weighted
average Shares outstanding (thousands)
|
599,260 | 599,694 | 599,571 | 600,000 | 600,000 | 600,000 | ||||||||||||||||||
Statement
of Financial Position Data
|
||||||||||||||||||||||||
Mexican
FRS:
|
||||||||||||||||||||||||
Cash
and cash equivalents
|
Ps. | 2,608.4 | Ps. | 3,419.9 | Ps. | 3,583.9 | Ps. | 3,039.9 | Ps. | 1,998.2 | 144.6 | |||||||||||||
Total
assets
|
15,008.6 | 16,530.9 | 17,559.2 | 19,116.4 | 19,455.0 | 1,408.2 | ||||||||||||||||||
Short-term
debt(6)
|
111.2 | 100.0 | 9.8 | 58.8 | 234.2 | 17.0 | ||||||||||||||||||
Long-term
debt
|
80.9 | 56.0 | 35.5 | 50.8 | 391.7 | 28.3 | ||||||||||||||||||
Total
stockholders’ equity
|
12,132.7 | 13,502.7 | 14,102.9 | 15,127.2 | 14,079.4 | 1,019.1 | ||||||||||||||||||
Capital
Stock
|
2,294.6 | 2,294.6 | 2,294.9 | 2,294.9 | 2,294.9 | 166.1 | ||||||||||||||||||
Selected
Operating Data
|
||||||||||||||||||||||||
Sales
volume (thousands of tonnes):
|
||||||||||||||||||||||||
Chicken
|
733.0 | 773.0 | 773.7 | 837.2 | 878.1 | |||||||||||||||||||
Eggs
|
138.1 | 140.6 | 143.4 | 147.8 | 143.6 | |||||||||||||||||||
Swine
and Others
|
9.1 | 9.6 | 8.9 | 16.1 | 18.8 | |||||||||||||||||||
Balanced
Feed
|
320.7 | 389.6 | 484.4 | 438.8 | 370.7 | |||||||||||||||||||
Margins
|
||||||||||||||||||||||||
Gross
margin (%)
|
18.9 | % | 28.1 | % | 22.5 | % | 20.5 | % | 13.1 | % | ||||||||||||||
Operating
margin (%)
|
6.4 | % | 15.2 | % | 9.2 | % | 8.2 | % | 1.1 | % | ||||||||||||||
Consolidated
net margin (%)
|
5.3 | % | 12.2 | % | 5.8 | % | 7.0 | % | (4.4 | )% | ||||||||||||||
Total
employees
|
18,896 | 20,432 | 21,035 | 23,088 | 23,248 |
(1)
|
Except
per share and per ADS amounts and operating
data.
|
(2)
|
Peso
amounts have been translated into U.S. dollars, solely for the convenience
of the reader, at the rate of Ps.13.815 per U.S.
dollar.
|
(3)
|
Net
income per share has been computed based on the weighted average number of
common Shares outstanding.
|
(4)
|
Net
income per ADS has been computed by multiplying net income per share by
twelve, to reflect the ratio of twelve Shares per
ADS.
|
(5)
|
Dividends
per share have been computed by dividing the total amount of dividends
paid by the weighted average Shares
outstanding.
|
(6)
|
Includes
notes payable to banks and current portion of long term
debt.
|
Exchange Rate(1)
(in current pesos per U.S. dollar)
|
||||||||||||||||
Year Ended December 31,
|
High
|
Low
|
Average(2)
|
Year
End
|
||||||||||||
2004
|
11.64 | 10.81 | 11.29 | 11.15 | ||||||||||||
2005
|
11.41 | 10.41 | 10.89 | 10.63 | ||||||||||||
2006
|
11.46 | 10.43 | 10.91 | 10.80 | ||||||||||||
2007
|
11.27 | 10.67 | 10.93 | 10.92 | ||||||||||||
2008
|
13.94 | 9.92 | 11.14 | 13.83 |
(1)
|
The
exchange rates are the noon buying rates in New York City for cable
transfers in pesos as certified for customs purposes by the Federal
Reserve Bank of New York (the “noon buying
rate”).
|
(2)
|
Average
of month-end rates for each period
shown.
|
Exchange Rate(1)
(in current pesos
per U.S. dollar)
|
||||||||
Period
|
High
|
Low
|
||||||
December 2008
|
13.83 | 13.09 | ||||||
January 2009
|
13.33 | 14.33 | ||||||
February 2009
|
15.09 | 14.13 | ||||||
March 2009
|
15.41 | 14.02 | ||||||
April 2009
|
13.89 | 13.05 | ||||||
May 2009
|
13.82 | 12.88 |
(1)
|
The
exchange rates are the noon buying rates in New York City for cable
transfers in pesos as certified for customs purposes by the Federal
Reserve Bank of New York.
|
B.
|
Capitalization
and Indebtedness
|
C.
|
Reasons
for the Offer and Use of Proceeds
|
D.
|
Risk
Factors
|
|
·
|
In
2004, México’s GDP increased by 4.4% and the inflation rate was
5.19%.
|
|
·
|
In
2005, México’s GDP improved and increased by 3.0%, and the inflation rate
was 3.33%.
|
|
·
|
In
2006, GDP increased by 4.8% while the inflation rate was
4.05%.
|
|
·
|
In
2007, GDP increased by 3.3% and the inflation rate was
3.8%.
|
|
·
|
In
2008, GDP increased by 1.3% and the inflation rate was
6.5%.
|
|
·
|
In
2004, the Mexican peso appreciated with respect to the U.S. dollar by 0.8%
at year end, whereas the average value of the Mexican peso against the
U.S. dollar was 4.4% lower, since the peso appreciated at the end of the
year.
|
|
·
|
In
2005, the Mexican peso appreciated with respect to the U.S. dollar by 4.9%
at the end of the year and also the average value of the Mexican peso was
3.6% higher.
|
|
·
|
In
2006, the Mexican peso was reasonably stable in its peso-dollar exchange
rate with a final depreciation of 1.6%, compared to the end of
2005. The average value of the Mexican peso was 0.10% lower
than the average of 2005.
|
|
·
|
In
2007, the Mexican peso remained reasonably stable in its peso-dollar
exchange rate. According with the U.S. Federal Reserve Bank,
the peso was depreciated with respect to the U.S. dollar by 1.1% at
year-end. The average value of the Mexican peso was 0.21% lower
than the average of 2006.
|
|
·
|
In
2008, the Mexican peso was highly volatile during the year in its
peso-dollar exchange rate with a final depreciation of 21.0%, compared to
the end of 2007. The average value of the Mexican peso was 1.9%
lower than the average in 2007.
|
|
·
|
the
Robinson Bours family were to sell substantial amounts of their Shares,
whether
|
|
o
|
directly,
or
|
|
o
|
indirectly,
through the Mexican trusts through which they hold Shares;
or
|
|
·
|
the
perception arose that such a sale could
occur.
|
|
·
|
we
file a registration statement with the Securities and Exchange Commission
with respect to that future issuance of Shares;
or
|
|
·
|
the
offering qualifies for an exemption from the registration requirements of
the Securities Act.
|
ITEM
4.
|
Information
on the Company
|
A.
|
History
and Development of the Company
|
|
·
|
preparing
balanced feed;
|
|
·
|
breeding,
hatching and growing chickens; and
|
|
·
|
processing,
packaging and distributing chicken
products.
|
Bachoco Sales Volume
(in thousands of tonnes)
|
||||||||||||||||||||
Year Ended December 31,
|
||||||||||||||||||||
2004
|
2005
|
2006
|
2007
|
2008
|
||||||||||||||||
Chicken
|
733.0 | 773.0 | 773.7 | 837.2 | 878.1 | |||||||||||||||
Eggs
|
138.1 | 140.6 | 143.4 | 147.8 | 143.6 | |||||||||||||||
Swine(1)
|
9.1 | 9.6 | 8.9 | 16.1 | 18.8 | |||||||||||||||
Balanced
Feed
|
320.7 | 389.6 | 484.4 | 438.8 | 370.7 |
|
·
|
Increased market penetration
through expanded distribution. We have an extensive
distribution network, supported by our own transportation fleet, superior
knowledge of existing wholesale channels and strategically located cold
storage warehouses and facilities. We have substantially
increased our distribution routes during the past years. We
plan to continue to develop and improve our distribution network and
systems in every product category and throughout our expanded geographic
coverage in México.
|
|
·
|
Increased service and market
responsiveness. We seek to remain a leader in the
Mexican poultry market by maintaining high standards of customer service
and continuing to be responsive to the changing needs of varying market
segments. As part of this strategy, we have structured our
operations in such a way as to enable us to vary the size, weight, color
and presentation of our chicken products, depending upon the particular
demands of the market segment. In addition, we have
decentralized order and sales services from our headquarters to our cold
storage warehouses and facilities, which serve as midpoints in the
distribution chain to wholesalers and local customers. This
strategy allows us to stay closer to our customer base and to better
cultivate growing customer segments, such as food-service operators,
supermarkets and food wholesale
clubs.
|
|
·
|
Low-cost production and
operating efficiency. We are among México’s lowest-cost
producers and distributors of chicken, due in part to economies of scale
and vertically integrated operations. We pursue on-going
programs to increase operating efficiencies and reduce operating
costs.
|
|
·
|
Continued brand
differentiation. We have developed a brand image for
premium fresh chicken and table eggs in México. Building on the
success of our branded products to date, we seek to continue to promote
our brand name through billboards, packaging, special publicity campaigns
and through development of brand loyalty among wholesale and retail
distributors. At the end of 2007 and beginning of 2008, we
successfully launched Bachoco’s new
image.
|
|
·
|
In
2006, we made capital expenditures of Ps.856.2 million net, with which
we:
|
|
o
|
Continued
to update our transportation fleet, farms, processing plants and feed
mills, which expenditures continue to the
present;
|
|
o
|
Increased
capacity, mainly for the production of live chickens
and;
|
|
o
|
Building
of a new feed mill in the state of
Aguascalientes.
|
|
·
|
In
2007, we made capital expenditures of Ps.991.7 million net, with which
we:
|
|
o
|
Began
the construction of the new complex in the state of
Sonora.
|
|
o
|
Finished
the construction of our new feed mill in the state of
Aguascalientes;
|
|
o
|
Increased
capacity in the production of live
chicken;
|
|
o
|
Increased
capacity of the secondary processor at some of our processing plants;
and
|
|
o
|
Updated
our transportation fleet, processing plants and feed
mills.
|
|
·
|
In
2008, we made capital expenditures of Ps. 1,098.8 million, with which
we:
|
|
o
|
Increased
capacity and implemented new technology in the processing plants located
in Celaya and Culiacán.
|
|
o
|
Increased
chicken capacity in farms located in Mérida and
Veracruz.
|
|
o
|
Finished
the construction of new farms located in Ciudad Obregón and
Hermosillo.
|
|
o
|
Began
the construction of new farms located in the state of
Chiapas.
|
|
o
|
Updated
our transportation fleet.
|
B.
|
Business
Overview
|
2004
|
2005
|
2006
|
2007
|
2008
|
||||||||||||||||
Chicken
|
2,390 | 2,498 | 2,592 | 2,683 | 2,853 | |||||||||||||||
Beef
|
1,543 | 1,559 | 1,602 | 1,628 | 1,673 | |||||||||||||||
Swine
|
1,150 | 1,088 | 1,102 | 1,116 | 1,149 |
|
“Live” chicken is
delivered alive to small independent slaughtering operations or to
wholesalers that contract with independent slaughtering operations for
processing. The freshly slaughtered chicken is then sold to
chicken shops and other specialized retailers for sale to consumers and in
some areas is sold directly to consumers by the
slaughterhouse. According to the UNA, live chicken accounted
for approximately 27% by volume of the chicken sold by producers in
México.
|
|
“Public Market” chicken
is a whole broiler presented either uneviscerated or eviscerated,
generally sold within 48 hours after slaughter in public markets
throughout México, but primarily concentrated in the México City
metropolitan region. According to the UNA, public market
chicken accounts for 21% by volume of the chicken sold by producers in
México.
|
|
“Rotisserie” chicken is
a whole broiler presented eviscerated and ready to
cook. Rotisserie chicken is sold by wholesalers and directly by
producers to small shops, stands (rosticerías or asaderos) and
supermarkets, which cook the chicken and sell it whole and freshly cooked
to the end-consumer, providing an economical form of
fast-food. According to the UNA, rotisserie chicken accounts
for 26% by volume of the chicken sold by producers in
México.
|
|
“Supermarket Broiler”
chicken is a fresh whole broiler presented with the edible viscera
packed separately. In most cases, it is sold directly by
producers to supermarkets and, in some regions, to other independent food
shops. Mexican consumers’ preference for freshness requires
regular deliveries of chicken to supermarkets and other food
shops. According to information provided by the UNA, the
supermarket broiler chicken accounted by the 12% of the volume of the
chicken sold by producers in
México.
|
|
“Chicken Parts” refers
to cut-up fresh chicken parts sold wrapped in trays or in bulk principally
to supermarket chains, the fast-food industry and other institutional
food-service providers. Producers generally sell directly to
the supermarket chains and deliver the chicken directly to the
outlet. Sales to the institutional market often require
customized cutting and presentation. According to the UNA,
chicken parts accounts for 10% of the chicken volume sold by producers in
México.
|
|
“Value-added Products”
refers mainly to cut up fresh chicken parts with value-added
treatment like marinating, breading and individual quantity frozen, sold
mainly wrapped in trays principally to supermarkets and other
institutional chains. Producers generally sell directly to the
supermarket chains and deliver the chicken directly to the
store. Sales to the institutional market often require
customized cutting and presentation. According to the UNA,
these products account for 4% of the chicken volume sold by producers in
2008.
|
Year
Ended December 31,
|
||||||||||||||||||||||||||||||||||||||||
2004
|
2005
|
2006
|
2007
|
2008
|
||||||||||||||||||||||||||||||||||||
Volume
|
% of
Total
|
Volume
|
% of
Total
|
Volume
|
% of
Total
|
Volume
|
% of
Total
|
Volume
|
% of
Total
|
|||||||||||||||||||||||||||||||
(thousands
of tonnes, except percentages)
|
||||||||||||||||||||||||||||||||||||||||
Public
Market and Rotisserie
|
319.1 | 43.5 | 349.6 | 45.2 | 344.3 | 44.5 | 371.0 | 44.3 | 402.1 | 45.8 | ||||||||||||||||||||||||||||||
Supermarket
Broiler, Chicken Parts and Other(1)
|
219.6 | 30.0 | 219.1 | 28.4 | 228.2 | 29.5 | 245.1 | 29.3 | 239.0 | 27.2 | ||||||||||||||||||||||||||||||
Live
|
194.4 | 26.5 | 204.3 | 26.4 | 201.2 | 26.0 | 221.2 | 26.4 | 237.0 | 27.0 | ||||||||||||||||||||||||||||||
Total
|
733.1 | 100.0 | % | 773.0 | 100.0 | % | 773.7 | 100.0 | % | 837.2 | 100.0 | % | 878.1 | 100.0 | % |
(1)
|
“Other”
comprises sales of value-added poultry products, viscera and other
products.
|
|
·
|
During 2004, we finished our
projects to expand the facilities at our Northwest Complex and Peninsula
Complex.
|
|
·
|
In
2005, we acquired assets of Grupo Sanjor, a private producer of chicken
and table eggs located in the Yucatán
Peninsula.
|
|
·
|
At the end of 2006, we acquired
assets of “Del Mezquital,” a private broiler producer located in the state
of Sonora.
|
|
·
|
At the beginning of 2007, we
reached a business agreement with “Grupo Libra,” a chicken producer
located in northeast México. We also started to build a new
complex in Hermosillo City.
|
|
·
|
In
2008, we finished several projects to expand our facilities in Mérida and
continued increasing our production in Northern México, specifically in
the city of Hermosillo and in the state of
Chiapas.
|
|
·
|
Live
Chicken – We sell live chicken primarily to wholesalers, which
contract out the processing to independent slaughterhouses and then resell
the processed product as public market chicken. To a lesser
extent, we sell to small, independent slaughterhouses in the southeast,
where live chicken continues to be the standard for
consumption. Additionally, customers can purchase live chicken
directly from us on our farms. However, we believe that the
market as a whole is moving slowly away from live
chicken.
|
|
·
|
Public
Market Chicken – We believe that we are the largest producer of
public market chicken in México. We regularly sell to more than
50 of the approximately 200 whole fresh chicken wholesalers operating in
the México City region. Most of our wholesale customers rely
primarily on us for public market chicken, although we have no exclusive
supply agreements. Our principal focus in this market has been
to provide superior distribution and service to selected wholesalers in
order to maintain and further develop loyalty. Public market
chicken is ordinarily sold to consumers without any packaging or other
identification of the producer, but our distribution system encourages
wholesalers to sell to retailers in containers from our own “Bachoco”
trailers, reinforcing our reputation for freshness and efficiency of
service and fostering brand loyalty among retailers. We believe
we have developed excellent relationships with the wholesalers we
serve.
|
|
·
|
Rotisserie
Chicken –We sell rotisserie chicken directly to rosticerías, asaderos and
supermarkets. We attribute the growth in our sales of
rotisserie chicken in large part to the rapid growth of the market for
freshly cooked chicken sold by rosticerías and asaderos and in the
rotisserie sections of supermarkets. We expect this market to
continue to grow because of an ever-increasing consumer demand for
convenient, low-priced and high-quality fast food. Success in
supplying rotisserie chicken depends on consistency and good service, and
only larger producers with more modern processing facilities and
distribution capacity can compete in this market. We expect to
expand sales of rotisserie chicken by leveraging our increasingly
developed transportation and distribution
network.
|
|
·
|
Supermarket
Broiler Chicken – We sell supermarket broilers, as well as chicken
parts and eggs, directly to the principal supermarkets, convenience store
chains and wholesale clubs in México. In order to build
consumer loyalty for our supermarket broiler chicken, we emphasize our
brand image as well as our superior service, reinforced by frequent
delivery to ensure freshness. Each chain negotiates purchases
centrally, but we deliver directly to every point of sale, ordinarily at
least once every 48 hours. We believe that we lead the market
in frequency of deliveries to
supermarkets.
|
|
·
|
Chicken
Parts – We sell chicken parts principally to supermarkets, using
the same marketing strategy that we use for supermarket broiler
chicken. We are also an important supplier of chicken parts to
the growing franchise fast-food and institutional food-service
industries. We continue to develop custom-cutting processes to
help meet demand from fast-food and institutional customers for a wider
variety of chicken parts.
|
|
·
|
Value-Added
Products –Mexican consumers have a greater preference for fresh
chicken than their U.S. counterparts. Frozen, heat and serve
and other further processed poultry products make up only a small
proportion of total Mexican poultry consumption today. Demand
for these kinds of fresh products is growing rapidly. The
potential for substantial growth in this market is large and we believe
that our distribution network, our large market share for supermarket
chicken sales, our brand name and our experience in a wide range of
existing Mexican distribution channels will be important competitive
strengths in this area.
|
|
·
|
In
January 2003, the Mexican government announced a temporary safeguard
to stabilize the flow of poultry imports, which
included an initial tariff of 98.8% on imports of chicken leg
quarters. This safeguard will decrease annually until it
reaches 0% in 2008. All other chicken products from the United
States, including whole chicken, chicken parts other than leg quarters and
eggs, remain tariff-free.
|
|
·
|
According
to the safeguard, for 2007, the tariff in effect was 19.8% for imports of
chicken leg quarters above the quota of 104 thousand
tonnes.
|
|
·
|
Starting
on January 1, 2008, the safeguard was phased out. This
allows U.S. producers to export any amount of chicken leg quarters free of
tariffs to México.
|
C.
|
Organizational
Structure
|
Percentage Equity Interest
|
||||||||||||
2006
|
2007
|
2008
|
||||||||||
Acuícola
Bachoco, S.A. de C.V.
|
100 | 100 | 100 | |||||||||
Aviser,
S.A. de C.V.
|
100 | 100 | 100 | |||||||||
Bachoco,
S.A. de C.V. (“BSACV”)
|
100 | 100 | 100 | |||||||||
Bachoco
Comercial, S.A. de C.V
|
- | 100 | 100 | |||||||||
Campi
Alimentos, S.A. de C.V.
|
100 | 100 | 100 | |||||||||
Huevo
y Derivados, S.A. de C.V.
|
97 | 97 | 97 | |||||||||
Operadora
de Servicios de Personal, S.A. de C.V.
|
100 | 100 | 100 | |||||||||
Pecuarius
Laboratorios, S.A. de C.V.
|
64 | 64 | 64 | |||||||||
Secba,
S.A. de C.V.
|
100 | 100 | 100 | |||||||||
Sepetec,
S. A. de C.V.
|
100 | 100 | 100 | |||||||||
Servicios
de Personal Administrativo, S.A. de C.V.
|
100 | 100 | 100 | |||||||||
Induba
Pavos, S.A. de C.V.
|
100 | 100 | 100 |
D.
|
Property,
Plant and Equipment
|
Type
|
Number
|
|||
Chicken
breeding farms
|
168 | |||
Broiler
grow-out farms
|
466 | |||
Broiler
processing plants
|
9 | |||
Egg
incubation plants
|
21 | |||
Egg
production farms
|
101 | |||
Swine
breeding farms
|
1 | |||
Swine
grow-out farms
|
12 | |||
Feed
mills
|
17 | |||
Further
process plants
|
3 |
ITEM
4.A.
|
Unresolved
Staff Comments
|
ITEM
5.
|
Operating
and Financial Review and Prospects
|
|
·
|
In
December 2006, the Company started operations at a new complex in the
state of Sonora by acquiring the farms from and leasing the processing
plant and feed mill of “Del Mezquital Alimentos” in accordance with our
strategic plans.
|
|
·
|
In
February 2007 and December 2007, the Company reached a business
agreement with “Grupo Libra” and “Grupo AGRA” respectively as described
below:
|
|
a)
|
Grupo
Libra is a company located in northeast México. The agreement
establishes a lease for the use of their facilities, which included
breeders and chicken farms with a capacity of approximately 3.0 million
chickens per cycle, along with a slaughter plant, and a processing
center. In addition, Bachoco acquired all of Grupo Libra’s
inventories and brands.
|
|
b)
|
Grupo
Agra is an eggs producing company located in the states of Nuevo Leon and
Coahuila in Northeast Mexico. The agreement provides for
leasing of their facilities, which include laying hens farms with a
capacity of approximately 1.0 million hens, a processing table eggs plant,
distribution centers and the Agra brands. In addition, we
acquired all their inventories.
|
A.
|
Operating
Results
|
Year Ended December 31,
|
||||||||||||
2006
|
2007
|
2008
|
||||||||||
(percentage of net revenues)
|
||||||||||||
Net
revenues
|
100.0 | % | 100.0 | % | 100.0 | % | ||||||
Cost
of sales
|
(77.5 | ) | (79.5 | ) | (86.9 | ) | ||||||
Gross
profit
|
22.5 | 20.5 | 13.1 | |||||||||
Selling,
general and administrative expenses
|
(13.3 | ) | (12.3 | ) | (12.0 | ) | ||||||
Operating
income
|
9.2 | 8.2 | 1.1 | |||||||||
Comprehensive
financing income (loss)
|
0.4 | 0.1 | (6.8 | ) | ||||||||
Taxes
|
(3.9 | ) | (1.7 | ) | 1.4 | |||||||
Net
income (loss)
|
5.8 | 7.0 | (4.4 | ) |
Year Ended December 31,
|
||||||||||||
2006
|
2007
|
2008
|
||||||||||
(percentage of net revenues)
|
||||||||||||
Chicken
|
77.6 | % | 77.6 | % | 76.9 | % | ||||||
Feed
|
9.0 | % | 8.0 | % | 7.3 | % | ||||||
Eggs
|
9.2 | % | 9.6 | % | 10.5 | % | ||||||
Swine
and Others
|
4.2 | % | 4.8 | % | 5.3 | % | ||||||
Total
|
100.0 | % | 100.0 | % | 100.0 | % |
§
|
Defined
contribution plan: This fund consists of employee and Company
contributions. The employee contribution percentage ranges from
1.0% to 5.0%. The Company contribution ranges from 1.0% to 2.0%
in the case of employees with less than 10 years’ seniority, and the same
contribution percentage as the employee (up to 5.0%) when the employee has
more than 10 years’ seniority.
|
§
|
Defined
benefit plan: This fund consists solely of Company
contributions and covers the Company's labor obligations with each
employee.
|
B.
|
Liquidity
and Capital Resources
|
C.
|
Research
and Development, Patents and Licenses,
etc.
|
D.
|
Trend
Information
|
E.
|
Off-Balance
Sheet Arrangements
|
F.
|
Tabular
Disclosure of Contractual
Obligations
|
|
•
|
As
of December 31, 2008 we have Ps. 234.2 million in notes payable to
banks and current installments of long term
debt.
|
|
•
|
Long
term debt to banks, as of December 31, 2008, was Ps.391.7 million
outstanding (excluding current portion), which is higher than Ps. 50.8
million in the same date of 2007. The weighted average interest
rates on long term debt for 2007 and 2008 were 7.8% and 12.9%
respectively. See Note 9 of the Consolidated Financial
Statements for more detail.
|
Payments Due by Period
(millions of constant pesos as of December 31, 2008)
|
|||||||||||||||||
Contractual Obligations
|
Total
|
2010
|
2011
|
2012
|
2013
|
||||||||||||
Long-term debt
|
Ps.
|
391.6
|
360.9 | 15.3 | 11.5 |
Ps.
|
3.9
|
||||||||||
Operating
leases
|
Ps.
|
227.8
|
70.5 | 69.0 | 68.2 |
Ps.
|
20.1
|
G.
|
Safe
Harbor
|
ITEM
6.
|
Directors,
Senior Management and Employees
|
A.
|
Directors
and Senior Management
|
Name
|
Position
|
Years as a
Member of the
Board of
Directors
|
||
Enrique
Robinson Bours Almada
|
Honorary
Chairman of the board
|
55
|
||
Mario
Javier Robinson Bours Almada
|
Life
Honorary Shareholder Director
|
55
|
||
Francisco
Javier R. Bours Castelo
|
Chairman
of the Board and Proprietary Shareholder Director
|
27
|
||
Eduardo
Rojas Crespo
|
Secretary
of the Board
|
1
|
||
Jose
Gerardo Robinson Bours Castelo
|
Proprietary
Shareholder Director
|
1
|
||
Juan
Bautista Salvador Robinson Bours
|
Proprietary
Shareholder Director
|
55
|
||
Jesús
Enrique Robinson Bours Muñoz
|
Proprietary
Shareholder Director
|
15
|
||
Jesús
Rodolfo Robinson Bours Muñoz
|
Proprietary
Shareholder Director
|
7
|
||
Arturo
Bours Griffith
|
Proprietary
Shareholder Director
|
15
|
||
Octavio
Robinson Bours
|
Proprietary
Shareholder Director
|
12
|
||
Ricardo
Aguirre Borboa
|
Proprietary
Shareholder Director
|
15
|
||
José
Eduardo Robinson Bours Castelo
|
Alternate
Director
|
15
|
||
Juan
Salvador Robinson Bours Martínez
|
Alternate
Director
|
15
|
||
José
Francisco Bours Griffith
|
Alternate
Director
|
15
|
||
Guillermo
Pineda Cruz
|
Alternate
Director
|
15
|
||
Avelino
Fernández Salido
|
Independent
Director
|
6
|
||
Humberto
Schwarzbeck Noriega
|
|
Independent
Director
|
|
6
|
|
·
|
Enrique
Robinson Bours Almada, Mario Javier Robinson Bours Almada and Juan
Bautista Salvador Robinson Bours are
brothers.
|
|
·
|
Francisco
Javier R. Bours Castelo, José Gerardo Robinson Bours Castelo and José
Eduardo Robinson Bours Castelo are sons of Mario Javier Robinson
Bours.
|
|
·
|
Arturo
Bours Griffith, José Francisco Bours Griffith and Octavio Robinson Bours
are nephews of Enrique Robinson Bours Almada, Mario Javier Robinson Bours
Almada and Juan Bautista Salvador Robinson
Bours.
|
|
·
|
Jesús
Enrique Robinson Bours Muñoz and Jesús Rodolfo Robinson Bours Muñoz are
sons of Enrique Robinson Bours
Almada.
|
|
·
|
Juan
Salvador Robinson Bours Martínez is the son of Juan Bautista Salvador
Robinson Bours.
|
|
·
|
Guillermo
Pineda Cruz is the son-in-law of Enrique Robinson Bours Almada, and
Ricardo Aguirre Borboa is the son-in-law of Juan Bautista Salvador
Robinson Bours.
|
Name
|
Position
|
Age
|
||
Cristóbal
Mondragón Fragoso
|
Chief
Executive Officer
|
63
|
||
Daniel
Salazar Ferrer
|
Chief
Financial Officer
|
44
|
||
David
Gastélum Cazares
|
Director
of Sales
|
57
|
||
José
Luis López Lepe
|
Director
of Personnel
|
63
|
||
Rodolfo
Ramos Arvizu
|
Technical
Director
|
51
|
||
Ernesto
Salmón Castelo
|
Director
of Operations
|
46
|
||
Andres
Morales Astiazaran
|
Director
of Marketing and
Value-added
Products
|
40
|
||
Marco
Antonio Esparza Serrano
|
Comptroller
Director
|
53
|
|
(a)
|
Submit
an annual report to the Board of
Directors;
|
|
(b)
|
Provide
the Board of Directors with its opinion on the matters that pertain to the
Auditing Committee, in accordance with the Securities Market
Law;
|
|
(c)
|
Inform
the Board of Directors of the current condition of the internal controls
and internal auditing system of the Company or of the entities it
controls, including any irregularities
detected;
|
|
(d)
|
Require
the relevant directors and other employees of the Company, or of the
entities it controls, to provide reports relative to the preparation of
the financial information or any other kind of reports or information it
deems appropriate to perform its
duties;
|
|
(e)
|
Receive
observations formulated by shareholders, Board members, relevant officers,
employees and, in general, any third party with regard to the matters
under the Audit Committee duties, as well as carry out the actions that,
in its judgment, may be appropriate in connection with such
observations;
|
|
(f)
|
Inform
the Board of Directors of any material irregularities detected as a result
of the performance of its duties and, as applicable, inform the Board of
Directors of the corrective actions taken, or otherwise propose the
actions that should be taken;
|
|
(g)
|
Call
Shareholders Meetings and cause the items it deems pertinent to be
inserted into the agendas of such Shareholders’ Meetings,
and
|
|
(h)
|
Assist
the Board of Directors in selecting candidates for audit and reviewing the
scope and terms of the auditor’s engagement, as well as evaluate the
performance of the entity that provides the external auditing services and
analyze the report, opinions, statements and other information prepared
and signed by the external auditor.
|
B.
|
Compensation
|
C.
|
Board
Practices
|
D.
|
Employees
|