Grupo Bimbo, S.A.B. de C.V.

Thank you very much and good afternoon everyone. Thank you for joining us on behalf of Grupo Bimbo.

I hope that you and your families are healthy and staying safe. Connected on the line today is our CFO, Diego Gaxiola; our BBU President, Fred Penny; and several members of our finance team.

2020 was a year in which we were tested, confronted by the uncertainty caused by the proliferation of COVID-19, which required us as individuals, as a company and as a community to rise to meet the great challenge of the pandemic with unity, creativity, and dynamism. I am truly very proud of what our associates have accomplished, especially those in the frontlines.

It was a remarkable year for Grupo Bimbo evidenced by several milestones, including record financial results. Even in this challenging environment, market share gains across multiple categories, IRA named us the fastest growing large consumer products company in the USA.

And finally, the presence of Grupo Bimbo in the mindset of Mexicans has strengthened with a growing knowledge of our company. Sustainability is the core aspect of our philosophy.

We continued with the objective of mitigating our environmental footprint all over our entire value chain through actions such as innovation in our packaging with a biodegradable and compostable technologies, the reduction of our water footprints and emissions due to efficiency in our processes, waste management and the use of renewable energy and alternatives to fuels. Highlighting that by year-end, we have increased our global use of renewable electricity from 49% to 80% meeting our 2020 objective and progressing in our commitment to achieve 95% renewable electricity by 2023.

Although we continue to face the most challenging world-wide crisis of the modern era, I am left with a satisfaction of having reached Grupo Bimbo’s 75th year anniversary with record results and with the unwavering commitment of our people, excited and energized with how our company is positioned for the future. I am confident that the future will bring opportunities for progress that will help us continue to feel the great responsibility of feeding and better serving our customers and consumers around the world.

Now, taking a look at the regional results of the fourth quarter. In North America, dollar sales increased by more than 11% excluding the favorable impact of FX rate.

We were able to gain market share in all our branded categories, especially in breakfast from the Thomas Bagels brand, buns and rolls driven by ballpark brand strength, and sweet baked goods were intimates outperforms the category. We also continue to see strong performance of the retail channel, which includes grocery, mask merchandising and glove, and the e-commerce channel more than doubled its size.

We gained millions of new households due to the exposure of our brands during the pandemic, which we intend to retain by continuing to add incremental marketing investments, an excellent in-store execution. Due to the lack of demand as customers continue to lean towards branded products, volumes continue to be solved across the private label category and in food service institutions and school closing persist through the pandemic.

Our adjusted EBITDA margin reached a record level reflecting the strong sales performance, lower commodity prices and productivity benefits from past investments, which were partially offset by one-time expenses incurred due to the coronavirus as well as the statistic investments in our brands. In Mexico, despite the pandemic, sales grew 1.6% driven by positive price mix and good performance of the traditional and retail channels.

Remember that our channel mix in Mexico is different than it is in the U.S., specifically the traditional and convenient channels are larger than the retail. And we also have a meaningful presence in wholesale and food service, which has struggled during the lockdowns.

Adjusted EBITDA margin contraction was mainly attributable to the sales mix and one-time expenses associated with COVID-19 such as labor, distribution, requirements, donations and safety equipments. In Latin America, the 6.5% sales increase was attributable to good growth in our Latin Centro division and in most countries, mainly Chile and Brazil, despite the devaluation of the Brazilian real.

This was offset by a weak performance in Argentina, primarily due to the macro economic situation. Also, we experienced market share gains in the bread category in the Latin Central division and in Brazil.

The strong sales performance, coupled with the productivity initiatives across the region, have enabled us to expand our margin by a hundred percent basis points. In EAA sales increased 17.3% as a result of strong results in the UK, in our QSR business and in the bread and buns category in Iberia, mainly due to the Paterna plant acquisition completed early in 2020.

The strong EBITDA expansion of 440 basis points was mainly explained, but by the strong operating performance in Iberia, Bimbo QSR, and the UK. I’m pleased to announce that we acquired Modern Food in India and signed an agreement to acquire a plant in Medina del Campo in Spain.

This plant in Spain has state-of-the-art technology and was owned by Cerealto Siro Foods. It manufactures the sweet baked goods for Mercadona and other customers.

This acquisition allows to enter the sweet baked goods, private label market in Spain, and it’s still subject to regulatory approval. Modern Food is a leading player in the baking industry in India.

In fact, it is the market leader in South India. It manufactures and distributes baking products in its seven plants.

This acquisition strengthens and expands our geographical presence in the country as a current product portfolio and manufacturing footprint compliments exceptionally well with our long-term strategy to grow in India. I would like now to turn over the call to Diego, who will walk you through our financials.

Please Diego go ahead.

Thanks, Daniel. Good afternoon, everyone.

And thank you for joining us today. I would like to start with a summary of our financial results, which were outstanding, reaching record levels of sales and adjusted the EBITDA.

We are clearly benefiting from being a global and diversified company in terms of Chinese categories and geographies. And from participating in a resilient industry, as most of our revenues are in hard currency, and volume has been strong in most of our markets, especially in North America.

In fact, we are able to substantially increase the proportion of profits outside of Mexico, from 49% in 2019 to about 58% in 2020/. A strong sales performance across every region, coupled with the lower commodity costs and productivity savings, enabled us to grow our operating income by 30% and expand the margin by 300 basis points.

Our financing cost increased 18%, reflecting higher interest expenses due to an unfavorable FX rate versus the fourth quarter of last year. The net effect of these factors yielded a significant improvement in net majority income of 58% and the margin of 3.4%.

While our return on equity was improved by more than 300 basis points. Now turning to the balance sheet, we closed the year with our net debt to adjusted EBITDA ratio of 1.9 times, the lowest level in the last 10 years.

Our total debt decreased by MXN 3 billion to MXN 2.8 billion when compared to 2019. It was mainly because of the strong cash flow generation, which was partially offset by the peso evaluation, but went from MXN 18.84, MXN 19.95.

In taking our leverage in pesos more than MXN 3.7 billion. EBIT may be net growth is fast full $2 billion available in our credit line, which provide us with flexibility and liquidity for the future.

As we keep a flexible amortization profile at an average maturity of more than 13 years and an average cost of 6%. Our net operating working capital, which mainly considers accounts receivables, inventories and suppliers, has improved significantly by almost two days as compared to 2019, which is equivalent of MXN 1.3 billion due mostly to a sequential improvement in our accounts As we keep a flexible and define maturity and another 6% Net working capital, which accounts, receivables, inventories, and suppliers improved significantly by almost two days as compared to 2019, which is MXN 1.3 billion pesos.

I think it was mostly due to improvement in accounts payable. Our gross cash flow level when compared to 2019 and our free cash flow before dividend and share buybacks take out totaled nearly MXN 15, from which we refer MXN 6 million to our shareholders, through MXN 3.7 billion in the buyback program, and close to MXN 2.4 billion in dividends.

I like to share with you out outlook for the year. Given the 2021, like maybe all the companies, we will have a difficult comparison to the extraordinary and unique year of 2020.

We will be sharing with you our quarterly reports at comparison with 2019, as well as with our guidance. Versus 2019.

we are expecting low double digit growth rate for our sales and need to high teens for our adjusted EBITDA prior versus 2020, our savings and adjusted EBITDA will remain essentially flat. We are expecting an effective tax rate in the need to high-30s and our CapEx for the year is [indiscernible] close to $1 billion.

We’re optimistic about the future of our resource continued to be strong. Our teams are doing an excellent and nice job and our global diversification continues to pay off.

So that concludes our remarks. And now we’ll proceed with the Q&A session.

Hi, good afternoon, and thanks for taking my questions. So if I may, the first one is related to modern foods.

Can you just share some details about the acquisition? I mean maybe the enterprise value of the transaction.

I mean the sales EBITDA generations, something like that. And that would be great.

And also if you can comment about some growth dynamics of the bake in industry in India, that would be my first question. And I’ll wait for the second one.

Thank you, Fernando. Very quickly, it’s a rather small deal in the context of a group or the Grupo Bimbo, but we believe for the long haul, the prospects of that region are quite interesting.

I have to note also that the price of bread in India is much lower than what is in the rest of the world given their particular circumstances. But I have to say that at this point in time is a small acquisition, we’re not giving more detail.

Okay. Thank you.

And my second question is about both North America, given the solid top line growth that we saw in 2020. What – can you share your outlook on consumption for this year and how do you expect to behave by channel?

Thank you.

Fred, do you want to answer it?

Sure. Thanks for the question, Fernando.

Yes, our branded business was strong in 2020. And we’ve seen a relatively consistent pattern in the beginning of 2021.

I think you have to think about 2021 in really three ways. We think about it the way I think about it in three phases, sort of pre-pandemic the first phase, where we’re going to go up against numbers that are more akin to 2019 with a relatively strong run rates.

And then like many other food companies, we hit week – I think it’s week 12 and 13 or week 11 and 12, I think 12 and 13. And then the balance of the second quarter when we had panic buying and extremely strong numbers that I don’t think any food companies are going to be able to actually cycle.

And then so the question then becomes what’s going to happen in the back half of the year. And that really depends on lots of things like availability of vaccine when are school is going to be fully back in, when a college is going to be fully back in, what happens with changes in work-from-home versus work-from-office, et cetera.

And that remains to be seen. I wouldn’t want to overly speculate on that.

But we’ve had strong brand performance across most of our categories. We’re working hard to continue that.

And at the same time, we hope for recovery in segments of our food service businesses if you think about that as a different channel.

Great. Thank you so much.

Thanks. Good evening.

Daniel, Diego and team, hope you guys are doing well. Congrats on the results again.

And thanks for the space for questions as always. Maybe the first one I’m kind of piggybacking on the question on M&A and it’s related to that on private label, you just made another acquisition of another client in Spain.

And from my – where I read it, it looks like it’s focused on private label as well. It’s an area where you’ve been present in the U.S.

for a long time, and in the last few years, it’s been rather difficult for private label. So just wondering how Spain differs from the U.S.

in this strategy and how you think private label fits into future of the company. And then if I can ask another one, simpler than that, less strategic on commodities, obviously we has jumped quite a bit on the back of Russia’s news.

How well prepared are you on hedges and at the high persists, how well situated are you for price increases? I recall in Mexico, there have been times where you chose not to increase prices.

And I think in the U.S. if I remember correctly, Fred, you dialed prices back a little bit at some point, not too long ago.

So just wondering what you’re thinking about prices of the commodities issue persists. Thank you.

Yes. Thank you, Felipe.

Great questions. On the dealing in Spain, this is geared towards serving Mercadona, which is the leading retailer there.

And we believe that it is a long-term positive development for a company as it strengthens our relationship with these retailer and allow us also to use this facility and participate in that category. The industry – the private label industry in Spain is different from the one in other countries.

And it’s a healthy industry and one that we believe it’s very important for us to participate in the context of the strategy of that particular country. And the private label in the U.S.

as we have mentioned, has suffered this year and the business in the U.S. and other countries is reacting differently from this case on.

And let me tell you that the decisions on private label strategy are driven not by a global strategy, but more so about the particular circumstances of each country. And we take a good look at them, but they’re driven by local management.

Regarding the second question, yes, we have seen that the global commodity prices have recent significantly in many commodities, including our raw materials and we’re facing them. We do have hedges and we recovered for the different commodities, but we will be facing cost increases in our raw materials.

And we have sort of taken the right steps in order to take the necessary measures to maintain our margins in the different countries, where we operate. So this is a global phenomenon.

And we have to make sure that our margins are maintained through these periods time.

Great. Thanks a lot, Daniel.

Maybe we can comment a little bit on how far you guys are hedged given how different programs or different companies. Thank you.

Yes. We don’t really give us specific details neither by your region nor by raw materials, but we do have a coverage of a few more months and in some commodities, the some smaller ones, we recover for longer period of time.

But I would say that the bulk of our hedges will be basically finishing in the latter part of the year.

Great. Thanks a lot for the color and congrats again, guys.

Good afternoon. Daniel and Diego, first of all, congrats on the results.

Just a question around capital allocation and I mean, you’ve shown very strong balance sheet. And if I remember in most of your quarterly presentations, you always show about the ability to grow with the prudent leverage.

And it’s really like this kind of pattern goes up to three times through an acquisition. You bring it down to two, you buy something else goes up to three, you bring it down to two, you buy something goes up to three.

And well, now we’re at 1.9. So right at the point where we could potentially expect something bigger on the M&A side.

But at the same time, you’ve been guiding to $1 billion in CapEx, which obviously is above of what we’ve been seeing in prior years in dollar terms. So help me out understanding, where do you want to take the company next?

Is it more big M&A. Is it organic growth?

Is it investments in technology and renewable energy and becoming greener? So just to understand the capital allocation and ultimately at two times leverage, how do you think about share buybacks, dividends, et cetera?

Yes, I think an expected question, Ben, and let me first say that the past is not necessarily a predictor of the future. And what we do every year is really take a good look at the issues that we have in front of us and the opportunity in alignment with our strategy and what happened this 2020 was we delayed some major projects due to the pandemic.

And we were thinking on having a very strong CapEx for 2021, which basically reflects the delayed projects as well as specific categories where we need to increase our capacity, given the growth that we had in our product lines. So that happens all around the world and that’s why we are basically strengthening the CapEx program, as well as to include significant investments in renewing our IT infrastructure and becoming more digitalized in our different processes.

We’re also hoping up our investments in electric vehicles. And in some cases also investing in renewable energy in our rooftops and in some other areas, but the majority of the investments go basically to the plant, the bakeries and increasing the developing capacity.

And let me tell you that definitely we will also take a look at the opportunities in terms of share repurchasing as we have done in the past. So all in all, I think that internally we have a good sense of what we want to do with free cash flow.

And as always, we will be attentive to the market base and see if there are opportunities that fit with our strategy in terms of M&A, but I just want to reassure you that the past is not necessarily the future in terms of predictions.

Not that it was bad, nothing to be worried about, Daniel, nothing to be worried about, but thank you very much. Very clear.

And then just one quick one, maybe that one for Fred. Within the U.S., have you seen at least from an ordering perspective on the food service side, some signs of recovery particularly considering that the vaccine rollout in the U.S.

seems to move forward much smoother than, for example, in Latin America and including what we would have expected in Europe. It seems to be little slow, but in the U.S.

not. Have you seen some of the food service guys that buy your products, putting in orders, where you would expect some of the recovery toward summer?

I think its Ben, I think it’s still a little bit too early to tell on that. We haven’t – I can’t think of a specific instance where we’ve seen a pattern of ordering up.

QSR generally has fared better, but if you think about institutional schools, et cetera, casual dining, those segments are still, I would say struggling. And it really is all over the map depending on which state you’re talking about, depending on whether they’re at – they’ve opened up for 25% seating or in few cases actually more than that.

So I think it’s going to take a little longer to see that improvement. If you read what’s going on with the vaccine, yes, it’s moving ahead.

But I can tell you, talking just internally with some of my folks, depending on which state you’re in, or which County you’re in, you may be able to get a vaccine fairly quickly, or you may not even be able to get through on the website. So I think there’s more to come on that.

The second half of the year hopefully as the vaccines become more broadly available, we’ll be better, but it’s, I would say, too early to highlight a specific trend improvement.

Okay, perfect. Thank you very much Fred.

Good evening, gentlemen. Thank you for the call.

A couple of questions. First similar to CapEx in the sense that you’re sort of catching up to what you missed in 2020.

My first question is on the outlook for integration and restructuring expenses they’re typically pretty customary, given the type of year we had, maybe some of those were on hold, would there be some catch up there as well?

Diego, you’ll take this one.

Yes, I can take it, Daniel. Thank you.

Hi, Alvaro. Well, we’re certainly going to have a catch up in terms of restructuring initiatives and expenses, Alvaro.

We did put on hold some initiatives certainly in the beginning of the second quarter of last year, but in most of the products we are able to catch up. Of course, we will continue to invest in that line.

We fortunately we still see a lot of opportunities, particularly in North America, not to continue to provide profitability for the business through these investments.

Great. And then just two more, one, just a quick clarification on your guidance on your tax rate, you said high 40s for the four.

No. Sorry.

I think my line was not very clear. What I mentioned in terms of the effective tax rates which need to high 30s.

30, okay.

I was hoping – to the rate that we had in 2020.

Perfect. Yes, that worried me.

And that leads me to my last question, which is on guidance. Nice to hear that mid to high 30s, you’re obviously making more money in some of these markets like Latin America and Europe, which helps let’s say the denominator for that equation.

But I was just wondering, Diego, if you could perhaps provide some guidance on sort of directionally what markets you expect to outperform. I’m assuming that would be Mexico within this guidance you gave on the EBITDA front, and some markets that might pull back and more specifically my concern is sort of structural levels of profitability in places like Latin America and Europe.

So any sort of color you can give as to what’s going on a country basis would be very helpful. Thank you.

Yes, Alvaro, what it’s very clear to read the very tough comparison that we’re going to face particularly in North America, Fred already mentioned, in the second quarter, third quarter, we don’t know exactly how this is going to evolve for the second half of 2021. But it’s clearly that we will face very tough comparisons and that would put some pressure to the growth rate and margins particularly in that region.

Great. Thank you very much, Diego.

You’re welcome.

Hi, guys, thanks for the space for questions. Two quick ones on my side.

The first one on CapEx obviously as you said 2021 is going to be higher on the catch-up on some projects, but what level maybe as a percentage of sales do you see kind of sustainable in terms of CapEx going forward. And the second one may be like a follow-up to the previous question there on margins across regions, but specifically thinking on EA we have seen strong performance obviously recently there in the region.

So just wondering how sustainable do you see these, and how do you see the trends there in the particular region moving now with the recent acquisitions that you mentioned, and the focus there on the region? Thank you.

Diego, you’ll answer?

Yes, yes, Daniel. On your first question, let me tell you that, one need to put up a little bit more of context.

In the last four or five years we have been investing around $700 million. As we mentioned we expect to invest more region, more in 2021 close to $1 billion.

So if we divide a little bit on the different buckets on the CapEx that we have, I would say more than in terms of a percentage of revenues which is not entirely correlated. We have maintenance CapEx bucket which is in the range of $400 million to $500 million at the top.

And then have the other buckets that we have also been investing proactively, which is growth and productivity. In terms of growth, this is the one that is going to be demanding more resources for 2021, either in new lines, new plans.

We’re also investing a little bit more on those without hardly moving the needle as big as these growth initiatives. If on the digital transformation and technology investments that we plan to do in the company.

For 2021, I’m sure it will be the case for the 2022 stride on a regular year we will go back more to the $700 million, $800 million range that we have being given financial traditionally, We have been investing slightly less on the last year. And in terms of the EAA, also, I mean, we can take the question.

I will say that definitely we see the results are sustainable, and not only that, we feel optimistic about the potential that we have in these region. In the long-run we’ll continue to have top line growth and also a margin expansion and continue to see an increased profitability in the region; in Spain, India, China, and in different markets in which we have presence in that particular region.

Perfect. That’s very clear.

Thank you so much for the added color that they won and congrats again on the results.

Thank you.

Hi, Daniel and Diego. Congrats on the results.

My first question, can you give us some color on and signs of recovery in the press channels in Mexico, especially convenience and traditional? And then second one.

Can you comment on your share buyback strategy for the cancellation of surge you’re doing? Thank you.

I’ll take the first one and Emiliano could you repeat it please?

Yes. If you could give us some color on the signs of recovering the press channels in Mexico, especially convenience and traditional?

Well, let me do a traditional channel is one channel that has basically been good during this crisis. So consumers really maintain their navel stores during the pandemic and the channel that were greatly affected were the convenience channel.

The bending channels, the food service, and the wholesale channels. So these are some of the four channels that were affected.

And we’re seeing a gradual comeback of all – of four of them, but still there below what was the number before the pandemic hit. So we’ll be cycling over, probably in the next quarter, some of these numbers, but that’s where we’re right now.

Great. I can take the one regarding the buyback program.

I mean let you tell about, in 2020 we bought back 100 million shares, representing MXN 3.7 billion. So we still have a little more than MXN 8 billion in our legal share for potential future buybacks.

We will continue to analyze opportunity and of course we will be very active as we believe it creates value to all our shareholders. Also you remember formally our extraordinary shareholders meeting back in October, we can tell nearly 170 million shares.

So now – and that was because doing the three months we were very, very active with the buyback program. So we didn’t wanted to wait until April.

So now on a yearly basis what we’re going to be doing is canceling the shares on a normal basis. And we will propose the cancelation of the shares that we have in the treasury today to the shareholders meeting that will take place in April.

Thank you, Diego. Very clear,

Well, thank you all for your time today and as always please do not hesitate to contact our Investor Relation team with any further comments or questions you might have.