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

Thank you very much and good afternoon, everyone and 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. We started off 2021 with the best first quarter on our history in terms of sales, profits and margins following a remarkable year for Grupo Bimbo.

These trends continue to reflect the hard work of our associates and the strength of our brand, as well as the benefit from being a diversified company. We were able to maintain the strong momentum across our four regions, especially in North America, Latin America, and EAA with continued market share gains across multiple categories, especially in the breakfast category in the U.S.

which includes English muffins and bagels, and a recovery of our global QSR business driven primarily by the improved COVID-19 situation year-over-year. In fact, we will be investing more than $25 million of our annual CapEx plan to open a bakery in Georgia, USA to better serve the QSR customers in the region.

I would like to highlight that we have begun to cycle difficult comparisons driven by the pandemic induced by which occurred in some of our geographies, starting in March of last year. So, in the second quarter of 2021 we will see the full effects of the panic shopping behaviors experienced during the second quarter of 2020.

Although this will be challenging, we expect our 2021 run rates to demonstrate strong performance versus 2019. We remain fully committed and confident with the guidance that we've provided and that Diego will reiterate in a few moments.

Looking ahead, we're facing a significantly higher inflationary environment. More specifically, we're seeing increases in commodities, freight and labor costs, and we will be taking actions to cover these costs increases.

Now looking at the original results of the first quarter; in North America sales grew by more than 8% in peso terms, while dollar sales increased by 6.1%. We continue to see the strong growth rate compared to previous quarters, with market share gains in all our branded categories, especially in breakfast.

We also continue to see strong performance of the retail channel which includes grocery, mask merchandising, and glove; while e-commerce nearly doubled it's size. We continue to see strong runway performance compared to pre-pandemic levels, driven by retail demand and favorable branded mix.

The private label business run rate has remained soft, while foodservice is beginning to rebound at schools and restaurants, manage partial open. Our adjusted EBITDA margin reached 12.6% reflecting the strong sales performance, favorable branded mix, freight [ph] efficiencies and productivity benefits from past investments which were partially offset by increased strategic investments in our brands.

We are cautiously optimistic going forward, as strengths continue to be strong and we have been able to maintain the run rate seen over the past quarters until we're seeing the new consumer households while we remain focused on increasing investment in our events. I'm also proud to share with you that we recently signed two virtual power purchase agreements with Renewable Energy Systems to procure renewable electricity that will offset 100% of electricity consumption in Canada; this is a big-step towards our commitment to be 100% renewable by 2025.

In Mexico, despite the pandemic and a strong first quarter in 2020, sales grew 1.6% driven by positive price mix and good performance of the buns, toasted bread, snacks, and confectionery categories; and also we performed very well in traditional chain. Adjusted EBITDA margins expanded 30 basis points as a reflection of distribution optimization initiatives in the commercial area.

In Latin America, the 6.6% sales increase was attributable to the strong results in all our divisions; that tortillas, bread and bun, and buns categories outperformed and we have market share gains on our bread category across our geographies. The strong sales performance coupled with productivity initiatives, and cost cutting like zero-based budgeting and a turnaround project in Brazil despite the currency devaluation which continues to impact our profitability in the country, has enabled us to expand our adjusted EBITDA margin by 150 [ph] basis points.

In EAA, sales increased 19.1%, mainly as a result of a strategic acquisition of Paterna in Spain, and a good organic growth in the UK and the Bimbo QSR businesses. Results in Iberia were under pressure due to citing difficult comparisons; given that in the first quarter of 2020, the panic shopping in the country and the ongoing lack of [indiscernible] because of the pandemic.

The EBITDA margin expansion of 50 basis points resulted from strong operating performance in the QSR business as it is recovering from the depths of the pandemic, and also because of the distribution of patient fees across our routes in Iberia. I would now like to turn off the call to Diego who will walk you through our financials.

Please Diego, go ahead.

Thank you, 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. Achieving growth across our four regions and the strong EBITDA margin expansions, as well as a 230 basis point improvement on our return on investment.

We are clearly benefiting from being a global and diversified company from participating in a resilient industry and from having the leader brands in the market in which we operate. As volume has been strong in most of our market, especially in North America.

Our revenues in hard currency continue to grow, representing now nearly 60% of the dollar [ph]. The strong sales performance across every region, primarily North America, Latin America, and the recovery of Bimbo QSR coupled with lower cost of sales, productivity savings, and the net non-cash effect during the first quarter of 2020 plus the net benefit that we had in this quarter related to the interest rate movements enabled us to grow our operating income by more than four times and expand the margin by 830 basis points.

Not only three of our four regions switched to positive operating income, our financing costs has slightly increased to 9%, mainly reflecting foreign currency translation offset by lower interest paid due to the deleverage. We ended up the quarter without [ph] 37.5% effective tax rate, which reflect an important benefit of our turnaround businesses which have been performing substantially better than last year.

And as a result, the net effect of these factors generate a significant improvement in net majority income and a margin expansion of more than 500 basis points. Turning to our balance sheet; thanks to our strong cash flow generation, we closed the quarter with a net debt to adjusted EBITDA ratio of 1.8 times.

Our total debt increased by MXN3 billion when compared to December 2020; this is mainly because of the depreciation of the Mexican peso as little bit more than 30% of our debt is nominated in US dollars. As you know, during the end of March, we announced an anticipated partial redemption for $600 million of our bond maturing in January 2022 with the intention to finance it through our $2 billion revolving credit facility.

Given that such redemption was effective until April 26, our short-term liabilities as of the first quarter of '21 still show the full amount of such bond. These transaction is in line with our permanent commitment to optimize our capital structure and continue our proactive search for future opportunities to maintain a solid balance sheet and the right debt profile.

With these we currently have approximately $1.4 billion in undrawn commitments under the credit facility which provides flexibility and liquidity for the future. Our net operating working capital which mainly considers accounts receivables, inventories, and suppliers have improved significantly by four days over the first quarter of 2020, which is equivalent to MXN3.6 billion, mostly due to accounts receivables and accounts payable.

Our free cash flow before share buybacks totaled MXN1.9 billion from which we have returned nearly MXN750 million in the buyback program. And finally, I would like to share with you that even including a new estimate of a stronger peso, given the outstanding results of the first quarter and continued strong trends we maintain our optimistic view about 2021 and feel confident in our guidance for the year.

So versus 2019, we are expecting low double digit growth rate in our top line and mid to high teens in EBITDA. While versus 2020, our sales and EBITDA will remain essentially flat.

We are expecting an effective tax rate in the mid to high 30s, and our CapEx is estimated to be in the range of $900 million to $1 billion as we are restarting those projects that were put on hold back in 2020. We are optimistic about the future as our results continue to be strong.

Our teams are going an extraordinary job and our global diversification continues to pay off. That concludes our remarks this afternoon.

So, Ele [ph] please proceed with the Q&A session.

Hey, good afternoon, Daniel, Diego. First of all, congrats on the strong results, that was clearly a very good first quarter.

Two quick questions. So first of all, and you've kind of alluded to it but considering the strength you're currently having but at the same time, the cost environment and I think you've flagged commodity freight and labor costs; the three of them.

So clearly, all somewhat going against potentially keeping those margins at the levels where they were last year. So how proactive have you been on the pricing side?

And what have you seen? Because obviously, it's not only you having to raise prices, it's across the commodities board; so how have you seen the reception of those price increases?

And how have potential wholesalers push back on you when it comes to price increases? That will be my first question.

Daniel, I believe you're on mute.

Sorry, I muted. Yes, Ben.

What I was saying is that our coverage in commodities ranges countries from countries depending on the particular circumstances. And what we have done in in countries where we have increased prices, and so far is that there has been an understanding on the market that there is the inflation, and so far we've been able to -- as we've seen in our results behave possibly with the market.

Okay, perfect. Thank you very much.

And then, say it's kind of a connected question. So, you've made the announcement and you've talked about what you're doing and what you're planning to do in Canada on the renewable energy, which kind of reminded me; could you give us an update where you stand on the situation in Mexico with some of the cogeneration you're having and how that could potentially impact if any reform or any change to the regulatory environment?

What that could mean for you from an input cost pressure perspective, just considering all the noise that's been out there for about a couple of weeks?

Yes. I have to tell you that electricity is not necessarily our main cost in the company, this is more a part of our cost inputs.

And we will now -- over 80% of our energy is coming -- electricity energy is coming from renewable sources, and we're very happy that we have done in all the countries. In Mexico we have solar roofs in most of our plants on BCs and on some data [ph] centers which are not included in the reforms that the government is pushing for.

And we also have a contract with the power generator that uses renewable sources, and so far it hasn't -- nothing has changed so far. The law it's still in the process of being basically implemented, and we as always will be abiding by any changes that happen in that regard.

But there hasn't been any news lately.

Perfect. Thank you very much.

I'll leave it here. Congrats, again.

Thank you.

Good night [ph], Danielle, Diego. Thanks for the call, very impressive indeed.

Couple of questions, if I may. I actually wanted to insist or to go back to the first question on the commodities and pricing.

I appreciate how strong you performed in the first quarter and also understand the hedging policy of the company when we think about 2021. But when you're thinking about later 2022, and as we head into the second half of this year, are you already or is the industry already taking measures when it comes to forward-looking pricing?

Any more details that you can give on the competitive landscape, what you think that the industry is doing? Whether thinking about 2022 and as the hedges go by?

The second question is kind of related, I mean, the U.S. performed -- this strong performance that you had in the U.S., I mean, we continue to see very solid performance for Bimbo when we look at Nielsen in the first quarter, looking at a two-year CAGR basis.

We are particularly surprised by the market share gains versus the industry, and both in sales and volume; so I would appreciate if you could comment on those market share gains? When we start to think about the reopening and the return of channels such as food service, convenience channels; are you guys comfortable that these market share gains are sustainable?

You know, if you could talk a little bit about the categories as you mentioned in the preliminary remarks, breakfast, and so forth; maybe that could help us to understand how sustainable you think those are. I appreciate the time.

Thanks for the questions.

Sure, Ricardo. I'll answer the first question, and I'll -- we'll rely on Fred to give you more comments on the second one.

On the first one, what I have to say is that these increases in commodity costs and others are happening globally or in most countries. The competitive situation in each country is different, so I cannot tell you that this is going to happen everywhere but I would say that all the participants are facing the same increases; the question is when will they be effectively given that they might have X or Y coverage on those futures that they might or what might we buy [ph].

But in general, this is inflation that we're seeing throughout many of our input costs.

And Daniel, I'd be happy to take the second question. Ricardo, the -- I guess first, I would say that we've been pleasantly surprised that how our run rate has held up across most of our categories as we hit the peak of the pandemic, which was really Week-11 of last year.

Obviously, we're running -- whether it's Nielsen or whatever the measure is, we're running negative to year ago numbers, but we're running strong numbers to pre-COVID 2019. And so we've seen gains in market share, to your point we've seen gains in household penetration, and we've really been focused on executing behind our core brands, our best brands and products and we've invested incremental marketing dollars targeted to retain as many of the households that we gained through the pandemic, and hopefully build on our share gains.

But I would say, all in all, I feel pretty good about where the run rates are. There is a big question of what's going to happen as we get into the second half of the year, I spoke about that in our last quarterly call.

Thinking about the year into three phases, obviously pre-pandemic and then cycling the significant numbers of primarily the second quarter, and then heading into the second half of the year with broad scale vaccinations. I anticipate that we would see some category slowdown as things get back to normal but I also would say that there's -- there have been shifts in consumer behavior, and there is still open questions about when all schools are fully back, all colleges are fully back, work-from-home versus back in office, etcetera.

But I think we're going to continue to favor more consumption at home, and so we'll just -- we'll have to see how that plays out. But so far, it's been on the positive side.

Thanks, gentlemen. Very helpful.

Hi guys, good evening. Thanks for the space for my question.

My first question is about Mexico, if you can elaborate a little bit more on the demand side. How things have been sort of progressing over the last couple of months?

If you see movements, which are the channels that are doing better or worse? And how competition is looking like?

And how pricing is evolving? Are you guys also feeling comfortable with passing through some eventual cost pressure there to the prices?

So that's my first question. And then, I am sorry to insist that once again, my colleagues already asked about costs but that's certainly one of the key topics right now.

But just look at your guidance, your guidance is for a flat margin, right; but you may start a year with 150 bps expansion. So, either your guidance is going to conservative and or you foresee some sort of a pressure, maybe eventually in the second half of the year.

Just wanted to double check, if it's fair to assume some margin pressure at some point of the year to bring your average margin to be flat year-over-year. If that's the case, what are the regions that could be facing most pressure in your view?

Thank you.

I didn't pick up the first part of the question, Lucas. But if Diego or Fred, did you get it, just -- just -- if you can answer him, and maybe the second one, Diego it's for you.

Sure.

Should I repeat over the first part of the question; it was about Mexico. So the outlook?

Yes, yes.

Yes. If you can just recap Mexico, give more details on the performance of demand, the consumer, how it's been evolving in the last couple of months?

And if we're being able to eventually increase prices in Mexico to go over eventually higher increasing costs? Thanks.

Yes. Okay.

Actually, I'm feeling positive about the country. We -- I talked with consumers, customers, been in the market; I believe that there is good demand, the brands are performing and I believe that the there is a good feeling about the industry in the country.

And we are -- we have been able so far to make sure that we can cover our costs here as well; so not particularly any extraordinary news, but things are looking good here. Diego, would you answer the second question?

Yes. Lucas, broadly let me start answering a little bit and give him a little more color on commodities, on what we're expecting for 2021.

I am going to say that we feel very certain because most of the commodities have already hedged according to our hedging strategy and our hedging policy. So, that impact that we would see in our results is going to happen more in the second half.

And the annual impact that we will have because of the commodities increase in 2021 without taking into consideration the different strategies that are being implemented that Daniel already discussed about it. It's going to be less than one percentage point.

Also these -- again, this is assuming everything else stays the same. Now, in terms of the guidance, let me just be very clear.

In terms of the EBITDA, remember that this quarter we still have kind of an easy comparison, it was a very strong quarter outstanding results basically all across the regions in the four segments that we report. But we're going to start to face very challenging comparisons, particularly in the second quarter, leave it in the third and also in the fourth quarter of last year when we had margin increases of 80 -- more than 100 basis every quarter.

And also -- and that mainly because of the extraordinary volumes that we have, mainly in North America. Of course, there are some expenses that we faced last year, particularly with related to COVID that we also believe are going to be lower this year, but we're going to lose part of the marginality [ph] that we were able to achieve because of these extraordinary volumes.

So, that is why basically in terms of sales, and maybe that we're expecting to see a flat margin. So having this increase in the first quarter, we do expect to see a decrease, particularly in the second quarter.

Excellent. Thank you very much.

Hi gentlemen, thanks for the call. A couple of questions on my end, the first one would be on the outsourcing the new labor law in Mexico.

I was wondering if there would be any material impacts worth commenting on there?

Sure, Alvaro. Well, we believe it was a good dialogue that the business organizations and the private sector and labor have; at the end of the day, I think it was a law that will bring benefits to the country.

And in particular, in our case, we are reviewing all the details of it and what changes we need to make. But at this point in time, we don't see any material impact or consequence.

Great. Thanks.

And my second question is on taxes. Diego, you mentioned that part of the reason why the tax rate was lower was higher profits in places like Europe and Latin America.

And the question is, whether you've used tax assets in the past, particularly in the U.S.? Whether or not we should expect for you to deploy some of these tax assets in places like Latin America over the next couple of years?

Yes, Alvaro. Let me tell you that other important positive effects that we have been seen in the last quarter, it is not just a matter of the first quarter; is that the operations that are still with loss before taxes have been improving substantially.

So our accounting policy has been very conservative, we haven't been creating any deferred taxes from these losses in the past. So today we're seeing in some of the operations that are now in the positive side, like I have only one with positive effect because we're having a profit.

And on an accounting perspective we did not created the deferred tax; so clearly this why it is working in our favor, having a profit and zero taxes on the P&L. There are still some operations that have losses before taxes, that we have continued to be conservative, not creating any deferred tax assets.

So if this trend continues, that we feel optimistic, we will start to see a positive effect in our effective tax rate. Although this is not necessarily going to have a big swing in 2021, this is probably more an effect that we will start to see in the coming years.

Very clear. And then, just one last one if I may.

I was wondering if you could comment, you know, we saw very good results from Latin America. I was wondering if you could, from the profitability side, if you can comment on the increased relevance of the Latin Central Division within those results?

I know you don't give much color country by country, but just sort of how that that sub-region has gained share would be very helpful. Thank you.

What we have seen is that that particular region had probably more lockdowns or more mix of work-from-home than others in LatAm. And the reality is that many of the countries in that region, we saw higher revenue; so that's what we believe happened, our teams are doing a great job in the market but in general, I think that's one of the causes of very good performance.

But we also have countries that outperformed, like Chile or Peru, that are doing very well as well.

Great, thank you very much. And congrats on the results.

Thank you.

Hi Daniel, Diego. Congrats on the results, and thanks for the space for questions.

Two questions on my side. The first one regarding capital allocation.

Could you comment on what are your priorities there in terms of dividends, buybacks, and maybe M&A? And then, could you share how much of the top line growth in Europe is coming from the contribution of the Paterna plant?

Yes. Paterna, it is more part of EAA, although positive one, and we're happy with integration of that business.

The most important part of the uses of the funds will be leaving CapEx and that's a reflection of first, the delays that we had in putting up many of the projects last year, and also in some constraints that we have in different categories because of the growth of volume. So that's the bulk of it.

And we have also shareholders assembly tomorrow, we're suggesting -- we're with the Board [ph] if the assembly approves dividend but it's already announced. Diego, I don't know if you want to comment anything else.

Yes. On the capital allocation, I would probably say, Emiliano that every year with a very long-term view, a series of periods in the company, we have a strong CapEx program.

As I mentioned in the guidance, we're probably going to be in the range of $1 billion. So it's going to be one of the years in which we're going to be reinvesting in the business more than any other year.

And also -- so a lot of the cash flow generation will go to the CapEx program. In terms of giving back to shareholders, the dividend if it is approved, tomorrow it's going to be MXN4.5 billion.

We bought back MXN750 million in the buyback program during the first quarter. As we have mentioned before, if we continue to have a free cash flow generation and we continue to see an opportunity regarding the price of the stock devaluation of the company, we will be buying back more shares.

Thank you very much.

Hi, afternoon. Congratulations for the results.

Just two questions. The first one is a clarification below.

When for calculation of EBITDA for the guidance for this year, I'm going to compare with the last year; you're including or you're excluding the loss of profits for MAPS [ph]? And the second question is regarding again, the commodities follow.

How much of the production for this year or maybe for the next year have you hedged or buy up to now? Thank you.

Is it's okay, Daniel, I can take both questions. Regarding the EBITDA, we exclude the MAPS [ph] effect, we have always excluded on our adjusted EBITDA any MAPS effect, either if it's positive or negative.

Normally, last year, particularly in the first quarter we had a big impact of more than $150 million because interest rates started to decline. Very quickly now that we have seen a rebound on interest rates, we are recognizing the profit, lower value on the liability of the MAPS [ph] that we have in our balance sheet.

It is on the operating income or maybe it is excluded on our EBITDA, okay. Both in every ratio, even with IFRS 16 or without, which is the EBITDA that we take into account for the leverage ratio of the company.

In terms of the hedges, remember that we have -- I would say a very sound and solid hedging strategy, both with commodities and effects. As I said, we're basically hedged for 2021.

And as part of the hedging strategy, we already started to take some hedges for 2022. Of course, that with the prices that we're seeing today in the spot market, the cost of these hedges is going to be higher than what we've seen in 2021.

Thank you.

Thank you.

Well, thank you very much for your attendance today. And as always, we will be open to answer any of your questions or comments in our Investor Relations Group.

Thank you very much, and hope to see you next quarter.