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Edited Transcript of BIMBOA.MX earnings conference call or presentation 27-Apr-17 3:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 Grupo Bimbo SAB de CV Earnings Call

Mexico May 2, 2017 (Thomson StreetEvents) -- Edited Transcript of Grupo Bimbo SAB de CV earnings conference call or presentation Thursday, April 27, 2017 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Alfred Penny

Grupo Bimbo, S.A.B. de C.V. - President of Bimbo Bakeries USA Inc

* Guillermo Jorge Quiroz Abed

Grupo Bimbo, S.A.B. de C.V. - CFO, Chief Administration Officer and Member of Advisory Board

* Tania Dib

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Conference Call Participants

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* Alexander Reid Robarts

Citigroup Inc, Research Division - MD and Head of Latin American Consumer Staples Equity Research Team

* Julie Chariell

* Lauren Elaine Torres

UBS Investment Bank, Research Division - Latin American Food and Beverage Senior Analyst

* Luca Cipiccia

Goldman Sachs Group Inc., Research Division - Research Analyst

* Pedro Leduc

JP Morgan Chase & Co, Research Division - Senior Analyst

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Presentation

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Operator [1]

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Good morning, everyone, and welcome to Grupo Bimbo's First Quarter 2017 Results Conference Call. If you need a copy of the press release issued yesterday, it is available on the company's website at www.grupobimbo.com.

Before we begin, I would like to remind you that this call is being recorded and that the information discussed today may include forward-looking statements regarding the company's financial and operating performance. All projections are subject to risks and uncertainties and actual results may differ materially. Please refer to the detailed note in the company's press release regarding forward-looking statements.

I will now turn the call over to Mr. Guillermo Quiroz, Chief Financial Officer of Grupo Bimbo. Please go ahead, sir.

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Guillermo Jorge Quiroz Abed, Grupo Bimbo, S.A.B. de C.V. - CFO, Chief Administration Officer and Member of Advisory Board [2]

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Thank you, Gary. Good morning, and thanks for joining us today. I'm here with Fred Penny, BBU's President; Tania Dib, our Treasurer and Head of Investor Relations; and several members of our Finance team. Unfortunately, Daniel is unable to join us today due to a very personal matter. So I will proceed with the issues, express several remarks, about performance in the period. And then we'll open up the call to any questions you may have.

We entered 2017 coming off a record year during which we re-envisioned our culture and committed to a clear set of transformational objectives for 2020. Among these are growing fresh packaged bakery in current geographies, identifying niche categories to complement our core portfolio, strengthening the DSD channel and growing our presence globally.

We have put sustainability front and center with a new sustainability central committee that ensures a strategic alignment from the top with both board members and senior executives overseeing these efforts.

And for the first 3 months of the year, sales, gross profit and adjusted EBITDA were all higher, reflecting an FX rate benefit and organic growth in key markets. Nevertheless, we faced enough economic pressures in the quarter even as we continue to invest in our key capabilities and global footprint, resulting in a contraction at the operating level.

Let me now provide some details on our performance by region.

In Mexico, sales rose 12% over last year, driven by volume category increases, most notably in sweet baked goods, salty snacks, bread and buns and confectionery and, to a lesser extent, price increases below inflation. Our Barcel, SANISSIMO, Oroweat, Bimbo and Ricolino brands showed good growth in the period. We had several product launches such as our new Canelitas Tentación, Gansito Doble Chocolate and Takis Cobra. All words in Spanish. Organic sales growth -- our healthy channels -- the performance can be owed to increased client penetration within our distribution network and more promotional activity.

At the operating level, as we mentioned on our last call, we anticipate a raw material pressure in 2017 and, in general, a more challenging year because of the FX rates and economic slowdown related to high volatility in North America. As a result, we are prioritizing volumes. That said, we were able to partially offset some of these pressures with supply chain efficiencies, leaving us with an adjusted EBITDA margin of 50%.

Moving on to North America. The 12.7% rise in sales primarily reflected the FX rate benefit. Our performance in dollar terms came in flat versus the year ago period while volumes declined.

In the U.S., despite overall softness in the market, we had a good start for the year. We grew market share with notable performance in both mainstream bread and sweet baked goods, partially offsetting pressure coming from our non-branding business, frozen and premium, the later arising from a more competitive environment.

As for our strategic brands in this market, better execution and focus are helping sales to trend positively. We feel good about our numbers considering market conditions. Our level of profitability is better, and we will continue to put our focus on growing our brands, pushing for greater efficiency with our supply chain and improving our DSD network.

In line with this, we closed 2 facilities, one in Sunbury, Pennsylvania and the other in Lubbock, Texas, which contributed to higher restructuring expenses in the period in line with our trend.

As for Canada, volumes were soft in the overall commercial bread category due to a challenging competitive environment. Yet our numbers were better than the markets, with good results coming from categories like breakfast and snack cakes.

I am pleased to announce, and does Daniel, that we keep strengthening our core portfolio through bolt-on acquisitions in growing markets and consumer segments. Last month, we made a small acquisition in Canada called Stonemill Bakehouse. With annual sales of around CAD 18 million and 1 plant in Toronto, the company is known for its slow-crafted baking process and will help strengthen our competitive profile in the growing crafted bread category. It has an excellent brand position and organic capabilities. And in fact, we have already launched a new line of a Stonemill organic bagel.

In terms of core operational developments in Canada, we continue to invest in ERP migration process, which will be finalized this year, as well as in efficiencies to achieve a leaner manufacturing profile. In line with this effort, we closed 2 sales centers and, as we announced early this year, we intend to close 2 plants in the coming months.

Overall, operating income in North America rose almost 20% -- 21%, and the adjusted EBITDA margin is 120 basis points on the back of a stronger productivity, favorable product mix, FX and commodities.

Let's now take a look at Latin America, where net sales rose more than 25% primarily because of the stronger local currencies against the Mexican peso.

Volumes were higher in some countries, mainly our Latin Centro division and notably in the sweet baked goods category and product innovation, including the introduction of Artesano Pullman in Brazil and Chocotost in Colombia. Nonetheless, consumers are under pressure across most of the region, most importantly in 2 of our key markets, Brazil and Argentina. The 1.2 percentage point contraction in the operating margin was in part a reflection of this but also because of our long-term investment in the region, such as the integration of the frozen bread business we acquired in Argentina and the start up of our new modern Cordoba plant. The recent closure of the (inaudible) plant in Chile and route restructuring to broaden and deepen our reach to our consumers throughout the region.

Moving on to Europe. Sales nearly doubled over the same period of last year with the integration of Donuts Iberia as well as organic growth and a currency benefit. The packaged bread category in the New York Bakery brand delivered good performance as these new product launches like Donuts Pantera Rosa, which helped drive growth.

We registered about MXN 230 million of integration and restructuring expenses for Donuts Iberia in the period, as planned, and the process will continue over the course of the year.

In line with our vision, we made the decision to expand our operations to Morocco with a small company called Grupo Adghal, which is -- this is with baked goods, generates an estimated annual sales of around $11 million and operates 3 plants. While small, it's a new market for us to. It's full of new opportunities. Results from this business will include a new region called EAA -- Europe, Asia and Africa -- starting next quarter.

Just before we take our questions, let me talk about the financial operation. As you know, our effective tax rate continues to be high. The main reasons are: a higher taxable base due to inflationary gains in Mexico on our financial debt; better earnings in the U.S., which are naturally subject to a higher rate, close to 38%, 39%; and the effect of no longer carrying deferred income tax in some nonprofitable operations.

Regarding the balance sheet, we are now seeing the reversal of the FX effect, which includes all of last year such that the depreciation of the dollar over the first 3 months of 2016 resulted in a decline -- I'm sorry, on the first 3 months of 2017, resulting in the decline in the peso value of our dollar-denominated debts. Additionally, the debt-to-adjusted EBITDA ratio declined from 2.8 to 2.6x in the year-end.

That concludes our remarks this morning. So Gary, would you please help us with the Q&A session -- Q&A session, please?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from -- and pardon me for any mispronunciations -- Luca Cipiccia with Goldman Sachs.

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Luca Cipiccia, Goldman Sachs Group Inc., Research Division - Research Analyst [2]

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I wanted to ask 3 quick ones. First, if you could qualify maybe a bit better the -- what I understand was a very solid volume growth in Mexico, both in terms of what have you -- what are you seeing, what have you seen this quarter or you -- what have you done right this quarter to drive that acceleration and how you see that playing out in the rest of the year. Secondly, you made reference to the operating -- to the restructuring costs in Europe, and I think I understand well -- you mentioned that, that will continue throughout the year. But if you could guide us maybe a bit more clearly on what type of a drag or operating income performance we should expect for that region this year and maybe after these restructuring investments are behind. And then lastly, same thing for the tax rate. We understand the drivers. But Is there any way you can guide us on how do you think -- and then at the end of the day, we're going to -- what will be for the year on average considering the fact that there's been a lot of volatility and it's specifically high. And I just would like to get a sense on what is a relative expectation for the year overall?

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Guillermo Jorge Quiroz Abed, Grupo Bimbo, S.A.B. de C.V. - CFO, Chief Administration Officer and Member of Advisory Board [3]

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Okay, Luca. So Tania will address the first question and I will prepare the second and third, okay?

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Tania Dib, [4]

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This is Tania. Yes, you are right, we had good performance regarding volumes in Mexico, although we anticipated raw material inflation for this quarter, and actually we're expecting a challenging year because of the FX volatility and potential economic slowdown regarding the new administration in North America. We focus on our initiatives that I am sure that you know really well. And let me mention some of these. Actually, we did increase prices but a little bit lower than inflation at the end of last year, around 3%. But -- and this was mainly the year that we are still prioritizing volumes. We're cautious on increasing client penetration in every channel. Statistically, we did very good regarding the modern channel. Also, the operational channel, we increased our number of clients significantly. And we as well worked on promotional activities. And of course, we work, as always, with our supply chain efficiencies, which offset the pressures that I already mentioned. I can comment as well that we -- regarding our efficiencies, that we are still investing in using (inaudible) in Mexico so that we can increase, for example, the life shelf (sic) [shelf life] of our products. We were very, very efficient regarding our waste reduction and focusing on in some niche categories as well. So I think that this can complement a little bit about volumes in Mexico. Now we will...

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Luca Cipiccia, Goldman Sachs Group Inc., Research Division - Research Analyst [5]

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This increased penetration, especially on distribution, do you think it's realistic to assume that your low-single to mid-single-digit volume growth should be carried through throughout the year if we're talking about incremental dollar or talking about incremental point of sales? Is that your sort of baseline for 2017, that sort of volume will remain?

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Tania Dib, [6]

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I think I would say that, yes, we are expecting around the mid-single-digit increase in volumes, though still, we are -- regarding profitability, we are anticipating from the pressures a challenging year. But regarding volumes, yes, we are optimistic.

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Guillermo Jorge Quiroz Abed, Grupo Bimbo, S.A.B. de C.V. - CFO, Chief Administration Officer and Member of Advisory Board [7]

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Okay, question number two is our European operations. I think basically, all the non-recurring charges are related to the integration of Donuts -- the recent acquisition of Donuts Iberia. What I can tell you is that with our plan shows a 2-year period for the -- for completing the integration, which would be 2017 and 2018. Our purchase for that is close to EUR 70 million.

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Tania Dib, [8]

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Euros.

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Guillermo Jorge Quiroz Abed, Grupo Bimbo, S.A.B. de C.V. - CFO, Chief Administration Officer and Member of Advisory Board [9]

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And more -- a bit more than half what we spent this year. And as you can see in our numbers, the charge for the first quarter is about EUR 13 million. So it's completely related to Spain, and that should be finished by the end of the following year. Okay? And now the last one. Let me tell you how I see this. Our largest operations are in Mexico and the U.S. The normal rate in Mexico should be 30%, if not -- because we had some problems with -- as all Mexican companies, deducting some of the fringe benefits. So let's say that a normal rate for Mexico is about 31%, 32%. Normal rate for the U.S. should be 39%, let's say, with an average 35%, okay? And the rest, we just showed -- or we just experienced a 43% rate. All that is coming from nonprofitable operations there that since about 2 years ago, we took the decision of not incurring deferred -- further deferred taxes on that. So that -- those 8 extra points should be reduced in time. And for this year, I wouldn't expect, to be honest, a rate below 41% or 40%.

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Operator [10]

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The next question comes from Lauren Torres with UBS.

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Lauren Elaine Torres, UBS Investment Bank, Research Division - Latin American Food and Beverage Senior Analyst [11]

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I just first like to follow up on Mexico and the comments you made on protecting or prioritizing volume. If you could just talk a little bit about, well, for the purpose of that. I guess we're hearing from a lot of, say, big companies in Mexico that they are keeping pricing in light of the environment you're involved with this year. And you're obviously, talking about prioritizing volume. So can you just talk a little bit about the intent behind that, the promotional activity you're doing, if this is going to be something we'll see for the entire year? And then the second question is on the U.S. Somewhat the opposite where your volumes are still under pressure and you talked about competitive activity. Just curious if this is more of the same -- what we saw last year or some of this activity have heightened.

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Guillermo Jorge Quiroz Abed, Grupo Bimbo, S.A.B. de C.V. - CFO, Chief Administration Officer and Member of Advisory Board [12]

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Okay. Fred, can you take the second one, please? And then we'll go back to the first.

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Alfred Penny, Grupo Bimbo, S.A.B. de C.V. - President of Bimbo Bakeries USA Inc [13]

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Yes, absolutely. Yes, let me just give you a little color on our top line performance. Our branded -- or in aggregate, our branded business was basically flat. We experienced good growth in our focus brands, our strategic brands. And I'd add that in the first quarter, the first few weeks of the year, the first month of the year was extremely soft market-wide across many categories, particularly in the Northeastern part of the United States. And so the category got off to a slow start. You can see that evidenced in most product categories, food and nonfood, in terms of where the market was early on. But our trends improved as we went forward. I would say that in the bread space, in commercial bread, the market has been a bit more competitive, and I think that's -- and my own read of it is that that's a reflection of the fact that there has been some softness and, obviously, the participants are trying to get some volume. But I wouldn't characterize it as a major difference from where the business was last year or the category was last year.

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Lauren Elaine Torres, UBS Investment Bank, Research Division - Latin American Food and Beverage Senior Analyst [14]

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I'm sorry, just quickly clarify. And just going from that then, I've heard since the last year, where you're not going to be price competitive, you'd rather lose some of the value in light of some of the pricing activity you're certain?

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Alfred Penny, Grupo Bimbo, S.A.B. de C.V. - President of Bimbo Bakeries USA Inc [15]

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Well, I would say this. To be consistent with what I had said on the topic in prior calls, we have a fairly clear strategy on what we're trying to do to grow, to generate top line growth, to focus on our key brands, key strategic brands, and we've been investing incremental marketing dollars in them. And at the same time, and this is also very important from our -- from the standpoint of our strategy, we've been working hard to improve our overall price realization through trade promotion effectiveness, and we continue to do that. And in the quarter, we actually -- and my view of this is we did a very good job of that. Our price realization was actually slightly up.

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Operator [16]

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The next question comes from Alex Robarts with Citibank.

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Alexander Reid Robarts, Citigroup Inc, Research Division - MD and Head of Latin American Consumer Staples Equity Research Team [17]

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I wanted to go back to Mexico. And you -- in the prior call, we talked a little bit about the 0-based budgeting initiative that was just getting under way. And at the time -- and I'm wondering, when we think about this first quarter, did you feel or did -- were you able to capture some benefits from 0-based budgeting? And I guess it might be tricky to quantify those if you did, but it's more about allocation. And is it fair to have the assumption that your benefits are being put back into the business for marketing and merchandising? Or are you finding that there is other uses of those savings? And kind of related to this, as we think about this year, might it be the year where you get the bulk of those 0-based budgeting savings? So I -- that was the first question, and I want to come back to a second one on the U.S.

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Guillermo Jorge Quiroz Abed, Grupo Bimbo, S.A.B. de C.V. - CFO, Chief Administration Officer and Member of Advisory Board [18]

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All right. Please, Alex, let me go back just a bit for -- and answer a question from...

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Tania Dib, [19]

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Lauren.

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Guillermo Jorge Quiroz Abed, Grupo Bimbo, S.A.B. de C.V. - CFO, Chief Administration Officer and Member of Advisory Board [20]

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Lauren about volumes in Mexico, if I remember correctly. What I would say is that, we don't know what is going to happen in the rest of the year. I think last months, weeks and even days have shown us all the activity we are subject to or we all are subject to. So for the company, the importance of maintaining or increasing volumes is a very high priority. Each one of our group of clients has a different response to increasing prices. Elasticity is different. So what I would say, we'll have to face the future. We think we have an opportunity to do that. But in any micro decision, because pricing in every line it takes in independently, pricing -- a pricing decision will always be biased to maintaining volumes. If that is -- should that be going to possible in any case, then we would proceed with price increases. But we will try to prioritize maintaining or even increasing our volumes. And now moving to the -- to your question, Alex, I still consider Citi -- the 0-based budgeting effort to be a new one. We even started with a -- considering as a pilot look exercise. Now it's expanding to the rest of the company. We are -- we see these -- lots of information about savings throughout the system, primarily Mexico. But I wouldn't dare to mention any amount because as a CFO, we'll have to be skeptical. I shall -- I still have to -- I will still have to ask for proof with the -- proof of the -- for the amounts -- the teams that are working in (inaudible) in our savings. So it's just been put in place. They are very optimistic. But I think that -- I shall ask for a separate team to evaluate really how much that -- those savings are.

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Alexander Reid Robarts, Citigroup Inc, Research Division - MD and Head of Latin American Consumer Staples Equity Research Team [21]

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Fair enough. No, I am very clear, Guillermo. I guess the second question I was keen to explore relates to the United States. And it's a clarification and then a question, sorry, but a clarification with the earlier comment on how branded -- on your branded sales. You had a flat in -- they were flat in the first quarter. But the category, I just didn't quite fully get it, so I know the first month was tough. But how was the category in the U.S. in the first quarter? And generally, how are you seeing the full year versus last year? I mean, do you think it might be flat? Is there room for growth? We're seeing some data suggesting not just generally foodservice is growing in the United States generally, and I'm wondering if you're seeing or you feel that, that could be something positive for the category. So that's kind of the first part. The second part is really on the restructuring expenses in North America. So we saw the $20 million coming in the quarter. Mainly, it's the Canadian ERP system. The -- we've these restructuring expenses dissipate over the last years. And I guess the question on this is that, is there a time when we'll get no more North American restructuring expenses? And what might be the number we can work with this year? Sorry for the long question.

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Guillermo Jorge Quiroz Abed, Grupo Bimbo, S.A.B. de C.V. - CFO, Chief Administration Officer and Member of Advisory Board [22]

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And that -- okay.

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Alfred Penny, Grupo Bimbo, S.A.B. de C.V. - President of Bimbo Bakeries USA Inc [23]

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So let me try to answer the U.S. category question. Total commercial bread and sweet goods as a category, a $13 billion category, as IRI reports it, was down in units and down in dollars, just shy of 2%. That's a little bit worse than the 52-week numbers would suggest. And I think that reflects, in part, the -- my reference to a pretty soft start in the first months of the year. Now having said that, inside of the category, and I've spoken to this in the past, there are -- in a category of that size, there are definitely growth opportunities, and we're working hard to take advantage of where those are. The sweet goods category overall actually has been growing, and we're getting our share of that growth. And so we have growth in some categories, some softness due to some competitor pressures and others. But I'm still -- I still am tending to be optimistic about the ability through focusing on our best brands and investing in them correctly to generate growth, and we're seeing that. But at the same time, we're also working to make the overall portfolio more efficient. And so some of our nonstrategic SKUs are continuing to be rationalized out, and that's obviously a bit of a drag that we have to overcome. The main reason for our top line being slightly down is a continuation of softness in private brands, private label volume. And it's a -- the run rate -- the negative run rate on private label hasn't really changed much from what it was in 2016. Guillermo, I think you should take the question on total North America restructuring.

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Guillermo Jorge Quiroz Abed, Grupo Bimbo, S.A.B. de C.V. - CFO, Chief Administration Officer and Member of Advisory Board [24]

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Yes, yes. I'd say complementary to your comments, Fred, that seen as a region, I think that the -- as you just mentioned, the U.S. is coming closing to much lower figures. And in the case of Canada, the growth will be next year. Perhaps some of -- there'll be some remaining expenses for next year. But as a total, I think that we should be -- we expect not so much in the U.S. for next year. I -- honestly, Alex, I don't think that, that line will be empty at any time in the future because we are looking for some -- for catching new efficiencies. This year, we are closing 2 plants in Canada. So I won't expect it to go to 0. But next year, we will -- we should be seeing much lower amounts.

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Operator [25]

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The next question comes from Pedro Leduc with JPMorgan.

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Pedro Leduc, JP Morgan Chase & Co, Research Division - Senior Analyst [26]

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Beyond the financial results line, there's an increase here versus last year, which you explained it's related to FX but as well as a high monetary assets in Venezuela and the high inflation. Could you quantify maybe how much was related to Venezuela, how much do you still have there that could impact us? That would be the first.

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Guillermo Jorge Quiroz Abed, Grupo Bimbo, S.A.B. de C.V. - CFO, Chief Administration Officer and Member of Advisory Board [27]

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I don't have here with me the impact of Venezuela. Of course, it's very small. There's a surprise there. In Venezuela, we are facing, well, a surprise from the financial point of view. We are facing a lot of difficulty there because in the first place, there's no official number for inflation. We are taking some private enterprise information, which is also being taken by some of the other international companies in Venezuela. But then we have to translate that into Mexican pesos using an unofficial exchange rate that is not, of course, close to the free market rate. So it's very confusing. And so I am here receiving a note from my team that says that this monetary loss coming from Venezuela amounts to MXN 65 million. It is strange because we have invested there a lot and now our monetary assets are larger than our debts. So that, according to the Venezuelan law, give us a taxable monetary gain. Unbelievable that issue. So MXN 65 million is the answer from FX.

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Pedro Leduc, JP Morgan Chase & Co, Research Division - Senior Analyst [28]

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Okay. No, that MXN 65 million is good. And maybe if you can help us follow up and see how much is left and we can maybe help to make how you move forward and then the rest is really, I imagine, related to leverage. And in that respect, how do you imagine the capital structure or capital allocation going forward this year? We see you have some tailwinds on EBITDA but also looking either some of the smaller (inaudible) and either referring -- you're looking for other regions or region, Middle East. Should we expect then more M&As this year? Or -- it seemed like you have a lot of internal opportunity, but I just want to see how you're thinking.

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Tania Dib, [29]

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Okay.

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Guillermo Jorge Quiroz Abed, Grupo Bimbo, S.A.B. de C.V. - CFO, Chief Administration Officer and Member of Advisory Board [30]

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Okay. Regarding CapEx, we are still maintaining our budget of about $660 million in the system. And these are new acquisitions; as they're -- as our Fred Penny shows, are very small, CAD 18 million and $11 million in Morocco. So these are small acquisition. That -- as of today, we're not seeing anything different from that. Of course, as I was saying before regarding to the volume question, we are always looking for opportunities, seeing what is there in the market. But our plans today are still related to reducing our debt ratio. So something we'll comment today, we're just reporting these 2 small things.

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Operator [31]

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(Operator Instructions) The next question comes from Julie Chariell with Bloomberg.

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Julie Chariell, [32]

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I want to ask about the Latin America business. You did cite some improvements there and some signs that seems there's positive volume growth, particularly in the central areas. But I wanted to just get your commentary overall on what you're seeing in the economies there, especially the more troubled economies in Brazil and particular Argentina. If you are seeing potentially signs of any consumer turnaround as inflation has begun to come down and interest rates. There have been a number of expectations in the market generally for improvements in the second half, and I'm just curious if that's consistent with what you're seeing.

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Guillermo Jorge Quiroz Abed, Grupo Bimbo, S.A.B. de C.V. - CFO, Chief Administration Officer and Member of Advisory Board [33]

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Fred, can you say the part of the U.S.?

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Tania Dib, [34]

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All right.

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Alfred Penny, Grupo Bimbo, S.A.B. de C.V. - President of Bimbo Bakeries USA Inc [35]

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How about you work the U.S., right?

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Guillermo Jorge Quiroz Abed, Grupo Bimbo, S.A.B. de C.V. - CFO, Chief Administration Officer and Member of Advisory Board [36]

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Because the...

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Alfred Penny, Grupo Bimbo, S.A.B. de C.V. - President of Bimbo Bakeries USA Inc [37]

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. It's all Latin America. It's all you, Guillermo.

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Julie Chariell, [38]

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It's all Latin America. It's all Latin America.

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Guillermo Jorge Quiroz Abed, Grupo Bimbo, S.A.B. de C.V. - CFO, Chief Administration Officer and Member of Advisory Board [39]

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Yes, okay. Okay. Sorry, sorry. Our comment is yes, we just had a very detailed review of the Brazilian operation. Things are getting better there in the market. Not very much, but let's say economy is doing better than before. Volumes are not as strong as we would like to, but we are being able to maintain our sales. So for the rest of the year, we are going to make additional changes in the other basic processes of the company. We should see better results for the rest of the year. And in the case of Argentina, well, the Argentinian economy, as you all know, is getting -- is going through a very profound change. It seems they're all -- getting better as well. And there, we are facing the integration of the frozen business just acquired. And we'll have to see how consumption behaves in both countries for the rest of the year. It's not very clear to us, to be honest.

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Operator [40]

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This concludes the question-and-answer session. At this time, I'd like to turn the floor back to Mr. Guillermo Quiroz for any closing remarks.

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Guillermo Jorge Quiroz Abed, Grupo Bimbo, S.A.B. de C.V. - CFO, Chief Administration Officer and Member of Advisory Board [41]

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Thank you, guys. Thank you all. Please call us anytime when you have any further comments or questions. Thank you very much again and have a nice day.

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Operator [42]

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Thank you. This concludes today's presentation. You may disconnect your line at this time, and have a nice day.