Letter to the Shareholders
Year 2016 was a year full of important challenges due to the exchange rate, however, Lala Group has been able to provide solid results, to expand its geographic presence and to invest to prepare for future growth.
During 2016, we developed internal abilities in regards to planning, purchases and logistics, which allowed us to become more efficient and create a decrement in our margins. We also invested heavily in the expansion of our international presence by acquiring “La Perfecta” in Nicaragua, and the distribution agreement reached with Florida Bebidas in Costa Rica and with these activities, we have increased our presence in Central America.
Similarly, with the acquisition of the brands and added value portfolio in the US, we have now entered the largest dairy products market in the world.
During this past 2016, acquisitions outside Mexico had an effect in the consolidated level of Grupo Lala. We are expecting an improvement in the results of these acquisitions during 2017.
From January to December 2016, a total of 2,863 million pesos of capital was invested, of these, 73.0% was mainly destined to the increment of property, factory and equipment.
» Net sells increased in 11.0% in comparison to 2015, from 48,183 million pesos to 52,468 million pesos to 53,468 million pesos, of which 6.7% were destined to organic growth, whereas the remaining 4.3% was allotted to acquisitions.
» During 2016, gross profit increased 7.6%, lower than the 11.0% of increment of gross sales. This due to the growing inflation in the cost of raw material which could not be compensated with price increments.
» Operation profit showed a decrement of 7.0% which can be explained by the consolidation of five months of operation in the US business, unexpected integration expenses in the Central America acquisitions, as well as the inflation of expenses in Mexico, above the increment of gross profit.
» As a consequence of this, the 2016 EBITDA increased 0.7% to reach 6,861 million pesos. At the same time, the EBITDA margin decreased 130 base points, from 14.1% to 12.8%.
During 2016, consolidated gross profit increased 243 million pesos to reach a closing figure of 4,193 million pesos, or 6.2% above last year’s.