Mexico's Bimbo unfazed by peso depreciation

www.forbes.com Reuters, 03.07.03, 1:23 PM ET By Alistair Bell MEXICO CITY, March 7 (Reuters) - The head of Mexico's Grupo Bimbo <BIMBOA.MX>, the world's third-biggest bread maker, said he is not overly worried by a recent depreciation of Mexico's peso against the U.S. dollar. "If there is economic turbulence it affect us. We are in a globalized world and everything affects you negatively or benefits you. But I think that is where the value of companies that look for staying power, quality and service come in," Bimbo Chief Executive Officer Rafael Velez told journalists on Thursday night. "Staying power enables you to resolve and confront all the possibilities that arise," he said. The Mexican peso has weakened by more than 6 percent against the dollar since the start of the year, mostly on fears that a war in Iraq would dampen the U.S. and Mexican economies. Mexico's currency also fell almost 12 percent in 2002. Currency depreciations can drag on a company's earnings by reducing the value of revenues earned abroad. For Mexican companies it can also make servicing foreign-denominated debt more expensive. Bimbo has four bonds outstanding, all denominated in pesos. Bimbo, which bakes bread, pastries, cookies and snacks, last year paid $610 million to buy the U.S. baking unit of Canada's George Weston Ltd. In the fourth quarter of 2002, Bimbo's sales came 68 percent from Mexico, 26 percent from the United States and 6 percent from operations around Latin America. Velez said Bimbo was not considering pulling out of any Latin American country, despite political upheaval in Venezuela and the economic crisis in Argentina. "We are where we are, and in those countries we have to deal with the good and the bad," he said. "We are a baker, and I have never heard of Bimbo abandoning anywhere." NO FARGO ACQUISITION Bimbo's profits have slumped in recent quarters due to the cost of implementing an information technology system known as Enterprise Resource Planning. Bimbo's share price has lost more than 3.8 percent since the start of the year. It was unchanged on Friday morning at 14.81 pesos on the Mexican stock exchange. Velez ruled out any bid to acquire Argentina' Fargo bakery, taken over by Deutsche Bank <DBKGn.DE> from an Argentine investment fund last year after Fargo defaulted on its $150 million debt. "Our company is known for its conservative style of administration, so we have a lot to consolidate before going and taking on risks. Now we are investing in systems and I think that is better," he said. Velez said Bimbo's sales were struggling recently but he gave no figures. "Some (sales) rise and some fall; but I think in general if you fight to give the best service, the best quality and the best possible price, then the public will judge you," he said. "We are feeling the sales difficult but we are growing," he said.