Mexico's Bimbo expects raw material costs to ease

Wed Apr 27, 2011 12:41pm EDT

* High costs for another qtr in Brazil due to expansion

* Bimbo sees closing on $925 mln Sara Lee deal in summer

MEXICO CITY, April 27 (Reuters) - Mexico's Bimbo expects prices of raw materials, which have hurt results, to ease going forward and forecast one more quarter of high costs in Brazil as it expands aggressively in Latin America's biggest economy.

Bimbo (BIMBOA.MX) posted on Tuesday a decline of nearly 6 percent in its net profit for the January-to-March period as prices for wheat, oils and sugar climbed. Strengthening of the peso against the dollar also hurt profits.

But Chief Financial Officer Guillermo Quiroz said on Wednesday things were looking better for the rest of the year.

"Volumes will continue to grow as the pace of economic recovery picks up and consumer confidence increases. We now expect raw materials prices to ease," he told analysts on a conference call to discuss the company's financial results.

Sales of Bimbo's Latin America unit rose nearly 14 percent in the first quarter, driven by Brazil, Colombia and Chile. It was the unit that posted the strongest percentage increase, above its U.S. and Mexico operations.

Brazil, Bimbo's biggest bet in South America, has put some pressure on the breadmaker's costs as it introduces its namesake bread brand and snack products to that market.

"We are investing a lot there. The outlook we have is ... that this high impact on our distribution costs will stay in place for one more quarter," Quiroz said. "We are expecting to leave behind cost pressures by the second part of the year."

Quiroz said the closing of the acquisition of Sara Lee's SLE.N North American fresh bakery was expected to take place in the early summer.

The U.S. Department of Justice is still reviewing papers related to the Mexican company's $925 million bid for the Sara Lee unit that will turn Bimbo into the world's leading bread maker.

"Literally millions of documents were sent to the DOJ, and all I can say is that we are headed for late June or July," Quiroz said.

The company's shares slipped 0.59 percent to 25.36 pesos in afternoon trading on Wednesday. (Reporting by Cyntia Barrera Diaz)

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