Industrias Bachoco SAB de CV (IDBHF) Risk Analysis
Risk Overview Q4, 2021
Source: the company's latest filing for the period ended Dec 31, 2021, filed Apr 29, 2022
Risk Change Over Time
No filing history is available.
- Corporate Activity and Growth - Risk 1Our derivative risk management activities could result in financial losses.
We routinely enter into financial derivatives transactions as part of our risk management activities, and losses from exposures thereof could result in a material adverse effect on our business, financial condition and results of operations. As part of our treasury operations, we trade various financial instruments, including currency and commodities, such as corn, soybean mean, soybean oil and related derivatives. As a result of these operations, we are exposed to numerous factors that are beyond our control, including overall market trading activity, foreign exchange fluctuations, volatility on the commodity market the credit risk of our counterparties and general market volatility. In addition, we could be exposed to a number of risks related to the movement of market prices in the underlying instruments to these derivatives transactions, including the risk of unfavorable market price movements relative to its long or short positions, a decline in the market liquidity of the related instruments, volatility in market prices, or foreign currency exchange rates relating to these positions, and the risk that the instruments with which we choose to hedge certain positions do not track the fair value of those positions. If we incur any losses from these exposures, it could have a material adverse effect on our business, financial condition and results of operations.
Risk Highlights Q4, 2021
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 21
- Economy & Political Environment - Risk 1Unfavorable economic conditions in Mexico or the United States, such as a recession or increases in interest and inflation rates, could have an adverse effect on our financial performance.
If the Mexican or U.S. economies experience a high inflation rate, recession or economic slowdown, consumers may not be able to purchase our products as usual, especially in Mexico, where these factors have a direct impact on the consumers. As a consequence, our earnings may be adversely affected. High interest rates in Mexico or in the U.S. could adversely affect our costs and our earnings due to the impact those changes have on our variable-rate debt instruments. Alternatively, we may benefit from the interest we earn on our cash balance. Mexico historically has had, and may continue to have, high real and nominal interest rates. A strong variation in the exchange rates between the peso and the U.S. dollar could negatively affect our financial results, as a greater percentage of our net revenue are made in pesos, and a large percentage of our raw material purchases are made in U.S. dollars. Furthermore, the Company could be adversely affected by negative economic conditions prevalent in the U.S. or other countries (including economic volatility as a result of the COVID-19 pandemic), even when economic conditions in such countries may differ significantly from economic conditions in Mexico, as investors' reactions to developments in any of these other countries may have an adverse effect on our securities. Consequently, the market value of our securities may be adversely affected by events taking place outside of Mexico or the U.S.
- Economy & Political Environment - Risk 2Political events and regulatory changes in Mexico could affect Mexican economic conditions and negatively affect our operations.
The Company has operations in both Mexico and the U.S. However, it is incorporated under the laws of Mexico, where a greater percentage of its net revenue are made. Accordingly, we foresee an impact mainly from negative developments in the political, regulatory and economic conditions in Mexico. The direct correlation between economic conditions in Mexico and the U.S. has strengthened in recent years because of the North American Free Trade Agreement ("NAFTA"), now United States – Mexico – Canada Agreement ("USMCA"). During 2017 the renegotiation process of NAFTA began between U.S., Canada and Mexico. The three countries reached an agreement in November 2018, which was later ratified in March 2020. With regard to the industry in which we compete, the trade agreement remained practically unchanged. Because the Mexican economy is heavily influenced by the U.S. economy, any potential re-negotiation of USMCA and/or other U.S. government policies that may be adopted by the U.S. administration (which may result in regulatory gridlock or, on the contrary, a major regulatory change) could have a material adverse effect on the Mexican economy, which, in turn, could affect our business, financial condition and results of operations.
- Economy & Political Environment - Risk 3AddedWe are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine.
Our business, financial condition and results of operations may be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions. Global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was reported. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, increase in our energy and other input costs, and supply chain interruptions. We are continuing to monitor the situation in Ukraine and globally and assessing its potential impact on our business. Additionally, Russia's prior annexation of Crimea, recent recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military interventions in Ukraine have led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People's Republic, and the so-called Luhansk People's Republic, including agreement to remove certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication payment system. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets. Any of the abovementioned factors could affect our business, prospects, financial condition, and operating results. The extent and duration of the military action, sanctions and resulting market disruptions are difficult to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this Annual Report.
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