Bloomberg News

Mexican Chicken Producer Bachoco Tumbles on Bird Flu

February 15, 2013

(Corrects name of city where company is based in third paragraph.)

Industrias Bachoco SAB (BACHOCOB:US), Mexico’s biggest chicken producer, fell for the first time in seven days after reporting possible cases of bird flu at five of its breeder farms.

The stock fell (BACHOCOB:US) 2.1 percent to 30.97 pesos at the close of Mexico City trading, snapping a seven-day climb that was the longest streak in almost two years. Trading volume today was more than triple the three-month daily average.

Avian influenza may have broken out at five farms in the state of Guanajuato, the Celaya-based company said in a statement yesterday. Bachoco is working with authorities to verify the outbreak and will take necessary action if the cases are confirmed, according to the statement.

“If they confirm the outbreak, they are going to have to kill all the hatching chickens,” Gustavo Teran, an analyst with Mexico City-based Corp. Actinver SAB, said in a telephone interview. Under a worst-case scenario, an outbreak could cut revenue by as much as 3 percent, Teran estimated.

Bachoco’s risks are contained because the company has diversified its production into about 100 poultry farms, Teran said. He rates the stock a buy.

“We spoke to the company and we feel comfortable that they’ve got it under control,” Teran said.

The company identified the bird-flu strain as H7N3, a contagious virus that ordinarily only infects birds. It’s similar to the type detected in 2012 in other producers’ laying farms in the neighboring state of Jalisco, Bachoco said.

Obtaining Eggs

A bird flu outbreak last summer caused egg and poultry prices to surge, driving up inflation in Mexico.

Bachoco should be able to offset any losses if the virus is confirmed by obtaining hatching eggs from third parties, according to Miguel Mayorga, an analyst with brokerage firm Grupo Bursatil Mexicano who rates the stock the equivalent of buy.

“Currently it’s a non-issue,” Mayorga said in a telephone interview. “If the disease spreads it could be a harder impact.”

To contact the reporter on this story: Danielle Verbrigghe in New York at dverbrigghe@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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