What are some examples of foreign currency instruments that Bimbo Foods Bakeries Distribution uses?
Bimbo_Foods_Bakeries_Distribution Franchise · 2025 FDDAnswer from 2025 FDD Document
risk
The Company carries out transactions in different foreign currencies and presents its consolidated financial statements in Mexican pesos. Accordingly, it is exposed to foreign currency risk (i.e. due to forecasted purchases of raw materials, contracts and monetary assets and liabilities) and foreign currency translation risk (i.e. due to net investments in foreign subsidiaries). The Company is mainly exposed to foreign currency risk associated with the performance of the Mexican peso against the American dollar and the Canadian dollar, and the Canadian dollar against the USD.
- Management of foreign currency translation risk
The Company has investments in foreign subsidiaries whose functional currency is not the Mexican peso, which exposes it to foreign currency translation risk. The Company has contracted intercompany financial assets and liabilities with those foreign subsidiaries in various currencies, which also generates foreign currency translation risks.
Foreign currency translation risk is mitigated mostly through the issuance of one or more loans denominated in currencies other than the functional currency to naturally hedge exposure to foreign currency and presented as a net investment in foreign subsidiaries.
As of December 31, 2024, 2023 and 2022, the loans in USD (described in Note 13) that have been designated as hedges on the net investment in foreign subsidiaries amount to USD969 million, USD841 million and USD1,058 million, respectively.
As of December 31, 2024, 2023 and 2022, the loans that have been designated as hedges on the net investment in foreign subsidiaries in Canada amount to CAD289 million, CAD289 million and CAD354 million, respectively (see Note 17, 2.3 (a)).
As of December 31, 2024, 2023 and 2022, the loans that have been designated as hedges on the net investment in foreign subsidiaries in Spain amount to EUR412 million, EUR318 million and EUR318 million, respectively.
As of December 31, 2024, the amount designated as hedges on the net investment in foreign subsidiaries in United Kingdom is GBP100 million.
As of December 31, 2024, 2023 and 2022, the amount designated as a hedge for non-current intercompany asset positions is CAD664 million, CAD664 million and CAD630 million, respectively.
As of December 31, 2023 and 2022, the amount loans for non-current intercompany that have been designated as the investment in USA subsidiaries is USD185 million and USD756 million respectively.
As of December 31, 2023, the amount designated as a hedge for non-current intercompany liability positions is USD13 million.
As of December 31, 2024, the amount designated as a hedge for non-current intercompany liability positions is CLP60,000 million.
Source: Item 14 — Other Accounts Payable and Accrued Liabilities (FDD pages 312–476)
What This Means (2025 FDD)
According to the 2025 FDD, Bimbo Foods Bakeries Distribution utilizes several financial instruments to manage foreign currency risk. These include foreign exchange and commodity forward contracts, which are used to hedge against fluctuations in currency values related to raw materials and other transactions. The company also uses intercompany financial assets and liabilities denominated in various currencies with its foreign subsidiaries.
To mitigate foreign currency translation risk, Bimbo Foods Bakeries Distribution issues loans denominated in currencies other than the functional currency of its foreign subsidiaries. As of December 31, 2024, the company had designated loans in USD amounting to $969 million as hedges on the net investment in foreign subsidiaries. Additionally, loans in CAD (Canadian dollars) totaling CAD289 million and loans in EUR (Euros) totaling EUR412 million were designated as hedges for investments in Canadian and Spanish subsidiaries, respectively. A further GBP100 million was designated as hedges on the net investment in foreign subsidiaries in the United Kingdom.
These strategies reflect Bimbo Foods Bakeries Distribution's approach to managing its exposure to foreign currency risks arising from its international operations and investments. By using these instruments, the company aims to protect its financial position from adverse currency movements and ensure stability in its financial reporting.