Mexico's Alfa expects valuation boost after food business refocus

By Kylie Madry and Rafael EscaleraMontoto

MEXICO CITY, April 24 (Reuters) - Mexico's Alfa expects its valuation to come in line with peers' after it spun off a number of units to focus on its food business Sigma, the firm's finance head said on Thursday.

Alfa had long complained of suffering a so-called "conglomerate discount," in which the group was valued at less than the sum of its units.

Over the past several years, it has spun off autoparts maker Nemak, telecommunications business Axtel and most recently petrochemical firm Alpek.

Shares in Alfa jumped nearly 14% during the firm's first-quarter earnings call before paring back gains to around 11% at 14.85 pesos ($0.7578) apiece. They've climbed some 26% so far this year.

"We expect this positive trend to continue," Alfa CFO Eduardo Escalante told analysts on the call, as the firm launches its Sigma-focused rebrand.

That will include adopting a Sigma-related name and trading ticker, Escalante added.

Scotiabank analysts wrote in a note that Alfa's shares still had room to climb 20% or so before reaching valuations in line with tortilla maker Gruma or bread maker Bimbo.

Alfa on Wednesday reported a first-quarter net profit which nearly tripled from the previous year, despite revenues dipping 5%.

In recent months, Sigma has faced some raw material cost pressures, the unit's finance chief added, leading to price increases.

Sigma Chief Financial Officer Roberto Olivares cited factors such as avian flu outbreaks in the Americas and Europe hitting turkey supply and U.S.-sourced beef becoming more expensive to import into Mexico due to the weakening of the peso currency.

Olivares added the impact of U.S. tariffs was limited for the firm, given nearly all of the finished products sold by Sigma in the U.S. were produced there.

Sigma has begun to diversify its sourcing to shift away from reliance on the U.S., he said, including buying poultry from Brazil and beef from Argentina.

($1 = 19.5960 Mexican pesos)