BRF says lower feed price, operational overhaul to lift margins

Shares rose by more than 10% in morning trade
calendar icon 2 March 2023
clock icon 2 minute read

Brazilian meat processor BRF SA said on Wednesday an expected fall in livestock feed prices will help it raise margins across its businesses after grappling with cost inflation and a fall in selling prices in some markets last year, reported Reuters.

In a conference call to discuss quarterly results, BRF executives said feed prices will drop, most notably in the second half of the year, as Brazil is harvesting large soy and corn crops.

An ongoing operational overhaul is also expected to bolster BRF's margins in coming quarters, the company said after posting dismal fourth quarter results, losing more money than analysts had expected which it attributed to non-recurring events and cost pressure across its key divisions.

BRF's proposed operational changes include reducing stocks of finished products and improving capacity utilization at its chicken and hog plants.

Shares rose by more than 10% in morning trade in Sao Paulo, as investors focused on the turnaround being led by Miguel Gularte, who took over as CEO in August after beefpacker Marfrig acquired a majority stake in BRF.

BRF is also keen to sell non-core assets, including a pet food unit, and use proceeds to reduce gross debt. It said it would pursue a leverage ratio of 2x net debt-to-EBITDA, down from 3.75x currently.

"This does not happen overnight," CFO Fabio Mariano said when asked by analysts to give a timeline for reaching that goal.

While vowing to raise margins in 2023, BRF said persistent downward price pressure, especially in export markets, has been a challenge in the first weeks of the year.

The problem, which is affecting Brazil's meat export industry in general, already impacted BRF's results in the fourth quarter, traditionally a strong one because of the holiday season.

© 2000 - 2024 - Global Ag Media. All Rights Reserved | No part of this site may be reproduced without permission.