BRF profits drop after ‘challenging’ period

By Oscar Rousseau

- Last updated on GMT

BRF's home market Brazil was "virtually flat" in the first quarter of 2016
BRF's home market Brazil was "virtually flat" in the first quarter of 2016
Brazilian meat processor BRF has reported a slide in gross profits for the first quarter of 2016 as pressure on poultry prices and the cost of corn hurt its income.

Gross income came to R$2bn ($500m), down 6.1% when compared with the same period in 2015, the company said in its Q1 trading report for 2016.

The first quarter of the year was one of the most challenging periods of the last decade, due to a combination of very distinct events,​” said Pedro Faria, the global CEO of BRF in a statement on Friday 29 April.

While chicken production in Brazil reached record levels, pressuring prices, the cost of corn rose exponentially and without any correlation to global prices, with price increases of over 30% in relation to end-2015​.”

Despite the struggles in the first quarter of the year, BRF said it will maintain its international expansion program which has recently seen it take over firms in Argentina​, Oman​, the UK and Thailand​. BRF said it plans to invest R$2bn ($500m) in 2016 to support its long-term growth strategy. “This is only possible because of our comfortable cash position and the robust financial management of our capital structure,​” noted Faria.

BRF: In numbers

Meat processing behemoth BRF markets products under three brands: Sadia, Perdigao and Qualy. It employs more than 105,000 people and operates 35 industrial units in Argentina, Brazil, the UK, the Netherlands, Thailand and the United Arab Emirates. It exports its products to more than 120 countries.

Strong Asia

Net operating revenue for BRF increased by 15.2%, reaching R$8.1bn ($2.3bn) in the first quarter of the year. This growth was driven by higher average prices and sales volume growth and EBITDA came to R$1bn, up 7.8% from 2015 figures.

The business, which claims to be ones of the world’s largest food companies, sold over one million tonnes of food products – a figure significantly higher than the company’s usual levels.

Asia (44.4%) and Europe (28.9%) recorded the largest growth rates in sales volume terms. Latin America also posted volume sales growth of 16.4%.

Malaysian opportunity

BRF’s native market Brazil was “virtually flat​” in the first quarter of the year, according to market research body Nielsen. In the Brazilian market, BRF adopted a new pricing policy that makes adjustments by region, channel and category.

Net operating revenue in the Middle East and North Africa recorded a year-on-year growth of 17.9%, driven primarily by a surge in volume sales of processed meats (27.1%).

Net income increased by 43.8%, when compared with the first quarter of 2015. During this period BRF won approval for four plans to export to Malaysia and three to export to China. BRF recently opened an office in Malaysia to support its growth plans in south-east Asia.

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