Brazil-based meat company BRF has made a number of acquisitions in recent months and has now reported a year-on-year increase of 2.7 percent in quarter revenue to BRL8.5 billion (US$2.7 billion). This the company has achieved despite what is describes as an “adverse business environment.” For the financial year so far, overall net revenue stands at more than BRL25.1 billion (US$7.88 billion), which is 8.2 percent more than a year ago.
For BRF, Brazil and Middle East/North Africa (MENA) continued to be the strongest regions for business in the third quarter of 2016 in terms of volume sales and net operating revenue.
Despite falling demand in the company’s home market, net revenue there was up 2.8 percent from the previous three-month period to BRL3.6 billion (US$1.1 billion). The improvement was attributed to innovations in a number of product ranges. Of its global business, only in Brazil has BRF recorded decreases in volume sales and net revenue for the current quarter compared to the previous one, and for the first nine months of this year compared with 2015. For the third quarter, sales of poultry are up in volume but this serves to reduce the decline in production by BRF in Brazil so far this year to 8.2 percent. Net revenue for the first nine months of this year is 3.2 percent below the 2015 figure.
Local production remains the “growth engine” in the MENA region. This helped support a 60 percent increase in the volume of processed foods produced during the quarter compared with the previous year. Net operating revenue in the region was BRL1.56 billion (US$490 million), 6.9 percent below the same quarter last year.
With an increase of 83 percent, the biggest percentage growth in BRF’s business volume year-on-year was achieved in Asia. Net operating revenue there was BRL1.28 billion (US$402 million), which is 68 percent more than in the third quarter of 2015. Sales have been strong in China, Malaysia and Vietnam, while the company’s business in Thailand has undergone a period of consolidation.
BRF describes the business conditions in Europe/Eurasia as “very challenging,” largely as the result of the falling value of the UK pound and Russian ruble. Net operating revenue in this region for the quarter was a little over BRL963 million (US$303 million) - 14.3 percent below the revenue for the same period in 2015.
Growth in value-added products was a highlight of the company’s 11.5 percent increase in sales in the region comprising the Americas (excluding Brazil). Net revenue for the quarter of BRL550 million (US$173 million) was also attributed to two recent acquisitions in Argentina, Campo Austral and Calchaquí, and to the re-launch of Sadia’s nuggets.
Quarterly sales volume for BRF in Africa was 4.4 percent above the previous three-month period, netting the company BRL191 million (US$60 million). The results were adversely impacted by political and macroeconomic difficulties in a number of countries in the region. Despite an increase in sales volume of 13.7 percent over the same period last year, third-quarter 2016 revenue for BRF was down 6.3 percent in this region.
BRF further develops its global reach
The company reports it has invested BRL641 million (US$201 million) over the last three months in measures to support the growth of the business, increase process efficiency and implement a number of new projects.
Earlier this month, BRF announced it had completed the acquisition of a majority stake in Malaysian company, FFM Further Processing.
To increase its presence in China through strategic partnerships, BRF has also signed an investment agreement worth US$20 million in the Initial Public Offering (IPO) for COFCO Meat of China, in order to increase its presence in China through strategic partnerships. A growing vertically integrated pork business, COFCO Meat has 47 hog farms, two slaughterhouses and two processing plants strategically located across China.
In June, BRF set up a new subsidiary, Sadia Halal, to specialize and serve Muslim markets.
In other developments over the period, BRF issued US$500 million in international 10-year bonds with a 4.35 per cent per annum coupon. It has also announced a reduction of 30 percent in the sodium content of more than 40 products in the Sadia portfolio, and the company launched a new range of ready-to-cook meals endorsed by Jamie Oliver. British TV chef Oliver has been in Brazil recently to announce his partnership with Sadia.
CEO’s view of BRF’s prospects for 2017
“Looking ahead, we reaffirm our purpose to ‘Feed the World’ and our strategic direction to grow through innovation,” Pedro Faria, Global CEO of BRF said, commenting on the latest quarter’s results. “We are certain that we will begin 2017 even stronger than our competitors. For the coming quarters, we believe the scenario for the sector will continue to improve due to the adjustment in the supply of chicken according to public data on production and housing, a gradual convergence of the price of corn to levels near export parity and a recovery of the Brazilian economy.”
