Keystone Foods net revenues up amid strong QSR demand

Keystone Foods achieved an increase in net revenues for the first quarter of fiscal year 2018 as its parent company, Marfrig Global Foods, plans to divest of the business.

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Morganka, Bigstock
Morganka, Bigstock

Keystone Foods achieved an increase in net revenues for the first quarter of fiscal year 2018 as its parent company, Marfrig Global Foods, plans to divest of the business.

The Brazil-based Marfrig Global Foods released its quarterly financial results on May 14.

For the period ending March 31, Keystone Foods achieved a net revenue of US$678.7 million, up from the US$667.2 million it reported for the first quarter of fiscal year 2017.

Strong product demand

Keystone Foods, the tenth largest broiler company in the United States, reported the demand continued to be strong during the quarter in the foodservice, retail and convenience channels in both the U.S. and Asia Pacific/Middle East/Africa (APMEA) region.

The demand for Keystone Foods products persisted during the quarter in spite of headwinds faced by the restaurant category due to extreme weather conditions, the company added. Leading quick service restaurant (QSR) brands outpaced the restaurant peer group as re-imaging, technology innovation and promotional activity drove both foot traffic and higher value tickets, the company said in a press release.

“In some cases, the expectation of promotional success required Keystone to build product inventory to meet high future demand, and to engage manufacturing partners when demand for certain products exceeded Keystone’s available capacity,” the company stated.

Challenges during the quarter

The company stated that some operational headwinds were faced during the quarter as a result of higher costs associated with hiring of third parties.

It also encountered some startup costs associated with recent capacity expansions.

“As these new production facilities achieve greater scale and higher utilization, it is expected that more capacity will be brough in-house, and production will achieve greater operational efficiency.

Beef processing

Keystone Foods during the first quarter commenced production of fresh beef, describing it as a “significant milestone,” and a “successful transition to meet the dynamic needs of our customers.”

Divestiture still planned

Marfrig, in its press release, reiterated its intent to divest of Keystone Foods, a decision it first announced in April. Those plans were announced at the same time Marfrig revealed its intent to acquire a majority stake in National Beef Packing Company, the fourth largest beef processor in the United States.

By selling Keystone Foods, Marfrig stated, the company can better focus on beef operations while accelerating its deleveraging process and leverage improvements in its capital structure.

Marfrig has not identified any potential buyers for Keystone Foods, but Bloomberg recently reported that Tyson Foods and Cargill are interested, citing “people with direct knowledge of the matter.”

Four members of the U.S. Senate Committee on Agriculture, Nutrition and Forestry have requested that the Committee on Foreign Investment in the United States (CFIUS) conduct a review of Marfrig’s planned acquisition of National Beef Packing Company.

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