While the COVID-19 pandemic continues to impact its protein business across the world, BRF S.A. is reporting improved sales and revenue for the latest quarter. While its core Brazilian chicken and pork divisions bear increasing costs of production, the firm continues to focus on its 2030 vision of product and business diversification.
In the Brazil-based protein company’s latest results, net revenue, gross margin and profit by BRF S.A. registered year-on-year improvements.
According to the second-quarter results published late last week, net revenue for the period was around 28% higher than the comparative three months of 2020 at 11.637 billion real (BRL; US$2.20 billion).
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) for the three months was BRL1.271 billion, an increase of more than 23% year-on-year.
Showing a 12.5% year-on-year improvement was gross profit for the quarter at almost BRL2.23 billion. However, additional costs of the coronavirus (COVID-19) pandemic resulted in a further deterioration from the third consecutive quarter for BRF. Reported gross margin for the latest quarter was 19.1% (compared to 21.7% for the same period of 2020). Adjusting for reported COVID-19 costs — BRL57.4 million for the latest quarter — gross margin fell from 21.7% to 19.1%.
At a reported BRL82.5 million, pandemic-related expenses also impacted EBITDA margin for BRF. Reported margin continued downwards for a second consecutive quarter to 10.9%. In the same period of 2020, the figure was 11.3%. Meanwhile, taking into account the COVID-19 expenses, the margins reported were 11.6% and 13.7%, respectively.
BRF’s net income for the latest quarter, however, is reported as a negative figure of BRL199 million. The figure was a positive BRL307 million for the comparative figure of 2020.
Rising costs of chicken, pork production in Brazil
Since 2020, costs of both chicken and pork production have risen in Brazil generally, according to figures reported by BRF in the quarterly report. For both activities, January 2019 is taken as the base.
In June of this year, the average costs of product sold per kilo had risen to 183 for chicken, and 177 for swine production. As a result, producers’ margins had declined to 71 and 87, respectively.
For BRF, the company reports that efficient cost management and a value-added product portfolio have ameliorated these impacts to some extent. However, since the last quarter, the firm’s average per-kilo costs have overtaken the price achieved by the company. The reported figures are BRL141 and BRL139, respectively.
Focus on brands, portfolio, and exports towards 2030 Vision
Among the company’s priority strategies for the coming years, BRF states the strengthening preference for, and leadership of its brands. To generate value, further investments will be made at its facilities in nine states across Brazil.
For its brands Qualy, Sadia, and Perdigão, BRF reports its best result for the last six quarters. Furthermore, the firm says it has achieved market leadership of at least 44% for its margarine, cold cuts, and frozen products.
As BRF spends more on innovations in Brazil — 7.2% of total revenue for the quarter just ended — it reports 84% growth in value-added products in its home market.
With a recovery in market demand across the world, BRF reports a rise in direct exports. For African markets, the firm has registered margin growth, while volumes have risen to the Americas.
Margins are showing signs of recovery for Banvit, BRF’s poultry business in Turkey. As its exports expand, there is an investment plan in place. With the Middle East is seeing economies reopen and a return to religious tourism, BRF reports exports by its Sadia company in Saudi Arabia are also rising. The Joody Al Sharqiya plant is now operating, according to the quarterly report.
In Asia, BRF registers different trends in the key markets of Japan and China. Despite some recovery in China’s pig numbers, the market remains unbalanced, according to BRF’s analysis. As a result, prices there have remained high, while inventories have been diminishing in Japan as a result of a recovery in prices.
In its latest report presentation, BRF confirms its commitment to achieving net zero greenhouse gas emissions by 2040.
Other recent business highlights
In July, BRF was announced as among the investors in Israel-based cultured meat company, Aleph Farms. The company secured more than US$105 million in funding for the large-scale commercialization of cultivated beef steaks.
Also in alternative proteins, BRF reports the expansion of its Sadia Veg&Tal line to include meatballs, kibbeh, and minced meat.
Developments in pet food sector
According to its latest quarterly report, BRF is now among the top 3 pet food brands in Brazil, as well as being market leader in Paraguay and Uruguay.
Meanwhile, the company has closed its acquisition of the Hercosul Group, and anti-trust authority approval has been given for it to acquire Mogiana Alimentos. Purchased for a total of BRL1.35 billion, the annual net revenue for these two operations amounted to BRL750 million. Targeted at the high end of the pert food market, the combined market share is given at 10%.
More on BRF
With annual slaughterings of almost 2.2 billion birds, BRF S.A. is the world’s second largest poultry meat producer, according to WATTPoultry.com’s Top Poultry Companies database.
Based in Brazil, BRF was formerly known as Brasil Foods, and produces chickens and turkeys.
Earlier this month, China suspended imports of pork from a BRF plant in Brazil. At the time, the firm was seeking an explanation for this suspension from its Lucas do Rio-VerdeMT facility, and was seeking reauthorization.
