March 26, 2008

EU ban may affect Brazilian beef exporters' credit rating

The EU's ban on Brazilian beef could affect the credit standing of Brazil's exporters in the short-term, according to Standard & Poor's Ratings Services.

Consolidation of Brazil's beef industry is likely due to the strict sanitary standards producers are required to meet and the limited access to certified cattle, said S&P.

Bigger companies might benefit from the situation, but the producers' openness toward market consolidation and stress o margins could squeeze liquidity. This could eventually affect companies' financial risk profiles negatively, the agency said.

Lower volumes will be made up for by an unavoidable rise in international prices, but as rated companies attempt to redirect shipments or cut unutilised capacity, they will experience falling margins and cash-flow generation, said S&P.