May 10, 2006

 

Sadia reports lower Q1 meat exports on bird flu, Russia ban

 

 

Sadia SA, Brazil's largest meatpacker, said late Monday (May 8) that export volume fell as a result of bird flu in its primary markets, as well as Russia's ban on Brazilian pork and chicken meat because of FMD in two states.

 

Chicken consumption dropped in the early months of 2006 in Europe and the Middle East because of bird flu fears, impacting demand for Sadia's chicken exports in those markets.

 

Russia banned all meat exports from most Brazilian states because of FMD in Mato Grosso do Sul and Parana states.

 

"The company believes that it will be able to export, in the next weeks, from other Brazilian states that did not have FMD outbreaks, as occurred in the states of Mato Grosso do Sul and Parana," Sadia's Chief Executive Gilberto Tomazoni said in the company's first-quarter financial report, released Monday.

 

Russia is Sadia's largest importer of chicken and pork. Russia recently opened its market to chicken, pork and beef exports from Rio Grande do Sul meat packers, and Sadia has a processing plant there.

 

Total export volume to all Sadia's international markets for both chicken and pork fell in comparison to Q1 2005, Sadia said. Chicken volume for Q1 amounted to 177,100 tonnes, 2.5 percent less than a year ago. Gross revenues dropped 21 percent to 530.5 million Brazilian reals because of the foreign-exchange impact.

 

Overall pork exports fell 34.4 percent to 12,600 tonnes for Q1 with gross revenues down 54.7 percent to BRL51.6 million because of the Russian pork ban, which took Santa Catarina and Rio Grande do Sul's biggest pork producers out of the market since late last year.

 

Sadia returned to the beef market last year as well, despite FMD. Brazil is the world's leading beef exporter.

 

Sadia's beef exports in Q1 rose to 9,681 tonnes compared with 1,088 tonnes in Q1 2005, translating into a revenue increase of 536 percent to 55.5 million reals.

 

As a hedge against disease fears in Sadia's world markets, the company has increased participation in the cooked proteins segment by 2.6 percent to 51 percent of the total products it produces. Bird flu and FMD do not survive in cooked meats. Volume of processed meat purchased from Sadia rose in Europe, but fell elsewhere by 23 percent to 20,400 tonnes.

 

In addition to animal health concerns, an unfavourable foreign exchange between the local currency and the US dollar led to a 7.9 percent decrease in total gross revenues of 1.8 billion reals. The weak dollar hurt export revenues even more, falling 19.7 percent to BRL728.3 million in Q1 2006 compared to the same quarter in 2005.

 

Sadia invested 216 million reals in Q1, including a new poultry plant in Mato Grosso state. Roughly 46 percent of Sadia's investments in the first quarter went to chicken processing, with 21 percent going toward pork.