Brasil Foods shares return to black

Shares in Brasil Foods rose more than 5% after the meat giant, formed from the merger of Brazil's top pork and poultry groups, and returned to the black, before it had started in earnest realising benefits from the deal.

The group, a tie-up of Perdiago and Sadia, reported earnings of BRL53 million (US$29.9 million) for the January-to-March period. Last year, Perdigao reported a fall of BRL226 million (US$127.35 million) into the red, with the groups running up combined after-tax losses of BRL465 million (US$262.04 million).

The improvement comes before the implementation of plans expected to release BRL500 million of cost cuts a year by 2012.

Brasil Foods has yet to gain approval from Brazilian anti-trust regulators to complete its merger, although the group expects to receive the go-ahead by August. Plans for implementing deal benefits are "nearing conclusion such that they can be adopted on the first effective day of working together as one company", Brasil Foods said.

The group's sales were flat at BRL5.05 billion (US$2.84 billion) in the first quarter, on a like-for-like basis, as an improved domestic performance offset the impact of a 7.8% drop in revenues from export markets, which were "still in recovery mode" from the global economic crisis.

However, costs were lowered by weaker prices of corn, which fell by 15% quarter on quarter, and soy, which dropped 16%, crops the group uses as livestock feed.

The group forecast an improvement in its trading environments both at home, favoured by a “positive macroeconomic environment”, and in exports, with Asian and European markets recovering.

Brasil Foods shares stood 5.5% higher at BRL23.15 (US$13.04) in late deals in Sao Paolo.