Brazilian firm merger seen to boost exports, new markets

 

 

The merger of Perdigao and Sadia is likely to boost the poultry and domestic meat exports and help tap new markets such as China, industry analysts said Tuesday (May 19).

 

The long-awaited action makes the new merged company, Brasil Foods, one of the largest food companies in the world, with combined revenues estimated at BRL22 billion (US$10.7 billion).

 

''Through synergies the two companies should see cost savings, and this should make their exports more competitive, which should lead to an increase in exports," said Jose Vicente Ferraz, director of Institute FNP, a large agribusiness research and consulting firm.

 

Ferraz said Brasil Foods should be able to export more goods to markets such as Russia - the top importer of chicken products - Europe, the Middle East and Japan.

 

He also said that Brasil Foods also will be well positioned to benefit from poultry export straight to China.

 

Under an agreement signed by Chinese and Brazilian officials Tuesday (May 19), Brazil can begin to export poultry products to China from more than 20 Brazilian plants that have already been inspected by the Chinese animal health authorities. Previously, Brazilian poultry exports needed to pass via Hong Kong.

 

Ferraz estimates that costs could be cut by around 10 percent on Brazilian chicken exports by removing port tariffs and freight costs for shipments that pass through Hong Kong.

 

He said the company will still face strong competition from companies such as Cargill, Tyson Foods, Doux Frangosul and local company Aurora Frango.

 

He added that customers can also easily switch between chicken or meat products and therefore Brasil Foods will be unlikely to inflate prices.

 

Lygia Pimentel, an analyst at Scot consultancy, agreed that the two companies will combine their muscle to hike exports of poultry and meat products to markets such as the Middle East and Russia.

 

Sadia already has a plant in Russia and can leverage this with new investment.

 

Maria Paula Valente, an analyst at consultancy FC Stone, said the merger is part of a growing trend in the Brazilian meat sector. Meat companies such as Marfrig are currently assessing opportunities to snap up struggling rivals.

 

In the area of feed stock, an analyst at a Brazilian consultancy said the merger is unlikely to impact Brazilian soy or corn meal sales.

 

The analyst said, however, that operating as one company will lead to one strategy rather than two. As a result, this could benefit or prejudice some traders as they need to buy from just one company with a single strategy.

 

A trader at a major US soy and soymeal exporter said the merger should not change the volumes of soymeal bought or sold.

 

The trader said the merged companies might close some overlapping operations or plants, which could cut sales.