August 17, 2010

Brasil Foods posts 23% increase in Q2 gross profits

Brasil Foods (BRF) closed the second-quarter 2010 with a gross profit of BRL1.5 billion, 23% higher than the same period in 2009 on a pro-forma basis.

Gross sales totalled BRL6.3 billion, 4.3% higher, reflecting the good performance recorded in the domestic market and improvement in important international markets such as Asia and Eurasia.

Cash generation in terms of EBITDA reached BRL587 million, 54% up on the same quarter 2009. This good performance was a reflection of cost savings and reduced operating expenses resulting in a margin of 10.6%, the best registered by the company since 2009-confirmation of the gradual and consistent recovery seen over the past few months.

Domestic market sales encompassing meats, dairy products and processed products in general were BRL3.8 billion, an increase of 8%. Pro-forma growth of 10% in sales volume was driven by stabilisation in the economy, improved disposable incomes and the expansion in consumption.

Export volume increased 10% in the quarter and revenue totalled BRL2.4 billion, in line with 2009. Export sales reflected a 9.3% decline in average prices in reals, the impact of the foreign exchange effect; however, returns from this business posted a substantial improvement. Net income of BRL132 million in the quarter was equivalent to a net margin of 2.4%.

BRF's capital expenditures were BRL155.7 million in the period and largely used for projects for increasing productivity and for improvements, in addition to new industrial units under construction, including Lucas do Rio Verde (MT) and Vitória de Santo Antao (PE).

During the second quarter, demand continued robust in the domestic market with the World Cup contributing to increased consumption of food products. The best performance was reported by the processed products segment-a 5% growth in volume.

Sales from the meats business rose 5.4% on a pro-forma basis and volumes were up by 7.5%. However, average prices slipped by 1.9% due to a 15.8% growth in the volumes of in natura products where prices are lower.

Dairy product volumes were 17.1% higher compared with the same quarter last year. Sales revenue also reported an increase of 5.4%. Despite an improved sales performance, average milk collection costs increased, squeezing segment margins.

Despite a decline of 8.3% in average prices in reals caused by the foreign exchange effect, meat export volumes were up by 10.2%. Prices and volumes to the Eurasian market improved both for poultry as well as pork products due to the Russian ban on these items from the US. During the period, Japan continued to register improvement in prices while volumes remained stable.

Although there was a 27% recovery in average prices in reals, the dairy product business posted a 19% decline in sales due to weaker international demand and high inventory in the leading producer regions. Better average prices were influenced by an improved product mix and a focus on sales of dairy products to the Middle East and Africa.

Meanwhile, BRF's first half gross sales were BRL12 billion. The domestic market segment reported the best performance, sales rising by 6%. EBITDA exceeded the BRL1 billion mark and corresponding to a 9.8% margin.