October 22, 2012

Brazil's Minerva Foods will be selling shares in an offering that could earn a minimum of US$219 million.

Minerva will offer 37.5 million shares in a primary offering, while controlling shareholder VDQ Holding will offer an unspecified amount of stock, the company said in a filing. An additional lot equivalent to 15% of the offering could be sold depending on demand, the filing said.

Minerva Foods reported net income of US$10.1 million for the third quarter, up from US$7.6 million in the same period last year.

The positive results were driven by greater availability of cattle for slaughter in Q3 and lower prices for the animal, due to a period of reverse cycle for cattle in Brazil that led the average price to drop 6% in the quarter, said Fernando Galletti de Queiroz, Minerva CEO, in the company's report.

Minerva also benefitted from the input costs crisis Brazilian poultry and pork processors faced in Q3. As retail prices for poultry and pork rose rapidly in the quarter, domestic beef prices were able to rise an average of 6.9% while still pricing lower than their protein competitors, Galletti de Queiroz said.

The company has been able to track and analyse the "substitution effect" driving consumers toward beef and away from the rising prices of pork and poultry, a trend that should continue well into 2013, Galletti de Queiroz said during a conference call with analysts.

Minerva's profit before interest, taxes, depreciation and amortization, or EBITDA, was US$66.2 million for the third quarter, up 47.9% from Q3 2011. The company's net revenue in Q3 rose 8.3% from last year, to US$567 million. Export sales were the biggest contributor to that growth, rising 30.5% from Q3 2011, to US$419.5 million.'

Domestic sales declined 23.3%, to US$182.7 million.

Minerva will continue to take a cautious approach to acquisition opportunities, with Galletti de Queiroz saying Thursday that an acquisition will only be pursued if it has a positive or neutral effect on deleveraging for the company.