October 22, 2012

Brazilian beef processor, Minerva Foods, has reported a net income of US$10.1 million for the third quarter of 2012, a rise from US$7.6 million in the same period of 2011.

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 amortisation, 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 is confident the fourth quarter will provide a significant rebound for domestic sales, driven by high Brazilian demand during the Christmas and New Year holidays.

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