October 31, 2013

 

Brasil Food's Q3 2013 net income up 216%

 

 

In the third quarter of this year, BRF (Brasil Foods) reports that the company registered a 216% growth in net income, on net sales up 5.4% to BRL7.6 billion (US$3.5 billion).

 

BRF reported a third quarter 2013 net income of BRL287 million (US$131 million), an increase of 216% in relation to the same period of 2012. Net margin showed a 2.5 percentage point improvement, reaching 3.8% in the period. The company reported gross profits of BRL1.9 billion (US$870 million), 25% more than for the same period last year with gross margin increasing from 21.2% to 25.2%.

 

Its consolidated net sales rose 5.4% to BRL7.6 billion (US$3.5 billion) while adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) reached BRL911 million (US$417 million), an on-year improvement of 61%. Adjusted EBITDA margin was 12% against 7.9% reported for the same period in 2012.

 

Among the factors contributing to this favourable performance are the results of operational and financial improvements introduced by the company and a gradual recovery in exports, with prices receiving a boost from the exchange rate.

 

Contributory factors to the better margins were a shift in the portfolio product mix towards higher value-added and the inclusion of 41 new products during the quarter. With growth in cash generation and reduced leverage, results are in line with the Acceleration Plan, which BRF announced in August with the aim of making the company a global benchmark in its segment of business.

 

During the quarter, BRF invested BRL377 million (US$173 million), of which BRL127 million (US$58 million) in biological assets. These investments were largely dedicated to increasing production capacity, construction and expansion of units and production lines, automation projects, improvements in processes and in support activities.

 

Other highlights of the period were the financial trading volume in the company's equities which reached an average of US$80 million/day, 6% more than in third quarter of 2012. BRF was also selected as a component of the new United Nations Global Compact index and for the second year running, the Dow Jones Sustainability Emerging Markets Index.

 

Domestic market sales amounted to BRL3.2 billion (US$1.5 billion) in third quarter 2013, an increase of 3.4% compared with the same quarter in 2012 and in spite of the challenging trading environment. Although volumes were down 16.3%, a reflection of weaker consumer demand and the effect of divestments and suspension of brands - the operating result was BRL274.9 million (US$126 million), an increase of 49.5% on a margin of 8.6%, an on-year gain of 2.6 percentage points.

 

In third quarter 2013, exports amounted to BRL3.2 billion (US$1.5 billion), an increase of 6.3% on-year. The performance of the international market was below our expectations due to some one-off factors, among which heavy rainfall at the Port of Itajaí affecting port operations for several days. On the other hand, the favourable exchange rate, the growth in revenue from the European market and a recovery in demand from the Ukraine all contributed to better prices and favourable prospects for BRF's performance through to the year-end.

 

The continued strategy of enhancing the business through a mix of higher value added products such as yogurts, cheeses and milk beverages was instrumental in achieving a third quarter 2013 sales revenue of BRL760 million (US$348 million), growth of 9.8% against the same period in 2012.

 

The segment's operating margin reverted to a positive 4.5%, a significant five percentage points improvement over the -0.5% in third quarter of 2012. The performance reflects the more effective passing on of costs to prices despite costs of collecting milk at the farm gate having spiralled to historic highs.

 

BRF's shares ended the quarter priced at BRL54.00 (US$25) on the BM&FBovespa with an appreciation of 11.5% compared to the closing price at the end of the second quarter. The closing price for the company's ADRs on the NYSE was US$24.53, a rise of 13%. It reported a market capitalisation of BRL47.1 billion (US$22 billion), a growth of 11.3% compared with third quarter 2012. Financial trading volume in third quarter 2013 reached an average of US$79.9 million/day, a rise of 6% on-year. In the first nine months of 2013, the average price was 11% higher than the share price in the same period last year.