July 31, 2008

 

Brazil's Sadia to reassess strategy in beef market

Brazilian food company Sadia SA (SDA) is reassessing its strategy to expand into the beef market, said Wilson Teixeira, Sadia's director of investor relations late Wednesday (July 30).

 

With a shortage of cattle in the Brazil, Sadia will reevaluate its plans to build new slaughterhouses, Teixeira said in a conference call.

 

"All scenarios can change and we'll wait for the best moment to make a further decision whether an acquisition or delay of the plans," said Teixeira.

 

According to Teixeira, Sadia currently has the capacity to slaughter 2,000 heads of cattle per day, while the company recently said that it intended to reach the capacity of 6,000 cattle per day.

 

However, Sadia still sees strong demand from its international customers for beef, as well as poultry and pork.

 

Beef is also an essential part of its offerings of processed foods, Teixeira said.

 

Sadia secures only 3 percent of its total revenues from the beef market.

 

Sadia also said that it had invested 952.7 million Brazilian reals ($598 million) in the first six months of 2008, almost three times more than in the same period of 2007.

 

The company intends to make further investments as part of Sadia's internationalization strategy and in its core business such as higher-value-added processed products.

 

Sadia will pump BRL60 million into a distribution centre in Pernambuco state as well as some BRL206 million in IT and infrastructure projects.

 

Teixeira also said that Sadia faced rising costs in the first six months of 2008, with soy prices rising 50 percent and corn rising 33 percent against same period in 2007.

 

Rising costs of fertilizer and an unfavourable exchange rate of the Brazilian real against the US dollar also impacted Sadia, he said.

 

Brazil is the world's leading beef and chicken exporter.