3 days ago
Marfrig Benefits From BRF as Chicken Cushions US Cattle Squeeze
Marfrig Global Foods SA is benefiting from BRF SA as the poultry and processed-food company continues to reap profits from strong global demand, helping to weather the impact of a severe cattle shortage in the US.
Marfrig's operating earnings fell less than expected in the second quarter, while BRF also beat analysts estimates. Marfrig's shares rose as much as 4% on Friday, while BRF gained as much as 5%.
The results are the first since shareholders in both Brazilian companies approved Marfrig's proposal to buy the BRF shares it doesn't already own. While the deal is still pending antitrust approval, Marfrig expects it to close by September, Chief Financial Officer Tang David said in a conference with journalists on Thursday.
Marfrig, which controls US beef producer National Beef Inc., is among the companies being squeezed by the worst cattle shortage in decades. Producers — including larger rivals JBS NV and Tyson Foods Inc. — are being forced to pay record-high prices for slaughter-weight animals, and they're struggling to pass those costs on to consumers.
Booming demand for chicken and low bird feed costs have so far helped Marfrig cushion the impact, even as trade bans following a bird flu outbreak in May dented profits in the second quarter.
'BRF reported a better-than-expected quarter, a positive surprise despite the negative impact of Chinese and EU export restrictions on Brazilian chicken,' XP Inc. analysts including Leonardo Alencar said in a note to clients. 'The prospect of lower grain prices, coupled with solid demand, continues, with a margin surplus expected after the trade bans end.'
BRF is counting on China and European nations dropping their poultry bans and resuming poultry purchases very soon, Chief Executive Officer Miguel Gularte said during an earnings call on Friday.
While chicken supplies in Brazil and other producing nations are expected to grow as much as 2% in the short term, demand worldwide should keep increasing at a faster pace, according to Gularte and BRF Chief Financial Officer Fabio Mariano. Growing income in Brazil and the Middle East and Asia, as well as BRF's move to increase its added-value products portfolio, should also help push prices higher.
Marfrig's earnings before items such as interest and taxes fell 11% from a year earlier to 3 billion reais in the three months ended in June. That compares with a 2.12 billion-real average of analyst estimates compiled by Bloomberg. BRF reported adjusted earnings of 2.5 billion reais, topping analyst estimates of 2.39 billion reais.
'This was an extremely challenging quarter,' Gularte told journalists on Thursday, citing the impact of the bird flu outbreak on the company's exports.
This article was generated from an automated news agency feed without modifications to text.
