19-05-2025
Marfrig Global Foods SA (MRRTY) Q1 2025 Earnings Call Highlights: Revenue Surge and Strategic ...
Release Date: May 16, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Marfrig Global Foods SA (MRRTY) reported a 27% increase in consolidated net revenue, reaching 38.6 billion reais compared to Q1 2024.
The company achieved an adjusted EBITDA of 3.2 billion reais with an EBITDA margin of 8.3%, marking a 20% year-over-year increase.
Free cash flow generation was positive at 182 million reais, an increase of 740 million reais year-over-year.
The company has successfully reduced its leverage for the seventh consecutive quarter, bringing it down to 2.69 times.
Marfrig Global Foods SA (MRRTY) announced a proposed merger with BRF, expected to unlock significant synergies and drive meaningful value creation for shareholders.
North American operations faced challenges with adjusted EBITDA dropping 89.7% compared to the previous year, resulting in a margin of only 0.2%.
Higher cattle prices and lower drop credit values negatively impacted the profitability of North American operations.
Sales to China decreased, now accounting for 49% of exports compared to the same period last year.
The company faces potential risks from tariffs that could impact margins in the upcoming quarters.
The avian flu outbreak in Brazil poses a potential risk to operations, although the company has contingency plans in place.
Warning! GuruFocus has detected 12 Warning Signs with MRRTY.
Q: Can you provide insights on the start of Q2, considering the challenging start of the year and potential tariff impacts on margins? A: (Tim Klein, CEO of North America Operations) We have seen a rapid escalation in cattle prices, which typically causes a lag in aligning boxed beef prices with cattle prices. However, as cattle prices stabilize, we expect improved demand for boxed beef. Currently, tariffs have not significantly impacted our margins, but we continue to monitor the situation closely.
Q: Could you elaborate on the tax-related synergies from the merger and the timeline for realizing them? A: (Inaus Corseria, Vice President of Administration and Controls at BRF) The tax synergies include optimizing the company's capital structure due to the larger corporation size. Initially, we will capture synergies from creditor-side tax benefits, especially in Sao Paulo. A second wave of synergies, requiring additional steps, may be realized in the second year post-merger.
Q: What are the main drivers for considering a US listing and potential re-domiciliation of the company? A: (Miguel Goulart, CEO of BRF) The inclusion of National Beef in the merger provides materiality for re-domiciliation, offering tax and cost advantages. We have been preparing for this scenario over the past few years, and we aim to make it a reality in the medium term.
Q: Could you break down the operational synergies expected from the merger? A: (Miguel Goulart, CEO of BRF) We anticipate 485 million in operational synergies in the first year, with costs contributing an additional 320 million. Synergies are mapped across commercial, logistics, supply, and SGNA areas, with significant contributions from commercial and supply chain optimizations.
Q: How might the avian flu outbreak impact the merger, and what are the protocols in place? A: (Miguel Goulart, CEO of BRF) The Ministry of Agriculture has declared a sanitary emergency in the affected area, implementing a 10-kilometer radius protocol. We are confident in Brazil's stringent sanitary measures and have contingency plans to navigate this situation. As for the merger, it's too early to determine the impact, but past experiences suggest manageable outcomes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
