Brazil: Marfrig posts loss after real beef problems
Over the first six months of the year, Marfrig narrowed the gap on its income loss, posting R$238m ($74.5) compared with the R$339m ($106m) it posted in the second half of 2015.
Net revenue for the meat processor – which claims to the be third-largest in Brazil, behind JBS and BRF – came to R$4.8bn ($1.5bn), slightly higher than the second quarter of 2015. Minimal growth for the business comes down to low global meat prices, soaring cattle costs in Brazil and a strong Brazilian real, which made exports, particularly beef, less competitive.
Marfrig reported a decrease in volume sales from its beef lines and food brand Keystone as dollar-based revenues to the US made trade expensive. While the business was hit by a high real, nearly 80% of its revenue came from other foreign currencies. And despite the challenges flagship brand Keystone faced in the US, it performed remarkably well on the global stage and posted a nearly 25% rise in pre-tax earnings to $67m.
Marfrig’s four-point strategy
- Natural growth through operational and productivity improvements
- Promote growth in high-margin Asian markets by expanding Keystone’s work in foodservice and beef exports
- Improve ties with America after a trade deal open the US market to Brazilian beef exports
- Reduce debt and financial overheads to boost free cash flow
The International Monetary Fund (IMF) expects negative GDP growth of 3.3% for Brazil this year. With a state of political and financial instability in the country, Marfrig said it could change its financial outlook for the third quarter of the year.
The company also divested a number of Argentinian beef plants in the second quarter of the year, selling factories to Chinese company Black Bamboo Enterprises for R$239m ($75m).
Beef remains Marfrig’s most prominent operation, with 38% of revenue coming from fresh beef and a further 55% coming from processed beef and poultry.