BRF experiences another tough year
In its management report for 2018, it posted a net loss of R$4.46bn for the year while its EBITDA was down 8.4% year-on-year.
The management team described 2018 as BRF’s “most challenging” in the past ten years, citing external factors such as “protectionist measures that aimed to close major import markets”, cost pressures and the truck drivers’ strike as reasons for the poor performance.
Global chief executive officer Pedro Parente said: “We recognize that the results of 2018 leave much to be desired. They clearly do not reflect the expanding scope of opportunities we see to create value to our shareholders and to society. Still, the events of 2018 led us to plant the seeds of structural change in strategy and operations that have initiated the crucial and significant process of recovering and rebuilding our company.”
Part of this change was BRF’s restructure plan which hoped to generate R$5bn via four avenues: divestment of assets in Argentina, Europe, and Thailand; sale of non-strategic assets; reduction of inventories of frozen raw material and finished products; and securitization of receivables. So far, R$4.1bn of the R$5bn has been achieved, the business falling short of its goal due to “adverse conditions in the Argentinean market, uncertainties regarding the quota regime and protectionist measures in Europe, as well as the build-up of debates around Brexit”.
Looking ahead, BRF suggested that the Asian market was an opportunity for the business and praised progress made in the halal sector.
“We are also indisputable leaders in the halal market, boasting a market share of over 41% in the Gulf Cooperation Council (GCC) countries. We believe our robust and verticalized operation in the region is poised to progress even further by, for instance, participating in the Saudis’ strategic move to promote food safety in the country—mainly through partnerships that will not hinder debt reduction.”
Management set out goals for 2019 which included: reversing the downward trend in margins by assembling a high-performance management team; consolidate fundamentals for leadership, innovation, and financial solidity to pursue historical profitability in 2020; and achieve sustainable and ongoing growth through a strict execution to deliver profitability levels above historical average as from 2021.
