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Brazilian Food Giant BRF To Cut Supplier Payments As Profit Slumps

Published on Sep 28 2016 12:45 PM in Supply Chain tagged: Trending Posts / Brazil / BRF

Brazilian Food Giant BRF To Cut Supplier Payments As Profit Slumps

BRF SA will cut the prices it pays to providers of services and materials, as Brazil’s biggest producer of processed food tries to restore profits that have been squeezed over the past year.

The company will discount by 5% the prices received by some Brazilian vendors, applying to deliveries starting 1 October and lasting until 2 January, according to a memo sent to suppliers and obtained by Bloomberg.

The measure is a response to both Brazil’s economic crisis and the surge in domestic commodity prices, which directly affect BRF’s supply chain, the São Paulo-based company said in an emailed response to questions.

BRF makes a range of products from margarine to lasagne, and it is the world’s largest poultry exporter. Its net income slumped 92% in the first half from a year earlier, to 70 million reais ($19 million), as the company struggled with the jump in domestic prices for corn used to feed its chickens, combined with a supply glut that sent export prices lower. Results were also hurt by a decline in sales volumes in Brazil, amid a deepening recession.

In June, BRF announced that it would suspend chicken output at two plants amid a “challenging” market and economic environment. Earlier this year, the company said that it was seeking to cut salaries in real terms by adjusting them below the rate of inflation.

Brazilian corn prices are up 23% from a year ago, amid an export boom combined with smaller-than-expected production, according to price data from Cepea, the University of São Paulo’s research unit.

BRF rose 0.6% at 2.23 p.m. in São Paulo. The Ibovespa benchmark gauge rose 0.3%.

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.

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