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After First Profit In Four Years, Brazil's BRF Braces For 2020 Volatility

Published on Mar 4 2020 10:24 AM in Coronavirus tagged: China / chicken / Brazil / exports / BRF

After First Profit In Four Years, Brazil's BRF Braces For 2020 Volatility

Brazilian food processor BRF SA reported its first annual profit in four years, yet the world's largest chicken exporter sees volatility in 2020 stemming from forex uncertainty, higher grain prices and the effects of a new coronavirus.

BRF said it earned R$690 million (€136.97 million) in the latest quarter, a 121% annual rise, on strong domestic and international sales, particularly to China. The result gave it a 2019 profit of R$1.213 billion (€240 million).

Coronavirus Outbreak

In a conference call to comment on results, BRF executives said forex volatility, higher grain prices and the fallout from the coronavirus could weigh on performance.

While hopeful that measures by China and other governments will help contain the spread of the virus, BRF CEO Lorival Luz said trade flows could be impacted.

"Our exports have not been affected in January and February," he said. "I am hopeful that countries and government actions will avoid a de facto disruption of trade flows."

BRF expects Chinese food imports to remain strong after African swine fever, as the Asian country needs more time to restore local meat supplies.

Regarding corn inventories, the company said it has enough for the first half, but declined to elaborate.

Despite higher grain costs compared with the same period a year ago, BRF said more efficient procurement of commodities and use of feed alternatives was helping it mitigate these effects on margins.

International Business

In international business, BRF increased sales by just over 17% to R$4 billion (€790 million), as it and other Brazilian firms boosted exports to China after an outbreak of ASF there killed about half of its pig herd.

Volumes sold in Asia over the latest quarter continued to exceed 200,000 tonnes of meat products, BRF said, adding the ASF crisis had a positive effect on prices of goods sold.

Meanwhile its key halal business in the Middle East continues to struggle due to shipping restrictions from Turkey to Iraq, which is impacting its Banvit subsidiary.

A halt in operations at the Abu Dhabi food processing plant that serves the Saudi Arabia market is also a concern.

BRF said it is working to reverse a recent Saudi Arabia suspension of two of Brazil-based exporting plants.

Executives declined to forecast when the European Union could lift a suspension on 12 plants related to BRF's role in a food security scandal, imposed in April 2018.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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