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Supply Chain

Brazil's BRF Posts Q2 Loss, Citing Global Chicken Oversupply

By Reuters
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Brazil's BRF Posts Q2 Loss, Citing Global Chicken Oversupply

Brazilian food processor BRF SA reported a loss of 1.337 billion reais (€250 million) in the second quarter, which was worse than analyst expectations, with the company hit by oversupply in the chicken market.

The company's earnings before interest, tax, depreciation and amortisation (EBITDA), came in at 1 billion reais (€180 million), above the average of analysts' projection of 917.43 million reais (€169.2 million).

Revenue Performance

Net revenues fell by an annual 5.7% to 12.2 billion reais (€2.25 billion), according to an earnings statement.

Last quarter, BRF said it increased its sales volume in Brazil, where it derives most of its revenue.

However, the average sale price fell by 1.3% on a quarterly basis, as the price of fresh chicken in Brazil remains below the historical average, reflecting an oversupplied global market.

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Chicken Supply

"The export segment was battered by the chicken glut," BRF chief executive Miguel Gularte told journalists. He noted the threat of export bans related to avian flu delayed a recovery of prices even in the face of improving supply and demand dynamics in recent weeks. "Importers became more conservative because of the bans, including Japan."

Brazil is considered free of highly pathogenic avian influenza under criteria from the World Organization for Animal Health. Yet Brazil confirmed cases on wild flocks and backyard poultry, triggering temporary regionalised import bans from Japan.

BRF said the liquidation of chicken stocks in the sector mitigated the effects of price adjustments that BRF applied in some types of processed products.

In the International market, BRF said it partially recovered margins and remained a top chicken exporter to Gulf countries, where it says its market share is 50%.

During the quarter, BRF also obtained 15 exports permits to sell products to China, Japan and Singapore, South Africa and Argentina, improving its business prospects on global markets, management said.

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