Brazilian Food Firm BRF Posts Worse-Than-Expected Q4 Loss
Brazilian food processor BRF SA said it lost money for the second consecutive quarter as a trade embargo, fallout from a food safety investigation and Brazil's feeble economy thwarted turnaround efforts.
BRF posted a fourth-quarter net loss of R$2.13 billion (€500 million), 12.5 times more than the consensus of analysts' estimates.
In the latest quarter, the company took a hefty one-time accounting loss related to asset sales in Argentina, Thailand and Europe, which were sold below book value.
Executives said an additional R$800 million (€187.33 million) loss related to currency exchange variations will be recognised in the first and second quarters, when the company expects the asset sales to close after obtaining regulatory approvals.
BRF fetched R$4.1 billion from asset sales in 2018, giving it a war chest to lengthen debt maturities and cut the cost of debt.
A Positive Cycle
Chief executive officer, Pedro Parente, said the asset sales mark the beginning of a positive cycle after the company's most challenging year in a decade.
"The cycle of adjustments to deal with adverse factors is over," he said. "Now we need discipline to execute our strategic plan."
Antonio Barreto, an Itaú BBA analyst, said in a note to clients on Thursday that BRF's results "seem neutral, but our first view is negative."
Barreto said BRF's EBITDA, a gauge of operating profit known as earnings before interest, taxes, depreciation, and amortisation, was roughly in line with estimates, but the question is how to improve it amid so many challenges.
BRF's results were affected after the European Union embargoed meat products from 12 of its plants following its involvement in a food safety investigation.
The embargo, which is still in effect, spurred an oversupply of chicken and pork products in the domestic market at a time of higher grain prices, putting margins under 'strong' pressure in 2018, the company said.
BRF said it expects grain prices to stay stable in 2019 after rising by 30% last year. Due to the state of the Brazilian economy and oversupplies, it was unable to pass through a price increase.
Last year, BRF posted a net loss of R$4.46 billion, its third consecutive annual shortfall.
Consecutive operating and financial difficulties led to an overhaul of management beginning in April.