BRF's Quarterly Net Income More Than Double29 October 2013
BRAZIL - In its report for the third quarter of 2013, BRF (Brasil Foods) has registered a 216 per cent rise in net income, on net sales up 5.4 per cent to 7.6 billion real (BRR).
BRF reported a third quarter 2013 net income of BRR287 million real, an increase of 216 per cent in relation to the same period of 2012.
Net margin showed a 2.5 percentage point improvement, reaching 3.8 per cent in the period.
The company reported gross profits of BRR1.9 billion, 25 per cent more than for the same period last year with gross margin increasing from 21.2 per cent to 25.2 per cent.
Consolidated net sales rose 5.4 per cent to BRR7.6 billion while adjusted EBITDA reached BRR911 million, a year-on-year improvement of 61 per cent.
Adjusted EBITDA margin was 12 per cent against 7.9 per cent reported for the same period in 2012.
Among the factors contributing to this favourable performance are the results of operational and financial improvements introduced by the company and a gradual recovery in exports, with prices receiving a boost from the exchange rate.
There was also a shift in the portfolio product mix towards higher value-added and the inclusion of 41 new products during the quarter - all of which contributing to better margins. With growth in cash generation and reduced leverage, results are in line with the Acceleration Plan, which BRF announced in August with the aim of making the company a global benchmark in its segment of business.
During the quarter, BRF invested BRR377 million, of which BRR127 million in biological assets. These investments were largely dedicated to increasing production capacity, construction and expansion of units and production lines, automation projects, improvements in processes and in support activities.
Other highlights of the period were the financial trading volume in the company’s equities which reached an average of US$80 million per day, six per cent more than 3Q12. BRF was also selected as a component of the new United Nations Global Compact index and for the second year running, the Dow Jones Sustainability Emerging Markets Index.
Domestic market sales amounted to BRR3.2 billion in 3Q13, an increase of 3.4 per cent compared with the same quarter in 2012 and in spite of the challenging trading environment. Although volumes were down 16.3 per cent - a reflection of weaker consumer demand and the effect of divestments and suspension of brands - the operating result was BRR274.9 million, an increase of 49.5 per cent on a margin of 8.6 per cent, a year-on-year gain of 2.6 percentage points.
In 3Q13, exports amounted to BRR3.2 billion, an increase of 6.3 per cent against 3Q12. The performance of the international market was below our expectations due to some one-off factors, among which heavy rainfall at the Port of Itajaí affecting port operations for several days.
On the other hand, the favourable exchange rate, the growth in revenue from the European market and a recovery in demand from the Ukraine all contributed to better prices and favorable prospects for BRF’s performance through to the year-end.
The continued strategy of enhancing the business through a mix of higher value added products such as yogurts, cheeses and milk beverages was instrumental in achieving a 3Q13 sales revenue of BRR760 million in the quarter, growth of 9.8 per cent against the same period in 2012.
The segment’s operating margin reverted to a positive 4.5 per cent, a significant five percentage points improvement over the negative 0.5 per cent in 3Q12.
The performance reflects the more effective passing on of costs to prices despite costs of collecting milk at the farm gate having spiralled to historic highs.
Although the scenario of deceleration due to a decline in away-from-home consumption persisted in the third quarter, sales in the food services area grew 5.8 per cent in relation to 3Q12, reaching BRR374.5 million of net sales.
The operating result for the quarter was BRR26.9 million, equivalent to an operational margin of 7.2 per cent, against 7.7 per cent for the same period in 2012, affected by notably higher costs when set against the average prevailing price for the quarter.
For the full first nine months of the year, operating profit recorded an improvement of 16.5 per cent, the margin increasing from 9.3 per cent to 10.4 per cent.
BRF’s shares ended the quarter priced at BRR54.00 on the BM&FBovespa with an appreciation of 11.5 per cent compared to the closing price at the end of the second quarter. The closing price for the company’s ADRs on the NYSE was US$ 24.53, an appreciation of 13 per cent.
BRF reported a market capitalisation of BRR47.1 billion, a growth of 11.3 per cent compared with 3Q12. Financial trading volume in 3Q13 reached an average of US$79.9 million per day, a rise of six per cent year-on-year. In the first nine months of 2013, the average price was 11 per cent higher than the share price in the same period last year.
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