13 March 2013

4 minute read

South America

The company’s efforts to accelerate the growth of its operations and at the same time comply with its commitments under the merger agreement were determinants in sustaining the positive result, underscoring BRF’s competitive advantage in its capacity to plan and execute.

Despite instability in the international economy which resulted in slow growth in the leading economies of the eurozone and decelerating growth rates in China, exports rose 15.2 per cent in revenues, totaling R$11.6 billion, and 9.6 per cent by volume.

In the domestic market, sales revenue improved by 8.5 per cent to reach R$12.6 billion.

This was achieved despite the modest growth of the Brazilian economy and the divestment of some of the Company’s assets and suspension of certain brand categories representing about a third of domestic market sales volume. Additionally, in the dairy products and food services segments, sales revenue rose by 6.9 per cent and 7.9 per cent, respectively.

EBITDA adjusted reached R$2.7 billion, a year-on-year decline of 17.4 per cent, impacted by several factors such as cost pressure, transitory expenses and the ceding of assets combined with an adverse international trading environment.

BRF’s robust governance model, consolidated in 2012 with the integration of Perdigão/Sadia, was reflected in the major advances which the company was able to record during the period in the form of new levels of efficiency which contributed to making the company increasingly more competitive and sustainable.

During the year, investments amounted to R$2.5 billion, 25 per cent higher than in 2011.

Capital expenditures were directed to the development of hundreds of projects related to growth, efficiency and support: adjustments made to plants for those production lines shifted from transferred units, new distribution centers, and the redesign of the logistics network, among others.

Over the 12 months, the company launched 454 products, underscoring its capacity for innovation and reinforcing its penetration in several retailing channels.

Export market operations reflected the trading environment in the international market: excess inventory in the Middle East, Japan and Russia early on in the year which together with sharp rises in grain prices, squeezed company margins.

Average prices saw a gradual recovery as supply and demand returned to equilibrium in the leading markets, rising by 5.1 per cent in local currency terms. However, this growth was not enough to restore operating margins which fell from 5.5 per cent to 1.6 per cent in the year due to the increase of 8.8 per cent in production costs.

In 2012, BRF ramped up its international operations on the basis of four pillars: brand, portfolio, improved distribution and local products. The strategy of adding value to the company’s international businesses is becoming a reality with construction work beginning on the plant in the Middle East, the acquisition of Federal Foods and the expansion of the business in Argentina.

The challenge facing BRF’s domestic operations in 2012 was to mitigate the effect of asset sales and suspension of brand names both from the operational point of view as well as from that of recovery in scale. This challenge was further compounded by the spike in grain prices, in turn impacting production costs, and increased meat supply in Brazil.

The company reported robust growth in domestic market sales revenue sustained by 99 new products launches in the period, by the redesign of the portfolio and its principal brands and the repositioning of its sales force.

Sales in the meats segment recorded R$ 12.6 billion, 8.5 per cent up on 2011. Average prices rose by 9.7 per cent while costs were 16.3 per cent higher on average, impacting operational profits and margin, the latter declining from 10.7 per cent to 8.2 per cent.

BRF ended 2012 as the third largest manufacturer of dairy products in Brazil with a 10.5 per cent market share. The segment’s sales revenue totaled R$2.7 billion, a year-on-year increase of 6.9 per cent.

During the year, progress was made with the project for fully integrating the dairy products area into BRF’s operational structure. Synergies will permit advances in production efficiency, the entire project to be concluded by the end of 2014, albeit with notable progress expected during the course of 2013. The process involves distribution centers, sales teams, management techniques and improvements in execution.

Sales revenues from the food services segment increased by 7.9 per cent, totaling R$1.6 billion. The unit maintained its strategy of increasing capillarity, servicing of 62 thousand companies, helping to offset such adverse economic impacts as inflation in the services sector.

In addition to the launch of 82 new products, the unit invested in the launch of a new category of product in the form of sachets of ketchup, mustard and mayonnaise and produced by the factory acquired in Argentina.

TheCattleSite News Desk