Marfrig Records Improved Performance in Q3

BRAZIL - Marfrig has recorded EBITDA of 272 million real (BRR) in the third quarter of this year (Q3 2009).
calendar icon 28 October 2009
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Marfrig Alimentos S.A., a food producer with a highly diversified meat operating base, has announced its results for the third quarter of 2009 (Q3). Except where stated otherwise, the financial and operational information is presented on a consolidated basis and in accordance with Brazilian Corporation Law.

Summary for Q3 2009

EBITDA was BRR 272.5 million, increasing by 48.6 per cent from BRR 183.4 million in Q2 and by 59.0 per cent from BRR 171.4 million in Q3 2008. EBITDA margin was 11.3 per cent, 370 bps higher than in Q2 2009, driven by export growth of 6.6 per cent, the performance of the Europe division and lower raw material costs (cattle in Brazil and in Argentina and grains).

Net income was BRR 200.4 million, reversing the net loss of BRR 52.7 million recorded in Q3 2008 and boosting net income in the year to date, building on the BRR 405.0 million recorded in Q2 2009. Net margin was 8.3 per cent, compared with negative 3.5 per cent in Q3 2008 and 16.8 per cent in Q2 2009.

Net income for the year to date was BRR 567.4 million, up 1,362.4 per cent on BRR 38.8 million in the same period a year earlier.

Net revenue stands at BRR 2,402.6 million in Q3 2009, up 57.7 per cent on Q3 2008 (BRR 1,523.6 million) and down 0.1 per cent in relation to Q2 2009 (BRR 2,403.9 million), mainly due to the depreciation in the dollar against the real of 9.9 per cent between Q3 2009 and Q2 2009.

Net revenue in the last 12 months (Q4 2008 to Q3 2009) of BRR 9.45 billion, is up 92.3 per cent on the BRR 4.90 billion recorded in the previous 12-month period (Q4 2007 to Q3 2008), driven by acquisitions and operating performance in 2009.

Gross income of BRR 367.8 million in Q3 2009, was up by 29.1 per cent and 13.5 per cent in relation to Q3 2008 (BRR 284.9 million) and Q2 2009 (BRR 324.2 million), respectively.

Comment from the CEO

Marcos Antonio Molina dos Santos, CEO of Marfrig Alimentos S.A., commented:

For Marfrig Alimentos S.A., the third quarter of 2009 was marked by the continued execution of our operational plans through the achievement of solid financial indicators. More importantly, however, were the important acquisitions and partnerships in the period, which complemented our strategic planning and strengthened the foundations of our business divisions for a new phase of growth in the coming years. These developments were further complemented by the integration of our businesses and the capture of synergy gains from the new units.

The important acquisition of Seara, the brand representing the entire Brazilian protein business of Cargill Inc., includes eight new industrial units that combined add approximately 17,000 tonnes of capacity in processed and prepared poultry and pork products, one private port terminal in Itajai, Santa Catarina state, subsidiaries in Europe and Asia and a workforce of some 20,000 employees. With this acquisition, which should be concluded this year, Marfrig effectively becomes one of the largest global players in the food industry.

Through the acquisition of 51 per cent of the Zenda Group, a company headquartered in Uruguay and with sales units in Argentina, Mexico, United States, Germany, South Africa, Chile, Hong Kong and China, Marfrig began playing an important role in the global finished and cut leather market, with major clients in the automotive, aviation and furniture industries.

With 12 new leasing agreements signed with plants previously run by meatpackers Margen S.A. and Mercosul S.A., we grew our cattle slaughter capacity by 8,800 head per day and our prepared products capacity by 1,700 tonnes per month. Also starting up in Q3 2009 were the turkey plant in Caxias do Sul and the cattle slaughter plant in Capão do Leão, both in Rio Grande do Sul state, creating over 1,200 new direct jobs.

We formed a commercial partnership with the Martins Group (Martins Comércio e Serviços de Distribuição S/A, Smart Varejos and Banco Triângulo) to capture joint gains in the distribution and logistics channels of both groups and in customer service in the retail segment (restaurants, butcher shops and supermarkets).

Operational Performance

Considering the acquisition of Seara, the leasing of the 12 beef plants and the acquisition of Zenda, Marfrig has a diversified operating base with 92 plants and offices in 13 countries,

The global financial environment in Q3 2009 was characterized by the continuous depreciation of the US dollar against other currencies. In the quarter, the Brazilian real appreciated by 8.9 per cent against the dollar to end the period at BRR 1.7781/US$, versus BRR 1.9516/US$ at the end of Q2 2009 (+9.9 per cent against the average USD exchange rate). The pound sterling closed the quarter at £/US$1.5984, appreciating by 2.9 per cent in relation to £/US$1.6463 at the end of Q2 2009 (the average price in the quarter was £/US$1.6012, compared with £/US$1.5542 in Q2 2009, for appreciation of 2.9 per cent).

The various domestic markets in which we operate remained stable in this exchange rate scenario, with an average price increase of approximately 1.4 per cent.

In export markets, Marfrig observed a drop of 4.7 per cent in average prices, influenced by the still slow recovery in the international market and especially by the currency depreciation in the period (in Q3 2009, revenue pegged to foreign currencies accounted for some 70.3 per cent of the group's revenue). This currency depreciation was partially offset by sales in higher-margin channels, the stronger Food Service sales in Brazil, more robust exports, stronger exports from Argentina and operational improvements in Europe.

Sales volume growth was led by the Argentina units, which posted an increase of 8.4 per cent in relation to Q2 2009, driven by the growth of 46.1 per cent in exports and of 1.7 per cent in the domestic market, as well as by the performance of the Brazilian operations, which expanded sales volume by 3.4 per cent, fueled by domestic sales in the Food Service, Pork and Beef divisions. Another performance highlight was the Europe operation, which despite the 5.7 per cent contraction in sales volume, presented substantial operational improvement, doubling the margins recorded since these operations began to be managed by Marfrig.

Beef Division

Brazil – In Q3 2009, 384,000 head of cattle were slaughtered, 6.7 per cent more than in Q2 2009, reflecting the higher utilization of installed capacity and inroads into the market share left by other meatpackers that reduced capacity or shut down activities. We closed the quarter with installed capacity utilization of approximately 55 per cent at our beef plants, excluding the new plants leased in Brazil that will start up in 4Q09.

Food Service – Sales volume in the Food Service division rose by 8.5 per cent in the quarter in relation to Q2 2009, confirming the timeliness of our decision to adopt a strategy of increasing beef capacity utilization in Brazil.

Argentina – Sales volume in Argentina rose by 8.4 per cent, mainly due to the 46.1 per cent growth in the country's exports. This was primarily due to the resumption of exports to Russia, which accounted for 16.4 per cent of Argentina exports in Q3 2009, versus 6.3 per cent in Q2 2009. In 4Q09 the new hot dog plant will start up operations, doubling installed capacity in the country and boosting the penetration of Quickfood's prepared products.

Uruguay – Beef slaughter volume in Uruguay grew by 26.6 per cent versus Q3 2008 and fell by 7.4 per cent in relation to Q2 2009, driven by the shortening of the dry season characteristic to the annual cattle cycle in this region. In Q3 2009, capacity utilization in the beef division (Brazil, Argentina and Uruguay) stood at 55.5 per cent, up from 53.4 per cent in the previous quarter, with acceleration in slaughter volume in September, after August registered lower slaughter volume due to the initial impact of foreign exchange variation on export volumes.


Brazil – Poultry slaughter volume in Brazil grew by 12.1 per cent and 46.0 per cent in relation to Q2 2009 and Q3 2008, respectively. Sales volume remained stable in relation to Q2 2009. In these quarters we effectively changed our sales mix, expanding export volume on the prior quarter by 8.8 per cent and offsetting the contraction in domestic sales of 6.6 per cent. The turkey operations were launched in August 2009.

Europe – Poultry slaughter volume was 1.6 per cent higher than in Q2 2009, while operational performance presented a significant improvement. Since we assumed control of the Europe operations, implementing minor operational adjustments and better practices while capturing synergy gains, we managed to more than double EBITDA margin to 7.3 per cent in Q3 2009.

Marfrig remains focused on increasing the supply of poultry from the Brazil units for the production of processed and prepared products and the sale of cooked and sliced beef products through the Europe Division (Moy Park), eliminating production bottlenecks and continuing to capture synergy gains in the Europe operations.


Pork sales volume grew by 18.4 per cent and 16.3 per cent in relation to Q2 2009 and Q3 2008, respectively, primarily reflecting the growth in domestic sales volume of 27.2 per cent on the prior quarter.


Mutton sales volume registered a seasonal contraction of 47.3 per cent on the prior quarter, since slaughter volume in Chile's Patagonia region fell due to the approach of winter, with only the slaughter operations in Uruguay and Brazil (which were launched in May 2009) remaining active.

Further Reading

- You can view the full report by clicking here.

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