Perdigão SA and Sadia SA, the Brazilian food processors in takeover talks, posted losses for a third straight quarter on lower prices and rising costs, according to Bloomberg.

Perdigão's first-quarter net loss of 226 million reais (BRR; $108 million), or BRR 1.09 a share, compared with a profit of BRR 51 million, or 25 centavos, a year earlier, the Sao Paulo-based company said yesterday in a statement to Brazil's securities regulator. Sadia posted a net loss of BRR 239.2 million, compared with a profit of BRR 248.3 million.

The global financial crisis has pared family income worldwide, reducing demand for poultry from Brazil, the world's biggest exporter. Exports fell to $987.4 million in the quarter, 22 per cent lower than a year earlier, according to Brazil's Trade Ministry. Export volumes fell 3.9 per cent.

Perdigão wants to buy Sadia to become the world's largest poultry company by market value. The deal, which according to Brazilian newspaper reports could be announced this week, will generate BRR 2 billion of cost savings in distribution and production for the combined company, according to Denise Messer, an equity analyst at Brascan Corretora in Sao Paulo.

A combination of discounts to clients and rising costs for packaging and freight led to lower profit margins, Perdigão said. The quarterly results reflect a 'tumultuous international scenario', where average prices declined about 22 per cent, Perdigão said.

Sadia faced rising interest costs after borrowing money to cover losses on currency futures contracts. Financial losses were BRR 260 million in the quarter, compared with a financial gain of BRR 90.2 million a year earlier.

Derivatives expenses

Sadia booked more than BRR 3 billion of expenses related to derivatives in the second half of 2008 after Brazil's real slumped 31 per cent, continues the Bloomberg report.

Perdigão’s cost of goods sold rose 7.4 per cent to BRR 2.07 billion, Perdigão said. The company also booked tax expenses of BRR 132 million related to the incorporation of a unit this year. The adjusted net loss was BRR 94 million, Perdigão said.

Perdigão, founded 75 years ago by Italian immigrants to Brazil, sells products including poultry, pizza and lasagna in more than 110 countries and has more than 55,000 employees. The company's brands include the namesake Perdigão, Batavo and Perdix. Sadia, whose name in Portuguese means 'healthy',’was founded in 1944 and makes more than 2,500 types of food.