BRF is the third largest exporter in the country and accounts for more than 20 per cent of the Brazilian trade surplus.

The year 2010 was one of many challenges and important achievements for BRF. The company reported growth with efficiency, gains in scale and profitability in both domestic and export markets, displaying a recovery which restored the Company's historical levels. Net income reached 804 million real (BRR), a 125 per cent increase – on a pro-forma basis(*) – compared with fiscal year 2009. Net sales at BRR22.7 billion were 8.3 per cent higher.

Despite a scenario of currency appreciation and spiraling commodity prices in the second half of the year, EBITDA (operating profit before financial expenses, taxes and depreciation) amounted to BRR2.6 billion, corresponding to growth of 126 per cent and representing a margin of 11.6 per cent against fiscal year 2009. Worthy of note was the operating performance in the fourth quarter when the Company reported a margin of 15 per cent with an equally robust rise in sales.

Key factors driving this good performance were the increase in commercialisation volumes of processed products in the domestic market, the consistent and gradual recovery reported in important international markets, reduction of production costs and commercial expenses plus a start on capturing synergies from processes already authorized by the Brazilian anti-trust authority, CADE such as the those of the Overseas Market and Supply Chain areas.

The company ended 2010 as the country's third largest exporter. Taking into consideration the numbers recorded in the balance sheet for the year, BRF accounts for a little more than 20 per cent of the Brazilian trade balance, which amounted to US$20.3 billion and confirming our vocation as a major generator of currency reserves for the country.

Export market performance last year was given a major boost from the coordination of BRF/Sadia's international operations. With synergy gains and better pricing management, 2.3 million tons were commercialised, 5.9 per cent more than the preceding year, on sales revenue of BRR9.2 billion, a growth of 4.3 per cent.

Domestic market margins recovered to pre-crisis levels on the back of strong performance. Sales totalled BRR13.5 billion, an 11.3 per cent increase, while volume was 3.8 million tons, a year-on-year increase of 4.9 per cent.

The Company invested more than BRR1 billion during the year in expansion and modernization of its productive capacity as well as in efficiency programs in all areas with a view to sustaining growth plans in the domestic and international markets.

BRF was once more rated as one of the companies inspiring greatest confidence among investors and shareholders, reporting a 21 per cent increase in market capitalization against an appreciation of only one per cent in the IBOVESPA stock index. In the past 10 years, the annual average return to shareholders was 31 per cent, making the Company one of the most attractive investment options in the capital markets.

Domestic market

Various were the factors stimulating demand and product sales in all segments of the domestic market during the course of last year. The meat segment recorded an increase of 10.5 per cent in sales revenue and 6.6 per cent in volume. The recovery in 'in natura' exports helped stabilise the domestic market, sustaining prices and the sale of higher added value items.

Net sales in the dairy products segment regained the levels of 2008 ending the fiscal year at BRR2.3 billion. Margins were squeezed by an increase in prices paid to milk producers while average prices at the consumer level remained on a par with 2009.

Export market

Markets generally posted a gradual and consistent recovery during the course of the year, more notably in the second half. Meat exports amounted to BRR9 billion, five per cent higher than in 2009, while volumes rose six per cent.

BRF has been implementing its Internationalization Project, its focus on higher added value products and distribution to the key operating regions, in this way the Company adopting a more pro-active posture in closer proximity to its final clients and consumers. During the year, important progress was made in distribution to the Middle East, a region which accounted for 31.9 per cent of the Company's overseas billings.

Fourth quarter: revenue grows 21 per cent and gross profit 49.5 per cent

Set against a favourable trading climate for the Company – an increase in domestic market demand and a gradual recovery in international markets – BRF recorded fourth quarter growth in sales both in volume as well as sales to both markets.

Net sales totalled BRR6.4 billion, 20.6 per cent higher, a growth of 22 per cent in the domestic market and 18.3 per cent in the overseas market. A total of 1.4 million tons was commercialised, a volume 6.4 per cent greater than the same quarter in 2009.

EBITDA reached BRR959 million, a year-on-year increase of 167 per cent with a margin of 15 per cent, a gain of BRR341.7 million when compared to the third quarter in 2010. The good performance of the markets in which the company does business and the incorporation of the fruits of the first phase of synergies sustained growth despite the substantial impact from the rising costs of the Company's leading raw materials (corn and soybeans).

Net income for the quarter was BRR360.2 million, corresponding to a margin of 5.6 per cent. This result represents a growth of 1,537.2 per cent compared with the same period in 2009, and was proportional to the favourable operating performance recorded in the last few months of the year.

The domestic market remained buoyant against a background of full employment, both contributing to sales of products in all segments, especially those lines destined to meet demand for the year-end holiday period. In the quarter, sales activity in the meats segment grew 22.9 per cent on volumes 10.4 per cent higher.

Again in the meat segment, export business generated a revenue of BRR2.4 billion, 18.3 per cent more than the fourth quarter of fiscal year 2009.

(*) Results from Sadia are incorporated as from July 2009; variations are compared against a pro-forma base as if the incorporation of shares had taken place on January 1 2009.

Further Reading

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