BRF Brasil Foods ended the first quarter of 2011 reporting a net income of BRR383 million, a year-on-year increase of 527 per cent, reflecting the operating performance during the period. EBITDA reached BRR816.4 million on a margin of 13.6 per cent.

Principal elements contributing to the good operating result in the quarter were:

• successful strategy for acquiring inputs against an environment of rising commodity prices, thereby ameliorating the impact of this scenario during the period
• improvement in the management of the company's costs and expenses
• continuity in the capture of synergies in areas authorized by the Brazilian anti-trust agency, CADE, and
• improved performance in export markets, the division which most contributed to the increase of 4.8 percentage points in EBITDA margin.

Net sales were BRR6 billion, 19.3 per cent higher than the first quarter 2010. Gross profit reached BRR1.5 billion, representing a growth of 37.4 per cent with a margin of 25.7 per cent.

Domestic market sales increased 20.4 per cent to BRR3.6 billion, driven by a favourable macroeconomic environment. Growth in volume terms was 13 per cent.

World demand for proteins contributed to a significant recovery in the export market. Export revenue was BRR2.4 billion, 17.7 per cent higher when compared with the first quarter in 2010, even with the 7.5 per cent appreciation of the real, and accumulating 549,900 tons.

Between January and March of this year, BRF invested a total of BRR278 million. Funds were dedicated to projects for improvements, replacement and productivity. The largest share of this expenditure was directed towards investments at the units in the states of Santa Catarina, Paraná, Rio Grande do Sul and the Midwest, in addition to the logistics and supply chain. The rate of CAPEX invested is below of planned levels, as company waits CADE's judgment.

Domestic market

Brazilian market conditions during the first quarter in 2011 proved favourable for sales of processed products, which reported an increase of 16.8 per cent on improved profitability. The good performance reflects public recognition of the quality of the company's brands, this being instrumental in maintaining margins despite the sharp advance in costs, more especially those of grains.

The Food Service businesses also presented a significant 28.4 per cent growth in sales compared with the same quarter in 2010, driven by the evolution in demand for processed products and the performance of the so-called Global Accounts (networks served both domestically and outside Brazil).

In the meats segment, sales were 27.5 per cent higher while volumes increased 10.7 per cent due to a better mix of produced products and the increase in the relative share of in natura sales of pork and poultry meats, more particularly special cuts.

Growth in volumes of 8.7 per cent was also recorded by the dairy products business on increased sales revenue of 16.2 per cent. Despite a better sales performance, prices paid to producers by the industry continued to pressure costs and consequently, to squeeze margins.

Exports

BRF reported a strong first quarter recovery in its international market performance despite a substantial rise in costs and the appreciation of the Real against the US dollar. In addition to robust demand, performance was also driven by progress in the project for reinforcing the company's internal processes.

The gradual recovery in the world economy and the growing importance of emerging powers, has stimulated an increase in protein consumption. In the first three months of the year, there were shortfalls in production in some countries, further boosting demand for Brazilian meat. This scenario was conducive to the implementation of the company's principal commercial initiatives as well as ensuring that profits came in at above forecast.

Meat exports increased 18.3 per cent in sales revenues and 3.7 per cent in volume. In the Food Service segment, the Global Accounts reported growth in consumption for several markets such as the Middle East and Japan.

Further Reading

-

You can view the full report by clicking here.