Brasil Foods has booked a 75% drop in third-quarter profits as higher feed costs more than offset sales gains in the period.
The Brazilian meat company said net income fell to BRL91m (US$44m) in the three months, down from BRL365m in the comparable period of last year. EBITDA fell 22% to BRL565m.
The company attributed the decline to a "significant" increase grain prices, which have been driven up by poor harvests, as well as the "world economic situation". During the period, the cost of sales rose 20.9% as corn priced spiked 26%.
The bottom line was also hit by costs associated with the transfer of certain assets to Marfrig as part of its bid to win regulatory approval for the integration of Sadia and Perdigao.
Brasil Foods emphasised sales grew by 14.3% year-on-year, climbing to BRL7.2bn, boosted by a 26% increase in exports, new product development and price increases.
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BRF's Revenues Rise to R$ 7.2 Billion in the Third Quarter 2012
SAO PAULO, Nov. 12, 2012 /PRNewswire/ -- BRF net sales reached R$ 7.2 billion, an increase of 14.3% over the same period of last year and 5.1% higher than the second quarter of 2012. The EBITDA margin was 7.9% of company's net sales and EBITDA total amount of R$ 565 million.
It is worth highlighting the fact that during the third quarter, the company fulfilled the agreement signed with the Brazilian anti-trust agency (CADE) and concluded one of the most important stages of the merger process. As expected by the company, this transitory process combined with the world economic situation impacted the results in the quarter.
Nevertheless, BRF achieved very positive revenues in its operating segments in the third quarter, with an expansion of 7.4% on the domestic market, 26% in exports, 4.8% in dairy products and 8% in food service. There was an increase of 4.3% in sales volume which amounted to 1.6 million tons.
The price increase adjustments partially reduced the pressure from the costs of the main raw materials on the operating margins in the third quarter. However, the impacts were still significant as the costs of corn, for example, increased by as much as 26.3% in the period over the second quarter of this year.
The EBITDA margin fell by 3.6 percentage points in the quarter. Gross profit amounted to R$ 1.5 billion, a decline of 5%, and net income was R$ 90.9 million, 75% lower than the third quarter of 2011.
During the year, 283 products were launched in order to expand the portfolio, to reposition brands and/or categories and adding value. There was 115 product launches in the third quarter, distributed as follows: Food Service - 18, domestic market - 51; export market - 31; and dairy products segment - 15.
Original source: Brasil Foods
