Brasil Foods Profit Trails Estimates on Weakening Demand

BRF - Brasil Foods SA (BRFS3), the world’s largest poultry exporter, fell the most in seven months after reporting first-quarter profit that missed analysts’ estimates because demand in Asia and the Middle East weakened.

Brasil Foods dropped 3 percent to 34.78 reais at 10:47 a.m. in Sao Paulo, after earlier declining as much as 4.4 percent, the most since Sept. 22. It was the worst performer on the benchmark Bovespa index, which slipped 0.1 percent.

Net income slumped to 153 million reais ($81 million), from 383 million reais a year earlier, the Sao Paulo-based foodmaker said April 27 after markets closed. That compares with a 243.7 million-real average estimate of six analysts compiled by Bloomberg.

Waning demand for the company’s chicken and turkey exports to the Middle East and Japan pushed down prices, while the cost of animal feed rose. Sales dropped 5.4 percent to 6 billion reais in the quarter.

“The main reasons for the shortfall were lower export prices and increased production costs,” Sao Paulo-based Itau BBA analyst Alexandre Miguel, who maintained his market-perform rating on the shares, said in a report today. “Operating margins were down in all divisions as price increases did not offset cost pressure.”

Export margins will likely rebound in coming quarters, Chief Financial Officer Leopoldo Saboya said in a news conference after the earnings release. The foodmaker also expects its debt rating to be raised to investment grade, allowing it to sell debt more frequently at lower costs, he said.

‘Frequent Issuer’

“We are likely to become a frequent debt issuers after getting the investment grade from the three rating agencies,” Saboya said.

The company received a $500 million, three-year revolving loan from 19 banks led by Banco Santander SA (SAN), Morgan Stanley (MS) and HSBC Holdings Plc (HSBA), according to an April 27 regulatory filing.

Before today, Brasil Foods fell 1.6 percent in Sao Paulo trading this year, compared with the benchmark’s 8.7 percent gain.

To contact the reporter on this story: Lucia Kassai in Sao Paulo at lkassai@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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