Brasil Foods Quarterly Profit Misses Estimates on Feed Costs

BRF - Brasil Foods SA (BRFS3), the country’s largest maker of TV dinners and frozen pizza, said profit slid in the third quarter, missing analysts estimates, after higher costs for grain used to feed its chickens and swine squeezed margins.

Net income dropped to 90.9 million reais ($44.3 million) in the period, Sao Paulo-based Brasil Foods said in a regulatory filing late yesterday. The result missed analysts’ estimates for a gain, excluding one-time items, of 107.8 million reais, the average of nine estimates compiled by Bloomberg. A year earlier the company had net income of 365 million reais.

Costs of goods sold rose 21 percent to 5.67 billion reais in the quarter. Prices for corn and soybean, two main ingredients used to feed Brasil Food’s chickens and swine, climbed 12 percent and 5.8 percent, respectively, after the worst U.S. drought in half a century scorched fields.

Brasil Foods raised prices on hot dogs and hamburger patties in the quarter, which wasn’t enough to offset an increase in grain costs, Ricardo Boiati, an analyst with Banco Bradesco SA (BBDC4), said in a Nov. 1 note to clients. He rates the stock equivalent to buy, which means the stock is expected to exceed Brazil’s Bovespa stock index by more than 10 percent.

Earnings before interest, taxes, depreciation and amortization, or Ebitda, declined to 7.9 percent of sales, from 12 percent a year ago, Brasil Foods said.

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

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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