Marfrig to Sell, Close Plants After Second Quarterly Loss

Marfrig Alimentos SA (MRFG3), Brazil’s second-largest food-maker, said it plans to sell and close plants and cut debt by as much as 2 billion reais ($996 million) after it posted a loss for a second straight quarter.

The company based on Sao Paulo plans to save about 250 million reais in working capital this year as it sells three food plants and closes or sheds four distribution units in Brazil, Seara Foods unit Chief Executive Officer Sergio Rial said. The meatpacker also is seeking to close a pair of slaughterhouses in Argentina and a food plant in Brazil, he said.

“This is a new chapter for the company, one where we will look to keep lower debt levels and focus on extracting more value to shareholders,” Rial told reporters today in Sao Paulo. “Results will improve as we cut costs and grain prices are expected to fall.´´

The stock surged as much as 8.2 percent to 7.14 reais in Sao Paulo, the most since July 27, 2012, and traded up 6.7 percent at 7.04 reais at 10:35 a.m.. The company posted a first-quarter net loss of 81.2 million reais compared with a profit of 34.5 million reais a year ago, in a statement released before the market opened.

The cost of integrating plants acquired from BRF SA (BRFS3) contributed to the loss, Rial said. The cost of products sold soared 28 percent as Marfrig doubled its capacity with last year’s acquisition of food processing plants from BRF. Prices increased in the quarter for corn and soybean, used to feed the company’s chickens and pigs.

Bond Payment

Corn prices rose 11 percent, on average, while soybean advanced 13 percent in Chicago.

Marfrig plans to make an interest payment on 2.2 billion-real bonds held by Brazil’s development bank as scheduled, Rial said. The bank is known as BNDES.

‘‘We are not in talks with BNDES to either postpone the payment or convert the notes,´´ he said.

BRF, based in Sao Paulo, is the country’s top food-maker.

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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