Marfrig Jumps on Asset Sales and Cost Cut Plan: Sao Paulo Mover

Marfrig Alimentos SA, Brazil’s second-largest foodmaker, rose the most in 18 months after announcing it’s selling and shutting plants in South America to reduce costs and debt.

Marfrig soared 13 percent to 7.45 reais at the close of trading in Sao Paulo, the most since Nov. 11, 2011. Brazil’s benchmark Ibovespa index rose 0.4 percent. The company’s $500 million of 9.5 percent bonds due 2020 led gains among Brazilian corporate bonds today, jumping 4.3 cents to 96.2 cents on the dollar, while securities due in 2016, 2017 and 2018 also rallied.

The maker of TV dinners and the biggest global meat supplier to McDonald’s is selling and closing units as part of a plan to cut debt by as much as 2 billion reais ($1 billion) and save about 250 million reais this year. The company, based in Sao Paulo, is in talks to sell three food plants in Brazil as part of the plan, said Sergio Rial, chief executive officer of Marfrig’s Seara Foods processed food unit.

“This is a new chapter for the company, one where we will look to keep lower debt levels,” Rial, who’s scheduled to replace Marfrig founder Marcos Molina as CEO in January, told reporters today in Sao Paulo. “Results will improve as we cut costs.”

The plan also includes closing or selling four distribution units in Brazil, as well as closing a pair of slaughterhouses in Argentina and a food plant in Brazil, Marfrig said in a statement distributed in Sao Paulo after posting its second straight quarterly loss today.

A net loss of 81.2 million reais in the first-quarter compared with profit of 34.5 million reais a year earlier, Marfrig said in a statement before markets opened in Brazil.

Integration Costs

The cost of integrating plants acquired last year from Sao Paulo-based BRF SA, the country’s top food-maker, contributed to the loss, Rial said. The cost of products sold soared 28 percent as Marfrig doubled its capacity with the acquisitions. Prices increased in the quarter for corn and soybeans, used to feed the company’s chickens and pigs.

Marfrig plans to make an interest payment on 2.2 billion reais of bonds held by Brazil’s BNDES development bank as scheduled, Rial said.

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