BRF Jumps as Traders Shrug Off Profit Plunge to Focus on Rebound

  • Net income fell 92% in the second quarter on rising costs
  • Company sees improving demand in second half of the year

BRF SA, Brazil’s biggest processed-food maker, climbed the most since May as investors ignored a plunge in second-quarter profits to focus on an expected recovery.

The shares rose 4.3 percent to 53.18 reais at 11:57 a.m. in Sao Paulo, leading gains in Ibovespa benchmark. A close at the level would be the highest since March.

The company, which makes more than 5,000 products from margarine to lasagna and is the world’s largest poultry exporter, said late Thursday that net income slumped 92 percent from a year earlier to 30.6 million reais ($9.4 million). That trailed the 245.4 million-reais average estimate of seven analysts surveyed by Bloomberg. Still, BRF told investors better days are coming amid signs of recovery in domestic consumption and stronger confidence in Brazil.

"The outlook started to improve in the end of the" quarter, Abilio Diniz, the chairman, said in a conference call with analysts on Friday. "The second half will be very different."

Executives said on the call that BRF may continue to raise domestic prices for processed food to offset higher costs. The company took two price increases, totaling 17 percent, in the first half as it sought to restore profit margins. They also said prices for the corn used to feed chickens have started to fall in domestic market as the nation’s winter harvest advances, easing cost pressures, while industry data suggests a reduction in chicken supply that helps ease a glut.

"It was a positive call," Gabriel Lima, an analyst at Bradesco BBI, said by telephone. "The results were already expected to be weak, and there are signs the worst is now behind us."