Brazil Food Giant BRF to Cut Supplier Payments as Profit Slumps

  • Company to lower prices paid to some Brazilian suppliers by 5%
  • BRF cites economic crisis, surge in domestic commodity prices

BRF SA will cut the prices it pays to providers of services and materials as Brazil’s biggest producer of processed food tries to restore profits that have been squeezed over the past year.

The company will discount by 5 percent the prices received by some Brazilian vendors, applying to deliveries starting Oct. 1 and lasting until Jan. 2, according to a memo sent to suppliers and obtained by Bloomberg.

The measure is a response to both Brazil’s economic crisis and the surge in domestic commodity prices, which directly affects BRF’s supply chain, the Sao Paulo-based company said in an e-mailed response to questions.

BRF makes a range of products from margarine to lasagna, and is the world’s largest poultry exporter. Its net income slumped 92 percent in the first half from a year earlier to 70 million reais ($19 million) as the company struggled with the jump in domestic prices for corn used to feed its chickens, combined with a supply glut that sent export prices lower. Results were also hurt by a decline in sales volumes in Brazil amid a deepening recession.

In June, BRF announced that it would suspend chicken output at two plants amid a “challenging” market and economic environment. Earlier this year, the company said it was seeking to cut salaries in real terms by adjusting them below the rate of inflation.

Brazilian corn prices are 23 percent up from a year ago amid an export boom combined with smaller-than-expected production, according to price data from Cepea, the University of Sao Paulo’s research unit.

BRF rose 0.6 percent at 2:23 p.m. in Sao Paulo. The Ibovespa benchmark gauge rose 0.3 percent.

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