The Brazilian meatpacker BRF posted a R$ 167 million (US$ 52.69 million) net loss in the second quarter of 2017, from a R$ 31 million net income a year earlier, hurt by small profit margins and the fallout of an investigation about tainted meat in Brazil. Analysts expected a lower net loss in the second quarter, of R$ 132 million.
BRF’s net revenue fell 5.7% from a year earlier, to R$ 8.027 billion (US$ 2,532.58), slightly below market expectations, (R$ 8.342 billion). EBITDA (earnings before interest, taxes, depreciation, and amortization) fell 39.1%, to R$ 575 million (US$ 181.42 million), while analysts predicted a less intense decline (26%, to R$ 695 million). The EBITDA margin dropped 3.9 percentage points, to 7.2% in the quarter.
BRF sales volume in the quarter fell 0.2%, to 1,169 million tons. The company’s gross margin was at 20.5%, or 2 percentage points (pp) below the margin for the same period in 2016 (22.5%).
In Brazil, sales volume increased 0.1%, to 495 million tons. Net operating revenue in the country fell 0.9%, to R$ 3.534 billion. In Europe and Eurasia, sales volume fell 12.4%, to 89 million tons. Net operating revenues in the region fell 13.4%, to R$ 883 million. In Asia, BRF’s third largest market, sales fell 3.8%, to 173 million tons, while net operating revenue in the region fell 13.6%, to R$ 1.090 billion.
At the end of the second quarter, the company’s net debt amounted to R$ 13.7 billion (US$ 4.32 billion), or 4.9 times higher than its EBITDA. At the end of the previous quarter, the debt was at R$ 12.243 billion, equivalent to 4.24 times the EBITDA. A year earlier, the debt was at R$ 11.041 billion, or 1.99 times the EBITDA.
The company acknowledged that this level of leverage is well above what it considered to be ideal regarding capital structure (between 2-fold and 2.5-fold) and reiterated that it does not have financial covenants in its debt instruments.
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