Bloomberg News

Marfrig Leads Gains in Brazil on Speculation Margins to Improve

November 23, 2011

Nov. 22 (Bloomberg) -- Marfrig Alimentos SA, Latin America’s second-largest beef producer, led gains on the benchmark Bovespa index on speculation profit margins will improve.

The shares rose 4.3 percent to 8.05 reais at 2:22 p.m in Sao Paulo. The stock lost 50 percent this year through yesterday, while the Bovespa dropped 19 percent in the period.

Marfrig “continues to improve its product mix toward higher-value-added processed products,” analysts from Raymond James including Daniela Bretthauer said in a note to clients yesterday. The shares should “rebound from current levels based on improved margins outlook going forward and current valuation,” the analysts said, as they upgraded Marfrig to “market perform” from “underperform.”

In September, Marfrig agreed to sell its U.S. and European distribution unit for $400 million to boost its cash position. The unit belonged to Keystone Foods LLC, which Marfrig bought in 2010 for $1.26 billion.

“The company’s high debt levels remain our main concern,” the analysts said.

Marfrig had 9.57 billion ($5.29 billion) reais in long-term debt at the end of the third quarter, which represents about 40 percent of the company’s total assets, according to Bloomberg data. Rival JBS SA’s ratio is 29 percent, the data show.

--Editor: Brendan Walsh, Marie-France Han

To contact the reporter on this story: Katerina Petroff in Sao Paulo at kpetroff@bloomberg.net

To contact the editor responsible for this story: Helder Marinho at hmarinho@bloomberg.net


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