Bloomberg News

Brasil Foods Slumps After Net Income Misses Estimates

March 23, 2012

BRF - Brasil Foods SA (BRFS3), the world’s largest poultry exporter, dropped the most in two months in Sao Paulo after fourth-quarter profit missed analyst estimates because of a one-time tax expense and higher costs.

Brasil Foods fell 3.6 percent to 35.25 reais at 10:11 a.m. in Sao Paulo after declining as much as 3.9 percent earlier, the most intraday since Jan. 10. It led losses in the benchmark Bovespa stock index, which rose 0.3 percent.

Net income fell to 121 million reais ($66.5 million) from 360 million reais a year earlier, the Sao Paulo-based company said late yesterday. Brasil Foods was expected to post a 472.7 million-real profit excluding some items, the average of nine analyst estimates compiled by Bloomberg (BRFS3).

Costs of feeding the foodmaker’s chickens, turkeys and swine surged 13 percent in the quarter because of rising corn prices in Brazil. Average domestic prices for the grain, the main ingredient in animal feed, climbed 8 percent in the period from a year earlier, the University of Sao Paulo’s Cepea crop- research agency said on its website.

“The efforts made were not enough to offset the weaker export margins, particularly as a result of higher labor costs and grain prices,” Daniela Bretthauer, an analyst at Raymond James, said in a note to clients after earnings were released. She has an outperform rating for the stock.

A strike at the Brazilian port of Itajai forced Brasil Foods to redirect exports through other ports, boosting costs for the TV diner maker and reducing margins. Earnings before interest, taxes, depreciation and amortization, or Ebitda, fell to 13 percent of net sales, from 15 percent a year earlier.

Sadia Costs

“BRF faced a strike at its main export port in the south during the quarter, which resulted in higher-than-forecast selling expenses that explains the Ebitda shortfall,” Bretthauer said.

Brasil Foods reported a tax expense of 215 million reais related to the acquisition of Sadia SA in 2009. Brasil Foods, formerly known as Perdigao, agreed to buy the bigger rival after it booked more than 3 billion reais of losses stemming from wrong-way currency bets.

Quarterly sales climbed 11 percent to 7.1 billion reais as demand from a growing middle class in Brazil pushed revenues. About two-thirds of sales come from the domestic market.

To contact the reporter on this story: Lucia Kassai in Sao Paulo at lkassai@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net


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