Marfrig Alimentos SA (MRFG3), Brazil’s second-largest food company, plans to raise about 1.1 billion reais ($543 million) in new shares and boost capital by a third after debt surged to a record. Shares tumbled.
The sale may be increased by 35 percent in offers of additional and supplementary shares, Sao Paulo-based Marfrig said in a statement today. Proceeds will be used to “strengthen the capital structure,” the company said.
Marfrig follows meatpacker Minerva (BEEF3) SA in selling shares to cut debt after costs increased. Prices for soybeans and corn, which Marfrig uses to feed its chickens and swine, have soared this year after the worst drought in the U.S. in half a century prompted concern demand growth will outpace supplies. Soybean futures in Chicago are up 28 percent this year, while corn has risen 17 percent.
Net debt jumped to a record 9.3 billion reais at the end of the third quarter, after almost tripling in the past two years, Marfrig said in a separate filing today.
Marfrig dropped 3.9 percent to 10.04 reais at 10:46 a.m. in Sao Paulo, after falling to 9.81 reais earlier, the lowest since Aug. 13. The shares led losses on the benchmark Bovespa index, which was up 0.1 percent.
Earnings before interest, taxes, depreciation, and amortization of 549.8 million reais surpassed the 435.8 million reais expected by analysts, according to data compiled by Bloomberg. Marfrig reported net income of 10.4 million reais, compared with a loss of 54 million reais expected by analysts, after losses stemming from a currency drop weren’t repeated.
The company led by founder and Chief Executive Officer Marcos Antonio Molina is the country’s fifteenth share sale this year following Minerva, Fibria Celulose SA (FBR:US) and Banco BTG Pactual SA.
Marfrig said shareholder BNDES, Brazil’s development bank, has agreed to convert as much as a third of its Marfrig bonds into equity as part of the offering, provided that the sale is held by Feb. 6. BNDES holds 13.94 percent of Marfrig.
BRF - Brasil Foods SA (BRFS3) is the country’s largest food company.
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