High prices for soy and corn – crucial ingredients in animal feed – hit record highs in the second quarter of 2016, ending 30 June, and affected BRF’s gross profits, which came to R$1.9bn ($577m). This was 24% lower than the second quarter of 2015, and the deprecation of the Brazilian real as well as economic slowdown in South America’s largest economy dented profits.
“In 1Q16, we emphasised that we were facing a very challenging moment for the industry in Brazil,” said Pedro Faria, global CEO of BRF. “This adverse scenario intensified during the second quarter, with chicken production and supply continuing to expand, corn prices moving towards record highs, and further deterioration in the Brazilian economy.”
Nonetheless, revenue for BRF for in the second quarter of the year climbed by 7.6% to R$8.5bn ($2.5bn). Overall growth was driven by higher retail sales prices and a surge in volume growth as the company sold more than one billion tonnes of food products worldwide in Q2.
Asia and Europe were the fastest growing regions for BRF in the period, increasing by 42.9% and 15.3% respectively. Brazil and the Middle East and North Africa (MENA) continue to be the primary markets for BRF.
The MENA region posted “substantial growth”, according to Faria, with sales of processed meat rising by 56% when compared to the same period last year. Net operating revenue climbed by 1.3% to $1.6bn ($480m).
Revenue for Europe topped R$1bn ($303m). Whilst sales in Asia increased by more than 40% as the business was supported by the consolidation of Golden Food Siam, a company acquired by BRF for $360m earlier in 2016. Other growth drivers include the usual suspects China and Japan, where demand for meat continues to rise.
The Brazilian processor has invested R$795m ($241m) to support its global expansion strategy. So far this year the business has acquired Argentinian firms Campo Austral and Calchaqui, acquired full control of Omani meat distributor AFK and approved the spin-off of Sadia Halal to create a business focusing exclusively on the burgeoning halal meat market.
The business said the high price of corn and soy looks to have peaked in the second quarter of 2016 and believes gross profits will rise moving into the autumn of 2