BRF records substantial losses following trade bans and strikes

Scandal-hit Brazilian meat company BRF has recorded a net loss of BRL 1.574 billion ($405 million) in its second-quarter results, as trade embargoes and a nationwide trucker strike led to falling profits in the quarter.

The results mark the company’s third straight quarterly loss despite its restructuring efforts and change in management, as BRF continues to struggle following its implication in the ‘Carne Fraca’ food safety scandal last year.

Brazilian authorities allege that BRF employees paid inspectors to overlook unsanitary conditions and potentially contaminated or rotten meat, and these allegations led to the European Commission suspending meat imports from 12 BRF facilities earlier this year.

BRF’s international unit recorded a sales decline of 14% as a result of this trade ban, as well as sanctions on beef and pork imports imposed by Russia in December 2017, and the unit’s revenue fell 23.4% year-on-year to BRL 1.6 billion ($412 million).

Charges related to the ongoing food safety investigation cost BRF BRL 288 million ($74.1 million), while the nationwide truckers strike carried out in Brazil led to a fall in production volume, leading to direct costs of BRL 75 million ($19.3 million).

Additional costs related to the company’s restructuring programme – which led to the appointment of a new CEO and the announcement that BRF would look to offload BRL 5 billion ($1.2 billion) worth of assets in the future– combined with these factors led to BRF recording an operating loss of BRL 289 million ($74.4 million) in the quarter.

During the quarter, BRF’s CEO José Aurélio Drummond Jr resigned from his position, and he was replaced by Pedro Parente in June.

However, the company’s overall net revenues actually increased 1.9% to BRL 8.18 billion ($2.11 billion), with sales volumes in Brazil increasing by 8.6%.

Parente said: “In this quarter, the intensification of trade policies with protectionist bias subjected BRF to significantly adverse conditions, particularly in international markets, but with significant impact on the domestic market as well.

“At the end of May, the European Commission excluded 12 of our Brazilian plants from the list of establishments licensed to export to the European bloc, blocking us from exporting from our primary production platform.

“We do not see the technical grounds for this decision, as we strictly comply with all local and international sanitation regulations and laws. We already filed an appeal with the European Commission Court of Justice and are awaiting the decision.”

He added: “BRF is a company with strong and well-established brands, build and based on quality and the trust of its customers.

“We have a great ability for innovation, and our reach is global. However, we need to be vigilant and diligent to continuously manage a very long and complex chain.

“These attributes are our strengths, and we believe that they constitute a solid foundation upon which we will be able to solidify and accelerate our recovery over coming quarters.”