Anti-corruption probe weighs on BRF Q4 results

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The company posted a fourth-quarter loss of $242 million.
SÃO PAULO, Brazil – Brazilian poultry processor BRF S.A. posted a fourth quarter loss of R$784 million ($242,373,600), compared to a loss of R$442 million in the year-ago period. Headwinds for the company included fallout from a federal food fraud investigation that targeted BRF and several other meat processing companies in Brazil.

“A significant proportion of adverse results recorded in 2017, around 50 percent of them, arose from direct effects of the Weak Flesh Operation,” the company said. “The operation has led to the closure of many markets, generated discounts on export prices and brought relevant obstacles in the production chain, driving to relevant impacts on the company’s results.”

For the fourth quarter ended Dec. 31, 2017, the BRF reported net revenues of R$8.9 billion ($2,751,435,000), up 3.6 percent from fourth quarter revenues of R$8.6 billion posted in 2016. The company attributed the result to higher sales volume recorded in the period, driven mainly by the sales of Christmas season products in Brazil and the Southern Cone countries of Uruguay, Argentina and Chile.

A bright spot for the company was its OneFoods business, which caters to the market for Halal meat products. Total market share in Gulf countries for OneFoods increased 1.1 percent to 41.6 percent compared to the fourth quarter of 2016. Net revenue for the quarter totaled R$1.9 billion and R$6.7 billion in the full year.

“With regards to OneFoods, we efficiently consolidated our operations in Turkey through Banvit, whose results exceeded our initial expectations,” the company said. “By the end of 2017, the region also recorded a significant improvement in price recovery.”

In a letter to shareholders, BRF acknowledged that the company faced challenging circumstances and, as a result, implemented significant changes at the company.

“Nonetheless, the company responded quickly and appointed a dedicated team of executives and external consultants to promptly deal with the issue, with assertiveness and transparency, particularly in discussions with the stakeholders and authorities involved,” the company said. “We put in our best efforts to take the required measures to mitigate any impact on our company and industry.”

BRF reassured investors that steps taken to confront the crisis would pay off in 2018, saying, “…we reaffirm our belief that the challenges we faced in 2017 allowed us to implement an important course correction, whose results should be strongly evident as of 2018. This correction should reflect substantial improvements in our financial performance, including local and global growth, recovery of margins and lower leverage ratios.”

1 Brazilian Real = 0.31 US Dollar

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