BRF to divest Argentina operations, focus on core assets

10-Jul-2018 - Last updated on 10-Jul-2018 at 22:03 GMT

Citing poor results and reduced demand, Brazil’s meat processing giant BRF is planning to off-load operations in Argentina, Europe, and Thailand to help reduce its debt.

The company told investors last week that it would adjust operations at 22 of its 35 plants in response to lower demand.

The company only entered Argentina in 2012 when it acquired a 90% of Quickfood. This was via an asset swap with Brazil's Marfrig Global Foods SA.

In an article on the SeekingAlpha investor site, financial blogger Stephen Simpson, CFA, called the exit from Argentina, “perhaps a little controversial.

“Although the proximity of Brazil and Argentina suggests to me that BRF should be able to maintain a solid market presence, the company pursued a lot of integration efforts here and had once hoped to make its Argentinian operations a global export center,” wrote Simpson.

Indeed, the company’s first quarter results reported that net revenue across South America, including Argentina, Bolivia, Chile, Paraguay and Uruguay, increased by 12.4% compared to the previous quarter.

Changes at the top

BRF has been regrouping after food safety concerns led to a ban on several Brazilian meat products by the EU, and disappointing sales. The company was also challenges in its domestic market following its alleged involvement in the Brazilian meat scandal, which authorities accused the firm of covering up salmonella in its chicken. BRF recently announced a shake-up at boardroom level, with former Petrobras leader, Pedro Parente, taking over as chief executive.

In response, the company said it would cut 5% of its domestic Brazilian workforce. It also announced it would divest operations in Argentina, Europe, and Thailand, and focus on the Brazilian domestic market, Asia, and the Muslim/halal market.

Positives in Brazil?

BRF’s first quarter results also indicated that volume growth rose by 9.6%, and was driven by the strategy of offering a product portfolio more suited to the country and greater availability of products. The company introduced a range of new products, including filled fresh sausages, frozen burgers and ready-to-eat pies and meatballs across wholesale channels, which represents approximately 20% of the total market.

BRF has over 30 brands in its portfolio, which are available in more than 140 countries on five continents.