Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Marfrig Global Foods SA (MRRTY, Financial) reported a consolidated net revenue of BRL34.8 billion for Q2 2024, marking a 16.5% increase compared to the same period in 2023.
- The company achieved a consolidated adjusted EBITDA of BRL3.4 billion, which is 64.8% higher than the previous year, with a margin increase of 285 basis points.
- Free cash flow was positive at BRL419 million, and the company reported a net income of BRL75 million, a significant turnaround from a loss of BRL784 million in the same period last year.
- Marfrig Global Foods SA (MRRTY) has been successful in its sustainability efforts, achieving 100% compliance in audits related to livestock in the Amazon for the 12th consecutive year.
- The company has made strategic investments in BRF and a diversified business model, focusing on value-added products, which contributed to a strong EBITDA performance.
Negative Points
- The North American operation experienced a 41.3% decline in EBITDA compared to the previous year, with margins impacted by higher cattle prices and lower drop values.
- In South America, the adjusted EBITDA margin contracted by 1.4% due to economic challenges in Argentina, affecting the fresh meat operation.
- The company faces challenges in the North American market with lower fed cattle supplies expected to reduce capacity utilization and margins in the second half of 2024.
- Despite strong beef demand, the North American operation anticipates lower profitability in Q3, traditionally a weaker quarter after the barbecue season.
- Argentina's economic situation, including high inflation and smaller cattle supply, continues to pose challenges for Marfrig Global Foods SA (MRRTY)'s operations in the region.
Q & A Highlights
Q: What are the expectations for the cattle cycle in North America, and how might it affect margins in Q3?
A: Tim Klein, CEO of North American Operations, explained that the decline in cow slaughter is a precursor to heifer retention, which could indicate a cycle turnaround. While Q3 and Q4 are typically lower due to seasonality, strong beef demand is expected to support margins. Retail prices are high, but consumers continue to buy beef, which is encouraging for future demand.
Q: How is Marfrig preparing for changes in animal availability in Brazil, and what opportunities exist for exports to the US?
A: Rui Mendonca, CEO of South American Operations, noted that Brazil is experiencing a positive cycle with increased slaughter and lower prices. The company is preparing for a transition in 2025 by ensuring supply through feedlots. Strong global demand, particularly from Mexico and Indonesia, presents opportunities for Brazil to export to the US.
Q: Can you provide insights into Marfrig's strategy for vertical integration and its impact on profitability?
A: An unidentified company representative stated that Marfrig's strategic plan for vertical integration through feedlots is successful, with 30% of supply coming from this system. This approach is expected to improve margins and ensure high-quality beef for export, particularly to Europe.
Q: What is the outlook for Argentina, considering current economic challenges?
A: Rui Mendonca acknowledged that Argentina faces challenges such as smaller cattle supply and high inflation. However, the company remains optimistic due to government support for the industry and the potential for improved conditions. Marfrig's processed beef operations in Argentina are also a positive factor.
Q: How will BRF's dividend policy impact Marfrig's capital allocation and leverage?
A: Marcos Antonio Molina dos Santos, Chairman of the Board, indicated that BRF's cash generation allows for potential dividend payouts, which could support Marfrig's deleveraging efforts. The company is flexible in capital allocation, considering buybacks and dividends, while maintaining a focus on reducing financial costs and improving ratings.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
