Brasil Foods to invest nearly $1 billion

Even though it's still waiting on a ruling about its future by Brazil's anti-trust body (CADE), BRF Brasil Foods S.A. will invest BRL1.5 billion (US$933 million) in its national operations this year, according to a top company official.

“Of course we will not jeopardize (investment) before knowing the opinion of CADE, but we have a plan,” said Jose Antonio do Prado Fay, company president, who spoke to industry analysts last week while presenting 2010 financial results in Sao Paulo.

The plan is for Brasil Foods to pursue new synergies with production units, modernization in existing factories and productivity gains. The investments should ensure production growth of 6% to 7%, and a boost of 10% to 12% in company revenue over the next two years, Fay said.

Officials made a point to emphasize that the investment isn't set in stone, and will depend on CADE's ruling on the merger of brands Perdigão and Sadia that began two years ago. Approval of the merger has moved slowly through Brazil's Senate, and Brazilian officials involved in the approval vote have spoken often of requiring Brasil Foods to maintain competitive balance in the industry. That could include keeping the major brand names alive and separate for five years, and selling off smaller brands that may otherwise be closed in the future.

Brasil Foods says the merger between Perdigão and Sadia generated net synergies of BRL74 million (US$46 million) last year. Net revenues in 2010 were announced as BRL22.6 billion (US$14 billion), with BRL13.5 billion (US$8.3 billion) made in the domestic market, up 11% compared to 2009. Foreign market sales reached BRL9.166 billion (US$5.6 billion) in 2010, up 4% from the year prior.

Despite domestic and export sales growth, officials say they remain wary of rising grain prices. Brazil's corn and soybean crops should produce above forecasted levels this year, but increasing demand from Asia will keep stocks low. Rising grain prices led Brasil Foods to boost its retail prices an average of 3.6% in the second half of 2010.

Along with domestic investment, Brasil Foods will eye invest abroad. The company already has operations in Europe (Food Plus), and plans to acquire another company outside Brazil, officials say. The target markets are Africa, the Middle East and Latin America, and officials say they prefer to buy existing brands rather than start from scratch.

Dairy products will be the focus of a special “company project” over the next three years, with research planned for how Brasil Foods can utilize the advantages of its existing beef infrastructure to compete in the dairy sector.

Brasil Foods will be Brazil's second largest beef, pork and poultry processor after its merger is formally approved by the government later this year. It is the third largest poultry processor in Latin America, one of the 10 largest pork processors in the world, and produces more than 1,500 products that are exported to more than 110 countries.

Source: http://www.meatingplace.com - April 4, 2010