EARNINGS RELEASE
2Q22
QUARTER HIGHLIGHTS
R$12,939 million | R$1,983 million | 15.3% | ||||||
Net | 11,637 million | Gross | 2,113million in | Gross | 18.2% in 2Q21 | |||
Revenues | in 2Q21 | Profit | 2Q21 | Margin | ||||
R$ (451) million | R$1,368 million | |||||||
10.6% | ||||||||
Net Result | -199 million in | 1,271 million in | Adjusted | 10.9% in 2Q21 | ||||
Adjusted | EBTIDA | |||||||
2Q21 | 2Q21 | |||||||
Continued | EBITDA | Margin | ||||||
Op. | ||||||||
R$ 961 million | 3.14x | 9.0 years | ||||||
Operating | R$ 667 million | Net Leverage 2.73x in 2Q21 | Debt | 9.5 years in | ||||
Cash Flow | in 2Q21 | Average | 2Q21 | |||||
Term | ||||||||
R$18.58 bi | BRFS3 R$17.16 | 1,082,473,246 | Common shares | |||||
4,545,683 | Treasury shares | |||||||
US$ 3.63 bi | BRFS US$ | 3.35 | Base: 06.30.2022 | |||||
Market Cap | Stock Prices | Shares Outstanding | ||||||
Base: 08.10.2022 | ||||||||
Conference Call | Acesso em: | Dial-in | ||||||
08.11.2022 - Thursday | https://choruscall.com.br/brf/2q | EUA: | ||||||
10:00 a.m. BRT | 9:00 a.m. US ET | 22.htm | +1 412 717-9627 |
IR Contacts:
Fábio Mariano
CFO and IRO
+55 11 2322 5377 | acoes@brf.com
See more at www.ri.brf-global.com
São Paulo, August 10, 2022 - BRF S.A. (B3: BRFS3; NYSE: BRF) - "BRF" or "Company" releases its results for the 2nd Quarter of 2022. The comments included here refer to results in BRL, according to Brazilian corporate law and practices adopted in Brazil and by International Financial Reporting Standards (IFRS), whose comparisons are based on the same periods in 2021 and/or previous years, as indicated.
Disclaimer
The statements included in this report concerning the Company's prospective business, projections, and growth potential are merely forecasts and were based on Management's expectations regarding the Company's future. These expectations are highly dependent on market changes and the general economic performance of the country, industry, and the international market, and are therefore subject to change.
MESSAGE FROM MANAGEMENT
Dear Sir(s)/Madam(s),
Aligned with our determination to achieve higher levels of efficiency and profitability, BRF reports positive results in all segments and markets in the second quarter of 2022. Following beginning the year negatively impacted on sales volumes and by the necessary adjustment measures, margin and results already record advances. In the period, there was an increase of 11.2% in Net Revenue, compared to 2Q21 and 7.5% compared to 1Q22, and an adjusted EBITDA of BRL 1.37 billion, 7.7% higher than 2Q21 and 1.2 billion higher than 1Q22.
The adjustment in the production chain and the balance of inventories contributed to the gradual recovery of operating margins, enabling, and enhancing a better commercial execution along with productivity gains.
In this quarter, we reinforced our brands and expanded the preference indicators for Sadia, Perdigão, and the margarine segment (Qualy, Claybom, and Deline), with a result of 27.7%, 15.6%, and 62.0%, respectively. We highlight the result of the Kantar Brand Footprint Brazil 2022 survey, which points to Sadia as the most reliable Brazilian brand and the only food brand among the first 10 mentioned. In the food category, Sadia is the most valuable brand in Brazil and the 9th most sustainable.
On the international front, the constant search for markets and the close relationship with customers developed over the years, enabled the Company to capture gain from the positive trend for volume of sales and chicken meat export prices. Additionally, we were authorized by the Saudi Food and Drug Authority, Saudi Arabian sanitary authority, to resume the export processed products to the country from our factory in Kizad (UAE). Reinforcing our leadership and more than 47 years present in the Halal market, we inaugurated a factory Dammam, Saudi Arabia, aiming to increase the productive capacity of our value-added portfolio.
By completing the first year of our Net Zero journey, we achieved around 90% traceability of grains from direct suppliers in the Amazon and the Cerrado region. We have evolved in promoting the use of clean energy in our operations and our integrated producers. In line with our ESG strategy, the BRF Institute, which has just completed 10 years, executed the final step of the Ecco Communities, an acceleration program for startups and social businesses to combat food waste and promote social development, with pilots in five municipalities where the Company is present.
The Company has completed an important stage in its plan to simplify its structure, whose gains have not yet impacted this second quarter, but already allow greater agility in the decision-making process and have resulted in capturing efficiency opportunities in several areas.
About Brazil, it is also important to highlight the resilience of our sector, in which we observe a solid demand for food. Additionally, this year, the World Cup, which will be hosted in Qatar, will take place in November, coinciding with the traditional end-of-year Celebration campaigns, which should boost the strength of our brands in the Brazilian market and the Halal market.
Nevertheless, considering the global geopolitical and economic scenario, we must be cautious and careful about the variables that impact our chain and the dynamics of the different markets. Foreign exchange,
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income, international freight, and diplomatic relations between nations, among others, can affect our business.
I thank, on my behalf and behalf of the Executive Committee, the support of the Board of Directors and our shareholders, as well as our employees, integrated, suppliers, partners, customers, communities, and consumers for the advances in our journey to make BRF an efficient, profitable, and benefit-generating food company for its entire chain and society.
Lorival Nogueira Luz Jr.
Global Chief Executive Officer
OPERATING AND FINANCIAL PERFORMANCE
Highlights ( Million R$) | 2Q22 | 2Q21 | Chg. % y/y | 1Q22 | Chg. % q/q |
Volume (Thousand Tons) | 1,157 | 1,148 | 0.8% | 1,144 | 1.1% |
Net Revenues | 12,939 | 11,637 | 11.2% | 12,041 | 7.5% |
Average Price (R$/kg) | 11.18 | 10.14 | 10.3% | 10.52 | 6.2% |
COGS | (10,956) | (9,524) | 15.0% | (10,928) | 0.3% |
COGS/Kg | (9.47) | (8.30) | 14.1% | (9.55) | (0.9%) |
Gross Profit | 1,983 | 2,113 | (6.2%) | 1,113 | 78.2% |
Gross Margin | 15.3% | 18.2% | (2.8) p.p. | 9.2% | 6.1 p.p. |
Net (Loss) Income Continued Operations | (451) | (199) | n.m | (1,546) | (70.8%) |
Net Margin - Continued Op. (%) | (3.5%) | (1.7%) | (1.8) p.p. | (12.8%) | 9.3 p.p. |
Net (Loss) Income Total Consolidated | (468) | (240) | 94.9% | (1,581) | (70.4%) |
Net Margin - Total Consolidated (%) | (3.6%) | (2.1%) | (1.5) p.p. | (13.1%) | 9.5 p.p. |
Adjusted EBITDA | 1,368 | 1,271 | 7.7% | 121 | n.m |
EBITDA Adjusted Margin (%) | 10.6% | 10.9% | (0.3) p.p. | 1.0% | 9.6 p.p. |
EBITDA | 897 | 1,294 | (30.7%) | 152 | n.m |
EBITDA Margin (%) | 6.9% | 11.1% | (4.2) p.p. | 1.3% | 5.6 p.p. |
Cash Generation (Consumption) | (12) | (2,168) | n.m | (3,691) | n.m |
Net Debt | 14,266 | 14,791 | (3.5%) | 12,588 | 13.3% |
Leverage (Net Debt/Adj.EBITDA LTM) | 3.14x | 2.73x | 15.0% | 2.83x | 11.0% |
The results of the second quarter reflect a context of sequential recovery of profitability in all our segments. Even in the face of the challenging macroeconomic scenario and persistent cost pressure, we captured opportunities in the global food trade and influenced the gradual recovery in the performance of the Brazilian market.
In addition, the consolidated results of 2Q22 were impacted by two non-recurring events, with no impact on free cash flow, which deserves to be highlighted according to the table below:
Debt | Proforma | |||
Consolidated | designated as | Turkey | ||
Highlights (Million R$) | Consolidated | |||
Results | hedge | Hyperinflation | ||
Results | ||||
accounting | ||||
Volume (Thousand Tons) | 1,157 | 0 | 0 | 1,157 |
Net Revenues | 12,939 | 445 | (54) | 13,330 |
Average Price (R$/kg) | 11.18 | 11.52 | ||
COGS | (10,956) | 0 | 152 | (10,804) |
COGS/Kg | (9.47) | (9.34) | ||
Gross Profit | 1,983 | 445 | 98 | 2,526 |
Gross Margin | 15.3% | 18.9% | ||
EBITDA | 897 | 445 | 75 | 1,417 |
EBITDA Margin (%) | 6.9% | 10.6% | ||
Adjusted EBITDA | 1,368 | 0 | 0 | 1,368 |
EBITDA Adjusted Margin (%) | 10.6% | 10.3% | ||
Net (Loss) Income Total Consolidated | (451) | 294 | (147) | (304) |
Net Margin - Total Consolidated (%) | (3.5%) | (2.3%) |
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We present below the details of the highlighted events that impacted the corporate results of 2Q22:
- Debt designated as hedge accounting: negative impact of BRL 445 million on Net Revenue of international markets. This effect comes from the accounting designation in 2012 of Senior Unsecured Note maturing in June 2022 as an instrument for hedging future export revenue. This designation was discontinued in 2021, due to a change in the Financial Risk Management Policy, according to to note 24.5 of the 2021 Financial Statements. With the maturity of the debt, the result of exchange rate variation was reclassified from Net Equity (Other Comprehensive Results) to Net Revenue, according to note 24.5 of the Interin Financial Information.
- Turkey's Hyperinflation: impact of the monetary correction of the financial statement of its subsidiary in Turkey, whose economy has come to be considered hyperinflationary. Accordingly, all non- monetary assets and liabilities, as well as items in the result statement, are adjusted for inflation against the Financial Result, according to to note 1.5 of the Interin Financial Information.
The pro forma consolidated result reflects the dynamics of operating results by business segment.
Next, we will present the consolidated results by segment, with the respective analyzes in the quarterly comparisons, in the pro forma view, that is, eliminating the accounting impacts detailed above.
Highlights Proforma | ( | Million R$) | 2Q22 | 2Q21 | Chg. % y/y | 1Q22 | Chg. % q/q |
Volume (Thousand Tons) | 1,157 | 1,148 | 0.8% | 1,144 | 1.1% | ||
Net Revenues | 13,330 | 11,637 | 14.5% | 12,041 | 10.7% | ||
Average Price (R$/kg) | 11.52 | 10.14 | 13.6% | 10.52 | 9.5% | ||
COGS | (10,804) | (9,524) | 13.4% | (10,928) | (1.1%) | ||
COGS/Kg | (9.34) | (8.30) | 12.5% | (9.55) | (2.2%) | ||
Gross Profit | 2,526 | 2,113 | 19.5% | 1,113 | 126.9% | ||
Gross Margin | 18.9% | 18.2% | 0.7 p.p. | 9.2% | 9.7 p.p. | ||
Net (Loss) Income Continued Operations | (304) | (199) | n.m | (1,546) | (80.3%) | ||
Net Margin - Continued Op. (%) | (2.3%) | (1.7%) | (0.6) p.p. | (12.8%) | 10.5 p.p. | ||
Adjusted EBITDA | 1,368 | 1,271 | 7.7% | 121 | n.m | ||
EBITDA Adjusted Margin (%) | 10.3% | 10.9% | (0.6) p.p. | 1.0% | 9.3 p.p. | ||
EBITDA | 1,417 | 1,294 | 9.5% | 152 | n.m | ||
EBITDA Margin (%) | 10.6% | 11.1% | (0.5) p.p. | 1.3% | 9.3 p.p. | ||
Cash Generation (Consumption) | (12) | (2,168) | n.m | (3,691) | n.m | ||
Net Debt | 14,266 | 14,791 | (3.5%) | 12,588 | 13.3% | ||
Leverage (Net Debt/Adj.EBITDA LTM) | 3.14x | 2.73x | 15.0% | 2.83x | 11.0% | ||
BRAZIL SEGMENT |
Brazil Segment | 2Q22 | 2Q21 | Chg. % y/y | 1Q22 | Chg. % q/q | |
Volume (Thousand Tons) | 547 | 570 | (4.0%) | 549 | (0.3%) | |
Poultry (In Natura) | 95 | 111 | (14.3%) | 116 | (18.2%) | |
Pork and Others (In Natura) | 38 | 31 | 22.0% | 26 | 43.0% | |
Processed foods | 414 | 428 | (3.2%) | 406 | 2.0% | |
Net Operating Revenues (R$, Million) | 6,536 | 5,817 | 12.4% | 5,883 | 11.1% | |
Average price (R$/Kg) | 11.95 | 10.21 | 17.1% | 10.72 | 11.4% | |
COGS | (5,499) | (4,762) | 15.5% | (5,691) | (3.4%) | |
COGS/Kg | (10.05) | (8.35) | 20.3% | (10.37) | (3.1%) | |
Gross Profit (R$, Million) | 1,037 | 1,055 | (1.7%) | 193 | n.m | |
Gross Margin (%) | 15.9% | 18.1% | (2.2) p.p. | 3.3% | 12.6 p.p. | |
Adjusted EBITDA (R$ Million) | 398 | 492 | (19.1%) | (411) | n.m | |
Adjusted EBITDA Margin (%) | 6.1% | 8.5% | (2.4) p.p. | (7.0%) | 13.1 p.p. |
In 2Q22, we observed gradual and progressive evolution of the segment's results compared to the previous quarter, when we adjusted our chain, which allowed us to adjust prices, optimize the product mix and improve commercial execution. Thus, we observed a sequential growth in the volume of processed products with an increase of +11.6% in the average price. We also see an increase in the volume of in natura pork cuts, which is one of our avenues of growth in the internal market.
In the annual comparison, we observed lower margins, but approaching historical levels with an expansion of 12.4% of net revenue and an increase of 19.2% in the average price of processed poultry, 21.9% of poultry, mostly chicken, but with a decrease of 14.8% in the average price of pork, still reflecting the
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imbalance in the supply of animals caused by the reduction in Chinese imports. The volumes were below the previous year, but we observed a normalization of sales over the quarter, even in the face of a still challenging macroeconomic scenario. Data shows that the average real income has reached the lowest level since 20121, with a decrease of -6.3% y/y 2, even with the increase in occupation by +10.3% y/y3. The inflation scenario persists as a relevant challenge, with an IPCA of +11.9%4 and IGP-M of +10.7%5, pressuring the segment's results. We highlight the increase in diesel of 56.7% y/y and 18.8% q/q6, the increase in the cost of labor as a reflection of collective agreements (INPC accumulated from the last 12 months at 11.9%7 until May/22). On the other hand, we observed an interruption in the significant hikes in the corn prices, with a 0.1% q/q8 drop.
INTERNATIONAL SEGMENT
International Segment | 2Q22 | 2Q21 | Chg. % y/y | 1Q22 | Chg. % q/q |
Volume (Thousand Tons) | 478 | 499 | (4.2%) | 469 | 1.9% |
Poultry (In Natura) | 347 | 380 | (8.7%) | 354 | (2.0%) |
Pork and Others (In Natura) | 51 | 52 | (1.8%) | 29 | 74.0% |
Processed foods and Others | 80 | 66 | 19.7% | 85 | (6.7%) |
Net Operating Revenues (R$, Million) | 6,116 | 5,428 | 12.7% | 5,497 | 11.3% |
Average price (R$/Kg) | 12.80 | 10.89 | 17.6% | 11.72 | 9.2% |
COGS | (4,802) | (4,478) | 7.2% | (4,725) | 1.6% |
COGS/Kg | (10.05) | (8.98) | 11.9% | (10.08) | (0.3%) |
Gross Profit (R$, Million) | 1,314 | 950 | 38.2% | 772 | 70.3% |
Gross Margin (%) | 21.5% | 17.5% | 4.0 p.p. | 14.0% | 7.5 p.p. |
Adjusted EBITDA (R$, Million) | 868 | 619 | 40.3% | 430 | 102.0% |
Adjusted EBITDA Margin (%) | 14.2% | 11.4% | 2.8 p.p. | 7.8% | 6.4 p.p. |
1. Asia
Asia | 2Q22 | 2Q21 | Chg. % y/y | 1Q22 | Chg. % q/q | |
Volume (Thousand Tons) | 121 | 151 | (20.0%) | 109 | 10.4% | |
Poultry (In Natura) | 85 | 103 | (18.0%) | 84 | 0.7% | |
Pork and Others (In Natura) | 33 | 43 | (24.7%) | 21 | 55.7% | |
Processed foods | 3 | 4 | (22.6%) | 4 | (21.2%) | |
Net Operating Revenues (R$, Million) | 1,486 | 1,777 | (16.4%) | 1,210 | 22.8% | |
Average price (R$/Kg) | 12.31 | 11.78 | 4.5% | 11.07 | 11.2% | |
COGS | (1,366) | (1,432) | (4.6%) | (1,228) | 11.3% | |
COGS/Kg | (11.32) | (9.49) | 19.3% | (11.23) | 0.8% | |
Gross Profit (R$, Million) | 120 | 345 | (65.3%) | (18) | n.m | |
Gross Margin (%) | 8.1% | 19.4% | (11.3) p.p. | (1.5%) | 9.4 p.p. | |
Adjusted EBITDA (R$, Million) | 37 | 268 | (86.1%) | (80) | n.m | |
Adjusted EBITDA Margin (%) | 2.5% | 15.1% | (12.6) p.p. | (6.6%) | 9.1 p.p. |
The performance in 2Q22 in the annual comparison reflects the challenging scenario of pig farming, especially in China, where we observe challenges related to the short-term supply imbalance caused by the accelerated recovery of the swineherd after African Swine Fever, with an effect on the global stocks of this protein, which is reflected in the reduction of export prices, attested by the SECEX export price data, which indicate a price variation of -12.9% y/y9 In addition, the uncertainties arising from the strategy to face the pandemic in China maintain high freight levels, with a variation of +293.9%10 over the last 2 years. The scenario for this market
- Source: Brazilian Institute of Geography and Statistics
- Average variation 2Q22 vs 2Q21. Source: Brazilian Institute of Geography and Statistics
- Average variation 2Q22 vs 2Q21. Source: Brazilian Institute of Geography and Statistics
- 12-monthcumulative variation. Source: Brazilian Institute of Geography and Statistics
- 12-monthcumulative variation. Source: Brazilian Institute of Geography and Statistics
- Variation in the average price (BRL/L) of 2Q22 vs 2Q21. Source: ANP - Brazilian National Agency of Petroleum, Natural Gas and Biofuels
- Brazilian National Consumer Price Index (INPC). Source: Brazilian Institute of Geography and Statistics (IBGE).
- Variation of the 6-month moving average price. Source: Bloomberg and Cepea/ESALQ
- Average Price USD/ton 2Q22 vs. 2Q21. Source: Brazilian Secretariat of Foreign Trade (SECEX).
- Source: Freightos Baltic Index (FBX) - Global Container Freight Index (06/26/2020 vs. 06/24/2022)
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BRF SA published this content on 10 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 August 2022 23:20:30 UTC.