Brazil’s BRF reports second-quarter net loss of 167 million reais on food scandal fallout News

SAO PAULO (Reuters) – Brazil’s food processor BRF SA on Thursday reported a wider-than-expected net loss of 167 million reais ($52.60 million) in the second quarter, as it continued to reel from the effects of a food safety scandal, it said in a securities filing.

The result marks a reversal of a 31 million reais profit from a year ago and is the third consecutive quarterly loss posted by the company.

BRF’s production was disrupted by a federal investigation announced on March 17 that accused Brazilian sanitation inspectors and companies of conspiring to evade safety checks.

Management had warned that the meat safety scandal would have lasting effects. In the second quarter, net operating revenues fell by 5.7 percent to 8 billion reais on an annual basis, BRF said.

As part of the investigation, BRF’s Mineiros plant was closed and two of its executives were among 60 people charged with taking part in the scheme. The plant was eventually reopened on April 8, but the probe resulted in several key importers of Brazilian meat, ranging from China to Europe, suspending purchases temporarily.

“The beginning of the second quarter was marked by low volumes due to the ‘Weak Flesh’ probe, especially in international markets,” BRF said.

The effects of the probe were partly mitigated later in the quarter, with volumes recovering in May and June, the company said.

The quarterly loss was larger than the 88 million reais forecast in a Reuters consensus estimate. Earnings before interest, tax, depreciation and amortization, a gauge of operational profit known as EBITDA, came in 575 million reais, below a 664 million reais estimate.

Beyond a fall in Brazilian chicken production and fallout from the investigation, BRF mentioned weak demand in certain regions of the country and bad weather in the port of Itajaí, during May, as contributing to a drop in Brazilian chicken exports in the second quarter.

According to industry group ABPA, Brazil’s chicken export volumes fell by 4.6 percent to 2.5 million tonnes this year through July.

Reporting by Ana Mano; Editing by Sandra Maler and Lisa Shumaker


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