BRF Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 16, 2025

Key Takeaways

  • Record Q1 results: Net revenue rose 16% year-over-year to BRL 15.5 billion and EBITDA reached a first-quarter high of BRL 2.8 billion, driving net profit to BRL 1.2 billion—double last year’s level.
  • Efficiency gains: The BRF plus program delivered significant cost and productivity improvements, boosting asset utilization and underpinning sustainable growth with financial discipline.
  • Strong balance sheet: Net debt declined to BRL 6 billion, leverage hit a record low of 0.54× EBITDA, and free cash flow reached BRL 1.3 billion (BRL 1.8 billion ex-acquisition).
  • Global expansion: BRF closed the acquisition of a processed food plant in China, took a stake in Saudi Arabia’s Duha Poultry, announced a new Jeddah facility, and secured 12 new export permits (187 total since 2022).
  • Avian flu mitigation: BRF emphasized strong biosafety protocols and regionalization agreements to limit export disruptions and relies on contingency plans and alternative markets to resume any temporary closures.
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Earnings Conference Call
BRF Q1 2025
00:00 / 00:00

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Moderator

Good morning, ladies and gentlemen. Welcome to our BRF Earnings Conference Call regarding the results of the first quarter of twenty twenty five. This re this conference is being recorded, and a replay can be checked on the website of the company. The presentation is also available for download. Right now, all the participants are connected as listeners, and then we will start our q and a session when more instruction will be provided.

Moderator

Before considering continuing, I would like to say that the prospective information have the basis, the beliefs, the administration of BRF and the current information for the company. These declarations can involve risks and uncertainties. Bear in mind that we talk about future events, therefore, depend on circumstances that cannot occur. Investors, analysts, and journalists should take into account that events connected to a macroeconomic environment to the segment and other factors can make the results be materially different compared to the ones that are expressed in the respective declarations. Here in this conference, we have Mr. Miguel Gallart, the CEO and Fabio Mariano, the CFO. I would like now to pass the floor over to Mr. Miguel, who will start the presentation. Please, Mr. Miguel, you can proceed.

Moderator

Good morning. I'd like to thank everyone for joining our first quarter twenty twenty five earnings conference call. We started the year delivering another consistent quarter with solid results and continued progress on our journey toward greater efficiency and growth. We reported a profit of BRL 1,200,000,000.0, twice as much as the same period last year. And our net revenue reached BRL 15,500,000,000.0, a 16% increase compared to the first quarter of twenty twenty four.

Moderator

The performance we'll be discussing today marks the best first quarter BRF's trajectory. Our BRF plus program delivered million in efficiency gains during the period and remains a key driver of continuous improvement across all work streams. Efficient management enabled growth through performance improvements, higher utilization of our current assets, allowing us to lay the groundwork for sustainable growth, always with financial discipline and focus on generating value for our shareholders. I now invite our CFO, Fabio Mariano, to present the quarterly results in detail, and I'll return afterwards for closing remarks on today's presentation. Good morning to everyone connected.

Moderator

On the first page, I'll highlight the main financial indicators for the first quarter of twenty twenty five. Starting with the net revenue, which reached at BRL 15,500,000,000.0, 16 percent higher than in the same period in 2024. EBITDA was BRL 2,800,000,000.0, the best result in our history for a first quarter, '30 percent higher than the previous year's performance, contributing for to a net profit of 1,200,000,000.0 in the period, double the first quarter of twenty twenty four. Free cash flow performance was approximately BRL 1.3 or BRL 1,800,000,000.0 if we eliminate the effect of the acquisition of Aduha Poultry in Saudi Arabia in partnership with PyeIF. Ending the slide with leverage, we reached a 0.54 times EBITDA in the last twelve months with the lowest leverage in history.

Moderator

The next slide on page four on the left shows the historical evolution of gross profit with profitability of 26.3% in the period. We reported a gross profit of more than billion dollars On the right, we can see the evolution of EBITDA and margins showing stability in operating results. We will now present the performance by market business segment. Starting with Brazil, we continue to evolve progressively. We achieved an EBITDA margin of 17.1%, volume growth, especially in processed categories and the contribution of fresh cuts to domestic mar market margins.

Moderator

On the next page, number six, we emphasize our journey of continuous evolution in commercial execution reflected in greater numerical distribution and new points of sales served. We also see greater adherence to suggested price there and a lower historical level of FIFO discounts associated with the useful life of products. Service levels are still at optimum levels despite the significant improvements in volumes. We remain attentive to our consumers' needs. And in the frozen food category, in ready meals, we launched new items in the Meuminu line from Perrigon and hot bowls from Sadia.

Moderator

We also promoted new campaigns and sponsorships, reinforcing the brand's visibility and supporting our consumers' reference reference. Excuse me. Now on the next page, we present the international market. We saw healthy margins in the segment with contribution of geographical diversification and new exports permits. EBITDA margin exceeded 19% in the quarter.

Moderator

On the next slide, we highlight the announcement of the construction of the new process products plan in Saudi Arabia and the growth in volume driven by Hamadan with an emphasis of gaining market share in process products. In Turkey, we continue to focus on increasing the contribution of sales and processed products, which represent around 25% share, helping to mitigate the effects of the greater local supply of fresh chicken. We maintain our market share, leadership with Zadia and Bamvet brands in their respective markets. On the right, I present the highlights of the direct export segment. We expanded our business alternatives with two new permits, 12 new permits in twenty twenty five, helping to maximize prices.

Moderator

There have already been eight 187 new export permits since 2022. Recently, we completed the acquisition of the processed food plant in China, reinforcing our strategy of added value at local presence. We also highlight the processed made in processed products in in Chile and the extension of portfolio with the launch of the Saria hamburger, which marks the first in the beef category. I'll end the presentation of the business segments on the next slide with the performance of ingredients and and pet. Segment reported six seventy six million in EBITDA.

Moderator

In pet, we'd improved the process by implementing SAP, strengthening the controls and management teams, which allowed us to improve the mapping of the BRF plus pet levers. In ingredients, we continue to diversify our products and markets. Next, I'll share the progress of our efficiency program and also growth, presenting in a base 100. On the left, you can see the annual evolution of the feed conversion and yield indicators for poultry and pigs for relevant catches. On the right, we have introduced gains in factory occupancy and volume sold.

Moderator

We have significantly increased volume since 2022. On page 12, we consolidate the following sustainability highlights, ESG. Consecutive participation in the ESD and carbon efficiency index portfolios, excellent position in the fair ranking among chicken and pork producers, and also in global animal welfare rankings. We published the 2024 report incorporating our progress in economic, social, and environmental terms. Lastly, we celebrated thirteen years of the BRF Institute with the mobilization of more than four 40,000 volunteers and social actions carried out in 70 cities.

Moderator

We now present on page 14 the information related to company's capital structure. On the chart on the left, we show the decline in net debt and leverage. On the right, we can see the debt profile, which remains diversified and long with no concentration of repayments in the short term and a fairly comfortable liquidity position. The next slide, it shows the free cash flow. The graph shows the operating cash flow for the quarter of 3,600,000,000.0 and investment flow of BRL 1,500,000,000.0, including the acquisition of Doha and a financial flow of BRL $05,000,000,000, resulting in a free cash flow of BRL 1,300,000,000.0.

Moderator

On Slide 16, we can analyze the involution of net debt in the last period. We reported net debt of 6,000,000,000 after return on equity versus BRL 8,300,000,000.0 in the fourth quarter of twenty twenty four. The reduction in loans will continue to contribute the lower interest charges in 2025. I would like to thank the audience and then give the floor to our CEO, Miguel Gallard, for his closing remarks. Thank you, Fabio.

Moderator

To wrap up our earnings presentation, I'd like to highlight that we delivered a record first quarter EBITDA of BRL 2,800,000,000.0. The our investments investments, sustainable growth, and financial discipline allowed us to reach the lowest leverage in BRF's history at 0.64 times. Our BRF plus program is still evolving, keeping the company's key indicators at healthy levels. This quarter, standout metrics included yield, feed conversion, and service level in Brazil. I I would like to highlight the progress of our commercial execution, which has been key to strengthening the presence of our products at more points of sale across Brazil.

Moderator

Additionally, we posted the highest historic growth in volume sold for first quarter with highlights in processed products and strong margin contributions for our fresh category. Our performance in international markets was supported by our ongoing market diversification and global expansion strategy, which drove both healthy and profitability and volume growth. This quarter, we secured 12 new export approvals, bringing the total to 187 since 2022. Our brands remain market leaders in Middle East with Zadia across GCC countries and Banffet in Turkey. Besides that, our operation in Southern Cone continues to grow steadily with a notable milestone in Chile where Zadia entered the burger category.

Moderator

Our global growth and present strategy is already gaining traction in the first few months of 2025. We concluded the acquisition of processed food plant in Hainan, China and acquired 26% stake in a Duha poultry company in Saudi Arabia. We also pronounced the beginning of the construction of a new processed food plant in Jeddah, also in Saudi Arabia, which will boost our regional presence with a focus on higher value added products. It's important to emphasize that none of these figures would be possible without our people. I would like to acknowledge the progress in employee engagement reflected in the global survey we conducted in the first quarter.

Moderator

We reached an employee satisfaction score of 89%, a four percentage point increase compared to 2024, keeping us above performance benchmark and reflecting BRF commitment to best in class management practice, a source of pride for all of us. All these factors strengthen in confidence in VRF and its growth journey led by our Chairman and controlling shareholder, Marcus Polina, who has been guiding the company's transformation for over three years with a strategy focused on operational efficiency, innovation, and global presence. I also want to thank our shareholders and the Board of Directors to their support along this journey. Our sincere thanks to our customers, integrator producers, suppliers, and communities where we operate for their strong partnership. And finally, a heartfelt thank you to Beref's more than a thousand in a thousand hun a hundred thousand employees for the outstanding quarter we delivered.

Moderator

Together, we remain focused on building a company that stands out in the market and we're proud of to be part of. Thank you all very much. Thank you. We'll start now our Q and A session for investors and analysts. In case you want to make a question, please click on the button, raise a hand.

Moderator

If your question was answered, you can leave the line clicking on the same button again. Wait while we collect the questions.

Moderator

Our first question is from Jacob Rosalind from Bradesco de Dade. Rosalind, your microphone is open. Miguel, Fabio, thank you for taking my questions. Two points that I would like to explore together with you. The first, we talked a little bit about in the call with the Commer Frigg from the incorporation, the avian flu.

Moderator

We saw the news coming out. The communication news from China closed the market for sixty days. What I would like to hear from you is that we saw over the last few years, Brazil implementing several protocols of regionalization, bilateral agreements, very specific, in some cases of avian flu in not in commercial poultry farms, but, things that were negotiated. What I would like to hear a little bit the points that you see with more attention when we think maybe about the large markets, what possibly do you have in terms of agreement, regionalization to bring more comfort that should happen? And what is a little bit more in doubt depending on the importing market so we can map out the scenario a little bit?

Moderator

This is the first point. The second, I would like to hear from you a little bit about growth Also, in the context of the incorporation, we mentioned clearly BRF to seems to be a growth vehicle. Your movements over the past few months make it really clear. I would like to hear what else you have seen in terms of opportunities and where you're heading and aiming at, and you wanna continue advancing and moving forward in terms of growth, not only organically and also inorganically that's been happening. These two points.

Moderator

Thank you. And, Heikki, the ministry of agriculture with ordinance seven eighty five created the communication with regionalization of sanitary for the municipality of Mocenegro with this focus of avian flu. In the first moment, the ministry regionalizes through communication, makes a communication for the World Health Animal Animal Health Organization. And this first measure, preventive closing of some markets, the case of China, as you mentioned. And as the documents, move between the countries and the information flows, you see the rationalization.

Moderator

I would like to remind you then in case of Newcastle disease, China did the same thing, closed Brazil and then they closed the around the Huguen and Dussault, the municipality. The period that we just had, we had in Newcastle last year is that the regionalization, from the disease was forecasted in several country, Saudi Arabia, Chile, Armenia, Bosnia, Kazakhstan, Cuba, Egypt, Philippines, Georgia, Hong Kong, India, Japan, Jordan, Macedonia, Mauritius, islands, several other countries, Thailand, Ukraine. All these countries are have regionalization forecast in the first moment. So we're gonna see as time passes and information flows, we're gonna have two situations. Some countries that were originalizations already forecast as applying the rule, is, limited to 10 kilometers radius and other countries working with aspects of states.

Moderator

So this is gonna be clearer in the next coming days. And there are some countries that are gonna close Brazil in the first moment. And then in the second, moment, study the status as a focus of the county municipality. All this is going to move forward, we have in terms of experiences that last year, it was the process was really fast of, limiting the radius and determining the focus, the outbreak in one region. And we, at PRF, we've been working very much in the past few years in the sense of having contingency plans.

Moderator

So we have a contingency plan that forecasts alternative markets. We have a 87 new permits in the past three years that we're gonna transit with product. And we also have we've been taking care of that very closely in keeping strategic inventories in regions where we have distribution. This allows two types of situations. First, you keep the clients supplied, and in the second moment, you've prefaced your product better and mitigate a little bit of the cost because of some temporary closings.

Moderator

We are working on that. It's too early to say anything, but we are aware that the country has a biosafety that is really strong, a credibility and concept, a reputation that is really strong, and we can transit this situation. We hope to very fast and agile to move, and it's gonna be difficult. But I am confident that we're gonna make it right and very fast as, if the markets that are closed are gonna be resumed. I'll give to floor to Fabio to answer answer the second part.

Moderator

Good morning. Hey, Q. You asked about growth. And before looking ahead, I would just like to recover a little bit of the history. We are reporting a growth of revenue growth in the quarter equivalent to 16% in the annual comparison.

Moderator

And when we look at Brazil, the growth is even bigger, 20%. This time is very much directed to volume. So this is important because it shows that it's something that we had already been disclosing our intent to occupy better our industrial assets. And we see many of the production lines, especially those aligned to process product, that there is a demand forecasted, and we would have to invest to be able to address that. So we already have investments projected.

Moderator

Most of them already approved and started the execution. And when they reach maturity, that means the facilities are finished and gradually volumes are flowing to the results of the company. We can then at maturity reach an additional growth of three to 5%. So this is the motive of the company while we've been calling in the new chapter. We are directed to this growth and it should has to be oriented to volume growth, not only in the purification equation of products, but and, from the inorganic perspective, we have been already disclosing all these transactions that makes sense from, strategically with this potential of adding more value to our portfolio.

Moderator

And the business combination also is more anchoring, this process to happen the way we imagine it should happen. Great. Thank you. Our next question is from Leonardo Alinkar from, your mic is open.

Moderator

Good morning. Thank you so much for the result. I know that there are many things that have been discussed. I would like to focus on this a little bit thinking of the the bird flu. Right?

Moderator

And maybe we can take a look at the next steps. I believe that it tends to be smaller than what the market was predicting at first, and I think that the fusion was discussed on the last call. So, considering that we are, you know, pretty much on the half of the second quarter and the first quarter was atypical. Let's put it like this, considering the seasonality of consumption in Brazil. We know that they press, you know, lots of margin.

Moderator

I know that you have, like, a a difference in terms of mix changing from one quarter to another, but the sequencing price is high. Right? And when we think of mix, we could have, like, a drop in that. So if you could comment a little bit, first of all, the domestic demand. Right?

Moderator

How are you seeing this? Right? Considering that the production is still enhancing. Right? And then all the other accounts that we have, like so I believe that we still have a very healthy read in terms of domestic demand.

Moderator

Maybe if you could talk a little bit about that in considering the continuity of the scenario. And when it comes to exports, maybe you could go back to a topic that was discussed before the the aviary flu, which has to do with the tariff. So the the market really reacted to the higher cost in The United States, eventually exporting less to some countries with some prices that were higher. China, we've seen some prices increasing. So if you could provide us with, you know, like, a general view of these markets, what are some of the possibilities for the second quarter?

Moderator

If you could share some of these details, I would like a lot. Okay. So on the fourth quarter, it's something that we saw on the first quarter of twenty twenty five. We saw a supply and an offer in demand that was extremely balanced on a market with possibilities of keep demanding and accepting the repositioning of prices. We had a price increase on the January, and this went very well.

Moderator

With these adjusted prices adapted to our costs, we were able to experiment with the increase of volume. This is something that was part of our predictions. Another important aspect when we analyze BRF, we see BRF going about their their homework. Let's put it that way that way. They increase the productivity of the plants.

Moderator

They improve their commercial service, considering their logistic process. All that allows that, considering a heated demand, the company can make the this performance to grow and to meet our customers' needs. What we've seen, right, and we are in the second month of the quarter, You see this demand price dynamic, and it's still absolutely balanced. Demand is very active. The pricing capacity is also there.

Moderator

So we see this this price demand that goes from one quarter to now, it looks very similar to what we saw in the first quarter. We are still focusing on enhancing our penetration, popularity, and client activation. So we see a quarter when it comes to the demand standpoint. When it comes to the domestic market, of course. Right?

Moderator

It seems to be very similar to what we saw on the first quarter. When we talk about exports, we can see that that rather depressed price in some markets that we've experimented on the second month of the first quarter is now being reverted. There are some geographies that are pricing their imported goods better. Speaking, about the the tariffs, if you analyze the price track record and volume track record of markets, you clearly see that so far, we haven't seen a big impact in terms of tariffs when it comes to pricing. If you think of China volume, it's still very stable.

Moderator

If you get China month to month, it's very stable. We don't have, like, a volume increase or a decrease of volume. There's no price variation as well. So I believe that we're seeing a stability. I don't see this varying that much.

Moderator

When you take a look at the the the feedstock, right, the protein or the cattle protein, right, it's it's back to stability nowadays. We have very good stability. We see the scenario without alteration, at least when it comes to the short term. Okay. It's very clear, Miguel. Thank you so much.

Moderator

Our next question comes from Guillermo Palares from Santander. Mr. Palares, your microphone is open. Morning, Miguel, Fabio, everybody. Two brief questions.

Moderator

I'd like to take the prior question about exportation and take the opportunity that we had two questions about the deals, Saudi Arabia. I'd like to hear a little bit more of your perspective with this acquisition and now starting the operation there. It's a market that obviously in this consolidation stage and the Vision of 02/1930. I'd like to hear from you your perspective in the sense and another point, Miguel, you mentioned about efficiency and we've had it for the BRF plus half two years. If you could share with us today, given this need of a little bit more investment, where we are in terms of, capability usage and the processing

Moderator

And if there is a bigger need, what is in transformation, then an increase of volume? And thank you. Guilherme, answering the first part of your question, we see the investments that we have made, they are perfectly aligned with the demand and opportunities, market opportunities. If you look at the Cissex bulletin to the first quarter twenty twenty five, you'll see MENA performing exportation above Asia, a 51,000 tons average month. And, against a hundred and thirty six nine hundred in Asia.

Moderator

So we have Mena, working, operating well in terms of demand. We opened yesterday our Hennen plant in China, extremely modern plant with the capacity production that is very high over 80,000 tons, allowing us to, use the place and use the commercial opportunities that are gonna come up very much aligned. We already have a process, an agreement to supply major networks of local fast food. This is gonna work anchoring production and profitability for the company in the mid and short term. On the other hand, we are gonna open next year the JDAU plant.

Moderator

This plant, extremely modern, that is gonna work as a productive hub for the region, BRF to capitalize and also capitalize the Saudia brand extremely reputed and distinct in that region. We follow and continue doing. I understand, we have made excellent choice. We continue doing that, and this allows us to take these opportunities. In the first moment, we have had a major focus on the organic growth CapEx of enjoying this bottlenecks that we had in production.

Moderator

This is starting to be behind. Company has the capacity to grow organically in the pipeline. We already have strategic investments that are gonna allow us the the trail the growth trail is constant and consistent. Consistent. The company continue performing and taking opportunities.

Moderator

As I said in the prior answers, when you have a 87 new permits, all this productive effort and planned effort turns into business opportunities that you capture. But still, we have opportunities that are anchored in a solid performance in the local market. Our leadership with the strong brands in Brazil service has a very tangible base to project growth good growth for the company. Hi, Guilherme. I'm gonna add to the second part of the question.

Moderator

You mentioned efficiency and we reported in this quarter over 300,000,000 in capturing additional captures. And you are correct. You we've been talking about this topic, about efficiency over quite a few years. And what I have to tell you is that in the company, we're not happy at with the results. We are happy with what was we have obtained so far, but we still see opportunities.

Moderator

So we see in some of our locations, we have room so we can evolve even better with the field indicators, with industry indicators, yielding, even the real commercial relationship we see we see room for improvement in execution and this is also valid for logistic service levels. This is gonna continue being a journey, to be trailed for continuous improvement. We have also mentioned in the expansion in the call about volume expansion. This has allowed us to speed up the idle parts in our factories, and this is we are investing in capacities. It's important to report that we have capacity to grow without major investments, but we have to think in the mid and long run, and for that, we have a oriented plan for for three, four years, and we've been in some lines, and the demand is gonna, go over

Moderator

So talk about some investments. Some of them have been approved under execution. And from there on, in addition to the growth plans that we have in the company, this is gonna add additional capacity between three to 5% with this project reach maturity. So the motto for growth doesn't mean that we are not gonna be guided, focused on an allocated resources that are unproportional in the growth journey, in the efficiency journey. Sorry.

Moderator

This continues as one of the pillars for the strategy of the company. Perfect, Fabio. If you could clarify a little bit, three to 5%, you comment, we're talking about Pantel or necessarily this is only volume because you could have an improvement in mortality and other questions involved. I'm talking about finished product, which is already a consequence of plantation in the field of its capacity of slaughtering and post industrialization. Thank you. Perfect. Thank you, Fabio Miguel. Thank you.

Moderator

Thank you. The q and a session, the teleconference of BRF is finished. We thank all of you for your participation, and have a wonderful day.

Analysts
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