The ever-volatile, and generally bad, economic situation in Brazil isn't doing any favors for BRF S.A. (NYSE:BRFS),
and neither is increasing competition. Worries about market share and a
potential price war in Brazil cast an already tough third quarter in an
even more negative light, helping accelerate a nearly 20% decline in
the Brazilian shares since my August update and a nearly 30% decline in the ADRs.
As I have warned in prior pieces, BRF shares and ADRs have always been more volatile than global integrated food companies like Nestle (OTCPK:NSRGY) and General Mills (NYSE:GIS)
and I expect that to be the case for the foreseeable future.
Nevertheless, I think fears of a price war are overdone and I believe
BRF's management continues to execute on a very sound plan to position
the company as a truly global protein and processed foods player.
Absent
a more robust recovery in Brazil (which nobody seems to expect right
now), it's going to likely take a couple of strong quarters for BRF to
get back into investors' good graces. Unfortunately, growing poultry
export competition from U.S. producers, higher grain prices, and a
tougher domestic market could make that a more prolonged process than
investors would like to see. I still believe BRF shares are an
attractive long-term holding, and that this is the sort of pullback that
investors can/should use to build positions, but the next quarter or
two could offer a level of volatility that nervous investors won't like.
Continue here:
BRF Sticking To Its Plan In A Challenging Market
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