Sunday, May 13, 2018

BRF SA Looking At A Long Road Back

"How can it get any worse?" certainly has a place of distinction among the most foolish validations that investors will try to use with struggling companies, and Brazil's BRF SA (BRFS) is a case in point. In addition to ongoing criminal investigations, BRF has been effectively banned from the EU for the time being, is facing rising costs and weak market share, has high debt and modest near-term free cash flow prospects, and has to find a new CEO and craft a turnaround strategy.

BRF's new board does appear to be an upgrade, and the company still has some positives going for it - including a meaningful overseas presence and a still-strong presence in the Brazilian market. While the valuation may look modest relative to the long-term potential of a successful turnaround, investors need to appreciate that such a turnaround is going to take time, and success is far from certain.

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BRF SA Looking At A Long Road Back

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