After Restructuring Optimism, Weak Second Quarter Results Bring BRF SA Back Down

Investors in troubled Brazilian food producer BRF SA (BRFS) got a brief respite from a year of terrible performance when the market responded favorably to the hiring of Pedro Parente as CEO and the subsequent broad restructuring initiatives he announced late in June. That honeymoon was short-lived, though, as challenging production costs, a trucker strike in Brazil, lack of market access in Europe, and tougher conditions in Asia all combined to produce a rather weak set of second quarter results.

To some extent, the quarterly results over the next year aren’t critically important – the bigger concerns are reducing leverage and making progress on restructuring efforts aimed at making BRF a leaner, more competitive global protein player in the years to come. Still, the results do underline some of the ongoing operating challenges and the basic reality that this is not going to be a smooth or easy process. While today’s price is arguably fair relative to the likely near-term performance, a successful turnaround should drive a substantially higher fair value in the coming years, but there’s really no visibility (let alone certainty) as to when that will start to materialize.

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After Restructuring Optimism, Weak Second Quarter Results Bring BRF SA Back Down