BRF SA Executing Well In Processed Foods, But Seeing Ongoing Challenges Outside Brazil

Processed foods remain the best long-term driver for BRF SA (BRFS), as the company continues to see good demand and margins, especially in Brazil, for these value-added products. At the same time, management is starting to realize some of the benefits of the efficiency improvement efforts that make up a big part of the turnaround program. While pricing could become more challenging in Brazil in the near term, the longer-term outlook for the company’s processed food efforts remains healthy in my view.

When I last wrote about BRF, after second quarter earnings, I thought the undervaluation in the share price was offset in the short term by risks from rising cost pressures (grain/production in particular) and ongoing challenges in the OneFoods (halal) business. Since then, the shares have drifted lower, even including a solid post-earnings run, but the valuation remains attractive from a longer-term perspective.

 

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BRF SA Executing Well In Processed Foods, But Seeing Ongoing Challenges Outside Brazil