Marfrig Reports Record-High Revenue and Ebitda in 4Q19
The company met all its guidance for the year and closed the period with solid numbers at its operations in both North America and South America
São Paulo, February 19, 2020 - Marfrig Global Foods submitted to the Securities and Exchange Commission of Brazil (CVM) its financial statements for the fourth quarter and fiscal year of 2019. The period was marked by various new records set by the company, such as the net revenue of R$14.2 billion in the fourth quarter of 2019, which was 23.5% higher than in the same quarter of the prior year.
The result reflects an especially good scenario for the North America Operation, which benefited from a strong and growing domestic market, and for the South America Operation, which in 2019 became the region’s largest beef exporter to China, with a total of 13 plants authorized (seven in Brazil, four in Uruguay and two in Argentina).
Adjusted EBITDA was R$1.6 billion, advancing 70.2% in relation to the last quarter of 2018, with margin of 11.4%. Free Cash Flow was R$1.1 billion in the quarter. Net income in the fourth quarter was R$26.9 million, compared to the net loss of R$1.3 billion posted in the fourth quarter of 2018.
“We enjoyed a quarter of extraordinary results that confirm the effectiveness of our strategy based on focus, operational excellence and investments in a portfolio of innovative and value-added products,” said Eduardo Miron, Global CEO of Marfrig Global Foods. “The records set in the fourth quarter made a decisive contribution to meeting our guidance given for the whole of the year.”
Results for the year
In 2019, Marfrig posted consolidated net revenue of R$49.9 billion (compared to the guidance range of R$47 billion to R$49 billion), representing an increase of 11.2% on 2018. Adjusted EBITDA set a new record by advancing 33.7% from 2018 to R$4.8 billion. EBITDA margin stood at 9.6%, compared to 8% in 2018 and the guidance range of 8.7% to 9.5%. Free cash flow, whose guidance range was R$1 billion to R$1.5 billion, came in at R$1.3 billion. The level of cash flow made it possible to discontinue working capital transactions in the last quarter in the amount of R$531 million.
The year also was marked by important strategic and corporate movements. In November, Marfrig concluded the transaction to increase by 30.73% its interest in the capital of National Beef. As a result, Marfrig now holds a controlling interest of 81.73% in the capital of the company, which is the fourth largest beef producer in the United States. In December, Marfrig carried out a follow-on operation of R$900 million, the proceeds from which were used for deleveraging. BNDES took the opportunity to sell in the market the 33% interest that it held in Marfrig.
North America Operation
In the fourth quarter of 2019, Marfrig’s North American Operation posted net revenue of US$2.3 billion (R$9.6 billion), an increase of 10.2% on the same period last year. Factors supporting this result included the continued increase in the prices practiced in the U.S. domestic market and the stronger demand from U.S. consumers.
The operation’s gross profit was US$343 million (R$1.4 billion), advancing 36.5% on the prior-year quarter. Gross margin rose expanded 11.8% in the fourth quarter of 2018 to 14.6% in the last three months of 2019. EBITDA was US$290.1 million (R$1.2 billion), with margin of 12.4%.
In 2019, net revenue from the North American Operation came to US$8.9 billion (R$35 billion), 4.9% higher than in 2018. Gross profit was US$1.2 billion, advancing 19.3%. EBITDA grew 11.1% to US$982 million (R$3.9 billion).
South America Operation
Marfrig’s South America Operation, which includes Brazil, Argentina, Uruguay and Chile, was the main beneficiary of the strong growth in beef exports to China. With 13 plants authorized, four of which were certified in 2019, the South America Operation posted net revenue of R$4.6 billion in the fourth quarter of the year, representing growth of 34.3% on the prior year. The result reflects the combination of the increase of over 36% in the average export price, the growth of nearly 22% in export volumes, the higher prices in Brazil’s domestic market and the 8.1% depreciation in the Brazilian real against the U.S. dollar.
Gross income nearly doubled in comparison with 2018, reaching R$655 million in the last three months of 2019. In addition to the extremely favorable scenario for exports, internal factors also contributed to the result. These include the optimization of the company’s production footprint, with the closing of two plants and the transfer of production to more productive units, the productivity gains in raw material usage and improved control of operating costs.
In the year, the operation’s net revenue came to R$14.8 billion, 7.3% higher than in 2018. Gross profit was R$1.7 billion, up 9.6% on the prior year.
Innovation in Products and Sustainability
“Just like in our pillars of ‘financial solidity’ and ‘operational excellence,’ in the pillars ‘sustainability’ and ‘products and clients’ we made important advances over the past year,” said Miron. “There were many intense months with a strong focus on innovation.”
On the sustainability pillar, in July 2019, Marfrig became the industry’s first company to issue Sustainable Transition Bonds. The US$500 million issue of 10-year bonds obtained the lowest interest coupon ever secured by the company. The funds are being used to purchase cattle in the Amazon Biome region and will work to promote sustainable cattle farming.
In August, Marfrig announced a partnership with U.S.-based ADM, the largest ingredient supplier to the global food industry, for the production of plant-based meat on a commercial scale. Next, the foodservice chain Burger King launched a plant-based version of its Whooper sandwich that uses the beef patties produced by Marfrig. At the end of the year, the company announced the launch of its own brand of plant-based products, Revolution, which is born already with heavyweight clients, such as Outback Steakhouse, and which in 2020 will begin to be exported and distributed in the retail channel.