Mar 10, 2014
SÃO PAULO–Brazilian meatpacker Marfrig Alimentos SAMRFG3.BR 0.00% may sell shares in two of its international units to try to reduce debt and speed up expansion plans in Europe and Asia.
Marfrig is considering selling shares for its U.S. unit Keystone Foods and European arm Moy Park, which together account for more than half of the company’s total revenue, Chief Executive Sergio Rial told reporters on Monday. If either sale goes ahead, Marfrig would still seek to maintain a “comfortable margin of control” of the firms, said Mr. Rial.
Marfrig took on massive debts as it snapped up meat-packing companies around the world over the last decade. It bought Keystone in 2010 for $1.26 billion, at a time when the U.S. company was the largest privately held meat-products company in the U.S. and a pioneer of boneless chicken nuggets. The purchase of Moy Park came earlier, in 2008, for about $680 million.
The company has struggled to cope with the debt load, which has led to losses and to the sale of units.
As part of the turnaround, Marfrig has reduced its presence in the Brazilian market. In June 2013, it sold its Seara Brasil unit to rival JBS SAJBSS3.BR -2.83% for 5.85 billion Brazilian reais ($2.5 billion) to help pay down debt. It kept its pure-play beef business through Marfrig Beef, which also operates in Argentina and Uruguay.
The firm is now focused on overseas expansion, particularly into Europe and Asia. Mr. Rial said he expects international demand for beef will remain strong and that China will represent an important part of the increase in global beef consumption in coming years. China is the largest buyer of exports from Marfrig’s Uruguayan unit, he said.
Brazil cannot export beef to China because of concerns there about the mad-cow disease.
The company posted a net loss of 83.4 million Brazilian reais in the fourth quarter; net debt increased by BRL471 million to BRL7.1 billion at the end of the quarter.
Marfrig shares had jumped sharply Monday morning, but reversed course and ended down 1.7% at 3.91 reais in São Paulo. The broad Ibovespa index declined 1.54%.
“There has been some operational improvement, but Marfrig is still our least favorite in the meat processing sector in Brazil,” said Daniela Martins, an analyst at Brazilian brokerage Concordia S.A, saying the company’s debt is still worrisome.
Marfrig isn’t planning to sell any other assets, but may try to reduce its borrowing costs either by selling a new bond to repay more expensive debt or buy back some existing bonds.
In January, the government-run National Bank for Economic and Social Development, or BNDES, agreed to roll over some of the debts it is owed by Marfrig. The bank also owns nearly 20% of Marfrig’s shares.