Marfrig said the increase in net revenues was explained by the higher sales volume in the North America operation and the higher export volumes and prices in the South America operation. In the third quarter, net revenue in U.S. dollars and other currencies accounted for 92% of total revenue, “which is an important factor resulting from the combination of the revenues generated “naturally” in North America with the exports from South America”, said the meat processor, adding that only 8% of the company’s revenue was generated in Brazilian real. In the quarter, the U.S. accounted for 65% of consolidated sales, while sales to China reached 10% and sales in Brazil’s domestic market fell to 8%.
Adjusted EBITDA amounted to R$2,196 billion (US$408.11 million), up 47% year-on-year, and adjusted EBITDA margin was 13%, expanding 120 bps from the same quarter in 2019 and representing the company’s second-best result ever. Marfrig attributed the “excellent performance” in the quarter to higher sales volume in the domestic market of the North America Operation; higher average price and growth in export volume, especially to China; operating efficiency gains and cost reductions achieved in the South America Operation; and higher local currency depreciation in the South America Operation. In the third quarter, 77% of adjusted EBITDA was from the North America Operation. The result from continuing operations in the period was a net income of R$674 million (US$125.27 million), and net debt ended the third quarter at R$3 billion (US$557.58 million), down 4% compared with the previous second quarter.
Cattle slaughter by geographical region
Marfrig said the beef protein industry gradually normalised its operations in the quarter. In the U.S., cattle slaughter volume was 6.6 million head (according to USDA figures), in line with the same quarter in 2019, and 18.5% higher than in the second quarter of the year, “confirming the industry’s recovery and the
normalisation of utilisation rates”. In Brazil, the Ministry of Agriculture and Livestock reported primary processing in the third quarter of 5.7 million head, 12% lower year-on-year, but 4% higher than in the second quarter of 2020. In Uruguay, data from Inac showed a 9% decline in total primary processing; 459,000 head against 503,000 in the same quarter of 2019. Despite the scenario marked by contraction in slaughter volume in the industry, Marfrig said it managed to increase its primary processing by 12% in the quarter. In Argentina, according to Instituto de Promoción de la Carne Vacuna Argentina, the number of cattle processed in the third quarter was 3% lower year-on-year and, similar to Brazil, Argentina also registered a 1.4% growth compared with the previous second quarter, with exports the industry’s main growth driver.
Processing capacity and exports
With total primary processing capacity of approximately 30,000 head daily, Marfrig said it has been expanding its footprint in the North American market and reinforcing its exports to key geographies. In the U.S., Marfrig is the fourth-largest beef processor and its operation there has three primary processing plants with capacity of approximately 13,100 head per day, which corresponds to over 3.7 million head a year, or roughly 14% of U.S. primary processing capacity. Net revenue from the North American Operation was US$2,236 million, down 0.6% from the third quarter of 2019.
Net revenue from the South American Operation was R$4.79 billion (US$890.70 million), advancing 26.3% on the same quarter of 2019, attributed to the 19.3% higher export volume and 35.5% depreciation in the Brazilian real against the U.S. dollar. In the third quarter, exports accounted for 62% of the operation’s revenue, up from 53% in the third quarter of 2019. Approximately 51% of total export revenue came from shipments to China and Hong Kong. Revenue from exports to the U.S. grew 100%, with the country representing an important destination for the organic segment of the Uruguay operation, while in 2020 Brazil reobtained authorisation to export fresh beef to the country.