Brazilian beef processor Minerva will report its third quarter results at the end of Wednesday, weeks ahead of the standard reporting period in November, indicating the company's eagerness to share positive news on beef exports buoyed by a favorable exchange rate, and domestic growth capitalizing on high pork and poultry prices, according to Deutsche Bank Markets Research.
Net revenue growth of 11.4 percent year-on-year (to BRL1.185 million) is the outlook for Minerva's Q3 results, said DB analyst Rebeca Sanchez Sarmiento in a report published Tuesday. Export growth has been driven by a steadily favorable exchange rate for Brazil, while domestic beef sales have benefited from industry-wide price increases for pork and poultry, she said.
Minerva's margins should benefit from a sweet spot in Brazil's cattle cycle, however higher interest expenses could drag on the company's bottom line, she noted.
Live cattle prices are below levels from last year, down roughly 7 percent from Q3 2011. Minerva's live cattle sales are up significantly, Sanchez Sarmiento wrote, leading DB to expect a gross margin expansion of 568 basis points. Selling, General and Administrative Expenses, or SG&A, should increase compared to last year in step with a boost in live cattle sales.
Deutsche Bank forecasts an EBITDA of BRL125 million, which would be up 38 percent from Q3 last year, and would result in an EBITDA margin of 10.6 percent, with 204 basis points of margin expansion.
Minerva reported a loss of BRL130.3 million in Q2 of this year, due mainly to the exchange rate's impact on debt held in U.S. dollars, the company said in August. Minerva's EBITDA rose 41.4 percent in Q2 compared to the year prior, to BRL112.7 million, which lifted the company's EBITDA margin to 10.5 percent from 8.5 percent.