Brazil's Minerva Foods, the country's third largest beef processor, reported net income of BRL20.6 million ($10.1 million) for the third quarter, up from BRL15.5 million ($7.6 million) in the same period last year.
The positive results were driven by greater availability of cattle for slaughter in Q3 and lower prices for the animal, due to a period of reverse cycle for cattle in Brazil that led the average price to drop 6 percent in the quarter, said Fernando Galletti de Queiroz, Minerva CEO, in the company's report.
Minerva also benefitted from the input costs crisis Brazilian poultry and pork processors faced in Q3. As retail prices for poultry and pork rose rapidly in the quarter, domestic beef prices were able to rise an average of 6.9 percent while still pricing lower than their protein competitors, Galletti de Queiroz said.
The company has been able to track and analyze the “substitution effect” driving consumers toward beef and away from the rising prices of pork and poultry, a trend that should continue well into 2013, Galletti de Queiroz said Thursday during a conference call with analysts.
Minerva's profit before interest, taxes, depreciation and amortization, or EBITDA, was BRL134.5 million ($66.2 million) for the third quarter, up 47.9 percent from Q3 2011. The company's net revenue in Q3 rose 8.3 percent from last year, to BRL1.152 billion ($567 million). Export sales were the biggest contributor to that growth, rising 30.5 percent from Q3 2011, to BRL852.3 million ($419.5 million).
Domestic sales declined 23.3 percent, to BRL371.2 million ($182.7 million). Minerva is confident the fourth quarter will provide a significant rebound for domestic sales, driven by high Brazilian demand during the Christmas and New Year holidays.
Minerva will continue to take a cautious approach to acquisition opportunities, with Galletti de Queiroz saying Thursday that an acquisition will only be pursued if it has a positive or neutral effect on deleveraging for the company.