Brazil-Meat company shares back on right track after media hype.
BRAZIL-THE MEAT TRADE BOUNCES BACK.
Battered shares of Brazilian meatpackers bounced back Tuesday as concerns the recent swine-flu outbreak could crimp earnings at the companies appeared overblown.
Local meatpackers were pummeled during the previous day’s trading session as investors punished companies with exposure to pork products, fearing a steep drop in consumption related to swine-flu worries. But several companies said that their exposure to the pork business was minimal.
Shares of JBS S.A. (JBSS3.BR) rebounded strongly after the company said late Monday that it’s revenue and profit projections remained unchanged. JBS said that its pork business represented 14% of net revenues, and any possible ban on pork exports would affect less than 1.5% of consolidated revenues.
JBS S.A. , which also controls leading beef exporter Friboi, rose 3.1% to 6.29 Brazilian reals ($2.87) as of 1515 GMT. The shares had plummeted more than 12% on Monday.
Rival meatpacker Marfrig Frigorificos e Comercio de Alimentos Ltda. (MRFG3.BR) also sought to calm investors, saying that pork products represented 4.2% of fourth-quarter revenues.
Marfrig’s non-processed pork sales totaled BRL66.5 million in the fourth quarter, with 58% coming from exports.
Marfrig’s locally traded shares were 0.7% higher at BRL10.57 after falling 4.5% Monday.
Meanwhile, shares of Perdigao S/A (PDA) and Sadia S/A (SDA) remained mostly unaffected by the outbreak as investors instead focused on renewed speculation of a tie-up between the two companies. Pork sales represent 6% and 8%, respectively, of total sales at the two companies.
Perdigao’s shares were 2.5% higher at BRL31.60, while Sadia shares slipped 4.1% to BRL4.70 after jumping 7.7% Monday.
Credit Suisse Group (CS) said the swine flu outbreak would have a "marginally negative" impact on results at Brazilian protein producers, so long as the outbreak doesn’t contaminate poultry and cattle.
Local meat producers could also benefit from the outbreak. Any drop in pork consumption could result in an increase for beef products, JBS said. Brazil is the world’s leading exporter of beef.
In addition, Brazil pork producer trade group Abipecs said that the swine-flu problem could actually benefit Brazil ’s exports should importing countries turn toward regions not directly affected by the outbreak.
"Effects in trade may happen and could eventually benefit Brazil ," Pedro de Camargo Neto, president of Abipecs, told Dow Jones Newswires.
Brazil exported 51,007 metric tons of pork in March, up from 42,741 tons in the same month last year. In the rolling 12 months through March, pork exports totaled $1.49 billion versus $1.27 billion in the same period a year ago.
Despite fears generated by the weekend outbreak of swine flu in Mexico , local meat producers have attracted interest from investors recently.
Last week, JBS raised a total of $700 million from a bond issue, with heavy demand causing the company increase the issue from $400 million. The five-year bonds came with a coupon rate of 11.625%. The bonds were priced at 95.046% of face value to yield 13%.