BRF S.A. (NYSE:BRFS) Q1 2025 Earnings Call Transcript

BRF S.A. (NYSE:BRFS) Q1 2025 Earnings Call Transcript May 16, 2025

Operator: Good morning, ladies and gentlemen. Welcome to our BRF Earnings Conference Call regarding the results of the First Quarter of 2025. This conference has been recorded and a replay can be checked on the website of the company. The presentation is also available for download. Right now, all the participants are connected as listeners, and then, we will start our Q&A session, when more instruction will be provided. Before considering — continuing, I would like to say the respective information have the basis, the believes, and the administration of BRF and the current information for the company. These declarations can involve risks and uncertainties. Bear in mind that we talk about future events, therefore, depend on circumstances that can or not occur.

Investors, analysts and journalists should take into account the events connected to a macroeconomic environment to the segment and other factors can make the results be materially different compared to the ones that are expressed in the respective declaration. Here in this conference, we have Mr. Miguel Gularte, the CEO; and Fabio Mariano, the CFO. I would like now to pass the floor over to Mr. Miguel, who will start the presentation. Please, Mr. Miguel, you can proceed.

Miguel Gularte: Good morning. I’d like to thank everyone for joining our first quarter 2025 earnings conference call. We started the year delivering another consistent quarter, with solid results and continued progress on our journey toward greater efficiency and growth. We reported a profit of BRL1.2 billion, twice as much as the same period last year. And our net revenue reached BRL15.5 billion, a 16% increase compared to the first quarter of 2024. The performance we’ll be discussing today marks the past first quarter in BRF’s trajectory. Our BRF+ program delivered BRL305 million in efficiency gains during the period and remains a key driver of continuous improvement across all work streams. Efficient management enabled growth through performance improvements, higher utilization of our current assets, allowing us to lay the groundwork for sustainable growth, always with financial discipline and focus on generating value for our shareholders.

I now invite our CFO, Fabio Mariano to present the quarterly results in detail, and I’ll return afterwards for closing remarks on today’s presentation.

Fabio Mariano: Good morning to everyone connected. On the first page, I’ll highlight the main financial indicators for the first quarter of 2025. Starting with the net revenue, which reached BRL15.5 billion, 16% higher than in the same period in 2024. EBITDA was BRL2.8 billion. The best result in our history for a first quarter, 30% higher than the previous year’s performance, contributing to a net profit of BRL1.2 billion in the period, double the first quarter of 2024. Free cash flow performance was approximately BRL1.3 billion or BRL1.8 billion, if we eliminate the effect of the acquisition of Addoha Poultry in Saudi Arabia in partnerships with PIF (ph). And in this slide with leverage, we reached 0.54 times EBITDA in the last 12 months, with the lowest leverage in history.

The next slide, on Page 4, on the left shows the historical evolution of gross profit with profitability of 26.3% in the period. We reported a gross profit of more than BRL4 billion. On the right, we can see the evolution of EBITDA and margins showing stability in operating results. We will now present the performance by market and business segment. Starting with Brazil, we continue to evolve progressively. We achieved an EBITDA margin of 17.1% volume growth, especially, in process categories and the contribution of fresh cuts to domestic market margins. On the next page, number six, we emphasize our journey of continuous evolution in commercial execution, reflected in greater numerical distribution and new points of sales served. We also see greater adherence to suggested price and a lower historical level of FIFO discount associated with the useful life of products.

Service levels are still at optimum levels despite the significant improvement in volumes. We remain attentive to our consumers’ needs. And in the frozen food category, especially, in ready meals, we launched new items in the Meu menu line from Perdigao and Hot Bowls from Sadia. We also promoted new campaigns and sponsorships, reinforcing the brand’s visibility and supporting our customers’ preference. Now on the next page, we present the International market. We saw healthy margins in the segment with contribution of geographical diversification and new export permits. EBITDA margin exceeded 19% in the quarter. On the next slide, we highlight the announcement of the construction of the new process products plant in Saudi Arabia, and the growth in volume driven by Ramadan, with an emphasis of gaining market share in processed products.

In Turkey, we continue to focus on increasing the contribution of sales in process products, which represents around 25% share, helping to mitigate the effects of the greater local supply of fresh chicken. We maintained our market share leadership with Sadia and Banvit brands in their respective markets. On the right, I present the highlights of the direct export segment. We expanded our business alternatives with two new permits – 12 new permits in 2025, helping to maximize prices. There have already been 187 new export permit since 2022. Recently, we completed the acquisition of the processed food plant in China, reinforcing our strategy of added value at local prices. We also highlight the process made in processed products in Chile and the extension of portfolio with the Sadia hamburger, which marks the first in the beef category.

I’ll end the presentation of the business segments on the next slide with the performance of Ingredients and PET. The segment reported BRL76 million in EBITDA, and PET we improved the process by implementing SAP, strengthening the controls and management teams, which allowed us to improve the mapping of the BRF+ Pet levers. In Ingredients, we continue to diversify our products and markets. Next, I’ll share the progress of our efficiency program and also growth presenting in base 100. On the left, you can see the animal evolution of the feed conversion and yield indicators of poultry and pigs for relevant catches. On the right, we have introduced gains and factory occupancy and volumes. We have significantly increased volume since 2022. On Page 12, we consolidate the following sustainability highlights, ESG.

Consecutive participation in the ESG in the carbon efficiency index portfolios, excellent position in the payer ranking amount chicken and pork producers, and also in global animal welfare rankings. We published the 2024 report incorporating our progress in economic, social and environmental terms. Lastly, we celebrated 13 years of the BRF Institute with the mobilization of more than 40,000 volunteers and social actions carried out in 70 cities. We now present, on Page 14, the information related to company’s capital structure. On the chart on the left, we show the decline in net debt and leverage. On the right, we can see the debt profile, which remains diversified and long, with no concentration of repayments in the short-term and a fairly comfortable liquidity position.

The next slide, it shows the free cash flow. The graph shows the operating cash flow for the quarter at BRL3.6 billion, an investment flow of BRL1.5 billion, including the acquisition of Addoha, and a financial flow of BRL0.5 billion, resulting in a free cash flow of BRL1.3 billion. On Slide 16, we can analyze the evolution of net debt in the last period. We reported a net debt of BRL6 billion after return on equity versus BRL8.3 billion in the fourth quarter of 2024. The reduction in loans will continue to contribute to lower interest charges in 2025. I’d like to thank the audience and then give the floor to our CEO, Miguel Gularte for his closing remarks.

Miguel Gularte: Thank you, Fabio. To wrap up our earnings presentation, I’d like to highlight that we delivered a record first quarter EBITDA of BRL2.8 billion. Our investments sustainable growth and financial discipline allowed us to reach the lowest leverage in BRF’s history at 0.64 times. Our BRF+ program is still evolving, keeping the company’s key indicators at healthy levels. This quarter set out metrics included yield, fee conversion and service level in Brazil. I would like to highlight the progress of our commercial execution, which has been key to strengthening the presence of our products at more points of sale across Brazil. Additionally, we boosted the highest historic growth in the volumes for first quarter, with highlights in processed products and strong margin contributions for our fresh category.

Our performance in International markets was supported by our ongoing market divesification and global expansion strategy, which drove both healthy and profitability and volume growth. This quarter, we secured 12 new export approvals, bringing the total to 187 since 2022. Our brands remain market leaders in Middle East, with Sadia across GCC countries and Banvit in Turkey. Besides that, our operation in Southern Cone continues to grow steadily with a notable milestone in Chile, where Sadia entered the burger category. Our global growth and presence strategy already gaining traction in the first few months of 2025. We concluded the acquisition of processed food plant in Henan, China, and acquired 26% stake at Addoha Poultry Company in Saudi Arabia.

We also pronounced the beginning of the construction of a new processed food plant in Jeddah, also in Saudi Arabia, which will boost our regional presence with a focus on higher value-added products. It’s important to emphasize that none of these figures would be possible without our people. I would like to acknowledge the progress and employee engagement reflected, in the global survey we conducted in the first quarter. We reached an employee satisfaction score of 89%, a 4 percentage point increase compared to 2024, keeping us above performance benchmark and reflecting BRF commitment to best-in-class management practice, a source of pride for all of us. All these factors strengthen and confidence in BRF and its growth journey, led by our Chairman and Controlling Shareholder, Marcos Molina, who has been guiding the company’s transformation for over three years, with the strategy focus on operational efficiency, innovation and global presence.

I also want to thank our shareholders and the Board of Directors for their support along this journey. Our sincere thanks to our customers, integrators, producers, suppliers and communities where we operate for their strong partnership. And finally, a heartfelt thank you to BRF’s more than 100,000 employees for the outstanding quarter we delivered together. We remain focused on building a company that stands out in the market, and we’re proud to be part of. Thank you all very much.

Q&A Session

Operator: Thank you. We will start now our Q&A session for investors and analysts. [Operator Instructions] Our first question is from Henrique Brustolin from Bradesco BBI. Brustolin, your microphone is open.

Henrique Brustolin: Good morning, Miguel, Fabio. Thank you for taking my questions. Two points that I would like to explore together with you. The first, we talked a little bit about in the call, the [indiscernible] from the incorporation Avian flu, we saw the news coming out, the communication news from China closing the market for 60 days. What I would like to hear from you is that we saw over the last few years, Brazil implementing several protocols of regionalization, bilateral agreements, very specific in some cases of Avian flu not in commercial poultry farms, but things that were negotiated. What I would like to hear a little bit the point that you see with more attention when we think maybe about the large markets, what possibly do you have in terms of agreement realization to bring more comfort that should happen?

And what is a little bit more in doubt depending on the importing market, so we can map out the scenario a little bit. This is the first point. The second, I would like to hear from you a little bit about growth. Also in the context of the incorporation, we mentioned clearly, BRF seems to be a growth vehicle, your movements over the past few months make it really clear. I would like to hear what else you have seen in terms of opportunities and where you’re heading and aiming at? And you want to continue to advance and then moving forward in terms of growth, not only organically and also inorganically that’s been happening? These two points. Thank you.

Miguel Gularte: Henrique, the Ministry of Agriculture with Ordinance 785 created the communication with regionalization of sanitary for the municipality of Montenegro with this focus of Avian flu. In the first moment, the ministry regionalizes through communication — makes a communication for the world health — animal health organization. And this first measure preventive closing of some markets, in the case of China, as you mentioned. And as the documents move between the countries and the information flows, you see the regionalization. I would like to remind you that in the case of Newcastle disease, China did the same thing, closed Brazil, then they closed the — around the Grande do Sul the municipality. The period that we just had — we had Newcastle last year, is that the regionalization from the disease was forecasted in several countries, Saudi Arabia, Chile, Armenia, Bozek, Kazakhstan, Cuba, Egypt, Philippines, Georgia, Hong Kong, India, Japan, Jordan, Macedonia, Mauritius Islands, several other countries, Thailand, Ukraine.

All these countries have regionalization forecasted in the first moment. So we’re going to see as time passes and information flows, we’re going to have two situations. Some countries that were regionalization already forecast as applying the rule is limited to 10 kilometers radius in other countries working with aspects of states. So this is going to be clearer in the next coming days. And there are some countries that are going to close Brazil in the first moment and then in the second moment, studied the status as the focus of the country, municipality. All this is going to move forward, and we have in terms of experiences that last year, it was — the process was really fast of limiting the radius and determining the focus, the outbreak in one month.

And we at BRF, we’ve been working very much in the past few years in the sense of having contingency plans. So we have a contingency plan that forecast alternative markets. We have 187 new permits in the past three years that we’re going to transit with product. And we also have — we’ve been taking care of that very closely in keeping strategic inventories in regions where we have distribution. This allows two types of situations. First, you keep the clients supplied. And in the second moment, you diversified your product better and mitigate a little bit of the cost because of some temporary closings. We are working on that. It’s too early to say anything but we are aware that the country has a biosafety that is really strong, a credibility and concept, a reputation that is really strong, and we can transit this situation.

We hope to be very fast and agile to move and it’s going to be difficult but I am confident that we’re going to make it right and very fast if the markets that are closed are going to be resumed. I’ll give it to Fabio to answer the second part.

Fabio Mariano: Good morning. Henrique, you asked about growth. And before looking ahead, I would just like to recover a little bit of the history. We are reporting a growth of revenue growth in the quarter equivalent to 16% in the annual comparison. And when we look at Brazil’s growth, it’s is even bigger, 20%. This time is very much directed to volumes. So this important because it shows that it’s something that we had already been disclosing, our intent to occupy better our industrial assets. And we see many of the production lines, especially those aligned to processed product, that there is a demand forecasted and we would have to invest to be able to address that. So we already have investments projected. Most of them already approved and started the execution.

And when they reach maturity, that means the facilities are finished and, gradually, volumes are flowing to the results of the company. We can then — a maturity reach an additional growth of 3% to 5%. So this is mode of the company, while we’ve been calling in the new chapter. We are directed to this growth. And it has to be oriented to volume growth not only in diversification equation of products but in — from the inorganic perspective, we have been already disclosing all these transactions that make sense from strategically with this potential of adding more value to our portfolio. In the business combination also, is more anchoring this process to happen the way we imagine it should happen.

Henrique Brustolin: Great. Thank you.

Operator: Our next question is from Leonardo Alencar from XP. Your line is open.

Leonardo Alencar: Good morning. Thank you so much for the result. I know that there are many things that have been discussed. I would like to focus just a little bit thinking of the bird flu, right, and maybe we can take a look at the next steps. I believe that it tends to be smaller than what the market was predicting at first, and I think this issue was discussed on the last call. So considering that we are still pretty much at the second quarter, and the first quarter was atypical, let’s put it like that, considering the seasonality of consumption in Brazil. We know that they passed a lot of margin. I know that you have like a difference in terms of mix change from 1 quarter to another but the sequencing price is high, right?

And when we think of mix, we could have like a drop in that. So if you could comment a little bit, first of all, the domestic demand, right, how are you seeing this considering that the production is still enhancing? And all the other accounts that we have, like, so I believe that we still have a very healthy read in terms of domestic demand? Maybe if you could talk a little bit about that considering the continuity of the scenario. And when it comes to exports. Maybe, you go back to a topic that was discussed before, the Avian flu, which has to do with the tariffs. So the market reacted to the higher costs in the United States, exports to some countries, some prices that were higher. China, we’ve seen some prices increasing. So if you could provide us with like a general view of this market.

What are some of the possibilities for the second quarter? If you could share some of these details, I would like a lot.

Miguel Gularte: Okay. So in the fourth quarter, it’s something that we saw — on the first quarter of 2025, we saw a supply and operating demand that was extremely balanced on the market with possibilities of keep demanding and accepting the repositioning (ph) of price. We had a price increase on the first week of January of 2025, and this went very well. With these adjusted prices adapted to our costs, we were able to experiment with the increase of volume. This is something that was part of our predictions. Another important aspects when we analyze BRF, we see BRF both about their homework, let’s put it that way, that they increased the productivity of the plants, they improved their commercial service considering the logistic process.

All that allows that, considering negative demand, the company can this increase performance to grow and meet our customers’ need. What we’ve seen and we are in the second month of quarter to we see demand-price dynamic, and it’s still absolutely balanced and very active. The pricing capacity is also there. So we see that with price-demand that goes from quarter to now, it looks very similar to what we saw in the first quarter. We are still focusing on our enhancing penetration with [indiscernible] and client activations. So we see a quarter when it comes to the demand standpoint. When it comes to the domestic market, of course, right, it seems to be very similar to what you saw the first quarter. When you talk about exports, we can just that rather depressed price markets that we experimented in the second month of the first quarter is now being reversed.

There are some geographies that are pricing their imported goods. Speaking about the tariffs, if you analyze the price track record and volume track record of markets, you clear see that, so far, we’ve haven’t seen an impact in terms of tariffs. When it comes to effect that [indiscernible] if you think of China volume, it’s still very stable. If you get China month-to-month, it’s very stable. We don’t have like an increase or decrease of volume. There’s no price variation as well. So I believe that we’re seeing a stability. I don’t see this varying that much. When you take a look at the feedstock protein or the cattle protein, it’s back to stability nowadays. We have very good stability. We see this scenario without alteration at least when it comes to the short term.

Leonardo Alencar: Okay. It’s very clear, Miguel. Thank you so much.

Operator: Our next question comes from Guilherme Palhares from Santander. Mr. Palhares, your microphone is open.

Guilherme Palhares: Good morning, Miguel, Fabio, everybody. Two brief questions. I’d like to take the prior question about exportation and take the opportunity that we had. Two questions about the deals in Saudi Arabia, we’d like to hear a little bit more of your perspective with this acquisition. And how is the operation there? It’s a market that obviously in this consolidation stage and the vision of 2030. I’d like to hear from you your perspective in the sense. And another point, Miguel, you mentioned about the efficiency, and we’ve had it for the BRF+ for two years. If you could share with us today. Given this needs a little bit more investment, where we are in terms of capability usage and the processing and poultry farms and if there is a bigger need. What is in transformation than an increase of volume. Thank you.

Miguel Gularte: Guilherme, answering the first part of your question, we see the investments that we have made, they are perfectly aligned with the demand opportunities, market opportunities. If you look at the successive bulletin to the first quarter of 2025, you have seen that performance of expectation above Asia, 151,000 tons average month and — against 136,900 in Asia. So we have men working, operating well, in terms of demand. We opened yesterday our Henan plant in China. Extremely modern plant with the capacity of production that is very high, over 80,000 tons, allowing us to use the place and use the commercial opportunities are going to come up very much aligned. We already have a process, an agreement to supply major networks of local fast food.

This is going to work, anchoring production and profitability for the company in the mid and short term. On the other hand, we are going to open next year, the Jeddah plant. This plant, extremely modern, that is going to work as a productive, for the region, allowing BRF to capitalize and also capture the Sadia brand, extremely reputed and distinct in that region. We follow and continue doing — I understand we have made excellent choice, we continue doing that. And this allows us to take these opportunities. For this moment, we have had a major focus on the organic growth CapEx of enjoying this bottlenecks that we had in production. This is starting to be behind. Company has the capacity to grow organically. In the pipeline, we have strategic investments that are going to allow us the trail.

The growth trail is constant and consistent. The company continued performing and taking opportunities. As I said in the prior answers, when you have 187 new permits, all this productive effort and plant effort turns into business opportunities that you capture. But still, we have opportunities that are anchored in a solid performance in the local market. Our leadership with the strong brands in Brazil, service has a very tangible base to project growth, good growth for the company.

Fabio Mariano: Hi, Guilherme. I’m going to add to the second part of the question you mentioned. And we reported in this quarter over BRL 300 million in capturing additional captures. And you are correct, you’ve been talking this topic about efficiency over quite a few years. And what I have to tell you is that in the company, we’re now happy with the results. We are happy with what was — we have obtained so far, but we still see opportunity. So we see in some of our locations, we have room, so we can evolve even better with the field indicators, with industry indicators yielding. Even the commercial relationship, we see room for improvement in execution. And this is also valid for logistics service levels. This is going to continue being a journey to be trailed for continuous improvement.

We have also mentioned in the expansion — in the call about volume expansion, this has allowed us to speed up the idle parts in our factories. And this is — we are investing in capacities. It’s important to report we have capacity to grow without major investments. But we have to think in the mid and long run, and for that, we have oriented plan for three, four years, and we’ve been in some lines the demand is going to go over the — our capacity. So talk about some investments, some of them have been approved, under execution. And from there on, in addition to the growth plans that we have in the company, this is going to add additional capacity between 3% to 5% with this project reach maturity. So the motto for growth doesn’t mean that we are not going to be guided, focused and allocated resources that are unproportional in the growth journey — in the efficiency journey, sorry.

This continues as one of the pillars for the strategy of the company.

Guilherme Palhares: Perfect, Fabio. If you could clarify a little bit, 3% to 5%, you comment, we’re talking about Plantel or necessarily this is only volume because you could have an improvement in mortality and other questions involved.

Fabio Mariano: I’m talking about finished product, which is already a consequence of Plantel yield of its capacity of slaughtering and post industrialization.

Guilherme Palhares: Thank you. Perfect. Thank you, Fabio, Miguel.

Operator: This concludes the first quarter results teleconference of BRF. We thank all of you for your interest and wish you all to have a wonderful day.