Brazil's multinational meat packing business Marfrig believes
that rising world incomes will support animal protein consumption in both the short
and longer terms. But the company has posted a reduction in half year figures, which
it attributes to uncertainty in its home market.
Marfrig said the IMF's
July forecast for world GDP growth in 2017 is unchanged at 3.5%, while China' GDP growth forecast has risen from 6.6%
to 6.7%. While the US GDP growth forecast has dropped from 2.3% to 2.1%, consumer
spending there is expected to remain strong as unemployment is the lowest for a
decade. Even Brazil's GDP has been revised upwards to 0.3% from 0.2%, in
expectation of a gradual recovery.
Fast food meat demand up 5.3% by 2021
In the longer term, the company points to higher growth
rates for animal protein products in value-added channels such as the global
fast food industry, which is predicted to grow in value by 5.3% in the 2016-2021
periods, especially in Asia which it expects to equal the size of the US market
Growing demand in China will drive beef imports to that market,
with the trade agreement between the US and China underscoring the level of
demand from that region. Australia is constrained by its current phase of the
cattle cycle, which will limit its presence in the global market, but the US is
responding to stronger domestic demand. Brazil has rebuilt its cattle herd,
with a higher supply of finished cattle ready to meet the current macroeconomic
conditions at reasonable margins.
Marfrig added that most international chicken markets have
been performing well, supported by a combination of good demand and favourable feed
YTD EBITA down 24%
The company has posted an EBITA of RS614 million on revenues
of RS8.45 billion in the first six months of 2017, respective falls of 24% and 11.8%
on the RS816m and RS9.58bn at the same stage of 2016. But in the second
quarter, EBITA was down 18.6% to RS319m and sales 7.8% lower at RS4.31bn.
It notes the political and economic uncertainty in Brazil affected
the second quarter, exacerbated by the "Operation Weak Flesh" investigation into
the bribery of meat inspectors at certain meat packing plants in Brazil that
led to the temporary suspension of Brazilian imports of fresh beef by the US
and other markets.
But with more finished cattle available in Brazil, Marfrig reopened
two meatpacking units there and expanded production at existing plants. These measures
will help it increase output by some 25% in the second half of 2017.