Brazil-based Marfrig Global Foods, is reportedly in negotiations for the sale of its Argentine assets and its U.S.-based Marfood beef jerky business, as the group continues to restructure its balance sheet toward its goal of cutting debt by $1.2 billion by the end of 2016.

 

The divestiture of these assets, which carry a value of R$293 million (US$77.26 million), and which follow closely upon Marfrig’s US$1.5 billion sale of its Moy Park chicken group to rival JBS, indicate Marfrig’s strategy of reducing debt and focusing its attention on its Keystone food services business, which sells meat production to U.S. and Asia-based restaurant chains.

 

The steep depreciation of Brazil’s real has created a challenge for agribusinesses operating in the country that are carrying dollar-denominated debt. In local terms, foreign earnings have been boosted, but the strengthening of the dollar has caused dollar-denominated debt to become a heavier burden. As a result of the 28% decline in the real against the dollar, Marfrig posted a R$538 million dent to its results for the July through September period.  Combined with the R$706 million expense incurred as a result of marking derivatives to market value, the group’s earnings for the quarter came in at R$185.9 million, even when including the group’s R$1 billion capital gain from the sale of Moy Park.

 

Despite these setbacks, operating profits jumped 40% to R$312.4 million, as revenues climbed 30% to R$4.94 billion due to improved performance from the group’s Keystone and Marfrig Beef businesses on the back of lower U.S. animal costs, climbing sales in Asia, and healthier packer margins.

 

Marfrig beef also posted an 8.1% jump in earnings before interest, tax, depreciation, and amortization (ebitda) resulting from its decision to cut its slaughter rates in Brazil by 29% and the shuttering of five plants in the country to “adjust to the current scenario of lower cattle availability,” reports Agrimoney.