Earnings Release | 2Q21
São Paulo, August 10, 2021 - Marfrig Global Foods S.A. - Marfrig (B3 Novo Mercado: MRFG3 and Level 1 ADR: MRRTY) announces today its results for the second quarter of 2021 (2Q21). Except where stated otherwise, the following operating and financial information is presented in nominal Brazilian real, in accordance with International Financial Reporting Standards (IFRS), and should be read together with the income statement and notes to the financial statements for the period ended June 30, 2021 filed at the Securities and Exchange Commission of Brazil (CVM).
Base Date: Aug. 09, 2021
Market Cap:
R$13.9 billion
Stock Price:
MRFG3 R$19.52 Shares issued: 711,369,913 shares
Conference Call in English Wednesday - Aug 11, 2021 11 a.m. BRT / 10 a.m. US Dial-in:
TF: +1 844 204 8942
DI: +1 412 717 9627
Code: Marfrig www.marfrig.com.br|ri
Investor Relations Contacts
- Eduardo Puzziello
- Stephan Szolimowski
- Vinícius Saldanha
+55 (11) 3792-8907ri@marfrig.com.br
Consolidated 2Q21 Highlights
- Net Revenue of R$20.6 billion (+9.0% vs. 2Q20);
- Adjusted EBITDA of R$3.9 billion (-3.6% vs. 2Q20);
- Adjusted EBITDA Margin of 19.1% (-249 bps vs. 2Q20);
- Net Income of R$1.7 billion (+9.0% vs. 2Q20);
- Free Cash Flow of R$2.2 billion (-31.4 vs. 2Q20).
Operating Highlights
NORTH AMERICA OPERATION
- Net Revenue of US$2.9 billion (+10.1% vs. 2Q20);
- Adjusted EBITDA of US$722 million (+13.8% vs. 2Q20);
- Adjusted EBITDA Margin of 24.5% (+80 bps vs. 2Q20).
SOUTH AMERICA OPERATION
- Net Revenue of R$5.0 billion (+14.1% vs. 2Q20);
- Adjusted EBITDA of R$181 million (-70.5% vs. 2Q20);
- Adjusted EBITDA Margin of 3.6% (-10.3 bps vs. 2Q20).
Other Highlights
- Financial leverage measured as ratio of Net Debt/ Adjusted EBITDA LTM of 1.45x in Brazilian real and 1.55x in U.S. dollar.
- Dividends: Proposal to distribute dividends in the amount of R$958.4 million | Dividend yield approximately of 7%.
- Equity Investment: acquisition of indirect relevant interest in BRF.
- Further Processing: segment accounted for around 15% of the Net Revenue of the South America Operation in 2Q21, up from 9% in 2Q20.
- Efficiency Program: gain of around R$30 million in 2Q20.
- Investment in last 12 months of R$1.7 billion: in projects to expand organic growth and higher-value products.
Events after the reporting period
- Agribusiness Certificates of Receivables (CRA): Issue of R$1.2 billion, in two series of 7 and 10 years, with an average rate after the swap operation of CDI + 0.97% p.a., making it one of Marfrig's lowest-cost operations ever.
- Treasury shares Cancellation: Approval of the cancellation of 20 million shares held in treasury
- Buyback Share Program: Approval of repurchase of up to 26.3 million shares
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Earnings Release | 2Q21
Message from Management
The second quarter of 2021 was marked by the excellent scenario in the United States, which reflected the high supply of animals combined with strong demand for beef. This favorable environment was supported by inventory rebuilding in the food service chain, the economic situation driven by stimulus packages and strong seasonality, i.e., the so-called barbecue season.
Primary processing volume in the U.S. industry reached 6.6 million head in the quarter, increasing 17.4% in relation to the same period of 2020. The cattle cost accompanied the higher primary processing volume (in the reference price USDA KS Steer $/cwt), increasing by 12% in 2Q21 compared to 2Q20. The higher raw material cost was practically offset by the stability in the beef sales price (USDA Comp Cutout $/cwt), which, multiplied by the higher sales volume, led the North America Operation to deliver its best result ever.
In contrast, South America is experiencing a situation different from that of the other countries where Marfrig operates. In Brazil, where domestic demand is still slowly recovering, exports remained the main driver of profitability in the protein industry. However, despite this demand from export markets, primary processing volume in the country declined sharply from the same period last year. The effects from the lower primary processing and sharp increases in raw material costs led exports to decline in the first six months compared to the same six-month period of 2020. According to data compiled by the Ministry of Agriculture, Livestock & Supply (MAPA) with SECEX/ME, beef shipments decreased slightly, with the 874,000 tons shipped in the period representing declines of 33,000 tons or 3.6% from the prior-year period.
Meanwhile, in Uruguay, which is experiencing a scenario different from that of its South American counterparts, according to data from the National Meat Institute (INAC), primary processing volume increased 33.5% on the prior-year quarter (647k head in 2Q21 vs. 485k head in 2Q20). The trend suggests a rebuilding of the cattle herd over recent years and that the supply of finished cattle will increase over the coming years.
Thanks to its geographic diversification, with a strong presence in North America and a lean and focused operation in South America, Marfrig reported record-high net revenue (R$20.6 billion) and its second highest Adj. EBITDA (R$3.9 billion) on a quarterly basis, representing Adj. EBITDA margin of 19%.
Another highlight was Marfrig's record-high net income, which grew 10% on the prior-year quarter to R$1.7 billion in 2Q21. In the first six months of 2021, net income was R$2 billion. Based on this result, Management is proposing the distribution in advance of interim dividends, of approximately R$958 million.
Marfrig also continued to uphold its nonnegotiable commitment to financial health and ended 2Q21 with its lowest leverage ratio (net debt/Adjusted EBITDA) ever: 1.45x in BRL and 1.55x in USD.
Still in the second quarter, Marfrig announced the acquisition of a passive relevant interest in BRF. The acquisition is in line with the Company's strategy to diversify its investments in segments that complement its business sector.
We will continue to focus on creating value for all shareholders, on always operating sustainably and on creating value for the cattle chain, our local communities and, especially, all Marfrig clients and partners.
Marcos Antonio Molina dos Santos
Chairman of the Board
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Earnings Release | 2Q21 | |||||||||||||||||
Key Consolidated Indicators | |||||||||||||||||
R$ Million | 2Q21 | 2Q20 | Var. % | 1Q21 | Var. % | LTM2Q21 | LTM2Q20 | Var. % | |||||||||
Net Revenue | 20.574 | 18.881 | 9,0% | 17.236 | 19,4% | 72.909 | 59.344 | 22,9% | |||||||||
North America | 15.550 | 14.479 | 7,4% | 12.663 | 22,8% | 52.907 | 42.802 | 23,6% | |||||||||
South America | 5.023 | 4.402 | 14,1% | 4.573 | 9,8% | 20.002 | 16.543 | 20,9% | |||||||||
Adj. EBITDA | 3.921 | 4.068 | -3,6% | 1.708 | 129,5% | 9.934 | 8.408 | 18,1% | |||||||||
North America | 3.782 | 3.480 | 8,7% | 1.523 | 148,3% | 8.684 | 6.791 | 27,9% | |||||||||
South America | 181 | 613 | -70,5% | 211 | -14,2% | 1.380 | 1.759 | -21,6% | |||||||||
Adj. EBITDA Margin (%) | 19,1% | 21,5% | -249 bps | 9,9% | 915 bps | 13,6% | 14,2% | -54 bps | |||||||||
North America | 24,3% | 24,0% | 28 bps | 12,0% | 1229 bps | 16,4% | 15,9% | 55 bps | |||||||||
South America | 3,6% | 13,9% | -1033 bps | 4,6% | -101 bps | 6,9% | 10,6% | -374 bps | |||||||||
Net Profit | 1.738 | 1.594 | 9,0% | 279 | 522,0% | 3.862 | 1.584 | 143,8% | |||||||||
Net Debt (in R$) | 14.378 | 17.382 | -17,3% | 17.747 | -19,0% | 14.378 | 17.382 | -17,3% | |||||||||
Net Debt | LTM EBITDA (R$) | 1,45 x | 2,07 x | -0,62 x | 1,76 x | -0,31 x | 1,45 x | 2,07 x | -0,62 x | |||||||||
Net Debt | LTM EBITDA (US$) | 1,55 x | 1,79 x | -0,24 x | 1,69 x | -0,14 x | 1,55 x | 1,79 x | -0,24 x | |||||||||
Average Cost of Debt (% a.a) | 5,09% | 6,13% | -103 bps | 4,66% | 43 bps | 5,09% | 6,13% | -103 bps | |||||||||
Average Debt Term (years) | 4,76 | 4,35 | 9,3% | 5,05 | -5,8% | 4,76 | 4,35 | 9,3% |
* Calculation of Consolidated Adj. EBITDA considers the amounts related to Corporate, in accordance with Appendix I.
Select Consolidated Results
Net Revenue
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Earnings Release | 2Q21
Results by Business Unit
North America Operation
Volume (thousand tons) | 2Q21 | 2Q20 | Var. % | 1Q21 | Var. % | LTM2Q21 | LTM2Q20 | Var. % | |||||||||||
Total Volume | 507 | 451 | 12,5% | 508 | -0,2% | 2.044 | 1.943 | 5,2% | |||||||||||
Domestic Market | 436 | 380 | 14,8% | 429 | 1,8% | 1.744 | 1.634 | 6,7% | |||||||||||
Exports | 71 | 71 | 0,1% | 79 | -10,8% | 300 | 309 | -2,7% | |||||||||||
US$ Million | 2Q21 | 2Q20 | Var. % | 1Q21 | Var. % | LTM2Q21 | LTM2Q20 | Var. % | |||||||||||
Net Revenue | 2.948 | 2.678 | 10,1% | 2.315 | 27,3% | 9.842 | 9.451 | 4,1% | |||||||||||
Domestic Market | 2.635 | 2.437 | 8,1% | 2.021 | 30,4% | 8.697 | 8.348 | 4,2% | |||||||||||
Exports | 313 | 241 | 29,9% | 294 | 6,4% | 1.145 | 1.103 | 3,8% | |||||||||||
COGS | (2.162) | (1.991) | 8,6% | (1.978) | 9,3% | (7.969) | (7.818) | 1,9% | |||||||||||
Gross Profit | 786 | 687 | 14,5% | 337 | 133,1% | 1.873 | 1.633 | 14,7% | |||||||||||
Gross Margin (%) | 26,7% | 25,6% | 103 bps | 14,6% | 1.211 bps | 19,0% | 17,3% | 175 bps | |||||||||||
Adj. EBITDA | 722 | 635 | 13,8% | 277 | 160,5% | 1.628 | 1.426 | 14% | |||||||||||
Margin (%) | 24,5% | 23,7% | 80 bps | 12,0% | 1253 bps | 16,5% | 15,1% | 146 bps |
Net Revenue & Volume
At the North America Operation, total sales volume in 2Q21 came to 507k tons (+12.5% vs. 2Q20), of which 436k tons (or 86% of the total) were sold in the domestic market.
The net revenue of the North America Operation set a new a record for the period, of US$2,948 million, representing an increase of 10.1% compared to 2Q20. In Brazilian real, the operation's net revenue was R$15,550 million, up 7.4% on 2Q20.
This strong performance is explained by the higher total sales volume and the higher average sales price in the export market, which increased 30% compared to 2Q20 and offset the 5.7% decline in the average price in USD in the domestic market.
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Earnings Release | 2Q21
Cost of Goods Sold
In 2Q21, cost of goods sold was US$2,162 million, increasing 8.6% compared to 2Q20, explained by the higher average cattle price, as explained below, and the higher sales volume in the period.
The average price used as a reference for cattle purchases (USDA KS Steer) was US$119.76/cwt, increasing 12.0% from 2Q20, reflecting the normalization of capacity utilization in 2Q21 compared to 2Q20, which was the worst period of the pandemic and registered the highest absentee rate in the industry.
Gross Income & Gross Margin
Gross profit was US$786 million in 2Q21, advancing 14.5% compared to 2Q20. In Brazilian real, gross income came to R$4,120 million, 9.6% higher than the gross income reported in the same quarter of 2020.
The figure, which set a new record for the period, is explained by the strong demand for beef products in the United States combined with the high cattle supply.
In 2Q21, the average sales price indicator (USDA Comprehensive) stood at US$292.66/cwt, in line with the same period of 2020. Another highlight in the quarter was the credits from subproducts, such as leather and other products, which increased 64.4% to US$11.74/cwt, compared to US$7.14/cwt in 2Q20.
Consequently, gross margin in 2Q21 was 26.7%, expanding 103 bps from a year earlier.
Adj. EBITDA & Adj. EBITDA Margin
Adj. EBITDA in 2Q21 reached US$722 million, which is the operation's highest quarterly result ever and 13.8% higher than in 2Q20. Adj. EBITDA margin in the quarter was 24.5%, expanding 70 bps from 2Q20.
In Brazilian real, Adj. EBITDA was R$3,782 million, growing 8.7% from 2Q20.
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Marfrig Global Foods SA published this content on 10 August 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 August 2021 22:15:11 UTC.