Minerva (BEEF3) predicts greater cattle availability in 2022 in Brazil

Minerva Foods (BEEF3) sees a new cycle of high cattle availability in Brazil, despite the uncertainties regarding grain supply and the increase in China’s demand for beef.

The CEO of Minerva Foods, Fernando Queiroz, said that he verifies the “beginning of the reversal movement in the Brazilian livestock cycle and the consequent increase in the availability of cattle in the country”.

The statements took place during a conference call with analysts this Thursday (12), to comment on the results of Minerva’s 1st quarter balance sheet, when the company had a 55% lower profit.

After the release of the results, the meatpacker’s shares closed down by 7.54%, quoted at R$ 12.26, even with the analysts having highlighted that the results did not disappoint.

For Itaú BBA, Minerva (BEEF3) delivered in line results, leading it to tread a solid path in 2022 and with a “slightly positive” quarterly balance.

Ebitda was 3% above estimates and 2% above consensus. “We highlight the strong revenue performance of the Brazilian division, while Athena suffered from volumes in the quarter”.

Itaú BBA says Minerva was able to sustain price increases in both divisions above costs, keeping margins at solid levels.

The rating is outperform (performance above the market), with a target price of R$ 16.

Cash flow

For Morgan Stanley, Ebitda was very strong, but with numbers already expected by the market. The point of attention is the profitability in the 2nd quarter and in the second half of the year.

The report highlighted that free cash flow (FCF) generation was weak mainly on account of working capital, “but we expect improvements in the coming quarters,” Morgan added.

Regarding the need to turn, Morgan pointed out, however, that this problem was associated with “ramp-up” of shipments to China and therefore should see “significant improvements in the coming quarters”.

Finally, Morgan wrote that it maintains a recommendation overweight (above the market average) and a target price of BRL 21.

Flock

At the end of 2019, according to the executive, the Brazilian cattle herd began to show a lower availability of animals for slaughter, a reflection of the growing movement of ranchers in retaining females for reproduction.

“With the lower supply of animals, the impact on the price of the arroba is a reality, which has accompanied us since then”, he said.

Queiroz commented that Minerva had been “successful” in passing on these cost increases and the consequent maintenance of “profitability at healthy levels”.

Minerva sees signs of improvement in the pasture

“However, at the end of 2021, we began to see the first signs and indicators of the beginning of the process of reversing this cycle. As an example, an increase in the percentage of female slaughter, which reflects the return of these animals in the slaughter pipeline after the end of the production cycle”, said the company’s CEO.

In addition, according to Fernando Queiroz, information regarding vaccination of calves in Brazil indicates a record volume of animals vaccinated in recent months.

“The numbers of the vaccination process are extremely important predictors of the availability of cattle ready for slaughter, which should supply the market over the next few months,” he said.

“Thus, we are confident in the increase in the availability of cattle in Brazil, which ends up favoring our industry”, he said.

Also according to him, this scenario of improvement was already visible in the first quarter of the year, “due to the acceleration we had in Brazil”.

US production drop

Unlike here, in the US, the Minerva executive points to the end of the animal availability cycle. Estimates from the United States Department of Agriculture (USDA) indicate a 5% reduction in beef production in 2022.

“The context is similar in Europe”, added Queiroz. In Brazil, on the other hand, the expansion of availability is 5%, he said.

In the United States, in the first quarter of the year, the CEO of Minerva added that there was a record of female slaughter: “This compromises the production of calves. So, next year, there will be a reduction in supply (in the US)”.

Uncertainties in grain supply

Queiroz also highlighted that there are uncertainties in the world supply of grains, initially impacted by the adverse climate scenario in the main producing regions.

“However, the difficulties were even more accentuated with the Russia-Ukraine conflict”, said the executive.

“It is a scenario that should directly reflect on the cost structure of the global protein chain, especially pork and chicken meat, but also beef produced by confinement in the northern hemisphere, thus implying an increase in cost and reduction of competitiveness abroad. of South America”, he analyzed.

Higher Chinese demand

Also according to Fernando Queiroz, there was an “unlocking” of the Chinese market, which had a repressed demand, “choked by the lockdown”.

He said he is “seeing more demand, more orders, more interest” from the Asian country for beef.

According to him, there was “a containment of distribution capacity in China, of release at ports, so the arrival of products was slower, but stocks are quite low”.

For the executive, ending the lockdown in the Asian country, “we expect a strong recovery in demand and consumption”.

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