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BRF(BRFS) - 2024 Q2 - Quarterly Report
BRFSBRF(BRFS)2024-08-15 00:03
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Financial Position and Assets - Cash and cash equivalents increased to 11.46billionasofJune30,2024,comparedto11.46 billion as of June 30, 2024, compared to 9.26 billion as of December 31, 2023[3] - Total current assets rose to 29.10billionasofJune30,2024,upfrom29.10 billion as of June 30, 2024, up from 25.95 billion as of December 31, 2023[3] - Total non-current assets grew to 44.27billionasofJune30,2024,upfrom44.27 billion as of June 30, 2024, up from 39.98 billion as of December 31, 2023[3] - Total shareholders' equity (consolidated) increased to 16,805,049asofJune30,2024,upfrom16,805,049 as of June 30, 2024, up from 15,643,656 at December 31, 2023[6] - Consolidated investments increased to R17,205,464asofJune30,2024,upfromR17,205,464 as of June 30, 2024, up from R13,683,725 at the end of 2023, primarily driven by investments in subsidiaries[186] - The consolidated property, plant, and equipment increased to 26,455,758 from 25,668,222, with additions of 1,022,465[191] - Intangible assets increased to 3,791,204asof06.30.24,withadditionsof3,791,204 as of 06.30.24, with additions of 106,749 and disposals of 3,338[194]−Consolidatedintangibleassetsreached3,338[194] - Consolidated intangible assets reached 7,994,271, driven by additions of 107,702andexchangeratevariationsof107,702 and exchange rate variations of 301,152[195] Liabilities and Debt - Total current liabilities increased to 28.51billionasofJune30,2024,comparedto28.51 billion as of June 30, 2024, compared to 25.55 billion as of December 31, 2023[3] - Loans and borrowings under current liabilities decreased to 1.95billionasofJune30,2024,from1.95 billion as of June 30, 2024, from 2.24 billion as of December 31, 2023[3] - Trade accounts payable under current liabilities increased to 14.65billionasofJune30,2024,from14.65 billion as of June 30, 2024, from 14.01 billion as of December 31, 2023[3] - Total non-current liabilities increased to 21.59billionasofJune30,2024,comparedto21.59 billion as of June 30, 2024, compared to 19.28 billion as of December 31, 2023[3] - Loans and borrowings totaled 19,606,704,withcurrentliabilitiesat19,606,704, with current liabilities at 1,951,420 and non-current liabilities at 17,655,284[196]−Debenturesincreasedto17,655,284[196] - Debentures increased to 8,505,965, with an average rate of 12.15% and a weighted average maturity of 6.84 years[196] - Foreign currency bonds grew to 7,030,656,withanaveragerateof5.347,030,656, with an average rate of 5.34% and exchange rate variations of 917,065[196] - Gross debt increased by 13.7% to R22,079millionin2Q24comparedtoR22,079 million in 2Q24 compared to R19,414 million in the previous period[109] - Net debt decreased by 0.9% to R8,932millionin2Q24fromR8,932 million in 2Q24 from R9,016 million in 1Q24[109] Equity and Earnings - Total equity rose to 15.75billionasofJune30,2024,from15.75 billion as of June 30, 2024, from 14.92 billion as of December 31, 2023[3] - Accumulated earnings increased to 1.49billionasofJune30,2024,comparedto1.49 billion as of June 30, 2024, compared to 0 as of December 31, 2023[3] - Non-controlling interests in equity grew to 1.05billionasofJune30,2024,from1.05 billion as of June 30, 2024, from 720.23 million as of December 31, 2023[3] - Net income attributable to controlling shareholders in Q2 2024 was 1,492,745 thousand Brazilian Reais, a significant improvement from (2,392,927) thousand Brazilian Reais in Q2 2023[4] - Comprehensive income for the consolidated entity in Q2 2024 was 1,491,887 thousand Brazilian Reais, up from (2,224,381) thousand Brazilian Reais in Q2 2023[5] - Comprehensive income for the period was 1,687,636,drivenbyincomefortheperiodof1,687,636, driven by income for the period of 1,492,745[6] - Net income in 2Q24 was R1,094million,asignificantimprovementfromanetlossofR1,094 million, a significant improvement from a net loss of R1,337 million in 2Q23, representing a year-over-year increase of 181.8%[90] - Income before taxes for the Consolidated was R1,313,211fortheApril−June2024period,asignificantimprovementfromthelossofR1,313,211 for the April-June 2024 period, a significant improvement from the loss of R1,460,615 in the same period of 2023[183] Revenue and Profitability - Net sales for the consolidated entity in Q2 2024 reached 28,307,101 thousand Brazilian Reais, a significant increase from 25,382,940 thousand Brazilian Reais in Q2 2023[4] - Gross profit for the consolidated entity in Q2 2024 was 7,154,254 thousand Brazilian Reais, compared to 3,158,949 thousand Brazilian Reais in Q2 2023[4] - Operating income for the consolidated entity in Q2 2024 was 2,955,584 thousand Brazilian Reais, up from (540,644) thousand Brazilian Reais in Q2 2023[4] - Net revenue in 2Q24 reached R14,930million,a22.314,930 million, a 22.3% increase compared to 2Q23[27] - Adjusted EBITDA in 2Q24 was R2,621 million, with a margin of 17.6%, up 160.4% year-over-year[27] - Gross profit surged by 164.5% year-over-year to R3,930millionin2Q24,withagrossmarginof26.33,930 million in 2Q24, with a gross margin of 26.3%[120] - Adjusted EBITDA grew by 160.4% year-over-year to R2,621 million in 2Q24[120] - The company's net margin improved to 7.3% in 2Q24, up from -11.09% in 2Q23, reflecting a significant turnaround in profitability[90] Cash Flow and Liquidity - Consolidated net cash provided by operating activities increased to 4,187,919 thousand Brazilian Reais in 2024 Jan-Jun, up from 1,337,686 thousand Brazilian Reais in the same period of 2023[7] - Consolidated net increase in cash and cash equivalents was 2,193,194 thousand Brazilian Reais in 2024 Jan-Jun, compared to a decrease of 636,660 thousand Brazilian Reais in 2023 Jan-Jun[7] - Free cash flow in 2Q24 was R1,728million,morethandoubletheR1,728 million, more than double the R844 million recorded in 1Q24[27] - Net cash provided by operating activities improved significantly to R2,266millioninQ22024comparedtoR2,266 million in Q2 2024 compared to R743 million in Q2 2023[128] - Net cash used in investing activities decreased to R1,376millioninQ22024fromR1,376 million in Q2 2024 from R573 million in Q2 2023, reflecting lower capital expenditures[128] - Net cash provided by financing activities turned positive to R451millioninQ22024fromanegativeR451 million in Q2 2024 from a negative R1,041 million in Q2 2023, mainly due to higher debt issuance[128] - Free cash flow increased to R2,750millioninQ22024fromR2,750 million in Q2 2024 from R1,728 million in Q2 2023, driven by stronger operating cash flow[129] Operational Performance - Consolidated revenues for 2024 Jan-Jun reached 30,932,275 thousand Brazilian Reais, compared to 28,107,642 thousand Brazilian Reais in 2023 Jan-Jun[8] - Consolidated gross added value rose to 11,293,474 thousand Brazilian Reais in 2024 Jan-Jun, up from 6,821,879 thousand Brazilian Reais in 2023 Jan-Jun[8] - Consolidated net added value increased to 9,579,887 thousand Brazilian Reais in 2024 Jan-Jun, compared to 5,257,661 thousand Brazilian Reais in 2023 Jan-Jun[8] - Consolidated payroll expenses grew to 3,763,955 thousand Brazilian Reais in 2024 Jan-Jun, up from 3,168,346 thousand Brazilian Reais in 2023 Jan-Jun[8] - Consolidated taxes, fees, and contributions increased to 3,058,492 thousand Brazilian Reais in 2024 Jan-Jun, compared to 2,304,380 thousand Brazilian Reais in 2023 Jan-Jun[8] - Consolidated income (loss) from continuing operations improved to 1,687,636 thousand Brazilian Reais in 2024 Jan-Jun, compared to a loss of 2,360,901 thousand Brazilian Reais in 2023 Jan-Jun[7] - Consolidated depreciation and amortization expenses rose to 964,214 thousand Brazilian Reais in 2024 Jan-Jun, up from 870,917 thousand Brazilian Reais in 2023 Jan-Jun[7] - Consolidated financial results, net, decreased to 927,705 thousand Brazilian Reais in 2024 Jan-Jun, down from 1,959,403 thousand Brazilian Reais in 2023 Jan-Jun[7] International Operations - International segment EBITDA reached R1,500millionin2Q24,withamarginof211,500 million in 2Q24, with a margin of 21%, driven by price recovery and new market access[23] - The company gained 32 new export authorizations in 2Q24, contributing to increased export volumes and revenue[23] - International segment net operating revenues grew 16.8% year-over-year to R7.073 billion, with a gross margin increase of 16.3 percentage points to 27.3%[44] - Adjusted EBITDA for the international segment reached R1.486billion,a516.21.486 billion, a 516.2% year-over-year increase, with a margin of 21.0%[44] - BRF achieved a 38.4% market share in GCC countries, up 1.20 percentage points quarter-over-quarter, and 27.2% market share in Turkey's processed food market[45] - In Chile, Sadia's market share grew across all categories, supported by a campaign reaching over 3 million people on TV and 60 million digital impressions[50] - BRF launched 31 new SKUs, including a pork portfolio for the USA, and expanded participation in trade fairs like Sial Shanghai and FHA Singapore[49] Efficiency and Cost Management - BRF+ 2.0 program captured R374 million in efficiencies in 2Q24, bringing the total to R812millionfortheyear[24]−COGS/kgdecreasedby11.8812 million for the year[24] - COGS/kg decreased by 11.8% year-over-year and 3.1% quarter-over-quarter, driven by lower grain and oil costs and changes in product mix[34] - The company's efficiency program, BRF+, captured R374 million in savings in 2Q24 and R812millioninthefirsthalfoftheyear[75]−Thecompanyconductedone−offarbitrageoperationstoreducegrainoriginationcosts,improvingresultsinotherbusinesssegments[54]−CostofGoodsSold(COGS)increasedby2.6812 million in the first half of the year[75] - The company conducted one-off arbitrage operations to reduce grain origination costs, improving results in other business segments[54] - Cost of Goods Sold (COGS) increased by 2.6% yly and 8.3% q/q, with unit costs decreasing by 2.7% in the corporate view and 7.5% in the managerial view[73] - Operating expenses increased by 16.4% yly and 10.5% q/q, with selling expenses rising by 12.6% yly and 8.9% q/q[80] Market and Sales Performance - Unemployment rate in Brazil reached 6.9% in Q2 2024, with a 5.8% year-over-year increase in average disposable income, boosting domestic sales of processed products[35] - Sadia's 80th anniversary campaign achieved over 6 million website hits, 120 million media reach, and 1.2 million product registrations, with innovative QR code usage on packaging[39] - Pet food sales volume increased year-over-year and quarter-over-quarter, driven by Super Premium and Super Premium Natural segments[53] - Net Operational Revenues increased by 22.3% year-over-year (yly) and 11.6% quarter-over-quarter (q/q), driven by a 5.4% yly and 7.8% q/q increase in volumes sold, and a 16.0% yly and 3.5% q/q increase in average price[68] - The company's net revenue, excluding hyperinflation effects in Turkey and hedge accounting, reached R14,672 million in 2Q24, an 11.5% increase yly compared to R13,161millionin2Q23[68]FinancialInstrumentsandHedging−CumulativeNotionalExposureforderivativesinstrumentssettledin2Q24reachedUS13,161 million in 2Q23[68] Financial Instruments and Hedging - Cumulative Notional Exposure for derivatives instruments settled in 2Q24 reached US556 million, up from US306millionin1Q24[65]−ForeigncurrencytranslationgainfortheconsolidatedentityinQ22024was252,463thousandBrazilianReais,comparedto(326,446)thousandBrazilianReaisinQ22023[5]−CashflowhedgesreclassifiedtoprofitorlossfortheconsolidatedentityinQ22024was(6,618)thousandBrazilianReais,comparedto391,081thousandBrazilianReaisinQ22023[5]−Theimpactofexchangeratevariationsonmonetaryassetsandliabilities,includingderivatives,totaled+R306 million in 1Q24[65] - Foreign currency translation gain for the consolidated entity in Q2 2024 was 252,463 thousand Brazilian Reais, compared to (326,446) thousand Brazilian Reais in Q2 2023[5] - Cash flow hedges reclassified to profit or loss for the consolidated entity in Q2 2024 was (6,618) thousand Brazilian Reais, compared to 391,081 thousand Brazilian Reais in Q2 2023[5] - The impact of exchange rate variations on monetary assets and liabilities, including derivatives, totaled +R258 million in 2Q24[89] - The company's working capital in local currency as of June 30, 2024, was R492,024,withanaveragerateof10.42492,024, with an average rate of 10.42% (down from 12.28% on December 31, 2023)[197] - The export credit facility had an outstanding balance of R1,583,437 as of June 30, 2024, with an average rate of 11.99% (down from 13.26% on December 31, 2023)[197] Environmental and Social Responsibility - The company achieved 35% clean energy usage in its operations, progressing towards its 50% target by 2030[116] - BRF maintained 100% traceability of direct grain suppliers and reached 90% traceability for indirect suppliers in the Amazon and Cerrado regions[115] - The company incurred losses of R113,083duetoextremeweathereventsinRioGrandedoSul,impactingoperationsandleadingtoadditionalexpensesforrepairsanddonations[158]SubsidiariesandInvestments−BRFholds100113,083 due to extreme weather events in Rio Grande do Sul, impacting operations and leading to additional expenses for repairs and donations[158] Subsidiaries and Investments - BRF holds 100% equity in key subsidiaries such as BRF Energia S.A., BRF Foods UK Ltd., and BRF Pet S.A. in Brazil, maintaining consistent ownership from 2023 to 2024[155] - BRF GmbH's ending balance increased to 15,769,833 from 12,220,014, driven by income of 3,262,362 and capital transactions of 229,755[188] - BRF Energia S.A. received a capital increase of 10,000, contributing to an ending balance of 10,383[188] - BRF Foods UK Ltd. reported a loss of 126, resulting in an ending balance of 1,168[188] - BRF Investimentos saw a capital increase of 5,841, leading to an ending balance of 6,020[188] - Sadia Alimentos S.A. recorded a loss of 8,247, reducing its ending balance to 2,882[188] - Sadia Uruguay S.A. experienced a capital reduction of 58,515, resulting in an ending balance of 50,494[188] Tax and Legal Matters - The company recognized tax assets related to IPI, with a balance of R1,153,692 as of 06.30.24[178] - The company used PIS, COFINS, IPI, and other recoverable taxes to offset federal taxes payable in the amount of R728,107forthesix−monthperiodendedon06.30.24[180]−DeferredincometaxesincreasedtoR728,107 for the six-month period ended on 06.30.24[180] - Deferred income taxes increased to R2,206,876 for the Parent Company and R2,190,242fortheConsolidatedasofJune30,2024,upfromR2,190,242 for the Consolidated as of June 30, 2024, up from R2,054,826 and R2,052,983respectivelyattheendof2023[181][182]−TaxlossescarryforwardfortheParentCompanyandConsolidatedstoodatR2,052,983 respectively at the end of 2023[181][182] - Tax losses carryforward for the Parent Company and Consolidated stood at R2,496,088 and R2,537,169respectivelyasofJune30,2024,showingminimalchangefromDecember31,2023[181]−TheParentCompanyrecognizeddeferredincometaxesofR2,537,169 respectively as of June 30, 2024, showing minimal change from December 31, 2023[181] - The Parent Company recognized deferred income taxes of R215,367 in other comprehensive income for the period ending June 30, 2024[182] - The effective tax rate for the Consolidated was 16.7% for the April-June 2024 period, compared to 8.4% in the same period of 2023[183] - Judicial deposits for the Parent Company decreased slightly to R403,345asofJune30,2024,fromR403,345 as of June 30, 2024, from R405,450 at the beginning of the period[184] - Consolidated judicial deposits increased slightly to R415,957asofJune30,2024,fromR415,957 as of June 30, 2024, from R415,718 at the beginning of the period[185] Inventory and Receivables - Finished goods inventory increased to 2,165,594 as of 06.30.24, up from 1,988,163 on 12.31.23[171] - Raw materials inventory decreased to 880,609 as of 06.30.24, down from 1,521,744 on 12.31.23[171] - Trade accounts receivable from third parties in the domestic market decreased from R1,729,067onDecember31,2023,toR1,729,067 on December 31, 2023, to R1,570,470 on June 30, 2024[168] - Expected credit losses for trade accounts receivable increased from R(547,078)onDecember31,2023,toR(547,078) on December 31, 2023, to R(637,452) on June 30, 2024[169] - Not overdue trade accounts receivable increased from R5,532,133onDecember31,2023,toR5,532,133 on December 31, 2023, to R6,020,373 on June 30, 2024[170] - Overdue trade accounts receivable for more than 360 days increased from R521,020onDecember31,2023,toR521,020 on December 31, 2023, to R588,385 on June 30, 2024[170] Currency and Inflation Impact - The Turkish subsidiary experienced a 24.7% price index increase due to hyperinflation, affecting income before financial results and taxes by R(22,244)andrecognizingrevenueimpactingthefinancialresultbyR(22,244) and recognizing revenue impacting the financial result by R98,223[163] - The inflation adjustment in Argentina impacted the Income