BRF(BRFS) - 2025 Q1 - Quarterly Report

Management Report Message from the Chairman The Chairman highlights consistent growth and record Q1 2025 results, attributing success to financial discipline, efficient capital allocation, and strategic market diversification. - BRF started 2025 with consistent growth and record figures, demonstrating a commitment to efficient capital allocation and financial discipline[22] - The company's market diversification strategy and focus on value-added products in strategic markets like Saudi Arabia and China have been crucial for its growth[23] Message from Management Management reports a strong Q1 2025 with doubled net income, 16% revenue growth, record adjusted EBITDA, and historic low leverage, driven by efficiency programs and strategic acquisitions. Q1 2025 Key Financial Highlights | Metric | Value | Change vs. Q1 2024 | | :--- | :--- | :--- | | Net Income | R$1.2 billion | +100% | | Net Revenue | R$15.5 billion | +16% | | Adjusted EBITDA | R$2.8 billion | +30% | | Free Cash Flow | R$1.3 billion | - | | Net Leverage | 0.54x | - | - The BRF+ efficiency program generated R$305 million in savings, contributing to increased factory occupancy and sales volume growth[26] - Strategic growth was advanced through the completion of an acquisition of a processed foods plant in China and a 26% stake in Addoha Poultry Company in Saudi Arabia[29] - Employee engagement reached 89%, an increase of 4 percentage points from 2024, placing the company above the average for high-performance companies[30] Operational and Financial Performance BRF's Q1 2025 consolidated net revenue grew 16.0% to R$15.5 billion, with adjusted EBITDA up 30.0% to R$2.75 billion, and net leverage significantly reduced to 0.54x. Consolidated Highlights Q1 2025 vs. Q1 2024 | Metric | 1Q25 | 1Q24 | Change % YoY | | :--- | :--- | :--- | :--- | | Volume (Thousand Tons) | 1,243 | 1,153 | 7.7% | | Net Revenues (R$ Million) | 15,512 | 13,378 | 16.0% | | Gross Profit (R$ Million) | 4,053 | 3,224 | 25.7% | | Net Income (R$ Million) | 1,185 | 594 | 99.6% | | Adjusted EBITDA (R$ Million) | 2,753 | 2,117 | 30.0% | | Adjusted EBITDA Margin (%) | 17.7% | 15.8% | 1.9 p.p. | | Leverage (Net Debt/Adj.EBITDA LTM) | 0.54x | 1.45x | (62.9%) | - The consolidated results for Q1 2025 were impacted by hyperinflation in Türkiye; managerial results, excluding these effects, are presented for business segment analysis[32] Brazil Segment The Brazil segment achieved strong Q1 2025 performance with 20.6% revenue growth to R$7.4 billion and 36.8% adjusted EBITDA growth to R$1.27 billion, driven by improved execution and processed product sales. Brazil Segment Financials (R$ Million) | Metric | 1Q25 | 1Q24 | Change % YoY | | :--- | :--- | :--- | :--- | | Net Operating Revenues | 7,435 | 6,162 | 20.6% | | Gross Profit | 2,060 | 1,587 | 29.8% | | Adjusted EBITDA | 1,274 | 931 | 36.8% | | Adjusted EBITDA Margin (%) | 17.1% | 15.1% | 2.0 p.p. | - Sales volume of processed products grew by 16% year-over-year, highlighting strong performance in this category[35] - The company achieved a new record low for FIFO (First-In, First-Out) discounts, demonstrating assertiveness in demand planning and production[37] - Brand campaigns were prominent, with Sadia focusing on cold cuts and its presence at Lollapalooza, Perdigão sponsoring sports events like Copa do Nordeste and NFL in Brazil, and Qualy achieving record volumes and market share in margarine[40][42][43][46] International Segment The International segment maintained healthy profitability in Q1 2025 with R$1.43 billion adjusted EBITDA and 19.1% margin, driven by export volume growth, favorable pricing, and strategic investments in the GCC. International Segment Financials (R$ Million) | Metric | 1Q25 | 1Q24 | Change % YoY | | :--- | :--- | :--- | :--- | | Net Operating Revenues | 7,483 | 6,484 | 15.4% | | Gross Profit | 1,903 | 1,497 | 27.1% | | Adjusted EBITDA | 1,426 | 1,096 | 30.1% | | Adjusted EBITDA Margin (%) | 19.1% | 16.9% | 2.2 p.p. | - The company obtained 12 new export authorizations in the quarter, including the key resumption of poultry exports to China from the Rio Verde (GO) unit[49] - In the GCC, sales volumes increased driven by Ramadan seasonality; the company announced a US$160 million investment to build a new processed products factory in Jeddah, Saudi Arabia, which will increase local production capacity from 17,000 to 57,000 tons per year[52] - In Türkiye, despite price pressure on in-natura products, the company maintained market leadership with a 25.3% total market share and 29.8% in processed products[53] Other Segments The 'Other Segments' (Ingredients and Pet Food) reported R$76 million adjusted EBITDA in Q1 2025, with reduced revenue but positive impacts from efficiency programs, an international award, and grain arbitrage. Other Segments Financials (R$ Million) | Metric | 1Q25 | 1Q24 | Change % YoY | | :--- | :--- | :--- | :--- | | Net Operating Revenues | 659 | 730 | (10.2%) | | Gross Profit | 133 | 174 | (23.6%) | | Adjusted EBITDA | 76 | 78 | (2.8%) | | Adjusted EBITDA Margin (%) | 11.5% | 10.7% | 0.8 p.p. | - In Ingredients, supply was reduced due to the BRF+ efficiency program; BRF Ingredients won first place in the F3 Krill Replacement Challenge 2025 with its chicken hydrolysate[67] - In Pet Food, the company strengthened its commercial team and unified its ERP (SAP) system across all Brazilian units to enhance synergies and savings[68] - One-off grain arbitrage operations contributed to the improvement in the absolute result of the Other Segments business[69] Consolidated Performance This section details BRF's Q1 2025 consolidated financial results, covering revenue, costs, expenses, financial results, net income, EBITDA, cash flow, and indebtedness, highlighting growth, cost management, and debt reduction. Net Operating Revenue Consolidated net operating revenue increased by 16.0% year-over-year to R$15.5 billion in Q1 2025, driven by higher sales volume and average prices, with hedge accounting protecting against exchange rate volatility. Net Operating Revenue (NOR) - Consolidated | Metric | 1Q25 | 1Q24 | Change % YoY | | :--- | :--- | :--- | :--- | | Volume (Thousand Tons) | 1,243 | 1,153 | 7.7% | | Net Operational Revenues (R$ Million) | 15,512 | 13,378 | 16.0% | | Average Price (R$/kg) | 12.48 | 11.60 | 7.6% | - The company uses derivative financial instruments for cash flow hedging to protect operating results from exchange rate volatility; the net effect of settled instruments in Q1 2025 was a reduction of R$36.771 million in the result[78][80] Costs, Expenses & Other Operating Results Consolidated cost of goods sold per kg rose 4.8% year-over-year due to higher production costs and raw material purchases, partially offset by BRF+ savings, while operating expenses as a percentage of net revenue decreased by 1.0 percentage point. Cost of Goods Sold (COGS) - Consolidated | Metric | 1Q25 | 1Q24 | Change % YoY | | :--- | :--- | :--- | :--- | | Cost of Goods Sold (R$ Million) | (11,459) | (10,153) | 12.9% | | COGS/kg (R$) | (9.22) | (8.80) | 4.8% | - The BRF+ efficiency program generated R$305 million in savings during the quarter, partially mitigating cost increases[85] Operating Expenses - Consolidated | Metric | 1Q25 | 1Q24 | Change % YoY | | :--- | :--- | :--- | :--- | | Selling Expenses (R$ Million) | (1,949) | (1,799) | 8.3% | | General & Admin Expenses (R$ Million) | (217) | (201) | 7.8% | | Operating Expenses as % of NOR | 14.0% | 15.0% | -1.0 p.p. | Net Financial Result The net financial result improved by 15.1% to an expense of R$457 million in Q1 2025, driven by increased financial revenues from a higher cash position and a positive net effect from exchange rate variations and derivatives. Net Financial Result (R$ Million) | Component | 1Q25 | 1Q24 | | :--- | :--- | :--- | | Financial Income | 366 | 274 | | Financial Expenses | (921) | (907) | | Exchange variation and derivative results, net | 98 | 95 | | Net Financial Results | (457) | (538) | - Financial revenues grew by R$92 million year-over-year, primarily due to higher interest income on a larger cash position[96] - The net effect of exchange rate variations on monetary assets/liabilities and their hedges was a gain of R$39 million, an improvement of R$45 million compared to Q1 2024[102] Net Income (Loss) The company reported a consolidated net income of R$1.185 billion in Q1 2025, a significant 99.6% increase from the prior year, driven by robust operating performance and reduced net financial expenses. Net Income (R$ Million) | Metric | 1Q25 | 1Q24 | Change % YoY | | :--- | :--- | :--- | :--- | | Net Income | 1,185 | 594 | 99.6% | | Net Margin (%) | 7.6% | 4.4% | 3.2 p.p. | Adjusted EBITDA Consolidated adjusted EBITDA for Q1 2025 increased 30.0% to R$2.753 billion, with the margin expanding by 1.9 percentage points to 17.7%, primarily due to strong operating performance and adjustments for hyperinflation in Turkey. Adjusted EBITDA Reconciliation (R$ Million) | Description | 1Q25 | 1Q24 | | :--- | :--- | :--- | | Net Income | 1,185 | 594 | | (+) Income Tax & Social Contribution | 242 | 121 | | (+) Net Financial | 457 | 538 | | (+) Depreciation & Amortization | 838 | 848 | | EBITDA | 2,723 | 2,100 | | (+) Adjustments (Hyperinflation, etc.) | 30 | 17 | | Adjusted EBITDA | 2,753 | 2,117 | Cash Flow BRF generated R$1.3 billion in free cash flow in Q1 2025, driven by strong operating profit and an improved cash conversion cycle, despite significant investment outflows for CAPEX and acquisitions. Managerial Free Cash Flow (R$ Million) | Component | 1Q25 | 1Q24 | | :--- | :--- | :--- | | Adjusted EBITDA | 2,753 | 2,117 | | Cash Flow from Operating Activities | 3,617 | 2,048 | | Cash Flow from Investments | (1,484) | (696) | | Free Cash Flow | 1,282 | 844 | - The cash conversion cycle ended Q1 2025 at -6.6 days, an improvement of 11.4 days compared to Q1 2024[109] - Total CAPEX in Q1 2025 was R$975 million, with R$383 million allocated to growth, efficiency, and support projects[111] - Investment cash flow included R$511 million for the acquisition of 26% of Addoha Poultry Company[110] Indebtedness The company significantly reduced its net debt to R$5.98 billion in Q1 2025, achieving a historic low net leverage of 0.54x, and received a 'Positive' outlook upgrade from Fitch Ratings. Debt Profile (R$ Million) | Metric | 03.31.2025 | 12.31.2024 | 03.31.2024 | | :--- | :--- | :--- | :--- | | Gross Debt | 19,582 | 21,045 | 19,414 | | Total Cash Investments | 13,600 | 12,720 | 10,397 | | Net Debt | 5,982 | 8,325 | 9,016 | - Net leverage (Net Debt / LTM Adj. EBITDA) reached a historic low of 0.54x in Q1 2025, compared to 0.79x in Q4 2024[121] - Fitch Ratings raised the outlook for BRF's credit ratings on a global corporate scale from 'stable' to 'positive'[121] - Post-quarter, the company issued R$1.25 billion in debentures, including its first-ever 15 and 20-year series, extending the proforma average debt maturity to 8.5 years[120] ESG Highlights BRF achieved significant ESG milestones in Q1 2025, including inclusion in B3's sustainability indices, top rankings in animal welfare benchmarks, and the publication of its 2024 Integrated Report. - The company was included in the ISE (Corporate Sustainability Index) and Carbon Efficient Index portfolios on the B3 stock exchange[125] - BRF was ranked as the top poultry and pork protein company in the Benchmark on Farm Animal Welfare (BBFAW), a key global ranking for farm animal welfare[127] - The company published its Integrated Report for 2024, reaffirming its commitment to transparency and governance[128] About Us This section provides an overview of BRF's corporate profile, detailing its integrated 'farm to table' model, extensive global operations, diverse product portfolio, and leading brands in key markets. - BRF operates a fully integrated business model, controlling the entire production chain from grain consumption and animal farming to processing, distribution, and point of sale[137][138] - The company has a significant global footprint, with 45 industrial facilities, a presence in approximately 120 countries, and over 100,000 employees worldwide[138][141][142] - BRF holds leading market share in key categories, including 40.5% in processed products in Brazil, 36.6% in the Gulf countries, and 25.3% in Türkiye[138][140][150] Financial Statements This section presents the primary consolidated and parent company financial statements for Q1 2025, including the Statements of Financial Position, Income, Comprehensive Income, Changes in Equity, Cash Flows, and Value Added. Statements of Financial Position The consolidated statement of financial position as of March 31, 2025, shows total assets of R$62.89 billion, total liabilities of R$45.51 billion, and total equity of R$17.38 billion. Consolidated Balance Sheet Summary (in thousands of BRL) | Account | 03.31.2025 | 12.31.2024 | | :--- | :--- | :--- | | Total Current Assets | 31,458,506 | 30,830,485 | | Total Non-Current Assets | 31,431,162 | 31,844,576 | | Total Assets | 62,889,668 | 62,675,061 | | Total Current Liabilities | 21,571,191 | 20,820,577 | | Total Non-Current Liabilities | 23,942,198 | 25,355,295 | | Total Liabilities | 45,513,389 | 46,175,872 | | Total Equity | 17,376,279 | 16,499,189 | Statements of Income (Loss) For Q1 2025, consolidated net sales reached R$15.51 billion, gross profit was R$4.05 billion, and net income attributable to controlling shareholders significantly improved to R$1.12 billion. Consolidated Income Statement Summary (in thousands of BRL) | Account | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Sales | 15,512,021 | 13,377,509 | | Gross Profit | 4,052,605 | 3,224,287 | | Income Before Financial Results and Taxes | 1,884,532 | 1,252,295 | | Income (Loss) for the Year | 1,185,070 | 593,744 | | Attributable to Controlling Shareholders | 1,124,435 | 504,993 | Statements of Comprehensive Income (Loss) The consolidated statement of comprehensive income for Q1 2025 shows a total comprehensive income of R$1.29 billion, including net income and other comprehensive income items like foreign currency translation and cash flow hedges. Consolidated Comprehensive Income Summary (in thousands of BRL) | Account | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Income for the period | 1,185,070 | 593,744 | | Other comprehensive income (loss), net | 108,342 | (61,328) | | Comprehensive income for the period | 1,293,412 | 532,416 | Statements of Changes in Equity Consolidated equity increased from R$16.50 billion to R$17.38 billion in Q1 2025, primarily driven by net income and positive other comprehensive income, partially offset by treasury share acquisitions. - Total consolidated equity increased from R$16.50 billion to R$17.38 billion during Q1 2025[9] - Key changes included income for the year (R$1.185 billion), positive other comprehensive income (R$108 million), and acquisition of treasury shares (R$417 million)[9] Statements of Cash Flows For Q1 2025, the company generated R$3.61 billion in net cash from operating activities, with net cash used in investing activities of R$1.30 billion and financing activities of R$1.15 billion, resulting in an R$887 million net increase in cash. Consolidated Cash Flow Summary (in thousands of BRL) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | 3,613,133 | 1,921,659 | | Net cash used in investing activities | (1,302,122) | (448,324) | | Net cash used in financing activities | (1,149,066) | (1,373,301) | | Net increase in cash and cash equivalents | 886,603 | 302,544 | Statements of Value Added The company generated R$5.84 billion in total value added in Q1 2025, primarily distributed to employees, government, and shareholders. Distribution of Added Value - Q1 2025 (in thousands of BRL) | Distribution | Amount | | :--- | :--- | | Payroll | 2,034,325 | | Taxes, Fees and Contributions | 1,722,584 | | Capital Remuneration from Third Parties | 893,403 | | Interest on Own-Capital (Shareholders) | 1,185,070 | | Total Value Added Distributed | 5,835,382 | Notes to the Financial Statements This section provides detailed disclosures supporting the primary financial statements, covering operations, accounting policies, risk management, segment information, related party transactions, and post-period events. Note 1. Company's Operations This note describes BRF's global food business, recent climate event impacts, a plant fire, and strategic acquisitions including stakes in Addoha Poultry and Gelprime, and a processed foods factory in China. - BRF is a Brazilian multinational food company focused on raising, producing, and selling poultry and pork products, with a portfolio of well-known brands[155][156][157] - The company was affected by climate events in Rio Grande do Sul in May 2024, resulting in shutdowns and additional expenses of R$1.184 million recognized in COGS[163][164] - Key strategic moves include the acquisition of 26% of Addoha Poultry Company in Saudi Arabia for R$511 million, the acquisition of a processed foods factory in Henan, China, and an agreement to acquire 50% of gelatin producer Gelprime[168][169][171][173] Note 23. Financial instruments and risk management This note details the company's management of credit, liquidity, and market risks, outlining its capital structure, debt profile (R$19.6 billion gross, R$6.0 billion net), and derivative instruments used for hedging. Consolidated Net Debt as of March 31, 2025 (in thousands of BRL) | Component | Amount | | :--- | :--- | | Gross debt | (19,581,762) | | Cash and cash equivalents | 12,051,967 | | Marketable securities | 1,220,922 | | Restricted cash | 326,973 | | Net debt | (5,981,900) | - The company actively manages market risks using derivative financial instruments, including foreign exchange, commodity price, and interest rate hedges, with detailed positions provided for each risk category[283][285][296][302] - A sensitivity analysis shows the potential impact of fluctuations in exchange rates and commodity prices on the company's results; for example, a 15% appreciation of the USD against the BRL would have a net positive effect of R$223.8 million on operating results from hedged USD revenues[310][314] Note 24. Segment Information The company reports operations across Brazil, International, and Other segments, with Brazil and International segments showing nearly equal net sales of R$7.4 billion each in Q1 2025. Consolidated Net Sales by Segment (Q1 2025, in thousands of BRL) | Segment | Net Sales | | :--- | :--- | | Brazil | 7,434,554 | | International | 7,422,052 | | Other segments | 655,415 | | Total | 15,512,021 | Consolidated Gross Profit by Segment (Q1 2025, in thousands of BRL) | Segment | Gross Profit | Margin (%) | | :--- | :--- | :--- | | Brazil | 2,060,004 | 27.7% | | International | 1,860,495 | 25.1% | | Other segments | 133,290 | 20.3% | Note 28. Related parties This note discloses transactions with related parties, including significant intercompany balances and total remuneration for key management personnel, which amounted to R$24.4 million in Q1 2025. - The company has significant intercompany transactions, including export pre-payments from its trading subsidiaries to the parent company[336] Management Remuneration (Q1, in thousands of BRL) | Category | 2025 | 2024 | | :--- | :--- | :--- | | Salary and profit sharing | 21,362 | 15,404 | | Share-based payment | 1,975 | 4,515 | | Total | 24,364 | 21,172 | Note 31. Events after the reporting period This note details significant post-reporting period events, including Board approval for a US$160 million factory in Saudi Arabia, a R$1.25 billion debenture issuance, and a proposed share merger with Marfrig Global Foods S.A. - On April 21, 2025, the Board approved a ~US$160 million investment to build a new processed products factory in Jeddah, Saudi Arabia, increasing local production capacity to 57,000 tons/year[343][344] - On April 23, 2025, the company settled its sixth issuance of debentures, totaling R$1.25 billion[345] - On May 15, 2025, the boards of BRF and Marfrig approved a plan for a merger of shares, where BRF would become a wholly-owned subsidiary of Marfrig; BRF shareholders would receive 0.8521 Marfrig shares for each BRF share[349][350] Declarations and Opinions This section contains formal reports and opinions from independent auditors, the Audit and Integrity Committee, and the Executive Board, all supporting the approval of the Q1 2025 financial statements. Independent Auditors' Report The independent auditors, Grant Thornton Auditores Independentes Ltda., concluded that the interim financial information for Q1 2025 was prepared, in all material respects, in accordance with relevant accounting standards. - The auditors issued an unmodified conclusion on the interim financial statements, stating they are not aware of any material misstatements[360] Opinion of the Audit and Integrity Committee The Audit and Integrity Committee examined the Q1 2025 interim financial information and related reports, finding no significant divergences and recommending approval of the financial information. - The Audit and Integrity Committee found no significant disagreements and recommended the approval of the interim financial statements[364] Opinion of Executive Board The Executive Board of BRF S.A. formally reviewed, discussed, and agreed with the company's Q1 2025 interim financial information and the independent auditor's report. - The Executive Board declared its agreement with the Q1 2025 financial statements and the independent auditor's report[366]