BRF plans chilled jv in eastern Europe

By Rick Pendrous

- Last updated on GMT

Brazil's vice president visited the Kizad facility in 2013 during construction
Brazil's vice president visited the Kizad facility in 2013 during construction

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BRF, the world’s 10th largest food company accounting for 14% of all poultry traded on the planet, is considering a new chilled food joint venture (jv) in central or eastern Europe. This is the next stage of a strategy to transform itself from a Brazilian commodity poultry and pig producer into an international manufacturer of added value foods.

“By 2020, I’d like to see at least a quarter of our production based outside Brazil, complementing our strong platform in Brazil,”​ said BRF’s global chief executive Pedro Faria, speaking in London recently.

International expansion not only brings in hard currency, it also reduces BRF’s dependence on the weak Brazilian Real, BRF said.

Expansion in Europe was unlikely to involve primary production facilities, said Roberto Banfi, BRF’s chief executive for Europe and Eurasia. However, he added: “We will not shy away from some sort of partnership with a local producer to be in a better position to serve​ [consumers]. A lot of the consumption in Europe is chilled and that is what we are looking towards.”

£17.82M investment

BRF plans to get closer to end markets through initiatives, such as the foodservice jv set up last May with the UK’s Invicta Food Group. The £17.82M (US$27M) investment with Invicta gave it a 62% stake in the business, which distributes processed food to pub chains in the UK and serves outlets in Ireland, Sweden, Finland, Iceland and Denmark.

In October 2014, BRF opened its largest processing facility outside Brazil, at Kizad in Abu Dhabi in the United Arab Emirates (UAE). BRF has just announced plans to expand production at the facility, increasing annual production from 72,000t to 100,000t by the end of 2016, said Faria.

BRF’s net operating sales for the third quarter of 2015 were up 14.4% to R$8.3bn (US$2.24bn) on the same period in 2014 and earnings before interest, tax, depreciation and amortisation were up 34.8% to R$1.52bn (US$0.41bn).

‘International expansion’

“BRF’s international expansion, which was intensified in the quarter, boosted the company’s results, while maintaining a strong and sustainable pace of growth,”​ Faria said.

“As the company embraces much more business globally and gets closer to consumers, we need to rethink our supply chain in a way that complements the cost competitiveness coming from Brazil with proximity to the market,”​ added Faria. “This is precisely the path we have been going in.”

BRF has expanded internationally since it was formed by the merger of Brazilian poultry processors Sadia and Perdigão in 2009. In April 2013, it restructured its senior management team and Abilio Diniz became chairman. Today, 47% of BRF’s revenues come from its home market, compared with around 60% a few years back, said Faria.

The company has around 96,000 employees, 35 industrial units in Brazil and nine plants elsewhere in the world, including six in Argentina and one each in the UK, the Netherlands and the UAE.

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