Fitch Expects Upswing in Brazilian Beef

Larger Brazilian meatpackers should begin to see their fortunes turn around, Fitch says in a report, at the expense of struggling medium-sized competitors. Names like JBS, Marfrig, Minerva and Bertin should benefit from higher market share and better margins, as they are able to pay cash to suppliers and have strong relationships over distribution channels, while smaller names like Independencia and Arantes have filed for bankruptcy protection. “Fitch expects free cashflow generation for these [larger] companies to turn positive in 2009 as select companies not only benefit from repercussions of bankruptcy, but also from better working capital management and lower capital expenditures,” the agency says, noting that they also benefit from government support. Brazilian government recently announced that it intends to support the food sector with BRL10bn in loans through BNDES. Further government support to the sector might include the speedy return of tax credits and the elimination of taxes on meat to stimulate domestic demand, Fitch says.