BRF Brasil Foods Aims for Regulators to Approve Merger in 2011 (DJ)

Source: Dow Jones Newswires

(dated 17/11/2010)

Nov 17 – Brazilian food giant BRF Brasil Foods expects to secure regulatory approval for its long-awaited merger some time in 2011, company officials said Tuesday.

Brazil’s antitrust authority “has been assessing the merger for over one year and the process is slow,” Jose Antonio do Prado Fay, the company’s president told analysts during a conference call on Tuesday.

Brasil Foods, which operates in 140 countries, was formed in May 2009 by the merger of food producers Perdigao SA and Sadia SA. The company hasn’t been able to carry out a full integration because it’s still waiting for the approvals.

Last year, Perdigao and Sadia committed to keep their distribution units separate until a final ruling is made.

In June, Brasil Foods said that it is confident of a speedy decision. The meat company argued that in the absence of relevant barriers to entry, the intense competition and the development of substantial cost savings and efficiencies, BRF was confident that Cade will approve the transaction.

As Brasil Foods awaits antitrust approval, Fay said it is working on some 200 integration projects, which should lead to cost savings. “We aren’t standing still,” he said.

Rafael Cintra, an analyst at Link Investimentos in Sao Paulo, said that Brasil Foods had expected to secure Cade’s approval this year and the delay is “the biggest concern hanging over the company.”

If Brasil Foods can get Cade’s approval in the first half of 2011, the company can begin to secure costs savings by integrating its operations. Brasil Foods should be able to secure almost 500 million Brazilian reais ($287 million) between 2011 and 2012 from savings such as combining logistics activities, Cintra said.

Brasil Foods’ shares on Tuesday fell 0.91% to BRL24.91.

Brasil Foods reported a third-quarter net profit of BRL190 million, down 10% from the year-earlier period. Earnings before interest, taxes, depreciation and amortization, a measurement of operating performance, for the third quarter was 614 million, up 111% from a year earlier, the company said.

Brasil Foods also reported strong net sales up 8% to BRL5.7 billion in the third quarter compared to a year ago spurred by strong demand for meat in Brazil and overseas.

Brazil’s expanding economy is allowing more people to eat ever-more poultry and meat products. Export demand for meat was strong in the Middle East, Asia and other emerging markets, Fay said.

As a result, Brasil Foods saw meat sales in Brazil rise 5% to BRL2.6 billion and exports up 6% to BRL2.4 billion in the quarter compared to a year ago.

The company warned, however, that rising costs of grains such as corn and soy, used for animal feed, could impinge on costs in the quarter. Brasil Foods is therefore likely to raise export prices in U.S. dollar by 10%-15% in 2011, the company said.