Minerva (BEEF3): shares fall sharply after disappointing results; Market attention turns to purchasing Marfrig assets

Minerva Foods (BEEF3), the largest beef exporter in South America, released its results on Wednesday night (8). The company ended the third quarter with a net profit of R$141 million, 0.3% lower than in the same period in 2022.

Earnings before interest, taxes, depreciation and amortization (Ebitda) fell 11.5% in comparison, to R$713.7 million, and revenue fell 16.2%, to R$7.068 billion.

The data was received negatively by the market and the company’s shares fell 9% at 10:55 am (Brasília time), quoted at R$7.17.

Despite this, the company’s CEO, Fernando Queiroz, considers that external movements could favor Minerva Foods in the coming quarters. “The global beef market remains very promising” stated the CEO in the conference call to comment on the results presented.

In relation to the foreign market, the executive also confirmed confidence in the recovery of the Chinese market, highlighting that the country is going through a process of Westernization of habits and that it could continue to be one of the drivers for the company in the near future.

To further encourage sales to the country, the CEO highlighted that meat from Colombia can now be exported to China. The news is positive for the name, which has plants in Colombia and is one of the country’s export leaders. Confidence in the global market for global protein was confirmed by Minerva’s CFO, Edison Ticle.

Regarding the financial results presented by the company, while the CEO stated that the quarter ended with comfortable liquidity, the CFO highlighted that the reduction in net debt, by more than R$ 200 million, as one of the highlights of the numbers presented.

“This allows us to maintain a balanced capital structure”, considers Ticle. The company’s leverage was 2.8 times and, at the end of September, 70% of the total debt was indexed to the dollar variation.

The CEO highlighted that there are no fears, in relation to Brazil, about demand. The panorama is different for the USA, since the executive considers that the cycle in the country will take time to reverse. The increase in demand in Latin America could fill the current gap in the US, according to Queiroz.

Numbers below expectations

Itaú BBA points out that Ebitda was 6% below its projection.

“As a result, we expect investors to revise downwards their EBITDA expectations for the year, probably towards the lower band of expectations of R$2.8-3.0 billion, expected a few months ago”, he assesses.

The bank sees a low positioning of investors in the stock, since the company’s investment thesis now revolves around the approval of the acquisition of slaughter plants from Marfrig MRFG3) and the expected contribution of the new assets acquired.

Bradesco BBI points out that Ebitda is below expectations, but that the meatpacking company generated positive free cash flow (R$608 million) for the second consecutive quarter, with the normalization of its working capital returning to R$581 million, while leverage financial remained practically stable compared to the previous quarter, at 2.8 times (compared to 2.7 times in 2Q23).

The bank also highlights operations with Marfrig as a major catalyst for the shares.

“The price recovery is still delayed and this supports our more cautious view on the name. Although Minerva shares are trading at 3.7 times the EV multiple, or enterprise value, over EBITDA expected for 2024, an 18% discount compared to its historical average, a reassessment of the multiples would depend on the company’s capacity to accelerate the efficiency of Marfrig’s recently acquired assets”, points out the house.

The market appears cautious regarding Marfrig’s recent acquisition of assets, the house says, and therefore the success of this new operation should be key to a recovery in share prices.