Marfrig Global Foods S.A.

Fundamentals for the sector in Brazil have also been improving gradually as the Brazilian economy modestly rebounds and cattle availability remains high, although there are some early signs of a declining trend. Export profits with the depreciated Brazilian real and strong export volumes have supported the consolidated profitability of Marfrig and offset still sluggish domestic demand and somewhat higher cattle prices. The company should also benefit from higher beef prices due to the impact of the ASF in the global protein industry, because its exports from Brazil should directly benefit. China has recently granted export permission to additional 25 meat plants in Brazil, including two plants from Marfrig, highlighting China's appetite to intensify imports. Additionally, our assessment of Marfrig's financial

...Positive momentum in the cattle cycle in the U.S. and stronger prices resulting from ASF should support profitability. Marfrig Global Foods S.A.'s (Marfrig) U.S. beef-processing subsidiary, National Beef (NB), has had solid results, with increasing earnings and cash flows. Healthy cutout margins have been in place since the end of 2015 and are likely to continue this year and next thanks to the rebuilding of the U.S. cattle herd and the solid economy bolstering demand. Although NB doesn't export, the stronger demand for U.S. protein could improve overall margins in the sector. In a normalized scenario, lower cutout margins would likely bring EBITDA margins to the 7%-8% area, which would be sustainable from 2020 on, but still difficult to measure upside potential due to the possible effects from ASF....

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