Poultry and pork producer BRF S.A. expects the COVID-19 pandemic to affect Brazil’s meat supply this year as producers have already started to reduce animal confinement preventively, Chief Executive Officer Lorival Luz said.
“The greatest challenge will be on the supply side and on the industry’s capacity to continue to supplying products in the same way,” he said, in a press conference call on Monday.
The Brazilian industry has taken preventive measures to avoid the spread of the COVID-19 earlier than in the United States and is prepared to face potential issues, according to the executive. But Luz didn’t discard risks of supply disruptions in the Brazilian market in the near future due to the possible closures of factories.
BRF’s poultry processing facility in Lajeado, in Brazil’s southernmost state of Rio Grande do Sul, was forced by a local judge to halt operations for 15 days from Monday.
Brazilian prosecutors and local authorities have been asking local judges to force meat companies to comply with preventive measures or shut down operations temporarily when they deem necessary to control outbreaks.
BRF has so far hired additional 1,700 temporary workers to replace employees removed from work at its Brazilian production facilities. People at the higher risk group for the disease, workers with symptoms or confirmation for COVID-19, and employees who have had contact with ill people have been removed from work.
Luz said the company could potentially increase the number of temporary workers in Brazil to 5,000 by June to ensure supply to its Brazilian and international clients.
“Our priority is maintaining production capacity. Operational costs at the current conditions have been higher and we will have an impact in the second quarter,” he said in a conference call with analysts, adding that the additional costs won’t have a significant effect on the company’s overall results.
Despite the adverse effects of the COVID-19, BRF sees acquisition opportunities arising.
The company announced late Friday the purchase of a food processing plant in Saudi Arabia for $8 million. BRF plans to invest $7.2 million to expand the production capacity of the Joody Al Sharqiya Food Production Factory from 3,600 metric tons to 18,000 metric tons per year as demand in the region increases. The factory produces breaded and marinated cuts and hamburgers.
BRF reported a net loss of BRL38 million ($6.5 million) in the first quarter of 2020, compared to a loss of BRL1 billion ($170 million) in the same quarter of 2019. Net revenue increased by 21.6% to BRL8.9 billion ($1.5 million) due to higher sales volumes and prices.
The damage done by African Swine Fever (AFS) continued to boost demand from China, and BRF’s volumes to the Asian country increased by 89.5% in the first quarter of 2020, year-on-year.
“The AFS is still there, halving China’s hog production, and there is no sign of a resumption (in local production to normal levels). This reinforces what we’ve been saying, that 2020 will be a relevant year of strong demand and prices,” Luz said.
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