BRF S.A. (NYSE:BRFS) Q2 2018 Earnings Conference Call - Final Transcript

Aug 10, 2018 • 09:00 am ET


BRF S.A. (NYSE:BRFS) Q2 2018 Earnings Conference Call - Final Transcript


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Good morning, ladies and gentlemen. Welcome to BRF S.A. conference call to discuss the results of the second quarter of 2018. This call is being broadcast via Internet at our website, where you'll also find the company's presentation for download. At this time, all participants are in listen-only mode. And after the company's presentation, there will be a QA session. (Operator Instructions) Forward-looking statements about the company's business perspectives, projections, results, growth potential are assumptions based on the management's expectations regarding the future of the company. Assumptions are highly dependent on market changes on the country and industry's economic conditions in our international markets. Those are subject to changes. As a reminder, this conference is being recorded.

This conference will be presented by Mr. Pedro Parente, Global CEO; and Mr. Lorival Luz, Global VP, CFO and IR Officer. Now we would like to turn the floor over to Mr. Pedro Parente, who will start the presentation.

Pedro Parente

Good morning, everyone. So let's start the presentation for the results of the second quarter of 2018. This is a quarter that has brought a very challenging environment for the company. But as you all know, this is not only for our company but also for different industries in Brazil, especially because of the truckers' strike. Now about our company. This challenging environment also is a result of a series of measures that have to do with protectionism starting in December of '17 by the Russian government measures banning imports of Brazilian protein. After that, already in this quarter, the second quarter of 2018, there was another measure by the European Union delisting 20 plants here in Brazil, and these are BRF plants. And in China, in June, also in the same quarter, they have applied temporary anti-dumping tariffs over imports of Brazilian poultry meat. These protectionist measures do have an important impact in our operations in the domestic market. We then had an oversupply because of the banning of exports, especially banning coming from Europe and Russia. I have already mentioned the truckers' strike. We'll have more details about that later on. And also as we have informed, we have performed some adjustments in our production change so that we could adjust the demand level, and that has then caused some restructuring cost. And also, as you know, there was an increase in grain cost that has also affected our gross margins. But we do have here a scenario of opportunities to recover market, and this is on the slide of the presentation. And you might experience some delay when we change the slides. So please bear with us there. And this happens in this type of conference. So as I said, we have market recovery opportunities in Brazil. We may have a recovery of market prices of In Natura and processed markets that reflect these supply adjustments. Also, we had a market opening in South Korea. And also, we have positive signs regarding the reopening of the Russian market to the Brazilian