RPT-Fitch: Latin American protein producers to benefit from improved outlook

Tue Dec 17, 2013 3:22pm EST

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RIO DE JANEIRO, December 17 (Fitch) Market fundaments for Latin America protein 
producers are expected to benefit from an improved outlook in 2014, according to
new Fitch Ratings report.  'In general, the fundamentals of the protein sector 
in Brazil are improving and are expected to be stronger in 2014. Softer grain 
prices are likely to reduce costs of chicken and pork producers,' according to 
Gisele Paolino, a Director at Fitch.  'Brazil beef producers should also benefit
from a positive cattle cycle, high beef prices in the country and demand from 
exports markets,' added Paolino.

While Fitch expects cash flow from operations (CFFO) of all rated companies to 
increase, free cash flow (FCF) trends vary depending on their strategy towards 
expansion. Fitch expects BRF, Marfrig, Minerva and JBS to improve FCF during 
next year, while Rodopa's FCF may continue to be constrained by expansion plans.

The Brazilian protein companies are expected to lower leverage during 2014 due 
to expanding EBITDA and steady debt levels. Lower input costs, strong 
international demand, focused efforts on obtaining cost efficiencies and 
improving working capital management should fuel rising CFFO.

Fitch expects demand for animal proteins to remain positive in 2014 due to 
improving global conditions and projected turnaround in the Brazilian economy. 
International demand from emerging markets remains structurally positive with a 
growing middle-class and the development of modern retail chains in those 
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