October 29, 2019 / 12:55 PM / 23 days ago

Brazil's BRF to invest $120 mln in Saudi chicken processing plant

SÃO PAULO (Reuters) - Brazilian food processor BRF SA (BRFS3.SA) on Tuesday announced an agreement to invest around $120 million to build its first chicken processing plant in Saudi Arabia in a bid to strengthen its position in a key growth market.

The company, the largest food exporter in the Gulf region, has four production facilities in the Middle East, where increasing populations will lift demand for food.

BRF shares rose marginally on the news, up 0.70% to 35.85 reais in late afternoon trading.

BRF currently serves the Saudi market through eight plants in Brazil and a factory in Abu Dhabi.

Earlier this month BRF said its Abu Dhabi plant was being audited and that Saudi Arabia had restricted buying of some of its products.

Asked whether agreeing on an investment on Saudi soil was a pre-emptive move against protectionism, Chief Financial Officer Carlos Moura downplayed the idea.

“The BRF move is that of a protagonist. It is not purely and simply defensive. We have a long history in the region,” he told Reuters in an interview.

The investment underscores BRF’s goal to remain a leading supplier to countries of the Gulf, he said.

Most of the output from the new plant, estimated at around 50,000 tonnes per year, would be for the Saudi market, but can also be directed to neighboring countries.

BRF, which has operated in the Middle East since the 1970s, said the plant’s product portfolio will include breaded and marinated products and burgers, among others.

The plan is to start operating the new plant by end-2021, Moura said.

According to the USDA, Saudi Arabia’s chicken production in 2019 is forecast at 730,000 tonnes and is projected to increase to 750,000 tonnes next year. Chicken consumption this year is estimated at 1.33 million tonnes and is forecast to reach 1.38 million tonnes in 2020.

BRF said the precise location, investment schedule and capital structure of its Saudi Arabia factory would be determined later.

Moura declined to discuss financing for the project in detail, but said there is “no obligation” to take out loans in the region. The plant will generate 1,000 direct and indirect jobs and will be 100% owned by BRF, he said.

The halal market, which requires an animal be slaughtered in accordance with Muslim rules for its meat to be allowed for consumption, represented about 27% of BRF global food volumes, generating net sales of 2.4 billion reais ($602 million) in the second quarter.

Reporting by Jamie McGeever and Ana Mano, Editing by Louise Heavens, Alison Williams and Dan Grebler

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