Brazil: BRF needs restructuring before Marfrig merger

MarcosMolina, the chairman of both Marfrig and BRF gave a rare interview to Bloombergto talk about the progress of an intended merger and his personal industryoutlook. In 2021, Marfrig has become BRF's largest shareholder with a 33.3%stake.

Initialplans to merge in 2019 were prevented due to governance issues. A combinationof the two companies would create the fourth largest food company in the worldby revenue, rivaling JBS and Tyson Foods. In previous projects, the synergiesof a merger were put at almost US$ 200m.

Thechairman expects grain prices to fall in 2H 2023 and 2024 and about 2-3 yearsto turn around BRF. A sale of its pet food business could cash in up to US$400m, helping to reduce financing costs in a rising interest rate environment.Moreover, 20% of the production capacity is said to idle at the moment.

For theU.S. meatpacking business he expects margins of about 5%, far below the 2021records of up to 15%.