Minerva, South America’s largest beef exporter, plans to cut debt after a significant acquisition of Marfrig assets for 7.5 billion reais. Analysts express concerns over increased debt levels and management’s operational efficiency with the new plants. Minerva reported a loss in Q4 and faced challenges with regulatory approvals and market conditions. Despite these, shares rose in early trading, but analysts recommend patience regarding investment decisions.
Executives at Minerva, South America’s leading beef exporter, affirmed their commitment to reducing debt following a significant acquisition. The firm acquired certain assets from competitor Marfrig for approximately 7.5 billion reais ($1.33 billion), which raised concerns about its debt levels among analysts. They are particularly focused on Minerva’s ability to efficiently manage the newly acquired plants and generate adequate free cash to handle increasing debt responsibilities.
The regulatory approvals for the acquisition took more time than anticipated, coupled with a less favorable Brazilian cattle cycle since the deal announcement in August 2023. These factors may present short-term challenges for Minerva. Moreover, the company incurred a loss of 1.57 billion reais ($277.32 million) in the fourth quarter, which marked the first period of operation for the newly acquired plants. Despite these difficulties, Minerva’s shares increased by 7.3% in early trading.
By the end of the fourth quarter, Minerva’s net debt reached 15.6 billion reais, a significant increase of 75.9% from the previous year. This spike in debt was largely due to the borrowings needed for the Marfrig acquisition, as noted by analysts Igor Guedes and Luca Vello from Genial Investimentos. They also pointed out that adverse forex impacts contributed nearly 2 billion reais to the company’s gross debt in that quarter, raising concerns about potential breaches of debt covenants, which could restrict Minerva’s ability to pay dividends or issue new debt. Analysts advise investors to remain cautious until the company outlines a plan for capital structure optimization.
In conclusion, Minerva is committed to addressing its debt situation following a substantial acquisition from Marfrig, albeit amid operational and market challenges. The company’s increased net debt and losses in the recent quarter have raised concerns among investors, prompting caution. Nevertheless, executives emphasize the potential for cash generation to manage future financial obligations effectively.
Original Source: www.tradingview.com
