Minerva BEEF3 commits to debt reduction post-acquisition of Marfrig assets, despite concerns over debt management and operational efficiency. The company saw a significant loss in Q4 and a rise in debt levels, prompting caution among analysts and investors regarding future financial strategies.
Minerva BEEF3, the largest beef exporter in South America, has pledged to reduce its debt after completing a significant acquisition. The company has acquired certain assets from competitor Marfrig for approximately 7.5 billion reais ($1.33 billion). Analysts have raised concerns regarding Minerva’s debt levels and its operational capacity to manage the newly acquired assets effectively while generating sufficient cash flow to cover increased debt costs.
Regulatory approvals for the acquisition were more prolonged than anticipated, and the Brazilian cattle market is currently less favorable than it was during the announcement in August 2023. This situation may pose challenges for Minerva in the short term. The company reported a fourth-quarter loss of 1.57 billion reais ($277.32 million), coinciding with its first operational quarter of the new plants. Despite these hurdles, Minerva’s shares increased by 7.3% in early trading.
By the end of the fourth quarter, Minerva’s net debt rose to 15.6 billion reais, which is a 75.9% increase year-over-year, partly due to borrowings for the Marfrig acquisition. Analysts Igor Guedes and Luca Vello from Genial Investimentos noted that unfavorable foreign exchange impacts raised the gross debt by nearly 2 billion reais, potentially risking a breach of debt covenants. This could hinder dividend payouts, new debt issuance, and necessitate a capital call.
Prior to the fourth-quarter results, XP analyst Lucas Alencar advised investors to wait for Minerva’s capital structure optimization plan before making any stock decisions, signaling caution amid financial restructuring.
Minerva is focused on reducing its high debt levels after a significant acquisition from Marfrig. Challenges include managing new assets effectively and navigating an adverse economic environment. Shareholders are advised to closely monitor the company’s capital optimization plans before taking investment actions, as higher debts may impact future operational capabilities and financial flexibility.
Original Source: www.tradingview.com
