A M. Dias Branco (MDIA3) recorded declines in fourth-quarter and consolidated net income for 2022, pressured by the effects of the war at Ukraine on the quotations of inputs such as wheatbut expects a more promising 2023 with lower costs and sustained average price in its portfolio, a company executive told Reuters this Friday.
The company, which is leader in biscuits and pasta markets in Brazilhad a profit of 15.5 million reais in the fourth quarter of last year, a sharp decrease of 89.7% compared to the same period in 2021, while annual profit totaled 481.8 million, a drop of 4.6%, according to the balance sheet financial.
Operating cash generation measured by Ebitda stood at BRL 121.3 million in the quarter, a reduction of 33.6% against the last three months of 2021. In the accumulated of 2022, however, it grew by 31.7% to BRL 900.4 million of reais.
“The company’s costs rose due to the rise in commodity prices in dollars, with the war between Russia and Ukraine… which are relevant players in wheat exports”, said the Executive Director of Investor Relations and New Business at M. Dias Branco, Fabio Cephaly.
He said that the entry of the national wheat harvest, in the second half of 2022, and the expansion of the cereal supply leaving Ukraine through an export corridor in the Black Sea – which cooled the commodity prices on the Chicago Stock Exchange – were not enough to cool the company’s costs still in 2022, due to its inventory carrying and hedging strategy.
In general, M. Dias has an average stock of four months for wheat and palm oil, so when the war broke out in Eastern Europe in February last year, the company had already purchased inputs at lower prices.
On the other hand, when global commodity prices began to decline, the impacts also arrived later for the company.
“I didn’t see the impact of the war at the end of Q1 and Q2. We started to see it in the third quarter and a lot in the fourth… The improvement in external prices was not seen in our 2022 results, but will be seen in the future”, he said.
According to the executive, expenses with inputs are currently decreasing and “at some point this will pass through to the quarterly results”.
“We have prospects of improving margins from now on. The cost of wheat is falling in the market and in our inventory and the story in palm oil is the same”, he added, citing that the issue of commodities is the main variable for margins at the moment.
record income
M. Dias Branco’s net revenue grew 27.7% in the fourth quarter to 2.76 billion reais and, in the year, reached a record 10.13 billion reais, an amount almost 30% higher than in 2021, mainly due to better prices and some gain in market share in the crackers, pasta and wheat flour segments.
The average price of products increased 27% in the quarter, against the same quarter of 2021, and 29% in the year, with a sequence of readjustments in the portfolio that were absorbed by the market, said Cefaly.
Sales volumes were close to stability, with slight advances, to 441.3 thousand tons in the last quarter of 2022 and 1.7 million in the year.
With this operational performance and the current average prices preserved, the executive believes that, when the cost reduction is seen in the balance sheet, the tendency is for the company to “come out stronger from the impacts of the war than when it entered”.
Source: Moneytimes
I am an author and journalist with a focus on market news. I have worked for a global news website for the past two years, writing articles on a range of topics relating to the stock market. My work has been published in international publications and I have delivered talks at both academic institutions and business conferences around the world.
