BRF SA Q2 FY2026 earnings call

Overall Strategic Positioning

• MBRF is advancing its multiprotein platform strategy, expanding market presence and increasing supply of higher value-added products to support long-term value generation.
• Merger integration is on track, with 158 million reais in planned synergies captured in the quarter, plus an additional 328 million reais in efficiencies through the MBRF+ program.
• The unified sales force in Brazil expanded the cattle product portfolio to 20,000 additional points of sale (PDVs), growing the total domestic customer base to over 340,000, and BIFA South America exports to the U.S. benefit from National Beef's existing trade and logistics platform.
• The first company-wide employee engagement survey recorded an 88% participation rate, 4 percentage points above the Brazilian corporate average and 3 points above the high-performance benchmark.

Operational Milestones

• 34 new export facility authorizations were completed in the quarter, expanding market access globally.
• The Sadia Halal IPO preparation is progressing, with the offering planned for the Riyadh Stock Exchange in Saudi Arabia.
• MBRF achieved multiple sustainability and governance recognitions, including full 100% monitoring commitment for cattle suppliers, reintegration of 113 farms into the supply chain, Brazilian GHG Protocol gold certification, CGU Pro-Ética governance certification, the launch of the first compostable trays in Brazil for meat products, and a national socio-economic inclusion award.

Segment-Specific Updates

• BIFA North America: Resilient performance even amid restricted cattle supply; average cattle live weights increased significantly as feeders extended feeding periods, and consumer beef demand remained strong despite record retail prices.
• BIFA South America: Revenue and volume growth driven by productivity gains from prior investments, higher industrial capacity utilization, and increased focus on value-added products.
• BRF: Domestic sales volume grew 4.6% sequentially, supported by strong brand performance, new product launches like the Sadia Pro line, and expanded distribution; Sadia and Perdigão retain their positions as the most chosen food brands in Brazil.

MBRF reported consolidated net revenue of R$ 40.7 billion in Q2 2026, up 4.9% year-over-year. Consolidated adjusted EBITDA was R$ 3.2 billion (up 5.4% YoY) with a 7.9% margin, and net profit totaled R$ 69 million. There are three operating segments:

1. BIFA North America: Contributed 46% of total consolidated revenue and 4% of total adjusted EBITDA. Net sales were $3.7 billion, up 14.9% YoY, with sales volume growing 2% YoY amid an industry-wide 7% decline in slaughter volume. EBITDA was $26 million, up 1.7% YoY, for an EBITDA margin of 0.7%.
2. BIFA South America: Contributed 16% of total consolidated revenue and 17% of total adjusted EBITDA. Volume reached 273,000 tons, up 8.8% YoY, while net revenue hit R$ 6.4 billion, up 26% YoY. Adjusted EBITDA was R$ 570 million, up 22% YoY, with an EBITDA margin of 8.9% (flat YoY). 62% of segment revenue comes from exports, with 53% of beef exports going to Asia, 24% to North America, and 16% to the EU.
3. BRF: Contributed 38% of total consolidated revenue and 79% of total adjusted EBITDA. Sales volume was flat YoY, while net revenue reached R$ 15.4 billion, up 1.1% YoY. Adjusted EBITDA was R$ 2.6 billion with a 16.8% margin, expanding 45 basis points YoY. Sadia Halal, a segment sub-unit, achieved a record adjusted margin of 16.1%, up 690 bps YoY, with 12-month adjusted EBITDA reaching $314 million.

• For BIFA North America, management expects second half 2026 margins to improve relative to the first half of 2026, as industry capacity reductions offset tight cattle supply, and beef demand fundamentals remain supportive through the current phase of the cattle cycle.
• Working capital consumed in the first half of 2026 due to seasonality, logistical disruptions from the Middle East conflict, and pre-building of inventory for year-end holiday events will be converted back to positive cash flow in the second half of 2026.
• Full-year 2026 CAPEX is expected to total approximately R$ 5 billion, down from R$ 6.2 billion in the last 12 months. CAPEX is targeted to decrease by a further R$ 1 billion to 3.5-4 billion reais in 2027, reaching the long-term recurring maintenance CAPEX level. Of the 2027 maintenance CAPEX range, 2.5-3 billion reais is allocated to the BRF segment, and the remaining ~1 billion reais is allocated to the combined BIFA North/South America cattle operations.
• Management expects sequential monthly improvement in BRF domestic market demand to continue through the second half of 2026, with a favorable balanced supply-demand outlook for global protein exports.
• Sadia Halal's current elevated margin (around 16% in Q2 2026) is expected to remain sustainably above the pre-conflict historical average of ~10% in the medium term, supported by stronger brand positioning, growing volume, and an ongoing shift to higher value-added products.

• The U.S. beef segment is in the trough of the 10-11 year cattle cycle, with multi-year reduced cattle supplies and compressed margins, though management notes the worst of this cycle phase is likely past.
• High leverage, with a leverage ratio of 3.41x as of Q2 2026, driven by the low contribution from BIFA North America in the current cycle and first half 2026 working capital consumption, which increases debt service costs.
• El Niño-related grain price volatility is a potential input cost risk, which management has mitigated through pre-positioned long grain positions via both physical purchases and forward contracts.
• The temporary Chinese embargo on Uruguay's Taquarembó plant creates near-term export disruption, though management notes the plant accounts for less than 30% of Uruguayan output and volumes can be redirected to other plants and markets, with no material expected impact on full-year results.
• Sustained high beef prices have reduced retail promotional activity in the U.S., limiting near-term volume growth in the quarter, even as overall core beef demand remains strong.

Q: An investor asks for the BRF segment second half 2026 outlook for the domestic market and international exports, after Q2 2026 posted stronger-than-expected margins. / A: Management says BRF domestic demand has improved sequentially month-over-month throughout the first half of 2026, driven by strong brand equity and consistent consumer prioritization of protein in Brazil. For exports, global protein prices have recovered month-over-month since December 2025, and the company's long-term strategic focus on the MENA region has positioned it to capitalize on elevated food security priorities following the Middle East conflict, with the region now importing more Brazilian chicken than Asia. Continued new market openings further diversify exposure, leading to a favorable balanced supply-demand outlook for the second half.

Q: Analyst Leonardo Alencar asks about the impact of Tyson's recent processing plant closure and the upcoming reopening of the U.S.-Mexico border on BIFA North America market dynamics. / A: Tim Klein explains that 10-12% of total U.S. processing capacity has exited the industry over the past two years (net of new capacity additions), which has rebalanced capacity with the current reduced cattle supply. The most recent Tyson closure removes an additional 3,000 head per day of capacity immediately. Gradually reopening Mexican cattle imports will not impact market supply until the second half of 2027, as imported cattle are lighter and go through grazing and feeding before processing. Management confirms the most challenging part of the current cattle cycle is now behind the industry.

Q: Analyst Matheus Enfeldt asks if there are plans for near-term portfolio adjustments, such as accelerating the Sadia Halal IPO, to reduce MBRF's currently elevated leverage, or if the company will rely on organic deleveraging via cycle improvement. / A: Management confirms that leverage is currently at the upper end of its target range, driven by the low contribution from BIFA North America in the current cycle and first half working capital consumption. Organic levers expected to gradually reduce leverage include: improving BIFA North America profitability as the cycle normalizes, continued delivery of merger synergies and efficiency gains, release of working capital to cash in the second half, and declining CAPEX starting in 2026. The Sadia Halal IPO remains an additional extraordinary lever, with a 75 million reais pre-IPO payment expected to hit cash by the end of 2026.

Q: Analyst Laura Hirata asks what the impact of the temporary Chinese embargo on Uruguay's Taquarembó plant is, and how competitive dynamics are shaping processed product pricing in Brazil's domestic market. / A: Management says the Taquarembó plant accounts for less than 30% of the company's Uruguayan output, and all volumes can be redirected to other Uruguayan plants or exported to other markets via the existing National Beef platform, so no material financial impact is expected. For processed products in Brazil, only frozen whole chicken categories have seen minor pricing pressure from industry oversupply; the rest of MBRF's processed portfolio remains resilient, supported by strong brand recognition that allows the company to offset raw material cost declines without full price pass-through.