Minerva BEEF3 plans to reduce debt after acquiring Marfrig’s assets for 7.5 billion reais ($1.33 billion), amid rising concerns regarding its financial management and operational efficiency. Despite a fourth-quarter loss of 1.57 billion reais ($277.32 million), the stock price increased. Analysts urge caution until Minerva reveals its capital structure optimization plan.
Executives at Minerva BEEF3, the largest beef exporter in South America, have stated their commitment to reducing debt following a significant acquisition. The company has recently agreed to a purchase of assets from Marfrig MRFG3, totaling approximately 7.5 billion reais ($1.33 billion), which has raised concerns among analysts regarding Minerva’s debt levels.
Analysts have also questioned the management’s capacity to efficiently operate the newly acquired plants and whether there will be sufficient free cash flow to manage increased debt expenses in the future. Following the delays in regulatory approvals for the purchase and the current unfavorable Brazilian cattle cycle, the company might encounter challenges in the short term.
In the fourth quarter, Minerva reported a loss of 1.57 billion reais ($277.32 million) while beginning operations at the newly acquired plants, yet its shares saw a 7.3% increase during early trading. By the end of the fourth quarter, Minerva’s net debt escalated to 15.6 billion reais, marking a 75.9% increase from the previous year due to the necessity of borrowing for the acquisition.
Moreover, an unfavorable foreign exchange impact nearly added 2 billion reais to the gross debt during the quarter, which could lead to a possible breach of debt covenants. This situation would restrict Minerva’s ability to pay dividends, issue new debts, and might necessitate a “capital call,” as noted by analysts Igor Guedes and Luca Vello at Genial Investimentos. Prior to the quarterly report, XP analyst Lucas Alencar advised investors to “wait for the company’s capital structure optimization plan before any stock positioning.”
In summary, Minerva is focused on debt reduction following a significant acquisition amidst concerns regarding its financial management and operational efficiency. While the company faces challenges such as increased debt and unfavorable market conditions, it reported a stock price increase despite recent losses. Future strategies regarding capital structure will be crucial for investors as Minerva navigates these uncertainties.
Original Source: www.tradingview.com
