Why BRF S.A. Stock Popped Today
Shares of BRF S.A. (NYSE: BRFS) were up 15.2% as of 1:45 p.m. EDT Monday after the Brazilian pork and poultry giant announced an ambitious restructuring plan.
More specifically, BRF has approved a restructuring that will include raising 5 billion Brazilian real (or roughly $1.29 billion) from the sale of certain operational units in Thailand, Europe, and Argentina, as well as real estate, non-operational assets, and minority interests in other companies.
The move will allow BRF to focus primarily on Brazil, Asia, and other regions where it says it enjoys "a leading position and has strong competitive advantages." BRF also plans to continue implementing its separate Brazilian factory restructuring which began in March.
On the latter, CFO Lorival Nogueira noted, "Within the next 60 days, final adjustments will be implemented in 22 of the 35 plants in the country with the objective of minimizing the impact of these changes on the local communities."
To be clear, BRF shares are still down more than 42% since early March, when the company's former CEO was arrested on fraud charges as the company allegedly worked to avoid food safety checks on exports for years. Exports from BRF to the EU were later banned, leading to a painful first-quarter loss of $32 million reported in May.
But this restructuring should go a long way toward stemming BRF's losses and refocusing the business on its most profitable operations. And it's no surprise to see the stock rallying from its lows in response.
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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.