Executive Summary / Key Takeaways

• BRF S.A. has undergone a significant transformation, achieving record financial performance, including a best-ever EBITDA of BRL 10.5 billion in 2024 and the lowest leverage in its history at 0.43x LTM EBITDA by Q2 2025, driven by its BRF+ efficiency program and strategic market diversification.
• The company's core investment thesis centers on its enhanced resilience, strong brand portfolio, and aggressive expansion into value-added products and international markets, particularly in the Halal segment and Asia, which mitigates commodity volatility and regional risks.
• BRF is leveraging advanced technologies like AI, machine learning, and robotics across its operations, from smart buying to recruitment, to drive continuous efficiency gains and maintain a competitive edge in a dynamic global food industry.
• Despite facing challenges such as avian influenza and regional market closures, BRF's robust contingency plans, extensive network of export permits (198 new since 2022), and strong domestic market execution have allowed it to reallocate products and sustain profitability.
• The outlook for 2025 and beyond anticipates continued growth, supported by a favorable grain scenario, stable protein demand, and a substantial CapEx pipeline focused on expanding capacity in high-conviction, processed product categories, signaling a "new chapter of growth" for the company.

BRF's Resilient Transformation and Market Dominance

BRF S.A. stands as a global food company, a dominant force in the poultry, pork, and processed foods sectors. Its strategic evolution, particularly since the launch of the BRF+ program in September 2022, has reshaped its operational landscape, emphasizing efficiency, growth, and broad market diversification. This transformation has been instrumental in solidifying BRF's position within the competitive global food industry. The company's foundational strengths are rooted in its iconic brands, Sadia and Perdigão, which celebrated their 8th and 9th anniversaries in 2024, respectively, underscoring their deep-seated consumer loyalty and market presence.

The broader industry is characterized by a delicate balance between supply and demand, with global protein consumption consistently outpacing production growth. Management observes a "perfect balance between offer and demand" for chicken, poultry, and beef, suggesting that demand will "keep overcoming the demand," which is a favorable long-term trend for BRF. This stable demand environment, coupled with a projected "fairly stable" grain scenario for the second half of 2025 and into 2026 due to record harvests, provides a strong tailwind for the company's input costs.

Competitive Landscape and Strategic Positioning

BRF operates in a highly competitive global arena, directly contending with industry giants such such as Tyson Foods (TSN), JBS S.A. (JBS), Pilgrim's Pride (PPC), and Hormel Foods (HRL). BRF's competitive edge is primarily derived from its robust brand portfolio and extensive global distribution channels. Its brands, Sadia and Perdigão, foster strong customer loyalty and pricing power, particularly in Latin America, where BRF is a leading player. This brand strength allows BRF to differentiate itself in consumer-facing segments, potentially leading to higher gross margins compared to competitors like JBS, which often focuses on commodity-scale production.

BRF's global distribution network facilitates efficient market access, supporting superior growth and capital efficiency. This broad reach helps BRF counter the U.S.-centric strengths of companies like Pilgrim's Pride, reducing its vulnerability to regional disruptions. However, BRF faces competitive disadvantages in supply chain dependencies and exposure to regulatory risks, which can impact costs and strategic execution. For instance, while Tyson Foods benefits from a more integrated domestic infrastructure, BRF's strategy of aggressive international diversification, evidenced by 198 new export permits secured since 2022, provides flexibility to mitigate regional market closures and maximize prices through product reallocation.

In terms of financial performance, BRF's TTM Gross Profit Margin of 26.03% and EBITDA Margin of 18.61% demonstrate solid profitability. While direct, real-time comparable TTM margins for all competitors are not available, BRF's focus on value-added products and efficiency gains positions it to maintain healthy margins.

For example, Tyson Foods' (TSN) P/E ratio of 24.42 and JBS's (JBS) P/E ratio of 1.95, along with Pilgrim's Pride's (PPC) P/E of 7.83 and Hormel Foods' (HRL) P/E of 17.79, provide a snapshot of varying market valuations across the industry. BRF's TTM P/E ratio of 8.06 suggests it trades at a discount compared to some peers, highlighting potential upside. Indirect competitors, such as plant-based food companies like Beyond Meat (BYND), also pose a threat by offering alternative proteins, which could shift consumer preferences and impact demand for traditional meat products. BRF addresses this by expanding its value-added portfolio and focusing on innovation.

Technological Differentiation and Innovation

BRF is strategically leveraging advanced technology to enhance its operational efficiency and maintain a competitive moat. The company has integrated robotics, machine learning, artificial intelligence (AI), and generative AI across various functions. This technological adoption is not merely for incremental improvements but for fundamental shifts in how BRF operates.

For instance, BRF employs computer vision for analyzing chickens, algorithms for generating consumer requests and managing supplies, and a "smart buyer" system that utilizes generative AI to understand recent negotiations and define target prices based on historical data. In human resources, "smart recruitment" tools assist in selecting and triaging candidates, while internal chatbots like "Sophia" serve HR and customer service needs.

The tangible benefits of these technologies are quantifiable and directly impact BRF's financial performance and market positioning. These innovations contribute to improved operational efficiency, leading to better yield indicators in poultry and swine, and higher plant utilization. The "smart buyer" system, for example, aims to optimize procurement costs, directly impacting the Cost of Products Sold (CPV). The enhanced efficiency and data-driven decision-making provide BRF with a competitive edge, allowing for timely responses to market changes and more assertive strategic execution. This technological roadmap is foundational to BRF's long-term growth strategy, enabling it to achieve higher profitability, lower costs, and a stronger market position in a rapidly evolving industry.

Financial Performance: A Story of Turnaround and Strength

BRF has demonstrated a remarkable financial turnaround, culminating in record-breaking results. For the full year 2024, the company reported a record EBITDA of BRL 10.5 billion, the most significant since its inception, on a net revenue of BRL 61.4 billion, a 14% increase over 2023. This robust performance translated into a net profit of BRL 3.7 billion for the year. The momentum continued into 2025, with Q1 2025 net revenue reaching BRL 15.5 billion, up 16% year-over-year, and an EBITDA of BRL 2.8 billion, marking the best first quarter in company history. Q2 2025 further solidified this trend, with net revenue of BRL 15.4 billion and EBITDA of BRL 2.5 billion, contributing to a best-ever first half EBITDA of BRL 5.3 billion and net income of BRL 1.9 billion.

Profitability metrics reflect this operational excellence. The gross profit for Q2 2025 stood at BRL 4.2 billion, a 7% increase from Q2 2024, with a profitability of 26.9%. The Brazil segment, a significant contributor, achieved an EBITDA of BRL 1.3 billion with a 16.4% margin in Q2 2025, driven by successive volume growth in processed products. The International market also posted healthy margins, exceeding 19% in Q1 2025 and reaching 17.3% in Q2 2025. This strong performance is a direct reflection of the BRF+ efficiency program, which has captured approximately BRL 4 billion in operational efficiencies since its launch in September 2022, including BRL 208 million in Q2 2025 alone.

BRF's liquidity and capital structure have also seen significant improvement. Free cash flow for Q2 2025 was approximately BRL 850 million, or BRL 1.3 billion excluding acquisitions and exchange rate variations. The company achieved its lowest leverage in history, reaching 0.43x LTM EBITDA in Q2 2025, a substantial reduction from 2 times in 2023. Net debt decreased to BRL 4.7 billion in Q2 2025, down from BRL 8.3 billion in Q4 2024.

This deleveraging, coupled with a diversified and long-term debt profile, provides BRF with a comfortable liquidity position and is expected to lead to lower interest expenses in 2025. The company's free cash generation in 2024, converting over 60% of EBITDA into free cash, underscores its financial strength and ability to fund future growth.

Operational Excellence and Strategic Initiatives

BRF's operational achievements are a testament to its strategic vision. In Brazil, the company achieved its highest second-quarter sales volume, expanding its customer base to over 330,000 points of sale. This growth was fueled by increased product assortment, greater adherence to suggested pricing, and the successful launch of new products in categories like pies, ready-to-eat snacks, and pork cuts. The partnership with Marfrig brands has also positively impacted the expansion of BRF's hamburger portfolio, leveraging the combined distribution strength.

The International segment has been a key driver of growth and resilience. Geographic diversification proved crucial in mitigating the impact of avian influenza restrictions on chicken exports in Q2 2025. In the Halal market, BRF launched the Sadia Fresh chilled chicken line in Saudi Arabia through its investment in Addoha Poultry and gained 1.4 percentage points of market share in processed products in the GCC. In Turkey, processed product volumes grew 7% year-over-year, with Sadia and Banvit maintaining market share leadership. The company's expansion efforts are further highlighted by 11 new export authorizations in 2025, bringing the total to 198 since 2022, enabling price maximization and offsetting export restrictions.

Strategic inorganic growth initiatives are also central to BRF's expansion. The acquisition of a processed food plant in Henan, China, and a 26% stake in Addoha Poultry Company in Saudi Arabia in Q1 2025, along with the planned construction of a new processed food plant in Jeddah, Saudi Arabia, underscore BRF's commitment to strengthening its presence in key international markets and expanding its value-added portfolio. The acquisition of 50% of Gelprime in 2024 marked a strategic entry into the gelatin and collagen segment, leveraging higher profitability and a competitive advantage from raw material. The Sadia brand is also being strategically positioned as a global brand for beef expansion, including beef cuts in the international market.

Outlook and Growth Trajectory

BRF's outlook for 2025 and beyond is characterized by a "new chapter of growth," driven by a combination of sustained efficiency gains, strategic investments, and favorable market dynamics. Management anticipates a "retraction for the cost of animal feed around 2% in the second half of the year," with soybean flour orders prolonged into Q1 2026, signaling a positive trend for input costs. In Brazil, the company expects "stable demand" and "resilient prices," with potential for "new rounds" of price adjustments in processed products in Q3 2025.

The company is actively investing in expanding its production capacity, particularly in processed, frozen, and dairy/curd product categories, where past idle capacity has largely been utilized. BRF has a project pipeline of BRL 1 billion for evaluation, with a focus on brownfield expansions. Management projects that these investments, upon maturity, could add an "additional growth of 3% to 5%" to volumes. CapEx in 2025 is expected to be "more intense" than in 2024 and 2023, reflecting this growth-oriented strategy. Furthermore, BRF has approximately 50 new export registrations in its pipeline for 2025, which will continue to enhance its global reach and flexibility. The company also expects the reopening of the Chinese and European markets for Brazilian chicken exports in the "next coming days or weeks," which would further normalize inventory levels.

Risks and Resilience

Despite a positive outlook, BRF operates in an industry susceptible to various risks. Animal health issues, such as avian influenza and Newcastle disease, pose significant threats, leading to export restrictions and market closures. The Q2 2025 quarter was "marked by restrictions and poultry exports" due to avian influenza, and the Chinese and European markets remain closed to Brazilian chicken exports. However, BRF has demonstrated enhanced resilience in mitigating these impacts. The company's experience with Newcastle disease in 2024 led to improved contingency plans, including transparent communication with international bodies and the strategic reallocation of products to other destinations or the domestic market. Its 198 new export permits since 2022 have been "extremely assertive" in navigating such episodes.

Commodity price volatility, particularly for grains, remains a factor. While a "fairly stable" grain scenario is projected, the additional demand for corn, potentially reaching 40 million tons, could lead to increased competitiveness in certain Brazilian states. BRF is proactively addressing this by exploring alternative feed ingredients like DDGs and sorghum to maintain cost efficiency. Labor costs, correlated with inflation, are also a consideration, with full employment potentially leading to higher wage adjustments. However, management believes this will not "significantly change the representativeness of the labor cost in regards to the total cost of sold product." BRF's strong domestic brands, Sadia and Perdigão, provide a crucial buffer, allowing the company to redirect products to the internal market during export disruptions, thereby mitigating financial impact. The company's continuous learning approach and robust data intelligence system further enhance its ability to make timely and effective decisions in challenging scenarios.

Conclusion

BRF S.A. has successfully executed a profound transformation, emerging as a financially robust and strategically agile global food company. The core investment thesis is underpinned by its unwavering commitment to operational efficiency through the BRF+ program, aggressive market diversification, and a strategic pivot towards high-value-added products. This narrative of resilience is vividly illustrated by record financial achievements, including its best-ever EBITDA and historically low leverage, even amidst significant industry challenges like avian influenza.

The company's competitive standing is strengthened by its iconic brands and extensive global distribution, while its proactive adoption of advanced technologies is creating a sustainable competitive moat. Looking ahead, BRF is poised for continued growth, fueled by a substantial investment pipeline in processed categories and a favorable macroeconomic environment. While risks inherent to the agricultural sector persist, BRF's proven ability to mitigate these through robust contingency planning and strategic flexibility, coupled with its technological leadership, positions it favorably for sustained value creation for discerning investors.