High coss of feed (blamed on drought in the United States) for chicken and swine cut into third quarter profits at São Paulo-based Brasil Foods S,A., Brazil's largest maker of TV
dinners and frozen pizza, confounding analysts' estimates.
The company raised prices on hot dogs and hamburger patties in the quarter, but that wasnt enough to offset an increase in grain costs, said Ricardo Boiati, an analyst with Banco Bradesco SA in a Nov. 1 note to clients. He rated the stock equivalent to buy, which means the stock is expected to exceed Brazils Bovespa stock index by more than 10%.
Net income dropped to 90.9 million reals ($44.3 million) in the quarter. The result missed analysts estimates for a gain, excluding one-time items, of 107.8 million reals, the average of nine estimates compiled by Bloomberg. A year earlier the company had net income of 365 million reals. Costs of goods sold rose 21% to 5.67 billion reals in the quarter.
Prices for corn and soybeans, two main ingredients used to feed Brasil Food's chickens and swine, climbed 12% and 5.8%, respectively, after the worst US drought in half a century scorched fields.
