Marfrig Global Foods SA
BOVESPA:MRFG3
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Marfrig Global Foods SA
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[Foreign Language] Good morning, everyone, and thank you for waiting. Welcome to Marfrig Global Foods S.A Second Quarter of 2020 Results Conference Call. With us here today we have Mr. Marcos Molina, Founder and Chairman; Tim Klein, Chief Executive Officer of North America Operations; Mr. Miguel Gularte, Chief Executive Officer of South America; Mr. Tang David, chief Financial and Investor Relations Officer; Mr. Paulo Pianez, Sustainability and Communications Director and Mr. Rafael Braz, Investor Relations Director. This event is being recorded. [Operator Instructions]
This event is also being broadcast live via webcast and may be accessed through Marfrig website at https://ri.marfrig.com.br/, where the presentation is also available. Participants may view the slides in any order they wish.
The replay will be available shortly after the events conclude. Those following the presentation via webcast may post their questions on our website. They will be answered by the IR team after the conference is finished.
Before proceeding, let me mention the forward statements are based on the beliefs and assumptions of Marfrig Global Foods S.A. management and our information currently available to the company. They involve risks and uncertainties because they relate to future events and therefore, depend on circumstances that may or may not occur.
Investors and analysts should understand the conditions related to macroeconomic conditions industry and other factors could also cause results to differ materially from those expressed in such forward-looking statements.
[Foreign Language] Now I'll turn the conference over to Mr. Marcos Molina. Mr. Molina, you may begin your presentation.
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Thank you, Marcos. Good morning, everyone. Let's begin on Slide #5. In the third quarter, National Beef posted net revenue of $2.2 billion, down 0.6% from a year ago. As we began the quarter, the effects of the COVID pandemic had softened and both cattle and box beef markets return to more normal, cyclical and seasonal levels. For the quarter, industry slaughter, shown in the third graph from the right-hand side, was up slightly from a year ago as all plants returned to normal schedules.
During the same period, our slaughter was also up slightly, allowing our market share to remain flat with a year ago. Beef demand, both domestic and international, remain strong, allowing the industry to maintain stable cutoff prices and operate at near full capacity.
Please move now to Slide 6. The backlog of cattle resulting from reduced slaughter levels in the second quarter allowed package to gain marginal leverage and widen the spread between cutout values and cattle prices. For the quarter, we posted an adjusted EBITDA of $321 million, relatively flat with a year ago. These results are particularly impressive given they include $31.7 million of incremental COVID-related expenses and if you remember, Q3 of 2019 was positively impacted by a fire at one of Tyson's beef plants.
I believe these results compare favorably with those of our peers. Our team is ready and able to manage through any future unusual or unexpected shocks as they may occur. As we move into the fourth quarter, plentiful supply of cattle and the continued strong demand for beef should provide the opportunity to manage historically wide margins for the foreseeable future. USDA monthly cattle inventory data continues to suggest that Fed cattle supplies will not peak until sometime in 2022.
Our top priority continues to be the safety of our employees. We continue to work with government agencies, industry groups and others to ensure our best practices are implemented in our plants. The learnings of the past several months will serve us well in the event, there is a resurgence of COVID in our facilities. If that were to occur, I am confident we will again manage our way through it effectively.
Now I'll pass to Miguel.
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[Foreign Language] [Operator Instructions] Our next question comes from Luciana de Carvalho from Banco de Brasil.
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[Foreign Language] Our next question comes from Mr. Guilerme palates from Bank of America.
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Our next question comes from Andre from Itau.
[Foreign Language] Congratulation on the results. My question to you would be your expectations for results regarding 2021 and maybe even 2022. When we look into cattle prices, we're seeing cattle prices still at low levels. Targets weights are still higher. So 2021 looks like a very solid year. What are your expectations going forward? I mean, when we think about disposable income and when we think about consumer preference, how should we think that results evolving maybe post 2021?
Well, it's pretty difficult to project out that far, but I can say that 2021, based on what we see in the data that we get from USDA as far as cattle supplies is all going to be in our favor. We're on the right side of the cycle yet. With the backlog that occurred in Q2, we expect the peak supplies not to occur until sometime in 2022.
The backdrop to all that has been very good demand for beef, both domestic and international that I think will provide a margin structure that's very favorable for the beef industry in 2021.
Just a follow-up here. When we think about 2021, I mean, 2020 is probably an off-the-chart year, but 2019 would be a good comparable base. Would that be a fair assessment?
Yes.
Perfect. I'll now ask my question to Miguel. [Foreign Language]
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[Foreign Language] Our next question comes from Felipe Vieira from Crédit Suisse.
[Foreign Language] If I can change to follow. So Tim, I would like to start reparties. You mentioned in previous calls, that does not make sense greenfield projects in the U.S. currently, given the actual stage of the cattle side of the U.S., right? But with specifically for national beef, does make sense, new strategic acquisitions of plant, given the favorable supply in the next quarters, but you previously commented in your last question, like mentioned on the main [indiscernible] in the last year?
Yes. Good question. We would certainly be interested in an acquisition of a beef processing facility if 1 was available for sale to further our footprint and lessen their geographic concentration.
So that's certainly a possibility. Beyond that, our CapEx dollars are going to be spent on projects that add value to our commodity products. So it would be things like further processing, case ready, which we're already doing hamburger patties. Those all allow us to convert commodity products to value added.
So that's where we're looking for strategic opportunities to expand but certainly, if there was a processing facility available, we would look at that as well.
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[Foreign Language] This concludes today's question-and-answer session and this concludes Marfrig Global Foods S.A. conference call for today. Thank you very much for your participation, and have a nice day.