Minerva has a comfortable repayment schedule

Minerva (BB / - / BB) reported neutral 1Q21 results, demonstrating stable revenue growth but lower margins. Revenue rose 13% y-o-y, but EBITDA declined 3% due to the devaluation of the Brazilian real. In local currency, the financial performance looks much better. Management said that while Brazil's domestic market (16% of gross revenue) remains problematic, exports (28% of gross revenue) improved by the end of Q1 21 - early Q2 21. The latest data on Brazilian beef exports confirms this trend.

Net leverage for the quarter rose slightly qoq to 3.0x in dollar terms, but is still under control, especially when compared to historical levels (> 3.5x). Minerva's liquidity position remains strong. The company has cash assets of $ 1.1 billion, which multiples of its short-term liabilities. The repayment schedule looks comfortable for a long time and is not a cause for concern. We forecast that the company's free cash flow in the amount of $ 250-300 million by the end of 2021. We like the dollar issue of Eurobonds maturing in January 2028 (USL6401PAH66). The securities with a duration of 5.4 years are traded with a yield of 3.4% per annum.

Minerva S.A. is the calf of the Brazilian cattle industry, but it's moo-ving up. The country's fourth-largest beef company processes 17,300 head of cattle per day, tailing behind JBS, Bertin, and Marfrig, in Brazil. Minerva S.A. packages and exports fresh and frozen beef, beef byproducts (leather, casings, and biodiesel), processed beef, and organ meats from its seven       matadouros      (slaughterhouses) in Brazil ((it serves 40,000 customers in Brazil alone), three in Paraguay, two in Uruguay, and one in Colombia. It also sells leather, and live cattle to the Middle East, and repackages prepared food for third-party companies including McCain and General Mills. Minerva manages its own distribution network.