(Recasts headline, adds details from conference call, from fourth paragraph)
By Ana Mano
SAO PAULO, May 12 (Reuters) - Brazilian food processor BRF SA on Friday said a recent meat safety scandal that resulted in the temporary closure of one plant and the charging of two company executives will continue to have an impact on its operations.
Chief Executive Pedro Faria told a conference call that marketing spending was likely to rise as BRF deals with the fallout from the “Weak Flesh” probe, which accused food inspectors and some executives of conspiring to evade checks.
“The investigation will leave profound wounds,” he said.
BRF SA reported a net loss of 286 million reais ($91 million) last quarter as net operating revenue fell on a combination of lower prices and production volumes.
The probe, made public in March, also caused major buyers of Brazilian meat to suspend imports temporarily. On the call, management said this affected about 15,000 tonnes of shipments, without elaborating.
The closure of the Mineiros plant also halted production of turkey meats, which BRF sells to Europe.
BRF booked a 40 million reais ($12.7 million) marketing expense related to the investigation, which also hampered its Middle East operations, said Faria.
“Shipments to the region are below historic levels,” he said, referring to March and April.
As a result, BRF said it remains “cautious” on Saudi Arabia, a key market for chicken products, where competition is growing and demand is weakening due to a shift in economic policy and introduction of import duties.
“BRF has near zero EBITDA margins in the region,” Faria said, alluding to a common gauge of operating profits.
Citing favorable prospects for feed prices in the coming quarters, BRF said that this month it will close the acquisition of Turkish poultry producer Banvit, which it bought in a joint venture with Qatar’s sovereign wealth fund.
The deal is part of BRF’s move into the halal market, with Banvit being integrated into BRF subsidiary OneFoods.
Faria said BRF is “enthusiastic” about the prospect of operating in Turkey, noting that Banvit will help the group reduce leverage.
Banvit has a better capital structure than BRF and OneFoods, he said.
BRF shares opened flat but rose 1.8 percent in late morning trading to 45.10 reais.
$1 = 3.1346 reais Reporting by Ana Mano; Editing by Daniel Flynn and Dan Grebler