By Brazil Stock Guide — Brazilian beef processor Minerva Foods (B3: BEEF3) reported a net loss of R$717.3 million ($139.5 million) in the third quarter of 2026, reversing a R$120 million profit a year earlier, as higher financial costs and losses on currency and commodity hedges weighed on earnings.
The company’s net debt reached R$15.2 billion at the end of September, up 28.5% from a year earlier and 5.5% from June. Net debt relative to earnings before interest, taxes, depreciation and amortization (EBITDA) over the previous 12 months rose to 3.2 times from 2.5 times a year earlier, highlighting the challenges facing Minerva as it seeks to reduce leverage.
Minerva recorded a net financial loss of R$1.64 billion during the quarter, a 50.2% increase from the same period in 2025. The figure included R$471.5 million in foreign-exchange hedging losses and R$254.7 million in commodity hedging losses. According to the company, some of these charges reflect timing differences between the accounting recognition of financial instruments and the underlying commercial transactions they are designed to protect.
The company said commodity hedging losses reflected cattle prices rising more than anticipated during the quarter. Because the cattle covered by those contracts will be processed in subsequent periods, Minerva expects the corresponding economic benefits to be recognized through lower costs of goods sold, primarily in the coming quarters.
Excluding the effects of foreign-exchange hedges, commodity hedges and currency fluctuations, Minerva reported adjusted recurring net income of R$120 million for the quarter.
Consolidated net revenue fell 6.4% year-on-year to R$14.5 billion, while EBITDA declined 13.6% to R$1.2 billion. The EBITDA margin narrowed to 8.3% from 8.9%. Total sales volumes dropped 13.2% to 483,100 metric tons, while cattle slaughter volumes fell 17.4% to approximately 1.29 million head.
Operating performance was affected by tighter cattle supplies, particularly in Brazil, and reduced shipments from Brazil to China after the country exhausted its export quota under Chinese safeguard measures. Gross revenue from Brazilian operations declined 19% to R$8.1 billion. In contrast, revenue in Paraguay and Argentina rose 50.5% and 44%, respectively, helping offset part of the contraction in Brazil.
Selling expenses increased 3.8% from a year earlier, while general and administrative expenses rose 17.9%. Minerva attributed part of the increase to higher logistics costs, particularly ocean freight, and reduced cost absorption as sales volumes declined.
Cash generation remained under pressure. Operating cash flow totaled R$518.1 million in the third quarter, compared with R$3.38 billion a year earlier. After capital expenditures, cash-based financial costs and changes in working capital, free cash flow to equity was negative R$402.7 million.
Free cash flow has now been negative for four consecutive quarters. The company reported a cumulative cash outflow of R$1.8 billion in the first nine months of 2026, bringing total free cash flow consumption over the previous 12 months to R$2.2 billion.
Minerva ended September with R$13.9 billion in cash and cash equivalents, which management said was sufficient to cover scheduled debt repayments through 2029. Approximately 84% of its gross debt is long-term, with an average maturity of four years.
The company also reported that it had repurchased and canceled approximately R$1.2 billion in international debt securities during the first nine months of the year, alongside R$66.2 million in domestic debt instruments. Minerva said it would continue prioritizing liability management, financial discipline and a gradual reduction in leverage.
Despite an improvement in gross margins during the quarter, the results underscore the importance of restoring operating profitability and generating sustained positive free cash flow to support the company’s efforts to bring down debt.
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