The financial bet of BRF on the rise of its own shares turned against the company. Last month, the company finalized the settlement of derivative instruments signed in 2017 with Bradesco to imitate a share repurchase. The balance was negative and consumed more than R$200 million of the BRF cash at a delicate time, in which the company worked to sell assets and thus reduce debts. BRF began to close these derivative contracts as of June 2018.
This is the second time the company has lost out on investing in its own shares. Before the derivatives, BRF lost money with a repurchase program. Together, these two movements led the company to have losses in excess of R$340 million in less than two years.
The contract with Bradesco, signed during the management of former CEO Pedro Faria, was the alternative found by BRF to deal with the negative impacts of Operation Lean Meat. The company had to sell treasury shares from a repurchase program opened years ago to bolster the cash. Despite having to get rid of the papers, the company wanted to keep the bet on the valuation of the business and established an instrument known by the English term “total return swap“ – widely used by public companies.