By Brazil Stock Guide – Minerva SA (B3: BEEF3) may have found a way to soften the impact of a slowdown in beef exports to China. The bigger challenge is convincing investors that stronger operations will eventually translate into meaningful cash generation.
According to Citi, Minerva should be able to redirect part of its export volumes to the US and other markets as China’s import quotas fill and shipments to the Asian market lose momentum. Yet the bank’s conclusion after meeting management was notably cautious: operational execution remains solid, but the investment case increasingly revolves around debt, free cash flow and shareholder returns.
“We continue to like how Minerva is operating the business; the question is how much of this operating performance ultimately translates into value for shareholders due to the still-high debt service,” Citi analysts said after the 18th Citi Brazil Equity Conference.
The timing matters. Minerva is expected to report strong second-quarter results, supported by a final wave of Chinese buying before import quotas are exhausted. Data from Brazil’s Foreign Trade Secretariat, known as Secex, point to robust Chinese demand during the period.
Citi expects China’s quota to be filled between mid- and late June, reducing shipment volumes throughout the third quarter. At the same time, prices paid by Chinese buyers have begun to lose relative attractiveness compared with those available in the US market.
That shift could change the geography of Minerva’s exports. The bank expects the US market to become increasingly important from July onward as domestic cattle supplies tighten and import demand rises. Stronger US beef prices in the second half of the year could absorb part of the volumes displaced from China and help preserve profitability.
The Market Wants Cash, Not Just Ebitda
For investors, the debate has moved beyond operating performance. Minerva has spent years proving its ability to navigate volatile cattle cycles, export markets and trade flows. The focus now is on converting those strengths into free cash flow after interest expenses and debt repayments.
Citi expects margins to improve moderately in the second quarter compared with the first. More meaningful improvement in cash generation, however, is likely to be concentrated in the second half of 2026.
For the full year, the bank continues to forecast high-single-digit revenue growth and margins broadly in line with those reported at the start of the year. Minerva posted an Ebitda margin of 8.3% in the first quarter.
Yet even those projections may not fully address investor concerns. Citi warned that market estimates for free cash flow could prove too optimistic. Consensus forecasts currently point to roughly 800 million reais in free cash flow, but those assumptions may rely on an exchange rate above 5.20 reais per US dollar. If Brazil’s currency remains stronger, those expectations could face downward revisions.
In other words, operating performance may improve while shareholder economics remain under pressure.
Cattle Costs Remain the Wild Card
The other key variable is cattle. According to Citi, live cattle account for roughly 80% to 85% of Minerva’s cost of goods sold, making livestock prices the single most important determinant of profitability.
While futures markets point to relatively contained prices, rancher behavior remains difficult to predict. Market references cited during the conference suggested cattle prices could fluctuate between 320 reais and 350 reais per arroba, a Brazilian livestock unit equivalent to 15 kilograms, or about 33 pounds.
Prices materially above 350 reais would be difficult to sustain through the second half, according to those market references. Even if export markets cooperate, cattle costs could quickly absorb part of the gains.
The Next Test After Marfrig
Citi also highlighted the integration of assets acquired from Marfrig Global Foods SA (B3: MRFG3). Management said the operational integration phase has largely been completed. The next stage is extracting synergies, improving efficiency and optimizing production flows across the enlarged platform.
The company sees room for gradual margin expansion over the next 24 months as those benefits materialize. That may ultimately determine whether Minerva’s investment case changes.
The company does not appear to have a demand problem. China remains a major customer, while the US may become a larger outlet as global beef trade adjusts. Operations continue to perform relatively well, and integration risks seem increasingly manageable.
What investors are questioning is something simpler: whether stronger Ebitda can finally become stronger equity value.
Until Minerva consistently converts earnings into free cash flow after interest costs, debt service and cattle inflation, the stock is likely to remain a balance-sheet story rather than a straightforward protein growth story.