Playing Chicken.


Poultry and food processor Sadia f lies hard and fast into economic uncertainty.

LUIS FERNANDO FURLAN knows something about adversity. In the last two years, the chairman of Sadia, Brazil's leading poultry producer and food processor, has seen important export markets crumble as major multinationals such as Italy's Parmalat and France's Doux have invaded his home territory. Now, with the local market in ruins, he is guardedly optimistic. "The moment to pick up the results of our efforts has come," Furlan says.

During the tough times, Furlan hacked costs and trimmed the fat from Sadia. The workforce was cut by a third to about 22,000 employees and 10 directorships were scrapped. The company also sold more than half of the firm's soybean-crushing plants in December 1997 to U.S.-based Archer Daniels Midland for $165 million. Last year, the efforts paid off. The company almost tripled profits to US$143 million even as sales plummeted by almost 20% to $2.2 billion. "Our fixed costs have come down and we have greater efficiency," says Furlan.

Now, Sadia is counting on its lean-mean operations to fly hard and fast straight into economic uncertainty. Exports will get a boost from Brazilian currency devaluation and provide a natural hedge to what promises to be a tough year at home.

Thai tested. During the years of a strong currency, many Brazilian companies stopped pushing exports and focused on the rapidly expanding local market. Not Sadia. Exports, which represent about a fifth of the company's total sales, were projected at $350 million last year, but topped $400 million. With the maxi-devaluation of the real, the company expects to increase overseas sales another 10% this year.

After nearly getting plucked in the Thai devaluation in 1997 and again with the Russian ruble collapse last year, Sadia is a tough international operator. It exports to 50 countries. Almost half its exports go to the Middle East, followed by Europe (19%) and Asia (15%). The foreign markets are a "natural hedge" toward paying the company's debt, says Sadia's financial director Luiz Murat. Indeed, much of the company's export...

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