Minerva 4Q25: Domestic Weakness and Cost Inflation Weigh on Profitability

Volumes down 10.6% QoQ on softer Brazil demand; export pricing provides partial offset, but cattle cost inflation pressures margins and clouds the 2026 outlook

We downgrade Minerva to Neutral following the significant spread compression observed across the curve over the past twelve months. The re-rating we anticipated has largely played out, and the bonds now reflect a credit that has completed its integration and stabilized its financial profile. At current levels, the investment case no longer offers the asymmetric risk-reward that underpinned our prior Overweight stance. The BEEFBZ 4.375% 2031 notes yield 6.3% for 4.3 years of duration, below the EM BB index yield of 6.8% at 5.8 years, while the BEEFBZ 8.875% 2033 notes yield 7.0% measured to the 2028 call date, trading inside the LatAm BB curve on an OAS basis and at the tight end of their 1-year range. With spread compression largely exhausted and carry no longer offering a meaningful premium relative to the broader EM BB universe, we think the risk-reward is balanced rather than asymmetric. The 2026 outlook reinforces this view, as the acquisition-driven deleveraging tailwind has been substantially absorbed, the resumption of dividends introduces a more balanced capital allocation framework, and margin compression from rising cattle costs is expected to keep EBITDA broadly stable in absolute terms. In this context, the credit is well managed and the fundamental trajectory remains constructive, but the bonds are fully priced for it. For investors already holding exposure, we prefer the BEEFBZ 4.375% 2031 notes as the more efficient and defensive exposure at current levels. We therefore view the current risk-reward as balanced rather than compelling.