This excerpt taken from the PDA 6-K filed Jul 10, 2009.
Gross Operating Revenue
Sadia's gross operating revenues, which correspond to the total amount of revenues generated by the Company's sales volumes in 2008 without deducting value-added tax on sales and other sales deductions, increased 22.5% to R$12,191.9 million from R$9,955.9 million in 2007, primarily due to an 8.3% increase in sales volumes to 2.3 million tons. Average prices in the domestic market increased 10.7% in reais terms in 2008 compared to 2007, while in the export market the average increase in prices was of 14.8% in reais terms. The domestic market was responsible for 54.2% of gross operating revenues and 48.2% of sales volumes, while the export market was responsible for the remainder.
The performance of the industry in 2008 was marked by a strong growth for the first nine months of the year, especially for poultry consumption worldwide and processed products consumption in the domestic market. During the fourth quarter, revenues were adversely affected by the deterioration of the global economy, which resulted in a decrease in sales of animal protein.
Domestic Market. In the domestic market, gross operating revenues increased 24.2% to R$6.6 billion in 2008, from R$5.3 billion in 2007, primarily due to a 12.2% increase in sales volume to 1,120.4 thousand tons in 2008 and an increase in average selling prices of 10.7% in reais terms.
Export Market. Gross operating revenues in the export market increased 20.5% to R$5.6 billion in 2008 from R$4.6 billion in 2007, primarily due to an increase in average selling prices of 14.8% in reais terms (20.5% in U.S. dollar terms), and to a 5.0% increase in sales volumes to 1,205.3 thousand tons in 2008 from 1,148.3 thousand tons in 2007.
In the Middle East, we maintained our traditional presence in the main areas of the region, with a strong market position and brand recognition. Middle Eastern countries' consumers primarily consume whole birds of low weight (from 0.8 to 1.3 kilograms) and processed products. Exports to Middle Eastern countries accounted for 26.7% of gross operating revenues in the export market. Europe, which was responsible for 22.2% of export gross operating revenues, is a large purchaser of poultry cuts and processed products. The main exports to Asia, which accounted for 18.7% of all gross operating revenues from exports, are special poultry cuts, pork carcasses and cuts. In the Americas, sales are
concentrated mainly on processed products, poultry parts and whole birds. The Americas accounted for 16.6% of export gross operating revenues. With respect to Eurasia, which comprises the Caucasus region and Russia, Sadia's exports were mainly pork and poultry cuts and processed products. This region represented 15.8% of all exports gross operating revenues.
Processed Products. Gross operating revenues from processed products increased 27.0% to R$5,876.7 million in 2008 from R$4,627.3 million in 2007.
Sales of processed products were the main driver of the growth in the domestic market, representing 78.8% of revenues in the domestic market. This result reflects our efforts to adapt our product portfolio, aiming at capturing the demand for higher value-added products in our product mix. We recorded an increase of 13.1% in domestic sales volumes and 25.5% in domestic gross operating revenues. The average selling price of Sadia's processed products sold in Brazil increased 11.0% when compared to the average price in 2007, primarily due to an increase in the price of grains. The highlights of this segment were refrigerated products, mainly sausages, light cold cuts and bologna, as well as frozen products, particularly hamburgers and ready-to-eat dishes, which were the best-selling items in relative terms.
The sales volume of processed products in the export market totaled 131.6 thousand tons, representing an increase of 18.6% compared with 2007. Export gross operating revenues from this segment increased 39.9% to R$667.8 million, reflecting an 18.0% increase in average selling price in reais of this segment compared with 2007. The products which contributed the most to gross operating revenues of this segment were baked, grilled and breaded products. The main importing region of processed products continued to be Europe.