It’s Raining Chickens at Sadia

By Travis Johnson, Stock Gumshoe, September 26, 2008

Though they didn’t actually cut off his head and let him run around the barnyard, the Brazilian poultry and pork producer Sadia has gotten rid of their Chief Financial Officer.  For very good reason:  They just reported a huge loss of about $400 million on what sounds like it was foolish and unapproved currency trading by the CFO.

The article from Bloomberg is here.  I didn’t see this coming, certainly, but one almost never sees individual malfeasance coming and nothing struck me as investor-unfriendly about the company before this.

I’ll be watching to see what happens over the next few days, to see how the new debt that they’ve had to take on impacts their expansion plans, but at the moment this is reportedly not going to significantly impact their operations. Losing $400 miillion is not going to make their earnings look good this year, of course, but the business by all accounts remains a good and growing one. The question is whether the drop in the share price of 25-30% today fairly values the company for the long term, or if that value should now be higher or lower than that. I don’t have answers, and I generally don’t have the ability to trade quickly on my accounts in reaction to this kind of news (or, often, the inclination), so I’ll wait a bit, think it through, and decide whether to make a change to my holdings in Sadia. Yet another reminder, in case I needed it, of the value of diversification at all times.

Full disclosure: I do own shares of Sadia, and by writing this note I’m committing to not trade in the shares for three days.

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