JBS’s global animal protein businesses across North and South America and Australia have logged a strong second quarter financial result, with Australia being a standout.

One of the world’s biggest producers of beef, pork and chicken, plus lamb and farmed salmon and value-added proteins, JBS delivered a global net profit of US$328 million for its second quarter ended 30 June, on net sales of US$19.3 billion and adjusted pre-tax earnings of US$1.9b, up 110 percent on last year.

JBS’s Australian operations, encompassing beef, lamb and pork processing plus the Primo smallgoods business and Huon Aquaculture salmon farming, delivered net sales of US$1.7 billion for the quarter, up 3pc on last year, and adjusted pre-tax earnings of US$201.7m, up 56pc on a year ago.

While the market environment in the United States remained challenging, the company’s beef businesses in Brazil and Australia were benefiting from favourable cycles, shareholders were told overnight.

In Brazil, the outlook for the beef business was promising, driven by significant growth in cattle processing volumes, domestic demand increase, and improved export profitability, JBS said.

“The strength of our diversification puts JBS in a unique position in the industry,” global chief executive Gilberto Tomazoni said.

“Our global diversification strategy is driven by investments in innovation and building strong brands, creating a more resilient and higher value-added portfolio.”

Australian operations

JBS Australia’s revenue increase last quarter (+9pc on last year) was explained by a 5pc increase in volumes sold and a 4pc increase in average prices. The strong growth in net revenue from the Australian beef business compared to the same quarter last year reflected the increase in volumes sold, the company said, while the improvement in pre-tax earnings margin reflected the lower cattle purchase price, given the greater availability of animals due to the more favorable Australian cattle cycle.

JBS quoted Meat & Livestock Australia statistics suggesting the price of cattle in Australia fell 4pc year on year in the second quarter.

JBS recently announced an investment of A$110 million to expand its salmon farming operations at Huon’s Whale Point facility in Tasmania.

COGS breakdown

In a significant reflection of the different production cycles being experienced in the company’s global operations, Australia currently (as at reporting date of 30 June) reflects the cheapest raw material (livestock) of JBS’s three main beef divisions, averaging 74pc of Cost Of Goods Sold (COGS).

In contrast, the JBS Beef North America division, facing a national beef herd at its lowest since 1951, and poised to enter herd rebuilding, is seeing skyrocketing livestock prices, currently averaging 85.6pc of COGS. The JBS Brazil business (mostly beef, but also including pork and chicken) is also currently high, at 86.4pc.

Labour cost is also incorporated into the COGS comparisons reported quarterly to shareholders by JBS. In this metric, Australia’s result is well behind sister divisions overseas, averaging 18.2pc of COGS. Compare this with JBS Brazil (5.6pc), USA pork (14pc) and the company’s global average of 9.2pc. A reference to JBS US Beef division labour cost last quarter being just 2.8pc of COGS appears to be a typographical error, as the equivalent report last year showed 8.6pc.

Diversification strategy

In providing commentary, JBS global chief executive Gilberto Tomazoni said the company had had a strong second quarter.

In a clear reference to the challenges currently being faced in  the US, he said the strength of the company’s diversification had put JBS in a unique position in the industry.

“While the market environment in the United States remains challenging, our beef businesses in Brazil and Australia are benefiting from favourable cycles in both countries. Our global multi-protein platform has enabled JBS to mitigate the natural cycles in our sectors and maintain a healthy cash generation,” he said.

“As testament to this strength, 75pc of JBS global’s EBITDA for the second quarter cames from its poultry and pork operations, primarily from the Pilgrim’s poultry division in the US, Seara in South America and JBS US Pork.”

JBS’s poultry and pork businesses in North America have benefited from lower grain prices and a better balance (than beef) between supply and demand.

With strong results in the US, Mexico, and Europe, JBS’s Pilgrim’s poultry division exceeded market expectations, recording the best EBITDA results in its history for a quarter of US$782m, compared with US$375m last year. Meanwhile, JBS US Pork division’s margin increased from 4.4pc to 11.pc, year-over-year.

• We’ll circle back with more JBS comment from the 2Q analyst conference call in coming days