Global efficiency drive for JBS

Jon Condon, 15/11/2011

JBS chief executive, Wesley BatistaThe world’s largest producer of animal protein, JBS SA, plans to seek greater efficiencies by integrating some of its functions currently run at region or country level into a global model.

In recent years, JBS has focused on structuring some shared service areas within each continental business unit, particularly in South America and the US, aiming at improving costs and efficiency at regional level.

“From now on, we will begin a new phase in which we will identify where some of these services – including operations, sales, purchasing, technology and human resources – can be integrated globally," chief executive Wesley Batista said yesterday.

The service integration strategy announcement came as part of JBS’s 2011 third quarter financial results briefing, delivered in Sao Paulo.

Mr Batista said this year’s third quarter was a period of significant importance for JBS, with net revenues exceeding R$15 billion (10.6pc higher than the same quarter last year) and operational cash flow generation of R$897 million.

“The period marks a new phase for the entire group,” he said.

“After a series of acquisitions in recent years which placed the company among the global leaders of the food industry, we are at a unique moment in our history.”

Mr Batista said between July and September the company had recorded a significant improvement in its operations, by capturing synergies among units around the world, especially in Brazil, the US and Australia.

“It was a period of time when we put all our attention on management, focused on internal activities and dedicated our efforts to improving every step in the execution of our plans,” he said.

These changes delivered good results in the third quarter with a strong cash generation, ending the quarter with R$5.6 billion in cash reserves.

Some of the adjustments driving the strong result included:

  • Consolidation of JBS leather operations in Brazil to centralise and focus efforts on value-added products. The company closed four plants, diverting and increasing production in four others for greater efficiency. The reorganisation is expected to deliver savings worth R$45 million per year. It had not reduced production capacity of finished and semi-finished leather products, and was an important step in devoting more resources to leather processes that offered higher margins.
  • Rationalisation had also occurred during Q3 in the JBS beef business. In September, operations ceased in three Brazilian plants, and deboning/fabrication was rearranged in three others. These changes allowed JBS to increase its Brazilian production by 5pc, by using the remaining units more efficiently. The company estimated it would save R$200 million each year as a result.
  • JBS also sees ‘significant growth opportunities’ in its South American dairy sector business, and said it had plans to increase its presence in the sector 2012.

In the US, the JBS chicken business continued to underperform, however some indicators already pointed to an improvement in 2012, the quarterly financial report said.

The US Beef division, which includes the company’s beef and lamb operations in Australia, remained firm, Mr Batista said. The US Beef (including Australia) business unit revenue in the third quarter grew 25pc over the same period last year and reached A$4.08 billion.

Of this total, about A$3 billion was sold on the US domestic market, an improvement of 27.6pc over the same quarter last year. The remaining A$1.17b came from exports of US beef, which increased by 20.1pc.

Value-adding, brands focus

Mr Batista said a program of strengthening the value of the company’s brands had been initiated in October, including important steps towards bringing more value-added products to the consumer market.

“I’m sure that we will modernise our beef business worldwide through our initiatives to transform a commodity-type product into a branded and value-added item,” he said.

“This is the new phase at JBS.”


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