JBS delivers lower third quarter beef sales, revenue

Jon Condon, 14/11/2013


Global processing giant JBS’s US beef division operations, which include Australia, delivered a big drop in net sales and earnings in its third quarter financial results issued this morning.

Earnings before tax at A$134 million were back by a substantial 22.5pc on the previous quarter, and by an even larger 28.4pc on the third quarter last year.

The result reflected the transfer of big cattle price increases from the industry to products in the domestic North American market, which could not be offset by improved performance in Australia, the report said.

Net revenue for the US beef division last quarter was A$5.17 billion, back 2.4pc on the previous quarter, but 9.7pc better than this time last year –  primarily due to an increase in exported volumes out of both the US and Australia.  

Cattle numbers slaughtered across the US beef division reached 2.4 million head during the third quarter, up about 18pc on this time last year (2.03 million). Part of that can be explained by the company's Canadian processing acquisitions inside the past 12 months, rather than organic growth.    

Since 2011 JBS has elected to combine its US and Australian (and more recently, Canadian) beef processing results into a common financial report, presented as ‘US beef’. This makes it impossible to distinguish Australia’s performance, and contribution to the overall result.

In commentary covering the US Beef division operations, JBS this morning said the American market presented a decrease in volumes of beef imported during the third quarter period which contributed to a better pricing of domestic US beef in the US domestic market.

USDA data showed a reduction in cow slaughter during recent weeks which was an important indicator towards US beef herd growth in the medium to longer term.

Operations in Australia presented a solid performance in exports and was benefitting from increased demand in the Chinese market.

“Our US, Canada and Australia operations will bring us better results in 2014 than they did in 2013,” JBS US Beef division chief executive Andre Nogueira said.

Trade agreements reached this year between the US and Colombia, as well as South Korea, and another deal being negotiated with Japan and several Asian countries that should be signed in the first quarter of 2014, offer new routes for export growth next year, Mr Nogueira said.

In combination across its global beef, chicken and pork operations in North and South America and Australia, the world’s biggest meat processor recorded consolidated net revenue of A$11.13 billion for the third quarter ended September 30, a year-to-year increase of 25.1pc. About 80pc of this came from organic growth (existing businesses).

Pre-tax earnings across the entire JBS empire reached A$786 million, up 24pc on this time last year.


South America strong performer, as currency eases 9pc

The big improver across the company’s operations was its South American division, where net revenue at A$2.85 billion was 35.2pc above where it sat this time last year. South America’s pre-tax earnings at A$316m were up 26.5pc on the previous quarter, and 3.3pc on year-earlier results.

Revenue in South America was up strongly because of a 21pc increase in the number of cattle processed in the period, which was reflected in a 31pc increase in the volume of beef in the Brazilian domestic market and a 30pc increase in exports.

“The highlight of the quarter was the increase of 40pc in revenue in the South American domestic market, boosted by the company’s marketing campaign and a 28pc increase in export revenues, thanks to the combination of growth in volume and prices, coupled with 9pc devaluation of the Brazilian Real (currency) in the period,” the JBS report said.

“JBS has a production and distribution platform in South America that permits efficiency and scale gains, that, allied with the focus on operational efficiencies, allows for solid and sustainable results,” it said.

In the third quarter, about 73pc of JBS’s global sales were generated domestically (within the country in which the meat was processed), with the remaining 27pc exported. 




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