Agribusiness

JBS lifts earnings 26pc in first quarter

Jon Condon, 15/05/2013

 

The world’s largest meat protein producer, JBS, this morning filed a first quarter financial result showing a 26.3 percent rise in pre-tax earnings in its global operations spanning beef, chicken, pork, lamb and goatmeat.

Company-wide pre-tax earnings for January-March reached R$879 million (about A$442 million), an increase of 26.3pc on the same quarter last year.

Consolidated net revenue for the quarter was R$19.5 billion (A$9.75b), an increase of 22pc compared to year-earlier performance. Main reasons given for the increase were:

  • the increase in beef volumes sold in business units in North and South America and Australia
  • the establishment of JBS’s South American poultry business and inclusion of those sales figures for the first time
  • price increases for beef and poultry products in the US ( a trend not evident in Australian operations, which are reported under the JBS USA beef division), and
  • the company’s commencement of beef processing operations in Canada, as a result of the acquisition late last year of XL Foods’ assets.

Results varied across the company’s different business platforms, but most were moderately to strongly positive.

About 74pc of JBS global sales in the first quarter (1Q13) were generated within domestic markets in which the company’s processing operations function, with the remaining 26pc of sales coming from exports. A global breakdown of JBS meat protein sales is presented below.

JBS’s leverage (net debt:earnings) remained at 3.4x at the end of the first quarter, stable in comparison with the previous quarter, but lower than 2Q12 (4.3x) and 3Q12 (3.7x.)

 

 

 

 

 

JBS USA business unit

Within JBS’s USA beef unit, which includes operations in Australia, net revenue for the first quarter was US$4.32 billion (similar in A$ terms, on today’s exchange rate). This result was 5.8pc better than the same quarter last year, due to the increase in US sales prices both in the domestic market and exports (not applicable to Australian operations, however), and the previously mentioned commencement of JBS’s operations in Canada, via the XL Foods assets acquisition.

Compared to the final quarter last year, JBS USA net revenues decreased 11.1pc, principally due to the seasonality of the period, the report said. Pre-tax earnings for the division were negative at A$25m, mainly impacted by the pressure in the cost of raw material (high US cattle prices due to supply shortage).

The US/Australia beef business processed 2.16 million cattle for the first quarter, up 10.4pc from this time a year earlier, but 5.3pc below the December 2012 quarter.

“The company believes in the improvement of the industry’s margins through the recovery of sales prices and a better balance between supply and demand, as well as the seasonal increase in the demand for beef and in the supply of livestock for slaughter,” this morning’s financial report said.

“JBS’s management maintains its focus on low cost operation, with emphasis on increase profitability per animal processed and an improved sales mix.”

 

South America

Net revenue out of the company’s South American operations was R$4.97b for the quarter, 30pc higher than a year earlier. That result was due mostly to the 26pc increase in volume of livestock processed in the period. The South America business processed 2.11m head during the quarter.

Regardless of the increase in sales volume, sales prices increased in the period both domestically and in export markets for South American beef, reflecting strong demand in emerging economies. South American earnings totalled R$562m in the quarter, an increase of 10.pc.

Although coming too late for consideration in the Q1 report, JBS last month completed its acquisition of two US operations previously held by XL Foods – an abattoir in Omaha, Nebraska, and another in Nampa, Idaho – both with capacity to process 1000 head/day. The facility in Nampa is idle and the company has no immediate plans to reopen it, given current US herd levels.

Destination for JBS global exports (all producing countries - not just Australia)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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