Australian, US beef operations contribute to strong 2Q result for JBS

Jon Condon, 16/08/2015

GLOBAL meat processor JBS has reported strong results in its combined US, Australian and Canadian beef businesses in its fiscal 2015 second quarter.

The JBS USA Beef division, capturing results from all three countries, had pre-tax earnings in the quarter ended June 30 of A$313 million, 110 percent higher than the same period last year. Net revenue (sales) of about A$8.1 billion was 11pc higher than the same quarter a year earlier.

JBS logoJBS does not report its Australian financials separately, but combined with US and Canadian results which can give a somewhat vague impression of the local business’s performance.

In commentary specifically about Australian operations, however, analysts were told the company registered an increase in volume sold through exports, primarily to the US, Japan, South Korea and New Zealand, while sales to China remained stable. The increase in raw material (livestock) costs in Australia had been compensated by the A$ devaluation relative to the US$, which helped maintain the profitability of the JBS Australia operations.

The integration of the Primo Group into JBS Australia operations, initiated during the second quarter, was occurring according to schedule, and JBS management remained optimistic in relation to the synergies to be captured from the business, the market was told.

JBS apparently performed well under difficult circumstances in its North American operations, where major competitors Tyson Foods and National Beef both recently reported losses in their second quarters.

Net revenue for JBS USA Beef last quarter was driven by an improvement in the performance of the US domestic US market, both in volume and in price, coupled with a 4pc increase in export volumes in the period, JBS said. Net revenue in the quarter was 14pc higher than in the first quarter due to an increase in the number of animals processed and, consequently, higher sales volumes – especially from Australian operations.

JBS USA Beef division processed 2.42 million cattle in the quarter, up from the first quarter’s 2.2m head but down 0.9pc from the 2.45m processed in the second quarter last year (primarily reflecting US trends). Average sales price in the quarter was up 6.7pc for domestic sales and up 1.3pc for exports.

The performance of the US Beef division reflects the improvement in the demand for beef in the US, coupled with a slight reduction in North American cattle prices during this period, JBS said. USDA data forecast growth in the cattle herd in the US which, combined with the recovery of the American economy, tended to boost JBS’s businesses in the country, it said.

In other JBS divisions:

  • The US chicken division, Pilgrim’s Pride Corp, was the company’s other big performer in its second quarter. PPC had pre-tax earnings of US$426m, up 26pc on a year earlier. This was despite sales being down 6pc to US$2 billion.
  • The company’s South American-based value-added products division, JBS Foods, had pre-tax earnings of 789m Real, 79pc higher than last year. The unit grew 30pc in sales for the domestic south American market and gained market share, the company said.
  • JBS Mercosul (South American beef division, with production operations in Brazil, Argentina, Paraguay and Uruguay) had pre-tax earnings of 377m Real, down 41pc.
  • JBS USA Pork had pre-tax earnings of US$65m, 43pc lower than a year ago. Sales were US$795m, down 23pc on last year. This result was due to a reduction in gross margin, JBS said. While throughput was up 14pc on the same quarter last year, average sales price fell 32pc for domestic US sales, versus a year ago, and export sales fell 25pc in value. The lower pork sales were due to a decrease in sales prices as a result of an increase in the number of hogs available to process and a consequent increase in the supply of pork products, JBS said.

In overall global operations across all species, JBS announced pre-tax earnings of $3.6 billion Real, 47pc higher than the same quarter last year. Net revenue totalled almost $39 billion Real (A$15b), an increase of 34pc year-on-year, reflecting sales increases in most of the company’s units except for JBS USA Pork and Pilgrim’s Pride chicken.

Net profit (US$22.7m), was down 68pc from the same period last year, due to a triple-digit increase in net financial expenses.


JBS global CEO, Wesley Batista

“The numbers for this quarter once again demonstrate the solidity and consistence of our results, thanks to a business model developed throughout the years, with the construction of a diversified production platform, with extensive access to consumers across the globe and a broad and diversified portfolio of products,” shareholders and analysts were told on Friday.

“Our focus on operational excellence and our financial discipline has permitted us to mitigate the effects of volatility associated with our business,” said global chief executive officer, Wesley Batista.

“We continue focused on operational excellence, the quality of our products, the expansion of our customer base, the optimisation of our sales channels, the expansion of our portfolio of prepared and high value added products, while investing in our brands,” he said.

JBS expects 2pc more cattle to be available for slaughter in the US in 2016, as herd expansion gathers pace, and cattle prices to fall because of the expected uptick in supply, Mr Batista said.


No early entry for Brazil beef to US

Chief executive officer Wesley Batista told Friday’s investor briefing in Brazil that JBS did not expect fresh beef exports from Brazil to the US to begin earlier than 2016.

His comments contrasted with earlier suggestions from the Brazilian government that the trade would get underway sooner. An agreement between the two countries was signed in June, but Mr Batista said it would take time to work through bureaucratic approvals and overcome “resistance from US cattle producers.”

“I never thought this would be an easy, simple deal,” Mr Batista told analysts.

Brazil’s agriculture ministry had said Brazilian exports to the US exports could begin during August for the first time in 15 years. The USDA took the first steps towards allowing imports in late June, but there has been considerable resistance from US beef producers and other lobby groups over perceived FMD disease risk.

A green light for fresh beef shipments to the US could help Brazil gain access to other key markets, such as Japan and South Korea, which have banned all beef imports from Brazil since a BSE scare in late 2012, and earlier FMD concerns, news agency Reuters suggested.


  • Shares in JBS fell 2.9pc on the Sao Paulo exchange the day after the company reported its 68pc drop in second-quarter net profit to A$31m, from a year earlier.




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