Big sales growth, but reduced net profit for JBS in first quarter

Jon Condon, 16/05/2014

jbs-newTHE world’s largest red meat processor, JBS, has recorded strong pre-tax earnings for its first quarter ended March 31, but net profit was well down due to large acquisitions in South America.

The global conglomerate, combining beef processing in North and South America and Australia, plus chicken and pork processing in the Americas and a newly-segmented value-added food division, posted net revenue for Q1 overnight of A$23.2 billion, up 35pc from this same period last year.

Net profit, however, at about $33.6 million, was down 69pc from the same period of 2013, impacted in part by big spending during the quarter. JBS spent A$341m during the quarter, 40pc of which was on asset acquisitions in Brazil, including processor Frinal in the state of Paraná.

Group-wide earnings before interest, taxes, depreciation and amortisation reached $840m, an improvement of 99pc year-on-year.

The net revenue position was due to an improvement in revenues from all business units, except for the US chicken operations, which remained stable. The main highlights were South American operations, which recorded a 27pc increase in revenue due to the improvement in sales of beef in both domestic and export markets, in addition to JBS Foods which registered revenue of A$1.33 billion.

During the first quarter, 73pc of JBS global revenue was generated in domestic sales (within the country in which the protein was produced), with 27pc through exports.


JBS USA beef improves revenue

Within the company’s JBS USA beef division, which also includes JBS Australia and the company’s new operations in Canada, net revenue in Q1 was A$4.9 billion, an increase of 4.8pc compared with the same period in 2013.

The improvement was due to an increase in sales prices in both domestic and export markets, which offset an increase in cattle prices due to lower availability of animals (in North America, at least) in the period. Exports increased 10.1pc in volume and 3.1pc in prices compared with the same period a year earlier, boosted by the increase in volumes out of Australia, due to drought, and the strong demand from the Asian markets.

JBS does not report its Australian operations separately, but only as part of the broader JBS US Beef division.

Pre-tax earnings were down A$24.2m, or 10.2pc, due to volatility in cattle supply in the US, where the market is experiencing a period of shortage, coupled with heifer and cow retention for herd rebuilding. The current US feedlot placement forecasts an increase in cattle availability for the coming months, which should contribute to a reduction in the volatility of US cattle supply, JBS’s Q1 report said. Conversely, US beef demand remains strong and contributes to a better pricing environment for beef products.


Devaluation assists South American exports

In South American operations, JBS Mercosul posted net revenue of A$3.04 billion for the quarter, 5.5pc higher than in 2013. The result was due to an increase in sales prices, thanks to the strong demand for beef in both Brazilian domestic and exports markets. JBS’s beef exports from Brazil were up 18.4pc in volume and 30.3pc in revenue for the quarter, driven heavily by the 16pc devaluation in the Real.

Pre-tax earnings totalled A$274m in the quarter, up 6.1pc.



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