THE world’s largest beef producer, JBS, has this morning reported a huge jump in financial performance for its 2014 full trading year.
Net sales were up 30 percent for the year to R120 billion ($A$50.4 billion), making the business the largest private company in Brazil, and the world’s second largest food company, based on revenue.
Pre-tax earnings across all species and regions came to A$4.66 billion – a massive 81pc increase over the previous year. The main highlights were the performance of JBS’s chicken, pork and beef operations in the US (including Australia), which registered EBITDA increases of 87pc, 11pc and 185pc, respectively. JBS does not report Australian operations separately.
The new JBS Foods division (mostly value added product), also contributed strongly to results, with pre-tax earnings of A$275 million.
JBS’s net income came across all divisions came in at A$840 million, also presenting a huge improvement of 120pc over the year before.
JBS global chief executive Wesley Batista told the market that the company had “enjoyed great achievements” in 2014.
“We continued to harvest from the transformational movements that we performed in the last few years in order to transform our company into a true multinational,” he said.
“We feel certain that the timing of the relevant investments made by us could not have been better or more opportunistic. Today, these investments bring excellent results to our company. We are confident that we built a unique global production platform, efficient and well positioned in countries that provide the most competitive environment to produce food products,” Mr Batista said.
Global export growth
In 2014, JBS global exports totalled US$16.2 billion, a 38pc in comparison on the year before.
“Our export sales confirm our ability to access 100pc of the world’s consumer markets and show consistent growth due to increased demand from emerging economies, particularly in Asia,” Mr Batista said.
“In the macro-economic scenario, we observed a consistent recovery of the American economy through our US operations. The reduction in the cost of energy and a consequent improvement in disposable income of Americans households should positively influence protein consumption in that market. We believe that this dynamic will be extremely beneficial to our business.”
“Our results for 2014 show that we are going in the right direction. In 2015, we will prioritise organic growth and focus on all aspects of improving our financial metrics, thus creating incremental value for our shareholders,” Mr Batista said.
Here’s a breakdown of the company’s results, by division.
Australia strong contributor to JBS US Beef:
JBS’s US Beef division (including Australian and Canadian operations) was one of the company’s star financial performers for the year.
Net revenue in the fourth quarter ended December 31 reached US$5.92 billion, an increase of 23pc compared to the same period in 2013 due to an increase in prices of 26.4pc and 25.8pc in the domestic and international markets, respectively, partially compensated by a decrease in volume in both markets. Earnings were US$325 million in the quarter, an increase of 78pc over the same quarter the previous year
This quarter results is a reflection of the company’ strategy regarding the purchase of cattle, which permitted the improvement in COGS, coupled with better beef prices in some markets that JBS operates. Domestic sales in Australia and exports from the US were highlights in the quarter, with significant price increases.
The main destinations for the US beef business unit were Mexico, the US (exports from Australia and Canada), Japan, Colombia, South Korea and Greater China.
For the full 2014 year, net sales from the US beef business unit were US$21.63 billion, up 16pc in comparison with 2013. Pre-tax earnings were US$916m, an increase of 144pc over 2013.
Annual results demonstrated initiatives adopted by the Company and implemented during the year, providing more agility in decision-making and flexibility to adjust the business according to market conditions.
“In addition, there was reduction in production costs, product mix and sales chain rationing, as well as investments in innovation and efficiency gains,” Mr Batista said.
“We increased our Sales to Asia, a growing market in terms of consumption of meats, through our Australian operation, which delivered an excellent performance during last year,” he said.
“Australia is a strategic region for food production in a global context, and we decided to expand our operation there through the acquisition of the Primo Smallgoods Group, a leading company in the prepared and convenience meat category.”
JBS US Chicken (Pilgrim’s Pride)
Net annual revenue for the Pilgrim’s Pride chicken business last year was US$8.6 billion, with earnings of US$1.35 billion, up 17pc on the previous year.
“Pilgrim’s Pride, our chicken business in the US, performed really well in 2014, as a result of a management committed to reduced production costs, high levels of productivity and rationalisation of its sales mix,” Mr Batista said.
JBS USA Pork
In the company’s US pork unit, revenue last year topped US$3.8 billion, with pre-tax earnings of US$405 million, 78pc higher than the year before.
JBS last year broke off its value-added foods operations in the US into a separate entity. Its 2014 net revenue totalled A$5.4 billion, and earnings of A$860 million. During 2014, JBS Foods made important investments in the production process to lift quality standards, and introduced more than 100 new products, increasing the value of the brands and delivering greater consumer preference.
“We achieved satisfactory results at the JBS Foods unit, one year after its creation,” Mr Batista said.
JBS South America
JBS Mercosul (South America) division posted net revenue last year of A$11 billion, up 22pc on the year before. Pre-tax earnings were A$973m, a decrease of 2.8pc compared to the previous year. The launching of convenience beef products reflected in an increase in the sales price in the processed products category of 16pc in the domestic market.