JBS shrugs off recent troubles with solid third quarter

Beef Central, 15/11/2017

JBS, the world’s largest meat processor, shrugged off its recent dramatic public exposure surrounding the activities of major shareholders, the Batista family, to post strong third quarter financials for the period ended 30 September.

Company president José Batista Sobrinho described the results as ‘extraordinary’, acknowledging the continued support of the company’s clients, suppliers, lenders and shareholders, despite the recent events.

“We continue to work effortlessly to be a reference in compliance and corporate governance, while delivering solid and consistent results,” The 84-year old company founder said.

International divisions outside of Brazil underpinned the results, with group pre-tax earnings increased 37 percent year-on-year to a record R$4.3 billion (A$1.72 billion). Net revenue was stable, at the equivalent of A$16.44billion, and net income of A$129 million, down 63pc on last year.

The company’s USA Beef division, including operations in Australia and Canada, produced third quarter net revenue of US$5.53b (A$7.28b), an increase of 3.2pc compared with the same period last year, and pre-tax earnings of US$405m (A$532m).

Exports, particularly out of the US operations, were the highlight, growing 9.5pc in volume and 3pc in price in year-on-year comparisons.

“Growth in domestic demand in the US has been significantly evolving throughout 2017, as a consequence of the strengthening of the American economy and low unemployment rate,” shareholders were told.

“At the same time, US cattle herds continue to grow, increasing levels of cattle availability.”

While this factor favours the performance of the industry as a whole, JBS said it had been leveraging its US beef division results through operational improvements, strong commercial relationships and product mix.

In Australia, although results were positive, the JBS business continued to under-perform compared with the previous year, the report said.

“The cycle of rebuilding the Australian beef herd after drought continues, with heifer retention impacting cattle availability in the short term. Thus, beef operations in Australia impacted the JBS USA Beef division’s consolidated results,” the company said.

JBS withdraws IPO plan

Last month, JBS withdrew its request for an initial public offering in the US stock exchange for a planned subsidiary, JBS Foods International.

The withdrawal is a blow to JBS SA’s plans to restructure the company and improve access to a broader base of investors. Under the reorganisation, JBS SA would have contributed all its assets except its Brazilian beef business to a new holding company. The holding company would have been a wholly-owned subsidiary of JBS International. JBS SA then would have become a consolidated subsidiary of JBS Foods International trading separately on the Brazilian stock exchange.

In August, executives with JBS SA said plans for the IPO would proceed in 2018 despite the legal scandals dogging the company’s controllers, brothers Joesley and Wesley Batista.

In May, the Batistas resigned from the board of JBS SA after it was revealed that seven executives agreed to a plea bargain with federal prosecutors regarding bribes allegedly paid to 2000 government officials, including the current Brazilian president.

More recently, federal prosecutors in Brazil formally charged the Batista brothers with insider trading and market manipulation, accusing them of minimising financial losses by buying and selling millions of JBS shares before giving evidence as part of the plea deal related to the bribery and corruption charges.

The Batista brothers remain in police custody in pre-trial detention in São Paulo.





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