JBS to list on NY stock exchange, as first quarter financials decline sharply

Jon Condon, 12/05/2016

GLOBAL meat processor JBS has announced plans to list most of its global operations on the New York Stock Exchange, as it released its first quarter financial results this morning.

The decision aligns with the fact that through acquisitions and growth over the past decade or so, the largest portion of the company’s earnings are now from outside of Brazil.

The New York Exchange, the largest in the world, also offers the attraction of greater access to capital, and relatively attractive cost of capital, Beef Central was told by a company observer this morning.

The NYSX Listing perhaps reflects the fact that JBS is now a true global player in the meat protein space, rather than an expanding regional player. The move was perhaps ‘inevitable’ as the company continues to pursue organic growth strategies, Beef Central was told.

A company statement this morning said the US listing was part of a corporate reorganization to strengthen JBS’s position as a leading Brazilian company in the global food industry.

The formation of new entity, JBS Foods International, to be listed on the NYSX, will include all the company’s operations outside of Brazil.

On the completion of the reorganisation, JBS SA will be renamed JBS Brazil and will remain a publicly-listed company on the Brazilian Stock Exchange. JBS Brazil will continue to hold JBS’s Brazilian beef, biodiesel, collagen and stock carrier businesses, as well as other activities and its global leather business.

The Seara operation and JBS Brasil, with their 125,000 team members based in Brazil, will remain under the leadership of existing management and will continue their growth strategies in the Brazilian market.

The company provided a list of objectives it hoped to achieve from the proposed reorganisation:

  • It will better reflect the global presence and the diverse international operations of the company
  • It will improve access to the international equity and debt capital markets which will enhance the company’s ability to raise financing to support its operations, while lowering the cost of capital. This will enhance the company’s ability to participate in the increasing consolidation of the global food industry and to better compete with other global food companies for international development opportunities
  • It will raise JBS’s profile among the global institutional investor community
  • It will create a BDR program and keep JBS SA as a listed company, which will allow Brazilian shareholders to participate in the global growth and expected valuation improvement; and
  • It will maximize the value of JBS SA and JBS Foods International, benefiting all shareholders and stakeholders.

“The proposed reorganization is a natural step in the continuing development of JBS as a leading Brazilian company in the global food industry,” chief executive officer of the global business Wesley Batista said.

“We have carefully considered various strategic alternatives to enhance the value of our company and we believe that the proposed reorganisation offers the greatest potential to deliver long-term value to our stakeholders.”

Upon the completion of the reorganization, the JBS Group will continue to be controlled by its existing Brazilian shareholders with its major shareholder J&F Investimentos (the Batista family), maintaining its central office and strategic decisions in Sao Paulo.

The existing management team will be maintained in its present form with Wesley Batista as the CEO of the Global Business, Enéas Pestana as the CEO of JBS South America, André Nogueira as the CEO of JBS USA (including Australia), Gilberto Tomazoni as the Global President of Operations, Tarek Farahat as the Global President of Marketing and Innovation and Vincent Trius as the Global President of New Projects.

Big drop in first quarter financials

Meanwhile, JBS has reported a big drop in key indicators for its first quarter for 2016, ended March 31.

Pre-tax earnings at R2.1 billion (A$5.35b) were 22.5 percent lower than the same quarter last year. Net revenue of R$43.9 billion, was up 29.8pc, year-on year, while gross profit at R$4.8b was stable. Net income was negative at R$2.7b, impacted by the result of the foreign exchange protection of the company.

Results in Australia contributed to the disappointing result in the quarter, influenced mostly by the under-performance of the JBS USA Beef business unit which includes Australia, the market was told.

This was impacted by:

  • Mark-to-market of the physical contracts of the forward acquisition of cattle in the US and in Canada, which suffered a price reduction in the period
  • Low availability of cattle for slaughter in Australia as a result of adverse climate conditions and
  • Increase in the value of the Australian dollar versus the US$.

“Besides this, the company suffered a negative impact of R$5.8 billion in the quarter, due to its foreign exchange protection policy. However, it is worth highlighting that in the period from 1Q15 to the present quarter, JBS obtained a positive result of R$4.8 billion with its FX protection strategy, even when taking into account the negative impact of this quarter,” the market was told.

“Our focus on operational efficiency, in the development of our brands, in the expansion of our portfolio of value added products, in the increase of our client base allied with the expectation of better market conditions in our sector maintain us confident that we will be capable of delivering good results in the coming quarters and thus, fulfil our goals for 2016,” Wesley Batista said.




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