JBS’s Brazil result dominates Q2 financial performance

Jon Condon, 15/08/2012


Global meat processing giant JBS this morning reported on its second quarter financial results, indicating an improving, but still negative earnings performance in its US/Australian beef business when compared with the same period last year.  

Strong business results in JBS’s South American beef operations were the real highlight of the last quarter, driven in part by a 10pc currency depreciation against the US$.

The company’s US Beef division, which incorporates JBS Australia operations, reported net revenue of US$4.27 billion for the second quarter, 7.6pc better than the same period last year. The US/Australia beef unit accounts for 46pc of the parent company’s overall net revenue.

This result reflects an increase of 4.3pc in volume of beef sold in the US domestic market, combined with prices 7.1pc higher. Compared to the first quarter this year, completed March 31, revenue increased 4.6pc, as a consequence of higher export volumes.

Although earnings before income tax, depreciation and amortisation was negative US$9.1 million in the quarter just completed, there was an improvement compared to the previous quarter (-US$45.4m).

This morning’s financial statement said margins remained under pressure during the second quarter due to the high price of US cattle. However the result demonstrates a trend towards improving margins in the sector, with the decrease of 4pc in average cattle prices in relation to the first quarter this year – a movement that was more intensified in June.

Another significant factor in relation to average US Beef division selling prices in the second quarter was the improvement in the US industry dynamics that can be perceived by the 4pc reduction in average weekly slaughter when compared with the same period last year. A similar trend was evident in the Australian business.

The statement said JBS believed in the recovery of margins in the sector through a better balance between supply and demand and improved flow of cattle in the second half of the year.

Management was maintaining a focus on operating with low cost, with emphasis on increasing profitability and the pursuit of ‘tailor-made’ customers and markets for each carcase item.

In terms of the broader global JBS beef, chicken and pork business, the company posted consolidated net revenue of A$8.69 billion, 26.3pc higher than the second quarter last year.

Consolidated pre-tax earnings were up 72.3pc compared to this time last year.

Strong business results in JBS’s South American beef operations was the highlight of the quarter. South America’s net revenue was up 19.4pc on this time last year to $2.02 billion, principally due to the increase in the number of cattle slaughtered combined with higher sales volumes, while pre-tax earnings increased 47.3pc.

The company has ramped-up its beef business in Brazil adding new processing sites with the capacity to kill an additional 8000 head/day. Net revenue in South America was up 19.4pc in comparison with 2Q11 and 12.8pc higher than 1Q12.

JBS’s troubled Pilgrim’s Pride US chicken business posted net revenue of US$2.0b and pre-tax earnings of US$125.7m for the quarter, reversing the negative result presented in 2Q11. The company warned, however, that the jump in grain prices could put stress on the chicken business over the next 12 months.

The results in Brazil reflected an improved cattle cycle and the company’s efforts to enhance operational efficiencies and to capture synergies, the financial report said. JBS management remained confident in the improvement of the cattle cycle in Brazil and in the increase of availability of livestock in the coming years.

JBS SA’s overall consolidated net revenue in the second quarter was A$8.68b, an increase of 26.3pc compared to 2Q11. The improvement was driven by the performance in the Brazilian beef division; the revenue increase in the JBS US Beef unit; and the 10.9pc devaluation of the Brazilian currency against the US$, all of which caused a positive effect in the company’s consolidated results.







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