Processing

Strong result for JBS beef in third quarter

Jon Condon, 14/11/2014

JBS reported a strong revenue increase year-on-year for its US Beef division (including Australia), in its third quarter financials reported yesterday.

JBS logoThe company’s combined global operations (all species) produced net revenue for the quarter ended September 30 of A$13.5 billion, 27.1 percent higher than the same period last year, and a company record for the reporting period. Pre-tax earnings reached A$1.58 billion, an increase of 111pc on 3Q13.

About 69pc of JBS’s global revenue last quarter were derived from domestic sales and 31pc from exports. Global net income in the third quarter was A$480 million, an increase of almost 400pc year-on-year and 330pc on the previous quarter this year.

In the company’s US Beef division (including Australia and Canada), third quarter net revenue reached A$2.57 billion, a 25pc increase compared to the same period in 2013. Australian figures are not reported separately.

The improvement was due to an increase in sales volume in both export and domestic markets, coupled with a significant increase in prices. Compared with the June quarter this year, net revenue posted an increase of 9.7pc.

Pre-tax earnings reached A$594 million in the quarter, an increase of 303pc over the same period last year. Compared with the previous quarter this year, pre-tax earnings increased 365pc.

The quarterly results reflected seasonally stronger beef demand during a time when beef supply remains constraint, contributing to an increase in sales prices, JBS said. Prices in export markets continued to grow, showing an increase of 9.3pc to all markets compared the last quarter. The main destinations for US Beef division (including Australia) exports were Japan, Greater China and South Korea.

JBS’s financial report said Australian operations performed well and contributed to the strong results for the US Beef division.

The increase in export prices, boosted by the demand in Asian markets, combined with rationalisation in production and diversification of sales channels in the US, contributed to an improvement in pre-tax earnings margin.

In addition, JBS beef operations in Canada had an important improvement in the period as a result of implemented initiatives in the region, such as production costs reductions and efficiency gains.

In discussions with financial analysts yesterday, global chief executive Wesley Batista said JBS would continue to pursue expansion in the coming quarters, using A$960m in free cash generated after investments in the third quarter to keep growing the company organically or through acquisitions.

Chief executive of the US beef division Andre Nogueira said the company’s Australian operations were “performing fantastically, delivering everything we have expected with strong demand for product in both China and the US.”

“The decline in available cattle in the US is being met by Australian supply,” he said.

With Australia expected to sign a Free Trade Agreement with China some time soon, Mr Nogueira suggested JBS’s beef operations in Australia would benefit significantly early on, but said that in time consistent growth in protein demand from China would force the country to fully-open its market to Brazil, the US and other beef exporters.

JBS’s US Beef division is investing in greater production this year and next, in products that can leave the plant ready for purchase by consumers. Production of such products increased 53pc this year, Mr Nogueira said, with current capacity at 19,800t per month. This was expected to grow to 30,200t capacity per month in 2015.

North American operations account for 51pc of JBS’s revenue this year, with 17pc coming from South America and 32pc from exports.

Mr Batista said JBS’s strategy to expand in the area of value-added products and brands in various markets had paid off in its latest results.

“We’re beginning to see the benefits of globalisation,” he said. “We’ve made various acquisitions that were a surprise to the market. The market questioned this strategy, but we were very confident that we did the right thing.

He said JBS was ‘optimistic’ for business in the fourth quarter.

“We will grow expressively in revenue in 2015 with organic growth expanding the business, and will keep growing in added value foods.”

In other JBS divisions:

 

JBS Foods:

The recently-created JBS Foods value-added division in Brazil posted net revenue of A$1.48 billion, an increase of 9pc compared with the previous quarter.

Revenue on domestic markets was up 17pc compared with the previous quarter, reflecting an increase in sales volumes in the three products category (pork, poultry and processed products). The main highlights were fresh pork (+25pc) and processed products (+18pc), as well as a higher price in the processed products segment, thanks to the initiatives to improve the product mix at the point of sales.

In the export market, JBS Foods’ net revenue was A$760 million, up only 3pc on the previous quarter boosted by an increase in volumes of fresh pork and poultry, principally to Russia, due to the embargo imposed by this country to the US and Europe exports. This embargo also resulted in an increase in pork prices.

JBS South America:

JBS Mercosul (South America) posted net revenue of A$2.85 billion in 3Q14, 15pc higher than this time last year, influenced by increased in sales prices in export markets. Compared to 2Q14, net revenue increased 2.8pc. Pre-tax earnings totalled A$244 million for the quarter, a decrease of 15pc compared with last year, due to an increase in Brazilian cattle prices in the period. Cattle slaughter numbers declined by 6.1pc in comparison with the same quarter last year, due to lower availability of cattle.

Nonetheless, a strong demand in the international market allowed the company to drive more South American beef products towards exports in order to maximise profitability per animal processed, whilst an increase in beef prices in the domestic market offset the reduction in the volume sold.

JBS has been benefiting from its strategy of investing in brands and in products innovation in the South American domestic market, yesterday’s report said. The launching of ‘convenience’ beef products reflected in an increase in sales volumes in the processed products category, coupled with an increase in prices during the period.

JBS USA Pork:

Net revenue in the quarter totalled A$412 million, up 4pc compared to last year. This result was due to a 19pc increase in sales prices in the domestic market and 15pc in exports. Compared with 2Q14, net revenue decrease 9pc, due to lower volumes.

JBS Chicken:

JBS’s US-based Pilgrim’s Pride poultry processing business recorded a net revenue of UA$2.67 million in 3Q14, an increase of 6pc compared with last year. In the US, PPC sales increased 5pc, of which 2.4pc was due to an increase in volume and 2.4pc to an increase in prices.

HAVE YOUR SAY

Your email address will not be published.

Your comment will not appear until it has been moderated.
Contributions that contravene our Comments Policy will not be published.

Comments

  1. Colin White, 17/11/2014

    If only the producers could post such levels of profitability.

Get Beef Central's news headlines emailed to you -
FREE!