(Bloomberg) — JBS SA, the world’s largest meat producer, swung to a profit in the second quarter as a sharp rebound in chicken and pork production more than offset a decline in its sizable U.S. beef business.
The Brazilian company reported net profit of 0.77 reais per share in the three months to June, it said late Tuesday, compared with a loss of 0.12 reais a year earlier.
“The chicken business is doing well in all regions,” said CEO Gilberto Tomazoni in an interview, citing lower grain prices and a better balance between supply and demand as the main drivers.
Shares of the company, whose operations extend from Colorado to New Zealand, have risen by around 80 percent in the past twelve months, making it one of the best-performing companies in Brazil’s leading index.
Chicken and pork producers are seeing a quick rebound in profits after last year’s slump as plentiful supplies of corn and soybeans are driving down the cost of feeding poultry and hogs at a time when consumer demand is rising. That’s a boon for JBS, even as its North American beef operations struggle with the tightest U.S. cattle supply in seven decades.
But the results fell short of the average estimates of analysts surveyed by Bloomberg as one-time expenses, including a tax settlement in Brazil and a restructuring of operations in Europe, offset some gains from sales. Profit before those items more than doubled from a year earlier, beating even the highest analyst forecast.
Profit margins
JBS increased its profit margin excluding taxes and interest to 9.8 percent in the second quarter – the best result in two years, even though North American beef production – which accounts for almost a third of the company’s sales – was close to breaking even. Chicken production, which includes the publicly traded Pilgrim’s Pride Corp., achieved healthy margins of over 17 percent.
JBS, controlled by the billionaire Batista brothers, also benefits from rising cattle herds in Brazil and Australia, although lower beef prices have limited profits at those operations.
Cash flow, which the Sao Paulo-based company can freely use for everything from acquisitions to share buybacks, rose more than fourfold in the quarter from a year earlier to about $1 billion. Net debt, which was nearly 2.8 times earnings in the second quarter, is expected to fall to nearly twice that by year-end, Chief Financial Officer Guilherme Cavalcanti said in the same interview.
JBS continues to hold talks with the U.S. Securities and Exchange Commission (SEC) about listing its shares in New York, Tomazoni said, but did not provide further information on the move.
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