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JBS Earnings Beat Shows Meat Operations Unscathed by Scandal

Bloomberg 2017-11-14 04:56:15

JBS SA reported better-than-expected third-quarter profit, showing that the world’s largest meatpacker’s operations have been left largely unscathed by the corruption scandal that has sent its owners to jail.

Adjusted earnings before interest, taxes, depreciation and amortization rose to a record 4.32 billion reais ($1.3 billion), compared with 3.14 billion reais a year earlier, the Sao Paulo-based company said Monday in a statement after markets closed. That exceeded all of the the six analysts’ estimates compiled by Bloomberg.

Meat operations in the U.S., which account for more than two-thirds of JBS’s revenues, have benefited from rising demand both at home and abroad, while the cost of feeding livestock and poultry remains low after farmers harvested back-to-back bumper corn crops. JBS and peers including Tyson Foods Inc. have had profitable margins on beef and pork-processing for much of the year, HedgersEdge data show.

JBS USA Beef, the Brazilian company’s biggest unit with operations spanning Australia and Canada as well as the U.S., saw its Ebitda margin expand to 7.3 percent from 5 percent. Ebitda at Pilgrim’s Pride Corp., JBS’s U.S. chicken unit, almost doubled from a year earlier, the company said last week. Seara, the company’s Brazil chicken unit, saw margins rise to 11 percent from 7.3 percent.

Jailed Brothers

JBS was plunged into crisis in May after the revelation that Wesley and Joesley Batista, the brothers who control the company, confessed to bribing more than 1,800 politicians. The ensuing turmoil saw JBS shares and bonds tumble, forcing the company to put assets up for sale while seeking a refinancing agreement with banks. Wesley and Joesley were arrested in September -- the former on allegations on insider trading, the latter for allegedly concealing information in his plea bargain -- and remain in jail. Their father Jose Batista Sobrinho was named as JBS’s chief executive officer in September after Wesley’s arrest.

  • The company reported third-quarter net profit of 323 million reais, curbed by the one-time impact of a 4.2 billion-real tax settlement in Brazil that the company announced on Nov. 7. Year-earlier profit was 887.1 million reais.
  • Net debt fell 9.6 percent from the second quarter to 45.5 billion reais, or 3.42 times Ebitda, amid strong cash generation and use of proceeds from asset sales to pay down bank debt. Total liquidity, which includes revolving credit lines, rose to 17.4 billion reais, exceeding the 16.4 billion reais in short-term debt, the company said.
  • Sales were little changed at 41.1 billion reais, compared with the average estimate of 41.6 billion.
  • Results in JBS’s domestic beef operation were hurt by a drop in volumes as the company reduced slaughtering levels and sold assets in the aftermath of the scandal as it tried to preserve cash. Ebitda at the JBS Brasil unit fell to 72.5 million reais, from 339 million reais a year earlier.