Brazil's JBS SA posted a net profit of BRL169.4 million (US$83.6 million) for the second quarter this year, a recovery from the BRL180.7 million (US$89.2 million) loss reported in the same period a year ago, thanks in part to a greater cattle supply in Brazil that helped beef compete against costlier pork and poultry, the company reported Tuesday night.
The world's largest beef and poultry processor reported net income of BRL18.4 billion (US$9.1 billion), up 26 percent from Q2 a year ago.
JBS' earnings before interest, taxes, depreciation and amortization, or EBITDA, rose 72 percent from Q2 2011, to BRL1.01 billion (US$498.3 million). The company's EBITDA margin also rose from 4.3 percent to 5.5 percent.
In a conference call with analysts on Wednesday, CEO Wesley Batista said beef demand in Brazil remains stable amidst a somewhat stagnant economy, and was only marginally weaker in the first semester compared to the year prior.
“We think the Brazilian beef market will show a better second semester than the first,” Batista said, “since the economy has the conditions in place to perform better the rest of this year.”
Thanks in part to the larger-than-expected cattle supply in Brazil during the quarter, the net income of JBS Mercosur, the South American unit that includes Brazil, rose 19.4 percent from Q2 2011, to BRL4.3 billion (US$2.1 billion).
That division's EBITDA increased 47.3 percent, to BRL630.3 million (US$311 million), and JBS Mercosur's EBITDA margin rose from 13.3 percent to 14.6 percent.
JBS expects an increase in the amount of beef exported from Brazil in the second half of this year, but doesn't expect beef price to rise much, said Jeremiah O'Callaghan, director of investor relations, on Wednesday. Domestic beef sales are also expected to have a stronger second half, again with limited price improvement.
JBS UNITS IN USA
The continuing recovery of JBS' poultry unit in the United States, Pilgrim's Pride, also contributed to a strong second quarter.
Pilgrim's registered an EBITDA of US$125.7 million for Q2, up from a loss of US$47.6 million in the same period the year prior. Pilgrim's net income for the second quarter of US$1.9 billion was relatively stable when compared year to year.
JBS USA Beef registered a net income of US$4.2 billion for Q2, up 7.6 percent from the same quarter in 2011. However, the unit's EBITDA undermined the company overall, reported as negative US$9.1 million, compared to a positive US$44.7 this time a year ago.
The success of Pilgrim's Pride in the second quarter may be short-lived if the company has to deal soon with the challenge of rising grain prices, something JBS said in its report will likely be reflected in fourth-quarter results.
JBS is lucky it did not have many fixed-price sales contracts through Pilgrim's this past year that would have suffered under the rapid rise of grain prices, said Batista on Wednesday.
Most annual contracts for Pilgrim's are ending now, so the company is confident its U.S. poultry sales for the coming year will have the flexibility to partially pass on rising input costs, “but it would be very hard to pass on the entire cost in the U.S. market,” Batista said.
JBS ended the quarter with an overall net debt of BRL15.2 billion (US$7.5 billion), 23 percent of which is due in the short term. The company's leverage, which compares net debt to EBITDA, was 4.27 times, compared to 4.3 times in Q1 2012.
JBS' gross debt increased by 11 percent from the first quarter, to BRL20.75 billion (US$10.2 billion), due in part to the devaluation of the real against the dollar. If currency exchange rates were excluded, JBS' gross debt would have been stable, the company said.
JBS ended the second quarter with BRL5.48 billion (US$2.7 billion) in cash on hand, offering a comfortable liquidity, the company said, because that's more than 110 percent of short-term debt.
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