JBS SA posts net loss in second quarter

By Bob Moser on 8/16/2011

JBS SA, the world's largest processor of beef, posted a net loss of BRL180.8 million (US$113.6 million) in the second quarter, reversing net gains of BRL3.7 million from a year earlier and BRL147 million recorded in the first three months of 2011, according to the company's earnings report and media conference on Tuesday morning.

JBS attributed the drop to a negative quarterly loss of Pilgrim's Pride in the United States of US$128.1 million, and poor performance by its American beef operations.

The company's consolidated net revenue totaled BRL14.6 billion for the quarter, up 3.6 percent compared to the same quarter in 2010. JBS said all its business units had revenue growth in local currencies year-over-year, reflecting an increase in overall average prices and strong demand in emerging countries.

But the company's earnings before interest, taxes, depreciation and amortization was BRL587.7 million for the quarter, down 41.2 percent from the year before and 29.7 percent less than the previous quarter. JBS SA's EBITDA margin was 4 percent, compared to 7.1 percent in the second quarter of 2010, and 5.7 percent during the first quarter of this year.

On a brighter side, JBS' sales revenue during the first six months of 2011 totaled BRL29.3 billion, up 19 percent from the first half of last year. The company said every business unit achieved double-digit sales growth in the first half of the year.

Revenue for JBS Mercosul, which includes beef, leather and dairy operations, reached BRL7.2 billion, up 14 percent from the first half of 2010. JBS USA (and the Australian operations it includes) saw poultry sales grow 15 percent during the semester to US$3.9 billion, while pork sales reached US$1.7 billion, up 21 percent from the same period a year prior. Beef revenues rose US$7.8 billion, up 26 percent.

“The weakness of the U.S. dollar is making U.S. beef prices very competitive,” said Wesley Batista, JBS executive president, during a conference call with Brazilian media on Tuesday morning. “Some cuts the U.S. can sell cheaper today in Brazil than in Russia, the Middle East and other markets.”

Batista said he believes JBS USA will have enough cattle to run beef plants in the third and fourth quarters at the same level they're running today, despite concerns of a cattle shortage in the U.S. He also sees beef processing margins remaining steady in the second half of the year, close to the 5 percent EBITDA margin the operation currently has.

Batista reiterated to Brazilian reporters that JBS isn't interested in property acquisition for the foreseeable future, and wants to focus instead on improving synergies within the company.