Meat&Poultry - June 2011 - 35

CORPORATE PROFILES

Bigger and bolder
JBS keeps pushing the envelope
BY STEVE KAY
meatpoultry@sosland.com

s the world’s largest meat and poultry company, JBS SA is used to being constantly scrutinized by fi nancial analysts, politicians and the media. However, it significantly raised its profi le this spring after it announced its 2010 fi nancial results. Much of this was due to Wesley Batista leaving JBS USA’s Greeley, Colo., headquarters to become JBS SA’s president and CEO in Sáo Paulo on Feb. 1. As comfortable as Batista is on a kill floor, he now appears equally comfortable explaining to investors and reporters where the meat giant is headed. Appearances at several investor conferences in March led to interviews and lengthy stories in major publications. Meanwhile, JBS in mid-April refuted allegations that it bought cattle illegally in the Brazilian state of Acre. Brazilian public prosecutors on April 14 filed a 2 billion reais (US$1.3 billion) civil suit alleging that JBS and 13 other beef producers bought cattle from illegally deforested areas in the Amazon and from farms linked to slavery. JBS said the lawsuit refers to the possible purchase of 578 cattle in the past four years. Its procedures for buying cattle in Acre are correct and the lawsuit contains four significant inaccuracies, it said. Batista’s PR offensive gave him several opportunities to repeat the message that JBS’s acquisition binge is over for now and that it is focusing on organic growth in its worldwide operations and on maximizing profits for shareholders. One way to do this is to shift some of its R$11.5billion (US$6.9 billion) of debt, now

predominantly on the books of the Brazilian company, to its US division to create a tax benefit there via amortization.

Next phase
JBS has reached a critical mass and is entering a new phase, Batista told the Reuters Latin American Investment Summit in Sáo Paulo. It’s now time for JBS to start reaping what it has sown. JBS in 2010 spent R$400

Its biggest immediate challenge is in Argentina. The country has quality cattle but not quantity. Most beef plants are running at only half their processing capacity. Beef packers face export and other restrictions. This led JBS to suspend operations at four plants and significantly reduce its workforce there.

Beyond the US
JBS also faces the prospect of near-recordh igh cat t le pr ices i n Batista Brazil. It also faces record-high priced cattle in Australia. None of these challenges is insurmountable, as beef prices in Brazil are much higher amid growing domestic demand. Beef exports from the US and Australia are increasing amid higher global beef prices. JBS will likely need to focus even more in both countries on improving carcass yields and being even more efficient. Another challenge is to keep its Pilgrim’s Pride business profi table in the face of high feed costs and somewhat depressed wholesale chicken prices. JBS is operating two cattle processing plants in Argentina, with four idled. JBS is disappointed that it can’t get its Argentine operations running more efficiently, JBS’s Jerry O’Callaghan told Meat&Poultry. Argentina has good cattle and a good Hilton quota (for exports to the European Union). But JBS is exporting only a little beef because 70 percent of all beef produced has to be sold domestically. The Argentine government is also extremely volatile in its decision-making over export

Batista does not rule out the possibility of a new acquisition if the opportunity arises, especially of a packaged foods company.

million to R$500 million (US$253.8 million to US$317.3 million) to integrate new acquisitions. Although it will continue fine-tuning, such costs will be more in the range of R$10 million going forward, he says. However, Batista does not rule out the possibility of a new acquisition if the opportunity arises, especially of a packaged foods company, he told Dow Jones Newswires and the Wall Street Journal. This suggests JBS might still be interested in Sara Lee’s meat business. None of the stories though mentioned any of the challenges that JBS faces in some of its beef operations.

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