Meat&Poultry - June 2012 - 36

Reais focused
BY STEVE KAY
meatpoultry@sosland.com

esley Batista headed the team that flew to Greeley, Colo.,

12 beef processing plants with a combined capacity to process two million head per year. This brings its total capacity in Brazil to 10 million cattle per year. JBS also leased four plants in February with a combined daily slaughter capacity of 3,000 head. JBS has also leased the assets of poultry producer Frangosul, owned by France’s Doux, and has the option to buy Frangosul outright. JBS will ramp its plants up to their capacity of 1.1 million birds per day by June. Meanwhile, JBS looks set to proceed with the purchase of smaller beef rival Independencia, which has four beef processing plants. The Mercosul unit has seen a gradual improvement in its performance over five quarters and this showed in its first quarter results. The unit had EBITDA (earnings be-

on-year improvement in its US chicken business (Pilgrim’s Pride Corporation). EBITDA for the quarter was $104.0 million, vs. a negative $53.5 million a year earlier. Sales totaled $1.889 billion vs. $1.893 billion. EBITDA margin was 5.5 percent versus a negative 2.8 percent. “The business is improving every day,” Batista told analysts. “It is operating much more efficiently and will have even better numbers in the following quarters.” JBS will also be hoping that its USA Beef unit has better numbers than in the first quarter. It reported negative EBITDA of $45.4 million, vs. positive EBITDA of $269.7 million a year earlier. The unit’s revenues totaled $4.079 billion in the quarter, up 7.5 percent from last year’s $3.793 billion. This reflected a 15.4 percent and 7.5 percent increase in average sales prices in the domestic and export markets, respectively, from 2011, said JBS. The business includes JBS’s Australian cattle feeding, beef and lamb processing, its giant US cattle feeding business and its US beef operations. So, it’s unclear how the strictly US beef business performed. However, the loss partly included foreign exchange hedging losses. So, the US business might have made money. The US beef industry did not balance supply and demand in the fi rst quarter, Batista said. But the balance has improved since the end of the quarter. US margins can recover with

after JBS SA’s acquisition of Swift & Co. He was instrumental in improving the performance of Swift’s beef business. So it was no surprise he headed back to Brazil in February 2011 because JBS’s beef business there was under-performing. It is now doing much better. Another reason for his move was to lead an expansion on JBS’s home turf. That’s now occurred in both beef and chicken. JBS SA, the world’s largest protein company, made numerous acquisitions in Brazil and several in Argentina to build its Mercosul business. But its last acquisition, of Bertin SA, was back in 2009. JBS over the past year had been looking to expand its

“JBS will not be looking to close any plants but to run them to match cattle availability.”
Brazilian beef business again as its profit margins improved and more cattle became available. Sales in its Mercosul unit totaled R$3.827 billion ($1.87 billion) in JBS’s fiscal 2012 fi rst quarter. JBS is now set to expand those sales by R$4.5 billion ($2.2 billion) per year in beef and chicken, it says. It has just leased

fore interest, taxation, depreciation and amortization) of R$508.6 million ($249.5 million), up 65 percent on 2011’s 308.3 million reais ($151 million). EBITDA margin was 13.3 percent vs. 8.6 percent. JBS is seeing a strong improvement in its Mercosul business, especially in Brazil, Batista told analysts last month. JBS did a lot of things to make the business more competitive and efficient. In addition, the weaker reais against the US dollar is helping exports from Brazil be more competitive globally. He expects the Mercosul unit to have a strong year. JBS also enjoyed a significant year-

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