JBS SA posts net profit in fourth quarter
March 8, 2010
by Bryan Salvage
SÃO PAULO, BRAZIL — JBS SA announced a net profit of R$127.9 million ($71.5 million) for its fourth quarter of 2009.
Net revenue for the year was R$34,311.8 million ($19,1900.4 million), representing a 13.1% increase year over year. Consolidated E.B.I.T.D.A. in the fourth quarter increased 49.6% compared to 4Q08, from R$265.9 million ($148.71million) to R$397.8 million ($222.48 million). Consolidated E.B.I.T.D.A. margin was 5.4% for the period, compared with 2.8% for 4Q08.
JBS finished 2009 with the growth revenue of 13.1% when compared to the prior year, mainly due to the completion of the acquisition of Smithfield Beef near the end of 2008, partially offset by the deteriorating market conditions caused by the global crisis, and a consequent reduction of sale prices in the beef and Pork operations of the U.S.
The E.B.I.T.D.A. reached R1,285.2 million ($718.79 million) in 2009, which was an 11.2% increase when compared to R$1,156.1 million ($646.59 million) in 2008. Despite the adverse conditions in the Argentine, Australian and the Pork business unit of the U.S., JBS was still able to present a consolidated E.B.I.T.D.A. margin of 3.7% for the period, practically unchanged in relation to 2008. The net income for the period was R$129.4 million ($72.37 million), compared with R$25.9 million ($14.49 million) in 2008.
In 4Q09, net revenue was R$7,408.9 million ($4143.7 million), 23.1% less than the revenue of 4Q08, which reflects mainly the appreciation of the real against the dollar in the period. Despite the revenue reduction, E.B.I.T.D.A. increased by 49.6% in comparison with the same period last year, going from R$265.9 million ($148.2 million) in 4Q08 to R$397.8 million ($222.5 million) in 4Q09, mainly as a result of operational improvements in Brazil and the U.S.. Consolidated E.B.I.T.D.A. margins climbed from 2.8% in 4Q08 to 5.4% in 4Q09.
In 2008, JBS SA tightened its financials, reduced its leverage and prepared itself for the difficult year ahead. “By the second half of 2009, we began to see the road ahead more clearly and were able to take our company to another level by making some relevant acquisitions,” said Joesley Mendonça Batista, chief executive officer.
In the U.S., as JBS SA planned to expand its downstream integration, it needed a more diversified protein base in that market and Pilgrim’s Pride fit into its strategy well. “We now have leading positions in the North American market in all three proteins and that gives us the scale and diversity to reach out efficiently to end users of our products,” Mr. Batista said. “We plan to build on that base in the coming years by producing more customized products and by delivering them to the doorstep of as many customers as possible.”
On Dec. 28, 2009, JBS S.A., through its subsidiary JBS USA, became the Pilgrim’s Pride controlling shareholder by acquiring 64% of the total share capital and voting rights. JBS USA paid $800 million in cash. The acquisition followed the legal applicable procedures and was approved by the bankruptcy court and the anti-trust authorities.
With the acquisition of Tatiara Meat Company near year’s end, JBS now has a leading position in lamb production, a sector in which Australia is demonstrating solid constant growth, Mr. Batista said.
JBS’ European operations based in Italy put in “a stalwart display” in the last year, Mr. Batista said. “While sales may have declined inside Italy, we were able to increase our market share in the African countries where we have strong distribution channels and we were very pleased with the inauguration of our beef patty plant in Russia serving customers with whom we have good long term relations and with whom we plan to continue our growth,” he said.
In North America, JBS SA was able to sustain margins and saw some growth and recovery, particularly in by-products, which augurs for a good, solid 2010, Mr. Batista continued. “As we now integrate Pilgrim’s Pride and implement synergies, our SG&A tend to reduce even further and we already see growth in the export market,” he said. "By the way, we gained substantial market share in some of the key export markets, such as Japan, Korea and Russia as well as breaking into markets that were untouched by U.S. exports, in the last six months and we will continue this drive during this year.”
Although JBS SA made substantial acquisitions during the last year, it continued to maintain a watchful eye on its balance sheet. Having acquired a controlling interest in Pilgrim's Pride and merged with Bertin, it ensured these investments were matched with non debt related cash injections in the company to maintain its leverage at manageable levels. “Although we consider our present leverage level comfortable we will be taking measures during this year to reduce this still further,” Mr. Batista said.
Net revenue of the Beef Business Unit of JBS USA was $2,817.0 million for the quarter, stable when compared to 4Q08 and 3Q09 (up 1.0% and down 0.9%, respectively). This stability in net revenues is due to the reduction in volume produced, partially offset by an increase in sales price, due to the generally more favorable market conditions, the company said. This is the result of the strategy adopted by the company in 2009 to increase the carcass yield, which compensated for the reduction in the volume slaughtered.
The E.B.I.T.D.A. rose from $60.4 million in 4Q08 to $126.0 million in 4Q09, representing an increase of 108.6% for the period. In comparison with 3Q09, the increase was 16.2%. This increase was due to the favorable market conditions, reduction of cost of sales, general, and administrative (SG&A), besides the strategy described above adopted by the company.
The company's Pork Business Unit realized a net revenue $605.6 million for the period, 0.8% better compared to 4Q08 which was $600.5 million, a positive variation in E.B.I.T.D.A. of 0.4 percentage points, which reflects an increase in production volume, partially offset by a reduction in sales price, a consequence of the unfavorable market conditions in relation to 4Q08.
In comparison to the previous quarter (3Q09), the growth in revenue was 8.3% and E.B.I.T.D.A. margin went from 2.7% to 4.7%. The revenue growth reflects an increase in volume sold due to the better market conditions because of the seasonal factors in the period, partially offset by a reduction in sale prices. For the accumulated year, there was a reduction of net revenue and E.B.I.T.D.A., which reflects a global crisis that still affects important markets, as well as the adverse effects caused by H1N1 influenza.