JBS suffers 2Q net loss, sales gain
Aug. 16, 2011
by Bryan Salvage
SÃO PAULO, Brazil – JBS S.A. announced for its second quarter 2011 a net loss of $11.06 million due to the Chicken Operations, which incurred a net loss of $128.1 million, and challenges faced by its Beef Operations in the US. Net revenue, however, was $8,989.39 million, 3.6 percent higher than 2Q10.
EBITDA for 2Q11 was $360.99 million , a decline of 41.2 percent compared to 2Q10, due to the underperformance by Pilgrim’s Pride (JBS USA Chicken) and the weak performance of JBS USA Beef division. However, during the first semester of 2011, the EBITDA of the Beef and Pork business units in the US totaled $503.3 million, 12.1 percent higher than the corresponding semester of 2010.
In 2Q11, total capital expenditures of JBS in property, plant and equipment was $170.21 million. The principal investments were for the improvement of productivity and the increase in storage capacity and distribution.
JBS USA Beef (including Australia) equaled 43 percent of JBS S.A. totaling $3,964.0 million, up over 2Q10 by 19.1 percent. 2Q11 results reflect an increase in average sales prices. Compared to 1Q11, the revenue increase was 4.5 percent.
EBITDA was $44.7 million in the period, a decrease of 77.1 percent and 83.4 percent over 2Q10 and 1Q11, respectively, with an EBITDA margin of 1.1 percent in 2Q11. Results reflect difficulties encountered by the Australian operation, primarily due to a strong Australian dollar and the impact of the mark-to-market hedge structure for the long position on cattle in the US, which depreciated significantly in the quarter due to the drought that hit the southern US and the resulting increase in the supply of cattle for slaughter.
Australian operations, besides suffering from currency appreciation, faced other challenges such as the increase in collections by the government, the carbon tax project and the increase in labor costs without any corresponding increase in productivity.
EBITDA for the 1st semester of 2011 of the Beef and Pork units in the US totaled $503.3 million compared to $449 million in the first semester of last year – a 12.1 percent increase.
Net revenues for JBS USA Pork amounted to 10 percent of JBS S.A. net revenues. Totaling $845.8 million, 14.4 percent above 2Q10, reflecting a significant increase in export volumes and average sales prices. Compared to the previous quarter, the increase was 1.1 percent. EBITDA reached $83.6 million in the quarter, 71.7 percent higher y-o-y. EBITDA margin was 9.9 percent in 2Q11. Comparing with EBITDA of 1Q11, there was a 20.6 percent decrease.
The Pork Business unit performance remains strong due to an increase in the sales prices of pork items and significant demand from the export market, combined with streamlined operation, lower cost of production and an adjusted product mix with higher aggregate value products in order to maximize performance.
JBS USA Chicken (Pilgrim’s Pride Corporation, a US listed company controlled by JBS USA) equaled 22 percent of JBS S.A. net revenues totaling $1,992.7 million, 16.7 percent higher than 2Q10. This reflects an increase in volumes sold. Compared to 1Q11, the increase was 5.3 percent.
EBITDA was minus $47.6 million, compared to minus $55.2 million in 1Q11, which reflects the high input grain prices, weak demand in the period and falling prices for certain products, principally the domestically sold cuts. Exports continue to grow, reaching record levels, higher than the US chicken industry average levels.
The company previously announced it would close its Dallas poultry plant in late September. Production from this plant will be redistributed to the other plants in east Texas, increasing the capacity utilization and efficiency of these plants as well as reducing production costs.