JBS SA 3Q posts net loss, but net revenue up

by Bryan Salvage
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SÃO PAULO, Brazil – JBS SA posted a loss for 3Q11of R$67.5 million (US$38.3 million), equal to minus R$0.02 EPS (minus US$0.11), due to the Chicken Operations, which incurred a loss of US$162.5 million as well as a net negative foreign exchange result of R$170.6 million (US$96.8 million). If these items were not included, JBS profit would have been R$372.1 million (US$211.1 million).

3Q11 net revenue totaled R$15,567.8 million (US$8832.8 million), a 10.6 percent increase compared to 3Q10. Highlights of the quarter include the JBS USA Beef and Pork business units, which experienced growth of 25.4 percent and 12.3 percent, respectively, when compared to 3Q10.

In 3Q, 75 percent of revenues were generated in the domestic market and exports represented approximately 25 percent.

EBITDA for 3Q11 was R$786.8 million (US$446.4 million), a decline of 24.1 percent compared to 3Q10, due to the underperformance by Pilgrim’s Pride (JBS USA Chicken). When compared to 2Q11, EBITDA increased 33.9 percent, reflecting the substantial improvement of the JBS USA Beef business unit, in addition to the continuous capture of synergies and operational improvements.

JBS USA Beef’s (including Australia) net revenue for 3Q11 totaled US$4,210.6 million, outperforming 3Q10 by 25.4 percent. These results reflect an increase in average sales prices in the domestic and exports markets combined with better utilization of production capacity. EBITDA was US$184.1 million in the period, an increase of 77.9 percent over 3Q10. The EBITDA margin was 4.4 percent in 3Q11. This result reflects the stabilized raw material price and the good export performance.

JBS USA Pork net revenue was US$867.1 million, 12.3 percent above 3Q10, reflecting the increase in export volumes and average sales prices. EBITDA reached US$75.9 million in the quarter, 16.4 percent lower year over year. Compared to 2Q11 EBITDA, there was a 9.2 percent decrease. EBITDA margin was 8.8 percent in 3Q11. Despite the EBITDA margin loss of 110 bps, the performance of JBS USA Pork remains strong. The 3Q11 margin reflects an annual cost increase of 17.8 percent in pork prices, which was partially offset by lower operational and administrative expenses.

JBS USA Chicken (Pilgrim’s Pride, which is controlled by JBS USA) net revenue for 3Q11 was US$1,891.2 million, 10.0 percent higher than 3Q10, reflecting an increase in volumes sold. Adjusted EBITDA was minus US$31.4 million, compared to minus US$47.6 million in 2Q11. The negative result reflects high input costs, including grain prices and an oversupply, which prevented the transfer of costs to selling prices.

The company has already captured US$295 million in operational improvements, from an estimated total of US$400 million, which minimized the impact of the increase in production costs.

Net revenue of JBS Mercosul was R$3,906.7 million (US$2216.6 million) during the third quarter, an increase of 11.9 percent in comparison to 3Q10, as a result of an increase in sales prices. In comparison with 2Q11, the revenue increased 8.1 percent. EBITDA was R$453.8 million (US$257.5 million) in 3Q11, an increase of 21.4 percent in comparison with 3Q10.
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