CEO Wesley Batista says the company will pursue an IPO in 2018.
SÃO PAULO, Brazil – JBS SA, the world’s largest meat packer, reported a sharp drop in net income for the second quarter as financial expenses and weak performance at Seara and JBS Mercosul weighed on results.

Net income for the second quarter was R$309.8 million ($96.8 million), down 79.8 percent from R$1,536.2 million ($480.2 million) reported in the second quarter of 2016.

Consolidated net revenue for the quarter was R$41,674.8 million, down 4.6 percent from R$43,671.9 million reported in the year-ago period.

On Aug. 11, the company advised that its second-quarter earnings would not be audited pending a review of the leniency agreement between JBS SA parent company J&F Investimentos and federal prosecutors in Brazil. The agreement included paying a fine of R$225 million and is related to a federal anticorruption investigation.

For the second quarter, JBS SA reported a net financial expense of R$2,210.8 million. Currency variations and fair value of adjustments on derivatives accounted for half of the expenses at R$1,154.8 million. Interest expense was R$1,064.8 million, while interest income was R$70.8 million. Taxes, contributions, tariffs and other expenses resulted totaled R$62.0 million, the company said.

In a conference call with analysts, CEO Wesley Batista said the company will move forward with plans to launch an initial public offering in the second half of 2018.

On a segment basis:

Seara posted net revenue of R$4,323.6 million, down 6.1 percent from the year-ago quarter. The company attributed the result to a reduction in average sales prices mainly in fresh poultry, and a decline in revenue from exports due to a reduction in volume and to the impact of the real appreciation.

Net revenue at JBS Mercosul dropped 14.2 percent to R$6,185.7 million. The JBS unit struggled with a 21.9 reduction in volume in the domestic market. A 7.4 percent increase in average sales prices, especially in fresh beef, partially offset the decline. Currency appreciation against the US dollar impacted the export market, which posted a decrease in net revenue of 11.4 percent in the second quarter.

JBS USA Beef, which includes Australia and Canada, saw a 5.9 percent increase in net revenue which totaled US$5,525.7 million, JBS SA reported. Sales grew 4.8 percent on higher prices, while exports grew 9.2 percent on higher volumes and higher prices for beef.

“In the United States, cattle supply continued to expand, thanks to low feed costs coupled with better pasture conditions,” the company said. “Beef demand remained strong in both markets, with a highlight in exports, which grew more than 10 percent in 2Q17 compared with 2Q16. These factors allowed for more favorable beef spreads, increasing JBS operating margin in the country.