JBS Profit Rises to Four-Year High on Grass-Fed Beef

JBS SA (JBSS3), the world’s largest beef producer, posted its highest quarterly profit in four years amid its reliance on South America’s low cost, grass-fed cattle.

Net income was 367 million reais ($178.3 million) in the third quarter, the Sao Paulo-based company said in a statement today. The result is below a forecast gain of 386 million reais, excluding one-time items, the average of nine estimates compiled by Bloomberg. JBS reported a loss of 67.5 million reais a year earlier.

JBS is benefiting from lower cattle prices in the Mercosur region, Thiago Duarte, a Sao Paulo-based analyst with Banco BTG Pactual SA, said in an Oct. 29 note to clients. The company also had higher beef sales and margins, said Duarte, who has a buy recommendation on the stock.

The company is shielded from rising grain prices because herds of cattle in Brazil and Argentina are primarily grass-fed, while ranchers in the U.S. and Canada rely on corn and soybeans for feedstock. Prices for corn climbed 12 percent and soybean prices rose 5.8 percent in the quarter amid the worst U.S. drought in more than half a century.

Net sales were 19.4 billion reais, up 24 percent from a year ago. Earnings before interest, taxes, depreciation and amortization were 7.1 percent of sales in the quarter. That compares with 5.1 percent a year earlier.

JBS said it has third-quarter free cash flow, or what is left after covering operating expenses and capital spending, was 156.9 million reais.

To contact the reporter on this story: Lucia Kassai in Sao Paulo at lkassai@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net