JBS Profit Misses Estimates on Rising Cattle, Feed Costs

JBS SA (JBSS3), the world’s largest beef producer, said fourth-quarter profit missed analysts’ estimates after rising soybean, corn and cattle prices boosted costs.

Net income fell to 66.4 million reais ($33.7 million), or 2 centavos a share, from 367 million reais, or 13 centavos, in the previous quarter, the Sao Paulo-based company said in a regulatory filing yesterday. That compares with a 268.7 million- real average of seven analysts’ estimates compiled by Bloomberg.

Profit margins at JBS’s U.S. unit narrowed after the cost of feeding its poultry and hogs climbed, as well as prices for cattle it buys from feedlots, amid the country’s worst drought in more than 70 years. The unit accounts for 76 percent of sales.

The earnings report showed a “challenging operating environment at JBS USA Beef, where the cattle herd continues to dwindle to an all-time loss and cattle prices trend higher,” Alexander Robarts, a New York-based Citibank Inc. equity analyst who rates the stock neutral, wrote in a report after earnings were released.

Average corn prices in Chicago rose 18 percent in the quarter from a year earlier and average soybean prices jumped 26 percent. Cattle futures rose to record levels.

JBS’s Brazilian beef unit benefited from a 3 percent drop in domestic cattle prices in the quarter and a weakening local currency that favored exports. The Brazilian real declined 1.2 percent against the U.S. dollar in the quarter.

Sales climbed 13 percent from the previous quarter and 29 percent from a year earlier to 21.9 billion 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

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