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JBS Profit Misses Estimates on Rising Cattle, Feed Costs

March 14 (Bloomberg) -- JBS SA, the world’s largest beef producer, jumped to the highest in almost a month after the company’s quarterly report showed it generated cash and increased sales amid rising costs for corn, soybean and cattle.

The stock rose 0.9 percent to 7.13 reais at 12:59 p.m. in Sao Paulo. Earlier it gained as much as 6 percent to the highest intraday price since Feb. 19.

“JBS posted encouraging improvement in operation results,” Luis Miranda, an analyst with Banco Santander Brasil SA who has a hold recommendation on the stock, said in a note to clients today.

JBS’s fourth-quarter sales of 21.9 billion reais ($11.1 billion) were 7 percent above Miranda’s estimate. The company generated 305.4 million reais in cash, reducing net debt to 3.4 times earnings before interest, taxes, depreciation and amortization, from 3.7 times in the previous quarter, JBS said in its earnings report released late yesterday.

Net income for the company based in Sao Paulo fell to 66.4 million reais, or 2 centavos a share, from 367 million reais, or 13 centavos, in the previous quarter. 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.

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.

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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