JBS Posts Record Profit as Currency Slump Boosts Revenue

  • Net income more than tripled in third quarter, sales up 40%
  • Both revenue and profit missed analysts' average estimates

JBS SA’s third-quarter profit more than tripled as the slump in the Brazil real boosted revenues at the world’s largest meat producer.

Net income climbed to 3.44 billion reais ($902 million) from 1.1 billion reais a year earlier, the Sao Paulo-based company said in a statement late Wednesday. That missed the 3.64 billion-real average of nine analysts’ estimates compiled by Bloomberg.

Revenue surged 40 percent to a record 43 billion reais, boosted by increased volumes as well as the currency depreciation, missing the 45-billion reais estimate by 11 analysts. The shares rose 0.6 percent to 14.24 reais at 12:11 p.m. local time.

More than 80 percent of its sales are in dollars and include revenue from JBS-controlled Pilgrim’s Pride, the U.S. company that’s the world’s second-largest chicken producer. The real has lost almost one-third of its value this year -- the most among major currencies tracked by Bloomberg.

Gains from derivatives used to protect JBS’s debt from currency swings swelled to 9.5 billion reais from 1.1 billion reais a year earlier, boosting free cash flow to 5.1 billion reais from 2.1 billion reais. Credit Suisse Group AG said in September that the met company’s profit from derivatives will swell to 15 billion reais for the full year.

Tyson Acquisition

"JBS has built a production platform that stabilizes results and earnings, offsetting specific market fluctuations, cycles," Chief Executive Officer Wesley Batista said at an event in Sao Paulo on Thursday. "We keep focused on profitability, on cutting costs."

Earnings excluding one-time items at JBS Foods, Brazil’s second-largest chicken producer and foodmaker, surged 80 percent to 1 billion reais boosted by export revenues as increased volumes and the depreciation of real more than offset weaker dollar prices. Revenues were also helped by the consolidation of recent acquisitions, including some chicken plants from Tyson Foods in Brazil.

"JBS posted strong results," Bradesco BBI analyst Gabriel Lima wrote in a note to clients. "Results reflected Brazil’s strong momentum, which offset weak performances in the U.S."

Plants Closed

Profit at JBS’s biggest unit -- JBS USA Beef -- fell 61 percent. Earnings before interest, taxes, depreciation and amortization at the unit, which includes operation in Australia and Canada, were $196.8 million in the quarter, reflecting lower export prices and the depreciation of the Australian currency, the company said. Adjusted net income at Pilgrim’s Pride, the second-biggest chicken processor in the U.S., missed estimates after falling 46 percent in the three months ended in September on weaker chicken prices following a drop in exports, the unit reported on Oct. 28.

Ebitda for JBS’s Mercosul beef operation rose 16 percent from last year to 640.8 million reais. Margins improved after company closed six plants in Brazil on a cattle supply shortage and weaker demand in Brazil amid the worst recession since 1930s as higher prices in reais offset lower volumes both in domestic and export markets.

JBS, which has major operations in three continents, said net debt was flat at 2.55 times Ebitda excluding revenues from Moy Park and other recent acquisitions.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE