JBS Profits Jump as Chicken More Than Offsets Beef Downturn
(Bloomberg) -- JBS SA said quarterly profits rose more than expected, with chicken making up for the bulk of the increase as the world's largest meat supplier faces deepening losses at its US beef business.
Adjusted net income for the three months ended in March rose 78% from a year earlier to 2.92 billion reais ($520.7 million), the Brazilian company said in a statement. That compares with the 2.79 billion real average of analyst estimates compiled by Bloomberg.
The result underscores how chicken has become a lifeline for major meat suppliers including Tyson Foods Inc. and Cargill Inc. as a severe shortage of cattle in the US inflates their costs and wipes out profits from beef processing.
Roughly 71% of JBS's earnings before items such as interest and taxes in the first quarter came from its chicken operations in North America and Brazil, which benefited from cheaper feed costs and strong consumer demand. That compares with 57% a year earlier.
The boom in chicken won't be fading anytime soon, according to JBS Chief Executive Officer Gilberto Tomazoni. 'We've seen a very strong demand, I see a very positive year for chicken and pork,' he said in an interview Tuesday, also citing supply constraints.
JBS said its North American beef business, the company's largest, had a loss of $112.9 million in the first quarter as surging prices for the meat it sells were more than offset by record cattle costs. Still, profits for JBS's beef operations in Brazil and Australia rose from a year earlier.
The company, which is based in Sao Paulo, is in the final stages of a longstanding plan to trade its shares in New York after receiving a green light by US regulators last month. The meat producer will go to minority shareholders for a vote on May 23. JBS says the move will broaden its access to capital and give it more flexibility to use equity as a source of funding.
JBS shares have soared 85% over the past year to record levels in April.
JBS's free cash flow was negative 5.4 billion reais in the first quarter, from negative 3.1 billion reais a year ago, due mainly to higher tax payments.
(Updates with CEO quote in fifth paragraph.)
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