Shares in world's largest meat processor slide on concerns over deepening beef losses

Irish Independent

16-05-2025

The Brazilian company said its North American beef business, JBS's largest, had a loss of $112.9 million in the first quarter as a severe shortage of cattle inflates costs. The company expects an even "more challenging" year for its beef operation in the US, JBS USA Chief Executive Officer Wesley Batista Filho said in a conference call.
The constrained cattle supply will see a reversal only by the end of next year, the company said.
JBS shares dropped as much as 6.6% on Wednesday, the most since May 2023. The stock had soared 85% over the past year through Tuesday, reaching a record in April.
JBS's business units in the US have also been hurt by the trade war, Filho said. China's retaliatory tariffs on US goods have had an impact on leather exports to the Asian country during the first half of the second quarter. Beef exports were also hit by tariffs and China's halt of export authorizations for hundreds of plants.
The worsening beef results come as chicken lifted JBS's overall results. Adjusted net income for the three months ended in March rose 78% from a year earlier to 2.92 billion reais ($520.7 million). 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. amid the losses in beef.
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.
Meat suppliers in Brazil and the US have not been able to expand chicken supply significantly given recent changes in chicken genetics, which have resulted in reduced fertility, Tomazoni said during the earnings call. The outlook is not expected to change this year, he said.
"Even with an increase of breeders in the field, the number of chicks remained the same or increased by 1% to 2%," Tomazoni said in the call. "What happens from now on will depend on the genetics companies."
JBS, 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'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.
Bloomberg L.P.