JBS Q4 profit well below expectations

Cattle supply restrictions, chicken glut to blame
calendar icon 27 March 2024
clock icon 2 minute read

Brazilian meat processor JBS SA posted much weaker-than-expected fourth-quarter results on Tuesday, and said cattle supply restrictions in the United States weighed on business, reported Reuters.

In addition, the company said an over-supplied global poultry market and high grain prices in the initial months of 2023 were detrimental to its annual performance.

JBS had net profit of 82.6 million reais ($16.58 million) in the fourth quarter, compared with analysts' projections of 800.2 million reais. The company said it lost 1.06 billion reais ($212.99 million) in the whole of 2023.

In final quarter of last year, earnings before interest, tax, depreciation and amortization, a measure of operating income known as EBITDA, came inat 5.104 billion reais, roughly in line with analysts expectations.

In 2023, adjusted EBITDA reached 17.1 billion reais, JBS said.

Better supply-and-demand dynamics for pork and poultry products in North America and for poultry products in Brazil were positive for the company as the year progressed, JBS said.

Results also improved somewhat as grain prices fell in the second half of last year, the company said.

"The fourth quarter result was what it was despite the negative cattle cycle in the US," CEO Gilberto Tomazoni said.

JBS's beef division had negative EBITDA of 488 million reais in the final quarter, according to the earnings statement. Tomazoni said the US cattle cycle will continue to challenge the firm in the next two years.

Cattle supply restrictions combined with lower Asian demand also weighed on overall U.S. beef exports, which fell 16% annually, JBS said, citing the USDA.

Still, the top three US beef export destinations continue to be South Korea, China and Japan, the company said.

The chicken cycle is now positive in the US, Brazil, Mexico and Europe, Tomazoni noted.

Guilherme Cavalcanti, the company's CFO, said he is confident in the company's leverage reduction trajectory, with leverage already down from the third to the fourth quarter. Cavalcanti said JBS would burn less cash in the first quarter of 2024 compared with last year.

Cash burn is usually higher in the first quarter of any year, he said.

($1 = 4.9828 reais)

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