March 8, 2010

JBS Q4 profits reverses year-ago losses

Brazil's JBS, the world's largest producer of animal protein, posted a net quarterly profit of BRL127.9 million (US$71 million) on Friday (March 5), reversing losses of BRL53.4 million in the fourth quarter of 2008.

In a statement to the local market regulator, JBS said its profit for all of 2009 grew nearly 400% to BRL129.4 million from a net profit of BRL25.9 million in 2008.

The company's fourth quarter earnings before interest, taxes, depreciation and amortisation - an indication of a company's cash flow known as EBITDA - rose 49% to BRL397.8 million from BRL265.9 million a year earlier. For all of 2009, company EBITDA 11% to BRL1.28 billion from a BRL1.15 billion in 2008.

Revenue fell as the real gained against the dollar. JBS boosted gross profit margins to 11% from 8% in the year-earlier period.

The cattle industry returned to economic viability in Brazil, CEO Joesley Mendonca Batista wrote in the company's earnings statement. "This helped bring our margins from low levels at the beginning of last year to almost double digits at the end," he wrote. Full-year margins reached 9.3% in 2009.

JBS controls more than 10% of the world's beef production and surpassed Tyson Foods Inc. as the top meat processor after buying control of Pilgrim's Pride Corp. and Bertin SA at the end of last year. JBS also agreed to lease five plants to boost output.

The meatpacker reported a loss of BRL128.7 million reais related to currency valuation and interest on debt, compared with a charge of BRL238.8 million a year earlier.

The real rose 33% last year, the best performance of the 16 most traded currencies tracked by Bloomberg. The dollar fell against all of them except Japan's yen.

Lower costs also helped to improve profits. Prices for cattle bought by JBS fell 14% from a year earlier, Bueno said.

The company may resume a US$2 billion initial public offering of its US unit, Bueno said. The share sale, which was expected to be priced in January, was delayed because of "deteriorated" market conditions, Chief Executive Batista said on January 28.

Proceeds of the share sale will be used to fund a global distribution network, the company said in a prospectus in July.

In December, JBS concluded a US$2-billion bond sale to finance the takeover of Pilgrim's Pride and Bertin. The bonds were bought by Brazil's development bank, known as BNDES.