May 17, 2024


JBS shares surge amid rising chicken demand and recovery in earnings



JBS SA's shares reached their highest point since 2022, buoyed by increased chicken demand, which helped the world's largest meat producer offset a severe cattle shortage in the US, Bloomberg reported.


JBS's earnings are rebounding faster than anticipated from last year's decline. The Sao Paulo-based company reported a profit of BRL 0.74 real per share (US$0.14) in the first quarter, reversing a loss from the same period a year earlier and surpassing all analyst estimates.


The stock surged as much as 9.3% in São Paulo, marking the highest level since November 2022 and making it the top performer in Brazil's benchmark stock index.


The profit improvement highlights how major meat producers are recovering after last year's setbacks, which included a surplus of white meat, high feed costs, and weak consumer demand due to inflation. Companies now benefit from lower grain prices and increased demand for chicken and pork as more affordable alternatives to beef.


JBS CEO Gilberto Tomazoni said chicken demand is strong, and consumers are shifting demand away from beef toward other proteins.


JBS's diversification is proving advantageous during a period when limited supplies of slaughter-weight cattle are expected to continue impacting profits for its North American beef unit, the company's largest operation. Higher margins in the chicken and pork segments, along with ample cattle supplies in Brazil and Australia, contributed to first-quarter earnings, enabling JBS to increase beef supplies from these countries while US exports remain constrained.


Other major meat producers, including Tyson Foods Inc, BRF SA, and Pilgrim's Pride Corp, the US chicken producer controlled by JBS, also reported first-quarter earnings that exceeded analyst predictions.


Tomazoni attributed improved earnings to efficiency-boosting efforts, which include streamlining operations in Europe following several acquisitions over recent years.

JBS's debt burden has decreased to 3.7 times earnings before items such as taxes and interest and is projected to reach 2.5 times by year-end, according to Chief Financial Officer Guilherme Cavalcanti.


However, JBS's profit margins remain below previous levels and are expected to stay that way until US cattle supplies recover, anticipated in 2025 or 2026. JBS shares had risen by less than 1% this year, lagging behind rivals like Tyson. The company is also pursuing a New York stock listing, a process facing delays and opposition from lawmakers and environmentalist groups.


Recent disruptions from excessive rain and floods caused temporary interruptions and recoverable production delays in some of JBS's chicken plants in southern Brazil. Operations have mostly resumed normalcy, though a small processed-food plant is expected to remain halted through the end of the week, Tomazoni said.


Floods in Australia also impacted beef production in the first quarter, an issue that should be fully offset by increased activity in the second quarter, according to Cavalcanti.


-      Bloomberg

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