August 31, 2010

Brazil's JBS may sell Argentine slaughterhouses

Brazilian processor JBS has plans of selling some of its beef plants in Argentina due to scarce supply of cattle and government meddling in the beef market.

In a filing to Brazil's securities regulator on Sunday (Aug 29) night, JBS said without giving details that "the possible sale of some production units (may occur) provided the value negotiated reflects the real price of the asset."

On Saturday (Aug 28), an industry source in Argentina said that JBS could sell three processing plants there that were not operating at full capacity-in Pontevedra, Berazategui and San Jose.

Cattle ranchers have reduced output with the government policies of Cristina Fernandez and her husband, former President Nestor Kirchner, of capping beef prices and exports.

JBS' acquisition of Argentina's Swift meatpacking operations in 2005 was its first foray into international markets, which has turned out to be a tour de force over the past half a decade. The company's global expansion culminated with the purchase of two US-based companies, Swift Foods Company in 2007 and Pilgrim's Pride in 2009.

Severe droughts in Argentina in recent years have also contributed to the decline in cattle output.

In JBS' recent conference call with investors on its second quarter results, the company said that "the Argentine government's intervention continues to limit our capacity to reverse the (negative) results from the local operations."