JBS (JBSS3) sees beef sales to China soaring; in Brazil, consumption falls

While registering growth in beef exports to China, JBS (JBSS3) reports that in Brazil protein consumption has reached the lowest levels in recent history. Here, the macroeconomic scenario remains challenging, putting pressure on demand, said the company’s CFO, Guilherme Cavalcanti.

“The profitability of this unit (beef) continues to be impacted by the increase in the average price of cattle, of around 11%,” said Cavalcanti, during a conference call with analysts to comment on the results of JBS, which saw its profit more than double. . The company also announced dividends of R$ 2.2 billion.

In addition to the results and dividends, JBS announced a program for repurchasing and canceling treasury shares. At around 12:00 pm, the company’s shares traded with a slight drop of 0.05%, quoted at R$ 35.73.

Less meat for Brazil and more for China

Conab data show that beef consumption reached 26.5 kilos per inhabitant last year, the lowest volume in 25 years – and the sale remains low in 2022.

On the other hand, JBS reported that the foreign market was the highlight of the quarter, mainly with the growth of 17.3% in volume and 20% in the average sales price of fresh beef, mainly driven by the resumption of Brazilian exports. to China at the end of 2021.

“We see that China will be an importer of beef in the long term”, says Gilberto Tomazoni, CEO of JBS, adding that this trend should change the market globally.

He explained that meat consumption is still very low in that country and as the cattle breeding and production cycle is time consuming in relation to other proteins, the change will take place more slowly, but it will occur.

Gilberto Tomazoni also said that JBS’ diversified platform by region and type of protein makes it easier to face “more challenging environments and cycles in a given business or one or another country”.

According to the executive, this diversification is evidenced in the results for the first quarter.

JBS in the United States

Regarding the North American market, André Nogueira, CEO USA of JBS, stated that, from a logistical point of view, there are problems, causing the company to work “with a level of stock much above what it would like”.

American ports have been impacted in recent months by strikes and the pandemic, which has generated logistical delays.

He believes in a gradual improvement in the United States regarding the item. Regarding Shanghai, in China, Nogueira said that there was a drop in exports due to the lockdown“but began to recover”.

“We are working with a (high) level of inventory and this has affected our cash generation, due to the price issue, which has increased a lot, but also due to slower logistics. But with the evolution, we will have cash generation”, he commented.

JBS balance sheet analysis

Bradesco BBI highlighted in a report that JBS’s Ebitda in the first quarter was 5% above the market consensus and with consolidated revenue and margins slightly above the consensus.

According to the document, the BBI continues to see the margins spot generally falling for US beef – which has been the main driver of JBS’ results – as lower cattle supply raises costs for meatpackers. BBI reiterated a neutral recommendation for the shares and a target price of BRL 36.

Robust results

Supported by yet another strong performance of its North American operation and beef exports from Brazil, JBS reported yet another robust result in 1Q22, slightly above expectations, Eleven evaluated.

The negative highlight, as expected, was due to Seara, which continues to suffer from a scenario of cost pressure. Eleven maintains a neutral recommendation for JBS, with a target price of BRL 36.

For Credit Suisse, JBS had a “very good” quarter, with consolidated Ebitda surpassing consensus numbers, mainly driven by operations in the United States.

Analysts remain constructive on JBS’ investment case, as they believe its operational momentum will remain solid in the coming quarters. Credit Suisse maintains rating outperform for paper, and a target price of R$ 45.

In XP’s assessment, net revenue came in line, while adjusted Ebitda was 8% above the broker’s projections.

“US Beef + Australia, PPC and US Pork remained strong and well above historical levels, while Friboi recovered, more than offsetting Seara’s drop due to rising costs and a more fragile consumer in Brazil,” they highlighted.

XP’s research team believes JBS will continue to show strength in its protein and geography diversification, which should help offset the cyclical character of the company’s earnings.

Thus, it reiterated its buy recommendation on JBSS3 with a target price of R$51.8, reinforcing its position as top pick in the protein sector.

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