Strong Earnings Driven by Low Feed Costs
JBS stock (NYSE:JBSAY) surged to a two-year high following a significant rebound in the company’s chicken and pork operations, resulting in stronger-than-expected financial results. The world’s largest meat producer reported a net profit for the second quarter, a turnaround from a loss the previous year. Earnings excluding specific expenses more than doubled, surpassing even the highest analyst forecasts.
The surge in profits for chicken and pork producers is attributed to a rapid recovery from last year’s downturn, driven by abundant supplies of corn and soybeans that have lowered feed costs. This positive development comes despite challenges in JBS’s North American beef operations, which are grappling with the tightest US cattle supplies in seven decades.
Robust Chicken Performance and Financial Health
JBS’s Chief Executive Officer Gilberto Tomazoni highlighted the strength of the chicken business across all regions, attributing it to lower grain prices and an improved supply-demand balance. Despite some global supply constraints due to fertility issues, the market is expected to stay balanced in the coming quarters.
In early trading in São Paulo, JBS shares climbed as much as 6.9%, extending the gains over the past year to nearly 90%. For the three months ending in June, the Brazilian company posted net income of 0.77 real (14 cents) per share, compared to a loss of 0.12 real a year earlier. Although this result fell short of Bloomberg analyst estimates due to one-time expenses, earnings before such items more than doubled to 9.9 billion reais, 25% above projections.
JBS’s profit margin, excluding taxes and interest, rose to 9.8% in the second quarter, the highest in two years. Its chicken operations, which include Pilgrim’s Pride Corp., achieved impressive margins exceeding 17%. Meanwhile, North American beef operations are nearing breakeven.
The company also benefits from increased cattle supplies in Brazil and Australia, despite lower beef prices limiting gains. Cash flows available for acquisitions and share buybacks jumped more than fourfold to approximately $1 billion in the quarter. JBS’s net debt, which stood close to 2.8 times earnings in the second quarter, is projected to decrease to nearly two times by year-end, according to Chief Financial Officer Guilherme Cavalcanti.
JBS is also in discussions with the US Securities and Exchange Commission regarding a potential listing of its shares in New York, though no further details have been provided.
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