Brazil's JBS swings to loss, citing grain costs and meat oversupply

2023-05-12 06:57

By Roberto Samora and Ana Mano SAO PAULO JBS SA, the world's largest meat company, on Thursday reported

By Roberto Samora and Ana Mano

SAO PAULO JBS SA, the world's largest meat company, on Thursday reported a net loss of 1.45 billion reais ($290.2 million) for the first quarter, blaming high grain prices and an over-supplied meat market for the worse-than-expected results.

Analysts had expected a 297 million real loss, according to Refinitiv consensus estimates. JBS said adjusted earnings before interest, tax, depreciation and amortization, a measure of operating income known as EBITDA, fell by almost 79% to 2.162 billion reais in the quarter.

The weak results reflect the challenging environment in the United States, where livestock prices are rising and consumers are deterred by high inflation, hurting JBS and rivals like Tyson Foods, which also reported losses this week.

JBS said U.S. cattle prices jumped 16% year- on-year, while wholesale meat prices rose only 2%, eroding margins.

JBS Global CEO Gilberto Tomazoni called the first-quarter results "an exceptional case" and said in an interview JBS had taken measures "to reduce the impacts of circumstances."

He sees a more benign outlook going forward, citing a fall in feed prices and potentially stronger demand for meats in China and in the U.S., where JBS gets most of its revenue.

JBS said net revenue fell across all business units with the exception of its Brazilian processed food division Seara, which posted a 9% rise in sales to 10.3 billion reais.

Meanwhile the company's U.S. beef, pork, and poultry divisions reported net revenue dropping between 2.5% and 5.6%.

The company's overall adjusted EBITDA margin was 2.5%, down 8.6 percentage points from the same period last year, when the company had the best first quarter in its history.

In home market Brazil, JBS's beef unit reeld from a fall in exports to China after a case of atypical mad-cow disease triggered a ban lasting about a month.

As challenges mounted, JBS said it burned 6.1 billion reais in cash last quarter, more than double the same period in 2022, as the first weeks of the year normally concentrate payments to cattle, pork and grain suppliers.

($1 = 5.0033 reais)

(Reporting by Ana Mano and Roberto Samora; Editing by Leslie Adler and Stephen Coates)