10 March 2010

6 minute read

South America

Net revenue for 2009 was R$34,311.8 million, representing a 13.1 per cent increase year on year.

In the fourth quarter the consolidated EBITDA increased by 49.6 pewr cent compared to the fourth quarter of 2008, from R$265.9 million to R$397.8 million. The consolidated EBITDA margin was 5.4 per cent for the period, compared with 2.8 per cent for the fourth quarter of 2008.

The company said that because of the acquisition of a controlling interest in Pilgrim’s Pride and the incorporation of Bertin near the end of 2009, JBS is also presenting the consolidated results pro forma including Bertin, Pilgrim’s Pride, and JBS as of 31st of December 2009.

The pro forma Net Revenue of R$55,223.6 million is 82.0 per cent higher than 2008 and EBITDA pro forma of R$3,058.0 million in 2009 was an increase of 164.5 per cent over the last year.

"As I have said in the past, a crisis for one is an opportunity for others, opportunity to make the acquisitions from which a corporation can emerge from a crisis situation stronger and prepared to grow when economies and consumption resumes growth," said Joesley Mendonça Batista, Chief Executive Officer.

"In 2008, when we saw the crisis looming, we tightened our financials, reduced our leverage and prepared ourselves for the difficult year ahead. It was a decision made in good time. By the second half of 2009, we began to see the road ahead more clearly and were able to take our company to another level by making some relevant acquisitions.

"In the US, as we planned to expand our downstream integration, we needed a more diversified protein base in that market and Pilgrims Pride fitted into our strategy well. We now have leading positions in the North American market in all three proteins and that gives us the scale and diversity to reach out efficiently to end users of our products.

"We plan to build on that base in the coming years by producing more customized products and by delivering them to the doorstep of as many customers as possible.

"In Brazil, as the cattle herd begins to show signs of recovery, we were able to merge our business with Bertin in a manner which served the needs of both. While we continue to control our business, we were able to bolt on a company of a size and scale that will be complimentary towards accelerating our growth strategy, not only at primary production level but also downstream in the direction of our consumers.

"We now have a solid base to add value to some of our by-products, such as hides and tallow, not to mention our new dairy business about which we are extremely optimistic. JBS is no longer a primary producer of beef, nor is it a primary producer of animal protein. We are now a food company with a very diversified production platform not only in the geographical sense but also in the various proteins building a bridge to consumers.

"As I mentioned, the Brazilian herd has turned the corner. Cattle ranching is economically feasible again and we already saw signs of a more fluid supply in 2009. This helped take our margins from a low near middle single digits at the beginning of last year to almost double digits by the end," Mr Batista said.

"As we rationalise costs and maximize scale, that trend should continue this year. Our currency has been strong here and our economy has been very robust. Revenue lost in the export market – in part because of the currency – has been compensated by the increase in consumption in our domestic Brazilian market.

"We expect that trend to continue in 2010 although we will, I believe, see prices climbing on the international market primarily because of the recovery of the various emerging markets but also because of a limited supply base.

"Although we made the right decisions within our company in Argentina to return to profitability – and we did feel we were turning a corner, our business there has been subjected to unpredictable conditions which will probably play a part in limiting our growth and profitability again this year.

"While the principles of a free economy are denied us, we will be unable to take the measures that our shareholders expect of us until such time as we can access again the good customers we have been serving from Argentina for so many years. Self imposed trade restrictions and the application of high tariffs will not enhance growth in our sector and the earlier they end, the better for the whole beef supply chain.

"Australia has the privilege of being a sanitary haven for livestock which gives it access to all major markets. The key to growth there is exports and we saw recovery in exports to the Asian countries, but more importantly, we saw Australia firming a foothold in Europe with regular supply of beef and lamb. Last year, we saw a tight cattle supply situation there but signs are that the herd size is now recovering again. With the acquisition of Tatiara Meat Company near yearend, we now also have a leading position in lamb production, a sector in which Australia is demonstrating solid constant growth.

"People comment that Europe, particularly the southern part, was one of the worst affected regions due to the global crisis. We are pleased to say that our European operations based in Italy put in a stalwart display in the last year. While sales may have declined inside Italy, we were able to increase our market share in the African countries where we have strong distribution channels and we were very pleased with the inauguration of our beef patty plant in Russia serving customers with whom we have good long term relations and with whom we plan to continue our growth.

"Finally in North America, we were able to sustain margins and saw some growth and recovery (particularly in the by-products) which augurs for a good solid 2010. As we now integrate Pilgrim’s Pride and implement synergies, our SG&A tend to reduce even further and we already see growth in the export market. By the way, we gained substantial market share in some of the key export markets, such as Japan, Korea and Russia as well as breaking into markets that were untouched by US exports, in the last six months and we will continue this drive during this year.

"Although we made substantial acquisitions during the last year, we continued to maintain a watchful eye on our balance sheet. Having acquired a controlling interest in Pilgrim's Pride and merged with Bertin, we made sure that these investments were matched with non debt related cash injections in the company to maintain our leverage at manageable levels. Although we consider our present leverage level comfortable we will be taking measures during this year to reduce this still further.

"Sustainability has been a topic much discussed last year. We heard negative comments from some channels some of which were directed towards our sector and ourselves. Let me be clear, JBS in its roots, is a sustainable company. We come from the land where we learned as children to respect nature and preserve it as fundamental to our future. My family and I carry that philosophy through our business practices. The key to our business is the raw material that comes from the land. We want to protect and preserve that base not only because of our principles but also with a view towards the future of our company.

"Once again, I want to close my comments by remembering all those who cooperated with me in 2009. I am overwhelmed by the unity and support of a team of dedicated, brilliant professionals that have helped us through another year, a difficult one, from which we are able to see our revenue base grow more than 50%. Our board and my family wish to thank you all wholeheartedly as we count on you to continue to stand by us in 2010."

TheCattleSite News Desk