JBS poises itself to go global despite poor beef performance in first quarter | TheFencePost.com

JBS poises itself to go global despite poor beef performance in first quarter

Allison Dyer Bluemel
abluemel@greeleytribune.com

In a move to further its global market reach and influence, the parent company of Greeley-based JBS USA announced plans this week to list most of its global operations on the New York Stock Exchange.

The company will continue to list its Brazil assets on the Brazilian stock exchange under JBS SA. The global operations will be listed under a new entity: JBS Foods International.

The move comes despite — or perhaps in part because of — underperformance in parts of the company during the first quarter of 2016.

"The proposed reorganization that was announced yesterday is a natural next step in the continuing development of JBS as a global food company," said Russ Colaco, head of strategy and corporate development at JBS, during the Thursday morning call.

The company reported big drops in key indicators during the first quarter, which ended March 31.

Pre-tax earnings came in 22.5 percent lower than the first quarter of 2015. However, net revenue was up year-over-year and gross profit remained stable.

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One of the largest contributing factors to the drop was the under-performance of JBS USA Beef business.

JBS USA saw net revenue drop 10.4 percent compared to last year. JBS USA Chicken also saw a drop of 4.4 percent in net revenue, while JBS USA Pork net revenue increased 64.8 percent.

Price drops of cattle in the U.S. and Canadian markets impacted business as well as low availability of cattle for slaughter in Australia because of bad climate conditions and an increase of the value of Australian currency compared to the U.S. dollar.

"Our management team went through a process where we've carefully considered various strategic alternatives to enhance the value of our company, and we believe that this proposed reorganization offers the greatest potential to deliver long-term value to our stakeholders," Colaco said.

The move follows multiple quarters where the company expanded its global holdings.

The JBS USA arm of the company is a majority shareholder of Greeley-based chicken producer Pilgrim's Pride Corp.

The NYSX listing — which will include all of the company's non-Brazilian operations — could improve the company's access to international equity and debt capital markets, according to the earnings report.

This would increase JBS' ability to raise financing to support operations.

JBS SA stock prices rose 21 percent following the announcement Thursday.

After reorganization, the company will continue to be controlled by existing Brazilian shareholders.

JBS USA performance

Net Revenue 1Q16 Net Revenue 4Q15 Net Revenue 1Q15 Change from 1Q15

JBS USA Beef $4.7 billion $5.3 billion $5.2 billion 10.4 percent down

JBS USA Pork $1.3 billion $1.1 billion $762.3 million 64.8 percent up

JBS USA Chicken $1.96 billion $1.96 billion $2.1 billion 4.4 percent down

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