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JBS Purchases Canadas XL Foods

JBS Q2 results better than expected

Company discloses it will eventually enter U.S. alternative protein market.

JBS S.A. posted better-than-expected results for the second quarter of 2019 due to improved demand stemming from the spread of African swine fever.

Net income for the quarter was 2.184 billion reals ($543 million), up from a loss of 911.1 billion in the second quarter of 2018. Year-to-date net income was 3.3 billion reals ($820 million).

“In previous quarters, we have already seen significant growth in protein consumption in Asia, and the event of African swine fever in many countries is contributing towards increased export flows and opens opportunities to accelerate the growth of our value-added businesses,” JBS president and chief executive officer Gilbert Tomazoni said.

Tomazoni said beef operations in North America and Australia remain strong, sustained by local demand and gains in export volumes.

Pilgrim’s Pride announced earnings before interest, taxes, depreciation and amortization (EBITDA) of $349 million for the quarter, a year-over-year increase of 24%. The increase reflects a more balanced supply and demand scenario, JBS said.

In the pork segment, despite higher raw material costs and a greater supply of pork, the EBITDA margin was 8.2%, an improvement from the second quarter of 2018.

In Brazil, the Seara business posted an 11.1% EBITDA margin due to price increases in processed foods locally as well as higher prices and volumes in the export market. The trend was also seen in the beef operation, which has been experiencing positive international results with increased volumes and sales prices, Tomazoni noted.

Tomazoni said he is very optimistic about the company's future, adding that a growing population, urbanization and income, among other factors, will result in an increase in global protein consumption, especially in Asia.

Alternative protein products

As with many of the large protein companies, JBS also has launched some alternative protein products in Brazil, although not yet in the U.S. According to Tomazoni, however, that day will come when the products enter the U.S. market.

“We see in U.S., it grew a lot,” he said of alternative protein products. "We are entering this market for sure, and we are just defining what is the best tailwind."

Determining the size of the market is difficult, though, because it is a trend, Tomazoni added.

Still, Tomazoni believes JBS has “a really good opportunity” in the market because it has the distribution capacity and the technology since the company already has such products in the market.

Combining all of the advantages JBS already has, Tomazoni believes the company “can play a big role” in the alternative protein market. For now, however, JBS is not disclosing when it will enter the U.S. market.

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