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JBS S A : Conference Call Transcript 1Q21

06/14/2021 | 03:58pm EDT

International Conference Call


1Q21 Earnings Results Call

May 13th, 2021

Operator: Good morning everyone and thank you for waiting. Welcome to JBS first quarter of 2021 results conference call.

With us here today we have Gilberto Tomazoni, Global CEO of JBS,

Guilherme Cavalcanti, Global CFO of JBS, André Nogueira, CEO of JBS USA, Wesley Batista Filho, CEO of JBS South America, and Christiane Assis, Investor Relations Director.

This event is being recorded and all participants will be in a listen-only mode during the Company's presentation. After JBS' remarks, there will be a question-and-answer session. At that time further instructions will be given. Should any participant need assistance during this call, please press *0 to reach the operator.

Before proceeding, let me mention that forward-statements are based on the beliefs and assumptions of JBS' management. They involve risks and uncertainties because they relate to future events and therefore depend on circumstances that may or may not occur.

Now, I'll turn the conference over to Gilberto Tomazoni, Global CEO of JBS. Mr. Tomazoni, you may begin your presentation.

Mr. Gilberto Tomazoni: Good morning everyone, thank you very much for your presence is in this first quarter 2021 result presentation call.

As we will demonstrate during this presentation, the company had an excellent operational result in this quarter. net income in this quarter reached RUS$2 billion, net revenue reached RUS$75 billion in the quarter, net revenue for this first quarter in 2021 was the same of the net revenue for the whole year of 2012, and only eight years have passed.

To be successful, a company must deliver short, medium, and long-term sustainable results on behalf of all stakeholders, team members, shareholders, customers, consumers, society as a whole. We believe that businesses are agent of transformation and our focus is on being a healthy company comprises healthy people on a healthy planet. This is why we put sustainability at the urge of our strategy, and we have assumed that in most significant commitment in history of JBS to become a net zero company by 2040. That's why the company joined the business ambition for 1.5 degrees for United Nations Global Pact, by which we committed to define science-based goals to reach net zero across our value chain until at most in 2050, an objective that JBS proposed to achieve 10


years early. That's why we created the Fund of Amazon, to invest in social development of the people that live in the Biome, investing in biotechnology and reforestation.

Our diversified platform in geographic and per type of protein has demonstrated important resilience in our results. Regardless of the challenge we face, our business units have responded well and made progress in every important financial indicator, including net revenue, EBITDA, and net income.

JBS operation in the US's done an exceptional performance with record numbers in comparison with all previous first quarter driven by a strong domestic demand and a gradual resurgence of food service sector and by grow in export demand led by the Asian market.

Pilgrim's Pride also has a sound quarter, following the recovery in demand in United States and foodservice business is improving and we have maintained our pace in the retail sector. And the diversified portfolio in the global consolidated operation have enabled us to [whether] the market challenge that the pandemic has presented.

Seara continues its rise due to our focus on our value-added products supported by well-established brand and innovation. The business recently rolled out a new category of product within a cold cut segment; Levíssimo Seara, produced 100% from pork loin, resulted in a significant lower fat and sodium content. Seara has also entered in the fish and seafood segment.

In Brazil, outstanding of challenging scenario, our cattle business has focused of strengthening the brand, building a close relationship with our clients, and getting better understand our consumer. In addition, we have managed to implement an efficient strategy taking the advantage of geographical location of our manufacturing facility to absorb production and preserve our processing capacity.

The company, as has been its history, remained active in evaluation M&A opportunities that are aligned with our business strategy and that make sense in terms of economic value. At the same time, we maintained our focus on the company organic growth. In the US, our new Italian specialty plant already has found a name in Columbia, Mo, investment announced for organic growth at Seara and other businesses around the world are ahead of schedule.

In line with our strategies of being an important global player in the plant-based segment, we announced a proposed acquisition of Vivera in Europe. With sale of €85 million, Vivera is the third leading plant-based company in terms of market share in Europe with a presence of 25 countries. In addition, Vivera brings technological knowledge that will accelerate our innovation in this strategic segment, which includes our Incrível brand by Seara in Brazil and our Ozo brand by Planterra in the United States.


Our low financial leverage and our comfortable debt maturity schedule have enabled us to continue generate significant shareholder returns, repurchasing RUS$3.9 billion in shares between January and April of this year, as well as a record dividend payment of RUS$2.5 billion, representing a yield of 7.9%.

We also made a significant sustainable advancement. During the quarter, Pilgrim's Pride became the first global meat and poultry company to offer sustainability linked bonds, 1-billion-bonds is tied to the company greenhouse gas emission reduction targets. JBS also invested in circular economy by ensuring the waste and byproduct are used as a raw material to create sustainable value.

In Brazil, we are building a fertilizer factor biodiesel plant and an extension of our plastic packing recycle plant. another significant advance made during the quality was bring online our transparent livestock farming platform in the Amazon Biome region. This tool, which employs blockchain technology, enabled us to extend our social environment monitoring system to suppliers of our cattle suppliers. We also open 13 green offices in our process units across Brazil. This office will be used to help farmers improve the environment's performance in these farms. We believe this inclusive collaboration approach will contribute to advance the livestock farmers in Brazil.

The company continuous commitment at tangibles initiatives that demonstrate that sustainability is no longer merely a pillar underpinning our business strategy. By the criteria by which all our initiatives are guided, we are confident that this is the best approach to create value and contribute to the society.

Our size and global scale give us the opportunity to have a tremendous positive impact on our supply chain in our sector. We know that trust is vital, and this process of transformation will be through dialogue, listening, and transparence.

We believe this is not only the right things to do, but the only option for the future of our share in society.

With all this, we will maintain our economic growth while being more sustainable, more actable, and more inclusive, creating job and living in harmony with the planet earth.

Thank you. Now I will pass to Guilherme, that will give the details about the financial results. Guilherme, please.

Guilherme Cavalcanti: Thank you, Tomazoni. Please, let's move to slide 13, with the financial and operational highlights of the first quarter 2021 and where I would like to highlight that we continued to advance in our long-term strategy delivering growth combined with financial discipline and a focus on operational efficiency.


In the first quarter of 2021, we achieved a net revenue of USUS$14 billion, or equivalent to RUS$75 billion, which is 33% higher than the first quarter 2020. JBS adjusted EBITDA was US$1.3 billion, or equivalent to R$6.9 billion, which represents an EBITDA margin of 9.1%, a record margin for the first quarter.

In the last 12 months, adjusted EBITDA was also a record, totaling US$6 billion, or equivalent to R$32.5 million. Net income was R$2 billion in the quarter, reversing the loss in the first quarter 2020, which was impacted by a negative result of the exchange rate variation of the period. In the last 12 months, net income was R$12.6 billion.

It's worth remembering that the net income of the first quarter 2020 had an impact of R$8 billion of exchange rate variation. With the reduction in our balance sheet exposure to foreign exchange rate both in regard of debt with third parties as well as intercompany debt, the impact in the first quarter 2021 was only R$100 million.

In the second quarter 2020, this impact was R$2 billion. With the current exposure, even with a more depreciated exchange rate scenario at the end of the second quarter, we won't have a significant exchange rate impact, and therefore, the accumulated net profit in the last 12 months tends to increase, indicating a good profit for the year of 2021, and consequently, a good minimum dividend to be paid in 2022.

Free cash flow for the quarter was negative by US$636 million, or equivalent to R$3.5 billion. In the last 12 months, free cash flow totaled US$2.8 billion, or R$15 billion. Despite the 75% growth in EBITDA compared to the first quarter of 2020, the company's net debt increased by US$1.1 billion due to the seasonal cash consumption of the first quarter in addition to other nonrecurring factors with emphasis to: the negative variation in the line of trade accounts payables and supply chain finance in approximately US$271 million, or R$1.5 billion, mainly due to the concentration of payments at the beginning of the year according to the usual seasonality; the payment of US$207 million, or R$1.1 billion, of settlements in the quarter; US$217 million, or R$1.2 billion, of interest paid in premium for prepayment of bonds; approximately US$430 million, or R$2.9 billion, in share repurchase in the first quarter of the year.

As a result, net leverage was 1.67 times in dollars and 1.76 times in reais. Excluding the settlement as well as the share repurchase, the leverage would have been 1.6 in reais and 1.5 in dollars. Even that the long-term leverage to pursue by our indebtedness policy is to stay between two and three times in net debt to EBITDA, we were able to return capital to our shareholders via share buyback in a more significant way, as disclosed in the CVM 358 forms.

But the carry of JBS shares remain strongly positive to the shareholders. The dividend paid now in 2021 in the amount of R$2.5 billion represented a 3.1% yield and having the repurchase of the shares in 2021 until April in the total of R$3.8 billion, we already delivered a total yield of 8% year-to-date. In addition, it


is worth mentioning that the JBS share price appreciated 40% this year while Bovespa appreciated 3.5%.

Given our robust balance sheet, which is the result of our operational performance along with our financial discipline, we were able to return to the shareholders at the same time that we invested in the growth of the company. Accordingly, our capital expenditures for the quarter totaled R$1.7 billion, of which R$1 billion were investments in modernization and expansion.

For another consecutive quarter, we reduced net interest expenses. In this quarter, the reduction totaled US$18 billion compared to the interest expenses in the first quarter of 2020. All other things being equal, we project an interest expense of approximately US$600 million for the year of 2021, which represents savings around US$140 million compared to 2020.

In relation to the new issues, on May 5, we issued another successful CRA (a local bond in Brazil) in the amount of R$1.65 billion. I also highlight that, once again, we demonstrate our role and commitment in ESG issues through the issuance of a sustainability linked bond by PPC in the amount of US$1 billion linked to our efforts to reduce the greenhouse gases emissions. It is worth mentioning that this bond is the first of this kind issued by a global poultry company.

To conclude this slide, I would like to highlight the announcement of the agreement we made for the acquisition of Vivera for the value of €341 million, which is the third largest plant-based products company in Europe, with a relevant presence in the Netherlands, United Kingdom and Germany, among other among other 22 countries. This demonstrates that despite all the challenges faced in a year of pandemic, we continue to advance in our long- term strategy of having a global and diversified production and distribution platform evolving towards our value-added products and brand.

Now, please, let's move to page 16, where we have our debt profile. As I mentioned earlier, net debt in the first quarter was US$10 billion, which represents a net leverage of 1.76 times in reais and 1.67 times in dollars. The cash position of R$10.3 billion, or equivalent to US$2.1 billion, together with the revolving of R$10.5 million, equivalent to US$1.8 billion, allowed JBS to end the quarter with a total availability of R$21 billion, which is more than three times higher than the short-term debt and enough to pay the debt until the mid-2026.

Moving to the pie charts at the bottom of the slide, I highlight that our average cost of debt in dollars of 4.9% per year is the lowest ever recorded by the company. However, it is still 1.2% above the interests on our bonds for the same average term of 6.3 years, therefore, it means that we still have a potential opportunity to reduce around US$140 million in financial expenses.

In addition, it's important to note that only 9% of our indebtedness is in the short-term, that is a very comfortable position. Also, the US entity has 82% of


This is an excerpt of the original content. To continue reading it, access the original document here.


JBS SA published this content on 14 June 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 14 June 2021 19:57:07 UTC.

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Sales 2021 320 B 57 348 M 57 348 M
Net income 2021 12 904 M 2 311 M 2 311 M
Net Debt 2021 47 071 M 8 432 M 8 432 M
P/E ratio 2021 7,02x
Yield 2021 3,94%
Capitalization 92 629 M 16 583 M 16 593 M
EV / Sales 2021 0,44x
EV / Sales 2022 0,41x
Nbr of Employees 250 000
Free-Float 32,6%
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Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus BUY
Number of Analysts 13
Last Close Price 36,89 BRL
Average target price 45,62 BRL
Spread / Average Target 23,7%
EPS Revisions
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Gilberto Tomazoni Chief Executive & Operating Officer
Guilherme Perboyre Cavalcanti Chief Financial & Investor Relations Officer
Jeremiah Alphonsus O'Callaghan Chairman
Eliseo Santiago Perez Fernandez Director-Administration & Control
Gilberto Meirelles Xandˇ Baptista Independent Director
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