1q10 conference call presentation
TRANSCRIPT
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1st Quarter 2010 ResultsMay 14th, 2010
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Presenters
Jeremiah OCallaghan
Investor Relations Director
Joesley Mendona Batista
Chief Executive Officer
Guilherme Arruda
Investor Relations
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DISCLAIMER
The forward-looking statements presented herein are subject to risks and uncertainties. These
statements are based on the beliefs and assumptions of our management, and on information
currently available to us.
Forward-looking statements are not guarantees of performance. They involve risks,
uncertainties and assumptions because they relate to future events and therefore depend on
circumstances that may or may not occur. Our future operating results, financial condition,
strategies, market share and values may differ materially from those expressed in or
suggested by these forward-looking statements. Many of the factors that will determine these
results and values are beyond our ability to control or predict.
Forward-looking statements also include information concerning our possible or assumed
future operating results, as well as statements preceded by, followed by, or including the words
''believes,'' ''may,'' ''will,'' ''continues,'' ''expects,' ''anticipates,'' ''intends,'' ''plans,'' ''estimates'' or
similar expressions.
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Agenda
Company Overview
Market Overview
1Q10 Highlights
Short Term Outlook
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Company Overview
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JBS S.A. at a Glance
Founded in the 1950s in Central West Brazil
IPO in 2007
Ibovespa ticker: JBSS3
ADR ticker: JBSAY
Leading protein producer in the World
Production platform in South America, North America, Europe andOceania
125,000 employees worldwide
Market cap of approximately R$19 billion
*Source: Bloomberg 13/05/2010
*
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Shareholders
7
Controlling
Holding 55.5%
BNDESPAR 17.3%
Market 19.1%
PROT - FIP
8%
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8
EBITDA (R$mm)
.
Bertin Merger
Pilgrims Pride
JBS Hides
5 new units
Tasman
Smithfield Beef
Five RiversInalca
Swift Foods Co.
SB HoldingsVenadoTuertoPontevedra(CEPA)
CAGR (2001-2009): 62%
2001 2006
pre IPO 2009% of total revenues of R$1,212mm % of total revenues of R$4.3bn % of total revenues of R$55.2bn
Beef Beef
Industrialized/
Further
Processed
Beef
Poultry
Industrialized/
Further
Processed
Pork
100%
23%
77%
52%
13%6%
29%
JBS S.A. Growth Through Acquisitions
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Global Low Cost Production Platform
9
World Beef Producers World Pork Producers World Chicken Producers
Total Number of Plants
65
33
3
6
3
10 544
OthersBrazil
EU
34%16%
14%
21%
10% China
5%
IndiaUS
OthersBrazil
EU
17%3%
10%48%
China
22%
US
Others
Brazil
EU
34%
15%
22%
17% China
12%
US
8 33 3 1
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10
1stRanking
Well-Recognized
Brands
ProductionUnits
GeographicPresence
andInstalledCapacity
2nd 3rd 1st 3rd 1st
Global Global U.S.A. Global Brazil Global
Beef
41.2
1.1
6.7
28.6
8.7
3.0
1.0
000 heads/day:
6.9
0.7
mm heads/day:
48.5
000 heads/day: 000 hides/day:
1.4
000 tons/day:
4.5
23.0
000 heads/day:
Total: 90.3 Total: 7.6 Total: 48.5 Total: 91.4 Total: 1.4 Total: 27.5
Chicken Pork Hides /Leather
Dairy Lamb
65 33 3 26 7 6
55.6
28.6
6.0
1.2
Leading, Sizeable and Diversified Business Platform
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Our Strategy
Production platform
Sales and distribution platform
Value added products
Branding
JBS Value & Strategy
EBITDA Margin
Financial
structure
Experienced
management
Cost
reduction,
process
optimization
Risk
management
Developed an efficient
and diversified global
production platform
Expanding a global distribution
platform to reach end clients
Customized and further
processed products for the
end users
Associating quality and branding
to increase client loyalty
Rationale
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12
Protein Consumption in Key Markets (millions of Ton, 2009E)
53 Distribution Centers
Growth 1
2 %
5 %
8 %
Growth 1
7 %
16 %
25 %
Growth 1
9%
8%
13 %
Growth 1
4 %
3 %
-2 %
Total: 46 mm ton Total: 74 mm ton Total: 86 mm ton
Asia & Middle
East
13
North America
15
Europe
8
Latin America
10
28%17%
22%
33%
Asia & Middle
East
30
North America
21
Europe
12
Latin America
1141%
16%
15%
28%
Asia
51
North America
11
Europe
21
Latin America
359%
24%
3%
13%
1 Real growth of total consumption in tons 2010E to 2015ESource OECD-FAO
Distribution Platform with Access to Key Markets
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Market Overview
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Market Highlights
Domestic growth in Brazil remains strong
Grain prices are competitive
Signs of growing importance of international trade with increaseddemand in all major importing markets
Increase in US Exports
Declining production in Europe
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Per capita food consumption curve
(Kg / Year)
Source: FAO
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Source: Secex* Until March
Brazilian Beef exports
(Thousand Tons)
16
780
1,095
1,263
1,4251,491
1,218
1,086
258231
0
200
400
600
800
1,000
1,200
1,400
1,600
2003 2004 2005 2006 2007 2008 2009 2010
E.U. Russia Egypt Venezuela Algeria USA Hong Kong Others Until March
*
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Source: USDA ERS* Until March
US Beef and Veal Exports (Million Pounds)
17
*
2,412 2,467
2,269
2,4492,520
461
697
1,146
1,433
1,888 1,867
478384
0
500
1,000
1,500
2,000
2,500
3,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Mexico Canada South Korea Japan Vietnam China Hong Kong Netherlands Others Until March
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Source: USDA ERS
* Until March
US Pork Exports (Million Pounds)
18
*
1,278 1,287
1,560 1,6121,717
2,181
2,667
2,9953,142
4,667
4,128
1,047
1,034
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Japan China Hong Kong Mexico Russia Canada South Korea Australia Others Until March
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Source: USDA ERS
* Until March
US Poultry Exports (Million Pounds)
19
*
4,9805,138
5,738
4,942 5,013 4,9975,333 5,367
6,070
7,1096,906
1,508
1,754
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Russia China (Mainland) Iraq Mexico Canada Cuba Other Chicken Others Until March
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20
Beef & Veal Supply and Demand in 2020
Source: Goldman Sachs
14.3
0.2
9.4
5.1
4.1
0.5
3.6 2.40.8
1.6
12.7
1.5 1.2
13.0 8.6
0.5
8.18.0
0.8 0.2
8.6
India
Europe
Australia
China
Brazil
Argentina & Uruguay
Global Surplus (Deficit) of Beef & Veal (Million metric tons)
USA
3.6
0.4
3.2
Production Imports Exports ConsumptionProduction Imports Exports ConsumptionProduction Imports Exports Consumption
Production Imports Exports Consumption
Production Imports Exports Consumption Production Imports Exports Consumption Production Imports Exports Consumption
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21
Chicken Supply and Demand in 2020
1.91.0
0.8
19.1 15.1
4.1
8.9
1.1 0.9
9.119.2
0.2
20.0
2.23.4
1.2
India
Russia
Thailand
China
Brazil
USA
Global Surplus (Deficit) of Chicken (Million metric tons)
Europe
Production Imports Exports Consumption
3.7 3.7
Deficit
Surplus
Production Imports Exports ConsumptionProduction Imports Exports Consumption
Production Imports Exports Consumption
Production Imports Exports Consumption Production Imports Exports Consumption Production Imports Exports Consumption
16.29.4
6.9
Source: Goldman Sachs
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22
Pork Supply and Demand in 2020
1.6 2.1
0.2
4.2 3.056.9 56.4
0.8
11.9 9.9
2.5
2.2
0.3
1.21.3 2.7
3.822.7 21.6
0.1
Brazil
Europe
China
Russia
Mexico
USA
Global Surplus (Deficit) of Pork Meat (Million metric tons)
Canada
1.11.1
0.5
0.7 1.2
0.3
Deficit
Surplus
Production Imports Exports ConsumptionProduction Imports Exports ConsumptionProduction Imports Exports Consumption
Production Imports Exports Consumption
Production Imports Exports Consumption Production Imports Exports Consumption Production Imports Exports Consumption
Source: Goldman Sachs
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1Q10 Highlights
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Highlights for the 1st Quarter 2010
Net Revenue increased by 35.4%, from R$9,267.9 million in 1Q09 to R$12,550.3million in 1Q10, mainly due to the incorporation of Bertin and acquisition of Pilgrims
Pride.
The 1Q10 consolidated EBITDA increased 307.5% compared to the same period in
2009, from R$211.5 million to R$862.0 million. The EBITDA margin was 6.9% for theperiod, compared with 2.3% for 1Q09.
Net Profit of R$99.4 million in 1Q10, compared to a net loss of R$322.7 million in1Q09.
Beef US posted EBITDA of US$170.5 million, on margin of 6.0%, a record for 1Q.
In Mercosul, JBS posted EBITDA of R$352.6 million, with 11.9% margin.
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JBS Consolidated Results
Net Revenue (R$ million) EBITDA and EBITDA Margin (R$ million)
Source: JBS
EBITDA Margin (%)
-11.6%
36.3%
-0.1%
81.6%
-9.5%
-24.0%
25
69.4%95,2%
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Performance by Business Units
Source JBS
EBITDA Margin (%)
Net Sales(R$ billion)
EBITDA (R$ mi) EBITDAmargin
JBS MERCOSUL
26
Net Sales( million)
EBITDA ( mi)
EBITDA margin
INALCA JBS
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Performance by Business Units
Source JBS
EBITDA Margin (%)
Net Sales(US$ billion)
EBITDA (US$ mi)EBITDA margin
JBS USA (Beef)
Including Australia
Net Sales(US$ million)
EBITDA (US$ mi)EBITDA margin
JBS USA (Pork)
27
Net Sales(US$ million)
EBITDA (US$ mi)EBITDA margin
JBS USA Poultry
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Debt
Net debt / EBITDA ratio remained at 3.1x q-o-q. Gross debt declined 5.7%, while Net Debtincreased 12.2%, reflecting working capital requirements to ramp up recent acquisitions, as wellas investments in fixed assets, further impacted by FX fluctuations.
The vast majority of the companys short debt is composed of revolving trade finance creditlines.
As demonstrated below, the percentage of short term debt was 40% in 1Q10, compared with
37% in 4Q09 and 47% in 1Q09.Net Debt / EBITDA Pro Forma per Quarter
Source: JBSNet Debt/ EBITDA EBITDA pro-forma
* LTM including Bertin and Pilgrims Pride pro-forma.
Gross debt Profile (R$ million)
28
*
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Revenue Distribution by Market
1Q10 1Q09
Source: JBS Source: JBS
29
Domestic
Market
77%
Exports23%
Domestic
Market
78%
Exports22%
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JBS Consolidated Exports Distribution
JBS Exports 1Q10
Source: JBS
JBS Exports 1Q09
30
US$ 1,765.4 Million
Japan
16%
E.U.
16%
USA
11%Mexico
9%
Russia
8%
South Korea
6%
China
5%Hong Kong
5%
Canada
4%
Middle East
4%
Taiwan
2%Others
14%
US$ 901.4 Million
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Short Term Outlook
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A Closer look at synergies Pilgrims Pride
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US$35mn
US$30mn
US$50mn
US$50mn
US$35mn
US$20mn
US$220mn
Description Size Timing
Transportation
Suppliers
G&A
Logistics optimization
Corporate
Exports
Total
Review of contract terms with carriers
Review of contract terms with packaging and other suppliers
Review of service contracts (e.g. Legal, insurance and IT)
Increase efficiency in average weight per truck
Streamlining of corporate structure and headquarters closure
Reach-out to end clients through JBS existing sales network 2010
1H10
Pilgrims Pride Acquisition: Synergies of over US$220mm/year
1H10
2 years
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A Closer look at synergies Bertin S.A.
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R$45mn
R$20mn
R$40mn
R$35mn
R$245mn
R$100mn
Hides / Leather
Logistics
Corporate/G&A
Suppliers
Industrial Processes
Exports
Total R$485mn
Value enhancement through further processing
Review of transportation contracts
Offices, personnel, services contracts and third parties
Review contract terms of non core suppliers (e.g. packaging)
Optimization of fixed costs and rationalization of existing contracts
Maximization of the combined sales channels and review of freight contracts
Description Size Timing
1H10
1H10
2 years
2010
Association with Bertin: Synergies to Achieve at Least R$485mm/year
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3434
Final ConsiderationsIn God We Trust, Nature We Respect
IR Contacts:
+55 11 3144 4055
www.jbs.com.br/ir34
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Q & AIn God We Trust, Nature We Respect
IR Contacts:
+55 11 3144 405535