3q12 conference call presentation
TRANSCRIPT
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JBS DAYNovember 14th, 2012Earnings Release 3Q12
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JBS S.A.
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3PAGE
JBS S.A. at a Glance
Founded in the 1950s in Midwest of Brazil
IPO in 2007
Leading protein producer in the World
Net Revenue of R$53.8 billion accumulated in nine months of 2012
EBITDA of R$3.2 billion accumulated in nine month of 2012
Organic Growth of 16,0% in first 9 months of 2012 compared to 9M11
140,000 employees worldwide
307 production units in 5 continents
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4PAGE
JBS Ranking
Largest global beef andlamb producer1
st
Largest global leatherprocessor1
st
Largest global chickenproducer1
st
Largest pork producer
in the US3rd
Source: JBS
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5PAGE
Sustainable Growth
Adequate Capital Structure and Qualified Management to Promote Growth
Adequate the CapitalStructure
Debt to finance
Working Capital Equity to finance
growth
Constructing a globalmeat productionplatform
Geographicdiversification inregions with lowproduction costs
Protein diversification
Access to all consumermarkets
Leadership in countrieswith production surplus
Integration of the
operations and focus oncash generation
Reduction of OperatingCosts
Reduction of WorkingCapital Needs
Capture of SynergiesReduction of Cost of
DebtBenchmark between
production platforms
Economies of Scale
Global Distribution PlatformAnd Value Added Products
Increase in the portfolio
with high value addedproducts
Recognition and leadershipin brand and quality
Direct service to retail andfoodservice
Higher margins and cashgeneration
Investments in Marketing,Research andDevelopment.
Building Global Brands
LongTerm
2008 to2009
2010 to2012
2005 to2007
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6PAGE
EBITDAMargin
Our Strategy
RATIONALE
Associating quality and branding toincrease client loyalty
Customized and further processedproducts for the end users
Expanding a global distributionplatform to reach end clients
Developed an efficient anddiversified global productionplatform
Production platform
Sales and distribution platform
Value added products
Branding
FinancialStructure
ExperiencedManagement
Cost reduction,process
optimization
RiskManagement
JBSs Value & StrategyDone
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7PAGESource: JBS
Presence in More Than 100 Countries, in 5 Continents
Slaughterhouses andProduction Units
Sales Office
Pork
LeatherBeef
Distribution CenterBiodiesel
Strategic Geographical Distribution Exports to more than 150 countries and more the 300.000 clients
Chicken
GeographicPresence andProductionCapacity
81,400 heads/day
Beef
8.3 mm birds/day
Chicken
50,100 heads/day
Pork
18,265 heads/day
Lamb
86,300 hides/day
Leather
3
61
39
29
2 64
17
301
6 Lamb
3 Added ValueProducts
4 Brands
2 Sales andDistribution
Platform
1 ProductionPlatform
Brazil:11 DCs
Australia7 DCs
USA30 DCs
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8PAGE
FRESH BEEFSwift BlackSwift OrgnicoSwift MaturattaSwift Grill
Aougue SwiftSwift Linha ProfissionalSwiftFriboi
INDUSTRIALIZEDCanned vegetable
HamCorned beefFeijoada
PtJerky / Jerked BeefSausage
DEEP FROZEN PRODUCTSHamburger
Arab Cuisine SpecialtiesMeatballsPotatoesLamb productsFish products
High Value Added Products Portfolio
Top of Mind Brands
3 Added ValueProducts
4 Brands
2 Sales andDistribution
Platform
1 ProductionPlatform
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9PAGE
Well-recognized Brands, symbols of quality
USA
Australia
Mercosul3 Added Value
Products
4 Brands
2 Sales andDistribution
Platform
1 ProductionPlatform
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Perspectives for the animal protein market
Global Scenario
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11PAGE
Worlds Food* Surpluses and Deficits
1965
1990
1970
1995
1975
2000
1980
2005
1985
2010
Net intra-regional trade, million tonnes
150
100
50
0
50
100
150
* Cereals, rice, oilseeds, meals, oils and feed equivalent of meat.Source: The Economist
NorthAmerica
SouthAmerica
Australia
Eastern Europeand former
Soviet Union
Western
Europe Asia
Middle East
& Africa
Central
America
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12PAGE
59.1
76.5
58.8
75.9
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E
Beef Production and Consumption Forecasts - 2000/2021
Global Scenario
CAGR1.2%
CAGR1.2%
Source: FAONote 1. Production CAGR / Note 2. Consumption CAGR
Beef Production Beef Consumption
(million tons)
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13PAGESource: USDA and JBS
US Cattle Herd and Beef Production
8
9
10
11
12
13
14
80
85
90
95
100
105
110
115
120
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012E 2014E 2016E 2018E 2020E
US Cattle Herd (million head) US Annual Beef Production (million tonnes cwt)
Substantial Recovery starting in 2014
Forecast
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14PAGESource: FAO
World Average Meat Consumption per Person, 60s to 2030
Consumption (kg/capita/year)
0 5 10 15 20 25 30 35 40 45 50
2030
1997-99
1964-66
Poultry Pork Lamb Beef
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15PAGE
Meat Consumption Forecast (Million tons) Expected increase in meat demand by country groupsbetween 2010 - 2020
Emerging
Developed
Source: FAO - OECD
Meat Consumption Growth Forecast 2011-2020
19%
81%
Poultry Pork Sheep Beef
2020
228.1
Ave 2008-10
278.2
2001
338.3
67.595.1
122.5
90.8
105.7
126.658.6
64.6
73.6
11.2
12.7
15.6
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16PAGESource: FAO
Protein Consumption in the World Today is Half That Recommended by FAO
Per Capita Meat Consumption (Kg/per capita)
The population growth coupled with rising living standards around the world will drive anincrease in demand for proteins in the emerging middle class
48
62 69
8088
121
42
82
China Rssia Mxico UE-27 Brasil EUA Mundo DesenvolvidosRussiaChina Mexico EU - 27 Brazil USA World Developed
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17PAGESource: USDA 2012 (Estimated)*Buffaloes / **Not considering Brazilian exports
Global Protein Trade Largest Exporters
JBS is present in the main exporter markets
Canada 5%
New Zealand 6%
Mercosul** 9%
Others 13%
USA 14%
India* 20%
Brazil 17%
Australia 17%
Chicken Exports
Beef Exports
Pork Exports
Turkey 3 %
Thailand 5%
Argentina 3%
E.U. 12%
Others 7%
Brazil 36%
USA 34%
Chile 2%
Brazil 9%
China 4%
Canada 17%
Others 4%
USA 34%
E.U. 30%
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3Q12 Highlights
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19PAGE
786.8
1,378.85.1
7.1
-12,0
8,0
0,0
200,0
400,0
600,0800,0
1000,0
1200,0
1400,0
1600,0
1800,0
2000,0
3Q11 3Q12
Positive Operating Cash Flow of R$630 million
R$157 million Free Cash Flow
Leverage decreased significantly and was 3.68x at the end of the quarter
3Q12 Highlights
Net Revenue (R$ billion) Net Income (R$ million)
15.6
19.4
3Q11 3Q12
24%75%
-67.5
495.4
-12-100,0
0,0
100,0
200,0
300,0
400,0
500,0
600,0
3Q11 3Q12
EBITDA margin (%)
EBITDA (R$ million)
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20PAGE
9M12 Highlights
44.9
53.8
9M11 9M12
20%
2,210.4
3,239.4
4.96.0
-12,0
8,0
0,0
500,0
1000,01500,0
2000,0
2500,0
3000,0
3500,0
4000,0
4500,0
5000,0
9M11 9M12
47%-101.3
948.6
-12-200,0
0,0
200,0
400,0
600,0
800,0
1000,0
9M11 9M12
EBITDA margin (%)
Net Revenue (R$ billion) Net Income (R$ million)EBITDA (R$ million)
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21PAGE
JBS entered the Canadian beef market through the signature of an agreement to manage and operate assets of XL
Foods in Canada, including a purchase option (2 plants, 1 feedlot and a farm) and XL Foods assets in the UnitedStates (2 plants).
Strategic Events
The Company also signed a term sheet to acquire 100% of the shares of Agrovneto S.A. a company specialized in
the production of chicken products which operates out of Nova Veneza in the southern Brazilian state of Santa
Catarina. The plant has capacity to process 140,000 birds per day.
JBS is scheduled to open 6 new beef plants in Brazil in the coming months as follows: Rolim de Moura, state ofRondonia which is due to initiate operations on 19.Nov.2012, Nova Andradina (Mato Grosso do Sul) with start-up
scheduled for 03.Dec.2012, Pontes e Lacerda and Vila Rica, both in the state of Mato Grosso, scheduled to start on
07.Jan.2013, Senador Canedo (Gois) scheduled for 04.Feb.2013 and Castelo dos Sonhos, in the Northern state of
Par, scheduled for 08.Apr.2013. These plants will add a total capacity of 1.2 million head of cattle by 2013, which
represents a 15% increase over the current capacity in Brazil.
JBS C lid d R l 3Q12
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22PAGESource: JBS
JBS Consolidated Results 3Q12
EBITDANet Revenue (R$ million) EBITDA and EBITDA Margin (R$ million)
786.8940.6
696.5
1,012.8
1,378.85.15.6
4.35.5
7.1
-12,0
8,0
0,0
200,0
400,0
600,0
800,0
1000,0
1200,0
1400,0
1600,0
1800,0
3Q11 4Q11 1Q12 2Q12 3Q12
15,567.816,934.5
16,011.1
18,468.319,366.6
3Q11 4Q11 1Q12 2Q12 3Q12
+15.3%
+4.9%
+8.8% -5.5%
+45.4%
+36.1%+19.5%
-26.0%
EBITDA Margin (%)
JBS M l
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23PAGE
3.93.8 3.8
4.3
4.6
3Q11 4Q11 1Q12 2Q12 3Q12
Source: JBS
JBS Mercosul
Performance by Business Unit
Net revenue at JBS Mercosul came in at R$4,597.8 million in 3Q12,
increase of 17.7% in comparison with 3Q11.
EBITDA totaled R$665.6 million in 3Q12, an increase of 46.7% over
the same quarter last year.
EBITDA margin at JBS Mercosul was 14.5% in the quarter.
The result of this business unit reflects an improved cattle cycle in
Brazil, the Companys efforts to enhance operational efficiencies and to
capture synergies in addition to the Companys strategy.
24%
% Net Revenue JBS S
Net Revenue (R$ billion)
EBITDA (R$ million)
YoY
17.7%
EBITDA Margin (%)
453.8407.7
508.6630.3 665.6
11.6% 10.7%13.3% 14.6% 14.5%
-10,0%
-8,0%
-6,0%
-4,0%
-2,0%
0,0%
2,0%
4,0%
6,0%
8,0%
10,0%
12,0%
14,0%
16,0%
-50
50
150
250
350
450
550
650
750
850
3Q11 4Q11 1Q12 2Q12 3Q12
JBS USA B f (i l di A t li )
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24PAGESource: JBS
JBS USA Beef (including Australia)
Performance by Business Unit
Net revenue for this business unit was US$4,275.9 million in thequarter.
This quarter was the turning point when margins becamepositive in 2012. EBITDA at JBS USA Beef unit totaled US$175.1million in the period, with an EBITDA margin of 4.1%.
The improvement in the dynamics of the sector in the U.S., dueto the better balance between supply and demand, permitted animprovement in margins at JBS USA.
Furthermore, the successful outcome of the operation inAustralia contributed to the results of this business unit.
45%
Net Revenue (US$ billion)
EBITDA (US$ million)
EBITDA Margin (%)
% Net Revenue JBS S
4.2
4.5
4.14.3 4.3
3Q11 4Q11 1Q12 2Q12 3Q12
184.1223.6
-45.4 -9.1
175.1
4.4% 5.0%
-1.1% -0.2%
4.1%
-30,0%
-28,0%
-26,0%
-24,0%
-22,0%
-20,0%
-18,0%
-16,0%
-14,0%
-12,0%
-10,0%
-8,0%
-6,0%
-4,0%
-2,0%
0,0%
2,0%
4,0%
6,0%
8,0%
10,0%
12,0%
14,0%
16,0%
-100
0
100
200
300
400
500
3Q11 4Q11 1Q12 2Q12 3Q12
YoY
1.6%
JBS USA Pork9%
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25PAGESource: JBS
JBS USA Pork
Performance by Business Unit
Net revenue in the pork business for the quarter was US$846.1
million, 2.4% lower than 3Q11.
EBITDA was US$40.4 million in 3Q12 with an EBITDA margin of
4.8%.
The quarterly result was influenced by the reduction of average
selling prices in general, compared to last year, due to oversupply
of finished products in the period.
Net Revenue (US$ million)
EBITDA (US$ million)
EBITDA Margin (%)
% Net Revenue JBS S
867.1923.1 855.4 844.0
846.1
100,0
180,0
260,0
340,0
420,0
500,0
580,0
660,0
740,0
820,0
900,0
980,0
1060,0
1140,0
1220,0
1300,0
3Q11 4Q11 1Q12 2Q12 3Q12
75.9 77.055.8 49.2 40.4
8.8% 8.3%6.5% 5.8% 4.8%
-23,0%
-19,0%
-15,0%
-11,0%
-7,0%
-3,0%
1,0%
5,0%
9,0%
13,0%
-0,023
99,977
199,977
3Q11 4Q11 1Q12 2Q12 3Q12
YoY
-2.4%
JBS USA Poultry (Pilgrims Pride Corporation) 22%
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26PAGESource: JBS
JBS USA Poultry (Pilgrim s Pride Corporation)
Performance by Business Unit
Net revenue in the 3Q12 for this business unit came in atUS$2,068.5 million, 9.4% higher than the same period of 2011.
EBITDA in the 3Q12 was US$105.6 million, reversing the negativeUS$31.4 million in 3Q11.
EBITDA in the 3Q12 was US$105.6 million, reversing the negativeUS$31.4 million in 3Q11.
Reduction in the PPCs net debt to US$1.1 billion at the end ofSeptember, as a consequence primarily of the US$75.6 operating cash
flow.
22%
Net Revenue (US$ billion)
EBITDA (US$ million)
EBITDA Margin (%)
% Net Revenue JBS S
1.9 1.8 1.92.0 2.1
3Q11 4Q11 1Q12 2Q12 3Q12
-31.4 22.6
104.0 125.7105.6
-1.7%
1.2%
5.5% 6.4% 5.1%
-25,0%
-23,0%
-21,0%
-19,0%
-17,0%
-15,0%
-13,0%
-11,0%
-9,0%
-7,0%
-5,0%
-3,0%
-1,0%
1,0%
3,0%
5,0%
7,0%
9,0%
-200
-100
0
100
200
300
400
500
3Q11 4Q11 1Q12 2Q12 3Q12
YoY
9.4%
JBS Consolidated Exports Distribution in 3Q12
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27PAGESource: JBS
JBS Consolidated Exports Distribution in 3Q12
Approximately US$2.53 billion, an increase of 7,9% in relation to 2Q12
US$2,534.4million
Mexico 13.7%
Japan 11.6%
Russia 6.8%E.U 6.7%
Canada 4.3%
Chile 2.9%
Taiwan 1.6%
Others18.6%
Africa and Middle East 14.5%
South Korea 4.6%
Venezuela 2.0%
China, HK and Vietnam 12.7%
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Debt Profile
Debt Profile
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3Q12 Net debt to EBITDA was 3.68x, substantially lower than the 2Q12.
Source: JBS
Debt Profile
The Company ended the quarter with R$5,0 billion in cash, which represents more than 90% of short-term debt.
The percentage of short term debt increased from 23% in 2Q12 to 27% in 3Q12.
4.04 4.004.30 4.27
3.68
0
1
2
3
4
5
-100
100
300
500
700
900
1100
1300
1500
3Q11 4Q11 1Q12 2Q12 3Q12
. Leverage EBITDA (R$ million)
Leverage
.
27%
23%
27%
28%
73%
77%
73%
72%
3Q12
2Q12
1Q12
4Q11
Short Term Long Term
ST / LT Debt Profile
Debt Maturity Schedule and Profile
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Bonds39%
Other61%
3Q12
Debt Maturity Schedule and Profile
JBS S.A.59%
Subsidiaries41%
3Q12
Bonds / Other
Source: JBS Financial Statements 3Q12
Net Debt: 15,243.9 (R$ million)
-472 -202
-4,393
-1,454
-2,081
-172
-3,743
-2,727
Short Term Netof Cash 2013 2014 2015 2016 2017 2018 2019 and after
Breakdown by Currency and Company
R$ 27% USD 73%3Q12
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Sustainability and
Social Responsability
JBS actions related to cattle traceability and the Amazon Biome
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Amazon
Environmental
Satellite image
Social & Environmental
Purpose: reduce deforestation in the Amazon Biome; avoidpurchasing cattle from Environmentally Protected Areas EPAs,Indigenous reserves and protected areas; eradication of slavelabor in Brazil.
JBS Brazil monitors a 100% of its cattle suppliers properties viasatellite geo-referencing (GPS monitoring).
After the property coordinates are collected, the data is keyed intoJBSs registry of cattle suppliers and is sent to an outsource companyto be analyzed by superimposing on a map constructed from satelliteimages and the DETER(1) and PRODES(2) produced by Brazils NationalInstitute for Space Research INPE.
JBS contains a database of almost 12,000 cattle ranches registeredin the Amazon Biome.
Satellite image monitoring of the Amazon Biome.
ySustainability
Source: JBS Sustainability Policy(1)Real Time Deforestation Detection(2)Legal Amazon Deforestation Monitoring Project
JBS SA participates in CDP - Carbon Disclosure Project.
Also, JBS integrates the Carbon Efficient Index ofBOVESPA - ICO2.
JBS Institute funds Germinare School
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Classroom
Social
Germinare School is a social initiative of the JBS Institute whichlooks at Education as the principal instrument to transform society.
Laboratory
Social
GERMINARE SCHOOL
Purpose: to prepare well-educated and well-rounded citizens with abroad cultural repertoire, sound ethical values and a positiveattitude toward life and society.
Number of students: 360 (2012)Capacity of 630 students.
Area: 6,000 m2Sport complex, swimming pool, computer lab and chemistry lab.
Amount invested: R$15 million
Selection process: tests and group dynamics.
Top Brazilian professors.
Social Responsibility
Source: JBS
Started in 2010.
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Mission
To be bestin what we set out to do, totally focusedonour business, ensuring the best products and services
for our customers, solidityfor our suppliers,
satisfactory profitabilityfor our shareholders and thecertainty of a better future to all our employees.