Brazil's JBS SA, the world's biggest beef producer, posted a profit of R169.5 mill. ($83.64 mill.) in the second quarter, compared with a R181 mill. loss in the same period last year.
Earnings before interest, tax, depreciation and amortisation, a gauge of operating profit known as EBITDA, were R1.01 bill. in the quarter, up 72% from the same quarter of last year.
Revenues were boosted by the expansion of beef processing capacity in Brazil by 8,000 head per day. The company also began poultry production in its home country for the first time in the quarter after leasing the Frangosul plants from France's Doux.
The company lost R689.2 mill. from currency swings in the period, while it partially compensated those losses with gains in derivatives contracts worth R615 mill., mainly as interest rates fell locally and overseas. The weakening of the Real, which shed almost 11% of its value against the dollar in the quarter, also helped boost foreign-derived sales revenue in local currency terms.
The company said it ended the quarter with cash reserves of R5.48 bill., which it said was just over double the value of its short term debts.
Rival meatpackers Brasil Foods and Marfrig say the rising cost of grains for feed, particularly for poultry since most of Brazil's cattle are pasture-fed, will make it necessary to raise the price of their products. JBS is likely to face those same cost headwinds, particularly with the start of local poultry operations this year.
JBS started out as a family butcher and shot to the top spot in beef globally through an aggressive takeover strategy which has been paused over the last few years. But appetite for growth appeared to have returned this year with the Frangosul leasing and expansion in domestic beef processing capacity.
Source: JBS SA