2q09 earnings conference call - presentation
TRANSCRIPT
JBS S.A.
2nd Quarter 2009 Results
August 13th, 2009
“In God we Trust”
JBS S.A.
Jeremiah O’CallaghanInvestor Relations Director
Joesley Mendonça BatistaCEO
1
Presenters
Our Values
The Foundation Of Our Culture
Planning
Determination
Discipline
Availability
Openness
Simplicity
2
Agenda
Market OverviewMarket Overview
2Q09 Highlights2Q09 Highlights
Questions and AnswersQuestions and Answers
3
Our StrategyOur Strategy
Final ConsiderationsFinal Considerations
Consolidated ResultsConsolidated Results
OUR STRATEGY
- Access to raw material supply globally.
- Leader in countries with surplus production.
- Scale.- Leader in exports globally.- Access to all meat markets.- Exchange of best practices.- Efficiency cost gains.- Cost reduction
opportunities.- Margin improvements.
- Access to raw material supply globally.
- Leader in countries with surplus production.
- Scale.- Leader in exports globally.- Access to all meat markets.- Exchange of best practices.- Efficiency cost gains.- Cost reduction
opportunities.- Margin improvements.
- Integrate the sales and distribution platform to serve efficiently, local and external markets, small retailers, food processors, restaurants, and other customers globally.
- Sales force distributed over the globe.
- Efficiency on selling the best product, to the best market, with the best price.
- Cost reduction on sales and transport.
- Margin improvements.
- Integrate the sales and distribution platform to serve efficiently, local and external markets, small retailers, food processors, restaurants, and other customers globally.
- Sales force distributed over the globe.
- Efficiency on selling the best product, to the best market, with the best price.
- Cost reduction on sales and transport.
- Margin improvements.
- High liquidity level.- Debt equalized to cash
generation.- Strong cash position.- Access to international
capital markets to finance growth.
- Development of long term financing plan.
- Use of export platform to grow.
- Hands-on working capital management.
- High liquidity level.- Debt equalized to cash
generation.- Strong cash position.- Access to international
capital markets to finance growth.
- Development of long term financing plan.
- Use of export platform to grow.
- Hands-on working capital management.
South AmericaSouth America
North AmericaNorth America
AustraliaAustralia
European UnionEuropean Union
AsiaAsia
RussiaRussia
AfricaAfrica
Middle EastMiddle East
South AmericaSouth America
North AmericaNorth America
AustraliaAustralia
European UnionEuropean Union
Debt forWorkingCapital
Debt forWorkingCapital
Equity toFinanceGrowth
Equity toFinanceGrowth
Cooked ProductsCooked Products
Case ReadyProducts
Case ReadyProducts
Global BrandsGlobal Brands
MarketingInvestmentsMarketingInvestments
Minced ProductsMinced Products
Fresh ProductsFresh Products
Cured ProductsCured Products
Ready to EatProducts
Ready to EatProducts
- High technology investments to produce value added products.
- Increase value added products portfolio.
- Customized products to each market.
- Convenience to consumers day to day.
- Brand and Quality recognition and leadership.
- Marketing investments to be present in consumer minds.
- Margin improvements.
- High technology investments to produce value added products.
- Increase value added products portfolio.
- Customized products to each market.
- Convenience to consumers day to day.
- Brand and Quality recognition and leadership.
- Marketing investments to be present in consumer minds.
- Margin improvements.4
OUR STRATEGY
FoundationFoundation
Financial
Structure
Financial
StructureExperienced
Management
Experienced
Management
Cost Reduction,Productivity,
Process Optimization
Cost Reduction,Productivity,
Process Optimization
Risk
Management
Risk
Management
ConsolidatedConsolidatedConsolidatedConsolidated
AverageAverageAverageAverage
EBITDAEBITDAEBITDAEBITDA
MarginMarginMarginMargin
4%4%4%4%
8%8%8%8%
12%12%12%12%
50%50%50%50%
5
6
Global Market
Largest beef importers
Others
38%
South Korea
4% EU-27
8%
Japan
10%Mexico
5%
United States
19%
Russia
16%
Source: USDA 2009
Largest beef consumers
Others
31%
Mexico
4%
China
10%
Brazil
13%
Argentina
5%
United States
22%
EU-27
15%
Largest beef exporters
Others
25%
New Zealand
7%
India
8%United States
11%
Canada
7%
Brazil
23%
Australia
19%
Largest beef producers
Others
31%
India
4%
China
10%
EU-27
14%
Argentina
5%
United States
21%
Brazil
15%
Meats Consumption Per capita (including beef, pork and poultry)
48
6269
8088
121
42
82
0
20
40
60
80
100
120
140
China
Russi
a
Mex
ico
EU-2
7
Braz
il US
Wor
ld
Deve
lope
d
Source: FAO
Per
capita
con
sum
ptio
n (k
g/ca
pita
)
Recommended Recommended consumption consumption 80Kg/capita80Kg/capita
7
Source: UN (United Nations) and USDA*UN Estimates**Beef consumption trend considering CAGR of 2.0% (from 1960 to 2008)
World Population Growth and Beef Consumption (1960 – 2050)
8
0
2000
4000
6000
8000
10000
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010* 2015* 2020* 2025* 2030* 2035* 2040* 2045* 2050*
Po
pu
lati
on
(m
illi
on
)
0
20
40
60
80
100
120
140
Co
nsu
mp
tio
n (
mil
lio
n t
on
s)
Population - Developed countries Population - Developing countries Beef Consumption**
CAGR 2,0%
Population growth, a beef Population growth, a beef consumption driver.consumption driver.
Source: USDA
Beef MarketUSA 1991 – 2009 (thousand tons – CWE)
9
7000
8000
9000
10000
11000
12000
13000
14000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Pro
du
cti
on
, C
on
su
mp
tio
n
0
500
1000
1500
2000
2500
3000
3500
Sto
cks, Im
po
rt, E
xp
ort
Ending Stocks Production Consumption Imports Exports
Exports Recovering after Exports Recovering after BSE in 2003.BSE in 2003.
10
USA Beef Exports
Vietnam
13%
Hong Kong
2%
Países Baixos
1%Egito
1%
China
4%Japão
11%
Coréia do Sul
11%
México
33%
Outros
7%
Canadá
17%
USA beef exports (1000 tons)USA beef exports (1000 tons)USA exports destination in TonsUSA exports destination in Tons
Source: USDA Source: USDA – 2Q09
309
652
520
317209
1,145
1,022
0
200
400
600
800
1000
1200
1400
2003 2004 2005 2006 2007 2008 2009Jan - May
Source: EU Commission / DG AGRI*Estimates
Beef MarketEuropean Union 1997 – 2013 (thousand tons - CWE)
11
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009* 2010* 2011* 2012* 2013*
Pro
du
cti
on
, C
on
su
mp
tio
n
0
200
400
600
800
1000
1200
1400
1600
Sto
cks, Im
po
rt, E
xp
ort
Ending Stocks Production Consumption Import Export
EU - 25EU - 15
Increased dependence Increased dependence on imports.on imports.
0
500
1000
1500
2000
2500
3000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Production Import Export ConsumptionSource: USDA
44.4% of Russian 44.4% of Russian consumption comes from consumption comes from
imports.imports.
Beef MarketRussia 2000 – 2009 (thousand tons - CWE)
12
Beef MarketBrazil 1991 – 2009 (thousand tons - CWE)
2000
3000
4000
5000
6000
7000
8000
9000
10000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Pro
duct
ion,
Consu
mp
tion (
00
0 M
T)
0
500
1000
1500
2000
2500
3000
3500
4000
Exp
ort
s, I
mp
ort
s, S
tock
s (0
00
MT)
Ending Stocks Production Consumption Exports Imports
Source: USDA13
Beef Brazilian Exports
Beef Brazilian ExportsBeef Brazilian Exports1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Exports JBS USD Exports Brazil USD
Source: Secex
25%25%
24%21%
14
21%
1.11.00.8
0.60.8
1.5
2.5
3.0
3.9
4.3
5.1
USD
Bill
ion
Highlights
4
15
• Net profit of R$172.7 million in the quarter.
• Net revenue increased 29.8% from R$7,129.5 million in 2Q08 to R$9,255.0 million in 2Q09.
• Consolidated EBITDA increased 32.1% in 2Q09 when compared with the same period last year, from R$290.8 to R$384.0 million. When compared with the 1Q09, EBITDA increased 81.5%.
• “Market share” gain in JBS Brazil, from 14.9% in 1Q09 to 17.6% in 2Q09.
• Initiated the strategy to build a sustainable, direct and efficient global distribution platform of meat and meat products both chilled and frozen.
• Positive operating cash flow generation of R$311.7 million in the quarter.
• Efficiency in managing working capital necessity.
• Expansion of harvesting capacity in Brazil with the inclusion of the 5 new facilities.
• Application for JBS USA IPO (Initial Public Offering) registration and BDR (Brazilian Depositary Receipt) program.
JBS Consolidated Results
Net Revenue (R$ million)Net Revenue (R$ million) EBITDA and EBITDA Margin (R$ million)EBITDA and EBITDA Margin (R$ million)
16
Source: JBS
EBITDA Margin (%)
295.0
470.5
265.9
211.5
384.0
4.1%
6.1%
2.3%2.8%
4.1%
2Q08 3Q08 4Q08 1Q09 2Q09
7,129.57,771.5
9,633.29,267.9 9,255.0
2Q08 3Q08 4Q08 1Q09 2Q09
-0.1%
81.5%
9.0%
59.5%
24.0%
-43.5%
-3.8%
-20.4%
Performance by Business Units
17
Net Sales(US$ million)
Net Sales(US$ million)
EBITDA (US$ mi) EBITDA margin
EBITDA (US$ mi) EBITDA margin
JBS USA (Beef)Including Australia
Net Sales
(US$ million)
Net Sales
(US$ million)
EBITDA (US$ mi) EBITDA margin
EBITDA (US$ mi) EBITDA margin
JBS USA (Pork)
Net Sales(€ million)
Net Sales(€ million)
EBITDA (€ mi)
EBITDA margin
EBITDA (€ mi)
EBITDA margin
INALCA JBS
Net Sales(R$ million)
Net Sales(R$ million)
EBITDA (R$ mi) EBITDA margin
EBITDA (R$ mi) EBITDA margin
JBS MERCOSUL
Source JBS
EBITDA Margin (%)
2.6
2.82.8
2.8
2.9
2Q08 3Q08 4Q08 1Q09 2Q09
104.6
59.7132.9
155.6
60.4
5.1% 5.6%
2.2% 2.2%3.6%
2Q08 3Q08 4Q08 1Q09 2T09
600682
620 526 554
2Q08 3Q08 4Q08 1Q09 2T09
24.7
7.5
19.9
52.1
25.6
4.5%
1.4%
4.3%
7.6%
3.2%
2Q08 3Q08 4Q08 1Q09 2T09
162143140
144 144
2Q08 3Q08 4Q08 1Q09 2T09
6.6
5.66.6
7.68.3
4.6%3.9%5.1%5.3%
4.7%
2Q08 3Q08 4Q08 1Q09 2T09
1.4
1.8
1.6
1.4
1.7
2Q08 3Q08 4Q08 1Q09 2T09
82.6
53.5199,1
102.258,2
5.6%
4.1%4.9%4.3%
3.7%
2Q08 3Q08 4Q08 1Q09 2T09
Debt
• Considering the seasonality with the production increase in a high moment of high demand for beef, the Company maintained its leverage on the same levels of the preview quarter.
• The Company has improved its net debt in comparison to the 1Q09. The short term debt decreased 47% in 1Q09 to 39% in 2Q09 against the total debt.
2.82.3
2.0
2.5 2.6
2Q08 3Q08 4Q08 1Q09 2Q09
Net Debt / EBITDA Pro Forma per Quarter
*
Net Debt = R$ 3,928MM
EBITDA pro forma = R$ 1,482 MM= 2.6
Source: JBS
Net Debt/ EBITDA EBITDA pro-forma
* LTM including Smithfield Beef pro-forma.
Debt Profile
50% 47%39%
50% 53%61%
0%
20%
40%
60%
80%
100%
2Q08 1Q09 2Q09
Short term Long term
18
Availabilities
• Besides the cash and cash equivalents noted above, the US and Australia subsidiaries of the Company has availabilities of approximately US$ 560 million under their existing credit facilities that provide additional liquidity.
• Therefore the Company’s total liquidity including the availabilities under its credit facilities:
19
R $ MillionR $ MillionR $ MillionR $ Million 06/30/0906/30/0906/30/0906/30/09 03/31/0903/31/0903/31/0903/31/09 Var.%Var.%Var.%Var.%
Net indebtednes sNet indebtednes sNet indebtednes sNet indebtednes s 3,927.73,927.73,927.73,927.7 4,173.84,173.84,173.84,173.8 -5.9%-5.9%-5.9%-5.9%
Cash and cash equivalents 2,298.7 1,798.0 27.8%
Current 2,411.9 2,780.0 -13.2%
Long term 3,814.5 3,191.8 19.5%Gros s indebtednes sGros s indebtednes sGros s indebtednes sGros s indebtednes s 6,226.46,226.46,226.46,226.4 5,971.85,971.85,971.85,971.8 4.3%4.3%4.3%4.3%
R$ R$ R$ R$ MillionMillionMillionMillion 06/30/0906/30/0906/30/0906/30/09
Additional availability 1,092.9
Cash and cash equivalents 2,298.7
Total Total Total Total LiquidityLiquidityLiquidityLiquidity 3,391.63,391.63,391.63,391.6
Operacional Cash Flow
The Company generated positive operating cash flow of R$311.7 million in the quarter.
20
CASH FLOWCASH FLOWCASH FLOWCASH FLOW 2Q092Q092Q092Q09
EBIT 296.6
taxes (34% ) -100.8NOP L ATNOP L ATNOP L ATNOP L AT 195.7195.7195.7195.7
Depreciation 87.4Gros s Cas h F lowGros s Cas h F lowGros s Cas h F lowGros s Cas h F low 283.2283.2283.2283.2
Working Capital Variation 316.5
CAP E X -288.0Inv es t imentsInv es t imentsInv es t imentsInv es t iments 28.528.528.528.5OPER AT ING CASH FLOWOPER AT ING CASH FLOWOPER AT ING CASH FLOWOPER AT ING CASH FLOW 311.7311.7311.7311.7
Working Capital
JBS decreased its working capital necessity form 53 days in 1Q09 to 37 days in 2Q09, that corresponds to the lowest working capital necessity of the sector, considering that the average of the sector is 75 days. This reduction ensures the efficiency of the Company’s management in managing its working capital.
21
Production & Stock = 32 days CLIENT = 42 days
SUPPLYER = 21 days
ProductDelivery
Supplyerpayment
Client’s payment to JBS
Client’s orderto JBS
WORKING CAPITAL &INTERESTS
53 days
1º Quarter 2009
Production & Stock 21 dias
CLIENT = 37 days
SUPPLYER = 21 days
ProductDelivery
Supplyerpayment
Client’s paymentto JBS
WORKING CAPITAL &INTERESTS
37 days
2º Quarter 2009
Client’s orderto JBS
JBS Consolidated Gross Revenue Distribution
Revenue Distribution by Business Units 2Q09Revenue Distribution by Business Units 2Q09 Revenue Distribution by Market 2Q09Revenue Distribution by Market 2Q09
Source: JBS Source: JBS
22
Domestic Domestic Domestic Domestic MarketMarketMarketMarket
74%74%74%74%
ExportsExportsExportsExports26%26%26%26%
I talyItalyItalyItaly4%4%4%4% ArgentinaArgentinaArgentinaArgentina
2%2%2%2%
BrazilBrazilBrazilBrazil16%16%16%16%
Beef USABeef USABeef USABeef USA54%54%54%54%
Pork USAPork USAPork USAPork USA13%13%13%13%
AustraliaAustraliaAustraliaAustralia11%11%11%11%
JBS Consolidated Exports Distribution
Exports Distribution 2Q09Exports Distribution 2Q09
Source: JBS
23
JapanJapanJapanJapan18%18%18%18%
E.U.E.U.E.U.E.U.15%15%15%15%
USAUSAUSAUSA9%9%9%9%
Africa and Africa and Africa and Africa and Middle EastMiddle EastMiddle EastMiddle East
8%8%8%8%
RussiaRussiaRussiaRussia7%7%7%7%
MexicoMexicoMexicoMexico7%7%7%7%
South KoreaSouth KoreaSouth KoreaSouth Korea6%6%6%6%CanadaCanadaCanadaCanada
5%5%5%5%
Hong KongHong KongHong KongHong Kong5%5%5%5%
ChinaChinaChinaChina4%4%4%4%
TaiwanTaiwanTaiwanTaiwan2%2%2%2%
OthersOthersOthersOthers14%14%14%14%
JBS Exports 2Q09JBS Exports 2Q09JBS Exports 2Q09JBS Exports 2Q09US$ 1,169.1 MillionUS$ 1,169.1 MillionUS$ 1,169.1 MillionUS$ 1,169.1 Million
Final Considerations
• The Company maintains its growth in Brazil reaching almost 18% market share, as commented in previous presentations
• The operations in the US continue to generate synergies and reduce costs maintaining margins regardless of the economic downturn
• The Company has already initiated the construction of it’s Global distribution network and margins tend to improve as a result of it’s implementation.
• The direction of JBS continues to focus on a healthy balance sheet, generating positive operational cash flow and maintaining the lowest leverage of the sector.
• JBS continues along the path of sustainability constantly improving controls in order to guarantee the origin of its products.
• JBS presented a solid financial structure and went thru the crises maintaining its liquidity. With the gradual recovery of global financial markets, global production and consumption, JBS is ready to continue strategic expansion through new acquisitions to maintain a competitive over its rivals.
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25
JBS S.A.
Questions and Answers
August 13th, 2009
“In God we Trust”
JBS S.A.
DISCLAIMERDISCLAIMERDISCLAIMERDISCLAIMER
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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