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JBS Posts Surprise Profit Slump on Currency Losses; Shares Fall

May 15, 2014

JBS SA, the world’s biggest meat producer, reported an unexpected 69 percent decline in first- quarter profit after currency-hedging costs partly erased gains from its poultry businesses. The shares fell.

Net income dropped to 70 million reais ($32 million) from 227.9 million reais ($103.1 million) a year earlier, the Sao Paulo-based company said in a statement late yesterday. That trailed the 233.3 million-real ($105.5 million) median estimate of four analysts’ estimates compiled by Bloomberg.

While the company’s poultry business is benefiting from declining prices for corn used to feed chickens, the cost of protecting against currency swings led financial losses to surge 11-fold to 869.3 million reais ($393.3 million) in the quarter, JBS said.

Profit was also hurt by losses at the U.S. beef unit as a cattle shortage pushes up prices for livestock that JBS buys to process at its abattoirs.

Beef is "the most challenging business for JBS," Chief Executive Officer Wesley Batista said on a earnings conference call today.

JBS fell 2.4 percent to 7.84 reais ($3.55) at 10:50 a.m. in Sao Paulo.

JBS’s Pilgrim’s Pride poultry unit in the U.S. has been cutting costs at plants and helping boost operating earnings, Citigroup Inc. said in a May 7 report.

The gains at the poultry unit "set the stage for another strong year," said Alexander Robarts, an equity analyst at Citigroup who rates the stock the equivalent of hold.

 

To contact the reporter on this story: Gerson Freitas Jr. in São Paulo at gfreitasjr@bloomberg.net To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net Carlos Caminada

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