3q09 conference call presentation
TRANSCRIPT
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JBS S.A.
3rd Quarter 2009 Results
JBS S.A.
November 16th, 2009In God we trust, nature we respect
JBS S.A.
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Jeremiah OCallaghan
Investor Relations Director
Joesley Mendona Batista
CEO
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Presenters
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Our Values
The Foundation Of Our Culture
Planning
Determination
Discipline
Availability
Openness
Simplicity
2
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Market Overview
3Q09 Highlights
Questions and Answers
3
Our Strategy
Final Considerations
Agenda
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2005/2006AdequateFinancial
Structure
2007/2008Global Production
Platform
2009/2010Global Sales &
Distribution
Platform
2011/2012Value AddedProducts &
Branding
- Access to raw materialsupply globally.
- Leader in countries withsurplus 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 anddistribution platform toserve efficiently, local andexternal markets, smallretailers, food processors,restaurants, and othercustomers globally.
- Sales force distributed overthe globe.
- Efficiency on selling the bestproduct, to the best market,with the best price.
- Cost reduction on sales andtransport.
- Margin improvements.
- High liquidity level.- Debt equalized to cash
generation.- Strong cash position.- Access to international
capital markets to financegrowth.
- Development of long termfinancing plan.
- Use of export platform togrow.
- Hands-on working capitalmanagement.
South America
North America
Australia
European Union
Asia
Russia
Africa
Middle East
SouthAmerica
NorthAmerica
Australia
EuropeanUnion
Debt forWorkingCapital
Equityto
FinanceGrowth
Cooked Products
Case ReadyProducts
Global Brands
MarketingInvestments
Minced Products
Fresh Products
Cured Products
Ready to Eat
Products
- High technologyinvestments to producevalue added products.
- Increase value addedproducts portfolio.
- Customized products toeach market.
- Convenience to consumersday to day.
- Brand and Qualityrecognition and leadership.
- Marketing investments to
be present in consumerminds.- Margin improvements. 4
Our Strategy
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Branding
ValueAdded
Products
Sales &Distribution
Platform
Production Platform
Foundation
Financial
Structure
Experienced
Management
Cost Reduction,Productivity,
ProcessOptimization
Risk
Management
ConsolidatedAverageEBITDAMargin
4%
8%
12%
50%
5
Our Strategy
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Market Overview
6
Agenda
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Global Market
Largest beef importers
Others
38%
South Korea
4% EU-27
8%
Japan
10%Mexico
5%
United States19%
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%
Brazil23%
Australia
19%
Largest beef producers
Others
31%
India
4%
China
10%
EU-27
14%
Argentina
5%
United States
21%
Brazil
15%
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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)
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*
Population(millio
n)
0
20
40
60
80
100
120
140
Consumption(million
tons)
Population - Developed countries Population - Developing countries Beef Consumption**
Population growth, a beefconsumption driver.
8
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Per capita food consumption (Kg / Year)
9
02 0
4 06 0
8 01 0 0
1 2 01 4 0
1 6 01 8 0
Cereals Roots and
Tubers
Beans, Peas
and Lentils
Sugar O ils Crops
and its
products
Meat Milk and its
products
1969/ 711979/ 811989/ 911999/ 0120302050
Source: FAO
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US Beef and Veal Exports (Million Pounds)
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Source: USDA ERS
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US Pork Exports (Million Pounds)
11
3,279
2,650
2,650
4,667
3,1422,995
2,667
2,181
1,7171,6121,560
1,2871,278
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
Japan China Hong Kong Mexico Russia Canada South Korea Australia Others Until August
Source: USDA ERS
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US Poultry Exports (Million Pounds)
12
4,621
7,109
6,070
5,3675,333
4,9975,0134,942
5,738
5,1384,980
4,6214,683
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
Russia China (Mainland) Iraq Mexico Canada Cuba Other Chicken Others Until August
Source: USDA ERS
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Brazilian beef exports (USD billion)
Source Secex
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3Q09 Highlights
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Agenda
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4
15
Net profit of R$151.5 million in the quarter.
7.8% net revenue growth, from R$7,771.5 million in 3Q08 to R$8,379.9 million in3Q09.
Operating cash flow of R$317.8 million in the quarter.
Despite relevant productivity gains in international operations, the impact of theglobal crisis in important consumer markets resulted in margin contractions.
Efficient working capital management.
Announcement of the association with Bertin S.A. and acquisition of Pilgrims PrideCorp.
Commitment to respect society and the environment supported by Non-governmentalorganizations.
Highlights
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Revenue Distribution by Business Units 3Q09 Revenue Distribution by Market 3Q09
Source: JBS Source: JBS
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JBS Consolidated Net Revenue Distribution
Italy5% Argentina
2%
Brazil17%
Beef USA50%
Pork USA12%
Australia14%
Domestic Market76%
Exports24%
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Exports Distribution 3Q09
Source: JBS17
JBS Consolidated Exports Distribution
Japan
19%
E.U.
12%Russia
9%USA
8%Mexico
7%
Canada
6%
Africa and
Middle East
6%
Hong Kong
5%
South Korea
4%
China
4%
Indonesia
3%
Others
18%
JBS Exports 3Q09US$ 1,127.4 Million
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Net Revenue (R$ million) EBITDA and EBITDA Margin (R$ million)
18Source: JBS
EBITDA Margin (%)
-9.5%
-24.0%
24.0%
-44.0%
-3.8%
-20.4%
-0.1%
81.6%
JBS Consolidated Results
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Net Revenue (Million)
0.6%
Source: JBS
Source: Banco Central
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Currency effects in the net revenue
R$ US$Exchange rate
average of the period:2Q09 2.07483Q09 1.8677
-9.5%
Excluding the exchange rate effect inthe period, net revenue increased 0.6%over 2Q09.
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Net Sales(US$ billion)
EBITDA (US$ mi)EBITDA margin
JBS USA (Beef)Including Australia
Net Sales(US$ million)
EBITDA (US$ mi)EBITDA margin
JBS USA (Pork)
Net Sales( million)
EBITDA ( mi)
EBITDA margin
INALCA JBS
Net Sales(R$ billion)
EBITDA (R$ mi)EBITDA margin
JBS MERCOSUL
Source JBS
EBITDA Margin (%)
2.2.
2.
2. 2.8
3Q08 4Q08 1Q09 2Q09 3Q09
59.760.4104.1
104.6 108.4
5.2%
2.2% 2.2%3.6% 3.8%
3Q08 4Q08 1Q09 2Q09 3Q09
144162
143144 146
3Q08 4Q08 1Q09 2Q09 3Q09
9.7
6.67.6
8.3
5.6
6.6%
4.6%3.9%
5.15.3%
3Q08 4Q08 1Q09 2Q09 3Q09
1.81.6
1.41.7 1.7
3Q08 4Q08 1Q09 2Q09 3Q09
47.382.6
199,169.4
58,2
4.3%5.6%
2.9%3.7%
4.9%
3Q08 4Q08 1Q09 2Q09 3Q09
Performance by Business Units
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The net debt / EBITDA ratio increased from 2.6x in 2Q09 to 3.3x in 3Q09, reflectingthe EBITDA decline when compared with 3Q08.
The company projects a reduction in leverage levels by the end of the year.
The gross and net debt reduced 5.6% and 2.2%, respectively, over 2Q09.
2.32.0
2.5 2.6
3.3
3Q08 4Q08 1Q09 2Q09 3Q09
Net Debt / EBITDA Pro Forma per Quarter
*
Source: JBS
Net Debt/ EBITDA EBITDA pro-forma* LTM including Smithfield Beef pro-forma.
Gross debt Profile (R$ million)
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Debt
5,971.86.226.4
5,877.1
1T09 2T09 3T09
Short term Long term
53%
47%
61%
39%
59%
41%
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For the second quarter consecutive, the Company generated positive operating cash flowof more than R$300 million.
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Operational Cash Flow
CAS H FL OW 3Q09 2Q09 Var.%E B IT 210.3 296.6 -29.1%
taxes -66.1 -90.4 -26.8%NOP L AT 144.1 206.2 -30.1%Depreciation 81.6 87.4 -6.7%
Gross Cash F low 225.8 293.6 -23.1%Working Capital Variation 326.5 316.5 3.2%
CAP E X -234.4 -288.0 -18.6%
OP ER AT ING CAS H FL OW 317.8 322.2 -1.3%
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JBS continues to reduce its working capital needs, which decreased from 37 days in 2Q09 to 33days in 3Q09.
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Working Capital
Production & Stock
21 diasCLIENT = 33 days
SUPPLYER = 21 days
ProductDelivery
Supplyer
payment
Clients paymentto JBS
WORKING CAPITAL &
INTERESTS
33 days
3 Quarter 2009
Clients orderto JBS
Production & Stock
21 diasCLIENT = 37 days
SUPPLYER = 21 days
ProductDelivery
Supplyerpayment
Clients payment
to JBS
WORKING CAPITAL &INTERESTS
37 days
2 Quarter 2009
Clients orderto JBS
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Signs of economic recovery bring the prospect of better results in coming quarters.
Turnaround of Argentine operations is under way with the change in managementand the implementation of internal restructuring.
JBS maintains its focus on building a distribution platform to add value to its productsand increase its margins.
The undergoing acquisition of Pilgrims Pride and the association with Bertin adds tothe growth potential of the company.
Financial leverage continues to be our focus and we aim to keep it under control.
We are committed to building a sustainable platform respecting our customers andthe environment.
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Final Considerations
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Questions & Answers
IR Contacts:[email protected]
+55 11 3144 4055www.jbs.com.br/ir
mailto:[email protected]:[email protected] -
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The forward-looking statements presented herein are subject to risks and uncertainties. Thesestatements are based on the beliefs and assumptions of our management, and on informationcurrently available to us.
Forward-looking statements are not guarantees of performance. They involve risks, uncertaintiesand assumptions because they relate to future events and therefore depend on circumstances thatmay 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-lookingstatements. Many of the factors that will determine these results and values are beyond ourability to control or predict.
Forward-looking statements also include information concerning our possible or assumed futureoperating 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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DISCLAIMER