Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- JBS SA (JBSAY, Financial) reported a record net revenue of $19.9 billion for Q3 2024, marking a significant increase from the previous year.
- The company achieved an EBITDA of $2.2 billion with a consolidated margin of 10.8%, reflecting a nearly 5% point increase compared to Q3 2023.
- JBS SA (JBSAY) announced a dividend distribution of approximately 17 cents per share, totaling around $382 million, to be paid in January 2025.
- The company's poultry and pork operations in Brazil and the United States performed above expectations, with the Sierra segment achieving a record-breaking 21% margin.
- JBS SA (JBSAY) reduced its net debt by $1 billion, bringing it down to $13.7 billion, and decreased leverage to 2.15 times, showcasing strong financial management.
Negative Points
- JBS SA (JBSAY)'s North American beef operations continue to face challenges due to the cattle cycle, impacting profitability.
- The company experienced a significant increase in Brazilian cattle prices, which could affect future results, especially in the export market.
- Despite strong performance in other segments, JBS SA (JBSAY) is still dealing with high live cattle prices in North America, pressuring margins.
- The company's free cash flow generation was impacted by higher use of working capital this year, raising concerns about future cash flow consistency.
- JBS SA (JBSAY) is navigating a complex US listing process, which could affect its capital allocation and dividend policies in the future.
Q & A Highlights
Q: Can you remind us of your ultimate ratings target for the company and how you plan to manage net leverage within the 2 to 3 times target?
A: Our policy is to maintain net leverage between two and three times, which we believe supports an investment-grade rating. We aim to keep leverage around two times, which could lead to a ratings upgrade. We are working on addressing a one-notch downgrade for governance, which, once resolved, could help us achieve a triple B flat rating. The pace of ratings upgrades will depend on potential acquisitions. Our target is to maintain leverage between two and 2.5 times while growing the company and returning capital to shareholders. (Guillerme Cavalcanti, Global CFO)
Q: Should we expect gross debt to decrease in the fourth quarter, and how will cash flow generation compare to the previous year?
A: We have already reduced gross debt by paying off local debentures and issuing new ones. We may further reduce gross debt depending on cash generation trends. Our EBITDA break-even point is $3.5 billion, and we expect to generate around $2.6 billion in free cash flow this year. The fourth quarter is typically strong for free cash flow, and we may use some cash to unwind balance sheet leverage, reducing interest expenses for next year. (Guillerme Cavalcanti, Global CFO)
Q: How do you see the recent increase in Brazilian cattle prices impacting results in the fourth quarter and 2025, especially regarding exports?
A: The main driver for our results was the drop in cattle prices, which increased margins. We are well-positioned with strong brands and distribution. While cattle prices have fluctuated, we expect margins to return to historical levels. (Gilberto Tomazoni, Global CEO)
Q: What are the structural changes in the US Beef business that could lead to better margins over time?
A: We are performing in line with historical levels and have improved the business significantly. There is still room for a 1.5 to 2% improvement in performance, which would take us to an operational excellence level. This improvement is independent of market conditions and relies on our internal efforts. (Wesley Batista Filho, CEO of JBS USA)
Q: How does the potential US listing affect your approach to dividends and capital allocation?
A: A US listing would remove the mandatory 25% dividend payout required by Brazilian corporate law. We would likely establish a dividend policy linked to free cash flow, aiming for stable dividends. Historically, we have balanced free cash flow between growth and shareholder returns, and we plan to continue this approach. (Guillerme Cavalcanti, Global CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
