JBS facing headwinds in the U.S., NY listing plans pushed back

By Ana Mano

SAO PAULO (Reuters) – JBS SA, the Brazil-based meat behemoth, is braced for tough times as low cattle availability squeezes beef margins in the United States, its main market, and management works to return pork business margins to more stable levels in North America.

In a discussion with analysts of JBS’ third quarter results on Tuesday, managers also said they are trying improve the operating performance of processed foods division Seara in Brazil, which made heavy investments to boost capacity at a time the world faces a global chicken glut and competitors make inroads in certain product categories.

JBS’ plans to increase Seara’s overall pork and chicken products production by 10% this year and 10% in the next are maintained, managers said.

On Monday, JBS reported an 86% drop in third-quarter net income compared to a year ago, sliding to around 573 million reais ($116.63 million).

The company cited struggling U.S. beef margins, a recovering pork division and global chicken oversupplies as weighing on results.

For the U.S. beef division, a shortage of cattle for slaughtering will remain a challenge in the fourth quarter and in 2024, Director Wesley Batista Filho said in the call.

On a brighter note, the company is expected to show strong cash generation in the fourth quarter following a drop grain prices and deferred livestock payments, CFO Guilherme Cavalcanti said.

The company’s plan to list shares in New York has been held back by a request from American Depositary Receipt holders to vote on the proposal, CEO Gilberto Tomazoni told analysts, repeating remarks from the previous day.

The dual listing of shares in New York and São Paulo potentially thwarts short-term opportunities to tap capital markets to fund business expansion initiatives, he said.

Tomazoni declined to give a timeline for the deal’s conclusion as it is still being scrutinized by the Securities and Exchange Commission (SEC).

(This story has been corrected to clarify that JBS plans to increase Seara’s production by 10% this year and 10% in the next year, in paragraph 3, and to fix the executives’ surnames in paragraphs 7 and 8)

(Reporting by Ana Mano; Editing by Steven Grattan)