JBS earnings lose steam due to high cattle prices; pork, poultry soar

GREELEY — Inflation is beginning to creep into JBS’s beef earnings, but not enough to cause a stampede.

Officials from JBS S.A. (OTCMKTS: JBSAY) this week reported the global meat-packing company’s second quarter earnings results, noting a massive increase in pork and poultry earnings, which makes up for a reduction in beef earnings due to high cattle prices. Pilgrim’s Pride (NASDAQ: PPC), in fact, recorded its best earnings before interest, taxes, depreciation and amortization, in its history for the second quarter with $782.8 million compared to $375.3 million in the second quarter 2023.

Overall, the company reported a 67% earnings loss from the same quarter in 2023 for the North American beef unit. While the unit saw a 3% growth in net revenue due to an increase in sales volume, a 5% increase in cattle prices drove down earnings. Even with that downturn, the company reports its other global beef segments can take up the slack.

“The strength of our diversification puts JBS in a unique position in the industry. While the market environment in the United States remains challenging, our beef business, Brazil and Australia are benefiting from favorable cycles in both countries,” JBS global CEO Gilberto Tomazoni said in an earnings call, transcribed by Seeking Alpha.

JBS’s U.S. pork division saw a 208% increase in earnings, while Pilgrim’s earnings increased 108% compared to the same time last year.

The company reported in its earning call that 75% of its EBITDA earnings came from the company’s poultry and pork operations.

“In the quarter, beef margins in North America continued to be pressured by both the cattle cycle and weaker demand given the inflationary scenario in the USA,” according to JBS’s second quarter earnings press release. “As the price of cattle represents approximately 85% of the cost of the goods sold and the selling price of meat remained stable in the annual comparison, profitability came under pressure in the period.”

The company’s pork division, said JBS USA CEO Wesley Batista Filho, is one of the company’s most consistent divisions.

“We’ve been investing a lot in this business … with a more prepared foods business. The prepared — to add value to our pork raw material, we’ve built a couple of greenfield plants here in the U.S. with expanded plants that we currently have. And the size of our prepared business has been growing a lot, and it adds value on this overall business unit,” Batista Filho said in an earnings call.

Batista Filho said going forward, the market can “expect … double-digit margins” in the pork unit.

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