3q08 conference call presentation
TRANSCRIPT
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3rd Quarter 2008 Results
JBS S.A.
November 05th, 2008
In God we Trust
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PRESENTERS
Rodrigo Gagliardi
Investor Relations Manager
Jeremiah OCallaghan
Investor Relations Director
Joesley Mendona Batista
CEO
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Our Mission
To be the best at what we set out to do, totally focused on our business,ensuring the best products and services for our customers, solidity for our
suppliers, satisfactory profitability for our shareholders and the certainty of a
better future for all our employees.
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Our Values
The Foundation Of Our Culture
Planning
Determination
Discipline
Availability
Openness
Simplicity
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MANAGEMENT
InvestorRelations
Jerry
OCallaghan
Brazil
Humberto
Magalhes
Argentina
Nelson
Dalcanale
ItalyLuigi
Scordamaglia /
Paolo Boni
Legal
Francisco
de Assis e Silva
FinancialDirector
Srgio
Longo
CEO
Chairman
Joesley
Batista
Mr. Humberto deCamposMagalhes holdsa degree in biologyfrom Universidade
Federal do MatoGrosso. He iscurrently the chiefoperating officer ofthe Braziliandivision. Beforejoining JBS in1999, he had over8 years ofexperience workingin the meatindustry.
Mr. Srgio Longo, hasbeen serving JBS as aFinancial Director sinceApril 2003 and he hasbeen a member of JBSboard of executive
officers since 2005.Before joining JBS hehad over 25 years ofexperience working infinancial institutions.
Mr. Francisco deAssis e Silva, GeneralCounsel, holds a lawdegree and a masterdegree inenvironmental law fromPontifcia UniversidadeCatlica at ParanState, a master degreein corporate law and amasters degree in
public law fromUniversidadeMackenzie, and an MBEin labor economics fromUniversidade de SoPaulo. He has been amember of JBS board
of executive officers
since January 2, 2007 .He has been workingfor the JBS Group sinceDecember 2001.
Mr. NelsonDalcanale
has been working atJBS since 2001 and iscurrently the CEO ofthe division inArgentina. Beforejoining JBS, he had21 years ofexperience in themeat industry.
Mr. JerryOCallaghan holds adegree in Engineeringfrom UCC (UniversityCollege Cork) inIreland. He immigrated
to Brazil in 1979. Mr.OCallaghan enteredthe beef sector in 1983and joined JBS in 1996to developInternational Trade forthe group. He iscurrently our InvestorRelations Officer.
Mr. Scordamaglia,started his career asProfessor in theVeterinary Universityof Perugia and as anadvisor in the legal
and QA departmentsof Inalca. He wasappointed CEO ofInalca in 2007.
Mr. Paolo Boniholds a degree inaccounting. Beforejoining JBS he hadover 25 years ofexperience in thebeef industry sector.He has been a BoardMember of Inalcasince 1996.
Management
& Controlling
Director
Eliseo
Fernandez
Mr. EliseoFernandez holds adegree in businessadministration andaccounting fromUniversidade Catlica
de Pernambuco and amasters degree inbusinessadministration f romFGV. He joined JBS inAugust 2005 and iscurrently themanagement andcontrolling director.Before joining JBS MrFernandez worked foreight years in theauditing and advisoryindustry and 10 years
in the retail industry.
Wesley
Mendona
Batista
Jos
Batista
Sobrinho
Jos
Batista Jr.
Marcus
Vinicius
Pratini de
Moraes(Independent)
Board of Directors
Demsthenes
Marques(Independent
PROT FIP)
BNDES(Independent)
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CFO
AndrNogueira
Australia
Iain Mars
Pork
MartinDooley
JBS
Packerland
BeefRichard Vesta
JBS Five
Rivers
MikeThoren
Beef USA
David Colwell
CEOUSA/AUS
WesleyBatista
MANAGEMENT
Trading
BrentEastwood
Mr. AndrNogueira holds adegree in Economicsfrom UniversidadeFederal Fluminense,a master degree inCapital Markets fromFGV Fundaco
Getlio Vargas, amaster degree in inEconomics fromUniversidade deBrasilia in 2003.
He worked for morethan 20 years inBanco do Brasil andjoined JBS in 2007,following the boughtSwift & Coacquisition.
Mr. BrentEastwood hadworked for Swift &Company for over18 years.
He moved to theUSA in 2007 to be
Vice President /Director of JBSTrading USA, theSwift DistributionCenters USA,Australia Trading,AustraliaDistributionCenters and theGlobal TradingBusiness in Brazil.
Mr. Thoren hasserved as Presidentand CEO of FiveRivers since theCompanysinception.
Mike received hisMaster of Science
degree inAgriculturalEconomics and hisdegree inAgribusiness fromWashington StateUniversity.
Mr. David Colwellholds a degree fromUniversity of SouthFlorida and has beenworking for JBS Swift& Company for 11years. David hasbeen the President of
JBS Beef since 2007.
Mr. Richard Vestajoined SmithfieldFoods following theacquisition ofPackerland in 2001and now serves asPresident and CEOof JBS Packerland.
Mr. MartinDooley
Holds a degree ofScience inBiology/MedicalTechnology Eastern Illinois
University - 1982Marty has workedat Swift &Company all hislife, having startedas a managementtrainee in 1983.
He was appointedin 2007 to be thePresident of JBSPork division.
Mr. Iain Marswas born inEngland. Iain hasbeen involved inthe beef industryfor all his life. MrMars was
appointedPresident and CEOof JBS Australia in2007, after theacquisition ofSwift & Company.He joined JBS in2005.
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OUR STRATEGY
Pursue Growth OpportunitiesThrough Acquisitions
Examples:
- Brazilian Slaughterhouses- Swift Armour- Swift & Company- Inalca- Tasman- National Beef *- Smithfield Beef *
Experiencedmanagement team withover 50 years ofexperience in the beefprocessing industry.
* The closing of these transactions are subject to certain closingconditions, including expiration or termination of applicablewaiting periods under U.S. antitrust law
Createsatisfactory andconsistent returnto shareholders
Mitigate Potential Risksas Sanitary Barriers &
Seasonality
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0.3 0.4 0.4 0.5 0.5 0.4 0.71.2 1.5 1.9
12.7
24.8
1993 1996 1997 1999 2000 2001 2002 2003 2004 2005 2006 2007* 2008**
JBS HISTORY HAS BEEN BUILT THROUGH MORE THAN 30
ACQUISITIONS IN 15 YEARS
Source: JBS* Pro forma JBS S.A. LTM Dec07 (includes JBS USA)** Pro Forma JBS S.A. LTM Sep08 (includes JBS USA, Tasman and 50% of Inalca); National LTM May08; Smithfield Beef LTM Sep07;(1) The closing of this transaction is subject to certain closing conditions, including expiration or termination of applicable waiting periods under U.S. antitrust law
Net Sales (in US$ billion)
Companies and assets acquired
Cceres
(Frigosol)
Iturama
(Frigosol)Araputanga
(Frigoara)
Barretos (Anglo)
Pres. Epitcio (Bordon)
Campo Grande (Bordon)
Pedra Preta
(Frigo Marca)
Rosrio
(Swift ARG)
San Jose
(Swift ARG)
Inalca
Swift Foods Co.
Maring (Amambay)
Berazategui
(Rio Platense)
Colonia Caroya
SB Holdings
JV Beef Jerky
Venado
Tuerto
Pontevedra
(CEPA)
Rio Branco
Cacoal 1
Cacoal 2
Porto VelhoVilhena (Frigovira)
Andradina
(Sadia)
Barra do
Garas
(Sadia)
Goinia
(Anglo)
Anpolis
(Bordon)
R$/US$ end of the year cotation R$/US$: 1.91
7
National Beef
Tasman
Smithfield Beef
Five Rivers
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AGENDA
IMPACT OF THE CRISIS
CONSOLIDATED RESULTS
OUTLOOK
QUESTIONS AND ANSWERS
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SHORT TERM DEBT PROFILE 3rd QUARTER 2008
The Administration of the Company is secure that even if the present financial crisis has not abated until the next
quarter the Company will not have difficulties in refinancing its short term debt and believes that in the final
analysis there will be a possible increase in the cost of the debt. The Company did a sensitivity analysis
considering firstly a probable scenario and secondly a pessimistic one in relation to the renewal of its short
term financing facilities.
Obs: The Finame, Finem and Finimp credit lines are automatically liquidated, meaning they are paid on expiry and are not renewable
Trade finance, Working Capital and other credit lines are interchangeable, meaning they can be refinanced but not necessarily in the same category under which they were initially contracted.
*Including Finimp
**Percentage to be paid in the period
***Simulation of the availabilities and applications after the amortizations programmed for the respective quarter without taking into consideration cash to be generated in future quarters.
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JBS S.A. Consolidated (R$ million)
4Q08 1Q09 2Q09 3Q09 Tota l %** 4Q08 1Q09 2Q09 3Q09 %** 4Q08 1Q09 2Q09 3Q09
Financing for purchase of fix ed a ssets
FINAME / FINEM - Enterprise financing 48 12 12 12 84 100% 48 12 12 12 100% 48 12 12 12
Notes Payable 2 - - - 2 100% 2 0 0 0 100% 2 0 0 0
Sub Total 1 50 12 12 12 86 100% 50 12 12 12 100% 50 12 12 12
Loans for w orking capital purposes
ACC - Exchange advance contracts 116 174 216 122 628 0% - - - - 20% 23 35 43 24EXIM - BNDES export credit facility 103 69 0 0 172 0% - - - - 20% 21 14 0 0
Fixed Rate No tes with final maturity in February 20 11 7 - - - 7 100% 7 - - - 100% 7 0 0 0
W orking Capital - American Dollars * 7 22 24 17 70 75% 5 16 18 13 75% 5 16 18 13
W orking Capital - Australian Dollars - - 97 - 97 0% - - - - 0% 0 0 0 0
W orking Capital - Euros 218 - - - 218 0% - - - - 0% 0 0 0 0
W orking Capital - Reais 101 - - - 101 0% - - - - 30% 30 0 0 0
Export prepayment 5 130 13 13 161 0% - - - - 20% 1 26 3 3
Fixed Rate Notes with final maturity February 2016 (144-A) - 10 - - 10 100% - 10 - - 100% 0 10 0 0
NCE / COMPROR 63 245 - 92 400 0% - - - - 20% 13 49 0 18
Sub Total 2 622 6 49 3 50 2 44 1.864 4% 12 26 18 13 20% 100 149 64 58
Tota l 672 661 362 255 1.950 8% 62 38 30 24 23% 150 162 76 70
Amortization of Short Term Debt
Cash , cash equ iva lents and Shor t- term investments 3rd Quarter 2008 * * * 2 .256 2.194 2.156 2.126 2.101 2.106 1.944 1.868 1.799
EBITDA 3rd Quarter 2008 471
Pessimistic ScenarioProbable Scenario
457155
AmortizationAmortization
Short Term Debt
Short Term Debt
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LIQUIDITY EVALUATION
Source:* Companies last public information
** Companies Last Twelve Months
Balance * JBS S.A.Brazilian Peers
(average)
USA Peers
(average)
ASSETS R$ (million) R$ (million) US$ (million)
Cash, cash equivalents and Short-term investments ## 2,256 1,223 57
Trade accounts receivable, net ## 2,169 623 1,017
Inventories ## 2,381 988 2,776
Prepaid expenses and other ## 326 100 215
Total Permanent assets ## 4,995 2,312 3,493
LIABILITIES R$ (million) R$ (million) US$ (million)
Loans and financings Short Term ## 1,950 1,234 297
Payroll, social charges ## 299 192 0
Trade accounts payable ## 1,410 527 1,369Other current liabilities ## 186 134 384
Loans and financings Long Term ## 2,802 2,072 3,158
Other non-current liabilities ## 114 121 531
Net Sale Revenue ** ## 29,979 5,590 20,187
Ebitda ** ## 1,079 596 653
Ebitda Margin (%) ## 3.60% 10.66% 3.24%
Working Capital ## 2,866 718 1,726
Net Debt ## 2,496 2,083 3,398
( Deficit ) or Surplus ## 370 (1,365) (1,672)
Net Debt / Ebitda** # 2.3x 3.5x 5.2x
Net Debt / Net Sale Revenue (per mon th)** # 1.0 month 4.5 months 2.0 months
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The best quarterly consolidated results in the history of the Company with EBITDA of R$470.5 millions,and net revenue of R$7,771.5 millions and profit of R$694.0 millions.
JBS USA Beef also performed at an historic level and confirmed the awaited increase in the EBITDA
margin from 5.1% in the 2Q08 to 5.6% in the 3Q08.
There was a significant increase in the EBITDA margin in the pork business in the United States from
3.2% in the 2Q08 to 7.6% in the 3Q08.
In Brazil the net revenues grew 27.6% and underwent a considerable recuperation of the EBITDA
margin of 5.5% in the 2Q08 to 6.2% in the 3Q08.
An important increase in the export volumes of Argentina, coupled with an increase in local market
sales, resulted in better margins in this respective market. The EBITDA was $19.6 million Argentine
pesos in the 3Q08 compared with -$11.7 million Argentine pesos in 2Q08.
HIGHLIGHTS
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JBS CONSOLIDATED RESULTS
NET REVENUE, EBITDA AND EBITDA MARGIN
591.1
94.8176.3
290.8
470.5
6.1%
3.0%4.1%
1.4%
4.2%
12M07 4Q07 1Q08 2Q08 3Q08
14,141.6
6,650.7
5,859.1
7,129.5
7,771.5
12M07 4Q07 1Q08 2Q08 3Q08
Net Sales Revenue (R$ million) EBITDA and Margin (R$ million)
EBITDA Margin(%)
-11.9%
86.0%
Source: JBSWithout considering National Beef and Smithfield Beef acquisitions.
21.7%
64.5%
9.0%
61.8%
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PERFORMANCE BY BUSINESS UNITS
2,630
1,976
7,375
2,756
FY 07 1Q 08 2Q 08 3Q 08
155.6
25.8
-0.9
132.9
5.6%5.1%
-0.1%0.3%
FY07 1Q08 2Q08 3Q08
Source: JBSFY of Swift used to be from June to May and INALCA period is from January to December.(1) 13 weeks ended 03/30/2008. (2) 13 weeks ended 06/29/2008. (3) 13 weeks ended 09/28/2008.
620536
2,175
682
FY 07 1 Q08 2Q 08 3Q 08
52.1
70.3
15.7 19.9
7.6%
3.2%2.9%3.2%
FY07 1Q08 2Q08 3Q08
155132
521
143
FY 07 1 Q08 2Q 08 3Q 08
7.6
26.0
7.4 7.5
5.3%4.8%
5.6%4.9%
FY07 1Q08 2Q08 3Q08
1,4251,271
4,892
1,811
FY 07 1 Q08 2Q 08 3Q 08(1) (2) (3)
102.2
692.0
132.758.2
5.6%
4.1%
10.4%
15.3%
FY07 1Q08 2Q08 3Q08
(1) (2) (3)
(1) (2) (3) (1) (2) (3)
Net Sales
(US$ million)
JBS USA (Beef)Including Australia
Net Sales
(US$ million)
JBS USA (Pork)
Net Sales
( million)
INALCA JBS MERCOSUL
Net Sales
(R$ million)
EBITDA (US$ mi)margin EBITDA
Margin (%)
EBITDA (US$ mi)margin EBITDA
Margin (%)
EBITDA ( mi)margin EBITDA
Margin (%)
EBITDA (R$ mi)margin EBITDA
Margin (%)
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The geographic diversification of its operations allows it to source meat efficiently, serve itscustomers cost-effectively, capitalize on increasing international trade opportunities and helps
to mitigate the potential impacts of sanitary barriers.
JBS: GLOBAL PRODUCTION & DISTRIBUTION PLATFORM
JBS Mercosul JBS USA / Australia Inalca JBS
Revenue Ebit da
Revenue Ebit da
Revenue Ebit da
76%
19%
5% US$42
Source: JBS
* JBS S.A. LTM Sep08, Pro forma JBS USA LTM Sep08 (includes Tasman) and Pro forma 50% of Inalca LTM Sep08
Exchange rates:
R$ / US$ = 1.91 09/30/2008
US$ / $ = 1.41 09/30/2008
US$265
US$257
US$3,043
US$778
US$11,839
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95176
291
X471
2.8
2.3
2.9
3.7
4Q07 1Q08 2Q08 3Q08 4Q08e
Net Debt/ EBITDA
Source: JBSWithout considering National Beef and Smithfield Beef acquisitions.
Net Debt / EBITDA Pro Forma per TRIMESTER (R$
million)JBSs Net debt in relation to its Ebitda
(last twelve months pro forma) is
affected by weak results in the 4th
quarter 2007 and 1st quarter 2008.
Good results expected for the 4thquarter 2008 and 1st quarter 2009 will
reduce the relation between Net Debt
over Ebtida.
Exchange rates:
R$ / US$ = 1.91 09/30/2008
US$ / $ = 1.41 09/30/2008
JBS NET DEBT/EBITDA
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EVOLUTION OF THE EBITDA MARGINS OF JBS USA (BEEF)
COMPARED WITH ITS LOCAL PEERS
16
-0.4%
1.3% 1.3%
3.6%
0.9% 0.9%
3.2%
-0.9%
2.3%
-5.3%
-0.7%-0.4%
-1.7%
4.2%
5.3%
-1.3%-1.2%
0.9%0.7%
FY03* FY04* FY05* FY06* FY07* 3Q07** 4Q07** 1Q08** 2Q08** 3Q08**
Peers Average Beef USA
JBS Beef USA
Source: JBS and estimates of JBS based upon public data from peersEBITDA margins of the Companies taking into consideration beef only in the US*Fiscal years for the Companies differ one from the other:FY Tyson: October to SeptemberFY Smithfield: May to April
FY National Beef: September to AugustFY JBS USA: June to May (altered after the acquisition)**The relevant quarterly period and adjustments made to the calendar year
EBITDA (%)
JBS S.A. ManagementPrevious Management
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CONSOLIDATED PRO-FORMA SEPTEMBER 2008
Combined Companies Pro-forma (US$ million)
Exchange rates:
R$ / US$ = 1.91 09/30/2008
Source: Company Estimates
JBS annual report, quartely reports - Pro-forma LTM Sep08 (including JBS USA, Tasman and 50% of Inalca)
Smithfield Beef Managerial numbers LTM Sep08 and 100% of Five Rivers LTM Sep08
*ABLAsset Based Loan contracted by JBS USA
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Net Revenue (US$ mm) 15.660 3.033 18.694
EBITDA (US$ mm) 564 139 703
EBITDA Margin 3,6% 4,6% 3,8%
Cash (US$ mm) 1.178 10 1.188
Short Term Debt (US$ mm) 1.019 0 1.019
Long Term Debt (US$ mm) 1.464 400 1.864
Net Debt (US$ mm) 1.304 0 1.694
Net Debt / Ebitda 2,3x 0,0x 2,4x
Slaughter Capacity (thousand head/day) 57,6 7,6 65,2
Units 98 16 114
Employees 48.991 6.370 55.361
INTEGRATED
and Five Rivers
*
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JBS USA BEEF EXPORT VOLUMES
12
Source: JBS
18
10
15
20
25
30
35
40
45
50
55
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Millionpounds
2007 2008
JBS Beef exports up64%; industry up 33%
JBS USA EXPORTS
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JBS CONSOLIDATED GROSS REVENUE
DISTRIBUTION
Revenue Distribution by Business Units 3Q08 Revenue Distribution by Market 3Q08
Source: JBS Source: JBS
19
DomesticMarket
64%
Exports
36%
Beef Italy5% Beef Argentina
3%
Beef Brazil22%
Beef USA43%
Pork USA14%
Beef Australia13%
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JBS CONSOLIDATED EXPORTS DISTRIBUTION
Exports Distribution 3Q08
Source: JBS
20
Russia
18%
Japan15%
Mexico10%E.U.
10%
Canada5%
South Korea4%
China4%
USA3%
HongKong
3%
Taiwan3%
Others25%
Exports JBS 3Q08US$ 1.7 billion
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CUTOUT PRICE VS. CATTLE PRICE IN USA
12Source: Bloomberg 21
C utout Price vs. C attle Price in The US
115
125
135
145
155
165
175
J ul-07 Aug-07 S ep-07 Oct-07 Nov-07 Dec-07 J an-08 Feb-08 Mar-08 Apr-08 May-08 J un-08 J ul-08 Aug-08 S ep-08 Oct-08
US$/100pounds
-80
-70
-60
-50
-40
-30
-20
-10
0
10
20
30
40
50
60
70
80
90
100
Margin(US$/Head)
Margin/Head C attle P rice B eef P rice
4.25.3
-5.3%
-1.3%-0.7%
EB ITDA Margin of JBS US A Beef
(excluding Australia)
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GLOBAL CATTLE PRICES US$/Kg
Source: Bloomberg, IPCVA (ARG) and INAC (URU). Converging Margins
Converging Prices
22
1.25
1.75
2.25
2.75
3.25
3.75
Ja n-07 Feb-07 Mar-07 Apr-07 May-07 J un-07 J ul-07 Aug-07 S ep-07 O ct-07 Nov-07 Dec-07 J an-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 S ep-08 Oct-08
BR A AUS AR G US A UR U
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ENTERPRISE VALUE AND EBITDA MULTIPLE
Source: JBS
96.3
264.8
5.5x
15.1x
Jul-07 Sep-08
SWIFT USA ACQUISITION
EV / EBITDA
175%
US$1,458.8 mm
SMITHFIELD BEEF ACQUISITION
70.0
139.3
4.1x
8.1x
Oct-07 Sep-08
EV / EBITDA
99%
US$565.0 mm
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FINAL CONSIDERATIONS
The consolidated results in the history of the Company.
Planning and discipline contributed to risk reduction.
Consistent improvement in the consolidated results of the Company.
Commitment from the Management to reduce the leverage of the
Company.
Appropriate liquidity level.
We will continue to grow. We see the present crisis as an immense
opportunity.
Regardless of the negative aspects of the present macroeconomicscenario, the Management of this Company forecasts substantiallyimproved consolidated operational results for 2009.
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Questions & Answers
JBS S.A.
November 05th, 2008
In God we Trust
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PUBLIC MEETING WITH ANALYSTS AND INVESTORS
26
ScheduleNovember 18th, 2008 (Tuesday)
8h00 Welcome Coffee
9h00 Presentation
LocationRadisson Hotel
Jacarand Room
Av. Cidade Jardim, 265
Jardim Europa So Paulo SP
Brazil
RSVP
To confirm your participation contact us at:
55 11 3144 4447 or,
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DISCLAIMER
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 information
currently available to us.
Forward-looking statements are not guarantees of performance. They involve risks,
uncertainties and assumptions because they relate to future events and therefore depend on
circumstances that may or may not occur. Our future operating results, financial condition,
strategies, market share and values may differ materially from those expressed in orsuggested by these forward-looking statements. Many of the factors that will determine these
results and values are beyond our ability to control or predict.
Forward-looking statements also include information concerning our possible or assumed
future operating 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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