conference call 3q09
TRANSCRIPT
JBS S.A.
3rd Quarter 2009 Results
JBS S.A.November 16th, 2009
“In God we trust, nature we respect”
JBS S.A.
Jeremiah O’CallaghanInvestor Relations Director
Joesley Mendonça BatistaCEO
1
Presenters
Our Values
The Foundation Of Our Culture
Planning
Determination
Discipline
Availability
Openness
Simplicity
2
Market Overview
3Q09 Highlights
Questions and Answers
3
Our Strategy
Final Considerations
Agenda
2005/2006Adequate Financial Structure
2007/2008Global Production
Platform
2009/2010Global Sales &
Distribution Platform
2011/2012Value Added Products &Branding
- Access to raw material supply globally.
- Leader in countries with surplus 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 and distribution platform to serve efficiently, local and external markets, small retailers, food processors, restaurants, and other customers globally.
- Sales force distributed over the globe.
- Efficiency on selling the best product, to the best market, with the best price.
- Cost reduction on sales and transport.
- Margin improvements.
- High liquidity level.- Debt equalized to cash
generation.- Strong cash position.- Access to international
capital markets to finance growth.
- Development of long term financing plan.
- Use of export platform to grow.
- Hands-on working capital management.
South America
North America
Australia
European Union
Asia
Russia
Africa
Middle East
South America
North America
Australia
European Union
Debt forWorkingCapital
Equity to
FinanceGrowth
Cooked Products
Case ReadyProducts
Global Brands
MarketingInvestments
Minced Products
Fresh Products
Cured Products
Ready to EatProducts
- High technology investments to produce value added products.
- Increase value added products portfolio.
- Customized products to each market.
- Convenience to consumers day to day.
- Brand and Quality recognition and leadership.
- Marketing investments to be present in consumer minds.
- Margin improvements. 4
Our Strategy
Branding
Value Added
Products
Sales & Distribution
Platform
Production Platform
Foundation
FinancialStructure
ExperiencedManagement
Cost Reduction,Productivity,
Process Optimization
RiskManagement
Consolidated
Average
EBITDA
Margin
4%
8%
12%
50%
5
Our Strategy
Market Overview
6
Agenda
Global Market
Largest beef importers
Others38%
South Korea4% EU-27
8%
Japan10%Mexico
5%
United States19%
Russia16%
Source: USDA 2009
Largest beef consumers
Others31%
Mexico4%
China10%
Brazil13%
Argentina5%
United States22%
EU-2715%
Largest beef exporters
Others25%
New Zealand7%
India8% United States
11%
Canada7%
Brazil23%
Australia19%
Largest beef producers
Others31%
India4%
China10%
EU-2714%
Argentina5%
United States21%
Brazil15%
7
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*
Popu
latio
n (m
illio
n)
0
20
40
60
80
100
120
140
Con
sum
ptio
n (m
illio
n to
ns)
Population - Developed countries Population - Developing countries Beef Consumption**
Population growth, a beef consumption driver.
8
Per capita food consumption (Kg / Year)
9
0
2 0
4 0
6 0
8 0
1 0 0
1 2 0
1 4 0
1 6 0
1 8 0
Cereals Roots andTubers
Beans, Peasand Lentils
Sugar O ils Cropsand its
products
Meat Milk and itsproducts
1969/ 71
1979/ 81
1989/ 91
1999/ 01
2030
2050
Source: FAO
US Beef and Veal Exports (Million Pounds)
10
Source: USDA ERS
US Pork Exports (Million Pounds)
11
3,279
2,650
2,650
4,667
3,1422,995
2,667
2,181
1,7171,6121,5601,2871,278
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
US Poultry Exports (Million Pounds)
12
4,621
7,109
6,070
5,3675,3334,9975,0134,942
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
Brazilian beef exports (USD billion)
Source Secex
13
3Q09 Highlights
14
Agenda
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 in 3Q09.
• Operating cash flow of R$317.8 million in the quarter.
• Despite relevant productivity gains in international operations, the impact of the global crisis in important consumer markets resulted in margin contractions.
• Efficient working capital management.
• Announcement of the association with Bertin S.A. and acquisition of Pilgrim’s Pride Corp.
• Commitment to respect society and the environment supported by Non-governmental organizations.
Highlights
Revenue Distribution by Business Units 3Q09 Revenue Distribution by Market 3Q09
Source: JBS Source: JBS
16
JBS Consolidated Net Revenue Distribution
Italy5% Argentina
2%
Brazil17%
Beef USA50%
Pork USA12%
Australia14%
Domestic Market76%
Exports24%
Exports Distribution 3Q09
Source: JBS17
JBS Consolidated Exports Distribution
Japan19%
E.U.12%
Russia9%USA
8%Mexico
7%
Canada6%
Africa and Middle East
6%
Hong Kong5%
South Korea4%
China4%
Indonesia3%
Others18%
JBS Exports 3Q09US$ 1,127.4 Million
Net Revenue (R$ million) EBITDA and EBITDA Margin (R$ million)
18
Source: JBS
EBITDA Margin (%)
-9.5%
-24.0%
24.0%
-44.0%
-3.8%
-20.4%
-0.1%
81.6%
JBS Consolidated Results
Net Revenue (Million)
0.6%
Source: JBS
Source: Banco Central
19
Currency effects in the net revenue
R$ US$Exchange rate
average of the period:2Q09 – 2.07483Q09 – 1.8677
-9.5%
• Excluding the exchange rate effect in the period, net revenue increased 0.6% over 2Q09.
20
Net Sales(US$ 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 (%)
2.72.8
2.72.9 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
143 144 146
3Q08 4Q08 1Q09 2Q09 3Q09
9.7
6.67.6 8.3
5.6
6.6%4.6%
3.9%5.1%5.3%
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
• 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: JBSNet Debt/ EBITDA EBITDA pro-forma
* LTM including Smithfield Beef pro-forma.
Gross debt Profile (R$ million)
21
Debt
5,971.8 6.226.45,877.1
1T09 2T09 3T09
Short term Long term
53%
47%
61%
39%
59%
41%
• For the second quarter consecutive, the Company generated positive operating cash flow of more than R$300 million.
22
Operational Cash Flow
CAS H FL OW 3Q09 2Q09 Var.%E B IT 210.3 296.6 -29.1%tax es -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%
JBS continues to reduce its working capital needs, which decreased from 37 days in 2Q09 to 33days in 3Q09.
23
Working Capital
Production & Stock 21 dias
CLIENT = 33 days
SUPPLYER = 21 days
ProductDelivery
Supplyer payment
Client’s payment to JBS
WORKING CAPITAL &INTERESTS
33 days
3º Quarter 2009
Client’s orderto JBS
Production & Stock 21 dias
CLIENT = 37 days
SUPPLYER = 21 days
ProductDelivery
Supplyer payment
Client’s payment to JBS
WORKING CAPITAL &INTERESTS
37 days
2º Quarter 2009
Client’s orderto JBS
• Signs of economic recovery bring the prospect of better results in coming quarters.
• Turnaround of Argentine operations is under way with the change in management and the implementation of internal restructuring.
• JBS maintains its focus on building a distribution platform to add value to its products and increase its margins.
• The undergoing acquisition of Pilgrim’s Pride and the association with Bertin adds to the 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 and the environment.
24
Final Considerations
The forward-looking statements presented herein are subject to risks and uncertainties. These statements 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 or suggested 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.
26
DISCLAIMER