JBS Says It’s Flush With Cash for Acquisitions and Dividends

JBS Says It’s Flush With Cash for Acquisitions and Dividends

Fabiana Batista 3/25/2021

(Bloomberg) — JBS SA beat earnings estimates with record cash flow last year, spurring the world’s largest meat supplier to propose record dividends and an acquisition-fueled expansion.

© Photographer: Victor Moriyama/Getty Images South America SAO PAULO, BRAZIL – MARCH 20: Butchers work at the popular Lapa Market March 20, 2017 in Sao Paulo, Brazil. Brazilian Federal Police launched a major operation in several Brazilian states with search and arrest warrants for directors of the country’s main meat-producing companies, such as JBS and BRF. Thirty-three employees of the Ministry of Agriculture were removed from office for alleged involvement in a corruption scheme and receiving a bribe for allowing spoiled meat to circulate in Brazilian supermarkets. (Photo by Victor Moriyama/Getty Images)

“We still have room to grow more through acquisitions and organically”, Chief Financial Officer Guilherme Cavalcanti said during an interview. “Our focus remains on expanding in processed foods in the regions where we already have production.”

JBS spent about 2 billion reais ($354 million) on acquisitions last year, including margarine assets from Bunge Ltd. in Brazil. The company also had ample cash to buy back shares and reduce net debt by 17% in dollar terms, Cavalcanti said. The acquisition outlook is supported by record-low leverage, he added.

Aside from a 74% increase in dividend payouts compared with 2020, free cash flow will be focused on expansion, Chief Executive Officer Gilberto Tomazoni said during a conference call with investors on Thursday.

“We continue to actively seek acquisition opportunities, but the assets have to make strategic sense and be at the right price,” Tomazoni said.

Budget Boost

The company plans to boost capital spending by as much as 48% this year, mostly in expansion projects and modernization of plants, Cavalcanti said in the same call.

JBS’s fourth-quarter adjusted earnings before interest, taxes, depreciation and amortization came in at 7 billion reais, exceeding the 6.73-billion average estimate among analysts tracked by Bloomberg.

Still, the pandemic is cutting into margins. In the fourth quarter, JBS’s beef and poultry returns in Brazil fell compared with the previous quarter, but poultry still is performing better than a year ago.

North America

JBS USA, which includes operations in North America, Australia and Europe, also saw weaker margins.

The Joe Biden administration’s economic stimulus package and widening availability of Covid-19 vaccinations have improved the outlook, according to Cavalcanti.

“Some regions will be more challenging in 2021, like Brazil and Australia, while in North America and Europe we see better perspective,” he said.

Besides U.S. domestic demand, exports to China have been strong, said Andre Nogueira, who oversees the company’s North American business.

(Updates with executives’ comments starting in fourth paragraph.)

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