Dive Brief:
- JBS saw a net loss of $53.2 million in the second quarter due to market challenges that affected its pork, beef and chicken segments, the world’s largest meat processor reported Tuesday.
- Net sales totaled $18.1 billion for the three months that ended June 30, down 3.6% over last year as excess poultry supply weakened global prices and reduced U.S. cattle availability tightened beef margins. JBS also cited a U.S. pork glut that drove prices downward in the quarter.
- “Although the global context remains challenging for the protein sector, we are confident that we have started a gradual recovery of our margin,” CEO Gilberto Tomazoni said in an earnings call. Meat processors Tyson Foods and Smithfield Foods also fell victim to unfavorable conditions, announcing consecutive quarterly losses this year and efforts to cut costs.
Dive Insight:
Volatility in meat supply has wreaked havoc on pricing, and processors have struggled to navigate prices that are either too high or too low depending on the segment.
A combination of high feed costs and low pork values have eroded returns for U.S. farmers this year and taken a toll on meat processing companies. In contrast, cattle numbers have shrunk due to prolonged drought, elevating beef prices and operating costs. Meanwhile, a global oversupply of chicken has pressured prices down in international markets.
JBS struggled with weaker prices across its segments during the second quarter, resulting in sales declines for its business segments in Brazil, Europe, Australia and the U.S.
Pilgrim’s Pride Corp., a poultry subsidiary of JBS, reported sales of $4.3 billion, a 7% decline amid volatile U.S. chicken prices and improving margins compared to earlier in the year. Gross profit fell 59% to $278.4 million compared to a year ago.
JBS USA Pork saw sales decline 16% to $1.8 billion during the quarter due to weaker prices. An oversupply of U.S. pork plummeted prices by 21% over last year, however, national production is slowing and inventory levels are on a downward trend, JBS said in its earnings report. Gross profit fell 87% to $26.9 million.
JBS Beef North America stood out as the only segment with sales gains over last year. The division posted sales of $5.8 billion, a 5% increase as live cattle prices remained high on lower supplies, resulting in higher costs that tightened margins. Gross profit declined 82% to $116.8 million.
Despite challenges, Tomazoni said in a message to investors that JBS' work to improve efficiencies have already had a positive effect, saying “we’ve doubled our margin over the first quarter.”
“Looking ahead, we see a scenario of more balance in poultry supply with potential positive impact on the sector prices,” he said. “We have also started capturing the decrease in grain price in our cost structure, benefiting our chicken and pork business globally.”
In June, JBS announced plans to list its shares both in Brazil and the U.S. to increase the company’s market value, attract more investors and expand its investment capacity.
