(Bloomberg) — The world's leading meat producer is confident that strong demand in the United States and value-added processed foods will offset the increased costs that have intensified in recent days after Russia's invasion of Ukraine.
JBS S.A. has seen costs rise for everything from feed and packaging to transportation, along with labor shortages in parts of the world, CEO Gilberto Tomazoni said Monday in an interview.
The invasion of Ukraine is worsening cost inflation caused by global supply chain bottlenecks, rising energy prices and shortages of commodity supplies since the pandemic emerged in 2020.
While demand in the US, JBS's main market, remains strong, the São Paulo-based company has also been working to increase its food mix, leveraging its broad portfolio of brands. Its $2 billion in acquisitions last year will add $2 billion in annual revenue, CFO Guilherme Cavalcanti said in the same interview.
“We're focusing on things we can control,” Tomazoni said. “Costs have increased significantly.”
JBS reported record revenue for the fourth quarter, exceeding Bloomberg's consensus estimate. Strong US performance is the main reason for the increase, allowing the company to deleverage, finance a new wave of purchases and increase dividend payments.
“It was a historic year for JBS,” Tomazoni said.
Even so, production costs increased 21% in the quarter over the previous year, while sales expenses soared 40%, according to consolidated profits released on Monday. In US beef operations, costs increased by 40% per capita in the quarter, however, earnings before certain items more than doubled due to rising prices.
At Seara, its Brazilian chicken, pork and processed food unit, higher feed costs have been partially offset by rising prices. Meat operations in the country were affected by a Chinese ban.
Plans for its US stock market debut still stand, but could take longer amid the market turmoil caused by the war.
“Listing in the US is a priority for us to create more value for shareholders. But to be successful, we must do it at the right time,” said Tomazoni.
Original Note:
Meat Giant JBS Bets on U.S. Demand to Tackle Cost Surge From War
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