JBS Posts Fourth Straight Loss, Citing Acquisitions

By Carlos Caminada and Laura Price

Bloomberg

July 31, 2008

(Bloomberg) -- JBS SA, the world's biggest beef producer, posted its fourth straight quarterly net loss on expenses related to U.S. acquisitions and currency losses.

The second quarter net loss of 364.4 million reais ($233.4 million) compares with net income of 38.7 million reais a year earlier, Sao Paulo-based JBS said today in a statement. Net sales increased more than sixfold to 7.13 billion reais.

More than half JBS's revenue comes from units in the U.S., where margins for meatpackers more than tripled in the quarter from a year earlier. The gains in the U.S. helped JBS counter losses from surging cattle prices in Brazil, said Jander Medeiros, an analyst at UBS Pactual.

Financial expenses, including debt costs, jumped sevenfold after the Brazilian currency's appreciation eroded the value of foreign assets and hedges JBS holds to protect future investments in U.S. units Smithfield Food Inc. and National Beef Packing Co. against a surge in the dollar.

Brazil's real gained 20 percent against the U.S. dollar in the year through June 30, including a more than 9 percent jump in the second quarter from March 31.

Earnings before interest, taxes, depreciation and amortization, or Ebitda, climbed 76 percent to 290.8 million reais from a year earlier. JBS said its U.S. and Australia beef businesses became profitable in the second quarter, with an Ebitda margin of 5.1 percent.

U.S. Improvement

``The improvement in U.S. margins is evident,'' Medeiros said in a telephone interview from Rio de Janeiro before the results were announced. ``It will more than compensate for any deterioration in Brazilian margins.''

JBS bought Swift & Co. for $225 million in July 2007 to become the world's top beef producer. It agreed to pay $1.27 billion this year to buy Smithfield Food Inc.'s beef unit, Tasman Group in Australia and control of closely held National Beef Packing Co. in the U.S.

In Brazil, the Ebitda margin fell to 4.9 percent from 14.7 percent because of an increase in cattle prices. Average cattle prices in Brazil rose in the quarter to 83.14 reais per arroba from 56.23 reais a year earlier, according to the University of Sao Paulo. An arroba -- equal to 15 kilograms (33 pounds) -- is a unit of measure used in the Brazilian beef industry.

Goodwill

JBS said its second-quarter earnings were also affected by the amortization of goodwill from the purchase of JBS USA Inc. Excluding the goodwill and the currency losses, JBS would have posted net income of 136.6 million reais.

The European Union this year banned most fresh-beef imports from Brazil, forcing JBS to sell the meat in less-profitable foreign and domestic markets. The EU bought a quarter of Brazil's red meat last year.

JBS shares fell 15 centavos, or 1.8 percent, to 8.4 reais today in Sao Paulo at 9:35 a.m. New York time. The shares have gained 1.4 percent in the past year until yesterday, compared with a 9.9 percent rise in Brazil's Bovespa index.

bloomberg.com

JBS Swift to use biogas at Nebraska plant

By Staff

Northern Colorado Business Report

July 30, 2008

GRAND ISLAND, Neb. - JBS Swift will be able to use animal waste and byproducts from its Grand Island beef plant operation to offset a portion of its energy needs through $7 million in tax-exempt bonds to build a biogas-producing facility adjacent to the plant.

According to meat industry Web site meatingplace.com, the bonds were issued by the city of Grand Island to Microgy Grand Island LLC, a subsidiary of Environmental Power Corp. The bond proceeds will be used to finance construction of a biogas facility that broke ground in December and is expected to be fully operational by the end of the year.

Microgy is constructing the biogas facility and will own and operate it, selling the gas to the JBS Swift plant to power its boilers, meatingplace.com said. At full capacity, the biogas facility is expected to generate 235,000 MBtu per year -- the equivalent of 1.7 million gallons of oil -- and offset about 25 percent of the plant's yearly natural gas needs.

JBS Swift has its headquarters and a beef-and-lamb processing facility in Greeley.

ncbr.com