3Q08 Results Presentation

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3Q08 Results Presentation

  1. 1. 3rd Quarter 2008 Results November 05th, 2008 JBS S.A. “In God we Trust”
  2. 2. PRESENTERS Joesley Mendonça Batista CEO Jeremiah O’Callaghan Investor Relations Director Rodrigo Gagliardi Investor Relations Manager 1
  3. 3. Our Mission To be the best at what we set out to do, totally focused on our business, ensuring the best products and services for our customers, solidity for our suppliers, satisfactory profitability for our shareholders and the certainty of a better future for all our employees. 2
  4. 4. Our Values The Foundation Of Our Culture Planning Determination Discipline Availability Openness Simplicity 3
  5. 5. MANAGEMENT Board of Directors Marcus CEO Demósthenes Wesley José José Vinicius Chairman Marques BNDES Mendonça Batista Batista Jr. Pratini de Joesley (Independent (Independent) Batista Sobrinho Moraes PROT FIP) Batista (Independent) Management Italy Financial Investor Brazil Argentina Legal & Controlling Luigi Director Relations Humberto Nelson Francisco Director Scordamaglia / Sérgio Jerry Magalhães Dalcanale de Assis e Silva Eliseo Paolo Boni Longo O’Callaghan Fernandez Mr. Humberto de Mr. Nelson Mr. Scordamaglia, Mr. Sérgio Longo, has Mr. Francisco de Mr. Jerry Mr. Eliseo Campos Dalcanale started his career as been serving JBS as a Assis e Silva, General O’Callaghan holds a Fernandez holds a Magalhães holds has been working at Professor in the Financial Director since Counsel, holds a law degree in Engineering degree in business a degree in biology JBS since 2001 and is Veterinary University April 2003 and he has degree and a master from UCC (University administration and from Universidade currently the CEO of of Perugia and as an been a member of JBS’ degree in College Cork) in accounting from Federal do Mato the division in advisor in the legal board of executive environmental law from Ireland. He immigrated Universidade Católica Grosso. He is Argentina. Before and QA departments officers since 2005. Pontifícia Universidade to Brazil in 1979. Mr. de Pernambuco and a currently the chief joining JBS, he had of Inalca. He was Before joining JBS he Católica at Paraná O’Callaghan entered master’s degree in operating officer of 21 years of appointed CEO of had over 25 years of State, a master degree the beef sector in 1983 business the Brazilian experience in the Inalca in 2007. experience working in and joined JBS in 1996 administration from in corporate law and a division. Before meat industry. Mr. Paolo Boni financial institutions. to develop FGV. He joined JBS in master’s degree in joining JBS in holds a degree in International Trade for August 2005 and is public law from 1999, he had over accounting. Before the group. He is currently the Universidade currently our Investor management and 8 years of joining JBS he had Mackenzie, and an MBE Relations Officer. controlling director. experience working over 25 years of in labor economics from Before joining JBS Mr in the meat experience in the Universidade de São Fernandez worked for industry. beef industry sector. He has been a Board Paulo. He has been a eight years in the Member of Inalca member of JBS’ board auditing and advisory since 1996. of executive officers industry and 10 years since January 2, 2007 . in the retail industry. He has been working for the JBS Group since 4 December 2001.
  6. 6. MANAGEMENT CEO USA/AUS Wesley Batista JBS JBS Five Pork Trading CFO Australia Packerland Rivers Beef USA Martin Brent André Iain Mars Beef Mike David Colwell Dooley Eastwood Nogueira Richard Vesta Thoren Mr. Iain Mars Mr. Martin Mr. Brent Mr. André Mr. Richard Vesta Mr. Thoren has Mr. David Colwell was born in Dooley Eastwood had Nogueira holds a joined Smithfield served as President holds a degree from England. Iain has worked for Swift & degree in Economics Foods following the and CEO of Five University of South Holds a degree of from Universidade acquisition of Rivers since the been involved in Company for over Florida and has been Science in Federal Fluminense, Packerland in 2001 Company’s the beef industry 18 years. working for JBS Swift Biology/Medical a master degree in and now serves as inception. & Company for 11 for all his life. Mr Technology – He moved to the Capital Markets from President and CEO Mike received his years. David has Mars was Eastern Illinois USA in 2007 to be FGV – Fundacão of JBS Packerland. Master of Science been the President of appointed University - 1982 Vice President / Getúlio Vargas, a degree in JBS Beef since 2007. President and CEO Marty has worked Director of JBS master degree in in Agricultural of JBS Australia in Trading USA, the Economics from Economics and his at Swift & Universidade de 2007, after the Company all his Swift Distribution degree in acquisition of Brasilia in 2003. Agribusiness from life, having started Centers USA, Swift & Company. He worked for more Washington State as a management Australia Trading, He joined JBS in than 20 years in University. trainee in 1983. Australia Banco do Brasil and 2005. Distribution He was appointed joined JBS in 2007, Centers and the following the bought in 2007 to be the Global Trading Swift & Co President of JBS Business in Brazil. acquisition. Pork division. 5
  7. 7. OUR STRATEGY Examples: - Brazilian Slaughterhouses - Swift Armour - Swift & Company - Inalca - Tasman Pursue Growth Opportunities - National Beef * Through Acquisitions - Smithfield Beef * * The closing of these transactions are subject to certain closing conditions, including expiration or termination of applicable waiting periods under U.S. antitrust law Mitigate Potential Risks as Sanitary Barriers & Seasonality Create satisfactory and consistent return to shareholders Experienced management team with over 50 years of experience in the beef processing industry. 6
  8. 8. JBS’ HISTORY HAS BEEN BUILT THROUGH MORE THAN 30 ACQUISITIONS IN 15 YEARS Inalca National Beef Swift Foods Co. Net Sales (in US$ billion) (1) Maringá (Amambay) Companies and assets acquired Berazategui Tasman (Rio Platense) Smithfield Beef Colonia Caroya Five Rivers SB Holdings JV Beef Jerky Goiânia Barretos (Anglo) Rio Branco Venado (Anglo) Pres. Epitácio (Bordon) Cacoal 1 Tuerto Campo Grande (Bordon) Cacoal 2 Pontevedra Porto Velho (CEPA) 24.8 Vilhena (Frigovira) Barra do Pedra Preta Cáceres Garças (Frigo Marca) (Frigosol) (Sadia) Rosário Iturama (Swift ARG) (Frigosol) San Jose Araputanga Anápolis Andradina (Swift ARG) (Bordon) (Sadia) (Frigoara) 12.7 1.2 1.5 1.9 0.3 0.4 0.4 0.5 0.5 0.4 0.7 1993 1996 1997 1999 2000 2001 2002 2003 2004 2005 2006 2007* 2008** R$/US$ end of the year cotation R$/US$: 1.91 Source: JBS * Pro forma JBS S.A. LTM Dec07 (includes JBS USA) ** Pro Forma JBS S.A. LTM Sep08 (includes JBS USA, Tasman and 50% of Inalca); National LTM May08; Smithfield Beef LTM Sep07; (1) The closing of this transaction is subject to certain closing conditions, including expiration or termination of applicable waiting periods under U.S. antitrust law 7
  9. 9. AGENDA IMPACT OF THE CRISIS CONSOLIDATED RESULTS OUTLOOK QUESTIONS AND ANSWERS 8
  10. 10. SHORT TERM DEBT PROFILE – 3rd QUARTER 2008 The Administration of the Company is secure that even if the present financial crisis has not abated until the next quarter the Company will not have difficulties in refinancing its short term debt and believes that in the final analysis there will be a possible increase in the cost of the debt. The Company did a sensitivity analysis considering firstly a probable scenario and secondly a pessimistic one in relation to the renewal of its short term financing facilities. JBS S.A. Consolida ted (R$ m illion) Proba ble Scena rio Pessim istic Scena rio Short Term Debt Amortiza tion Amortiza tion Short Term Debt 4 Q 0 8 1 Q 0 9 2 Q 0 9 3 Q 0 9 Tota l %** 4Q08 1Q09 2Q09 3Q09 %** 4Q08 1Q09 2Q09 3Q09 Fina ncing for purcha se of fix ed a ssets FIN AME / FIN EM - Enterprise financing 48 12 12 12 84 100% 48 12 12 12 100% 48 12 12 12 N otes Payable 2 - - - 2 100% 2 0 0 0 100% 2 0 0 0 Sub Total 1 50 12 12 12 86 100% 50 12 12 12 100% 50 12 12 12 Loa ns for w ork ing ca pita l purposes ACC - Exchange advance contracts 116 174 216 122 628 0% - - - - 20% 23 35 43 24 EXIM - BN DES export credit facility 103 69 0 0 172 0% - - - - 20% 21 14 0 0 Fixed Rate N otes with final maturity in February 2011 7 - - - 7 100% 7 - - - 100% 7 0 0 0 W orking Capital - American Dollars * 7 22 24 17 70 75% 5 16 18 13 75% 5 16 18 13 W orking Capital - Australian Dollars - - 97 - 97 0% - - - - 0% 0 0 0 0 W orking Capital - Euros 218 - - - 218 0% - - - - 0% 0 0 0 0 W orking Capital - Reais 101 - - - 101 0% - - - - 30% 30 0 0 0 Export prepayment 5 130 13 13 161 0% - - - - 20% 1 26 3 3 Fixed Rate N otes with final maturity February 2016 (144-A) - 10 - - 10 100% - 10 - - 100% 0 10 0 0 N CE / COMPROR 63 245 - 92 400 0% - - - - 20% 13 49 0 18 Sub Total 2 6 2 2 6 4 9 3 5 0 2 4 4 1 .8 6 4 4% 12 26 18 13 20% 100 149 64 58 Tota l 672 661 362 2 5 5 1 .9 5 0 8% 62 38 30 24 23% 150 162 76 70 Amortiza tion of Short Term Debt 155 457 Ca sh, ca sh equiva lents a nd Short-term investments 3 rd Q ua rter 2 0 0 8 *** 2 .2 5 6 2 .1 9 4 2 .1 5 6 2 .1 2 6 2 .1 0 1 2 .1 0 6 1 .9 4 4 1 .8 6 8 1 .7 9 9 EBITDA 3 rd Q ua rter 2 0 0 8 471 Obs: The Finame, Finem and Finimp credit lines are automatically liquidated, meaning they are paid on expiry and are not renewable Trade finance, Working Capital and other credit lines are interchangeable, meaning they can be refinanced but not necessarily in the same category under which they were initially contracted. *Including Finimp **Percentage to be paid in the period ***Simulation of the availabilities and applications after the amortizations programmed for the respective quarter without taking into consideration cash to be generated in future quarters. 9
  11. 11. LIQUIDITY EVALUATION Brazilian Peers USA Peers Balance * JBS S.A. (average) (average) ASSETS R$ (million) R$ (million) US$ (million) Cash, cash equivalents and Short-term investments ## 2,256 1,223 57 Trade accounts receivable, net ## 2,169 623 1,017 Inventories ## 2,381 988 2,776 Prepaid expenses and other ## 326 100 215 Total Permanent assets ## 4,995 2,312 3,493 LIABILITIES R$ (million) R$ (million) US$ (million) Loans and financings Short Term ## 1,950 1,234 297 Payroll, social charges ## 299 192 0 Trade accounts payable ## 1,410 527 1,369 Other current liabilities ## 186 134 384 Loans and financings Long Term ## 2,802 2,072 3,158 Other non-current liabilities ## 114 121 531 Net Sale Revenue ** ## 29,979 5,590 20,187 Ebitda ** ## 1,079 596 653 Ebitda Margin (%) ## 3.60% 10.66% 3.24% Working Capital ## 2,866 718 1,726 Net Debt ## 2,496 2,083 3,398 ( Deficit ) or Surplus ## 370 (1,365) (1,672) Net Debt / Ebitda** # 2.3x 3.5x 5.2x Net Debt / Net Sale Revenue (per month)** # 1.0 month 4.5 months 2.0 months Source: * Companies’ last public information 10 ** Companie’s Last Twelve Months
  12. 12. HIGHLIGHTS • The best quarterly consolidated results in the history of the Company with EBITDA of R$470.5 millions, and net revenue of R$7,771.5 millions and profit of R$694.0 millions. • JBS USA Beef also performed at an historic level and confirmed the awaited increase in the EBITDA margin from 5.1% in the 2Q08 to 5.6% in the 3Q08. • There was a significant increase in the EBITDA margin in the pork business in the United States from 3.2% in the 2Q08 to 7.6% in the 3Q08. • In Brazil the net revenues grew 27.6% and underwent a considerable recuperation of the EBITDA margin of 5.5% in the 2Q08 to 6.2% in the 3Q08. • An important increase in the export volumes of Argentina, coupled with an increase in local market sales, resulted in better margins in this respective market. The EBITDA was $19.6 million Argentine pesos in the 3Q08 compared with -$11.7 million Argentine pesos in 2Q08. 4 11
  13. 13. JBS CONSOLIDATED RESULTS NET REVENUE, EBITDA AND EBITDA MARGIN Net Sales Revenue (R$ million) EBITDA and Margin (R$ million) 14,141.6 EBITDA Margin(%) 6.1% 7,771.5 4.2% 7,129.5 4.1% 3.0% 6,650.7 5,859.1 1.4% 591.1 470.5 -11.9% 21.7% 9.0% 290.8 176.3 94.8 86.0% 64.5% 61.8% 12M07 4Q07 1Q08 2Q08 3Q08 12M07 4Q07 1Q08 2Q08 3Q08 Source: JBS Without considering National Beef and Smithfield Beef acquisitions. 12
  14. 14. PERFORMANCE BY BUSINESS UNITS JBS USA (Beef) Including Australia JBS USA (Pork) INALCA JBS MERCOSUL Net Sales Net Sales Net Sales Net Sales (US$ million) (US$ million) (€ million) (R$ million) 7,375 4,892 2,630 2,756 521 2,175 1,811 1,976 1,425 1,271 620 682 155 143 536 132 FY07 1Q08 2Q08 3Q08 FY07 1Q08 2Q08 3Q08 FY07 1Q08 2Q08 3Q08 FY07 1Q08 2Q08 3Q08 (1) (2) (3) (1) (2) (3) EBITDA (US$ mi) EBITDA (US$ mi) EBITDA (€ mi) EBITDA (R$ mi) margin EBITDA margin EBITDA margin EBITDA margin EBITDA Margin (%) Margin (%) Margin (%) Margin (%) 7.6% 15.3% 5.1% 5.6% 4.9% 5.6% 5.3% 3.2% 4.8% 3.2% 2.9% 10.4% 0.3% -0.1% 5.6% 692.0 4.1% 155.6 132.9 70.3 52.1 26.0 25.8 15.7 19.9 7.4 7.5 7.6 132.7 102.2 58.2 -0.9 FY07 1Q08 2Q08 3Q08 FY07 1Q08 2Q08 3Q08 FY07 1Q08 2Q08 3Q08 FY07 1Q08 2Q08 3Q08 (1) (2) (3) (1) (2) (3) Source: JBS FY of Swift used to be from June to May and INALCA period is from January to December. (1) 13 weeks ended 03/30/2008. (2) 13 weeks ended 06/29/2008. (3) 13 weeks ended 09/28/2008. 13
  15. 15. JBS: GLOBAL PRODUCTION & DISTRIBUTION PLATFORM The geographic diversification of its operations allows it to source meat efficiently, serve its customers cost-effectively, capitalize on increasing international trade opportunities and helps to mitigate the potential impacts of sanitary barriers. Exchange rates: US$11,839 R$ / US$ = 1.91 – 09/30/2008 US$ / €$ = 1.41 – 09/30/2008 US$778 5% US$42 76% Revenue Ebitda US$265 Revenue Ebitda US$3,043 19% US$257 Revenue Ebitda JBS Mercosul JBS USA / Australia Inalca JBS Source: JBS 14 * JBS S.A. LTM Sep08, Pro forma JBS USA LTM Sep08 (includes Tasman) and Pro forma 50% of Inalca LTM Sep08
  16. 16. JBS – NET DEBT/EBITDA Net Debt / EBITDA Pro Forma per TRIMESTER (R$ million) JBS’s Net debt in relation to its Ebitda (last twelve months pro forma) is Net Debt/ EBITDA affected by weak results in the 4th Exchange rates: R$ / US$ = 1.91 – 09/30/2008 US$ / €$ = 1.41 – 09/30/2008 quarter 2007 and 1st quarter 2008. 3.7 Good results expected for the 4th 2.9 2.8 quarter 2008 and 1st quarter 2009 will reduce the relation between Net Debt 2.3 over Ebtida. 471 X 291 176 95 4Q07 1Q08 2Q08 3Q08 4Q08e Source: JBS Without considering National Beef and Smithfield Beef acquisitions. 15
  17. 17. EVOLUTION OF THE EBITDA MARGINS OF JBS USA (BEEF) COMPARED WITH ITS LOCAL PEERS EBITDA (%) 5.3% 3.6% 4.2% 2.3% 3.2% 1.3% 1.3% 0.9% 0.9% 0.9% 0.7% -0.4% -0.4% -0.7% -0.9% -1.2% -1.3% -1.7% Peers Average Beef USA JBS Beef USA -5.3% FY03* FY04* FY05* FY06* FY07* 3Q07** 4Q07** 1Q08** 2Q08** 3Q08** Previous Management JBS S.A. Management Source: JBS and estimates of JBS based upon public data from peers EBITDA margins of the Companies taking into consideration beef only in the US *Fiscal years for the Companies differ one from the other: FY Tyson: October to September FY Smithfield: May to April FY National Beef: September to August FY JBS USA: June to May (altered after the acquisition) **The relevant quarterly period and adjustments made to the calendar year 16
  18. 18. CONSOLIDATED PRO-FORMA SEPTEMBER 2008 Combined Companies Pro-forma (US$ million) INTEGRATED and Five Rivers Net Revenue (US$ mm) 15.660 3.033 18.694 EBITDA (US$ mm) 564 139 703 EBITDA Margin 3,6% 4,6% 3,8% Cash (US$ mm) 1.178 10 1.188 Short Term Debt (US$ mm) 1.019 0 1.019 Long Term Debt (US$ mm) 1.464 400 * 1.864 Net Debt (US$ mm) 1.304 0 1.694 Net Debt / Ebitda 2,3x 0,0x 2,4x Slaughter Capacity (thousand head/day) 57,6 7,6 65,2 Units 98 16 114 Employees 48.991 6.370 55.361 Exchange rates: R$ / US$ = 1.91 – 09/30/2008 Source: Company Estimates JBS – annual report, quartely reports - Pro-forma LTM Sep08 (including JBS USA, Tasman and 50% of Inalca) Smithfield Beef – Managerial numbers LTM Sep08 and 100% of Five Rivers LTM Sep08 *ABL – Asset Based Loan contracted by JBS USA 17
  19. 19. JBS USA BEEF EXPORT VOLUMES JBS USA EXPORTS 55 50 45 40 Million pounds 35 30 25 20 JBS Beef exports up 15 64%; industry up 33% 10 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: JBS 2007 2008 12 18
  20. 20. JBS CONSOLIDATED – GROSS REVENUE DISTRIBUTION Revenue Distribution by Business Units 3Q08 Revenue Distribution by Market 3Q08 Beef Italy 5% Beef Argentina 3% Beef Australia 13% Exports Pork USA Beef Brazil 22% 36% 14% Domestic Market 64% Beef USA 43% Source: JBS Source: JBS 19
  21. 21. JBS CONSOLIDATED – EXPORTS DISTRIBUTION Exports Distribution 3Q08 Exports JBS 3Q08 US$ 1.7 billion Others Russia 25% 18% Japan Taiwan 15% 3% Mexico E.U. 10% Hong 10% Kong 3% USA 3% China 4% South Korea 4% Canada 5% Source: JBS 20
  22. 22. CUTOUT PRICE VS. CATTLE PRICE IN USA C utout P ric e vs . C attle P ric e in T he US 5.3 4.2 % 175 % 100 90 80 165 -0.7% -1.3% 70 60 -5.3% 50 155 40 Marg in (US $ / Head) US $ / 100 pounds 30 20 145 10 0 -10 135 -20 -30 -40 125 -50 -60 E B IT D A Margin of J B S US A B eef -70 (excluding Aus tralia) 115 -80 J ul-07 Aug-07 S ep-07 O ct-07 Nov-07 D ec-07 J an-08 F eb-08 Mar-08 Apr-08 May-08 J un-08 J ul-08 Aug-08 S ep-08 O ct-08 Margin/H ead C attle P rice B eef P rice 12 Source: Bloomberg 21
  23. 23. GLOBAL CATTLE PRICES US$/Kg Converging Prices 3.75 3.25 2.75 2.25 1.75 1.25 J an-07 F eb-07 Mar-07 Apr-07 May-07 J un-07 J ul-07 Aug-07 S ep-07 O ct-07 Nov-07 D ec-07 J an-08 F eb-08 Mar-08 Apr-08 May-08 J un-08 J ul-08 Aug-08 S ep-08 O ct-08 BR A AUS AR G US A UR U Source: Bloomberg, IPCVA (ARG) and INAC (URU). Converging Margins 22
  24. 24. ENTERPRISE VALUE AND EBITDA MULTIPLE SMITHFIELD BEEF ACQUISITION SWIFT USA ACQUISITION EV / EBITDA US$1,458.8 mm EV / EBITDA US$565.0 mm 15.1x 8.1x 5.5x 4.1x 264.8 139.3 96.3 70.0 99% 175% Oct-07 Sep-08 Jul-07 Sep-08 Source: JBS 23
  25. 25. FINAL CONSIDERATIONS • The consolidated results in the history of the Company. • Planning and discipline contributed to risk reduction. • Consistent improvement in the consolidated results of the Company. • Commitment from the Management to reduce the leverage of the Company. • Appropriate liquidity level. • We will continue to grow. We see the present crisis as an immense opportunity. • Regardless of the negative aspects of the present macroeconomic scenario, the Management of this Company forecasts substantially improved consolidated operational results for 2009. 24
  26. 26. Questions & Answers November 05th, 2008 JBS S.A. “In God we Trust”
  27. 27. PUBLIC MEETING WITH ANALYSTS AND INVESTORS Schedule Location November 18th, 2008 (Tuesday) Radisson Hotel 8h00 – Welcome Coffee Jacarandá Room 9h00 – Presentation Av. Cidade Jardim, 265 Jardim Europa – São Paulo – SP Brazil RSVP To confirm your participation contact us at: 55 11 3144 4447 or, ir@jbs.com.br 26
  28. 28. DISCLAIMER 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. 27

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