JBS exports rocked by global supply chain challenges


LIKE all food exporters, global protein giant JBS is being buffeted by international supply chain challenges, higher costs and delays – but the effects and severity differ by region, the company said during an investor briefing held last week.

The briefing followed the release of JBS’s full-year results, showing record pre-tax revenue and profit for its 2021 business year ending Dec. 31.

Across the company’s beef, pork, chicken and value-added divisions in North and South America, Australia and New Zealand, JBS posted record net sales of $65 billion last year. dollars, up 29.8% over the previous year. Adjusted pre-tax profit hit a new record high of US$8.5 billion while net profit grew 345% year-on-year.

During the questions, analysts asked about global supply chain challenges, particularly in light of recent developments including Russia’s attack on Ukraine.

Gilberto Tomazoni

JBS Global Managing Director Gilberto Tomazoni said the supply chain situation differs from region to region.

“In general, we’ve faced challenges since COVID started, and it’s still not normalized,” he said.

“As part of this, limited availability of shipping containers has occurred in all regions in which we operate. We have a very close relationship with our transport companies and try to find solutions for each of these restrictions, when they occur.

“But we are seeing a build up in terms of stock, with higher than normal stock levels due to logistics restrictions. It’s no different in Brazil than in Australia, but now with the war in Ukraine, we We face additional challenges Fortunately, our exports specifically to Russia are very small compared to our activity in terms of exporting to other markets, and do not really impact our bottom line.

Managing Director of JBS’s US Beef Division (including corporate operations in Australia) Andre Nogueira said that in addition to problems with shipping lines and container availability, port congestion has continued with little improvement in recent months.

“So the situation continues, and it’s a day-to-day challenge on top of the much, much higher costs than we’ve ever seen before to move chilled and frozen meat,” Nogueira said.

“The cost (of each shipment) is now very, very high, but it’s not just about the cost – there is a serious limitation in access to containers, but US ports in addition are experiencing high levels of This is a big challenge now – that’s why exports could have been much higher.

In Brazil, the most serious problems were encountered last year, but they were normalizing now, analysts said.

Inflation to rein in consumer spending

Responding to a question about the impact of the Russian-Ukrainian conflict on global protein trade, Tomazoni said the inflationary impact would not be tied to one region or another, or one sector or another. – it would be a global challenge.

“But it could be labor costs in one region, while logistics costs, energy and fuel costs and commodity costs could be higher in others” , did he declare.

“In the case of JBS, our response is to focus on the things we can control – managing our internal costs, managing our mix and managing our market and commodity position opportunities.”

While JBS took a global approach in terms of strategy, each region would execute locally, he said.

“But we see that our main way to meet this challenge is to use our culture, because we have a decentralized company, we give a lot of autonomy to our business unit, each of the leaders of the business units has autonomy to manage the In this situation, your ability, your speed or your reaction makes a big difference, and we strongly believe that it could be an advantage for us.

André Nogueira of the US Beef division said the impact of inflationary costs was felt by everyone.

“Inflation is everywhere – the pressure is very, very high. In the beef division in the US, our costs have been 30-40% higher than they were two years ago, pre-COVID.

“The answer to this is twofold: first, to have strong risk management to best deal with issues such as grain prices (which have risen sharply since the events in Ukraine), and to ensure that we communicate with our customers on the reality of rising freight, packaging, labor and grain market costs. It’s not just grain, but all the other costs, especially in the United States where our operational costs have increased due to labor shortages, trying to operate more and more effectively every day.

Motivation for aquaculture growth

Several questions explored the company’s diversification strategy and its recent move into alternative fish and protein, through its acquisition of companies such as Australian farmed salmon producer Huon Aquaculture.

JBS started out as a Brazilian company specializing in one type of protein (beef), but has grown into a global food company with a diverse footprint across many types of protein, in different regions, analysts said. Many of them were value added.

Last year, the company completed seven strategic acquisitions worth approximately $2.1 billion.

“It has allowed us to increase our relevance in segments and businesses where we see significant growth opportunities,” Mr. Tomazoni said.

“The purchase of Vivera, for example, has positioned us as a leader in the European plant-based protein market, providing a structure to leverage growth and synergy within our global plant-based operation.”

The acquisition of Australia’s Huon Aquaculture marked JBS’s entry into the global aquaculture market, providing a solid foundation for global expansion.

“In terms of where we want to grow, aquaculture is clearly a priority – we’re seeing that seafood has the highest per capita consumption in the world and the growth is outpacing that of other seafood proteins. meat. And we see that the capture of wild fish will be limited,” said Tomazoni.

“Not only will wild-caught fish not continue to grow, but they could decline. Aquaculture will be needed to meet global demand,” he said.

“With the acquisition of Huon, we entered the fish protein segment. And we’ve come to the right place, because in Australia we have structures to run the business, and we’re going to accelerate our learning about the aquaculture and fish protein business – and we want to turn our aquaculture business into something as big as what JBS has with its global chicken and pork business.

“We are constantly looking for growth opportunities in this segment,” Mr. Tomazoni said.

Are there synergies between proteins?

Another analyst asked if synergies were likely to be found in some of JBS’s recent acquisitions, for example, in Australia with Huon Aquaculture and Rivalea Pork, with existing beef and lamb operations.

Already, Huon salmon and Rivalea pork are on product supply lists held by JBS’ Australian wholesale division DR Johnston.

Mr. Tomazoni said mergers and acquisitions are part of JBS’s DNA.

“We are in the market all the time looking for opportunities that fit our strategy and make sense in economic terms,” he said.

The acquisition of plant-based protein producer Vivera has given JBS a lot of synergy in terms of the business that we already have in its operations in Brazil and the United States.

“We don’t know how big the herbal market will be in the future, but we certainly want to be one of the leaders in the segment, and we are investing in R&D to develop new products and new types of packaging and strategies for growth,” he said.

Cultured meat JBS also entered the cultured (laboratory-produced) meat business last year, with the purchase of a majority stake in cultured meat producer BioTech Food in Spain. BioTech has a pilot plant that already produces small amounts of cultured meat.

“The technology has already proven itself – they produce a ton of material in the pilot plant. Now our strategy is to build an industrial plant that will produce 100,000 tonnes of cultured meat,” Tomazoni said.

“And alongside that, we’re investing in R&D, because biotechnology, I believe, will be one of the growth opportunities – not just in cultured meat, but in derivatives of that technology.”

Demand supports strong bottom line

Last year’s record financial performance in the US Beef division (including Australian operations) was supported by international and domestic demand for beef outpacing supply, analysts said. In North America, this demand was driven by the strong performance of the retail channel and the recovery in foodservice.

Global international demand for beef also remains very strong, particularly in Asia, which now accounts for more than 75% of the US Beef Division’s total exports, with China becoming the third largest destination for US beef.

JBS Australia’s performance last year continued to improve sequentially, thanks to better seasons and good management in the region. Cattle availability in Australia was still low, analysts said, but strong domestic and international demand had boosted beef prices and therefore improved earnings.

Previous Labor more confident than Tories on taxes and public spending - poll
Next Sebi Unveils "Manthan" Ideathon to Promote Innovation in Securities Markets