Agenda. Company Overview. JBSS3 Stock Performance and Ongoing Actions. Market Overview. 3Q10 Highlights

Transcription

1 January, 2011

2 Agenda Company Overview JBSS3 Stock Performance and Ongoing Actions Market Overview 3Q10 Highlights 2

3 Who We Are 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. Our Values Excellence Planning Determination Discipline Availability Openness Simplicity 3

4 Corporate Structure CEO President Joesley Batista Finance Director Brazil Marcos Bastos Corporate Law Department Francisco de Assis e Silva Investors Relations Jeremiah O Callaghan / Guilherme Arruda Corporate And Adm. Controller Eliseo Fernandes CEO MERCOSUL Marco Bortolon New business José Luis Medeiros Commercial and Distribution International Offices Marco Bichieri JBS Hides Roberto Motta Dairy Gilson Teixeira Marcos graduate from Mackenzie University in Business Administration and has a MBA in Finance from San Francisco State University. Worked in many financial institutions in Brazil, primarily in Investment banking, Financial Projects, and Portfolio management. Started in 2008 with JBS. Francisco is the director of the Law Department. Has a post graduated from the University of Mackenzie. Started working at JBS in December of 2001 and later became a member of the Executive Board in January of Jerry has a Engineering Degree from the University of Cork College in Ireland. Immigrated to Brazil in Started working in the Beef Sector in 1983 and in JBS in 1996 in order to develop the Trade Area and eventually became the Investors Relations Officer. Guilherme graduated in Business and Economics from the University of California. Start in the Company in 2009 after working for 7 years for BTG Pactual. Eliseo has a Business Administration and Accounting Degree from the University Católica de Pernambuco and a post graduate degree in Business Administration from FGV. He started with JBS in August 2005 and eventually became Director of Administration and Corporate Governance. He has 8 years Experience in Auditing and Consulting and 10 years in the Retail industry. Marco has more than 10 years experience in JBS. Initially started as a Production Manager and in 2009 was promoted to Chief Operating Officer of the Brazil Beef Division. José Luiz has a degree in Accounting and has been working in the Beef Sector since year in Bertin and started at JBS in January 2010 became the Director of New Business. Marco has more than 24 years of experience in the Protein Sector. Worked for more than 20 years in Bertin. Roberto has more than 20 years in the Leather Industry. Was responsible for incorporating BMZ Hides with the JBS Group. Gilson has more than 25 years experience in Finance and Controller of business units of Bertin, where he later served as a member of the Board for 5 years. 4

5 Corporate Structure CEO USA/AUS Wesley Batista Pilgrim's Pride Don Jackson Beef USA Bill Rupp Pork Martin Dooley Australia Iain Mars JBS Five Rivers Mike Thoren JBS Carriers Moe Schroder Trading Robert Wadland Human Resources Bob Daubenspeck CFO André Nogueira Don is the President, CEO and Director of Pilgrim s Pride since January For 9 years was the president of the chicken division of Foster Farms and vice president of Food Services in ConAgra Poultry Company. Before this he worked at Seaboard farms of Athens for 22 years, including 4 years as the CEO of the Chicken Division Bill has learned the Beef Industry from the ground up. Right out of college, he began learning the business at Cargill where he worked for 25 years. He was a general plant manager and eventually went to build a meat processing facility in Canada. He later became the VP of Operations, then was the President of the Beef Business, and eventually became the president of Cargill Meat Solutions. Bill joined JBS in 2010 as the President of the US Beef Business. Martin has a degree in Biology from the University of Eastern Illinois. Worked in Swift for his whole life, having started the company as a manager trainee in In 2007 was given the position of president of the Pork Division of JBS USA. Iain was born in England and worked in the Beef Industry for his whole life. He became the President and CEO of JBS Australia in 2007, after the acquisition of Swift. He has worked in JBS since Mike is the President and CEO of Five Rivers since the Start of the Company. Has a Masters of Science in Agricultural Economics and has a degree in Agribusiness from the University of Washington State. Moe has more than 30 years experience in Transportation Sector. Graduated from the University of Ryerson, Toronto, Canada. Occupied the position of Vice President of Sales, Dedicated Operations at KLLM and before that was in various executive positions at CR England. Moe Joined JBS to run the carrier business Robert has 27 years of meat trading experience with 17 years of that at JBS enhancing exports out of Australia and New Zealand. Recently transferred to the US to run the group s trading business unit Robert assumed this position in February 2009 and before that was in JBS Packerland from 2002 to André has a degree in Economics from the Federal University Fluminense, a masters in Capital Markets from FGV Fundação Getúlio Vargas, and masters in Economics from University of Brasilia in Worked more than 20 years at Bank of Brazil and started at JBS USA in 2007 after the Swift acquisition. 5

6 Shareholders Market 18.7% BNDESPAR 17.0% PROT - FIP 8.0% Treasury 1.7% FB Participações S.A. 54.5% Average daily trade volume of R$ 33.3 million in 3Q10 Source: JBS 6

7 Leading, Sizeable and Diversified Business Platform Beef Chicken Pork Hides / Leather Dairy Lamb Ranking Production Units Geographic Presence and Installed Capacity 1 st 2 nd 3 rd 1 st 3 rd 1 st Global Global U.S.A. Global Brazil Global heads/day: mm heads/day: 000 heads/day: 000 hides/day: 000 tons/day: 000 heads/day: Total: 88.2 Total: 7.6 Total: 48.5 Total: 91.4 Total: 1.4 Total: 27.5 Well- Recognized Brands 7

8 Our Strategy Rationale Branding Value added products Associating quality and branding to increase client loyalty Customized and further processed products for the end users Sales and distribution platform Expanding a global distribution platform to reach end clients Production platform Developed an efficient and diversified global production platform EBITDA Margin Financial structure Experienced management Cost reduction, process optimization Risk management JBS Value & Strategy 8

9 Distribution Platform with Access to Key Markets Growth 1-2 % 3 % 4 % Growth 1 9% 13 % 8% Growth 1 2 % 8 % 5 % Growth 1 7 % 25 % 16 % Distribution Center Sales Offices 1 Real growth of total consumption in tons 2010E to 2015E Source OECD-FAO 9

10 Agenda Company Overview JBSS3 Stock Performance and Ongoing Actions Market Overview 3Q10 Highlights 10

11 Animal Protein Consumption Growth in the Last Decade 47.7% EU - 27 North America 7.5% 41.4% 23.7% East Asia Central America 29% 70.2% Middle East 48.7% Southeast Asia South America 32.2% Sub Saharan Africa 23.3% Oceania 3 Source: FAPRI February

12 GLOBAL SUPPLY-DEMAND FOR POULTRY Global Supply-Demand for Poultry Choose Year for Chart: 2020 Estimates for Chart GS Goldman Sachs Estimates 2020 GLOBAL SURPLUS (DEFICIT) OF POULTRY MEAT Goldman Sachs Estimates European Union Surplus Deficit Million tons Million tons 0.6 Russia United States China Brazil India Thailand Source: Goldman Sachs 12

13 GLOBAL SUPPLY-DEMAND FOR PORK Global Supply-Demand for Pork Choose Year for Chart: 2020 Estimates for Chart GS Goldman Sachs Estimates 2020 GLOBAL SURPLUS (DEFICIT) OF PORK MEAT Goldman Sachs Estimates Canada Surplus Million tons European Union Deficit Million tons United States Russia Mexico Brazil China (0.3) Source: Goldman Sachs 13

14 Global Supply-Demand for Beef GLOBAL SUPPLY-DEMAND FOR BEEF & VEAL Choose Year for Chart: 2020 Estimates for Chart GS Goldman Sachs Estimates 2020 GLOBAL SURPLUS (DEFICIT) OF BEEF & VEAL Goldman Sachs Estimates United States Surplus Million tons European Union Deficit Million tons Brazil China Argentina & Uruguay India Australia Source: Goldman Sachs 14

15 Beef Exports Brazil vs USA Both Brazil and the US continue to lead global beef exports. Brazilian Beef Exports (Tons) US Beef and Veal Exports (Tons) % 10.8% % 23.1% JAN-SEPT 09 JAN-SEPT JAN-SEPT 09 JAN-SEPT 10 0 Beef Exports Avg Price in US$ per Ton Beef Exports Avg Price in US$ per Ton Source: USDA and Secex 15

16 Chicken Exports Brazil vs USA The reopening of the Russian market in late August should boost US chicken exports in the latter half of Brazilian Chicken Exports (Tons) US Chicken Exports (Tons) % 6.5% % -5.7% JAN-SEPT 09 JAN-SEPT JAN-SEPT JAN-SEPT Chicken Exports Avg Price in US$ per Ton Chicken Exports Avg Price in US$ per Ton Source: USDA and Secex 16

17 Agenda Company Overview JBSS3 Stock Performance and Ongoing Actions Market Overview 3Q10 Highlights 17

18 Highlights - 3Q10 Net revenue for the 3Q10 was R$14,069.6 million, practically stable in comparison to the 2Q10, which was R$14,116.3 million. Consolidated EBITDA increased by 2.6% q-o-q, reaching R$1,026.4 million for the 3Q10. EBITDA margin was 7.3% in the quarter. The main operating highlights were: JBS Mercosul operations presented EBITDA of R$363.7 million and EBITDA margin of 10.4% for the quarter, versus 9.5% in 2Q10, despite challenges such as cost of raw materials and FX-rate. JBS USA Pork presented EBITDA of US$90.8 million and a historical EBITDA margin of 11.8% in 3Q10. JBS USA Chicken (PPC) had an EBITDA of US$170.0 million, 33.2% higher q-o-q, with EBITDA margin of 9.9%. Consolidated customer base grew 15.3% q-o-q, primarily in Mercosul, and now exceeds 350 thousand clients globally. 18

19 1 Consolidated Performance by Protein 1 R$ Millions Net Income EBITDA Margin EBITDA Beef 8, % Pork 1, % Chicken 2, % Others 1, % Total 14, , % Export Growth Customer Base Evolution 4.500, , , , , , , ,0 400,0 350,0 300,0 250,0 200,0 150,0 100,0 500,0-4Q09 1Q10 2Q10 3Q10 50,0-4Q09 1Q10 2Q10 3Q10 Exports (R$ Millions) Exports (mil tons) Customers (thousand) (1) in Local GAAP 19

20 JBS Consolidated Results Net Revenue (R$ million) EBITDA and EBITDA Margin (R$ million) 6,9% 7,1% 7,3% 5,4% 3,5% 1.000, ,4 862, , , , , ,9 291,9 397,8-11.6% 69.4% 12.5% -0.3% 36.3% 116.7% 16.0% 2.6% 3Q09 4Q09 1Q10 2Q10 3Q10 3Q09 4Q09 1Q10 2Q10 3Q10 Source: JBS EBITDA Margin (%) 20

21 JBS MERCOSUL Performance by Business Units JBS USA Beef Including Australia JBS USA Pork JBS USA Chicken (PPC) Net Sales (R$ billion) Net Sales (US$ billion) Net Sales (US$ million) Net Sales (US$ billion) 1,7 1,7 3,0 3,5 3,5 2,8 2,8 2,8 3,3 3, ,8 1,7 1,7 1,7 3Q09 4Q09 1Q10 2Q10 3Q10 3Q09 4Q09 1Q10 2Q10 3Q10 3Q09 4Q09 1Q10 2Q10 3Q10 2Q09 3Q09 2Q10 3Q10 EBITDA (R$ mm) EBITDA margin EBITDA (US$ mm) EBITDA margin EBITDA (US$ mm) EBITDA margin EBITDA (US$ mm) EBITDA margin 2,9% 6,6% 11,9% 9,5% 10,4% 352,6 334,5 363,7 3,8% 4,5% 6,0% 5,9% 170,5 194,9 3,1% 2,7% 4,7% 5,4% 6,6% 90,8 11,8% 9,3% 164,6 10,6% 184,4 7,5% 127,6 9,9% 170,0 112,2 108,4 126,0 103,5 28,6 34,9 48,7 47,3 15,3 3Q09 4Q09 1Q10 2Q10 3Q10 3Q09 4Q09 1Q10 2Q10 3Q10 3Q09 4Q09 1Q10 2Q10 3Q10 2Q09 3Q09 2Q10 3Q10 Source: JBS EBITDA Margin (%) 21

22 Revenue Distribution by Market Revenue Distribution by Market 3Q10 Revenue Distribution by Market 2Q10 Pork Exports 1% Chicken Exports 2% Pork Exports 2% Chicken Exports 2% Beef Exports 25% Beef Domestic 44% Beef Exports 25% Beef Domestic 44% Chicken Domestic 20% Pork Domestic 8% Chicken Domestic 20% Pork Domestic 7% Exports = 28% Domestic Market = 72% Revenue Distribution by Business Units 3Q10 Exports = 29% Domestic Market = 71% Revenue Distribution by Business Units 2Q10 USA Chicken 22% Mercosul 27% USA Pork 9% * * USA Beef 42% Source: JBS * Including Australia 22

23 EBITDA Distribution by Business Units 3Q10 2Q10 Mercosul 36.4% USA BEEF 18.1% * USA PORK 15.9% Mercosul 43.9% USA BEEF 36.1% * USA Chicken 29.7% USA Chicken 12.6% USA PORK 7.4% Source: JBS * Including Australia 23

24 JBS Consolidated Exports Distribution JBS Exports 3Q10 JBS Exports 2Q10 China 4% South Korea 5% Taiwan Canada 2% Others 4% 12% USA 7% E.U. 7% Russia 10% Africa and Middle East 19% Hong Kong 8% Japan 10% Mexico 12% US$2,326.9 Millions US$2, Millions Source: JBS 24

25 Debt Profile The ratio of net debt to EBITDA was 2.9x in the quarter, slightly less than 3.0x in 2Q10. It is important to note that the liquidity of the balance sheet continues to improve, as the cash position amounted to R$4,402.5 million (25.2% higher than 2Q10), almost 90% of short-term debt, compared to 70.0% in the previous quarter and 55.0% in 1Q10. Additionally, the debt profile also improved. ST debt reached 33.0% of total debt in the 3Q10, compared to 36.0% in the 2Q10 and 40.0% in the 1Q10. Leverage ST / LT Profile 3,3 3,1 3,1 3,0 2,9x * 60% 64% 67% 40% 36% 33% 3Q09 4Q09 1Q10 2Q10 3Q10 Source: JBS *LTM including Bertin and Pilgrim s Pride pro-forma. EBITDA Margin EBITDA 1Q10 2Q10 3Q10 Short term Long term 25

26 Agenda Company Overview JBSS3 Stock Performance and Ongoing Actions Market Overview 3Q10 Highlights 26

27 Stock Performance JBS shares fell 7.5% when compared with the 2 nd Quarter closing price. The Ibovespa and the S&P 500 Indexes increased 13.4% and 11.1% respectively, in 3 rd Quarter The sector, in general, was impacted by factors such as FX-Rate and rising input cost. The Company continues to focus on measures to enhance the share price. JBS vs Ibovespa in the 3Q10 130,0 125,0 120,0 115,0 110,0 105,0 100,0 95,0 90,0 85,0 80,0 Jul-10 Aug-10 Sep-10 JBSS3 IBOV Source: Bloomberg (Base 100 = 01/07/10) 27

28 Ongoing Actions Pending issues Actions INALCA JBS JBS bought 50% of Inalca JBS in 2008 paying a total of million. JBS filed a request at the International Chamber of Commerce in Paris to guarantee the right to nominate the CFO, which has been denied JBS from the outset. The Company requested Ernst & Young to conduct a full audit, which in progress. Argentina The Company closed 3 plants and concentrated its production in a more efficient industrial complex. Laid off 1,500 employees from 4 plants. Negotiated commercial agreements that will increase plants utilization and deficiencies as well as maximizing the Pilar Distribution Center. Transferred headquarters from Buenos Aires to Rosario, reducing administrative expenses. 3Q10 income already reflects an improvement over the previous quarter due to these actions. 28

29 Ongoing Actions Pending issues Actions Convertible Debentures JBS paid a premium of R$ 521,940, to its Debenture holders on December 23 rd, JBS communicated that it is in advanced stages of negotiation with its main Debenture holder for the 2 nd issuance of mandatorily convertible Debentures. The new Debentures will have the following characteristics: Amount: R$4 billion Conversion price of R$ 9.50 per Period: 5 years share (JBSS3), plus interest paid on the debentures, net of taxes, minus the Interest:8.5% per annum, paid remuneration paid to shareholders in quarterly the period (dividends, interest on Mandatorily convertible into JBS equity, etc). S.A. shares at the end of the 5th year. Debt Distribution and Income Tax Rate The management is in advanced studies supported by specialized consultants, aiming to rebalance the Company's debt, according to the cash flow of each region. The Company believes that a solution will be implemented during the first half of 2011, which should reduce the cost of capital and maximize the goodwill amortization, increasing the Company's profitability 29

30 Coverage by Equity Analysts The Company continues to work on increasing coverage by equity analysts. Please find here below the list of present analysts covering JBS. Institution Analyst Recommendation Target Price Banco do Brasil Mariana Peringer Buy Bradesco Ricardo Boiati Outperform BTG Pactual Fábio Monteiro Buy 9.30 Goldman Sachs Gustavo Wigman Neutral 8.60 HSBC Pedro Herrera Overweight Merrill Lynch BofA Fernando Ferreira Neutral 8.00 Santander Luis Miranda Buy 9.60 Safra Erick Guedes Outperform UBS Gustavo Oliveira Neutral 8.80 Votorantim Luiz Carlos Cesta Neutral0, 8.80 Source: Bloomberg and Company 30

31 IR Contacts: In God We Trust, Nature We Respect 31