JBS gaining ground in earnings

Sales, and subsequently profit margins, are improving for JBS beef divisions, especially in the United States and Australia, which are more than making up for losses in the South American markets and restrictions from European markets, company officials reported Thursday.

<strong>THE NUMBERS</strong> US Beef, -21.8 million or -1.3 percent US pork, 15.7 million, or 2.9 percent JBS Australia, 20.9 million, or 6.1 percent * First quarter 2008 earnings (before interest, taxes and other expenses)

The company posted a $21.8 million loss in the first three months of this year for its U.S. beef division, which would seem bad in any other circumstance. But compared to the last three months of 2007, when the Greeley-based beef division for JBS USA lost $99.3 million in earnings before interest, taxes and other expenses, company officials feel they have reason to celebrate.

JBS changed its financial reporting this quarter, reporting JBS USA earnings as U.S. beef and Australian beef combined. Earlier this year, the company reported a $101 million loss in its fourth quarter earnings for JBS USA in 2007, but they restated that to $99.3 million.

Compared to the same quarter last year, JBS overall grew more than 400 percent in net revenues. JBS USA grew 20 percent in revenues in that time, reported Joesley Mendonça Batista, CEO of JBS S.A., the parent company of JBS Swift & Co., in Greeley.

"We always heard many people would say to us that the US and Australian business were businesses that didn't grow, that they were old markets, and what we are seeing here is that we increased our sales in that market, US and Australia, by 20 percent, compared to the first quarter of 2007.

"To increase 20 percent in such a huge business, I think is really something that is important to highlight here."

JBS South America, the parent company, had trouble this quarter in one of its subsidiaries, Mercusol, which is facing losses due to European restrictions on beef and from Argentina's government trying to control inflation by restricting export sales, which is 50 percent of the Mercusol revenues, Batista reported.

"Even with Mercusol margins going down, I think ... it is by far compensated by the margins in US and Australia," Batista said.

Batista said the numbers speak well of things to come, especially with the impending reopening of South Korean markets to U.S. beef, the first shipment for which is likely weeks away, as well as the expected acquisitions of Smithfield and National Beef, which could be approved this summer.

Steve Kay, publisher of Cattle Buyer's Weekly, an industry trade magazine, said profits should increase in the next few months, regardless.

"Swift beef will have a pretty profitable quarter as well other beef packers in this second quarter," Kay said. "Margins have improved significantly. We've had a dramatic rally in wholesale beef prices" in the last couple of months.

Batista agreed.

"The second quarter is already on the positive side," Batista said. "It's much better than our first expectations."