JBS to cut rate of M&A

JBS to cut rate of M&A

Highly-acquisitive Brazilian meat group JBS has indicated it will ease off the throttle in 2012 and reduce its participation in M&A activity in the global protein sector.

The group became the world's largest protein company through a flurry of acquisitions in 2009 and 2010, including a majority stake in ailing US poultry giant Pilgrim's Pride, a merger with Brazil-based Bertin and the acquisition of two Australian firms - lamb business Tatiara and beef group Rockdale Beef. 

Since then, rumours have linked JBS to a possible takeover of US pork group Smithfield Foods and Sara Lee's protein business. 

However, JBS's business has struggled in the face of an appreciating Brazilian real and growing loses at Pilgrim's Pride. As a consequence, the company booked 2011 EBITDA of BRL3.52bn, down 16.3% from 2010 levels.

JBS CEO Wesley Batista, who took the helm at the meat group last January, today (22 March) suggested the company would look to consolidate its takeovers and improve profitability in 2012.

Speaking during a conference call to discuss the group's full-year results, Batista said the firm's priority now was to "maintain careful management of each of our business units... avoiding the pitfalls of complacency and bureaucracy".

"Our focus continues to be on improved operational efficiency, and in maintaining our organic growth," he said. 

However, Batista stopped short of ruling out further acquisitions in the next 12 months. He added the firm would continue to keep a "watchful eye" for takeovers that could "bring value to our business model and shareholders".  

Batista was upbeat on the outlook for the firm's struggling US chicken business, which racked up an EBITDA loss of US$149.8m in 2011, down from positive EBITDA of $481.9m the previous year.

Management highlighted the firm had witnessed an improved performance in the from Pilgrim's Pride in the last three months of 2011, which allowed it to book a fourth-quarter group profit of BRL25.6m after two consecutive quarters of losses. 

Efforts to improve the performance at Pilgrim's Pride have centred on capacity reduction and increasing the business' exposure to export markets in an attempt reduce the group's reliance on the US poultry market, which has experienced pricing difficulties due to an oversupply of broiler meat. 

"Although there is more to be done, we can already see the results of our efforts," Batista said.

Batista also indicated that the group would increase its financial discipline and focus on increasing cash flow in order to deleverage its balance sheet. According to JBS's financial statement, released after close of the market yesterday, the group's net debt stood at BRL13.6bn at the end of 2011.