JBS posts large loss, announces reorganization

Brasilia | Reuters –– Brazilian meat packer JBS posted a much larger-than-expected first-quarter loss on Thursday, but its shares jumped the day after it announced a corporate reorganization to bring together international operations.

JBS, the world’s biggest meat packer, lost 2.741 billion reais (C$1.02 billion) on currency hedging costs and poor results on the company’s U.S. cattle operations. Analysts polled by Thomson Reuters had expected a loss of 1.1 billion reais.

CEO Wesley Batista said the company had reduced its hedging position since late March and that the U.S. cattle cycle is improving, meaning the company should avoid a loss in the second quarter.

Sao Paulo-based JBS said Wednesday it will create JBS Foods International, an Ireland-based company whose assets will encompass its global operations, including its beef plant at Brooks, Alta.

The international company would also include JBS’s Brazil-based food processing firm Seara Alimentos.

A separate publicly-traded company, JBS Brazil, would continue to hold JBS’s Brazilian beef, biodiesel, collagen and carrier businesses plus its global leather business.

The company said it expects the reorganization to help improve its access to international equity and debt capital markets, allowing it to raise further financing to support operations while lowering its cost of capital.

JBS shares jumped 17.3 per cent, leading gains on the Bovespa index. Analysts at Brokerage Brasil Plural said the change diminished JBS’s capital costs, unlocking shareholder value.

JBS is not focused on acquisitions in 2016, but rather on consolidating its recent purchases and reducing leverage closer to two times its earnings before interest, taxes, depreciation and amortization (EBITDA), said Batista, who under the planned reorganization would remain CEO of the global business.

EBITDA totaled 2.137 billion reais in the quarter, down 22.5 per cent from a year earlier.

Batista also said the Brazilian Senate’s decision to put President Dilma Rousseff on trial, removing her from office for up to six months, is positive for the Brazilian market and that the Brazilian real would continue to strengthen.

JBS, once a family-run butcher, grew into a global player during the past decade, catching a wave of Workers Party policies to stimulate home-grown conglomerates.

Reporting for Reuters by Silvio Cascione and Caroline Stauffer. Includes files from AGCanada.com Network staff.

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