JBS N : Conference Call Transcript - 1Q25

International Conference Call

JBS S/A (JBSS3)

1Q25 Earnings Results Transcription

May 14th, 2025

Operator: Good morning and welcome to JBS, SA and JBS USA 1Q25results conference call.

At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. As a reminder, this conference is being recorded.

Any statements eventually made during this conference call in connection with the Company's business outlook, projections, operating and financial targets, and potential growth should be understood as merely forecasts based on the Company's management expectation in relation to the future of JBS. Such expectations, I highly depend on market conditions, on Brazil's overall economic performance, and on industry and international market behavior, and therefore, are subject to change.

Are present with us today, Gilberto Tomazoni, Global CEO of JBS, Guilherme Cavalcanti, Global CFO of JBS, Wesley Batista Filho, CEO of JBS USA, and Christiane Assis, Investor Relations Director.

Now I will turn the conference over to Gilberto Tomazoni, Global CEO of JBS. Mr. Tomazoni, you may begin your presentation.

Gilberto Tomazoni:

Good morning, everyone. Thank you for joining us today for earnings call.

JBS begins 2025 with one of the strongest 1Q results in its history. And yet, another demonstration of the strategy of our diversified global platform. Net sales rose 8.5% in US dollar, and net profit jumped 50.5%, with an EBITDA margin of 7.8%. A remarkable performance in what is a typical softer quarter for the global protein industry. Quarter after quarter, our results continue to validate the strategy decisions we have made building the management of our platform.

We also advanced our goal for our dual listing of JBS shares in both Brazil and the United States, following the completion of our regulation with the US Security Exchange Commission. Once approved by our minority shareholders, this step will remark a new chapter in the company journey. We believe this mutual listing will enhance our international visibility, attract new investors and further strengthen our position as a global leader in food.

Our poultry and pork business in Brazil and the United States were the standout performance this quarter. Seara and Pilgrim's delivered a record 1Q EBITDA margin of 19.8% and 14.8% respectively. I want to emphasize that Seara's performance reflected a disciplined focus on operational excellence and position across domestic and international market, capturing value through product mix optimization and a strong focus on innovation.

With the launch of new category in Brazil, such as the Air Fryer Ready products line and the co-branded partnership with Netflix, the business continued to strengthen its portfolio of high value-added offerings.

Pilgrim's results were driven by solid demand, disciplined portfolio management, and stable grain costs. JBS US Pork also delivered a strong performance, supported by higher sales volume and a favorable supply demand and dynamic, achieving an EBITDA margin of 12.4%. Our strategy of geography and protein diversification continues to yield positive results, even amid ongoing margin pressure for JBS Beef North America.

The beef business in Brazil and Australia are benefiting from the respective cattle cycles in both countries. At Friboi, the focus remained on operational excellence, expanding the value-added portfolio and increasing market access. In Australia, where the cycle is expected to remain favorable in the coming quarters, results reflect operational improvement in export growth despite being a quarter that typically sees higher cash consumption, the company leverage ratio stood at

1.99x EBITDA in US dollars, well below the 3.66x EBITDA reported at the same period last year, uncovering our financial strength. Net sales for the quarter reached 19.5 billion with adjusted EBITDA of US$1.5 billion US dollar.

We remain confident in our long-term strategy, operational excellence, growth through diversification, innovation, value-added products and strong brands. The strength of our global platform combined with a disciplined capital allocation, market diversification, and our capacity to innovate, support value creation for all of our stakeholders, including our team members, customers, investors, producers, partners, and consumers.

Finally, our 1Q results reaffirm our conviction that we are in the right path, delivering consistent growth, expanding margin, and preparing JBS for a new cycle of opportunities.

Thank you again for joining us today. I will pass turn to the call over to Guilherme, who will work throughout our financial results in more details. Guilherme, please go ahead.

Guilherme Cavalcanti:

Thank you, Tomazoni. Let's now move onto the operational and financial highlights of the 1Q25, starting on slide 10, please. Net revenues for the 1Q was US$19.5 billion, adjusted EBITDA totaled of US$1.5 billion and represents a

margin of 7.8% in the quarter. Net profit was US$500 million in the quarter. Excluding the non-recurring items, adjusted net income would be US$572 million.

Moving on to the next slide, in the 1Q25, operating cash flow recorded a negative result of US$285 million, while free cash flow was negative by US$970 million. The main variations that impacted cash flow in the annual comparison were: The increase in tax payments in the amount of US$206 million driven by solid results mainly from Seara, PPC, US Pork, and Australia; the increase in working capital impacted mainly by the growth in inventories due to the higher cost of capital in the US and Brazil; the increase in margin deposits for our hedge positions in the futures market driven by the rise in cattle prices in US; and the payment of antitrust related settlements in the amount of US$140 million.

Moving on to the slide 13, net debt in the 1Q ended at US$14.8 billion, a reduction of US$1.1 billion compared to the previous year. I would also like to highlight some advances we have made in liability management, which allowed us to reach an average term of approximately 12 years and an average cost of 5.4%.

In January 2025, we issued bonds totaling US$1.75 billion with strong demand for these securities. In March, we issued a CRA through Seara for approximately US$123 million. The first issuance with a 30-year term, the longest in the Brazilian capital market. As a subsequent event, in May, we repurchased US$850 million in senior notes due to 2030 and filed an issuance of a new CRA through Seara for a total amount between US$141 million and US$176 million. Leverage in dollars decreased in one year from 3.66x to 1.99x in the 1Q25. The decrease is due to the expansion of EBITDA and debt reduction.

Finally, I would like to highlight that in the general meeting, the shareholders approved the distribution of US$789 million in dividends, equivalent to $0.30 per share, which will be paid today. It is worth remembering that we still have $0.17 to be distributed in the event of approval of the dual listing.

I will now briefly go through the business units. Starting with Seara on slide 14, net revenue growth in the quarter was 3%, while profitability grew approximately 8 p.p., reaching 19.8% EBITDA margin, a record for the 1Q. This result is a consequence of a better commercial and operational execution, a strong global demand for poultry and pork, and expansion of the value-added portfolio.

Moving on to the slide 15, in the 1Q25, JBS Brazil recorded a net revenue 10% higher than in the 1Q24 as a result of strong international demand and higher price in the domestic market, which were intended to offset the sharp increase in cattle prices. Thus, the EBITDA margin reached 4.1%, a slight drop year over year.

Moving on to the slide 16, and now speaking in dollars and US-GAAP, JBS Beef North America net revenue in the 1Q25 grew 15% compared to the previous years as a result of a strong demand that drove cutout to record levels in the US.

However, profitability continues to be pressured by the challenging cattle cycle which has also kept the price of live cattle at record levels.

On slide 17, we have JBS Australia. In the annual comparison, the 12% revenue growth is mainly due to the higher volume sold in beef exports. The EBITDA margin reached 10.4%, an increase of 1.3 p.p. in the annual comparison as a result of the greater availability of animals for slaughter and gains in the operational efficiencies.

Turning now to JBS USA Pork, net revenue for the quarter grew 5% year over year, reflecting high prices driven by strong demand. Pork consumption is also being helped by the average price of beef, which remains high. Once again, JBS USA Pork demonstrated consistency and solidity in its results for the quarter, thus delivering an EBITDA margin of 11.1%.

Pilgrim's Pride, highlighted on slide 19, reported a 2% increase in net revenue in the quarter. In the 1Q25, Pilgrim's delivered a solid performance, reflecting the consistent execution of its strategy and the resilience of its diversified portfolio across all regions where it operates. The company maintained robust margins driven by operational gains and the continued strengthening of strategic partnerships with key customers even in the face of a volatile scenario.

With that in mind, I would like to open up for the Q&A session.

Question and Answer Session

Operator: Ladies and gentlemen, we will now begin the question-and-answer session. If you have a question, click the Raise Hand button at this time. If at any point your question is answered, you can remove yourself from the queue by clicking Lower Hand.

And our first question comes from Ben Theurer, with Barclays. Please, go ahead

Ben Theurer, Barclays: Yeah, good morning, Tomazoni and Gui. Thank you very much for opening up for questions here. Two questions for you. So number one, you talked a little bit about this on the call earlier today, but I guess a few things were lost in translation, literally. As it relates to these recommendations for the voting on the dual listing, which is upcoming in about 10 days, how do you feel about your ability to really talk to investors and how has the feedback been just from some of these investors that tend to vote along these proxies?

To get a little bit of a sense how you how you think about the outcome of the voting next week and what is under your control. That would be my first question, and I have a second one on your operations.

Guilherme Cavalcanti: Okay. So we don't have access to votes, and [14:21 inaudible] votes comes closer to the General Assembly, so basically, we don't know how many of those specific funds will follow the proxy of the agencies. What

we've been continuing to be talking to shareholders, showing the importance for them to come to vote. A lot of funds generally never comes to General Assembly. So we are stressing this importance for the ones that we continue talking.

Ben Theurer: OK, thank you very much. Good luck with that. And then second, just on the beef business in the US, and you've flagged a couple of things in terms of like export headwinds because of lever, particularly in the 2Q what is upcoming in terms of just from a tariff perspective, but also at the same time, I mean, clearly, cattle price just continued to go up.

So as you look at the current environment, A, what are you seeing or what signs are you seeing in terms of just starting a rebuild and what the implications are for you guys here? And second, as it relates to these trade flows, how much of an impact should we think about this in 2Q, just from a margin perspective or dollar amount? Anything you can share with us as to the impact from these tariff implications on exports. Thank you.

Wesley Batista: Ben, good morning. A few things. So for sure, we're seeing 2025 a much more difficult year than 2024 from a margin perspective. We are seeing some signs of herd rebuild, if you want to say that, because what we're seeing is a much lower processing of female, of non-fed animals, about 14% versus the same time last year, which is already a year, you know, 2024 was already much lower than 2023.

So we continue to see that, and that is encouraging. It's not as fast as we would like, and it's not as intense as we would like, but still, they are positive signs for herd rebuild. So we still expect that 2026 would be a better year than 2025, but probably not 100%.

When it comes to tariffs and trade disruption, we think that this whole scenario of trade that we had right before this weekend, wood was costing us, from a margin perspective, about 1 to 1.5% p.p. in margins. And like I said in the previous call, a lot of that was coming from actually our byproducts. A lot of hides go to China and get processed there. So that is a very important market for hides.

So since that's kind of gone away, we see that it's probably just going to impact half of the quarter, so it wouldn't be a full impact of the quarter. With that, also we're seeing that 2025 will be a challenging year. Q2 will be very challenging compared to same time last year. The one thing, Ben, that we're seeing more than ever and we're very confident about is that, and we're being able to see this in the current quarter that we're presenting and we're certainly going to be able to see that in the 2Q, is even though the US beef business continues to be challenging, we're going to be able to continue to show relatively stable margin given diversification of the business.

So we're seeing, as the US has these challenges, we're seeing positives in other geographies and in other proteins. So we continue to be very confident. Actually,