JBS reports best year ever, record profit

After distributing more than R$7 billion in dividends and investing $2.1 billion in acquisitions, JBS released Monday its 2021 results, which confirmed that the year was the best in the company’s history in several aspects — from growth, with record revenues and EBITDA, to shareholder remuneration, which achieved a return of more than 70%.

Boosted by strong demand for beef in the United States, in Brazil and in the international market, JBS reported a net income of R$20.5 billion in 2021, more than triple that of the previous year (R$4.6 billion). Alone, the fourth quarter result was already higher than the full year of 2020. From October to December, JBS profited R$6.4 billion, up 61% year over year.

The second largest non-financial company in the country, behind Petrobras, JBS had net revenues of R$350 billion last year, an advance of 29.8%. In the fourth quarter, revenues, mostly generated in the U.S., rose 27.8% to R$97.2 billion.

Thanks to the exceptionally positive moment in the operations abroad, especially in the U.S., the pressure of costs that harmed the business in the Brazilian market (Seara, above all) was not able to bring down the result of JBS. In the year, EBITDA increased 54.5%, to R$45.6 billion. With this, the adjusted EBITDA margin rose 2.1 points, to 13% in 2021. In the fourth quarter, adjusted EBITDA reached R$13.1 billion, an increase of 86.9%. Thus, the margin advanced 4.3 points, to 13.5%.

In an interview with Valor, CEO Gilberto Tomazoni celebrated the ability that JBS had in 2021 to combine multi-billion investments in acquisitions and organic expansions (there were more than R$20 billion last year) with shareholder returns. “JBS is the best option in the market. Not only for what it delivers in the short term, but for the potential it still has,” he said.

With share buyback programs (R$10.6 billion) and dividends (R$7.4 billion), JBS made a “dividend yield” of 8.2% in 2021, CFO Guilherme Cavalcanti said. When you add up the valuation of JBS shares on the stock exchange (the share rose 60.4% last year, while benchmark stock index Ibovespa declined 11.9%) and the return to shareholders in the form of dividends and buybacks, JBS’s total shareholder return reached 73.4%, Mr. Cavalcanti said.

In addition, the investments JBS has been making are remunerating shareholders’ capital well. In 2021, the return on invested capital (ROIC) metric reached 24.1%, up from 20.4% in 2020. This metric has been evolving at least since 2018, when it was 11.6%. “Our average cost of capital is 7.5%. That shows JBS’s value creation,” he added.

Last year, JBS’s capital structure also improved, which helped the company earn investment grade, reducing the cost of debt. In December, the net debt-to-EBITDA ratio in dollars was 1.46 times, the lowest in history. In September, it was 1.49 times. With cheaper debt issues — the group issued $1.5 billion in notes in January, JBS lengthened the average maturity from 5.9 years in 2020 to 8.1 years. The average cost of debt fell to 4.3% per year.

“Our capacity to cover debt service became stronger,” said Mr. Cavalcanti. The ratio between JBS’s EBITDA and financial expenses rose to 11.6 times from 7.8 times. “What it generates in free cash flow is greater than any debt amortization. The refinancing risk is zero,” stressed the executive. Last year, free cash flow generation totaled R$11.9 billion.

For 2022, JBS maintains positive expectations. In the United States, the demand for meat remains firm, while Asia buys more and more. The margin of the beef business in the U.S. is not expected to be as high as it was, unusually, in the last two years, but it is possible to say that it is structurally higher than in the past decade. In Mr. Tomazoni’s reading, even with a slightly lower supply of cattle in the U.S., margins would remain in the “high single digits.” In the past, U.S. slaughterhouses celebrated when they had margins of 6%.

Source: Valor International

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