Posts

JBS invests R$400m to launch new collagen, gelatin business

New company will produce collagen, gelatin to food, pharmaceutical, cosmetics industries

08/10/2022

Claudia Yamana — Foto: Silvia Zamboni/Valor

Claudia Yamana — Foto: Silvia Zamboni/Valor

Giant meatpacker JBS has a new venture. The company starts this month the operations of Genu-in, a new company that will produce collagen peptides and gelatin from bovine skin coming from the company’s production chain. The investment in the business totaled R$400 million, with an eye on a market of $4 billion a year that has grown more than 15% annually in the last five years, data by consultancy Allied Market Research show.

The new business will sell peptides and gelatin to the food, pharmaceutical, and cosmetics industries. Collagen is widely known as a protein that helps with skin hydration, wrinkle reduction, and cartilage regeneration, among other benefits.

“It is a company that was born big, positioning itself among the three major players in the market with 10% of the global market for peptides and bovine skin gelatin,” said Claudia Yamana, CEO of the group’s new company.

The investment is higher than the R$280 million forecast in February 2021, when JBS announced the venture. The higher contribution is due to higher prices of steel, copper, materials for manufacturing the equipment, and transportation expenses, the company said.

Genu-in will be the main Brazilian company in this field. A direct competitor of JBS in the processing of bovine protein, Marfrig, for example, only sells the by-products of its production to collagen and gelatin manufacturers. Globally, the biggest competitors are German company Gelita and Rousselot, of U.S.-based Darling Ingredients. Both have operations in Brazil.

Genu-in joins the new business division of JBS, with operations that transform the by-products of the cattle, pork, and poultry processing chains into products such as leather, biodiesel, fertilizers, feed, pharmaceutical inputs, personal care, and cleaning materials. Collagen was already produced by JBS, but for use in industrialized foods made from meat.

The executive argues that the differential to the competitors is precisely in the control of the entire chain, “from the origin to the plant,” preserving native collagen and its benefits. In the first moment, production will be concentrated on products made from bovine skin.

With a facility in Presidente Epitácio, São Paulo, Genu-in starts operations with more than 130 employees. Production capacity is 6,000 tonnes per year of collagen peptides and 6,000 tonnes of gelatin per year.

“The installed capacity here is five times larger than the domestic market,” says Ms. Yamana. The company will operate in the foreign market, but also sees growth potential in the domestic market “as the population ages.”

The first launch is the collagen peptide Genu-in Life, an ingredient for health and beauty products. The component will be in the formulation of third-party brands that will reach final consumers through the retail market by early 2023, according to Ms. Yamana. Another product is Genu-in Gel gelatin, which is used by the food industry in the production of desserts, ice creams, and candies, and by pharmaceuticals in the development of pills and medicine capsules.

*By Raquel Brandão — São Paulo

Source: Valor International

https://valorinternational.globo.com/
/by

JBS reports best year ever, record profit

Gilberto Tomazoni — Foto: Silvia Zamboni/Valor
Gilberto Tomazoni — Foto: Silvia Zamboni/Valor

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

https://valorinternational.globo.com

/by

Development bank raises R$1.9bn with JBS block trade

A cruzada inócua e cara de Bolsonaro contra o BNDES

The Brazilian Development Bank (BNDES) pocketed almost R$1.9 billion on Wednesday with the sale of another slice of its shares in JBS. In a block trade coordinated by BTG Pactual, the state-owned bank disposed of 50 million shares. Since December, BNDESPar, the bank’s equity arm, has raised more than R$4.5 billion with the sale of JBS shares.

The shares were traded at R$37.52, the price of the firm guarantee given by BTG. A source who followed the operation said that JBS bought shares again, which signals that the meatpacking giant still sees a large discount on its market capitalization.

In December, when BNDES started divestments in JBS with the sale of 70 million shares, the company took virtually all the shares for R$38.01 each, disbursing more than R$2.5 billion. BofA was the coordinator of the block trade.

With this Wednesday’s sale, BNDES reduces the position in JBS to less than 20%. The bank’s bet on the company was quite profitable. Since 2007, BNDESPar has invested R$8.1 billion in JBS, overperforming Brazil’s benchmark stock index Ibovespa, interbank deposit rate CDI and the goal of the development bank’s pension fund.

As the BNDES continues to reduce its position in the company over the next few months, JBS will be able to get rid of the overhang that weighs on its shares.

Analysts believe that JBS is trading at a discount considering the positive moment, especially in the United States. Last week, analysts Thiago Duarte and Henrique Brustolin, with BTG Pactual, revised the target price for the stock to R$55 from R$50, which embeds a potential for appreciation of more than 45% over current prices.

According to the analysts, JBS shares trade at a multiple of 3.7 times the projected EBITDA for 2022 and 4.6 times for 2023, which is 20% below the historical level.

JBS is currently valued at R$88 billion on the stock exchange. The BNDES’s position is worth R$17 billion.

Source: Valor International

https://valorinternational.globo.com

/by