In the first quarter of 2024, JBS S.A. (JBSAY) reported a 2% increase in EBITDA margins year-over-year and a 5% increase compared to the same quarter in the previous year. The company's net profit reached $332.3 million with net revenue totaling $18 billion and adjusted EBITDA of $1.3 billion. Global CEO Gilberto Tomazoni highlighted the strong performance of key segments and outlined substantial investments in expansion, while Global CFO Guilherme Cavalcanti detailed the financial strategy, including debt repayment plans and leverage rate goals.
Key Takeaways
- JBS S.A. achieved a solid first quarter with a 2% increase in EBITDA margins from the previous quarter and a 5% increase year-over-year.
- The company reported a net profit of $332.3 million, net revenue of $18 billion, and adjusted EBITDA of $1.3 billion.
- JBS saw strong performance in Seara, Pilgrim's, and its U.S. pork businesses, aided by lower grain prices and a balanced supply-demand scenario.
- The company plans to open new plants and expand existing facilities in Brazil, Saudi Arabia, and Spain.
- JBS intends to pay down at least $500 million in gross debt in Q2, aiming for a long-term leverage rate of 2x to 3x net debt EBITDA.
- The company is awaiting SEC responses for its filings for a New York Stock Exchange listing.
- Despite tougher conditions expected in the U.S. beef business in Q2, JBS remains optimistic about its chicken and pork segments.
- There are opportunities to capture an additional 2% margin benefit in the U.S. beef market, primarily through labor efficiency and product mix improvements.
Company Outlook
- JBS is focused on operational excellence, cost management, and portfolio optimization.
- Upcoming investments include new plants in Brazil, an expansion in Saudi Arabia, and a cultivated protein plant in Spain.
- The company expects tougher conditions in the U.S. beef market in the second quarter but sees potential in other segments.
- Seara's growth potential in value-added and branded segments is not yet fully realized.
Bearish Highlights
- The U.S. beef business may face challenges in the second quarter.
- Signs of herd retention and decreased cattle processed are not definitive indicators of market trends.
Bullish Highlights
- Reduced grain prices and supply-demand rebalance have benefited JBS's pork businesses.
- The company sees growth potential in Seara and other value-added products.
Misses
- There were no specific misses mentioned in the provided context of the earnings call.
Q&A Highlights
- The company discussed its leverage and debt repayment strategies, including a focus on reducing the average cost of debt.
- JBS is looking to capture further margin benefits in the U.S. beef market not related to automation or capital expenditures.
JBS S.A. has demonstrated resilience and strategic growth in the first quarter of 2024, with a solid increase in EBITDA margins and robust net profits. The company's focus on cost management, operational excellence, and strategic investments positions it well for future growth. Despite expecting some headwinds in the U.S. beef sector, JBS is optimistic about its overall business performance and is actively managing its debt structure to maintain financial stability and flexibility for potential mergers and acquisitions or dividend increases. Investors and stakeholders will likely watch the company's progress on its New York Stock Exchange listing and its ability to capture additional margins in the U.S. beef market closely.
InvestingPro Insights
JBS S.A. (JBSAY) has been making headlines with its solid performance in the first quarter of 2024, and the data from InvestingPro provides additional insights into the company's financial health and stock performance. With a market capitalization of $12.68 billion and a P/E ratio that has adjusted from 31.74 to a slightly lower 28.61, JBSAY appears to maintain a strong position in the market. Moreover, the company's commitment to shareholder returns is evident with a high dividend yield of 6.53%, which is particularly attractive for income-focused investors.
InvestingPro Tips reveal several key factors that could influence investor sentiment towards JBSAY. Notably, the stock has experienced a significant return over the past week, month, and year, with a one-week price total return of 19.27%, a one-month return of 35.03%, and an impressive one-year return of 79.97%. This momentum suggests a robust investor confidence in the company's prospects. Additionally, the company is trading near its 52-week high, at 99.91% of this peak value, which may indicate a strong market belief in its ongoing and future performance.
For investors seeking more comprehensive analysis, InvestingPro offers a range of additional tips on JBSAY, which can be accessed through their platform. Currently, there are 18 more InvestingPro Tips available that can provide further insights into JBSAY's performance and potential investment opportunities. By using the coupon code PRONEWS24, investors can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a wealth of information that can help in making more informed investment decisions.
JBS S.A.'s recent financial results and InvestingPro's data together paint a picture of a company that is not only performing well in terms of profitability and revenue growth but also appears to be a potentially attractive option for investors looking for strong returns and stable dividend income.
Full transcript - JBS SA (OTC:JBSAY) Q1 2024:
Operator: Good morning and welcome to JBS S.A. and JBS USA First Quarter of 2024 Results Conference Call. [Operator Instructions] 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. Our potential growth should be understood as merely forecast based on the company's management expectation in relation to the future of JBS. Such expectation are highly depend on market conditions on Brazil's overall economic performance and on industry and international market behavior, and therefore are subject to change. 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 very much for your participation in our results teleconference. Before delving into the results, I want to take this opportunity to express my solidarity with the victims on the catastrophe caused by the rain in Rio Grande do Sul, especially our more than 16,000 team members in the state. The world has been following the situation with sadness and the dedication of our entire team has been essential for help our team members, our partners, along with their families and the impact communities recovery. Once again, I want to express my deep admiration and gratitude for this extraordinary work that everyone has been doing to offer support during this tragic event. As a company, we have mobilized them to provide donations of essential items for assistance to people in the region, such as food, hygiene and clean products, water, clothes and blankets. Shifting to our results that we were released today. JBS solid first quarter reinforced that we are on the path to recover as indicated in the previous periods. We added nearly 2% points to our consolidated EBITDA margins compared to the fourth quarter of 2023 and almost five points compared to the first quarter of 2023, achieving a margin of 70.2 for the period. I would like to highlight Seara's results with a double digit margin already achieved in the first quarter, the closing of some operation gaps, the normalization of grain costs and the growth involved in domestic market reinforce our promise, prospect for Seara this year. We maintain our focus of identifying consumer preference and capturing operational opportunities. The focus on key customers, brand growth and consolidation of the business in Europe, along of the pursuit of operational excellence are reflected in the Pilgrim's strong performance. Business margins saw a significant increase jumping for 6.5% in the first quarter in 2023 to 11% in the first quarter in 2024. The U.S. pork margin similar increased from 2.5% to 16.4% over the same period. Both the poultry and pork business are benefit from reduction of grain price as well as the rebalance of supply and demand. I want to highlight that the stat of our results, once again reinforce the importance of geographical and protein diversification. In a traditional weaker quarter of the global protein industry, the beef business in Brazil and Australia capture cattle cycle highs in both countries while JBS beef in North America continues to experience weak margins, where we are in the region scale cycle in seasonal conditions as previously noted. We achieved a net profit of $332.3 million for the period with net revenue of $18 billion and adjusted EBITDA of $1.3 billion. Our priority remain the leverage. The leverage rate decreased from 4.42 in dollar in the fourth quarter of 2022 to 3.66 in dollars in the first quarter of 2024. The results from the quarter emphasize our confidence in JBS long-term strategy, focus and on spending our global multi-protein platform and consolidation our portfolio of strong brands and value-added products. In this regard, we have made numerous investments over the past few years that will begin the yield results. In Brazil, we will open a new in natura pork plant and prepare a food plant this year in Dourados, industrial Complex in Mato Grosso do Sul. We also announced in April that we will double the capacity of our Campo Grande beef facility in the same state, one of the recently approved the China export facilities. In Jeddah, Saudi Arabia, we are finalizing our third halal value added products facility, and in San Sebastian in Spain, we'll begin operation at the Bio Tech Foods cultivated protein plant. We remain focused in what we control to become increasingly competitive in each market where we operate. For this reason, we have an absolute focus on our operation, cost management, productivity increase, portfolio optimization and prices regardless of geographic or economic fluctuation. We are confident that the strength of our platform, combined with our financial performance and our commitment to excellence and innovation will allow JBS to continuous its growth trajectory, generate value for our stakeholders and the communities in which we operate. Thank you again for your participation in these results call, and now I will pass the floor to Guilherme who will detail our numbers. Guilherme, please.
Guilherme Cavalcanti: Thank you, Tomazoni. Let's now move to the operational and financial highlights of the first quarter of 2024. Starting on Slide 15, please. Net revenue in the first quarter, 2024 was $18 billion. Adjusted EBITDA total at $1.3 billion and represents a margin of 7.2% for the quarter. Net profit was $332 million in the first quarter. Moving on to the next slide, operating cash flow in the quarter was $25 million. Free cash flow for the quarter was negative at $625 million. As we anticipated in the last earnings conference call, we estimated that the cash consumption would be half of the amount reported in the same period last year, which happened. Despite this cash consumption, which is common to the first quarter due to the seasonality of the period, the improvement is mainly explained by the increasing results from practically all of our business units. Also on this slide, capital expenditures in the quarter was approximately $284 million, 55% of each was maintenance CapEx. This amount is 26% lower than the first quarter, 2023, and is in line with our estimate of the year of $1.3 billion. Now moving to the Slide 17, net debt ended up the first quarter at $15.9 billion, reflecting an increase in $569 million compared to the previous quarter. A change that is in line with the cash consumption of the quarter and expected, considering the seasonality of this time of the year. The leveraging dollars reduced from 4.42x to 3.66x, and in reals from BRL 4.32 to BRL 3.7 in the quarterly comparison, confirming that the leveraging path that we had indicated in previous calls. For the second quarter, we expect another significant decrease in this indicator to around 3x. A simple leverage exercise without considering guidance to achieve a leverage at the end of the year of 2.5x, our consolidated margin for 2024 should be close to 7.5%, considering that the first quarter is seasonally weaker and the margin was already 7.2%, it is reasonable to think about this level of leverage for the end of the year, thus align it with our policy of maintaining leverage rate between 2x and 3x in the long-term. It's worth mentioning that we reduced gross debt in $666 million in the first quarter, mainly due to the payment of short and long-term bank debts. We'll continue to reduce gross debt in the second part. So I will now briefly go through the business units. Starting with Seara on Slide 18, net revenue for the quarter remains stable in relation to the same period of the previous years at [ $2.08 billion]. However, as we had indicated, profitability has already returned to normalized double-digit levels. This improvement is the result of the intense focus on operational excellence on the management team, on reducing costs, especially grains and on better balance of global supply and demand on commercial execution and on the maturation process of Seara's new plans. Thus, the EBITDA margin grew by more than 10 percentage points in the annual comparison, reaching 11.6% in the first quarter. Moving out to Slide 19, JBS Brazil recorded net revenue of 22% higher than the first quarter last year, driven by higher volume sold. The favorable cattle cycle had a positive impact on sales volume, both in domestic and international markets due to the greater availability of animals for slaughter. This cycle has also contributed to reduce the prices of live cattle as a consequence has boosted profitability in a positive way. Moving to the Slide 20, and now we speaking in dollars and in U.S. GAAP. JBS Beef North America net revenue grew 6% year-over-year in the quarter as a result of the increase in average prices and volumes. However, profitability was still under pressure considering the more challenging cattle cycle, given that the price of live cattle increased more than wholesale price. In Slide 21, JBS Australia in the quarter, the growth in revenue in the annual comparison is the result of higher volume sold in both domestic and international markets. The growth in profitability in the annual comparison mainly reflected the greater availability of cattle in the market, given the more favorable cattle cycle and efficiency gains in several areas of our business in Australia. Turning now to JBS USA pork net revenue for the quarter was 6% higher compared to the first quarter last year due to the increasing average prices in the period. In addition to the improvement in commercial dynamics, profitability in the quarter was positively impacted by lower average grain costs, reduction in the average pork price and continuous efforts aimed at expanding value-added portfolio in addition to improving commercial operational and logistic execution. Pilgrim's Pride (NASDAQ:PPC) is highlighted on this Slide 23 required an increase in net revenues of 5% in the first quarter, 2004 compared to the last year. The first quarter brought the fruits of the strategy already implemented, allowing the company to grow ahead of the markets together with the key customers. The portfolio of branded products continue to expand and contribute to the diversification. These efforts combined with an interest focus on operational excellence resulted in an increased profitability in the period. As you can see, the results for the first quarter were very encouraging, as we had indicated in the last earnings conference calls. Therefore, we are optimistic about our deleveraging and free cash flow generation trajectory for the year. At this time, I would like to open for our question-and-answer session.
Operator: [Operator Instructions] Our first question comes from Priya Ohri-Gupta with Barclays (LON:BARC). Please Priya, you may proceed.
Priya Ohri-Gupta: Great. Thank you so much for taking the questions. Guilherme, congratulations on the deleveraging so far. It sounds like you expect to continue to pay down debt in the second quarter given where your cash balance is and typically second quarter starting when you seasonally generate free cash flow or positive free cash flow. How should we think about first the amount of debt that you would look to bring down in second quarter, I think, to get to that 3x level that you had mentioned on the call? And then secondly, as you think about repaying this debt what type of an approach do you take? Do you look to sort of maximize your deleveraging by thinking about the price of the bonds and going for lower priced, or do you think about NPV benefits that taking out certain bonds could bring? Thank you.
Guilherme Cavalcanti: Thank you, Priya, for your question. First the payment of the debt that we intend to do in the second quarter has not impacted on the 3x that I mentioned because I mentioned 3x net debt, so debt less cash. So the amount, how much I will pay in the second quarter won't affect this estimate for 3x in the second quarter. Now in terms of paying down that, you are right. I finished the first quarter with $3.5 billion in cash on hands plus $3.2 billion in revolving facilities. This cash on hands, I have access. I don't need all that cash to operate even in a mobile volatile scenario. But of course we are always more conservative. We paid $660 million in debt in the first quarter. In the second quarter, we intend to pay at least $500 million in gross debt. So currently, I'm working with a payment of $500 million in gross debt. If you look our debt breakdown, we have 13% more or less. It is local debentures in Brazil, in fact, 11% of our debt is local debentures in Brazil, which I just announced that a repurchase of BRL 1.8 billion and an issuance of BRL 1.5 billion to BRL 1.8 billion. So just I am getting better rates and better tenures in making these exchange in the local debentures. The $500 million debt I intend to pay in the second quarter given that our commercial banks, now it's only 3% of our debt, and this is rural credit, which has a very low cost of debt and in fact a positive carry. You're right that I have to think about repurchasing bonds and the strategy we are still analyzing with what will be NPV or gross that, or average cost of that. I would say that having a lower average cost of debt improves our free cash flow for the period. So I would say that this could be a parameter to decrease the average cost of debt because then I decrease my financial expenses and increase my free cash flow for the years, giving me even more flexibility going forward. But of course, this will all depend on the studies and the level of the bonds in the secondary market by the time that we decide to do this.
Priya Ohri-Gupta: Okay. Wonderful. That's helpful. And I believe on the call earlier this morning, you mentioned that the objective is to maintain that leverage sort of in the 2.5x to 3x area, because anything sort of in the lower part of that two to 3x corridor is not as efficient. First, can you just walk us through that piece, and then as you think about sort of this faster pace of deleveraging, it sounds like you could start to think about things like M&A or dividends. Can you secondly just walk us through how you would prioritize those and the timing of sort of that happening relative to when some of the deleveraging will come through in the back half? Thank you.
Guilherme Cavalcanti: Okay, Priya. So first, our long-term charge is not 2.5 to 3x. It is 2x to 3x. So our long-term goal is to be between 2x and 3x is net debt EBITDA. So on average it's 2.5x. If we start to get too much below 2x than net EBITDA or too low as what has happened in 2021, for example, we were more aggressive in returning capital to the shareholders and also we did M&A. In the last five years, we generated more than $10 million in cash, which will be applied in $4 billion in expansion CapEx, $3.2 billion in acquisitions, $3 billion in dividends and $3 billion in share repurchase because leverage was going down. And if you start to be with a lower debt, you decrease your returns to the equity holders, and it's not so that efficient. So in case our deleveraging is faster and going to the lower range or even the low 2x, we'll for sure open opportunities for M&A in dividends, but M&A, it's an opportunistic, we will not allocate M&A -- first comes the target and the opportunity, and if it makes sense, if it creates value, if it's accretive and then we think about the leverage not the other way around. So if there's an opportunity regardless of the leverage, if it's opportunity to create the value for all stakeholders that is the priority. But generally, those M&A situations, they takes more time. And if we deleverage more fast, then we have a good opportunity of M&A dividends increase could be an alternative.
Priya Ohri-Gupta: So could we potentially see the dividend increase this year outside of possibly what may be paid with regards to the listing? And then just my last follow up is if you could give us any update on where you are with the listing process? Thank you.
Guilherme Cavalcanti: Yes, we already promised $450 million in basically BRL 1 per share if in case the listing is approved. And of course we didn't start the discussions of other levels of dividends. But again, it all depend on deleveraging path. We don't need to make this decision now, let's say how the year goes and how fast deleverage happens for. Then we think about if we increase or not the level of dividend. In terms of the listing, we saw that we make the filings on March 27 and we're still in the process and waiting for answers from SEC but is in the normal course of the process.
Priya Ohri-Gupta: Thank you so much.
Operator: Our next question comes from Ben Theurer with Barclays. Please go ahead.
Benjamin Theurer: Yes, good morning. And thanks for taking my question. Tomazoni, maybe just following along the lines from Priya, what we've just talked about and coming back to M&A and what's opportunistic and what's creating value for shareholders. So clearly we've all seen certain news article about Oscar Mayer in the U.S. potentially being up for that. So as it relates to that, what is opportunistic for you and creates value, given the potential for synergies here of integrating that? Would that something or somewhere else? Would that be something that you would consider as a good target as it would allow you to also further vertically integrate and create value? Just like, if you have some general comments on that would be much appreciated.
Gilberto Tomazoni: Hi, Ben. Thank you for your question. We have along these years to say that our strategy in terms of grow will be in aquaculture. We want to transform aquaculture the same we have done with chicken and pork to become relevant actor in this arena. We started with a small operation in Australia, but our focus on to grow in this segment. And then we have mentioned that value-added and brand is one of our priority, and this will be in Brazil, will be in U.S. and be all of the world. We want this part of value-added brand grow in our portfolio. And the other business like chicken and pork remain our priority for growth. And I cannot mention a specific target that you have mentioned because it's part of the strategy of the company, evaluate all of the times the opportunities we have. But what I can say to you that the value-added and brand is part of our strategy, but should be things that is aligned with the strategy, but make sense in terms of create value creation. And this the name that we are looking for make align with the strategy and make sense of economic.
Benjamin Theurer: Perfect. That's very helpful. And then maybe another question with Wesley on the call as well. Just wanted to dig a little bit into the dynamics right now in U.S. beef and what you're seeing. So it's a twofold question. So one, I think you mentioned on the call earlier this morning about being weaker than about a year ago, and I think this is obviously U.S. beef specific but just if you could clarify that and where it's ultimately coming from, that softness versus a year ago? And then second, the most recent data we've been looking at, it hasn't been that complete, but it doesn't feel like there is yet much of confirmation as to have a retention. So just wanted to get your comments on what you're seeing on the ground in terms of like what type of cattle comes into the slaughter, and if you're sensing a little bit of a switch and potential for retention to be happening right now.
Wesley Batista Filho: Ben, good morning. On U.S. beef, for sure compared to last year, and it's simple to see is just look at the spreads of what the U.S. state publishes and it's going to be a more challenging year this year compared to previous year. And it's simple. It's a lower availability of care. And on the demand side, obviously, the consumer with overall inflation and on many other categories, obviously makes it more difficult for the consumer to have a higher demand for beef. And on the export markets, it's not very dramatic, but we obviously have our Australian business doing very well and our Brazilian business doing very well with volumes and exporting, obviously that creates competition for the U.S. beef. So for sure, it is a tougher challenge, a tougher market for than last year for beef. And just to be very clear, that's beef. When we talk about second quarter for pork, we expect second quarter for pork to be, if anything, even though we see a tighter packer margin, we have our own live production. So should balance it out. And if anything, we think that Q2 has the potential to be better than Q1 for pork. And I wanted to make that very clear. And across the board, we're pretty optimistic about our other businesses. So the U.S. beef business being tougher this year is when I talk about the second quarter being tougher is beef-specific, for sure, even in the U.S., with chicken, with pork, we expect it to be actually, if anything better the second quarter than the first quarter and same thing goes for Australian business and everything. So this is beef-specific. When it comes to half retention, then you're right that we haven't seen a very, very clear and definite data that indicates that half a retention has significantly started. But we see signs, initial signs that we see with, we look at it with optimism. One of them is like I've been saying in the earning calls for a while, relatively speaking, it's a better year from a precipitation, from a water perspective compared to previous year. It's not perfect everywhere. You have the northern plains being a little bit more -- still pretty dry, but overall it's better than last year. So I think I see that with optimism. And the other thing is the reduction we're seeing in cattle processed year-over-year when you qualify that data little bit, we're seeing a 13% drop in calculating. So it's still not as low as it should be to have a clear understanding of half a retention. But it's a 13% decrease. So it's not irrelevant. And even within the fed cattle being processed, we're down 3.3% quarter-over-quarter, Q1-over-Q1 previous year, and if you open that in steer and heifer, it's the 3% decline in steer and a 3.8% in heifer. Again, I'm not saying that those are definite signs that we are well underway in half a retention. I'm not saying that, but we look at those signs with optimism.
Benjamin Theurer: Thanks for that Wesley. And then one last question on Seara, clearly very strong first quarter double digit margins. How is the second quarter coming together? Is that just a level you think you can kind of run through, or were there certain specifics in 1Q that potentially not repeated into 2Q as it relates to the profitability?
Gilberto Tomazoni: Ben, in reality, I mentioned when my speech in the beginning that is Seara was able to catch part of the gaps that were identified, remain opportunities to keep improving our personal excellence and caption these gaps. This is one thing. We are not end of the process. We are in the process. It is a part. Of course, the main part of the grain benefit, or particularly all of the grain benefit is already in our results. But the potential of Seara, as I mentioned before, the capture of the gaps Seara is not still in the full potential capacity. We expect that Seara keep growing is March. It's March.
Operator: Our next question comes from Carlos Laboy with HSBC. Please go ahead.
Carlos Laboy: Yes. Good morning Guilherme. Can you please give us an update on where you stand in terms of the SEC filings? The next steps as you look forward toward the toward New York Stock Exchange listing?
Guilherme Cavalcanti: Okay. So again, as I mentioned before, we did the filings on the March 27 and we are waiting for SEC response. So it depends on the level of questions that might come or not from the process because it's a back and forth process. And at some point, SEC will have no more questions. And then we can ask for a registration. And then once we have a go-ahead of SEC for the registration, then we can call general assembly and then put it to votes and so on.
Operator: Our next question comes from Carla Casella with JPMorgan (NYSE:JPM). Please go ahead.
Carla Casella: Couple of questions that are follow up and then one new one. I think one of the prior callers had asked about Oscar Mayer which may be for sale from Kraft. Did you say how something like that might fit into your portfolio, or if that's anything that could be of interest to you, would you even look at it?
Gilberto Tomazoni: Carla, I just mentioned before to Ben that our strategy is to grow and value-added and brand grow in aquaculture, grow in chicken. And we are investing in Brazil in this direction that for growing value-added and brand. We evaluate all of the opportunities in this arena. And I cannot comment on one specific target that you mentioned, but I say it is part of our starting grow and value-added and brand. And of course, it is one of the important things fit our strategy. Second, should be makes sense in terms of value creation to the company.
Carla Casella: Okay, great. I'm sorry I missed that. And then pork was so strong. I'm just wondering if you saw any outperformance in markets like California or Massachusetts where some of your competitors may not have enough of the Prop 12 kind of hog supply. Is there any of that driving some of your strength there?
Wesley Batista Filho: Carla, good morning. We obviously got prepared with this very early on, but I wouldn't say that a lot of our strong, a big part of our strong performance comes from that specifically. It's obviously being prepared and being able to service our customers in those markets, especially in California, which is a huge market, is important for sure, especially to keep our strategy of key customers and being able to continue that strategy. It's very important. I'm not downplaying that, but I wouldn't say that the strong performance of pork comes fundamentally first from something like that. It's by mix sale, it's performing well on the three points.
Carla Casella: Okay. Great. And then a follow up on you mentioned and when talking about the debt structure that you refinanced some of the BRL debt, did you say what rate? I didn't see any change in the rates in your debt schedule. I'm just wondering when you refinanced and maybe how much you were able to improve the rate?
Guilherme Cavalcanti: So basically I announced it. Repurchase of BRL 1.8 billion of local debentures that has different maturity, but more or less on 2030. And I'm issuing other trenches in the same amount maturing in longer terms with 20 years, 15 years. So basically we'll extend the maturities but the end rates is those local debentures. The rates are inflation. So IPCA is the Brazilian inflation plus a spread. This spread we will only know in the book building that will be done in May 24, because how it works, we put a ceiling rate, but then as the demand is higher, we compress the rates. So I cannot say now how much will be the difference in rates from the ones that I'm repurchasing and the ones that are issuing. But for sure I'm extending the tenures, but it also depends on how much people chooses from 10, 15 or 20 years.
Carla Casella: Okay, great. That's super helpful. And then just one last one, you did another bond exchange this quarter. Are all of your 100% of your bonds now all registered and exchanged?
Guilherme Cavalcanti: No the last ones that we did in September, 2023 the 10s and 30s that is mature in '34 and '53. They are not registered yet. When we filed the listing in March 27, we filed together the ask for the registers of those bonds that so far is still 144A then SEC probably will once sort everything together both, all the filings together.
Carla Casella: Okay, great. Thank you so much.
Operator: Our next question comes from Guilherme Palhares with Santander (BME:SAN). Please go ahead.
Guilherme Palhares: Good morning, everyone. Just a follow up from the conference call in Portuguese. Wesley, you mentioned there are other two percentage points of margins to be captured in the U.S. beef market. If you could just go into detail where are those gains? Are those on the industrial side or on the commercial side? If you could give more details on that would be appreciated. And sorry if I missed the initial speeches but Guilherme, if you could go through that equation that you usually share in terms of the breakeven, in terms of cashflow for the year, that would be also appreciated.
Wesley Batista Filho: Thank you. Guilherme, good morning. I would say out of the 2%, 1.5% is operations and the plants and 0.5 percentage point is in sales. But I would also mention to you that like you probably noticed already that when we first did this call, I spoke about this a year ago, we were talking about 2% sort of thing, and we got that and we found some more opportunity. So if we're able to close this other 2%, I wouldn't be surprised if we found another 1% or 2% opportunities because that I don't think that 2% -- this extra 2% I'm talking about brings us to perfection. Things just brings where we see our operations should be performing. And that's why we have mapped so far, but I would say 1.5% to operations and 0.5% more on the commercial side.
Guilherme Cavalcanti: Guilherme, our breakeven EBITDA analysis continues to be the same. So capital expenditures of $1.3 billion for the year. And if you look on Page 6 of the press release, the capital expenditure of the first quarter is in line with this forecast. Also interest expense is $1.1 billion also first quarter was in line with that. Leasing of $500 million first quarter was also in line with this amount. And biological assets we put in this analysis $750 million of working capital consumptions for biological assets in case the grain prices may stays the same. So if you look on the first quarter, the biological asset consumption was much lower because of the falling in the grain prices. So again, these biological assets, consumptions depends a lot on the grain prices. So that's one that is not fixed basically as the orders. But again, the analysis continues to be the same because grain prices, we don't know if it can fall more or go up. So continues to be this $3.5 billion EBITDA and remember that EBITDA above that, then we have to subtract 25% of our effective tax rate.
Guilherme Palhares: Thank you, Wesley. Just a follow up. Wesley, you said 75% of the two percentage margin benefit on the industrial side. If you could just mention where do you think the gaps are on the industry, right? So is it about pricing? Is it about automation? Where do you see the gaps and where do you envision the operations being best practices going forward?
Wesley Batista Filho: Nothing coming from automation or anything that would require CapEx first which is performing well from an efficiency perspective. Efficiency here meaning labor efficiency and mix at the plant level, getting the right products in the right buckets. It's more things that are 100% on our control without extra CapEx.
Guilherme Palhares: That makes perfect sense. Thank you.
Operator: This is the end of the conference call held by JBS. Thank you very much for participation and have a nice day.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.