JBS Reports Increase in Meat Exports to China as Domestic Consumption Falls in Brazil

JBS Reported That, Unlike China, Beef Consumption in Brazil Reached the Lowest Volume in 25 Years

JBS, while registering an exponential increase in beef exports to China, reports that in Brazil, beef consumption recently reached the lowest levels in history. In Brazil, the economic scenario remains alarming, leading to a pressure on demand, said the company’s CFO, Guilherme Cavalcanti.

As Cavalcanti stated during a conference call with analysts to discuss JBS’s results, which saw its profit more than double, “The profitability of beef continues to be impacted by the average price increase of cattle, around 11%.” JBS, which started in the fertilizer sector, also announced dividends of approximately R$ 2.2 billion.

Brazil Consumes Less Beef, Unlike China

According to data from Conab, beef consumption reached 26.5 kilograms per person in Brazil in 2021, which is the lowest volume in 25 years, and the sales of the product remain low in 2022.

On the other hand, JBS reported that the market of countries outside, such as China, was the highlight of the quarter, mainly with a 17.3% increase in volume and a 20% increase in the average price of fresh beef, mainly driven by the resumption of Brazil’s exports to China at the end of 2021.

As JBS’s CEO, Gilberto Tomazoni, assesses, China will be a major importer of beef in the long term, and he further adds that this habit of importing meat from Brazil could change the market globally.

JBS Present in the United States

In the North American markets, André Nogueira, CEO of JBS in the U.S., stated that, from a logistical standpoint, there were problems, causing the company to operate “with inventory much larger than it would like.”

The U.S. ports have been affected in recent months due to strikes and the pandemic, causing delays in logistical properties.

André believes in gradual development in the United States regarding the consumption of meat from Brazil. Regarding Shanghai, China, Nogueira mentioned that exports have fallen due to lockdowns, but the country is starting to recover in this regard.

“We are operating at a (high) level of innovation and this has harmed our productivity, due to the issue of price, which has increased significantly, but also due to the slowdown in logistics. However, through evolution, we will be able to generate income,” he noted.

Valuable Results for JBS

JBS, which is supported by strong performance from its North American operations and also by its beef exports from Brazil, especially to China, reported another robust result in Q1 2022, slightly above expectations, noted Eleven. The unfavorable highlight, as already expected, was due to Seara, which continues to suffer from a cost pressure scenario. 
Eleven maintains a neutral recommendation for JBS, with a target price of R$ 36.
According to Credit Suisse, the company had a “very good” quarter, with EBITDA exceeding consensus numbers, primarily driven by operations in the United States.
Analysts maintain positive outlooks for investments in JBS, as they believe the company’s operational momentum will remain stable in the coming quarters, mainly due to beef exports to China. Credit Suisse also maintains an outperform rating for the stock and a target price of R$ 45.

In XP’s assessment, net income came in line, while adjusted EBITDA was 8% above the broker’s projections.
“US Beef + Australia, PPC and US Pork remained strong and well above historical levels, while Friboi recovered, more than compensating for Seara’s decline due to rising costs and a weaker consumer in Brazil,” they highlighted.
XP representatives believe that JBS will continue to demonstrate power in its protein diversification, which can help offset the cyclical nature of the company’s results.
Thus, they reiterated a buy recommendation with a target price of R$ 51.8, reinforcing its position as a top pick in the beef sector.