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JBS posts poor income amid bribery investigation

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Oscar Rousseau

By Oscar Rousseau+

16-May-2017

JBS CEO Wesley Batista said South America faced 'a challenging scenario'
JBS CEO Wesley Batista said South America faced 'a challenging scenario'

Brazil-based JBS, one of the world’s largest meatpackers, has reported poor results for the first quarter of 2017.  

Wesley Batista, global CEO of JBS, said the business had encountered a “challenging scenario” in South America over the three months to 31 March.

The company is reeling from a nationwide corruption scandal involving alleged bribery of government health inspectors. One JBS employee is under state investigation over their relationship with federal food safety officers, although JBS has distanced itself from the individual .

Despite the scandal at the heart of Brazil’s meat industry , JBS’ results are not as bad as they could have been: the mammoth meat processor posted net income of R$422m ($135m) compared to the R$2.7bn ($881m) loss the business reported in the first quarter of 2016.

Costly exports

Still, net revenue dropped by 14% to R$37.6bn ($12bn) due to a weak performance from its Seara and JBS Mercosul divisions, alongside a growing Brazilian real against the US dollar.

Currency appreciation also had a negative impact on Brazilian export profitability. Only 26% of sales came from exports in Q1, while just under three-quarters of sales came from markets in which the business operates.

JBS is one of the world’s largest meat companies and owns a number of million-dollar turnover companies, including chicken processors Moy Park and Pilgrim’s Pride.

Volume growth in Europe

JBS Mercosul – which operates beef production in Brazil, Argentina, Paraguay and Uruguay – was one of the worst-performing business units in terms of revenue, which tumbled by 11%. As the largest business unit by revenue, this was a blow to JBS, exacerbated by Seara, the third-largest business unit by revenue, which posted a 4% revenue drop.

However, its second-largest business unit, JBS USA Beef, which includes Australian and Canadian operations, posted a revenue rise of nearly 6%, thanks to increased volume sales

In Europe it was a similar story: chicken processor Moy Park reported revenues of £370.4m ($477m), rising by over 6% as it saw a near-25% rise in fresh chicken volume sales.

US chicken subsidiary Pilgrim’s Pride also posted a more modest 2.9% rise in revenue.

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