The business posted profit of BRL887.1 million ($258m) for the three months to 30 September 2016, a year-on-year drop of 74.2%.
The downward drag on profit comes after a tumultuous quarter, particularly in Brazil, where the country’s strong real dented export profitability, and higher grain prices put pressure on costs.
JBS was also rocked by the suspension of its CEO and chairman Wesley and Joesley Batista respectively, following corruption allegations. Both suspensions were subsequently lifted in September.
Will shareholders cut their losses?
“This latest trading update for JBS may cause some concern amongst shareholders with a 74% drop in Q3 profits on a like-for-like basis clearly a negative development,” said XTD analyst David Cheetham.
“Monday’s [14 November] closing share price of 9.29 BRL is not far from the lowest level seen in the past year and this earnings release is likely to provide food for thought amongst shareholders who have seen a significant drop over the past month and may be tempted to cut their losses.”
Despite the turmoil in the highest echelons, the meatpacker said a focus on innovation and efficiency ensured revenue was not significantly damaged.
Headwind to subside
“In our international operations, we had good results across all of our business units, due to our constant focus on operational efficiency, cost control and investments in innovation, combined with greater supply of cattle in the US, the growth in our North American exports and the synergies captured from the assets acquired in 2015,” said JBS CEO Wesley Batista in a statement.
JBS expects headwinds in Brazil to soften moving forwards, and profitability will recover. Batista added he was “optimistic and confident” the business would start to improve, with its US beef operation driving performance uplift.
The company grew its beef exports from the US by 32.5% in the last quarter, thanks to strong demand from Asia.
JBS ended the quarter with net revenue of BRL41.2bn ($11.9bn), a drop of 4.3% compared with Q3 2015. Gross profit for the same period was BRL5.3bn ($1.5bn) a like-for-like decrease of 14.4%.
Earnings before interest, taxes, depreciation and amortisation (EBITDA), a measure of operational liquidity, was BRL3.1bn ($901m).
JBS net revenue changes by business unit
Seara (Brazil): -8.6%
JBS Mercosul (Argentina, Brazil, Paraguay and Uruguay): -5%
JBS USA Beef (Australia, Canada, US): -6.8%
JBS USA Pork: +72.2%
Pilgrim’s Pride (US, Puerto Rico, Mexico): -3.8%
Moy Park (Europe): -0.6%