You are on page 1of 32

6th Annual Latin America Executive Conference

Key Biscayne (FL) – January, 2014

Disclaimer

This release contains forward-looking statements relating to the prospects of the business, estimates for operating and financial results, and those related to growth prospects of JBS. These are merely projections and, as such, are based exclusively on the expectations of JBS’ management concerning the future of the business and its continued access to capital to fund the Company’s business plan. Such forward-looking statements depend, substantially, on changes in market conditions, government regulations, competitive pressures, the performance of the Brazilian economy and the industry, among other factors and risks disclosed in JBS’ filed disclosure documents and are, therefore, subject to change without prior notice.

PAGE

2

JBS S.A.

JBS S.A. at a glance
After Seara Brasil acquisition

Founded in the 1950’s in Midwest of Brazil IPO in 2007 Leadership position in the global food industry

Estimated revenues of around US$50 billion in 2014
Presence in 5 continents and sales to more than 150 countries Production facilities in the low cost geographies 185,000 employees
Beef Chicken Pork Leather Production capacity 100 thousand heads/day 12 million birds/day 70 thousand hogs/day 100 thousand hides/day Lamb
25 thousand lambs/day

PAGE

4

JBS Strategy To Move Up Value Chain

Rationale

Associating quality and branding to increase client loyalty

Branding
Customized and further processed products for the end users

Value added products

Sales and distribution platform

Expanding a global distribution platform to reach end clients

Production platform Cost Reduction, Process Optimization

Develop an efficient and diversified global production platform

Financial Structure

Experienced Management

Risk Management

JBS’s Value & Strategy

PAGE

5

JBS Strategic Positioning
World’s Food* Surpluses and Deficits (Net intra-regional trade, million tonnes)

150 100 50 0 50 Eastern Europe and former Soviet Union 100 150

Central America North America South America Australia

Western Europe

Asia

Middle East & Africa

1965 1990

1970 1995

1975 2000

1980 2005

1985 2010

* Cereals, rice, oilseeds, meals, oils and feed equivalent of meat. Source: The Economist

PAGE

6

JBS is present in the main exporter markets
Global Protein Trade – Largest Exporters Beef Exports
Others 14.7%

Brazil 18.4%

Canada 4.0%
India* 17.0%

New Zealand 6.2%
Mercosul** 9.3% USA 13.4%

Australia 17.0%

Chicken Exports
Others 9.4% Turkey 2.8% China 4.1% Thailand 5.3% E.U. 10.8%

Pork Exports
Brazil 34.8%
Chile 2.5% China 3.2% Others 4.4%

USA 33.4%

Brazil 9.0%
Canada 17.0%

USA 32.7%

E.U. 30.5%

Source: USDA 2012 *Buffaloes / **Excluding Brazilian exports

PAGE

7

Meat Consumption Growth Forecast 2011-2020

Meat Consumption Forecast (Million tons)
338.3 73.6 15.6

Expected increase in meat demand by country groups between 2010 - 2020

Developed

278.2 228.1 58.6 11.2 90.8 64.6 12.7 105.7

19%
126.6

81%
122.5

67.5
2001

95.1

Ave 2008-10

2020

Emerging

Poultry

Pork

Sheep

Beef

Source: FAO - OECD

PAGE

8

Seara at a Glance and Transaction overview

Seara Brasil – Successful history

 Obtains an ISO 9002 certification for the whole chicken production chain – Itapiranga, SC (1st. Company in Brazil)

2013

JBS acquisition of Seara Brasil

 Ceval incorporates Seara Agro Industrial S/A and Seara becomes one of Ceval’s brand

2009 2005

 Acquisition of Frigorífico Seara by Ceval Agro Industrial S.A

1996 1982 1989

 Seara is acquired by Cargill  Marfrig acquires Seara and starts the integration of previously acquired assets in the sector

1956

1980
 First Brazilian company to export chicken cuts to Europe

 Frigorífico Seara is founded

Seara Brasil: Leading platform resulting from the integration and acquisition of over 20 assets/brands since 2007
PAGE

10

Seara Brasil – Assets overview

Geographic Footprint and Capacity

Sizeable operation platform
2.6 million birds per day

16.2 thousand hogs per day

80 thousand tons of processed products per month
10 thousand hides per day

Slaughterhouses Industrialized/Processed Products
PAGE

11

Seara Brasil – Strong brand portfolio with more than 2.2 thousand SKU
Strong brand awareness at different price points with Seara as a global brand

Processed & elaborated

Processed & frozen

Margarines

Processed & elaborated

Processed & frozen

Processed

Processed & elaborated

Processed & frozen

Light processed & elaborated

PAGE

12

Potential value creation from multiple differential

Illustrative analysis of Seara Brasil firm value at different scenarios
Firm value of Seara Brasil (R$bn)1
13,2 12,2 14,1

FV of Seara Brasil at Packaged food Companies trading multiple (10.1x EBITDA)

11,2 10,1 5,6 6,6 7,6 8,5

Potential value creation of R$8.5bn
(Seara Brasil with same margin of Packaged food Companies and evaluated at same multiple)

4,5

FV of Seara Brasil at transaction multiple (5.6x EBITDA)

5,6

5,6

5,6

5,6

5,6

Normalized EBITDA margin of Seara Brasil (assuming normalized sales of R$10.0bn) Normalized EBITDA margin
Implied normalized EBITDA of Seara Brasil

10.0%
R$1.0 bn

11.0%
R$1.1 bn

12.0%
R$1.2 bn

13.0%
R$1.3 bn

14.0%
R$1.4 bn

Sensitivity analysis at different normalized EBITDA projection of Seara Brasil
Source: Company filings and Bloomberg as of June 11, 2013 1 Considers enterprise value of R$5.6bn for Seara Brasil, normalized sales of R$10.0bn and normalized EBITDA margin of 10%

EBITDA margin of Packaged Food companies

PAGE

13

JBS successful track record of turnaround and integrating operations
Proven management team with experience to integrate and extract synergies

Swift acquisition (2007)

Pilgrim’s Pride acquisition (2009)

Key initiatives

] \ ] \
JBS stake in PPC 64.0%

Cost reduction Efficiency improvement

] \ ] \
68.0%

Margin improvement

Integration of processes

] \ ] \

SG&A control Brand repositioning

Example: JBS value creation in Pilgrim’s Pride acquisition
Total JBS investment in PPC
67.3% 75.6%

3.624

2.529 1.095

800

42

144

110

Dec-09
JBS USA acquisition of 64% stake in PPC

Nov-10
Increase ownership to 67.3%

Jan-12

Mar-12/Nov-12

Total JBS investment

JBS USA Acquisition of additional oversubscription in shares from Lonnie “Bo” PPC rights offering Pilgrim and Don Jackson1

Value creation to JBS

Current market value of JBS in PPC 2

JBS USA acquired 18.7 mm shares from Lonnie “Bo” Pilgrim, the founder and former controlling shareholder of PPC (US$107.2 mm) and 455.3 thousand shares from Don Jackson, JBS USA’s former CEO (US$2.7 mm) 2 PPC market value of US$4,813.8mm (as of August 15, 2013)
1

PAGE

14

Recent Events
Massa Leve Transaction and Operation Overview
Transaction Rationale
• Expansion in production capacity of convenience products (Utilization rate of 50% on average);

Company Overview
• Founded in 1992 and headquartered in Rio Grande da Serra, in the State of São Paulo;

• Entrance into new product categories: fresh pasta, pies, cheese and garlic bread;
• Expansion of market share; • Purchase Price of approximately R$260 million, of which R$200 million through the transfer of shares issued by JBS and currently held in treasury (low cash output).

• Leading company in fresh pasta category and third largest in ready meals and sandwiches in Brazil;
• More than 20k active customers; • Approximately 1,000 employees; • Projected sales of R$400 million in 2014

Revenue Breakdown by Brand - 2012
Third Party Brands 25.7%

Footprint
Rio Grande da Serra – SP (Great São Paulo Region)

Massa Leve 67.7%

Private Label 6.6%

Revenue Breakdown by Product - 2012
Fresh 41.9%

Frozen 58.1%

Source: JBS, subject to regulatory approval.

PAGE

15

3Q13 Results

3Q13 Highlights
Net revenue of R$24.2 billion, an increase of R$4.9 billion compared to 3Q12, or 25.1%, of which 87.6% came from Organic Growth

Consolidated EBITDA was R$1,709.7 million, an increase of 24.0% over 3Q12. EBITDA margin was 7.1%
Net income of R$219.8 million

Free cash flow of R$806.9 million

Operating cash flow of R$1,241.0 million

JBS ended the quarter with R$7.8 billion in cash and cash equivalent, corresponding to 73% of short-term debt

Leverage excluding the debt assumed in the Seara acquisition was 2.96x, as previously projected by the Company
Leverage ended the period at 4.03x, considering total debt assumed from Seara acquisition, but not including EBITDA from the acquisition
PAGE

17

JBS Consolidated Results – 3Q13

Net Revenue (R$ million)
24.222,0 21.850,7 19.366,6 19.527,6 21.931,0
2200,0 2000,0 1800,0 1600,0 1400,0 1200,0 1000,0 800,0 600,0 400,0 200,0 0,0

EBITDA EBITDA (R$ million) and EBITDA Margin
7,1 5,4 4,5 7,6 7,1 8,0

1.667,7

1.709,7

1.378,8 1.170,9 879,4

12,8%

-10,6%

12,3%

10,4%

-15,1%

-24,9%

89,6%

2,5%

3Q12

4Q12

1Q13

2Q13

3Q13

3Q12

4Q12

1Q13

2Q13

3Q13
EBITDA Margin (%)

-12,0

Source: JBS

PAGE

18

JBS Mercosul
Performance by Business Unit
27%

% JBS S.A. Net Sales

Net Revenue (R$ billion)
35.2% 6,2 5,3 4,6 5,0 5,4

 Net revenue of R$6,214.4 million, 35.2% superior to 3Q12:  Increase of 21.3% in volume of animals processed;  Increase of 31.1% in the volume of beef in domestic market and 30.1% in the international market;  Increase of 40.5% in revenue of domestic market, boosted by the Company’s marketing campaign.  EBITDA of R$687.5 million and EBITDA Margin of 11.1%:
18,0%

3Q12

4Q12

1Q13

2Q13

3Q13

EBITDA (R$ million)
1000

14,5% 665,6

12,6% 11,3% 664,8 561,7 543,5 10,0%

900

11.1% 687,5

16,0%

14,0%

12,0%

800

10,0%

8,0%

700

6,0%

 JBS Brazil had EBITDA Margin of 11.7%;  Improved exports, coupled with real devaluation.

4,0%

600

2,0%

0,0% 500 -2,0%

-4,0% 400 -6,0%

-8,0% 300 -10,0%

200

-12,0%

-14,0%

100

-16,0%

-18,0%

0

-20,0%

3Q12

4Q12

1Q13

2Q13

3Q13

EBITDA Margin (%)

Source: JBS

PAGE

19

JBS USA Beef (including Australia and Canada)
Performance by Business Unit
44%

% JBS S.A. Net Sales

Net Revenue (US$ billion)

 Net revenue of US$4,689.8 million, outperforming 3Q12 by 9.7%:
9.7% 4,9

 Increase in exported volume.
4,8 4,7

4,3

4,3

 EBITDA of US$125.3 million and EBITDA Margin of 2.7%:
2Q13 3Q13

3Q12

4Q12

1Q13

 Transfer of cattle prices increases from the industry to products in the domestic American market;  Improved performance in Australia in the period.
16,0% 14,0% 12,0% 10,0%

EBITDA (US$ million)
500

 Decrease in beef imported into the US during this period, which contributed to a better pricing of beef in domestic market.  Strong Australian exports particularly to Greater China.  USDA data shows a reduction in cow slaughter during the last weeks which is an important indicator towards herd growth in the medium and long term.

400

4,1% 2,1% -0,6%

3,4%

8,0%

2,7%

6,0%

4,0%

2,0%

300 0,0%

-2,0%

200

175,1 103,3

-4,0%

161,7

-6,0%

125,3

-8,0%

-10,0%

-12,0%

-14,0% 100 -16,0%

-25,1
0

-18,0%

-20,0%

-22,0%

-24,0%

3Q12
-100

4Q12

1Q13

2Q13

3Q13

-26,0%

-28,0%

-30,0%

EBITDA Margin (%)

Source: JBS

PAGE

20

9%

JBS USA Pork
Performance by Business Unit
% JBS S.A. Net Sales

Net Revenue (US$ million)
6.8%
1300,0 1220,0

 Net revenue totaled US$903.3 million, an increase of 6.8% year
868,5
903,3

1140,0

1060,0

980,0

846,1

955,5

on year:
 8.5% increase in prices in both domestic and export markets,

842,0

900,0

820,0

740,0

660,0

580,0

500,0

420,0

340,0

260,0

180,0

100,0

3Q12

4Q12

1Q13

2Q13

3Q13

coupled with stable volumes.

EBITDA (US$ million)
199,977 13,0%

 EBITDA of US$43.8 million and EBITDA Margin of 4.8%:
5,6% 5,8% 4,8%
9,0% 5,0%

4,8%

4,5%

1,0%

 Higher prices in the domestic market and in exports, partially offset by an increase in raw material costs.

-3,0% 99,977

-7,0%

40,4

42,7

46,8

50,7

43,8

-11,0%

-15,0%

-19,0%

-0,023

-23,0%

3Q12

4Q12

1Q13

2Q13

3Q13

EBITDA Margin (%)

Source: JBS

PAGE

21

JBS USA Poultry (Pilgrim’s Pride Corporation)
Performance by Business Unit

21%

% JBS S.A. Net Sales

Net Revenue (US$ billion)
3.6%

 Net revenue of US$2,142.8 million, 3.6% higher than 3Q12:
2,2 2,1

2,1

2,2

2,0

3Q12

4Q12

1Q13

2Q13

3Q13

 Increase of 4.4% in revenues from the United States, due to an increase revenue per pound sold, thanks to higher market prices;  Decrease in volume sold and in the revenue from PPC Mexican operation, due to the normalization after a market recovery followed by AI issue.

EBITDA (US$ million)
500 20,0%

EBITDA of US$226.1 million and EBITDA Margin of 10.6%:
 Industry favorable scenario, which saw a decrease of 3.9% in costs at PPC US operations, coupled with efforts to reduce inventory, in addition to a decrease in freight and storage costs.  “The improvements in our margins is a result of the processes to transform our commitment into operational excellence”, stated Bill Lovette, Pilgrim's CEO.

12,1%
400

15,0%

10,6%
10,0% 5,0%

5,1%
300

3,1%

5,8%

265,0 226,1

0,0%

200 -5,0%

105,6
100

67,4

117,7
-10,0% -15,0%

0

-20,0%

3Q12

4Q12

1Q13

2Q13

3Q13

EBITDA Margin (%)

Source: JBS

PAGE

22

JBS Consolidated Exports Distribution in 3Q13
Approximately US$3.0 billion, an increase of 16.6% in relation to 3Q12
Greater China* 20,4% Other 14,6%

Chile 3,0% Canada 4,2% Venezuela 4,7% South Korea 5,5%

 Increase of 16.6% in 3Q13 exports compared to 3Q12

3Q13 US$2,954.0 million

Mexico 15,6%

Japan 11,9%

Russia 5,6%
E.U. 5,6% Africa and Middle East 9,0%

Others 18,6%

Africa and Middle East 14,5% Mexico 13,7%

Venezuela 2,0% Chile 2,9% Canada 4,3% South Korea 4,6% E.U. 6,7%

3Q12 US$2,534.4 million
Greater China* 14,3%

Japan 11,6%

Russia 6,8%

Source: JBS *Considers China, Hong Kong and Vietnam

PAGE

23

Debt Profile

Debt Profile

Leverage (Net Debt/EBITDA)

 Leverage excluding the debt assumed in the Seara
2.000 4.03

acquisition was 2.96x, as previously projected by the Company.

1.500

3.68

3.43

3.40 3.28

1.000

2.96*

 Leverage ended the period at 4.03x, considering

total debt assumed from Seara acquisition, but not
500

including EBITDA from the acquisition.
3Q12 4Q12 1Q13 2Q13 3Q13

0

Leverage .

EBITDA (R$ million)

Source: JBS *Leverage excluding the debt assumed in the Seara acquisition.

PAGE

25

Debt Profile
At the end of the period 75% of JBS’ consolidated debt was denominated in U.S. dollars, with an average cost of 6.2% per annu m. The proportion of debt denominated in reais, 25% of consolidated debt, has an average cost of 10.5% per annum, influenced by the recent increase in Selic. JBS ended the quarter with R$7.8 billion in cash and cash equivalent, corresponding to 73% of short-term debt. JBS issued a US$1.0 billion Bond with maturity in seven years and 7.75% yield per annum and paid R$558.5 million of the 2014 Bond allocated in short-term liabilities, both of which will contribute to improve JBS debt profile in 4Q13.

Breakdown by Currency & Average Cost
R$

ST / LT Debt Profile

25%

 10.5% annum  6.2% annum

3Q12

27%

73%

USD

75%

4Q12

30%

70%

1Q13

28%

72%

Breakdown by Company and Debt Types
2Q13 3Q13 35% 65%

JBS S.A. 60%

Subsidiaries 40%
3Q13 35% 65%

3Q13

Bonds 36%

Others 64%

Short term

Long term
PAGE

Source: JBS

26

Updated Indebtedness Considering Subsequent Events to the Quarter

Considering the US$1.0 billion Bond issued by JBS S.A. in October in addition to the conclusion of agreements with banks involved in the Seara acquisition and considering that these funds will be used to pay down short-term debt, the debt profile shows relevant adjustments, such as:

 Short-term debt will reduce to 21% of total debt

 Cash and cash-equivalents will represent 116% of short-term debt
 Average maturity will extend to 53 months  Average cost of dollar denominated debt remains at 6.2% per annum

Source: JBS

PAGE

27

Stock Performance and Marketing Campaign

JBS Stock Performance
 During the 12 months to September 30th, 2013, JBSS3 substantially outperformed the Ibovespa Index, increasing 15%, while the index decreased 12%.  The Average Daily Traded Financial Volume in 3Q13 was R$31.4 million, an increase of 22.4% compared to the same period of 2012.  Current JBS’ market cap is R$24.0 billion.
120%

100%

80%

60%

JBSS3

IBOV

Source: Bloomberg, 100 = 09/28/2012

PAGE

29

Pilgrim’s Pride Corp. (PPC) Stock Performance (Controlled by JBS)
 During the 12 months to September 30th, 2013, PPC stocks substantially outperformed the S&P 500 Index, increasing 228%, while the index increased 17%.  Current PPC’s market cap is US$3.7 billion.

380%

300%

220%

140%

60%

PPC

SPX Index

Source: Bloomberg, 100 = 09/28/2012

PAGE

30

Friboi Marketing Campaign in Brazil
BEEF

Friboi Marketing Campaign results:  102% increase in Friboi presence in the press*  Winner of “Top of Mind 2013” award from Folha de São Paulo Newspaper, with 45% of brand recall.  Finalist in the “Caboré de Publicidade Brasileira” award in the advertizing category, the Oscar of Brazilian advertising.  Considered one of the 10 advertising slogans of the year with greatest recall by Exame magazine (Oct / ​2013)

Source: JBS * Shopping Brasil Average from March to October vs Average of January and February 2013
PAGE

31

Mission

To be the best in what we set out to do, totally focused on our business, ensuring the best products and services for our customers, solidity for our suppliers, satisfactory profitability for our shareholders and the certainty of a better future to all our employees.