Brazil’s JBS S.A. expects to boost margins in its JBS USA Beef business in 2018 as market conditions improve, JBS USA CEO André Nogueira said in a conference call with analysts Tuesday.
JBS USA Beef, which includes operations in the United States, Australia and Canada, reported a 50.1 percent increase in its third-quarter earnings before interest, tax, appreciation and depreciation, to $405.1 million, with an EBITDA margin that reached 7.3 percent.
“Margin expectation is even greater for next year,” said Nogueira.
Strong demand for beef and increased supply of cattle bolstered the company’s performance in the United States, though low cattle availability in Australia was a limiting factor.
Australian cattle supply should start to recover in 2018 and return to normal in 2019, and cattle availability in the United States should increase by 2 to 3 percent next year, he said.
JBS should also see further reduction in leverage in the fourth quarter as a result of its divestment plan, said Director of Investor Relations Jeremiah O’Callaghan. JBS’ total net debt fell 9.6 percent to BRL45.5 billion in the third quarter.
JBS earlier this year announced a divestment plan aimed at raising BRL6 billion ($1.8 billion) to pay short-term debt. The company has already sold European poultry processor Moy Park this year, as well as a stake in Vigor Alimentos and its beef operations in Mercosur.
The sale of Five Rivers Cattle Feeding in the United States is expected to occur before the end of the year. Nogueira told Brazil’s Valor Econômico newspaper Tuesday that negotiations for the sale of the asset are advanced, and that JBS should announce the transaction this year.
The divestment plan was announced in June, after JBS’ controlling company J&F closed a leniency agreement with prosecutors in Brazil to settle charges related to a corruption scandal. JBS executives Wesley and Joesley Batista are currently in jail as a result of investigations into insider trading in the financial markets.