Brazil's beef giant JBS posts surprise fourth-quarter net loss

JBS the world’s largest meatpacker, reported a net loss of 345.1m reais ($103.9m €84m) in the fourth quarter this week, missing a consensus estimate as the company booked significantly higher financial expenses.

This is the second time the company has missed earnings estimates since José Batista Sobrinho, founder of JBS, took the helm from his son Wesley Batista.

Wesley, who had the top job at JBS since 2011, was arrested last September on insider trading claims related to his knowledge of the plea bargain deal with Brazilian authorities. In the deal, Wesley, along with his brother Joesley Batista, confessed to bribing politicians to advance their business interests.

Following Wesley’s release from prison in February, prosecutors banned him from taking any executive roles in companies owned by J&F, including JBS.

Joesley Batista, who was JBS’s chairman until May 2017, had been arrested three days before Wesley after recordings suggested he tried to take advantage of prosecutors and conceal details during negotiations that led to the brothers’ plea deal. Joesley remains in prison.

Net financial expenses rose 121pc to 2.07 billion reais in the final quarter, as exchange rates fluctuated and JBS adjusted the fair value of derivative contracts, resulting in a 1.09 billion reais charge.

Analysts had expected JBS to report a positive net income of 556.4m reais in the final three months of 2017. In the comparable period of 2016, JBS posted net income of 708.1m reais.

JBS said net revenues rose by 2.7pc to 42.7 billion reais in the quarter despite poor results of its JBS Brasil division, which was impacted by the sale of JBS’s South American beef assets and a reduction of animals slaughtered in Brazil.

Independent auditors BDO approved JBS’s financial statements “with reservations” due to uncertainty related to the involvement of J&F Investimentos, parent company of JBS, in plea bargain and leniency agreements with Brazilian authorities regarding participation in a far-reaching corruption scheme.

“There is additional information submitted by J&F to the federal prosecutors, as foreseen in the agreements, which are not yet public,” the auditors said.

Independent investigations related to J&F’s cooperation with the authorities are also still ongoing, BDO said.

Earnings before interest, tax, depreciation and amortization, a gauge of operating profitability known as EBITDA, edged up 2.7pc from a year earlier to 3.19 billion reais, below the consensus of 3.43 billion reais.