Brazilian Meat Giant JBS-Friboi Exports Expected to Grow More in US than Brazil

Brazilian meat multinational JBS-Friboi Brazil's JBS-Friboi group, a meat producer and the world's leading bovine slaughterhouse, increased its export volume by 275% in the second quarter this year, compared with the same period of last year. From April to June 2007, the group shipped 112,200 tons, whereas, during the same period this year, shipments totaled 421,200 tons.

The figures include not only the company's operations in Brazil, but also those in Australia, the United States, Argentina and Italy.

Revenues from exports totaled US$ 1.6 billion, growth of 273%. The leading market was Japan, with an 18% share, followed by the European Union, with 16%, and Russia and Mexico, with 10% each. Out of total export revenues, US$ 788.2 million came from JBS-Friboi units in the Mercosur region.

The president of the group, Joesley Mendonça Batista, stated during a press conference that in the coming months, exports originated from the United States should grow more than those from Brazil.

"The current situation in the United States favors for exports to all regions," said the company's CEO for the United States and Australia, Wesley Batista, at another press conference.

He cited the Middle East among the markets to which exports from the United States are favorable. The group exports to the Arab world and even owns a branch in Egypt, an Arab country located in North Africa. However, the region does not rank among the leading markets for JBS-Friboi.

In the second half this year, 63% of the group's sales were to the domestic market, where it maintains its units, and 37% were shipped to foreign countries. Mendonça Batista believes that in the next few months, 25% of revenues should come from foreign trade, and the remaining 75% from the domestic market.

The president at JBS-Friboi stated that the group is prepared to continue growing, even though he forecasts a not-so-favorable scenario for the activity in Brazil during the second half.

One of the problems facing Brazil's slaughterhouses is low herd availability, which has led the price of beef to rise. That, in turn, has increased costs for meat producers, lowering their profit margins. This phenomenon occurred with JBS in the second quarter already.

Earnings before interest, taxes, depreciation and amortization (EBITDA) stood at 5%. According to Batista, the margin is explained due to the price of the arroba of cattle beef with bones (approximately 32 lbs), which is currently around US$ 50. Still, the group promises to keep on expanding its capacity and slaughtering.

According to the president at JBS-Friboi, the company transferred its cost increase over to exports as much as it could. Now, according to him, prices are going through the roof.

"We went up and up, until we found ourselves alone in the market," he claims. According to him, there came a point when prices were on a level with those of other competing countries. "Now, we can only increase our prices if the others do so as well," he says.

Anba

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