Q2 2022 JBS SA Earnings Call
off JBS.
Andreno Guerra, President of Operations in North America. Wesley Batista Filho, President of Operations in Latin American, Oceania and the Global Plant-Based Business. And Christiana Sis, Investor Relations Director.
This event is being recorded and all participants will be in a listen-only mode during the company's presentation.
After J.D. asks remarks, there will be a question and answer session. At the time, further instructions will be given.
Should any participant need assistance during this call, please press star zero to reach the operator.
Before proceeding, let me mention that forward statements are based on the beliefs and assumptions of JBS management. They involve risks and uncertainties because they relate to future events and therefore depend on circumstances that may or may not occur.
Now, I will turn the conference over to Gilberto Tomaszoni, Global CEO of JBS. Mr. Tomaszoni, you may begin your presentation.
Good morning everyone and thank you for your participation in this earning call for the second quarter for 2022.
As we will highlight in the presentation, we reported a consistent result this quarter.
Starting with 16 growth in dollars, we added $2.5 billion in net revenue in this quarter when compared to the second quarter of 2021.
Since 2020 we have invested 4.5 billion dollars in our growth.
which include $2.3 billion in acquisition and $2.2 billion in capex for expansion and modernization of our facilities.
With a significant portion of this investment, we start to operate by the end of this year.
In addition to growth, we have also returned to our shareholders.
in the same period since 2020.
$4.9 billion, which includes $2.1 billion in dividends and $2.1 billion in share by parallelogram industry to be detect.
Our liability managed.
which extends our debt from 6.3 years to 8.8 years and reduces its costs.
An hour leverage of $1.65 has ensured JBS in a position to maintain its growth track record.
Our results in this quarter show how our global platform
based on multi-protein and multi-geography strategy.
is one of our primary competitive advantages.
it
The US business is in the process of normalization margins.
Even though I'm American.
In Brazil, I'm Paul Trevisius.
And North America potter visits are strong, as shown by pilgrims and Sierras results.
In addition, the Brazilian and Australian beef businesses are starting a positive cycle.
with a relevant increase in margin from Freeboy and JBS Australia.
in other words
The declining margin of the beef business in the US was almost totally compensated by the companies other business.
This shows that our unique portfolio combination has brought stability to our overall results.
even as we operate in a business segment that can individually be more volatile as you can see in your page 3
YEET
We should highlight another great JBS advantage.
the ability to manage different business with a consistent operational excellence.
in different countries and cultures.
This allows us to
to keep opening new avenues for growth as
was the case of plant-based, salmon and cultivated proteins.
It was this mindset that transformed a butcher shop in the countryside of Brazil into the largest food company in the world.
The achievement has been possible because of an absolute focus on people.
operate with simplicity and autonomy in our strong company culture, which includes the values and beliefs that guide the daily attitude for more than 250,000 team members around the world.
Our commitment to corporate governance, sustainability, and operational excellence
as being recognized by the SAP Investment Grade achievement in this quarter.
We now have full investment grade. The status calls the three main rating agents, SAP, Moods and Fitch.
We have also focused and developed a roadmap to achieve net zero by 2040.
We have still, we have until July 2013.
2023 to submit our roadmap to the SBTI, but hopefully we will do so before then.
We have already started the key initiatives.
as important milestone in our SDG strategy. We are achieving the second quarter of 2022.
Circular economy was a highlight.
with the opening of our third biodiesel production plant in Brazil in the launch of our bio-fertilizer unit.
In the U.S., JBS is supporting the construction of the University of Nebraska Fiddle Lot Innovation Center to recharge innovation, reduction, and fiddle lot.
An initiative is complemented by our partnership with Colorado State University to research carbon capture technology.
At the time when food security and sustainability dominate the global agenda, our purpose to feeding people around the world is even more relevant.
Therefore, we remain focused on what we can control.
and being the best in all we do to help create a better, fair and more sustainable world for us in the future generations.
Thank you very much. Now I will go to Guilherme Cavalcanti who will make the details of our results. Guilherme please.
Thank you, Tomazzoni. Let's go over the operational and financial highlights for the second quarter 2022 starting on the July 23, please.
I would like to start by highlighting that S&P recently assigned an investment grade rating to JBS as a result of solidly operational and financial performance coupled with substantial improvements on the ESP front.
With S&P's investment rate ratings, JBS is now rated investment rate by the three rating agencies as Moody and Fiji had already upgraded their ratings last year.
As a result, several note holders have requested that we register the bonds with the SEC. Accordingly, as per the announcement to the market released on August 2, 2022, we announced an offer to exchange senior notes and a solicitation of consent to amend the identities of some bonds in order to confirm the identities of the investment grade book.
Now let's confirm to the identities of the investment rate bonds issued in June 2022.
Registering our notes will be important to broaden the potential investor base, increase liquidity and universal confidence.
In addition, it will simplify the company's capital structure.
As previously mentioned, I would like to highlight the three investment rate bonds issued in June last year, which totaled $2.5 billion as follows. $500 million due to 2028, $1.25 billion due to 2023, and $750 million due to 2052.
The funds were used in such a way as to have no impact on leverage to the prepayment of $1.8 billion in senior notes, $500 billion in term loan B, and $400 million in short-term debt with $200 million will be paid with the company's available cash.
In Brazil, earlier this month, we also retained an unsecured revolving credit facility in the amount of $450 million, maturing in 2025.
All this liability management that we carried out led JBS to increase its average from 6.3 years in the second quarter of 2021 to 8.8 years in the second quarter of 2022. For the same period, our average cost of debt dropped from 4.75% to 4.45%.
And financial leveraging dollars remained at a very comfortable level at 1.65 times.
Moving to the July 24 in the quarter, we invested approximately $1.1 billion as follows.
We will turn it for $151 million to shareholders through entering dividends, which represents $0.20 per share.
We carried out share buybacks in the quarter, totaling $206 million.
It was mentioning the cancellation of 27 million Treasury shares that we acquired in April 2022 and the opening of a new buyback program of 113 million shares.
We also invested $303 million in the modernization and expansion of our production units.
We also invested more than $90 million globally in ESG initiatives.
Finally, I would like to point out that the return on invested capital was 26.1% considering the last 12 months.
Now move to July 26 where we present the financial and operational highlights for the quarter.
In the second quarter of 2022, we achieved net revenues of $19 billion, which represents an increase of 7.7% in the annual comparison.
The adjusted EBITDA for the quarter was 2.1 billion dollars, which represents a EBITDA margin of 11.2%.
Net income was a total of $803 million in the quarter, which represents an earnings per share of 30 cents per dollar.
I would also like to highlight that considering the second quarter of 2022, net revenue was a record $71.2 billion, Adjust De Bida was $9.1 billion and net income $4.4 billion.
Or...
$1.86 per share of earnings.
Please now move into the slide 28. The operational cash flow in the quarter was $839 million. Pre-cash flow for the quarter was $77 million. The lower pre-cash flow was a result of higher investments in expansion and an increase in tax paid.
in the second quarter.
In 2008-02, last of months, the operating cash flow was $4.6 billion. Pre-cash flow generation was $1.8 billion. Excluding non-recurring payments of $676 million and expansion cap-acts of about $1.1 billion, pre-cash flow for the last of months would have been $3.6 billion, which represents a conversion of 41% of adjusted EBITDA. In 2008-02, the operating cash flow was $4.6 billion.
We also have increased investments in the company's organic growth. In the graph on the bottom of the slide, we have our capital expenditures in the quarter totaling $534 million of which 57% is related to investments in modernization and expansion.
Now please, let's move to slide 29 where we have the evolution of our debt profiles. The net debt in the second quarter of 2002 was $15 billion, which represents an increase of $873 million in the quarter comparisons due to working capital consumption of $523 million, mainly impacted by the increase in accounts receivables, driven by the increase in average prices, mainly CRN PPC.
and inventories as a result of higher cattle purchase in the end of the quarter, taking advantage of market opportunities in Brazil and higher grain costs.
In the quarter, we also spent $658 million as part of the shareholder return through buybacks and dividends.
capital expenditures of $534 million, as already told, and paid taxes in the amount of $508 million.
Net leverage was 1.65 times in dollars and 1.64 times in reals, while interest coverage increased from 9.2 times to 11.2 times in the second quarter. Both ratios extremely comfortable.
In addition, it is important to highlight our comfortable liquidity position. We ended the quarter with a cash position of $3.7 billion, which together with the revolving credit facility of $2.2 billion in the US and $450 million in Brazil gives us a total liquidity of $6.4 billion.
Considering the payments in July of the terminal on the year of $500 million and the short term debt in the amount of $400 million, the average debt maturity increased from 6.3 years to 8.8 years in 2000 in the second quarter.
Let's move to the business unit's performance.
Starting in Seattle on July 30, net revenue grew 20% in the second quarter as a result of higher prices in both domestic and international markets.
In the domestic market, despite revenue growth in all categories, the prepared foods category was the main highlight, with an increase of 19% in average sales price and 5% in volume. This performance in the result of investments in quality preference and innovation made by CIRA in recent years. In the export market, net revenues in dollars increased by 28% compared to 2021 due to an increase in the average sales price as volumes were stable in the period.
It is worth noting that the world supply of chicken has been limited by avian influenza in North America and Europe , lower productivity in poultry genetics, and the conflict between Ukraine and Russia.
In terms of cost, the scenario for our production costs, especially for feed, continue to be very challenging despite the improvement in corn prices in the annual comparison. However, through better commercial execution, mix of markets and channels, and operational efficiency, Sierra reached the highest bidet in its history of $306 million.
In the quarter, the Sierra brand received two important achievements according to Kanta Brand Footprint 2022 ranking. Sierra is among the five most chosen brands by Brazilians, gaining 91 positions in eight years. And Sierra brand was considered the most valuable Brazilian brand in its sector according to each store magazine.
Now moving to JBS Brazil on July 31, we see that...
The revenue for the quarter growing 10.8% year over year reaching $2.9 billion. In the export market, despite the average export price reaching the highest historical level during the quarter, the dropping volumes to China given the lockdown in the country and the suspension of important JBS demand for exports, pressure exports, pressures export sales.
On the other hand, the company has been increasing its exports to other destinations such as Philippines and Emirates.
In the domestic markets, 13% growth in the in-atture abyss category is explained by the company's strategy to continue increasing the value-added portfolio and growing brand awareness with consumers.
in addition to increasing the number of key customers with a high service level through the loyalty program that Osogu North updives.
As a result, the profitability, despite being impacted by the increase in the average acquisition price of cattle increases by 2.3 percentage points in the annual comparison.
Moving to July 32, at JBSB North America is now speaking in dollar terms and in US GAAP, JBSB North American revenue reached $5.5 billion in the second quarter, an increase of 2.7% year over year and the adjusted data total is $624 million with an 11.3% margin.
In the domestic market, even with the delay in the start of the grilling season due to typical weather conditions for the period, demand for beef remains strong, contributing positively for the net revenue growth.
In the international market, despite the continuous slowdown of American ports, beef exports increased 7.4% in volume during the second quarter.
The Asian market continues to be the most important buyer, notably China, which despite the lockdowns during the period kept its purchase volumes high by more than 35% year-to-date according to USDA data.
Moving on to July 33, we have JBS Australia, Natural Avenue was $1.7 billion, an increase of 32% compared to second quarter 2021, and an adjusted bid of $106 million with a margin of 6.3%.
Sales in the domestic market, which represented 39% of the total revenue in the period, were 12% higher than in the second quarter 2021, driven by the additions of HUON and RIVALIA, which have a strong focus on the domestic market, and by the recovery in demand in the retail and food services channels.
In the export market, net revenue increased 49% compared to the second quarter of 2021, expanded by the demand that remains strong in key markets such as the United States, South Korea and Japan.
Now moving to JDS USA pork in the second quarter, the true net revenue was $2.1 billion, an increase of 4.2% year over year. Exalted bid average is $214 million with a 10.1% bid margin. Near domestic market according to USDA information, pork production was slightly lower in the period as a result of the reduced availability of hogs for slaughter impacting the cost of live animals.
On the other hand, heated demand sustained at price at higher levels.
to the same period in 2021.
In the international market, USDA figures show that US pork export volumes were down 18% year-over-year in the second quarter, giving the lower volume exported to the key customer markets.
Port JBS, the port business in the USA, grew in both revenue and margins in the annual comparison due to the better sale mix of ad-valued products.
which continues to add relevant results for the company.
The U.S. price on July 35 presented a net revenue of $4.6 billion in the quarter, an increase in 27% year-over-year. I just added that total is $623 million with a little bit of margin of 13.5%.
In the US, demand remained robust for operational improvement, diversified product portfolio, the good profitability in Big Bird's business, and the continuous growth of branded products were the main drivers for growth in profitability for the period. In Mexico, the profitability was impacted by seasonal disease, which reduces production efficiency but which were partially offset by strong demand in the country and continuous operation improvements.
In Europe , the recovery in results was experienced by the greater product diversification, production optimization, and focus on partnership with key customers to offset inflationary costs.
To finish, I would like to move to July 36 that shows that our exports total $35 billion with approximately 170 countries taking part of these exports.
With that, I would like to open to our question and answer session, please.
Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press the star key followed by the one key on your touch tone phone. If at any time you would like to remove yourself from the questioning queue, please press star two. If you have a question, please press star two.
And our first question comes from Ben Terror with Barclays.
Yeah, good morning and thank you very much for taking my questions. Tomomoni team, congrats on the results.
So first question on USBs and if I think I got this right on the call earlier this morning, but maybe you can help me with some clarification. So obviously margins were under pressure and I guess no surprise here, but given what's going on with industry dynamics, a little bit of herd liquidation, how should we think about the near-term future in terms of cattle availability and ultimately cattle pricing and how that's going to impact your profitability.
Good morning, Dan. So the near-term care availability for the next six months already defined with the Care on Feed report that you have to release on July 1st with...
more care, a little bit more care on feed now than we had the same time of last year. I think the exact number is 0.4% more care on feed now than we had in the same quarter of last year and the same time of last year. So we know the amount of care that will be available for the next five, six months.
Margins continue to trend in the direction of more normal margins, whatever will be the normal margin. It's hard to say then at this point that we need to wait some more quarters because we're going to have less cattle next year. How much less? It depends on how the drought will continue or not continue in the U.S. or when we start to recover from the drought in the U.S. and that's weather related. We will no longer have...
more rain there that are in drought right now and right now we have around 40 percent.
of the areas that grow care in the U.S. that are under drought.
But we have a new dynamic in terms of access.
of US beef in a global basis. We have been calling the attention for quite a period of time since China opened for US beef, and now China is the third largest import of US beef.
And...
in spite of price, we have been high in the historical level. This year, US probably be the year to actually achieve the record number in terms of export of beef. So there's a new dynamic in terms of global demand. There's a new dynamic in terms of the value added that we're doing inside of our operation. And we need to wait a little bit more.
in terms of what would be the new normal level for US business production. Let me use this opportunity then for your questions. We have a pretty strong quarter in the port business.
We have 10.5 percent.
margin, EBITDA, US GAAP.
And I think that's really to recognize that our operation
and been doing extremely well compared with our competitors. I think that this is consequence of the strategy, the supply strategy that we define, the quality of our product, the value added product, and we have been delivering this type of margin around nine to 10% for several years now. And again, even with all the challenges, with China, important last port, US export down.
of what this was able to deliver, pretty strong quadrant. You know what was funny? That was actually my second question, so I don't have to ask this anymore. Thank you very much. And with that, we can go to Brazil and maybe some comments on Seattle I wanted to kind of understand. Obviously, we've seen an impressive improvement, not only on a year-over-year basis, but even more so on a sequential basis within Seattle.
in context of what the second quarter was.
Good morning Ben. So regarding Ciarra's profitability in the quarter, we saw a decrease in corn prices in Brazil in REI.
That hasn't affected our second quarter, it won't affect a big part of the third quarter, but it will be something that could be very positive for us going forward into the fourth quarter and next year.
We also have to be aware that this can change depending on what happens with the exchange rate in Brazil, and also what happens with the American harvest here in the US that could change the overall price of corn in the world. So having said that, it's a positive for the future, and something that we are optimistic about. Regarding the individual businesses within Seattle, the chicken business for sure was a business that performed really well.
In the domestic market and in the export market we have a very high demand for beef, for pork, or excuse me, for chicken. A lot of that has to do with the demand for chicken as a competitive protein that's very accessible, especially in this inflationary time. So that has been either in all markets has been a very good demand. And also there is the supply side.
We know that worldwide hatchability and genetic production productivity has been relatively lower. In some places you have the Ukraine production of chicken that has been lower and that affects a lot some of the European and Middle East markets.
We also have some, especially in North America and some places in Europe , you have the Asian influenza. So all of those things combined, you have a scenario which the demand for chicken has been very strong and supply has been restricted. So that was a business that performed pretty well. Pork within Seattle, we obviously not where it used to be when we were exporting a lot of pork to China.
But there has been a rebound in the pork prices and in the profitability of pork. We know that in Brazil the per capita consumption of pork is quite low and most of the consumption of pork in Brazil is in the prepared category. Very little fresh consumption of pork and that has been changing. We have seen a lot of movement in Brazil to grow the pork.
So we've seen a rebound and it has been pretty good to see.
The other thing is the prepared business. Prepared business has been very strong for us for quite a period of time. It has been very resilient. We had a lot of price increases to compensate for costs. We have improved a lot of mix.
Our productivity in those businesses has been pretty well, pretty good. So there isn't one thing Ben, there isn't one single business within Seattle that delivered this result. All of the businesses have had a very good quarter. And we are very optimistic about the second half of this year.
Perfect, thank you very much Wesley. And then last question. Ben, Ben, Ben, sorry, I just had in terms of, because you talk about what will be expect for the future of Chiara. I would welcome...
Wesley said that you can see in Seattle two competence, I say one is the competence
for manage needs very well and take the advantage for the opportunities in the market. Internal and internal market. This makes a lot of difference in the market like we have today. And the second one is the power of the brand.
the preference of the consumer and the penetration when you increase the penetration and you increase the repurgency.
Great!
you can predict what will be the future, we will keep growing. I think this is important to understand how Sierra keep growing, because of one was built disadvantage for a long period of focus on quality, and the other is the strong operating team that we have managed the company.
Yep, that makes sense. And then just one final question. Do you have any update in terms of your plans timing and the dependency of the B&D is for reselling part of its stake or all of its stake to move forward with the listing in the US? All you could have done basically now on the fixed income side, but on the equity side, I know you still have this little project pending with the US listing. So any update you can share on that?
No Ben, we about the list in the US, it's not news, it's our priority, we have focus on to find the...
to design what will be the process that will release more value from our shareholders. We don't need to work up because we don't need money for growth. We have the balance sheet that supports our strategy. But for sure, it's really our great opportunity for growth.
create value for the shareholders that you are focused on. The second thing is about being there. I think we are not able to answer because these are shareholders and they take the decision by themselves.
value for the shareholders that you are focused on. The second thing is about being there. I think we are not able to answer because these are shareholders and they take the decision by themselves. Okay, thanks for that TomoZun.
Our next question comes from Rodrigo Almeida with Santander.
Hi, good morning. I have a couple things from my side here I just wanted to explore with you. I think first talking about the export market I wanted to get some color both. Maybe try to blend here Brazil and in the US and just to get some color from you on demand, how that has been behaving. I think especially as we here at least we're excited after this will be.
Yeah, sorry about that. So yeah, the export market on a global basis, I think the type of supply. So I want to see how things are going out of the US to the other regions, especially to Asia and out of Brazil as well.
I think that's the first question. The second question is related to SEARA and investments. In the Middle East, I think it's one of the, let's say, given the constraints and supply of poultry, I think one of the interesting things that we've seen in that region is that
demand a lot, right? And I just wanted to get a take on how Sierra has been working and what is the strategy of Sierra in the Middle East, especially as we talk about local investments over there. I think that's my second question. Thank you.
Well, about the export, I think it is worth it and I can complement after I say, look, the market, the international demand for protein is huge.
We see Asia is strong demand. Beef is structural in the regions. You know that the capital consumption is low compared to the other parts globally. And this is a institutional beef that will not be changed.
Chicken now is a global demand for chicken. It's everywhere. It's not one region. We are seeing from Brazil. We see Brazil export higher volume, U.S. is exporting. All the regions are exporting because of increased demand.
I don't know if Andrei knows anyone to compliment this.
For export from US is what we said. Pork is weak but chicken is pretty strong and beef will be the record year for US export of beef.
The US and Canada continue to be a very important player and Asia is the biggest event.
Global demand will be very strong for protein overall.
But now especially for beef and chicken.
Very similar from the Brazil side so I wouldn't add too much from that comment. Rodrigo, about the Middle East, it has been a priority this year for us. We have established our distribution network there. We use it to distribute in the Gulf through third parties, through distributors. We still have partners that help us with distribution of some brands.
But Sierra in the main market, in the Gulf, the 6 main markets, so Salvi, UAE, Qatar, Gulf, Bahrain, Andaman, we are more involved and we are doing it ourselves. So this is new. This is something that is maybe a few months, we are a few months into it and it has been progressing really, really strong. And will be an advantage for us going forward and will prepare the way for us to continue to build brands in our...
and that will also be a big important platform for us to develop our brands in the region. We will also continue to invest in production capabilities in the region to be able to grow our brand in the region. And to put it similar to what Tomo Zoni said in the previous call in Portuguese, we believe that there is a...
There is a space and there is a chance for us to really work hard and repeat what we did in Sierra, in Brazil, in the Middle East region. We already have the distribution. We have the production capability which will grow and we think we can continue to develop our product portfolio there and our brand in the region.
And that's an important priority, especially for our CRBs.
Rodrigo, take into consideration that we not just export from Brazil, we export to the Middle East from the US, we export from Canada, we export from Australia, we export from New Zealand and we export from Europe . And this is a combination of opportunities globally for the region. That's where we explain that we are creating our own network distribution, we are creating the brand and we take that as an advantage.
our global platform.
Thank you.
Our next question comes from Priya Origupta with Barclays.
Hello, and thank you so much for taking the questions. I was hoping that I could just ask a couple of follow-ups on the process that you're undergoing with regards to the exchange and the consent for some of the bonds that you have outstanding. Um,
So assuming that the exercise goes according to plan, your intent is to add reg rights to all the bonds that are issued under the three coissure USA structure, is that correct?
Yes, if the consent is accepted by the majority of the outstanding notes, we will automatically give reg. rights for all of our notes for our bonds, which means that in the next 365 days, we will have registered these bonds in SEC.
Okay, thank you. What exactly?
Sorry, go ahead.
Sorry, go ahead. What exactly?
No, I was just going to ask if you can remind us what process you would have to undergo to actually do the registration given sort of some of the structural considerations and SOCKS compliance for some of your boxes. So if you could just remind us exactly what the next steps will be to get from reg. rights to registration for the bonds.
The next, the registration right is just a filing on SEC and then we start to make the public, we will file not only in CBM Brazil but we start filing our financial results at SEC and this requires the company to be SOX compliant. And then we already have this process already done in some parts.
of the world, others we are developing. But we intend to register this bond next year, which means that we will need SOX compliance only by 2024, which is enough time for us to complete our project.
And so that would assume that the current organizational structure largely stays the same.
Is that fair? Yes, we... We evaluate.
Now we are talking about registering the bonds on the current group structure. We can do some simplified instructions within the group but not the current entity.
Okay, thank you. And then I was hoping that you could give us a little bit more color around the dynamics that you're seeing in terms of demand for North America beef, for retail versus food service. We saw some commentary come across the tape from the call this morning. If you could just share some of that insight with us on this call, that would be helpful.
André?
Hello?
Sorry, sorry, sorry, Tomazon, could you repeat the question and that's the last part of the question.
Yes, I was asking if you could share some commentary from earlier or a poll that you have around the demand dynamics that you're seeing in North America beef, some of the inflationary impact sort of on the retail side and then what you're also seeing in food service. Thanks,isy uses this chemical as an investment where you can actually save fat a lot of energy then looking at the energytrithinkle with this particle sensor. For instance with cloudy skies the carbon ratio goes down to visible Kylie or I could Write one point or the 2016
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See ya in the domestic market
I would say that for the high price cuts...
a little bit slow.
like the middle meats have been a little bit slow and you can see that's how the price of the cuts are behaving. We're good in the ground dish side.
Externally very strong.
food services are being okay but retail price has been...
pretty high. So if you compare now
retail price that is higher than the same time of last year despite of the car out being lower
I think that the retail have a lot of incentives to start to promote more beef.
and maybe they will start now in this holiday season.
But I would say that overall, domestically...
beef demand has been okay. Considering that you have to import much more beef in the first part of this year.
And I think that this import will slow down in the second part of the year. So probably for the domestic beef.
We are going to see a...
are good to fair demands for the remainder of the year.
That's helpful. Thank you very much.
Our next question comes from Carla Casala with JP Morgan.
Hi, can you just talk about your views towards leverage going forward and have you set a leverage target for the consolidated entity or the US business that you're talking about registering in the US market?
Hi, Carla. Yes, in March 2019, the board approved that we should pursue to have net debt to be done between two and three times. So these are long-term targets, which is a target that rating agencies require for companies of our sector to be investment-grade. So basically the idea is we want to keep the investment-grade, we want to continue to...
to improve our ratings because given our financial metrics we think we can improve our ratings which give us access to even other instruments, cheaper instruments in the debt capital market. So that's our policy and this is valid for the entire group.
Okay, great. And is the plan still to lift the U.S. business at some point in the future?
We still have plans of that. We don't need to rush. We don't need the money because our leverage is low. We have balance sheets to continue to grow the company and we still have a plan. And we are taking steps towards that. I would say, ratcheting our bonds in SEC will be part of something that will facilitate this process in the future.
But for sure it's our priority because it's in...
It is a real opportunity to create value for the shareholders. We find the best way to create more value to the shareholders, but we are keeping work on that.
Okay, great. Thank you. The rest of my questions have been answered.
Thank you, Karla.
This concludes today's question and answer session. I would like to invite Mr. Tom O'Donohue to proceed with his closing statements. Please go ahead, sir.
Thank you everyone for being part of this conference and thanks to our team members that allow us to present these great results and to say that we are very confident of the strength of our team, our balance sheet and our platform to take advantage of the market opportunities in new fields to maintain profitability and growth.
Thank you. That does conclude the GBS Autos conference call for today. Thank you very much for your participation. Have a good day and thank you for using QoS.
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