Q3 2022 JBS SA Earnings Call
Good morning, everyone and thank you for waiting welcome to GBS assay Jbs USA third quarter of 2022 results conference call.
With us here today, we have as you bet, the Thomas Ghani Global CEO of Jbs anatomy.
The Laramie Cabo country global CFO of Jbs.
Wesley about cheese, the video global President of operations, and Christiane Assis Investor Relations director.
This event is being recorded and all participants will be in a listen only mode. During the company's presentation.
After Jbs is remarks, there will be a question and answer session at that 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 MS. Youbet Tacoma Zani global CEO of Jbs.
You may begin your presentation.
Good morning, and thank you very much for your presence in this call to review the results for the third quarter of 2022.
I'd like to note that.
After many years and rent will get is not a year with us today.
The transition of Israel to ask about is a failure has been completed I want to take this opportunity to thank Andreas was more for his immeasurable contributions to the company over the years.
He will remain with us in our advisor Bard and U S.
Appealed right Bart.
I would also like to reach.
As the CEO every success in his new role as our global President of operations.
We recorded the highest net revenue in our history for a quarter.
At $98 9 billion Reais.
Analyze it annualize at revenue is already close to 400 billion Reais.
A major milestone for GBS, which is now the largest food company and reward in terms of revenue.
We are experiencing a period of rising cost.
Jeff electricity grid and the other causing an increase in inflation in several countries impact now.
Cost structure and the consumer behavior is.
Specially in Europe .
In additional our beef business in U S.
United States is returning to the normalized margin.
In 2020 does margin experienced in the study.
These are reported to normalized <unk> was already anticipated by the market.
Despite these vehicles thats our numbers for the quarters once again demonstrate our ability to produce solid results.
During the quarter, we posted a net profit of 4 billion reais in reducing our gross debt by $1 billion compared.
Compared to the second quarter of 2022.
We are the data later.
Distress and releasing of our global presence once again made a difference.
This is the results of our solid the geographical.
In multi protein strategy of diversification.
High quality of our team our agile leadership.
This decline had mentioned.
Looking at our geographic breadth and diversification.
I believe that the market is not yet understood our competitive advantage, but I'm glad that some analysts have already recognized the DS.
In high hope that so it will be evident to all market.
Gilead will present, the laser our liability management strategy escalated as in the comfortable cash position.
We have created the leverage.
The ratio of one seven times in U S dollars and increased average terms of our debt from six to 10 years.
In addition, we have no significant maturities until 2020 said and reiterated that reduce our costs and our bet.
Our solid financial conditions allow us to navigate to the challenging market scenario, leaving us well positioned to take advantage of the opportunities that may arise.
While maintaining the conservative position that is necessary to facilitate the global economic Senate soon.
<unk> 2021, we have invested more than 26 billion reais and the expansion of our business, including more than 50 below <unk> and Greenfield projects in Brazil, and United States. Most of this new plants will be operating by the end of this year and throughout 2023.
We are assessing our presence at relevant market with expansion of our plants, our SaaS business in Brazil, and the prepared foods business and U S.
We're all remained our quality strategy of the company. We are confident in the value creation for given of these investments provide including the ability to strengthen our free cash flow.
Indeed in this period, we have a further diversified our business with our entity in the cell phone market in Alberta, partially offer one acquisition in Australia, our expansion in the pork market and in Australia in the acquisition of <unk>.
Relevant investment in alternative proteins with acquisition of Nevada, and our investments in technology with our cultivated proteins.
I'll add of the responsibility to the future generation of Society, we haven't made progress in our net zero 2000, the FERC commitment.
Focusing on action that makes the company more sustainable and at the same time more competitive more productive increased efficiency in our process and reducing the rates across our value chain.
Consistent with our sustainability focus in the quality, we have lunch, Jimmy which grew jewels that fit styles and agility fronted mill asset in Houston by make use our bogie and risky waste become raw materials, but another brunches increase efficiency and reduce emissions.
<unk> made an important investment to convert methane in the renewable energy and enthusiasm.
In Europe , <unk> is investing to improve energy efficiency projects across several of our facilities.
Our journey to net zero will make jbs more efficient more competitive and more sustainable.
Our focus remains putting the best people in the right place to exceed and grow maintain efficiency and streamline the management structure reinforce our culture of ownership and execution and the constant improvement of our unique diversified business platform.
But it gave us the opportunity to phase differences that are in market conditions. Thank you for your time. This morning, and I will now pass to <unk>, who will give you details of our results Gilead in peace.
Okay.
Thank you Tomas.
Let's go over the operational and financial highlights for the third quarter starting on slide 17. Please.
I'd like to start highlighting all the liability management that we carried out throughout the quarter and the significant benefits of been painted woods.
The reopening and pricing of $2 billion of senior notes with maturities in 2020, H 2033 in 2052.
With reach GBS using the net proceeds to pay in full the term loan b with this payment the company reduce its secured debt from 50% to 4% remaining in its balance sheet only the secured debt of seamless pride. Moreover.
Moreover, the proceeds were also used to redeem the 2028 and 2029 bonds with coupons of 675% and six 5%.
Actively in addition to the payment of other short term debt.
At the beginning of October we conducted the issuance of agribusiness receivables certificate in the amount of $289 million.
And three series with maturities of 10% to 732 and 37.
We also announced last week, the net expansion of $600 million in the variability of revolving credit lines, because we have a total amount of $3 $2 billion.
Of which $2 $8 billion at Jbs, USA and $550 million at Jbs, Brazil.
In the quarter order important highlights were the registration rights of our senior notes with the U S Securities Exchange Commission, the simplification of the debt structure through the consolidation of the issuers of all the nodes and the removal of collateral from the subsidiaries of all jbs USA in depth.
These steps are essential to expand the potential investor base, the liquidity of the nodes.
And the investors confidence in addition to improving compatibility with the companies with investment grade credit risk due to the improvement as we move all high yield governance from the notes.
The impact of all these slightly demanded let GBS to increase its average debt term from six two years to 10 years in the third quarter 2022.
While reducing the cost of debt with a positive net net present.
Present value impact of the interest reduction over the last two levels maintenance of $75 million.
Our financial leverage in dollars remained at very comfortable levels of 176 times.
Yesterday, we announced that the new baby.
Entering dividends in November 2019, <unk> in the total amount of $133 million.
Which represents <unk> 30 versus a $1 per share.
Finally, I would like to point out the return on invested capital was 22% considering the third quarter last 12 month's results.
Now moving on to slide 18.
Very presented financial and operational highlights for the quarter in the third quarter of 2000.
We achieved net revenues of $19 billion.
Which represents an increase of 7% in D&O comparison, yes.
Adjusted EBITDA for the quarter was $1 8 billion.
Which represents an EBITDA margin of nine 6%.
Net income was a total of $765 million.
In the quarter, which represents an earnings per share of <unk> 30.
<unk> per share.
I would also like to highlight that considering the third quarter of 2013 to last 12 months net revenue was a record of $72 billion.
Adjusted EBITDA of $8 2 billion and net income of $3 7 billion.
And the earnings per share of $1 63.
<unk>.
Now moving to slide 19, the operating cash flow in the quarter was $1 $3 billion free cash flow for the quarter was $615 million.
In the quarterly comparison free cash flow generation was positively impacted by the lower consumption of working capital mainly given the improvements in accounts receivable of $280 million, considering the better flow of sales to China with less restrictive measures related to COVID-19 during the quarter.
Additionally, we had a reduction in tax payments of $242 million.
Walker over quarter.
In the third quarter of 2022 last 12 months operating cash flow was $4 $1 billion free cash flow generation was $1 2 billion.
Excluding nonrecurring payments of $186 million in.
And expansion Capex in the amount of $1 2 billion free cash flow of the last 12 months would have been $2 9 billion.
Which represents a cash conversion of 35% of the adjusted EBITDA.
We have also increased the investments in the company's organic growth and the graph on the bottom of the devices total capex was.
$566 million.
Of which $286 million was expansion capex, mainly given investment, especially at the Cri and prepared foods plants in the U S.
Now please let's move to slide 20, where we have the evolution of our debt profile.
In the third quarter 2000.
<unk> was $14 five.
$5 billion, which represents a decrease of $432 million.
From the second quarter on.
On the back of the high higher free cash flow generation and also positive reversion of the operating working capital our gross debt was reduce it in $1 billion from the second quarter to the third quarter.
Yes.
Net leverage was 176 times in dollars and 181 times in <unk>, while interest coverage was standpoint, two times in the third quarter of 2022, both extremely profitable radios.
In addition.
<unk>. It is important to highlight our comfortable liquidity position, we ended the quarter with a cash position of $3 1 billion, which together with our revolving credit facility available of $3 $2 billion allows us a total liquidity of $6 3 billion.
Finally, as mentioned above with our liability management carryout in the period. The average debt term increased from six to 10 years.
Let's move to the business units performance, starting with Seattle on July 21, net revenue grew 23, 22% in Q3, mainly as a result of a 20% increase in the average sales price and 2% growth in volume in.
In the domestic market. The main highlight was the prepared food category.
11% ingredient prices why are volumes remained stable compared to the third quarter 2021, Seattle continue to invest in innovation capacity expansion commercial and operational execution.
The Sierra brand continues to increase its referenced penetration in the Brazilian households, and we purchases by consumers.
In the export market net revenues.
Increased 36% compared to third quarter 2000, and you want it is worth mentioning the strong growth of poultry sales in the period with a 29% growth in prices and 13% of items in the annual comparison.
In the third quarter 2000 ended to the higher production costs was offset by higher bye bye.
Bright spots through.
Combine that with a better mix of markets channels and products. In addition to the management focus on operational efficiency and innovation, thus adjusted a bit to that reach its one 8 billion reais with an EBITDA margin of 15, 1%.
Now moving to Jbs, Brazil on July 22, we see the revenue for the quantity growing by 5% year over year, reaching $3 1 billion.
In the export market strong international demand, mainly from Asia contributed to a 12% growth in net revenues and.
With a growth of 4% environment, 7% and the average price.
In the domestic market, even with the challenging macroeconomic scenario sales in the fresh discussed every grew four 3% year over year.
As a result of higher volumes. Following this strategy of increasing the number of clients through the loyalty program and approach the pretty boy and CST brands to the consumers.
Finally, I would like to highlight an important achievement that free Board brand was once again chosen as top of mind brands that is the most remembered and preferred eventbrite Brazilians According to digital too that a failure.
Moving to the slide 33.
At Jbs beef in North America, and now with speaking in dollars and in U S. GAAP GBS North America revenue reached $5 $6 billion in the third quarter.
The increase of five 2% year over year, and the adjusted EBITDA totaled $403 million with a seven 3% margin.
This quarter this margin in North America faces, a relevant impact year over year, given the acceleration of expected changes in the market conditions.
The domestic market host wholesale beef prices declining sequentially incentivising reduced promotional sales and promotions are likely to accelerate going forward on the other hand life catheter remain at high levels during the quarter, increasing 15% year over year.
In the export market and export markets year to date the U S. Beef exports continue to outperform 2021 and volumes, 5% warm any prices, 40% or more as a result of better international demand and a significant improvement of logistics <unk> American sports.
Moving on to slide 24.
We have GBS, Australia net revenue was $1 7 billion.
An increase of 19% compared to the third quarter 2021, and adjusted EBITDA of $59 million with a margin of three 6% sales.
Sales in the domestic market represented 41% of total revenue in the prior period.
6% higher in the third quarter 2021, driven by the additions of one any of Alere, which have a strong focus on the domestic market and by the recovery in demand in the retail and foodservice channels in the export market net revenue increased 15% compared to the third question that you aren't expanded by higher average prices.
Now moving onto Jbs USA pork into the third quarter due to net revenue was $2 $1 billion in increasing one 6% year over year adjusted EBITDA reached at $92 7 million bonds with a four 4% EBITDA margins.
Domestic market the results year over year were impacted by an increase in costs given the lower availability of live animals as well as the increase in the cost of rates as well as higher labor and logistics costs on the other hand immense Dana and prices at high levels.
Our national market. The USDA figures show that the U S for sports volumes fell 13, 3% year over year from January to September given the lower volume exported to keep customers markets.
For Jbs USA pork net revenue increased due to higher volumes from the value added portfolio of Swift to prepared foods business unit seems to be fair foods margin grew 56% in the third quarter compared to the last year. Therefore, the company continues to make important investments to expand.
Spreads while expanding its value added portfolio.
Dugard surprise on July 26 presented a net revenue of $4 5 billion in the quarter, an increase of 17% year over year.
EBITDA totaled.
$461 million with an EBITDA margin of 10, 3%.
In the U S quarterly results continue to reflect the benefits of the consistent execution of the strategy to focus on customers, having a value added portfolio and the relentless pursuit of operational excellence in Mexico, a more challenging macroeconomic scenario.
Affected.
In the quarter and additional seasonal disease impacted production specialty broiler readers to mitigate these risks the company has focused on service level and keep customers.
In Europe , despite the weak consumption environment and high cost inflation. The gradual recovery of results was a consequence of production optimization and the focus of those partnerships will keep customers promote innovation and a better service level.
<unk> I would like to move on slides 27 that shows that our exports totaled $5 $4 billion in the third quarter with approximately 190 countries being reached by these exports with that I would like to open to our question and answer session.
Ladies and gentlemen, we will now begin the question and answer session. If you have a question from.
Process targets key followed by the one key on your telephone numbers.
Is that any time, you would like to remove yourself from the question in queue. Please press star two.
And our first question comes from Ben Theurer with Barclays.
Yes, good morning, it's premature.
Very mature.
Questions.
Two questions. If I may firstly could we go a little bit into the outlook not so much into what the most recent quarter was but really looking ahead into into maybe a little bit of next year, what your expectations are particularly in beef and pork in North America.
We all know that.
It's a tough comp versus what it was last year.
And we're seeing still a relatively good trading income and bond.
Our environment, but.
Given what we're seeing in the market lifecasting prices, you've called it out these going up how do you feel about the levels of profitability into next year.
Just very particular USB from U S ports that will be my first question.
Hi, Ben good morning.
We see that these margins in the U S will come back to normal history.
Which is around mid single digits.
We think that.
Good a good perspective of what beef margins should.
The range you should have it whatever what has always been the history of.
The historical.
This margin, which is well above the mid single digits. So we expect this to.
Yes.
The adjustment to our normal.
Cyc cycle through to be happening, but this is.
Just talking about this before I move on to <unk>.
We don't take that as a surprise.
We've seen that come in and this is something we've been talking on the Covid, it's coming back to normal.
This margin range, so we take that.
Very normal for us but.
More than that I think that.
This will.
This highlights of this changing cycles that we are analyzing.
James will highlight a very big advantage that GBS has which is the <unk>.
Geographic and the <unk> for the different protein diversification, we have right. So we have been highlighting this very much.
I think that these adjustments to our normal beef cycle was going to highlight that even more and is going to make that.
At vintage that GBS.
Even more even more clear.
We're very.
Positive that this is going to be a very highlight a big highlight in our in our strategy because again, it's not just one characteristic of our company I think it's one of the fundamentals of our business is that.
Cycles in our business happening.
There are sometimes more positive sometimes more challenging but our diversification allows our margin to be to have a more stable profile.
Regarding regarding pork.
Then we.
We're also very confident about our business embark going forward our business our <unk> business in the U S is probably one of the most consistent businesses we have.
As in margin very consistent in their performance at.
It reflects their performance so.
Onto our live production on our pork processing plants, it's probably one of the most.
Consistent businesses, we have and on top of that business than we are.
<unk> been building a lot on value added so I mentioned on the Portuguese call a while ago.
Inside of this specific business unit that we look at which is the port the jbs pork.
USA.
We already have.
One five reaching $1 $5 billion prepared foods business in this in this business unit. So this is a business that we've been growing a lot on top of the <unk> acquisition and we've done a lot of investments in their own that fueled some acquisitions, but a lot of greenfield we have more.
Coming online so we have expansion of our morbidity plant in Missouri, we have.
The new plant in Colombia, that's going to <unk>.
And pursued also very very.
And on top of that vertical system business, we have been growing a lot on this.
Prepared business that will add value to our overall book of business. So overall, we're confident that that business will perform well going forward.
Thank.
Just complementing.
But we have.
To go into the line and we'll be able to continue to add value.
Whereas at Jetblue, who add what's your SaaS.
And when we're hesitant to say that the return to normal margin.
It is important to take in consideration that normal margin.
What is normal margin because in the what is the difference in terms of what that is business today what was before.
You will look for the best.
U S export to U S was really not significant today.
Spartan from U S International market become important how these will be effect.
The margin in the future.
No.
And the other thing and they can close date of Jbs. We I think that's another facility you are investing in the value add program that all of this will be impacting the margin but for sure. It is too early to understand the what is the what is the.
<unk> will offer the impact both of these initiatives.
Okay perfect. Thanks for that.
Second question was on Seattle.
Definitely.
In the quarter here.
Slight price increase very strong volume.
It sounds like the domestic market with a little softer maybe on the volume.
Okay.
Thanks.
Yes.
Okay.
And kind of get a sense.
We have started to run the ground we have.
We had a bad disconnect here and I Couldnt, we Couldnt hear your question do you mind repeating that question about <unk> again.
Sure no problem.
Scatter is if you could elaborate.
Okay.
Okay.
Okay.
Hello.
Okay.
Concentrating on not just to get a little better understanding of what what's been driving.
No because its price offset by volume and how you think about the Brazilian economy, and the consumer going forward.
Then it cut off again, but I'll talk about CRE and if I Miss anything please let me know and I'll follow.
A follow up so.
We are very positive about the ciara.
<unk> has been performing quite well in all of the basis of our performance. Our current performance is not something Thats short term is not something that has been happening right.
Been suffering a work of a few years, it's been since the very beginning is offer a foundation of our business, which is we've been investing quality we've been investing.
In in mix innovation, we have done a lot of improve.
Improvements in our facilities.
And we have been performing quite well one on operation side, so going forward.
We expect Seattle to continue to perform very well independent of.
Again, we obviously are aware of what's going on from a macroeconomic perspective, but thats not in our plans we don't.
Blend our quality of our product launches, we don't plan.
Our efficiencies with focus on the on based on that if there is going to be.
What's going to happen on the macroeconomic we're going to focus on our on our basics in our on our foundation, which has been what brought us here.
<unk> said that we don't see that the domestic market has been soft we think that it has been performing well.
We're very.
Very confident that we'll continue to continue to perform well in the next in the next year.
It will be a source of strength for <unk> to add to that Dan I think when we're looking at sea otter, and where and when were looking at wholesale is going to perform going forward and growth in <unk> you know that we have been.
And quite a locking lighting capex for Seattle, we have we're going to expand our capacity. So these are all projects that are not only approved but they are in process of being done.
Finished then we're going to start production pretty soon.
We have invested to increase our capacity and sort of which probably will be around a 20% increase in.
Our volumes going forward.
And we're going to be investing or we have invested on the items that we see that we can most advance any of the items that we see that there is the biggest demand and biggest potential in the domestic market. So.
Specialty in the domestic market so.
We're very confident that all set to continue to perform well, but the company will grow to a different level.
Thank you very much worsening.
Then a question comes from Carla Casella with JP Morgan.
Hi, Thank you.
What are your thoughts or if theres any change in your thoughts around a potential U S listing and what hurdles remain to get Paul.
Look karla.
Hello.
Hello can you hear me.
Yes.
Okay.
Right.
Karla.
Yeah.
Mid teen <unk>.
Our.
May be audit.
We continue to work on the process and seek for the best.
Great value for shareholders.
And.
We have broken down market, we are not talking about the market when tissue is not available that we are being considered.
Because it would be not an IPO will be leasing.
And we have done some.
We're working in this way we are lifting our bonds.
All of the work we have gone done that.
And we'll be out front with the leasing we export is not a question.
<unk>.
We will be in.
But when we believe that for sure if we keep this as a priority.
Okay, Great and then can you just remind us.
We were talking about listing in the U S with Sierra be part of the U S business as well.
This is the discussion we are we are.
We are working on that.
And for fly.
In the past Seattle was included.
And when we are not see a reason that Seattle will be not included but we have not.
Defined it yet.
Okay.
And then you talked about the success you've had in the prepared business you called out the 1 billion five I've already the business you haven't prepared park can you give us where you stand in prepared foods and the other key segments.
Sorry could you repeat Scott.
Got it.
Yes, so the pork has about $1 five of prepared foods and growing can you just say where you stand in the other businesses in terms of how much of their business is now in prepared foods.
Carla we did not lose DC information so far this year, we opened the information about the trial.
And then maybe in the future will be release. This information about prepared because we have prepared in different business units. We are preparing ci who have prepared and feel good that we have prepared in the U S. Whereas we mentioned we are prepare in Europe , but we are prepared.
In Australia, we are preparing Mexico and.
Looking forward, how we can disclosure of this information.
Difficult to say to you will now will be the amount of debt because.
It's gone.
From different business that will be changed all up the way that we release our results.
Okay. That's helpful and then just one more.
Can you give us a sense for what percentage of your business today is foodservice versus retail and it does vary dramatically by category.
High protein I should say.
Okay.
Whereas it Ken I don't know if you have that information Carlo.
It will be disabled will be the same challenge I mentioned about prepared I don't know if they have best best information better answer for this.
Carlos I don't have that information right here, we can follow up but.
We don't it's not something that we manage that way, we don't look at that that exposure down.
Foodservice is a relevant part of our business, but it is not it.
We don't we don't look at Ari for our information of channels by total company, we look by business unit. So.
We could follow up with us, but that's not how we how we operate our business and look at the at our operations.
Okay, great. Thank you so much for the answers.
Thank you Carla.
The next question comes from Ken Zaslow with.
Bank of Montreal.
Hey, good morning, guys.
Hello.
Hello, Good morning, we can hear you Ken.
Perfect I just have two questions. My first one is can you walk us through your capital investments this year as well as next year, just giving us kind of a flavor of how youre going to be spending the money in which divisions.
You think that'll have the greatest impact I know you did say that volume is going to be up 20% I think in 2023 based on the capital investment could you put a little bit more color on this stuff I think this is really key.
I will let gilead.
Details of this but I want to say that huge investment we have made.
Greenfield.
Red Dog, we still do have some some investment to finalize investment.
But the main part of the Greenfields that the expansion of Crs patients on V. U S prepared foods is already done, but I'll, let the gilead to explain more in detail.
Thank you Ken.
So again in 2021, our expansion Capex was $1 billion.
This year ex patient Capex will be probably be on the range of $850 million. So for next year.
We don't announce any other greenfield will be something lower than that so given that we are in the process of.
Of getting ready and commissioning the plant.
This number tends to decrease.
In terms of business units most of the scarp ex us.
Just to add what <unk> with the.
Expansion in Seattle.
And the other relevant about the Thailand meats.
Plant in U S and the vehicle plant in U S.
Great.
Maintenance Capex district give you an idea we had we get around $1 $2 billion meaningfully as capex in the last two years now with <unk>, one and other acquisitions.
The problem is forecasting a $1 $4 billion of maintenance Capex for next year, but we don't have the budgets read yet. So these final numbers will be still be in the approval process.
Ken I don't know it to us.
Once we get it for you but.
Our main investment.
Greenfield was done we need to finish the investment, but do need to mature investment that huge investment in Shanghai investment.
Now we are seeing the future low investment in the Greenfield because you need to mature all of these investments.
What do you think the return will be on your growth Capex in 2023.
As you think about it is all of this.
You harvest the investments.
I didn't know you can't find it.
Well, that's good and we are <unk> our business, yes, okay.
Our business is cyclical so too.
Talk about.
Return on this specific year.
It's difficult I would say that for example for M&A, we have a hurdle rate of around 14% so without doing M&A unless we have a at least a 14% return when we forecast.
What I can say with slightly being generated in return on invested capital if you look.
The last 12 months, our return on invested capital was 22%.
So given that we are talking about.
Expansion of operations, which will increase free cash flow and dilute our fixed costs.
These days.
These things to improve but of course, it all depends on market prices of our products as well.
Okay. My second question is.
On U S core the margin.
Essentially improved.
Actually pork Packer margin didn't really do that much different.
Assuming that the internal improvement and I know you did talk about the value added.
Do you think the key driver sequentially was to improve your pork Packer margins.
Your partner margins.
In the U S is it just seemed like E.
It did kind of improved pretty dramatically sequentially.
Yes, so our business our <unk> business in the U S performing pretty consistent.
The.
Going forward, we expect it to perform as well as we have performed this year.
Sure.
Specific.
The more specific yet into the deals that we think that we're going to probably have a little bit more hogs next year due to better health.
And we expect that.
There is a potential for the cut out of <unk> to improve given that theres going to be a reduction in overall.
And broken.
Production, given because especially because of beef in the United States now.
Those are some of the details, but overall, we think that we're going to have.
A pretty pretty good a year going forward for four four for <unk>.
Next in the United States next year.
Great I appreciate thank you guys.
The next question comes from pre Ias Audi group with Barclays.
Hi, Thank you for taking our questions. This is August and for pre up to questions from our end can.
Can you talk a bit about the increased promotions, you're seeing at retail on beef given that they are accelerating how much of this activity is pulling from the man from pork products.
Sorry can you repeat that question.
Yes.
Just talking a little bit about the increased promotions that youre seeing at retail on beef considering that those promotions have been accelerating.
Are you seeing.
Beef pulling demand from pork products.
No look we see that obviously.
Going forward there could probably be more features more ads, we have been looking at that.
And we're following that but.
That doesn't necessarily pull the demand from has been pulling the demand from fourth to beef, we don't we don't see that necessarily so.
Thats not something that we we look look like that.
What will happen in the United States next year, and thus more given to suppliers, we're going to have a reduction in the production of diesel and slight increase in the production of pork and chicken.
That probably will be.
Something that we're going to we're going to.
See from a consumption perspective, but that's more given.
Related to the supply.
Of those three proteins more so than the demand for.
And the retailer ads and promotions.
Thank you and one more question from our end now that you have a simplified capital structure. How are you thinking about the medium term ratings objective.
Yes.
Yes, exactly if you look at our financial metrics.
For sure we will be higher than a triple b minus that we are today I think just looking at the finding of financial metrics.
We would be around <unk> plus.
So we still have some work to do in others.
In other not quantified.
Metrics.
Including management and governance, which is do you have.
One discount factor sector of volatility that is done at a discount factor.
Which we intend to show that our business diversification makes the consolidated margin much more stable. So maybe we could also take these.
Volatility sector notch down and if we manage to that.
I think we can.
With our ratings.
Two is people will be plus level, which will be a good target because with that level, we have access to very cheap commercial papers.
Triple B plus companies can raise commercial papers at software mice five bps, while triple B flat, it's software plus 45 bps in the Triple B minus the software plus 90 bps. So it's yeah.
If we can increase our ratings. We can have also a significant reduction in our cost of capital as well.
Great. Thank you for your answers.
This concludes today's question and answer session I would like to invite Mr. Tom Anthony to proceed with his closing statements. Please go ahead Sir.
Yeah.
Thank you for all of you for the present.
It's Ted.
I recognize.
Intense of discussing beef margin in U S. Because of the size of the business is because the importance in our portfolio.
But I would like to.
With light on our diversified platform. We are not just do you see demand in U S. Chicken we are core.
We are prepared foods, we have presence in Australia, we are present in Brazil business in Europe , I think is jbs is diversified.
That is practically Mitch.
Globally and this is this is allowing us to navigate in these different cycles. The natural cycles of our business I believe that the market is still not recognized is a huge competitive advantage that the JV SaaS because this will get neutralized due one site to do other cycle.
One geography to the other proteins. These I think this is really a huge competitive advantage and our hope.
And Mike will be reorganizing.
Yeah.
As soon as possible because I think this is the market will be show how important diseases.
Diversified, but the Florida.
And I will take the opportunity to thank you our 250 team members.
Team members.
That is great our door.
The work and the commitment that.
Yes.
<unk>.
<unk> delivered a great result.
It really is today. Thank you.
That does conclude the GBS audio conference for today.
Thank you very much for your participation have a good day and thank you for your <unk> call.
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