Earnings please analysts, but JBS shares fall.
The company reported a 40,4% increase in profit, but a 4,5% rise in debt is worrying investors.
247_ (with information from AE) – JBS (JBSS3) shares experienced significant fluctuations on Wednesday, the 11th, on the Brazilian stock exchange and closed lower. The day saw general losses in stocks across various sectors due to investor pessimism in global markets following data from the Chinese economy suggesting a possible interest rate hike in that country. The Brazilian company's shares closed trading at R$ 5,56, down 1,25%, on a day when the Ibovespa lost 1,70%.
The protein company announced results that divided opinions. There was an increase in profit, but the company's debts and operating results are a cause for concern. The consolidated net profit of R$ 90 million represented an increase of 40,4%. If only the profit attributable to controlling shareholders is considered, the amount is R$ 147 million, 48% higher.
However, EBITDA (earnings before interest, taxes, depreciation, and amortization) was R$ 836 million, a 3% decrease compared to the R$ 862 million obtained in the same period of 2010. According to the company's earnings report, the EBITDA performance was affected by the negative result of the company's chicken unit, Pilgrim's Pride. The EBITDA margin was 5,7%, 1,4 percentage points below the 7,1% recorded in the first quarter of last year. JBS reported that it ended the period with a consolidated net debt of R$ 11,605 billion, an increase of 4,5%, which the company explained by the greater need for working capital during the period.
Overall, experts highlighted the strong performance of the beef and pork operations in the United States and the Mercosur unit, which includes the company's activities in Brazil. However, cash flow generation, which remains negative due to working capital needs, continues to worry analysts. According to Rafael Cintra, an analyst at Link Investimentos, the significant increase in export prices for beef and pork from JBS USA boosted the profitability of these operations, which exceeded his expectations. Furthermore, the capture of synergies with Bertin is supporting the growth of JBS Mercosur's EBITDA margin.
Analysts Erick Guedes, Fernando Labes, and Felipe Rotenberg from Banco Safra also liked the results presented by the company and believe the numbers will be positive for JBS shares. "The result could have been better if it weren't for the weak performance of Pilgrim's, which is already incorporated into the share price and therefore shouldn't be a factor in the asset's decline," the experts stated in a report. Safra reiterated its buy recommendation for JBS shares, with a suggested target price of R$ 10,35. The potential upside is 84,2% compared to yesterday's closing price (R$ 5,62).
BB-Investimentos analyst Mariana Peringer cited that JBS's results for the period showed that demand for food products and proteins remained strong globally, and believes this trend may continue in the coming quarters. "It's worth noting that, in April and May, the main agricultural commodities have shown falling prices. But given the current global inflation and high liquidity in the markets, we are somewhat skeptical about a cooling of raw material prices, and these recent drops are isolated incidents," explained Peringer in a market report. BB-Investimentos maintains its short-term recommendation to hold the shares, with a target price of R$ 10,20, "even though the company's intrinsic value demonstrates potential for long-term appreciation." The potential upside is 81,5%.