background image
AnnuAl RepoRt
2008
theRe is one thing thAt is devAstAting when lAcking
but, if developed And encouRAged, hAs the potentiAl
of bReeding unpRecedented success in All dimensions
of life. this thing is tRust.
" no chAin cAn be stRongeR thAn its weAkest link. "
Jbs suppoRts the sustAinAble development of the livestock chAin.
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indicAtoRs
net profit . R$ million
06
07
08
158
-165
25
cash flow final
balance . R$ million
06
07
08
261
1,382
2,292
consolidated gross
profit . R$ million
06
07
08
4,749
14,727
31,106
total Assets . R$ million
06
07
08
3,464
8,448
16,096
ebitdA . R$ million
06
07
08
547.8
602
1,156.1
net debt/ebitdA 2008
1º tri
2.89x
2º tri
2.77x
3º tri
2.31x
4º tri
1.95x
. 2 .
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mission,
cReed And
vAlues
the mission of Jbs s.A.
"Maximise the value of each animal in a sustainable
way".
compAny cReed
"As we believe that one of the main competitive
differences is the quality of our people, and as we believe
that, no matter how simple the position may be, well-prepared
and motivated personnel make the difference, we consider
Human Capital as the main asset of our company. Mainly
through our people we manage to innovate, create, improve
and grow. This capital, when well used and with adequate
support, enables us to achieve the results necessary for the
perpetuation of JBS".
ouR vAlues
:
Planning
:
Determination
:
Discipline
:
Availability
:
Frankness
:
Simplicity
. 3 .
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history of Jbs
R$/US$ exchange rate at the end of the year.
Source: JBS
* Pro forma JBS S.A. LTM Dec07 (includes JBS USA)
** Pro Forma JBS S.A. LTM Dec08 (includes JBS USA, Tasman and 50% of Inalca); Smithfield Beef LTM Dec08
R$/US$: 2.337
growth in slaughtering capacity (head/day)
53
70
02
06
07
5
500
5,800
22,600
51,400
Acquisitions
ensuRe An
incReAse
in
slAughteRing
cApAcity
the history of Jbs has been marked by the acquisition of more than 30 units
over the last 15 years, with appropriate capital and management structure.
65,700
08
93
96
0.3
03
0.7
00
0.5
06
1.9
97
0.4
04
1.2
01
0.5
07*
12.7
99
05
02
08**
0.4
19.8
0.4
1.5
Anápolis
(Bordon) ­ BR
Barra do Garças
(Sadia) ­ BR
Barretos
(Anglo) ­ BR
Pres. Epitácio
(Bordon) ­ BR
Campo Grande
(Bordon) ­ BR
Rio Branco ­ BR
Cacoal 1 ­ BR
Cacoal 2 ­ BR
Porto Velho ­ BR
Vilhena
(Frigovira) ­ BR
Inalca ­ ITA
Swift Foods Co. ­ EUA/AUST.
Maringá
(Amambai) ­ BR
Berazategui
(Rio Platense) ­ ARG
Colonia Caroya ­ ARG
SB Holdings ­ EUA
JV Beef Jerky ­ BRA/EUA
Goiânia
(Anglo) ­ BR
Andradina
(Sadia) ­ BR
Tasman ­ AUST
Smithfield Beef ­ EUA
Five Rivers ­ EUA
Araputanga
(Frigoara) ­ BR
Cáceres
(Frigosol) ­ BR
Iturama
(Frigosol) ­ BR
Venado ­ ARG
Tuerto ­ ARG
Pontevedra ­ ARG
(CEPA) ­ ARG
Pedra Preta
(Frigo Marca) ­ BR
Rosário
(Swift) ­ ARG
San Jose
(Swift) ­ ARG
R$/US$: 2,337
. 4 .
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index
AnnuAl
RepoRt
2008
Jbs historical overview
Jbs today
who Jbs is
message from the president
message from the
board of directors
segments of Activity
Acquisitions
corporate governance
operations and
commercial Relationships
financial performance
consolidated brands
sustainability
corporate information
financial statements
. 6 .
. 7 .
. 14 .
. 16 .
. 18 .
. 20 .
. 27 .
. 30 .
. 39 .
. 46 .
. 49 .
. 53 .
. 65 .
. 67 .
. 5 .
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Jbs oveRview
JBS have expanded the Company business based on
the business spirit in management, the vocation for leadership
and the quality of employees and collaborators. Innovative
actions have turned this company into the largest world
producer of meat and the largest Brazilian food company.
55 yeARs
of impoRtAnt
Acquisitions
And stRong
inteRnAtionAl
pResence
José Batista Sobrinho
starts operation of a small
slaughterhouse in the city
of Anápolis (GO), with a
capacity of handling five
heads of cattle per day.
1953
Acquisition of the first
slaughtering unit in
Planaltina (DF).
1968
With the purchase of another
cattle-slaughtering unit in
Luziânia (GO), production
soars to 500 heads a day.
1970
Significant expansion of the
Brazilian operation through the
purchase of slaughtering units
and also units producing fresh
and industrialised meat, as also
as investments in increasing
the production capacity. In
this period, the slaughtering
capacity reaches 5.8 thousand
heads per day.
1981 a 2002
Internationalization.
Acquisition of Swift
Argentina.
2005
IPO.
Acquisition of Swift EUA.
Start of globalization
2007
Consolidation of
globalization. Constant
search for efficiency.
2008
. 6 .
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Jbs todAy
JBS is now the largest beef producer in the world, with
a capacity to slaughter 65.7 thousand heads of cattle per
day. The Company is also the largest world exporter of beef,
with access to all world markets, and also has production
platforms in the four largest world producers, namely Brazil,
Argentina, Australia and the United States.
The Company produces both fresh and processed
beef, ready meals, preserved vegetables, beef by-products,
and also fresh pork meat. The Company is market leader for
beef on the Brazilian, Argentinean and Australian markets,
and also the third largest beef-producing company on
the American market. With a slaughtering capacity of 48.5
thousand heads per day, JBS has become the third largest
producer of pork in the United States.
The Company operations are carried out in several
different units in Brazil, Argentina, the United States, Italy and
Australia, and this has provided access to all the consumer
markets of the world, operational flexibility in production, low
transport costs, both for transporting the cattle to the units
and for transporting the products to the end clients, and a
lower risk of phytosanitary problems.
JBS has a structure of low cost, efficient operating
cycle and high-quality products. All platforms have a
sustainable and long-term relationship with clients around
the world. JBS Brazil serves these clients through the
Company's 22 Production Units, with a capacity to slaughter
18,900 heads of cattle per day and with a total workforce of
16,900 employees in Brazil.
In JBS Argentina, there are six slaughterhouses with
a total capacity of 6,700 heads/day as well as production of
industrialised products and one tin packaging factory, with a
total of 5 thousand employees in that country.
The operations in the United States have a total of
17,900 employees and production is distributed among
18 units with a total slaughtering capacity of 28,600 heads
of bovine cattle per day, 48,500 pigs per day, 4,500 small
animals per day, and 11 confinement pens with a static
capacity to fatten 820,000 thousand heads of cattle.
The JBS operations in Australia are distributed among
10 plants with a total capacity to slaughter 8,500 heads of
cattle per day and 15,000 small animals daily.
In Italy, Inalca JBS has more than 2 thousand
employees, 8 production plants and the capacity to slaughter
3,000 heads of bovine cattle per day. This Company has
an additional distribution platform in countries such as the
United Kingdom, Russia, Angola, the Congo, Algeria, the
Democratic Republic of the Congo and Poland.
distribution of production units in 2008
22
10
18
6
8
Brazil
Australia
USA
Argentina
Italy
. 7 .
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Jbs woRldwide
globalized production and distribution platform
JBS NO MUNDO
Abatedouro
Abatedouro e Indústria
Centros de Distribuição
Indústria de Vegetais em Conserva
Indústria de Carne Enlatada
Indústria de beef Jerky (Beef Snack's)
Indústria de Carne Suína
Indústria de Carne Ovina
Processamento de Carne Bovina e Suína
Curtume
Sede Administrativa
Confinamento
Indústria de Embalagens
Pátio de Containers
Escritórios Comerciais
JBS NO MUNDO
Slaughterhouse (Beef)
Slaughterhouse and Industry
Distribution Center
Vegetable Canning Plant
Beef Canning Plant
Beef Jerky Plant (Beef Snack's)
Slaughterhouse (Pork)
Slaughterhouse (Lamb)
Beef and Pork Processing Plant
Wet Blue Processing Plant
Headquarters Office
Feed Lot
Package Industry
Inland Container Terminal
Commercial Office
. 8 .
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AC
RO
MT
GO
MS
PR
SP
MG
RJ
JBS IN BRAZIL
Slaughterhouses
Slaughterhouses and Industry
Distribuition Centres
Units for Preserved Vegetables
Units for Preserved Beef
Administrative Office
Container Yard
Confinement Unit
description
:
The operations of JBS Brazil are carried out by 22
production units, with a total capacity of slaughtering
18,900 heads of cattle per day, and more than
16,900 employees;
:
The clients of JBS in Brazil are essentially sellers,
restaurants and leather tanning units (curtumes). The
current client portfolio of JBS includes more than
6,000 companies on the internal market; and
:
JBS is the largest Brazilian exporter of bovine
products, with a turnover of US$1.1 billion in 2007,
according to the Secretariat for Foreign Trade
(SECEX). The Company is also the 22nd largest
exporter in Brazil, considering all segments.
platform
At this moment, the Company plants are distributed
as follows:
Jbs bRAzil
:
19 slaughtering units situated in Brazil, in the States
of Acre, Goiás, Mato Grosso, Mato Grosso do Sul,
Minas Gerais, Rondônia, São Paulo and Paraná,
five of which also have the capacity to produce
industrialised products;
:

One plant for tin packaging, in the State of Rio de
Janeiro, Brazil;
:
One plant for tin packaging for vegetables, in Minas
Gerais, Brazil;
:

One plant for jerked beef in São Paulo, Brazil; and
:
One confinement site in the State of São Paulo, Brazil.
clients
In 2008, a total of 11,240 clients were served on the
domestic market, and 436 on the overseas market, in more
than 100 countries, especially Russia, the United Kingdom,
Iran, Hong Kong and Saudi Arabia.
AC
RO
MT
GO
MS
PR
SP
MG
RJ
JBS NO BRASIL
Abatedouros
Abatedouros e Indústria
Centros de Distribuição
Indústria de Vegetais em Conserva
Indústria de Carne em Conserva
Sede Administrativa
Pátio de Containers
Confinamento
: total kill capacity: 18,900
heads of cattle/day.
: 16,900 employees.
: amount of plants: 22
. 9 .
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Jbs ARgentinA
description
:

In 2005, JBS acquired Swift, now known as JBS
Argentina, with a capacity to slaughter 6,700 heads
of cattle per day and more than 5,000 collaborators;
:

The Company was the first packaging industry in
Argentina to receive the ISO 9001:2000 certification for
the whole process of production of processed meats;
:

In Argentina, the Company is absolute market leader
in the segment of industrialised meats for the internal
market, with a market participation of 77% of all
sales of 2007. The client portfolio consists of 786
companies; and
:

Last year, JBS Argentina was responsible for 87% of
all the industrialised beef sold in the country, which
exported to the United States, Europe and about
190 other clients.
JBS IN ARGENTINA
Slaughterhouses
Slaughterhouses and Industry
Administrative Office
BA
CO
SF
ER
platform
At this moment, the Company plants in Argentina are
distributed as follows:
:

Six slaughtering units in Four provinces (Buenos Aires,
Entre Ríos, Santa Fé and Córdoba), of which five also
have the capacity to produce industrialised meats;
:

One plant for tin packaging, in the province of
Buenos Aires.
clients
JBS Argentina has a total of more than 650 clients
internally and 140 clients on the export market, serving 43
countries, especially the European Union, the United States,
Uruguay, Israel and Canada.
JBS NA ARGENTINA
Abatedouros
Abatedouros e Indústria
Escritório
BA
CO
SF
ER
: total kill capacity: 6,700
heads of cattle/day.
: 5,000 employees.
: amount of plants: 7
. 10 .
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description
:
The operations of JBS USA are carried out by 18
production units, with a total capacity of slaughtering
28,100 heads of cattle per day, 47,900 pigs per day,
and 4,000 heads of sheep per day, as well as 11
confinement units with a total capacity of fattening
820,000 heads of cattle.
:
The operation has more than 24,200 employees; and
:
The Company has been well known as a supplier of
prime-quality beef and pork for more than 150 years.
platform
At this moment, the Company plants in the United
States are distributed as follows:
:
8 slaughtering units in the states of Colorado, Utah,
Texas, Nebraska, Wisconsin, Michigan, Pennsylvania
and Arizona;
:
3 pig-slaughtering plants in Minnesota, Iowa and
Kentucky;
:
1 sheep-slaughtering plant in the state of Colorado;
:
1 leather tanning unit in Texas;
:
2 units for production of preserved meat (jerked beef)
in Minnesota and Texas;
:
2 grease units in Pennsylvania; and
:
11 confinement units in the states of Colorado, Texas,
Oklahoma, Kansas, Ohio and Idaho.
clients
JBS Argentina has a total of more than 3,900
clients in the United States and some 500 clients on the
export market, serving 37 countries, especially Mexico,
Canada, Taiwan, South Korea and Hong Kong.
JBS IN EUA
Cattle Slaughterhouses
Distribution Centres
Pig Slaughterhouses
Pig and Cattle Slaughterhouses
Sheep Slaughterhouses
Administrative Headquarters
Offices
CA
UT
AZ
CO
TX
NE
IA
IL
WL
MN
CT
NJ
FL
KY
Jbs united stAtes
JBS NOS EUA
Abatedouros Bovinos
Centros de Distribuição
Abatedouro Bovino e Suíno
Abatedouro Suíno
Abatedouro Ovino
Sede Administrativa
Case Ready (pratos prontos)
CA
UT
AZ
CO
TX
NE
IA
IL
WL
MN
CT
NJ
FL
KY
: total kill capacity: 80,000
heads of cattle/day.
: 24,200 employees.
: amount of plants: 18.
. 11 .
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description
:
The operations of JBS Australia are carried out by 10
production units, with a total capacity of slaughtering
8,500 heads of cattle per day and 16,500 heads
of sheep and pigs. In addition, the Company has
some 6,900 employees;
:
TBS Australia is the largest meat processor and
exporter on the Australian market, having a commercial
relationship with more than 30 countries, mostly on the
Pacific coast and in North America.
platform
At this moment, in Australia, the Company plants are
distributed as follows:
:
10 slaughtering units for cattle, sheep and pigs; and
:
5 confinement units in Queensland and New South
Wales.
clients
JBS Australia has a total of 185 clients in the United
States and some 400 clients on the export market, serving
35 countries, especially South Korea, China, Japan, Taiwan
and Indonesia.
Jbs AustRAliA
JBS IN AUSTRALIA
Cattle Slaughterhouses
Distribution Centres
Administrative Headquarters
Confinement Units
Western Australia
Southn Australia
Queensland
New South Wales
Victoria
JBS NA AUSTRÁLIA
Abatedouros
Centros de Distribuição
Sede Administrativa
Confinamentos
Western Australia
Southn Australia
Queensland
New South Wales
Victoria
: total kill capacity: 25,000
heads of cattle/day.
: 6,900 employees.
: amount of plants: 10
. 12 .
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description
:

The Italian operation is responsible for the
production of fresh bovine meat, as also as
processed and smoked meats and snacks, through
a jointventure with the Cremonini Group;
:

Turnover of US$1,039 million and assets of US$771
million;
:

The production division is responsible for two
companies: NALCA SpA and Montana Alimentari SpA;
:

Largest producer of beef in Italy;
:

Largest producer of industrialised beef in Europe;
:

Largest producer of hamburgers in Italy;
:

The Company is the only non-American supplier of
McDonald's;
:

Capillarity in distribution throughout Europe, Africa
and Russia;
:

Benchmark in technology in the market for cattle
slaughtering;
:

10 production plants;
:

Production capacity of 800,000 heads of cattle per year;
:

40,000 tonnes of hamburgers per year; and
:

2,019 collaborators.
distribution
:

Moscow (Russia)
:

St. Petersburg (Russia)
:

Luanda (Angola)
:

Lobito (Angola)
:

Melangie (Angola)
:

Brazzaville (Congo)
:

Point-Noire (Congo)
:

Algiers (Algeria)
production
units
:

Poland ­ Slaughterhouse
:

Moscow ­ Logistics and Distribution
clients
INALCA JBS has a base of more than 8,000 clients
internally and also 660 on the external market, serving 65 countries,
especially France, Spain, Greece, England and Germany.
inAlcA Jbs itAly
JBS IN ITALY
Slaughterhouses
JBS NA ITÁLIA
Abatedouros
: total kill capacity: 800,000
heads of cattle/day.
: 2,019 employees.
: amount of plants: 10
. 13 .
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who Jbs is
The success of the Company is backed up by
business spirit and by a pioneer approach, both very strongly
present in JBS management.
JBS S.A. was the first company to be structured
professionally, in the meat industry in Brazil. The strategic vision,
focused on an expansion policy, started the internationalisation
of the Company in 2005 with the purchase of Swift Argentina.
The following year, the Company became a sociedade
anônima (like a PLC in the United Kingdom) and, in March
2007, promotes a new milestone on the São Paulo Stock
Exchange. With the opening of the Company's capital in 2007,
JBS strengthened its pioneer spirit, being the first company in
the meat-packing segment to trade its shares on the Stock
Exchange. The opening of the Company's capital shows the
advances made by JBS, which thus consolidates the best
practices of Corporate Governance which the Company has
always practiced, making the market more transparent.
The year of 2007 has been important in the history of
JBS as the start of the globalisation of the Company, while the
year of 2008 has seen the consolidation of this movement. In
2007, JBS purchased the Swift Foods Company, in the USA,
with units in that country and also in Australia, now known as
JBS USA and JBS Australia. In 2008, JBS announced the
completion of purchase of a 50% stake in Inalca, the largest
producer of beef in Italy, as also of Smithfield Beef Group,
Inc. and the Tasman Group, the former being situated in the
United States and the latter in Australia.
The acquisitions in 2008 have consolidated the
globalisation of the Company and also strengthen the JBS
strategy of geographical diversification of their production
and distribution units, thereby reaffirming the Company's
global presence in the main meat-producing countries,
and with access to 100% of the consumer markets. This
production platform makes JBS a company that holds
global leadership in the beef segment, and which exports to
the most important importing countries in this segment.
The JBS management style also includes a search for
modernity, quality of products and raw materials, construction
of relationships with partners, clients, collaborators and society
in general, satisfaction of shareholders, and a commitment to
issues of social and environmental responsibility.
JBS is dedicated to the production of fresh and chilled
beef, processed beef, fresh and chilled pork, and also beef
and pork by-products.
pioneeRism
hAs been the
mARk of the
pAth tRAiled
by Jbs
. 14 .
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JBS is present in all the world's consumer markets thanks
to its productive strategy, with plants in the main beef-producing
countries ­ Brazil, Argentina, the United State, Italy and Australia
­ and also leadership in terms of exports, serving 110 countries.
JBS also has, as their strategy for the consolidation of global
presence, a strong and well-structured policy of acquisitions.
In 2008, they tightened their grip on the North American market
with the purchase of Australian company Tasman for some
US$150 million, and also the takeover of Smithfield Beef, which
operates in the United States.
JBS analyses companies throughout the world, to
identify those that have good market potential but which are
not able to establish an efficient management system. On
takeover, the companies go through a period of financial
cleansing and then the JBS standards of management
are enforced. This means that there has been the start of
a process of optimisation of the results of these production
units and also the unification of Company culture.
Nowadays, JBS is active in the food and transport
segments, and, in all the countries where the Company is
present, has a total of 48.9 thousand collaborators which
contribute towards the success of the Company.
The JBS operations are structured in five segments:
:

JBS Brazil
:

JBS Argentina
:

JBS United States
:

JBS Australia
:

JBS Italy (Inalca)
volume sold . thousand tonnes ­ 2008
domestic market (1,343)
90.7%
2.4%
6.9%
volume sold . thousand tonnes ­ 2008
export market (419)
93.8%
6.2%
Fresh
Processed
Fresh
Processed
Others
. 15 .
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messAge fRom
the pResident
Joesley mendonça batista
President of JBS S.A.
We kept at 2008 the same growing rate that
characterized Company's management on last years, with
worldwide presence in the main producer and customer
markets for our products. Our global production platform
is consolidated, with many challenges as our culture
implantation in those unities, processes integration and
costs structure revision, that resulted in efficiency and
improvement increasing ­ we optimize our resources on
production processes managing, speed up our production
unities supplying and fresh products delivery, with quality to
our customers.
Company attitudes were a preparation for worldwide
economic crisis. With the turnover in worldwide credit
market and lower funding lines availability on international
financial markets, we turn our focus to the Company
economic health, rather than to continue growing, as was
occurring to this moment. Between adversities we were
in face of there are strong increase on cattle prices, low
cattle availability due a cyclic herd deterioration and the
high appreciation of Brazilian currency, Real, in the first half
of year - that prejudices our products competitiveness on
international market.
Although in face of this scenario, we close 2006 with
R$ 30.3 billion of net income, that represents more tan two
times last year income, a 114.5% growing and R$ 1.2 billion
of EBITDA, 95.6% higher than 2007.
Not less important, at 2008 JBS retaken the newly
USA'S purchased company results, between fixed costs
reduction, operational efficiency improvement, larger scale
and focus on details. Those points, due they are inside factors
­ not exposed to market conditions ­ created a scenario to
Company continue presenting sustainable results.
Positive results were ensured thanks to excellent
JBS positioning on its main markets. EBITDA margin
maintenance in the 4% rate probes JBS solidity and risk
management capacity.
Company also work on is de-leverage, reducing the
relation between liquid debt on EBITDA from 3.64 at 2007 to
1.95 at 2008. Worked with debt basically funding its working
capital, not having problem to refund its short time debts in
the moments of low liquidity market. At 2008 also began to
balance geographically its debt, with incomes generation on
each operation country.
The Company belief in its values reflect on management
attitudes, as the adoption of additional corporative governance
practices in relation to that is required by law and the own
regulation of New Market from BM&FBovespa, as the existence
of audit, Finances, People Management and Enterprise Strategy
committees,. On this last comittee, a detach for Sustainability
quaestions. We have sustainability programs suitable to each
production unities, that includes environment, natural resources
use, wastes treatment and social actions.
. 16 .
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with
conseRvAtive
mAnAgement
And A focus
on
Results
,
Jbs envisAges
oppoRtunities
Amid moments
of tuRbulence
Although pointing to 2009 as a year to conservative
business management movements, JBS demonstrates
that its growing strategy has been being correct. Company
is taking advantage of opportunities as firms acquisitions,
where its management model, between efficiency
improvement and costs reduction, can increase its resuls. At
2008 we incorporate to our portfolio Inalca operations, Italian
firm responsible by fresh beef, manufactured, smoked and
snacks production, between Association with Cremonini
group, Tasman Australian group, and Smithfield Group beef
unity (Smithfield Beef), in United States, and its confining
operations known as Five Rivers, are now respectively
named as: "JBS Packerland" and "JBS Five Rivers".
Those acquisitions represents the conclusion of
investments plan to build a slaughtering, production and
trading platform sustainable, on EUA and Australia, that began
at July, 2007, between Swift & Company acquisition.
The next years, we believe, Will be marked by JBS
distribution global platform integration and expansion, to
consolidate each more our strategy to create the largest
world company of direct distribution of beef, cooled and
freeze dairy products.
This report shows JBS'S management solidity and the
trust that company entrust on its more than 48.9 thousand
employees around the world.
. 17 .
background image
messAge fRom
the boARd
of diRectoRs
Ever since the Company was set up in 1951, with
a slaughtering capacity of five heads a day, until reaching
60 thousand heads per day, with units on six continents,
JBS has always trailed a path of excellence in business
management, administration of human resources and risk
assessment. Nowadays these qualities are more important
than ever before. The world is changing, and business
scenarios are more and more volatile.
JBS is structured to grow by replicating its business
model and taking opportunities that place the Company
closer to the supplier markets and producers. The Company
is therefore in an excellent position to take on the current
phase of the world economy, with solid financial health and
a conservative management in the main markets.
JBS has its main asset in its team of collaborators. The
innovation capacity and the ability to meet even the strictest
consumer expectations have led JBS to levels of excellence
which make the Company look to the future with confidence.
Even with the negative factor of the world financial crisis,
which hit the markets as from October 2008, JBS managed
to build a solid base to make their business permanent. The
geographical expansion has ensured presence close to the
clients, thereby bringing significant reductions of operational
and logistics costs. The Company has been keeping up its
margins, this clearly showing that it is possible to establish
performance targets and to have security in business.
The Management of JBS in 2008 has shown itself
to be competent and conservative in the light of a scenario
of turbulence, and this has reaffirmed its excellence of
management, and credibility before the market.
constAnt
gRowth,
And solidity
. 18 .
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betsy markey
Congresswoman from the
Fourth District of Colorado
cAttle is the most impoRtAnt commodity in the stAte
of coloRAdo, And is Responsible foR moRe thAn 60% of
ouR AgRicultuRAl income. Jbs bRings An inteRnAtionAl
peRspective to this industRiAl segment, which will
benefit the pRoduceRs And Also mAke AgRicultuRe in
coloRAdo feAsible in yeARs to come.
globAlisAtion
. 19 .
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segment
of Activity
The year 2008 was marked by the global financial
crisis. As from September 2008, the world felt the pinch with
the effects of this scenario.
The speculations about the duration and the impact
of the current global crisis have led to a high volatility as
yet unseen in the capital markets. For JBS, this situation
of instability was regarded as an opportunity to prove the
solidity of the Company and also the ability to manage risks,
which gave the Company reasonable financial stability even
in the most adverse conditions.
The experience of JBS in statistical studies on elasticity
have shown that, during previous global crises the consumption
of bovine protein was not reduced, meaning that the Company
believed that the demand for their products would continue to
grow and that there would be good results at the end of 2008.
Some effects of this crisis, such as exchange rate operations,
brought important benefits. This movement led to the financial
deleverage of JBS, as currently more than 80% of cash flow is
in American currency while almost all the debt in Brazilian Reais.
It also provided operational gains through the global production
and distribution platform, directing Company resources
between the markets for each region.
In 2008, the first impact on business came in the form of
suspension of credit lines for exports. JBS, well positioned with
the main producing and consumer markets, sought to strengthen
their activities in the domestic markets where they have their
units. In this way, the Company reduced its dependence on
international markets when there was lack of credit for importers.
Once again, the strategy of expanding Company business
throughout the world and getting closer to the main markets
proved to be correct. Lower costs and improvement to efficiency
were key factors for the success of the Company.
Jbs is Active in
the pRoduction
And commeR-
ciAlisAtion of
beef, And is
pResent in
the
lARgest
pRoducing
And consumeR
mARkets
of
this segment
. 20 .
background image
The position of JBS on the markets in the United States
and in Australia were important factors for the Company
business not being contaminated by the world financial crisis.
The United States are the largest world market for beef, while
Australian has strategic closeness to the Asian markets. In
the United States, the Company also has strong operations
with pigs as well as cattle, this being a diversification that
also helped to ensure positive results in the year.
JBS obtained satisfactory results in 2008. The
Company closed the year with a positive performance.
The third quarter, for example, had the best quarterly result
consolidated in the history of the Company, with an EBITDA
of R$470.5 million, a net turnover of R$7,771.5 million, and a
net profit of R$694.0 million. In this same period, JBS USA,
considering its activities in the beef segment, also obtained
its best historical result and confirmed the expected increase
in EBITDA margin, from 5.1% in 2Q08 to 5.6% in 3Q08.
The year 2008 was important for JBS to confirm its
stability and leadership in the beef segment, even in the light
of an adverse scenario.
The year has also been relevant because JBS has
confirmed its stability and leadership in the beef segment
and also for the full retaken of the results obtained by
JBS USA. In addition to the good results obtained on the
American market, exports have stood out through the strong
global demand. The turnaround of operations in the USA
has once again proved the experience and the competence
of the Management of JBS, guided by your efficient strategy
of seeking opportunities in purchases.
In 2008, JBS thus consolidated the Company's
globalisation and also confirmed to the market its capacity
for management.
pRoduction
Brazil has the 2nd largest bovine herd and In terms
of the herd commercially used, Brazil has the largest cattle
herd in the world, by number of cattle heads.
In the ranking of world production of beef, Brazil is in
2
nd
position, behind the United States which yonder USA are
the largest consumer of this product.
Australia is the second largest exporter of beef as
it has many productive advantages: exceptional sanitary
conditions, as it is a large island without borders onto any
other countries, which means there is no risk of infection by
animals from other countries; good weather conditions; and
proximity to Asia, an important consumer market for beef.
Argentina is the fourth largest beef producer.
Argentinean meat is in itself a very strong brand on the
international market through its tradition, native pastures and
also its climate similar to that of Europe. These benefits allow
the development of a product which is highly competitive on
the European market.
bRAziliAn mAcRoeconomic scenARio
2007
2008
Growth in GDP
3,7
5,4
Inflation (IGP ­ M)
3,8
1,76
Inflation (IPCA ­ M)
3,1
4,47
Selic (Official Interest Rate)
15,0
11,25
Sources: IBGE and FGV
. 21 .
background image
total scenario - herd & production - 1960 to 2009
p
roduction . million tonnes
h
erd . million head
1,200.0
1,100.0
1,000.0
900.0
800.0
700.0
600.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
60
66
00
88
02
82
72
06
92
80
94
74
64
08
96
84
98
78
68
04
86
76
90
70
62
Total Herd
Production (equivalent carcass weight)
Source: USDA
main beef exporters
26
17
12
6
6
10
6
5
11
1
Brazil
Australia
United States
India
New Zealand
Canada
Argentina
Uruguay
European Union
Others
main beef importers
18
15
10
6
4
5
6
4
3
29
United States
Russia
Japan
Mexico
European Union
South Korea
Canada
Venezuela
Egypt
Others
. 22 .
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consumption
Beef is an important source of protein, and for this
reason it is the third most commonly eaten meat in the world,
after pork and chicken.
USDA statistics show that the consumption of beef
has been rising steadily since 1960. The same source shows
that since 2001 the world consumption of beef has grown at
a rate of 1.1% per year, on average.
For the next few years, we expect a steady growth in
the world consumption of beef, as a result of the population
growth, mainly in countries like China, Brazil, other Latin
American countries, the Middle East and Eastern Europe.
The maintenance in the growth of the population in
developed markets and the constant growth of population
in the emerging markets show a strong demand for the
Company's products in both the short and the long term.
world population growth and consumption of beef
c
onsumption . million tonnes
p
opulation . million
10,000.0
8,000.0
6,000.0
4,000.0
2,000.0
0.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
-
60
75
30*
15*
90
40*
10*
45*
95
70
50*
20*
05
cAgR 2.0%
80
25*
00
35*
85
65
Population of Developed Countries
Population of Developing Countries
Consumption of Beef*
Source: United Nations and USDA
* UN Estimate
** Trend for beef consumption considering CAGR of 2% per annum (between 1960 and 2009)
expectAtions
of steAdy
gRowth
in
consumption
of beef
. 23 .
background image
commeRce
The United States, even as the largest beef producer in
the world, has a shortage of production of lower-value cuts, in
contrast to a surplus of high-value cuts, which makes the USA
the largest importer of subgrade beef (as the production does
not meet the high demand of the country) and an important
exporter of choice and prime cuts. The country's exports
fall after 2003, in the wake of the outbreak of BSE (popularly
known as "mad cow disease"), but started an important
recovery as from 2008, suggesting that the volumes exported
should return to the levels of before 2003.
In Australia, export of beef is a strong activity. The
country has been one of the leaders in this segment for more
than a decade now. About 75% of the exports of Australian beef
have been made to Japan, South Korea, Russia, Taiwan and
Mexico, among other countries, and this figure is developing
further, so that there may be a record growth in 2009.
consumption of beef per caput . in kilos per year
uruguay
52.4
Argentina
65.6
eu
15.9
Australia
34.7
usA
40.7
Russia
16.3
canada
31.7
brazil
37.3
china
4.7
mexico
24.1
Japan
9.4
In the export ranking, Brazil has been in the lead since
2004, mainly thanks to the increase of the national herd and
also efficiency in livestock husbandry, together with the
occurrence of BSE in some beef-exporting countries ­ this
being an illness which does not affect the national herd, and
which therefore opened the markets formerly covered by
these countries to the export of Brazilian meat.
Argentina has been significantly increasing their
exports in recent years. The beef industry in the country has
obtained great success through the international marketing
made with the aim of placing the country's meat with a prime
perception by the international market.
. 24 .
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beef deficit and surplus . thousand tonnes
brazil
Argentina
Australia
united states
china
european
union
Russia
south korea
Japan
(-1,500)
2,500
1,500
500
(-500)
1999
2009*
Production - Consumption
Source: USDA
Estimate for 2009
the beef industRy: bRAzil, ARgentinA, the
united stAtes And AustRAliA
With the largest beef herd for commercial purposes,
Brazil has also become the largest world exporter of beef,
thanks to the stepping up of production, characterized
by low cost, which allows the widening of the range of
destination markets for exports. The reduction of sanitary
and commercial barriers has also played a part in bringing
about the average growth of 25.5% in Brazilian beef exports
since the year 2000.
In 2008, considering the total between January and
October, Brazil exported just over 1.89 million tonnes of fresh
beef equivalent, with a turnover of US$4.67 million. Compared
with the same period for 2007, we see that there has been
a rise in turnover by 26%, in contrast to a 13% fall in volume.
The largest buyer of Brazilian fresh beef has been Russia,
with 38% participation, followed by Venezuela (9%), Iran (7%),
Hong Kong (5%), Egypt (5%), Algeria (4%) and Israel (4%).
For processed meats, 20% of the total exported goes to the
United States, followed by the United Kingdom (14%), Italy
(6%), the Netherlands (6%), Germany (2%), Belgium (1%)
and Jamaica (1%). The according to data released by the
Brazilian Meat Exporting Industries Association (ABIEC).
This year, with the tightening of European restrictions
on fresh Brazilian meat, there was a significant rise in the
sales of processed meats (sales of fresh beef fell), even
in the case of Europe itself. More specifically, at the end of
2008, the international financial crisis has had a negative
impact on shipments, particularly in the case of Russia.
The restrictions set by the Argentinean Government
on beef exports in 2008 removed the country from the 4
th
place among the largest world exporters, bringing it down to
7
th
place. In 2005, Argentina was the 3
rd
largest world exporter
of beef. The crisis between the Government and the rural
beef producers had an important impact on the segment.
This scenario was made even worse as from September,
when the world financial crisis broke out.
: Production platform which leads in countries
with production surplus.
: Leader in exports to the most important
beef-importing countries.
: Access to 100% of beef consumer markets.
: Sustainable and long-term relationship with global clients.
globAl leAdeRship of Jbs
. 25 .
background image
The United States are the largest world producer of beef,
even though the country has only the third largest commercial
herd. The country is also the largest world consumer of beef,
with significant consumption of cheaper cuts and a lower
consumption of prime cuts. In this way, the country stands out
for exports of prime and choice beef and, at the same time, is
the largest importer of second-grade beef.
For JBS, the United States is the most strategic market of
their operations, as this is the most important consumer centre
and also a producer of beef protein. This is also a market which
warrants lots of attention, through seasonality and also due to
the high competitivity of the segment in the country.
Australia is now the second largest beef exporter in the
world. Australia has kept its position as leader in beef exports to
Asia, making the most of the excellent economic performance
of this region, and China is the main target, destination of two
thirds of Australia's production.
RegulAtion of the segment
The production and commercialization of beef is
subject to extensive regulation from Government authorities
at municipal, state and federal level and also foreign
institutions, with regard to the processing packaging,
storage, distribution, advertising and labelling of the products,
including food safety requirements.
Recently, practices and procedures for food safety in
the beef processing industry have subjected the companies to
a more intense analysis and supervision.
JBS seeks to remain aligned with the requirements
set by the Governments and also by the regulatory bodies in
the countries where the Company is active, to make sure that
the Company operations comply with all laws and regulations
regarding food safety.
the Jbs
opeRAtions ARe
in
confoRmity
with lAws And
RegulAtions
of the mARkets
wheRe the
compAny is
Active
. 26 .
background image
gRowth
iris Rezende
Mayor of Goiânia
i hAve followed the tRAJectoRy of Jbs gRoup foR oveR
fouR decAdes now. fRom A humble oRigin, this compAny
gRew to gigAntic pRopoRtions in the scenARio of its stAte,
of bRAzil And oveRseAs thRough its competence And the
eARnestness it AlwAys fAced its commitments with. Jbs
gRoup's tRump cARd is the solidity in its commeRciAl
tRAnsActions; its cRedibility, theRefoRe, is Above dispute.
in conclusion, we cAn it is A compAny thAt inspiRes
confidence, which is An edge in the globAlized woRld.
. 27 .
background image
Acquisitions
JBS has constructed a solid business management
model in the food segment. The Company seeks to expand
its presence on the global market through a strategy of
assessment of opportunities and acquisition of companies
that could benefit from a "management shock" based on
the JBS model. In this way, the Company has sought to
consolidate a position of leadership in strategic markets and
ensure god results for the Company's investments.
The Company started its internationalisation in 2005
with the purchase of Swift Armour, an Argentinean company,
and then, as from 2007, JBS embarked on an expansion and
globalisation plan, moving towards the largest producing and
consuming markets for their products. In 2007, the purchase
of Swift Foods, of the United States, in an operation worth
the puRchAses
mAde in 2008
hAve consoli-
dAted the
globAlisAtion
of the compAny
US$1.4 billion, consolidated the Company's position as the
largest world producer of beef and the third largest producer
of pork.
In 2008, with the purchases of the JBS operations
in Australia, Italy and the United States, the Company
consolidated its globalisation process.
In March 2008, the Company clinched an agreement
with Cremonini SpA ("Cremonini"), for the acquisition of a
50% stake in the capital stock of Inalca SpA ("Inalca"), one
of the most important beef producers in Europe, for a total
of 225 million Euros, based on an enterprise value for Inalca
set at 600 million Euros. The acquisition of Inalca, which
now bears the name of Inalca JBS, established important
synergies between products and sales channels of JBS
and Cremonini, both leaders in their respective markets. On
the one hand, JBS with its production and distribution in the
markets of South America, the United States and Australia,
and, on the other hand, Cremonini, through Inalca, with its
presence in Europe, Russia and Africa. For JBS, this operation
was a unique opportunity to access, through Inalca, new
markets and clients, including large multinationals in the
fast-food business, producers of processed foods, large
retail chains, and food service companies. This alliance also
offered JBS access to Inalca's cutting-edge technology,
widely acclaimed, as also to the products with highest
added value, traded under the Montana brand name.
For Cremonini, this transaction gave privileged
access to the main world sources of supply of beef, as well
as strengthening its supply chain. This Association in Italy,
together with the acquisitions made in the United States and
in Australia, have confirmed the global leadership enjoyed
by JBS.
The acquisitions of the American company Smithfield
Beef and Australian company Tasman were closed at R$565
million and US$150 million respectively.
. 28 .
background image
the integRAtion of the tAsmAn
gRoup, smithfield beef And
the confinement units of five
RiveRs hAve incReAsed the
pRoduction plAtfoRm And
intRoduced
syneRgies
thAt
hAve Reduced costs
In March 2008, JBS announced the purchase of
the Tasman Group, an Australian company, and also of
Smithfield Beef, an American company. The confirmation
that authorization had been received from the Australian
Competition & Consumer Commission (ACCC), the
Australian regulator, for the purchase of the Tasman Group
was received by JBS on 23 April 2008. The new structure
gave JBS Australia an additional 5,000 employees and
15 units, including slaughterhouses for bovines and small
animals (sheep and calves) with a capacity of slaughtering
8,500 heads of cattle per day and also 16,500 small animals
per day.
As part of JBS's globalisation strategy, the acquisition
of Smithfield Beef in 2008 was an important step in the
completion of the investment plan for the construction of a
sustainable slaughtering platform, and also the production
and commercialization of beef, in the United States and
Australia, which started in July 2007 with the purchase of
Swift & Co. This purchase shall increase JBS's capacity
to meet specific demands made by the clients, and shall
also provide economies of scale and operational efficiency,
thereby generating value for the shareholders.
The acquisition of Smithfield Beef Processing included
100% of the shares issued by subsidiary Five Rivers Ranch.
With the purchase of Smithfield Beef Processing,
JBS USA started to have four more slaughtering units in that
country, located in Green Bay (Wisconsin), Plainwell (Michigan),
Souderton (Pennsylvania) and Tolleson (Arizona); a grease-
producing unit in Elroy (Pennsylvania) and a bovine confinement
unit in South Charleston (Ohio); and a transport company, with
some 120 refrigerated lorries. Five Rivers has ten confinement
units for bovines, with a total capacity of 811,000 heads, in the
states of Colorado, Idaho, Kansas, Oklahoma and Texas.
With the purchases in the United States, currently this
platform accounts for about 75% of the consolidated net
turnover of JBS.
With these operations, JBS, which were already
leaders in beef production, also became the leader in the
sale of beef-based products. The Company obtained a
significant advantage with the proximity to the largest beef-
producing and consuming markets in the world. After this
business integration, JBS had 14% of world beef production,
and a capacity to kill 15 million heads per year, as well as
31% of meat sales on the international market.
. 29 .
background image
dr. mario dario Ravettino
President | Consortium of
Argentinean Beef Exporters (ABC)
tRust
the ARgentineAn beef industRy hAs Added poweR to its
Activities with the pARticipAtion of bRAziliAn cApitAl.
the significAnt development of the Jbs fRiboi gRoup,
the owneR of 8 industRiAl plAnts in the countRy,
cleARly expRess the decision tAken by this business
gRoup, A leAdeR in the segment, to boost And enhAnce
the ARgentineAn beef industRy, which shAll bRing
concRete benefits foR the countRy, foR the woRkeRs
And Also foR the technology of the sectoR.
. 30 .
background image
coRpoRAte
goveRnAnce
JBS follows a model of Corporate Governance with the aim
of implementing the best practices in the Company, that should
be reflected in transparency and trust from a range of publics,
and also ensure the best products and services to the Company
clients, solidity to suppliers, satisfactory yield for shareholders,
and the certainty of a better future, for all collaborators.
Corporate Governance is the very essence of the
Company, which makes use of best market practices and
also acts in line with currently effective laws, in a natural way.
Governance is a reality within JBS, something dynamic and
natural, which is part of the daily activities of the Company.
The conduct of JBS is represented by the pillars of corporate
governance. This means that the view of organizational
behaviour based on Governance guides JBS in the strict
compliance with laws and also respect for all segments of
the public.
coRpoRAte goveRnAnce in the essence of Jbs
The corporative responsibility of JBS is shown in the
transparency and equity with which the Company carries out
its business.
JBS believes that, through collaborators who are both
committed and motivated, the Company may constantly grow
and innovate, thus achieving the desired results.
JBS believes that people are the same, anywhere on the
planet and in any business environment, regardless of their social,
intellectual or hierarchical level, and only brings to the Company
those people who enjoy prosperity, who seeks firm commitment
to work, availability, learning, growth and expansion. For JBS, after
all, their greatest asset is human capital. Indeed, it is the capacity
of human work that makes a success of the Company and also
sustains all possibilities for future growth and innovation.
Jbs conducts
its business in
A
tRAnspARent
And ethicAl
mAnneR, this
being the
bAse of the
compAny's
coRpoRAte
goveRnAnce
. 31 .
background image
In terms of operational focus, JBS believes that everything
starts at the plants, as the harmony and the precision of the
quality of the "cattle" raw material, together with the capacity
of human work, make a success of the Company and also
back up and prop up the possibilities of growth and investment
in the future. JBS monitors external factors to make strategic
decisions and always focuses on what is within their reach and
what can be controlled. The Company is obstinate in controlling
costs, in increasing the slaughtering and production capacity,
and also in the steady improvement of yield and the guarantee
of the best quality of their products.
Risk control identifies and classifies the events that cause
strategic risks to JBS business, according to the probability
thereof, and establishes the respective control procedures. The
Company conscientiously deals with possible risks that could
involve the Company's segments of activity, and sets targets
and guidelines for the management thereof.
The Company creates and sustains different
Commissions to ensure correct implementation of all
Company activities. At present, JBS has Audit, Finance, People
Management and Corporate Strategy Commissions. For
example, the Corporate Commission manages sustainability
at JBS. JBS believes that its development and corporate
growth must be associated to the sustainability of Company
actions. With this belief, JBS supports and invests in the
improvement of the production chain to which it belongs.
JBS shares are traded on the New Market, a segment of
Bovespa made up of companies which have committed them-
selves, on a voluntary basis, to the adoption of corporate govern-
ment policies in addition to those required by relevant legislation.
infoRmAtion AppRAisAl policy
The policy for disclosure of information is another
key issue in meeting the rules for transparency and
the requirements of regulators of the financial market,
such as the Brazilian Central Bank, the Securities
Commission (CVM) and the São Paulo Stock Exchange
(Bovespa). JBS S.A. discloses relevant facts and
notifications as per CVM instructions, which requires
that the data about Company business are published
in a way that gives investors and the market enough
time to make decisions concerning their investments.
JBS also, through press releases, makes the Company's
quarterly results available to the market and also holds a
conference for investors and market analysts, as also a
press conference every three months to comment on
Company performance, events and also shed light on
possible doubts shown by the market.
Commitment to efficient corporate governance is
reflected in the option to register the Company in the listing
segment of the New Market of the São Paulo Stock Exchange
(Bovespa), which has a strict commitment to good practices
of corporate governance. JBS shows its commitment to
transparency and also quality in business management through
public commitments inherent to the New Market, namely:
:
Grant to all shareholders the right to joint sale ("tag
along"), in cases of alienation of the share control of
the Company, in which case the acquirer of the control
should make a public offering of share purchase to
the other shareholders;
:
Take up supply procedures that favour scattering of
shares;
:
Comply with minimum standards for quarterly
disclosure of information;
:
Follow stricter disclosure procedures with regard to
deals made by the controlling shareholders of the
Company, as also Board Members and Directors,
involving securities of their issuance;
:
Submit any existing shareholder agreements and
programmes with share purchase options to Bovespa;
:
Prepare annual financial statements, including cash
flow statements, in the English language, as according
to international accounting standards like the Generally
Accepted Accounting Principles (GAAP) of the USA, or
the International Financial Reporting Standards (IFRS);
. 32 .
background image
:
Use exclusively the arbitration rules of Bovespa,
by which Bovespa, the Company, the controlling
shareholder, the managers, and the members of
the Fiscal Board of the Company, if installed, agree
to solve any dispute or controversy concerning the
listing regulations through arbitration; and
To ensure correct conduct in all JBS activities, in addition
to the Tax and Management Commission, JBS also has
Audit, Finance, People Management and Corporate Strategy
commissions. Each of these commissions plays a relevant
role in the guarantee of JBS management processes.
Audit commission
:
Give opinions about hirings, remuneration, retaining
and replacement of the external auditor;
:
Contribute to the preparation of the scope and the
schedule of the annual auditing activities and also to
the review of current internal risk controls, seeking to
improve the quality of the information supplied to the
Board of Directors;
:
Identify and suggest actions in support of the monitoring
of the activities of the internal and external auditors, and
establish a channel of communication between internal
institutions for accounting controls and the Board of
Directors; and
:
Try to solve possible controversies between the
Auditors, Board and Fiscal Commission about the
financial statements of accounts.
finance commission
:
Give an opinion about the appropriate capital
structure, and prepare studies about market capital
costs vis-à-vis costs of Company debts;
:
Study the projects for investments and adaptation of
the Company's financial structure in depth;
:
Give an opinion on the proposal for distribution of
dividends and tax planning;
:
Monitor quarterly results; and
:
Seek to protect the internal financial control systems.
people management commission
:
Help the Board of Directors with issues regarding
remuneration and identification of directors;
:
Give an opinion on the mechanisms for variable
remuneration and long-term incentives;
:
Help with the process of executive appraisal;
:
Give support to the Board of Directors, for the
management of the executive succession plan;
:
Monitor the Company policy for retaining talent; and
:
Give opinions about the organizational structure of the
Company and also the general Human Resources
policies.
corporate strategy commission
:
Mr. Marcus Vinicius Pratini de Moraes is the current
president;
:
Develop, and propose to the Board, policies
regarding corporate strategy and the sustainability of
the Company operations;
:
Advise the Board of Directors in all matters concerning
sustainability, by means of identification, addressing
and treatment of critical issues that amount to risks, or
which could have a negative impact on business;
:
Make recommendations to the Board of Directors,
and accompany the implementation of policies,
strategies and actions that concern the sustainability
of business at the Company; and
:
Assess the proposals for strategic investments of the
Company from the standpoint of sustainability, and
make recommendations to the Board of Directors
regarding making decisions about these investments.
. 33 .
background image
José batista sobrinho: Mr. José Batista is a member of our
Board of Directors and is the founder of the JBS Group.
He has experience in beef production in the JBS Group
spanning more than half a century. Mr. José Batista was
elected to this position on 2 January 2007. Mr. José Batista
is the father of Mr. Joesley Mendonça Batista, Mr. Wesley
Mendonça Batista and Mr. José Batista Jr.
José batista Junior: Mr. Batista is a member of our Board of
Directors, having been elected to this post on 2 January 2007,
having more than 25 years of experience in beef production
within the JBS Group. Mr. Batista is one of the sons of Mr. José
Batista, the founder of the JBS Group, and brother of Mr. Joesley
Mendonça Batista and Mr. Wesley Mendonça Batista.
marcus vinicius pratini de moraes: Mr. Pratini de Moraes has been
a member of our Independent Administration Committee since 2
January 2007. He is an Economics graduate from the Faculty of
Economic Science of the University of Rio Grande do Sul (1963),
with graduate studies in Public Administration from the Deutsche
Stiftung für Entwicklungsländer, in Berlin, Germany (1965) and in
Business Administration by Pittsburgh University & Carnegie Tech
­ Carnegie Institute of Technology (1966). Mr. Pratini de Moraes
held the posts of Interim Minister of Planning and General Co-
ordination (1968-1969), Minister for Industry and Commerce
(1970-1974), Minister of Mines and Energy (1992) and Minister
for Agriculture, Livestock and Supplies (1999-2002).
demósthenes marques: Born in Passo Fundo, Rio Grande do Sul,
he is a graduate in Civil Engineering from the Federal University
of Santa Maria, and completed post-graduate studies in Urban
Development by the Cândido Mendes Integrated Faculties, a
specialist in Audits of Public Works from the University of Brasília
(UnB) and in Geographical Information Systems by the Federal
University of São Carlos (UFSCar).
He has been an Investments Director at FUNCEF since
July 2004. He has been an employee of the Brazilian Federal
Savings Bank (Caixa Econômica Federal) since 1989, and at
this institution he carried out executive roles in the areas of Urban
Development and also Social and Economic Development.
boARd of diRectoRs
The Board of Directors is the highest institution of
Company management and is responsible, among other
points, for establishment of policies and guidelines for
Company business. The Board of Directors also supervises
the Management and also oversees the implementation, by
the Management, of the policies and guidelines regularly
established by the Board of Directors.
The Administration Committee of JBS currently
consists of seven members, three of which are independent
committee members.
The term of the first Administration Committee after the
opening of capital, which occurred in 2007, is three years. This
means that the term of the current members of the Administration
Committee is due to expire in 2009. As from 2009, the members
of the Administration Committee shall be voted for a unified term
of two years, with the right to unlimited re-elections.
The Administration Committee meets once a quarter,
or at any moment when a special meeting is called by the
President or by any other member.
Joesley mendonça batista: Mr. Joesley Batista is the current
President of the Administration Committee, having been elected
to this post on 2 January 2007, and has more than 20 years of
experience with the production of beef within the JBS Group. He
is also the Executive President of JBS S.A. Joesley Batista has
worked for the JBS Group since 1988 and is one of the sons of
Mr. José Batista Sobrinho, founder of the JBS Group, and brother
of Mr. José Batista Júnior and Mr. Wesley Mendonça Batista.
wesley mendonça batista: Mr. Wesley Batista is the current
Vice-President of our Board of Directors, having been elected
to this post on 2 January 2007, and also has more than 20
years of experience with the production of beef within the JBS
Group. He is also a Member of the Board, and has worked for
the JBS Group since 1987. He is one of the sons of Mr. José
Batista Sobrinho, founder of the JBS Group, and brother of Mr.
José Batista Júnior and Mr. Joesley Mendonça Batista.
membeRs of the boARd of diRectoRs
post held
date elected
term ends
Joesley Mendonça Batista
President
2/1/2007
August 2009
Wesley Mendonça Batista
Vice-President
2/1/2007
August 2009
José Batista Sobrinho
Board Member
2/1/2007
August 2009
José Batista Jr.
Board Member
2/1/2007
August 2009
Marcus Vinicius Pratini de Moraes(1)
Board Member
2/1/2007
August 2009
Demósthenes Marques(1)
Board Member
11/4/2008
August 2009
Humberto Pires Grault Vianna de Lima(1)
Deputy Member
11/4/2008
August 2009
(1) Independent Board Member
. 34 .
background image
He has also been a Board Member at Litel S/A (the
holding company of the society structure controlled by Vale
do Rio Doce), Brazil Railways (Brasil Ferrovias), Ferronorte,
Ferroban, Novoeste and ALL ­ América Latina Logística.
humberto pires grault vianna de lima: Brazilian, graduated in
Economics at the Faculty of Political and Economic Science in
Rio de Janeiro, in 1979. He also has post-graduate studies in
Economics from the Economic Research Institute Foundation
(FIPE) of the University of São Paulo (USP), and in Economics
from the School of Economics of the Getúlio Vargas
Foundation (FGV), between January 1990 and December
1991. He simultaneously holds the posts of Manager of New
Projects and that of Participations Manager, at the Petrobrás
Social Security Foundation (Petros), since March 2008.
mAnAgement teAm
The Management Team at JBS is its executive institution.
The executive directors are their legal representatives and are
also responsible for internal organization, decision-making
process, daily operations, and implementation of policies
and general guidelines as established at regular intervals by
the Board of Directors.
The members of the Management Team of the
Company are elected by the Board of Directors for terms of
three years, and are entitled to be re-elected. The Management
Team of JBS meets whenever called up to do so, either by the
President or by the majority of its members.
Joesley mendonça batista: Mr. Joesley Batista is the current
President of the Board of Directors, having been elected to this
post on 2 January 2007. He has more than 20 years of experience
with the production of beef within the JBS Group, and is also the
Executive President of JBS S.A. Joesley Batista has worked for
the JBS Group since 1988 and is one of the sons of Mr. José
Batista Sobrinho, founder of the JBS Group, and brother of Mr.
José Batista Júnior and Mr. Wesley Mendonça Batista.
wesley mendonça batista: Mr. Wesley Batista is the current
Vice-President of our Board of Directors, having been elected
to this post on 2 January 2007. He has more than 20 years of
experience with the production of beef within the JBS Group.
He is also a Member of the Board, and has worked for the
JBS Group since 1987. He is one of the sons of Mr. José
Batista Sobrinho, founder of the JBS Group, and brother of
Mr. José Batista Júnior and Mr. Joesley Mendonça Batista.
francisco de Assis: Francisco has been on the Management
Team since 2 January 2007. He is a qualified lawyer, qualified
from the Catholic Pontifical University of Paraná. He took a lato
sensu
post-graduate course in Environmental Law, at the Catholic
Pontifical University of Paraná; also a lato sensu post-graduate
course in Company Law, at the Mackenzie University in São
Paulo; a master's degree course (stricto sensu), at the Mackenzie
University in São Paulo and the Catholic Pontifical University of
Paraná, in the areas of State Law, with a master's dissertation on
Constitutional Tax System, with all the credits for a Doctorate; he
also took an MBA course at the University of São Paulo (USP) in
Labour Economics. He has carried out his professional activities
at the JBS Group since December 2001.
sérgio longo: Mr. Longo was the Financial Director at JBS
between 2003 and January 2009, when he resigned. In April
2009, he was elected as a member of the Fiscal Commission
at JBS S.A. Mr. Longo has more than 25 years of experience
working in financial institutions, and before joining our Company,
worked for 18 years at the Sudameris Bank and four years at the
Rural Bank.
Jeremiah Alphonsus o'callaghan: Mr. O'Callaghan was born in
Cork, Republic of Ireland, in 1953. He read Engineering at UCC
(University College Cork) and immigrated to Brazil in 1979. He
entered the meat industry in 1983, developing global commerce
for the Brazilian beef segment. He first worked at Mouran (1983
to 1989), then at Bordon (1989 to 1995) and finally joined JBS in
1996, to develop the area of International Business.
diRectoRs
post held
date elected
term ends
Joesley Mendonça Batista
President
2/1/2007
2/1/2010
Wesley Mendonça Batista
Executive Operations Manager
2/1/2007
2/1/2010
Francisco de Assis
Legal Affairs Manager
2/1/2007
2/1/2010
Sérgio Longo
Financial Manager
2/1/2007
2/1/2010
Jeremiah O`Callaghan
Investor Relations Manager
14/5/2008
2/1/2010
. 35 .
background image
stRAtegies And competitive AdvAntAges
The solid performance from JBS and the Company's
growing productivity indices allow the Company to show
constant growth, and also present steady improvement of
their operational margins. The aim so the strategies adopted
by JBS are the following:
:
Stay as market leader in the beef segment;
:
Boost profitability and also financial solidity;
:

Make the Company business perennial.
To ensure that this goal is achieved, JBS has adopted a
strategy based on the following principles:
:

Search for opportunities for investments and
acquisitions;
:
Sound financial structure;
:
An experienced and efficient management team;
:
Constant search for cost reduction;
:

Increase in productivity and expansion of participation in
products that bring higher yield and have higher added
value, thus maximising financial returns for the Company;
:
Search for better margins; and
:
Diversification of production platforms.
Risk mAnAgement
JBS anticipates possible problems that could affect the
segment of production and commercialization of beef, especially
concerning trade barriers.
The Company's strategy of expanding their operations in
units located in different Brazilian states is fundamental to protect
the Company against risks comcerning phytosanitary barriers in
the international beef trade.
Should there be any commercial or sanitary blocks
against bovine-origin food produced in certain regions, JBS can
keep up the export of their products through production in areas
that are not under the effects of the embargo.
Another factor that helps with Risk Management related
to commercial barriers of a political or phytosanitary area is the
internationalisation of production, with plants scattered around
other countries (Argentina, United States, Italy and Australia).
Re
du
c
e
c
osts
,
in
c
r
e
a
s
e
of pro
duc
ts wi
t
h
gre
ate
s
t a
d
d
e
d
v
alu
e
pr
oduc
t
i
vi
ty a
nd ex
pa
n
d
p
r
o
d
u
cti
on
M
a
na
g
e
m
en
t
te
am
an
d a
cquis
i
t
io
ns
S
ee
k
oppor
t
u
n
i
tie
s
f
or
inv
est
ments
F
in
a
nc
i
a
l
s
tr
u
ct
ure
di
v
er
sit
y
C
r
e
at
e
g
eo
gr
ap
hic
a
l
Be
tt
er
m
a
rg
i
ns
geneRAte
sAtisfActoRy
And consistent
RetuRn to the
shAReholdeRs
Examples:
Frigoríficos Brasileiros
SwiftArmour
Swift & Company
Inalca
Tasman
SmithfieldBeef
Mitigate potential risks
such as sanitary barriers
and seasonality.
Administration with more
than 50 years of experience
in the beef industry.
JBS NO MUNDO
Abatedouro
Abatedouro e Indústria
Centros de Distribuição
Indústria de Vegetais em Conserva
Indústria de Carne Enlatada
Indústria de beef Jerky (Beef Snack's)
Indústria de Carne Suína
Indústria de Carne Ovina
Processamento de Carne Bovina e Suína
Curtume
Sede Administrativa
Confinamento
Indústria de Embalagens
Pátio de Containers
Escritórios Comerciais
. 36 .
background image
With the uncertainties of the international money markets,
the pressure of foreign exchange rates in Brazil, with the volatility of
the Brazilian Real during 2008, JBS has been active in minimising
the Company's exposure to financial risks. Conservative
governance principles have enabled the Company to face the
reduction of the global supply of credit with minimum impact,
and keep their consolidated margins.
enviRonmentAl policy
JBS is a Company that has its success largely based on
the management of products with environmental responsibility
For the Company, the environment shall be seen
as a factor of business stability and, as such, treated in a
sustainable fashion. For the Company, the excellence in
environmental management shall be based on economic
feasibility and ecological correctness.
The JBS units are evolving in their management of
natural resources. For this purpose, they act in a responsible
fashion when using the materials, and have issues related to
mitigation of global warming in their internal policies, so much
so that this is the first company from this segment to succeed
in approving a carbon-credit programme in accordance with
the rules established by the Kyoto Protocol.
The treatment of residue in all JBS units is considered
a priority issue, both from the environmental standpoint as in
terms of public health. JBS invests in technologies to make
their industrial residues inert and minimize the impact on the
environment.
The Company has programmes in place for the
reduction of water consumption, and treats its effluents so
the water may be returned to nature within the standards of
quality required by normative institutions.
There are also programmes for reduction of use of
energy and for the search for alternative sources of energy, that
reduce the impact of the Company on the need to generate
electricity in the countries where the Company is active.
cApitAl mARkets
The Company shares traded on Bovespa, under the
code JBSS3, in 2008 had a performance of -15.5%, while
the overall Bovespa index had a performance of -40,2%.
JBS believes that the good performance of their shares
compared with the overall index is a consequence of the
acknowledgement of the Company's solidity and transparency,
by the general market. The Company has become established
as the largest producer and exporter of beef in the world, with the
market capitalization having exceeded the level of R$7.6 billion.
At the end of 2008, the total free float available for trading on the
stock market was a total of 683,167,775 shares, corresponding
to 47.5% of the Company capital. In December 2007, the free
float stood at 36.4%.
In line with the expansion that has been observed,
mainly in the American market, this being the region where
the Company makes most of its income, in 2008 JBS
completed its programme for American Depositary Receipt
(ADR) Level I, aiming at the increase of liquidity and visibility
of the Company shares. The Level I ADRs are traded under
the code JBSAY.
.
Jbs Adopts A
Responsible
stAnd
RegARding the
use of nAtuRAl
ResouRces,
theReby
ensuRing the
feAsibility of
the compAny's
business
. 37 .
background image
Jbss3 vs. ibovespa
200
180
160
140
120
100
80
60
40
jan/08
dec/08
nov/08
oct/08
sep/08
aug/08
july/08
june/08
may/08
apr/08
mar/08
feb/08
Source: Bloomberg (base 100 = 02/01/08)
JBSS32009*
Ibovespa Index
Announcement of
acquisitions of Smithfield
Beef, National Beef and
Tasman Group, and
increase of capital stock
by R$ 2.5 billion
Ibovespa: Payment
of R$ 17.5 million
in dividends
Publication
of Results
for 2007
Publication
of Results
for 1Q08
Announcement
of ADR
Programme
Publication
of Results
for 3Q08
Public Meetings with
Investors:
São Paulo New York
shAReholdeRs
no. of shares
%
J&F Participações S/A
632,781,603
44.0%
ZMF Investment Fund Participation
87,903,348
6.1%
Shares held by the treasury
34,226,200
2.4%
Shares in circulation
BNDES Participations S/A ­ BNDESPAR
186,891,800
13.0%
FRDT ­ FP
205,365,101
14.3%
Minority Shareholders
290,910,874
20.2%
Total Shares in circulation
683,167,775
47.5%
totAl
1,438,078,926
100.0%
shareholders on 31 december 2008
. 38 .
background image
cristina kirchner
President of Argentina
pRide
this impoRtAnt fAmily gRoup, opeRAting on A woRld
scAle, is A mAtteR of pRide foR ARgentinA, A countRy
which hAs eight plAnts And investments totAlling
us$400 million. i Am pRoud foR this, And Am gRAteful
foR the tRust. these busines speople hAve been Able
to conciliAte the inteRests of the inteRnAl And the
expoRt mARket, And i must congRAtulAte them on this.
we would like All compAnies in ARgentinA to be like
this, Just like the compAny of the bAtistA fAmily.
. 39 .
background image
opeRAtions And
commeRciAl
RelAtionships
with A pRoduction plAtfoRm
with moRe thAn 60 units And
globAlised distRibution
, Jbs hAs
Access to 100% of the consumeR
mARkets foR beef
With a focus on growth and on geographical expansion
of Company activities, JBS distributes its operations among
22 units in nine Brazilian States, six units in Argentina, 18 in
the United States and 10 in Australia. The acquisition of all
the units reflected the strategy of being active in regions with
heavy presence of livestock and, in so doing, manage to get
operational flexibility for production, reduction of the costs of
transporting the livestock and also the ready product, as also
the reduction of phytosanitary risks.
The strategic location of the units is one of the factors
that place the Company at an advantage on the market,
as this provides a production strategy with low costs and
operational efficiency. In Brazil the suppliers of livestock on
the JBS portfolio are a total of 15,000 breeders. Following the
principles of guarantee of the security of the livestock and the
quality of the meat, the cattle breeders are located within a
radius of 500 kilometres of the slaughtering units.
. 40 .
background image
In the Argentinean operations, the livestock is purchased
in specialised fairs, from a total of some 1,600 breeders that are
within a radius of 350 kilometres from the slaughtering units.
The suppliers of JBS USA make up a select portfolio,
with breeding confinements centres that are part of the largest
meat suppliers in that country.
In the Australian operations, the cattle are purchased from
a portfolio of more than 10,000 suppliers. In all operations, JBS
has a team specialised in the purchase of cattle. The breeders
are selected through strict criteria, including the requirement for
documents that show the quality of the operations, and also
confirmation that the use of antibiotics and agricultural pesticides
follows the respective standards established by the industry.
Jbs bRAzil
The Company exploits the segment of the slaughtering and
cold storage of bovines, as also processing of meats, preserves,
fats, animal feed and derived products, with industrial units situated
in the states of São Paulo, Goiás, Mato Grosso, Mato Grosso do
Sul, Rondônia, Minas Gerais, Acre, Rio de Janeiro and Paraná.
The Company produces a wide range of produdcts industrialised
products and also prime cuts of beef, with significant penetration
in both Brazilian and international markets.
The whole production process follows strict quality control
and also meets international phytosanitary standards.
The handling of the beef is made in climatised rooms,
while the cold storage chambers or freezer compartments have
temperatures controlled by fully computerised systems.
Control programmes for Cleansing and Hygiene (PPHO
­ Standardised Operational Hygiene Programme), Personnel
Training (GMP ­ Good Manufacture Practice), Analysis of Hazard
Points and Critical Control Points (HACCP ­ Hazard Analysis
and Critical Control Points), as well as the Friboi Total Quality
Programme (TQF), are carried out on a permanent basis, to
make sure of the quality of the products.
In addition, the carcases are inspected by veterinary
doctors from the Federal Inspection Service of the Ministry
for Agriculture (SIF), for the issuance of the authorisation for
production and processing.
As a complement to the accompaniment of the sanity
and trackability of raw materials, the processes are subjected to a
control process made by modern laboratories and experienced
technicians, at the JBS industrial units.
In 2008, JBS Brazil closed the year with 22 units to serve
their clients, with a total capacity to slaughter 18,900 heads of
cattle/day and 16,900 collaborators in Brazil.
Jbs bRAzil
matured
organic beef
friboi
swift
Anglo
fresh meat
processed meat
tailored products
. 41 .
background image
exeter
Ace
swift
swift
plate
cabaña
las lilas
la blanca
Jbs ARgentinA
The JBS Argentina was established with the purchase
of Swift Armour S/A, a company which had been founded
in 1907 and which in 2005 was purchased by JBS, being
composed of six industrial units: Rosário, Venado Tuerto,
São José, Pontevedra, Berazategui and Col-Car, as well as
one unit for production of tin packaging, in Zarate.
The JBS Argentina is dedicated to the exploitation of
the cattle slaughtering and cold storage industries, as also
meat processing, preserves, fats, animal feed and derived
products, with industrial units in the provinces of Buenos
Aires, Entre Rios, Santa Fé and Córdoba. JBS Argentina has
three subsidiaries, of which two were purchased in 2007, a
slaughter and cold-storage unit in the town of Berezategui
(Consignaciones Rurales), a tin factory situated in Zarate
(Argenvases), both in the province of Buenos Aires, and
one purchased in 2008, a slaughtering and cold-storage
unit in Córdoba (Col-car). JBS Argentina enjoys leadership
in the production of meat-based foodstuffs in the country,
and is also the first in beef exports, being well renowned for
the high quality of the products, not only by the demanding
Argentinean internal market, as also by the international
market. The total volume slaughtered by JBS Argentina was
474 thousand heads in 2008, compared with 608 thousand
in 2007, which is a rise of 22%.
The productive units are distributed in a strategic
manner, in the provinces which have the highest production of
livestock. They also have modern technology in the processing
of chilled and frozen meats and also industrialised products.
The purpose of JBS Argentina is to develop, produce
and commercialise meat-based foods with high added
value, which are healthy, safe and tasty. The main publics
are final consumers and also large food companies.
JBS seeks quality in all stages of its processes.
With this in mind, the Company makes use of trackability of
the animals and also strict systems for sanitary and quality
control, as well as special care with the packaging, which not
only ensures the quality of the products in transport but also
reinforces the Company image of competence, as regarded
by the clients.
JBS Argentina closed 2008 with six slaughtering
plants, with a slaughtering capacity of 6,700 heads of cattle
per day, and also production of processed meats and one
factory to produced tin packaging, and has more than five
thousand collaborators in that country.
Jbs ARgentinA
fresh meat
processed meat
tailored products
. 42 .
background image
Jbs usA
Since 2007, JBS has been the largest Company
operating with bovine products in the North American market.
This was possible with the purchase, in July of that year, of
Swift Foods & Company, a Company which is well known for
supplying beef and pork products of high quality over more
than 150 years.
Swift & Company, now known as JBS USA, is the
leader in world beef exports, and the focus of the Company's
activities is on the development and supply of beef-based
and pork-based foods with practicality and flavour.
Aside from supplying the largest world consumer
of meats and industrialised dishes. The JBS USA is also a
diversification of the operations of the Company, with the
opportunity to exploit the pork segment.
The total number of head slaughtered in 2008, at the
USA Business Strategy Unity of JBS USA, was 12,576 thousand,
which is an increase of 4.02% when compared with 2007, when
it came to 12,071 thousand.
In the United States JBS carries out company
operations through eight beef processing units, three units for
processing pork meat, one unit for lamb slaughter, selected
beef and pork products processing unity, one leather tanning
unit, seven rented centres for regional distribution, two units
for grease production, and 11 farms for fattening cattle,
operated by JBS Five Rivers.
At the end of 2008, the operations in the United States
had 17,900 employees and production is distributed among
18 units with a total slaughtering capacity of 28,600 head
of cattle/day. 48,500 pigs/day, 4,500 head of small animals/
day, and 11 confinement units, with a static fattening capacity
of 820,000 head of cattle.
Jbs euA
cattle
pork
swift
premium®
black Angus
swift® Angus
select
swift's Angus
guaranteed
tender®
swift
premium®
guaranteed
tender®
swift®
natural fresh
pork
g.f swift 1855
brand black
Angus tm
. 43 .
background image
middle fed
long fed
e marbling
scores
beef city
fed
Amh
swift
Jbs AustRAliA
With nine slaughtering units and another five units for
cattle confinement in Australia, JBS stands in one of the main
beef-producing markets in the world. This contributes towards
the consolidation of the Company's world leadership.
JBS Australia is the largest and most encompassing
beef processor and exporter in Australia. It has commercial
relationships with more than 30 countries. The Company's
activities in the markets of the Pacific Coast and North
Jbs AustRáliA
cattle
America is worthy of mention. The sophisticated care
about hygiene and health have made possible a significant
expansion towards new clients around the world.
At the end of 2008, the operations of JBS Australia
were distributed among 10 production plants, with a total
slaughtering capacity of 8,500 cattle/day and 15,000 small
animals/day.
. 44 .
background image
inAlcA Jbs
Inalca JBS in Italy already has more than 2 thousand
employees, 8 production plants, and the capacity to
kill 3,000 bovines per day. The Company also has an
additional distribution platform in the United Kingdom, Russia,
Angola, the Congo, Algeria, the Democratic Republic of the
Congo and Poland.
The acquisition of Inalca, now known as Inalca JBS,
created important synergies between products and sales
channels of JBS and Cremonini, both leaders in their respective
segments. On the one hand, JBS, with their production and
distribution in markets such as South America, the United
States and Australia, and on the other hand Cremonini,
through Inalca, with presence in Europe, Russia and Africa.
50%
Jbs
50%
cRemonini
inAlcA Jbs
inAlcA Jbs
cattle
ibise
montana
inalca
. 45 .
background image
sales and market
internal markets
brazil
JBS clients in Brazil are retailers, restaurants and
also leathers, distributors and food industry. The Company
has created the Swift Butcher (Açougue Swift) programme,
to establish a solid relationship with clients and also to
consolidate the brand among the end consumers. JBS
is also actively investing in the Swift, Maturatta and Friboi
brands, as also in the publicising of the concept of Organic
Beef, with traders and consumers.
Currently, JBS Brazil has a book with small, mean and
large customers.
Argentina
In Argentina, JBS commercialises own brands and also
those of third parties, including: Swift, Cabaña Las Lilas, Armour,
Plate, Fray Bentos, Safra, Exeter and Corte Buona.
The client portfolio in Argentina consists of several
companies, including the most important hypermarket and
supermarket chains in the country, as well as wholesalers and
distributors which are present in the whole country.
usA
JBS USA commercialises brands that are well known
at a global level for the high quality of the products, always
focused on innovation to add value to the clients' sales
by making available tasty and practical products for the
consumers. The client portfolio is made up of large retail
networks, some of which are present in many countries. From
the portfolio of wholesalers, the main clients account for a
significant part of Company sales, all well consolidated in their
respective segments of activity.
Australia
In Australia, the domestic market is strategically
relevant and shows great growth potential. JBS is present
in this market with strong brands and diversified products,
aimed at a demanding consumer public, growing and with a
high consumption power.
sales and market
68%
32%
Domestic Market
Export
distribution of income by business unit
Beef - Italy
Beef - Argentina
Beef - Brazil
Beef - United States
Pork - United States
Beef - Australia
47%
5%
12%
3%
19%
14%
. 46 .
background image
export market
brazil
JBS is the largest beef-exporting Company in Brazil,
according to data released by SECEX (Development Ministry
Foreign trade Secretariat), and also holds an important position
among the most important Brazilian exporters, considering all
segments. As in the case of domestic business, there is no
market concentration.
Argentina
In Argentina, JBS is also in first place for beef exports.
In the last business year, JBS Argentina was responsible for
most of the exports of industrialised beef in the country, with
the main destination markets being the United States and
Europe, which have a base of some 172 clients.
usA
For the export market, JBS USA offers products with
the same standard of quality and brand recognition, as
shown in the domestic market.
At 2008, JBS USA exported 50% more than American
industry average. Main USA firm exportation customers were
México, Canada, Japan, South Chorea and Hong Kong.
Australia
The leadership in beef exports is also repeated in Australia,
which obtained a high yield in the products traded on the foreign
market in 2008. Have a strong share on Asian market, which
supplies customised products.
exportations Jbs 12m08 ­ us$ 5.6 bilhões
Mexico
Russia
EU
Japan
Canada
MIddle East
Hong Kong
South Korea
Taiwan
USA
China
Others
11%
15%
3%
3%
4%
4%
18%
5%
7%
8%
9%
13%
. 47 .
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finAnciAl
peRfoRmAnce
in 2008, the
Results of
Jbs ReinfoRce
the compAny's
gRowth
stRAtegy
net turnover .
R$ billion
05
06
07
3.6
4.0
14.1
114.5%
30.3
08
net tuRnoveR
In 2008, the consolidated Net Turnover came to
R$30,340 million, which is a growth of 114.5% compared
with the R$14,141.6 million of 2007.
ebitdA
The EBITDA came to R$1,156.1 million, 91.9% more
than the EBITDA of 2007, which came to R$602.3 million.
The EBITDA margin for the period was 3.8%.
9,6%
ebitdA . R$ million ­
ebitdA margin . %
05
06
07
345.1
564.9
602.3
14,2%
4.0%
EBITDA Margin
EBITDA
08
1,156.1
3.8%
. 48 .
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expenses
The operational expenses came to a total of R$2,907
million in 2008, which is an increase of 45.1% compared
with 2007, when they came to R$1,596 million. This increase
occurred due to the strong growth of the Company over this
period. Sales expenses rose by R$730 million, strengthening
the relationship channels with the clients and also with
prospective clients of JBS.
debt
The total debt of JBS in 2008 came to R$5,616
million, of which 60.6% is long-term debt with the extension
of liquidation until 2016. With available funds equivalent to
R$2,291.6 million, the net debt of the Company comes to
R$3,324.9 million, which represents a debt over EBITDA ratio
(last twelve months pro-forma) of 1.95 times.
net pRofit
In 2008, there was a net pro-forma profit of R$1.05
billion, when adjusted by the exchange rate variation for
investments abroad and after the amortisation of the agio
is excluded.
investments
The total value of the capital expenditure incurred
by JBS in goods, industry and equipment, not including
purchases, was R$994.1 million in 2008. This total sum
was invested during the year in maintenance and also in
improvements to the distribution platform.
the pRo-foRmA
pRofit in 2008
cAme to R$1.05
billion, if Ad-
Justed by the
exchAnge RAte
vARiAtion foR
investments
AbRoAd, And if
the AmoRtisA-
tion of the Agio
is excluded
. 49 .
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don heatley
Chairman Meat & Livestock Australia,
North Queensland cattle producer.
quAlity
"the pARtneRship between the bAtistA fAmily And
the "fAmily" of the AustRAliAn beef industRy And
its dedicAted collAboRAtoRs hAs pRoved to be A
foRmidAble foRce, to pRovide ReliAble pRoducts of
high quAlity foR consumeRs ARound the woRld. in
Addition, these two gRoups seek to be the best in
eveRything they pRopose to do."
. 50 .
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quAlity,
innovAtion And
stRong bRAnds
Having been on the market for five decades, JBS
has always stood out for the excellence of their products,
the satisfaction of the needs of clients and also the final
consumers around the world. With this in mind, the Company
knows that it is necessary to take care of all details of all
processes, of each stage, and of all operational segments
of the different Company units.
This means the need to constantly invest in the
collaborators, in machinery and technology to develop what is
most modern in the food segment, to meet the specific demands
of each client in a customised way, and innovate through the
launch of products that meet the needs of the final consumer.
In the Company's platform in Brazil, the service to the
clients is provided by the 22 production units, with a total
slaughtering capacity of 18,900 heads of cattle per day and
more than 16,900 collaborators. The clients of this platform
include points of sale, wholesalers, supermarkets, industrial
firms, production of foodstuffs which have its composition,
restaurants, leather tanning units, and others. The current
client portfolio of JBS in Brazil has more than 11,240 clients
on the internal market and 436 on the export market.
Through customised products and brands, or own
brands such as Friboi, Swift, Friboi Grill, Anglo, Organic Beef
and Maturatta, JBS Brazil serves the domestic market and
also exports to more than 100 countries, especially Russia,
Hong Kong, the European Union and Saudi Arabia.
The focus on excellence of quality can also be perceived
in JBS Argentina. In this country, the Company was the first
packaging industry to earn the ISO 9001:2000 certification for the
whole process of production of processed meats. Through six
slaughtering plants, of which five producing processed meats
and one producing tin packaging, JBS Argentina develops its
portfolio of innovative products with brands that are well known
on the market, such as Plate, Cabaña Las Lilas and Swift, to
serve a client base comprising more than 650 clients on the
domestic market and some 140 clients abroad.
JBS USA has been recognised as a provider of high
quality beef and pork meat for more than 150 years. With brands
such as Swift & Company, Angus Select, Premium Black,
Hereford, La Herencia, Swift Premium, 1885, among others,
in the United States JBS serves more than 3,900 domestic
clients as well as 500 clients in 37 countries, especially Mexico,
Canada, Taiwan, South Korea and Hong Kong.
focus on
innovAtion
And quAlity
of pRoducts
. 51 .
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With a production platform based in Italy, Poland and
also in Moscow, Inalca, an Italian company in which JBS has
a 50% stake, is recognised in Europe for its high technology
and product innovation. This operation is responsible for the
production of fresh beef, as well as processed and smoked
meats and snacks. For its quality, Inalca JBS is considered by
the whole world as a benchmark in technology within the market
for slaughter of bovines and meat processing. Inalca JBS serves
a base of 8 thousand clients on the Italian market and also 660
clients abroad, with the Montana, Inalca and Ibisè brands.
With 185 clients internally and 400 abroad, JBS
Australia stands out as the largest beef processor and
exporter on the Australian market. JBS Australia offers the
following brands to the market: Seattle Meat, Beef City, Royal,
Your Choice, AMH and Tasman Meats, among others.
On all JBS production platforms, the Company recognises
the importance of keeping the standard procedure, from the
choice of raw materials, through the industrial processes, for
hygiene, training and care with refrigerated transport.
In all countries, there is a Quality Assurance area and
also a department for Research and Development of products,
responsible for the study of possible launches and for preparing
the standards of quality for all items offered to the clients.
Focused on innovation and excellence of quality, JBS
seeks to be recognised by clients and consumers as a
Company which serves with full credibility. For this purpose,
JBS has customised brands or own brands to serve each
client, with respect for cultural and religious considerations
of the variety of regions where the Company products
are consumed.
Jbs And its bRAnds
JBS seeks to strengthen its brands with highest
added value and profitability. This is a strategy that enables
the maintenance of operational results. The Company is
structured to offer high-quality products focused on the
preferences of local consumers.
product lines
JBS is a food company focused on the production of fresh
and processed beef, handled within strict standards of hygiene
and commercialised in practical and hygienic packaging, in
portions appropriate for consumption. All JBS platforms produce
beef ­ Argentina, Brazil, Italy, Australia and the USA.
fresh beef: chilled or frozen cuts, including picanha, ribs, filet
mignon, front cuts and beef giblets, among others.
processed beef: meat products such as cooked and
frozen meats, preserved meat and meat extracts, as well
as industrialised meats (beefburgers, kibe, sausages
and mortadella) and ready meals. With installations and
processes well suited to the international market, JBS exports
processed meat to all five continents and is market leader for
global beef exports.
The Company is also present in the pork and
lamb segments through the Company operations in the
United States, where 47,900 pigs are slaughtered every
day. There are three pork slaughtering units in the United
States, in Minnesota, Iowa and Kentucky. JBS is also active
in the slaughter of small animals, in the United States and
in Australia. Some 20,500 of these animals are killed daily,
including 4,000 lambs at JBS USA at a plant in Colorado,
and 16,500 heads at JBS Australia.
. 52 .
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Jbs bRAnds: woRldwide Recognition
. 53 .
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mAnAgement tools And excellence of quAlity
To ensure the quality of the final product, JBS has
an efficient system for controlling the origin of the cattle, as
also transport and industrial production with sanitary care
and hygiene. From the purchase of raw materials through
to commercialisation, the products with the JBS brand go
through efficient processes of industrialisation, preservation
and transport.
JBS invests in the trackability of the animals, which are
processed in their units as a way of ensuring the application
of strict health procedures and control of origin, including
environmental and social concerns.
The excellence of JBS products also has fundamental
tools: a logistic and information technology structure for data
management and optimisation of processes.
Jbs quAlity policy
"To conquer recognition and trust in the JBS brands,
through the quality of the products and also the perfect
service to the clients, thereby ensuring the morale of the
collaborators and the security of the consumers, with respect
for the law and for the environment."
The excellence in JBS activities in their markets of
interest has arisen from an attention focused on the interests
of the clients, the heavy investment in quality programmes,
the permanent monitoring of their installations with strict
criteria for hygiene and sanitary controls, permanent physical,
chemical and microbiological analyses and quality control,
that accompany the product from the entry in the units until
delivery to the clients.
The requirements assessed by JBS go well
beyond just the compliance with the legislation of each
country where the Company is present. The Company
considers that sanitary guarantees are a structural part
of the business, such as the implementation of specific
Quality Programmes such as: Allergens, Genetically
Modified Organisms (GMO), Specific Risk Materials,
Animal Welfare and so forth; certification by the British
Retail Consortium (BRC), World Technical Standards for
food; and others.
To make sure of the quality and the food safety of
the products, JBS internally disseminates programmes and
procedures such as Best Production Practice, Standard
Procedures for Operational Hygiene, Operational Sanitary
Procedures, and Analysis of Hazards and Critical Control.
sAnitARy
stAndARds
ARe
consideRed
pARt of the
business
stRuctuRe
. 54 .
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sustAinAbility
dr. mario dario Ravettino
President | Argentinean
Beef Exporters Consortium: A.B.C
the ARgentine RefRigeRAtion industRy stRengthened
its Activities with the pARticipAtion of bRAziliAn
cApitAl investments. the substAntiAl development
of gRupo fRigoRífico Jbs fRiboi, which owns eight
industRiAl plAnts in the countRy, expRess A decision
of this industRy-leAding coRpoRAte gRoup to boost
And impRove the ARgentineAn RefRigeRAtion industRy,
which will Result in concRete benefits to the
countRy, the woRkeRs And technology of the sectoR.
. 55 .
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sustAinAbility
For JBS, whose corporate governance includes
concepts of social responsibility, respect for the environment,
ethical conduct and economic performance, sustainability is an
important value. The Company believes that its development
and corporate growth may be linked to sustainability of actions.
Thus, JBS follows best governance practices and uses, as
master lines, the transparency before all segments of the
public that the Company has a relationship with, constantly
investing in the improvement of the production chain in its
units, with a focus on the reduction of environmental impact,
as well as seeking ways of establishing closer relationships
with collaborators, family members and also the community in
general, through social initiatives.
JBS has a sustainability policy, as the Company is
well aware of its responsibility as the largest beef-producing
company in the world, and of all the impact generated by
its operations in each region. Thus, the Company has a
sustainability programme suited to each of the Company's
units, including Environmental Policy, Procedures Adopted,
Information Policy, Relationships and Investments, Usage of
Natural Resources, social and environmental actions and
treatment of residue.
The premises of sustainability, including those of being
ecologically feasible and correct, socially fair and culturally
accepted, have always been part of the development and
growth of JBS in all the countries where the Company is
active. The vast experience of the Company proves the
importance of the reduction of the environmental impact to
keep up a close relationship with the communities where
the Company is present. In its activities, JBS prioritises the
sustainable use of materials, the climactic factors, treatment
of residues, partnerships with fair organisations, for health,
ethics and quality of life.
Jbs believes
thAt peRenniAl
compAny
Activity is
AssociAted to
sustAinAble
development
JBS is the first and the only company
from this segment to have registered an
MDL project at the United Nations Convention
on Climate Change (UNFCCC). The project is
currently being assessed by a designated authority.
. 56 .
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ethicAl behAviouR
With regard to ethics, JBS adopts this behaviour in all
Company decisions and relationships. For this reason, since
2004 the Company has had a manual, well aligned with the
principles of sustainability, which reflects the ethical activity
of JBS S.A. in the Company's relationships with strategic
segments of the public.
This manual has guidelines to help to make integrity
the nucleus of everything that JBS proposes to do. For JBS,
integrity shall not be an ideal but rather a real process, live and
dynamic, and active within the Company.
The Ethical Conduct Manual of JBS, updated five
years ago, also seeks to shed light on, and avoid, situations
that could lead to doubts or raise suspicion about procedures
adopted in Company operations, thus seeking to make it easier
to communicate cases that may be, or come to be, conflicting
with the ethical conduct expected by the Company.
Among all formative principles, JBS believes that none
is as important as ethics, as they consider that this is the base
for prolonged success and also the main ingredient in the
construction and maintenance of relationships based on
trust, both internally and externally. For JBS, trust and ethics
are essential to do business.
The Manual highlights JBS ethical standards, the personal
responsibilities of each collaborator, the policy of non-retaliation,
instructions about what the employees should do when faced
with a possible violation of some ethical standard, guidance about
communication with the media, company assets, treatment of
confidential information, including information with exclusive rights
and commercial secrets. The material also addresses the use of
the Internet and the Intranet, as well as other electronic media,
maintenance and storage of records, conflicts of interests,
relationships with suppliers and third parties, minimum age for
hiring ­ mainly with regard to child labour, support for the balance
between work and personal life, diversity in the workplace to
provide equal opportunities of employment, harassment in the
workplace, policies about presents and entertainment, prohibition
of bribes, rewards, illegal payments and other corrupt practices,
among other themes.
The full content of the ethical conduct manual may be
found on the Company's institutional website (www.jbs.com.br)
and also in the Investor Relations website (www.jbs.com.br/ri).
RelAtionship with the inteRnAl public
For JBS, the valuing of the Company's collaborators
is a creed, and the policy of people management is
structured in a way that sustains the business. JBS believes
that well-prepared and motivated professional people make
the difference in a Company, so that the Company may
constantly grow and innovate.
The morale of the employees, as also their participation
and the sense of participation in the Company are essential
so that the Company may attain targets and overcome
challenges. The importance that JBS assigns to its Human
Capital can be proved through a transparent relationship of
mutual growth.
Nowadays, JBS is active in different countries
through communication tools, provision of lectures and
events; disseminates the organisational culture for all
business platforms, thus implementing and strengthening
the Company's way of being and management culture.
The values, creeds and conducts of JBS are informed
to all collaborators. In this way, as soon as a Company is
purchased, JBS carries out a process of integration so that
the organisational culture may be implemented and followed
by all business units, thus preserving and strengthening the
Company guidelines, which JBS calls the DNA.
Human Resources Management at JBS is focused on
the development of policies that allow the attraction, development
and retaining of talent, thus setting up a highly motivated team,
committed to results. The main aim of HR policies is to integrate
the employees at units throughout the world with the culture of
the Company so that they may be part of the JBS family, thus
creating their way of being.
. 57 .
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selection, development
And RetAining of tAlent
selection
JBS promotes the recruitment and selection of
candidates on a local basis, thus generating jobs in the regions
where the Company is present. In 2008, JBS employed a total
of 12,103 people in the United States, 2,109 in Italy, 6,995
in Australia, 16,993 in Brazil and 5,059 in Argentina, giving a
total of 48,991 direct jobs. The policy at JBS prioritises internal
recruitment, thus giving opportunities to the professional
people who already work at the Company, regardless of the
country or the state that has an available vacancy.
In this way, the Company offers a wide Opportunity
Plan for their collaborators, who have the chance to migrate
to another area or even to another country. JBS believes that
if the collaborator has the values of the Company, then he
or she is able to learn any technical skill. This shows that
JBS firmly believes in its collaborators and prioritises internal
recruitment to thus offer opportunities to the Company's
Human Capital.
development and Retention
Seeking professional development, JBS promotes
training sessions, giving priority to internal recruitment, gives
grants and offers other benefits according to the needs of
each business platform ­ medical assistance, food, crèche
assistance and transport.
For the Company, the sustainable growth of JBS S.A.
is linked to the human development with regard to quality of
life, prosperity in the profession, commitment to work, learning
and growth. In this way, JBS establishes with their collaborators
in Brazil, Argentina, Italy, Australia and the United States a
partnership in which each of the parties complies with its duties
and is guaranteed its rights. A responsible form of activity in
Human Resources, with respect for individual rights and the
labour legislation, and also constructing a work environment
which is safe and healthy, based on equal opportunities.
To hold on to the Company collaborators, JBS often
carries out internal surveys to assess the motivation of the
collaborators. This mensuration is made among all collaborators,
so that JBS may make the necessary adjustments to keep the
high motivation which is a feature of the Company's team of
48.991 collaborators throughout the world.
In 2008, the Company launched a distinctive Programme for selection and training in Brazil. Through participation in University career fairs and
also through holding lectures, JBS selects and recruits young University students or recent graduates to participate in the Our People Programme.
The initiative consists of three months of training at one of the 22 units of JBS Brazil. The training is theoretical and also practical, and JBS seeks
to train specialists in the meat packing segment. The aim of the Company is to focus on the formation and development of professionals starting
their career (recent graduates) who have been identified as having a potential future in the Preparation of Successors; Professionalisation of the
Workforce and filling vacancies for new collaborators in Brazil or in the other countries where JBS is active. This project was piloted in Brazil and,
in 2008, produced 140 collaborators. The intention is now to migrate this idea to all the JBS platforms throughout the world.
. 58 .
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benefits offeRed
JBS offers remuneration compatible with market levels,
as well as benefits offered by the law in each country where
the Company is active. JBS also plans additional assistance
as a way of valuing the relationship with employees and
construction of a healthy work environment, as well as keeping
good relations with institutions representing the workers.
tRAining And heAlth And sAfety policy
JBS invests in the professional enhancement of the
Company employees, with the adoption of a training policy
that is well aligned with Company Culture. The activities are
planned in line with demand.
The quest for the health of the employees in all
countries where JBS is active is also incorporated into
the Company's daily routine, with initiatives that seek
improvement in the quality of life in the work environment, as
also encouragement of changes in habits, that bring positive
results from the behaviour standpoint.
With regard to the initiatives that seek to guarantee
security in the workplace, JBS seeks to promote preventive
action, such as collective awareness-building in search for
a safe work environment, discipline for the use of Personal
Protection Equipment, and for work safety regulations.
The good practices for health and safety include
labour gymnastics for prevention of repetitive strain injury
(RSI) and other osteomolecular disorders related to work.
The collaborators have Personal Protection Equipment
and also a process of awareness building, concerning
behavioural security, in an attempt to mitigate incidents. The
presence of security technicians in the factory increases the
positive feeling of each worker at the necessary moment of
minimising risk problems within the work environment.
RelAtionships with supplieRs
JBS has sustainable partnerships with suppliers in all
platforms where the Company is active, whether in Argentina,
Brazil, the United States, Australia or Italy. The Company
has adopted the internal procedure of assessment of
suppliers with regard to criteria related to quality, punctuality,
sustainability and trust in products and services. This posture
seeks to ensure that the global production chain for beef is
sustainable in all aspects, and offers the end clients a product
with guaranteed origin and that respects best practices.
JBS cultivates transparency between the Company and
its cattle suppliers in the United States, Australia, Argentina,
Italy and Brazil, as a way of promoting the long-term growth
in the segment, through the strengthening of the livestock
production chain, including industry and the distributor.
The Company seeks to offer the livestock farmer
conditions to commercialise the livestock, so that the supplier
may plan sales in advance, making negotiations easier and
optimising results.
The relationship policy includes a programme of visits
to industrial units and accompaniment of production, as also
advice on sanitary issues, animal nutrition or sale of livestock.
To ensure transparency in the acquisition process,
JBS S.A. publicises and makes clear to the suppliers that
they have commercial relationships with companies that
have commitment and engagement with the social and
environmental issues that affect the chain. The JBS conduct
is constantly publicised to the suppliers through the Ethical
Conduct of the Company and also environmental practices.
In all countries where JBS is active, the Company
seeks to encourage best practices from the suppliers. Based
on programmes, JBS discloses, encourages and supports
their suppliers in the adoption of sustainable conduct.
. 59 .
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One example is the Friboi Quality Farms Programme
of JBS, set up to support the mission of JBS to be the best in
everything they propose to do, and is an example of valuing
suppliers. In yet another initiative, it was the first Brazilian
meat producer to implement a tool for quality management
on the farms that supply the animals.
Friboi Quality Farms seek to prepare producers for
the Global Gap/EurepGAP (Eurep ­ Euro-Retailer Produce
Working Group and GAP ­ Good Agricultural Practice) and
ensure 100% of acquisitions involving certified animals.
The normative document is based on best
agricultural practices. The aim here is to ensure the integrity,
transparency and harmony of global standards. The food
shall be produced with respect for health, safety and also
the well-being of the employees, without forsaking the care
for the animals and for the environment.
then contacted and, when they agree to participate in the
Friboi Quality Farms programme, they are put through a
preliminary audit and then the adaptation work is started.
The Global Gap/EurepGAP is a management tool that gives
information about strong points of the property and also
points that warrant further attention.
Thus, it makes it possible to have efficient planning,
together with reallocation of resources and allocation of
gains, thereby strengthening the business.
With this programme, JBS seeks the joining for forces
in favour of the supply of meat produced ethically and
professionally. The Friboi Quality Farms programme means
that the Brazilian products can be competitive on the market,
adding value to the producers and ensuring quality to clients
and the satisfaction of the end consumer.
RelAtionships with clients And consumeRs
Active in the most important and largest platforms for
beef production in the world ­ Brazil, Argentina, the United
States, Italy and Australia ­ JBS S.A. ensures that the global
clients are served with quality. This geographical activity
enables the Company to have some flexibility, so that possible
external factors, whether commercial or sanitary, among
others, do not affect the service to clients, this because JBS
has mobility to produce in different platforms, and thus ensure
that the clients' demands are met.
Having close relationships with clients, JBS manages
to observe needs with greater ease and thus develop specific
products and services for each region, thus respecting the
habits and customs of each country.
To keep this close relationship, the Company
participates in trade fairs and events in the beef segment, on
a global level; these fairs include SIAL, Anuga and Gulfood.
Apart from these events, JBS includes invitation to events
that may interest the clients, and visits to industrial plants in
the United States, Australia, Brazil, Argentina and Italy, so that
these may be fully aware of the JBS global operations.
To measure the satisfaction of this external public, the
sales team is in constant contact with the clients to measure the
rate of satisfaction and also look into possible improvements.
It is worth pointing out that for JBS the cultivation of a
good relationship starts with the efficient care of all production
stages, to ensure the quality of the final product ­ the main
tool for the Company to attain the highest levels of satisfaction
and trust by the clients and consumers ­ and ensure the
preference and loyalty for the Company brands.
woRking in
tRAnspARent
fAshion with
supplieRs
is pARt of
Jbs cultuRe
The trend is for markets, especially those abroad, to
seek more and more products with the certainty that they have
been produced within the strictest regulations and ethical and
quality standards, accepted throughout the world.
JBS has qualified a team of professionals qualified
to guide and train livestock farmers to that they may be
entitled to request certification. The pre-selected farms are
. 60 .
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In the relationship with the end consumer, JBS
complies with all legal requirements for production and
commercialisation, making product information available on
the labels, which describe the correct methods of handling,
as also ingredients and origin.
With the end consumer, the Company make global
surveys to identify needs and food habits of the public, and
thus develop products that meet this demand. In addition, at
regular intervals special publicity campaigns and promotions
are launched, with a focus on the approximation and
identification of JBS brands by the consumer.
The Company keeps contact with consumers through
channels on all business platforms, such as the Client Service
Hotline (SAC), sites, telephone lines, publicity announcements,
informative leaflets and action at the points of sale.
RelAtionship with the goveRnment
JBS's conduct before the Government has the
principle of spreading the best practices that the Company
has adopted in the light of compliance with legislation in all
the countries where the Company is present (Italy, the United
States, Brazil and Australia). JBS S.A. has a commitment to
the execution of its labour, tax and environmental obligations
as established by the legislation of each country.
JBS has activities in several countries around the world.
The Company's relationships with the governments of these
countries is based on strict ethical standards. In addition, the
Company seeks to understand the cultural characteristics
of each people, so as to respect the local values and laws
applicable to Company activities in each country.
Being a global company, JBS keeps a permanent
watch on the political and social demands of each country
where the Company is active and to where it exports. In this
way, the Company is always prepared to respond to changes
in regulations and keep their products and units within strict
criteria of legality, whether in relation to environmental, labour,
social or tax issues.
In its relationship with authorities, the Company has
a strict principle of transparency, and does not get involved
in any activities which could lead to mistaken interpretations.
JBS gives value to relationships based on mutual respect,
compliance with the laws, and ethical commitments.
investoR RelAtions
For JBS, the base of any relationship is trust, and
this is the kind of relationship that the Company establishes
with its investors. To serve the investor, JBS has an area for
Investor Relations structured to inform the shareholders and
market analysts in a swift and transparent manner, and also
to keep a close relationship with this public. The Company
has public meetings to present its results, in institutions like
the Association of Investment Analysts and Professionals of
the Capital Markets (APIMEC). In 2008, JBS held a public
meeting with a total of 80 participants. The Company calls
the market over every quarter to show the Company results,
when the Executive President presents the results obtained
by JBS and also the outlook for the segment, in public.
In 2008, JBS held these meetings on a regular basis
to make the figures public. There were also two roadshows
with banks and shareholders. At the end of 2008, eight
financial institutions were accompanying and disclosing the
performance of JBS S.A.
RelAtionships with the pRess
With the Press, has a relationship of transparency, ethics
and professional respect. For JBS, the media is essential so
that the market and society in general may be informed about
everything that happens with regard to Company actions.
The relationship with the press is the base on which the
news can be taken to the final public in a correct and truthful
manner. Through the Press Relations Department of JBS,
the communication media is served globally, and are always
brought up to date about all actions and news concerning the
. 61 .
background image
Company in real time. JBS makes use of communication tools
to take a clear stand, efficiently and objectively, with the vehicles
of communication, whether through press releases, press
conferences, interviews with the Company spokespeople, and
disclosure of news on the company website, where there is a
dedicated space for journalists.
For the Company, the means of communications
are essential to ensure transparency in relationships
between companies and communities. For this reason,
JBS has a transparent, ethical and professional relationship
with journalists and vehicles. For JBS, the means of
communication are the link through which the market and
society in general may be informed about all events with
regard to the actions of the Company.
The relationship with the press is the base so that the
relevant information may be taken to the public and also all
the Company stakeholders in a correct and truthful manner.
To make sure that the media and journalists have access to all
the information about JBS, the Company has a professional
structure for dealing with the Press. This structure is active in
an ethical manner and is firmly committed to the truth, so that
they can offer relevant information in reasonable time, so that
the general public, clients, suppliers and shareholders may
always be informed about the JBS actions and commitments,
in all markets where the Company is active.
The relationship between JBS and the press makes
use of the more traditional disclosure methods, including
press releases, a specific area on the Company website,
press conferences, interviews with spokespeople and other
means necessary to make the relevant information public
for society and for the Company. This relationship follows
principles of transparency, clarity and objectivity in the flow
of information.
RelAtionship with the community
Well aware of its role, JBS carries out a range of
activities with the communities surrounding the factory units,
whether supporting cultural events or charity institutions,
carrying out social actions or volunteer programmes to meet
the needs of society, or giving lectures about environmental
awareness.
JBS also helps towards the development of the
regions where the Company is active, employing thousands
of people throughout the world. Currently the total workforce
is more than 55 thousand, if we add together the collaborators
in Brazil, Argentina, the USA, Australia and Italy.
enviRonment
All productive JBS units in Brazil and around the world
are in conformity with applicable environmental Laws and
Regulations. This means that all the units have an environmental
licence in accordance with regulations currently in force. To
control the environmental impact of the Company operations,
JBS has a programme of preventive maintenance of machines,
equipment and also gas filtering systems, as also programmes
for the efficient use of water, energy and recycling of materials
used in the routine activities of the Company. At regular intervals,
the environmental impact of products, processes, operations
and services are assessed, to identify possible factors causing
relevant environmental damage, as well as developing and
implementing sustainable processes.
An ethicAl
RelAtionship
with the
pRess is the
guARAntee
of
quAlity
communicAtion
with the
shAReholdeRs
. 62 .
background image
initiAtives of sociAl And enviRonmentAl Responsibility tAken up by Jbs s.A.
Jbs brazil
social and environmental Activities
:
Physical Activities: Stretching exercises are performed by the collaborators before the start of their work activities;
:
Health Care: Access to a private health insurance plan at reduced prices, including preventive medical examinations
and several prevention campaigns;
:
Crisis Management Commission: To deal with accidents of any kind;
:
Environmental Education Programme: Aimed at the collaborators through different types of informative campaigns;
:
Selective Refuse Collection: The Company has a programme for selective refuse collection, to educate the collaborators;
:
5S Quality Control Programme (Tidiness, Orderliness, Cleanliness, Standards and Self-Discipline)
tReAtment of Residues
solid waste
effluents
emissions
noise and
vibrations
Monitoring with indicators
·
·
·
·
Use of reuse targets
·
·
-
-
Use of recycling targets
·
·
-
-
Use of programmes to reduce generation
·
·
·
·
Use of selective collection or unitary treatment
·
·
-
-
Investment in technology to reduce generation
·
·
·
·
Use of process to reduce environmental impact
·
-
·
·
Use of guarantee of legal conformity in
handling, transport and destination
·
·
-
-
Jbs Argentina
social and environmental Activities
:
Gymnastics programme implemented in all units;
:
Injury Prevention programme;
:
First Aid Units in all business units;
:
The Company carries out medical examinations and check-ups once a year (clinical examination, blood, urine, X-rays,
hearing and sight) on all employees;
:
Vaccination of all employees against certain diseases;
:
Incentive Programmes for people to stop smoking;
:
The Company is a founder member of an NGO known as "Food Bank" which donates food to those in need;
:
5S Quality Control Programme (Tidiness, Orderliness, Cleanliness, Standards and Self-Discipline).
tReAtment of Residues
solid waste
effluents
emissions
noise and
vibrations
Monitoring with indicators
·
·
·
·
Use of reuse targets
·
·
-
-
Use of recycling targets
·
·
-
-
Use of programmes to reduce generation
·
·
·
·
Use of selective collection or unitary treatment
·
·
-
-
Investment in technology to reduce generation
·
·
·
·
Use of process to reduce environmental impact
·
-
·
·
Use of guarantee of legal conformity in
handling, transport and destination
·
·
-
-
. 63 .
background image
Jbs united states
social and environmental Activities
:
The Company has implemented guidance classes for all new employees, and has also organised stretching classes;
:
Insurance available for all full-time employees;
:
Direct communication so that the collaborators may get in contact with the corporate offices and also industrial managers;
:
JBS Swift recycles most of the waste generated. Each unit has its own mechanism for management of waste, according
to the kind of waste that is generated. These programmes are based on the selective management of the flow of
solid waste;
:
The Company has partnerships with United Way, Relay for Life, American Cancer, Hob for Life, Boy/Girl Scouts, state
schools and local food banks.
tReAtment of Residues
solid waste
effluents
emissions
noise and
vibrations
Monitoring with indicators
·
·
·
·
Use of reuse targets
·
-
-
-
Use of recycling targets
·
·
-
-
Use of programmes to reduce generation
-
-
-
-
Use of selective collection or unitary treatment
·
·
-
-
Investment in technology to reduce generation
·
·
·
·
Use of process to reduce environmental impact
·
-
·
·
Use of guarantee of legal conformity in
handling, transport and destination
·
·
-
-
tReAtment of Residues
solid waste
effluents
emissions
noise and
vibrations
Monitoring with indicators
·
·
·
·
Use of reuse targets
·
-
-
-
Use of recycling targets
·
-
-
-
Use of programmes to reduce generation
-
-
-
-
Use of selective collection or unitary treatment
·
·
-
-
Investment in technology to reduce generation
·
·
·
-
Use of process to reduce environmental impact
·
·
·
-
Use of guarantee of legal conformity in
handling, transport and destination
·
·
-
-
Jbs Australia
social and environmental Activities
:
Collaborators are given special reduced prices for use of the Gym;
:
The Company offers an on-site medical team to solve illnesses or other health problems that the Collaborators may have;
:
Access to a private health insurance plan at reduced rates;
:
There is a formal procedure with the OHS Manual, which deals with management of injuries at the workplace;
:
Crisis Management Training for all collaborators;
:
There is a programme for collaborator guidance, in addition to selective refuse collection;
:
Partnership with Healthy Waterways Partnership, dedicated to improvement of the health of the river systems in
Southeastern Queensland;
:
Member of the Fitzroy Basin Association in Rockhampton, seeking the sustainable development of the Fitzroy Basin.
. 64 .
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coRpoRAte
infoRmAtion
Jbs s.A.
Av. Brigadeiro Faria Lima, 2.391
2º andar, conjunto 22, sala 2
postcode: 01452-000
São Paulo ­ SP ­ Brasil
Telephone: (+ 55 11) 3144-4000
www.jbs.com.br
investoR RelAtions
Director: Jerry O'Callaghan
Manager: Rodrigo Gagliardi
Av. Marginal Direita do Tietê, 500
postcode: 05118-100
São Paulo ­ SP ­ Brasil
Telephone: (+ 55 11) 3144-4055
E-mail: ir@jbs.com.br
shAReholdeR RelAtions
Banco Bradesco BBI S/A
Avenida Paulista, 1.450, 3º andar
São Paulo ­ SP
www.shopinvest.com.br
independent AuditoRs
Terco Grant Thornton Auditores Independentes
Av. das Nações Unidas, 13.797, Bloco II, 18º andar
postcode 04794-000 ­ São Paulo ­ SP
Telephone: (+ 55 11) 3054-0007
. 65 .
background image
cRedits
Published by the Investment Relations
Department and Corporate Communication Department
published by
Corporate Communication Department JBS S.A.
pRinting design
TheMediaGroup ­ Financial
Communication and Sustainability
imAgens
JBS Image Bank
. 66 .
background image
. 67 .
financial
statements
Report of
independent auditors
Balance sheets
statements of income
statements of changes in
shareholders' equity
statements of cash flows
economic Value added
notes to the financial statements
. 2 .
. 4 .
. 6 .
. 8 .
. 10 .
12 .
. 14 .
background image
. 68 .
RepoRt of
independent
auditoRs
1.

We have audited the individual (Company) and consolidated balance sheets of JBS S.A
and controlled companies (Companies) as of December 31, 2008 and the respective
individual (Company) and consolidated statements of income, changes in shareholders'
equity, cash flows and value added for the year then ended, prepared under the
responsibility of the Company's management. Our responsibility is to express an opinion
on these financial statements. The financial statements of JBS Argentina S.A., an indirectly-
controlled company, and of JBS USA Inc., a directly-controlled company, were reviewed
by other independent auditors, member firms of BDO network. The financial statements
of Inalca JBS S.p.A , JBS Global A/S (Denmark) and SB Holdings, Inc,. directly-controlled
companies, were audited by other independent auditors.
Our opinion, insofar as it relates to the carrying value of the investments in these companies
and the equity in their earnings, is based on the report of those other auditors. As from
October 23, 2008, the financial statements of JBS USA include the accounts of JBS
Parkland (formerly Smithfield) and JBS Five Rivers (formerly Five Rivers).
2.

Our audit was conducted in accordance with auditing standards in Brazil and comprised:
(a) planning of the work, taking into consideration the significance of the balances, volume
of transactions, and the accounting and internal control systems of the Companies,
(b) checking, on a test basis, the evidence and records that support the amounts and
accounting information disclosed, and (c) evaluating the significant accounting practices
and estimates adopted by management, as well as the presentation of the financial
statements taken as a whole.
to the Board of directors and shareholders of JBs s.a.:
background image
. 69 .
3.

In our opinion, based on our audits and on the opinion of other independent auditors, as
mentioned in paragraph 1, the financial statements referred to in that paragraph present
fairly, in all material respects, the individual and consolidated financial position of JBS S.A.
and controlled companies as of December 31, 2008, and the results of its operations, the
changes in shareholders' equity, the cash flows and value added to its operations for the
year then ended, in conformity with Brazilian accounting practices.
4.

The audit of the financial statements for the year ended December 31, 2007, originally
prepared before the adjustments resulting from the changes in accounting practices
described in note 2, was conducted under the responsibility of other independent auditors,
who issued an unqualified report on March 10, 2008 emphasizing the presentation of
the statement of cash flows as supplementary information and the early application of
procedures to recognize exchange variations of foreign investments, pursuant to Technical
Pronouncement No. 2 issued by the Committee of Technical Pronouncements, whose
application is expected for the fiscal years ending as from December 2008, in accordance
with Brazilian Securities and Exchange Commission (CVM) Resolution No. 534. In
connection with our audit of the financial statements for the year ended December 31,
2008, we also analyzed the adjustments resulting from the changes in accounting practices
described in note 2. In our opinion, these adjustments were adequate and properly made,
considering all significant aspects.
We were engaged only to analyze the adjustments described in note 2 and not to evaluate,
review or apply any other procedures to the financial statements for the year ended December
31, 2007, and therefore we do not issue an opinion on these financial statements. As mentioned
in note 2, the Brazilian accounting practices have been changed as from January 1, 2008.
The financial statements for the year ended December 31, 2007, presented together with the
2008 financial statements, were prepared in accordance with Brazilian accounting practices
in effect until December 31, 2007 and, as allowed by CPC Technical Pronouncement No.
13 ­ Initial Adoption of Law No. 11,638/07 and Executive Act No. 449/08, are not being
republished with the adjustments for purposes of comparison between the years.
Ribeirão Preto, February 16th, 2009.
Estefan George Haddad
BDO Trevisan Auditores Independentes
Partner Accountant
CRC 2SP013439/O-5
CRC 1DF008320/O-5 "S" SP
to the Board of directors and shareholders of JBs s.a.:
background image
. 70 .
Balance sheets
as of decemBeR 31, 2008 and 2007 (in thousands of Reais)
company
consolidated
assets
2008
2007
2008
2007
cuRRent assets
Cash and cash equivalents (Note 5)
1,522,973
869,784
2,291,617
1,381,703
Trade accounts receivable, net (Note 6)
552,991
444,218
2,232,300
1,236,148
Inventories (Note 7)
539,510
604,225
2,549,674
1,511,595
Recoverable taxes (Note 8)
447,343
351,677
623,022
482,918
Prepaid expenses
1,754
4,388
70,881
44,468
Other current assets
166,275
30,612
493,372
102,910
total cuRRent assets
3,230,846
2,304,904
8,260,866
4,759,742
non-cuRRent assets
long-term assets
Credits with related parties (Note 9)
1,700,868
60,306
54,569
17,461
Judicial deposits and others
16,378
8,249
102,779
41,443
Deferred income taxes (Note 19)
22,626
16,251
481,485
23,758
Recoverable taxes (Note 8)
37,632
31,442
65,307
44,205
total long-term assets
1,777,504
116,248
704,140
126,867
permanent assets
Investments in subsidiaries (Note 10)
3,803,669
2,149,919
-
829,975
Other investments
10
10
5,722
10
Property, plant and equipment, net (Note 11)
1,804,833
1,328,015
4,918,671
2,536,098
Intangible assets, net (Note 12)
959,230
9,615
2,205,347
193,917
Deferred charges
-
-
1,603
1,596
total permanent
6,567,742
3,487,559
7,131,343
3,561,596
total non-cuRRent assets
8,345,246
3,603,807
7,835,483
3,688,463
total assets
11,576,092
5,908,711
16,096,349
8,448,205
The accompanying notes are an integral part of the finantial statements
background image
. 71 .
company
consolidated
liaBilities and shaReholdeRs' eQuity
2008
2007
2008
2007
cuRRent liaBilities
Trade accounts payable (Note 13)
383,979
355,510
2,077,844
1,099,385
Loans and financings (Note 14)
1,494,690
858,975
2,214,788
2,384,836
Payroll, social charges and tax obligation (Note 15)
62,722
93,158
337,238
203,613
Declared dividends (Note 16)
51,127
17,465
51,127
17,465
Other current liabilities
76,772
50,294
248,344
70,536
total cuRRent liaBilities
2,069,290
1,375,402
4,929,341
3,775,835
non-cuRRent liaBilities
Loans and financings (Note 14)
2,991,344
1,341,313
3,401,709
1,364,800
Deferred income taxes (Note 19)
83,453
59,642
884,927
99,755
Provision for contingencies (Note 17)
48,244
45,979
57,637
55,681
Debit with third parties for investment (Note 18)
210,480
-
210,480
-
Other non-current liabilities
38,870
31,787
480,302
101,702
total non-cuRRent liaBilities
3,372,391
1,478,721
5,035,055
1,621,938
minoRity inteRest
-
-
(2,458)
(4,156)
shaReholdeRs' eQuity (note 20)
Capital stock
4,495,581
1,945,581
4,495,581
1,945,581
Capital reserve
769,463
985,664
769,463
985,664
Revaluation reserve
118,178
123,343
118,178
123,343
Profit reseve
1,297
-
1,297
-
Valuation adjustments of shareholders´ equity
(2,920)
-
(2,920)
-
Accumulated exchange conversion adjustments
752,812
-
752,812
-
total shaReholdeRs' eQuity
6,134,411
3,054,588
6,134,411
3,054,588
total liaBilities and shaReholdeRs' eQuity
11,576,092
5,908,711
16,096,349
8,448,205
The accompanying notes are an integral part of the finantial statements
background image
. 72 .
company
consolidated
2008
2007
2008
2007
GRoss opeRatinG ReVenue
sales of products
Domestic Sales
2,971,842
2,118,600
20,787,532
8,974,879
Foreign Sales
2,424,375
2,321,456
10,318,077
5,752,224
5,396,217
4,440,056
31,105,609
14,727,103
sales deductions
Returns and discounts
(206,162)
(191,932)
(369,178)
(273,556)
Sales taxes
(323,649)
(252,282)
(396,176)
(311,976)
(529,811)
(444,214)
(765,354)
(585,532)
net sale ReVenue
4,866,406
3,995,842
30,340,255
14,141,571
Cost of goods sold
(3,957,624)
(2,915,674)
(27,347,753)
(12,609,093)
GRoss income
908,782
1,080,168
2,992,502
1,532,478
opeRatinG income (eXpense)
General and administrative expenses
(137,568)
(74,188)
(570,147)
(275,594)
Selling expenses
(470,620)
(374,469)
(1,517,591)
(786,630)
Financial income (expense), net (Note 21)
(263,633)
(276,283)
(612,176)
(403,113)
Equity in subsidiaries (Note 10)
211,876
(276,591)
-
-
Goodwill amortization (Note 12)
(179,867)
(74,824)
(179,867)
(74,853)
Non-recurring expenses (Note 22)
(35,693)
(67,082)
(35,693)
(67,082)
Other (expense) income, net
10,098
(171)
7,731
11,206
(865,407)
(1,143,608)
(2,907,743)
(1,596,066)
income (loss) BefoRe taXes
43,375
(63,440)
84,759
(63,588)
Current income taxes
3,336
(101,793)
(52,246)
(107,104)
Deferred income taxes
(20,772)
201
(9,975)
2,201
(17,436)
(101,592)
(62,221)
(104,903)
statements of income
foR the yeaRs ended decemBeR 31, 2008 and 2007 (in thousands of Reais)
background image
. 73 .
company
consolidated
2008
2007
2008
2007
income (loss) BefoRe minoRity inteRest
25,939
(165,032)
22,538
(168,491)
Minority interest (expense) income
-
-
3,401
3,459
net income (loss)
25,939
(165,032)
25,939
(165,032)
net income (loss) per thousand shares
18,48
-153,18
statement of eBitda (earnings before income taxes,
interest, depreciation and amortization and non-operating
income) (expense), net
Income (loss) before taxes
43,375
(63,440)
84,759
(63,588)
Financial income (expense), net (Note 21)
263,633
276,283
612,176
403,113
Depreciation and amortization
71,157
56,626
243,591
120,807
Equity in subsidiaries (Note 10)
(211,876)
276,591
-
-
Non-recurring expenses (Note 22)
35,693
67,082
35,693
67,082
Goodwill Amortization (Note 12)
179,867
74,824
179,867
74,853
amount of eBitda
381,849
687,966
1,156,086
602,267
The accompanying notes are an integral part of the finantial statements
background image
. 74 .
statements of chanGes in
shaReholdeRs' eQuity
foR the yeaRs ended decemBeR 31, 2008 and 2007 (in thousands of Reais)
capital
stock
capital
reserve
goodwill
Revaluation
reserve
profit
reserve
mandatory
Valuation
adjustments
of
shareholders'
equity
accu-
mulated
exchange
conver-
sion ad-
justments
Retained
earnings
total
Balance as of
decemBeR 31, 2006
52,524
-
130,521
-
-
-
-
183,045
Capital Increase
1,893,057
-
-
-
-
-
- 1,893,057
Goodwill in
shares issue
-
1,160,983
-
-
-
-
-
1,160,983
Realization of
revaluation reserve
-
-
(7,178)
-
-
-
7,178
-
Loss for the year
-
-
-
-
-
- (165,032) (165,032)
Declared dividends
(R$16,21 to one
thousand of shares)
(Note16)
- (17,465)
-
-
-
-
- (17,465)
Loss absorption
- (157,854)
-
-
-
- 157,854
-
Balance as of
decemBeR 31, 2007
1,945,581
985,664
123,343
-
-
-
- 3,054,588
Adjustments to
initial adoption of Law
11.628/2007 and
Executive Act 449/08
(Note 2)
-
-
-
-
-
-
(87)
(87)
background image
. 75 .
capital
stock
capital
reserve
goodwill
Revaluation
reserve
profit
reserve
mandatory
Valuation
adjustments
of
shareholders'
equity
accu-
mulated
exchange
conver-
sion ad-
justments
Retained
earnings
total
Balance adJusted
as of JanuaRy 1,
2008
1,945,581
985,664
123,343
-
-
-
(87) 3,054,501
Capital Increase
2,550,000
-
-
-
-
-
- 2,550,000
Goodwill in shares
issue
-
279
-
-
-
-
-
279
Realization of revalua-
tion reserve
-
-
(5,165)
-
-
-
5,165
-
Treasury Shares
- (195,073)
-
-
-
-
- (195,073)
Valuation adjustments
in subsidiaries share-
holders´ equity
-
-
-
-
(2,920)
-
-
(2,920)
Accumulated ex-
change conversion
adjustments in subsid-
iaries shareholders´
equity
-
-
-
-
-
4,794
-
4,794
Investiments exchange
rate variations, net
-
-
-
-
- 748,018
- 748,018
Net income
-
-
-
-
-
-
25,939
25,939
Proposal for destina-
tion of the net income
Mandatory
-
-
-
1,297
-
-
(1,297)
-
Declared dividends
(R$36,42 to one
thousand of shares)
(Note 16)
- (21,407)
-
-
-
- (29,720)
(51,127)
Balance as of
decemBeR 31, 2008
4,495,581
769,463
118,178
1,297
-2,920
752,812
- 6,134,411
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. 76 .
company
consolidated
2008
2007
2008
2007
cash flow from operating activities
Net income (loss) of the year
25,939
(165,032)
25,939
(165,032)
Adjustments to reconcile net income (loss) to cash
provided
Depreciation and amortization
71,157
56,626
243,591
120,807
Allowance for doubtful accounts
4,423
1,819
10,393
1,589
Goodwill amortization
179,867
74,824
179,867
74,853
Minority interest
-
-
(3,401)
(3,459)
Equity in subsidiaries
(211,876)
276,591
-
-
Write-off of fixed assets
2,949
2,412
9,964
3,310
Deferred income taxes
20,771
(201)
9,975
(2,201)
Current and non-current financial charges
487,668
107,134
758,914
100,689
Provision for contingencies
2,265
(1,228)
(1,074)
2,676
Adjustment to present value of assets and liabilities
339
-
339
-
583,502
352,945
1,234,507
133,232
Variation in operating assets and liabilities
Decrease (increase) in trade accounts receivable
(1,512)
49,304
(169,660)
(726,332)
Decrease (increase) in inventories
64,715
(40,290)
(294,794)
(863,281)
Decrease (increase) in recoverable taxes
(103,038)
65,951
(135,969)
71,167
Decrease (increase) in other current and
non-current assets
(141,158)
41,975
(329,459)
(111,738)
Decrease (increase) in credits with related parties
(1,178,154)
30,686
(22,395)
(17,460)
Increase (decrease) in trade accounts payable
18,521
95,617
(170,440)
807,020
Increase (decrease) in other current and
non-current liabilities
194,960
49,236
849,785
269,925
net cash provided by (used in) operating activities
(562,164)
645,424
961,575
(437,467)
statements of cash floWs
foR the yeaRs ended decemBeR 31, 2008 and 2007 (in thousands of Reais)
background image
. 77 .
company
consolidated
2008
2007
2008
2007
cash flow used in investing activities
Additions to property, plant and equipment
and intangible assets
(806,687)
(487,877)
(1,237,702)
(1,748,088)
Increase in investments
(1,511,441)
(2,216,321)
(3,645)
(904,828)
Net effect of the working capital of acquired company
-
-
(1,721,877)
-
net cash used in investing activities
(2,318,128)
(2,704,198)
(2,963,224)
(2,652,916)
cash flow from financing activities
Loans and financings
3,147,323
1,325,046
3,614,242
4,987,313
Payments of loans and financings
(1,917,921)
(1,632,784)
(3,926,026)
(3,812,873)
Increase in capital stock and goodwill in subscription
2,550,279
3,054,040
2,550,279
3,054,040

Declared dividends / distribution of
retained earnings
(51,127)
(17,465)
(51,127)
(17,465)
Shares acquisition of own emission
(195,073)
-
(195,073)
-
Valuation adjustments of shareholders´ equity
-
-
749,725
-
net cash provided by financing activities
3,533,481
2,728,837
2,742,020
4,211,015
effect of exchange rates on cash and cash equivalents
-
-
169,543
-
Net increase (decrease) in cash
653,189
670,063
909,914
1,120,632
Cash and cash equivalents at the beginning of the year
869,784
199,721
1,381,703
261,071
cash and cash equivalents at the end of the year
1,522,973
869,784
2,291,617
1,381,703
The accompanying notes are an integral part of the finantial statements
background image
. 78 .
company
consolidated
Revenue
Sales of goods and services
5,190,054
30,736,430
Other income
10,098
7,611
Own assets building income
(4,423)
(9,364)
5,195,729
30,734,677
Goods
Cost of services and goods sold
(3,236,824)
(22,458,475)
Materials, energy, services from third parties and others
(1,049,273)
(4,341,198)
Losses/Recovery of amounts
-
50,443
Other costs
852
852
(4,285,245)
(26,748,378)
Gross added value
910,484
3,986,299
depreciation and amortization
(71,157)
(243,591)
net added value generated by the company
839,327
3,742,708
net added value by the company
Equity in subsidiaries
211,876
-
Financial income
1,546,876
1,700,735
Others
(176,689)
(174,743)
net added Value to distRiBution
2,421,390
5,268,700
economic Value added
foR the yeaR ended decemBeR 31, 2008 (in thousands of Reais)
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. 79 .
company
consolidated
distRiBution of added Value
labor
Salaries
378,937
2,173,072
Benefits
33,449
464,479
F.G.T.S (Brazilian Social Charge)
21,711
21,847
434,097
2,659,398
taxes and contribution
Federal
108,265
190,526
State
45,540
74,480
Municipal
1,966
3,162
155,771
268,168
capital remuneration from third parties
Interests
1,573,678
2,061,032
Rents
14,666
32,346
Others
217,239
225,218
1,805,583
2,318,596
owned capital remuneration
Dividends
25,939
25,939
Minority interests participation on retained income
-
(3,401)
25,939
22,538
added Value distRiButed
2,421,390
5,268,700
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. 80 .
1 opeRatinG actiVities
JBS S.A (Company) is a listed company in the Novo Mercado segment, which requires the highest level of corporate
governance in the Brazilian market and its shares are traded on the BM&F Bovespa S.A. ­ Stock Exchange, Commodity
and Forward.
The operations of the Company and its subsidiaries consists of:
a) activities in Brazil
The Company operates slaughterhouses, cold storage and food processing operations for the production of beef,
canned goods, fat, animal rations and beef by-products, which are produced in the manufacturing units located in the
States of São Paulo, Goiás, Mato Grosso, Mato Grosso do Sul, Rondônia, Minas Gerais, Acre and Rio de Janeiro. The
Company distributes its products through distribution centers located in the State of São Paulo, and a container terminal
for export in the city of Santos.
In order to minimize transportation costs, the Company is responsible for the transportation of cattle to its slaughterhouses
and the transportation of its export products.
Mouran Alimentos Ltda.(Mouran) is a subsidiary which conducts slaughterhouse and cold storage business
operations for the production of beef, canned goods, fat, animal rations and beef by-products in its facilities located in
the State of São Paulo.
JBS Embalagens Metálicas Ltda. (JBS Embalagens) produces metallic cans in its plant located in the State of São
Paulo, which are purchased by the Company.
The subsidiary JBS Confinamento Ltda. (JBS Confinamento), located in Castilho, State of São Paulo, renders fattening
service of bovine for slaughter.
Beef Snacks do Brasil Indústria e Comércio de Alimentos Ltda. (Beef Snacks), an indirect subsidiary of the Company,
located in Santo Antônio da Posse, State of São Paulo, in operation since August 2007 produces Beef Jerky. Beef Snacks
purchases meat in the local market and exports to the United States of America.
b) foreign activities
The Company has indirect subsidiaries located in England and Egypt, which are responsible for the sales and
distribution of the Company's products in Europe, Asia, and Africa.
JBS Argentina S.A. (JBS Argentina), an indirect wholly-owned subsidiary of the Company, operates slaughterhouses
and cold storage facilities for the production of beef, canned goods, fat, animal food and by-products, with industrial units
located in the province of Buenos Aires, Entre Rios, Santa Fé and Córdoba.
notes to the financial statements
foR the yeaRs ended decemBeR 31, 2008 and 2007 (eXpRessed in thousand of Reais)
background image
. 81 .
JBS Argentina has three subsidiaries, beeing two acquired in 2007, one meat-packing slaughterhouse in Berezategui
(Consignaciones Rurales) and other can factory located in Zavate (Argenvases), both located in the province of Buenos Aires,
and one acquired in 2008, one meat-packing slaughterhouse in Cordoba (Col-car).
SB Holdings, Inc. (SB Holdings) and its subsidiaries, Tupman Thurlow Co., Inc. (Tupman) and Astro Sales International,
Inc. (Astro) located in the United States and acquired by the Company in January 2007, sale processed beef products in the
North-American market.
Jerky Snacks Brands, Inc (Jerky Snacks), an indirect wholly-owned subsidiary of the Company, located in the United
States of America, produces and sells meat snacks (Beef Jerky, Smoked Meat Sticks, Kippered Beef Steak, Meat&Cheese,
Turkey Jerky and Hunter Sausage). Jerky Snacks purchases meat from Brazil and in the local market and its sales are mainly
in the United States of America.
Global Beef Trading Sociedade Unipessoal Ltda. (Global Beef Trading), an indirect wholly-owned subsidiary of the
Company, located in Ilha da Madeira, Portugal, sells bovine meat, birds and porks products. Global Beef Trading imports the
products from Latin America and exports to several countries, in Europe, Africa and Asia.
In July 2007, the Company acquired Swift Foods Company, presently known as JBS USA Holdings Inc. (JBS USA).
JBS USA has feedlots and processes, packages and delivers fresh, further processed and value-added beef and pork
in natura products for sale to customers in the United States and international markets. The fresh meat products prepared by
JBS USA include refrigerated beef and pork processed to standard industry specifications.
In the United States, JBS USA operates eight beef processing facilities, three pork processing facilities, one lamb slaughter
facility, one value-added facility for pork and eleven confinement. In Australia, JBS USA operates ten beef and small animals
processing facilities and JBS USA in Australia operates five feedlots that provide grain-fed cattle for its processing operations.
JBS USA completed in October of 2008 the acquisition of the cattle meat unit of Smithfield group and also the fattening
confinement operations known as Five Rivers.
Smithfield, actually JBS Packerland, own four cattle units and one confinement cattle unit, and Five Rivers, known as
JBS Five Rivers, own ten cattle confinement units.
JBS USA divides its business into three segments: Swift Beef, through which it conducts its U.S. domestic beef
processing business; Swift Pork, through which it conducts its U.S. domestic pork processing business; and JBS Australia,
through which it conducts its Australian beef and small animals, the last business in Australia since May 2008, with the
acquisition of Tasman, which operates six beef and small animals slaughterhouses and one cattle feedlot unit.
Since January 2008, the Company owns 50% of Inalca S.p.A. social capital, presently known as Inalca JBS S.p.A,
(Inalca JBS). Inalca S.p.A. is Italy's leading beef company and one of the main operators in the European processing
beef sector. It produces and markets a complete range of fresh and frozen meat, packed under vacuum or portioned in a
protective atmosphere, canned meat, ready-to-serve products, fresh and frozen hamburger, minced meats and, pre-cooked
products. Inalca JBS owns six facilities in Italy, specialized by production line, and nine foreign facilities in Europe and Africa.
The integral subsidiary Montana Alimentari S.p.A. (Montana) is one of the leading Italian companies in the production,
marketing and distribution of cured meats, snack and ready-to-eat products with over 230 products. Montana owns the
well-known brands "Montana" and "IBIS", and Montana owns four facilities, specialized by type of production and located in
the area distinguished by the Protected Denomination of Origin (P.D.O.) and Protected Geographic Indication (P.G.I.) brands.
Montana is also one of the main operators in the Italian canned meat market and pre-sliced products.
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. 82 .
2 elaBoRation and pResentation of financial infoRmation and initial adoption to
laW n° 11.638/07 and eXecutiVe act n° 449/08
The individual and consolidated financial statements, were prepared in accordance with the generally accepted accounting
principles in Brazil, that embraces the corporate Brazilian legislation, the Pronouncements, Orientations and Interpretations
emitted by the Brazilian Accounting Pronouncements Committee ­ CPC and approved by the Brazilian Securities and Exchange
Commission (Comissão de Valores Mobiliários ­ CVM).
In the elaboration of the individual and consolidated financial statements of 2008 the Company adopted, by the first time,
the alterations in the corporate legislation introduced by the Law n° 11.638 approved on December 28, 2007, with the respective
modifications introduced by the Executive Act n° 449, of December 3, 2008.
The conclusion authorization for these financial statements was given by the Board of Directors on February 18, 2009.
The Company included in the financial statements the Economic Added Value (EVA) report. The objective of this report is to
demonstrate the wealth generated by the Company, and the distribution of this wealth among the elements that contributed to its
generation, such as employees, lenders, shareholders, government and others, as well as the wealth portion not distributed.
According to the choose option foreseen in the pronouncement CPC 13 the Company is presenting the Economic Value
Added exclusively for the year ended on December 31, 2008.
Initial adoption of the Law n° 11.638/07 and Executive Act n° 449/08
According to the Deliberation CVM no. 565, of December 17, 2008, that approved the accounting pronouncement
CPC 13 ­ Initial Adoption of the Law no. 11.638/07 and of the Executive Act no. 449/08, the Company established the transition
date for the adoption of the new accounting practices on January 1, 2008, being the transition date for the adoption of the
changes in the accounting practices adopted in Brazil, representing the preparation date of the initial financial statements
adjusted by the referred changes.
The Company chose the option foreseen in pronouncement CPC 13 and reflected the adjustments related to the
changes of accounting practice directly in the retained earnings on January 1, 2008. The financial statements referring
the year ended on December 31, 2007, presented with the financial statements of 2008, were prepared according to the
effective accounting practices adopted in Brazil until December 31, 2007, and, as allowed by the pronouncement CPC 13
­ Initial Adoption of the Law n
o
11.638/07 and of the Executive Act n
o
449/08, are not being restated with the adjustments for
comparison purposes between the years.
The balance sheet adjustments in the transition date due to the initial adoption of the Law n
o
11.638/07 and Executive
Act n
o
449/08, the summary of profit & loss effects in 2008, and the effects in the shareholders' equity as of December 31,
2008 due to the adoption of the referred legislation are presented below:
Balance sheet adjustments in the transition date
company
consolidated
dec 31, 2007
adjustments Jan 1, 2008 dec 31, 2007 adjustments Jan 1, 2008
Trade accounts receivable (a)
444,218
(738)
443,480 1,236,148
(738)
1,235,410
Recoverable taxes ­ Current (a)
351,677
(196)
351,481
482,918
(196)
482,722
Recoverable taxes ­ Long Term (a)
31,442
(1,056)
30,386
44,205
(1,056)
43,149
Investiments in subsidiaries (b)
2,149,919 (823,666)
1,326,253
829,975 (829,975)
-
Intangible (b)
9,615
823,666
833,281
193,917
829,975 1,023,892
Trade accounts payable (a)
355,510
1,903
357,413 1,099,385
1,903 1,101,288
Retained earnings
-
(87)
(87)
-
(87)
(87)
(a) ­ Adjustment to present value
(b) ­ Goodwill in investments acquisition
background image
. 83 .
Effects in the profit & loss of 2008 and in the shareholders' equity as of December 31, 2008
net income of the yeaR
shaReholdeRs' eQuity
company
consolidated
company
consolidated
through law 11.638/07 and executive act 449/07
25,939
25,939
6,134,411
6,134,411
Exchange variation in foreign investments, net
748,018
845,519
-
-
Equity in subsidiaries
97,501
-
-
-
Adjustment to present value of assets and liabilities
(339)
(339)
(252)
(252)
Valuation adjustments in subsidiaries
shareholders' equity
2,920
2,920
-
-
Orders of sales exchange variation
(77,896)
(77,896)
(77,896)
(77,896)
Income taxes due to the adjustments above
26,600
26,600
26,600
26,600
through effective accounting principles in 2007
822,743
822,743
6,082,863
6,02,863
There was no tax effect due to the adjustments of the adoption of the Law n° 11.638/07 and Executive Act n° 449/08
3 siGnificant accountinG policies
a) profit and loss calculation
The operations results is in conformity with the accounting regime of competence.
b) accounting estimates
The preparation of financial statements in accordance with generally accepted accounting principles in Brazil requires
the Company's management to (i) make estimates and assumptions that affect the reported amounts of assets and liabilities
and (ii) disclose (a) contingent assets and liabilities as of the date of the financial statements and (b) the reported amounts of
revenue and expenses during the reporting period. Actual results could differ from those estimates.
c) financial instruments
The financial instruments are recognized in the moment that the Company becomes part of the contractual dispositions
of the instrument. When a financial asset or liability is initially recognized, it is registered by the fair value, added by the
transaction costs that are directly attributable to the acquisition or emission of the financial asset or liability.
In case of financial assets and liabilities classified in the category of fair value through the result, the transaction costs
are directly accounted in the profit and loss of the exercise.
The subsequent measurement of the financial instruments happens in each date of the financial statements according
to the rules established for each classification of financial assets and liabilities in: (i) assets and liabilities measured to the fair
value through the result, (ii) maintained until the expiration date, (iii) loans and receivables (iv) available for sale.
d) allowance for doubtful accounts
Allowance for doubtful accounts is computed based on the probable loss, the profile of the customers, overall
economic and financial condition and specific risks relating to the relevant customers. The Company's management believes
that the allowance for doubtful accounts is sufficient to cover the exposure to possible losses.
e) inventories
The Company's inventories are valued based on their cost of acquisition, creation or production, which cost is lower
than the market or net realizable value.
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. 84 .
f) investiments
The Company's investments in subsidiaries are accounted according to the equity method.
g) property, plant and equipment, net
Property, plant and equipment are stated at an amount equivalent to the sum of their historical acquisition cost and
the amount resulting from the increase in the value of these assets as determined by revaluations performed by independent
appraisal firms until December 31, 2007.
Depreciation is computed pursuant to the straight-line method, using rates described in Note 11, which take into
account the useful and economic lives of the assets.
h) intangible assets
The intangible assets are demostrated by the acquisition or formation cost, deducted by the amortization. The
intangible assets with indefinite usefull life are not amortized.
i) Reduction to recovery amount (impairment)
The items of property, plant and equipment, intangible assets and deferred charges are tested by its recoverability
amounts, at least, annually, in case there are indications of loss of value. The goodwill and the intangible assets with indefinite
useful life are tested annually independently of there is (or not) indication of loss of value.
j) other current and long-term assets
Current and long-term assets are accounted for at their realization value, including, if applicable, the related income,
charges and monetary variations.
k) currrent liabilities and long-term liabilities
Current and long-term liabilities are accounted for at their known or computed amounts, including, if applicable, the
related income, charges and monetary variations.
l) contingent assets and liabilities
Contingent assets are recognized only when there are final judgements or favorable judicial decisions rendered.
Contingent assets with probable gain are only published in accompanying notes.
Contingent liabilities are provisioned when the losses are appraised as probable and the involved amounts are
measurable with enough certainty. The contingent liabilities appraised as possible losses are only published in accompanying
notes and the contingent liabilities appraised as remote losses are not provisioned and not published.
m) income tax and social contribution
Current taxes
Provisions for income tax and social contribution are based on rates and laws and regulations in force.
Deferred taxes
The Company records deferred income tax assets and liabilities based on temporary differences between the carrying
amounts on the Company's financial statements and the tax basis of assets and liabilities.
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. 85 .
n) profit by share
The profit by share is calculated based on the shares in circulation on the date of the financial statements.
o) consolidation
All assets and liabilities of JBS S.A. and its subsidiaries and revenues and expenses from transactions between
JBS S.A. and its subsidiaries were eliminated. No inter-company profits were recorded on the consolidated balance sheet of the
Company. Accordingly, the shareholders' equity of JBS S.A. individually is equal to its consolidated shareholders' equity.
The financial statements of the subsidiaries of JBS S.A. located outside of Brazil were originally prepared using the local
currency of the country in which they are located. Subsequently, these amounts were converted into Reais using the applicable
commercial exchange rates reported by the Central Bank of Brazil on the date of the consolidated balance sheet for assets and
liabilities, and the average exchange rate of the period to revenues and expenses. The gains and losses due to the conversion
are recognized in the shareholders' equity in 2008 and in the financial income (loss) in 2007.
With respect to the Company's investment in JBS Argentina and its subsidiaries and Inalca JBS and its subsidiaries, we
have compared the generally accepted accounting principles in Argentina and Italy with the corresponding principles in Brazil
applied by the Company, and we have noted that there were no material differences.
The accounting principles adopted by Tupman and Astro, both subsidiaries of SB Holdings, located in the United States
of America, do not differ significantly from those adopted in Brazil.
The accounting practices adopted in the United States of America by JBS USA (US GAAP) are adjusted to Brazilian GAAP,
according to the following differences:
­ Finished goods inventories: valued using market price, and are adjusted to production average cost method;
­ Permanent assets: includes R$794,059 related to intangible assets and fixed assets goodwill, calculated according to
applicable purchasing accounting, and it was adjusted reducing the shareholder's equity.
The subsidiary companies included in the consolidation are mentioned in the Note 10.
p) adjustments to present value of assets and liabilities
The financial long term assets and liabilities are adjusted by its present value, and the short term, when the effect is
considered relevant in the financial statements. The adjustment to present value is calculated considerating the contractual
cash flows and the market interest rate.
4 acQuisitions of sWift foods company (pResently JBs usa) and inalca s.p.a (pResently inalca JBs)
In July of 2007, the Company acquired 100% of Swift Foods Company (presently JBS USA Holdings, Inc.) and since
January 2008 the Company owns 50% of Inalca S.p.A. social capital, presently Inalca JBS S.p.A, (Inalca JBS).
Due to the significance of these investments in the consolidation in the financial statements of the Company for years
ended as of December 31, 2008, and the comparability loss with previous periods, we are presenting below the combined
income statements to allow a comparison of the consolidated financial statements before the investment in JBS USA and
Inalca JBS, and we are presenting these referred financial statements.
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. 86 .
2008
2007
assets
consolidated
inalca JBs
JBs and other
subsidiaries
JBs and other
subsidiaries
Cash, cash equivalents and short-term investments
2,291,617
83,539
2,208,078
1,381,703
Trade accounts receivable, net
2,232,300
229,530
2,002,770
1,236,148
Inventories
2,549,674
274,053
2,275,621
1,511,595
Other current and non current assets
1,891,415
60,733
1,830,682
757,163
Investments in subsidiaries
-
-
600,167
829,975
Property, plant and equipment, net
4,918,671
732,839
4,185,832
2,536,098
Other permanent assets
2,212,672
46,450
2,166,222
195,523
total assets
16,096,349
1,427,143
15,269,372
8,448,205
liaBilities and shaReholdeRs's eQuity
Trade accounts payable
2,077,844
277,994
1,799,850
1,099,385
Loans and financings
5,616,497
418,241
5,198,256
3,749,636
Other current and non current liabilities
2,270,055
127,173
2,142,882
548,752
Minority interest
(2,458)
3,568
(6,026)
(4,156)
Shareholders' equity
6,134,411
600,167
6,134,411
3,054,588
total liaBilities and shaReholdeRs' eQuity
16,096,349
1,427,143
15,269,372
8,448,205
Balance sheet
2008
2007
consolidated
JBs usa
inalca JBs
JBs and other
subsidiaries
JBs and other
subsidiaries
Net sales revenue
30,340,255
22,680,498
1,544,249
6,115,508
4,891,944
Cost of goods sold
(27,347,753)
(20,877,360)
(1,384,410)
(5,085,983)
(3,709,197)
GRoss income
2,992,502
1,803,139
159,839
1,029,525
1,182,747
General, administrative and
selling expenses
(2,087,738)
(1,190,824)
(124,224)
(772,690)
(569,706)
Financial income (expense), net
(612,176)
(206,119)
(32,080)
(373,977)
(369,962)
Equity in subsidiaries
-
-
-
349,116
(160,976)
Goodwill amortization
(179,867)
-
-
(179,867)
(141,935)
Other (expenses) income
(27,962)
(1,985)
(1,112)
(24,865)
(5,217)
Income taxes
(62,221)
(54,982)
(4,043)
(3,196)
3,459
Minority interest (expense) income
3,401
-
1,508
1,893
-
net income (loss)
25,939
349,229
(114)
25,939
(61,589)
amount of eBitda
1,156,086
715,041
78,558
362,487
692,453
income statements
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. 87 .
5 cash and cash eQuiValents and shoRt-teRm inVestments
Cash, bank accounts and short-term investments are the items of the balance sheet presented in the statements of
the cash flows as cash and cash equivalents and are described as below:
company
consolidated
2008
2007
2008
2007
Cash and cash equivalents
236,432
109,221
975,194
323,709
Certificates of bank deposits ­ CDB-DI
1,147,326
339,029
1,150,604
348,472
Investment funds
139,215
421,534
165,819
709,522
1,522,973
869,784
2,291,617
1,381,703
Certificates of bank deposits ­ CDB-DI, with first-line banks, are fixed income securities that provide yields of
approximately 100% of the Brazilian interbank rate. The Investment Funds are supported by investments in Multi-Market funds,
to the qualified public.
6 tRade accounts ReceiVaBle, net
company
consolidated
2008
2007
2008
2007
Receivables not yet due
505,910
427,746 1,654,871
990,611
Overdue receivables
From 1 to 30 days
35,802
7,904
449,001
154,709
From 31 to 60 days
6,277
4,941
71,726
71,993
From 61 to 90 days
6,589
4,978
24,236
10,513
Above 90 days
7,875
2,497
63,050
17,516
Adjustment to present value
(1,191)
-
(1,191)
-
Allowance for doubtful accounts
(8,271)
(3,848)
(29,393)
(9,194)
47,081
16,472
577,429
245,537
552,991
444,218 2,232,300 1,236,148
7 inVentoRies
company
consolidated
2008
2007
2008
2007
Finished products
489,953
513,492 1,770,199 1,072,732
Work-in-progress
674
745
157,745
71,514
Raw-materials
1,978
55,242
70,213
68,688
Livestock
-
-
282,591
171,552
Warehouse spare parts
46,905
34,746
268,926
127,109
539,510
604,225 2,549,674 1,511,595
background image
. 88 .
8 RecoVeRaBle taXes
company
consolidated
2008
2007
2008
2007
Value-added tax on sales services (ICMS/IVA/VAT)
379,678
295,362
476,761
353,100
Excise tax ­ IPI
51,657
39,920
111,447
97,805
Social contribution and taxation on billings ­ PIS and Cofins
19,330
42,427
32,957
55,623
Income tax withheld at source ­ IRRF
25,556
4,072
29,612
7,485
Others
9,936
1,338
38,734
13,110
Adjustment to present value
(1,182)
-
(1,182)
-
484,975
383,119
688,329
527,123
current and long-term:
Current
447,343
351,677
623,022
482,918
Non-current
37,632
31,442
65,307
44,205
484,975
383,119
688,329
527,123
Value-added tax on sales and services (icms / iVa / Vat)
Brazilian law authorizes manufacturers of goods to set off the ICMS tax paid upon the purchase of raw materials against
the taxes charged upon the sale of the finished goods manufactured with such raw materials. Recoverable ICMS derives from tax
credits received by the Company in connection with ICMS taxes paid upon its purchase of raw-materials, packaging materials and
other goods, which are offset against ICMS taxes resulting from the sale of the Company's products. As export sales are exempt
from ICMS and a relevant portion of the Company's sales are export sales, a tax credit is generated.
The Tax Authority of the State of São Paulo (Secretaria da Fazenda do Estado de São Paulo) filed administrative
proceedings against the Company challenging the amount of the Company's ICMS tax credits arising from the purchase
of cattle by the Company in other Brazilian states. The Tax Authority of the State of São Paulo claims that the tax incentives
granted by such other states were not based upon an agreement with the State of São Paulo, and accordingly, the Tax
Authority of the State of São Paulo only recognizes the Company's ICMS tax credits up to the amount of the ICMS tax paid
in such other states.The Company's management believes that its accounting of the ICMS tax credit is in accordance with
Brazilian law, and expects to be reimbursed of such credits.
pis and cofins (social contribution on net income)
PIS and COFINS tax credits are generated as a result of PIS/COFINS taxes paid by the Company upon its purchase of
raw-materials, packaging and other materials used in the manufacturing of its products against the PIS/COFINS taxes paid by
Company upon the sale of its finished products. Similarly to ICMS and IPI, as exports of the Company's products are exempt
from such taxes, a tax credit is created.
iRRf (withholding income tax)
IRFF corresponds to withholding income tax levied upon the redemption of marketable securities by the Company. The
Company expects to set off such withholding income taxes against income taxes on net income paid for the applicable period.
General comments
Based upon final administrative decisions by the Câmara Superior do Conselho de Contribuintes and on the opinion
of its legal counsels, the Company and JBS Embalagens has performed a monetary adjustment of its tax credits of PIS,
COFINS and IPI based on the SELIC rate (which is the reference rate published by the Central Bank of Brazil). After such
monetary adjustments, the total PIS, COFINS and IPI tax credits totaled R$134,073. During the exercise of 2008 was received
an amount of R$17,045, remaining receivable an amount of R$117,028.
background image
. 89 .
9 Related paRties tRansactions
Balances between related parties in the balance sheet and income statement are the following:
decemBeR 31, 2008
trade accounts
receivable
trade accounts
payable
purchase
sales of
products
credits
(debits)
Mouran Alimentos Ltda.
-
-
-
-
5,719
JBS Confinamento Ltda.
215
8
17,537
408
14,959
JBS Embalagens Metálicas Ltda.
-
2,735
49,734
-
57,282
JBS Global Beef Company SU Ltda.
-
-
-
-
(54,920)
JBS Global (UK) Limited
24,625
-
-
165,589
-
JBS Argentina S.A.
-
677
13,165
-
-
The Tupman Thurlow Co.
34,258
715
-
69,322
18,488
JBS Global A/S (Dinamarca)
-
-
-
-
(531)
Global Beef Trading SU Ltda.
-
-
-
20,943
-
Beef Snacks Brasil Ind.Com.Alimento Ltda.
5
-
24
14,941
72,135
Beef Snacks International BV
-
-
-
-
4,463
Inalca JBS S.p.A
6,798
-
-
24,568
-
JBS USA, Inc.
-
-
-
-
1,580,340
JBS Agropecuária Ltda.
143
7,540
52,704
3,072
-
Flora Produtos de Higiene e Limpeza S.A.
1,813
83
855
93,620
-
Marr Russia L.L.C .
-
-
-
21,049
2,933
JBS Banco S.A.
61
-
-
5
-
SARL Inalca Algerie
129
-
-
2,027
-
J&F Participações S.A.
1
1
-
6
-
Frimo S.A.M.
-
4
-
2,370
-
Swift & Company Trade Group
-
-
-
893
-
68,048
11,763
134,019
418,813
1,700,868
decemBeR 31, 2007
trade accounts
receivable
trade accounts
payable
purchase
sales of
products
credits
(debits)
Mouran Alimentos Ltda.
-
-
2,292
10,164
-
JBS Embalagens Metálicas Ltda.
401
2,346
63,559
11,418
69,695
JBS Global Beef Company SU Ltda.
-
-
-
-
(41,626)
Friboi Egypt Company L.L.C.
8,667
-
-
72,382
-
JBS Global (UK) Limited
11,554
-
-
44,784
-
JBS Argentina S.A.
-
595
6,569
-
-
The Tupman Thurlow Co.
25,900
609
-
70,770
-
Global Beef Trading SU Ltda.
587
-
-
2,527
-
Beef Snacks Brasil Ind.Com.Alimento Ltda.
805
84
9
4,890
22,095
Beef Snacks International BV
-
-
-
-
10,142
47,914
3,634
72,429
216,935
60,306
background image
. 90 .
The Company and its subsidiaries mantain comecial transaction between then, mainly sales operations, realized wtith
normal price and market conditions, when existing.
The credits and debits are presented, mainly, by mutual contracts which are calculated interests and exchange rate variation.
The parent company J&F participações S.A warranty Eurobonds loans caption operation of the Company in the
amount of US$200 million which the longest due is in 2011.
10 inVestments in suBsidiaRies
a) Relevant information about subsidiaries
decemBeR 31. 2008
company's
share quantity
(thousand) participation
capital
stock
shareholders'
equity
net income
(loss)
JBS Embalagens Metálicas Ltda.
10,002
99.00%
2
38,949
(896)
JBS Global Investments S.A.
93,000
100.00%
217,341
109,421
(84,893)
JBS Holding Internacional. S. A.
679,153
100.00%
679,153
582,180
(38,725)
JBS Global A/S (Dinamarca)
1,232
100.00%
103,370
137,865
(8,205)
Mouran Alimentos Ltda.
120
70.00%
120
(21,699)
(6,247)
JBS USA, Inc.
0,1
100.00%
2,212,940
2,301,887
349,229
SB Holdings, Inc
20
100.00%
23
4,170
425
JBS Confinamento Ltda.
30,001
100.00%
30,001
29,420
(581)
Inalca JBS S.p.A
280,000
50.00%
1,132,326
1,200,334
(227)
decemBeR 31. 2007
company's
share quantity
(thousand) participation
capital
stock
shareholders'
equity
net income
(loss)
JBS Embalagens Metálicas Ltda.
10,000
99.00%
2
39,844
(1,011)
JBS Global Investments S.A.
23,000
100.00%
40,740
40,908
(6,804)
JBS Holding Internacional. S. A.
535,128
100.00%
535,128
385,831
(95,015)
JBS Global A/S (Dinamarca)
212
100.00%
71,648
108,106
(5,362)
Mouran Alimentos Ltda.
84
70.00%
120
(15,452)
(11,595)
JBS USA, Inc.
100.0
100.00%
880,186
719,210
(160,976)
SB Holdings, Inc
20
100.00%
18
2,751
684
JBS Confinamento Ltda.
30,001
100.00%
30,001
30,001
-
background image
. 91 .
b) investments movement
11 pRopeRty, plant and eQuipment, net
eQuity in suBsidiaRies
december
31, 2007
addition
(disposal)
exchange
rate variation
shareholders'
equity
income
statements
december
31, 2008
JBS Embalagens Metálicas Ltda.
39,446
-
-
-
(887)
38,559
JBS Global Investments S.A.
40,909
118,599
58,056
(23,250)
(84,893)
109,421
JBS Holding Internacional. S. A.
385,831
144,025
-
91,049
(38,725)
582,180
JBS Global A/S (Dinamarca)
108,106
11,052
29,469
(2,557)
(8,205)
137,865
Mouran Alimentos Ltda.
(10,816)
-
-
-
(4,373)
(15,189)
JBS USA, Inc.
719,210
772,223
509,121
(47,896)
349,229 2,301,887
SB Holdings, Inc
2,750
-
879
116
425
4,170
JBS Confinamento Ltda.
30,001
-
-
-
(581)
29,420
Inalca JBS S.p.A
-
465,542
150,327
(15,588)
(114)
600,167
Transfer to Other current liabilities
(Negative equity Mouran)
10,816
15,189
Goodwill transfered to Intangible
823,666
-
total
2,149,919
1,511,441
747,852
1,874
211,876 3,803,669
company
net amount
annual
depreciation Rates
cost Revaluation
accumulated
depreciation
2008
2007
Buildings
4%
407,162
116,742
(37,235)
486,669
387,867
Land
-
107,469
9,352
-
116,821
114,004
Machinery & equipment
10%
307,603
45,846
(68,135)
285,314
229,619
Installations
10%
93,523
21,815
(22,318)
93,020
79,614
Computer equipment
20%
14,856
736
(7,629)
7,963
8,162
Vehicle and Airplanes
20%
84,817
215
(43,658)
41,374
35,777
Construction in progress
-
759,028
-
-
759,028
459,809
Others
10 to 20%
20,071
3,883
(9,310)
14,644
13,163
1,794,529
198,589
(188,285)
1,804,833 1,328,015
consolidated
net amount
annual
depreciation Rates
cost Revaluation
accumulated
depreciation
2008
2007
Buildings
3 to 20%
1,643,770
116,742 (187,648)
1,572,864
862,953
Land
-
637,186
9,352
(14,408)
632,130
233,226
Machinery & equipment
8 to 10%
1,963,331
45,846 (674,611)
1,334,566
691,535
Installations
10%
98,625
21,815
(23,151)
97,289
84,393
Computer equipment
20 to 100%
71,715
736
(35,405)
37,046
40,395
Vehicle and Airplanes
14 to 50%
136,356
215
(56,470)
80,101
54,043
Construction in progress
-
1,090,190
-
- 1,090,190
526,422
Others
10 to 100%
117,618
3,883
(47,016)
74,485
43,131
5,758,791
198,589 (1,038,709)
4,918,671 2,536,098
background image
. 92 .
Until December 2007, supported by appraisal reports from SETAPE ­ Serviços Técnicos de Avaliações do Patrimônio
e Engenharia S/C Ltda., the Company made an appraisal of its facilities, resulting in an increase in the value of these assets,
and the creation of the revaluation reserve and the related deferred income tax and social contribution provisions. As of
December 31 2008, the balance of the Company's revaluation of fixed assets account was R$198,589, the balance of the
Company revaluation reserve account was R$118,178, and the balance of the Company income tax and social contribution
account was R$56,306. The Company recorded accrued depreciation of R$24,105 with respect to the Company's revaluation
of fixed assets as of December 31, 2008.
12 intanGiBle assets, net
company
consolidated
2008
2007
2008
2007
Goodwill
949,615
- 1,331,283
170,656
Other intangible assets
9,615
9,615
874,064
23,261
959,230
9,615 2,205,347
193,917
a) Goodwill
In the Company
In July 2007 the Company acquired 100% of the capital stock of Swift Foods Company, actual JBS USA Holdings, Inc.,
and paid a goodwill of R$877,609, based on the expectation of future profitability. The goodwill will be amortized as long as
such profits are earned, during a period of five years. During the year ended December 31, 2008 the goodwill was amortized
in the amount of R$175,522, and the actual accumulated goodwill amortization is R$248,656.
In January 2007 the Company acquired 100% of the capital stock of SB Holdings, Inc., and paid a goodwill of
R$21,725 based on the expectation of future profitability of the subsidiary. The goodwill will be amortized as long as such
profits are earned, during a period not exceeding ten years. During the year ended December 31, 2008 the goodwill was
amortized in the amount of R$4,345 and the actual accumulated goodwill amortization is R$6,035.
In March of 2008 the Company acquired 50% of the capital stock of Inalca S.p.A., presently known as Inalca JBS, and
paid a goodwill of EUR 94,181, which correspond as of December 31, 2008 to R$304,972, based on the expectation of future
profitability. The goodwill will be amortized as long as such profits are earned, during a period not exceeding ten years.
As described in note 20 d), the Company intends to exclude permanently the goodwill amortization from the dividends
calculation base.
In Subsidiary
In 2007, JBS Holding International S.A., through its subsidiaries JBS Argentina S.A. and JBS Mendoza S.A.,
acquired 100% of the capital stock of Consignaciones Rurales S.A. and Argenvases S.A.I.C. and in 2008, through the
same subsidiaries, acquired 100% of the capital stock of Colcar S.A., with a total goodwill in these acquisition of $53,341
thousand argentinean pesos, that corresponds as of December 31, 2008 to R$36,133. These goodwill are based on the
expectation of future profitability and it will be amortized during the period and extension of the projections that determined
it, not to exceed 10 years.
JBS USA has a goodwill in the amount of US$147,855 thousand, corresponding as of December 31, 2008 to
R$345,537 represented, mainly, by the acquisition in 2008 of Smithfield, Tasman and Five Rivers, preliminary calculated and
subject to adjustments. The goodwill is represented by the excess of the aggregate purchase price over the fair value of the
net identifiable assets acquired in the purchase business combination.
b) other intangible assets
Represented, mainly, by customers' list, trademarks and patents, commercialization rights, and others, of the
subsidiary JBS USA.
background image
. 93 .
13 tRade accounts payaBle
14 loans and financinGs
a) company
company
consolidated
2008
2007
2008
2007
Commodities
313,316
242,688 1,044,142
588,230
Materials and services
70,586
109,078
916,293
470,830
Finished products
2,024
3,744
119,356
40,325
Adjustment to present value
(1,947)
-
(1,947)
-
383,979
355,510 2,077,844 1,099,385
modality
annual average rate of
interest and commissions
2008
2007
financing for purchase of fixed assets
FINAME / FINEM ­ Enterprise financing
TJLP-UMBNDES index rate and
interest rate of 3.0%
231,700
227,561
231,700
227,561
loans for working capital purposes
ACC ­ Exchange advance contracts
Exchange rate variation and
interest rate LIBOR + 1.00%
591,990
288,761
EXIM ­ BNDES export credit facility
TJLP and interest rate of 3.0%
177,407
426,891
Fixed Rate Notes with final maturity
in February 2011 (Eurobonds)
Interest rate of 9.375%
651,713
494,338
Working Capital
CDI and interest rate of 6.0%
51,113
-
Export prepayment
Exchange rate variation and interest
rate of LIBOR + 1.0%
516,838
167,810
Fixed Rate Notes with final maturity
in February 2016 (144-A)
Exchange rate variation
and Interest rate of 10.5%
731,569
554,638
NCE / COMPROR
CDI and interest rate of 2.0%
1,533,704
40,289
4,254,334 1,972,727
total loans and financings
4,486,034 2,200,288
current and long-term
Current
1,494,690
858,975
Non-current
2,991,344 1,341,313
4,486,034 2,200,288
long-term installments have the following maturities:
2009
-
180,121
2010
636,327
105,744
2011
1,122,953
519,210
2012
298,308
4,848
2013
232,656
-
2016
701,100
531,390
2,991,344 1,341,313
background image
. 94 .
b) consolidated
modality
annual average rate of
interest and commissions
2008
2007
financing for purchase of fixed assets
FINAME / FINEM ­ Enterprise financing
TJLP-UMBNDES index rate and
interest rate of 3.0%
231,700
227,561
Notes Payable
Interest rate LIBOR + 1.75% and
interests of 3.0% to 7.25%
26,380
19,325
258,080
246,886
loans for working capital purposes
ACC ­ Exchange advance contracts
Exchange rate variation and interest
rate LIBOR + 1.00%
714,885
340,879
EXIM ­ BNDES export credit facility
TJLP and interest rate of 3.0%
177,407
426,891
Fixed Rate Notes with final maturity
in February 2011 (Eurobonds)
Exchange rate variation and interest
rate of 9.375%
651,713
494,338
Working Capital ­ American Dollars
LIBOR + Interest rate of 1.1% to 3.2%
377,253 1,402,371
Working Capital ­ Australian Dollars
BBSY + 0,975% to 1.60%
160,166
47,030
Working Capital ­ Euro
Euribor + Interests 0.15% ­ 1.75%
418,241
-
Working Capital ­ Reais
CDI and interest rate of 6.0%
51,113
-
Export prepayment
Exchange rate variation and Interest
rate of LIBOR + 1.0%
516,838
167,810
Fixed Rate Notes with final maturity
in February 2016 (144-A)
CDI and Interest Rate of 10.5%
731,569
554,638
NCE / COMPROR
CDI and Interest Rate of 2.0%
1,559,232
68,793
5,358,417 3,502,750
total
5,616,497 3,749,636
current and long-term
Current
2,214,788 2,384,836
Non-current
3,401,709 1,364,800
5,616,497 3,749,636
long-term installments have the following maturities:
2009
797
184,379
2010
666,020
110,004
2011
1,416,958
520,840
2012
322,770
6,477
2013
248,111
-
2016
747,053
543,100
3,401,709 1,364,800
Exchange Contract Advances (ACCs) are credits funded by financial institutions to JBS S.A. and subsidiary, amounting
to US$302,844 thousands on December 31, 2008 (US$192,446 thousands as of December 31, 2007) and are used to
finance the Company´s export sales.
Outstanding amounts of export pre-payment loans were US$221,155 thousands on December 31, 2008 (US$94,738
thousands on December 31, 2007). Such loans were funded by financial institutions.
background image
. 95 .
NCE (Notas de Crédito à Exportação)/COMPROR are an export finance credit facility linked to COMPROR used to
finance the purchase of raw materials used in the Company's export products.
EUROBONDS ­ JBS S.A. issued 9.375% fixed rate notes due in 2011 in total aggregate amounts of US$200 million on
February 6, 2006 and US$75 million on February 14, 2006. These notes are guaranteed by JBS S.A. and J&F Participações
S.A. 144-A ­ JBS S.A. also issued the 10.5% fixed rate notes due on 2016 in the total aggregate amount of US$300 million on
July 28, 2006. These notes are also guaranteed by the Company.
15 payRoll, social chaRGes and taX oBliGation
company
consolidated
2008
2007
2008
2007
Payroll and related social charges
23,240
35,638
86,157
55,577
Accrual for labor liabilities
28,590
27,125
182,521
94,502
Income Tax
-
8,727
15,960
8,727
Social contribution
-
2,298
119
2,298
ICMS/VAT taxes payable
3,088
15,504
3,095
15,513
Others
7,804
3,866
49,386
26,996
62,722
93,158
337,238
203,613
16 declaRed diVidends
company
consolidated
2008
2007
2008
2007
Declared dividends
51,127
17,465
51,127
17,465
51,127
17,465
51,127
17,465
The Company, considering that it has generate positive EBITDA, deliberated that for the dividends calculation base the
goodwill in investments acquisition of JBS USA and SB Holdings will be permanently excluded.
Based on the above, the Company declared dividends of R$51,127 (R$17,465 in 2007), that will be submitted to the
General Assembly of the Shareholders for approval, as calculation demonstrated below:
2008
2007
net income (loss) of the year
25,939
(165,032)
Mandatory reserve (5%)
(1,297)
-
Investments exchange rate variations
-
160,030
Investments amortization ­ JBS USA
175,522
73,134
Investments amortization ­ SB Holdings
4,345
1,690
adjusted base for dividends calculation:
204,509
69,822
declared dividends (25%)
51,127
17,465
background image
. 96 .
17 pRoVision foR continGencies
The Company and its subsidiaries are parties in several legal and administrative proceedings arising from the ordinary
course of their respective businesses, including labor proceedings, civil proceedings and tax proceedings based on the
estimative of its legal advisors. The Company has established provisions in its financial statements for the contingencies
arising from these proceedings based on the estimates provided by its legal advisors. The table below sets forth the main
information about the legal and administrative proceedings as of December 31, 2008:
company
consolidated
type of proceedings
number of lawsuits/
administrative proceedings
provision
provision
Labor
1,268
5,799
9,208
Civil
503
15,663
21,216
Tax
191
26,782
27,213
total
1,962
48,244
57,637
tax proceedings

a) ICMS ­ Value Added Tax (Imposto sobre Operações Relativas à Circulação de Mercadorias e sobre a
Prestação de Serviços de Transporte Interestadual e Intermunicipal e de Comunicação)
The Tax Authority of the State of São Paulo (Secretaria da Fazenda do Estado de São Paulo) filed several administrative
proceedings against the Company, under which the Tax Authority challenges the amount of the Company's ICMS tax credits
arising from the purchase of cattle and meat transfer by the Company in other Brazilian states. The Tax Authority of the State of
São Paulo claims that the tax incentives should be approved by Confaz , and are known as a "Tax War". The Tax Authority of the
State of São Paulo does not recognize the Company's ICMS tax credits up to the amount of the ICMS tax paid in such other
states. The Company estimates that the claims under these administrative proceedings amount to R$118,000 in the aggregate.
In addition to presenting its defense in such administrative proceedings, the Company has filed legal proceedings seeking
the payment of damages from such other states if the Tax Authority of the State of São Paulo prevails in these administrative
proceedings. The legal proceedings filed by the Company suspended the requirements of the State of São Paulo.
Based on the opinion of the Company's legal counsels, the Company's management established a provision for
losses arising from such administrative and legal proceedings in the amount of R$826.
The Tax Authority of the State of Goiás filed other administrative proceedings against the Company, due to interpretation
divergences of the Law concerning the export VAT credits. Based on the opinion of the Company's external legal counsel, the
management of the Company believes the Company will prevail in most of these proceedings. The Company's management
has recorded a provision for losses arising from such administrative proceedings in the amount of R$4,185.
b) PIS (Programa de Integração Social) and COFINS (Contribuição para Financiamento da Seguridade Social)
The Company has filed administrative proceedings challenging the calculation method used in the assessment of
PIS and COFINS by the Federal Tax Authority (Secretaria da Receita Federal). The Company's management estimates that
the contingencies arising from these legal proceedings amount to R$6,969 in the aggregate. Based on the opinion of the
Company's legal counsels and recent decisions granted by the Brazilian Federal Supreme Court (Supremo Tribunal Federal), the
Company's management has recorded a provision for losses arising from such legal proceedings in the amount of R$3,793.
c) CSLL ­ Social contribution on net income (Contribuição Social sobre o Lucro Líquido)
Based on an amendment to the Brazilian Federal Constitution that exempted profits from exports from federal
contributions, the Company has filed a lawsuit against the Federal Tax Authority (Secretaria da Receita Federal) seeking to
exclude its profits from exports from the calculation of the Social Contribution on Net Income (Contribuição Social Sobre o
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. 97 .
Lucro Líquido ­ CSLL) payable by the Company. The management believes, based on the opinion of the Company´s legal
counsels, that it will obtain success in the claim. Accordingly, the management of the Company has not established any
provision for contingencies arising from these proceedings.
d) INSS - National Social Security Institute (Instituto Social de Seguridade Social)
In September 2002, the INSS filed two administrative proceedings (autos de infração) against the Company, seeking
to collect certain social security contributions (which are referred to as contributions to the Rural Workers' Assistance Fund
(NOVO FUNRURAL) in the aggregate amount of R$69,194, that the Company should have allegedly withheld in connection
with purchases of cattle from individual ranchers. As a result of a decision by a lower court in a proceeding to adjudicate a
writ of mandamus action filed by the Company in order to challenge the constitutionality of such social security contributions,
the administrative proceedings have been stayed and the INSS has been enjoined from collecting these social security
contributions from the Company.
The INSS has not timely appealed from this decision and, accordingly, the proceeding has been submitted to the
review of the Regional Federal Court of the 3rd Region as a matter of law. Currently, the proceedings await a ruling by such
appellate court. Based on the opinion of the Company's legal counsel supported by precedents of the Federal Supreme Court
in a similar case, the Company's management believes that the Company will prevail in these proceedings. Accordingly, the
Company has not established any provision for contingencies arising from these proceedings.
In order to preserve its claims under the administrative proceeding and to avoid the lapse of the applicable statute of
limitations period relating to these claims, the INSS sent the Company tax default notices (notificações fiscais de lançamento
de débito) with respect to the contributions allegedly owed by the Company for the period from January 1999 to December
2003 in the aggregate amount of R$69,194. In its defense to these default notices, the Company argued that it did not pay
the contributions with respect to the period described in such notices in light of the favorable decision issued by the trial court
reviewing the writ of mandamus action, which ordered the stay of the administrative proceedings and enjoined the INSS from
collecting the contributions from the Company until a final decision is reached under such action.
An ongoing legal proceeding arguing as to the unconstitutionality of the contribution to the Rural Workers' Assistance
Fund, with issues and factual circumstances similar to the writ of mandamus action is currently under review by the Brazilian
Federal Supreme Court (Supremo Tribunal Federal). Up to the present moment, five of the ten judges opining on this proceeding
have voted to declare this contribution unconstitutional and no judge has issued a dissenting opinion on this matter.
Based on this and other precedents and on the opinions of its external legal counsel, the Company's management
believes the Company will prevail in these proceedings. Accordingly, the Company's management has not established any
provision for contingencies arising from these proceedings. Currently, the Company is not forced to proceed any discount,
or pay the amount. In case any discount is made, due to commercial negociation, the Company proceeds the discount and
deposits it in Judgement, accomplishing the judicial decision.
Social Security Contributions ­ Third-party Entities. The INSS filed several administrative proceedings against the
Company with claims totaling approximately R$11,000, seeking to collect certain social security contributions with respect to
third-party entities (contribuições previdenciárias ­ terceiras entidades) allegedly owed by the Company. These proceedings
are based on a wrongful interpretation by the INSS of the Social Security Fund Code (Código do Fundo de Previdência
e Assistência Social). Based on the opinion of the Company's external legal counsel, the management of the Company
believes the Company will prevail in these proceedings. Accordingly, the management of the Company has not established
any provision for contingencies arising from these proceedings.
e) Other Tax Proceedings
The Company is also party to 100 other tax lawsuits and administrative proceedings. Contingencies arising from
these proceedings are not material to the Company if considered on an individual basis. We highlight the proceedings with
probable risk of loss, which have been provisioned for in the aggregate amount of R$17,978.
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. 98 .
laBoR pRoceedinGs
As of December 31, 2008 the Company was part in 1,050 labor proceedings, 218 tax proceedings filed by the work
regional police stations and 2 proceedings established by the work public prosecution service, involving the total value in
discussion of R$34,020. Based on the opinion of the Company's external legal counsel, the Company's management
recorded a provision in the amount of R$5,606 for losses arising from such proceedings.
Most of these lawsuits were filed by former employees of the Company seeking overtime payments and payments
relating to their exposure to health hazards.
ciVil pRoceedinGs
a) Slaughterhouse at Araputanga
In 2001, the Company (formerly known as Friboi Ltda.), entered into a purchase agreement for the acquisition of one
slaughterhouse located in the City of Araputanga, State of Mato Grosso, from Frigorífico Araputanga S.A. ("Frigorífico Araputanga").
As a result of the payment of the purchase price by the Company and the acknowledgement by Frigorífico Araputanga of
compliance by the Company with its obligations under the purchase agreement, a public deed reflecting the transfer of title of
the slaughterhouse from Frigorífico Araputanga to the Company was registered with the applicable real estate notary.
As (i) Frigorífico Araputanga was a beneficiary of certain tax benefits granted by the Federal Government through an
agency responsible for fostering the development of the northern region of Brazil (Superintendência de Desenvolvimento da
Amazônia ­ SUDAM) and (ii) the slaughterhouse sold to the Company was granted by Frigorífico Araputanga to SUDAM as
collateral for these tax benefits the consent of SUDAM was required for the registration of the public deed with the applicable
real estate notary. In June 2004, Frigorífico Araputanga S.A. filed a lawsuit against the Company in a state court located in
the City of Araputanga, State of Mato Grosso, alleging that the Company breached the purchase agreement and seeking
an injunction to prevent the Company from finalizing the transfer of the slaughterhouse and a declaratory judgment that the
purchase agreement and the public deed registered with the real estate notary were null and void.
In the lawsuit, Frigorífico Araputanga claimed that the sale of the slaughterhouse should be nullified as the Company
did not obtain the consent of SUDAM in order to register the public deed with the applicable real estate notary. In January
2005, the court of appeals (Tribunal de Justiça do Mato Grosso) held that the Company had complied with all material terms
of the purchase agreement. The lawsuit was subsequently submitted to the review of the Federal Court of Cáceres, under
n
o
2005.36.01.001618-8, in light of the inclusion of the Federal Government as a party to the lawsuit. The Company obtained the
consent of Unidade de Gerenciamento dos Fundos de Investimento ­ UGFIN, the successor of SUDAM, according to the Federal
Regional Court of the 1st Region (Tribunal Federal da 1ª Região) decision, under Proceedings n
o
2006.01.00.024584-7.
The parties are waiting for ruling following a judicial expert appraisal favorable to the company, that after evaluating the
payments made by Agropecuária Friboi, the appraisal concluded that the debit was already paid. The judicial appeal number
2006.01.00.024584-7 was judged favorably to the Company, when the "TRF" Regional Federal Court declared valid the purchase
tittle deeds of the property, object of discussion. Based on the Company´s legal advisers' opinion and based on Brazilian
jurisprudence management of the Company believes that their arguments will prevail and no provision was registered.
b) Trademark Infringement
In July 2005, Frigorífico Araputanga filed a lawsuit against the Company seeking damages in the amount of R$26,938
and punitive damages in the amount of R$100,000 for the use by the Company of the trademark "Frigoara" without Frigorífico
Araputanga's consent. The amounts of the claim were based upon a report presented by Frigorífico Araputanga to the trial court,
which appraised the value of the trademark "Frigoara" at R$315,000.
The Company presented its defense against this lawsuit alleging that (i) the lawsuit should be analyzed and reviewed
together with the lawsuit relating to the purchase of the slaughterhouse from Frigorífico Araputanga by the Company, (ii) the
trademark "Frigoara" was used by the Company for a limited period of time, with the written consent and upon the request of
Frigorífico Araputanga (the use of the trademark by the Company was a requirement of SUDAM to consent to the registration
of the public deed contemplating the transfer of the slaughterhouse from Frigorífico Araputanga to the Company) and (iii) the
amount of any damages under the lawsuit should be limited to a percentage of products sold by the Company under the
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. 99 .
trademark "Frigoara," pursuant to article 208 of the Intellectual Property Law. Almost all of the products manufactured by the
Company were marketed under the trademark "Friboi." The only product marketed by the Company under the trademark
"Frigoara" was minced meat, in limited amounts.
In light of the foregoing, the Company's management established a provision for losses arising from this lawsuit in
the amount of R$600. Following a determination of the judge of the trial court, the lawsuit was submitted to the review of
the Federal Court of Cáceres on January 17, 2007. The judge of the Federal Court of Cárceres determined that this lawsuit
be joined with the lawsuit relating to the purchase of the slaughterhouse by the Company from Frigorífico Araputanga. The
Federal Government will be notified to issue an opinion on the matter under discussion in this lawsuit.
Based on the Company's legal counsel opinion supported by precedents of the Federal Brazilian Supreme Court
(Supremo Tribunal Federal) and the Brazilian Superior Court of Justice (Superior Tribunal de Justiça), the Company's
management believes that the Company will prevail in these proceedings.
c) Others
The Company is party in several civil lawsuits, mainly, pursuant to which certain of the Company's former and current
employees are seeking damages from accidents that occurred in the workplace, in amounts varying based on their salaries.
Based on the opinion of the Company's legal counsel, the Company's management recorded a provision for losses arising
from these lawsuits in the amount of R$15,063 as of December 31, 2008.
18 deBit With thiRd paRties foR inVestment
Refers to the amount of 65 million Euros that will be increased in Inalca´s purchase price in case the Company achieves
at least one of the following economic targets: EBITDA average over business year 2008, 2009 and 2010 equal or greater than
Euro 75 million, or alternatively, EBITDA over business year 2010 equal or greater than Euro 90 million. In case none of these
economical objectives is reached, the debit will be reverted against the goodwill of the acquisition.
19 income taXes
Income tax and social contribution are recorded based on taxable net income pursuant to the rates set forth in the
applicable laws. Deferred income tax and social contribution are recorded based on the temporary differences between the
carrying amounts on the Company's financial statements and the tax basis of assets and liabilities, as well as on the tax loss
carry forward credits.
a) Reconciliation of income tax and social contribution of the comnpany
2008
2007
Income before income tax and social contribution
43,375
(63,440)
addition (exclusion), net:
Permanent differences (Mainly equity in subsidiaries)
(9,671)
362,311
Temporary differences
(61,092)
590
calculation basis for income tax and social contribution
(27,388)
299,461
Income tax and CSLL
-
(101,793)
-
(101,793)
Temporary differences
61,092
(590)
deferred income tax and social contribution
(20,772)
201
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. 100 .
b) deferred income tax and social contribution
company
consolidated
2008
2007
2008
2007
assets:
· Over tax losses and temporary differences
22,626
16,251
481,485
23,758
22,626
16,251
481,485
23,758
liabilities:
· Over revaluation reserve
83,453
59,642
884,927
99,755
83,453
59,642
884,927
99,755
The Company and its subsidiaries have a track record of future taxable net income. The Company expects to recover the
tax credits arising there from within eight years due to the termination of the causes of their contingencies.
20 shaReholdeRs' eQuity
a) capital stock
Through the Extraordinary Shareholders Meeting held on January 2, 2007, shareholders approved amendments of the
by-laws and the deployment of the 52,523,990 existing shares into 350,000,000 common shares and without nominal value.
Through the Extraordinary Shareholders Meeting held on March 7, 2007, the shareholders approved a new amendment of
the by-laws and the deployment of these 350,000,000 shares into 700,000,000.
On March 28, 2007, the Company increased its Capital Stock through an initial public offering of 150,000,000 of
ordinary common shares at the share price of R$8.00 per share, being the amount of R$39,224 considered as capital
increase and R$1,160,776 considered as capital reserve (premium on shares issued).
Through the Extraordinary Shareholders Meeting held on June 29, 2007 shareholders approved the subscription
of 227,400,000 new common shares, nominative, without nominal value by at the share price of R$8.1523 per share,
corresponding to R$1,853,833 generating a capital reserve of R$207. BNDES Participações S.A. ­ BNDESPAR (BNDESPAR)
subscribed to a significant portion of the new common shares representing the Company's capital. The subscription of the
shares by BNDESPAR occurred through an assignment of a portion of the preemptive rights of the shareholders of J&F and/
or ZMF in the subscription of new shares.
Through the Extraordinary General Meeting of April 11, 2008 shareholders approved the private issue of 360,678,926
new common, registered shares, without par value, at the price of R$7.07 per share, corresponding to R$2,550,000, generating
a capital reserve of R$279. BNDES Participações S.A. - BNDESPAR (BNDESPAR) and PROT ­ Fundo de investimentos em
Participações (PROT) issued a significant portion of these new common shares. The subscription of shares by BNDESPAR
and PROT occured through the cession of part of the preference right of the shareholders J&F and ZMF in the subscription
of those new shares, pursuant to an investment agreement executed on March 18, 2008.
The Social Capital, subscribed and integralized on December 31, 2008 is represented by 1,438,078,926 ordinary shares,
without nominal value. From the total shares, as described in letter e) below, 34,226,200 shares are maintained in treasury.
The Company is authorized to increase its capital by more 22,600,000 ordinary nominative shares.
b) Retained earnings reserves
Mandatory
Computed based on 5% of the net income of the year.
Reserve for expansion
It refers to the remaining balance of the net income after the computation of mandatory reserve and dividend distribution.
The purpose of this reserve is to provide funds to investment in assets.
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. 101 .
c) Revaluation reserve
Revaluation reserve reflects the appraisal effected by the Company, net of tax effects that are progressively offset
against retained earnings to the same extent that the increase in value of the revalued property is realized through depreciation,
disposal or retirement.
d) dividends
Mandatory dividends correspond to 25% of the adjusted net income of the year, according to article 202 of Law 6.404/76.
The Company, considering that it has generate positive EBITDA, deliberated that for the dividends calculation base the
goodwill in investments acquisition of JBS USA and SB Holdings will be permanently excluded.
e) treasury shares
The Board of Directors of the Company, based on the amendment of its by-laws and according to the normative
instructions of CVM numbers 10/80, 268/97 and 390/03, authorized the acquisition of, not more, 41,113,898 shares of own
emission for maintenance in treasury and subsequent cancel or alienation without reduction of the social capital.
On December 31, 2008, the Company maintained 34,226,200 treasury shares, with an average unit cost of R$5.70,
and the minimum and maximum acquisition prices were R$2.68 and R$8.54, respectively, not having happened alienation of
the acquired shares.
The market value of the shares according to the negotiation as of December 31, 2008 was R$4.93.
21 fincancial income (eXpense), net
company
consolidated
2008
2007
2008
2007
Exchange variation
(86,013)
87,544
(223,595)
14,506
Results on derivatives
56,401 (180,877)
(30,383)
(180,678)
Interest ­ Loss
(435,481)
(220,422)
(553,370)
(283,681)
Interest ­ Gain
228,605
68,041
236,757
85,102
Taxes, contribution, tariff and others
(27,145)
(30,569)
(41,585)
(38,362)
(263,633)
(276,283)
(612,176)
(403,113)
The financial income for year ended ended December 31, 2007 is negatively affected, by a significant amount, by exchange
variation rate of the permanent investments in foreign currency. The impact of the referred exchange variation rate in the compay
financial income is R$82,809 (R$160,030 in the consolidated) and did not affect the EBITDA. In 2008 the exchange variation rate of
the permanent investments in foreign currency is beeing registered em specific account in the shareholder's equity.
22 non-RecuRRinG eXpenses
company
consolidated
2008
2007
2008
2007
BONDS Expenses
(35,693)
-
(35,693)
-
CADE Agreement
-
(13,769)
-
(13,769)
Initial public offering
-
(53,313)
-
(53,313)
(35,693)
(67,082)
(35,693)
(67,082)
In 2008 refers to non-recurring expenses referring to the "consent solicitation" process of the EURO BONDS and notes of the 144-A
rule, as described in note 14. In 2007 refers to non-recurring expenses with the initial public offering in Mew Market and payment to CADE.
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. 102 .
23 manaGement's compensation
For the years ended December 31, 2008 and 2007, the aggregate compensation paid by the Company to the
Company's management was R$3,000.
24 insuRance coVeRaGe
The Company adopts the policy of maintaining insurance coverage for property, plant and equipment and
inventories that are subject to risks, in the amounts considered sufficient to cover any loss arising from such risks. Due to the
multi-location aspect of its business, the Company contracts insurance covering the maximum possible loss per operational
unit. The insurance covers the following events: fire, flooding and landslide.
As of December 31, 2008 the maximum individual coverage was R$99,000, considering all types of risks.
The insurance coverage related to the controlled company JBS Argentina has the same characteristics as explained
above, and the maximum coverage as of December 31, 2008 was US$32 million (equivalent to R$74,784).
The insurance coverage related to the controlled Company JBS USA, Inc. has the same characteristics as explained
above, and the maximum coverage as of December 31, 2008 was US$200 million (equivalent to R$467,400).
The insurance coverage related to the controlled Company Inalca JBS has the same characteristics as explained above,
and the maximum coverage as of December 31, 2008 was Euros 141 million (equivalent to R$456,579).
25 Risk manaGement and deRiVatiVe instRuments
The Company's operations are exposed to market risks primarily related to exchange rates, the credit worthiness of its
customers, interest rates and cattle prices and uses derivatives financial instruments to reduce the expositure to those risks.
The Company has a formal risk administration politics, controled by the administration treasury department, that uses control
instruments through appropriate systems and qualified professionals in the risk measurement, analysis and administration,
that make possible the reduction of the daily risk exhibition. Additionally, operations with speculative financial instruments
character are not allowed. This politics is permanently monitored by the financial committee and for Directors of the Company,
that have the responsibility of the strategy definition to the risk administration, determining the position limits and exhibition.
a) exchange Rate and interest Rate Risk
The exchange rate and interest rate risks related to financings and loans, and accounts receivable from clients
denominated in foreign currencies, inventories, are hedged on a transaction by transaction basis, through derivative
instruments, such as swap contracts (dollar to CDI or LIBOR to fixed interest rates or vice-versa), futures contracts traded on
the Bolsa de Mercadorias e Futuros ­ BM&F and forward contracts.
The notional value of the contracts is only accounted for in memorandum accounts.
The results of over-the-counter trades in the futures market and daily adjustments of currency future contracts are made
realized and liquidated; on the BM&F, and are recognized as financial income or expense, in the profit and loss accounts.
b) credit Risks
The Company is exposed to credit risks in respect of accounts receivable, which are partially mitigated through the
diversification of the credit profile of the Company's portfolio. The Company does not have a client that represents more than
10% of its combined net sales revenue, and its clients have good financial and operating indicators.
c) purchase price of cattle
The Company is exposed to volatility with respect to the price of cattle, caused by climate factors, supply, transportation
cost and agricultural policies. According to its inventory policy, the Company maintains individual physical control of its
livestock, which includes anticipated purchases combined with operations on the future markets.
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. 103 .
d) estimated market Value
The financial assets and liabilities of the Company are accounted in the balance sheet based on their respective
acquisition cost, and the related classification of revenue and expenses in the income statement is accounted for based on
its expected realization or liquidation value.
The market amount of the financial instruments not derivatives and derivatives contracts were estimate based on the
available market information.
e) financial instriments information
Below are presented the assets and liabilities exposed to risks, which are subject to derivative instruments, as well as,
the effects of those accounts in the income statements of the year ended on December 31, 2008:
income statements effects
eXposuRe
2008
2007 exchange variation
derivatives
opeRatinG
Accounts receivable ­ US$ /
/ £
321,068
263,700
112,875
(108,462)
Investments ­ US$ /
3,892,644 1,694,641
-
-
Inventories destined to export ­ @ cattle
53,960
71,903
-
5,464
Order of sales ­ US$ /
/ £
442,583
405,917
77,895
(164,832)
subtotal
4,710,255 2,436,161
190,770
(267,830)
financial
Credits with subsidiaries ­ US$ /
1,550,774
(9,389)
392,153
Loans and financings ­ US$
(2,740,319) (2,040,064)
(666,975)
Imports payable ­ US$
(4,816)
(3,537)
(1,961)
Amounts receivable (payable) of forward contracts, NET
60,205
538
-
324,231
subtotal
(1,134,156) (2,052,452)
(276,783)
324,231
total
3,576,099
383,709
(86,013)
56,401
Investments ­ Was deliberated, in the Council of Administration meeting, that the Hedge of the investments in overseas
companies should not be done.
Order of sales ­ The notional is not registered in the balance sheet. Starting from the year of 2008, according to the
methodology denominated hedge accounting, introduced by the pronouncement CPC 14, the Company started to account
the sales orders exchange variation to oppose the effects of the hedge of these same orders.
f) sensibility analysis
Considering that the Company is subject, mainly, to the exchange rates and interests risks on your assets and liabilities
in foreign currency, and uses derivative instruments for protection of these referred assets and liabilities, the variations of
sceneries are followed by the respective protection objects, generating almost null effects.
26 acQuisition contRact in pRoGRess
national Beef
In March 4, 2008, the Company executed the Membership Interest Purchase Agreement ("National Beef Agreement"), to
acquire all of the membership interests representing the entire ownership of National Beef, a limited liability company organized
under the laws of the state of Delaware, United States of America, which slaughters and trades boxed beef, case-ready beef and
beef by-products. Closing of the transaction contemplated in the National Beef Agreement is subject to customary regulatory
approvals and other customary closing conditions. The Department of Justice of the United States filed a complaint in the
Federal District Court challenging the acquisition. The Company look forward to defending this matter in court.
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. 104 .
National Beef owns (i) three beef slaughter plants, one located in Dodge City, Kansas, one in Liberal, Kansas and the other
in Brawley, California; (ii) two case-ready beef processing plants, specializing in products for sale to retailers destined to the end
consumer, located in Hummels Wharf, Pennsylvania, and Moultrie, Georgia; (iii) one plant located in Kansas City, Kansas specializing
in portioned products for commercial establishments and end consumers; and (iv) one transportation company, with approximately
1,200 vehicles including refrigerated transportation and transportation of live stock, headquartered in Liberal, Kansas.
Pursuant to the agreement, the Company shall pay US$560 million to the members of National Beef, approximately
US$465 million of which shall be paid in cash and US$95 million with JBS existing shares. At closing, the Company shall assume
the debt and other liabilities of National Beef, resulting in an enterprise value of approximately US$970 million. JBS intends to use
shares held in treasury to effect the payment of the portion of the acquisition price to be paid with shares, and, for this reason.
Joesley Mendonça Batista
Wesley Mendonça Batista
Chief Executive Officer
Chief Operation Officer
Jeremiah Alphonsus O'Callaghan
Francisco de Assis e Silva
Investor Relations Director
Legal Director
eXecutiVe manaGement
BoaRd of diRectoRs
RepoRt of fiscal council
José Paulo da Silva Filho
Accountant CRC: 1PE011318/O-0 'T' SP
Joesley Mendonça Batista
Wesley Mendonça Batista
Board President
Vice-President
José Batista Sobrinho
José Batista Júnior
Marcus Vinicius Pratini de Moraes
Demósthenes Marques
The Infra-signed members of JBS S.A.'S Fiscal Council, in the exercise of its legal and statutory attributions, having
examined the Report of the Directors and the Financial Statements of the year ended on December 31, 2008, and based
on the Audit Report of Terco Grant Thornton Independent Auditors, expressing an unqualified opinion, have an opinion that
the mentioned financial statements, audited based on the Corporate legislation in place, presents fairly JBS S.A.'s financial
position, approved by the Ordinary General Meeting.
São Paulo, February 19, 2009.
Divino Aparecido dos Santos
Florisvaldo Caetano de Oliveira
Ricardo Antunes Agostini

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