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Conference Call
Results 3Q07
November 8, 2007
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Presenters
Presenters
Joesley Mendonça Batista
CEO
José Paulo Macedo
Investor Relations Director
André Gustavo Menezes
Investor Relations Manager
1
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Period Overview
We concluded the acquisition of Swift Foods Company, now JBS USA, making
JBS the world's largest beef producer ;
Period Overview
JBS the world s largest beef producer ;
During these first 120 days of management, we continued to implement our
strategy, centered on recovering of the operating and financial performance of
JBS USA beef division: implementation of a second shift at the Greeley plant,
JBS USA beef division: implementation of a second shift at the Greeley plant,
increasing the volume of cattle slaughtered; intense focus on costs reductions
and improvement of the operating efficiency on yields/processes;
Pork division and Australia continue to operate according to our estimates;
Pork division and Australia continue to operate according to our estimates;
In the US beef division, we remain confident with the results generated from
the initiatives implemented thus far, despite the industry's current scenario and
pressure on margins in the US;
pressure on margins in the US;
We continue to focus on growth and consolidation of our position in the
Mercosur region: continued investments in the expansion of the slaughtering
capacity of our plants in Brazil and the acquisition of meatpacker Col Car in the
capacity of our plants in Brazil and the acquisition of meatpacker Col Car in the
province of Cordoba, Argentina;
We started operations of the expanded frozen and cooked beef unit in
Andradina and of a new container terminal for exports in Cubatão both in the
Andradina and of a new container terminal for exports in Cubatão, both in the
state of São Paulo, Brazil;
In Brazil, we focused on the maintenance of profitability levels rather than
expansion on sales volume given the pressure on raw materials costs during
expansion on sales volume, given the pressure on raw materials costs during
the quarter.
2
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3Q07 Results ­ JBS S.A. (excluding JBS USA)
Total Net Revenue (R$ million)
Q
(
g
)
6.5%
16.9%
12.3%
1,234.6
1,315.5
1,171.2
3,056.6
3,572.8
3Q06
3Q07
2Q07
9M06
9M07
Total Volume (`000 tons)
15.9%
1.4%
21.0%
778.3
941.5
281.7
326.6
322.2
3Q06
3Q07
2Q07
9M06
9M07
Average Sales Price (R$/Kg)
-8.0%
3 4%
10.8%
-3.4%
4.38
4.03
3.64
3.93
3.79
3
3Q06
3Q07
2Q07
9M06
9M07
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3Q07 Results ­ JBS S.A. (excluding JBS USA)
Domestic Market
Net Revenue ­ Domestic Market (R$ million)
Domestic Market
40.4%
4.8%
30.6%
364.4
511.6
487.9
1,117.8
1,459.7
3Q06
3Q07
2Q07
9M06
9M07
Volume ­ Domestic Market (`000 tons)
29.2%
2.7%
23.8%
496.6
614.7
166.8
215.6
210.0
3Q06
3Q07
2Q07
9M06
9M07
Average Sales Price ­ Domestic Market (R$/Kg)
8.6%
2.1%
5.5%
2.18
2.37
2.32
2.25
2.37
4
3Q06
3Q07
2Q07
9M06
9M07
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3Q07 Results ­ JBS S.A. (excluding JBS USA)
Exports
Net Revenue ­ Exports (R$ million)
Exports
-7.6%
17.7%
9.0%
870.2
803.9
683.3
1,938.8
2,113.2
3Q06
3Q07
2Q07
9M06
9M07
281.7
326.8
Volume ­ Exports (`000 tons)
-3.4%
-1.0%
16.0%
114.9
111.0
112.2
3Q06
3Q07
2Q07
9M06
9M07
Average Sales Price ­ Exports (per kilogram)
-4.4%
8.3%
-6.0%
2 6%
18.9%
23 0%
7 57
7 24
2.6%
23.0%
7.57
7.24
3.49
3.78
6.09
3.15
3.23
6.47
6.88
3.07
3Q06
3Q07
3Q06 3Q07 2Q07
2Q07
9M06
9M07
9M06
9M07
5
Q
(R$)
Q
(R$)
Q
(US$)
Q
(US$)
Q
(R$)
Q
(US$)
(R$)
(R$)
(US$)
(US$)
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During the quarter, price increases reflected
pressure on raw material costs...
150
130
140
120
130
110
90
100
Rear Price
Forequarter Price
Ribs de-boning Price
Arroba Price
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We focused on the maintenance of profitability
levels rather than on the expansion on sales
levels rather than on the expansion on sales
volume...
Net Debt/EBITDA*
EBITDA and EBITDA Margin
EBITDA Margin (%)
3,6x
3 3
430 5
493,3
2,8x
2,6x
3,1x
3,3x
430,5
13,8%
13,1%
14,1%
14,1%
13,8%
2,2x
2,3x
1 1 9
170,3
171,9
165,2
2002
2003
2004
2005
2006
2Q07 3Q07
3Q06
3Q07
2Q07
9M06
9M07
7
* Consolidated
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Swift ­ EBITDA by Division
Swift EBITDA by Division
EBITDA by Division
(In thousands of US$)
2003
2004
2005
2006
2007
SWIFT Beef
71,201
44,656
(65,132)
(97,082)
(19,592)
SWIFT Pork
75,532
132,619
122,091
73,336
70,309
AUSTRALIA
60,324
42,891
106,044
29,465
45,553
OTHERS
(2,733)
(45)
(18)
-
-
TOTAL
204,324
220,121
162,985
5,719
96,270
,
,
,
,
,
EBITDA Margin
2.52%
2.33%
1.69%
0.06%
1.01%
Source: S&C Holdo 3, Inc. ­ SEC Filings
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Swift ­ Pre-Acquisition Status
EBITDA Margin (%)
Pre-Acquisition Status
Swift Pre Acquisition Status
EBITDA Margin (%)
Comparable companies
Swift Beef
The US beef division had been
operating with margins 2% lower
than the industry;
Pre Acquisition Status
3,7%
than the industry;
Stated cattle slaughtering capacity in
the US was 17,200 head/day;
2,8%
1 1%
1,3%
Greeley plant with a slaughtering
capacity for 6,000 head/day in 2
shifts was only operating 1 shift,
slaughtering 3,400 head/day;
0,4%
1,1%
1,0%
-0,4%
0,8%
Considering 2 shifts and the
optimization of 3 other plants,
effective total slaughtering capacity
is 20 500 head/day;
-1,7%
-1,2%
is 20,500 head/day;
On the acquisition date, the division
was slaughtering 14,500 head/day;
2003
2004
2005
2006
2007
Therefore, it was operating at 70%
capacity;
With a low focus on cost reductions
and efficiencies in the production
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Source: SEC Filings
and efficiencies in the production
process.
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We began a second shift at the Greeley plant,
where 1 100 new employees have been hired
where 1,100 new employees have been hired,
increasing the volume of cattle slaughtered...
Average cattle slaughtered/Day
Average cattle slaughtered/Day
18 500
20,000
15 015
15,289
16,389
18,500
14,506
15,015
15,289
Jun
Jul
Aug
Sep
Oct
Nov
Dec
JBS S ift B
f USA T t l
JBS Swift Beef USA Total
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We have redefined the company's organizational
structure eliminating overlapping positions and
structure, eliminating overlapping positions and
reducing management levels...
Eliminated positions
Savings US$
Beef Division
87
4,500,000
Pork Division
8
400,000
Corporate
93
8,400,000
Total:
188
13,300,000
resulting in an annual savings of
...resulting in an annual savings of
approximately US$ 13 million in operating and
administrative expenses
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Great part of the planned initiatives have
l
d b
i
l
t d
IMPLEMENTED ACTIONS
already been implemented...
Elimination of 188 positions ­ US$13.3 million/year
Reduction in annual insurance costs through renegotiation of existing premiums
and deductibles, maintaining all insurance policies required for the adequate
continuity of the business ­ US$ 8.0 million;
Elimination of annual costs with outsourced services from professionals and
consultants ­ US$12.1 million/year;
R d ti
t
ith t i l
t
li
d
d i i t ti
US$1 5
Reduction costs with materials, traveling and administrative expenses ­ US$1.5
million/year;
Increase in volume and greater dilution of fixed costs at the plants - additional
g
p
revenue of US$1.3 billion/year;
...which already generate a reduction of the normalized cost per
...which already generate a reduction of the normalized cost per
head of approximately US$40 against the quarter ended in May
and US$28, compared to the FY2007, reducing the "gap" with the
US beef industry
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Disclaimer
Disclaimer
The forward-looking statements presented herein are subject to risks and
uncertainties. These statements are based on the beliefs and assumptions of our
management, and on information currently available to us.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions because they relate to future events and
therefore depend on circumstances that may or may not occur. Our future
operating results, financial condition, strategies, market share and values may
differ materially from those expressed in or suggested by these forward-looking
statements. Many of the factors that will determine these results and values are
beyond our ability to control or predict.
Forward-looking statements also include information concerning our possible or
assumed future operating results, as well as statements preceded by, followed by,
assumed future operating results, as well as statements preceded by, followed by,
or including the words ''believes,'' ''may,'' ''will,'' ''continues,'' ''expects,'`
''anticipates,'' ''intends,'' ''plans,'' ''estimates'' or similar expressions.
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Thank you
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