In April all of JBS operations will meet U.S. auditing and compliance requirements under the Sarbanes-Oxley Act, JBS management told analysts on a call to discuss fourth-quarter results, moving one step closer to an initial public offering (IPO) of the unit.

“It is the best option to unlock value,” JBS chairman and investor relations officer Jeremiah O’Callaghan said.

In October, the company pulled a planned US$500 million U.S. IPO of JBS Foods International after the scandals in Brazil hurt investor interest in the deal.

Among the international operations that would have been included in JBS’s IPO is its Brooks, Alta. beef packing plant, one of Canada’s largest, with capacity to process up to 4,200 head of cattle per day.

O’Callaghan on Thursday said JBS is still dealing with fallout from plea deals struck by the company’s former chairman and CEO, who admitted to bribing scores of Brazilian politicians. He said JBS was running an internal investigation as part of collaboration efforts with Brazilian and U.S. authorities.

JBS reported an unexpected fourth-quarter net loss late on Wednesday due to currency and hedging effects, as well as weakness at its Brazil beef unit, but overall operational performance remained strong, boosting optimism about the potential U.S. listing.

Analysts at JPMorgan highlighted strong cash flow and the increasingly profitable U.S. beef division in a note to clients suggesting shares could recover from recent underperformance.

JBS shares rose as much as 5.2 per cent in Sao Paulo, trading to 9.36 reais (C$3.66).

Strong cash flow helped the company lower its ratio of net debt to EBITDA to 3.38, the lowest in the industry, according to management.

“We did it faster and better than planned,” said chief operating officer Gilberto Tomazoni, regarding the deleveraging efforts. He said the company will continue reducing net debt through cash generation until reaching a target ratio of two times EBITDA by 2019.

JBS said global demand for animal protein will grow steadily through 2030, and its beef and leather operations in South America are the only units that are not performing well.

“We outperformed our competitors in each of the segments in each of the markets where we operate,” said Andre Nogueira, chief executive of the U.S. business. “From the viewpoint of our JBS USA unit, 2018 will be even better than 2017,” he added.

— Reporting for Reuters by Ana Mano and Paula Laier.

The post JBS still keen on U.S. IPO despite scandals appeared first on Farmtario.

Police said there were indications that JBS and controlling shareholder FB Participacoes SA gained an unfair advantage in trading stocks, currency futures and forwards in April and May.

“There is evidence these dealings occurred with the use of privileged information, generating undue advantages in capital markets in a context in which almost all investors incurred financial losses,” the police said in an emailed statement.

JBS and its parent company J+F Investimentos have denied any wrongdoing.

The police operation follows several investigations by securities regulator CVM on trades made before the revelation of a plea deal by top JBS executives, which triggered a financial market selloff last month.

In the plea testimony, the Batista brothers, Joesley and Wesley, said President Michel Temer received 15 million reais (C$6.1 million) in JBS bribes, exacerbating a scandal that threatens to oust him from government.

On Friday, police served three search warrants at the offices of JBS and FB in Sao Paulo, and also detained four unnamed people for questioning.

JBS and holding company J+F Participacoes said they surrendered all materials and documents requested by police during the raid, adding they are co-operating with the investigation. J+F reiterated in a Friday statement that all of the group’s currency trades are legal and consistent with a strategy of hedging financial positions.

JBS stock on Friday fell as much 5.8 per cent to 7.08 reais (C$2.89) before recovering to a milder drop of 0.8 per cent in late afternoon trading. The Bovespa index slipped 0.3 per cent.

JBS’ controlling shareholders sold shares in the meatpacker worth 329 million reais in April, according to securities filings. Police also questioned purchases of U.S. dollars in future and forward markets, which local media reported surpassed US$1 billion.

JBS shares have fallen 16 per cent since the Temer scandal broke on May 21, contributing to a 7.2 per cent loss of the benchmark Bovespa stock index. The Brazilian real weakened four per cent in the period as traders bet political turmoil could delay the implementation of structural reform.

— Reporting for Reuters by Ana Mano and Paula Laier in Sao Paulo.

The post Brazil federal police raid JBS on insider trade probe appeared first on Farmtario.

JBS shares rose two per cent in Sao Paulo despite lower-than-expected earnings reported late on Monday, as investors cheered the strong performance of its U.S. beef business and the outlook for stronger global demand this year.

“We expect… a gradual improvement each quarter in international prices, which clearly helps to recover margins, along with lower input costs,” Batista told analysts on a call.

Earnings before interest, taxes, depreciation and amortization slipped to 6.6 per cent of revenue in 2016, from 8.2 per cent in 2015, as a spike in Brazilian grain prices and a tight U.S. cattle market eroded profitability.

By the fourth quarter, however, the so-called EBITDA margin recovered to 7.5 per cent, just 0.1 percentage point below a year ago. The margin in the JBS USA beef business swung to 7.3 per cent from negative 0.5 per cent a year earlier.

Bradesco BBI analyst Gabriel Lima told clients in a note on Monday that exports to Asia helped boost the U.S.-based beef division, whose strong performance should lift the group’s EBITDA by 30 per cent this year.

Excluding the cost of writing off a discontinued brand in South America, Lima said fourth-quarter EBITDA would have risen about 10 per cent, in line with his expectations.

Batista said U.S. beef exports have remained healthy in the first three months of 2017, up about 25 per cent from a year ago.

He said the $230 million acquisition of ham and bacon producer Plumrose USA, announced along with earnings on Monday, should generate annual cost savings between $25 million and $30 million (all figures US$).

Batista said JBS had no major acquisitions on its radar, that but there could be more opportunities like the Plumrose deal.

The plan to list its global business units separately in a U.S. IPO of subsidiary JBS Foods International remains on schedule, Batista added.

— Reporting for Reuters by Paula Laier and Brad Haynes.

The post JBS sees margins up in 2017 as feed, cattle costs fall appeared first on Farmtario.