Jbs N.V. (JBS) Q1 2026 Earnings Call Transcript

Good morning and welcome to JBS's first quarter of 2026 results conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session and instructions will be given at that time. As a reminder, this conference is being recorded. Any statements eventually made during this conference call in connection with the company business outlook, projections, operating financial targets, and potential growth should be understood as merely forecast based on the company's management expectations in relation to the future of JBS. Such expectations are highly dependent on the industry and marketing conditions and therefore are subject to change. Our president with us today, Gilberto Tamazzoni, Global CEO of JBS, Yvierme Calacanti, Global CFO of JBS, Wesley Batista Filio, CEO of JBS USA, and Cristian Aziz, Investor Relations Director. you. Now, I'll turn the conference over to Gilberto Zamazzoni, who will be CEO of JBS. Mr. Zamazzoni, you may begin your presentation.

Good morning, everyone. Thank you for joining us today. The first quarter of 2026 was a challenging period for JBS, shaped by market volatility, seasonality, operational disruption, and change in a global trade flow. This is consistent with what we have been signing. We understand the nature of our business and the cycles we operate in, and we manage the company with that in mind. In the environment, we remain focused on what we can control. Operational excellence, cost, discipline, agility, and long-term value creation. JBS delivery net growth, sales growth of 11%, reaching $21 billion, U.S. dollars, and is a record for a first quarter. Net income was US$221 million, and ABTDA totaled approximately US$1.1 billion, with a margin of 5.2%. Leverage increased to 2.77 times, reflecting pressure on earnings and cash generation. while we continue to strengthen our liability profile, extending average debt maturity to approximately 15.6 years. From an operation perspective, the quarter reflected both the challenge of the cycle and the resilience of our platform. In BIF North America, the environment remained very difficult. APTDA was negative to $230 million, with margin at 2.3% negative, impacted by constrained cattle supply and higher costs. During the quarter, we advanced organizational and operational adjustment across our U.S. beef platform, focused on rationalizing and resourcing and simplifying our structure in more challenging phase of the Carol cycle. At the business, at business as evolved, several areas were already operating in an integrated way. Building on that, we brought together fed beef, the three business units, fed beef, regional beef, and case ready into a more unified structure. future. This is a natural step. It reduces duplication, improves coordination, and allows us to leverage our scales and talent more efficiently while stressing decision-making and positioning the business to improve its performance over time. These actions are part of a broader effort driving efficiency across the company. Our focus is to extract more value from existing access improve productivity and enhance execution through technology automation and data at freeboy and pilgrims we have been developing a piloting artificial intelligence initiatives for over a year to support better decision making commercial execution and operational efficiency. And we are now scaling this capability globally. At Seara, we continue to advance automation and process improvement to increase productivity, improve product equality, and support expansion of higher value-added categories. This reflects our approach to the cycle. We act early, focus on what we control, and position the business for a stronger performance ahead. This quarter, once again, highlighted the importance of our diversified platform. Despite the headwinds, our business helped balance the consolidation performance. Seara delivered an ABTDA margin of 15.5%, supported by strong export demand, innovation, and growth in value-added products, despite currency pressure and cost inflation. The outlook for poultry in Brazil remained positive, supported by balancing supply demand, including adjustment in breeder placement and continuous demand growth. JBS Brazil reported an EBITDA margin of 4.5%, a second or higher first quarter margin in its history, supported by a disciplined commercial execution and favorable demand. Friboy also delivered a strong top-line performance with a solid demand, both domestic and in exports. The China safeguard created an adjustment in the global trade flow during the quarter. But our team responded quickly, managed volume within the quota structure, and developed alternatives markets, such as United States, Mexico, Indonesia, preserving value and expanding our commercial footprint. In Australia, margin reached 7.1%, and operational fundamentals remain positive. In Queensland, cattle conditions are the best we have seen in the last three years, reinforcing our positive outlook for the business. In the United States, Pilgrim has a softer quartet, impacted by sazonality and planet plant adjustment. These actions were necessary to improve efficiency, enhance productivity mix, and better align our footprint with demand. The adjustments have been completed, and we have already seen improvement trends. U.S. park remained stable, with a sign of gradual improvement supported by more balanced supply and demand dynamics. cash flow in the quarter was also impacted for grow capex with investment focus on efficiency especially in value-added products and is threatening our global footprint fully aligned with our long-term value creation looking ahead the fundamental of a global protein remains strong beef supply continues to be constrained in the key markets poultry demand remained solid, and our brands continue to gain relevance with the consumers. Seasonality. We are at an important low. The start of barbecue season in the United States typically support the stronger consumption across protein and improve the industrial conditions to coming quarters. At the same time, we will remain disciplined. Our priorities are clear. Operational excellence, extreme control on cash generation, we also remain focused on and threaten the company's long-term position in a global capital market, including creating the conditions for further expanding our participation in relevant equity indices over time. We continue to review costs, optimize research, and improve productivity across the business. We understand the cycle, We operate with discipline, and we are taking the right action to navigate the current environment while strengthening the company for the future. Thank you. I will now turn the call over to Guillermo, who will be through the financial results in more details. Guillermo, please.

Thank you, Tomazoni. Let's now move on to the operational and financial highlights of the first quarter, 2026. Net sales reached a record of $22 billion for a first quarter. Adjusted EBITDA in IFRS totaled $1.1 billion, which represents a margin of 5.2% in the Adjusted bid-dying U.S. GAAP totaled $916 million, which represents a margin of 4.2% in the quarter. Adjusted operating income was $516 million, with a margin of 2.4% in IFRS, and $444 million in U.S. GAAP, with a margin of 2.5%. Net income was $222 million in the quarter and an earnings per share of $0.21. Excluding the non-recurring items, adjusted net income would be $241 million and an earnings per share of $0.23 per share in the quarter. Finally, the return on equity was 22% and return on invested capital was 15%. Pre-cash flow in the first quarter of 2026 was negative at $1.5 billion compared to a cash consumption of $970 million in the first quarter of 2025. In addition to the seasonal cash consumption that typically occurs in the first quarter, the main drivers of a higher cash burden compared to the same period last year were a decline in adjusted EBITDA of approximately $400 million, reflecting the weaker operating results. An increase in capital expenditures, which more than doubled compared to the first quarter 2025, totaling $566 million, driven primarily by expansion capex of $319 million, compared to a $79 million in the first quarter 2025. In addition, an additional of $252 million working capital impact resulting from the higher livestock suppliers payment deferral, as previous flagged in our last earnings call, it is worth noting that if we execute the same level of livestock deferral in the fourth quarter of 2026, this impact will be offset on the free cash flow for the full year. Notably, working capital consumption was already below the same period last year, because excluding the additional $252 million in deferred livestock payments, working capital would have been approximately 23% better compared to the first quarter of 2025. In the first quarter, we also strengthened our balance sheet with the issuance of $2.5 billion in bonds in the market and the tender offer of $1.45 billion. This allowed us to extend our debt maturity profile, reaching an average debt term of 15.6 years and an average cost of 5.7%. We have no significant debt maturities until 2031. Our leverage ended the year at 2.77 times, in line with our long-term target of keeping net debt to be done between two and three times. Our $3.4 billion in revolving credit lines and $3.5 billion in available cash provide us with the flexibility to continue executing our expansion capex, value creation projects, and shareholder returns while maintaining a health and robust balance sheet. Last night, we also announced that beginning next quarter, we will voluntarily file forms 10K, 10Q, and 8K with the SEC prepared under IFRS and supplemented on the earnings released by certain indicators reported under USGAP. This initiative is expected to broaden our eligibility for key benchmark indexes, such as S&P Composite 1,500 family. With that in mind, I would like to open up for the question and answer session.

Thank you. The floor is now open for questions from investors and analysts. If you have a question, please click the raised hand at this time. If at any point your question is answered, you can remove yourself from the queue by clicking lower hand, and questions will be answered in the order they are received. Ladies and gentlemen, the first question comes from Isabella Simenado from Bank of America. Mrs. Simenado, you may go ahead.

Thank you. Good morning, Tomazoni, Guilherme, Chris. Thank you for the time. I have a couple of questions. First, Guilherme, if I may ask you for that break-even EBITDA exercise you do every quarter, that's really helpful. If you could just walk through that. We really appreciate. And also to the point of cash, right? And your leverage is pretty close to three times, right? I know that's not how rating agencies look at that. But if you look to the EBITDA US gap, right, it's even higher than that. So I was wondering, you mentioned before, right, a CapEx of $2.4 billion for this year and 1.3 of expansion. If that continues to be the goal, right, or if you are reviewing that, not only for this year, but going forward, what type of levers you have, right, to bring leverage down, assuming you don't have a big jump, right, in your EBITDA for the next 18 to 24 months. So that would be my first point. And now also about the U.S. beef business, right? I think we have been discussing that for a while now about how the cycle apparently has changed, right, or is being different than the previous down cycles. And there's a matter of really how the cattle herd can be rebuilt at this point as the sector goes through generational transitions and issues. I mean, do you see the business model changing going forward? I mean, any type of vertical integration that would make sense on the cattle part for you to be supportive of the cattle herd growth over time? That would be that would be my second point. Thank you.

Hi, Isabella. So on the first question, I think it's early. We're still reviewing our estimates. And again, there's a lot of variables that's not in our control. But I would say that for this year, the break-even EBITDA, the cash flow break-even EBITDA, will be anything between $5.7 and $6 billion. That's our better estimation at the moment. In terms of cash usage, you write the leverage reach of 2.77. So, bear in mind that our long-term target is to be between two and three times. We, being in this range, we think we keep investment grades. above three times, we enter on the attention zone where when we start reviewing things like you mentioned capital expenditures, dividends, and so on. Our dividend limit is at 375. And I think it's worth mentioning that in 2023, our leverage reached 4.84 in the third quarter. And we kept investment grade because of the cyclicality nature of our business because in 2024 the leverage came down without any effort to 1.89 in fact the in 2024 I even unwinded discount receivables so 2024 we used we would be printing a 2.8 billion dollars free cash flow but I used 500 million dollars to unwind discount receivables so I printed 2.3 billion dollars free cash flow so that's the kind of leverage that the levers that we have uh to use because we are not we are not we don't use these levers uh recurrently exactly to be able to use uh whenever we need so for example i could increase my discount receivables again for anything from $500 to $1 billion in discount receivables that I unwinded in 2024 when the cash flow was robust. I can also increase my supplier vendor finance because we have space for that. But these all have costs. So we use only if needed. So that's how we will be managing leverage. So second quarter, we may be closer to our up-range limit on the long-term target. But bear in mind that the second semester, there's always a strong free cash flow generation. So we expect to end up the year in our target zone of between two and three times. And as long as we keep inside this range, we've been managing to keep the billion-dollar dividend that we already announced, and around the one more than a billion dollars in growth CAPEX. If you look at since 2019, we did an average of expansion CAPEX of almost a billion dollars with an almost billion dollars average dividends as well. So, I think being in this range, I think we can keep the space of growth capex and dividends, but we will always be monitoring according to our leverage, which is our main variable for capital allocation decisions.

Isabella, good morning. So, obviously, this herd rebuild in the cycle of the U.S. business is taking longer than we all wish for. But for the industry to have any integration, especially on the cow-calf side of the business, is just not realistic for a few reasons. It's very specialized, and the people that do it have very special knowledge that's very different than what we do. And other than that, especially on the cow-calf side of this supply chain, it's very expensive. Expensive not as in price. I mean, it's expensive. It has a lot of, you need a lot of land and you need to manage a lot of land to be able to have a significant amount of livestock. And that's not our business. So we're not looking into that.

Super helpful.

Thank you, ladies and gentlemen. The next question comes from Enrique Bristolin with Bradesco. You may go ahead, Mr. Bristolin.

Good morning, everyone. Thank you for taking my questions. I have two also on U.S. beef. The first is to understand, you know, a little bit more the profitability of delivering the quarter. We know it's a seasonally weak quarter evolving into the barbecue season, right? We continue to see spreads that seem to be pressured as they were.

Henrique, maybe, can you repeat the question? We lost half of the question. Can you repeat, please?

Sorry, sure. The first one is if there was anything extraordinary in Q1 U.S. beef margins, such as hedges or even the impact from the Greeley strike. And the second is how you see margins evolving into the barbecue season. Spreads appear to be pressured back to the levels they were in the beginning of the year. So, you know, how you see this favorable seasonality playing out under the current environment?

So, no, there wasn't anything extraordinary from a hedge perspective or even the whole strike situation. didn't have a meaningful impact on our quarterly results. So nothing to do with that. It was simply margins, especially in January and February, were for sure very, very challenging and probably one of the most challenging periods we've ever seen in history. So talking about the next quarters, we expect obviously to be better than what we had in Q1, But for sure, 2026 will be a more challenging year than 2025.

That's clear, Wesley. Thank you very much.

Thank you. Our next question comes from Benjamin Thurier with Barclays. Mr. Thurier, you may go ahead.

Hey, good morning, Tomozoni, Guy. Just two very quick ones. So first, can we talk a little bit about Australia and some of the cost headwinds, what you're seeing on the Australian cattle cycle, maybe, and if there was something in particular in the first quarter that drove a little over 300 basis points of margin contraction. And then second, if you could share a few thoughts as it relates to the cattle price in Brazil. It's been very erratic and volatile. So any background, any interpretation as what we should think about going forward for the Brazilian cattle price, that would be helpful. Thank you very much.

Hi, Ben. Thank you for your question. Related to Australia, the only the operation was very strong we had a good quarter in terms of volume and sales and the only the impact when you compare to the last quarter last year the first quarter last year was FX was around 15% the valuation the valuation of the Aussie and this is the only impact of the business the business remains strong in Queensland that when we have 40% of the cattle herds, the conditions, the environment conditions for pastures is the best we have seen in the last three years. And then we remain very positive with the Australia business. About the volatility in Brazil, it's normal because, as you know, Brazil is focusing to accomplish the quota in a China quota, and all of the players in the market try to produce as much as they can in order to be able to reach a share of the quota. It is normal. The price of the Carol increase. But you saw in the last two weeks, the price start to go down. And we see that if the quote will be achieved, we believe it at the end of June, the volume should go down. and the price of the carol should be down as well in a way to accommodate that where Brazil will be put in an additional 100,000 tons per month. This is normally what we see in the situation that less cattle will be harvested and the price of the carol will be down. I think it's a part of the... We see it as normal.

Perfect. Thank you very much.

Thank you. And now Guilherme Gutila from BTG would like to ask a question. You may go ahead, Mr. Gutila.

Hi, Tomazoni, Guilherme, and Wesley. Good morning. So we have two questions here also. The first one is regarding Seara. So just want to discuss a little bit more about the margin of the company. So margins stay at quite strong levels, but they decline sequentially. So if you could provide us a bit more information on what drove the sequential decline, if it was more related to the pork business, to the chicken, or maybe something else, like any call you can provide us would be very helpful. And if I may just do a quick follow-up also in the U.S. beef, there was some new reports like pointing to the postponing of the measure but there was also the possibility of lower u.s beef import tariffs so how are you guys seeing this for the u.s beef segment and also for jbs brazil and australia that should also benefit kind of from this thank you Guilherme, related to Seara Seara increases its sales volume both domestical and export demand for all of the products

remains very strong the only explanation is the effects if you take the effects compared to the quarters You see the effects, the impact will be around 10%. And this is more than justify all of this. The business is very strong. We are very confident with the results of Sierra in the coming weeks, in the coming quarters.

And on the U.S. beef, Guilherme, so, you know, if tariffs are lowered, I actually see this as, and there is a more, a bigger income of Australian and Brazilian beef and from other geographies as well. So I see this as mostly in a lot of, in a big sense, very complementary. The U.S. has really gone into a production system that prioritizes prime and choice and heavier cattle. And today, just the percentage of select cattle that we see is a lot smaller than what we use it to have. is basically a very very small minority of cattle nowadays is is ungraded or low graded cattle so i think you know that that that increase in imports potential increase in imports could could uh you know complement that production that we're we're doing a lot less of and i actually think that you know when the byproduct of having this priority of higher marble more premium beef that we're a production system that we have in the U.S. is that we have a lot of fat trim as part of our production. Actually, you could almost argue it's one of the main primals, one of the main products that comes out of cattle is fat trim. And the only reason why our fat trim is valued so high and it has such a good value is because we have available lean. And if we don't have that available lean, We actually could see our fed cutout actually reduce and the price of that, you know, well-marbled beef actually have to be higher because we don't have the credit for that fed trim. So my point is, you know, in some cuts, yes, you would probably be in a way competitive with domestic production. But I would say that the majority of what potentially would come in would actually be pretty complementary. and not what we're targeting to produce in the U.S. right now.

Very clear.

Thank you.

Thank you. And our next question comes from John Baumgartner from Mizuho. You may go ahead, Mr. Baumgartner.

Hi, this is Isabella on for John. Thank you for taking our question. So could you please discuss the next step that JBS plans to take in terms of increasing its presence in value-added meat? Is there still more to do on the M&A front to secure assets, and does JBS have the necessary brands and assets right now for the next steps in its growth? And in terms of going to market, should we expect a strategy similar with the partnership between Sierra and Netflix in Brazil, or is there a different approach that you plan to take? Thank you.

Isabel, in terms of M&A, it's part of our routine to look all the times to opportunities for M&A, for Grow. But this moment, we are focused on the cash generation and to personal excellence. And this is the focus of the company now.

Okay, thanks.

Thank you. And our next question comes from Laura Hirata from Santander. Mrs. Hirata, you may go ahead. Mrs. Hirata, if you're trying to speak, you might be on mute.

Hi, good morning. Can you hear me? So, good morning, everyone. Thanks for taking my question. Actually, I have two for my end. First on Seara, the export scenario has become somewhat more challenging in key markets as a result of disruptions in the Middle East, while we also saw the European Union considering banning protein exports from Brazil. So, it would be very helpful to understand how Seara adjusted its commercial strategy in response to that environment, both in terms of logistics and also in terms of pricing. And if I may add, you announced you're going to start publishing 10Q and 10K fillings, which we see as positive in terms of eligibility for U.S. indexes. In this sense, what are your expectations for JBS's next steps towards being included in those indexes? And I was wondering if you could share with us some thoughts on the accounting standards that this broader discussion could potentially bring. That's all from my end. Thank you.

Laura, I will start to answer the question about Seara that you have made. And Guilherme will be answering you about the 10Q, 10K we are published. First, you asked about the Middle East war and how this impacts the business. I will tell you this is the neutral impact because we have an input of cost additional because you need to skip some port and you need to use trucks for internal transportation to reach the customers. But demand in terms of volume remains the same, remains strong as it was before. And the extra cost is burdened by the market. It means that we can say it is neutral, this war in the business so far. Related to the European that you mentioned, it's very new. I know that Brazil will provide the necessary clarification to the European Union regarding to the technical guidance related to the subject. And for our side, we see Brazil is fully compliant with European Union requirements. And the other thing is important to clarify, important point that export has not been suspended. I think we have a period of clarifications, and this has not impacted the business so far. And we are very confident Brazil will be fine, will be reaching agreement with the European Union. And for our side, we continue to monitor the matter.

Hi, regarding indices, it's worth mentioning that today only around 40% of our free float comes from passive funds, which in this sector generally this number is 60 percent and the reason is that is because we are not on the main indexes yet however we already have we think we already have uh the necessary uh criteria for the russell we entered last year last september in the foods u.s as a u.s company uh so uh now may june we have rebalancing of russell uh it's not in our control but There's chances that we enter into Russell, creating a demand for the shares. And now, having more than 50% of our sales in the U.S., and if we do 10Ks and 10Qs, and in June, we'll complete one year of having our primary listing in the U.S., this makes us eligible to the S&P family. So that's the perspective in terms of the index. In terms of accounting standards, we are Netherlands Incorporated, so the IFRS is the accounting standard for that. But in our crash release, we put all the relevant information in U.S. Gap so you can compare and also the bridge from IFRS to U.S. Gap. So with that, we think we can reach U.S. investors that are used to U.S. Gap and have the comparability and reach also European investors and Latin American investors that are used to IFRS.

That's super clear.

Thank you, guys. and our next question comes from Leonardo Alansar with XP Investimentos you may go ahead Mr. Alansar thank you for taking my questions I would like to discuss a little bit more about US beef as you mentioned that the strike in the first quarter wasn't really impactful for the for the results and would you say that without the strike situation would be a little worse for the first quarter or not or even if there's any lingering effects for the Q2 from this strike. Another thing that I would like to understand from your side that we've been discussing this for the last few quarters but just to get an update regarding the Mexican border, if you're expecting that to open anytime soon, if you think that would change the supply side in the short term, could be a tailwind for this second quarter, maybe for the second semester. So two questions for US beef. And just one thing about Seara. You mentioned, Tomazoni, regarding the exports middle east and i agree with that but then looking on the domestic side we've been seeing some erratic performance from biases between natura or fresh and and processed goods and looks like in the beginning of the year we saw some strength from the processed side and now we are seeing some transitioning to the more to the natura so just to get an uh an understanding here what you're seeing if there is a demand is softening or if it's just a short-term hiccup, let's say. So just to get them a better view from Seara on the domestic market as well.

Leonardo, just on the... Good morning. Just on this strike situation, you know, we were able to redirect volumes in other plants, so we didn't lose, you know, volume because of this strike. There were maybe, you know, costs here and there that were were extraordinary but nothing significant enough to to justify you know doing any adjustment or anything like that that's relevant to the market so we we decided to just leave it as is with the result because it wasn't significant um mexico uh border opening for for feeder cattle absolutely no question is the most important thing that could ever happen in the short term to get some sort of relief on the supply side on beef in the U.S. Obviously, the USDA has been super, as always, very responsible in making sure that that's done whenever they feel the situation or they have assurance that the situation from the Mexico side is exactly how they want so that they keep screw arms outside of the U.S.

But having said that, whenever that, you know, the U.S., whenever and if that ever happens with the U.S. government feeling that, you know, that is the right time, absolutely would be the most significant thing that could happen to normalize supply in this industry in the short term. and leonardo related to your question about chicken in brazil and chicken de brazil we we start the year beginning of the year i think january was a little bit softing and in this this quarter but then february and march that recovery i think is the market demand in Brazil, very strong, and the demand in the export is strong. We, that time, in the last quarter, we discussed that the statistics show that Brazil will grow high volume because of the genetic will be higher. And that moment I saw that, I said that we're not seeing the market, but I don't know in Statistica, but in reality, Statistica was some mistake that the association that republished the numbers and correct the information that the market will grow around 10 percent. You're talking more about 4 percent. But 4 percent is very, it is, I think, is balanced with the demand. we have external demand in the normal growing domestic market okay i think wisely and thomas just to to be clear you said this improvement but then it's mostly in natura or process it or both no process it we are we are the market is we can say stable the market is not a grow but we are We are, you say you are flat, but we sell more value added, more premium products than the low, more commodity product. But the demand, if you saw the demand in January was weak, but they recovered in March. We made a very good sales that we are confident that this is a combination of our strategy to distribute in domestic market, different channels, different category of product. We are able to manage this situation. But for chicken, it's very strong, the demand. For processed products, it's strong in the premium and soft in the more commodity.

That's clear. Thank you.

Thank you. And our next question comes from Heather Jones. From Heather Jones. You may go ahead, Mr. Jones. Hi, Mr. Jones. If you're trying to speak, you may be on mute.

Hi, are you able to hear me now?

There you go.

Thank you. My question is on North American beef. And just due to a variety of factors, including drought, it just seems like the herd rebuild is getting pushed out and likely to be much more slow and meager than expected. And then, like you mentioned, the border reopening. So, it just seems like even if everything goes right from here, we're looking at like late 28 before any significant increase in cattle availability. So, it would seem additional industry rationalizations required. And so, I was just wondering, when do you see that happening? And wondering if JBS has considered rationalizing some capacity, maybe one of your smaller facilities. So, just hoping you could help me how to think through that.

So Heather, you're right. Especially with this drought, it's going to delay the herd rebuild. I don't think we further liquidate, but it's probably going to delay the herd rebuild here. Look, we're not really focused on that right now with this, you know, talking about plant rationalization and all of that. So we're focused just on making our business better with the things that we can control given the footprint we have. So that's not something that we're looking at at the moment. And it's very difficult for me to speculate on anything else, right? Because anyway, it wouldn't be appropriate for me to speculate on other players in the market. But we're not looking at that right now.

Okay, thank you. Our next question comes from Ricardo Alves from Morgan and Stanley. You may go ahead, Mr. Alves.

Thanks, everybody. Good morning. Thanks for the call. One question for Wesley, one for Guilherme. First on U.S. beef, Wesley, please, as we think about the grilling season, protein inventories are down big time in the U.S. Red meat is down, chicken is down. And when you look at beef purchases to be delivered in June, July, also down big time, 15 percent or so. So how do you feel about channel inventory today when you're thinking about retailers and food service as we head into the grilling season? These data points, I think that my point is that these data points would indicate to us that there's a lot of upside to cut out prices in the very near term. I wanted to see if you have that view or on the flip side, maybe it could also indicate that demand is expected to be softer, I guess. I don't know. I don't think that that's the case, but it is a possibility. So I just wanted to hear from you what you get from retailers and food service, you know, in your conversations on ground. I think that that would be helpful for the very short term on the cutouts. That's my first question. The second question, a really quick one to Guilherme, the pretty significant CapEx expansion that we've been discussing for the past couple of months, and we saw that taking place in the first quarter. um could you detail a little bit more i know that maybe you cannot quantify by division but at least you know the main projects that you're working on um uh for the rest of this year just so that we have a better idea of you know what's going on in in your u.s pork division uh even projects that you're doing on us beef ppc and so forth i think that that would be helpful as well just a reminder of the capex expansion thanks everybody the ricardo on beef um you know cutouts is already

you know started the year already compared to the same time last year much higher than 15 percent higher than um on the on the whole quarter than let than compared to the same period of time and the reason is you know lower volume and demand continues to be strong so you know you have a constant demand and a shorter supply you know it's uh price price tends to go up when that happens So, you know, looking forward, I would expect it's difficult to, you know, we have to wait and see and see how that's going to impact demand, this potentially higher prices, but supply is tighter. So we'll see what happens there, but we'll probably see demand continue to stay strong and we know the supply is kind of short. So there is a potential for, but we have to wait and see.

Hi, Ricardo. So the main projects continue to be one analysis. So the Pilgrim's Prepared Foods Facility in Walker County, the Acene, Iowa, Fully Cooked Bakel and Sausage Facility, the Perry, Iowa, Fresh Sausage Plants, Cactus, Texas, and really Colorado modernization of the beef processing plants. Then we have investments in Brazil, in biodiesel, in the Paraguay chicken plant, and also the Oman acquisition. Bear in mind that the Oman acquisition will not be a cash effort, even that it will all be financed with the local banks there.

And our next question comes from Lucas Ferreira with JP Morgan. You may go ahead, Mr. Ferreira.

Hi, everyone. Thanks for taking my questions. Two follow-ups. One is on Australia. It seems like you guys have a sort of a constructive view there on the quality of pastures in the business. I just wanted to understand, you know, potentially the trend for margins there once, at least if you look at the Australian dollar, remains even a bit stronger than the levels we've been seeing in the first quarter. and and cattle prices seems to be sort of a stable um but uh with the mla outlook of uh some reduction in in slaughtering this year right with uh with the changing cycle so i don't know in the regions you guys operate and all the all the other you know businesses in australia how to think about margins going going from here if it's also some seasonal effects that should help lifting the margins going forward and number two is on on still on the usb wesley just so i understand your comment you mentioned that you expect 1026 to be more challenged than 25 last year you had a 1.5 negative margin should we expect a weaker margin this year uh giving your comments and and then to kiwa's particular week last year right with a minus 3.9 margin again I remember the issues with the hedging, et cetera. So should this sort of weakness more skewed towards the second half or how to think about also the evolution of the business from here?

Lucas, thank you for your question. Related to Australia, where we operate, we are very, very positive in terms of the volume that will be harvested this year. I think it will be no different than the last year. Some period of the year, I think, will be higher. I mentioned at the beginning in one of the answers that we have Queensland, where we are main operation, that the climate condition is very positive. I think it's the best in the last three years. And this shows us that the coming months will be a good supplier. And talk about supplier. Then you talk about demand. Demand is very, very strong. And I think it's not just in the US, but all of the premium markets that Australia sell, that Japan, Korea, and other ones. Japan is very, Australia is very well positioned for catch this benefit from this demand, the growth demand, global growth demand. See, look, we are positive where we operate. That will be a great year for this JBS Australia.

Lucas, we, so I'm going to say this without giving any guidance, but, you know, you could expect this this year versus last year. I'm talking market in general to be one, one and a half percentage point worse than last year. One, about one percent, I think it's fair. Obviously, then we have our internal dynamics, right? How our operations are. And like you said, last year we had some hedging impact in a specific quarter. But overall, you could expect the market to be one to one and a half percentage point worse than the last year.

Perfect. Thank you very much, Hebron.

Thank you. Next, Jack Harden from Stevens would like to ask a question. You may go ahead, Mr. Harden.

Hi, this is Jack Harden on for Prawn Sharma. Thanks for the question. For U.S. chicken, consumer demand remains strong, partly supported by tight beef supplies, but broiler processing margins remain below mid-cycle levels. How do you assess the current supply-demand balance in chicken, and do today's margin levels suggest the industry needs to moderate production? That's serious.

But we we see very balanced in the in the chicken demand in the U.S. We had in the beginning of the year that the big bird was a little bit very challenged. And but this is that the price of breast recovering during the quarter. We see that demand is strong. and value-added and prepared. We are a strong demand. And all of the business, all of the other categories that pilgrims sell in domestic market in the U.S., all of them are positive. And when you look for the side in the supply, we see better balance supply demand. We are positive with our business in pilgrim's business.

And our next question comes from Thiago Borochi from Goldman Sachs. You may go ahead, Mr. Borochi.

Hey, guys. Good morning, everyone. It's always a pleasure to talk to you. Thanks for the Q&A. I think the question goes to Tomazoni, and this is just to try to gain perspective beyond the quarter on the benefits from diversification and portfolio. This was a very rare quarter where we saw very strong demand. Actually, you mentioned in three business units record high sales for our first quarter. But at the same time, virtually all the business units delivered lower margins versus last year. I think the exception was Brazil beef, which, you know, one could argue that this quarter, particularly diversification didn't quite help you. I think my question for you is, once you think about the year and the build-up, you mentioned the grilling season in the U.S., obviously the year-end brings seasonality also to Brazil. Where are the opportunities where you think margins could show some clearer sequential improvements? Where are the main risks and how would you expect diversification to help you going forward? Thank you very much.

Okay, Tiago. Good question, Tiago. I'm very positive for diversification because when you look for our results this quarter, if you compare to the last quarter, the difference is around $400 million. And we can explain this difference with two business units. First, the U.S., BIF-U.S. I think the results of BIFUS impact around 50% of the difference of EBITDA. And Wesley, I feel you have explained about that. And I think we reached the bottom of the results. I think we see that the common quarter, we cannot say they will improve a lot, but I think it will be better than it was this quarter. The market condition didn't change, but I think we are more balanced. And we made some adjustments in our structure that I think will help us to navigate even inside of the company with the low cost of operation, more synergy and outside synergy in terms of commercial. I think this is one of the things that give us more confidence about that the results will be better than was this quarter. If you can add it, Wesley.

Oh, I was just going to add, Tiago, that I think a good way to think about diversification is always more so than comparing every time to always on the comp versus last year. If you look just at the absolute number, you have Pork USA and Seara with double-digit margins. You have Australia, even though this quarter was a lower quarter than when it has been, is still in a very positive high single digit right when you have the US, beef US at the low cycle. If you went back five years ago, you'd probably see all of the other businesses at a lower margin and beef higher. And I think the other way to look at this diversification as working even in this quarter is when you compare our portfolio of businesses with any one of our peers right and in each one of them could be that they are in a in a singularly in in a market and that market is really good or really bad but uh our businesses are always going to have our portfolio of business is always going to give a more stable uh uh kind of result versus our peers just uh based on on the uniqueness of our diversification so i think you know i would say that even in this quarter that was a weaker quarter the diversification thesis that we have is is actually

is actually pretty evident in my opinion and and uh just to to to to end finish my my my my point of view that we start that 50 was beefy us the other 50 was pure need to adapt its portfolio to the market demand we before uh us was just focused to export They use the breast, the white meat, and export the dark meat. That is portal, like quarters. But the market changes. There is a demand in domestic market now in the U.S. for dark meat. And people need to adapt its layout of the three factories in order to be able to supply the demand of the market. Then we stop for two weeks, three plants. Then this was affected, the results. And the climate condition has affected as well. Then these two things explain the difference in terms of the results compared to the last year. 400 million, that 200 million in the pilgrims and around 200 million in the beef. That is one thing about that. The other thing is, you mentioned that the other business not delivering the results. But that was the effects. effects was affect seara and effects was affect australia this is if you want to explain the business is that effects seara in australia and the the pilgrims that i explained in uh and beef in us well this is one thing about the results the other thing if you talk about diversification of course if you have just the beef in us we have a really tough situation but as we have managed different business in different geography, we are able to compensate. If you compare just a single company with one business, that will be a huge difference. Of course, the differentiation is working. And I believe that this difference in terms of cycle is normal in our business. We need to be able to focus and manage the business. When they have the low level, we need to be better than the other competition. The high level will be better the competition. This is the part. This is the game.

Certainly true. Thank you very much, Tomazone and Leslie.

Thank you. And our next question comes from Renata Cabral at CIDI. You may go ahead, Mrs. Cabral.

All right. Thank you so much for this space for questions. My first one is a follow-up related to the last one, diversification, but in the angle of GLP-1 adoption, it was already mentioned by companies' management that the adoption of GLP-1, it's a structural shift towards hypertension diet, of course, particularly in the U.S., as the adoption is higher right now due to costs. So, could you please calibrate to us how tangible this trend is already in your day-to-day business? Are you seeing measurable change in the consumer behavior already? For instance, it was the different perceptions of the consumers for PPC. So in terms of innovation, a GLP-1 is something that you think about when you are elaborating a new product and mix in terms of a smaller portion or anything different. And this focus in the U.S., but even for Brazil, are you seeing already this trend or you think the contribution can come in the future? And since you are investing in expansion for Seara, so do you have this in mind in terms of the future products that you are going to release on those investments? So this is my first question. The second one is related to grain prices that has been positive for the company for a while. Right now, there's the discussions on the potential risks on the El Nino and the fertilizers costs. So if you can share your outlook for 2026-27, it would be great as well. Thank you so much.

Thank you for your question. When you talk about GLP-1, I think GLP-1 is one of the factors that is affecting the global consumption of protein. When we are saying here that a strong demand for protein is globally in all of the market. And this is affected by, of course, as you mentioned, GLP-1. But GLP-1, I think, is not the most important issue. I think this is the perception, and not just perception, but the knowledge that protein is very important for to have, even in the new generation or the older generations. Because if you want to have longer life, you need to eat more protein. If you want to have muscle in the beginning, you need to eat protein. That protein becomes very important for all of the generation. The second, the regulatory, that you saw that the U.S. FDA changed the pyramid. They invert the pyramid because they put that you need to have more protein in order to have more health. then to eat more protein is healthier and this is globally and then there is about this new technology about medicine that is because you want to lose weight and if you lose weight you need to eat more protein in order not to lose muscle just less fat and this is it's not in one country i think this is globally we see that will be continuous high protein the consumption and we We are, we are, it's not new in order. Now what we see the new now, all the companies try to adapt the portfolio to have more protein. Even that the companies that work in a high carbohydrate product, now they want to adapt for more protein. But this, but if you look our core, our core is focused on protein that we don't need to adapt our core. We need to accelerate what we have done so far. For example, we launched a high-protein line of products in Seara and other parts of the world. And we work in innovation in order to facilitate how the people eat protein. For example, use our fry for simplifying the lives if you want to cook at home. And you see that the people cook more at home. And if I say you, we have the right portfolio for the right trend. And we not see it as a tendency. We see this is structural. They eat more protein. And we are investing in all of the innovation in order to facilitate that. And the second question I understood that you asked about grain, about the cost of the nutrition of the animal. Now, look, if you look for, say, despite a global inventories being at a comfortable level, there is significant volatility in the market. And I think it's a lot of uncertainty regarding the weather conditions and the fertilizer costs. If you look for corn globally, demand remains very strong. Appian supports the market, even with the recent pressure on the grain price. I think the tendency is to increase the price because of the weather, because of the fertilizers. But in terms of what is the impact of our company, I can say to you that we believe that we are well positioned from a risk management perspective. While the crop conditions have improved, we remain prepared for the potential volatility, including the possible reduction in the Brazilian safrinha crops.

Thank you so much, Tomazoni. Super clear. Thanks for sharing your thoughts on GOP-1 as well. Very complete answer.

Thank you. And our next question comes from Ricardo Boiatati with Safra. You may go ahead, Mr. Boiatati.

Good morning, everyone. Wesley, a couple of follow-ups here regarding North America. The first one, besides the tariffs discussions this week, right, there were some reports about the potential deregulation in the cattle industry. So in your view, what can be really done to incentivize ranchers to raise more cattle sustainably, I mean, in the longer term? And what is the likelihood of any potential policy change happening this year in that regard? The second point here on the overall protein demand in North America, this summer we have the FIFA World Cup happening in North America, right? So can we expect here any meaningful impact coming from that event, specifically in North America? Maybe a stronger than usual barbecue season or something like that. And lastly, on prepared foods, this is a more broad question for the company. We see many CapEx initiatives to build or expand capacity in prepared foods. so my question is if you can quantify a little more how fast prepared foods are growing within JBS portfolio and do you have any particular long term target for this category to represent in your overall portfolio in the long term thank you guys good morning so on the deregulation for sure I mean as we you know And see cow-calf producers and ranchers in general trying to rebuild herd

and deciding to rebuild herd regulation and over-regulation can be, you know, an obstacle in anything the government does to help the ranchers. It's very helpful and for sure it's important. On the protein side, demand is pretty strong overall. You know, how impactful would the FIFA World Cup be? I don't know. I think it's helpful.

It's not negative, but I think it might be relevant in a few days of the next few months, but I don't think it moves the needle enough to say that this substantially, structurally changes how we're going to see the overall summer and spring here for beef demand. and what about our strategy for value added we we don't have a specific target for value value we want to increase the share of prepared food in our port fund and why we want to do that because when we're talking now a lot about cycle where is the low part of the cycle a high part of the like prepare that there is practically no cycle that the demand normally is very stable and and and with higher margin and because of that we are we are prioritized our investment in the prepare and in prepared food and brands we are we are investing in in brands and we are investing in in the line of prepared foods. And if you saw that investment, we have, Guilherme just mentioned before, the investment in the U.S. about sauces. It's breakfast sauces. It's value-added. Pilgrims are value-added from breaded plant. And you saw in Brazil, some investment on Searo was focused on that. We are prioritized investments value-added.

This is the fact. we are not have a specific target on that that's clear thank you very much guys thank you and our next question comes from priya orhi gupta with barclays you may go ahead and see gupta great thank you so much for taking the questions um guillermo can we talk a little bit about how we should think about net leverage trending through the end of the year i think earlier um you know a couple months ago at cagney in particular we had talked about scope for net leverage to be below two and a half times this year. And it sounds like it could be ending the year sort of in the upper range of that two and a half to three times area. I just want to make sure that we're thinking about that correctly. And as part of that, you highlighted sort of the new issuance and tender that you did recently. However, it does look like you tendered less than you issued. Should we expect some of that incremental amount to get deployed to debt reduction later this year or just kept on the balance sheet? And then the second question I had was just on the free cash flow break even. You talked about it being $5.7 to $6 billion now. Last quarter, you had said it would be $5.7. So if you could just walk us through what's driving the higher end of that range now, That would be helpful.

Hi, Bria. So from a lateral average perspective, you're right. I think the perspective to end this year is more likely to be between two and a half and three times, given, again, the weaker results we had in the first quarter. In terms of the tender we did, bear in mind we have a billion dollars in dividends to be paid in June. But our cash position is still at $3.5 billion, which is around $500 to $600 million above our minimum cash, given our cash conversion cycle and the different geographies that we are around the world. So we have space to buy bonds with this excess cash, but this decision will probably be done in the second semester when is the period where our cash generation is stronger. In terms of the free cash flow breakeven, it's just an estimate. I think the accounts that we have continue to be on a $5.7 billion. Working capital in the first quarter was better than the first quarter last year. But going forward, I just gave this range because there's a lot of moving things like energy prices that could impact grains. We know how much will be this impact basically on fertilizers and energy in the grain prices that could move working capital if prices go up. So that's why I gave the range from 5.7 to 6 for because only the uncertainties that we have given all the volatility in the markets.

Great, thank you. And just a quick follow-up, if you do think about looking at further debt pay down, should we expect you to use a similar approach to what you did in the beginning of the year, or could you take other considerations into account, sort of thinking through interest expense reduction versus maturity management and absolute debt reduction?

Yes, the approach will be absolutely the same, given that all my debt, including the $2.9 billion maturing in 2032, all the coupons are below treasury. So it's not worth it to pay any of those debts. So any repurchase would be on 34, 33, 35 spots. The 34, for example, is the highest coupon, which we still have $300 million outstanding. That could be a possible target.

Thank you. Very clear.

Thank you. And our next question comes from Mateus Enfield with UBS. You may go ahead, Mr. Enfield.

Hi, all morning. Thank you for your time. My first question on the beef demand in Brazil, we're still seeing it quite resilient despite of prices. So I'm just trying to get a sense if you're getting pushback from retailers or pushback on the margin on demand growth or demand reduction. And what's the size or scale that we could expect for demand down in Brazil and in U.S. beef as a result of higher prices? And then my second question is on sort of a longer term view around production. We're seeing quite a lot of restrictions to trade flows, be it quotas or sanitary barriers for exports. I know the company's planning to diversify, but whether there are some additional regions that could become focused for investments in the midterm, such as the rest of LATAM or more investments in Europe, that could help circumvent those sanitary and trade flow restrictions in general. and how you're incorporating that into the longer-term investment decisions that the company is taking. Those are the two questions.

If understood well, you asked for about the demand for beef in Brazil and beef in the US.

Yeah, yeah, both of them.

But look, in Brazil, So even that we had the higher price of carol and the higher price of meat, the demand in Brazil remained strong for beef and for all of the proteins. And we talk about JBS. and now I think it's with the end of the quotas of China May the price of cattle will be decreased and I think it will be more viable to sell in domestic market it is important that we have developed category management 2.0 we call Asogi Reserva it's in Brazil that we manage inside of the store of our customers the budget area and this show that the store they have our model they sell not just more meat but they sell more for all of the stores and this this project is get a strong reception from our customers. And because of that, I see that even now with this situation that after the quota of China end, we are, I think, we are very well structured, even in Brazil, even in the U.S., to manage the volume for our business, Freeboi. I think in the U.S., we have to comment a little bit about the demand, but I think...

The demand continues strong, Matheus. We think all the things I already mentioned before on just the overall protein trend and people understanding more about nutrition, prioritizing protein, we've seen that. And just the overall preference also for protein, and especially beef, has been pretty strong. So that's how we see the demand in the U.S.

It is related to the question first we answered about the demand of protein, GLP-1, and the other factor that is a booster all of the protein consumption globally. I think, Mateus, if I'm right, your question about the investment, the fluid expansion of our investment. Is it correct?

Yeah. How you're considering restrictions to trade flows with quotas and sanitary barriers into your investment process and investment decision for the mid-long term?

I think we are very well positioned where we produce and where we sell our product. I think we built this global platform and you look for, we are produced where is the most competitive way to produce and we are present to sell where is the market demand is. Then I think it's in terms of balance, we are very balanced. Of course, now our focus now for this year is to cash generation we are not we are not looking for to to a new a new uh uh project uh in our portfolio we just and start with the project in paraguay we start the project in oman i think now we need to develop this project in the green field that we are working on no no any new project in our in our pipeline now awesome super clear thank you thank you And our next question comes from Igor Guedes with Ginell.

You may go ahead, Mr. Guedes.

Can you hear me?

Yes.

Okay. Thank you very much for the opportunity. The first question is about CapEx. We observed CapEx essentially doubling year over year, and it came slightly higher than we expected, reflecting on acceleration across the platform, but mainly related to renovation projects stemming from the downtime at PPC with capacity expansion initiatives. It would be interesting to understand if you can share with us how the capacity expansion is progressing from a numerical standpoint, how much of increase you expect to achieve based on what production levels and whether we can expect CapEx to normalize as early as second quarter. In my second question, I would like to get your perspective on what might happen in the second half of the year regarding the filling of China's quotas. As you have already mentioned, it's possible that cattle prices will fall in Brazil given the quota is being front-loaded faster than initially expected, which could reduce the number of slaughters in the second half of the year, leaving more cattle on hand and lowering price per arroba. But my question is more focused on the cutout side of the domestic market. Do you think it's possible that with the reduction in exports, part of the volume will be directed to the domestic market? And with more meat supply here, the cutout price might face downward pressure. I would like to take your view on this variable going forward. Thank you very much.

Look, when you talk about the CAPEX, we are put $1 billion in CAPEX for expansions. The Grow CAPEX, as we call it. Grow CAPEX. And we are not disclosure one by one, but because many business units, the different types of CAPEX, It will be difficult to explain volume because one is number of chicken, the other is a volume of, well, prepared food and to put together will be difficult to explain that we are not disclosed then. But the CAPEX is, as you mentioned, if you compare for the last years, is higher because we are seeing this strong demand. But we are not seeing now any moment that we need to review the CAPEX because we are seeing the cash generation for the second semester of the year will be strong. But this is something we can see in the future. Because it's a capital expansion, we can postpone, we can give more time to do. But we are not looking now because we are not seeing that it's necessary for now. but could be in the future something that we can take a look the other thing about the Brazilian situation about the market situation about beef we say that the end of cut of China we may the number of care will be harvested for the English will be down should be down because we need to To accommodate this, I mentioned, 120,000 tons per month for beef, we need to find a market for that. Then the industry will be reduced, the number of cattle will be harvested. And if you reduce the number of cattle will be harvested, combined with more availability of cattle for feedlot, But we believe that the price of carol will be down as well. It means that carol could be down because more volume domestic, but the price of beef will be down as well. Then I see that the spread between the carol and the live carol will remain. or depends, in our case, could be enhanced that we have value-added product. When you talk value-added product, not with processed product, it's value-added raw products that I mentioned to you, better representation, better way to serve the customer in different cuts of beef. That, if you look for our side, I think we are very well structured in Brazil and outside of Brazil to take advantage, the impact of this end of the quarters of China.

Okay, super clear. Thank you very much.

Ladies and gentlemen, if there being no further questions, I would like to pass the floor to Mr. Giubato D'Amazoni.

I would like to thank you everyone for joining us today and all JBS team members for their dedication. And you look ahead, we have not changed our focus, execution, efficiency, and disciplined capital allocation and cash generation. That is what allows us to deliver a consistent result and build a long-term value creation. Thank you.

This is the end of the conference call held by JBS. Thank you very much for your participation and have a nice day.