Jbs N.V. (JBS) Q2 2026 Earnings Call Transcript

Good morning and welcome to JBS, second quarter of 2026 results conference call. At this time, all participants are in listen-only mode. Following management's remarks, we will open the floor to a question and answer session, and instructions on how to participate will be provided at that time. Please note that to ensure all analysts have an opportunity to ask a question, we kindly request that each analyst limit themselves to just one question. 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 and financial targets, and potential growth should be understood as merely forecasts based on the company's management expectations in relation to the future of JBS. Such expectations are highly dependent on the industry and market conditions and therefore are subject to change. Our president with us today, Gilberto Tamazoni, Global CEO of JBS, Guilherme Cavalcanti, Global CFO of JBS, Wesley Batista Filio, CEO of JBS USA, and Cristiane Assis, Investor Relations Director. Now I'll turn the conference over to Gilberto Tamazoni.

Mr. Tamazoni, you may begin your presentation. is in leading the business and ensuring a smooth transition. We have been planning this successfully, carefully, from a position of stress, and nothing changed in our strategy, our priorities, or the way we operate. This decision reflects the strength of the company we have built. Over the past several years, we have transformed JBS in many ways. building a more diversified, more global, and more resilient business. Our dual listing was a defining milestone in that journey, positioning the company for its next phase on value creation. With a strategy clear and a strong leadership team in place, I believe this is the right moment for JBS to begin in the next chapter of under-weather leadership. Turning to our results, the second quarter once again demonstrates the resilience of our global operating model in an environment that remains complex and volatile. Supply and demand dynamic vary across geographies and proteins, while currency movements, trade disruption in geopolitical events under far more complexity. Against this backdrop, our priorities are clear. Improving efficiency, protecting margin and starting commercial performance, allocation production to the markets where we create the most value. Adjusted net income was 218 million US dollars. adjusted with that total 1.143 billion US dollars under IFRS with a margin of 6% and 1.3 billion US dollars under US GAAP with a 5.3% margin compared to the first quarter profitability already showed improvement in the majority of our business units net income was significantly affected by not recurring items while important to understand these items do not change how we assess the business our focus is on operating performance cast generation and balance sheet discipline performance improved across several business during the quarter although important part of our portfolio is still operating in a challenge environment while usb continues to operate in a challenge environment we have reorganizing our operating instruction and are very confident at the results of those changes I will leave the discussion to the business, to ASB, who will be providing more details on the quarter and our outlook for beef and pork in North America. In Australia, results improved further, supported by robust global demand for beef and attractive export opportunities. Before moving on, I would like to comment briefly on the strategic partnership we announced last Friday with Danantara Investment Management. The transaction includes a $2.5 billion US dollar equity investment by Danantara in exchange for a 25% stake in our Australia and New Zealand operation. To gather the additional funding capacity expected through the Joint Venture Bank, this gives us access to up US$5 billion to fund acquisition, greenfield projects, and other growth opportunities across Indonesia and Southeast Asia. This creates a well-capitalized platform to accelerate our expansion in one of the fastest-growing protein consumption regions in the world, while preserving the strength of JBS balance sheet and reinforcing Australia as a strategic hub within our global operation. Importantly, it does not change how we manage the business. our australia new zealand operation remained fully consolidated under the same leadership and operating model with that let's turn to our operating performance global beef fundamentally remain construct constructive although conditions vary considerably across markets supply is limited in several regions. Demand remains resilient, and our global footprint allows us to direct products to the market where returns are the strongest. JBS Brazil delivers a strong quarter driven by export demand and disciplined commercial execution. Under IFRS, adjusted EBITDA total to $269 million, with a margin of 5.9%. Even with elevated carol price, JBS reported it's highest EBITDA for a second quarter. A carol availability has improved in Brazil. Our focus has been on maximizing the value of every animal through our integrated commercial network. However, China remains an important destination, and recent shift in trade flow reinforces the importance of maintaining balancing exposure across export and domestic markets. By balancing volumes across China, other markets, export markets, and the domestic market, we protect margins and maximize value per annual. Our domestic business is another important competitive advantage. Through the Freeboy brand and a long-standing customer relationship, we work alongside retailers and categories partners, helping them to grow value across the beef category. During the quarter, our barbecue portfolio performance particularly well. We have expanded commercial initiatives with major retailers across Brazil. And chicken, both Fugan Sprite and Seara, delivered solid results, although market dynamics involved differently across regions. At PPC, demand remained healthy across retail and food service, Although industry supply expanded faster than demand, even so, result improved from the first quarter as operating conditions normalized, planned upgrades were completed, and expending assets continued to mature. At Ciara, margin remains strong despite a tougher year-over-year comparison, a less favorable currency environment and changing export market dynamics. The business grew volumes, reflecting improvements in operating, quality, and commercial execution. We see further opportunities to improve mix, distribution, and execution in domestic markets, while converting volume growth into a sustainable profitability. Our priorities for the second half are clear, execution and cash generation. We expect leverage increase during the quarter and reducing the remainder of priority. We are focused on a strong cash generation, disciplined working capital management, and a prudent capital allocation. The environment remains dynamic, but our priorities are unchanged. We are focused on execution, cash generation, and disciplined capital allocation. With a diversified portfolio, a strong market position, and experienced teaming around the world, we believe we are well positioned to create value through this cycle. Thank you, and I will turn now the call over to Wesley.

Ramazzoni, thank you for everything you've done for JBS over the past 15 years, and congratulations on the leadership you have shown. You have lived our values every day, challenged our teams to keep raising the bar, and helped us deliver stronger results. We've worked together for more than a decade, and I've learned a lot from working alongside you, and I'm very grateful for the trust and partnership we've built over the past years, which will help ensure a smooth transition and continuity in our strategy and priorities. I'm incredibly proud and excited to have the opportunity to lead JBS starting in January 2027. This is a company where I've spent my entire professional life, and it means a great deal to me. We're fortunate to have an exceptionally strong leadership team and an extraordinary group of 280,000 team members around the world. I'm very excited about what we can accomplish together. As we look forward, my focus remains the same. Operational excellence, disciplined capital location, customer service, and creating long-term value across our diversified global platform. We'll continue to live our values, strengthen our culture, and build on the tremendous work you've done over the past eight years. We'll keep evolving, growing, and making JBS an even stronger company for the future. With that, let me turn to our U.S. operations. The second quarter reflected resilient protein consumption in the United States, despite a challenging environment for the beef industry, where tight cattle supplies and historically high cattle costs continue to pressure margins. Even so, U.S. beef delivered a quarter of solid improvement. Our EBITDA margin improved from a negative 3.9% in the second quarter of last year to a negative 1.3% this year, reflecting an important step forward despite the ongoing challenges of the cattle cycle. Over the past several quarters, we have improved plant performance, optimized our operating footprint, strengthened our commercial capabilities and increased productivity across our plants. Many of the operational initiatives we've been working on are already translating into better results, and the announced capacity optimization will continue, contribute progressively as they are fully implemented. At the same time, we are beginning to see early signs that industry fundamentals are moving in the right direction. The gradual reopening of the Mexican border and the first indications of herd rebuilding reinforce our confidence that supply and demand are heading towards a healthier balance over time. The reopening of the Mexican border is particularly important. The expected reopening of the three ports of entry should restore most of the historical flow of cattle from Mexico into the United States. Cattle from Mexico have represented about 5% of U.S. slaughter, so restoring that flow is very meaningful for the industry. We also expect many of the first cattle crossing the border to be heavier than what they used it to be prior to the border closure. That should allow them to reach slaughter weight much sooner than normal. Assuming the ports reopen as expected, we believe we'll continue to see an increase in cattle available for slaughter during the first quarter of 2027, with slaughter volumes returning to a more normal level by the second quarter. Turning to pork. Market fundamentals proved more challenging during this quarter. Even so, our pork business delivered another quarter of solid performance. EBITDA margin reached 8.9% compared to 6.5% a year ago. Our pork business once again demonstrated its ability to compete at the highest level. We'll continue focusing on operational excellence, customer service, discipline, capital allocation, and continuous improvement. Those are the levers we control, and they position us to create greater value over the long term as cattle supplies recover. I'll now turn the call over to Guilherme.

Thank you, Tomasori and Wesley. Before we move on to the quarters operating results, I would like to highlight that starting in the second quarter, we voluntarily began reporting results as a U.S. domestic company and therefore reporting forms thank you and thank you in IFRS for the time being. We believe this initiative represents a significant step in our strategy of alignment with the U.S. capital markets and may span our eligibility for inclusion in a more ample group of stock indexes. In this regard, I would like to highlight JBS inclusion in the Russell 1000 and Russell 3000 indexes in June. This inclusion, as well as the potential for inclusion in additional indexes going forward, is key to expand in our investor base, increasing liquidity, enhancing global visibility, and unlocking value to shareholders. Let's now move on to the operational and financial highlights of the second quarter, 2026. Net sales reached a record of $24 billion for the second quarter. Adjusted EBITDA in IFRS totaled $1.4 billion, which represents a margin of 6% for the quarter. Adjusted EBITDA in US GAAP totaled $1.3 billion, which represents a margin of 5.3% for the quarter. Adjusted operating income was $790 million, with a margin of 3.3% in IFRS, and $866 billion in US GAAP with a margin of 3.6. The quarter's net loss was $102 million with a negative EPS of 10 cents. In addition to the year-over-year decline in operating results, we also reported $319 million increasing in net financial expenses. The main drivers were $172 million in premiums, interest, and costs related to the tender offer for the bond and the CRAB, Brazilian local venture, of which $147 million had a cash impact. It's worth remembering that this reflects the liability management we carried out in the first quarter, in which we issued $2.5 billion in bonds at a more attractive rate and longer tenors. market to mark of derivatives net of exchange rate variation of 53 million dollars monetary restatements and high interest expenses relate to increasing that which together amounted of approximately 120 million dollars additionally the net loss was also impacted by the final calculation of the bargain price gain of the acquisition of mantequilla alimentos with no cash impact totally 81 million dollars and antitrust settlements totally 133 million dollars excluding the non-recurring items adjusted net income was 218 million dollars and the earnings per share was worth 20 cents for the park free cash flow free cash flow into in the second quarter of 2026, improved by $125 million year over year, reaching a positive of $130 million compared to a cash consumption of $55 million in the second quarter of 2025. This improvement was mainly driven by working capital, particularly the accounts receivable line reflecting higher receivable discounts and larger advance payments from Chinese customers related to JBS Brazil's exports. The accounts payable line also increased, mainly driven by higher cattle prices and increased slaughter volumes, particularly in Brazil. This improvement was partially offset by a decline in adjusted EBITDA of $324 million, high net cash interest expenses of $129 million due to a higher concentration in the second quarter of interest related to the bonds issued in 2025 real appreciation that increased interest expenses in u.s dollars of the brazilian local adventures and increasing total debt moreover total capital expenditures increased by 163 million dollars of which 159 million dollars was expansion capex finally we had lower tax payments year-over-year of $135 million. Not considering guidance, but simply updating the cash flow break-even exercise for this year, we expect $5.1 billion in 2026 driven by capital expenditure of $2 billion in 2026, $400 million reduction versus the initial estimate. Working capital, expectation of negative $350 million of working capital in 2026, a $500 million improvement versus last year, driven by higher receivable discounts and estimation previously. Legal settlements of $100 million already realized in 2026. Biological assets of $850 million flat versus 2025. Interest expenses of $1.3 billion and increase of $150 million versus the initial estimates due to higher net debt. Leasing expenses flat at $500 million in 2026 and effective tax rate estimated at 25%. We continue to strengthen our liquidity position. In August, we announced an increase in our revolving credit line from $3.5 billion to $4.2 billion, while reducing the all-in cost of this line. Our cash liquidity, combined with the revolving credit facility, totaled approximately $7.7 billion. Our average debt term reached 15.3 years and an average cost of 5.7%. As we anticipated in our last conference call, due to the $1 billion dividend payment in June and the typical cash consumption of the first half of the year, our net leverage ended up the quarter at 3.1 times, slightly above our long-term target of keeping net debt-to-tipta between two and three times. It's important to highlight that we have no significant debt maturities for the next five years. until 2031 and up to 2032 all the coupons are below the current treasury rates and 35 percent of our gross debt is beyond 2050. with that in mind i would like to open up for the question and answer session you the floor is now open for questions from investors and analysts as previously mentioned we kindly request that each analyst limit themselves to just one question with your excuse if you have any questions please press the raise hand button thank you Ladies and gentlemen, our first question comes from Tiago Bortolucci with Goldman and Sachs.

Mr. Bortolucci, you may go ahead.

Yes, hi. Thank you. Good morning, everyone.

Good morning, Tiago.

My question, thank you, Wesley. I can't start this call other than say progress to Tomazoni on what has been a remarkable job, not just in JBS, but also in the animal protein industry. and also wishing you, Wesley, continued success on your extended responsibilities in a chair that I think is sensitive not only to your investors, but also for the country, right? We'll be looking forward to keeping up with the conversation. My question is on how you are seeing, Wesley, the state of the U.S. demand, right? Throughout your press release, I see comments of sticky demand on beef and poultry. But then, on the other hand, I also see you mentioned that inflation is weighting down on pork. You had negative chicken sales growth on food service and retail, and some of your peers, like Tyson Smithfield and even Gruma, are cutting their guidance, right? When I looked at the beef cutout, it seems it has reached somehow of a ceiling, not necessarily following the seasonality. And this is the reason for my question, right? What gives you comfort that demand remains healthy? And why should we think that spreads can't erode more prominently going forward? This is the question.

Thank you. good morning so we we still think that demand is is is very strong what we have seen and we can tell this by everything we look on on protein trends in in general there is plenty of data in the market about that and we can see that when we talk to to our customers and and what we see in marketplace um we have found out actually that and and we we didn't think it uh we used it to think that proteins had more of a substitution effect depending on prices and that was a you know a big surprise that of the inelasticity of protein demand when it comes to you know demand for beef demand for pork and demand for chicken not being so substituted to each other and we see that in in demand a little bit we see pork demand a little bit weaker than chicken and beef beef demand is very strong. And I actually think that, again, I keep on saying, you know, a few years ago, I cut out about $300. I would have thought it was going to be a very tough, you know, we would have a tough time achieving that. And we've reached way above that, almost into the 400. So look, I think demand is still pretty strong. What we are seeing is where the consumer is consuming that protein changing and going more into retail, more eating at home than away from home and food service. That's something we've seen. But again, for the time being, as we see the marketplace right now, we think the protein demands will continue to be strong.

That's helpful, Wesley. Thanks very much.

Thank you. And our next question comes from Mr. Ricardo Alves with Morgan and Stanley. Mr. Alves, you may go ahead.

Hello, everybody. Tomazoni, Guilherme, Wesley. Congrats to both of you, Tomazonio on the great tenure, for sure, and Wesley on the CEO appointment. Looking forward to continue the interaction. This is great news for everybody. I have another one on the U.S., but specifically on the other side, the question that we asked the last time, you know, the spreads indicated much tougher second quarter versus the first quarter, But your numbers obviously showed actually a pretty significant improvement. So I wanted to explore more of that. I remember, Wesley, during the JVS day, you spent quite some time talking about the in-house initiatives that you guys were looking at to improve the beef margin. So I'm just wondering if there are more details that you can provide there, some of the initiatives that may have already kicked in and help the quarter. And if you can specifically say what you're doing differently, that would be helpful. Or even if there are a couple of issues in the first quarter that were not present, if we're able to quantify that, that would be helpful just so that we have a better base now to model the U.S. beef going forward. But it does seem like there has been a significant de-risking of a division that some people were really concerned about. Thank you very much.

Ricardo, good morning. So first, when we look at the comp, obviously last year, the same quarter we were comparing last year, was a quarter where we had some extraordinaries. It was a tough quarter and had some other impacts, like hedging that kind of mixed the number a little bit. And that's the second quarter of 2026 does not have anything that's very material. There's only minor things and so nothing related to hedging or anything like that.

So the comparison is something to keep in mind.

But when you just compare the second quarter to the first quarter and just the business in general, it was relatively solid performing compared to performance given the market conditions. So, look, we use it to run our business in two different business units. And the reason for that is when we acquired Swift and afterwards the Packerland acquisition, Packerland focused on a completely different type of cattle, different types of size of plants, different kind of cattle procurement. And so we use it to run those two business units very separate. And the market has changed then, has changed quite a lot. And actually that separation didn't make sense anymore. So we went ahead and put those two business units together and run nowadays the business unit as one. And look, there is on both sides of the business, there is strength, the strengths that one had and the other one didn't have. And we think that there is going to be a lot of synergies there. And a lot of them are, you know, on the sales side. We've done a lot of work over the past three, four years in terms of yields. There is always a little bit more, but most of the plant that I presented in New York was not related to yields, was related to being able to sell more ground beef, sell more value-added ground beef, sell more value-added items. You might have seen that we actually had announced the plant closure of Sotherton, but now we have reversed and decided to run that as a value-added facility. Just shows the size of the demand that we have actually for value-added items and that we can continue to supply. So a lot of that's going to be in terms of sales that we're going to get most of that difference. I actually had a breakdown there on the presentation that talked about that. But we are seeing that and we're very confident. Actually, after we've done this integration, we're even more confident. The last thing I would say is most of that capture has not been seen yet. and we are just beginning so we we've performed this you know this this result that we have here uh but this is without the the you know we are just getting started on that three percent improvement plan that we we think we have that's very clear thanks wesley and our next question comes from leonardo alansar with xp inventimentos mr alansar you may go ahead hello everyone thanks for taking my question was only congrats for your move and also for you wesley i'll be enjoying

discussing usb free fuel a lot and and sticking with that point was like just to understand it better and so mexican border is open now well it's expected to defer the first few cattle to arrive in the by the end of the month right and it's just one part open i wanted to hear from you both from the the the volume that is expected the pace of this volume growing you said already that that you're expecting even heavier cattle to come from Mexico. But if we talk about the space of imports and connect that information with capacity utilization, would you say this opening is already relevant for any changes in strategies? Would you say, talking about this historical level of 1.5, 2 million heads per year, would you expect that number to happen by the end of this year only 2007 or at least the volume will be enough for us to expect a higher capacity utilization just understand how you're seeing the the pace of impact from the mexican border opening that just happened or if it's more like uh since it opened there's a ceiling for the cattle prices and that is already helping margins but then no direct not real impact yet just to get your ideas on that thank you donald good morning so um yeah obviously we are we're forecasting the

market and there's a lot of things that we don't know but what we know is the first uh port is going to open is here on the 24th uh that's the port of douglas douglas uh arizona uh you know that port by itself could probably handle 300 400 000 head that's just an estimate is difficult to to predict something around 300 400 is so a third of what the usual amount they use to come from mexico can come from that port but then uh in the announcement that the usda made is you know they're going to analyze how that port opening in douglas looks like and open two more uh ports in in new mexico so santa teresa and columbus so if with with those three ports open we are going to have, they have, you know, right around one point, you know, over a million head capacity of, you know, flow capacity. So those three ports should be able to handle a big part, if not 100% of the normalization of the border. Again, these are all estimates that we have, right? We're looking at historical numbers and looking at numbers provided in the public, for the public. So, you know, it's, I think it's, it's going to be possible within those three ports, if those It's three ports opening to have a big part of what Mexico uses to trade flow to the U.S. Only two states, Mexican states, got approval to export to the U.S., so Chihuahua and Sonora. Those two states are the biggest states. Both of them are over two-thirds of the Mexican flow of cattle to the U.S. The other thing that I would mention is, yes, we have information from the market that obviously that cattle, use it to become very young to the U.S. and get backgrounded in the U.S. Once the border shut, and especially after two years of the border shut down, that cattle had to be backgrounded somewhere else, and it was backgrounded in Mexico. So there is cattle that's in the process of being backgrounded, or cattle that's backgrounded and just waiting to go to a feedlot and to get finished in Mexico. So obviously there will be a part of feedlots in the U.S. actually buying that cattle and actually having that flow happen, but we don't see any reason why that wouldn't happen. We also think that there is, you know, because the 1.2 million head of cattle that came were just the calf crop that was destined to the U.S. On top of that, there is the cattle that's being fed. So we think that the cattle that's available is bigger than the traditional 1.2. So on one hand, you only have two states, so about two-thirds of the cattle being able to come to the U.S. On the other hand, you probably have a little bit of a bigger number of cattle in further phases of the cattle feeding and cattle raising process. So bottom line is we think that because there is a lot of cattle that's already in further stages of cattle production and are heavier, that we're going to start seeing flows, obviously, end of this month and into the end of the year. and expecting that the two next ports of New Mexico open. We think beginning, you know, somewhere in the first quarter, we should start seeing cattle ready for slaughter that were born in Mexico. And if all goes according to plan, we should go back to a much more normalized, if not all, most of the volume or a big part of the volume that we had for coming from Mexico and ready for slaughter in the second quarter.

Okay, that's great information.

And our next question comes from Poohan Sharma with Stevens. Mr. Sharma, you may go ahead.

Hey, good morning. Thanks for the question. And Tom Izzoni, congrats on a successful tenure here. And Wesley, congrats to you on the new role and really looking forward to continuing to work together here. um i i really wanted to get your thoughts on u.s beef um and i know everybody's asking about mexican uh border flow so maybe i'll ask uh just updated thoughts on heifer retention and can you maybe give us the uh your thoughts any updated thoughts on the timeline for fed cattle supplies to be rebuilt was the um what you saw in the report was that a surprise just

given all the commentary with drought concerns um regarding heifer retention in the u.s poor and good morning so yeah we we we obviously think that heifer retention and and u.s cattle uh you know herd rebuild is more timid than than than we expected and then then then obviously we wished for, to get back to a more balanced stage of a situation in cattle supply. But at the end of the day, what really matters is, number one, it seems like it has, for now, it has stopped dropping, and that's a big deal. And I think we're going to start seeing, we see signals that we're might going to start going up. You know, one thing that I'll just mention, and not to keep on going back to Mexico, And, you know, but it's I think it's again, I think it's super relevant is that, you know, for us to wait for a cattle herd rebuild that takes a little bit longer with another one, you know, a million head, million point five head, whatever that, you know, ends up coming from Mexico is a much more different situation than without that. So it gives us a lot more, you know, a lot more balance and a lot more, you know, structure for us to see and wait this cattle rebuild without the margins that we have seen in 2025, 2026. I think it probably brings us more to a little bit, if all goes according to plan, right, and all the ports open, we should go back to an equilibrium more like what we saw in 2024, maybe 2023, depending on the amount of cattle that comes. So I think it brings us a lot more and it gives us more patience to see what's going to happen. Weather is a big deal. Weather is a big deal for sure. And we will have to see what comes out of that. One part of the number that doesn't get shown, Purim, that I think is relevant and we have anecdotally heard it, you know, it seems pretty promising, is the heifer retention and just cattle rebuild that we're seeing in Canada. We don't see, obviously, in those reports, but it's very relevant because it's an open, you know, it's a market that, you know, U.S. cattle goes to Canada, Canadian cattle goes to the U.S. So that's a big deal. And look, I think we should see, you know, over the next years, a couple of years, three years, starting to see much stronger rebuild. But again, it's a very different situation having the Mexican cattle and waiting for a more longer term herd rebuild in the U.S. The other thing that I would just mention, not to take this too long here, but when you look at, you know, there's two things that you need to look at, right? Half a retention, but also the amount of cows that get processed to slaughter, right? And that number has been going down very fast as well. So if you look at the number compared to 2026 or 2022, we're processing half of the beef cows that we were processing in 2022. So I think that's relevant as well.

Great. Thank you for the caller.

Thank you. And our next question comes from Henrique Brustolen with Pradesco BBI. Mr. Brustolen, you may go ahead.

Hello, everyone. Thank you for taking my questions. And Tomazoni-Wesley, congratulations on the transition and wishing you both all the best. My question is on Seara. We see another strong quarter, right? But margins weakening relative to Q1. So I'd just like to hear a little more if you could qualify, you know, where the sequential margin drop came from. If we're mostly talking about export markets or the domestic market. and what are the main trends you are seeing for both of these going into the second half of the year. Thank you very much.

Thank you Ricardo for your question and thank you for your words. Seara, let's say you still if you compare the quarter or below, but it's still a healthy margin 14%, 15% is really a healthy margin for this business is what we look for for this business. When you compare quarter to quarter, there is some difference. The main difference is a pork. Pork price in domestic market was below. Some of the market ticket was below. The other will be higher. But look, in reality, many change across across the one category to the other category, but if I make a summary, who was weaker in the domestic market?

Thank you very much, Tomozoni.

And our next question comes from Benjamin Thurer with Barclays. Mr. Thurer, you may go ahead.

Yeah, good morning, and I'll just follow suit with those wishes to you, Tomozoni, and Wesley, looking forward to working more with you together. Sure. Just coming back to the U.S., and we haven't talked much about the pork business. So if you could maybe explain us a little bit more what you're seeing within the pork. You've highlighted that you expected it to kind of like gain a little bit of these like replacement dynamics, but it hasn't turned out to be the case. So the demand picture for pork. So maybe just talk a little bit what you're seeing. what are the differences across the different cutouts and what's been a little bit of a headwind if you want to call it this way. Not major, just a little bit obviously in terms of profitability in PORC as we look into where it stands right now slightly below what usually the target is for you guys closer to the very high end of the high single digit.

Dan, good morning. So pork has had a weaker demand than chicken and beef for sure. And look, I think the biggest thing is, you know, first of all, if you look at just the volume process by the industry, it's kind of stable and the cutout is lower. So that just tells you that, you know, demand seems weaker because it's the same amount of supply and lower price. So and we think that part of that comes from a little bit of a weakness in the prepared in not necessarily our prepared foods, just but just in general, the market of prepared foods, just the demand that we're seeing from customers and internal as well being a little bit more pressure and consumers deciding to, you know, to cut back maybe a little bit on those on those options. you know it's it's a quarter so i wouldn't say that that's a long-term trend that we should expect for the coming you know quarters and years but that's something just to keep in mind that we've seen a little bit more weakness coming from processors that we sell to and just in our prepared foods business in general a little bit weaker uh demand than than than usual all right thank you very much your next question comes from lucas ferreira with jp morgan Mr. Ferreira, you may go ahead.

Hi, good morning, everybody. So first of all, congrats, Thomas Onion, on the tenure, and Wesley for the new position. So very well deserved. My question is on the U.S. poultry industry, which clearly is suffering from lower spreads, especially on the commodity part of the business, on the big birds. So my question to you guys is where you guys think we are in this cycle. So if you already see some sort of capacity reduction and volume production cuts in the industry or when do you guys think we should see that happening, especially on, like I said, on the most commoditized part of the business, especially on the Big Bird? So that's my question. Thank you very much.

Thank you, Lucas. uh in key two and chicken supply grew uh 4.5 percent in the west was above expectation above expectation of the industry uh because the growth was driven by the higher egg sets and chicken placement but the most significant was the better bird survival rates compared to with the last year when respiratory disease and low pet influence increased mortality means that the industry taken historical rates of the survival rates and based on that placed the chickens for this year and how the rate was better we had more chickens. What do we expect from. We expect that the industry will be adjusted in common modes. If you look for historical, the industry is very disciplined in terms of to manage the supply demand in this business.

Thanks, Tomozoni.

And our next question comes from Thiago Duarte with BTG. Mr. Duarte, you may go ahead.

Yeah, hello, guys. Good morning, everybody. Tomozoni Wesley, same from me. Congrats on the transition and good luck to you both. Yeah, so I'll stick to the chicken business, but in a different way. It's interesting to see how Pilgrims has been suffering from this higher supply of chicken and translating into lower chicken prices, enhancing to lower margins. And while Seara doesn't seem to be suffering from from the same phenomenon, and you guys mentioned in the press release, strong export markets and the Middle Eastern market in particular, sustaining good profitability in the chicken exports out of Brazil. So my question to you is how you see those two moving parts unfolding in the coming months and quarters, whether you see this chicken price pressure at some point spilling over into Seara's export business, or you expect the other way, you expect Pilgrim's margins to eventually improve before any erosion on the Seara business? So how you expect this global chicken price environment to unfold into the two subsidiaries? That would be my question. Thank you.

Tiago, thank you for the question. And I think you mentioned that as compared Pilgrim's and Seara, they are really different even both of them export but they export different type of products they compete in very few markets mainly in Africa with the La Quartes otherwise there is no competition in that and for Seara export are very important for Bugle is less important that show this comes from this a little bit the explanation about what's the difference in the US Publish has a diversified portfolio I think you had the opportunity to hear from Fabio but what is super in the US is the category of big bird this is a commodity that the product that we sell for processors we increase too much the volume and the demand is not enough to met the supply because of this and Pilgrim as a part 25% of the business is around 25% of the business is commodity and this part of the business even Even before, we transformed to factories and from Big Bird to Crazy Ready. Because Crazy Ready demand is strong, as we mentioned, when they talk about the U.S. market for beef, consumers eat more at home. And then because of that, the demand in retail for chicken increase. But, of course, as we have a balanced portfolio, we suffer with the commodity. And we see that this, I mentioned the question that I answered before. If you look for the historical, normally the industry, they have a very disciplined in terms of supply and demand in the U.S. for this last, I think, many years. and this we are expected because the additional supply we have in the market it was because, mainly because of the historic we planted before the survival rates for chicken lower than it was in the fact, in the quiet because of this oversupply when you go to Brazil we see now that the last numbers of the Brazilian Association that the production grew 5.6%. I think this but export increased 20%. Means that because of that the availability in domestic market was 3.1. In export market uh sorry in export market uh demand remain held even uh at price below previous level uh we we believe that uh when you look ahead i can it's difficult to to predict or forecast what we have i think just the number of the association means that they forecast for 2000 to 2027 the production will be grow 2.8% and the export will be grow through, the availability will be 2.7%. If that numbers is the normal numbers that the market could be could be asset because it's normal growth of the market. Means that's it. We see that today we have the level of placement of chicken is higher but we see that the demand for a sport in Brazil is high and I believe that it will be possible to compensate not all of them but industry should be normally to look for the again historic you see that industry normally rebalance when we have this balance in the market we see this quarter, the next the coming quarter will be I think we are confident in terms of what marketing what we will be able to do with Seara and and see it's something that we are not managed, something that we not control, we focus on our what we control, we control the mix we control the price, we control the diversification of chains and what we are doing Thank you so much, Tomazoni.

My question is on Australia, right? I think we saw a very important growth in top line, right? Which you mentioned about JBS Brazil, how China, POTA impacted exports. But I wanted to understand if we can assume this is the same reason why Australia's top line has been so strong this quarter. And on top of that, how can we think performance ahead, not only in terms of revenues, but in terms of maybe the impact on the profitability of this division.

Isabella, Australia, we see that we are very excited with the business in Australia. We are in the middle of the cycle. We see two, three years very positive for our Australia business. and all of the business in Australia is performed well when you look for the Australian results below the comparison of the same period the last year, mainly because of the currency but business and because of the climate, we had very, we dry a lot in Australia and we are not able to bring the cow to the plants and because of a little bit of volume, we are able to produce more and this is what we are seeing in the next quarter. And as you saw that with this joint venture we have done, we did that on time, we are creating a platform for growing in Australia in Indonesia and South Africa in Australia is really well Asian, sorry, Asian in Australia is very well positioned it's close to this market and we have a strong team so look, we are bullish in Australia Thank you Tomazonio Thank you, and our next question comes from Heather Jones

from Heather Jones you may go ahead, Mrs. Jones Mrs. Jones, if you're speaking, you may be muted. As we wait to get connected with Mrs. Jones, the next question comes from Gustavo Tiano from Itao. Mr. Tiano, you may go ahead.

Hello, everyone. Thanks for taking my question. And congrats, Wesley, on your new position at the company. And best of luck to you both in Tomazoni in your role starting next year. And my question actually relates to free cash flow going forward. And a couple of months ago in the JBS Day presentation, it was mentioned that CapEx for 2026 should be slightly lower than previously stated in other conference calls, reaching something close to $2 billion. But my question is on what to expect for 2027. And if you understand that the current cycle conditions at this point, especially with the Mexican border reopening, enables a reacceleration of the expansion CapEx agenda for next year. and if the JV in Australia changes your appetite towards accelerating the consolidated investment level going forward since this new variable was added into the equation last week. Thank you very much.

Thank you, Gustavo. So beginning with the joint venture, that's a way for us to continue with the agenda of growth and accelerate this agenda in that region of the world without putting more pressure on the balance sheet. So bear in mind that Danantara is to put $800 million in first place and then adding up to $2.5 billion in equity. And then after that, we start to raise that. So basically, there will be no pressure in terms of free cash flow from the investments in that region, given this capital structure that was designed. Now, coming back to JBS consolidated free cash flow, remember that last year we had a working capital consumption of $850 million, mainly due to increasing prices, which continue to happen this year. We see that this second quarter, we had record revenues of $24 billion, so increasing prices, increasing revenues drags working capital. However, we had anticipation of Chinese, and we had receivables discounts. So with that, that's why we are forecasting that this year the working capital consumption will be $500 million better. For next year, again, we should, because of the U.S. beef, and if we don't have any inflationary pressure, we should be a good EFO in terms of releasing working capital. But, of course, that all depends on grain prices, cattle prices, and cutout prices. with all the other lines already in line. I think just interest expense is also in line with what we've been presenting. So this all depends now on each one estimates of the data to plug into this equation.

Thanks. That was clear.

Thank you. And for the next question, we'll go back to Mrs. Heather Jones from Heather Jones. You may go ahead with your question, Mrs. Jones.

Good morning. Thank you for the questions. And my congratulations to Tomozoni and Wesley as well. My question is for Wesley on U.S. beef. So in 24, Douglas represented about 15% of imports from Mexico. So I was just wondering if there's been some expansion there that would allow for greater flows to that port. And if Mexico cattle flows return to levels approximately two-thirds of where they were prior to the closing, Is that factor alone enough to return JBS's U.S. beef EBITDA levels to break even?

Heather, good morning. So, yeah, for sure. It wasn't as much as what I'm predicting, but obviously there were many options, right? There were options all over Texas. There were all of the options were open. So, obviously, if you have just Douglas opening, it's going to be more than if you have Douglas and plus five more ports or i don't know how many uh there were back then so uh we expect obviously as for especially for a while it's going to be the only port that's going to be more than than usual and what the way that we are looking at that volume it's pretty simple we look at the volume uh that how we estimate we're basically looking at what were what was a high volume day uh back then uh before you know what was a very high day for douglas how much could douglas handle and we're just multiplying that and and trying to estimate how much that means in a year so that's how we're getting that number look we it's it's it's obviously we're dealing with a lot of assumptions here and things that are we're going to know pretty soon if they're going to come up you know turn out to be as expected or not and we're going to know pretty soon actually how this all is going to uh look like but but we think that we've you know we've another let's say just another median head of cattle uh in the balance here if we're right now at around one one and a you know between two and one percent negative we should be closer to a break even i don't know if it's going to be enough for us to be at a break even or above break even i'm pretty sure that a median head makes a big difference it's the size of a two-shift plant right so it's a it's a big deal so we we think that it's going to be much better how much if it's going to be above or right below be breakeven? I'm not quite sure yet. It's going to be much better than where we are right now. That's what I mean. That's what I think.

Wonderful. Thank you so much.

Thank you.

Thank you. And our next question comes from Matthias Enfield with UBS. Mrs. Enfield, you may go ahead with your question.

Hi, morning. Thank you for the time and also wish both Tomozoni and Wesley's success in the new positions. On my question, I know you You touched a bit on this for SEADA, but when I get a sense of the demand landscape in Brazil, retailers are quite negative on the outlook for the second half of 26 in early 2027. So my question is, how are you seeing that if you're already seeing some impact on demand weakness throughout the operations there, some shift from beef to pork to chicken to eggs? And what's your perception around that and the risk on margins if we do see the consumer sort of downgrading their protein consumption? That's it. Thank you.

Thank you for the question, Mateus. I think we are not seeing so far weak demand for our products. We see strong demand and for all of the proteins, the price of pork is a little bit depressing because the supply, the demand is higher than, sorry, the supply is higher than demand. But for chicken, the chicken and the value-added, our value-added business, the demand is strong. Strong, I would say. It's normal. We are not seeing the present. We don't see that people be downgrade in terms of one product to the other. we see that protein now is on the top of the priority for all of the population many reasons you know that many reasons of that protein become very strong globally in Brazil even and this GLP-1 in Brazil is spent a lot now with the new brands come to the marketing of this GLP-1, I believe the accessibility of them will be higher and we are so positive on that. Of course, we see that we have today, when you look for the market, as I mentioned, I answered Tiago before, there's a higher production of chicken And I think the English should be rebalanced that even the domestic export of chicken is very high and the demand, global demand is high for chicken. But I think will be revealed the level of the chicken placed in Brazil and about the margins. So look, we're not given forecast of that, but you can see that we have a strong gain of efficiency inside of the company, innovations and new mix. And we are confident that Ciara will keep continuous delivery, good margins.

Very clear. Thank you.

And our next question comes from Renata Cabral with Citi. Mrs. Carball, you may go ahead.

Thanks for taking my question. Good morning, everyone. Congratulations to Wesley for the appointment. Wishing you every success in the role. And Tomazoni, congratulations on the extraordinary run as a global CEO. So my question is, I'm going to shift to Brazil with. The company had a strong quarter with record second quarter in EBITDA growth, and the exports were clearly an important part of that performance, particularly because of the purchase of China. and now we have a July export data for for the industry that gives us a first indication of post-quote environment so my question for you is if you could help us to understand whether what you have seen so far in terms of exports volumes for the company and and pricing is broadly in line with your expectations for this environment and looking through the reminder of the year, the second half, how should we think about China demand and the ability to redirect the volumes to other markets?

Thank you, Renata. I'll give you an overview about the beef in Brazil because it's a very complex environment now with the China quotas. Because based on the current expectation, Brazil should resume production for China in October with shipment restarting in November. And given the normal transited times, that commercial impact of those shipments will be reflected primarily in 2027. As always, we continue to measure our commercial strategy and the dynamic optimization production allocation across the sport market to maximum market in order to maximize the value. But there isn't market that can accommodate the volume of 150,000 tons that China was this period that will be restart China and now we have this volume the harvest of the animal has fallen 20% in the first month but the price of the live animal did not fall and should fall because the animal is in the field and I believe that the farmers have prepared for the end of the quota and the cattle, as I mentioned before, are there and the price should fall and then we re-equilibrate the cutout and the margin in this business because of course, Brazil will be with this without quota of China and probably with the European quote, the European restriction that we have, I believe that you need to reduce the number of care harvests in Brazil. For this period, we don't have the quota of China. When the quota of China restart again, October that will be different. But so far till October, we see that the price of carol should be full because the number of carol will be full harvest will be full and I think as a unique conditions because we have brand, we have category management with the retails that provide, I think it's when you combine this category management and the brand that we have provide for us a very competitive advantage in the sector. So look, we are we see tough now the market for this period of the time, but we believe that the market you will be back in a healthy situation very soon when it comes months.

That's helpful context, Tomazoni. Thank you so much.

Our next question comes from Guilherme Palleres with Santander. Mr Palleres, you may go ahead with your question.

Good morning, Wesley, Tomazoni, Guilherme. Thank you for taking my question. Again, as everyone mentioned, congrats on the move, Wesley and Tomazoni. You'll be truly missed as one of the key executives on the protein space, and not only for JBS, but for the entire sector as a great voice defending the sector globally. Wesley, I know that you have not taken office already, but you have been with JBS in any part of the organization I think now right so you have been all over the place in any divisions and you get a company now that it's a company listed in the US a global player which in the last couple of years changed a bit the strategy from M&A and integration as it was in the past towards more of an organic growth value added so I want to take your thoughts having experience in all divisions so far, seeing every operation, what do you think lies ahead for the organization? What is the agenda that you will try to pursue? What will be the JBS of Wesley Filho from now on?

Guilherme, thanks for the question. You know, the good thing about a transition that's internal, like what we're doing, is that there is a lot of continuity, right? So, you know, when you get a new CEO that comes from a market, from the market, or that's not on the day-to-day of the operations and the guy's new and, you know, they have to come up with something completely new and something completely different sometimes, right, just to, you know, maybe mark, you know, kind of what direction that they think is relevant. And that's exactly not the case, right? I mean, Tomazzoni and I have been working together for the past 10 years. So a lot of what has been done within JBS for the past decade here, in a lot of ways, I've had the privilege to be part of that team that was doing that. And I was alongside Tomazzoni all the time here doing that. So you should not at all see JBS have a big change in the strategy, in the way we do things uh again because we we are just one team and when we've been working together for all of that time so um there is a lot of alignment uh in terms of leadership uh and in this transition here the other thing too i would not at all consider a jbs of wesley or jbs you know jbs has 280 000 team members and a very very strong leadership team that's i think it's Maybe I'm biased, but I think it's the best in the industry. So I think that's something else that I just mentioned. Now, in terms of where we're going to go, Guilherme, for sure, we have a lot of new avenues of growth that have been open in the last few years that need to continue to mature and continue to evolve. And, you know, we just announced, you know, really just last week about this whole Danantara deal and all of the potential that we have in Southeast Asia. That's a population market, market population of 700. If you consider the ASEAN block plus, you know, Oceania, Australia and New Zealand, right, or New Zealand as well, you're talking about, you know, 750 million people. So it's a huge market that we, you know, we trade a little bit, but not very, very much that opens a whole new avenue of growth for us. Australia is a huge platform for us to get started in that, you know, huge competitive advantage for us to grow in that area of the world. We have the project in Oman that continues to grow our business in the Middle East. and obviously I'm talking about new geographies but even in our traditional geographies like the US and doing continue to evolve our agenda on brands like what we're doing with Just Bear in Brazil a lot of the growth that we've done in Seara has been matured but there's still some to go and there's a lot for us to get done there our business in the UK is a business that gets talked relatively little about, but it's a great business, you know, about $5 billion business within pilgrims that, you know, $5 billion that we don't talk quite as often. But anyway, we're going to continue to grow on the avenues that we have been growing, and you'll see a lot of continuity and alignment going forward. But thank you for your question, Guilherme.

Thank you, Wesley.

Our next question comes from Ricardo Boyari with Safra. You may go ahead, Mr. Boyari.

Mr. Boyari, it's possible you may be on mute if you're trying to speak hi uh good morning everyone um i'd like to join the crowd here on the on the compliments uh so um tomozoni congrats on a job well done thank you for the interactions during these years it's been a pleasure and hope to keep in touch and wesley congrats on the new role truly a well deserved step and wish you all the best on the position uh my question is on australia i'd like to to continue uh this conversation wesley about the potential of Australia as a production platform. Obviously, you are relevant there, but in terms of GBS's global platform, it's not that relevant. So in the scope of the partnership with the Nantara, and when you look at the country's potential there in terms of grain production, land availability, and so on, how big an opportunity Australia could be, especially for the production of chicken in the future? I mean, logistics-wise, it seems to be very competitive, right, to have Australia as a production platform in chicken. So how do you think about this, and how is this being considered in the scope of the deal with Denantara? Thank you.

Thank you, Ricardo, for the question. I think it's important to discuss a bit, what is the long-term strategy of this partnership? It's to expand our investment capacity in Southeast Asia. And when we preserve our operating model and give us a financial discipline and a full operating control, So the priority in these first two years is to invest in the regions for Indonesia. Indonesia is the focus. And it's the main focus on us with this partnership is this first two years in Indonesia. Then after that, we can invest in Australia or the other places in South Asia. But you mentioned that in Australia, we are a very diversified platform. Just we miss the chicken. Of course, chicken is something that we have all the times considered the opportunity to enter this sector, but we didn't find the right conditions that we believe that is accretive for us to go in. But it's still open as an opportunity. We don't have a pipeline of investment or acquisition to announce, but in reality we are looking for opportunity. That could be M&A or Greenfield and with a focus Indonesia now. And why we are so confident? Because of the size of the market. We're talking about 640 million population in this area. And we cannot go along. in this something that is safe and the way that we have organized this deal with creating conditions that we have we are not we not stress our balance sheet and I think it was we have additional capital is not changing our investment discipline And at the same time, you can catch the opportunity as this growth market and then grow consumption of proteins. I think this is, and we have a strong team there. We didn't change the business. And GBS remained fully responsible for the manage, the platform. And we will retain full operational control. I think this was a perfect movement in the strategic area for the increased consumption of protein.

Great, Tomozoni. Thank you very much.

Our next question comes from Carla Casella with J.P. Morgan. You may go ahead, Mrs. Casella. Mrs. Casella, if you are speaking, you may be on mute. Moving to our next question comes from Priya Origupta with Barclays. Mrs. Origupta, you may go ahead with your question.

Hi, good morning. This is Teresa on for Priya. Thank you for taking our questions. And congrats, Tomazoni and Wesley, on the transition to our new roles. We're really looking forward to work with you and wish you both the best. So our question is, will we continue to expect that net leverage will end the year at or below three times? And in support of this, how should we think about the potential for any debt repayment over the rest of the year?

Thank Hi, thanks, Teresa. Yeah, bear in mind that on a last-of-month rail, we are replacing very strong, especially from the chicken US, EBITDA of last year, to a more normalized margins for chicken US this year. So this statistical effect tends to pressure the leverage. However, second half of the year is where we generate the bulk of our free cash flow. So, one thing probably tends to balance the other. So, we're thinking that we'll be finishing the year in the levels more or less the same as we got in the second quarter, slightly above three times. And as we generate free cash flow, and given we have no debt maturity in the short term, And because all of the coupons up to 2032 are below Treasury, the efficient debt to be repurchased, I would say probably the 34, which have a 6.75 coupon, you should have still $300 million outstanding there and some 33s or 35s. But let's see how the second half behaves and then we can make a decision of repaying or not those more expensive debt.

Great. That's helpful. Thank you.

Ladies and gentlemen, there being no further questions, I would like to pass it forward to Mr. Gioberto Tamazzoni.

Before we close, I want to just to thank all of you for your kind words and congratulations today for me on behalf of Wesley. I also thank you for the attention, respect, and support you have shown me. And over these past eight years, our interactions have always been very productive. Your question, your perspective, even your challenge have helped us improve the way we communicate, sharpen our focus, and become a better company. I have learned a great deal from all of you. and of course I want to thank our entire team around the world everything we have accomplished over these years has been a team effort and I'm very proud of what we have built together we still have a few important months ahead of us and my focus remained fully only the JVS continued to deliver strong results and working closely with ESRI to ensure a smooth transition to successful transition thank you again for your trust for your engagement in your partnership over all these years.

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