JBS N.V. Q1 FY2026 earnings call

Overall Context & Financial Position

• Q1 2026 was a challenging period marked by market volatility, cyclical headwinds, seasonal pressure, and global trade flow disruptions, consistent with management's prior expectations.
• Net sales grew 11% year-over-year to a record Q1 level, demonstrating the resilience of the company's diversified global platform.
• Leverage ended the quarter at 2.77x net debt to EBITDA, within the company's long-term target range of 2x to 3x. The company strengthened its balance sheet via $2.5 billion in new bond issuance and a $1.45 billion tender offer, extending average debt maturity to 15.6 years at an average cost of 5.7%, with no significant debt maturities until 2031. Total available liquidity is $6.9 billion ($3.4 billion revolving credit lines + $3.5 billion cash).
• Starting next quarter, JBS will voluntarily file SEC 10-K, 10-Q, and 8-K reports under IFRS, with U.S. GAAP supplementary metrics included in earnings releases, to expand eligibility for major U.S. equity indices.

Operational Restructuring & Efficiency Initiatives

• Restructured the U.S. beef platform, merging three previously separate business units (fed beef, regional beef, case-ready) into a unified organization to reduce duplication, improve coordination, leverage talent more efficiently, and strengthen decision-making, positioning the segment for improved long-term performance.
• Scaling artificial intelligence capabilities globally, after over a year of piloting at Friboi, to improve decision-making, commercial execution, and operational efficiency.
• Continuing automation and process improvement initiatives at Seara to boost productivity, improve product quality, and support expansion of higher value-added categories.

Strategic Priorities

• Core near-term priorities are operational excellence, cost discipline, cash generation, and strengthening JBS' position in global capital markets, including creating conditions for inclusion in major benchmark equity indices.
• Prioritizing investment in value-added and prepared foods, which have more stable demand and higher margins than commodity protein, to reduce overall portfolio cyclicality. Management is actively expanding capacity for these categories across geographies, with no fixed target for their portfolio share.
• Maintaining a disciplined approach to capital allocation, with leverage as the primary variable guiding decisions on CapEx and dividends.

JBS overall: Record Q1 2026 net sales of $22 billion, IFRS adjusted EBITDA of $1.1 billion (5.2% margin), U.S. GAAP adjusted EBITDA of $960 million (4.2% margin), net income of $222 million, free cash flow of negative $1.5 billion.

• Beef North America: EBITDA of negative $230 million, with a negative 2.3% margin, pressured by constrained cattle supply and elevated operating costs. Contribution to overall group profitability was negative in the quarter.
• Seara (Brazil Poultry/Prepared Foods): Delivered a 15.5% EBITDA margin, supported by strong export demand, innovation, and growth in higher-value added product categories. Sequential margin decline was fully explained by currency impacts; sales volume grew in both domestic and export markets.
• JBS Brazil (Friboi Beef): Reported a 4.5% EBITDA margin, the second-highest first quarter margin in company history, supported by disciplined commercial execution and strong domestic and export demand. China safeguard quotas caused trade flow disruptions, but the company reallocated volume to alternative markets (U.S., Mexico, Indonesia).
• Australia Beef: Achieved a 7.1% EBITDA margin, with strong operational performance. Queensland cattle pasture conditions are the best in three years, supporting positive outlook. Margin contraction year-over-year was driven by 15% Australian dollar devaluation.
• U.S. Pork: Had a softer than expected quarter, impacted by seasonality and necessary plant efficiency adjustments that have now been completed, with early improvement trends observed. Supply and demand dynamics are gradually balancing, and performance is stabilizing.

• Full-year 2026 cash flow breakeven EBITDA is forecast in the range of $5.7 billion to $6 billion, up from the prior fixed estimate of $5.7 billion, to account for market volatility in energy, fertilizer, and grain prices that could impact working capital requirements.
• Management expects full-year 2026 leverage to end in the upper end of the 2x-3x target range, specifically between 2.5x and 3x, downwardly revising prior expectations of leverage below 2.5x. The company still expects to end the year within the target range, supported by strong seasonal free cash flow generation in the second half.
• Full-year 2026 U.S. beef industry margins are expected to be 1 to 1.5 percentage points worse than 2025, with Q2 2026 expected to be better than Q1 2026, despite continued challenging market conditions.
• JBS reaffirmed its full-year 2026 capital expenditure plan: total CapEx of $2.4 billion, with $1.3 billion allocated to expansion projects, and plans to maintain the $1 billion annual dividend as long as leverage stays within the 2x-3x target range.
• Management expects 2026 to be a strong year for JBS Australia, with stable slaughter volume, strong demand for premium product, and better pasture conditions supporting performance after the Q1 currency-driven margin decline.

• Persistent constrained cattle supply in the U.S. from drought and generational industry transition has delayed herd rebuilding, pushing any meaningful increase in cattle availability to as late as 2028, keeping U.S. beef margins under pressure for an extended period.
• Global market volatility in energy, fertilizer, and grain prices creates uncertainty for feed costs and working capital requirements, which could pressure cash flow and leverage if prices rise significantly.
• Ongoing trade restrictions including China's beef safeguard quotas and potential sanitary barriers in the European Union create trade flow disruptions and short-term price volatility in Brazil's cattle market.
• The Middle East conflict has created incremental logistics costs for Seara exports, though these costs have so far been passed through to the market with no net impact on profitability. The European Union's ongoing review of Brazilian poultry imports creates potential near-term market access uncertainty, though no shipments have been suspended to date.
• Leverage is near the upper end of the company's 2x-3x target range, requiring continued discipline on capital allocation and limiting flexibility for large-scale M&A or incremental capacity expansion if earnings remain under pressure.

Q: With leverage near 3x, what levers does management have to reduce leverage if EBITDA does not rise quickly over the next 18-24 months, and will the 2026 CapEx plan be maintained? Also, will JBS pursue vertical integration in U.S. cattle to address long-term supply constraints? / A: Management estimates 2026 cash flow breakeven EBITDA of $5.7 billion to $6 billion, and expects to end the year within the 2x-3x leverage target supported by strong second half free cash flow. As long as leverage stays in the target range, the $1 billion dividend and $1.3 billion expansion CapEx plans will be maintained. Available levers to reduce leverage if needed include re-expanding discounted receivables (unwound in 2024 when cash flow was strong) for $500 million to $1 billion in incremental cash, and increasing supplier vendor finance. Management notes that vertical integration in cattle production is unrealistic, as it is a highly specialized, land-intensive business very different from JBS' core processing operations, and no vertical integration is planned.

Q: What is the company's outlook for U.S. beef import tariff reductions, and how would that impact JBS segments? / A: Management believes any increase in imports from Brazil and Australia would be largely complementary to current U.S. production. The U.S. industry now focuses on high-marble, premium fed beef, with very little low-grade/lean production. Increased lean beef imports would support higher value for the large volume of fat trim generated by U.S. premium production, actually supporting overall processing margins rather than competing with domestic output.

Q: How is the GLP-1 weight loss trend impacting protein demand, and is JBS adapting its product portfolio for this trend? / A: Management views the GLP-1 trend as reinforcing the existing structural growth in global protein demand. GLP-1 users are advised to increase protein intake to preserve muscle while losing weight, alongside broader consumer and regulatory trends that emphasize higher protein consumption for long-term health. JBS already focuses on core protein products, and is accelerating innovation of higher-protein, convenient prepared product lines to align with this trend, which is already visible in both the U.S. and Brazil.

Q: What are the main drivers of JBS' expanded first quarter CapEx, and what are the key expansion projects underway for 2026? / A: The main expansion projects for 2026 include a new Pure Prepared Foods facility in Walker County, a fully cooked bacon and sausage facility in Key Iowa, a fresh sausage plant in Perry Iowa, modernization of existing beef processing plants in Cactus Texas and Greene Colorado, a new chicken plant in Paraguay, and the Oman acquisition (which is fully financed by local banks with no cash contribution from JBS). The majority of these investments target expansion of higher-margin value-added and prepared food capacity.