JBS N.V. Class A Common Shares

Good morning and welcome to JBS second quarter of 2025 results conference call. At this time, all participants are in a 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 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 market conditions, on Brazil's overall economic performance, and on industry and international market behavior, and therefore are subject to change. Our president with us today, Gilberto Tomasoni, Global CEO of JPS, Guilherme Cavalcanti, Global CFO of JBS, Wesley Batista Filho, CEO of JBS USA, and Cristiane Assis, Investor Relations Director. Now, I'll turn the conference over to Gilberto Tomazoni, Global CEO of JBS. Mr. Tomazoni, you may begin your presentation.

Good morning, everyone. Thank you for joining us today for our earning call. The second quarter of 2025 marked the beginning of a new phase for JBS. With the launch of our shares on the New York Stock Exchange, we completed our dual listing. This is a strategic milestone that enhances our global visibility, broadens our investor base, and reinforces JBS's position as one of the world's leading food companies. I want to emphasize that this starts a new chapter of our trajectory. We see a clear path to long-term value creation, anchored in operational excellence, diversification, innovation, value-added products, and strong brands. It's worth highlighting that over the coming years, we will keep investing consistently to expand our platform and position the company to meet the global demand for protein. We truly believe, and GBS is well-positioned for the future, We are delivering our long-term strategy with discipline and consistency, and that gives us confidence in the path ahead. At the same time, we will stay fully committed to our mission of returning value to our shareholders. Evidence is by 1.2 billion in dividends. we paid this quarter, as well as today announcement of 400 million share repurchasing program. Let's take a closer look at the some strategic movement we have made this year. During the first half of 2025, we have made a several important investment in the United States. In May, we disclosed our plan to build a new fresh sausage facility in Iowa. totaling 135 million U.S. dollars. This came in addition to 200 million U.S. dollars allocated to upgrading our beer plants in Texas and Colorado, and 400 million for a new preparer food facility that Pilgrim's Building in Georgia. Pilgrim's Building in Georgia. Yesterday, we also announced an afforded 100 million US dollar investment to acquire an expand your facility, which will be transformers in the in larger ready to eat bacon and sausage plant in in our US operation. I want to stress here that all these projects are designed to support the growth of JBS' prepared food portfolio, helping us to meet the growth demand for customers and consumers for these products. Even amid a challenging macroeconomic environment and with ongoing pressure in some business units, our second quarter Performance, once again, reflected the resilience of our diversified global platform. Net sales were record, reaching 21 billion U.S. dollars, a 9% increase year over year. Adjusted VDA was 1.8 billion, and with a margin of 8.4%. Faulty operations, once again, stood out as a key highlight. Pilgrims achieved the highest EBITDA in its history, supported by lower grain costs and resilient U.S. demand. Results also reflect continuous growth in the prepared food portfolio, a strong relationship with the key customers, and a solid performance across fresh and crazy red segments in the U.S. Mexico and Europe delivered a strong result as well. I would like to particularly highlight that Seara delivered another quarter of consistent results. Despite the outbreak of avian influenza in Brazil, the business reached an AVIDA margin of 18.1%, driven by disciplined commercial strategy, product mix management, and a strong focus on innovation. The results highlight the robustness of our biosecurity protocols and the maturity of Brazilian sanitary systems. It is important to note that SWIFT in technical response in Brazil's sanitary authorities, together with the strict industry-wide control, ensured that only one isolated case was confirmed in the country at commercial farms. In the United States, our beef business continued to face a pressure from an unfavorable cattle cycle, as the spread between the livestock cost and beef price narrowed. The pork business was affected on a short-term basis by the trade restriction, and we expect the performance to return to a normal level over the next few quarters. Diversification remained one of our greatest threats. In Brazil, Friboi delivered strong results, driven by a new export approval and productivity gains. In Australia, we continue to benefit a favorable livestock cycle, with export growth and operational improvements, contributing to another quarter of consistent performance. We also reaffirmed our commitment to financial discipline, The quarter end with a net average 2.27 times in line with our long-term target in reflecting the stress of our capital structure and our financial management. With a strong, more balanced, and more innovative global platform, JBS is well prepared for the next phase of global opportunities. I want to conclude by saying that we remain confident in our teaming and ability to create long-term value. Thank you again for joining us today. I will now turn the call over to Guilherme, who will walk through the financial results and more details. Guilherme, please, go ahead.

Thank you, Tomasani. Let's now move on to the operational and financial highlights of the second quarter of 2025, starting on slide 13, please. Net revenue for the second quarter of 2025 reached a record of $21 billion. Adjusted EBITDA totaled $1.8 billion, which represents a margin of 8.4% in the quarter, while adjusted operating income was $1.2 billion, with a margin of 5.7%. Net profit was $528 million in the quarter, and earnings per share was $0.48 per share. Excluding the non-recurring item, adjusted net income would be $583 million, and the ETS would be 53 cents. Finally, the return on equity was 25.7%, and the return on invested capital was 17%. Although the difference in EBITDA between the second quarter 2024 and the second quarter 2025 was only $141 million, the free cash flow difference reached approximately $1.1 billion due to the mainly following factors. The difference in EBITDA, as mentioned above, $104 million of higher capital expenditures, $242 million increase in finished goods inventories in the US driven by higher prices. This cash is expected to return to the operating results over the coming quarters as sales are made. $250 million due to livestock hedging. Future purchases from suppliers such as fig lots at fixed prices are hedged through future contracts, exposing us to the spot price and thus matching with the mid-sales. Due to the sharp rise in the cattle and hog prices, there was a negative cash impact on operating results due to the hedge. This cash is expected to return in the following quarter as the physical purchases are settled. $122 million increase in legal settlements. $257 million in higher tax payments, mainly due to improved results from PPC and Australia in recent quarters. A $51 million impact on Seattle's chicken inventory caused by the market closure due to a single... it should return to around $4.5 billion, based on the following estimated breakdowns, which may change over time due to the variables beyond our control.

Can I continue?

Yeah.

So, capital expenditures of $2 billion in 2020 robotics and $2 billion in 2026, which already included maintenance capital. Working capital of $900 million in 2025 and $250 million in 2026. The additional $650 million in 2025 compared to 2026 is due to the inventory and hedge impacts explained earlier. Legal settlements of $200 million in 2025 and assuming zero in 2026. Biological assets of $650 million in 2025 and the same amount for 2026. Interest expenses of $1.15 billion in 2025 and $1.1 billion in 2026. Leasing expenses of $500 million in 2025 and repeating in 2026. Moving on to slide 16 to discuss our debt position and leverage. In June, we accessed the bull market to refinance our short-term and 2027 and 2038 and 2030 maturities. Strong investor demand allowed us to upsize the issuance to $3.5 billion, while achieving a record low spread for issuers with our credit ratings, which includes a $1 billion 40-year tranche. In addition, Ciara issued approximately $160 million in local debentures. We used the $3 billion to efficiently retire debt, clearing nearly all opportunities through 2031, As a result, our average maturity extended from 11 to 15 years, while the average cost increased by just 25 basis points to 5.6%. We kept the 2029 bond outstanding, given its low 3% coupon, along with the 2031 bond at 3.75%, and two 2032 no-trade coupons of 3.625 and 3%. From the $3.5 billion raised, $500 million was retained as excess cash. Leverage increased to 2.27 times in the second quarter of 2025, primarily due to $141 billion decline in last 12-month EBITDA and the payment of $1.5 billion in dividends. Interest probably remained stable at 7.7 times compared to the previous quarter. With leverage at the lower end, of our comfort range, stable interest coverage in line with recent quarters, no significant in the coming years, and a strong cash position, we announced a share buyback program of up to $400 million. We believe this represents an efficient use of excess cash given the current valuation multiples relative to our global peers. The repurchase programs may be implemented through open market purchase, privately negotiated transactions, or under Rule 10 of the Exchange Act. Even with the share buyback program, we expect to end the year with leverage below 2.5 times and interest coverage consistent with the end of 2024 levels at 7.4 times. Our $3.4 billion in revolving credit lines and available cash of $3 billion combined with expected cash generation in the second half provide a robust financial position to continue pursuing value creation opportunities to our shareholders. I now briefly go through the business units. We started with Sialans like 20 during the second quarter, 25. In the first half of the quarter, we saw a favorable commercial environment, both in the domestic and export markets. However, in mid-May, Brazil reported its first case of Asian flu in a commercial flock. The country was officially declared free of the disease again in June, but some key export markets remained temporarily closed, which affected commercial performance. Even with the temporary headwinds caused by the outbreak, Seattle achieved an adjusted EBITDA margin of 18.1% in the quarter, reflecting our strong focus, agility, and discipline in pursuing operational and commercial excellence. Moving on to slide 21, in the second quarter of 2025, JBS Brazil recorded a net revenue of 20% higher than in the second quarter of 2024. driven by strong demand in both international and domestic markets, which partially offset the sharp increase in cattle prices. As a result, they build a margin which is 6.4% in the port. Moving on to the slide 22, and now speaking in dollars and under U.S. GAAP, JBS beef North America net revenue in the second quarter grew 14% year-over-year, driven by strong demands and that growth cut out values to record levels in the U.S. However, profitability continues to be pressured by the challenging cattle cycle, which has also capitalized cattle prices at record highs, as well as by the additional headwinds related to global trade and animal health concerns in Mexico. On the slide 23, we have JDS Australia. In the annual comparison, the 20% revenue growth was primarily driven by higher volumes of beef exports. The GDPR margin reached 12.7% and increased 50 basis points compared to the same period last year, reflecting greater availability of animals for slaughter and gains in operation efficiency. Turning now to JBS USA Pork, net revenues for the pork were decreased by 5% year-over-year. The pork business was affected on a short-term basis by trade restrictions, but we expected performance to return to normal levels over the next few quarters. Pilgrims Pride, as highlighted on the large 25, reported a 4% increase in net revenue in the pork. In the second part of 2005, Pilgrims delivered record adjusted EBITDA of $687 million. In addition to our favorable commercial environment across its key markets, the strong performance reflects the successful execution of its strategy, including the strengthening partnership with the customer's expansion of value-added and branded products, innovation, and efficiency gains. With that in mind, I would like to open for our Q&A session.

Thank you. The floor is now open for questions. for questions from investors and analysts. If you have questions, please click raise hand at this time. If at any point your question is answered, you can remove yourself from the queue by clicking at lower hand. Questions will be taken in the order that they are received. Please hold while we poll for questions. The first question comes from Lucas Fajeda with JP Morgan. Please go ahead.

Hi, Guilherme. Thanks for the space for questions. Guilherme, sorry, I think your line broke a little bit in the beginning of the presentation, so I just wanted to explore with you a little better your scenario for the free cash flow break-even this year and next year. I just wanted to understand, especially if you already have any views on the COPX, given the the projects the company is announcing for processed foods. And if I may also quick a follow-up on the effect of the hedges, just wondering if you can explain a little better how much of that $250 million you mentioned is returning to the EBITDA in the following quarters. If you can explain a little better, that would be great. Thank you.

Hello, excuse me.

You can hear you.

Okay, so can you hear me now?

Yes.

okay so lucas uh basically i'm gonna uh repeat the numbers that was cut uh so kept expenditures uh two billion dollars for 2025 and two billion dollars for 2026 already including the extensions announced of course 2026 uh we still uh have to budget uh and in the beginning of next year we will give update on that uh Working capital, $900 million for this year and $250 million for 2026. This additional $6 million in 2025 compared to the next year is due to the inventory and hedging packages that I will explain again. Legal settlements of $300 million this year and assuming zero next year. Biological assets of $650 million this year and the same amount for next year. Interest expenses of $1.15 billion this year and $1 billion next year. And leasing expenses of $500 million in both years. So basically, that's how we get to the $5.5 billion free cash flow break even for 2025, and $4.5 billion for 2026. Now, the hedging explanation, basically, we purchase cattle and hogs, for example, for sometimes one year from now at a price fixed. because sometimes the feedlot needs to have a better prediction of their flows to invest in grains and buy the cattle. And then we sell futures to be on the spot. So basically we buy cattle in the future for a fixed price, and we sell futures to be spot and then meet with the sales price of the meat in the future. So basically this cash flow tends to return as the physical purchases are settled and the meat are sold. And, of course, it all depends on the market. at the coming quarters, but that's how it works. And the thing is, even though the cattle price raised very fast recently, we had this impact on the hedging, on the derivatives, and on the margin that we have to deposit, the cash margin we have to deposit. But, again, as the cattle price also comes back and we freeze, also the cash margin tends to be released. It's clear, Lucas.

Mr. Ferreira, you are with your microphone unmuted. Muted. Okay, thank you. The next question comes from Van Thurer with Barclays. Please go ahead.

Hi, good morning. Can you guys hear me? Yes, we can hear. Okay, audio not in our favor today. So... Two quick ones. So number one, obviously your business in Australia was really strong this quarter and kind of like surprised on the upside. So I was wondering if you can help us understand or maybe give a little bit more detail amongst the different categories in Australia, what, A, drove the significant top-line expansion, but on top of it also that margin expansion. Where was that coming from, which subcategory? And then I'll have a quick follow-up on the free cash flow.

Thank you. Ben, our results in Australia call for we increase volume, domestic and external, and we are able to increase price as well. And the strong performance came from beef. And The other business, they are quite on the same level of what were last quarter. Even on the exception of the salmon business, that was a bit lower because of the disease we had and we had less amount, volume of salmon to sell. But this, consider the size of our salmon business is not relevant in all, consider all all of our fees in Australia, we can sell to you that the results, improved results, was in the Carol. And we are seeing continuous for this year.

Okay, that's very clear. And then one for Guy, just to be clear on what we've talked about following up with Luca's question, the free cash flow, as a starting point, like from a break-even perspective, we should still use the IFRS EBITDA, correct?

Correct. I'm talking all in IFRS EBITDA.

Okay. I just wanted to clarify that. Perfect. Thank you very much, and congrats. I'll pass it on. Thank you, Matt.

The next question comes from Enrique Brustolin with Bradesco. Please go ahead.

Good morning, Tomazoni, Guilherme, Wesley, and Chris. Thank you for taking my questions. I have two that I would like to explore in US beef mainly. We saw this big sequential margin deterioration, right, which was also typically below some of what was reported already by peers. So I would like to understand a little bit more in the quarter specifically what's behind it. If there were, you know, some components that could be seen as one-off, given how your operations are structured with the vertical integration on some of the byproducts, and that we could see some improvement in the coming quarters. So that's the first one. And the second, also on U.S. beef, is based on the experience you already have on that market and navigating previous cycles, lows, what do you believe will be needed to bring margins back to break-even levels? And I know this is not an easy one, but, I mean, if you think it will mostly depend on cattle supplies coming back to growth once again, Or there are things that could happen before that, capacity adjustments, even the trade barriers being improved, that could bring margins back to those levels sooner than the cattle availability grows. Those would be the two. Thank you.

Good morning, Henrique. So, a few comments. On our performance during the quarter, it was a very challenging quarter for sure. And one of the things that makes it very challenging is when the market has a huge increase in volatility and price, like we have, just to put it in perspective, right? So, if I were to count at the end, the last quarter of last year was at around – $190 per 100 weight, and we went up to $230 to $238, and actually during the second quarter was around $225. And when those swings are really huge like that, sometimes you see some gaps in the – some challenges in the quarter that's basically – positioning, and that's a short-term impact. It's a relevant impact, but it's a short-term impact. Actually, we just did a picture of our beef plants, and all the work that we've been doing from an operational perspective, we're very confident with the work that the plants are doing, and in terms of efficiencies, in terms of use, they're actually improving versus the previous quarters. And so we don't think that there is anything regarding operations. I think it's much more to do with positioning and especially when you have an explosive market like what we had in the last quarter. When it comes to, you know, where we see from a cycle perspective, and like you said, adjustment in capacity versus cow herd review, obviously we talk a lot about cow herd review because that's what's, you know, what we know in the market, what we see, what we have data, you know, and we are confident that we are fully into herd rebuild. One of the true information that's very relevant is cow slaughter is down again this year. And if you look, it's been compounding about 10% to 15%. decrease in cow kills year after year, so that's a good sign. We're seeing less heifers as percentage of feeder cattle versus previous periods. So those things are encouraging. Obviously, when they start happening, they take a double hit, right? You already have less cattle. Now you have less heifers coming to market because they're being retained, which is good news long-term, but short-term, it makes it more challenging. You know, talking about capacity adjustments, I can obviously just talk about our own business. I can't talk about the market because I wouldn't be able to answer that. But, you know, we're comfortable with our current capacity and we don't see any changes coming from that end on our side.

That's clear, Wesley. Thanks very much.

The next question comes from Andros Trozic with Bank of Montreal. Please go ahead.

Can you hear me now? Yes. Okay, great. Good morning. Thanks for taking the questions. My first one, can you talk about the outlook for Brazil beef? With the U.S. tariffs, how is that impacting the operating environment and the supply-demand balance there, and how should that play out in margins over the balance of the year?

Hi, Andrew. Thank you for the question. When you look for – just to make a comment first by the impact of the tariff, and then I'll think about how to look about the business – The tariffs were recently in payment. There is no impact in the quarter. When you look globally, the impact of JBS overall will be immaterial. If you look just for free boy in Brazil, as a whole, the impact is not relevant. But some specific plants that exported more to U.S. maybe, but this is the good things for our global platform that allow to production to be redirected and impact to be very mitigated. I think this is one of the moments that the value of the platform is make more strong. If we talk about the future, it's too early to estimate the real impact. And it will depend how the global market will be rebalanced, because the system is interconnected. Maybe some countries, will be substitute a Brazilian product, Australia and in other countries. Even besides of that, some of US product exported today could remain in the market. And we put, if made that Brazil will be replaced that one that was directed to the US. That for us is not, we are not seeing today this Really, a strong impact is too early to quantify the impact. About the outlook, if you see that the free boy, they show a strong growth in volume, and even in price. Domestic and export. We lost a little bit in terms of gross margins. But we gain more than that. We compensate with a higher bond. We see that for the next quarter, our beef operation in Brazil continues to deliver good results.

That was a very helpful color on that. And then I wanted to also ask on the U.S. prepared foods issue, strategy, and you listed a number of investments that you've made there. How much will that increase your U.S. prepared foods volumes when I take all of those projects together? And as you think about continuing to build out that strategy, are you comfortable going with internal projects and smaller acquisitions kind of one by one? Or I guess how are you thinking about the aspirations and achieving the aspirations in U.S. prepared foods? Hi, Andrew.

So on the prepared food side, On our chicken, the plant that we announced in Walker County, it's a significant increase. It's going to be almost going to double our capacity on that. But on the other side, on the pork side, on the sausage and cooked sausage, It will probably be a 20%. I'm throwing, you know, I can probably get more precise numbers afterwards and send that your way, but it will be a significant increase on both sides. Maybe an average of 25%, 30% increase of our total capacity on volumes in the U.S., but we certainly can send you some more precise numbers afterwards. Our approach to this is pretty simple. We are on how we're investing and where we're deciding to grow. We're really starting off going by where we're seeing the demand in the market and where we're seeing that the market has a need for products. You know, we have grown a lot our prepared food side on chicken, and today we actually need more capacity to continue to grow. That's our bottleneck for growth in this market is actually production capacity. It's much more production capacity than actually being able to sell. And on the pork side of prepared foods, We've been working a lot with customers and the demand for these products that we're starting to make are pretty large and we decided to go there. We will obviously always look at assets for acquisitions and obviously there is a lot of things that go into place. There is actually something out in the market for an acquisition or if there is or if there isn't, and if there is, if the assets are something that we think are good assets for the long term. In these three cases, we decided that the best thing to do was to build a plant, modern plants that are going to be completely new and ready for the next 10, 15, 20 years. So that's what we decided. We're very excited about these three plants, and we think they're going to be among the best plants in the country.

Great. Thank you very much.

The next question comes from Guilherme Gutia with BTG. Please go ahead.

Hi, guys. Good morning. So just want to discuss a bit here about the chicken business. So maybe starting with Seara. Just if you guys could give us a bit more color on how the Avian flu outbreak impacted the company results. Maybe break down a bit how was the second segment profitability and how the outbreak impacted it. And also on chicken, but on a different topic, just want to discuss a little bit more here about the supply and demand. So, we already discussed here in previous opportunities about how the lower hatchability and higher mortality rates are impacting the supply of the chicken supply. But, like, what do you guys expect ahead? Like, until when do you guys believe the supply constraints can delay the cycle from turning? So, that's it. Thank you.

Thank you for the question. I will be very pragmatic with the answer here to you. When the outbreak happened in Brazil, and all, practically 100% of the market to export to Brazil closed it, and we say that the impact that moment in June, if that was in June, the impact of Al-Ibida in June was around 5%. Not just in chicken, the company as a whole, Seara. And now, some of the markets reopened, remain closed to important markets, that Europe and China. We see that the government and the Minister of Agriculture is working to reopen market. I saw in the media yesterday that President Lula discussed with President Xi Jinping about the issue. I'm so confident that may be reopened very close these two markets. And because there is no technical reason to be closed, because all of the technical things was answered, a question that the market made, and ONDA was declared Brazil free. We are so confident that will be reopened in the coming weeks. But of the fact that today is closed and the impact for these two markets is in the impact is in the in the uh profitability of seora there will be around uh two percentage points uh one one one point five say one point five two percent points that is the impact we have now uh with this To see, I think with this, I hope we answered your question of the first question. The second question would be the outlook of the chicken business. We saw a strong demand for chicken globally. All of the markets in Brazil, in the U.S., Europe, Mexico, all of the markets see strong demand. Because in the U.S., the consumers have changed, substitute beef from chicken. And we see all international markets very demand. Brazil is, we had the problem, but the market that opened, we export. There is strong demand for the volume. All the things that you have mentioned before about genetic, about mortality, about productivity, not changed so far. And we are remain confident from the outlook for this year for chickens.

Very clear. Thank you very much.

Muito claro. Obrigado. The next question comes from Priya Origupta from Berkeley. Please, go ahead.

Hi. Thank you so much for taking my question. Making sure you guys can hear me, okay?

Yes, we can hear you, Priya.

OK, perfect. Wesley, I'd love to just follow up on the comments that you are making around the prepared foods business. You did highlight that the company does consistently look at acquisitions as well as it considers or how to approach acquisitions. growing out capacity. Based on some of these investments that you guys have been talking about, should we assume that the need for acquisitions might be lower in the near future in the prepared side of the business? Or is there still scope to look at inorganic growth?

I agree. It's difficult to forecast what's going to be the future, right, on this, because these are all based on opportunities, right? Acquisitions are always based on opportunities. So always like we've always done in our history, we're going to look at anything that comes up, but it's difficult to forecast if it's going to be more one or more the other. Obviously, when we want to grow a business, we look at both. So it will be difficult for me to project for you.

That's helpful. It's just more of an ongoing thing. With regards to the beef cycle, I would say getting to this point of heifer retention has been a little bit more elongated than we've seen in the past. What's your perspective on how long it could take us to really start to see the bottom on profitability. So how are you thinking about getting back to break even in the beef segment and then starting to see growth?

I think this year and the beginning of next year are going to be the bottom side of the cycle. And then from there, It's going to be a gradual increase, somewhere end of 27, beginning of 28. It's going to be gradual. It's not going to be overnight, right, that you're going to see a complete change in the business. It's going to be gradual. But I think the worst part of the cycle is going to be right here for the next maybe three, four quarters. And then from there, we're going to see this change and improvement.

Okay, that's helpful. And Guilherme, can you remind us again how you think about your ongoing cash balance? You know, we're just shy of about $3 billion at this point. We include some of the margin cash in there. Is that the right level for the near term, or would you like to have a little bit more of a cushion there around where you maintain cash?

Hi, Bria. No, I think there is more than enough. I think given the company's cash conversion cycle today, a cash of $2 billion worldwide is more than enough for the operation. So it's really our comfort with the current levels. And that's one of the reasons that we announced the share buyback programs, because, as you know, we paid $3 billion in debts. And the other debts that we have up to 2032, they all have coupons lower than 375%. So it was not efficient to buy the debt with excess cash. So we announced the share buyback program. But we still have cash above what we need today. to our cash conversion cycle to operate.

Great. And then just one last administrative question. Where are you guys in terms of updating the bond ticker now that the equity listing has been completed and then putting the shelf in place? Thank you.

Okay, so first, the ticker of BZ, we are talking, it's out of our control. We're talking to Bloomberg for a while now to take the BZ out of the ticker. We'll keep following on that. And the shelf registration we need, first we'll finish all the exchange offer to make all the remaining 144 bonds registered. And then we need the first register offer registered. for them to be a weak seed and have to shelf registration. So we first need to do an issuance of that inequity for them or registered, so then to ask for the shell registration and we see. So I think maybe we need a new issuance, which currently we don't envision, given that we just, again, as we talked about, we have more than enough cash. We have no maturities in the near term. So I don't see we coming to the market anytime soon.

Great. Thank you so much.

The next question comes from Gustavo Traiano with Itaú PBA. Please go ahead.

Hello, everyone. Can you guys hear me? Yes, Gustavo, we can hear you. Thanks, Gui. So, actually, my question is on U.S. pork. And earlier in the call, you guys mentioned that margins should recover in the next two quarters. So I just wanted to have more granularity on this topic. Maybe the reasons behind the margin compression in US GAAP in this quarter and why do you believe they are improving in the remainder of the year? And if possible, if we could explore a little bit more like the pace of this recovery and when do you expect these margins to reach your, I see, recurring level going forward? And if we could discuss maybe the margin performance in the integrated part of the business compared with the non-integrated part of the business, if that's a fair comparison to do for this quarter, if there are different margin performance between those two operations in there. Thank you very much.

Gustavo, good morning. So the U.S. pork performance this quarter was a lot of it was because of some of the trade disruptions we had with product going to China and there were for that period of time there was 100 and some percent tariffs and we had products coming back, products that we had to reshuffle and that created a disruption that we did not expect. We expect that as of the third quarter of 2025 we're Right now we're back to normal in margins, so that's not something that we're overly concerned about being a gradual recovery. We think it's an immediate recovery. It was more of a one-off in the second quarter. We actually are quite optimistic about margins in the pork business. We've grown our live production. Like you're saying, you're asking about the integrated supply in the last five to ten years. We've grown that, and when we see grain prices being at a relatively low level based on history, and on the other side you see a potential for the cutout of pork to become, when there is low availability of beef and high prices of beef, pork becomes a very good option. So you could see a little bit of strength there because of that. We're actually quite optimistic about fork margins in the U.S. going forward.

That's super clear. Thank you very much.

The next question comes from Leonardo Alencar with XP. Please go ahead.

Good morning. I hope you can hear me.

Yes, we can hear you. Just speak a little louder, please, Leonardo.

Okay, thank you. Good morning to Mazzoni, Cavalcanti, Cleveland, Wesley. Thank you for taking my question. I would like to go a little deeper regarding the US beef. I understand this hurdle building is ongoing and that you're expecting that to change the scenario for at least three, four quarters ahead. But we need to consider the other factors in place, the issue with the cattle import from Mexico that is not really happening right now, and also the impact of the terrorist beef Brazil restricting import of trimmings of beef, lean beef. If you could just go a little deeper on the discussion about the cycle in the U.S., and if you could expect this average wave of cattle continue to increase or even decrease, maybe, and just to understand how this is going to play in the future, because this was a very strong change of metrics, we could say, the average wave of the cattle, and that increased probably the production of cattle. of feather meat, let's call it. So, this was one of my questions. And the other one would be a follow-up regarding sad. I understand that the issue with China and we are expecting this restriction to drop in the possible future. But then, What's your read on China, on the market in China, demand in China? Since they already, they are not importing meat from Brazil for a while now, and demand is probably still good, but then I wanted to hear that from you, if stocks are decreasing in China right now. So if you could expect China to resume imports to a previous level we were seeing before the restrictions, or if there's room for improvement on that. So that's my question. Thank you.

Morning, Leonardo. So, you know, you bring in a few good points. This Mexico situation is obviously quite relevant. In the short term, there is about 1.2 million head of feeder cattle that comes to the U.S. and they're fed in the U.S. So, you know, as of November last year, the border got shut. And beginning of this year, it opened. Then it got shut down again. And, you know, we have been following this situation quite closely, and what we realize is that, you know, the Mexican government is doing a lot of work to make sure that that situation is handled and working with the U.S. government to figure out a way to reopen and continue the flow of cattle. We think that this is going to be it's very relevant in the medium term, in the short term, but we don't think that necessarily would impact the long term of the cycle of the herd review, so I would disconnect those things. It's a very important point that you bring up, and it does create an impact in the U.S., especially in the south of the U.S., which, you know, it's where a lot of that cattle stays. When it comes to imports and Obviously, lean trim is something that the U.S. has imported for a long time. We blend that. The market blends it with fat trim and make ground beef. So when you lose a source like Brazil, it's significant. So, you know, the impact of that, it's still relatively early to see because there is inventory in the U.S. There was inventory coming to the U.S. So we haven't seen 100% of what this is going to look like, but certainly domestic meat or meat that is imported that's lean is going to appreciate in value and going to have a higher value. And we'll see exactly how big the impact is going to be when that Brazilian inventory of meat in the U.S. kind of gets used and we will see less flow of Brazilian beef coming in. So it's too early to tell exactly how big is going to be the impact.

Okay, thank you. What about China, chicken, seara?

Leonardo, related to chicken, seara, I think we, I don't know what's clear before, but the impact of the avian flu, when we had the month that had the outbreak, was really a strong impact, was around 5% in the result of Seattle. Now, after release on markets, the impact is around 1.5% percentage of EBITDA. And we are really confident with the future of this business because demand is strong, domestic and export. And not just in Brazil. We see all of the markets. We see in the U.S., with the release of the results, and I think Fabio mentioned that the strong demand in the U.S. is not different in Mexico, is not different in Europe. We see, and when you look for the supply, we have the same restriction we had before. We are discussing about genetic, about mortality, All of the issues remain. It may increase a little bit more the number of bullets, but when you look for the demand, the increase in the percentage of the number of bullets, it does not make really a difference to impact the results. We remain very positive with the chicken business for this year.

Okay. Thank you very much for the details.

The next question comes from John Baumgartner with Mizuho. Please go ahead. Mr. Baumgartner, your microphone is muted on your side.

Can you hear me now?

Yes, thank you.

Thank you. So just, yeah, first question for me, thanks for the opportunity. Following up on U.S. prepared foods...

Excuse me, ladies and gentlemen, it seems that Mr. Baumgardner has disconnected his line. I'll be moving to the next question, okay? The next question comes from Renata Cabral with Citi. Please go ahead.

Hi, everyone. Thank you so much for taking my question. My first one will be on the Brazilian beef cycle, actually. The initial expectations was that maybe this year, 2025, towards 2026, would have the change in cycle in Brazil. We had cattle prices with a lot of volatility naturally because the recent trade tensions. So my question is the previous expectations remains regarding the cattle cycle in Brazil. If you could discuss a little bit would be really helpful. And my second question is on disclosures. Now that you are reporting under U.S. GAAP, it's much easier for us to compare your numbers with U.S. peers. And given your recent investments in – announced investments in prepared foods, would you be able to share even a rough sense of range of prepared foods represents – your business today, or looking ahead, do you see room to provide more details over time to help us to have a better comparison on this front? Thank you so much.

Okay, so I will start with the second question. So basically, we have a problem. First of all, the thing is our business segment has to be how we manage the company. So that's why we don't have prepared foods as a business segment because we have prepared foods in Europe, in the U.S., in PPC, in Brazil, and so on. So that's the reason. Of course, we can try to make managerial numbers for how much should be prepared foods. But then comes the question on what is the threshold, what's divided, what is prepared or not. So let's say if we get what is really processed food, I would guess that a 15% currently would be a good estimate. But, of course, if you include, for example, brands, case-readies, or just brands that you put in the Natura meet, we can go up to 50% if you put brands on the value-added side. that's something in between that uh and of course we will always try to to continue to improve uh our disclosures and again as we grow and then we'll try to to have this number uh developing uh to a more to a better disclosure i think it's related to renata related to uh beef cycle in brazil

We are very optimistic with the cycle in Brazil. And I believe that is Brazilian, like the Brazilian sector is in a transformation. Because when we, Brazil is increasing the feedlot, that the feedlot, it make possible to have increase, reduce the age of the animals to go to processor plants, to have genetic improvements. You have more feedlot because the DDG now is available because of ethanol, corn ethanol. And this is kind of the change in the livestock sector that will be and enhance the production. Producers make a good margin today because if you look for the quarter, the price of the beef increased 20% and the price of livestock increased 40%. It means that this is a good moment for the producers. There is a lot of incentives to raise animals. And the possibility for increased productivity is huge in Brazil. Brazil is a half of the Earth of the U.S. And we produce the same amount of meat with the U.S. If you look at this, it's a huge opportunity for improvement. And today, with the conditions we see in the market that I already mentioned, we are positive for this year and the next year for the livestock in Brazil.

Thank you so much, Tomazone and Guilherme. That was helpful.

The next question comes from Mr. John Baumgartner with Mizzou. Please go ahead.

Good morning. Thanks for the question. Can you hear me? Yes. Good morning. Thank you. Just wanted to follow up on U.S. prepared foods and your comments there, Wesley. You're making the investments in chicken and bacon and sausage and some of these Italian meats, and you mentioned responding to market demand. I'm curious, are there any particular white spaces in terms of species or product format that you still see as incremental opportunities for you, maybe more in beef or other types of pork? And then as you develop the portfolio, how do you anticipate the marketing to evolve? Are there opportunities for partnerships like you're doing with Netflix and Ciara in Brazil?

John, so we see that where we're investing, where we have announced so far is where we're really seeing the demand is, like we mentioned, the sausage, the cooked sausage. Just to explain what that is, it's a lot of that is what would go into what we've seen, pizza toppings and salads. So it's prepared bacon and cooked bacon and sausage. We're seeing a lot of demand there. That's where we built. We're very confident about that. You know, as we see other opportunities, we might communicate. But so far, that's where we see the opportunities and where we invested. On the Pilgrim side, we've done a fantastic job here in the U.S. with branding our products. And, you know, great success story with JustBear and, you know, Achievement. pretty large market share in a pretty short time and a lot of distribution. And it's a brand that's continued to grow very much and do a good job. And there is a huge opportunity for us to do that on the pork side, on the red meat side of prepared foods. And we haven't done much of that, but that's something that's for sure part of our plans and part of what we see as a potential for this prepared foods business in the U.S.

Thanks, Wesley. And then, you know, coming back to U.S. beef and what the market's seeing in terms of resilient demand, despite weaker food service traffic, the broader economic challenges facing consumers, I'm curious your thoughts on that demand resilience. Are you seeing something different in terms of how consumers interact with beef during this cycle? Is it the broader protein movement that's driving consumers to prioritize spending on beef more so than past inflationary cycles? Any observations you have on demand resilience there would be great.

Yeah, I think it's, you know, there is one comparison that's very, very illustrative of how resilient beef demand is. You know, we've always compared chicken breasts with pork loin and ground beef as, you know, accessible meat. affordable sources of protein, and we always compare those items as items that, you know, the consumer kind of jumps back and forth. And we've obviously seen with the short supply of cattle and all of that, we've seen the ground beef gap of price of ground beef versus those two other sources of protein really open the gap. But you mentioned, right, food services is lower, but on the retail side, we've seen, and actually on the overall side, we've seen demand for ground beef continues to be pretty strong, and people choosing to still consume ground beef, even with this delta, this larger gap in price between pork and chicken, you know, consumers are still really, really going after beef. I think there is a few things. I think, yes, there are those trends of people eating more protein, but that benefits all of the categories. People, you know, prioritizing protein, all of that is very important. But I think actually what really, you know, I think it's a testament to is the quality of U.S. beef and how the U.S. consumer trusts it and really likes it. And even, you know, at a premium versus other proteins, they're still really looking forward to consume it and seek it. So, obviously, this price being so much different in pork and chicken is more to do with the cattle cycle than anything, but The consumer is responding to that and still choosing to consume US beef because of its quality and how much they trust the product. That's what we think. Thanks, Wesley.

The next question comes from Ricardo Alves with Morgan Stanley. Please go ahead.

Hey, everybody. Good morning. Thanks for the call. I have three questions, two for Guilherme. Guilherme, on working capital, I believe you mentioned $900 million of consumption this year, right? So that would imply something like $600 million of cash relief into the second half. I just wanted to confirm that level of magnitude at least, and if that's correct, if you could break it down in terms of how much of that would come from inventories, or if you can just give some more – granularity in terms of working capital relief into the second half and the magnitude. That's the first question. The second one, also to you, Guilherme, if I may, JBS has been paying a lot of dividends over the past few years, and I think that this year was not different. And now you have the buyback announcement, which is obviously appreciated. What is your current mindset on the distribution side? Are you sticking to that idea of returning something like $1 billion per year? Because it actually seems that you're running well above those targets. So I just wanted to get the latest on your latest thoughts on the distribution side. My last question to you, Wesley, I thought it was very interesting the comment you made on pork, that the sequential recovery would be immediate. I think that that's the expression you used, as opposed to gradual. When you look at the beef performance this quarter, do you think that there are elements to the performance of the second quarter that you could also have an immediate sequential recovery? I know that you also made it clear on the U.S. beef side that you're going to have three or four quarters of very tough profitability, which is a view that we tend to share. But on a sequential basis, this minus 4%, are there elements, are there factors that you believe you can overcome really fast to improve to, I don't know, maybe closer to low single-digit negative margins? Those are my questions. Thank you so much.

Hi, Ricardo. So basically for this year, I think the best estimation in terms of cash generation for the second half is that what I mentioned that the free cash flow break-even for this year at $5.5 billion. So get whatever is your denied estimation for the whole year, minus 5.5, and then takes out 25% effective tax rate. that should give you a good estimation of how much cash we will generate and you're right we'll be releasing uh cash in the second half as all every year we we do uh and it comes from decrease in inventories, and the postponed – in the last quarter, we always have around at least $400 million of postponement of livestock payments that releases working capital in the fourth quarter. So that – I think that can – that the math of the cash flow break-even that I mentioned can give you a good estimation of what we are expecting to generate the whole year, and of course, consequently, in the second half. So in terms of the dividends, if you look at how much we paid in dividends since 2020, we are exactly $1 billion, $975 million average, in fact. So we paid in 2020 around $800 million, 2021 another $800 million, $900 million. So in 2023, we paid 450, but we promised there the listing that we paid this year. So if we consider that the listing dividend that we paid in June was really promised in 2023 and get back this number, so you'll see that we've been paying on the average of the last five years is exactly around $1 billion. That's, as I mentioned. And that's why the excess cash, we just turned it on into share buybacks, as we did in the past, in 2021. For example, we used the excess cash for share buybacks. So it doesn't change. Going forward, I think we continue with the mindset of paying around a billion dollars in dividends every year and So, of course, it depends on the M&A opportunity. So, of course, this year we could increase to share buybacks given there was no relevant M&A this year. So, I think it didn't change. So, $1 billion of dividends. We continue to think about $1 billion of growth capex going forward. And, again, and also having free cash flow for M&A. If there's no M&A, we can improve the distribution on a buyback, for example.

Ricardo, sorry. Okay, go ahead, go ahead, Wesley. So, Ricardo, on the beef side, we think that our internal performance Again, I think we're going to perform better in the third quarter than we did in the second quarter. And part of that is because the things that we can improve are much more on the mid-margin side, on the buy and sell side versus operations. So we think that that can be a quicker improvement in performance. Having said that, it's a lot more difficult for you to project and to try to predict the beef market today than the pork market because the pork market is a lot more stable today versus the beef market and it's really tough right now to have a really long term perspective of exactly what the market itself is going to do on beef but we think on our own performance we could have a much better quarter on the third quarter versus the second quarter on the things that depend on us Thank you so much Wesley Thanks Jeremy

The next question comes from Ricardo Boyachi with Safra. Please go ahead.

Good morning, everyone. Thanks for the opportunity. I have a follow-up question on prepared foods. Wesley already gave some nice callers, but I wanted to explore the opportunity in terms of sustainable margin improvement that the ongoing project could provide for the company. Any estimate of what the incremental normalized margin could be when these projects mature? in the future. That's the first question. And the second one, I think it goes to Guilherme. Regarding the shareholder base, since the dual listing, how do you see it evolving? Are you seeing already U.S. investors gaining traction? Are you already starting to access fund managers that maybe you previously couldn't? Any color on how that is evolving would be great as well. Thank you, guys.

Ricardo, good morning. So we think that, you know, the markets that the products that we're investing in and the categories that we're investing in are categories that should have higher double-digit margins, around 15% is our expectation. And so we should bring the average of our EBITDA up.

Ricardo, our expectation in all of the projects of PREPARE and the ROI will be around 20%.

So in terms of shareholder base, so first of all, I think since we listed New York Stock Exchange, our average trading daily volume more than doubled when we compared to the last year. And our IR team is receiving a lot of reverse inquiries of new investors, new U.S. investors that are starting to study the story of JDS. We increased it already, our investor, the foreign investor base. And especially on the conferences that we have, for example, we have in September conferences already scheduled, the number of meetings with JBS increasingly 60%. So we have full day schedules in conference. So I think people are starting to get the story, making their models. So we'll be doing also all these semester non-dual shows in Boston, New York, Los Angeles, San Francisco, Chicago, Toronto, so on and so forth until the end of the year. So to try to get also Nashville to get these new investors. And at the same time, again, as I mentioned before, we start checking the boxes to get to the index, given that today 54% of the assets under management are passive. This September, we will have, for example, a FTSE index will release their rebalancing, so you'll have a vision. where we're going to be, for example, in the Russell next year. So most likely June next year we'll be in the Russell. And, again, trying to check the boxes and doing developments like we did in terms of releasing numbers in U.S. comparison to be able to be eligible to the most index that we can be.

That's great, guys. Thank you very much.

The next question comes from Guilherme Palhares with Santander. Please go ahead.

Good morning, everyone. Thank you for taking the question. So just a quick view here on the table egg industry. You guys, of course, had the investment on Munchketa. I'd like to hear your thoughts now that you are closer to the business, your prospects. And if you could also read a bit how this is playing out in the U.S., whether there are opportunities there. We saw the very strong prices of eggs there. and Brazil also being a player on the exports during Q2. So if you could share a bit your thoughts around that business, what it means for growth in the next couple of years for the company, I would appreciate that.

Guilherme, thank you for the question. When we announced our company, joint but when we bought 50 of mantiguera and we are mentioned that is a new uh or is a new wave of growth and we are increase our diversification of our platform and we and we want to do with the eggs what we have done with chicken and pork and beef to be one of the leader of the global leader of the category This is the strategy. We cannot mention one or other strategy because this will be responsible for Manticera, not for us to say that what will be acquisition or something like that. All I can say is it's our priority for growth, both in Brazil and U.S. in the ag sector.

Amazonio, could you share a bit your thoughts about the growth of this category? Because it seems that when you look in terms of production in Brazil, it has been outpacing other proteins as well. So what is your thought going forward for the industry as a whole?

I think it's very positive, Guilherme, because I think we have mentioned in other calls that the consumers, now they have a preference for protein. Proteins become more healthy. And it is a new trend. And when you look for the types of protein, we see that the eggs is more affordable among all the other proteins that are available in the market. It means that eggs keep growing, and eggs become very healthy. And I think it is an opportunity. to create brands and eggs as well. And Manticare is start to do that already with the Epi Eggs and Manticare and some other brands. They are developed. This is the strategy. We see that this category will be grow. And we can enter in the value-add eggs product as well. We are so excited with the grow of this category. And because of that, we make this investment. And we consider this category one of the category we are really make difference in terms of growing the future.

Thank you, Tomasane.

The next question comes from Igor Gedges with Genial. Please go ahead.

Good morning, everyone. Thank you for taking my questions. Can you hear me?

Yes, we can hear you. Good morning.

My question is about the U.S. pork unit. You exceed our expectations in terms of margins, mainly due to the resilience of domestic pork consumption in the U.S. But beyond that, you mentioned the expansion of high value-added products, which partially offset the negative pressure on pork or fowl prices, redirect to pet food and animal feeding industry due to trade restrictions. In other words, as we understand it, the margin could have been even better if you realized price had behaved normally. I would like to understand if there's an expectation to resume normal shipments of PocoFall to China and restore the realized price in second half. Thank you once again.

Igor, good morning. The trade with China after the trade truce has been kind of in place here and postponed has already resumed to China and it's normal as of right now.

So in the next quarter, we can maybe see the realized price of ForkUS going up in your view?

Yeah, we could see normalized margins from the third quarter forward.

Okay, thank you very much. Okay, thank you very much.

The next question comes from Isabella Simonato with Bank of America. Please go ahead.

Thank you. Hi, everyone. Thank you for the call. Just a quick question on U.S. Fork and most related to accounting, actually. We saw a big difference, right, in the IFRS margin and U.S. GAAP, which happened in the past, and you guys put a footnote explaining a little bit of the accounting. So I think our perception, right, is that you took a hit when we think about the U.S. cap margin in the end of the quarter because of lower cutout prices, right, while hot prices moved up during the quarter. So back to the discussion, right, of margin improvement in Q3, can we assume that the margin, right, for the average of the quarter was actually a little bit higher than those 6.5%, or if you can break down what was the counting impact regarding biological assets and mark-to-market of inventories. I think that will help to clarify a little bit of the heat on profitability. Thank you.

Good morning. Look, we manage the business here on a day-to-day, on a US GAAP basis, so we don't manage in the US, we manage it in US GAAP, so we don't follow this on IFRS margins on a day-to-day basis. When I mentioned the improvement in margin next quarter and normalizing, going back to normal from where we expect these margins to look like it's It's on a U.S. GAAP basis, and it doesn't have really a lot to do with U.S. GAAP IFRS differences.

I got it. Thank you.

The next question comes from Puran Sharma with Stevens. Please go ahead.

Good morning. Thanks for the question here. Just wanted to parse into Australia a little bit more. I think you mentioned before the other businesses were running about the same as the prior quarter, maybe except for the salmon business. But the strong performance came from beef. It sounds like there's continued favorability in terms of the cattle cycle. So I was just wondering, you know, as you look out, I think you said you see room for continued improvement for the year. And I was wondering if you meant that on a sequential basis, like when I look at EBITDA margins, do they sequentially improve from these strong levels, or were you thinking more on kind of a year-over-year basis?

Thank you for the question. We see that the margin of the Australian business will be two digits. And the common quarters, we see favorable livestock availability. We see that improving our results on the salmon business. And the other business, they are very stable. Pork performs very well, and prepared food is doing well. And see that... 50% of our business in Australia is beef, and we see these results will be above two digits. Above, no, it will be two digits, sorry for that. It's two digits, and we remain confident because we are talking, the other part is that the cattle are available, but there is too much rain. They are not able to catch the cattle in the farms. And now the environment condition is much better, and we have normalized our operations. We are working and our plants are full, and we remain confident of this business.

Great. I appreciate that. And just as a follow-up, and wanted to hone in further on the U.S. and Brazil tariff situation. It sounds like JBS Brazil can find some offsets. You guys mentioned your global platform, and, you know, so I think you could find some offsets if you see some weakness there. But I just wanted to ask about the U.S. chicken business, Pilgrim's Pride. Typically, 4Q is a period where you see seasonal weakness for chicken. And I think this year we're seeing just a little bit of incremental supply growth when it comes to egg set. But I'm trying to think about the Brazilian kind of beef situation. Do you think this bodes positively for PPC? And if so, can you help us kind of think about how much room for improvement there can be from a potential lower beef supply because of Brazilian tariffs?

I think there is too early to estimate the real impact. Now, because we see that the volume from Brazil, that Brazil not export to U.S., maybe we replace from the other markets, from Australia and from other countries. And as I mentioned before, besides of that, some of the U.S. products, today are exported, could be remade in the domestic market. The end, I think, is the U.S. market will be supplied from the one side, from the other side. And this will be open, the opportunity for Brazil, because this is an interconnected system. There is no more production of beef globally. If some countries, they directed its sales to U.S., there will be open opportunity for the market that they leave. And I think we need to wait for this rebalance situation that we can more estimate what will be the impact of that. Related to chicken, you are right. There is a little bit increase in terms of the egg set. But when you see the demands, I think it's – we talk about 1%, 2%. And the demand for protein is much higher than this. And we don't see any reason to not to be in accordance to this normal cycle of the business.

Great. Thank you for the call, Eric.

Thank you, everyone. Ladies and gentlemen, there being no further questions, I would like to pass the floor to Mr. Gilberto Tomazoni.

I would like to, once again, thank you, everyone, for joining this call, this quarter market hour, at least in nice. We reaffirm our focus on growth and deliver value to shareholders. As well, our confidence in the threat of our diversified platform, both in terms of geographic and protein. Year after year, it has proven to be the right strategy and excellent tool to protect companies for cycles, supply chain disruption, or geopolitical impacts. I would like also to take this opportunity to thank all JVS team members. Our company is truly powered by people who share a common mission and are focused on delivering better results for every day. Thank you all.

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