SAO PAULO – Brazilian meat giant JBS SA played down the effects of COVID-19-related lockdowns in China, saying they would not affect demand for JBS products despite causing logistics concerns, according to management remarks on Thursday.
During the first quarter, inventories rose in the United States because of logistics issues that also hampered U.S. ports, increasing costs for that business unit, which is the company’s biggest.
Still, China is seen as a long-term beef importer due to its low per capita consumption levels, JBS said.
JBS posted a first-quarter profit that beat expectations in spite of higher global grain prices and lower pork exports to China, with the U.S. beef and poultry business performing well.
Shares rose by 1.7% in early trading in São Paulo but later pared nearly all gains at 35.76 reais.
Citi analysts reiterated a buy rating on the stock and increased their target price to 50 reais per share after the quarterly results.
Credit Suisse analysts said they remain positive on JBS’s investment case, as they believe “operating momentum will remain solid in the coming quarters.”
However, Credit Suisse sees gradually declining cattle availability in the United States putting pressure on fat steer prices.
That should be offset by strong U.S. demand for beef, specially as Americans kick off barbecue season, they said.
While sales grew by double-digit levels across all business units in the first quarter, JBS recognized a challenging scenario in Brazil, its home market.
In the South American nation, where the 12-month inflation rate stood at 12.1% through April, demand for beef is at historical lows due to high unemployment and an economic downturn.
(Reporting by Ana Mano; Editing by Marguerita Choy)
