JBS: Profit To Shrink In 2Q17 Despite Good US Performance

(RTTNews) - Brazilian meat packer JBS results in the second quarter should be driven by a strong performance in the United States, while in Brazil the company may show negative impacts brought on by its executives' involvement in a corruption scandal.

JBS officials were at the center of a plea bargain deal that led to a corruption charge against the Brazilian President, Michel Temer.

"We expect positive results, despite the turmoil in governance and the company's image," analysts at Itaú BBA said.

The meat division in the United States should be a highlight in JBS' second quarter earnings report. The EBITDA margin (earnings before interest, taxes, depreciation, and amortization) is expected to rise to 5.1% in the second quarter of 2017, from 0.5% in the second quarter of the previous year.

Seara will also show some improvements due to lower grain prices, with an EBITDA margin of 8.2%, from 8.3% in the same quarter of 2016. For JBS Mercosul, the EBITDA margin should decrease from 6.3% to 5.2%.

"JBS should lose market share in the quarter," Itaú BBA analyst said.

Analysts at BTG Pactual also expect that JBS Mercosul's negative results, with cutbacks in volume and impacts on the company's reputation, should be overshadowed by strong figures in the U.S. operation.

The bank said it would wait to see if the company will comment on the plea-bargain deal made by its parent company, J&F, with Brazilian Justice to pay a R$ 10.3 billion penalty.

"We look forward to understanding how the company and its auditors expect to address possible provisions and other matters related to the agreement of its controlling shareholders," they said in a report.

Analysts expect JBS' profit to fall 68% in the second quarter from a year before, to R$ 488.175 million, and a 5% decrease in the company's revenue, to R$ 41,671 billion.