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TEXT-Fitch affirms JBS, subsidiaries IDRs at 'BB-'
2012年5月11日 / 下午5点58分 / 6 年前

TEXT-Fitch affirms JBS, subsidiaries IDRs at 'BB-'

May 11 - Fitch Ratings has affirmed its ratings for JBS S.A. 
(JBS), JBS USA, JBS USA Finance and JBS Finance II Ltd., including JBS' Issuer
Default Rating (IDR) which was affirmed at 'BB-'. A full list of ratings actions
follows at the end of this release. The Rating Outlook is Stable.	
	
Fitch considers net debt-to-operating EBITDA in the 3x range to be the
normalized leverage ratio for the 'BB-' rating category for a company with
volatile and cyclical operating earnings that are typical for the protein
industry. JBS' leverage is currently high for the rating level. The company
performed below Fitch's expectations during 2011 due mainly to operating losses
at Pilgrim's Pride (PPC), a poultry company in the U.S. of which JBS owns 75.3%.
Fitch expects JBS' operating performance and credit statistics to improve
significantly in 2012 as a turnaround at PPC should positively affect 2012
results.	
	
JBS' credit ratings continue to reflect its strong business profile as the
world's largest beef and lamb producer and second largest chicken producer.
Further factored into JBS' ratings are the company's geographic and product
diversity, which partially mitigates the risks of trade barriers and animal
diseases. JBS' risk profile is above average due to cyclical risks associated
with the meat business and the company's aggressive attitude toward growth
through acquisitions. While its business profile benefits from the improved
diversification through past acquisitions, the risk of additional acquisitions
in the medium term remains.	
	
Key Rating Drivers:	
The current leverage metrics are high for the rating category; therefore, even a
moderate deterioration in the company's various businesses may lead to a
negative rating action. A downgrade could also be triggered by the lack of
improvement of the company's financial performance, or a large dilutive debt
financed acquisition. Continued negative free cash flow (defined as cash flow
from operations less capital expenditures and dividends) could also result in a
negative rating action. Rating improvement is not likely to occur as the company
is facing the challenge to increase its cash generation and improve the credit
metrics.	
	
Poor 2011 Operational Performance; Turnaround Expected in 2012:	
During 2011, JBS' operational performance was weaker than Fitch's expectations.
EBITDA deteriorated to BRL3.1 billion from BRL3.5 billion in 2010, which was
contrary to Fitch's expectation that the company's cash generation would expand
during the year. As a result, JBS' EBITDA margin declined to 5% in 2011, from
6.4% in 2010.	
	
The underperformance was due to the company's poultry businesses in the USA,
which was negatively affected by the high cost of grains, excess industry
supply, weak demand and the decline in poultry product prices. In addition, in
the last quarter of 2011, margins in JBS' U.S. beef business were negatively
affected as cattle costs rose faster than beef prices. Together, these two
unfavorable developments were sufficient to outweigh the improved performance of
JBS' pork business in the U.S. and its beef business in Brazil.	
	
Fitch believes that a turnaround in the company's poultry business is underway
in 2012. There is industry evidence of a decline in cold storage reserves and
supply capacity, and improved pricing. In the first quarter of 2012, PPC
reported EBITDA of USD101 million; this compares with a negative EBTIDA of USD
53 million during the same quarter last year. Fitch believes that JBS can
achieve a 2012 EBITDA margin in line with its first quarter 2012 level of 5%.	
	
JBS' financial performance should improve in 2012 despite likely challenges in
the company's U.S. beef division. Cattle supply in certain regions of the U.S.
will continue to be depressed in 2012. Additionally, the first quarter of 2012
results will likely be affected by the negative consumer response to lean
finely-textured beef (LFTB, commonly known as 'pink slime'). Positively, the
discovery of an instance of mad cow disease in California last month has had an
immaterial impact on the U.S. beef industry. No export bans were affected by any
large importing country or block of countries. In Fitch's opinion, the threat of
reduced demand for U.S. beef has been alleviated unless another case is
discovered within a short period of time.	
	
JBS' consolidated EBITDA and margins are expected to improve during 2012.
Furthermore, Fitch's rating incorporates expectations that FCF will be positive
in 2012 as the company puts behind restructuring and integration charges and
improves profitability.	
	
Leveraged Capital Structure:	
JBS' net leverage is currently high for the rating category at 4.4x as of Dec
31, 2011. However, with the ongoing turnaround, Fitch believes that the company
will be able to reduce its net leverage metric to 3.0x by the end of 2012.	
	
JBS' capital structure has sharply deteriorated during the last 12 months.
Strong working capital needs and below expected cash flow from operations have
resulted in rising debt levels. The company's total debt/EBITDA ratio and net
debt/EBITDA ratio of 6.1x and 4.4x, respectively, during 2011 compare
unfavorably with ratios of 4.5x and 3.3x, in 2010.	
	
Liquidity and Debt Amortization Profile Manageable:	
JBS' continues to present adequate financial flexibility due to its manageable
maturity profile and acceptable liquidity. The company has been successful at
issuing long-term debt in order to lengthen its debt amortization profile.	
	
Liquidity is supported by BRL5.3 billion of cash and marketable securities as of
Dec 31, 2011, which almost completely covers BRL5.4 billion of short-term debt
(28% of total debt). JBS also has about USD62.2 million available under its new
ABL (Asset Based Loan) facility. Fitch expects positive FCF generation in 2012.	
	
Refinancing risks are manageable, considering that about 65% of short-term debt
corresponds to trade finance lines that support export activity and are secured
by and repaid with the export receivables. In terms of funding sources, Fitch
also views favorably the company's relationship with BNDES.	
	
Fitch affirms the following ratings of JBS and other companies of the group as
follows:	
	
JBS:	
--Foreign currency IDR at 'BB-';	
--Local currency IDR at 'BB-';	
--Notes due 2016 at 'BB-';	
--National scale rating at 'A-(bra)'.	
	
JBS USA:	
--Foreign currency IDR at 'BB-';	
--Local currency IDR at 'BB-';	
--Term Loan B facility due in 2018 at 'BB'.	
JBS USA Finance, Inc:	
--Foreign currency IDR at 'BB-';	
--Local currency IDR at 'BB-';	
	
JBS USA jointly with JBS USA Finance:	
--Notes due 2014 at 'BB-';	
--Bonds due 2020 at 'BB-';	
--Notes due 2021 at 'BB-'.	
	
JBS Finance II Ltd:	
--Foreign currency IDR at 'BB-';	
--Local currency IDR at 'BB-';	
--Notes due 2018 at 'BB-'.	
	
Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.	
	
Applicable Criteria and Related Research:	
--'Corporate Rating Methodology' (Aug. 12, 2011);	
--'National Ratings Criteria' (Jan. 19, 2011);	
--'Parent and Subsidiary Rating Linkage' (Aug. 12, 2011).	
	
Applicable Criteria and Related Research:	
Corporate Rating Methodology	
National Ratings Criteria	
Parent and Subsidiary Rating Linkage

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