JBS N.V. (JBS) Q3 FY2025 Earnings Call Transcript & Summary

Good morning, and welcome to JBS Third Quarter 2025 Results Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. Any statements eventually made during this conference call in connection with the company's business outlook, projections operating and financial targets and potential growth should be understood as merely forecast based on the company's management expectations in relation to the future of JBS. Such expectations are highly dependent on the industry and market conditions, and therefore, are subject to change. Our present with us today, Gilbert Tomazoni, Global CEO of JBS; Guilherme Cavalcanti, Global CFO of JBS; Wesley Batista Filho, CEO of JBS USA; and Christiane 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. The third quarter of 2025, once again demonstrated the stress and consistence of JBS global multi-protein platform. and more important, how we operate with discipline, agility and resilience. We achieved a record net sales with growth across all business units. This performance reinforced the balance and the scales of our operation and show our ability to manage the platform proactively mitigated the impact of local market cycles. Net income reached $581 million and return on equity over the last 12 months was 23.7%, reflecting solid sustainable performance. We continue to navigate a challenging cattle cycle in the United States, marked by historical high price and tight supply. Even in this environment, JBS Beef North America delivered a record debt to revenue, supported by resilient domestic demand, while capital availability remain limited, consumption held steady, and the team continues to execute with discipline, although careout value remain elevated, they were not sufficient to offset higher corn costs. Australia was a clear highlight. Profitability is staying strong, supported by improved care on availability and healthy global demand. The regions continues to play an important role in diversifying our geographic exposure and balancing result across protein. In Brazil, [ Free boy ] delivered another consistent quarter with solid performance in both export and domestic sales. The team strengthened relationship with the key customer through our value-creation approach and remain focused on operational excellence and disciplined execution. Seara also posted another quarter of consistent results in a period is still impacted by a restriction to export to Europe and China, which have recently been left. The business maintained healthy margins, driven by a disciplined commercial strategy, effective mix management and continuous innovation in its product portfolio. initiative such as the launch of high protein ready meals, the developer of a dedicated air freight portfolio and a partnership that brings the brand close to the consumer, included with Netflix illustrate our ongoing commitment to innovation and value creation. In the United States, our chicken and pork business also remained resilient. [ Bigger ] price continues to grow, supported by a diversified portfolio and ongoing gain. The Prepared Foods segment stood out with sales raising more than 25% in U.S. while operation in Europe and Mexico also outperformed their markets. In pork, lower grain cost and steady demand created a positive environment though supply constraints continue to limit overall growth market growth. These results show how we operate in our global platform, manage scale efficiency sharing knowledge across the region and make it quick informed the decision to protect per pharmacy. We continue to invest in innovation and value-added products, as part of our long-term strategy, strengthening brands and expanding higher-margin category remains central to sustainable growth. We end the period with a leverage of 2.39x, fully aligned with our long-term targets. Overall, the company remains stable and well positioned. -- global protein demand continues to rise. And JBS is prepared to capture this growth with a balanced portfolio, solid execution and a long-term perspective. Thank you again for joining us today. I will now turn the call over to Guilherme, who will be worked through the financial results in more details.

Thank you, Tomazoni. Let's now move on to the operational and financial highlights of the third quarter 2025. Net sales for our third quarter 2015 reached a record of $22.6 billion. Adjusted EBITDA in IFRS totaled $1.8 billion, which represents a margin of 8.1% in the quarter. Adjusted EBITDA in U.S. GAAP comparable totaled $1.6 billion, which represents a margin of 7.2% in the quarter. Adjusted operating income was $1.3 billion with a margin of 5.5% in IFRS and 5.6% in U.S. GAAP comparable. Net income was $581 million in the quarter and earnings per share of $0.52. Excluding nonrecurring items, adjusted net income would be $602 million and earnings per share of $0.54 per share. Finally, the return on equity was 24% and and the return on invested capital was 17%. The free cash flow of the third quarter 2025 was $383 million representing a difference of $612 million compared to the third quarter of 2024, mainly due to the following factors. Adjusted EBITDA decreased $319 million, but excluding noncash items, we have a reduction of $230 million, driven by the impact of the beef cycle in U.S. Avian flu in Seara and higher cattle costs in JBS Brazil. An increase of $226 million in capital expenditures, mainly growth CapEx, an increase of $258 million in working capital, mainly reflecting higher revenues and costs resulting from the increasing livestock prices. Our cash conversion cycles in base remained stable in relation to the previous quarter, not considering a guidance, but simply updating the cash flow breakeven EBITDA exercise, it is expected to increase to $6 billion in 2025 and to $5 billion in 2026, driven by capital expenditures in 2025 and $2 billion in 2026, already including maintenance CapEx, although 2026 budget is still to be approved. Working capital expected to increase to $1.3 billion in 2025 and $700 million in 2026. The 2025 increase in nominal terms is related to higher prices, higher sales volumes, increased cost of livestocks and fulfilling the pipeline of organic expansions. It is worth mentioning that 2026 working capital depends on variables not in controls of the company, like grains and livestock prices. Vigor settlements of $400 million in 2025. biological assets of $650 million in both 2025 and 2026. Interest expenses of $1.15 billion in 2025 and $1.15 billion in 2026. The leasing expenses of $500 million for 2025 and 2026. Last week, we completed another debt issuance in Brazilian capital markets. The total amount of agribusiness receivables certificate was approximately $570 million, with 2/3 places in a 40-year tranche, the longest ever completed in the Brazilian capital markets. As a result, our pro forma average debt maturity reached 15.4 years with an average cost of 5.6% per year. Leverage increased to 2.39x in the third quarter against a against second quarter of 2025, primarily due to $319 million decline in the last 12-month EBITDA and the payment of $362 million in share buyback. In this regard, we announced the completion of a $600 million share buyback program. We believe this represent an efficient use of cash given the current valuation multiples relative to our global peers and the leverage at comfortable levels. Even with the share buyback program completed and the $1.2 billion dividends paid and the approximately expansion CapEx of $1 billion, we expect to end the year with leverage below 2.5x. Our $3.4 billion revolving credit lines and $4 billion of available cash combined with the expected cash generation in the coming quarter, provide us with the flexibility to continue executing our expansion CapEx and value creation projects while maintaining a healthy and robust balance sheet. With that in mind, I would like to open to question-and-answer session. Thank you.

The floor is now open for questions from investors and analysts. [Operator Instructions]. Our first question is from Mr. Lucas Muse from Morgan Stanley.

I have 2 quick ones. The first 1 is related to the expansion CapEx, the ongoing expansion CapEx especially related to the pork expansion, the 2 plants in Iowa, if you could share more details on what should we expect as it pertains to revenue expansion or volume expansion into next year as you start opening up those additional capacity expansions in U.S. pork. And my second question is related to U.S. chicken, the third quarter results of PPC were very solid, especially in the U.S. But given that chicken prices are significantly down, are significantly down into the fourth quarter, if you could give us an update what you are seeing in the fourth quarter as it pertains to profitability, especially in the U.S. if maybe the commodity part is suffering a bit, but a bit more resilient on the other part of the portfolio. And coming into 2026, if you still see a solid supply and demand outlook, given USDA is still very constrained outlook on chicken supply in the U.S. Also in the light that one of your competitors was talking about cycling through a new genetic line that was a bit better than the one that was being used in the last 2 years or so. So maybe a little bit more details on U.S. chicken dynamics, both on a bit on the short term and looking in 2026. Those are my questions.

So on the expansion we're doing in prepared foods in the U.S. So it's 2 plants that we announced in Iowa, right? So one is the very plant that we're going to produce sausage there. And the other one is in Ankeny that we're going to do further ready-to-eat bacon and ready-to-eat sausage. Those are very complementary to what we are doing today. So we produce a lot of bacon in the U.S. We're going to start producing sausage. That's going to be -- it's going to use a lot of our trends, a lot of our the meat that will come from our saw meat that we're going to harvest in that same plant. So it's very complementary on the supply side of our business and very complementary on the business on the sell side as well because there is sales side because there is a lot of demand right now from our customers there. So we think it's going to be a quick ramp up. That's what I'm getting at for those plants. Next year, you're not going to see any impact because there are going to still be under construction, finalizing and we're just breaking ground right now in 1 of those plants and the other 1 where it's going to be more putting equipment and lead time for equipment. So you're not going to see anything for next year. 2027 is when you're going to start seeing a ramp up and start for us to start doing -- starting to see the revenue and the extra margin that's going to come from those businesses in our pork division. Those 2 businesses, you could expect something around 50 -- $500 -- between $500 million and $750 million revenues as we ramp it up. So something like that. And we see the margin for this extra business in the higher double-digit margins for that. So -- we're very excited about that. And we think it's going to be a relatively quick ramp up for these plans given the complementarity of -- on the supply side and on the sales side.

Related to the chicken that you are mentioning that they dropped the price in the U.S. market, we see the drop on the price on the big bird segment. And -- but I think they found the limit for growth in the last weeks, they a little bit increase in terms of the price. And we -- but with a look for PPC. PPC has a balanced portfolio. We have a small bird, we have middle birds and then big birds, and we are prepared then prepared as part of our portfolio. We remain confident about the chicken market next year in U.S. even in Brazil because even that we see that increase in terms of the 1-day chicken, we see that the product is emitted because we have infrastructure and the availability of genetic. You mentioned the new genetic of -- yes, there is a new genetic of core, we still start to go to the market. But this is not something that you put in the market is a quick reaction because you talk about genetic, you have time to get to the market. We -- in our view, we will be more availability of chicken, but the export market remained very, very strong. if you have a consideration that Brazil that this year will be -- if the year-to-date, they are flat compared to the last year and domestic in the export market is in a lot of demand because if you just make the comparison with pork, Brazilian pork is more than the last year and chicken is flat. It is because chicken availability of chicks because of some market was closed and now ubiquity, as I can mention in Europe and China. And I think it's next year -- we see that there will be a strong market, export mat from Brazil, we see the market from U.S. So look, we are still with this growth in terms of on the chicken place. We remain very confident about next year.

Our next question is with Isabella Simonato with Bank of America.

I think as you guys have been mentioning right, and Guilherme, you mentioned a higher working capital consumption given given higher raw material prices, but also given growth, right? And I wanted to maybe reconciliate when you look at the top line growth of this quarter or the year-to-date, right? -- and you try to look at the volume growth, can you tell us, I mean, how much came from -- first of all, what was the volume growth overall, but -- and how much came from expansion and new operating lines and et cetera, because I think at some point, we have a tough time, right? Looking at the expansion CapEx you have been doing that you should continue to do that translate that into into top line growth, right, which has actually been quite strong. So if you could break down I mean, what has been as a result of top line growth of your organic expansion, I think that would be quite helpful. And second, going back to the chicken market and especially in Brazil, right, both bands from Europe and China have been removed. -- if you guys could explore a little bit how you've been seeing the export market now in fourth quarter? And the dynamic also of mix -- and that includes the domestic market of Ceara. I would appreciate.

Thank you Isabella. So the major part of the working capital consumption was really due to prices. In terms of volumes, I would highlight Permian JBS Brazil had an increase in volumes of 3% and Seara, which we have been made in investments in organic expansion. We had volumes growing in 8%. So on the other hand, again, we have been in some business units, price going up 16%, sometimes 24%. So basically, the main variable is prices that made this first, increased revenues, increasing costs and consequentially increase in working capital.

With the question about -- Isabella about the chicken market, if I understood well, it's about the Brazilian chicken market, how we see that export market in this next quarter and next year. Is it correct?

Yes, especially because the main headwind, which was the ban, right, from China and Europe to understand that's gone. So.

Yes, yes. They just lifted restrictions from Europe and from China. You know that this is too important markets from Brazil because we Brazil is they optimize the mix of the [indiscernible] in these 2 markets play a very important role. Even for Seara, it's much more impact because Seara is the ever strong market share in Europe and then reopen Seara it's for make a lot of difference. And of course, for China for all of the market made a lot of difference. Seara is the leader in the export market from Brazil, they are suffered more than the others. And -- but now I see that a strong market. We do not see any constraint in terms of demand. We have a strong demand and we see that next year, we will continue this demand because overall, we see that demand for protein remained very strong, not just for chicken, but for beef and for pork. Look, Brazil export this year compared to last year, year-to-date, 14% more pork and chicken was stable. Stable because of restrictions. But next year, I think Brazil will get the same track as before. And even that is more -- I mentioned before, when the answer this question, you see it is more chicken in the market. But the limit to grow -- there is a limit to grow because infrastructure, you are not build a chicken house very easy. You have some genetic restrictions to increase production. Even that was mentioned before, the new genetic from Kobi, but will take time to go to the market and to be effective. We not see really -- we see more volume next year, but we see demand more than compensating.

Our next question comes from Ms. Heather Jones with Heather Jones.

Are you able to hear me now?

Yes, go ahead.

My questions are related to the U.S. Redknee business. I guess, first on the North American beef business, -- the volatility that we've seen in futures in the futures curve recently. Just wondering if you could help us understand how that may affect your Q4 results? And then my second question is on pork. The sequential improvement in Yell's results stands in short contrast to industry benchmarks as well as your competitors. So I was just wondering if you could explain what drove that strong sequential improvement despite what was really tight spreads, et cetera.

Heather, this is Wesley. So on the beef volatility, for sure, when you have market futures being as volatile as it did, it creates stability in results. So recurring impact it could impact us. On the other hand, it's showing a decrease in cattle cost. So on the other hand, it could help a little bit to cutout is suffering a little bit in the recent weeks. So -- but -- when you're having stability like that in the future, it's always a challenge because it could create losses for us with our hedging position. So -- but overall, on top of just the future has been more volatile. Margins have been tighter in the fourth quarter so far than the third quarter. And there are usually tighter on the fourth quarter than third quarter, just historically anyway. So yes, I think that could create a challenge for the fourth quarter on the beef business. On the pork side, Heather, this pork business that we operate in the U.S., I think the -- I don't know what I can say about our business is -- we have very good plans. All of our plants are -- 4 of our 5 plants are double shift plants. They're very modern. They're very well invested. We've been adding a lot of value added in our business. So -- if you went back in history, we will be producing very little prepared foods. And nowadays, it's becoming more and more of a bigger business of ours, and we intend to grow, as I mentioned in the last answer to Lucas. Another thing, too, it's a business that we've developed that we're -- it's very integrated. We are integrated on the live side. We're integrated on the prepared side. We have key customers that are very good for us. I don't know how to pinpoint one thing or another, Heather. I think I couldn't do that because it's a lot of very little -- a lot of things. It is a very consistent business of ours. So operational excellence is a big deal in that business. And if you look at our margins historically, they're pretty stable and it's a pretty stable business for us. I mentioned on the last call in the second quarter that it was a little bit of a tougher quarter for us. That margins were going to come back. And here we are, they are back, and I'm still pretty optimistic about the the fourth quarter as well. It's a pretty good business for us. I don't know how to put it in a different way. It's a business that's very consistent and very integrated on both sides and operates at a very high level.

Our next question comes from Thiago Duarte with BTG.

I have 2 questions here. The first one is actually an extension of the some of the remarks that Guilherme made during the presentation regarding capital allocation, you mentioned the share buyback and the dividends, and it remains -- and how comfortable you remain with the leverage of the company towards the end of this year. My question is how M&A opportunities fit into this strategy? Over the past several months, there have been rumors about JBS participating in potential bids for different companies, especially in the U.S. So my first question is really about how confident or not you are that you will have M&A opportunities to invest and particularly in the prepared foods segment, which has been the one of the main targets as you have been saying for quite some time. So that's the first question. The second question is, I think, more to Wesley. There's an interesting chart in the company's presentation where you showed the retail price for U.S. beef, pork and chicken. And what we have been seeing is that beef retail prices are close to all-time high. Chicken and pork prices haven't really followed so even though they remain higher, but they haven't been following suit. And the price ratio between beef and the other protein is also at the all-time high, right? So my question to you, Wesley, is how you see those trends unfolding going forward, right? Should we think more about beef demand at some point going off because of high prices and hampering further price hikes? Or do you believe that this high beef prices will continue to offer support for the other proteins to just continue to rise and catch up with beef, right? I think that's how you see the -- this very unique situation of coating prices and how the consumer will behave on the back of that. Those are my questions.

So in terms of capital allocation, I think it's more M&A. I think as you can see, we have leverage and we have a cash generation to couple with that. There's no big M&A that we are looking at the moment. But in case it appears a good opportunity, the first thing that I'm going to do is because I want to keep investment grade is to higher ratings assessment from rating agencies. So at the end of the day, rating agencies will tell me what will be the capital structure that I should have in terms to pursue that M&A. And today, we have more flexibility in shares, given that we have 2 class of shares, and they are listed in ISE. So at the end of the day, I'm very confident that we can pursue any type of M&A once the opportunity appears, but the end of the capital structure will be dictated by the rating agencies.

So a few things about this beef prices and beef prices versus [ portion. ] So first thing, I mean just supply and demand, beef prices are going to be at the sort of levels where they are as long as suppliers is tight. When supplies increase, obviously, you're going to see probably this prices fall and the market adjusts to a more normal level. This is just what we should expect and what has happened in the past. So -- having said that, I think it's a big testament to the demand of beef to see even entry-level if items like ground beef being at the price levels where they are and there is still strong demand for them. So it's just a big testament for the quality of the product and just the structural demand that there is for all those products. Now as it relates to pork and chicken. Again, there is some obviously substitution between the 3 proteins. And obviously, when beef is expensive and people beef, pork and chicken are good options for somebody who's trying to find an affordable -- a more affordable option than beef. So it kind of generates, it drives a little bit of demand for pork and chicken, and we obviously, we as -- as long as we have type supplies, we're going to see higher demand for other proteins as well. And yes, so that's what we've been seeing. Now -- is it going to be a lot more than what it is? I don't know. It depends a lot on these deep supplies. I think it's, we're getting very close here to the bottom of the trough of this cattle supply shortage. So I think we'll see what happens. But -- and if we have more demand, if we have more supply for beef, we should see beef falling in the -- and that come back to a normality. If not, then obviously, chicken and pork is a big option for a budget, for a more affordable project solution.

And our next question is from Gustavo Troyano with Itau.

My first one is on Seara actually, and more focus on process foods here in the domestic markets. So some competitors reported like strong margins and volumes in the quarter. So I just wanted to touch base on how is your margin performing in the segment in the quarter? -- and what we could expect for these margins going forward? And if you could comment also on the ramp-up of the [ Hollande ] plan that we discussed a couple of quarters ago, -- and if we could expect more volumes to come within the processed food segments here in Brazil would be great. And the second question relates to Australia actually. And we saw higher cattle prices in the region in the quarter. And despite that, margins remain quite resilient. And I just wanted to understand a little bit more what to expect for the fourth quarter because cattle prices kept increasing. And I just wanted to hear from you guys -- how do you see the balance between demand for Australian beef and supply going forward to understand a little bit more on the margins in the region. So if you could comment on the beef margins going forward and also how the other businesses in Australia are performing such as Huon are the processed foods operations compared to the beef margins that you reported in the quarter would be great.

Thank you for the question, Gustavo. Related to Seara, I think is Seara is just mentioned about the performance of the brand. The holds our penetration of the brand increased compared to the last year, we have increased the penetration in the good thinks about the penetration that we grow in repurchasing more than last year. It means that the brand is strong. We are gaining preference. We gain top of market top of mind because of our leadership in innovation, we are bringing new things from the market. Then the brand is very, very healthy, and we are growing we are an -- we are growing the margins and we are growing the volume in prepared. You asked about specific about Rolândia. Rolândia is full noble sheet and branded products -- and the other part of sauces and hot dogs and we are working through. And we are now thinking about the expansion of the plant. It means that Rolândia is -- we are -- in reality, we built -- the builder was preparing for this pension. Now we have to -- we are in part of them. We have put the machines. Now this machine is full. Now we are considered to expand. In terms of volume, we have not disclose margin by category, but I can share with you that in terms of volume we have grown in domestic market quarter last year with quarter of this year, 70% in terms of volume in domestic markets. And in terms of price, we have increased 5.5% in terms of price. So we combine all of the products, we sell in domestic market. Go to Australia. Australia is a -- they are performance very well. I know that the price of [indiscernible] increase but demand from Australia is very strong. We export 75% of we produce in Australia. And it's -- our operation there is a strong focus on export and export of beef, strong demand. alone is demand is strong for Brazil, is strong from Australia. The demand of beef is strong because we increased the income of the population and because of this trend of the newer went with more protein and because of the adoption of the new drugs in Q1 and so on. And so, look, we see for the next year, we are very confident about the business there. availability of cattle it's good. And the other business like like some is that we have there, we had in the past some challenge in terms of the disease this is over we are now performers in more than 20% of margin of this business that pork is going fair very well. We have increased the productivity. We share in best practice with the Brazil U.S. that bring a lot of leverage for our business there. We are investing in -- to update all of the farms that we have there. That help us to increase the yield increase productivity. And say, look, we are bullish in Australia business that we have there. And I think next year, we are seeing a stronger result from Australia as well.

Next, we have Ben Theurer with Barclays.

As well, 2 quick ones. So one, on the beef side, I mean, obviously, a lot being talked about, there's still a lot of like constraints, but maybe, Wesley, can you elaborate a little bit on what you're seeing in the market in terms of rebuild of the herd, how you think about 2026, the challenges maybe with an even tighter market if there's going to be some retentions to get a little bit of a sense how to think about '26 in the U.S. beef business versus 2025. And then my second question is related to working capital. I remember back in the second quarter, you've talked a lot about building inventory, putting into the cold storage because of the product that was shipped out to China. So I just want to understand how you -- how we should think about the timing and the delay to basically put into our models as to when this inventory is supposed to come down a little bit. How long is it going to take you to ship this out.

Ben, so when it comes to BS 2026, yes, we're going to -- we're seeing half of retention that's happening a few [indiscernible] attention overall. Just a piece of data. This quarter, USD numbers, we processed 545 [indiscernible] was 545,000. Just as a reference, Q3 of 2022 was $973 million. So we're almost half of the quarter Q on a few years ago. So I mean it's a very important number, in my opinion. And we're seeing also just our team members traveling and meeting people seeing that it has happened. So yes, we think 2026 will still be a challenging year from a supply perspective and then probably from there, it starts getting gradually better, not -- it's not going to be a an overnight get completely better, but it's going to be a gradual improvement from 2017 forward. So that's how we're seeing this. On the working capital side for pork was a very, very short-term thing that was restricted to the second quarter of 2025. did not carry forward into the third quarter, we cleared all of that inventory that had the issues because of all the tariffs going back and forth. So no worry about that.

The working capital was more related to, like, out of Brazil on what you had to build because of Avianifluenza actually at the Seara site. No, no worries about. I mean it's helpful in the pork side as well.

I don't see that the Seara, there is we sell all of the additional number. I think it's volume yet because even flu. I don't see any is normal inventory of Seara. We don't see park we are selling a lot. We are the leader in this part park. We are the leader in far chicken. I think is normal.

Next, we have Mr. [ Ben Maho ] from Bank of Montreal.

First question is just on Seara. I just wanted to revisit the headwind with the China EU export bans on chicken -- is there any way to quantify the headwind during third quarter and the expected recovery pace of that headwind. That will be my first question. Second question has to do with just the Brazil and Australian cattle offsets for the U.S. And just remind us on the beef cycles there. So it's my understanding that Brazil, the cycle plays out kind of first where availability gets tighter, and then second is Australia with kind of a longer tail and more of a hedge against the pressures that we're seeing in the U.S. So if you could just elaborate on that a little more.

Yes, it constrains the restriction to export to China and Europe is a place big role in terms of Seara export, the profitability of Seara because Seara is a strong market share in Europe. In Europe is the premium market of breast reopen Europe make a lot of impact in the Seara P&L. Because we keep producing the breast, and we are not able to export to Europe. We changed this volume for the other market. When we go to the other market with this extra volume, we have a pressure in this market with extra volume, now we can back to reexport to Europe. That means that we reduce the presence in other markets. The other market will be helped to increase the margin as well for the breast, then this is a huge impact. It's difficult to say how is the impact because there is a conjoined impact in the business. The other thing about China, China plays a very important role in terms of the optimization of the carcass. The wins that we sold to China is a premium market compared to the other markets. Of course, the same explained about Europe, about breast, doing is the same. We move new wings from China to the other markets. Now we are back to sell wins to China. And the other thing and important that fits and [indiscernible] that we are not market for all of the heating power that we have. Now we reopened that is reopened, it will make really extra revenue from the company. So look, this is a very important impact on the Seara business. About the price increase, the price of livestock in Australia and Brazil, yes, this increase in price. But they can out more than compensate increase the price of the life count. We see strong demand from Australia. We have sold out our volume in Australia. We are seeing -- we are not seeing that this will be an impact next year for Australia will be a strong year. In Brazil, yes, Brazil there is some reduction in the heart, the availability of -- but the reduction is considered the top we got this year and next year. We have grown more than 20%. Now some restrictions, but still much higher than the before means that we -- the market in Brazil will be key see a strong market next year as well.

And just to complement, obviously, that there is a as the U.S. exports a lot less, especially to Asian countries and other North American countries. It is a direct correlation to U.S. or to Australia and Brazil. export volumes being stronger, right? As we need more domestic beef in the U.S., we keep more beef in the U.S., export less out of the U.S., Automatically, you're going to see an advantage to our businesses in Australia and Brazil, and that's and that's a very important correlation that helps minimize the impact of the cycle in the U.S.

Next question comes from Carla Casella with JPMorgan.

You mentioned the Brazilian debt financing that you did. I'm just wondering, is that -- was that sold to the public markets? Or are there any concentration there of holders? And then I'm not sure if you gave a rate that you're paying on that.

Carla. So about the rate, yes, that depends on the tranches we had crunches, the longest one was a 4-year tranche was inflation plus 8%. But on a swapped basis, when you swap to dollars, it's dollar plus 6.2%. So all the tranches were launched at the rate that inside our bond curve in U.S. So that's one condition for any debt issuance is that it has to be inside my investment-grade curve. So that's what happened with this with these local debentures that we issued. There was a lot of individual investors amended, but also treasuries from banks that generally they continue to be selling to individual investors throughout the next months because individual investors has a tax exemption on this kind of local debentures. And that's the reason why on a swapped basis, it is issued inside my bond curve.

Okay. That's great. And you do need -- I mean, you have cash flow in Brazil. So do you see, over time, putting more or less debt in Brazil? Or are you well balanced to where you'd like to be now in terms of Brazilian debt versus U.S. debt?

Great. Yes. I of my revenues, 12% of my rev -- total revenues is generated in Brazilian reals. Currently, I have around 10% of my debt in Brazilian reals. So I still have some room to put some local debentures that and to balance and have no need to hedge. So I have this current, we don't have currency exposure. So I still have some room to have more real out that but not that much. So I'm almost where we want to be in terms of currency exposure balance that is -- that in reals is more or less equivalent to my reals revenues.

Okay. That's great. And then just one other question. You mentioned the 2.5x leverage target for year-end. Is that using IFRS EBITDA or U.S. comp EBITDA.

Yes, IFRS EBITDA. So it will be below 2.5x in IFRS EBITDA.

Our next question comes from Henrique Brustolin, with Bradesco BBI.

A few follow-ups here on Seara as well. First, -- the seasonal offerings now at year-end have been gaining, I think, relevance in your portfolio. So I just like to hear a little more on how your expectations are for this year-end, especially thinking about the domestic market here in Brazil. The second, on the production growth that we see for the Brazilian market, right? The there is the date of 7% growth in the breeder flock placements in Brazil this year. I know there are some bottlenecks. So I would just like to hear from you if you see that as a good proxy for what we should think about supply growth going forward? Or again, if given bottlenecks, it should be -- it could be a smaller number. And the third one on the export prices, we see the softening of export prices at the margin, as you mentioned, Tomazoni, the question is whether that's entirely related to the point you mentioned before about relocation of volumes from Europe and China to these other markets. or if you also see maybe some signs of weakness in some specific markets. I think that would be really helpful in terms of thinking how Seara will shape up going forward.

First, the question for the period of that we see that this is become more and more important because we develop a portfolio of the product to attend this market. It's the customer market that we have a fit and some other products. And the market is -- we plan to grow above the next year. And we are seeing a strong market. We are just this morning before to have this call. I talked with the people from Seara's going to -- how we go the operation crystal operation and say they are very confident and happy with the demand so far. Of course, this the first events go to the retail and the second demand iterative, the consumers buy the product in the shelf. But so far, we are seeing strong demand from the retailers. We are not seeing that any constraint in terms of the volume to sell in the -- and some of the news about the Brazilian market is the retail market is constrained. But for our category, we are not seeing this constraint. We are sell not just the product further even. But just the current product and portfolio we have, we are selling well. We are not seeing this constrained in our portfolio. The second question, if I understood it about export right?

It's about exports and prices whether that's related to the redirecting of volumes? And the other one was about the production growth if the 7% readers.

About it, we see now the -- with this reopened Europe and reopened China. We see we are opportunity for increase in price because some of the market with the extra volume, I mentioned before, was the present because not just us, but all of the Brazilian need to sell in this -- the market there is for this product, mainly for best in wins and see another opportunity for this product to grow in terms of price. We are seeing some movements already in the market. And yes, for me, but the average price for Seara will be higher for sure because even we are not increasing the price, we just accept the new market, it will be increased our average price. And what is the challenge in terms of volume or pricing external market is the small birds that go to Middle East, but this remain very, very challenged market because they are -- there is a local production and the Brazilian before it was a big market for the Brazilian small bird and greener. And now we compete with the local production. This is -- if you consider all of the market, you can see that this is the most difficult market. And about the increase in terms of the genetic and you mentioned the breeders, see, yes. But they increased, but they need increase in order to replace the old ones because we have restrictions in terms of availability of genetic before bridges before. And all of the -- or the Brazilian producer keep longer the bullets, the bleeders in the share in the farms in order to compensate the not availability of the new ones, -- now -- and then this is not good in terms of productivity, in terms of because when they get older, you the eggs that you can come from them is less ability, more mortality. And now it's an opportunity to have to have a more healthy age in terms of breeders. And see, Brazil, I mentioned before that if you look at Brazil in this year, with a strong demand for the external market, fundamental protein, we are not go, they're not go because a lot of restriction really that come from the event I believe that next year, the export from Brazil will be strong. As we saw now in the last month was one of the record is part from Brazil. I believe that Brazil will be compensated next year what we are not able to export this year far in the market.

Next question comes from John Baumgartner with Mizuho.

I'd like to ask about JBS Brazil. Thinking forward from here on the revenue side, can you speak to how resilient you expect domestic demand will be given higher prices just your expectations for resilience there. And then second, how export opportunities are evolving for Brazil. And I'm curious about maybe the structural opportunities to diversify exports across Asia, Korea, Japan, maybe some opportunities to supply more into Mexico, the trade deal with the EU and Mercosur, how do you think about new export opportunities for Brazil that are longer lasting? And in 2026, specifically, the ability for any incremental demand from exports to support prices and minimize the pressure on profit margins from higher cattle costs.

Look, JBS Brazil is -- we have other correlated business we put together, but the main business is Friboi all of the in our beef business. We see that the market will be strong for the export to Brazil. Brazil in the last -- I think in the last 2 years, opened more than 100 new markets and they keep open market from Brazilian export for beef. And we see a strong demand and I think will remain next year, the demand from the market. and they are more than compensate the increase the cost of livestock more than compensate. And the domestic market is remaining strong as well. I think it's -- for beef, we see that will be good next year for all of the market, even the Brazilian market because in Brazilian market, we are developing a special work with our key customers. we manage -- we call category of management 2.0 that we are managing the category inside of the retails. We manage the portfolio. We manage the presentation. We training the people that they take care of the butcher area. And the good news from that decide to increase the volume of the beef, they are increased the volume for all other categories. It means that the retail, they have a partnership with Friboi they are able to grow not just in beef, but all of the categories that we have a strong program here is a mature program. It's proved the results here in Brazil. And the external market, I think, is this time of market demand that is huge. We are not seeing a restriction on that.

Our next question comes from Thiago Bortoluci with Goldman Sachs.

The first one, and I think is for Wesley. I remember was early in the year you mentioned a bunch of investments into your U.S. beef operations, right? And we know, obviously, those are aiming for the medium term, not necessarily this cycle. But I'd just like to understand from you, given the run rate profitability that we're delivering there, how much of those investments or any other work you could do in terms of efficiency could help protecting a little bit the sequential evolution in 2026. And how comparable you think margins could go on a sequential year versus where we are year-to-date. This is the first one. And the second one, I think, is for Guilherme. You have the soft guidance right of returning $1 billion per year to shareholders. either through dividends and buybacks. I know this year was a very special 1 because of the listing, but you are delivering so far a run rate closer to EUR 2 billion maybe EUR 1.5 billion if you exclude the dividends related to the listing. Does it mean maybe there might be space for you guys to be a bit higher on shareholder returns particularly, as you mentioned, there is no clear M&A on the table for next year.

Sure. So the investments we're doing are not going to impact 2026. They're going to impact 2027 going forward. So we shouldn't be seeing anything there. Actually, it's perfect timing to think about it because 2026 will still be a low supply for cattle and all of those plants are going to be with their revamp and extra better efficiency, better capacity for us for value-added items even for more volume. Into 2027, which is when things should starting to look better, at least better than '26 and then from then on get better. So it's -- actually, the timing there couldn't have been better. Just overall, we should probably think of 2026 in a year that's a margin perspective, I think will look similar to what 2025 looks like.

So in our decision to return money to shareholders, the main variable, so far is our leverage given that we want to keep investment ready, and we are a BBB company. So that's the main variable for that. So this year, again, we will -- besides having all these return that you mentioned, we'll finish the year below 2.5x, which is a very comfortable level. So we are now in the process of budgeting for next year. We also have to wait for the first quarter. That's always a cash consumption quarter. So generally, those decisions will start to be doing in second quarter next year. So probably returns will be more skewed to the second half of 2026. But I think we are confident that we can continue to have the dividends of around $1 billion per year as long as we can keep leverage on our comfort zone. And again, any excess, we will be deciding in terms of share buybacks or extra dividends and also depending on M&A opportunities.

And our next question is with Mr. Lucas Ferreira with JPMorgan.

I hope you hear me well. Quick follow-up, Guilherme that $700 million expected working capital investments for 20 just ballpark numbers, how much of that is volume growth and how much is pricing? So just we have a sensitivity here of how things could go.

I would say it could be half and half. This $700 million, as I mentioned, in the beginning depends on a lot of variables, that is out of our control. So basically, I did an average of many years before. But we won't -- it all depends on 3 things: on grains, prices, in livestock prices and finished product prices. This can swing a lot. So this is again -- the $700 is working capital is something that is really what can swing more in terms of what we're forecasting for next year. So maybe, again, we can even have a neutral value, right, not consuming, not releasing, except for the biological assets that you always be consuming. That's why I separate biological assets. But again, this number was just an average of years before because we will have some volumes that will impact that, especially from the expansion that we do, but the main impact will always be on the prices of these 3 elements that I mentioned.

A quick follow-up on the biological assets that you're guiding pretty much like a flattish number writing dollars. Obviously, there is the FX effect. But can we assume, given all the industry inflation and the cost of grandmothers, et cetera, that this implies also that your -- and obviously assume that chicken is most of this biological assets, right, that the -- your placements are sort of flattish or at least not growing significantly. Is it fair to assume.

Because the main variable that impacts this is the grain prices. So basically, we are considering that grain prices will not be much higher next year, so we can consider it flattish, okay? Because the livestock with chicken and pork, they basically are valued through their cost of feeling, that's the grain.

Next question comes from Pooran Sharma with Stephens.

Just wanted to follow up on some of the hedges you talked about last quarter. I think you mentioned you put on -- you took a $250 million loss due to some of the hedges. I was just curious if you're able to share how much of that rolled off in 3Q? And how much are -- should we expect to see roll off in 4Q?

Yes. Bear in mind that we are talking about the cash impact of the derivatives because they offset on the physical purchase. But you're right. On the third quarter, we have this impact on this negative impact, that will be -- so far, it's been with the decrease in future market is being offsetting from a cash standpoint in the fourth quarter. Of course, this depends from now to the end of the quarter, how well the behavior. But so far, we are releasing cash on the derivative side. But bear in mind that it is on a margin basis, it's offset by the physical purchases.

Great. And just just thinking about the pork business here. I was just wondering, you mentioned the supplies, the industry supply still remain constrained. And I was just wondering just given where hog production margins are at, why don't you think you've seen any signs of expansion. And the last hogs and pigs report seem to indicate that we're not going to see any expansion. I think other players within pork processing are also walking away from raising hogs. So at this point, when you look at your integrated operations, do you see the shorter hog supply situation here in the U.S. as a benefit to your business? Given just where hog production margins are at? Or is it more of a negative just given it it'd be impacting your pork packer side of your business? Would just love your thoughts on that.

So we see obviously this year, we had a lower volume of cues next year, we're probably going to see higher cues if help is better than this year and believe it will be better than this year. So we might see more hogs into next year. Now this whole strategy of how much Hog we raise and how much -- we are basically for 25% of our more or less 25% of our -- of the hogs wood process we raised. It's a number that we think we like it. We like it to be around that. So our hog procurement is very well balanced, taking risk on hog prices, corn risk, hog risk and there is some cut-out businesses as well that's hogs that we buy indexed on cut out. So it's a very -- the way we buy hogs is a way that minimizes volatility on each one of the indicators. So even in years that we don't have a great operations in great revenue or a great result in hogs in hog production. It ends up not being a terrible year for us. I think the way that we buy hogs and the way that we structured how procurement allows us not to feel huge impacts if one of these 3 price indexes, cut out, grain or hogs, if they have big swings, we're able to kind of hedge that a little bit. So we're not obviously, we want our pork processing in our port hog production to do well at the same time. But if 1 does worse and the other one does better, it's almost a hedge for us.

Next question comes from Leonardo Alencar with XP.

I would like to discuss a little bit further about Brazilian cattle. This year was positive surprise, no surprise upside, but then we don't have much visibility for 2026. So first, what's your base case for cattle availability the next year? And second, scenario, maybe a potential scenario of a tighter supply of cattle. Should we view of this project, this shift retail stores that we'll be building up for a long time now -- should we view that as a margin hedge? Or maybe the scenario of retailers with lower margins, squeezed margins, will be a good opportunity to increase the pace of growth on that area? Those are my 2 questions.

The availability of cattle in Brazil, we see that the information we have that will be last 3% to 5%. This is the market information about different search will be 3% to 5%. But Leonardo, it's important to see this 3% to 5% for a high level. It's -- and this still a lot of cell available in the market because we are not -- if you back to 2023, we are seeing that we are much, much higher than the time even that we have some reduction now, we have the reduction ever a different level that we remain much more availability as before. This is one thing that we see that market and in Friboi have a special program to purchase the cattle in the market. We are long-term strategy with the farms in order to have a reliable supply along the years. It's one thing. The second thing, we see the Brazilian market grow a lot of the [indiscernible]. And the rate of growth in feed is ungradable rate because with the booming of the ethanol card industry in Brazil, the availability of DDG helps to enhance the diet of the cattle. And the combination of the improvement of genetic and the improvement of diet we see that the age -- the size of the field of the Brazilian beef in Greece. And this is another point that you need to put in consideration because of that, we improve the quality, we improve and we improve the let's say, we improved the quality of the projects that got to be harvest. And this is -- but because of that, we are so excited about the Brazilian market because if you compare to Brazilian to U.S. earned, U.S. has less than half of Brazilian herds, and they produce more beef opportunity for Brazil grow beef market. It's a huge, huge opportunity to -- in terms of genetic, in terms of diet in terms of management of the herds. It is one thing. And the other thing you mentioned about our stock on Swift store, Swift store was developed because we believe that the frozen beef there is a market. And they -- and if you sell frozen, we save some waste in the chain, some yields that -- when you sell fresh, we are losing the yield and during the process still to go to the consumers. And the consumer attitude, they go to the market, they not go every day to the stores. They go one day, they buy, they go to home, and then frozen, the met -- and this was the idea to develop the concept, why they [indiscernible] they at home, when they further at home, they don't have the best condition to frozen. Let's frozen that they need inside of the plant that we save the yields and we get better products. And this was the idea to develop this market. And this market is going well. And we not compete with our customers because we have the solution to put in starting -- some of the customers, they want to have this frozen beef inside of this -- in the store, we go there and we build a swift store inside of the store. This is one segment we are growing. And the other segment, as I mentioned before, it is a category of management. We are -- we call a [indiscernible] we are teach the people that operate the budget area in order they are preparing to attend better the consumers. And the other way, we help them to define the mix and to define the presentation of each one of the gut. And then that is a win-win strategy because they don't just sell more meat, but they sell more of the other products inside of the stores.

Our next question comes from Priya Ohri with Barclays.

One follow-up. I know you've gotten some questions around the working capital. But it does seem like relative to what you discussed on the second quarter call, in the breakeven calculation, the working capital need has gone up about $400 million for this year, $450 million for next year. Can you just walk us through sort of what specifically is driving that? And then my second question is just around any progress you've made with regards to updating your bond ticker. I know that's something that you guys have been discussing for a little bit. So I just wanted to see where you were there.

So basically, this year, the increase was mainly because of livestock prices and also finished product prices. Next year, as I mentioned, there's a lot of variables of this uncertainty. So I just made an average of last year because this is, again, depends on the varies that I mentioned before. So I can tell you what this year, it was mainly for the reasons of livestock prices and finished rather prices and some increase in volumes. The figure we are in the process of making the NV, so our Netherlands company now as a co-issue as well. So these will mean restructuring. So maybe with this argument of being restructuring, the U.S. Bloomberg, if now they can take the ticket [indiscernible] from the ticker, but that's that's what our next trial will be once we finish making the NV as a poissuer.

Great. Do you have a time line around that possibly -- and then just one final question around whether you've gotten any indications from BNDES around how they're thinking about selling down their existing holding, which is for sale.

No, we don't have a time frame, but I think by next year, we will have the restructuring of the poise in place. And BNDES, we have no news on that.

Our next question is with Igor Guedes with Genial.

My question is about U.S. pork. We understand that although domestic demand remains resilient, supported by consumers switching to cheaper proteins. Margins still seems to reflect the effect of weaker prices for byproducts and of all -- the operation has made progress in expanding its high value-added portfolio, including the strengthening in prepared product line, but this has not yet been enough to offset the compression factors. We have an agreement at Chinese, the Chinese products will be subject to a 40% tariff in the U.S. Do you think this agreement will be enabled to return of sales of byproducts and of a to China? with the administration of the 2 countries reaching a better understanding on tariffs. Is it possible to see this margin improvement going forward. Thank you very much.

So obviously, if we have more markets for our products, including offs, it's always better and always going be better for margins overall to have more options. But margins are not compressed because of that. I mean we're just back to to a 10% EBITDA here, close to where we have been operating in the previous quarters, except for the second quarter. So margins are not compressed because of that right now. It's just -- it was compressed in the second quarter because of some backup that we had on the experts, but not anymore.

And again, obviously, if we have more market access for meat or for us or for any one of our byproducts, it's always positive, but I wouldn't say the margins are compressed because of that though.

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

Thank you all for joining us today, and it's our continued interest in JBS. This quarter once again highlighted the stretch of our global protein platform and the way that we operate it. With discipline and that guides our work every day, as we close, I want to express my appreciation to our more than 280,000 team members around the world. They are committed to excellence in this is the foundation of our performance and the reason we continue to deliver consistent and long-term value. Thank you.

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