In June last year, the European meat industry was given a jolt as Moy Park, the Northern Ireland-based poultry processor, announced it had been acquired by the world’s largest meat processor JBS. Headquartered in Brazil, JBS has amassed a truly global meat processing empire in a relatively short period through an aggressive acquisition policy.

Until last year, the group had mainly focused its efforts in South America, the US and Australia, but the acquisition of Moy Park gave the Brazilian giant a significant foothold in Europe for the first time to make it a truly global business.

Strategic acquisition

Reporting its annual results for 2015 this week, it was interesting to hear JBS chief executive Wesley Batista say that last year was notable for JBS as it “evolved significantly” with strategic acquisitions made during the last 12 months.

Having shelled out more than €1.3bn for Moy Park, Batista and JBS see the business as being “totally aligned” with its global strategy. Batista sees the innovative, added-value, convenience-type products rolling off the production line at Moy Park, which are tailored specifically for the modern consumer, as the key to moving the business away from commodity cycles and widening profit margins.

What it also does is give JBS direct access to a market of more than 500m consumers to which access was largely restricted until now due to trade barriers and food safety concerns.

Earnings boost

For 2015, JBS recorded operating profits of €1.9bn, an increase of 88% compared with 2014, while sales for the year increased by 35% to almost €40bn.

Earnings (EBITDA) for the year jumped by 20% to almost €3.3bn. However, group earnings margins actually decreased 100bps to 8.2% as a sluggish performance from the group’s US beef division dragged on earnings.

JBS said earnings for its US beef unit, which plunged by 36% in the year, were affected by the bullish US dollar in 2015, which weighed on exports, and the retention of cows and heifers by farmers in the US as the country seeks to rebuild its herd after hitting a 63-year low last year.

However, while a strong US dollar was weighing on exports from its US subsidiaries, JBS benefitted hugely from the weakened Real over the course of 2015. The group added that 30% of sales now come from export markets, with Asia and the Middle East key markets.

Integrating Moy Park

Over the course of 2016, JBS will seek to fully integrate the Moy Park business into its overall structure. The group acquired Moy Park from its rival Brazilian meat processor Marfrig, who had been forced to offload what was the jewel in its crown to reduce a heavy debt burden.

Taking advantage of this, JBS now has full control over the largest poultry business in Europe, processing 5m chickens a week last year. The €141m in earnings reported by Moy Park last week for its 2015 financial year will help JBS to improve its overall profitability and should aid margin expansion in the years ahead.