JBS SA

BOVESPA:JBSS3

Earnings Call Transcript 2020-Q1

[Operator]

Good morning, everyone, and thank you for waiting. Welcome to JBS First Quarter of 2020 Results Conference Call. With us here today, we have Gilberto Tomazoni, Global CEO of JBS; Guilherme Cavalcanti, Global CFO of JBS; Andre Nogueira, CEO of JBS USA; Wesley Batista Filho, CEO of JBS South America; and Christiane Assis, Investor Relations Director. This event is being recorded. [Operator Instructions]

Before proceeding, let me mention that forward statements are based on the beliefs and assumptions of JBS management. They involve risks and uncertainties because they relate to future events and therefore depend on circumstances that may or may not occur.

Now I will turn the conference over to Gilberto Tomazoni, Global CEO of JBS. Mr. Tomazoni, you may begin your presentation.

[Gilberto Tomazoni, executive]

Good morning and welcome to JBS First Quarter 2020 Earnings Conference Call.

The world is facing an unprecedented challenge and we are collectively fight the coronavirus pandemic. Therefore, our primary focus is the commitment towards the health and safety to our staff member and the purpose of safely producing food for millions of families of the world. Our more than 240,000 team members around the globe are doing the best to ensure that food remain available at the time when ourselves and the global cities need it most. I truly believe that the men and women and -- of JBS are here for their service. I think -- I thank our entire team for serving the greater food and helping society during this moment. JBS has adopted and implemented enhanced preventive measures and health protocol to safeguard the safety and protection to our team members in every facility around the world. We have partnered with health professionals and use this prevention expert to review and validate our procedures. Importantly, we have continuously evolved our operation to reflect the best available science expert guidance. Our entire approach to mitigate the potential introduction of spread of coronavirus in our facility has been managed by the -- our COVID-19 Crisis Committee which is led by the company global leadership team. We are facing this crisis at our best moment.

Financially, we are extremely solid. The liquidity at the end of the first quarter was worth BRL 4.6 billion and reached BRL 3.5 billion in cash, representing that more than 5x our short-term obligation and enough to pay all of our debt until 2025.

The second, diversification of production platform by region and by type of product, which by itself represents a great competitive advantage. But with all of the volatility that the markets are facing, it has become a vital to mitigate setbacks in one or another market or aiming for one property to another.

The third, people and culture, the -- by model made up by a culture that prioritize an attitude of ownership, the sense of urgency and determination to make it happen and by a very experienced leadership team will be decided to navigate a market in which great change are happening.

We are presenting a quarter of solid results: revenues of BRL 56 billion, which represents year-over-year growth of 27.3%; and when we discount the exchange rate, growth was around 10%; BRL 3.9 billion of adjusted EBITDA; adjusted net income of BRL 800 million; and reported net loss of BRL 5.9 billion, which consider no cash FX impact of BRL 8.2 billion; a leverage ratio of 2.17x in dollar and 2.77x in reais.

The world is going through a humanitarian crisis and emergency to the area of health and social assistance. Conscious of our responsibility, of good corporate citizens, JBS is committed to making a positive impact in the lives of people and support the communities where we life and work -- where we live and work. The JBS Board of Directors approved a BRL 700 million donation to help combat the effects of COVID-19 pandemic. Our social responsibility investments will extend to all regions at the global where we are present and will be overseen by Advisory Committee comprised by expert medical advisers and audit by Grant Thornton, which waived its fees to participate in the program.

We are confident that this moment will eventually turn. When this is over, we will leave knowing that we have done our best to protect the health and the safety for our team members, that we have fulfilled our mission to feed the world during the most challenging moment of our generation and that we have stood side-by-side with the society when we were needed most.

Now I ask Guilherme to go through the numbers and the -- talking about the business operations. Guilherme, please.

[Guilherme Cavalcanti, executive]

Thank you, Tomazoni.

Please let's start on Page 13 of the presentation where we compare the first quarter 2020 results with the first quarter 2019 where we mainly have 18% FX depreciation between those quarters. Even though our revenues in reais increased 27%, reaching BRL 56.5 billion, our gross profit reached BRL 7.3 billion and our adjusted EBITDA reached BRL 3.9 billion with an EBITDA margin of 6.9%. Also in this page, we see our reported net loss of BRL 5.9 billion, which is impacted with the FX variation on the U.S. dollar debt when translated into the real balance sheet. This generated an impact of BRL 8.2 billion, which is a noncash impact. And if we take this out in that tax effect, we should -- so excluding the FX variation, we should have reported a net profit of BRL 800 million.

Now please moving to Page 14. We see that our operational cash flow increased 43%, reaching BRL 1.1 billion. And our net interest expenses decreased $26 million in the quarter compared to the quarter of last year. So this is in line of our decrease in our cost of debt that forecast a savings for the year of around $100 million, which could be a little less depending on how long we will continue to work with my cash position above normal levels as an insurance for the volatility that we are facing.

Also in this page, we see our free cash flow, which is a cash consumption of BRL 637 million, which is a lower consumption than the same quarter last year. It's worth mentioning that every first quarter, we have a cash consumption. It's a seasonal effect mainly because of a concentration of suppliers' payments in the beginning of the year, inventories building and tax payments.

Now please let's move to Page 15 where we talk about our debt profile. On the left hand, we see that our leverage that we should look in dollars, given that 90% of our cash generation are in dollars and 94% of our debt are also in dollar, so we ended the quarter with a 2.17x net debt EBITDA. This compares to the end of the year that we had at 2.13x. It's mainly a maintenance level of our leverage ratios with a very small increase and keeping us on a very comfortable level of net debt to EBITDA. I think it's an -- you can easy calculate how much your net debt to EBITDA for the next quarter should fall in order for you to reach 3x. It's a very improbable scenario. So we will continue probably on this comfortable range of leverage. The leverage in reais rose from 2.16 at the end of the year to 2.77 at the end of the quarter, again, because of the impact of the debt transformation into the balance sheet in reais, which was done by the FX of the end of the quarter, which was 5.19. In the same time, the EBITDA in reais for the last 12 months was being generated in dollars but translated into an average FX of 4.1. So this difference from the average FX of the last 12 months and the FX at the end of the quarter increases this leverage ratio momentarily. If -- once the FX stabilized at some level with our EBITDA in reais where this -- our EBITDA is generated in dollars and then translated into reais into a higher level, it starts to convert this real leverage with the dollar leverage.

Now on the right-hand side, we see what Tomazoni mentioned, our robust liquidity position of $4.6 billion. We had at the end of the year $4.5 billion in liquidity. So we kept this comfortable liquidity position despite the small cash consumption of the quarter. And it's worth to mention that we withdraw $850 million in revolving credit facilities in U.S. and that we were raising almost $500 million in trade finance in Brazil, both withdraws just to build up cash. If we did -- if we didn't have withdraw this revolving, if we didn't raise this trade finance, we still have more than $2 billion in cash position. So this capital raising was just to improve our cash position in an uncertainty time, and we can prepay it at any time when you think that the volatility will start to become lower.

Now this liquidity, if you look, it's enough to cover all the amortization of the debt up to the middle of 2025. And this cash -- this liquidity of the end of the quarter, if we adopt the expenses already announced after the end of the first quarter, which is the acquisition of the Empire Packing, the BRL 1.4 billion dividends that we paid, the BRL 750 million acquisition of the margarine and the BRL 700 million of donation announced this year, even adding these announced expenses, our liquidity is still enough to take us up to the end of 2024.

On the bottom of the page, we see that we increased it from the end of last year our exposure to commercial banks that was only 8%, we increased it to this 15%. It was mentioned that the bond markets are more -- it's less favorable now, so we are using the credit limits that we have available for the company with the commercial banks.

On this page still, we see that we decreased from the first quarter 2019, we had an average cost of debt in dollars of almost 6%, and we ended this quarter with an average cost of debt of 5.28%. So that's the reason as we saw on the interest expense savings.

Now let's talk about the business unit performance. We will begin talking about Seara. So the main first quarter highlights for Seara was a net revenue of BRL 5.8 billion, 39% higher than the first quarter 2019, boosted by a 14.5% growth in sales volume and 22.2% in average sales price. EBITDA for the quarter was BRL 983 million, an impressive 254% increase with an EBITDA margin of almost 17%.

For the domestic market, net revenue was BRL 2.9 billion, a 24.7% increase over the first quarter of 2019 with a 3.8% higher volumes and a 17.5% higher prices. Processed Foods category was the highlight, posting an increase of 8.4% in volumes sold and 8.1% in average sales price to this period.

Seara continues increasing its preference with the Brazilian consumer through a strategy based on quality, innovation and execution. For the fifth consecutive Nielsen and assessment, Seara maintained its market leadership in the frozen food category with 23.4% of the share -- of share in -- versus the second -- so 1.7 points -- percentage points above the second brand and reached the leadership in the meatless product market with the Incrível Seara line in addition to growing in the organic chicken category with the Seara Orgânico line. Additionally, Seara has consolidated its innovation launched in 2019 and has been delivering record results in Incrível Seara, Seara Gourmet and Seara Nature product lines. In the export market, net revenues was BRL 2.9 billion, a 64% growth over the first quarter '19, boosted by an increase of 27.7% in volumes sold and 28.5% in higher prices.

Now please let's turn to Page 18 to talk about JBS Brazil. First quarter highlights was our net revenues was BRL 8.2 billion, which corresponds to a 20.6% increase in relation to the first quarter 2019. EBITDA for the quarter was BRL 338 million, which corresponds to a 73% growth over the first quarter 2019 with a 4.1% margin. In the domestic market, net revenue was BRL 4.9 billion, a 28.6% increase over the first quarter 2019 due to a growth of 7.2% in volumes and 19.9% in prices.

Friboi continues to consolidate its position as the main beef brand in the Brazilian market and has been expanding its strategic partnership through the Açougue Nota 10 program, a new model of beef sale, which aims to develop a special sales channel in retailers and help them manage their butchers, trading profession -- training professionals, avoiding waste and differentiating their product at the point of sale. In the export market, net revenues increased 10.6%, reaching BRL 3.3 billion due to a growth of 27% in prices, partially offset by a reduction of 13% in volumes sold. The company is also investing in initiatives to offer products with higher value-added in the export market and in February this year launched during Gulfood 2020, the largest food and beverages fair in the world held in Dubai, the Farms Fibroi brand.

Now let's move to the next page where we talk about JBS USA first quarter highlights. Net revenues was $5.2 billion for the quarter, an increase of 3.1% compared to the first quarter 2019 driven by an increase of 4.2% in volumes sold, which more than offset a reduction of 1.1% in average sales price. EBITDA was $244 million with EBITDA margin of 4.7% in the first quarter 2020. JBS USA Beef improved its product mix and continued to grow the volume of value-added programs. After the end of the quarter, JBS USA concluded the acquisition of Empire Packing in the United States announced at the end of last year, reinforcing its performance in case ready segment. This acquisition adds additional capacity to the existing case ready business and places JBS USA as 1 of the 3 main case ready operators in the country.

Beef exports for JBS USA Beef in the United States performed above the American market rates, which grew 10.5% compared to the exported volumes for the same period in 2019. The main import markets for U.S. beef products in the period were Japan, South Korea, Mexico and Canada. In Australia, the challenging cattle availability scenario coupled with temporary and seasonal shutdown at some plants in the northern region of the country, which occurred due to the rains, impacted production volumes for the quarter. JBS Australia international sales posted 4% growth in the annual comparison due to higher prices and FX rate impact. Primo Foods prepared food operation continues to exceed its production volumes, diversifying the portfolio with new innovative launches mainly in this next segment.

Now let's please move to the next page with JBS USA Pork first quarter highlights.

Net revenue was $1.5 billion in the first quarter 2020, an 11% increase in relation to the first quarter 2019 due to a 6.1% growth in average prices and 4.9% in volumes sold for the period. EBITDA was 28 -- $129 million for the first quarter 2020, an increase of 22% in annual comparison with EBITDA margin of 8.7%. JBS USA Pork results were due to a good supply of hogs in the United States and the solid pork demand in domestic and international markets as well as the strong operational performance of this business unit. In the first quarter 2020, JBS USA Pork sale exports grew 56% compared to the first quarter 2019, highlighting the increasing export volumes to the Chinese market, which started importing pork cuts in addition to the traditional of offals. The country reopening following the effects of COVID-19 and the continued impact of the African swine indicate that China will continue to lead the global pork imports for some time.

Plumrose continues to expand its presence in the prepared Foods segment in the United States as a result of strong operational performance and volume growth. In April, this business unit began the construction of a new plant for the production of pre-cooked and cooked bacon in Moberly, Missouri with a capacity of 24 million pounds per year, which we will start operating in 2021.

Now moving to Pilgrim's Pride first quarter highlights. Net revenues of -- totaled $3.1 billion, a 13% higher than first quarter 2019. EBITDA was $166 million, 19% lower than the same period last year while EBITDA margin was 5.4%. In the U.S.A., the market tracked normal seasonality initially during the first quarter before wider implementation of travel and movement restrictions due to COVID-19 disrupted retail and foodservices channel demand. The large bird deboning market was especially volatile during the quarter and remained challenged compared to 2019. PPC continued to improve its relative performance versus the industry across all its business units. The unit also adapted quickly to the change in channel demand by shifting the mix of its production capabilities, supported by its close partnership with key customers, a strong focus in execution by PPC team members, the geographic diversity and its footprint and its presence across all bird size categories.

In Mexico, revenue was stable. Market environment during the first quarter was difficult as weak macro conditions persisted longer than expected, contributing to uncertainties in consumer spending. PPC increased its share of non-commodity products with stronger execution and growth in prepared foods have helped and partially offset the weakness. In Europe, the legacy operations once again delivered robust results in the first quarter, and the newly acquired European operations also performed well and continued to generate positive EBITDA.

Now the next page, we just have our unique global platform, which Tomazoni mentioned in his speech. And in the last page, we have our exports breakdown by region.

With that, I would like to open to the question-and-answer session.

[Operator]

[Operator Instructions] Our first question comes from Leandro Fontanesi, Bradesco BBI.

[Leandro Fontanesi, analyst]

I have two questions. The first one, I appreciate the comments that you provided in the Portuguese conference call. Just trying to ask the question in a different way. When we look into the U.S. market, and I understand that you mentioned that protein spreads based on the spot today is not very good reference, given the volatility. But if we consider April, for example, in -- I understand that there might -- the data, even if it's not perfect, suggests there's some improvement in terms of margins. And just to understand, if this is enough -- if you think it is enough to compensate for the higher operating costs that you have with safety gear, cleanliness and also the bonuses that you mentioned. So just to understand if this movement would be positive in the absolute terms for EBITDA in April, for example, in comparison to March. So if you can give us a direction, not any further details.

And the second question is -- I understand that there's a difference between the impact of coronavirus for integrated businesses in comparison to non-integrated businesses. And I understand that in Brazil, we are just beginning to see some impacts in some of the plants that you have. So just to understand, what's the impact? What's the difference in terms of impacts, the negative impact of coronavirus in integrated businesses in comparison to non-integrated, if in Brazil, you're doing the adjustment in chick collection, for example, in the industry in anticipation to any potential impacts from coronavirus?

[Gilberto Tomazoni, executive]

Thank you, Leandro, for your questions. I will ask Andre, please, could you answer Leandro about the U.S. beef? And then, Wesley, maybe I think you can answer about the integrated business in Brazil.

[Andre Nogueira, executive]

Thank you, Leandro. Well, just to elaborate a little bit more. So the spot market in U.S., that was a report in -- most of the analysts cover. Probably response for something around 20% of the total meat that we've sold. That's my point. That the spot, especially in a time, high, high volatility [indiscernible] cost right now and I think not peculiar. On the cost side, it's very tough for us to have a clear view at this point, consider how fast we are implementing other actions to protect our workers. So again, having this now for a little bit more than 2 months, and we're taking actions every day. And to be honest, with the COVID with so much [indiscernible] in the safety of our workers, cost now for us is secondary. So I'm not looking as close as you used to look at cost because now there is a bigger, bigger priority of decision for us all. So we're taking actions every day. It's very hard to have a full visibility how this will be for the quarter. Some items are easy, and we decide to pay an extra thank you bonus for the team members. This is easy to calculate. But how fast we're implementing the actions, how does this impact our operation? How this has slowed down the normal production facility on top of the costs to stop some plants, on top of what we have done in U.S. that we take the vulnerable population, the most vulnerable population out of our plant. And that represents around 10% of the team members. So it's a little bit frustrating. I understand that, but we don't have the full visibility of the costs. We had around 1,000 people divided into 2 groups. One is the extra cleaning that they're doing, and the other one -- kind of half and half, and the other one just to enforce the new policy related to COVID and educate policy in the end of this COVID. With so many actions at the same time in several different plants, that's hard to have the visibility. On top of that, they spot just a small piece of the market that does not represent the market stability that we have right now the full picture. And as I said before, on top of that, we're taking it from export, put it into the next month, too much volatility for me to try to give any direction. Do I expect overall that we will follow the normal trends in terms of second quarter being much better than the first quarter? That response, probably yes. We expect that this normal trends will continue to apply for this year, for the second quarter to be better than the first quarter as it is pretty much every year.

[Wesley Mendonça Filho, executive]

Leandro, this is Wesley. And...

[Gilberto Tomazoni, executive]

Leandro...

[Wesley Mendonça Filho, executive]

Sorry, Tomazoni. Go ahead.

[Gilberto Tomazoni, executive]

No. No. Go ahead. Well, I suppose that you are not -- you have dropped your line. Okay. Go ahead.

[Wesley Mendonça Filho, executive]

Yes. Leandro, so regarding COVID effect in Seara and being integrated, we have -- since the beginning of the spread of COVID-19 in Brazil, we have been working with a very, very strong protocol to take care of our team members. And we are working in partnership with specialists and the best hospitals in the -- in fact, all just in Brazil to make sure that we have a safe environment in our plants. We have very fast -- we were very fast to implement all of those protocols in our plants. And we're very, very confident of the safety we're providing to our team members in our plants. That being said, we are not working with a scenario of reducing in a significant way our chick placement and doing -- predicting any sort of disruption in our plants ahead of time. So we're not working with that scenario given the protocol we have implemented in our plants.

[Operator]

Our next question comes from [ Rafael Former ], Logos Capital.

[Unknown Analyst]

I understand that the moment is -- predictability is very low and the company is focused on another fronts. But could you please give us an update on the lifting of U.S. operations, please? Any news on this would help.

[Gilberto Tomazoni, executive]

Sorry. I lost the end part of your question. Could you repeat that, please?

[Unknown Analyst]

Yes. Sure. I understand that the predictability is very low and the company is focused on other fronts. But could you give us an update on the lifting of the U.S. operations, please?

[Gilberto Tomazoni, executive]

Okay. Okay. Now I understood. Now the lifting is our priority because there is a lot of value to unlock to all of the stake-- all of shareholders. But at this moment, really we are not look at this project. We are focused on to protect our team members and to provide food for the world. But the project is in the top priority of the company. Sorry if I'm not to be specific, but it's what I can tell you now.

[Operator]

Our next question comes from Bryan Hunt with Wells Fargo Securities.

[Bryan Hunt, analyst]

I was wondering if you could discuss the migration of your beef and pork capacity to retail products from foodservice products particularly -- and/or export products, particularly in the U.S. operations given the dramatic slowdown in foodservice operations around the world.

[Gilberto Tomazoni, executive]

Andre, maybe you start to answer the question.

[Andre Nogueira, executive]

Bryan, thanks for the question. Here in U.S., the migration is very simple for us as well. We do not have any plants fully dedicated to foodservice in the beef and pork side. So I'd say that the migration for us was very similar to adjust some products, but really, really easy migration. And you are right, there was a slowdown in foodservice that, by the way, it's picking up in the last 2 weeks, Bryan, surprisingly, a little bit. The pace of the pickup in foodservice is still way below the normal, but it starts picking up. The only area, Bryan, that we have a little bit is some of the -- in the further process, bacon line, that we have that dedicated foodservice, that line is hard to convert for retail. But we are running the other lines in -- also the process more. So we are not going to have any less volume, even in the prepared foods side, because we are not running food at foodservice line. I would say that the volume will be higher despite of that. So no impact -- no material impact on us at all to change from foodservice to retail. Very easy.

[Bryan Hunt, analyst]

All right. And then my -- I'm sorry. Go ahead.

[Gilberto Tomazoni, executive]

Go ahead. No. No. Go ahead, Bryan. Go ahead, Bryan.

[Bryan Hunt, analyst]

And then my second question is you all invested in Scott Auto Technology several years ago because of the automation. You've got a fully automated sheep processing facility in Australia. How can you take that technology and roll it out as quick as possible maybe to improve social distancing and/or -- in the problems with attendance and absenteeism? Where do you kind of stand in that time line? And what kind of improvement should we expect in automation in the next 12 to 24 months?

[Gilberto Tomazoni, executive]

Bryan, automation and digitalization has been a priority for the company for the last, last years. We are focused on that because we strongly believe that it will help improve the productivity of the factory. Now I think we have one more incentive to accelerate the productivity. But we are not in a condition to give you the preview on a program and a time that what will be put in place.

[Operator]

Our next question comes from Carla Casella with JPMorgan.

[Carla Casella, analyst]

I was wondering if you could give us a sense for what level of capacity you think the U.S. beef, pork and chicken markets are currently running giving -- given the plant shutdowns, I guess industry-wide and in your own business as well.

[Gilberto Tomazoni, executive]

Sorry. I had a difficulty to understand your question. The connection is not so good. Could you repeat that, please?

[Carla Casella, analyst]

Yes. I'm wondering what capacity the U.S. is running currently for the beef industry, the pork industry and the chicken industry given the plant shutdowns that we've had. And then what you're running at in terms of your percentage of your capacity?

[Gilberto Tomazoni, executive]

I don't know. I think the line in U.S. dropped. Andre, are you in the line? I think it's the guys -- they dropped the line. But I will answer that. The -- what we know that the industry -- the last information from about last week that the industries are working around 70% in beef and pork and around 90% in chicken. And we are running a little bit more than this in our operation now. We are -- all of our -- all our factories now is running.

[Operator]

Our next question comes from Ben Theurer with Barclays.

[Benjamin Theurer, analyst]

A couple of ones. And I'd like to start off with the Brazilian business. I mean, clearly, we've seen very strong performance on the EBITDA side in JBS Brazil, but also in the case of Seara, it was obviously an impressive quarter. Now can you give us a little bit of a sense of what you expect for the rest of the year in terms of the domestic market and the export markets just considering that, obviously, FX for export has been very favorable? But what could that mean for pricing domestically and then ultimately, consumer reaction to that, facing a more challenging macroeconomic condition in Brazil? That will be my first question.

[Gilberto Tomazoni, executive]

Wesley, would you like to answer this question?

[Wesley Mendonça Filho, executive]

Sure. The situation -- current situation makes it very tough to make long-term predictions like this, right? We know that COVID makes the scenario unstable, right? And I guess no one knows and is able to do a very, very accurate prediction right now of how we're going to perform until the end of the year. What I can tell you is the performance we had in the first quarter, yes, there was a -- there were some fundamentals in the market that helped us, such as the exchange rate. But a lot of it comes from performance and execution and a lot of the fruits that we were harvesting from work from previous years. So quality, innovation, execution in our team -- with our team. So I -- when I look forward, I see a lot of those scenarios, a lot of those fundamentals. Still, I do still believe that they'll still hold. And our performance, we're expecting that to continue and improve. What I can tell you is that it's very difficult to make a very precise prediction, but we believe these fundamentals and our execution should continue as strong.

[Gilberto Tomazoni, executive]

Ben, and this is for all of our operations. It's too early to give a -- to make enough prediction or forecast for the year. We are facing really high volatility in the market. We need more time, probably more weeks, more months that -- given a more stable, you can -- more stable reaction to predict the consumer behavior or the demand, what we change -- for one chain to the other chain, what will be happened with the COVID in the different divisions. It's really tough to predict. I know that you are not comfortable with the answer. But unfortunately, we are not -- it's not because we want to avoid to answer the question, because it's really -- it's not -- it's unpredictable with the information we have now.

[Benjamin Theurer, analyst]

Okay. That's okay, Tomazoni. And then I'm not sure if Andre is back, but maybe you can answer my second two-folded question as well. So clearly, with the capacity in the U.S., be it in beef and pork, as you said, running at about 70%. So clearly, there's a lot of cattle and a lot of hogs that are not getting slaughtered right now. And my math suggests that we're running roundabout at about 3 million hogs and almost 1 million cattle that have been backed up and not slaughtered. So the question really is, do you think from this low slaughter activity and the impact it has on farmers, which basically get all the backlog and have all these animals ready to slaughter but can't put them into processing, do you think this is going to have a medium to more long-term impact disruption on cattle and hog supply way beyond what the current situation around COVID is and the uncertainty here? Obviously, I'm really thinking more of like 1 to 2 years out what it could mean. And also in light of the Australian business connecting that into it that you got, I think, 1 plan suspended for exports to China, you've highlighted how pork exports to China were strong. So you're going to offset that out of the U.S. or out of Brazil. Just to understand a little bit that Australia piece, but particularly, my question would be on this medium, long-term impact from cattle and hog supply.

[Andre Nogueira, executive]

Great. Thanks for the question.

[Gilberto Tomazoni, executive]

Andre. Oh, you are back. Okay. Go ahead.

[Andre Nogueira, executive]

Thanks for the question, Ben. Ben, I think that one thing that's very important is all of this situation that we have right now describe that our fact together does not change in my perspective the great outlook in terms of consumption of protein in a global base at this moment. We still have a vast of protein in Asia that I think that will have to be, for us, Brazil, Australia will be the ones that will supply for that vast. The demand in mid- to long-term perspective, in my view, continue to be very positive. So you are right, the production at this moment has been backing some of beef and pork, just -- again, my perspective that we're running the industry, we have to run now at 75% in the beef and 84% in the pork. Of course, it depends how this virus will behave will define how fast can we ramp up this production. The ramp-up has been pretty good in the last 2 weeks in terms of increasing. And this will define how much can we catch up in terms of this production for the remainder of this year.

I think that cattle, it's easier, a little bit easier than hogs. You hold the cattle in the farmers longer, the feedlot is going to slow down. So I don't anticipate any big disruption in the cattle supply lot, probably around -- but to tell you we have lots of supply. So I don't think that changed anything with supply perspective. If anything, it's positive in cattle. In the hog side, we are seeing a little bit of people need to eliminate hogs at the farm. I don't think that at this point is a huge movement, but they exist. What could be the impact in terms of supply for the long term in the hog? I think that will be related to how the government will support this farm. Everything that I hear from the government, there's a concern and a huge attention to support the farms. And as they support the farms, as we can run more, as the demand in Asia continues to be pretty strong, just remember that the growth in exports from U.S. in the first quarter, so before they were hit by this virus, was 500% higher than last year in the same quarter.

So demand is there. The agreements in place. I have the confidence that we'll be able -- if the virus continue to go down, we'll be able to ramp up this production back. So I think that the perspective for the medium and long term continue to be very positive. We need to get through this situation that we're right now. The U.S. government has been very, very supportive for the farmers overall. I think that they will find a way to be supportive for the hog producers. And if the hog producers have the perspective and have the demand out there, I don't think that we're going to see any big reduction. We are not seeing any big reduction, and I don't think that we're going to see any big reduction that could compromise the supply for 2, 3 years ahead. Again, too early and just to share with you my expectation and what are we seeing toward these hog producers.

[Benjamin Theurer, analyst]

And on Australia, the plant that got suspended for exports to China.

[Andre Nogueira, executive]

This is one of business of plants that we have global that can export to China. We never like to have a plant suspended. But what's the mature impact of that in the reality for JBS overall? No. What we don't send for that plant, we send from other. That plant can send more -- can supply more Japan and Korea. Again, it's never good, but the real material impact for us, consider the global footprint, we had, in some way, a lot of good discussion and a lot of good perspective in sales from beef from U.S. and from Canada to China. We just slowed down because of the availability now. But give -- once the availability come back, we'll have a plenty of plants are available to export to China. So no mature impact from that.

[Bryan Hunt, analyst]

And then one quick last one for you, Andre. Do you think -- with social distancing having to be put in place, more investments into safety of workers, face masks, all that kind of stuff, do you think there is a substantial and relevant impact on operating costs and, call it, costs associated with human resources in the future as a result of the pandemic we're going through right now?

[Andre Nogueira, executive]

Yes. There is -- when I used 5 of our plants in the last 2 weeks and I'm amazing -- I'm amazed on how the workers embraced the new safety protocol that we put in place, using masks, using face shields. It's not also I'm used seeing that all the time every day. But they embrace there. They -- I think that now there's a very good level of understanding of how this is relevant and why that's important. And I think that they are adjusting really, really fast. I was very positive surprised in these 5 plants, what they did in the last 2 weeks. The acceptance, the embrace and how they understand what we're doing. So the use of PP&E in terms of productivity, I don't think that will have an impact. It will be more costs, no question. We are using disposable face masks. There's a cost related to that. And it's more than 1 face mask per day. We are using an average of 1.5 per day for each of our team members on a global basis. We hire in U.S. 1,000 extra people, around 500 for extra cleaning in all the common areas and 500 for education related with COVID and enforcement of the new policy. There is that extra cost. That will be with us until we have a vaccine, until this pandemic change course or go away. It will be -- how much will be this cost? It's hard to say right now. But there is a way. We now see in U.S. that only in U.S. and Canada, we invest -- we expect to invest and we invest right now -- from now to the end of the year over $100 million. And this investment, this is safety investment. This is not related with additional costs because we stop a plant. This is the cost like masks, this is the cost like safety of vulnerable population, this is the cost like the extra 1,000 people, this is the cost like put physical barriers between the workers in the line when 6 feet is not possible. So this cost will be with us during this time of this pandemic.

[Operator]

Our next question comes from Lucas Ferreira with JPMorgan.

[Lucas Ferreira, analyst]

I just wanted to ask Guilherme. Guilherme, if you have an updated view on the CapEx for the year. Did you have already revised budget? And what is the -- you had at least a range of expectation for the full year for CapEx? And what is all this volatility means to working capital for the company, just also an expectation on the working capital as well.

[Guilherme Cavalcanti, executive]

Thank you, Lucas. On the first, as Tomazoni mentioned, we have a very robust liquidity position. So we don't have a need to revise our CapEx budget for the year. So we didn't have any CapEx restriction because of that. So we had still the same guidance of around $1.2 billion for the entire company for the year. Secondly, working capital, we don't have also great variations, except on the balance sheet in reais, given that the FX translation of accounts receivables and accounts payable. But this is -- again, this is only on the translation. We don't have -- we are not having any pressure from the supply side or accounts receivable. I think, in fact, as we have credit limits with bank, we've been, especially from the second semester of last year, increasing our terms of payments. And at the same time, we were decreasing our accounts -- our discounts of receivables given that we don't need to incur any additional interest expenses when the accounts receivable discount becomes very expensive in situations where the market is in turbulence. So -- but that's the 1 month -- 1 thing is offsetting the other, so we don't have main variances in working capital for the rest of the year.

[Gilberto Tomazoni, executive]

And Lucas, about the CapEx, we didn't change the CapEx. We keep the CapEx because the fundamentals of the business are very positive and -- for the future. And we need to keep doing our strategic investment.

[Lucas Ferreira, analyst]

Perfect. If I may, another quick question. In the chicken market, what is the price differential that you have from exporting from Brazil and from the U.S.? And how do you see the dynamics of the export market for chicken in China when you export through [ Pugreens ] and when you export through Seara? How do you see the U.S. competing with Brazil? That would be my question in China from the U.S. and Brazil.

[Gilberto Tomazoni, executive]

I think the answer is not just for chicken, it's for all of protein. Each country has its own market there because the position of the products are different. And for example, the answer to our question about chicken, pork and chick, there is not -- I can say the market is very huge. We don't need to compete. There is a market for everyone in there. No need to be competing one country to another country. The market is huge, a lot of markets. When you go to the other mix, the product, U.S. is more focused on commodity issues and Brazil is more focused on more value-added products in terms of deboning, it's more production. U.S. is more commodity. It's more like water. Then in the end, there is not competition. Of course, we compete for all protein markets, but we compete in different layers.

[Operator]

This concludes today's question-and-answer session. I would like to invite Mr. Tomazoni to proceed with his closing statements. Please go ahead, sir.

[Gilberto Tomazoni, executive]

I am extremely grateful for our team of 240,000 around the world who are dedicated to providing food to the world when it needs it most. Thank you for your service in community. Thank you for all of you having participate in this conference. Thank you.

[Operator]

That does conclude the JBS audio conference call for today. Thank you very much for your participation. Have a good day and thank you for using Chorus Call.