JBS SA

BOVESPA:JBSS3

Earnings Call Transcript 2019-Q2

[Operator]

Good morning, everyone, and welcome to JBS conference call. During this call, we will present and analyze the results for the second quarter of 2019. As requested by JBS, this event is being recorded. The recording will be available this afternoon and can be accessed by following the instructions posted on company website at www.jbs.com.br/ir. Taking part in this call, we have Gilberto Tomazoni, Global CEO of JBS; Guilherme Cavalcanti, Global CFO of JBS; André Nogueira, CEO of JBS USA; Wesley Batista, Sr., CEO of JBS South America; and [indiscernible] Investor Relations Director.

Now I'll turn the conference over to Mr. Gilberto Tomazoni. Please, sir, go ahead.

[Gilberto Tomazoni, executive]

Good morning, and welcome to our conference call to present the results for the second quarter of 2019. Apologize for the delay. Our service provider had a technical problem. We are very happy to announce another quarter of solid results. In the last 24 months, we have delivered consistently quarter after quarter, everything that we have set out to do. This quarter, we have completed 2 years since we have set 5 priorities for JBS, which have been completed every quarter.

Continuous focus on operational excellence, organic growth of our business, continuous investment in quality and innovation, deleveraging and robust global compliance programs. Mission accomplished, all of them exceeded our expectations. The record results of the second quarter show that we have made the right choice in reinforce the company's operational excellence and the execution ability of our management team.

This quarter, net revenue was over BRL 50 billion, an increase of 12.5% of the second quarter of 2018. Net income for the quarter was BRL 2.2 billion, with an earnings per share of BRL 0.82. Year-to-date, net income reached BRL 3.3 billion. Record EBITDA of BRL 5.1 billion, 20% higher than the second quarter of 2018 with a 10% margin, the third largest in the last 10 years. Operating cash flow was BRL 5.2 billion and free cash flow was BRL 3.7 billion. This strong cash generation and debt reduction resulted in a leverage of 2.78x in reais and 2.81x in dollars. And it wasn't just the leverage ratio debt improving. Our debt profile improved significantly, increasing our average debt maturity from 4.3 years to 7 years.

In the last 24 months, from the second quarter of 2017, until the second quarter for 2019, we had reduced our gross debt by $5.3 billion, which reduced our interest expenses by $400 million per year. During the same period, we paid more than BRL 80 billion of debt with banks in Brazil.

The company is in excellent financial condition and future prospects are even more encouraged. These [indiscernible] has already been preceded by a larger portion of the market and our [indiscernible] company strong ex depreciation as well as in the issuance of our last bonds when after 4 hours of launching, we have demand for $70 billion, more than 4.5x the initial offering.

As you have noted, I'm very optimistic about the company's future. I see very favorable market, the increase in population, urbanization and increase in income, among other factors has result in increase on a global protein consumption, especially in Asia. In addition, the [indiscernible] is very positive event of African Swine Fever in many countries, in addition to increased export flows should create the opportunity to accelerate the growth of our branded and value-added product. These favorable market conditions encountered JBS at its best moment in history.

Our financial situation is already -- as I already commented is very solid. Operationally, the company is very strong with an experienced and motivated management team. We have a diversified production platform by geography and by protein types, which is already a great advantage that -- because of even more important, consider that drought and tariffs is crucial events. In U.S [indiscernible] is our international assets in addition to unlocking tremendous value would be an important driver for accelerating the growth. Lastly, the evolution of our governance and the presentation of our financial [ policies ] clearly demonstrates our commitment towards financial discipline. All are positive reasons JBS is very prepared to capture market opportunity.

Organic growth alone is no longer a priority. In addition, I want to highlight the advances in our ability to innovate the effort in qualifying our markets, and our [indiscernible] teams. The creation of a global innovation team and the advancements and research that were made in recent years has already brought excellent results. Consider -- compared by a large international and international peers and by the larger numbers of new product launches in different geographies where we are present. Two of these releases introduced the company into the vegetable protein segment in Brazil, with the launch of the Incredible Burger by Seara, a vegetable burger made by soy and other vegetables, which have been sold in Brazil market for over 60 days. In Australia, Primo has launched a line of flexitarian sausage, a mix of vegetables and animal protein. Most importantly, these products were created by our researchers between our core development labs and our proprietary technology.

Now I will pass it on to Guilherme to share the details of the financial and business results. Guilherme, please.

[Guilherme Cavalcanti, executive]

Thank you, Tomazoni. Please let's move to Slide 4 of the presentation. We see that our net revenue increased 12.5%, higher than the effects evaluation that was 8.5%. Fixed cost by [indiscernible] made our EBITDA increased 20% reaching a record of BRL 5.1 billion. Our net profit reached BRL 2.2 billion and the net profit accumulated in the June 2019, it's already BRL 3.3 billion. It's worth mentioning that the Brazilian cooperate law requires that we pay 25% minimum of the net profit.

Now please move to Page 5, we can see that our operational cash flow increased in 46%, the double of EBITDA given the improvement in the working capital, paid both on the accounts receivable and on the days of payment. Also our net financial expenses decreased in $20 million quarter-over-quarter due to the -- we did the payment of debt with free cash flow, we generated from the second quarter '18 to the second quarter '19. We generated $1.4 billion and all of these resources were used to pay down debt. We also used our cash [indiscernible] extended the maturities of our debt. We use part of our cash position to pay down debt decreasing the carry of this position, and we also issued new debt cheaper than with that debt we paid, but most of the movement was done in the second quarter. So we will continue to see improvements going forward.

Then we reached to our free cash flow of BRL 3.7 billion, which means that 71% cash conversions related to the EBITDA. In dollars, we generated a free cash flow of $950 million this quarter, and the accumulated free cash flow of the year is $750 million.

Now please move to the Slide 6, where we have our debt profile. So on the left hand side, we considerably decreased our gross debt by $3 billion, a half of that is free cash flow generation and half of that as I mentioned, using cash position to pay gross debt. Our net leverage decreased to 2.8x net debt to EBITDA and moving to the pie to the left of the chart, we see that our average interest rate for a 6-year average period -- that was -- at June 30, it was 6%. So comparing to our bond that is maturing 2025. So it's the same average period of our debt. This bond is trading 1% lower than my average cost of debt. So we see that at the margin, we have the potential to continue to decrease interest expense.

And more than that, even these bond '25, if you compare to the same period of the average [indiscernible] industry, we are still 0.5% higher so there's room also compared to our same segment of companies -- with our same rate trading. And if you consider our metrics -- financial metrics, if you could compare to our [indiscernible] industry, then we would have debt at around almost 1% difference. So this shows that we can have around 2% decrease in our average cost of debt and if you compare to food companies in U.S. with the same leverage, with the same debt that we have, you see that we can get this 2% difference in our average cost of debt, releasing free cash flow to our shareholders.

Now please move to Page 7, where we talk about liability management that was done after the close of the quarter. So you see on the left hand side it was the photography of our repayment schedule as June 30 and what we did after that. First we got $200 million from the U.S. free cash flow but to pay down debt -- backed debt. We're bringing today $300 million from U.S. free cash flow using to pay down debt. We issued a bond in Brazil of $750 million, which we are using to pay down debt. We issued $1.25 billion from the U.S. -- we issued to call our 24 bond and half of our 23 bonds. So this result was the repayment schedule that we see on the right-hand side, our average gain from 5.8 years to 7 years. And now our cash position plus our revolving line, they are in line to pay the amortization of the debt in full up to 2025. So it's a very comfortable liquidity position that the company has today.

Let's move to Page 9 as we start with Seara. So net revenue of BRL 5.1 billion, an increasing 24% year-over-year, with an increase of 18.3% in average prices and 5.6% in volumes. In the domestic market, net revenue was driven by a 25% growth in prices when compared to the second quarter '18. In the export market, net revenue totaled BRL 2.5 billion, 29% higher than the second quarter '18, as a result of an 11.6% increase in sales price and a 15.6% higher volumes. EBITDA then totaled BRL 563 million with an 11.1% margin, an increase of 150% when compared to the second quarter last year.

Now please move to Page 10 when you talk about -- we'll talk about JBS Brazil. So net revenues of BRL 7.2 billion for the quarter, a growth of 15% in relation to the second quarter last year, with processed volume increasing by 12.2%. In the domestic market, net revenue was BRL 4.2 billion, a 17% increase when compared to last year, with an increasing 15% in volumes and 1.6% in price. In export market, which represents 41% of the unit's sales, net revenue grew 12% reaching BRL 2.9 billion, due to an increasing 6.5% in volumes and 5.3% in prices. Despite the temporary suspension of Brazilian beef exports to China, sales to this region improved 32% when compared to the second quarter '18. EBITDA then for the quarter was BRL 336 million with a 4.7% margin, a recovery of 72% when compared to the first quarter of '19.

Now please let's move to Page 11 where we will talk about JBS USA Beef. EBITDA was $503 million, 11.8% lower than the same period, impacted by lower U.S. exports and higher cattle prices. Nevertheless, EBITDA margin was a robust 8.9%. In the domestic market, despite the delayed start of the grilling season due to atypical weather conditions for this period, demand for beef in the second quarter '19 remained strong, boosting sales notably in the second half of the quarter. In Australia, the main highlight was the increase in beef and lamb exports directly to China, which grew 68% in volumes and 85% in sales year-to-date when compared to the first half of 2018.

Now please let's move to Page 12 where we talk about JBS USA Pork. Net revenues totaled BRL 1.6 billion with an increase of 9.1% in relation to the second quarter '18, mainly due to a 10.4% growth in average prices with stable volumes. A relevant EBITDA margin of 8.2%. JBS U.S. Pork has been able to differentiate itself from the competition due to its outstanding operational performances and to its ability to transform primary products into higher value-added products, earning sales premium and increasing margin. In June, exports grew 9.3% when compared to the same month last year, which signals a recovery considering an expected increase in imports by China and Mexico.

Now please let's move to Page 13 where we talk about highlights of Pilgrim's Pride. Net EBITDA of $350 million, are 24% higher than the same period last year, while EBITDA margin was 12.3%. Significant operational recovery in the U.S. reflecting higher market featuring and promotional activity of chicken in retail and food service, supporting better demand for the commodity segment, combined with its U.S. portfolio, which continues to deliver strong results in high value-added segments. In Mexico, the reduction of chick supply alongside the growth of demand coupled with less competition of other proteins contributed to better pricing of chicken cuts and consequently to stronger operational performance of PPC.

Now on Page 14, we show our global footprint that despite freight barriers we always have several angles to sell our products. With that, the second quarter, the exports revenue was $3.3 billion representing 25% of our sales and almost 50% of that was directed to Asia.

Now I'll pass it over to Gilberto Tomazoni for the final consideration.

[Gilberto Tomazoni, executive]

Thank you, Guilherme. Before I open the questions, I would like to highlight our priorities. Organic, inorganic growth, financial discipline and cost of capital reduction, operational excellence, innovation, quality and compliance. JBS is ready to grow in a suitable way and advanced with our strategy in brand and value-added products. Now we can open line for questions.

[Operator]

[Operator Instructions] Our first question comes from Bryan Hunt, Wells Fargo Securities.

[Bryan Hunt, analyst]

My first question is that you all have mentioned that you would like to begin growing inorganically or through acquisition. What level of leverage are you willing to endure to execute that part of your growth strategy?

[Guilherme Cavalcanti, executive]

Okay. Thank you for the question. Last quarter, we just announced that in the long term, we pursue to be between 2 and 3x net EBITDA, which we consider a comfort level, especially in an environment of decreasing interest rate and also considering that we experience significantly the maturities of our debt. For -- and again, we have a limit of 3.75 in order to pay extraordinary dividend and a limit of 4 25 for acquisitions. But it's worth mentioning that if we pass 2 quarters above 3.75, the Executive Board has to present to the Board of Directors, a contingence plan to bring down leverage ratios. So we have these parameters, but our willingness is to pursue between 2 and 3x net debt to EBITDA.

[Bryan Hunt, analyst]

Given your market cap now and your overall global scale, the level of EBITDA, your free cash flow metrics, is investment -- an investment grade rating in the cards for the company, is that a financial objective?

[Guilherme Cavalcanti, executive]

Yes. I think for sure, our free cash flow, strong free cash flow generation we'll continue to make our deleveraging path. However, our commitment is to reduce the cost of capital, investment grade should be a consequence of that. We aim to maximize value to our shareholders so we will be considering that. So if we maximize value to our shareholders, double the prior level, we'll be fine with that as long as we have a low cost of debt and a low cost of capital. So we don't have an objective of investment grade, we have an objective of creating value to our shareholders and investment grade could be a consequence of that.

[Bryan Hunt, analyst]

Looking in the U.S, one of your competitors lost one of their plants to a fire, takes about 5% out of the U.S. market. Can you talk about the flexibility you may have within your operations, maybe to operate on extra Saturdays or overtime to absorb additional sales?

[Guilherme Cavalcanti, executive]

Andre, please, could you make a comment?

[Andre Nogueira, executive]

Thanks for the question. [indiscernible] along the issue [indiscernible] members. [indiscernible] I think that we always thought that the second part of the year will be very strong and we're going to have some [indiscernible] I don't think that it's [indiscernible] because of the labor situation. [indiscernible] have today a little bit different so we are not going to change our original plan. [indiscernible] should meet that customer demand. If it's [indiscernible] and sell a little bit more we can do that as long as it doesn't affect the safe and the health of our team members. So at this point we are not changing our plans. We think that the second part of the year will be very strong that's what [indiscernible] started the year because of [indiscernible] because of strong demand [indiscernible] export will start to pick up [indiscernible] not changing [indiscernible].

[Bryan Hunt, analyst]

And the last question is could you tell us what hurdles the company has to come over -- has to overcome to complete their listing IPO on the U.S. market?

[Guilherme Cavalcanti, executive]

The listing in U.S. continued in our plans, and we are continuing to study the models. It's worth mentioning that as I mentioned before, the strong free cash flow generation, we don't need primary resources. So we are talking about a listing in U.S., and as well as since we don't have the urgency to pay down debt anymore, we have time to think the best structure that is listing we will unlock value to shareholders.

[Gilberto Tomazoni, executive]

But Bryan, I want to emphasize this is one of our main priorities because of the potential to unlock value to the company and a driver to accelerate the growth.

[Bryan Hunt, analyst]

Are there any settlements that you have to make either with the Brazilian government or the U.S. Federal Trade Commission to get that done or hurdles or not? And that's my last question.

[Gilberto Tomazoni, executive]

No. There's no -- those are not hurdles for an SEC listing.

[Operator]

Our next question comes from Carla Casella, JPMorgan.

[Sarah Clark, analyst]

This is Sarah Clark on for Carla Casella. I was wondering if we could talk a little bit about pork. How much of the worldwide pork supply has been wiped out from ASF?

[Gilberto Tomazoni, executive]

Carla, could you repeat the question, please?

[Sarah Clark, analyst]

Yes. How much of the worldwide pork supply has been wiped out from ASF? On the African [indiscernible] site.

[Gilberto Tomazoni, executive]

It's a really difficult question. We don't have -- we have market information. We don't have the details of that. I think the market is talking about, could be 30, could be more than 30, could be 40. I don't know -- we don't know exactly. I know this is important. It's a situation not just in China but in other countries, it become worse in Europe. But we don't have really numbers to say to you what is the size of this.

[Andre Nogueira, executive]

[indiscernible] Let me try to help a little bit here. The official numbers that is around 4 million hog, 1 million of China and 3 million [indiscernible] in Asia. The main one was the [indiscernible]. The official number from the Chinese government that we reported a total in China is that the herd in China reduced this year compared to last year around 25%, both in the [indiscernible] sow and the hog numbers. That's the official number, that's the number that we use to plan the official number from China is that it is around 25%. We have a lot of other speculations in the market. All the numbers that speculate is bigger than that, we really don't know if some [indiscernible] that the Chinese government sets out and it's around 25%.

[Operator]

The next question comes from Marcel Moraes, Santander.

[Marcel de Moraes, analyst]

Just some detail about Seara and what has been going on with the ASF? We saw a very strong margin gain in the quarter and we can also see volumes exports, volumes going up a lot, 16%. So what do you think would be kind of the bottleneck for you to continue increasing the export volumes mainly into China, I guess, but what do you think is going to be the next bottleneck that you may face?

[Wesley Batista, executive]

[ Marcel ] this is Wesley. We -- I think we have very good facilities approved to export to China. We have a good number of plants approved to go to China -- to export to China. For us to increase our volume to China, I guess the biggest barrier or the biggest bottleneck we would have would be having raw materials. So it'll be having enough growers to increase the production. But today our industrial capacity to those -- for that market is good, is well-suited for increase in demand.

[Marcel de Moraes, analyst]

And looking forward, when you evaluate what's going on in, let's say July, August, do you think the number that we saw in the second quarter in terms of performance is sustainable? Do you see those numbers trend in even higher? How do you compare what we're going to see in the second half with what we saw in the second quarter?

[Wesley Batista, executive]

We don't give specific guidance, but we can expect that the main drivers that led to this improvement in results will continue. So exports still continue to be strong and you have domestic process, further processed prepared foods, prices have continued to be higher. We continue with the same prices and we'll probably, will have a further increase and you also have the grain situation that we think would be stable to some small potential upside.

[Marcel de Moraes, analyst]

Just a final question on the prepared foods. I saw in the domestic market, the average price is up 25%, very strong number, but how much of the prepared foods are contributing to that 25%? I guess it's less than that, but is it kind of double-digit, strong double-digit price increase on prepared foods?

[Wesley Batista, executive]

The increase in prices for just -- for the process is around 18%, 20%.

[Operator]

The next question comes from Alan Alanis, UBS.

[Alan Alanis, analyst]

Congratulations on both the operating and financial results. You're a very big company. I mean, you're selling easily north of $50 billion per year and you're making this big investments on the -- my question has to do with the vegetable meat, with the nonmeat, the vegetable meat that you mentioned. How much you think you can sell of these new products next year and the years afterwards? And what is the anticipated margin that you can sell? I know it's small relative to the overall size of the company, but I'm interested in terms of how much management how -- what the size of the opportunity for you? And you think that in 2020 or 2021, you could be selling, how much of this product worldwide?

[Gilberto Tomazoni, executive]

Thank you for the question. Look, we are following this market very closely. I think it's -- there is a trend, a lot of new companies entering this market and now we entered. We are already at 60 days in the market in Brazil with the line of Incredible Burger, it's launched by Seara and in Australia by Primo, the flexitarian, a range of sausage and still we are developing in this market, we've seen U.S, has grown a lot, we are entering this market for sure and we are just define what is the best to start to enter. To quantify the size of the market now is difficult because there is a trend. It's clear but depends on the supply.

If you see the amount of companies entering the market -- and we don't know how really the size of this market, there is many information, information in the market. We don't have clear numbers about what is the size of the market but I believe that we have a really good opportunity in our market because we have already distribution capacity. We have sales capacity, we have relation with retailers then we have now technology to produce the product because we have already product in the market. If you combine the -- our technology to produce the product, to develop the product with combination with the ability to sell and distribution in a relationship with the existing base of customers, I strongly believe that we can play a big role in this market. But to advance you know what we will decide, it's too early.

[Alan Alanis, analyst]

Got it. No, I understood that. When do you think you will have a product in the U.S? Because you already have a product in Brazil, correct?

[Gilberto Tomazoni, executive]

We are not open this information. Sorry for that. But we are working on that.

[Alan Alanis, analyst]

Got it. Understand. No, I understand. A different question, changing topics completely and I appreciate the answers. How much of -- I don't know what you can comment regarding, I mean BNDES and it's still a large shareholder of JBS. They've been selling shares of other companies in Brazil. How do you see -- I mean I know I'm asking a question about one of your key shareholders -- but what are the different scenarios that U.S. management see for that stake of BNDES?

[Gilberto Tomazoni, executive]

I think this question, we should make to BNDES. I understand your question but we can't -- we don't have answer for that. I think you need to talk with -- it's better to talk directly to BNDES.

[Alan Alanis, analyst]

Yes. We will do that again. I guess that one of the possibilities, I don't know how connected the structure, but given the very strong financial position and the excellent work that you did in refinancing all of this. How much -- I guess if I can ask a question that you can answer -- how do you think about share buyback programs? Let me make a more direct question that would be more straightforward for you.

[Gilberto Tomazoni, executive]

I think the returning capital to shareholders is also the agenda. So as I mentioned in the presentation, we are presenting a big profit, which in Brazilian corporate law, it's required to distribute at least 25% of my net profit. So I have to take this in consideration. Of course, as long as we are generating a lot of free cash flow, we will -- and again, we will have the leverage and the free cash flow enough to grow and to pay dividends or share buybacks and those decisions will be done depending on the market situation, the company valuing the stock market, the minimum dividends that I have to distribute. So this is decision that we'll take ahead but we need time to decide. [indiscernible]

[Alan Alanis, analyst]

It's good that you have that flexibility. Congratulations on the results.

[Operator]

Our next question comes from Antonio Hernandez, Barclays.

[Antonio Hernández Vélez Leija, analyst]

First of all congratulations on your results. Actually 2 question, the first one is on USA pork. Can you give more light on outstanding results that you have there, especially on top line? And second, could you please give more light also on JBS Brazil on the impact on profitability and what should we expect for the second half?

[Gilberto Tomazoni, executive]

Andre, please, answer the question about our Pork business there and then Wesley would be answering Brazil.

[Andre Nogueira, executive]

Can you repeat, Hernandez, the question about the results in the pork division?

[Antonio Hernández Vélez Leija, analyst]

Yes. On the pork division, can you give more light on the solid top line results that you have there? I mean you were posting a very good price growth and a very good volume growth. Can you please explain how sustainable is that? And maybe a couple -- more light on that?

[Andre Nogueira, executive]

My line is really bad, I did not understand the question, about pork or chicken?

[Gilberto Tomazoni, executive]

Andre, he asked for -- you know the connection is really bad here. We have some difficulty to understand as well. But Andre, I don't know if you can hear him better. The question is about our pork operation in the U.S.

[Andre Nogueira, executive]

All right. Okay. It's about pork.

[Gilberto Tomazoni, executive]

Yes. Is it strong result -- he asked is it sustainable? The result of the last quarter?

[Andre Nogueira, executive]

The result in the last quarter in pork was strong. The market is very challenging for lot of activities in the quarter. It's not related to [indiscernible] for our team, the structure of the business, the plan, the execution, [indiscernible] continue to grow. This is very sustainable. The strength of our business is great. So that's why we outperformed the market and we've been outperforming the market for several years [indiscernible]. So I don't think that changed. We have to expect that in the second quarter for this year and for next year [indiscernible] will be better [indiscernible] but that should increase the margins [indiscernible]. And again the quarter is strong [indiscernible], it's more related to the execution of our team and the strength of our business is very challenging market recently because [indiscernible] development [indiscernible] for the second quarter of this year and for next year and I think the opportunity is similar.

[Wesley Batista, executive]

So here in Brazil when it comes to Seara, a few drivers to give some idea what we're expecting. So on the domestic side, we still think that there is price to be increased. We still think that from previous cost increases that we weren't able to pass on to price. In previous periods we still have some of that to catch up but our exports, we still think that there is potential to increase volume in exports to better prices in the fresh and frozen side. So on the sales side, we expect that we can increase exports. When it comes to [indiscernible], we think that to the end of -- we're comfortable and we're confident with the position we have, and we think that we'll be -- we'll have stable to better situation than we're in.

So overall, we expect -- we are confident with expecting a good second half of the year. When it comes to beef or actually to JBS Brazil, more specifically talking about beef, we have a second quarter that we think will be a good -- or second half of the year that we think will be a good cattle supply. There'll be enough cattle supply. Still have a little bit of a question mark for the first half of next year, still have to wait and see a little bit how that will play out. Like I mentioned before, in the previous call, we have capacity to -- we're increasing capacity to export to China, about 15% to 20% in the next second half of this year, which will make it -- will allow us to export more to that country. So overall, we're expecting to utilize our capacity better in the beef plant in Brazil and be able to export more for steady cattle supply for rest of the year and still waiting to see what's going to happen for the first half of next year.

[Operator]

The next question comes from [ Waleed ], [indiscernible].

[Unknown Analyst]

Thank you very much for the presentation and congratulations on the results. I have 3 questions. So just regarding CapEx, could you give us any idea if there was any change in terms of what you were expecting in CapEx for the second half of the year? You mentioned that you are going to increase your capacity, your export to China and Brazil, and is there any CapEx involved as well in increasing the supply in the U.S. as we have short supply for the second half? So this is the first question.

The second question is regarding dividends. Yes, you have this dividend policy, which is -- applies to Brazilian companies. Just wanted to know whether it is possible for you also to think of an exceptional dividend if you have a record year in terms of profits.

The last question, you mentioned at the beginning of the call that in terms of rating, you defined with BB+ rating as long as you can unlock value for shareholders. You are right now at double BB- BB, so does it imply that you would like first to reach that level of BB+ or you're still fine remaining at the rating that you have right now?

[Guilherme Cavalcanti, executive]

Okay. Beginning with the ratings. Again, as I mentioned, our target is to decrease our cost of capital, our cost of debt in the ratings but as a consequence. So the level there will be a comfortable, the level, if reached, is objective. It could be investment grade or not. But for sure, we want to continue to decrease our cost of debt and improve our metrics. And I think our metrics already deserve higher ratings. In terms of dividends, it's too early to say, I think it's something that we should decide later on because we don't even know what's going to be the profit of the whole year. And again, Brazil -- it's the Brazilian corporate law that requires the 25% minimum. So we have to first to know what's going to be this number for them to decide if you're going to be pay more dividends or not.

[Wesley Batista, executive]

Regarding CapEx, in Brazil to increase export to China, though our CapEx in JBS Brazil is really focused on China, it's not relevant to the overall size of CapEx of JBS Global.

[Gilberto Tomazoni, executive]

Andre, do you have -- can you make some comments about the CapEx in the U.S.?

[Andre Nogueira, executive]

Well, there is no relevant change in the CapEx [indiscernible] and give guidance about the CapEx for the year, consider the growth and the organic growth we're creating. So there is no relevant changes in the guidance or degrees in terms of CapEx for the operations [indiscernible] BRL 650 million [indiscernible].

[Operator]

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

[Gilberto Tomazoni, executive]

Before I have to make the final remarks, I want to point that when you talk about organic growth, we had talked to growth in the market that when we have operating and we have a synergy with our existing business. For example, in Brazil, we bought a small pork plant. It's a lot of synergy with Seara operation and according to the trend is aligned with the trend of increasing consumption of pork meat. The size of this is our focus is increasing the size of our value-added embedded business in line with our long-term strategy. This is the focus of our organic growth. But for finalize, I want to thank you, each one of you to participate in this conference call and special thank you for our 230,000 team members who with their daily work and dedication have made this company better each day. And thank you to all who stood by us, and wish us for our success. Thank you.

[Operator]

This concludes JBS audio conference for today. Thank you very much for your participation, and have a good day.