JBS SA

BOVESPA:JBSS3

Earnings Call Analysis

JBS Reports Record Revenue and Improved Profit Margins in Q3 2024

In Q3 2024, JBS achieved record net revenue of $20 billion and adjusted EBITDA of $2.2 billion, up from the previous year, reflecting a robust 10.8% margin. The company announced a guidance revision for 2024, projecting net revenue of $77 billion and adjusted EBITDA between $6.9 billion and $7.1 billion. Net debt decreased by $1 billion to $13.7 billion, and free cash flow surged by 65% year-over-year to $1 billion. Notably, the Seara segment reported a remarkable 21% EBITDA margin, indicating strong operational performance. Upcoming dividends of approximately $382 million are set for January 2025, maintaining the company’s commitment to shareholder returns.

Strong Q3 Results Showcase Resilience

In its third quarter of 2024, JBS S.A. reported record net revenues of USD 19.9 billion, a strong indicator of its operational excellence across its diverse multi-protein platform. The company achieved an EBITDA of USD 2.2 billion with a consolidated margin of 10.8%, reflecting a significant increase of nearly 5 percentage points compared to the same quarter in 2023. The impressive results also allow for a dividend distribution of approximately USD 0.17 per share, totaling around USD 382 million, demonstrating JBS's commitment to returning value to its shareholders.

Segment Performance Highlights

Breaking down the performance by segment, JBS Brazil's beef segment stood out with an EBITDA margin of 11.6%, up 8.2 percentage points year-over-year, bolstered by favorable livestock cycles and increased domestic demand. The Seara division excelled as well, achieving a remarkable 21% EBITDA margin, a rise of 15.5 points year-over-year, thanks to operational improvements and a strong global demand for its poultry products. Meanwhile, Pilgrim's Pride reported a 16.9% margin driven by robust demand across key regions like Europe and Mexico.

Market Conditions and Strategic Positioning

The growth in JBS's profitability was attributed to a combination of strong global demand, favorable grain costs, and strategic management of product offerings. The company has effectively improved operational efficiencies and diversified its portfolio with higher-value products. This focus on branding and innovation has not only helped in higher sales but also in maintaining competitive margins, crucial in today's fluctuating market.

Outlook for Future Quarters

Looking ahead, management is optimistic about maintaining momentum, with expectations remaining favorable for the next few quarters. Despite challenges such as the ongoing cattle cycle in the U.S., JBS aims to sustain margins through rigorous operational excellence. Furthermore, in terms of net debt, the executives indicated a target range of 2 to 3x net debt to EBITDA, with aspirations for a potential ratings upgrade to investment grade, contingent upon future performance and financial management.

Continued Commitment to Growth and Innovation

JBS is also focused on bolstering its debt management policies while making strategic investments in growth and expansion. The company's commitment to organic growth, acquisitions, and operational improvements plays a pivotal role in its long-term strategy. With a historical average return to shareholders of approximately 20% annually in U.S. dollars, JBS's strong operational execution reflects an adept management ethos committed to shareholder value.

Earnings Call Transcript 2024-Q3

[Operator]

Good morning, and welcome to JBS S.A. and JBS USA Third Quarter of 2024 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 business outlook, projections, operating and financial targets and potential growth should be understood as merely forecasts based on the company's management expectations in relation to the future of JBS. Such expectation highly dependent on market conditions, on Brazil's overall economic performance and on industry and international market behavior and therefore, are subject to change.

Are present with us today Gilberto Tomazoni, Global CEO of JBS; Guilherme Cavalcanti, Chief Global CFO of JBS; Wesley Batista Filho, CEO of JBS USA; and Christiane Assis, Investor Relations Director.

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, everyone. Thank you very much for your participation in our results teleconference. The third quarter results for 2024 reaffirm our positive outlook for the year, highlighting once again the strength of the JBS global multi-protein platform, the quality of our team and our focus on operational excellence. Net revenue was a record USD 19.9 billion.

During this period, EBITDA reached USD 2.2 billion with a consolidated margin of 10.8%, marking a nearly 5% point increase compared to the same quarter in 2023. The results present this quarter allow us to announce that the company will distribute dividends on January 15, 2025 of approximately USD 0.17 per share, totaling around USD 382 million. Last October, approximately USD 815 million in dividend were distributed. Our poultry and pork operation in Brazil and United States performance above expectation, especially Seara, which closed the quarter with a record-breaking 21% margin.

A strong global demand, favorable grain costs and our agility in managing product and market mix alongside our focus on high-value products, brand and innovation complement the results of already implemented operational improvements and efficiency, productivity and commercial enhancements.

Pilgrim’s reported a solid 16.9% margin this quarter, driven by robust demand primarily in Europe, U.S. and Mexico. Operational improvements and portfolio diversification and value-added products and brands also contribute of these results, along with partnership with key customers aimed at delivering value to consumers. The business performance also reflects a focus on quality, service and innovation. Our U.S. pork business posted a 12.1% margin, driven by higher sales, both in U.S. and international, along with impressive growth in value-added products and strong gain across agricultural performance metrics. I would like to emphasize once more that JBS multi-geography, multi-protein platform is unmatched in this resilience amid market challenge. While U.S. operations are still feeling the effects of cattle cycle, JBS Brazil posted one of the best performance with 11.6% margin driven by the Beef segment.

Beyond our high export volume, Friboi results reflect the pursuit of operational excellence, the increase in domestic demand, they open a new market and improvement in the product mix with a focus on value-added products, branded and customer service. Australia continues to capture the benefit of cattle cycle with a 9.8% margin in the third quarter despite rising livestock prices.

The outlook of the business remained favorable in the coming quarters. We're focused and growth fueled by diversification, innovation, value-added products and strong branding. Recently, we announced an investment to expand Huom Aquaculture salmon production in Australia. In Jeddah, Saudi Arabia, we are finishing a new Seara facility that will quadruple local value-added chicken product capacity in the region.

I would like to emphasize that our performance -- Q3 performance underscores the strength of our financial management as leverage dropped to 2.15x in U.S. dollar. Net debt was reduced by USD 1 billion, increasing to USD 13.7 billion and net profit came in at USD 693 million. With our global footprint, the expertise of our team, ongoing innovation and commitment to operational excellence, JBS is primed to continue delivering value to our customers, consumers and stakeholders alike. With the emphasize, I want to emphasize that our robustness on this quarter is not an outline.

As we consider the accumulative results on the last 6 years, JBS had generated an average annual return to shareholders of approximately 20% in U.S. dollar and a free cash flow of USD 14.4 billion before expansion in CapEx, delivering both growth and value. During this period, USD 7.7 billion was invested in organic growth and M&A and USD 6.5 billion was distributed in dividends and share buybacks.

Thank you again for your participation in these results calls. And now, I will pass the floor to Guilherme, who will detail our numbers. Guilherme, please?

[Guilherme Cavalcanti, executive]

Thank you, Tomazoni. Let's now move to the operational and financial highlights to the third quarter of 2024. Starting on Slide 12, please. Net revenue of the third quarter was a record, totaling $20 billion. Adjusted EBITDA totaled $2.2 billion and represents a margin of 10.8% in the quarter. Net profit was $693 million in the quarter. And excluding nonrecurring items, adjusted net income would be $730 million.

Considering another quarter of strong results, I would like to highlight that last night, we released the new assumptions of the company's guidance for the year of 2024. Therefore, our new numbers consider a net revenue of $77 billion and adjusted EBITDA between $6.9 billion and $7.1 billion, which implies an EBITDA margin between 9% and 9.3% for the year.

Moving on to the next slide. Operational cash flow in the quarter was $1.9 billion. Free cash flow for the quarter was $1 billion, an increase of 65% year-on-year. Year-to-date, free cash flow generation was $1.4 billion. This strong generation is explained by the improvement in the results of all of our business units, except for JBS Beef North America, which is facing a challenging moment in the cattle cycle. CapEx in the quarter was approximately $321 million, 60% of which was maintenance CapEx. The total amount is 15% lower than the third quarter 2023 and is in line with our estimate for the year of $1.3 billion.

Moving to the Slide 15. Net debt at the end of the third quarter of 2024 was $13.7 billion, a $1 billion reduction compared to the previous quarter, reflecting the strong free cash flow generation in the period. During the quarter, we carried out 2 important movements for the company. The first of these is the repurchase of $722 million of local debentures of CRAs agribusiness receivable certificates issued by the company. In addition to reducing gross debt, this repurchase excludes all remaining financial covenants of the company's debt. Therefore, currently, 100% of JBS debt does not have financial covenants.

The second was the first issue of Seara's local debentures, CRAs in October in the amount of $276 million in 3 tranches of 5, 10 and 20 years with a 10- and 20-year issues having the lowest spread over the treasury -- over the NTNB, which is the Brazilian treasury yield.

Leveraging dollars came down in just one quarter from 2.77x, ending in the third quarter at 2.15x. The reduction happened due to the expansion of EBITDA and the reduction of the debt due to the cash generation. For the year-end, merely as an exercise, without considering a leverage guidance, if we consider the third quarter 2024 net debt of $13.7 billion and simply divided by the average EBITDA of our guidance of $7 billion, our leverage would reach below 2x by year-end. Over the past six years, we have maintained a balanced approach to growth and returns to shareholders with $4.5 billion in organic growth CapEx, $3.3 billion in acquisitions, $4.1 billion in dividends and $2.8 billion in share buybacks. It's important to mention that this entire amount was funded by the company's free cash flow generation.

The strong free cash flow generation despite our largest business in terms of net revenue, the JBS Beef North America, is still facing a challenging scenario, shows the robustness of our unique platform. We are optimistic that our geographic and multi-protein diversification will continue to provide growth and returns for our shareholders.

In October, we paid an interim dividends in the amount of $812 million, equivalent to $0.37 per share. We also announced last night an additional payment of dividends in the amount of $382 million, equivalent to $0.17 per share, considering an FX of BRL 5.81 per dollar. These dividends will be paid in January 15, 2025.

Considering the two distributions, which totaled $1.2 billion, the dividend yield as of today is approximately 8.5%. Additionally, we reopened our share buyback program, which can buy up to 113 million shares. I will now briefly go through the business units. Starting with Seara on Slide 16. Net revenue growth was 5% year-on-year, while profitability grew by a significant 15.5 percentage points, reaching 21% EBITDA margin. These numbers are the result of a better commercial and operational execution, strong global demand and the expansion of our value-added portfolio. Seara continues with its strategy of winning consumer preference through product quality, innovation, execution and the strengthening of the brand, achieving growth in penetration and repurchase rates.

Moving now to Slide 17. JBS Brazil recorded net revenue, 10% higher than the third quarter 2023, driven by higher volume sold, mainly in the international markets. This result is attributed to the strong global demand in addition to the favorable livestock cycle for the period, resulting in greater availability of animals for slaughter. Therefore, the EBITDA margin reached 11.6%, an increase of 8.2 percentage points in the annual comparison.

Moving to Slide 18 and now -- from now on speaking in US GAAP. JBS Beef North America net revenue grew 6% year-on-year as a result of the strong demand for beef in the period. Profitability continues to be pressured by the challenging cattle cycle, which has kept the price of live cattle at high levels.

On July 19, we have JBS Australia. In the quarter, revenue growth of 13% year-over-year is the result of both higher volumes sold and prices. The improvement in profitability in the annual comparison reflects the increasing operational efficiencies, and despite the favorable livestock cycle, the price of Australian cattle, our main business grew 25% in the yearly compare.

Turning now to JBS USA. Pork net revenue for the quarter grew 1% compared to the third quarter in 2023. In the domestic market increase in revenue is a result of higher sales volumes driven by strong seasonal demand. Pork consumption is also being favored by the average price of beef, which remains at high levels. The quarter's profitability was positively impacted by lower grain costs, ongoing efforts to expand the value-added portfolio and consistent commercial and operation logistic execution. Pilgrim’s Pride, as highlighted on slide 21, recorded an increase in net revenue of 5% in the third quarter 2024 compared to the third quarter 2023.

Throughout the quarter, the company continued to focus on operational excellence, portfolio diversification and strengthening partnerships with key customers aiming to add even more value to the customer. The focus on quality, improving the level of services and innovation is reflecting in the strong results of quarter.

At this time, I would like to open up for our question-and-answer session.

[Operator]

[Operator Instructions] And our first question comes from Priya Ohri-Gupta with Barclays.

[Priya Ohri-Gupta, analyst]

First of all, Guilherme, well, first of all, congratulations on the solid quarter. On the call earlier this morning, I think you talked a little bit about where you hope to manage your net leverage on an ongoing basis within that 2 to 3x target and how you think about that with regards to maybe requesting a ratings upgrade. Could you just remind us sort of what your ultimate ratings target is for the company, what you hope to achieve maybe over the midterm, where we should see leverage migrate to over the next year and what the key drivers will be? And how we should think about sort of timing of upgrades within that? That's my first question. And then I have a follow-up.

[Guilherme Cavalcanti, executive]

Thank you, Priya. Yes. Our policy states that we should be between 2 and 3x net debt to EBITDA, which is a level that we think we can keep investment grade. Given our free cash flow generation, we've been able to stay in this range despite we invest in organic growth, acquisitions and also dividends. So this year, as I mentioned in my speech, we may end up below 2x net debt to EBITDA. So I think if we maintain around 2x, I think we can start being considered for upgrade.

Just bear in mind that we still have one notch downgrade for governance which we are working, and we expect at some point, this one notch down for governance is taken out and then we could go to BBB flat. And the pace of ratings upgrade, it will depend mainly on opportunistic acquisitions that we never know if it will appear or not. So this -- the timing can be maybe delayed depending on acquisition or not.

Our target, I think -- again, our target is to be between 2 and 3x, prefer to be between 2 and 2.5x. I think it can be at 2.5x, again, going -- growing the company and returning capital to shareholders. Then I think the target -- I think at the levels of BBB flat, for example, we maximize the firm value from an equity perspective. But the BBB+, it's an interesting target to be pursued because then you can access program of commercial paper at much lower levels and much deeper.

We intend to start our first commercial paper program this year, maybe still, better for seeing smaller amounts just to be testing the market. And as we can -- as we have ratings upgrade in the future, we might be getting a deeper access of this market. It's also worth mentioning that as we grow, as the company grows, it's easier to continue to return money shareholders and grow and keeping the leverage given the size of the company.

For example, what I mean is that six years ago, again, we almost doubled our EBITDA that we had six years ago, and we have the same level of net debt. So that's -- so as we are growing, increasing our EBITDA, I think naturally, on the long-term, you should be going on a path of ratings upgrade given the size. What I mean is that I work in companies before that sometimes you get to a size of EBITDA, that's even difficult for you to find targets or spend an amount of money that could put your leverage too high.

For example, today, this year, our guidance is that we have $7 billion of EBITDA for this year. That's our guidance, the midpoint of our guidance. So we need to increase our leverage in 1x, I need to spend $7 billion without bringing any EBITDA to the denominator. So that's what I mean by the size of the company helping on the ratings upgrade. And that's, in fact, is one of the metrics of one of the rating agencies is size. It's clear?

[Priya Ohri-Gupta, analyst]

Yes. That's very helpful. So mechanically, your net leverage did improve because of the higher cash balance. Should we expect gross debt to come down in the fourth quarter?

And then secondly, just given the higher use of working capital this year, as we think about cash flow generation in fourth quarter versus fourth quarter of '23, should we still expect cash flow from operations to be higher, which has been the trend this year or more in line?

[Guilherme Cavalcanti, executive]

Thank you, Priya. So basically, if you look on our press release on Page 7, we already do a pro forma where we show that we used our cash balance to pay dividends, and we also made an issuance of a local debenture. We still have excess cash but it's because we have -- we took the opportunity also to issue local debentures and having -- being opportunistic in market. But we still could have a potential to decrease more. For example, we paid in the last quarter, we paid $700 million $722 million of our local debenture, and we issued only $261 million.

So last quarter -- in the sense, we already reduced the gross debt. The thing is which debt we would be paying that will be efficient. If you look at our bonds, they are trading very efficiently at good rates. But then let's see what is the continuing trend of our cash generation and to see if there's an opportunity to continue to pay gross debt, which could be a possibility. For the fourth quarter, I mentioned in the beginning of the year that our EBITDA of breakeven, which means what is the EBITDA that would be have 0 free cash flow was $3.5 billion, which was comprised of $1.1 billion of net interest expenses, $1.3 billion of capital expenditures, $500 million of leasing and $650 million of working capital consumption because of the biological assets, which is basically feeding the breeders.

This calculation proved it valid. So if you get our guidance for EBITDA midpoint of $7 billion, and we decreased for $3.5 billion, which would be our breakeven EBITDA and take out 25%, which is our average effective tax rate we would reach around $2.6 billion of free cash flow for this year, which makes sense given the fourth quarter is generally a quarter of strong free cash flow. This number could vary depending on -- I can unwind some balance sheet leverage that I did last year when our leverage was higher, so to keep leverage under control. So I may use a part of this cash also to unwind some leverage, some vendor finance, for example, which will mean lower interest expenses for next year.

[Priya Ohri-Gupta, analyst]

Okay. That's helpful. And then my final question would just be around how you're thinking about the listing process in the U.S. and any updates you could give us there?

[Guilherme Cavalcanti, executive]

So basically, Priya, as you know, we are currently on a process of exchange offer of the bonds of the $2.5 billion bonds we issued in 2023. So we need to finalize this process, which is expected to finalize by the end of November. Once we finalize this exchange offer, then we resume the filings for the equity. for the listing. So I would say, then we will start -- we restart the process of back and forth with the SEC of the listing. It's worth mentioning that our 20-F, it's already approved by SEC and the exchange offer also the F-4 of the exchange of the debt was approved. So now we resume the process of getting the approval, the registration for also the F-4, which is the exchange of the shares.

[Operator]

Our next question comes from Ryan Levine with Barclays.

[Ryan Levine, analyst]

This is Ryan filling in for Ben today. Congrats on the results. So 2 quick ones. Starting with Brazil beef. About the recent increase, the significant increase of Brazilian cattle pricing, how do you see that impacting your results into the fourth quarter in 2025, especially in context of the export market?

And then second, very quickly with US beef, do you think there's any room for margin and profitability improvement even before a turnaround in the cattle cycle, which I think you talked about this morning could potentially be in the second half of 2025?

[Gilberto Tomazoni, executive]

Ryan, about -- I'll answer about beef in Brazil, and then I will ask Wesley to answer about beef in US. In Beef in Brazil, the main driver of the result was the price of cattle. The price of cattle dropped and this increased the margin. Of course, JBS take this advantage because of very well positioned in terms of brand and distribution. But the main driver was the price of the cattles. We see now the price of the cattle, they dropped too much and now they go up too much. I see some time -- some opportunity for correction. But if you make the assumptions, we see that the margin of Friboi for the future will be back to the historical results.

[Wesley Mendonça Filho, executive]

So on US beef, internally, we see between a 1.5% and 2% improvement. We've improved a lot in the last year. This would take us to a more operational excellence level. We are right now performing according to historical, but there is still another 1.5% to 2% space to improve regardless of market. And when I meant on the earlier call about second half of 2025, what I meant there is where I see -- where I thought that -- I think that herd rebuild is going to really start picking up, not when we're going to see more supply of cattle.

[Ryan Levine, analyst]

And congrats on the results again.

[Operator]

Our next question comes from Ben Mayhew with BMO.

[Benjamin Mayhew, analyst]

And congratulations on the strong result. I guess I'll start with the implied fourth quarter guidance. I know you just touched on the Brazil beef business. But just if you could walk us through briefly the -- kind of what you're expecting by segment in the fourth quarter? I'll start there.

[Guilherme Cavalcanti, executive]

We don't break our guidance by segment and also by quarter.

[Benjamin Mayhew, analyst]

Okay. That's fair. So in terms of the U.S. pork business, you guys have been outperforming consistently the industry. And I'm just wondering if you can talk us through how you're doing that and how that momentum might keep up into '25?

[Wesley Mendonça Filho, executive]

Yes, Ben. Good morning. US pork -- our US pork division has been outperforming the market for a while here now, and they've been performing pretty well. There isn't one thing, but there is a few things that really help us get there. Our plans -- our assets are really good. We have, out of our 5 pork facilities in the US, 4 of them are large double-shift plants that are very well invested, and they're just very, very efficient. But that's not only that.

This is a team that has been operating very well on the buy, make and sell of the business very well for a long time. So honestly, we do see this -- at least our performance, obviously, it's difficult to talk about comparison to market. But our performance, we see this business continuing to have solid performance like we've seen into next year.

We do not see a reason -- for any reason for that to change. The other thing too that's relevant we have inside of this business, you have the prepared foods part of our business, which operates in the mid-double-digit levels, mid- to low double digits level. So not too high above the average of what we have here, but it brings that average a little bit higher.

And that business has also been performing really well. We have 2 new plants that are pretty much done with their ramping up. And it's a business that also has -- especially in the next last couple of years, really, really improved performance and now bringing the average of this segment -- the average EBITDA of this business higher.

But the bulk of this is not -- the bulk of the performance and the bulk of the performance of pork division is the pork business. This prepared foods is -- will be secondary as to why they've been performing so well versus market.

[Benjamin Mayhew, analyst]

And if I could just squeeze in one more. The Seara result in Q3 was stellar. How do you think about the sustainability of these margin levels? And what are some of the key drivers that you're seeing in the business that are allowing it to perform at such a high level? And I'll leave it there.

[Gilberto Tomazoni, executive]

Ben, we are -- if you look for the page, let's see the number of the page.

[Guilherme Cavalcanti, executive]

Page 5 of the presentation.

[Gilberto Tomazoni, executive]

Page 5 from the presentation. We have year-by-year, the volatility of our -- by our business units and the average of our margin. We -- you can see that we are constantly increase our margin in terms of average because we are keep investing in value-added and brands.

When you say value-added, it's not just value added based on processed product. No, it's for -- its [ rocket ] that is marinade or different package or more practices to the consumer, so on, that -- and brand. We start to invest in Seara brand in Brazil. Then we buy business U.S. We buy business in Europe. We buy business in Australia. And we are keeping investing in value-added and brand.

And then, you will see the trend. Last year was an outliner because of -- we are just -- after the pandemic, and that was discontinued in terms of supply and demand. But then we are back. You can see this year, we are back on that. And the trend, you can see, we are keeping investing on that. And the trend for us is to grow margins. And it is graphic. It's proved that we are able to do that. And this is our focus.

[Operator]

Our next question comes from Carla Casella, JPMorgan.

[Carla Casella, analyst]

Okay. Can you hear me now?

[Guilherme Cavalcanti, executive]

Yes, we can hear you.

[Carla Casella, analyst]

Great. Sorry about that. Just one follow-up on the U.S. listing question. If you do list in the U.S., how does that change the way you think about dividends and capital allocation? Or does it?

[Guilherme Cavalcanti, executive]

It has slightly changed because when you are listed in Brazil, the corporate law in Brazil requires that you pay 25% minimum dividends on your net profit. So basically, the corporate law gives you a dividend policy.

When we move to a U.S. listing, of course, U.S., you don't have any mandatory dividends. So generally, companies build and we state some dividend policy in their political internal policies or so to the market.

So then, for example, when you are an electricity company or telecommunications, you can -- you see a lot of progressive dividends, things like that. We are in a cyclical business. So generally, when you are in a cyclical business, is not prudent to promise progressive dividends or anything like that. But you can have some guidance in terms of cash flow generation, something linkage to the free cash flow generation and try to keep the dividends as the more stable as possible.

So for example, Tyson had around $600 million to $700 million of dividends per year, mostly constant for the last 7 years. Hormel has around $500 million in dividends in the last 7 years. ADM has around $800 million to $900 million. Bunge has around $400 million. So you try to keep some dividends, try to make it as constant as possible. So you have a minimum dividend yield for pension funds to allocate because some -- the special funds, they need some cash to pay their clients. So that's more or less.

So -- moving to the U.S. listing, I will not have these minimum payout ratio that the Brazilian corporate law requires. And then I will put something in capital allocation linked to the free cash flow. I would say, practically speaking, if you look at the last 6 years, we generated $14 billion of cash -- free cash flow before expansion CapEx.

How we use the money? We spent $4.5 billion in expansion CapEx, $3.3 billion in M&A, $3.8 billion in dividends, not including the next one, and $2.8 billion in share repurchase. So it was a balanced approach of our free cash flow between return or short term to shareholders and growth.

So again, if you look at our guidance and if you think that we could -- with the $7 billion EBITDA, we could be generating $2.5 billion free cash flow, we could -- that's half and half with historically, that's more or less we could be doing going forward. But of course, this will depend on opportunistic acquisitions and allocation. But in the long term, we have -- we intend to have this balanced approach between -- and being able to deliver growth and value for our shareholders.

[Carla Casella, analyst]

That's super helpful. I love all the detail. Just a quick question with the change in the U.S. regime here. If we see a tariff or trade wars, can you just give us some color how that impacted the business back in 2018, '19 when there was a little bit more trade disruption?

[Wesley Mendonça Filho, executive]

Carla, the business continued to perform pretty well. And obviously, that might create some short-term disruption. But the U.S. is -- if not the most, among the most competitive protein producers in the world. So look, obviously, we're watching and seeing what's the effect of any change in regulation in commerce between countries, but at this point, we're not super concerned about what's going to -- if that's going to create a huge disruption in our export flow, at least not for now.

[Carla Casella, analyst]

Okay. That's great. And then just one last one. It's kind of a follow-up. I was going to ask about margins. A lot of your businesses are operating at kind of record margins, and it's very helpful what you saw on Seara and on pork. Can you just turn to beef as well on the U.S. beef side. You seem to be narrowing kind of the gap to Marfrig. And are there structural changes in that where you think ultimately you could have better margins than them over time? Or how should we think about the beef margins in North America and the structural improvements you've made, the cost cuts you've made?

[Wesley Mendonça Filho, executive]

Yes. Well, we are performing now, Carla, very, very much in line with what our history is, and our history versus peers, it's public, so we either perform at par or better than peers for a long time. So we -- obviously, we're -- that's what we shoot for. We're trying to do the best job we can here. And yes, potentially, obviously, it's difficult to say, right, because it doesn't depend only on our numbers, but we are -- we've improved a lot of our business. There is still things to improve in performance. But performance is close to history.

There is still another 1.5%, 2% that I mentioned now would take the business to excellent. It wouldn't be just to be at the history. We're already there. And we're working hard to get there as soon as we can.

[Carla Casella, analyst]

Okay. That's great. And that's the 1 out of 2 that's all excluding cycle improvement?

[Wesley Mendonça Filho, executive]

That's 100% dependent on us regardless of the market.

[Operator]

Ladies and gentlemen, there have been no further questions. Now I would like to pass the floor to Mr. Gilberto Tomazoni for his final remarks. Please go ahead.

[Gilberto Tomazoni, executive]

I want to thank everyone again for being here. I also want to emphasize that having a global platform is not enough. You must operate it well. I extend my gratitude to all our 270,000 team members. And finally, I want to reiterate that the strength of this result is not outline.

Over the past 6 years, JBS generated an average annual return to the shareholders of approximately 20% in U.S. dollar. Thank you.

[Operator]

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