JBS SA

BOVESPA:JBSS3

Earnings Call Transcript 2020-Q4

[Operator]

Good morning, everyone, and thank you for waiting. Welcome to JBS Fourth Quarter and 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 look statements are based on beliefs and assumptions of JBS management. They involve risks, uncertainties because they relate to future events, and therefore, depends on circumstances that may or may not occur.

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

[Gilberto Tomazoni, executive]

Good morning, everyone. Thank you for joining today's call. The results for 2020 make us very proud. The [indiscernible] produced a positive impact for us, for our team members, investors, society and dependents. Last year, we reaffirmed our commitment to and invested globally in looking after people, the community and protecting the planet. Our business is a people business, so looking after people's health and safe (sic) [ safety ] was our first priority. We adopted the most advanced safety protocol in our operation, designed in partnership with specialists in Brazil and U.S. We placed high-risk groups on leave, enhanced social distance conditions throughout our operations and strengthened the use of personal protection equipment. Millions of people have benefited from our social program, Fazer o Bem Faz Bem in Brazil and Home Strong in U.S. -- sorry, Hometown Strong in U.S. -- outside Brazil, in U.S. and in Canada. As part of our action, we built hospital, donated respirators, ambulances and more than 10,000 tons of food to those in need, among other social initiatives. You can find details on our website.

And 2020 was also the year of great progress, demonstrating our mission of feeding the world with sustainability. Sustainability has become the lens through which we look at all our actions and decisions in the company. In other words, we put sustainability at the core of our strategy. This was a strategical view that led us to global public commitment. We have announced this week to achieve net 0 greenhouse gas emissions by 2040. You can find more information in how we will achieve the goals on the JBS Net Zero website. The Fund for the Amazon, which aims the financial sustainable development of the local communities with reforestation, bio-economy and technological development initiatives is now full speed ahead. We have already selected the first project for these initiatives. We are investing in the circular economy to reduce greenhouse emissions and increase our competitiveness in [ all its ] plants for recycled plastic, manufactured fertilizers and biodiesel, using industrial waste as the main part of the raw material. Our effort has been recognized by a standard entity. CDP listed JBS as the best Brazilian company in the industry in the climate change category. JBS is also among the first 10 Brazilian companies with the best performance in the Fairr Index, jumping [ eighth ] position in a year.

Our compliance program is also moving ahead at pace. We have conducted over 190,000 training sessions to help us for staff globally. Our innovation value -- our innovation head and brand strategy remains strong. We have launched over 1,400 new products around the world. Our plant-based business is progressing rapidly. We highlight the Seara Incrível range with over 50% market share in Brazil. Our focus is to become a house of brand with [ the win ] to have 10 brands, each with more than $1 billion in sales by 2030. We accelerated online purchasing as presented an exceptional opportunity to talk directly to the consumer and enhance our partnership with the retailers. I invite who would like to try out an excellent barbecue to have an experience and to buy online and [indiscernible] for the U.S.

In 2020, we achieved the lowest debt level in our history, in history, 1.58x in dollars and 1.56x in reais. In addition, our free cash flow exceed $3 billion.

Growth is part of our DNA. Our history speaks for itself. We are constantly evaluating M&A opportunities. Using our cash generation for growth has been and continues to be our priority in search for assets that makes a strategical sense in which are the right end, which are at the right price. It's a combination to be strategic and the right price. At times like this is an essential to practice financial discipline and not just as we grow for the sake of growth but value growth.

We made 2 acquisitions that did not have a strong impact on cash position but were of enormous strategical importance. The margarine business of Bunge in Brazil, which gave Seara the strength to compete in the segment; and the Empire Packing in the U.S. with the case-ready portfolio.

With a few interesting M&A opportunity, we decided to repay debt early, invest in modernizing our plants, accelerated investment in Seara, pursue organic growth for value-added in U.S., strengthen ESG initiatives, repurchased shares and proposed record dividends. After all of this, we have maintained financial condition for potential strategic acquisitions. A public list in U.S. continues to be a strategic movement. In these pandemic times, we are focusing on the health and safety of our people and fulfill our responsibility to feeding the world, but we don't stop working during this period. We have taken several internal steps in preparation to be the company public in U.S. The list -- the listing of is not a question -- the listing in the U.S. is not a question of if, but rather than when, and it will occur at the moment -- the opportunity moment in the best interest of the company.

Thank you all for the attention, and I will now hand over to Guilherme, who will go in details of our operational results. Guilherme, please?

[Guilherme Cavalcanti, executive]

Thank you, Tomazoni. Please, let's move to Page 24 with the financial highlights of the year, where I would like to highlight that, despite all the challenges, we continue to deliver solid performance based on our focus on financial discipline and operational efficiency.

In 2020, consolidated net revenues reached $52 billion or BRL 270 billion, which is 32% higher than 2019. The adjusted EBITDA was $5.6 billion or BRL 29.6 billion that represents an EBITDA margin of 10.9% in the year. In 2020, we presented a net income of BRL 4.6 billion. It is important to highlight that this profit was negatively impacted by BRL 7.8 billion of exchange rate variation on the balance sheet accounts, a large part of which was due to the impact of the exchange rate variation on liabilities between companies of JBS USA, which had their profile changes to investment. Discount the effect of the exchange rate variation on these intercompanies, net income would have been around BRL 10 billion.

The strong cash generation and low leverage allowed us to propose dividends of BRL 2.5, equivalent to approximately $487 million to be approved at the shareholders' meeting. The free cash flow reached a record high of $3.3 billion or BRL 17.8 billion. That is 87% higher than the free cash flow generated in 2019. The financial discipline, along with the strong cash generation, allowed our leverage to reach a record low of 1.58x in U.S. dollars. With this low leverage, we were able to use the strong free cash flow to, one, make acquisitions totaling approximately $400 million, including the acquisition of Bunge's margarine assets in Brazil and the case-ready production units of Empire Packing in the United States; to pay dividends in the amount of $250 million; to exercise our share buyback plan in the amount of $230 million, equivalent to BRL 1.3 billion; pay leases of $300 million; and reduce the company's net debt by $1.8 billion. The dividend paid in 2020 represented a 2.4% yield. Adding to the share buyback in 2020, we have a yield of 5.5%, the highest among the international peers.

For 2021, considering the proposed dividends, as mentioned earlier, we have a dividend yield of 3.5%. Adding to the share buyback carried out up to March 8 in the total amount of BRL 2.6 billion, we have a total yield of 7.2%.

To conclude this slide, I would like to highlight that for another consecutive year, we have reduced significantly our interest expenses, thanks to our liability management. In 2020, we presented a net financial expenses of $724 million, which represents a reduction of $84 million compared to 2019. If we had the reduction of $60 million generated by the payment of the 2025 bond in February of this year, this reduction would be a total of $144 million per year.

Now please, let's move to Slide 25, the highlights of the quarter. So in relation to the highlights of the quarter, the net revenue totaled BRL 14 billion in the fourth quarter 2020, equivalent -- sorry, $14 billion, equivalent to BRL 76 billion, which represents an increase of 33% in the annual comparison. The consolidated EBITDA reached $1.3 billion in the quarter or BRL 7 billion with a margin of 9.2%. The free cash flow generated remained robust, totaling $697 million or BRL 3.8 billion in the fourth quarter, which is 18.6% higher than the fourth quarter '19. And we ended up 2020 with a total availability, including revolving credit lines, in the amount of $4.6 billion, which is enough to pay all the debt until mid-'26.

Now Slide 26 and Slide 27 shows the evolution, the graphic evolution of net revenue, gross profit, EBITDA, net income, both for the year and for the quarter.

So let's move to Slide 28, please. We have -- where we have our debt profile. I would like to highlight in the graph of the left, our decrease of 16.6% in the net debt in dollars that ended 2020 at $8.9 billion, equivalent to BRL 46 billion. As a result, net leverage measured in reais reduced from 2.16x in '19 to 1.56x in 2020. And net leverage in dollars decreased from 2.13x to 1.58x. The cash position of $2.6 billion, together with the revolving line of $2 billion, allowed us to the end of the year with a total availability of $4.6 billion, as mentioned earlier, which is 6.5x higher than the short-term debt.

Moving on to the pie chart at the bottom of the slide. Firstly, we see that only 7.9% of our total debt is in the short term, a very comfortable position. Another important point to highlight is that the average cost of debt in dollars in the fourth quarter was 5.07%, as you can see in the pie chart on the chart, which is still around 0.7% above the interest on our bonds for the same average term of 6 years. And thus, it means that we still have a potential opportunity to reduce $90 million in financial expenses.

As I mentioned earlier, I would like to highlight the continuity of our liability management. In 2020, we announced the payment of bonds that were due in 2023 and 2024 in a total amount of $1.3 billion. We also issued our local debentures in Brazil in the total amount of BRL 1.9 billion in December. And it's worth remembering that in February of this year, we used the cash to pay the bond that was due to 2025 in the amount of $1.05 billion. With that, the average cost of debt fell to 5% in the first quarter of 2021.

Another important point to mention is that we continue our process of better balancing the debt with cash generation between business units, more specifically between United States and Brazil. Currently, the U.S. entity has 85% of our total debt and around 80% of the free cash flow generation in 2020. This better balance, in addition to reducing costs, generates greater cash efficiency and less exchange exposure in the parent company's balance sheet.

Now let's talk about the business units. Please, let's move to Slide 29. Let's talk about Seara. We have, on the fourth quarter of 2020, net revenue growing 32% in the annual comparisons with EBITDA growing 51% and presenting a margin of 14%. And it's worth mentioning that considering the impact of the extemporaneous tax credit in the EBITDA margin for Seara, the EBITDA margin of Seara would be 17.8%.

For the year, Seara posted a revenue of BRL 26.7 billion, an increase of 31% and an EBITDA of BRL 4.2 billion with margin of 16%. Sales in the domestic market totaled BRL 4.1 billion, 33% higher year-on-year. Once again, the prepared foods category was the highlight, recording an increase of 30% in volumes sold and 23% in average sales price for the period. This performance is also a result of all the innovations launched by the company since 2019, which have increased their share in the business results by 3x since then.

In terms of market share, Seara brand increased its advantage in 3.4 percentage points in comparison with the second brand in frozen food category, being the leader by the second year in a row. Seara also reached a leadership in portioned sausage meat and frozen vegetables categories. Also, the Holiday Campaign had the best sellout of its history, reaching 18% increase year-over-year in sales, mainly due to a 17% increase in prices.

In the export market, net revenue was BRL 3.5 billion, a 30% increase over the fourth quarter '19, mainly due to an increase of 27% in prices.

Now let's move to Page 30, JBS Brasil. We see the revenue for the quarter growing by an impressive 40% and an EBITDA margin of 5.1%. Again, it's worth mentioning that, here, that considering the impact from the extemporaneous tax credit, EBITDA margin would have been 6.4%. For the year, the revenue reached BRL 42 billion and EBITDA margin expanded from 5.4% in '19 to 7.4% in 2020.

In the domestic market, sales represented 56% of this business net revenue and were 46% higher than the fourth quarter '19. This increase results mainly from the beef business, Friboi, that posted an increase of 15% in volume and 30% in average sales price of fresh beef.

In the export market, fresh beef sales grew 3.2% in volumes and 20% in prices with the highlight to China and Hong Kong, which revenues increased around 60% in this period.

Despite the margin impact in the quarter due to an increase in the production costs, notably in cattle prices, the annual performance of JBS Brasil was positively impacted by the company's performance in the export market and by the strategic partnerships it has been focusing with its key customers in Brazil, such as Açougue Nota 10 and Açougue Gourmet 1953 Friboi, in addition to the constant pursuit for operational efficiency in high value-added products.

Now let's move to Page 31 at JBS USA Beef and now speaking in dollar terms and in U.S. GAAP. JBS USA Beef's revenue reached $5.6 billion in the fourth quarter with an EBITDA margin of 9%. As a result, JBS USA Beef ended the year with a revenue of $22 billion and presented an annual increase of 23% in EBITDA, reaching an EBITDA margin of 11%.

In North America, the industry fundamentals remained solid during the quarter and throughout 2020, supported by the good cattle availability and beef demand. Despite the reduction in volume produced, a consequence of the pandemic impact in the first half of the year, sales revenue surpassed the previous year due to the increase in demand, both in the domestic and international markets, which boosted the price of products sold. In addition, there was an improvement in the product mix, resulting from innovation in value-added programs.

In exports, the highlight was the volume and mix products exported from the United States and Canada to China. It is worth mentioning that, considering the data released by USDA, JBS represented more than 50% of the total volume of beef exported from the United States to China in 2020.

In Australia, however, the low availability of cattle throughout 2020 has significantly reduced beef production, and consequently, the business margin in this region. On the other hand, Primo Foods, which is the prepared food and branded products operation, maintained its consistency of performance and presented very positive results.

Now let's move to Slide 32, JBS USA Pork. In the last quarter of the year, the revenue grew 12.5%, and EBITDA margin was 10.2%. For 2020, revenue totaled $6.2 billion, and EBITDA amounted to $607 million with a margin of 9.8% that is slightly higher than the previous year. The 12.5% increase in net revenues in the fourth quarter was due to an increase of 9.5% in average sales price and 2.7% in volume sold for the period.

Throughout the quarter, pork production and prices increased due to certain seasonality but mainly due to the growing demand in the domestic and international markets.

I would like to highlight the exports in 2020, where volumes during the year exceeded significantly the previous year. It is worth mentioning that according to USDA data, China has become the main consumer market for American pork. And that at JBS USA, 32% of the total pork export volume was directed to China. Japan, Mexico and Canada were also highlights of JBS USA Pork exports throughout the year, as well as our other smaller markets, that increased their participation, such as Philippines and Chile.

The former Plumrose, now rebranded to Swift Prepared Foods, remains focused on the organic growth of its operations, investing in the expansion of its production lines and in greenfield projects. In 2020, new bacon production lines were added at the Ottumwa plant as well as the construction of a new pre-cooked and cooked bacon plant in Missouri, which we will start operating in mid-2021, with the capacity to process 11,000 tons per year.

Additionally, we continue to make progress on the already announced project of a new plant for the production of Italian meats and charcuterie ready-to-eat products with an estimated investment of $200 million and which is expected to be operating by the end of 2022.

Now Pilgrim’s Pride on Page 33. PPC presented revenue of $3.1 billion in the quarter as well as an expansion of 27% in the EBITDA with a margin of 6.6%. In the year, the EBITDA totaled $788 million with a margin of 6.5%.

In the U.S., PPC's operating performance has continued to be resilient driven by its partnership with key customers and the resilient (sic) [ relentless ] focus on execution. Within the case-ready and small bird business, strong key customer demand from QSR and retail customers has continued to remain strong. While the commodity sector has continued to be challenging, the company continues to improve its operational efficiency in that business.

In Europe, despite the significant hit of COVID-19, the EBITDA was 6% higher than the previous year, reflecting the strength and consistency of our business model. And the performance of the newly acquired European operation has continued to improve with the performance driven by strong pork exports and good domestic demand as well as from the continuing implementation of operational improvements and capturing of synergies.

In Mexico, after a very challenging first half during 2020, operations have continued to rebound strongly and deliver great results in the second half of the year, in line with prior years.

Now please, on Slide 34. To conclude, I'd like -- it shows that our exports amounted to $14 billion in 2020, with Greater China, representing 31%; and Asia, as a whole, representing 53% of this total.

With that, I would like to open for our question-and-answer session, please.

[Operator]

[Operator Instructions] Our first question comes from Andre Hachem with Itaú.

[Andre Hachem, analyst]

I basically have 2 questions. So firstly, congratulations on the results. They were very strong.

So my first question is related to 2021, looking to Seara. We're seeing a lot of cost pressure when we look in terms of grains. And on the other hand, we're seeing purchasing power, per se, coming down. So if you could comment on how you're seeing the environment in terms of new cost or new price increases,and passing through these costs, it would be very helpful.

The second question is regarding capital allocation. You're generating a lot of cash flow. I mean, when we look into 2021, the prospects for the year still look very good. So if you could comment on your appetite in terms of dividends and buybacks going forward.

And the final question, which is a bit unrelated to the first 2, would be relisting in the U.S. or listing in the U.S., how that effort is going forward. So a lot of questions on my side, but that's pretty much it.

[Gilberto Tomazoni, executive]

Andre, thank you for the question. We are divided -- you made 3 questions. I understood Seara, capital allocation and U.S., correct?

[Andre Hachem, analyst]

Exactly.

[Gilberto Tomazoni, executive]

Okay. We will start with Seara. Wesley, can you answer about Seara, the cost pressure and [indiscernible].

[Wesley Mendonça Filho, executive]

Good morning, Andre. For sure. So yes. For sure, the grain increase in cost coming from grains is a challenge for us. Like I mentioned in the previous call, we've been -- we know about that this was coming since mid-2020. So we knew that there was going to be the sort of inflation on grain. We -- since that period of time, we started working very hard on minimizing the cost by increasing efficiency improvement in our live side of the operation and also already doing a lot of work with product mix. So a lot of the improvement in prices will also come through improvement of mix, and we started that since the beginning of last year.

Now, for sure, it's a challenge. No question it will be a challenge. And the structure of cost is different for 2021 as opposed to the previous 2 years. So it might be necessary to have further pure price increases. We are looking at the market, and we'll see what will be necessary to maintain our margins.

Regarding purchase power, yes, that's a challenge. But on the other hand, we have 2 things. Some of the value-added items we have been investing in and looking to sell more and more, they are not so impacted by this. And we also see a very strong export market, which will also help compensate that. That is for Seara.

[Gilberto Tomazoni, executive]

Thank you, Wesley. About the capital allocation, Andre, we -- the cash -- within our cash generation for growth will be and continues to be our priority. And we are constantly looking for opportunities to make an acquisition, a strategical acquisition. And should we make it, it should be at the right price. And in the start, it's important to have a financial discipline. That will not change.

This year, we -- last year, 2020, we are able to make some 2 strategical acquisitions, pay debt and invest in our -- more in our plans to accelerate investments and repurchase shares, and we proposed a record dividend. But our focus is being for use our cash and growth. Andre, I think you asked a question about U.S.

[Andre Hachem, analyst]

Yes. My question regarding the U.S. would be regarding the listing in the U.S. How advanced is that effort? What would be the milestones to look out for? So if you could give us any comments in regard to the listing in the U.S.

[Gilberto Tomazoni, executive]

Andre Nogueira, could you answer?

[Andre Nogueira, executive]

I'm sorry. I think that the question is about U.S. listing. So...

[Gilberto Tomazoni, executive]

U.S. listing. I thought U.S. market. I was not clear. No. U.S. listing, let me answer on that, please. Look, the public list in the U.S. continues to be our strategic movement. It's a natural strategy. It's a natural way. And the listing is not a question of if, but rather than when, and it will happen at the most opportune moment and the best interest of the company.

[Operator]

Our next question comes from Ben Theurer from Barclays.

[Benjamin Theurer, analyst]

As well from my side, congrats on the strong results. 2.5 questions, to be honest. The first one is just to quickly follow up on the listing. So obviously, you also still have a little bit of the overhang of BNDES, stating -- having stated a while ago that they want to divest. And I mean, obviously, that's roughly 22% participation. Could you give us an update on what your talks are with BNDES in terms of the stake sale? And if that could potentially coincide with the U.S. listing, just to have like that one liquidity event, just to understand a little bit where you stand on that. That would be the follow-up, and then I have 2 more.

[Gilberto Tomazoni, executive]

Yes. I believe we are not the right people to answer this question because we are just able to talk about the company, not what our shareholders are thinking about.

[Benjamin Theurer, analyst]

Okay. I'll take it from there. Perfect. And then maybe that one's for Andre. So obviously, in the U.S., the beef business has been very strong, and we've seen very strong fundamentals within the first quarter as well. But if you could give us a little bit of an update on the situation down in Australia and how that actually evolved and impacted during the last quarter. I mean we know there there's been a lack of cattle availability, but there's hope that there can be some good replacement and rebuild now with La Niña and actually some excess water right now. So just to understand what your expectation is within the Australian business and how you've actually performed over the last couple of weeks, months in that business, considering the issues on cattle availability.

[Andre Nogueira, executive]

Ben, thanks for the question. You are right, Ben. U.S. fundamentals -- U.S. and Canada fundamentals are very strong, good supply of livestock and very, very strong demand. You followed this very closely how the cattles behaving in February, for example, very unusual. February, normally, historic, is the low month in terms of demand in U.S., but the cattles have performed very well and very good, very good demand globally. Not only -- of course, China that we are doing as a company, in particular, doing very well. We have 50% market share last year, showing how strong our customer base there, how fast we can move to take advantage of the market but in total Asia. And with the reopening foodservices part in the U.S., we are seeing the last few weeks, a very strong demand comes from foodservice. So the perspective for the year for U.S., our [ fed ] business, our regional business, our Canadian business, plus our continued investment in value-added, further process the perspective, very positive.

Australia, in the commodoty side, beef, lamb, absolute opposite, very, very challenged. Australia, right now, my -- we don't have a great statistic from the country. But my guess is that Australia is probably processing less than 100,000 cattle per week, has been this way since last quarter. It's not new. And the normal would be 140,000. So you can see that's 40,000 less or almost 40% less production in Australia happening right now.

It's very good news for the future because farm condition or ranch condition in Australia is extremely good, and they received even more rain this week pretty much all over the place, so pretty much setting the condition, a very strong condition for grass in Australia for the full year with the amount of water that they're receiving right now. So we're going to continue to see a very strong retention and rebuild of the herd in Australia. My guess, the business will be very challenged this year and probably recover with more availability to start next year. The business is not contributing a lot in terms of EBITDA because of the commodity side. Our other business, our small business are doing very well but not enough to offset what we are not making in the commodities. So Australia has been a drag in our performance with not a strong contribution in absolute number for our EBITDA, and that's what I expect that will continue for the full year.

I'm very positive in the other business. Primo doing extremely well, Primo growing volume, growing margin of processed beef there, branded beef there, but the commodity side is very, very challenged and will continue. I don't think will improve. This year was very challenging. The second part of last year, third and fourth quarter and continue this first quarter and probably will continue for the year, which is still normal for demand, okay? The first quarter is always much more challenged in Australia, improved a little bit in the second quarter but not -- far away from what will be the normal level. And that caused them, to be honest, reinforce why U.S. and Canada are so strong because Australia is a big, big exporter and a big export for the same market that you have served. So Australia is a big exporter, was the big exporter to China, the a big, big export to Japan, to Korea, to Indonesia, to Malaysia, so all the markets that we have served. So that's why probably the demand from the U.S. and from Canada beef have been so strong.

[Benjamin Theurer, analyst]

Okay. And then last one on ESG, and your targets were going net 0 by 2040, and maybe that's for Tomazoni. So you've made very clear that you're not only talking about Scope 1, Scope 2 and very narrow Scope 3, but actually the broader Scope 3, which would include a lot of your suppliers, which is, to a degree, out of your control. So just to understand what you're thinking over the next 2 decades, how you can drive and work together with your suppliers to actually be net 0, including Scope 3. Or is that part really more offset by certain initiatives you can do for carbon offsetting and not so much by reducing? Just to understand how you come up with the math. Tomazoni?

[Gilberto Tomazoni, executive]

Sorry. We have submitted our commitment to the organization this week in the -- in the Science-Based Targets, SBTi. And we are deploying -- first, we re-evaluate our emission according to the criteria of SBTi.

And Scope 1, 2 and 3, we have a lot of information about Scope 1 and Scope 2, and -- but we have no information about the Scope 3. And we have used the Science-Based base to calculate and to evaluate all of the emissions and the sequestration from the gas as well. And -- but of course, we are doing that. We have 2 years to do that. But before that, we are work -- we already work on that. We have -- we accelerate what we have done so far to sequestrate carbon in our internal operations and to use science-based solutions for agriculture natural solution for -- it gives us the capture and the -- of the -- what the generation from the emission of the other cattle. If you consider that in normal, traditional farms, the emission that we have with the technology farm, well managed and the -- you change dramatically the situation. For example, if you intend to have the emission, you can kept -- capture gas from the farm. But you need to adopt integration with agriculture cattles in [indiscernible]. And we have put now in Brazil what we call green office to support our farmers to apply this new technology. And so when we have more information, we are disclosed.

[Operator]

Our next question comes from Leandro Fontanesi with Bradesco BBI.

[Leandro Fontanesi, analyst]

Just a quick question on the U.S. We have been seeing the U.S. government launching some big stimulus, giving checks to consumers. Do you think -- are you feeling that this is helping on the consumption side for your segment there? And how do you see the outlook in terms of demand given the stimulus?

And I understand you mentioned you don't like to comment about competitors. But just thinking how you see in terms of the beef industry in the U.S. in terms of capacity, volume capacity, if you can comment thinking about the next 2 to 3 years because you have been pretty stable in the last couple of years.

[Andre Nogueira, executive]

Thank you, Leandro. Thanks for the question. And for sure, the stimulus helped. They just issued last week another round of checks of $1,400. So for sure, it will help. It's probably impacting some retail demand this week, next week. How much is this relevant? I cannot put this math for you. But this is causing other -- consequence to both the stimulus and the additional unemployment checks of the $300 on top of what the state unemployment. Labor has become very, very tough, despite of a relatively high unemployment in the U.S. right now at 8%. But for perspective, this will drop very fast. I think that now, because of the stimulus, because of the unemployment and health, absenteeism is pretty high, and probably labor will be a challenge. So we are constrained in production U.S., I believe, for the full year labor availability in several parts of the U.S. in production. So you have [ normal side ], the stimulus probably helped the demand a little bit. I'm not sure how much. And the other side, constrained in the production side because of labor.

I think that the U.S. industry is very balanced right now in terms of supply of cattle and capacity. The most important event, probably, is demand. As I already said before, global demand, pretty strong; U.S. and Canada demand, pretty strong. And I don't see that change. So again, my perspective is positive because, one side, you have an adequate supply of cattle, adequate supply of hogs. In the other side, a very strong global demand that my perspective will become even stronger as we start to see the economy reopen, especially countries that are more advanced in vaccination, like U.S. We have, for example, more than 1/3 of our workforce already vaccinated. Probably at the end of next week, we will have probably around 50% of our workforce already vaccinated. So I think that just will bring normality for U.S. very fast and probably help the demand even more in the demand side.

[Operator]

Our next question comes from Lucas Ferreira with JPMorgan.

[Lucas Ferreira, analyst]

I have a question to Andre Nogueira. Andre, wanted to pick your brains on peer grains, your outlook for peer grains in 2021, especially in the U.S. Some of your competitors have been very bullish about pricing, about the supply and demand dynamics. We've been monitoring that spreads have actually been increasing despite of these very high on prices.

So I was wondering, you did a lot of that migration from, let's say, foodservice to retail, the trade-backs and with the reopening of the vaccination, how your mix of products is looking like? Are you also positive about margin expansion? And your, let's say, [ fee ] acquisition strategy, will it allow some margin improvements already in the short term? So how to think about Pilgrim’s profitability, let's say, first half of this year.

[Andre Nogueira, executive]

Lucas, thanks for the question. For sure, the perspective for the chicken industry in the U.S. now is better than it was, I would say, a month ago. I think that we're seeing a more balance in the grain price is not low but stopped going up and have a good perspective that, in the second part of the year, this price probably will come down. So we have -- compared for a month ago, probably more benefit perspective in the grain side.

And on the demand side, I would apply the same rationale for beef, pork and chicken. We are seeing the price that we're seeing right now. You follow that in the chicken price in breast meat, in dark meat, it's way higher than it was in the same period of last year. And we have several issues in the production side. We have a big, big storm in Texas that impacted production and not only impact production but probably will continue to impact production for the next 3 months.

So U.S. is expecting that for chicken production this year, we just grow less than 1%, 0.5%. So they're saying that production will be pretty much the same level last year, and exports have been pretty strong. You saw how fast U.S. took market share in China, and we're seeing the most recent numbers of exports to countries like Angola and other countries. So we have a stronger performance in export, a strong domestic market. Probably chicken is a business that will benefit more for the reopening of foodservices. Especially school and things like that are a little bit behind. So as foodservices go back to normal, especially schools, colleges, chicken get the more benefit. They were more impacted last year, so they get the more benefits when we open.

And another point that I think that's very positive for chicken for the year, when you look at the levels that probably are going to see of beef and pork. Keep in mind that we're seeing pork cutouts right now almost 50% higher than the same time of last year. This cutout hike right now almost 15% higher than the same period of last year.

So I'm cautious optimism. We have the cost side, that will be a challenge. We have the labor side, that will be a challenge. But at the other side, put some constraints, increased production, and you have the demand side, that in my view, is very positive, both domestic and international.

[Lucas Ferreira, analyst]

A quick follow-up here. Looking at the data, the pricing there, it seems like that the commodity cuts are doing better as of now. So like the [ big ] birds and maybe mentioned exports, the like quarter is also very strong. Have you been able to adjust your mix to benefit of this? Can you comment about the -- specifically about the mix of cuts, please.

[Andre Nogueira, executive]

We, for sure, always look the mix based on the profitability. But we don't adjust the mix in 2 or 3 weeks, correct? It takes a little bit of time. But for sure, over time, as we see, we are going to adjust the mix to capture the [ marks ] that allowed us better balance. But these are just not from 1 week to the other. You have some space there to adjust, but not from 1 week to the other.

But you are right. You are seeing some segments improve margin, pretty strong. And the first, always, when you see that, as the margin starts to improve, the first one that gets the benefit is the more commodity side. It always happens this way, right? When it's down, the commodity suffers first. When it stops, the commodity benefits first but knowing this benefit filters through the other segments. So that's our expectation.

[Operator]

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

[Gilberto Tomazoni, executive]

I would like to thank all of you to participate in this call and especially to our team members for the great work and the commitment to our purpose to feed people around the world with the best and in an increasingly sustainable manner. Thank you.

[Operator]

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