JBS SA

BOVESPA:JBSS3

Earnings Call Transcript 2021-Q4

[Operator]

Good morning, everyone, and thank you for waiting. Welcome to JBS Fourth Quarter and the Full Year of 2021 Results Conference Call. With us here today, we have Gilberto Tomazoni, Global CEO of JBS; Guilherme Cavalcanti, Global CFO of JBS; Andre Nogueira, President of Operations in North America; Wesley Batista Filho, President of Operations in Latin America, Oceania and the Global Plant-Based Business; and Christiane Assis, Investor Relations Director. This event is being recorded. [Operator Instructions]

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

Now I will turn the conference over to Gilberto Tomazoni, Global CEO of JBS. Please proceed.

[Gilberto Tomazoni, executive]

Good morning, everyone. Thank you for being part of this conference. The past year included several great achievement for JBS. We have excelled our purpose to feed the world, providing the best production in a sustained way, thanks to the determination of our more than 250,000 team members around the globe. At the same time, we have invested and strengthened the foundation that will fuel the company's goal in the coming years.

We achieved a record profit and investment, generating a return to all our shareholders, team members, cities, states, shareholders and investors. JBS, previously a Brazil-focused company specializing in one type of protein, has evolved in a global food company with a diversified footprint in all types of proteins that includes a vast portfolio of strong brands and value-added products. Within this context, 2021 has set the stage for JBS's trajectory in the coming years. We increased our investment in [ $150 million ] in 2021 in relation to 2022, reaching the relevant total of $4.19 billion resources that we are directed to expand and modernizing our operations around the world, buying companies and sustainable projects that express our ESG commitments.

The strategy acquisition we made in 2021 in a total of $2.8 billion allowed us to increase our relevance in segment and business where we see significant global opportunities. The purchase of Vivera, for example, has positioned us as a leader in Europe's plant-based market, providing a structure to leverage growth and synergy within our global plant-based operations. The acquisition of Huon marked our entrance in the aquaculture market within industrial leaders that will provide a solid foundation for our global expansion. 2021 also marked our entrance into the cultured meat space with the purchase of a controlling stake in BioTech Foods. Our investment in research and the construction of our production facility in Spain will help accelerate the industrial development in our cultivated protein market.

I would also like to highlight the acquisition of Rivalea in Australia, Kerry Consumer Foods Meats and Meals business in U.K., Kings Group in Italy and Sunnyvalley Smoked Meats in U.S. We invested $1.1 billion in greenfield projects in our brands and value-added products in Brazil. Seara introduced new products, continuing to expand choice to the consumers. To meet growing demand, we accelerated efforts to expand and modernize 15 Seara production units in a process that we are now in the final stage.

In United States, with Swift Prepared Foods, we focus on the potential for growing our margin and brands and invested in the construction of 2 specialty plants in the state of Missouri, 1 for Italian products in Columbia and another for cooked bacon in Moberly. These investments in M&A and the expansion of CapEx add up to $3.4 billion, almost the same amount of $3.6 billion we distributed to the shareholders in dividends and share buybacks. While we continue to transform our customer and consumer relationships, over the past 2 years, we have experienced unprecedented growth in e-commerce through both direct sales platforms and with our partners. For instance, Friboi Online, Loja Seara, Comer Bem and Swift Online allow our brand to be delivered to the consumers in various regions in Brazil included in the client channels.

In United States, Wild Fork Foods offer a consumer the opportunity to purchase ready-to-eat meals and several type of protein online. I'd say United States and Mexico, all available for immediate delivery.

At the same time, we have strengthened our relationship with the commercial partners, introducing Swift store-in-store to important Brazilian retailers. We also doubled down our growth in the already established Açougue Nota 10, which support the fresh meat category of our large supermarket groups in Brazil. The execution of this strategy was possible, thank you to our financial profile. As Guilherme will explain, we have today the healthiest financial standing in our company history with a debt extension secured through successful bond issues. That includes in November 2021, issued the market the lowest spread in the history for a Brazilian corporation. Proving that sustainability is our strategy, we issued sustainability-linked bonds.

With all these initiatives, our leverage fell to its lowest level, 1.51x (sic) [ 1.52x ] in reais and 1.46 in dollars. Building our future is based on our strong ESG standards. Our dedication to the society and the future of the planet is constant. In 2021, we took on what I consider to be JBS's most important commitment, to be net zero by 2040. We have already taken decisive steps like launching our Transparent Livestock Platform and the Green Office program, both aimed at addressing the sustainable challenge in Brazilian livestock supply chain, our most pressing industry challenge.

We have also made progress in reducing methane emission associated with the cattle production by testing dietary additives as well as supporting additional researches. JBS has also invested in a circular economy, expanding our operations in new plants for recycling plastic, collagen, organic fertilizer and biodiesel. We also invest in a solar energy project for our Swift stores in Brazil and our operation in U.S. We committed a total of $1.41 billion in sustainability projects around the world in 2021.

In the social sphere, we continue to offer direct support to the communities in the regions in which we operate. This is clear in Brazil where the "Fazer o Bem Faz Bem" program has given more than $81 million to highly vulnerable regions. And the JBS Fund for the Amazon is already funding 6 initiatives to promote sustainable and socioeconomic development in both the Amazon regions. The same applies to our operation around the world, particularly in the United States where over the past 2 years, Hometown Strong has committed $100 million to initiatives supporting the commitments around JBS's operation. We are proud for our support to the Germinare School in Brazil, which has 800 full-time students and the Better Futures program in the United States, which offer a free community college education to all of our U.S. team members and their children and has more than 2,500 students involved in the programs this year.

Change we have made into our governance structure has been recognized by our main shareholders. In 2021, we reached a majority of independent directors on our Board of Directors, 7 out of 9 members. And 22% of our Board is composed by women, for which we earned the Women on Board certification last year.

In conclusion, we ended 2021 with an unprecedented recognition, achieving full investment-grade achievement and record operating results. Our consolidated net revenue grew 30%, reaching $71 billion and a net income for $4.15 billion. These results prove our operational excellence and our capacity to deliver growth and value at the same time. And all of these thanks to our extraordinary team. Thank you.

I will pass now to Guilherme Cavalcanti, there will be -- give more information about our financial profiles and the business update.

[Guilherme Cavalcanti, executive]

Thank you, Tomazoni. Let's please move to our financial management achievements. The year of 2021 was marked by great achievements. JBS was rated full investment grade after the upgrades of the company's credit rating by Fitch in June and by Moody's in November. I would also like to emphasize JBS's first 30-year bond, which had a demand greater than 5x the initial offer. This bond, coupled with all the work we did in terms of liability management, made JBS increase the average maturity of the debt from 5.9 years in 2020 to 8.1 years in February 2022. For the same period, our average cost of debt dropped from 5.1% to 4.3%. Financial leverage in dollars reached 1.46x, the lowest of JBS history.

We announced an acquisition of 7 companies that are part of our long-term growth strategy of enhancing our value-added portfolio and branded products for $2.1 billion, which will add $2 billion in revenue in 2022. And we compensate the investors through dividends and share buybacks of approximately $3.7 billion until February 2022. That's translating into a total yield of 22%. We achieved all these always with a strong focus on financial discipline and our ESG agenda, which already has made a lot of progress, as Tomazoni mentioned.

On Slide 30, we are demonstrating what I just mentioned. We have invested $8.1 billion in 2021 with the following breakdown: we returned $3.3 billion to shareholders through share buybacks and dividend distribution. If we include the share buybacks made in 2022, the return was $3.7 billion. Considering all strategic M&A announced in 2021, we invested $2.1 billion. We also invested $1.8 billion in the modernization and expansion of our production units. And finally, we have invested globally more than $1.3 billion in ESG initiatives. All things considered, we were able to reduce our leverage from 1.58x in 2020 to 1.46x in 2021 and increased interest coverage from 7.8x to 11.6x in the same period.

Now move to Slide 31, where we present the financial and operational highlights for the quarter. In the fourth quarter of 2021, we achieved net revenues of $17.4 billion which represents an increase of 27.8% in the annual comparison. In 2021, net revenues totaled $65 billion. The adjusted EBITDA for the quarter was $2.4 billion, which represented an EBITDA margin of 13.5%. In 2021, adjusted EBITDA totaled $8.5 billion, also a record EBITDA margin of 13%.

Net income was a total of $1.2 billion in the quarter, which represents an earnings per share of $0.48 per share. In 2021, net income was a total of $3.8 billion, which represent an earnings per share of $1.53. JBS distributed $1.4 billion in dividends, which represents a dividend yield of 8.2% in 2021. Considering the share buybacks of 2021 and those on the first 2 months of 2022, the total yield was 22%.

The return on invested capital in 2021 was 24%, whereas this indicator had been 20% in 2020 and 16.5% in 2019. In other words, the carry of JBS shares remains extremely favorable to the shareholder. The company's Board also approved yesterday the cancellation of 129 million shares in treasury as well as the new buyback program with the object of maximizing the value generation to the shareholders through an efficient management of its capital structure.

To conclude these slides, following JBS's vision of diversifying proteins and geographies, expanding value-added portfolio, the company announced its 7 strategic acquisitions that totaled an investment of approximately $2.1 billion for the full year of the 2020, and the expected impact of the net revenues is $2 billion.

Please now move into Slides 34 and 35. The operating cash flow in the quarter was $1.8 billion. Free cash flow for the quarter was $1.1 billion, which represents a conversion of 45% of EBITDA to free cash flow. In the year, the operating cash flow was $4.7 billion. Free cash generation was $2.2 billion. And excluding nonrecurring payments of $768 million and the expansion CapEx of the amount of $991 million, free cash flow for the year would have been $4 billion, in line with 2020 with a conversion of 47%.

We have also increased investments in the company's organic growth. In the graph on the bottom of the slide, we have our CapEx in the year totaling $1.8 billion, of which 56% is related to investments in modernization and expansion.

Now please let's move to Slide 36, where we have the evolution of our debt profile. Net debt in 2021 was $12.4 billion, which represents an increase of $3.5 billion in the annual comparison, due to the share buybacks on the amount of $2 billion, M&A in the total amount of $1.7 billion and $1.3 billion in interim and anticipation of dividends. However, net debt -- net debt financial expenses in 2021 were stable in relation of 2020, corresponding to $731 million.

Net leverage was 1.46x in dollars and 1.52x in reais, the lowest level ever reached by the company. Interest expense coverage increased from 7.8x in 2020 to 11.6x in 2021. And it is important to highlight our comfortable liquidity position. We end the year with a cash position of $4.2 billion, together with the revolving line of $2.2 billion allowed JBS to end the year with a total availability of $6.6 billion, which is approximately 3x the short-term debt and enough to pay all the debt until mid-2027.

Moving to the bottom of the slide, I highlighted that our average cost of debt in dollars of 3.99% per year is the lowest ever record by the company. Considering the issuance of senior notes in January of 2022 of $900 million for our 30-year bond and $600 million for our 7-year bonds, the average debt maturity came from 5.9 years to 8.1 years. Considering January 2022 issuance plus the ones in 2021, the total amount of bonds issued by the company was $7 billion with an average oversubscription of 5x.

In Brazilian local debentures, the issuance was BRL 2.8 billion. Also worth mentioning that our free cash flow of the year is higher than any annual debt amortization, what means a 0 refinancing risk going forward.

Now let's move to the business units' performance. Starting with Seara on the Slide 37. Net revenue grew 34% in the fourth quarter and 37% in 2021, posting growth in both volumes and prices. Sales in the domestic market, which accounted for 53% of the business unit's revenue in the period, the prepared foods category maintained its growth trend and registered an increase of 5% in the volumes sold and 11% in prices.

I'd like to highlight Seara's holiday campaign, which was very successful with a 24% growth in its kits sold in relation to last year. The Seara brand also maintained its position as a market leader in the frozen segment and pizzas. In the export market, Seara posted volumes growth of 15% and 21% increase in average sales price, even facing a temporary suspension in certifications to export to Saudi Arabia and the recovery of the Chinese hog herd.

In 2021, Seara continued to make consistent progress in its strategic plan with a strong innovation agenda, expansion of its production capacity investments in its brand's household penetration and increasing the number of point of sales. The scenario for our production costs remained challenging in 2021 with an average cost of soybean meal and corn rising 31% and 56% year-over-year, respectively, according to ESALQ data. As a result, adjusted EBITDA reached $210 million with a margin of 11.2% in the quarter and adjusted EBITDA of $750 million in 2021 with a margin of 10.6%.

Now moving to JBS Brazil on Slide 38. We see the revenue for the quarter growing 5% year-over-year, reaching $2.5 billion in the quarter and $10 billion in 2021, an increase of 29% year-over-year. The domestic market was the highlight of the quarter with net revenue posting an increase of 13% in the annual comparison, mainly driven by the strengthening of Açougue Nota 10 loyalty program, which has already surpassed 1,700 stores.

In 2021, net revenue grew 29% as a result of the price increase. It's important to point out that the Friboi brand was selected the most remembered brand -- meat brand in Brazil according to the Top of Mind 2021 survey. However, the performance for this business unit continues to be impacted by the increase in the average price of cattle, which according to the data published by ESALQ, increased around 35% in the annual comparison and also by China temporary suspension of Brazilian beef exports. As a result, EBITDA for JBS Brazil totaled $125 million in the quarter with a margin of 5% and $429 million in 2021 with a margin of 4.3%.

Moving to Slide 39. At JBS USA Beef and now speaking in dollar terms and in U.S. GAAP, JBS USA Beef's revenue reached $7.5 billion in the fourth quarter, an increase of 34% year-over-year and in the year, net revenue of $27.2 billion, an increase of 25% year-over-year. The adjusted EBITDA totaled $1.3 billion and a margin of 18% in the quarter and $4.9 billion in 2021 with a margin of also 18%.

This demand is higher than supply sustaining the results in the year and the quarter in both domestic market and exports. In North America, beef demand was driven by the strong performance on the retail channel and the recovery in the foodservice channel. In international, global demand for beef also remains very strong, particularly in Asia, which is now responsible for more than 75% of the total U.S. beef exports, with China becoming the third largest destination for American beef.

U.S. exports in 2021 were not only better due to the logistics impacts, mainly on the back of the congestions in American ports during the period. JBS Australia performance continued to improve sequentially as a result of the good management in the region. Cattle availability is still low, but strong domestic and international demand has increased beef prices and, therefore, improved results.

Now moving to JBS USA Pork. In the fourth quarter 2021, net revenue was $1.9 billion, an increase of 10.2% year-over-year. Adjusted EBITDA reached 220 -- $230 million with a 12.1% EBITDA margin. In 2021, net revenue was $7.6 billion, and adjusted EBITDA was $766 million, an increase of 26% year-over-year with a 10% EBITDA margin. The strong demand for pork boosted prices and was important to sustain margin growth in the quarterly comparison and to keep margins stable in the annual comparison, even in the face of a much more challenging cost scenario, especially labor costs, packaging and transport. The shortage of labor and logistics also impacted production growth and a better mix of products.

In the export market, Mexico, Colombia and Philippines grew volumes in 2021 by 31%, 61% and 84%, respectively, and compensating the decline in the exports to China since the beginning of 2021.

Pilgrim's Pride on Slide 41 presented net revenues of $4 billion in the quarter, an increase of 30% year-over-year. Adjusted EBITDA totaled $317 million with an EBITDA margin of 7.8%, which excludes the impact of an aggregate of nonrecurring payment of $132 million in the U.S. In 2021, net revenue was $15 billion, an increase of 22% year-over-year. Adjusted EBITDA totaled $1.3 billion, 64% year-over-year with an EBITDA margin of 8.7%.

In the United States, demand and prices have been robust given the improvement in the foodservice channel, while retail sales remained strong and were above pre-pandemic levels. In Mexico, results continue to be solid while in Europe, the results were strongly impacted by the high inflationary costs and shortage of labor. On the other hand, we recently acquired Pilgrim’s Food Masters, former Kerry Meats and Meals, consolidating -- and consolidated at the end of September 2021. It has already contributed positively to the results despite still passing through its integration process.

To finish, I would like to move to Slide 42 that shows that our exports totaled $17 billion in 2021, with Greater China representing 27% and Asia, as a whole, representing 54% of the total.

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

[Operator]

[Operator Instructions] Our first question comes from Ben Theurer, Barclays.

[Benjamin Theurer, analyst]

Congrats on the strong results. Two questions. So first, if we look into the current global supply chain disruption, obviously, the implications we have from the Russia-Ukraine on grain cost. Can you elaborate on your different strategies, be it in North America and South America on the hedging side?

And where do you think -- what is -- what this is ultimately going to drive in terms of further inflation and the need to engage on pricing? I mean, we've seen Seara as being very strong on pricing. But how much more can you do on the pricing side to offset that cost pressure? That would be my first question.

[Gilberto Tomazoni, executive]

Thank you, Ben. Thank you for your questions. Look, the inflation, as you mentioned, is not just related to one another region or one other sector. It's a global challenge and inflation comes from different, different regions. It could be labor cost in one region more than others, come from logistical costs, energy costs and commodity costs as well. And I will give you a general answer, and then I leave Wesley and Andre to give you more details for each one of the regions.

First, we are focused in things that we control. And we control our internal costs, manage our opportunities for position in the markets in commodities. As we have a global team of commodity, we take decisions as a global decision. In terms of strategy, the execution, each one of the regions makes its own execution. But we look at it globally. And we see that our main way to face this challenge is use our culture because, as you know, we have a decentralized company. We give a lot of autonomy to our business units. Each one of the leads of the biz units has the autonomy to manage the situation.

In this situation, your ability, your speed or reaction makes a lot of difference. And we strongly believe that this to be an advantage for us as a structure, in culture and our restructure decentralized. I'll give to Andre and Wesley, if you want to give a specific action we are taking in the regions to face this challenge.

[Wesley Mendonça Filho, executive]

Ben, so specifically about Seara, for sure, we've been, for a few years, having this pressure on the cost side, especially on the grain. Like Tomazoni mentioned, nowadays in the past year hasn't only been grain. We have pressure on logistics, on labor, even in Brazil with the inflation and all of the adjustments we have done here with the labor costs. So obviously, all of these are structural, right? This is not just for us, this is for the market. So as long -- like Tomazoni said, we're focused on the things we can control. And being structural, we see that the market in general, when the cost pressures come, the tendency is to -- for this to be adjusted in the medium term. So specifically about the cost pressure we're seeing right now with grain, we have done already some further price increases in the first quarter. Obviously, the timing of the cost increase is usually fast and then price comes at a more paced speed. So the first quarter, we'll probably see less of that price increase in the results, and we're going to see more of the effect of those price increases in the second quarter of 2022.

Again, like we said before, obviously, there is a part that has to come from price increases, but there is also a lot that's in our hand. That's mix and deciding channel mix and product mix. So we're also focusing on those other avenues to increase average price without necessarily just increasing price.

[Andre Nogueira, executive]

Trying not to repeat Wesley then, the perspective here is the same again. The impact for everyone, inflation is everywhere, the pressure is very, very strong. I comment, especially in U.S., our costs have been 30% to 40% higher than it was 2 years ago before the COVID in the fourth quarter. The answer for that is twofold: one, have a strong risk management to do as best as we can with the grain situation, make sure that we are communicating with our customers about the reality of the grain margin, not only the grain, all the other costs, especially in U.S., our operational costs because of the labor shortage. And we were very aggressive in raising compensation for our team members trying to be ahead of the curve because availability of labor is more relevant than the cost of labor at that point. So continue to work as hard as we can and be excellent in the operation. We're more and more efficient every day, that's what Tomazoni commented about control, what we can control.

But communicate with the customers about the reality of the cost that impacted us in freight, in grain, in labor, in all the aspects of the cost and do the best that we can and use communication to make sure that the customers are aware of the reality in working price as much as we can.

[Benjamin Theurer, analyst]

Perfect. And then second question, this is most likely more for Gui. Multiple things around this. If we look into 2021, you've spent a lot in M&A. I mean you haven't spent as much in a while. But at the same time, you accelerated a lot, just purchase of PPE investments, CapEx, et cetera. So if we look into the balance of the strength of your free cash flow, everything you've been doing, dividends, share buybacks, but then at the same time, investing a lot. How should we think about the capital allocation in '22 in an absolute reais amount in terms of CapEx, M&A, what do you foresee? And how shall we put into context here what potential extraordinary dividends could look like or share buybacks as the year unfolds?

[Guilherme Cavalcanti, executive]

Okay. Thank you, Ben. Okay. Let's start with the capital expenditure. We forecast the capital expenditure for this year on a range of $1.8 billion. We've been half of that expansion and half of that maintenance.

Now on the share buybacks and dividends, remember that we ended up the year with 1.46x net debt EBITDA, so below 1.5. And the first quarter of 2022 tends to be higher than the first quarter of 2021, so our last 12 months EBITDA will expand.

We also recovered a capital reserve on the form of accumulated profits with the results of the fourth quarter. And we ended the year with a very strong cash position of $4 billion, which is money that we raised in very low interest rates in the end of 2021 and the beginning of 2022. So given that we have a strong capacity to continue to return money to the shareholders and doing M&A at the same time, so we don't need to have a trade-off between these 2 investments.

Generally, what we do is to decide throughout the year growing scenarios of performance to see how fast we will be returning this money to the shareholders. Of course, if we have opportunities to buy JBS shares at a good price to continue to be doing, remember that the enterprise value to EBITDA of JBS is still very compelling for share buybacks. And also worth mentioning that our net profit of 2022 tends to be a good profit again. Last year, we had BRL 20 billion in net profit. And for Brazilian corporate law, we need to pay 25% of that net profit, which last year we anticipated given that we have a better forecast predictability of our net profit.

So this year, most likely, as we'll be forecasting net profit for the year, we will probably be anticipating dividends again. So the M&A will depend on the opportunities that appear for us. But the thing is, as you mentioned, we have a very strong balance sheet. We don't need to have a trade-off between these investments, and we'll continue to do M&A and returning money to the shareholders until we have a capital structure more efficient.

[Benjamin Theurer, analyst]

Okay. The U.S. IPO, does that play an important role within that? Are we timing to it? Or is it really more when it can be done, it can be done?

[Guilherme Cavalcanti, executive]

It can be done when it can be done. It doesn't imply any consequence on the strategy because, again, we don't need to raise capital given the low leverage that we have right now.

[Operator]

Our next question comes from Leonardo Alencar, XP Investimentos.

[Leonardo Alencar;XP Investimentos;Equity Research, analyst]

I wanted to get a better view on the M&A process. As we see in the M&A process, it's how you're managing to diversify domestically and the protein profile. So I wanted to check if this is a correct way this in terms of the M&A process? And to understand, how do you see the synergies? If it's possible to expect perhaps in Australia with Huon and with Rivalea in the beef operation, is it possible to expect synergies between operations? I understand it's probably too early on this process to get the full picture. But then if you can give us some more color even on Europe with Kerry and King's, if it's possible to expect synergies between operations as well.

And for the next steps for the M&A process, if we should expect more geographical diversification? Or if we should expect more protein diversification like this move towards the fish protein?

And the last point for this is the changing environment with higher grain prices. This could affect the strategy or even would be a good opportunity. And maybe we can expect a faster pace of M&A for 2022 due to lower margins for most players in the world?

[Gilberto Tomazoni, executive]

Leonardo, I understood the first part of the question well that you talked about the synergy and what is the focus for M&As. But the last part of your question, I lost. The connection was not good. Could you repeat that, please?

[Leonardo Alencar;XP Investimentos Equity Research, analyst]

Now the last part is just that since we are seeing this changing environment for grain prices, corn prices and higher soybean prices going up, we are seeing the margins for the sector getting worse for many countries. And if this could be a good opportunity for maybe this process of M&A, maybe you could see more M&As coming in the short term because of that.

[Gilberto Tomazoni, executive]

Now it's clear. Thank you. I'll answer both questions in the same time because they are connected. First, M&A is part of our DNA. We are, all the time, in the market, looking to find opportunities that fit with our strategy and makes sense in terms of economic. Discipline is very, very important. It's now more because we have a strong balance sheet, should be disciplined is more important. And because of that, you saw that we start to increase our activity in greenfield that was not so active in the past. Because we believe that sometimes, the acquisition with the sector we want to enter or we want to expand the opportunity in the market, the value that is possible to buy not make sense in terms of the future results. And then we decided to grow with greenfield.

But the main part of our deal is M&A. We reinforce our internal structure in order to give more time and dedication for the net zero target that we want to be in [ 2005 ] and for M&A activity was one of the 2 reasons -- or the 2 reasons that we enhanced our internal structure. That means, this we are focused on.

Of course, when we have a challenge in the market because of inflation or because of overproduction or because of lack of supply, many of the disruption in the market gives -- opportunities appears. I don't know now it will be appears because of that. But to say, we are -- it's a continuous process to look for opportunities. If now it appears, we are ready because our balance sheet allows us to do something relevant in acquisition.

In terms of where we want to grow, aquaculture is clear, our focus on. So we see that seafood, the -- in terms of as the biggest consumption per capita consumption in the world and grow higher than the other meat proteins. And we see that wild fish will be a restriction, we do not grow that. Maybe it will be less. And aquaculture, we need to supply the demand. And with acquisition of Huon, we enter in the segment. But it's -- and we enter in a place -- in the right place because, in Australia, we have the structure to manage and we accelerate it. It will speed our learning about the sector. And we want to transform our aquaculture business that we enter right now and big as we have chicken and pork in our portfolio. This is the one -- it's a driver for growth.

Of course, we are not timed for growth. We are looking opportunity all the time for growth in this. The other thing is plant-based. With the acquisition of Vivera give us a lot of synergy in terms of the business that we are already in. We are in half in our operation in Brazil and U.S. And we don't know the size of this consumption. Think about this business. But for sure, we want to be one of the leader of the segment. And we are investing in R&D and team is developing new products and new type of packaging. And the strategy is for growth, and we are dedicated team to do that. This is -- I'll talk about segment. And we are entering as well in the cultivated meat with the -- by the control of the BioTech in Spain. And BioTech has a pilot plant that already produce. They are -- the technology is already proven. They produce 1 ton in the pilot plant.

Now our strategy is to build industrial sectors that will be 100,000 -- 100 tons, sorry, 100 tons of cultivated meat. And this is -- and besides of that, we are investing in R&D because BioTech, I believe, that biotechnology will be one of the opportunities for growth not just in cultivated meat but in derivatives from this technology.

And thinking about other priority is brand and value-added. If you look what we have bought in the past, we -- in the last year, we made an acquisition a lot in brands. Previous bought the retail business of Kerry Foods in U.K. and Ireland. It was a branded company. We brought brands to the operation that we have in the U.K. We are investing in Sunnyvalley in U.S. was a value added. We are a greenfield of Italian specialty with the US, $200 million. This is branded product that we have produced that. And this fit with the acquisition we made in Italy that we bought historical -- 2 historical brands. And that will be -- that already has a plan for its live operations. They import [ bucket and slice ] in the U.S., and this is already present, the brand in the market. That is perfect fit and help us to speed up -- speed the -- our operation that the plant we have already. We are -- we'll be finished at the end of this year.

And Europe, we are still about the regions. We are -- we see that U.S. is an opportunity. We want to grow more our value-added and brand products in the U.S. market. We want to grow more in Europe. We see Europe is a huge opportunity because we can take -- each one of the country in Europe is opportunity. Europe is a continent, but each one of the country is a different strategy and different opportunities. And we see Europe as opportunity as we see Brazil as an opportunity. In Australia, we just bought Rivalea in Australia that is one more protein. Now we are present that and is a booster for our value-added product that we have with Primo in Australia.

In summary, we -- this is -- we are not changing strategy. We now are more prepared. Why we're more prepared? Because we enhanced our structure and we have a strong balance sheet and we have discipline for growth.

[Operator]

Our next question comes from Barbara Halberstadt, JPMorgan.

[Barbara Virginia Halberstadt, analyst]

I wanted to follow up on one question regarding the capital allocation. It's clear that you want to keep leverage below a certain level. I just wanted to confirm how much that is, if it is at the 1.5? Or just below 2x?

And also, if you're comfortable with the gross debt level where it is and also cash position? Or if, over time, we should expect more of a focus on the net leverage metric than on necessarily the levels for gross debt and cash?

And then the second question would be on the supply chain. If you could comment a little bit on how you're seeing currently supply chain globally, especially for your export businesses. You mentioned from some of your operations, you faced some issues in the fourth quarter, and we've heard from different industry players similar comments on lack of containers or just higher cost delays. So I just wanted to get a little bit of more color on how you're seeing the supply chain bottlenecks evolving in the first and second quarter for this year.

[Guilherme Cavalcanti, executive]

Thank you, Barbara. On your first question, in terms of leverage, in the beginning of 2019, we approved our indebtedness policies at the Board that states that on the long term, we should pursue to stay between 2 and 3x net debt-to-EBITDA, so that's our long-term goal. However, in the last 2 years, we've been expanding our EBITDA and generating free cash flow on a pace that is faster than we've been able to spend because the capital discipline that Tomazoni just mentioned. So at the end, our net debt-to-EBITDA fell below 1.5x, despite all our investments and return to shareholders in terms of dividends and share buybacks.

So going forward, as I mentioned, we intend to pursue to have efficient capital structures that we intend that is to be between 2 and 3x net debt-to-EBITDA because it's also this level that rating agencies requires for food companies to be investment grade. So thinking on the investment grades, we want to have this long-term goal.

In terms of gross debt and cash, it's a fact that we end up the year with a much higher cash position that we need with the $4 billion, and we raised another bond in January, a 30-year bond and a 7-year bond, which will be financed in part of the debt and the other part also increases our cash position. We did that because we took advantage of the very friendly market. So we took advantage of this market and the positive feeling about the sector to raise this cash. And of course, now it's time for us to decrease short-term debt, use this cash to decrease short-term debt.

However, most of these short-term debt, basically almost all is in Brazil. It's trade-related debt, which I need to generate FX contracts in order to prepay those debt. So that's why I cannot pay at once. We need to have some time. So throughout this semester, I'll be decreasing my short-term debt using this cash position because -- also because in an environment of higher interest rates, it's also good to pay the short-term debt and to decrease the carry of this cash. So that's how we intend to do.

Also using the revolver lines to work -- to be able to work with a lower cash position as well. However, we tend to think the company on a net leverage basis because we want to be able to take advantage of -- to raise cash when the market is friendly and don't need to raise cash when the market is more challenging. So that's -- so to think on a net leverage, that's how we think. But also bear in mind that we have a carry of this cash that we should also to take care.

[Operator]

Our next question comes from Carla Casella, JPMorgan.

[Carla Casella, analyst]

My question is around the charges that you took this quarter, mostly with PTC but the others. I'm wondering if the DOJ charges were cash or noncash? And if there -- if this is the end of the resolution? Or if there could be further charges going forward?

[Guilherme Cavalcanti, executive]

Most of what we -- the impacted results were cash. And it's -- going forward, it's still -- we thought that for the chicken part, it's almost done. But that is something that's very difficult to predict because it doesn't depend on us or anything of new transactions of this sort. But we think that most of it is done.

[Andre Nogueira, executive]

Just to clarify, these are not DOJ issues. This is settlement with customers in the lawsuits, so that's not DOJ charge.

[Carla Casella, analyst]

Okay. Great. And then you've talked in the past about whether you're registering your bonds, your U.S. bonds. Can you just talk about what that entails? And maybe the ballpark and timing in terms of what could be the earliest or latest do you think you would register the bonds?

[Guilherme Cavalcanti, executive]

Yes. What is needed for that is just we need to have an SEC process just at least enough shares. So we need to comply with some steps, including having SOX compliance for the entire company. So we are analyzing the cost and those steps and how long we need to implement everything. And also, we remember that we have this listing project as well, which is more or less the same needs that we have for both projects. So it's difficult to say when, but at some point in the future, we intend to have our bonds registered. So with that being allowed to participate in the indexes and also being allowed to have a shelf registration, which will be -- will make our issuance even more fast whenever we can go to the market.

[Carla Casella, analyst]

Great. That's super helpful. And just one follow-on on that. Would it be a registration for all the bonds? Or would it just be the U.S.? Or the [ SA ] bonds? Would it include all the financial subsidiaries as well?

[Guilherme Cavalcanti, executive]

And given that SA is a guarantor and the parent, they need is -- the process has to be for the entire company. So if we will, most likely, we will have -- we will be registering all the bonds.

[Operator]

Our next question comes from Priya Ohri-Gupta, Barclays.

[Priya Ohri-Gupta, analyst]

Great. Just one follow-up around the bond structure, if I may. Has there been any updated timing around or thoughts around potentially changing the issuer for the notes that are issued under JBS Finance Luxembourg to JBS USA Food Co.? And what steps would be needed to do that?

[Guilherme Cavalcanti, executive]

All right. That's a good question. If you look at the presentation, you will see that we end up the year with around 34%, 35% of the bonds allocated at the SA entity in Luxembourg, which is not the most efficient from a savings perspective. So most likely during this semester, we will probably -- we'll be rebalancing these which can be -- one way to do this is as we did in the past and also as we mentioned on the bonds calls when we issue them. We have the ability to change the issuer to the U.S.A. We will improve cash savings doing that. And also raising -- allocating and raising money on the U.S. entity. So probably, we'll be rebalancing this throughout this first and second quarter.

[Priya Ohri-Gupta, analyst]

Okay. And then you've highlighted some of the recent benefits of liability management that you -- actions that you've taken. How are you thinking of any additional steps to address them at the legacy bonds that are in the structure now that you're investment grade?

[Guilherme Cavalcanti, executive]

That's a good question. Markets now are challenging. And the good thing is that we don't need to go to the market not only because we have, again, a high cash position, very strong of $4 billion. And we -- and our free cash flow generation is higher than any amortization even if you look at the outer years. So we don't have a necessity of the financing. So we can wait the markets to improve. And when it does -- we will -- we'll be doing more liability management. Of course, now the calls that we have, it's lower. We have paused for 2023, '24 with the bonds with 6.8% and 6.15% yield, which have an opportunity to decrease those interest expenses. But we don't need to do this in the short term, and we'll probably be waiting to access the market only when we feel we have a friendly environment again.

[Priya Ohri-Gupta, analyst]

Okay. That's helpful. And then can you just remind us of your hedging strategy for the beef and the pork segment? As part of that, if you could sort of remind us what percent of your cattle and hog purchases are contracted ahead of time? And the percentage of your pork business that's vertically integrated and the role that, that plays in the current backdrop?

[Gilberto Tomazoni, executive]

Andre? Andre, I think you will be better positioned to answer this question.

[Andre Nogueira, executive]

Yes. We don't disclose our hedge strategy and our hedge position. So most of the cattle are cash-based cattle. And we have some hogs that are contract. Our own hog production represents around 15% of the hogs that we process. And we have another piece of the hogs that is based in the cost. But overall, we don't disclose any hedge position or any hedge strategy.

[Operator]

Thank you. We will now reopen Barbara Halberstadt from JPMorgan. Please proceed.

[Barbara Virginia Halberstadt, analyst]

I just wanted to follow up on the supply chain question. Just wanted to understand what are the type of bottlenecks you've seen? And if you're still seeing them in your export businesses? We've heard other players experiencing the same situation in their industries as well. So just wanted to understand how you're seeing overall logistics bottlenecks across your businesses, especially for exports? And any costs that might be related to that?

[Guilherme Cavalcanti, executive]

Barbara, if I understood well your question, you talk about the situation in terms of logistics. Is it correct?

[Barbara Virginia Halberstadt, analyst]

Yes, correct. In terms of logistics for -- especially for exports.

[Guilherme Cavalcanti, executive]

I think we have different situations in different regions. In general, we are facing a challenge after the -- during the COVID and is not still normalized. And this restriction of availability of containers was something that happened in all of the regions. One depends on the others. We have a very close relationship with the shipping companies and try to find a solution for each one of the restrictions. Of course, this not means that we are -- we don't have a problem. We still have some restriction, as Andre mentioned in the beginning that we have, in terms of stock, we have more higher stock that normally we have because of restrictions of logistics. And it's not different in Brazil, and it's not different in Australia. But it's that -- now with this, with the war, we face that communication to some regions was stopped. And fortunately, we -- our export from this region specific to Russia is very small compared to our activity in terms of export. And it's not really make a big impact in our results. I don't know if Andre or Wesley, you want to add and clarify something more about logistics.

[Andre Nogueira, executive]

Just to add because you asked on top of the issues with shipping lines and the container availability, the port congestion continues without any relevant improvement in the last several months. So the situation continues and is a day-by-day challenge on top of much, much higher cost than we ever saw before to move. It's not only about the cost. The cost is very, very high. There's a limitation in the containers, but the ports in U.S. on top of that have been -- high level of congestion that's created a big challenge in all the export. That's why I comment that our export could be much higher still if this was not about the logistics and the port congestion in the U.S.

[Wesley Mendonça Filho, executive]

And in Brazil, we had a -- our biggest problem was last year. This year, things are more normalized. But obviously, we still observe and we're very close to this to make sure that we don't have any disruption in our production because of that.

[Operator]

Thank you. This concludes today's question-and-answer session. I would like to invite Mr. Tomazoni to proceed with his closing statement.

[Gilberto Tomazoni, executive]

Thank you to all of you for being part of this conference. And a special thanks to all of our JBS team for their dedication and make JBS better everyday. Thank you.

[Operator]

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