Earnings Call: Q3 2026

Nov 10, 2026

Summary

Q3 sales were $23B, with adjusted EBITDA of $1.2B IFRS; U.S. beef returned to positive adjusted EBITDA. Pork oversupply and working-capital pressure weighed on results, while management expected Q4 improvement in U.S. beef, Seara and Brazilian beef.

Good morning and welcome to JBS's third quarter of 2026 results conference call. At this time, all participants are in listen-only mode. Following management's remarks, we will open the floor for a question-and-answer session, and instructions will be given to participants on how to provide at that time. Please note that to ensure all analysts have the opportunity to ask a question, we kindly request that each analyst limit themselves to just one question. 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 expectation in relation to the future of JBS. Such expectations are highly dependent on the industry and market conditions, and therefore are subject to change. Our president with us today, Gilberto Tomazoni, Global CEO of JBS, Guilherme Cavalcanti, Global CFO of JBS, Wesley Batista Filho, CEO of JBS USA, and Christiane Assis, Investor Relations Director. Now, I'll turn the conference over to Gilberto Tomazoni. Mr. Tomazoni, you may begin your presentation. Good morning, everyone, and thank you for joining us today. The third quarter was marked by challenging market conditions across several of our business. Changing international trade flows, pressure on poultry margins, and a global oversupply of pork affected our results. At the same time, we made progress in important areas of our operation, reinforcing our confidence in the strategy we have been executing. Our experience in food industry has shown us the importance of understand market cycles, improving efficiency, and making decisions that strengthen our business over the long term. Our important development in the quarter was the return to positive EBITDA in our U.S. beef business. This is an encouraging result of the work we have been doing to improve competitiveness. There is still more to do, but we are beginning to see the benefit of these initiatives. Wesley will provide more details of the performance of North America business and the actions underway. Turning to Pilgrim's Pride, as Fabio Sandri highlighted during the company third quarter earnings call, chicken continues to resonate with the consumer across its markets, supported by affordability and the strength of its diversified portfolio. He also emphasized the progress in operation efficiency, innovation, and investment in high-value products. These remain important priorities as Pilgrim's continues to strengthen its business and build resiliency across market cycles. In Brazil, despite a challenged quarter, our team respond promptly in adapting production and commercial strategy and leverage our global network and distribution capabilities. While export to China declined sharply, Friboi successfully redirected volumes to other markets and expanded domestic sales. This performance reflect the strength of Friboi brands, the value of our Friboi+ retail relationship programs, and the effectiveness of our commercial execution. We already see an improvement in October, reflecting this adjustment and renewed demand from China as a customer secured volumes under the 2027 quota. Together with seasonality and stronger domestic consumption, this created a more favorable environment for our Brazilian beef business in the fourth quarter. The recovery in export volumes, combining with the strongest seasonal demands in Brazil, give us confidence in a better fourth quarter for Friboi. Our strong brand, customer relationship, and access to international market remain important competitive advantage, allowing us to respond changing in demand and maximize the value of our products. Friboi is a clear example of how strong brands, close relationship with retailers, and access to different markets help us to respond challenging conditions and strengthen our competitive position. At Seara, the quarter was affected by higher costs and more challenging commercial environment in Brazil. Despite this pressure, Seara gained market share across the categories and reaches the highest ever level of brand preference in consumer consideration. These results reflect the strength of Seara brand and its position with Brazilian consumers. We are focusing on what we can control, improving efficiency and commercial execution, strengthening the integration between our operation and customers, and increasing the value of our portfolio. We continue to invest in automation at Seara to improve productivity and efficiency. Seara's strong brand, innovation, and investment in production capability provide a solid foundation for growth. The gains in market share and record brand indicators reinforce the competitiveness of Seara of the strength of the commercial execution. Internationally, the Middle East remain as an important market, where our investment in local production and distribution are strengthening our presence and contributing positively to results. In Europe, we maintain production and build inventories during a period of trade restriction, position the business to benefit as sales resume. The fourth quarter is also an important period of Seara, supported by strong seasonal demand in the local markets. Together with the recovery in international sales and inventories built during the quarter, this support a more favorable outlook for Seara in the final months of the year. Across the global operation, market conditions vary, but the pace of recovery will not be the same across the proteins and geography. This reinforce the importance of our diversification strategy. We have built JBS as a global multi-protein company with access to different markets and sources of earnings. Diversification does not eliminate industrial cycles, but it stress our ability to navigate them, allocate capital, and continue developing our business. Our investment in efficiency, innovation, brands, and value-added products support this long-term strategy. Our people remain fundamental to the execution, with experienced team close to our operation and customers. Cash generation is another important priority. Leverage increased during the quarter, as expected, reflecting the operating environment. We remain focused on working capital management and disciplined capital allocation, maintaining the financial flexibility needed to support our investments. We have built JBS as a long-term vision, investing consistently and strengthening our ability to compete in different markets and industrial cycles. Our strategy remain unchanged. We will continue to focus on execution, efficiency, innovation, and develop our people, creating conditions for sustainable growth and long-term value creation. Our leadership transition is progressing as planned, with Wesley Batista Filho gradually take on greater responsibility for JBS operations. This is a natural step in the company evolution, supported by our strong management team, consistent strategy, and our people we have built over the years. Thank you very much. I will now turn the call over to Wesley. Good morning, everyone. The main highlight of the quarter was our U.S. beef business returning to positive adjusted EBITDA under the U.S. GAAP after two challenging years. This reflect both improving market conditions and the operational changes we have been implementing. Earlier this year, we brought our fed beef, regional beef, and case-ready business units under one management structure to better coordinate procurement, production, and sales, and optimize our production footprint. We have also increased our focus on yields, productivity, maintenance, operational reliability, and cost discipline. On the market side, the reopening of the U.S. border to Mexican cattle imports is an important development. Cattle are arriving heavier and reaching processing weights sooner. We expect approximately 1 million head of imported cattle from Mexico per year. Cattle prices have declined from recent peaks, while beef prices remain resilient. Although cattle supplies remain tight, Mexican imports and a better balance in processing capacity support a more constructive outlook. Turning to U.S. pork, market conditions deteriorated rapidly during the quarter. Higher global supply and weaker demand have pressured prices and margins. We expect these conditions to remain challenging into the first half of 2027. Our focus is on cost management and operational efficiency. The U.S. has harvested its second-largest corn crop on record, supporting ample grains availability and stable feed costs. In South America, soybean planting in Brazil has progressed within the ideal window, although it is still early to assess the second corn crop. Overall, we are encouraged by the improvements of the U.S. beef business. Our focus remains on what we can control, improving productivity, managing costs, and making our operations more competitive. Thank you, everyone. I will now turn the call over to Guilherme. Thank you, Tomazoni and Wesley. Last night, we announced the acquisition of 100% of Flora for the enterprise value of $442 million, of which $367 million for the equity and $175 million in debt assumption. All the equity will be paid in JBS treasury Class A shares. There will be no impact on JBS net leverage given Flora EBITDA. Flora brings higher margins than JBS, a portfolio of well-established home and personal care brands, and significant synergies. Flora also brings an important strategic advantage to JBS. It is established B2C platform gives us access to new sales channels in Brazil, particularly drug stores and specialized retailers, which we can leverage to accelerate the growth of our higher value-added products, including Genu-in, our collagen-based health and nutrition platform. At the same time, Flora is highly complementary to our value chain, as it uses raw materials that JBS already produces. Tallow is a clear example, with approximately 93% of Flora's consumption already supplied by JBS. This combination allows us to move closer to the end consumer while creating new venues of growth. We see cost synergies from integrating corporate and commercial functions, as well as additional opportunities across logistics, procurement, and tax. Considering only 2027 synergies, Flora acquisition multiple would reduce from seven times to less than 4.9 times. Over 10 years, we estimate the present value of total synergies and monetization of tax credits at $422 million, further reinforcing the value creation of the transaction. On page 17 of the 10-Q financial statements, we disclose approximately $800 million in VAT-related tax credits and $2.2 billion in income tax credit. Additional details, including breakdown, further explanation can be found on page 18 of our 2025 annual financial statements. Keep in mind, under Brazil's tax reform, VAT tax, ICMS, will be gradually replaced by CBS and IBS, but we expect the tax credit accumulation to continue to grow. To establish the synergies, you can use the applicable tax rate, Flora's revenue and net margins, incorporating a higher capacity utilization and additional capacity expected to come online over the next years. We also announced the acquisition of Canal Rural for the enterprise value of $16 million to be paid in JBS treasury Class A shares. Canal Rural brings us closer to the producer, strengthens our ability to advance traceability across our indirect supplier base, and provides an important platform for engaging with society and policymakers. Let's now move on to the operational and financial highlights of the third quarter of 2026. Net sales reached $23 billion for the third quarter. Adjusted EBITDA under IFRS totaled $1.2 billion, with a margin of 5.2% for the quarter. Excluding mark-to-market adjustments on biological assets, adjusted EBITDA margin would have been 5.5%. This metric is used by some of our peers, which also report under IFRS. The main impact was the mark-to-market in U.S. pork, given the reduction in the future curve of live hogs. It's important to highlight that there is no cash impact related to that. Adjusted EBITDA in U.S. GAAP totaled $1 billion, which represents a margin of 4.4% for the quarter. Adjusted operating income was $521 million, with a margin of 2.3% in IFRS, and $597 million in U.S. GAAP, with a margin of 2.6%. Net income was $164 million in the quarter, and earnings per share of $0.15. Excluding the non-recurring items, adjusted net income would be $167 million, and earnings per share would be $0.16 in the quarter. Free cash flow was negative $167 million in the third quarter, with $551 million in decrease year-over-year, explained by $653 million decline in adjusted EBITDA and higher working capital consumption in Brazil, particularly inventories. The increase was mainly reflected higher grains inventory at Seara, as well as higher chicken inventories at Seara in Europe. The company also faced high inventories in JBS Brazil beef products to be sent to China in the fourth quarter 2026 to fulfill the 2027 quota. This offset the quarterly positive working capital contribution of $325 million positive from the U.S. and Australia business units. Total working capital consumption was $106 million in the quarter. Not considering guidance, but simply updating the increasing and increasing the cash flow breakeven exercise for the year, we expect $5.5 billion in 2026, driven by $2.1 billion in CapEx, working capital, expected consumption of $550 million in 2026, an improvement of $300 million year-over-year, legal settlements of $100 million already realized in 2026, biological assets of $850 million flat over 2025, interest expenses of $1.4 billion, an increase of $100 million versus the previous estimate due to the higher net debt. Leasing expense at $500 million in 2026, and an effective tax rate of 25%. Another exercise, again, without providing guidance, is to look at the potential for cash flow generation in 2027. In Beef North America, our largest segment, adjusted EBITDA was negative by $309 million year-to-date in U.S. GAAP. Considering year-to-date working capital consumption of $254 million and CapEx of $158 million, the cash consumption of this business unit was $721 million. For every 1% improvement in Beef North America EBITDA margin, this would translate into approximately $300 million in EBITDA. We are still in the budgeting process, but we expect to reduce CapEx by around $500 million in 2027. Considering the closing of Australia's equity sale and cash flow improvement, we expect leverage to be within our target range for the end of 2027. Debt profile. We continue to strengthen our liquidity position. In August, we announced an increase in our revolving credit line from $3.5 billion to $4.2 billion, while reducing the all-in costs of this line. Our cash liquidity combined with the revolving credit line facility totaled approximately $8.2 billion. Our average debt term reaches 14.4 years, with an average cost of 5.7%. Net leverage ended the quarter at 3.54 times. Excluding the mark-to-market of the biological assets, our net leverage would have been 3.41 times. However, the company maintains a well-balanced debt maturity profile with no material maturities over the next five years. It is also worth noting that more than 95% of our debt has fixed interest rates, 33% maturing beyond 2050, and all the debt up to 2032 has coupons below the equivalent treasury rates. On August 16th, we delivered a proposal to the board of Pilgrim's Pride Corporation to acquire the shares of PPC common stock that JBS and its affiliates do not already own, as announced to the market. Given our ownership of approximately 82% of PPC and our pending proposal, we will not take any questions related to PPC. We appreciate your understanding. With that, I would like to open to Q&A session. Thank you. The floor is now open for any questions from investors and analysts. As previously mentioned, we kindly request that each analyst limit themselves to just one question. Ladies and gentlemen, our first question comes from Mr. Gustavo Troyano with Itaú. Mr. Troyano, you may go ahead with your question. Hello, everybody. Thanks for taking my question. My question is on U.S. Beef, and especially thinking about the profitability levels going forward. I just wanted to hear your thoughts on the pace of the segment's margin recovery as we move into the fourth quarter, especially considering that you disclosed the monthly profitability levels for the segment throughout the third quarter, and it seems that the fourth quarter could be better than what the seasonality would suggest. I just wanted to hear from you if you think that the third quarter could be a bottom for this cycle when we think about 2027, if this margin should start to recover sequentially from the fourth quarter onwards. Still on that topic, just to follow up on a point that we discussed in JBS Day a couple of months ago, when you mentioned that there were some operational improvements to be delivered in this segment, if these numbers are starting to show off in the third quarter, or if there's a potential for 2027 to incorporate these operational improvements. Thank you very much. Gustavo, good morning. We had a good third quarter in our opinion. It started off actually quite tough, more in line with what the second quarter looked like, and it ended up a lot better. Q4 is usually a little bit of December could always be a little bit of a surprise, but given how it has started in the first half of our Q4 here, we expect that Q4 should be stronger than Q3. We're expecting a sequential improvement into Q3 as of right now, because again, we're in the middle of the quarter here, but so far it looks promising. Again, when we look into next year, based on a couple of things, based on just the market improving overall, the balance between supply and demand for cattle, we think we are going to have a much better year into next year, and probably, as of right now, we think it is going to be a market that operates in the low single digits. But we could have maybe actually even a positive surprise depending on how things develop. On top of that, just how the market is going to look like, you said it right, it is a big focus of ours, is this integration that we are having between our beef business units, and we are seeing a lot of improvements, but we still expect a lot into next year. I still think that just on operational efficiencies and some more synergies in sales, we could have up around or even above 2 percentage points into next year. Thank you very much. Thank you. Our next question comes from Mr. Ricardo Alves with MS. Mr. Alves, you may go ahead with your question. Hello. Can you hear me, everyone? Yes. Good morning. Yes. You can. Yes. Good morning, Wesley, Tomazoni, and Guilherme as well. Thanks for the call. Question on Flora, about 80% coming from taxes. I missed the very beginning of the explanation on the tax credits, Guilherme. Can you go over the tax credits again, just in terms of how much we should expect in the short term? Is there some timing on when you can really monetize those credits? And then, when we're thinking about Flora alone, our understanding is that the net debt EBITDA ratio was closer to 4x. Is it fair to say that the leverage was also a factor for the transaction, the leverage at the Flora level? I am not talking about the leverage of JBS, because maybe in terms of short-term financing, given that long-term rates are in a much more difficult place today in Brazil, maybe you incorporate that into the balance sheet of JBS. Maybe you are going to be able to leverage more all the growth that you expect in the personal care, all the discussions that we have had in the past around collagen. Just to understand how, within the JBS portfolio, you could accelerate the growth potential you see there, if that was also a rationale for the transaction. Just those two follow-ups from the Flora transaction, please. Okay. Thank you, Ricardo. Beginning with tax credits, the monetization of tax credits is pretty straightforward. As you know, the ICMS, the VAT tax, exporters are exempt of that, but we pay ICMS on the inputs in the states we operate. When we export the product, we cannot offset the ICMS we paid. Those credits, as a consolidated balance sheet, are around $800 million in JBS. When we have Flora inside JBS, with the same CNPJ, we call it the same corporate, we can pay Flora's ICMS on the domestic sales with the ones credits or the ICMS credits that we have accumulated. Those ICMS, as I mentioned, will be replaced by CBS and IBS, which will have the same dynamic of credit accumulation. It may be even more. We will be able to use, to monetize those credits with Flora. The last is Flora will start to pay income tax next year. Bear in mind that we have, as I mentioned, $2.2 billion in income tax credits in JBS balance sheet, which can also be paid to pay Flora's income tax. Basically, those are the major parts of the tax credit synergies. As you mentioned, it is the most part of the synergies. Now, the net debt EBITDA, you are putting on the 2026 Flora EBITDA. Flora, some segments of Flora operated in 2026 with 49% capacity, which we expect to increase the capacity to 70% next year and so on, because we had some disruptions in 2026, factories renovation, things that decreased our capacity utilization, and we have the CapEx, expansion CapEx that is being implemented, and new capacities coming online in the next years. Because we have all these downtimes, because we have these disruptions, and we have the capacity coming online next year, it is better to look at 2027 EBITDA. That is around 420 million reais, okay, for next year. Considering this 420 million reais, that net EBITDA of Flora would be even lower than JBS. As we put more capacity online throughout the years, increasing revenue and EBITDA, and monetize tax credits, the net effect on leverage throughout time is even positive with Flora acquisition. Okay, clear, Ricardo. Now let's talk to the strategic part. I will begin, and Wesley will help here. What I would say here, Ricardo, is obviously all of those are the short-term, more simple parts of this whole opportunity here. But what we are very interested about is, we see this as a more of a continuation of the work we have been doing for the past five years, especially when we started our business with Genu-in in Brazil and with BioTech Foods also in Spain and in the south of Brazil. We think that the future of the protein market is going to be obviously in the center of the plate. That is the main part of the business, and that continues to be a main focus of ours. But we cannot ignore, and we need to be very, very much present in all of the nutritional supplements and nutritional part of the business that we think is a huge value-add part of the business, especially given the production capacity that we have. We think that starting off in the Brazilian market, that we have a lot of strength in the commercial side overall, being able to distribute now with a different, obviously, distribution base for all of these dry goods, being able to create a strong D2C business for all of this sort of nutritional market. We think it is a big opportunity and something that will add a lot of value to our core products, and on top of that, enhance our portfolio on nutrition overall. Going from the center of the plate also to all of this nutritional side. Again, it is a business that is growing within JBS, and we think that in the future, in the next decade, this will become a huge business globally as a whole, and we want to be an important part of that. It is an important step for us to grow in that direction. I also want to highlight that it's also an important way for us to monetize our byproducts. For example, if you look at Darling, the company in U.S., great part of its valuation is for the ingredients that enhance human health and well-being. Thank you for the very complete answer, Wesley. Thank you also, Guilherme. Helpful. Thank you, Gabriel. Thank you. Now, Isabella Simonato would like to ask a question from Bank of America. Isabella, you may go ahead. Thank you very much. Good morning, everyone. I want to follow up on the Flora deal. I guess the overall rationale is clear, but I wanted to ask if you could think about this acquisition as a first step of some category that can become bigger over time for JBS. I recall we had the discussion, I think, in the first JBS Day in the U.S. if you could move away from proteins and diversify and become more of a consumer goods company. I wonder if we can interpret this move as a first step of something bigger. I guess that's my first question. Still on that matter, when we compare Flora to eventually other targets of acquisitions in that segment, if you could just give us a context about their peers and eventually relative valuation, and why do this now? My sense is that the implementation of the tax reform also matters and timing, but I just want to understand a little bit better timing and the context for this. I understand that there's no immediate balance sheet impact to JBS, but I wonder if adding complexity here and eventually any type of additional investments at Flora might require it in this time, if that makes sense. Thank you. Isabela, good morning. I'll start here. Obviously, like I said, this part of nutrition and being able to develop a strong D2C business for all of this supplement category is a main target of ours, and it's one of the biggest parts of the vision of this acquisition, on top of all the things that Guilherme mentioned that are very important as well from an integration and synergy perspective, verticalization as well of our core products. Obviously, it's very important for us to grow all of this to have a complete portfolio, and we're going to have other portfolios that we are entering as a company right now. Obviously, we're going to do everything we can to be very successful in that and to have a leadership position in those categories within the Brazilian market, and obviously, we'll see what the future holds for that. If there's creative ways to grow that business within the Brazilian context as of right now, it's something that we're going to evaluate. But again, we think that there is potential, so let's see. I will let Guilherme mention here about the valuation. Hi, Isabela. We have to split it in two fronts here. If you look at the international peers, enterprise value in the for 2007 multiples ranges from 10 to 14 times. But if you look at the Brazilian comparables, this range from five to 10 times. In Brazil, multiples are lower than our international peers, but we think that we have potential. That is one of the reasons that we see potential value creation. Again, as I mentioned, if you look at all the synergies and put the net present value of them compared to the enterprise value we paid, we see that the multiple is very, very compelling. Thank you. Thank you. Our next question comes from Mr. Henrique Brustolin from BBI. Mr. Brustolin, you may go ahead with your question. Hello, everyone. Thank you for taking my question. My question is back to U.S. beef, especially about Mexican cattle imports. Wesley, you have mentioned the relevance of cattle imports from Mexico to help rebalance the U.S. industry. We are seeing imports growing, but still at a somewhat slow pace to get to the 1 million heads per year, and of course, there is a natural ramp-up here. It would be great to get your view in terms of how are imports right now shaping up relative to your expectations, and how you expect the pace picking up going into 2027, so we can see this better environment in terms of cattle supply and beef margins. Thank you very much. Hey, good morning. We think that Mexico, obviously, when it first opened and we just had one port of entry, was below 1,000 head, beginning 1,000 heads per day. But given the volumes that are crossing as of right now, we think it is very relevant. Obviously, there are many variables here, but given what we know right now, we would expect into an annualized basis of about 1 million head. If you think that we have two of the two biggest states of Mexico, right, being open to export to the U.S., and you are doing 1 million head out of the 1.2 that used to come, I think it is pretty relevant. And it is a big deal. If you think about it also, Edgar, I think it is a good way to think about it is, in the past, again, Mexican cattle would account for 4%-5% of U.S. processing volumes. But if you look at just what that percentage was of the southern states, you are talking about, I don't know, probably 15, around 15% of the processing capacity of the south of the southern plant. So, it is a big deal, and just the amount of cattle that has been crossing, it is relevant enough to make a big difference. And I attribute a lot of the improvement in the cattle situation for us in the U.S. coming from the reopening of the Mexico border. Thank you very much. Very clear, Wes. Thank you. And now Mr. Pooran Sharma from Stephens has a question. You may go ahead, Mr. Sharma. Good morning, and thanks for the question here. I just wanted to focus on U.S. pork. My first question would be to understand the commentary you alluded to earlier. I believe you said you expected maybe some potential relief in the first half of 2027, or at least you expect the conditions to drag on through the first half of 2027. I just wanted to see what gives you confidence or visibility into improvement in the back half of 2027. For my follow-up, I wanted to understand just the differences between U.S. GAAP and IFRS a little bit better for this segment. We've seen the last few quarters a big divergence in these margins, and I think it's largely due to the biological asset valuation. Given the move we've seen in lean hogs in 4Q, I just wanted to get a sense if you would expect the same type of divergences between U.S. GAAP and IFRS to persist in 4Q for U.S. pork. Sharma, good morning. On the pork side, we expect that it will continue to be tough, at least through the first half of the second year, of next year. What we expect, and we see the USDA number for just global production kind of similar thing in line with what we believe is, we think that there is going to be an adjustment of production globally. Obviously, countries that are more competitive and more productive are going to gain a bigger market share of the global pork supply, and countries that are less efficient are going to lose space and competitiveness. The USDA is showing a decrease in next year's pork production globally, similar to the increase we had this year. We already see numbers, for example, in China, which are the biggest pork producers in the world, reducing. They used to hover around 40 million sows. That was their total herd there of sows. Now they are close to 36, and that's a relevant decrease in a very, very large country. We think we're going to see that in other areas. Countries that are less competitive are going to lose space in the market. I think that globally, overall, we're going to see an adjustment. Obviously, you have to remember that pork cycle is a lot shorter than the beef cycle. I'm not saying that the beginning of second half of next year is going to be great and things are going to be completely changed. I don't know that yet. Our expectation is that given what we're seeing globally, especially in some of these countries moving in to reduce production, we think that there is a good chance that we have a better second half of next year. Okay, going to the mark-to-market, you are totally right. The volatility all comes from the fact that the IFRS inventories are mark-to-market, including the hogs, while in U.S. GAAP it is at cost. And how it is the mark-to-market, you get all the future curve of hogs to price our inventories. And that is what the big swing was. Looking at the fourth quarter, it will depend on this future curve. We think that the future curve is already inclined, so only if it inclines even more down, that would have another effect like that. It is worth mentioning that, for example, WH Group, which reports in IFRS, and because of this high volatility, its EBITDA adjusted is adjusted for the mark-to-market of biological assets. Okay. Appreciate the clarification. Thank you. Next is Mr. Thiago Duarte with BTG. If you would like to ask a question, please go ahead, Mr. Duarte. Yeah. Hello, everybody. Good morning. Thanks for the opportunity as usual. I want to circle back to Guilherme's exercise in the end of the presentation, particularly when discussing the outlook for 2027. Obviously, you never provided a guidance, but looking at the exercise and trying to reconcile the numbers a little bit, you talked, Guilherme, about coming into the end of 2027 with the leverage of the company within what you call the safety zone, if I am not mistaken, which is up to 3x leverage, right? As we try to sort of reconcile the numbers to your EBITDA, the way I am looking at the math here, it implies a pretty nice improvement in the company's EBITDA into 2027 relative to 2026. My understanding is that the biggest contributor to that in your exercise has to come from the U.S. Beef division. My question to you guys, and obviously going back into the discussions about cattle imports from Mexico and so on and so on, is, are you comfortable that U.S. Beef can approach the sort of historical normalized of low to mid-single-digit margin into 2027? That would be the question, trying to reconcile to the exercise that Guilherme did in the end of the presentation. Thank you. Okay. Thank you, Thiago. I also read your report last night. You mentioned that at the $1.4 billion EBITDA of the fourth quarter, we would be ending at 3.75. That is not correct. You forgot the free cash flow generation of the fourth quarter, which kind of sets part of the decrease in the last 12 months EBITDA. Bear in mind that the last part we have is deferred livestock. We will have the inventory sales in Europe of Seara, and we have the resume of Chinese purchase from the working capital we consume in JBS Brazil in the fourth quarter. Therefore, with the $1.4 billion EBITDA that you mentioned for the fourth quarter, we would be ending between 3.5 and 3.55 times net debt to EBITDA, depending on, of course, the free cash flow, but that is, I think, a better estimate. Now for the next year, you are right. The main assumption here is the turnaround of U.S. Beef. Remember, this year, U.S. Beef consumed $721 million of free cash flow already, because only working capital was $254 million, and $310 million of EBITDA. For next year, if EBITDA comes to the positive side, whatever, that is why I mentioned each 1% is $300 million EBITDA, and the working capital consumption was mainly due to the cattle prices increase in the first semester. If we think of a falling cattle price or even a stable cattle prices, we should release working capital from this business unit instead of consuming working capital. My assumption for next year, again, bear in mind we have the Australia equity sale of $800 million cash inflow. We have the fourth quarter, as I mentioned, free cash flow generation. For next year, if we have a turnaround in the beef segment and we end up with an EBITDA between $5.5 billion or $6 billion, we will be below three times. That is super helpful. Thank you, Guilherme. Thank you. Our next question comes from Mr. Benjamin Theurer with Barclays. You may go ahead with your question, Mr. Theurer. Hi. Yeah, good morning. Thanks for taking my question. I actually would like to pick up on that, on the exercise and one of the commentary you make, Guilherme, as it relates to CapEx next year. If I picked it up the right way, I think you said you are looking into the budgeting to reduce CapEx by approximately $500 million. Is that against the roughly $2 billion base in 2026? If so, what would be areas where you are looking at in terms of cutting CapEx? Is that cut outright or is that postponing? How should we think about that reduction in CapEx that you have mentioned? Thank you. That is a very important point that I also forgot to put in the equation of the previous question, that also I embedded around $500 million of CapEx expenditure decrease for next year, improving free cash flow. Our $2 billion of free cash flow, $2.1 billion this year, bear in mind that is around $1 billion in maintenance CapEx, there is not much change of that, but $1 billion is growth CapEx. What we will be doing for next year is that some CapEx that, or some projects that we started, we already began. So we will finish it, but we will not start new projects. Or the ones that did not start, we will postpone for the other year, or depending on how the year stays. So, that is why we are still in the budgeting process. In fact, I am going to Greeley next Friday for budget and CapEx meetings. But we are very confident that we can cut around $500 million of CapEx. Remember that in 2023, when our EBITDA was $3.5 billion, we budgeted $1 billion in maintenance CapEx for 2024, and a $300 million growth CapEx for 2024. But because 2024 was better than expected, in fact, we ended up with $6.8 billion in EBITDA and $2.8 billion of free cash flow. We restarted some projects, and we end up 2024 spending $500 million in growth CapEx. So that is what we intend to do. We will stop, postpone CapEx, reduce the $500 million. If the year is better than expected, we can anticipate the ones that we postponed. Is it clear? Yep. There is your safety. Our next question comes from Mr. Thiago Bortoluci with GS. Please go ahead, Mr. Bortoluci. Yes. Hey, guys. Good morning, everyone. Thanks for the opportunity. I think my question is for Wesley. I would like to stress again the demand side in the U.S. This is just to put in perspective a few of the information we have so far. We know pork has been under pressure for a while. It is not the first time you mentioned it in your press release. When I see the numbers for Pilgrim's, you continue to choose strong demand. But then when I see top-line growth, it is pressured within food service, fresh, and retail. Then, I think more importantly, when I see the evolution of the cutout for beef, throughout the grading season, it moved actually downwards and ended the quarter even a little bit below last year. In a context when we have rates in the U.S. potentially higher for longer, inflation potentially higher, how confident you are that demand will remain sticky into next year? More importantly, how confident you are in your pricing power eventually to protect or even expand margins in this context? Thank you very much, Wesley. Thanks, Thiago. Look, we see demand for protein in general as being pretty strong. I think the fundamentals are all there. I do not want to be too repetitive and talk about all of them, because it is something that in all conferences and all meetings, we all talk a lot about, and we all kind of see similar fundamental trends that everybody knows. But when we look at specifically for protein, we see beef demand. When you have such a big increase in prices, obviously our price follows the price of cattle. So when we have such a large increase of cattle prices, and then we have such a large increase of beef prices, sometimes it is even difficult to look at the seasonality, because just maybe the price of cattle goes up in the off-season kind of period, right? Then things kind of stabilize afterwards. It is always a little bit tricky to look at that in that way. But the way I would say it is, having a cutout that is in the high 300s, and still have the strong volume that we are seeing, I think that is a big deal, and it shows that demand in beef is really strong. When we talk to customers, we hear that the beef demand is quite inelastic. Actually, I would even say, Thiago, much more inelastic than we even expected before all of this big shortage of cattle that we have had in the U.S. In chicken, we are seeing, just worldwide, we are seeing the same thing. We are seeing demand for chicken pretty strong, especially in food service. We are seeing a lot of food service chains, QSRs, all going into chicken. So there is a big trend going there. Now, obviously, inflation overall across the board, especially in fuel, has taken a toll in consumers. What we are seeing is that the protein that has had the biggest challenge has been pork. Pork absolutely has had the biggest. We are seeing the softness in demand very concentrated in pork. I think it just shows, I think it is not necessarily anything against pork that the consumer has. It is just that their preference for beef and chicken has been just so strong that the protein that they have, whenever they have to stretch a little bit more of their dollar, they are still going to have their beef, they are still going to consume chicken, and maybe they cut back a little bit on pork. So that is what we have been seeing. But overall, the trends are still pretty consistent, in our opinion. Having said that, obviously, when overall inflation is just that high, it is strong and puts a straining consumers, they have to make a choice, and they have made a choice to cut back on pork demand. Helpful, Wesley. Thank you very much. Perfect. Thank you. Our next question comes from Mr. Andrew Strelzik with Bank of Montreal. You may go ahead with your question, Mr. Strelzik. Hey, thanks for taking the question. Wanted to ask about Seara. You talked about record chicken exports out of Brazil, but there were also some areas of weakness as well, and the margins were the lowest we have seen in a little while. I am curious if we should anticipate Seara margins continuing to decline year-over-year in the fourth quarter and into 2027, or if you see opportunities for that to recover. If you do see opportunities for that to recover, what the drivers would be? Thank you. Hi, Andrew. Thank you for your question. First, I will answer directly your question. We see improvement on the margin of Seara for the fourth quarter compared to the third quarter. What is the reason for that? First, I think is one of the very important reasons is the appreciation of the dollar against real. Seara exports 50% of its revenue, and this means a lot in terms of impact in the bottom line. This is the first. The second point that the market for the chicken, just to add the explanation of Wesley, we see the demand of chicken globally very strong. Seara, the report that was the largest volume that sold in one quarter to export, means that the market is very demanding. This is the point, that demand is strong and dollar is higher. There is another point of Seara. In Europe, our team anticipated the restriction of Brazilian poultry export and shipped chicken breast ahead of those restriction, building inventories in this region. We expect to sell these inventories in the fourth quarter, allow us to serve customer even while shipment from Brazil were restricted. Together with the stronger seasonal demand in Brazil and support the favorable outlook of Seara, for this month, we are really expect higher margin than the third quarter of Seara. Great. Thank you very much. Thank you. Our next question comes from Mr. Leonardo Alencar with XP. You may go ahead, Mr. Alencar. Okay, thank you. Good morning, everyone. Probably a follow-up on the last question. I understand there are many moving parts going on in Brazil right now, with the Newcastle in Santa Catarina and now the restriction on pork exports to Philippines, but also this inventory build-up because of the Chinese quota for beef and Seara's strategy on corn. There are too many things in place to get a better view on the Q4. If you could just walk us through on this inventory release. I would expect probably beef and part of this chicken in Europe to be released on Q4, but then corn maybe it would stay for longer, but then this impact on exports, how they could play on margins as well. Just some more color on that. Thank you. Did you hear my question? I am not listening anything from your side. Sorry, Leonardo. I think someone had a problem there with the- Oh, sorry. Sorry, I am back. Sorry. Did you get my question? Yes, I think I got your question. Let me see if I will start to answer about the Hello? Hello? Yeah, I'm here. You are hear me, Leonardo? Yes. Okay. Just to talk about, you mentioned the restriction that we have in terms of Philippines. We do not yet know the certain what is the restriction will be. There is a talk that helping the import for at least 60 days. It is unclear whether this refer to stopping to issues of import license or health shipments. If the decision of concerns import license, the impact will be not felt until around January. If the decision is to health in shipment, that impact will be immediately. Of course, this will be impact. We not know how is impact yet, but you know that pork is under pressure globally, Wesley has mentioned that is not just in U.S., globally. And of course, we have markets to sell with the lower price that will be impact of margin. But we expect pork is really, if you consider all of the revenue of Seara, pork is the fresh pork, is the have lower impact if you compare the other business that we have in Seara. The other point that you mentioned is about, I think is about the quota of China. I think it is important to let know that we start begin to production for China's market in the second half of September. Anticipated this revenue demand under the 2027 quota. That production for starting the third quarter, while the related sales we are expected to benefit in the fourth quarter. We already seen improvement on October, and I think we will be in an additional revenue that we produce in September, the second half. We just add the cost of the production and not the revenue. Now we are start to shipping to China that we will see the strong improvements on results of Friboi in Brazil. The same will be with Seara. I mentioned before the other question because Andres asking about the product that we have in Europe. Europe is closed. We are selling the product. We are expecting that we reassume the importation on next year or end of this year, but the product will be around in Europe next year. Means that I think the strategy you have done both in Seara to build inventory in Europe and the strategy to start to produce early to China in Friboi will be benefit our business in the fourth quarter. Okay. Thank you, Donizete. Thank you. Our next question comes from Mr. Matheus Enfeldt with UBS. Mr. Enfeldt, you may go ahead with your question. Hi. Morning. Thank you for your time. I want to have a question on U.S. beef. We saw peers partnering with cattle suppliers for a while now, but particularly more recently. We discussed in the past whether the current U.S. cattle cycle was going to lead to a structurally different supply. My question is more on your end, what is the way to get closer to the rancher, if there are any alternatives there, anything that the company is considering or going in that direction. Or if you want to restate the comments from previous calls that it is a business that it is a bit too different from yours. So trying to understand how you get closer to the rancher, if that is a strategy that JBS can also follow. Thank you. Hi, Matheus. No, we see that us entering the ranching business or even the feedlot business is not our focus, is not our core. It is not something that we have done that in the past, and I think that our model today, which is to partner up with having long-term commitments with companies that are specialized to do that, is the best scenario for us. We do not see ourselves verticalizing the supply chain in beef. We do not see that as something that goes well. Having said that, obviously, we have a very strong partnership with a lot of different suppliers, and those are very long-term agreements that are great partnerships, and we see us having that going in the future, not us doing it ourselves. Awesome. Thank you. Thank you. Our next question is from Mr. Lucas Ferreira with JP Morgan. Mr. Ferreira, you may go ahead. Hi, guys. Hope you are all good. I also have a follow-up on the U.S. beef business, which is looking at 2027. Obviously, we are going to have more cattle from Mexico, and with the ramp-up that we have been seeing, it is looking great. But on the other hand, we also expect retentions to increase, right? That is the expectation for some normalization ahead. We started to see some announcements of more capacity being added back to the system. I wanted to hear also on the labor side, if there could be more labor available next year. The question is really, how do you see the net-net of this thing? More cattle from Mexico, you mentioned 1 million heads, but eventually more retention and also more capacity being added or more shifts being added as these animals getting into the system. Wesley, what do you see the net-net of the cattle availability in the country? If you think there is a risk of more supply actually ends up limiting the upside for margins. Thank you very much. Lucas, good morning. Our analysis on beef has always been with the information we have in the public, so I am not going to talk about individual kind of announcements by our peers. But recent announcement nowadays was, I think, a little bit of a continuation of what we heard in the past. We do not see like there is any news, any new information that changes the way we see the market going forward. We already expected that. At least there is nothing new from recent announcements from our point of view. It is more of a continuation of what had previously been. Also, all of these comments that we are making is based on that as an assumption. We think that next year will be, again, a much better supply-demand for cattle. Labor hasn't been a problem, at least from our perspective, for a few years now. Even if there is more labor in next year, I don't think it changes. It is something that has already been the case for this year. Perfect. Thank you very much. Thank you. Thank you. Our next question comes from Mrs. Heather Jones with Heather Jones Research. You may go ahead with your question, Mrs. Jones. Good morning. Thanks for the question. My question is related to the U.S. pork business, specifically on the GAAP results. It was a sharper than I expected sequential deterioration, and just trying to get a sense of, was that predominantly driven by lower hog production earnings or more evenly split between raising and the processing side? Heather, good morning. We had a sharp decline in hog producing, for sure. Hog producing has been a big part of it. It has been doing great for the past years, and it has been a great part of a good help to our business, and now has been deteriorating more faster. It is an important part of the decline. Yeah, it is an important part of it. But also, just overall, spreads have been tighter, right? If you look at spread between cost and the hog cost, and even hog cost, it has been kind of compressed on both sides. Okay. Thanks so much. Thank you. Thank you. Our next question comes from Mr. Guilherme Palhares with Santander. Go ahead, Mr. Palhares. Good morning, everyone. Question here for Guilherme. Guilherme, if you could just recap a bit the steps towards the closing of the Danantara deal, when we should see the $800 million flowing through the balance sheet, and just the overall step-by-step until then. Thanks, Guilherme. Yeah, basically depends on the regulatory authorities of Australia, including FIRB. Generally, it does not take so long, but it is something that is out of our control. But we do not expect to take a long time. Thank you. Thank you. Next we have Mr. Ricardo Boiati from Safra. Mr. Boiati, you may go ahead with your question. Sorry, Mr. Boiati, if you are trying to speak, you might be on mute. We may have some issues with his line there, so we will go ahead to the next one, which comes from Priya Ohri-Gupta with Barclays. Mrs. Ohri-Gupta, you may go ahead with your question. Hi, good morning. Thank you so much for taking the question. Guilherme, I was just wondering if we could dig a little bit into the leverage discussion. Should we now be expecting fourth quarter leverage or year-end 2026 leverage to be similar to where we are now? How does that sort of dovetail with some of the stronger free cash flow, given the working capital unlock in fourth quarter that's expected? As we think about the leverage progression into 2027, I think you talked a little bit about sort of the EBITDA improvement that could be needed to get you below 3x. Should we be thinking of any potential for debt paydown or any possible refinancing activity that could accompany this? Thank you. Thank you, Priya. Basically, the fourth quarter, we will still have the negative impact of probably a lower fourth quarter than it was the fourth quarter last year. That is always a quarter that we generate a lot of free cash flow. One of the reason is the deferred livestock. We postpone payments for the next year as request by the producers. This year, we also have, as we mentioned, we produced beef in Brazil in September, but we couldn't sell because of the quotas to China. In October, we resumed to sell the 2027 quota. This will also release, and also the Seara chicken inventory in Europe, as I mentioned. All this together, we think that the free cash flow of the fourth quarter may kind of offset this statistical last of month effect, and we finish this year with the levels around where we are now. For next year, January 1st quarter is a quarter that we consume free cash flow, mainly because of the postponement of the livestock deferral. This year, again, we may have two effects that maybe also offset this. First is better working capital. If the cattle prices stay as it is right now, we'll be releasing working capital in the first quarter. Also, the EBITDA, bear in mind that the beef EBITDA in the first quarter this year was negative, and if now we turn around for the positive side, we will have the opposite statistical effect. If that, maybe we will start deleveraging even in the first quarter and getting to the year-end below 3x. Again, some moving pieces here, but I think that the statistical effect should work in our favor next year. How should we think about the debt movement just on the back of that? Okay, sorry. Yeah, no, again, remember, we have short-term debt that is mainly trade finance that is very easy to roll over and cheap as well. For the next five years, we do not have any significant maturity. Up to 2022, all the coupons are below treasury. Again, with the increase in treasury, there are a few opportunities for liability management, given we have some 34s with 6.75% coupon. That is the ones that are in JBS and PPC. That is the only one that I would say that would be more expensive to ban what it would be to refinance today. For liability management today, again, given the treasury curves, there is not much opportunities. Again, we want to deleverage, and as we generate free cash flow and with the incoming of the Australia equity sale, we will have to look at some debt to be paid. Probably the first ones will be the Flora debt of the debt assumption. That is the $150 million-$160 million debt that we assumed with the Flora deal. Those debt are more expensive than JBS. They are capital markets debt, but they are more expensive than JBS. So probably those ones would be the first to be paid. Then I would say the short-term debt, the trade finance would be the second on the list to be paid. I do not see much opportunity for bond repurchase besides those high coupons that I mentioned. Thank you so much. Thank you. Our next question, we will go to Ricardo Boiati with Safra. Go ahead, Mr. Boiati. Can you hear me now? Yeah, good morning. Hi, good morning, Tomazoni, Wesley, Guilherme. Thanks for taking my question. Regarding Australia, do you expect a rebound in exports already in Q4, or should we look to shipments to fulfill next year's quota to be more concentrated in Q1 2027 in Australia? October was impacted by rains, right? How are you seeing November and December turning out to be there? I am trying to understand how to think about sales and margins in Australia at Q4 and in 2027. Thank you. Yeah, Ricardo. We expect Australia to be somewhat stable here into Q4. Like you said, it's still raining quite a lot. It's incredible what's been going on in Australia in terms of rainfall. It's been, I don't know, probably five, six years that there's been above average rains in Australia. As far as we've been in Australia, we haven't seen such a long period of time with such consistent rains for such a long time. That's kind of obviously surprising to all of us, and we expected obviously to be a little bit more on the drier side at some point. In the fourth quarter, we still see quite a lot of rain in Australia. If anything, if we see an improvement, we're going to see in 2027, not right now. On the other hand, we see it relatively stable. It's been challenging on the beef side because of this. On the long term, it's actually pretty good news. There is a lot of cattle in Australia. The herd is on a healthy side. All of this rain obviously has a long-term effect that should create a more stable business for us in the future, we think. In the long run, it's not bad that it's raining that much. It's actually good news, and we want good weather for raising livestock. Obviously, it creates a short-term pinch that we didn't expect. But we're expecting that it should create a longer, more smooth cycle into the future than ups and downs that we've seen in other markets, because of such consistent weather. Also, I'll mention that in Australia, we've been able to build quite a lot of businesses that are able to complement. Even though beef is in a challenging moment right now, we have other businesses that we've invested in the last year that are able to bring the average of the whole business actually higher and create a good business. We're very excited about the business in Australia. We think that our business in Australia is one of our stronger businesses within the company, and we think we're going to have a more stable business in the future because of all this good weather that we're seeing. Awesome, Wesley. Thanks a lot. Thank you. Our next question comes from Mrs. Carla Casella with JPMorgan. Mrs. Casella, you may go ahead with your question. Sorry, Mrs. Casella, if you are speaking, you may be on mute. Sorry. Can you hear me now? There you go. Perfect. My question is on M&A opportunities. I was a little surprised by M&A, just given how high the leverage is now, recognizing that even the M&A was not adding to leverage. Was there a timing issue to do Flora now? Is it better to do it now versus later? I am wondering what the catalyst was there. Then also, while leverage is higher, are you still looking? Are there more potential M&A opportunities, and kind of how are you looking at that today? Thanks, Carla. As you mentioned, the Flora deal was, the equity was all paid in shares. We assumed $175 million in debt only, and it's bringing EBITDA. The rationale to do now, as I mentioned, is that we have, as I mentioned in the beginning, $800 million in VAT tax credits and $2.2 billion in income tax credits. So those credits, the faster you use it, you monetize it, the better. So bringing Flora now, it's a way to fast monetize the VAT credits, also in light of the Brazilian tax reform. That's the reason why to do now. Besides, again, the rationale, the strategic rationale that was mentioned, and as I mentioned, a great part of the valuation and the potential of Darling Ingredients companies is the ingredients to health and nutrition is something that we want to go more and more with our byproducts and because it's a customer and get those high margins. Now, for general M&A, I think only very We just have the closing of the Oman deal, which is $150 million outflow. We have the sale of the Australia, $600 million inflow. I don't see any M&A that we would be using cash, maybe only very small M&As. Any M&A to a certain size, only if the seller accepts to receive JBS shares, which generally, very rare cases. But again, M&As, I would say, on some size, only if the seller accepts to JBS shares, again, which is generally very rare cases that this happens. We are not seeing M&As in the radar in the short term, because we will be focusing really on the leveraging. Okay, great. Thank you. Ladies and gentlemen, there being no further questions, I would like to pass the floor to Mr. Gilberto Tomazoni and Mr. Wesley Filho. Thank you. To wrap up, this quarter showed the strength of our diversified global platform and the progress we are making across our business. The return to the positive EBITDA in U.S. Beef was an important milestone. We know there is more work ahead, and we remain focused on operational excellence, financial discipline, and creating long-term value. I want to thank our teams around the world for their hard work and dedication. Their commitment and execution make this progress possible. To everyone joining us today, thank you for your time, your continued interest in JBS, and your engagement. We look forward to continue to our dialogue. Thank you, everyone.