Exhibit 99.1
JBS S.A. | |
Financial statements and Independent auditors’ report | |
As of December 31, 2023 and 2022 |
Index | Page | |
Independent auditor’s report | 1 | |
Statement of financial position - Assets | 6 | |
Statement of financial position - Liabilities and Equity | 7 | |
Statements of income for the years ended at December 31, 2023 and 2021 | 8 | |
Statement of comprehensive income for the years ended at December 31, 2023 and 2021 | 9 | |
Statements of changes in equity for the years ended at December 31, 2023 and 2021 | 10 | |
Statements of cash flows for the years ended at December 31, 2023 and 2021 | 11 | |
Economic value added for the years ended at December 31, 2023 and 2021 | 12 | |
Note 1 - Operating activities | 13 | |
Note 2 - Basis of preparation and presentation of financial statements | 15 | |
Note 3 - Business combination | 17 | |
Note 4 - Cash and cash equivalents | 18 | |
Note 5 - Trade accounts receivable | 19 | |
Note 6 - Inventories | 20 | |
Note 7 - Biological assets | 21 | |
Note 8 - Recoverable taxes | 23 | |
Note 9 - Related party transactions | 24 | |
Note 10 - Income taxes | 26 | |
Note 11 - Investments in subsidiaries, associates and joint venture | 32 | |
Note 12 - Property, plant and equipment | 34 | |
Note 13 - Leases | 38 | |
Note 14 - Intangible assets | 41 | |
Note 15 - Goodwill | 43 | |
Note 16 - Trade accounts payable | 48 | |
Note 17 - Loans and financing | 49 | |
Note 18 - Other taxes payable | 58 | |
Note 19 - Payroll and social charges | 58 | |
Note 20 - Dividends payable | 59 | |
Note 21 - Provisions | 59 | |
Note 22 - Equity | 65 | |
Note 23 - Net revenue | 66 | |
Note 24 - Financial income (expense), net | 67 | |
Note 25 - Earnings per share | 68 | |
Note 26 - Share-based compensation | 68 | |
Note 27 - Operating segments and geographic reporting | 70 | |
Note 28 - Expenses by nature | 73 | |
Note 29 - Risk management and financial instruments | 74 | |
Note 30 - Subsequent events | 91 | |
Note 31 - Approval of the financial statements | 91 |
KPMG Auditores Independentes Ltda.
Rua Verbo Divino, 1400, Conjunto Térreo ao 801 - Parte,
Chácara Santo Antônio, CEP 04719-911, São Paulo - SP
Caixa Postal 79518 - CEP 04707-970 - São Paulo - SP - Brasil
Telefone +55 (11) 3940-1500
kpmg.com.br
Independent auditors’ report on the individual and
consolidated financial statements
To the Shareholders and Board of Directors of JBS S.A.
São Paulo-SP
Opinion
We have audited the individual and consolidated financial statements of JBS S.A. (“the Company”), referred to as parent company and consolidated, respectively, which comprise the statement of financial position as at December 31, 2023 and the statements of income (loss), comprehensive income (loss), changes in equity and cash flows for the year then ended, and notes, comprising material accounting policies and other explanatory information.
In our opinion, the accompanying financial statements present fairly, in all material aspects, the individual and consolidated financial position of JBS S.A. as at December 31, 2023, and its individual and consolidated financial performance and its cash flows for the year then ended, in accordance with accounting practices adopted in Brazil and International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).
Basis for opinion
We conducted our audit in accordance with the Brazilian and International Standards on Auditing. Our responsibilities under those standards are further described in the “Auditors’ responsibilities for the audit of the individual and consolidated financial statements” section of our report. We are independent of the Company and its subsidiaries in accordance with the relevant ethical requirements included in the Brazilian Accountant’s Code of Professional Ethics and in the professional standards issued by the Brazilian Federal Accounting Council, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matter
Key audit matter is that matter that, in our professional judgment, was of most significance in our audit of the current period. This matter was addressed in the context of our audit of the individual and consolidated financial statements as a whole, and in forming our opinion on these individual and consolidated financial statements and, therefore, we do not provide a separate opinion on this matter.
KPMG Auditores Independentes Ltda., uma sociedade simples brasileira, de responsabilidade limitada e firma-membro da organização global KPMG de firmas-membro independentes licenciadas da KPMG International Limited, uma empresa inglesa privada de responsabilidade limitada. | KPMG Auditores Independentes Ltda., a Brazilian limited liability company and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. |
1
Evaluation of Income Tax
See note 10 to the individual and consolidated financial statements
Key audit matter | How our audit addressed this matter | |
On December 31, 2023, the Company recorded R$ 668,938 thousand in income tax and social contribution in its consolidated statement of income. The Company is domiciled in Brazil and conducts business globally, consequently, it is subject to income tax in the several jurisdictions abroad where it maintains operations. The income tax is an estimate based on the Company’s understanding of current tax legislation and tax rates and their application to the Company’s business.
Due to the complexity in evaluating the application of current tax legislation in several jurisdictions abroad where the Company maintains operations, including changes in the respective tax legislation on income tax, we consider this matter as significant for our audit. | Our procedures included, but were not limited to:
● Evaluation of the design of certain internal controls related to the Company´s income tax process, including controls over the identification of changes to tax legislation in the jurisdictions in which the Company operates.
● Evaluation, with the involvement of our income tax specialists with specialized skills and knowledge in certain jurisdictions abroad where the Company maintains operations, of interpretation and application by the Company of tax legislations, including the impacts on the calculation of income tax arising from changes in those legislations.
● Evaluation, with the involvement of our income tax specialists, of certain transactions that could impact the calculation of income tax, including reviewing underlying documentation and assessing the impact on the Company’s income tax calculations.
● Assessment whether the disclosures in the consolidated financial statements consider all relevant information.
Based on the evidence obtained through the procedures summarized above, we considered the amount of income tax, as well as the related disclosures made by the Company, acceptable, in the context of the consolidated financial statements taken as a whole, for the year ended December 31, 2023. |
KPMG Auditores Independentes Ltda., uma sociedade simples brasileira, de responsabilidade limitada e firma-membro da organização global KPMG de firmas-membro independentes licenciadas da KPMG International Limited, uma empresa inglesa privada de responsabilidade limitada. | KPMG Auditores Independentes Ltda., a Brazilian limited liability company and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. |
2
Other matters
Statements of value added
The individual and consolidated statements of value added (DVA) for the year ended December 31, 2023, prepared under the responsibility of the Company’s management, and presented herein as supplementary information for IFRS purposes, have been subject to audit procedures jointly performed with the audit of the Company’s financial statements. In order to form our opinion, we assessed whether those statements are reconciled with the financial statements and accounting records, as applicable, and whether their format and contents are in accordance with the criteria determined in the Technical Pronouncement CPC 09 - Statement of Added Value. In our opinion, the statements of added value have been fairly prepared, in all material respects, in accordance with the criteria determined by aforementioned Technical Pronouncement, and are consistent with the individual and consolidated financial statements taken as a whole.
Audit of the financial statements from prior year
The individual and consolidated statement of financial position as at December 31, 2022 and the individual and consolidated statements of income, comprehensive income, changes in equity and cash flows and the respective explanatory notes for the year then ended, presented as corresponding amounts in the individual and consolidated financial statements for the current year were previously audited by another independent auditors, who expressed an unmodified opinion on March 21, 2023. The corresponding amounts relating to the individual and consolidated statements of value added (DVA), for the year ended December 31, 2022, were subjected to the same audit procedures by those independent auditors and based on their examination, those auditors issued an unmodified opinion.
Other information accompanying the individual and consolidated financial statements and the auditors’ report
Management is responsible for other information that comprises the management report.
Our opinion on the individual and consolidated financial statements does not cover the management report and we do not express any form of assurance conclusion on this report.
In connection with our audit of the individual and consolidated financial statements, our responsibility is to read the management report and, in doing so, consider whether that report is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of on the management report, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the individual and consolidated financial statements
Management is responsible for the preparation and fair presentation of the individual and consolidated financial statements in accordance with accounting practices adopted in Brazil and with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB), and for such internal controls as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the individual and consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company and its subsidiaries’ financial reporting process.
KPMG Auditores Independentes Ltda., uma sociedade simples brasileira, de responsabilidade limitada e firma-membro da organização global KPMG de firmas-membro independentes licenciadas da KPMG International Limited, uma empresa inglesa privada de responsabilidade limitada. | KPMG Auditores Independentes Ltda., a Brazilian limited liability company and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. |
3
Auditors’ responsibilities for the audit of the individual and consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the individual and consolidated financial statements as a whole, are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Brazilian and international auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Brazilian and international auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
– | Identify and assess the risks of material misstatement of the individual and consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve the override of internal control, collusion, forgery, omissions, or intentional misrepresentations. |
– | Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s and its subsidiaries internal controls. |
– | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
– | Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the individual and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern. |
– | Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the individual and consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
– | Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the individual and consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. |
We communicate with those charged with governance regarding, among other matters, the planned scope, timing of the audit and significant audit findings, including any significant deficiencies in internal controls that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships or other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
KPMG Auditores Independentes Ltda., uma sociedade simples brasileira, de responsabilidade limitada e firma-membro da organização global KPMG de firmas-membro independentes licenciadas da KPMG International Limited, uma empresa inglesa privada de responsabilidade limitada. | KPMG Auditores Independentes Ltda., a Brazilian limited liability company and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. |
4
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the individual and consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
São Paulo, March 26, 2024
KPMG Auditores Independentes Ltda.
CRC 2SP014428/O-6
Original report in Portuguese signed by
/s/ Fabian Junqueira Sousa | |
Fabian Junqueira Sousa |
CRC 1SP235639/O-0
KPMG Auditores Independentes Ltda., uma sociedade simples brasileira, de responsabilidade limitada e firma-membro da organização global KPMG de firmas-membro independentes licenciadas da KPMG International Limited, uma empresa inglesa privada de responsabilidade limitada. | KPMG Auditores Independentes Ltda., a Brazilian limited liability company and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. |
5
Statements of financial position
In thousands of Brazilian Reais - R$
Company | Consolidated | |||||||||||||||||||
Note | December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | ||||||||||||||||
ASSETS | ||||||||||||||||||||
CURRENT ASSETS | ||||||||||||||||||||
Cash and cash equivalents | 4 | 4,458,670 | 2,096,334 | 22,122,405 | 13,182,158 | |||||||||||||||
Margin cash | 4 | 64,754 | 80,434 | 641,283 | 679,391 | |||||||||||||||
Trade accounts receivable | 5 | 2,575,423 | 4,380,011 | 16,416,149 | 20,234,895 | |||||||||||||||
Inventories | 6 | 4,016,197 | 4,633,201 | 24,696,583 | 28,142,094 | |||||||||||||||
Biological assets | 7 | — | — | 8,289,048 | 9,710,693 | |||||||||||||||
Recoverable taxes | 8 | 1,537,885 | 1,473,985 | 4,449,734 | 5,330,928 | |||||||||||||||
Derivative assets | 42,746 | — | 425,043 | 442,929 | ||||||||||||||||
Other current assets | 314,282 | 197,463 | 1,564,678 | 1,667,982 | ||||||||||||||||
TOTAL CURRENT ASSETS | 13,009,957 | 12,861,428 | 78,604,923 | 79,391,070 | ||||||||||||||||
NON-CURRENT ASSETS | ||||||||||||||||||||
Recoverable taxes | 8 | 5,754,089 | 6,128,844 | 8,444,560 | 9,165,569 | |||||||||||||||
Biological assets | 7 | — | — | 2,573,041 | 2,619,066 | |||||||||||||||
Related party receivables | 9 | 1,807,878 | 1,103,125 | 573,955 | 951,021 | |||||||||||||||
Deferred income taxes | 10 | — | — | 3,751,335 | 3,161,300 | |||||||||||||||
Derivative assets | 396,698 | 98,134 | 396,698 | 123,215 | ||||||||||||||||
Other non-current assets | 568,573 | 226,679 | 1,545,468 | 1,118,115 | ||||||||||||||||
8,527,238 | 7,556,782 | 17,285,057 | 17,138,286 | |||||||||||||||||
Investments in equity-accounted investees, associates and joint venture | 11 | 41,640,588 | 55,399,509 | 274,021 | 294,837 | |||||||||||||||
Property, plant and equipment | 12 | 13,509,618 | 13,027,863 | 62,541,120 | 62,170,792 | |||||||||||||||
Right of use assets | 13.1 | 135,801 | 54,664 | 8,257,855 | 8,374,892 | |||||||||||||||
Intangible assets | 14 | 204,312 | 31,021 | 9,612,859 | 10,328,389 | |||||||||||||||
Goodwill | 15 | 9,085,970 | 9,085,970 | 29,556,234 | 30,412,362 | |||||||||||||||
TOTAL NON-CURRENT ASSETS | 73,103,527 | 85,155,809 | 127,527,146 | 128,719,558 | ||||||||||||||||
TOTAL ASSETS | 86,113,484 | 98,017,237 | 206,132,069 | 208,110,628 |
The accompanying notes are an integral part of these financial statements.
6
Statements of financial position
In thousands of Brazilian Reais - R$
Company | Consolidated | |||||||||||||||||||
Note | December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | ||||||||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||||
CURRENT LIABILITIES | ||||||||||||||||||||
Trade accounts payable | 16 | 4,468,136 | 4,297,855 | 25,450,974 | 31,009,515 | |||||||||||||||
Supply chain finance | 16 | 1,466,235 | 1,263,694 | 4,589,870 | 3,071,099 | |||||||||||||||
Loans and financing | 17 | 1,297,393 | 4,999,929 | 4,316,360 | 8,228,557 | |||||||||||||||
Income taxes | 18 | — | — | 403,022 | 475,174 | |||||||||||||||
Other taxes payable | 18 | 238,006 | 281,532 | 697,157 | 725,721 | |||||||||||||||
Payroll and social charges | 19 | 1,208,139 | 1,083,670 | 6,280,042 | 6,251,132 | |||||||||||||||
Lease liabilities | 13.2 | 62,454 | 27,675 | 1,707,172 | 1,788,353 | |||||||||||||||
Dividends payable | 20 | 160 | 135 | 1,938 | 183 | |||||||||||||||
Liabilities from anti-trust agreements | 21 | — | — | 955,866 | 909,132 | |||||||||||||||
Derivative liabilities | 42,513 | 278,227 | 698,361 | 559,536 | ||||||||||||||||
Other current liabilities | 1,230,467 | 954,745 | 2,813,379 | 2,141,820 | ||||||||||||||||
TOTAL CURRENT LIABILITIES | 10,013,503 | 13,187,462 | 47,914,141 | 55,160,222 | ||||||||||||||||
NON-CURRENT LIABILITIES | ||||||||||||||||||||
Loans and financings | 17 | 11,950,708 | 10,699,653 | 92,505,465 | 84,125,504 | |||||||||||||||
Income taxes and other taxes | 18 | 232,324 | 313,170 | 456,865 | 606,041 | |||||||||||||||
Payroll and social charges | 19 | 1,965,664 | 1,859,444 | 2,374,674 | 2,378,970 | |||||||||||||||
Lease liabilities | 13.2 | 88,576 | 35,023 | 7,206,761 | 7,195,655 | |||||||||||||||
Deferred income taxes | 10 | 3,136,770 | 2,995,114 | 6,585,412 | 7,112,102 | |||||||||||||||
Provisions for legal proceedings | 21 | 559,310 | 478,185 | 1,529,624 | 1,321,380 | |||||||||||||||
Related party payables | 9 | 14,459,311 | 22,066,929 | — | — | |||||||||||||||
Other non-current liabilities | 356,179 | 38,091 | 560,821 | 401,823 | ||||||||||||||||
TOTAL NON-CURRENT LIABILITIES | 32,748,842 | 38,485,609 | 111,219,622 | 103,141,475 | ||||||||||||||||
EQUITY | 22 | |||||||||||||||||||
Share capital - common shares | 23,576,206 | 23,576,206 | 23,576,206 | 23,576,206 | ||||||||||||||||
Capital reserve | (773,537 | ) | (807,955 | ) | (773,537 | ) | (807,955 | ) | ||||||||||||
Other reserves | 30,513 | 36,497 | 30,513 | 36,497 | ||||||||||||||||
Profit reserves | 15,379,953 | 18,653,056 | 15,379,953 | 18,653,056 | ||||||||||||||||
Accumulated other comprehensive income | 5,138,004 | 4,886,362 | 5,138,004 | 4,886,362 | ||||||||||||||||
Attributable to company shareholders | 43,351,139 | 46,344,166 | 43,351,139 | 46,344,166 | ||||||||||||||||
Attributable to non-controlling interest | — | — | 3,647,167 | 3,464,765 | ||||||||||||||||
TOTAL EQUITY | 43,351,139 | 46,344,166 | 46,998,306 | 49,808,931 | ||||||||||||||||
TOTAL LIABILITIES AND EQUITY | 86,113,484 | 98,017,237 | 206,132,069 | 208,110,628 |
The accompanying notes are an integral part of these financial statements.
7
Statements of income for the years ended at December 31, 2023 and 2022
In thousands of Brazilian Reais - R$
Company | Consolidated | |||||||||||||||||
Notes | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
NET REVENUE | 23 | 51,434,387 | 54,942,851 | 363,816,537 | 374,851,600 | |||||||||||||
Cost of sales | 28 | (43,403,640 | ) | (46,542,216 | ) | (324,167,540 | ) | (315,373,528 | ) | |||||||||
GROSS PROFIT | 8,030,747 | 8,400,635 | 39,648,997 | 59,478,072 | ||||||||||||||
Selling expenses | 28 | (4,052,689 | ) | (3,932,216 | ) | (22,941,168 | ) | (24,184,460 | ) | |||||||||
General and administrative expenses | 28 | (2,797,753 | ) | (3,022,452 | ) | (11,547,075 | ) | (11,829,547 | ) | |||||||||
Other expenses | (22,853 | ) | (102,754 | ) | (613,091 | ) | (517,882 | ) | ||||||||||
Other incomes | 28,414 | 498,347 | 754,631 | 1,629,507 | ||||||||||||||
NET OPERATING EXPENSES | (6,844,881 | ) | (6,559,075 | ) | (34,346,703 | ) | (34,902,382 | ) | ||||||||||
OPERATING PROFIT | 1,185,866 | 1,841,560 | 5,302,294 | 24,575,690 | ||||||||||||||
Finance income | 24 | 1,752,934 | 2,665,385 | 2,913,998 | 4,215,115 | |||||||||||||
Finance expense | 24 | (4,382,475 | ) | (5,394,859 | ) | (9,661,982 | ) | (10,567,455 | ) | |||||||||
NET FINANCE EXPENSE | (2,629,541 | ) | (2,729,474 | ) | (6,747,984 | ) | (6,352,340 | ) | ||||||||||
Share of profit of equity-accounted investees, net of tax | 11 | 43,708 | 15,273,409 | 47,607 | 60,514 | |||||||||||||
PROFIT (LOSS) BEFORE TAXES | (1,399,967 | ) | 14,385,495 | (1,398,083 | ) | 18,283,864 | ||||||||||||
Current income taxes | 10 | 480,742 | 925,990 | (338,457 | ) | (2,587,065 | ) | |||||||||||
Deferred income taxes | 10 | (141,747 | ) | 146,351 | 1,007,395 | 504,455 | ||||||||||||
TOTAL INCOME TAXES | 338,995 | 1,072,341 | 668,938 | (2,082,610 | ) | |||||||||||||
NET INCOME (LOSS) | (1,060,972 | ) | 15,457,836 | (729,145 | ) | 16,201,254 | ||||||||||||
ATTRIBUTABLE TO: | ||||||||||||||||||
Company shareholders | (1,060,972 | ) | 15,457,836 | (1,060,972 | ) | 15,457,836 | ||||||||||||
Non-controlling interest | — | — | 331,827 | 743,418 | ||||||||||||||
(1,060,972 | ) | 15,457,836 | (729,145 | ) | 16,201,254 | |||||||||||||
Basic and diluted earnings per share - common shares (R$) | 25 | (0.48 | ) | 6.93 | (0.48 | ) | 6.93 |
The accompanying notes are an integral part of these financial statements.
8
Statements of comprehensive income for the years ended at December 31, 2023 and 2022
In thousands of Brazilian Reais - R$
Company | Consolidated | |||||||||||||||||||
Note | 2023 | 2022 | 2022 | 2021 | ||||||||||||||||
Net income (loss) | (1,060,972 | ) | 15,457,836 | (729,145 | ) | 16,201,254 | ||||||||||||||
Other comprehensive income (loss) | ||||||||||||||||||||
Items that are or may be subsequently reclassified to profit or loss: | ||||||||||||||||||||
Loss on foreign currency translation adjustments | (611,874 | ) | (6,108,552 | ) | (741,988 | ) | (6,562,633 | ) | ||||||||||||
Gain on net investment in foreign operations | 869,554 | 717,426 | 869,554 | 717,426 | ||||||||||||||||
Gain (loss) on cash flow hedge | 37,624 | (253,193 | ) | 37,624 | (253,193 | ) | ||||||||||||||
Deferred income tax on cash flow hedge | (12,792 | ) | 86,086 | (12,792 | ) | 86,086 | ||||||||||||||
Valuation adjustments to equity in subsidiaries | (63,631 | ) | (33,989 | ) | (63,631 | ) | (33,989 | ) | ||||||||||||
Items that will not be subsequently reclassified to profit or loss: | ||||||||||||||||||||
Gain associated with pension and other postretirement benefit obligations | 29,234 | 55,491 | 35,679 | 69,625 | ||||||||||||||||
Income tax on gain (loss) associated with pension and other postretirement benefit obligations | 3,527 | (14,137 | ) | 4,716 | (17,553 | ) | ||||||||||||||
Total other comprehensive income (loss) | 251,642 | (5,550,868 | ) | 129,162 | (5,994,231 | ) | ||||||||||||||
Comprehensive income (loss) | (809,330 | ) | 9,906,968 | (599,983 | ) | 10,207,023 | ||||||||||||||
Total comprehensive income (loss) attributable to: | ||||||||||||||||||||
Company shareholders | (809,330 | ) | 9,906,968 | (809,330 | ) | 9,906,968 | ||||||||||||||
Non-controlling interest | — | — | 209,347 | 300,055 | ||||||||||||||||
(809,330 | ) | 9,906,968 | (599,983 | ) | 10,207,023 |
The accompanying notes are an integral part of these financial statements.
9
Statements of changes in equity for the years ended at December 31, 2023 and 2022
In thousands of Brazilian Reais - R$
Capital reserves | Profit reserves | Other comprehensive | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note | Share capital | Premium on issue of shares | Capital transaction | Stock options | Other reserves | Treasury shares | Legal | Investments statutory | Tax incentive | VAE | FCTA | Retained earnings | Total | Non- controlling interest |
Total | |||||||||||||||||||||||||||||||||||||||||||||||
DECEMBER 31, 2021 | 23,576,206 | 211,879 | (628,199 | ) | 30,464 | 43,957 | (3,037,838 | ) | 2,028,293 | 11,457,300 | — | 334,646 | 10,102,584 | — | 44,119,292 | 3,677,428 | 47,796,720 | |||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | — | — | — | 15,457,836 | 15,457,836 | 743,418 | 16,201,254 | |||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | — | — | — | — | — | — | (6,108,552 | ) | — | (6,108,552 | ) | (454,081 | ) | (6,562,633 | ) | |||||||||||||||||||||||||||||||||||||||||||
Net exchange differences from translation of foreign operations taken to equity | — | — | — | — | — | — | — | — | — | — | 717,426 | — | 717,426 | — | 717,426 | |||||||||||||||||||||||||||||||||||||||||||||||
Gain (loss) on cash flow hedge, net of tax | — | — | — | — | — | — | — | — | — | (167,107 | ) | — | — | (167,107 | ) | — | (167,107 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Gains associated with pension and other postretirement benefit obligations, net of tax | — | — | — | — | — | — | — | — | — | 41,354 | — | — | 41,354 | 10,718 | 52,072 | |||||||||||||||||||||||||||||||||||||||||||||||
Others comprehensive results | — | — | — | — | — | — | — | — | — | (33,989 | ) | — | — | (33,989 | ) | — | (33,989 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | — | — | — | — | — | (159,742 | ) | (5,391,126 | ) | 15,457,836 | 9,906,968 | 300,055 | 10,207,023 | |||||||||||||||||||||||||||||||||||||||||||||
Purchase of treasury shares | — | — | — | — | — | (3,648,028 | ) | — | — | — | — | — | — | (3,648,028 | ) | — | (3,648,028 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Sales of treasury shares | — | — | — | — | — | 834,181 | — | (9,931 | ) | — | — | — | — | 824,250 | — | 824,250 | ||||||||||||||||||||||||||||||||||||||||||||||
Cancellation of treasury shares | — | — | — | — | — | 5,851,685 | — | (5,851,685 | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | 31,839 | — | — | — | — | — | — | — | — | — | 31,839 | 7,286 | 39,125 | |||||||||||||||||||||||||||||||||||||||||||||||
Shares repurchased by Pilgrim’s Pride Corporation | — | — | (453,938 | ) | — | — | — | — | — | — | — | — | — | (453,938 | ) | (512,060 | ) | (965,998 | ) | |||||||||||||||||||||||||||||||||||||||||||
Realization of other reserves | — | — | — | — | (7,460 | ) | — | — | — | — | — | — | 7,460 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Legal reserve | — | — | — | — | — | — | 772,892 | — | — | — | — | (772,892 | ) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Investments statutory reserve | — | — | — | — | — | — | — | 8,843,185 | — | — | — | (8,843,185 | ) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Tax incentive reserve | — | — | — | — | — | — | — | (2,590,821 | ) | 4,003,823 | — | — | (1,413,002 | ) | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Dividends distributed | — | — | — | — | — | — | — | — | — | — | — | (2,218,116 | ) | (2,218,116 | ) | — | (2,218,116 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Distribution of interim dividends | — | — | — | — | — | — | — | — | — | — | — | (2,218,116 | ) | (2,218,116 | ) | — | (2,218,116 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Prescribed dividends | — | — | — | — | — | — | — | — | — | — | — | 15 | 15 | — | 15 | |||||||||||||||||||||||||||||||||||||||||||||||
Dividends to non-controlling interest | — | — | — | — | — | — | — | — | — | — | — | — | — | (25,872 | ) | (25,872 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Purchase of acquired business | — | — | — | — | — | — | — | — | — | — | — | — | — | 17,224 | 17,224 | |||||||||||||||||||||||||||||||||||||||||||||||
Others | — | — | — | — | — | — | — | — | — | — | — | — | — | 704 | 704 | |||||||||||||||||||||||||||||||||||||||||||||||
DECEMBER 31, 2022 | 23,576,206 | 211,879 | (1,050,298 | ) | 30,464 | 36,497 | — | 2,801,185 | 11,848,048 | 4,003,823 | 174,904 | 4,711,458 | — | 46,344,166 | 3,464,765 | 49,808,931 | ||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | — | — | — | (1,060,972 | ) | (1,060,972 | ) | 331,827 | (729,145 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Exchange variation in subsidiaries | 11 | — | — | — | — | — | — | — | — | — | — | (611,874 | ) | — | (611,874 | ) | (130,114 | ) | (741,988 | ) | ||||||||||||||||||||||||||||||||||||||||||
Exchange rate variation in investment | 22 e1 | — | — | — | — | — | — | — | — | — | — | 869,554 | — | 869,554 | — | 869,554 | ||||||||||||||||||||||||||||||||||||||||||||||
Gain (loss) on cash flow hedge, net of tax | 29a3.2.1 | — | — | — | — | — | — | — | — | — | 24,832 | — | — | 24,832 | — | 24,832 | ||||||||||||||||||||||||||||||||||||||||||||||
Gains associated with pension and other postretirement benefit obligations, net of tax | — | — | — | — | — | — | — | — | — | 32,761 | — | — | 32,761 | 7,634 | 40,395 | |||||||||||||||||||||||||||||||||||||||||||||||
Others comprehensive results | — | — | — | — | — | — | — | — | — | (63,631 | ) | — | — | (63,631 | ) | — | (63,631 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | — | — | — | — | — | (6,038 | ) | 257,680 | (1,060,972 | ) | (809,330 | ) | 209,347 | (599,983 | ) | |||||||||||||||||||||||||||||||||||||||||||
Stock option grant plan | 26 | — | — | 34,418 | — | — | — | — | — | — | — | — | — | 34,418 | 6,737 | 41,155 | ||||||||||||||||||||||||||||||||||||||||||||||
Carrying out revaluation reserve | 22 c | — | — | — | — | (5,984 | ) | — | — | — | — | — | — | 5,984 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Investments statutory reserve | 22 d4 | — | — | — | — | — | — | — | (3,370,639 | ) | — | — | — | 3,370,639 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Reserve of tax incentives in subsidiaries | 22 d5 | — | — | — | — | — | — | — | — | 97,536 | — | — | (97,536 | ) | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Distribution of interim dividends | 20 | — | — | — | — | — | — | — | — | — | — | — | (2,218,116 | ) | (2,218,116 | ) | — | (2,218,116 | ) | |||||||||||||||||||||||||||||||||||||||||||
Prescribed dividends | — | — | — | — | — | — | — | — | — | — | — | 1 | 1 | — | 1 | |||||||||||||||||||||||||||||||||||||||||||||||
Non-controlling dividends | — | — | — | — | — | — | — | — | — | — | — | — | — | (33,015 | ) | (33,015 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Others | — | — | — | — | — | — | — | — | — | — | — | — | — | (667 | ) | (667 | ) | |||||||||||||||||||||||||||||||||||||||||||||
DECEMBER 31, 2023 | 23,576,206 | 211,879 | (1,015,880 | ) | 30,464 | 30,513 | — | 2,801,185 | 8,477,409 | 4,101,359 | 168,866 | 4,969,138 | — | 43,351,139 | 3,647,167 | 46,998,306 |
The accompanying notes are an integral part of these financial statements.
10
Statements of cash flows for the years ended at December 31, 2023 and 2022
In thousands of Brazilian Reais - R$
Company | Consolidated | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Cash flows from operating activities | ||||||||||||||||
Net income (loss) | (1,060,972 | ) | 15,457,836 | (729,145 | ) | 16,201,254 | ||||||||||
Adjustments for: | ||||||||||||||||
Depreciation and amortization | 857,033 | 794,403 | 10,725,449 | 9,853,829 | ||||||||||||
Expected credit losses | 29,708 | 43,128 | 49,899 | 47,217 | ||||||||||||
Share of profit of equity-accounted investees | (43,708 | ) | (15,273,409 | ) | (47,607 | ) | (60,514 | ) | ||||||||
Result on the sale of fixed assets | (9,526 | ) | 4,021 | (72,216 | ) | (98,882 | ) | |||||||||
Income tax and social contribution | (338,995 | ) | (1,072,341 | ) | (668,938 | ) | 2,082,610 | |||||||||
Net financial result | 2,629,541 | 2,729,474 | 6,747,984 | 6,352,340 | ||||||||||||
Share-based compensation | — | — | 34,418 | 39,125 | ||||||||||||
Provisions | 236,133 | 94,118 | 527,427 | 225,494 | ||||||||||||
Estimated losses for realizable value of inventories | (28,564 | ) | 51,368 | (29,586 | ) | 68,263 | ||||||||||
DOJ and Antitrust agreements | — | — | 510,230 | 516,354 | ||||||||||||
Gain on bargain purchase | — | — | — | (266,235 | ) | |||||||||||
Impairment | — | — | 154,797 | 104,308 | ||||||||||||
Indemnity J&F | — | (543,165 | ) | — | (543,165 | ) | ||||||||||
Fair value (market to market) of biological assets | — | — | 442,841 | (204,948 | ) | |||||||||||
2,270,650 | 2,285,433 | 17,645,553 | 34,317,050 | |||||||||||||
Changes in assets and liabilities: | ||||||||||||||||
Trade accounts receivable | 1,777,882 | (85,801 | ) | 3,126,268 | (1,297,319 | ) | ||||||||||
Inventories | 610,963 | 423,475 | 2,345,294 | (2,338,806 | ) | |||||||||||
Recoverable taxes | (547,360 | ) | (1,841,631 | ) | 660,334 | (3,653,738 | ) | |||||||||
Other current and non-current assets | (23,428 | ) | 361,152 | (189,778 | ) | 742,188 | ||||||||||
Biological assets | — | — | (2,645,955 | ) | (4,442,720 | ) | ||||||||||
Trade accounts payable and supply chain finance | (124,416 | ) | (932,058 | ) | (4,118,275 | ) | 1,306,969 | |||||||||
Taxes paid in installments | (240,688 | ) | (400,986 | ) | (240,688 | ) | (402,813 | ) | ||||||||
Other current and non-current liabilities | 1,332,132 | 648,594 | 1,213,084 | (643,540 | ) | |||||||||||
DOJ and Antitrust agreements payment | — | — | (442,854 | ) | (873,107 | ) | ||||||||||
Income taxes paid | — | — | (355,000 | ) | (5,288,096 | ) | ||||||||||
Changes in operating assets and liabilities | 2,785,085 | (1,827,255 | ) | (647,570 | ) | (16,890,982 | ) | |||||||||
Cash provided by operating activities | 5,055,735 | 458,178 | 16,997,983 | 17,426,068 | ||||||||||||
Interest paid | (1,821,768 | ) | (1,136,995 | ) | (6,438,252 | ) | (4,798,503 | ) | ||||||||
Interest received | 302,357 | 106,460 | 938,932 | 705,949 | ||||||||||||
Net cash flows provided by (used in) operating activities | 3,536,324 | (572,357 | ) | 11,498,663 | 13,333,514 | |||||||||||
Cash flow from investing activities | ||||||||||||||||
Purchases of property, plant and equipment | (862,569 | ) | (1,348,274 | ) | (7,492,311 | ) | (11,226,603 | ) | ||||||||
Proceeds from sale of property, plant and equipment | 224,896 | 34,097 | 359,703 | 253,249 | ||||||||||||
(Purchases) Proceeds of intangible assets | (17,292 | ) | (7,733 | ) | (44,719 | ) | (43,360 | ) | ||||||||
Additional investments in subsidiaries | (9,934 | ) | — | — | (10,811 | ) | ||||||||||
Acquisitions, net of cash acquired | 680 | — | (17,156 | ) | (1,979,276 | ) | ||||||||||
Dividends received | 62,500 | 14,000 | 62,500 | 14,000 | ||||||||||||
Related party transactions | (8,952,846 | ) | 10,119,913 | 5,191 | 3,905 | |||||||||||
Other | — | — | 102,511 | (135,946 | ) | |||||||||||
Cash provided by (used in) investing activities | (9,554,565 | ) | 8,812,003 | (7,024,281 | ) | (13,124,842 | ) | |||||||||
Cash flow from financing activities | ||||||||||||||||
Proceeds from loans and financings | 14,989,339 | 6,945,468 | 44,700,803 | 40,927,694 | ||||||||||||
Payments of loans and financings | (17,558,805 | ) | (7,190,703 | ) | (35,111,656 | ) | (38,419,594 | ) | ||||||||
Derivatives instruments settled | (62,308 | ) | (1,259,815 | ) | (58,049 | ) | (1,342,179 | ) | ||||||||
Margin cash | 15,680 | 88,374 | (130,759 | ) | 570,288 | |||||||||||
Dividends paid | (2,218,116 | ) | (4,436,242 | ) | (2,218,116 | ) | (4,436,242 | ) | ||||||||
Dividends paid to non-controlling interest | — | — | (29,565 | ) | (25,872 | ) | ||||||||||
Capital reduction in controlled companies | 13,184,553 | — | — | — | ||||||||||||
Pilgrim’s Pride Corporation share repurchase | — | — | — | (965,998 | ) | |||||||||||
Purchase of treasury shares | — | (3,648,028 | ) | — | (3,648,028 | ) | ||||||||||
Sales of treasury shares | — | 824,250 | — | 824,250 | ||||||||||||
Payments of leasing contracts | (52,232 | ) | (34,330 | ) | (2,141,748 | ) | (2,243,385 | ) | ||||||||
Cash provided by (used in) financing activities | 8,298,111 | (8,711,026 | ) | 5,010,910 | (8,759,066 | ) | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | 82,466 | (86,660 | ) | (545,045 | ) | (1,506,598 | ) | |||||||||
Net change in cash and cash equivalents | 2,362,336 | (558,040 | ) | 8,940,247 | (10,056,992 | ) | ||||||||||
Cash and cash equivalents beginning of period | 2,096,334 | 2,654,374 | 13,182,158 | 23,239,150 | ||||||||||||
Cash and cash equivalents at the end of period | 4,458,670 | 2,096,334 | 22,122,405 | 13,182,158 |
Non-cash transactions: | ||||||||||||||||
Company | Consolidated | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Non-cash additions to right of use assets and lease liabilities CPC 6 and IFRS 16 | 138,324 | 39,881 | 2,444,826 | 2,526,801 | ||||||||||||
Capitalized interests | 130,127 | (79,855 | ) | (346,155 | ) | (369,155 | ) | |||||||||
Capital increase in subsidiaries | 10,063 | — | — | — | ||||||||||||
Dividends reversal | 1 | 15 | (3,449 | ) | 15 | |||||||||||
Cancellation of treasury shares | — | (5,851,685 | ) | — | (5,851,685 | ) | ||||||||||
Decrease in share capital subsidiaries through assumption of debt | — | (13,579,986 | ) | — | — |
The accompanying notes are an integral part of these financial statements.
11
Economic value added the years ended at December 31, 2023 and 2022
In thousands of Brazilian Reais - R$
Company | Consolidated | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Revenue | ||||||||||||||||
Sales of goods and services | 52,459,326 | 55,738,800 | 367,737,057 | 378,442,481 | ||||||||||||
Other income (expense) | 38,662 | (1,023 | ) | 280,042 | 383,846 | |||||||||||
Expected credit losses | (29,708 | ) | (43,128 | ) | (49,899 | ) | (47,217 | ) | ||||||||
52,468,280 | 55,694,649 | 367,967,200 | 378,779,110 | |||||||||||||
Goods | ||||||||||||||||
Cost of services and goods sold | (38,919,768 | ) | (43,110,872 | ) | (233,378,966 | ) | (228,038,740 | ) | ||||||||
Materials, energy, services from third parties and others | (7,260,130 | ) | (7,031,329 | ) | (67,754,020 | ) | (69,067,216 | ) | ||||||||
Loss / Recovery of assets | — | — | (27,006 | ) | — | |||||||||||
(46,179,898 | ) | (50,142,201 | ) | (301,159,992 | ) | (297,105,956 | ) | |||||||||
Gross added value | 6,288,382 | 5,552,448 | 66,807,208 | 81,673,154 | ||||||||||||
Depreciation and Amortization | (857,033 | ) | (794,403 | ) | (10,724,439 | ) | (9,853,829 | ) | ||||||||
Net added value generated | 5,431,349 | 4,758,045 | 56,082,769 | 71,819,325 | ||||||||||||
Net added value by transfer | ||||||||||||||||
Share of profit of equity-accounted investees, net of tax | 43,708 | 15,273,409 | 47,607 | 60,514 | ||||||||||||
Financial income | 1,752,934 | 2,665,385 | 2,913,998 | 4,215,115 | ||||||||||||
Others | 3,004 | 497,429 | (35,608 | ) | 834,111 | |||||||||||
1,799,646 | 18,436,223 | 2,925,997 | 5,109,740 | |||||||||||||
NET ADDED VALUE TOTAL TO DISTRIBUTION | 7,230,995 | 23,194,268 | 59,008,766 | 76,929,065 | ||||||||||||
DISTRIBUTION OF ADDED VALUE | ||||||||||||||||
Labor | ||||||||||||||||
Salaries | 3,025,499 | 2,682,601 | 37,020,838 | 35,852,511 | ||||||||||||
Benefits | 493,550 | 431,794 | 7,685,579 | 7,034,561 | ||||||||||||
FGTS (Brazilian Labor Social Charge) | 198,868 | 168,998 | 533,796 | 452,039 | ||||||||||||
3,717,917 | 3,283,393 | 45,240,213 | 43,339,111 | |||||||||||||
Taxes and contribution | ||||||||||||||||
Federal | (508,581 | ) | (1,487,958 | ) | 389,017 | 2,847,369 | ||||||||||
State | 737,338 | 540,735 | 2,379,326 | 2,126,099 | ||||||||||||
Municipal | 24,859 | 23,411 | 26,325 | 25,207 | ||||||||||||
253,616 | (923,812 | ) | 2,794,668 | 4,998,675 | ||||||||||||
Capital Remuneration from third parties | ||||||||||||||||
Interests and exchange variation | 4,156,784 | 5,230,745 | 9,207,319 | 9,366,450 | ||||||||||||
Rents | 43,716 | 52,471 | 818,041 | 733,561 | ||||||||||||
Others | 119,934 | 93,635 | 1,677,670 | 2,290,014 | ||||||||||||
4,320,434 | 5,376,851 | 11,703,030 | 12,390,025 | |||||||||||||
Owned capital remuneration | ||||||||||||||||
Dividends | — | 4,436,233 | — | 4,436,233 | ||||||||||||
Net income (loss) attributable to company shareholders | (1,060,972 | ) | 11,021,603 | (1,060,972 | ) | 11,021,603 | ||||||||||
Non-controlling interest | — | — | 331,827 | 743,418 | ||||||||||||
(1,060,972 | ) | 15,457,836 | (729,145 | ) | 16,201,254 | |||||||||||
ADDED VALUE TOTAL DISTRIBUTED | 7,230,995 | 23,194,268 | 59,008,766 | 76,929,065 |
The accompanying notes are an integral part of these financial statements.
12
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
1 | Operating activities |
JBS S.A (“JBS” or the “Company”), is a corporation with its headquarters office in Brazil, in the City of São Paulo, and is controlled by J&F Investimentos S.A. The Company has its shares publicly traded and listed on the “Novo Mercado” segment of the Sao Paulo Stock Exchange (B3 - Brasil, Bolsa e Balcão) under the ticker symbol “JBSS3”. In addition, American Depository Receipts related to shares issued by JBS are also publicly traded in the United States of America under the symbol “JBSAY”. The consolidated financial statements comprise the Company and its subsidiaries (collectively, the ‘Company’) for the year ended December 31, 2023 and were authorized by the Board of Directors on March 26, 2024.
These financial statements include the Company’s operations in Brazil as well as the activities of its subsidiaries. Below is a summary of the Company’s main operating activities by entity and geographic location, as well as the ownership percentage of interest in the main subsidiaries as of December 31, 2023 and 2022:
At the Company:
Description | Activities | Units | Country | ||||
JBS S.A. (JBS, Company) | - | Beef processing: slaughtering, refrigerating, industrializing and production of canned beef by-products.
| 67 | Brazil | |||
- | Leather production, processing and commercialization.
| ||||||
- | Production and commercialization of steel cans, plastic resin, soap base for production, soap bar, biodiesel, glycerin, olein, oily acid, collagen and wrapper derived from cattle tripe; industrial waste management; purchase and sale of soy beans, tallow, palm oil, caustic soda, stearin; transportation services; dog biscuits; eletric power production, cogeneration and commercialization.
| ||||||
- | Distribution centers and harbors. | 14 |
Consolidated: Main activities in Brazil
Description | Activities | Units | Country | Participation | December 31, 2023 | December 31, 2022 | ||||||||
Seara Alimentos Ltda. (Seara Alimentos) | - | Chicken and pork processing: raising, slaughtering and processing of broiler chickens and hogs; production and commercialization of beef and food products; and production of pet food and concentrates.
| 47 | Brazil | Indirect | 100% | 100% | |||||||
- | Distribution centers, transportation services and harbors.
| 24 | ||||||||||||
- | Direct sales to customers of beef and by-products in stores named “Mercado da Carne”. | 248 | ||||||||||||
Meat Snacks Partners do Brasil Ltda (Meat Snacks) | - | Beef Jerky production. | 2 | Indirect | 50% | 50% | ||||||||
JBS Confinamento Ltda. (JBS Confinamento) | - | Cattle fattening services. | 10 | Direct | 100% | 100% | ||||||||
Brazservice Wet Leather S.A (Brazservice) | - | Wet blue leather production, processing and commercialization. | 1 | Direct | 100% | 100% |
13
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Consolidated: Main activities outside of Brazil
Description | Activities | Units | Country | Participation | December 31, 2023 | December 31, 2022 | ||||||||
JBS USA Holding Lux, S.à.r.l. (JBS USA) | - - | Beef processing: slaughtering, refrigerating, industrializing and, production of by-products; Transportation services.
| 56 | Australia, Canada, France, Mexico, New Zealand, Netherlands, United Kingdom and United States of America. | Indirect | 100% | 100% | |||||||
- | Pork processing: raising, slaughtering, industrializing and commercialization of by-products derived from processing operations.
| 61 | ||||||||||||
- | Chicken processing: raising, slaughtering and processing of broiler chickens, production and commercialization of by-products derived and prepared meal from processing operations.
| 157 | ||||||||||||
- | Fishing processing: raising, slaughtering, industrializing and commercialization of by-products derived from processing operations.
| 2 | ||||||||||||
- | Plant based processing: industrializing and commercialization of by-products derived from processing operations.
| 3 | ||||||||||||
JBS Global (UK) Ltd. (JBS Global UK) | - | Trading fresh and processed beef, pork, lamb, chicken and fish products for the European market.
| 1 | United Kingdom | Indirect | 100% | 100% | |||||||
JBS Toledo NV (Toledo) | - | Trading operations for the European market; cooked frozen meat commercialization; logistic operations; warehousing.
| 1 | Belgium | Direct | 100% | 100% | |||||||
Rigamonti Salumificio SpA (Rigamonti) | ’- | Production and commercialization of bresaola, Prosciutto di San Daniele D.O.P. (raw ham) and Prosciutto di Parma D.O.P.(raw ham) and pork products: ham, cooked ham, mortadella, among others.
| 9 | Italy and United States of America. | Indirect | 100% | 100% | |||||||
Conceria Priante (Priante) | - | Semi-finished and finished leather production.
| 1 | Italy | Direct | 100% | 100% | |||||||
JBS Leather International (Leather International) | - | Wet blue, semi-finished and finished leather production. | 7 | Argentina, Germany, China, Mexico, Uruguay and Vietnam.
| Direct | 100% | 100% | |||||||
Seara Holding Europe B.V. (Seara Holding) | Animal protein products trading, industrializing and commercialization of by-products derived from processing operations. | 14 | China, Netherlands, Saudi Arabia, South Africa, United Arab Emirates, United Kingdom and Singapore.. | Indirect | 100% | 100% |
Dual listing in Brazil and the United States: On July 12, 2023, the Company announced to the market the dual listing in Brazil and the United States through JBS B.V, a company located in the Netherlands. At the Securities and Exchange Commission (CVM), JBS B.V will be registered as a foreign issuer to list Brazilian Depositary Receipts - Level II BDRs on B3 backed by class A shares. The operation will be submitted for approval to the Extraordinary General Meeting, yet to be called. At the SEC, JBS B.V. will be registered as a foreign issuer (Foreign Private Issuer – FPI) to list its class A shares on the New York Stock Exchange (NYSE), in the United States of America.
14
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
2 | Basis of preparation and presentation of financial statements |
The financial statements were prepared in accordance with accounting practices adopted in Brazil (BRGAAP), in compliance with the law of joint stock companies (Lei das sociedades por ações - Leis das SA’s), pronouncements, interpretations and orientations issued by the Brazilian Accounting Pronouncements Committee (Comitê de Pronunciamentos Contábeis) - CPC, requirements of the Brazilian Securities Commission - CVM and with the International Financial Reporting Standards (IFRS) issued by International Accounting Standards Board (IASB). The accounting practices adopted in Brazil require the disclosure of the Economic Value Added (Demonstração do Valor Adicionado - DVA), individual and consolidated, while the IFRS rules do not require its disclosure. As a consequence, due to IFRS rules, DVA is disclosed as supplementary information without any loss to these consolidated financial statements. The Company individual financial statements are identified as “Company” and the consolidated financial statements are identified as “Consolidated” in order to provide an understanding regarding how Management forms its judgments about future events, including the variables and assumptions underlying the estimates and the sensitivity of those judgments to different variables and conditions, below are demonstrated the most significant policies:
2.1 | Functional and representation currency |
These consolidated financial statements are presented in Brazilian reais (R$), which is the Company’s presentation and functional currency. All financial information is presented in thousands of reais, except when indicated otherwise.
2.2 | Translation of subsidiaries financial statements |
The consolidated financial statements of foreign subsidiaries are prepared using each subsidiary’s respective functional currency. The results and financial position of all entities with a functional currency different from its immediate parent’s functional currency and the Company’s presentation currency (R$) are translated into the parent’s functional and Company’s presentation currency as follows:
i. | assets and liabilities are translated at the current rate at the date of each closing period; |
ii. | income and expenses are translated at the average rate at the date of each closing period; |
iii. | all exchange rate translation differences are recognized in other comprehensive income (loss), and are presented in the statement of comprehensive income (loss) as foreign currency translation adjustments; and |
iv. | foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of income, under the caption “Finance income” or “Finance expense”. |
2.3 | Individual financial statements |
The individual financial statements presents the evaluation of investments in associates, subsidiaries and joint ventures by the equity method. In order to reach the same income statement and equity attributable to the Company shareholders in the individual and consolidated financial statements, the same adjustments of accounting practices upon the adoption of IFRS and CPCs, were done on both financial statements. The carrying value of these investments includes the breakdown of acquisition costs and goodwill.
2.4 | Consolidated financial statements and investments in associates and joint ventures |
The Company consolidates all majority-owned subsidiaries. The Company controls an entity when the Company is exposed to or has rights to variable returns resulting with its involvement with the entity and has the ability to affect those returns through its ownership over the entity. Subsidiaries are consolidated from the date that the control is obtained by to the Company. Consolidation is discontinued from the date that control ceases.
2.5 | New standards, amendments and interpretations |
a. | Standards, amendments and interpretations recently issued and adopted by the Company |
IAS 1/CPC 26 - Presentation of financial statements
As of January 1, 2023, the changes clarify which liabilities have the right to postpone settlement and whether these rights exist on the closing date of the financial statements and, also, whether the classification between current and non-current would impact the entity to exercise the right of postponement. The amendments also address that only if a derivative embedded in a convertible liability is itself an equity instrument, the terms of a liability would not affect its classification. The Company did not identify significant impacts as a result of this change.
15
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
IAS 8/CPC 23 - Accounting Policies, Changes in Estimates and Rectification of Errors
As of January 1, 2023, the changes provide clarification to the distinction between changes in accounting estimates and changes in accounting policies and correction of errors, in order to correctly apply the standard. The Company did not identify significant impacts as a result of this change.
IAS 12/CPC 32 - Taxes on profit
Effective January 1, 2023, the changes seek to limit the scope of the Initial Recognition Exemption (“IRI”) so that the IRI will no longer apply to transactions that give rise to equal and compensatory temporary differences. Therefore, a deferred tax asset and a deferred tax liability should be recognized for temporary differences generated at the time of initial recognition of a lease or a liability provision for dismantling and removal of leased equipment. The Company did not identify significant impacts as a result of this change.
As of May 23, 2023, the changes to the International Tax Reform - Pillar Two Model Rules aim to address tax issues related to the creation of a global system of minimum taxation for multinational companies, as disclosed in note 10 - Income tax and social contribution.
IAS 1/CPC 26 and IFRS Practice Statement 2 – Disclosure of accounting policies
From January 1, 2023, the changes require the disclosure of “material” rather than “significant” accounting policies. The changes also provide guidance on applying materiality to the disclosure of accounting policies, helping entities provide useful information about entity-specific accounting policies that users need to understand other information in the financial statements. The Company did not identify significant impacts as a result of this change.
b. | New standards, amendments and interpretations that are not yet effective |
IAS 1/CPC 26 and IFRS 7/CPC 40 – Supplier financing agreements (“Risk Withdrawn”)
As of January 1, 2024, the changes aim to increase the transparency and comparability of financial information in withdrawn risk operations that consist of financing suppliers through a financial institution. The Companies must inform the terms and conditions of operations with suppliers, the exposure to the risk taken in the balance sheet cash flow and the factors that affect the liquidity risk related to this operation. The Company is monitoring the changes and will adapt the disclosure of the explanatory note in accordance with the standard’s requirements.
IAS 21/CPC 02 – Effect of changes in exchange rates and conversion of financial statements
Effective January 1, 2025, this change establishes the accounting requirements for when a functional currency cannot be converted into other currencies. In this case, the Company must use the most recent observable exchange rate to translate the results and financial position of this foreign operation into its presentation currency. The entity must also disclose this exchange rate, the date it was observed and the reasons why the currency is not exchangeable. The Company is following the discussions and so far has not identified any impacts resulting from this change.
From January 1, 2023, changes in relation to contractual covenants impact the classification of liabilities between current and non-current, taking into account the existence of covenants after the balance sheet date. The classification of an obligation as current or non-current depends on the company’s right to renegotiate this obligation for at least twelve months, as provided for in the contract. If the company breaches a contractual long-term borrowing obligation, by the balance sheet date or before the end of the reporting period, making the liability due and payable to the creditor, even if the creditor has agreed not to require prepayment after the balance sheet date, the liability must be classified as current. The Company did not identify any impacts resulting from this change.
2.6 | Significant accounting judgements and estimates |
The preparation of these consolidated financial statements requires the use of estimates and judgment by management in the application of the Company’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates depending upon the variables, assumptions or conditions used by management.
16
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Judgments: Information about the judgments made in applying the accounting policies that have the most significant effects on the amounts recognized in these consolidated financial statements is included in the following notes:
a. | Net revenue – transfer of control (note 23); |
b. | Share-based compensation (note 26); |
c. | Deferred and current income taxes – uncertain tax treatments (note 10) |
Assumptions and estimates uncertainties: Information about assumptions and estimation uncertainties at the reporting date that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year is included in the following notes:
a. | Accounting for business combinations – fair value of the assets acquired and liabilities assumed (note 3); |
b. | Fair value measurement for biological assets (note 7); |
c. | Recognition and realization of deferred income taxes assets (note 10); |
d. | Impairment of financial assets (note 5); |
e. | Key assumptions underlying the impairment test of goodwill, property, plant and equipment and intangible assets (note 15, 12 e 14); |
f. | Key assumptions about the likelihood and magnitude of an outflow of resources related to the provision for legal proceedings (note 21); |
g. | Derivative financial instruments and hedge accounting (note 29). |
The Company periodically reviews the estimates and assumptions on an ongoing basis. Revisions to estimates are recognized prospectively.
3 | Business Combination |
The Company applies the acquisition method to account for business combinations with entities which are not under common control. The consideration transferred is measured at fair value which is calculated by the sum of the assets transferred, the liabilities incurred to the former owners of the acquiree and the cash or equity interests issued by the Company. The measurement period should not exceed a year from the acquisition date. Generally, all identifiable assets acquired and liabilities and contingent liabilities that are present obligation assumed in a business combination are measured initially at their fair values as of the acquisition date. The Company recognizes any non-controlling interest in the acquiree on an acquisition, either at fair value or at the noncontrolling interest’s proportionate share of the recognized amounts of the acquiree’s identifiable net assets. Acquisition costs are expensed as incurred and reflected within other expenses in the Company’s Consolidated Statement of Income.
Goodwill is initially measured as the excess of the sum of i) the consideration transferred; ii) the fair value of any non-controlling interest in the acquiree (when applicable); and iii) the fair value at the acquisition date of any previous equity interest in the acquisition, over the fair value of net assets acquired, as described in the footnote 15 - Goodwill. When the consideration is less than the fair value of the net assets acquired, the gain is recognized directly in the statement of income of the period as “Gain on bargain purchase” and the acquisition-related expenses including transaction and integration costs are expensed as incurred.
Management uses judgment to identify tangible and intangible assets and liabilities, in valuing such assets and liabilities, and in determining their remaining useful lives. The valuation of these assets and liabilities is based on assumptions and criteria, which include in some cases, estimates of future cash flows discounted at the appropriate rates. The use of different assumptions for valuation purposes, including future cash flows or discount rates, may result in differences in the estimates of the value of assets acquired and liabilities assumed.
Assets and liabilities are initially recognized at the best estimate of fair value. Third party valuation firms are usually engaged to assist in valuing the acquired assets and liabilities. When third parties are involved in developing these estimates, Management evaluates the appropriateness of the significant inputs and assumptions used in the valuation estimates, which often involves an interactive process with the appraisers. The qualifications and reputation of the third party appraisers are also evaluated.
The Company assess the reasonableness of the overall fair value measurements through comparison to other acquisitions. The estimates of the fair value of assets and liabilities assumed may be adjusted during the measurement period (which shall not exceed one year from the acquisition date) or additional assets and liabilities are recognized to reflect new information relating to the facts and circumstances existing at the acquisition date which, if known, would have affected the amounts recognized on that date. These adjustments are infrequent and have historically not been material.
17
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
The acquisitions accounted for as business combinations are presented bellow. Management considers an acquisitions significant for disclosure when total assets exceeds US$50 million (R$242,1 million at December 31, 2023). Acquisitions are paid with cash and cash equivalents, except where otherwise indicated.
Acquired company | Acquiror | (%) of voting interests acquired | Background and rationale for acquisition | Goodwill deductible for tax (1) | Acquisition date | Acquisition price | Goodwill generated on acquisition | ||||||||
TriOak Foods (“TriOak”) (2) | Swift Pork | 100% | Operates in several states in the United States, processing pork and selling grains. The indirect subsidiary Swift Pork was the exclusive buyer of TriOak. The acquisition guarantees access to a consistent supply of premium pigs for the Company’s operations. | Yes | 12.02.22 | 1,211,909 | 67,719 |
(1) | The conditions for the goodwill tax deductibility follows the legislation of each country, considering that the country of domicile of the acquirer does not coincide with the country of domicile of the acquiree. |
(2) | The allocation of the acquisition price of TriOak was adjusted in the year ended December 31, 2023, with a reduction in biological assets of R$127,014, an increase in fixed assets of R$49,629 , a reduction in the right of use and leasing provision of R$51,501, and a reduction in goodwill of R$64,206. |
The assets acquired and liabilities assumed in the business combinations were measured at fair value as presented below:
Acquisition | ||||
2022 | ||||
FAIR VALUE | TriOak | |||
Cash and cash equivalents | 19,509 | |||
Trade accounts receivable | 32,657 | |||
Inventories | 81,408 | |||
Biological assets | 689,969 | |||
Property, plant and equipment | 653,139 | |||
Right of use assets | 646,627 | |||
Other assets | 10,004 | |||
ASSETS | 2,133,313 | |||
Trade accounts payable | 111,191 | |||
Loans and financing | 219,747 | |||
Income taxes and other taxes, payroll and social charges | 11,558 | |||
Lease liabilities | 646,627 | |||
LIABILITIES | 989,123 | |||
Total identifiable net assets fair value | 1,144,190 | |||
Proportionate ownership acquired | 1,144,190 | |||
Purchase consideration transferred | 1,211,909 | |||
Goodwill/ (Gain on bargain purchase) | 67,719 |
The indirect subsidiary Swift Pork was the exclusive buyer of TriOak, acquired on December 2, 2022, therefore the revenue/profit of the acquired company, after intergroup eliminations, are not considered material for the purposes of presenting net revenue, results for the period and pro forma adjustment.
4 | Cash and cash equivalents |
Cash and cash equivalents: The Company considers all highly liquid investments with an original maturity of three months or less, readily convertible to known amounts of cash and which are subject to an immaterial risk of changes in fair value to be cash equivalents. The carrying value of these assets approximates their fair values.
18
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Margin cash: The Company is required to maintain cash balances with a broker as collateral for exchange-traded futures contracts. These balances are classified as margin cash as they are not available for use by the Company to fund daily operations. The balance of margin cash also include investments in Treasury Bills, linked to the Consumer Price Index - Consumer Price Index (“CPI”), that protect against the risk of inflation (or deflation) when held to maturity. The cash is redeemable when the contracts are settled, therefore they are not considered as cash and cash equivalents.
Company | Consolidated | |||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2021 | |||||||||||||
Cash on hand and at banks | 531,461 | 1,820,325 | 8,863,520 | 5,972,915 | ||||||||||||
CDB (bank certificates of deposit) and National Treasury Bill (Tesouro Selic) (1) | 3,927,209 | 276,009 | 13,258,885 | 7,209,243 | ||||||||||||
Cash and cash equivalents total | 4,458,670 | 2,096,334 | 22,122,405 | 13,182,158 | ||||||||||||
Margin cash | - | - | 88,068 | 308,302 | ||||||||||||
Treasury bills | 64,754 | 80,434 | 553,215 | 371,089 | ||||||||||||
Margin cash total | 64,754 | 80,434 | 641,283 | 679,391 | ||||||||||||
Total | 4,523,424 | 2,176,768 | 22,763,688 | 13,861,549 |
(1) | CDBs are held at high quality financial institutions and earn interest based on floating rates and are pegged to the Brazilian overnight interbank lending rate (Certificado de Depósito Interbancário - CDI). Tesouro Selic are bonds purchased from financial institutions having conditions and characteristics that are similar to CDB’s. |
At December 31, 2023, the availability under Brasil revolving credit facilities was US$450million (R$2.18 billion at December 31, 2023) and US$450 million (R$2.4 billion at December 31, 2022). In the United States the revolving credit facilities at December 31, 2023, was US$2.9 billion (R$14 billion at December 31, 2023) and US$2,8 billion (R$14.35 billion at December 31, 2022).
5 | Trade accounts receivable |
Trade accounts receivable correspond to amounts owed by customers in the ordinary course of business. If the receivable is due within one year or less the account receivable is classified as a current asset, otherwise the receivable is classified as a non-current asset. Accounts receivables are presented at amortized cost less any impairment. Accounts receivable denominated in currencies other than the entities’ functional currency are remeasured using the exchange rate in effect at the end of the reporting period. The age of accounts receivable along with the expected credit losses and present value adjustment are as follows:
Company | Consolidated | |||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||
Receivables not due yet | ||||||||||||||||
Domestic | 746,465 | 1,414,055 | 9,296,795 | 11,152,049 | ||||||||||||
Foreign | 1,626,049 | 2,315,482 | 4,127,529 | 5,058,255 | ||||||||||||
Subtotal | 2,372,514 | 3,729,537 | 13,424,324 | 16,210,304 | ||||||||||||
Overdue receivables: | ||||||||||||||||
From 1 to 30 days | 155,627 | 325,741 | 1,925,636 | 2,515,484 | ||||||||||||
From 31 to 60 days | 50,765 | 142,384 | 451,089 | 590,988 | ||||||||||||
From 61 to 90 days | 6,018 | 133,895 | 142,768 | 346,939 | ||||||||||||
Above 90 days | 233,938 | 310,931 | 911,619 | 1,038,761 | ||||||||||||
Expected credit losses | (232,988 | ) | (252,719 | ) | (411,088 | ) | (431,170 | ) | ||||||||
Adjustment to present value | (10,451 | ) | (9,758 | ) | (28,199 | ) | (36,411 | ) | ||||||||
Subtotal | 202,909 | 650,474 | 2,991,825 | 4,024,591 | ||||||||||||
Trade accounts receivable, net | 2,575,423 | 4,380,011 | 16,416,149 | 20,234,895 |
19
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Adjustment to present value: The Company discounts its receivables to present value using interest rates directly related to customer credit profiles. The monthly interest used to calculate the present value of outstanding receivables on December 31, 2023 and 2022 were, mostly in Brazil, 1.2% (1.3% at December 31, 2022). Realization of the present value adjustment is recognized as an offsetting item to sales revenue.
Within trade accounts receivable, the diversity of the portfolio significantly reduces overall credit risk. To further mitigate credit risk, parameters have been put in place when credit is provided to customers such as requiring minimum financial ratios, analyzing the operational health of customers, and reviewing references from credit monitoring entities. The Company does not have any customer that represents more than 10% of its trade receivables or revenues.
Expected credit losses are estimated based on an analysis of the age of the receivable balances and the client’s current situation. The resulting bad debt expense and the reversal of this expenses are recognized in the statement of income within “Selling Expenses”. The Company writes-off accounts receivables when it becomes apparent, based upon age or customer circumstances, that such amounts will not be collected. Below are the changes in the expected credit losses:
Changes in expected credit losses:
Company | Consolidated | |||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||
Balance at the beginning of the period | (252,719 | ) | (262,431 | ) | (431,170 | ) | (459,378 | ) | ||||||||
Additions | (29,708 | ) | (43,128 | ) | (49,899 | ) | (47,217 | ) | ||||||||
Write-offs (Reversals) | 34,052 | 46,185 | 49,809 | 53,607 | ||||||||||||
Exchange rate variation | 15,387 | 6,655 | 20,172 | 21,818 | ||||||||||||
Balance at the end of the period | (232,988 | ) | (252,719 | ) | (411,088 | ) | (431,170 | ) |
6 | Inventories |
Inventories are stated at the lower of the average cost of acquisition or production and their net realizable value. In the case of finished products and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity, such as purchased raw materials, livestock purchase costs, livestock grow out costs (primarily feed, livestock grower pay and catch and haul costs), labor, manufacturing and production overheads. Biological assets are reclassified to work in progress inventory at the time of slaughter based on their carrying amounts, which is historical cost as described in accounting policies in Note 7 - Biological assets.
Company | Consolidated | |||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||
Finished products | 2,514,584 | 2,906,265 | 14,990,882 | 17,199,677 | ||||||||||||
Work-in-process | 673,840 | 529,556 | 2,837,178 | 2,730,386 | ||||||||||||
Raw materials | 523,377 | 963,523 | 3,674,716 | 4,864,552 | ||||||||||||
Supplies | 304,396 | 233,857 | 3,193,807 | 3,347,479 | ||||||||||||
4,016,197 | 4,633,201 | 24,696,583 | 28,142,094 |
20
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
The changes in the estimated losses for realizable value of inventories accrual, which its offset is recognized in these financial statements as “Cost of sales”, are presented below:
Company | Consolidated | |||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||
Balance at the beginning of the period | (58,110 | ) | (6,742 | ) | (310,581 | ) | (248,637 | ) | ||||||||
Incorporations | (332 | ) | — | — | — | |||||||||||
Additions | (25,225 | ) | (55,743 | ) | (278,893 | ) | (296,491 | ) | ||||||||
Write-offs | 53,789 | 4,375 | 308,479 | 228,228 | ||||||||||||
Exchange rate variation | — | — | 4,741 | 6,319 | ||||||||||||
Balance at the end of the period | (29,878) | (58,110 | ) | (276,254 | ) | (310,581) |
7 Biological assets
The Company’s live animals consist of chickens, cattle, hogs and fish and are segregated into consumables and bearer assets. The animals classified as consumables are those intended for slaughtering to produce in-natural meat or processed and by-products. Until they reach the appropriate weight for slaughtering, they are classified as immature. The slaughtering and production processes occur in a very short period of time and, as a consequence, only live animals transferred to slaughter are classified as mature. The animals designated as bearer assets (breeder chickens, hogs, fish), are those which are intended to produce other biological assets. Until they reach the age of reproduction they are classified as immature and when they are able to start the reproductive cycle are classified as mature.
Biological assets (live animals) are measured at their fair value, using the cost approach technique to live animals. In determining the fair value of live animals, all losses inherent to the breeding process are already considered. For assets kept for production the cost is amortized over time, considering the reduction already recognized during its life cycle.
The measurement of the fair value of biological assets falls within Level 3 of the measurement hierarchy at fair value accordingly to IFRS 13 due to complex market prices, mathematical models, and subjective assumptions used in the discounted cash flow models. These are assets with unobservable inputs such as weight, price of feed inputs, storage costs, medicines, discount rate, wood age, among others. Fair value for live animals might change due to increase or decrease in feed costs, storage costs and outgrowers costs; for forests, the fair value might change due to increase or decrease in discount rate, price of wood or age.
Chicken and eggs:
Current (consumable) - Refers to broiler chickens that will be slaughtered upon maturity. Broiler chickens remain in development for a period of 30 to 48 days to produce fresh meat and/or commercialized products. The eggs remain in incubation between 21 to 25 days.
Non-current (bearer assets) - Refers to breeder chickens that are set aside for breeding and have an estimated useful life of 68 weeks (476 days). The animals in this category are segregated between mature, when they are in the breeding stage and immature when they are under development. The costs associated to breeder chickens are accumulated up to the production stage (immature) and amortized over their productive lives based on an estimate of their capacity to produce eggs (mature). Amortization of the mature hen is included under the caption “Cost of sales” in the statement of income.
Cattle:
Current (consumable) - Refers to owned cattle in feedlots and grass-fed cattle which remains under development for 90 to 120 days.
Non-current (bearer assets) - Refers to breeder bulls that are set aside for breeding and have an estimated useful life of 5 years (1,825 days). The costs associated to breeder bulls are accumulated up to the production stage (immature) and amortized over their productive lives based on an estimate of their capacity to produce new assets (cattle). Amortization of mature bulls is included under the caption “Cost of sales” in the statement of income.
Hogs:
Current (consumable) - Refers to hogs that will be slaughtered upon maturity. Hogs remain in development for a period of 170 to 175 days to produce fresh meat and/or industrialized products.
Non-current (bearer assets) - Refers to hogs that are set aside for breeding which have an estimated useful life of 27 months (810 days). The costs associated with breeder hogs are accumulated up to the production stage and amortized over their productive lives based on an estimate of their capacity to produce new assets (hogs). Amortization of breeder hogs is included under the caption “Cost of sales” in the statement of income.
21
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Fish and eggs:
Current (consumable) - Refers to live finfish weighing more than 1kg that are destined for slaughter after the maturation period. Finfish at this stage are measured at fair value less cost to sell.
Non-current (developing stage) - Refers to eggs, juveniles, smolt and live finfish below approximately 1kg. The estimated time period for eggs to develop to fish being placed at sea is approximately 24 months. These biological assets are measured at cost.
Non-current (bearer assets) - Refers to breed stock that are set aside for breeding which have an estimated useful life of 36 months (1,095 days). The costs associated with breed stock fish are accumulated up to the production stage and amortized over their productive lives based on an estimate of their capacity to produce new assets (eggs). Amortization of breed stock fish is included under the caption “Cost of goods sold” in the statement of income.
Consolidated | ||||||||||||||||
Current biological assets (consumable): | December 31, 2023 | December 31, 2022 | ||||||||||||||
Amount | Quantity (thousands) | Amount | Quantity (thousands) | |||||||||||||
Chicken and eggs | 3,318,541 | 560,414 | 3,850,196 | 615,040 | ||||||||||||
Cattle | 302,855 | 19 | 309,703 | 17 | ||||||||||||
Hogs | 3,757,454 | 8,516 | 4,486,728 | 7,922 | ||||||||||||
Lamb | 610 | 1 | 3,845 | 6 | ||||||||||||
Fish (biomass - kg) | 909,588 | 21,678 | 1,060,221 | 25,256 | ||||||||||||
Total current | 8,289,048 | 9,710,693 |
Consolidated | ||||||||||||||||
Non-current biological assets (bearer assets): | December 31, 2023 | December 31, 2022 | ||||||||||||||
Amount | Quantity (thousands) | Amount | Quantity (thousands) | |||||||||||||
Mature chickens breeding stage | 1,021,615 | 23,745 | 904,834 | 24,598 | ||||||||||||
Immature chickens in development and eggs | 884,705 | 16,867 | 952,216 | 21,241 | ||||||||||||
Cattle | 12,268 | 1 | 9,178 | 1 | ||||||||||||
Hogs | 562,367 | 670 | 671,174 | 716 | ||||||||||||
Mature fish (kg) | 11,343 | 84 | 11,009 | 93 | ||||||||||||
Immature fish in development (kg) and eggs | 68,456 | 514 | 60,369 | 382 | ||||||||||||
Eucalyptus forests (hectares) | 12,287 | 2,232 | 10,286 | 2,232 | ||||||||||||
Total non-current | 2,573,041 | 2,619,066 | ||||||||||||||
Total of biological assets: | 10,862,089 | 12,329,759 |
Consolidated | ||||||||||||||||
Changes in biological assets: | Current | Non-current | ||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||
Balance at the beginning of the period | 9,710,693 | 7,409,092 | 2,619,066 | 2,245,019 | ||||||||||||
Business combination (1) | (127,014 | ) | 905,884 | — | 207,286 | |||||||||||
Increase by reproduction born and cost to reach maturity | 64,344,135 | 63,094,943 | 4,180,754 | 4,083,268 | ||||||||||||
Reduction for slaughter, sale or consumption | (67,522,191 | ) | (64,819,239 | ) | (332,334 | ) | (428,076 | ) | ||||||||
Increase by purchase | 1,995,067 | 2,766,366 | 901,673 | 851,040 | ||||||||||||
Decrease by death | (831,807 | ) | (393,961 | ) | (89,342 | ) | (77,099 | ) | ||||||||
Changes fair value | (446,309 | ) | 204,931 | 3,468 | 17 | |||||||||||
Transfer between current and non-current | 1,537,427 | 1,507,273 | (1,537,427 | ) | (1,507,273 | ) | ||||||||||
Exchange rate variation | (370,953 | ) | (964,596 | ) | (135,622 | ) | (148,159 | ) | ||||||||
Amortization | — | — | (3,037,195 | ) | (2,606,957 | ) | ||||||||||
Balance at the end of the period | 8,289,048 | 9,710,693 | 2,573,041 | 2,619,066 |
(1) | Refers to the business combination adjustment of the acquisition of TriOak acquired during the 2022 financial year, as described in explanatory note 3 - Business combinations. |
22
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
8 Recoverable taxes
Recoverable taxes as of December 31, 2023 and 2022 was comprised of the following:
Company | Consolidated | |||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||
Value-added tax on sales and services - ( ICMS/IVA/VAT/GST) | 1,128,414 | 2,040,368 | 4,452,222 | 5,253,253 | ||||||||||||
Social contribution on billings - PIS and COFINS | 1,751,100 | 1,502,722 | 2,432,254 | 2,752,896 | ||||||||||||
Withholding income tax - IRRF/IRPJ | 4,333,343 | 3,981,884 | 5,792,623 | 6,257,710 | ||||||||||||
Excise tax - IPI | 22,645 | 21,748 | 106,528 | 127,719 | ||||||||||||
Reintegra | 29,904 | 32,463 | 43,111 | 49,832 | ||||||||||||
Other | 26,568 | 23,644 | 67,556 | 55,087 | ||||||||||||
7,291,974 | 7,602,829 | 12,894,294 | 14,496,497 | |||||||||||||
Breakdown | ||||||||||||||||
Current | 1,537,885 | 1,473,985 | 4,449,734 | 5,330,928 | ||||||||||||
Non-current | 5,754,089 | 6,128,844 | 8,444,560 | 9,165,569 | ||||||||||||
7,291,974 | 7,602,829 | 12,894,294 | 14,496,497 |
Value-added tax on sales and services (ICMS/ IVA / VAT / GST): Refers to excess credits derived from purchases of raw materials, packaging and other materials over tax charges due on domestic sales, since exports are exempt. Since these credits do not expire, the Company expects to recover the total amount of the tax credit, including Brazilian ICMS credits from other states (based on the difference between the statutory rate of tax and the effective rate for ICMS collection in the state of origin) either through offsetting tax charges on domestic sales or through purchases of fixed assets, packaging, electricity, and other vendors.
Social contribution on billings - PIS and COFINS: Refers value added taxes (non-cumulative PIS and COFINS credits) arising from purchases of raw materials, packaging and other materials used in products sold in markets outside of Brazil. Such credits do not expire and can be offset against other federal taxes, such as income taxes, or used to settle, administrative or judicial proceedings. The Company started to offset the PIS and COFINS credits generated, starting in August 2018 with social security debts.
Withholding income tax - IRRF/IRPJ: Refers mainly to income tax paid from foreign subsidiaries, Brazilian withholding income tax levied on short-term investments and income tax and social contribution prepayments paid by estimate. As of December 31, 2023 the amount of R$4,290,022 (R$3,809,280 as of December 31, 2022 ) relates to advances of income taxes in foreign jurisdictions, which do not expire.
Excise tax – IPI: Refers to value added taxes incurred upon the production of goods in Brazil. The rates may differ according to the type of product, volume or selling price. These credits do not expire and can be used to pay other federal taxes or reimbursed in cash.
Reintegration of the Special Tax Values - Reintegra: Refers to tax incentives for exports which can be fully or partially reimbursed in cash. Tax credit amounts are calculated by multiplying the statutory rate by gross revenue from the export of certain commercial products. These credits do not expire and can be offset against other federal taxes, such as income taxes, or reimbursed in cash.
23
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
9 Related parties transactions
The main balances of assets and liabilities, as well as the transactions resulting in income (loss) for any period, arise from to transactions between related parties or at under market conditions and prices. Transference of costs includes borrowing costs, interest and exchange, when applicable. The following table includes balances and net effect on income of intercompany financing transactions between the Company and its subsidiaries:
Company | Consolidated | |||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||
Related party receivables | 1,807,878 | 1,103,125 | 573,955 | 951,021 | ||||||||||||
Related party payables | (14,459,311 | ) | (22,066,929 | ) | — | — | ||||||||||
(12,651,433 | ) | (20,963,804 | ) | 573,955 | 951,021 |
Costs transfer | Statement of financial position accounts | Financial income (expense) | ||||||||||||||||||
Currency | (administrative and funding) | December 31, 2023 | December 31, 2022 | 2023 | 2022 | |||||||||||||||
Direct subsidiaries | ||||||||||||||||||||
JBS Finance Luxembourg S.à.r.l | US$ | 2,52% a 3,64% a.a. | — | — | — | (74,322 | ) | |||||||||||||
Brazservice Ltda. (1) | R$ | CDI + 4% a.a. | — | 32,502 | 1,546 | 5,582 | ||||||||||||||
Enersea Ltda. (1) | R$ | CDI + 4% a.a. | — | 80 | 4 | 762 | ||||||||||||||
JBS Embalagens Metálicas Ltda | R$ | CDI + 4% a.a. | 54 | 14 | 5 | 1 | ||||||||||||||
JBS Confinamento Ltda. | R$ | CDI + 4% a.a. | (3,784 | ) | 109,696 | 14,713 | 17,355 | |||||||||||||
JBS Investments Luxembourg S.à.r.l. | US$ | 2,52% a 3,64% a.a. | (8,057,016 | ) | (10,047,675 | ) | (237,830 | ) | (233,736 | ) | ||||||||||
Indirect subsidiaries | ||||||||||||||||||||
Seara Holding Ltda. (2) | R$ | - | (6,398,511 | ) | — | — | — | |||||||||||||
JBS Leather Paraguay Srl | GUA | 7% a.a. | 9,642 | 9,812 | 375 | 481 | ||||||||||||||
Seara Alimentos Ltda. (2) | R$ | CDI + 4% a.a. | 1,224,227 | (8,521,864 | ) | (653,805 | ) | (597,379 | ) | |||||||||||
JBS Luxembourg S.à.r.l | US$ | 1,83% a 7,30% a.a. | — | (3,497,390 | ) | (74,948 | ) | (236,601 | ) | |||||||||||
Other related parties | ||||||||||||||||||||
J&F Investimentos S.A. (3) | R$ | IPCA | 570,936 | 543,165 | 14,620 | — | ||||||||||||||
J&F Oklahoma Holdings, Inc. | R$ | 3.4%(*) | — | 400,017 | 6,962 | (3,578 | ) | |||||||||||||
Flora Produtos de Higiene e Limpeza S.A. | R$ | Selic | 3,019 | 7,839 | — | 494 | ||||||||||||||
Total | (12,651,433 | ) | (20,963,804 | ) | (928,358 | ) | (1,120,941 | ) |
(*) | Rate for the contract term. |
(1) | The direct subsidiaries Brazservice Ltda and Enersea Ltda were incorporated by the Parent Company for corporate simplification purposes. |
(2) | Refers to the transfer of the current account of the indirect controlling company Seara Alimentos Ltda. to its controlling company Seara Holding Ltda. |
(3) | Refers to the agreement signed between JBS S.A. and J&F Investimentos S.A. and some former executives of the Company, which represents the definitive extinction of the dispute subject to Arbitral CAM process no. 186/21, by which J&F committed to with payment in the updated total amount of R$570,935, to be paid according to the terms and conditions specified in the agreement. |
Operations in direct and indirect subsidiaries refer to remittances for working capital that will be and/or have been settled with a capital increase/reduction, distribution of dividends, or cash.
Related party receivable | Consolidated | |||||||
December 31, 2023 | December 31, 2022 | |||||||
J&F Investimentos S.A. | 570,936 | 543,165 | ||||||
J&F Oklahoma Holdings, Inc. (1) | — | 400,017 | ||||||
Flora Produtos de Higiene e Limpeza S.A. (1) | 3,019 | 7,839 | ||||||
573,955 | 951,021 |
(1) | J&F Investimentos S.A is the ultimate controller of the related companies. |
24
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
The disclosure of significant intercompany commercial transactions is in accordance with the criteria established by Management, by disclosing individually, balances which are equal or higher than 2% of the total of each transaction (sale of products, purchases, accounts receivable and accounts payable). Additionally, transactions which are below the described criteria will be disclosed if relevant. This analysis is performed for each related party. If any related party has not met this criteria in the past but if in the current period they do, the comparative balance will be disclosed.
Accounts receivable | Accounts payable | Purchases/Services rendered | Sale of products/Services provided | |||||||||||||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||||||||||||
COMPANY | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||
Direct subsidiaries | ||||||||||||||||||||||||||||||||
JBS Confinamento Ltda. | 2,138 | 2,300 | 28,021 | 119,563 | 646,327 | 1,255,584 | 12,412 | 15,108 | ||||||||||||||||||||||||
Brazservice Ltda. | — | 2,977 | — | 14,283 | 39,163 | 118,172 | 16,717 | 107,333 | ||||||||||||||||||||||||
Conceria Priante Srl | 20,443 | 15,479 | — | — | — | — | 33,579 | 38,928 | ||||||||||||||||||||||||
JBS Chile Limitada | 20,820 | — | 318 | — | 8,045 | — | 115,709 | — | ||||||||||||||||||||||||
JBS Toledo N.V. | 11,096 | 8,577 | — | — | — | — | 296,408 | 332,485 | ||||||||||||||||||||||||
Indirect subsidiaries | ||||||||||||||||||||||||||||||||
Seara Alimentos Ltda. | 228,076 | 215,066 | 52,593 | 58,663 | 226,657 | 294,037 | 2,514,070 | 2,778,655 | ||||||||||||||||||||||||
JBS Global UK Limited | 105,667 | 138,313 | — | — | — | — | 475,859 | 408,103 | ||||||||||||||||||||||||
JBS Aves Ltda. | 5,658 | 5,523 | 20,900 | 20,757 | 3,858 | 5,919 | 131,718 | 136,520 | ||||||||||||||||||||||||
Weddel Limited | 5,497 | 22,402 | — | — | — | — | 67,822 | 77,967 | ||||||||||||||||||||||||
Sampco, LLC | 96,505 | 108,359 | — | — | — | — | 794,851 | 959,321 | ||||||||||||||||||||||||
Meat Snacks Partners do Brasil Ltda. | 16,255 | 3,547 | — | 128 | — | — | 361,483 | 445,483 | ||||||||||||||||||||||||
JBS Asia Limited | — | — | 266,286 | 82,036 | 221,117 | 120,517 | — | — | ||||||||||||||||||||||||
JBS Leather Asia Limited | 69,532 | 70,780 | — | — | 7 | — | 328,648 | 242,559 | ||||||||||||||||||||||||
JBS USA Holding Lux S.à.r.l. | 260,857 | 520,893 | — | 715 | 1,454 | — | 944,384 | 1,065,280 | ||||||||||||||||||||||||
Seara Comércio de Alimentos Ltda. | 2,197 | 4,349 | 3,859 | 1,680 | 30,242 | 20,059 | 18,891 | 15,904 | ||||||||||||||||||||||||
JBS Australia Pty Ltd. | 3,096 | 9,298 | — | 678 | 1,909 | 691 | 187,974 | 292,889 | ||||||||||||||||||||||||
Other related parties | ||||||||||||||||||||||||||||||||
Agropecuária Santa Luzia Ltda. | 59 | 1,772 | 122 | 44 | — | 28,058 | — | 7,241 | ||||||||||||||||||||||||
JBJ Agropecuária Ltda. | 4,252 | 2,912 | 1,941 | 40,357 | 1,716,976 | 1,619,097 | 24,782 | 26,994 | ||||||||||||||||||||||||
Flora Produtos de Higiene e Limpeza S.A | 33,536 | 34,359 | 2 | — | 13 | 4,505 | 321,027 | 334,348 | ||||||||||||||||||||||||
Eldorado Brasil Celulose S.A | 246 | 314 | — | 6 | 59 | 287 | 2,941 | 8,596 | ||||||||||||||||||||||||
Prima Foods S.A. | 506 | 315 | 2,047 | 4,012 | 63,465 | 101,963 | 3,148 | 14,612 | ||||||||||||||||||||||||
Banco Original S.A | 34 | 5 | — | 9 | — | — | 97 | 81 | ||||||||||||||||||||||||
Agropecuária Nelore Parana Ltda | — | — | 3,870 | 9,149 | 144,882 | 172,150 | 2,434 | 454 | ||||||||||||||||||||||||
886,470 | 1,167,540 | 379,959 | 352,080 | 3,104,174 | 3,741,039 | 6,654,954 | 7,308,861 |
Other financial transactions in the Company
The Company and a few of its subsidiaries entered into an agreement in which Banco Original (Related party) acquires trade accounts receivables held against certain of the Company’s customers in the domestic and foreign markets. The assignments are measured at market value through a permanent transfer of the risks and benefits to Banco Original of all trade accounts receivable. At December 31, 2023, the unpaid balance of transferred receivables was R$2,664,506 (R$969,151 at December 31, 2022) in the Company, and R$5,158,611 (R$2,133,083 at December 31, 2022) in the Consolidated, respectively. For the years ended at December 31, 2023, the Company incurred financial costs related to this operation in the amount of R$225,979 (R$165,304 at December 31, 2022) in the Company, and R$478,112 (R$375,142 at December 31, 2022) in the Consolidated, respectively, recognized in these financial statements as financial expenses.
At December 31, 2023, the Company and a few of its subsidiaries hold investments with Banco Original, in the amount of R$1,482,874 (R$477,103 at December 31, 2022) in the Company and R$3,783,589 (R$1,869,825 at December 31, 2022) in the Consolidated, recognized as cash and cash equivalents, respectively. The short term investments, CDB and similar investments have earnings similar to CDI (Certificado de Depósito Interbancário), according to both maturity and amount established at the start date of the investment, following market practices. For the years ended at December 31, 2023, the Company earned interest from these investments in the amount of R$40.943 (R$7,478 at December 31, 2022) in the Company, and R$129.265 (R$17,159 at December 31, 2022) in the Consolidated, respectively, recognized in these financial statements as financial income.
The Company enters into purchase agreements for livestock with certain suppliers, including the related party JBJ Agropecuária Ltda., ensuring a fixed price when purchasing cattle, without a cash impact in the Company until the maturity date of these commitments. Based on this contract of future delivery, JBJ has already made anticipation with the banks of this operation in the supply chain finance modality. At December 31, 2023 the balance of this transaction was R$299,800 (R$446,000 at December 31, 2022).
25
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
The Company purchases residues generated from cattle slaughter for rendering operations with Prima Foods S.A. (formerly called Mata Boi Alimentos S.A.).
The Company sponsor´s Institute Germinare, a youth-directed business school, whose mission is to educate future leaders by offering free, high-quality education. During the years ended at December 31, 2023 the Company made donations in the amount of R$111,049 (R$178,831 at December 31, 2022) recognized in these financial statements as general and administrative expenses.
The Company is a member of the JBS Pela Amazônia Fund, a non-profit association whose objective is to promote and finance initiatives and projects aimed at the sustainable development of the Amazon Biome. During the year ended December 31, 2023, there were no donations (R$5,500 at December 31, 2022), recorded under the caption general and administrative expenses.
The Company holds competitions to contract or renew its insurance. In this process, it includes Original Corporate Corretora de Seguros Ltda. on the panel, an insurance broker who is a related party. All contracts are made at market value, if they are completed.
In the years ended December 31, 2023 and 2022, no expected losses with doubtful debts were recorded, nor were any bad debt expenses related to transactions with related parties recognized.
Remuneration of key management
The Company’s key management is comprised of its Executive Officers. The aggregate amount of compensation received by the Company’s key management during the years ended at December 31, 2023 and 2022 is the following:
2023 | 2022 | |||||||
Salaries and wages | 41,517 | 39,702 | ||||||
Variable cash compensation | 96,876 | 98,000 | ||||||
Share-based payments | 37,932 | 35,446 | ||||||
176,325 | 173,148 |
The Chief Executive Officer, the Administrative and Control Officer, the Chief Financial Officer and the Executive Officers are parties to the Brazilian employment contract regime referred to as CLT (which is the Consolidation of Labor Laws), which follows all the legal prerogatives of payments and benefits.
Except for those described above, the Board of Directors members are not part to any employment contract or any other contracts for additional business benefits such as post-employment benefits or other long-term benefits, termination of work that does not conform to those requested by the CLT (Brazilian Labor Law).
10 Income taxes
Current taxes
The Company and the subsidiaries located in Brazil are taxed based on their taxable income. The subsidiaries located outside of Brazil use methods established by the respective local jurisdictions. Income taxes have been calculated and recognized considering the applicable statutory tax rates in effect at the balance sheet date.
Current tax comprises expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any.
The current income tax charge is calculated using enacted or substantively enacted tax rates at the end of the reporting period in the countries where the Company’s subsidiaries operate and generate taxable income. The Company periodically evaluates positions taken in which applicable tax regulation is subject to interpretation and recognizes an accrual, if needed, for probable payments of income tax.
In compliance with the interpretation ICPC 22/IFRIC 23, the Administration analyzed the relevant tax decisions and whether they conflict in any way with the positions adopted by the Company. In relation to uncertain tax positions, the Administration has reviewed the respective legal opinions and jurisprudence and recognized a provision for such matters. Periodically, the Company evaluates the tax positions assumed in which there are uncertainties about the tax treatment adopted and, if necessary and applicable, constitutes a provision.(Net income arising from foreign subsidiaries)
26
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Deferred taxes
Deferred tax assets and liabilities are presented net in the statement of financial position when there is a legally enforceable right to offset current tax assets against liabilities and when they are related to income taxes levied by the same taxation authority on the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
In the Company, tax calculations refer to known tax uncertainties due to judgments used to calculate tax liabilities in the application of complex tax regulations complex tax regulations, which are constantly evolving in the tax jurisdictions where the Company operates. Deferred taxes will only be recognized if it is probable that it is probable that in the future there will be a positive tax base against which temporary differences can be utilized and losses offset, based on projections of taxable income taxable results as well as technical feasibility studies, submitted annually to the Company’s and its subsidiaries’ management bodies, when applicable.
Changes in tax laws and rates may affect deferred tax assets and liabilities recorded in the future. the Administration does not believe that there is a reasonable probability that there will be a material change in the recognized balances, however, at the close of the fiscal year, the calculation may result in a payment that is significantly different from the current estimate of tax liabilities or a change in the effective tax rate in the financial statements due to the complexity of these tax uncertainties. A legal settlement not favorable to the Company would require a cash outflow and could result in an increase in the effective tax rate on assessment; a favorable legal settlement may result in a reduction in the effective tax rate at assessment.
Deferred taxes are recognized on tax loss carryforwards and temporary asset and liability differences on tax basis versus book basis. Deferred taxes are not recognized when arising from active and/or passive adjustments that do not affect the tax bases, with the exception of adjustments of business combination adjustments. Deferred taxes are determined using tax rates (and laws) that are effective or substantively effective at the end of the current period and are expected to apply when the deferred tax asset is realized or the deferred tax liability is settled.
Deferred tax expense on goodwill amortization is recorded only when there is tax amortization of goodwill in the assessment.
Tax losses in Brazil do not expire, but are limited to the use of 30% of taxable income for the year. The utilization of tax losses in other jurisdictions expires between 10 and 20 years.
Company | Consolidated | |||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||
Deferred income taxes assets | — | — | 3,751,335 | 3,161,300 | ||||||||||||
Deferred income taxes liabilities | (3,136,770 | ) | (2,995,114 | ) | (6,585,412 | ) | (7,112,102 | ) | ||||||||
(3,136,770 | ) | (2,995,114 | ) | (2,834,077 | ) | (3,950,802 | ) |
a. | Deferred income tax and social contribution |
a1. | Unrecognized tax benefit |
The current balance of benefits related to the tax effects of accumulated tax losses and negative social contribution bases not recognized by subsidiaries on December 31, 2023 was R$3,806,133 (R$3,214,811 on December 31, 2022). These values come from companies that do not have profitability histories or future profit projections sufficient to support their record.
27
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
a2. | Composition of deferred tax income and social contribution |
Company | ||||||||||||||||
December 31, 2022 | Income statement | Other Adjustments (1) | December 31, 2023 | |||||||||||||
Tax losses and negative basis of social contribution | - | 28,991 | - | 28,991 | ||||||||||||
Expected credit losses on trade accounts receivable | 88,021 | (6,851 | ) | - | 81,170 | |||||||||||
Provisions for contingencies | 162,583 | 27,583 | - | 190,166 | ||||||||||||
Present value adjustment - Trade accounts receivable | 3,318 | 235 | - | 3,553 | ||||||||||||
Right of use assets | 2,732 | 2,446 | - | 5,178 | ||||||||||||
Goodwill amortization | (3,277,762 | ) | - | - | (3,277,762 | ) | ||||||||||
Present value adjustment - Trade accounts payable | 2,090 | ) | (7,075 | ) | - | (4,985 | ) | |||||||||
Hedge operations(2) | 61,197 | (195,356 | ) | - | (134,159 | ) | ||||||||||
Accrued liabilities | 184,190 | (21,363 | ) | - | 162,827 | ) | ||||||||||
Realization of other reserves | (257,332 | ) | 3,080 | - | (254,252 | ) | ||||||||||
Other temporary differences | 35,849 | 26,563 | 91 | 62,503 | ) | |||||||||||
Deferred taxes, net | (2,995,114 | ) | (141,747 | ) | 91 | (3,136,770 | ) |
Company | ||||||||||||
December 31, 2021 | Income statement | December 31, 2022 | ||||||||||
Expected credit losses on trade accounts receivable | 91,840 | (3,819 | ) | 88,021 | ||||||||
Provisions for contingencies | 164,082 | (1,499 | ) | 162,583 | ||||||||
Present value adjustment - Trade accounts receivable | 3,671 | (353 | ) | 3,318 | ||||||||
Right of use assets | 3,622 | (890 | ) | 2,732 | ||||||||
Goodwill amortization | (3,277,762 | ) | — | (3,277,762 | ) | |||||||
Present value adjustment - Trade accounts payable | 2,694 | (604 | ) | 2,090 | ||||||||
Hedge operations (2) | 16,236 | 44,961 | 61,197 | |||||||||
Accrued liabilities | 134,382 | 49,808 | 184,190 | |||||||||
Realization of other reserves | (260,867 | ) | 3,535 | (257,332 | ) | |||||||
Other temporary differences | (19,363 | ) | 55,212 | 35,849 | ||||||||
Deferred taxes, net | (3,141,465 | ) | 146,351 | (2,995,114 | ) |
Consolidated | ||||||||||||||||||||
December 31, 2022 | Income statement | Exchange variation | Other Adjustments(1) | December 31, 2023 | ||||||||||||||||
Tax losses and negative basis of social contribution | 3,387,144 | 799,728 | (119,345 | ) | - | 4,067,527 | ||||||||||||||
Expected credit losses on trade accounts receivable | 164,732 | 23,618 | (3,966 | ) | - | 184,384 | ||||||||||||||
Provisions for contingencies | 716,633 | (96,868 | ) | (12,702 | ) | - | 607,063 | |||||||||||||
Present value adjustment - Trade accounts receivable | 59,095 | (22,071 | ) | - | - | 37,024 | ||||||||||||||
Tax credits - Foreign subsidiaries | 68,855 | 51,706 | (6,040 | ) | 145 | 114,666 | ||||||||||||||
Labor accidents accruals | 32,032 | 8,945 | (2,600 | ) | - | 38,377 | ||||||||||||||
Pension plan | 54,708 | 18,602 | (4,408 | ) | (11,020 | ) | 57,882 | |||||||||||||
Accrued liabilities | 1,257,677 | (68,236 | ) | (71,302 | ) | 2 | 1,118,141 | |||||||||||||
Non-deductible interests | 399,481 | 669,248 | (42,575 | ) | - | 1,026,154 | ||||||||||||||
Right of use assets | 117,832 | 10,713 | (5,492 | ) | - | 123,053 | ||||||||||||||
Goodwill amortization | (4,100,891 | ) | (55,961 | ) | 32,845 | - | (4,124,007 | ) | ||||||||||||
Present value adjustment - Trade accounts payable | (42,292 | ) | 12,933 | - | - | (29,359 | ) | |||||||||||||
Business combination | (2,303,239 | ) | (915 | ) | 153,406 | - | (2,150,748 | ) | ||||||||||||
Inventory valuation | (572,398 | ) | (489,952 | ) | 59,790 | - | (1,002,560 | ) | ||||||||||||
Hedge and hedge accounting operations (2) | 42,831 | (162,715 | ) | - | (2,912 | ) | (122,796 | ) | ||||||||||||
Realization of other reserves | (575,927 | ) | 16,079 | - | - | (559,848 | ) | |||||||||||||
Accelerated depreciation and amortization | (3,061,949 | ) | 370,471 | 201,669 | - | (2,489,809 | ) | |||||||||||||
Other temporary differences | 404,874 | (77,930 | ) | (86,014 | ) | 29,849 | 270,779 | |||||||||||||
Deferred taxes, net | (3,950,802 | ) | 1,007,395 | 93,266 | 16,064 | (2,834,077 | ) |
28
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Consolidated | ||||||||||||||||||||
December 31, 2021 | Income statement | Exchange variation | Other adjustments | December 31, 2022 | ||||||||||||||||
Tax losses and negative basis of social contribution | 2,407,989 | 1,019,925 | (43,409 | ) | 2,639 | 3,387,144 | ||||||||||||||
Expected credit losses on trade accounts receivable | 146,544 | 20,059 | (1,871 | ) | — | 164,732 | ||||||||||||||
Provisions for contingencies | 544,132 | 172,501 | — | — | 716,633 | |||||||||||||||
Present value adjustment - Trade accounts receivable | 45,564 | 13,531 | — | — | 59,095 | |||||||||||||||
Tax credits - Foreign subsidiaries | 74,993 | (1,288 | ) | (4,577 | ) | (273 | ) | 68,855 | ||||||||||||
Labor accidents accruals | 218,775 | (172,451 | ) | (14,292 | ) | — | 32,032 | |||||||||||||
Pension plan | 120,970 | (28,822 | ) | (8,339 | ) | (29,101 | ) | 54,708 | ||||||||||||
Accrued liabilities | 1,478,003 | (132,043 | ) | (88,283 | ) | — | 1,257,677 | |||||||||||||
Non-deductible interests | 32,889 | 370,290 | (3,698 | ) | — | 399,481 | ||||||||||||||
Right of use assets | 33,884 | 84,106 | (158 | ) | — | 117,832 | ||||||||||||||
Goodwill amortization | (3,937,854 | ) | (189,119 | ) | 26,082 | — | (4,100,891 | ) | ||||||||||||
Present value adjustment - Trade accounts payable | (33,568 | ) | (8,724 | ) | — | — | (42,292 | ) | ||||||||||||
Business combination | (2,641,925 | ) | 225,085 | 164,819 | (51,218 | ) | (2,303,239 | ) | ||||||||||||
Customer returns accruals - Foreign subsidiaries | (186,478 | ) | 174,938 | 11,540 | — | — | ||||||||||||||
Inventory valuation | 131,675 | (704,606 | ) | 533 | — | (572,398 | ) | |||||||||||||
Hedge and hedge accounting operations (2) | (150,686 | ) | 115,035 | 916 | 77,566 | 42,831 | ||||||||||||||
Realization of other reserves | (592,204 | ) | 16,277 | — | — | (575,927 | ) | |||||||||||||
Accelerated depreciation and amortization | (2,748,785 | ) | (504,898 | ) | 191,734 | — | (3,061,949 | ) | ||||||||||||
Other temporary differences | 135,629 | 34,659 | 240,862 | (6,276 | ) | 404,874 | ||||||||||||||
Deferred taxes, net | (4,920,453 | ) | 504,455 | 471,859 | (6,663 | ) | (3,950,802 | ) |
(1) | Changes in the deferred tax balance sheet accounts that do not directly impact profit & loss accounts, are shown in a specific column in the footnotes. These changes refer mainly to deferred taxes on cash flow hedge operations recognized in equity, carried out by the subsidiary Seara Alimentos and impacts related to the acquisitions of the King´s group in Italy and Rivalea in Australia. |
(2) | The hedge and hedge accounting operations are demonstrated in footnote 29 - Risk management and financial instruments. |
a2. | Expectation of realization of deferred IR/CS on tax losses and negative basis |
Deferred tax assets arising from tax losses and temporary differences will be realized as future taxable profits become available, against which these deferred tax assets can be used. The period for settlement or realization of such differences is imprecise and is linked to several factors that are not under the Company’s control.
When estimating the realization of active deferred tax credits, constituted on tax losses and negative social contribution basis, the Company considers its budget and strategic plan, adjusted based on estimates of the main tax additions and exclusions. Based on this estimate, the Company believes that it is likely that these deferred tax credits will be realized.
29
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
b. Reconciliation of income tax and social contribution expense:
Company | Consolidated | ||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||
Accounting result before taxation | (1,399,967 | ) | 14,385,495 | (1,398,083 | ) | 18,283,864 | |||||||||||
Nominal rate | -34 | % | -34 | % | -34 | % | -34 | % | |||||||||
Expected tax expense | 475,989 | (4,891,068 | ) | 475,348 | (6,216,514 | ) | |||||||||||
Adjustments to reconcile tax expense: | |||||||||||||||||
Share of profit of equity-accounted investees | 14,861 | 5,192,959 | 16,186 | 20,574 | |||||||||||||
Investments grants (3) | 997,128 | 1,928,646 | 2,309,571 | 2,335,224 | |||||||||||||
International rate differences | — | — | (83,939 | ) | 1,632,197 | ||||||||||||
Net income arising from foreign subsidiaries (4) | (1,013,138 | ) | (1,378,928 | ) | (1,023,544 | ) | (1,378,928 | ) | |||||||||
Transfer pricing adjustment | (60,277 | ) | (39,042 | ) | (61,059 | ) | (179,324 | ) | |||||||||
Unrecognized tax benefits | — | — | (1,862,376 | ) | 472,790 | ||||||||||||
Interest not taxed | — | — | 700,336 | 672,699 | |||||||||||||
J&F leniency expenses refund (5) | — | 184,676 | — | 184,676 | |||||||||||||
(37,757 | ) | (597 | ) | (37,757 | ) | (597 | ) | ||||||||||
Donations and social programs (3) | 10,444 | 13,171 | 32,405 | 27,188 | |||||||||||||
Other permanent differences | (48,255 | ) | 62,524 | 203,767 | 347,405 | ||||||||||||
Current and deferred income tax (expense) benefit | 338,995 | 1,072,341 | 668,938 | (2,082,610 | ) | ||||||||||||
Current income tax expense | 480,742 | 925,990 | (338,457 | ) | (2,587,065 | ) | |||||||||||
Deferred income tax income (expense) | (141,747 | ) | 146,351 | 1,007,395 | 504,455 | ||||||||||||
338,995 | 1,072,341 | 668,938 | (2,082,610 | ) | |||||||||||||
% IT/PBT | 24.21 | % | 7.45 | % | 47.85 | % | (11.39 | )% |
Additional information: analysis of the variation in the effective rate:
The Company understands that, due to the origin and non-recurrence of certain events, for the purposes of predictability of the effective rate, possible effects of deferred taxes on the amortization of goodwill may be disregarded; unrecognized deferred taxes; income tax and social contribution on realization of the revaluation reserve and investment subsidy from previous years. Therefore, the adjusted effective rate, excluding the previously mentioned effects, in the years ending December 31, 2023 and 2022 would be 23.99% and -5.45% in the Parent Company and 155.18% and -23.16% in the Consolidated.
(3) The Company and its subsidiaries have subsidies granted by state governments, as presumed credit, partial and full reduction of the ICMS calculation basis for certain goods in its production chain, in accordance with the regulations of each State. The appropriate values of these tax incentives as income in the result are excluded in the calculation of taxes on profit, when the requirements set out in current legislation are met. During 2023, the Company and its subsidiaries recorded the amount of government subsidies in the amount of R$6.79 billion, of which R$2.82 billion were presumed credit and R$3.97 billion were ICMS reduction and exemption, excluded from basis for calculating income tax and social contribution.
The exclusion of this tax benefit from the income tax and social contribution calculation base on net profit reflected a tax gain in 2023 of R$960,675 referring to the presumed credit and R$1.34 billion in exemption and base reduction.
30
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
On June 12, 2023, the ruling on Special Appeals No. 1,945,110 and 1,987,158 (Repetitive Topic 1182) was published, discussing the requirement for IRPJ and CSLL on amounts related to ICMS tax incentives, distinct from those granted in the form of presumed credits. The ruling in reference stated that the taxes in question are not due, as long as the requirements of article 30 of Law No. 12,973/14 are observed, and it is certain that the Company recorded the profit reserve referred to in article 195-A of Law No. 6,404/76. On August 31, 2023, Provisional Measure No. 1185/23 was published, which changed the investment subsidy regime for tax purposes and revoked article 30 of Law No. 12,973/14, which was converted into Law on December 29 2023 through Law No. 14,789, the effects of which will be observed for the year 2024.
(4) | In accordance with Law No. 12,973/14, the results of subsidiaries abroad must be taxed at a nominal rate of 34%, and the tax paid abroad by these subsidiaries may be credited in Brazil. The results obtained from subsidiaries abroad are subject to taxation by the countries where they are headquartered, in accordance with the applicable rates and legislation (profits taxed by foreign jurisdictions included in the reconciliation of income tax and social contribution expenses). The Company analyzes the results of each subsidiary for the application of its income tax legislation, in order to respect the treaties signed by Brazil and avoid double taxation. |
(5) | Refers to the indemnity J&F as described in the footnote 9 - Related party transactions. |
(6) | Refers to donations made by the Company, as described in explanatory note 28 - Expenses by nature. |
Global Minimum Tax: The Organization for Economic Co-operation and Development (OECD) is an international organization made up of 38 member countries that work to create international standards and seek solutions to a range of social, economic and environmental challenges. These solutions range from improving economic performance and creating jobs to promoting solid education and combating international tax evasion.
With regard to the fight against tax evasion, the BEPS (Base Erosion and Profit Shifting) project was created in 2013. This initiative is a collaboration between the G20 (group of twenty countries with the largest economies) and the OECD. The objective of the BEPS project is to implement 15 measures to combat tax evasion, improve the coherence of international tax rules and ensure a more transparent tax environment on the international stage. The project aims to prevent the abuse of tax rules that result in the erosion of the tax base, mainly through the transfer of profits to destinations with more favorable taxation or no taxation.
Pillar II is part of one of the OECD’s most recent initiatives, known as BEPS 2.0. It aims to address tax issues related to changes in business models in a globalized environment. The objective of Pillar II is to create a global system of minimum taxation for multinational companies with an annual global turnover of more than EUR 750 million. This additional taxation aims to balance the global income tax collection of these companies and guarantee the payment of a minimum effective global rate of 15%, per jurisdiction, where the multinational group operates.
From 2024 onwards, Pillar II rules will come into force in several countries, impacting several multinationals operating in these countries. During the first three years, there will be some transition rules (Safe Harbor) with the aim of simplifying the calculations of the effective rate by jurisdiction, allowing adaptation to the affected multinational groups.
Although the implementation of Pillar II presents uncertainties in the Brazilian legal system, the Company and its subsidiaries are monitoring the potential impacts that this new rule may bring to the Group.
31
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
For the 2022 calendar year, during 2023, the Company performed a Safe Harbor analysis using 2022 financial data for the jurisdictions where the Company operates. The results of this preliminary analysis indicate that some countries within the Group may be subject to additional income tax payments in accordance with Pillar II rules. However, the estimated additional payment percentage cannot be precisely calculated until the release of these Financial Statements, especially due to the fact that the impact of Pillar II will be based on 2024 results, which cannot yet be known.
Furthermore, in December 2023, the CVM (Securities Commission) published Resolution No. 197, which introduced changes to CPC 32 and IAS 12 “Profit Taxes”. In accordance with this Resolution, due to measurement uncertainties and impacts, the Company decided to apply the exception for recognition and disclosure of information on deferred tax assets and liabilities related to Pillar II income tax, until we have more definitive information available.
11 | Investments in equity-accounted investees, associates and joint venture |
The investments in associates and joint ventures are accounted using the equity method. Associates are those companies in which the Company has significant influence, without the power to control the financial and/or operating policy decisions. Joint ventures are those in which control is jointly exercised by the Company and one or more partners.
The financial statements of its subsidiaries are adjusted to follow the accounting policies established by the Company. All transactions, balances and unrealized gains and losses on transactions between group companies have been eliminated.
The non-controlling interest are presented in the consolidated financial statements as an integral part of the equity, as well as the results attributable to them in the income statement.
When the Company acquires more shares or other equity instruments of an entity that it already controls, the gains and losses of this variation of participation are recorded as an increase or decrease in shareholders’ equity under the caption “Capital Transaction”.
Relevant information for investments in the year ended at December 31, 2023:
Participation | Total assets | Share capital | Equity + Goodwill | Net revenue | Net income (loss) | |||||||||||||||||||
i. In subsidiaries: | ||||||||||||||||||||||||
JBS Embalagens Metálicas Ltda. | 99.95 | % | 84,860 | 203,269 | 80,679 | — | (138 | ) | ||||||||||||||||
JBS Confinamento Ltda. | 100 | % | 543,719 | 866,121 | 346,365 | 786,148 | (92,564 | ) | ||||||||||||||||
Conceria Priante Srl | 100 | % | 180,001 | 14,984 | 93,959 | 111,439 | (21,991 | ) | ||||||||||||||||
JBS Leather International B.V. | 100 | % | 755,547 | 100,029 | 550,351 | 703,467 | (14,615 | ) | ||||||||||||||||
Brazservice Ltda. | 100 | % | — | — | — | 38,983 | (636 | ) | ||||||||||||||||
Enersea Ltda. | 100 | % | — | — | — | 16 | 6 | |||||||||||||||||
JBS Asset Management Corporation | 100 | % | 94,816 | 104,227 | 94,604 | 2,350 | (9,161 | ) | ||||||||||||||||
JBS Investments Luxembourg S.à.r.l. | 100 | % | 174,704,834 | 366 | 40,061,058 | 317,107,825 | 121,735 | |||||||||||||||||
JBS B.V. (5) | 100 | % | — | — | — | — | (235 | ) | ||||||||||||||||
JBS Toledo N.V. | 100 | % | 223,867 | 19,049 | 202,936 | 608,827 | 14,806 | |||||||||||||||||
JBS Chile Limitada | 100 | % | 77,893 | 25 | 21,935 | 332,060 | 4,726 | |||||||||||||||||
JBS Finance Luxembourg S.à.r.l. | 100 | % | 4,669 | 726 | 310 | — | (67 | ) | ||||||||||||||||
ii. In joint ventures: | ||||||||||||||||||||||||
Meat Snack Partners do Brasil Ltda. | 50 | % | 499,372 | 23,762 | 376,862 | 1,021,502 | 83,685 | |||||||||||||||||
iii. In affiliates: | ||||||||||||||||||||||||
JBS Ontario | 100 | % | 204,792 | 5 | 77,430 | 683,956 | 7,315 | |||||||||||||||||
Birla Societá Agricola Srl | 20 | % | — | 13,379 | 40,805 | — | (7,738 | ) |
32
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Changes in the Company’s investments:
Equity | ||||||||||||||||||||||||
December 31, 2022 | Addition (disposal) | Exchange rate variation | Changes in the equity of investees (1) | Proportionate share of income (loss) | December 31, 2023 | |||||||||||||||||||
JBS Embalagens Metálicas Ltda. | 80,777 | — | — | — | (138 | ) | 80,639 | |||||||||||||||||
JBS Confinamento Ltda. (2) | 377,409 | 61,520 | — | — | (92,564 | ) | 346,365 | |||||||||||||||||
Conceria Priante Srl | 120,500 | — | (4,550 | ) | — | (21,991 | ) | 93,959 | ||||||||||||||||
JBS Leather International B.V. (3) | 635,828 | 19,707 | (44,150 | ) | (46,419 | ) | (14,615 | ) | 550,351 | |||||||||||||||
Brazservice Ltda. | 43,940 | (43,304 | ) | — | — | (636 | ) | — | ||||||||||||||||
Meat Snacks Partners do Brasil Ltda. (4) | 209,092 | (62,500 | ) | 1,874 | (1,877 | ) | 41,842 | 188,431 | ||||||||||||||||
Enersea Ltda.(2) | 350 | (356 | ) | 6 | ||||||||||||||||||||
JBS Asset Management Corporation | 111,742 | — | (7,977 | ) | — | (9,161 | ) | 94,604 | ||||||||||||||||
JBS Investments Luxembourg S.à.r.l. (2) | 53,603,571 | (13,194,616 | ) | (3,965,443 | ) | 3,495,811 | 121,735 | 40,061,058 | ||||||||||||||||
JBS B.V. (5) | (27 | ) | 264 | (1 | ) | (1 | ) | (235 | ) | — | ||||||||||||||
JBS Toledo N.V. | 195,970 | — | (7,840 | ) | — | 14,806 | 202,936 | |||||||||||||||||
JBS Chile Limitada | 19,953 | — | (2,744 | ) | — | 4,726 | 21,935 | |||||||||||||||||
JBS Finance Luxembourg S.à.r.l. | 404 | — | (27 | ) | — | (67 | ) | 310 | ||||||||||||||||
Total | 55,399,509 | (13,219,285 | ) | (4,030,858 | ) | 3,447,514 | 43,708 | 41,640,588 |
(*) | Holding company that consolidates the operations of the subsidiaries Seara and JBS USA. |
(1) | Refers to changes in the equity of investees arising from subsidiaries, of the functional currency (dollar) of the direct subsidiary JBS Investments Luxembourg S.à.r.l. (JBS Investments Lux.) to the functional currency of its subsidiaries, such as Australian dollar, Canadian dollar, pound sterling, euro, Mexican peso, among others. |
(2) | The Company increased the capital in its direct subsidiaries JBS Confinamento Ltda. and JBS Leather International, through partial settlement of a current account. |
(3) | The direct subsidiaries Brazservice Ltda. and Enersea Ltda. were incorporated by the Parent Company for corporate simplification purposes. |
(4) | The indirect Meat Snacks Partners do Brasil Ltda. distributed profits across the Company. |
(5) | The Company controls the capital in the direct subsidiary JBS Investments Lux, and envy cash for JBS S.A. |
Equity | ||||||||||||||||||||||||
December 31, 2022 | Addition | Profit distribution | Changes in the equity of investees | Proportionate share of income | December 31, 2023 | |||||||||||||||||||
Meat Snacks Partners (4) | 209,092 | — | (62,500 | ) | (3 | ) | 41,842 | 188,431 | ||||||||||||||||
JBS Foods Ontario Inc. | 75,720 | — | — | (5,606 | ) | 7,316 | 77,430 | |||||||||||||||||
Birla Societá Agricola (6) | 10,025 | — | — | (314 | ) | (1,551 | ) | 8,160 | ||||||||||||||||
Total | 294,837 | — | (62,500 | ) | (5,923 | ) | 47,607 | 274,021 |
33
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Equivalência patrimonial | ||||||||||||||||||||||||
Saldo em 12.31.21 | Adição (Baixa) | Variação cambial | No patrimônio líquido | No resultado do período | Saldo em 12.31.22 | |||||||||||||||||||
JBS Embalagens Metálicas Ltda. | 80,852 | 25 | — | — | (100 | ) | 80,777 | |||||||||||||||||
JBS Confinamento Ltda. | 5,029 | 460,601 | — | — | (88,221 | ) | 377,409 | |||||||||||||||||
Conceria Priante Srl | 151,113 | — | (18,307 | ) | — | (12,306 | ) | 120,500 | ||||||||||||||||
JBS Leather International B.V. | 806,120 | (85,601 | ) | (61,042 | ) | 1,095 | (24,744 | ) | 635,828 | |||||||||||||||
Brazservice Ltda. | 45,376 | — | — | — | (1,436 | ) | 43,940 | |||||||||||||||||
Meat Snacks Partners do Brasil Ltda. | 169,050 | (14,000 | ) | — | — | 54,042 | 209,092 | |||||||||||||||||
Enersea Ltda. | (7,193 | ) | 8,573 | — | — | (1,030 | ) | 350 | ||||||||||||||||
JBS Asset Management Corporation | 114,814 | — | (7,323 | ) | — | 4,251 | 111,742 | |||||||||||||||||
JBS Investments Luxembourg S.à.r.l. | 58,900,478 | (14,049,185 | ) | (4,226,976 | ) | (2,351,587 | ) | 15,330,841 | 53,603,571 | |||||||||||||||
JBS B.V. | 109 | — | (4 | ) | — | (132 | ) | (27 | ) | |||||||||||||||
JBS Toledo N.V. | 211,470 | — | (25,087 | ) | — | 9,587 | 195,970 | |||||||||||||||||
JBS Chile Limitada | 18,431 | — | (1,093 | ) | — | 2,615 | 19,953 | |||||||||||||||||
JBS Finance Luxembourg S.à.r.l. | 381 | — | (19 | ) | — | 42 | 404 | |||||||||||||||||
Total | 60,496,030 | (13,679,587 | ) | (4,339,851 | ) | (2,350,492 | ) | 15,273,409 | 55,399,509 |
Changes in the Consolidated’s investments:
Equity | ||||||||||||||||||||||||
December 31, 2021 | Addition | Dividends distribution | Changes in the equity of investees | Proportionate share of income | December 31, 2022 | |||||||||||||||||||
Meat Snacks Partners | 169,050 | — | (14,000 | ) | — | 54,042 | 209,092 | |||||||||||||||||
JBS Foods Ontario Inc. | 74,140 | — | — | (4,892 | ) | 6,472 | 75,720 | |||||||||||||||||
Total | — | 10,811 | — | (786 | ) | — | 10,025 | |||||||||||||||||
243,190 | 10,811 | (14,000 | ) | (5,678 | ) | 60,514 | 294,837 |
12 | Property, plant and equipment |
Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditures that are directly attributable to the purchase of the items and the costs attributable to bringing the asset to its working condition for its intended use. When parts of an item of property, plant and equipment have different useful lives, those components are accounted for as separate items of property, plant and equipment.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with these costs will flow to the Company and they can be measured reliably. The carrying amount of the replaced items or parts are recognized. All other repairs and maintenance costs are charged to the statement of income in the period in which they are incurred.
Depreciation is recognized using the straight-line method over the estimated useful lives of the assets. Assets are depreciated to their residual values. Land and construction in progress is not depreciated.
34
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
The Company assesses the recoverability of long-lived assets whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. When future undiscounted cash flows of assets are estimated to be insufficient to recover their related carrying value, the Company compares the asset’s estimated future cash flows, discounted to present value using a risk-adjusted discount rate, to its current carrying value and records a provision for impairment as appropriate.
The assets’ residual values and useful lives are reviewed and adjusted, if needed, at the end of each reporting period and the effect of any change in estimates is accounted for prospectively.
At each reporting date, management assesses whether there is an indication that an asset may be impaired. In that case, the estimated recoverable amount will be measured to determine if the asset is impaired. Assets and liabilities are grouped into CGU’s (Cash generating units) for impairment testing purposes. When an asset’s or CGU’s carrying amount it is higher than its estimated recoverable amount, it is written down immediately to the recoverable amount. The recoverable amount is the higher amount of the estimate of the assets’ fair value less cost to sell and value in use. For the year ended December 31, 2023 the Company recognized impairment for the Property, plant and equipment, in the amount of R$113,726 (R$18.707 at December 31, 2022 ), related to the indirect subsidiary JBS USA.
Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are recognized within the statement of income.
The Company’s construction in progress relates to investments for expansion, modernization and adaptation of plants for the purposes of increasing productivity and obtaining new certifications required by the market. When these assets are completed and placed in service, they are transferred to property, plant and equipment and depreciation commences.
During the year ended at December 31, 2023, the Company entered into several purchase commitments for property, plant and equipment in the amount of R$80,340(R$147.376 at 31 December, 2022), in the Company and R$1.88 billion (R$ 3,36 billion in 31 December, 2022) in the Consolidated.
Net amount | ||||||||||||||||||
Company | Useful life | Cost | Accumulated depreciation | December 31, 2023 | December 31, 2022 | |||||||||||||
Buildings | 5 to 40 years | 5,485,294 | (1,697,999 | ) | 3,787,295 | 3,580,188 | ||||||||||||
Land | — | 2,278,266 | — | 2,278,266 | 1,749,340 | |||||||||||||
Machinery and equipment | 3 to 30 years | 7,539,411 | (4,403,271 | ) | 3,136,140 | 3,066,247 | ||||||||||||
Facilities | 10 years | 3,083,705 | (1,156,950 | ) | 1,926,755 | 1,797,795 | ||||||||||||
Computer equipment | 2 to 5 years | 343,583 | (268,490 | ) | 75,093 | 41,814 | ||||||||||||
Vehicles (land and air) | 5 to 35 years | 1,020,249 | (312,551 | ) | 707,698 | 515,344 | ||||||||||||
Construction in progress | — | 1,528,857 | — | 1,528,857 | 2,214,667 | |||||||||||||
Others | 2 to 15 years | 199,705 | (130,191 | ) | 69,514 | 62,468 | ||||||||||||
21,479,070 | (7,969,452 | ) | 13,509,618 | 13,027,863 |
35
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Net amount | ||||||||||||||||||
Consolidated | Useful life | Cost | Accumulated depreciation | December 31, 2023 | December 31, 2022 | |||||||||||||
Buildings | 5 to 60 years | 31,373,046 | (10,530,548 | ) | 20,842,498 | 19,722,715 | ||||||||||||
Land | — | 5,856,709 | — | 5,856,709 | 5,512,969 | |||||||||||||
Machinery and equipment | 3 to 30 years | 46,184,841 | (25,315,981 | ) | 20,868,860 | 19,998,538 | ||||||||||||
Facilities | 10 to 30 years | 5,694,331 | (1,995,406 | ) | 3,698,925 | 3,001,689 | ||||||||||||
Computer equipment | 2 to 15 years | 2,197,781 | (1,392,714 | ) | 805,067 | 606,623 | ||||||||||||
Vehicles (land and air) | 3 to 35 years | 2,122,860 | (802,819 | ) | 1,320,041 | 1,121,272 | ||||||||||||
Construction in progress | — | 7,923,847 | — | 7,923,847 | 11,084,915 | |||||||||||||
Others | 2 to 25 years | 2,917,325 | (1,692,152 | ) | 1,225,173 | 1,122,071 | ||||||||||||
104,270,740 | (41,729,620 | ) | 62,541,120 | 62,170,792 |
Changes in property, plant and equipment:
Company | December 31, 2022 | Additions net of transferences (1) | Incorporates (2) | Disposals | Depreciation expense | December 31, 2023 | ||||||||||||||||||
Buildings | 3,580,188 | 540,100 | 14,402 | (105,304 | ) | (242,091 | ) | 3,787,295 | ||||||||||||||||
Land | 1,749,340 | 564,375 | 276 | (35,725 | ) | — | 2,278,266 | |||||||||||||||||
Machinery and equipment | 3,066,247 | 416,950 | 14,181 | (51,809 | ) | (309,429 | ) | 3,136,140 | ||||||||||||||||
Facilities | 1,797,795 | 239,814 | 7,852 | (6,205 | ) | (112,501 | ) | 1,926,755 | ||||||||||||||||
Computer equipment | 41,814 | 50,808 | 178 | (1,087 | ) | (16,620 | ) | 75,093 | ||||||||||||||||
Vehicles (land and air) | 515,344 | 321,637 | 371 | (35,861 | ) | (93,793 | ) | 707,698 | ||||||||||||||||
Construction in progress | 2,214,667 | (685,810 | ) | — | — | — | 1,528,857 | |||||||||||||||||
Other | 62,468 | 21,065 | 642 | (1,697 | ) | (12,964 | ) | 69,514 | ||||||||||||||||
13,027,863 | 1,468,939 | 37,902 | (237,688 | ) | (787,398 | ) | 13,509,618 |
Company | December 31, 2021 | Additions net of transferences | Disposals | Depreciation | December 31, 2022 | |||||||||||||||
Buildings | 3,746,613 | 53,283 | (393 | ) | (219,315 | ) | 3,580,188 | |||||||||||||
Land | 1,748,561 | 995 | (216 | ) | — | 1,749,340 | ||||||||||||||
Machinery and equipment | 3,131,222 | 267,253 | (2,869 | ) | (329,359 | ) | 3,066,247 | |||||||||||||
Facilities | 1,680,385 | 224,013 | (263 | ) | (106,340 | ) | 1,797,795 | |||||||||||||
Computer equipment | 35,229 | 21,874 | (225 | ) | (15,064 | ) | 41,814 | |||||||||||||
Vehicles (land and air) | 442,619 | 179,049 | (34,026 | ) | (72,298 | ) | 515,344 | |||||||||||||
Construction in progress | 1,419,799 | 794,868 | — | — | 2,214,667 | |||||||||||||||
Other | 64,412 | 9,758 | (126 | ) | (11,576 | ) | 62,468 | |||||||||||||
12,268,840 | 1,551,093 | (38,118 | ) | (753,952 | ) | 13,027,863 |
36
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Consolidated | December 31, 2022 | Additions net of transferences (1) | Business combination adjustments (3) | Disposals | Depreciation expense | Exchange rate variation | December 31, 2023 | |||||||||||||||||||||
Buildings | 19,722,714 | 3,418,759 | 21 | (161,506 | ) | (1,315,974 | ) | (821,516 | ) | 20,842,498 | ||||||||||||||||||
Land | 5,512,969 | 583,120 | — | (71,057 | ) | — | (168,323 | ) | 5,856,709 | |||||||||||||||||||
Machinery and equipment | 19,998,538 | 4,965,205 | 49,681 | (188,389 | ) | (3,049,080 | ) | (907,095 | ) | 20,868,860 | ||||||||||||||||||
Facilities | 3,001,689 | 936,195 | — | (13,743 | ) | (219,632 | ) | (5,584 | ) | 3,698,925 | ||||||||||||||||||
Computer equipment | 606,623 | 451,037 | — | (3,581 | ) | (223,288 | ) | (25,724 | ) | 805,067 | ||||||||||||||||||
Vehicles (land and air) | 1,121,272 | 500,778 | — | (43,652 | ) | (217,255 | ) | (41,102 | ) | 1,320,041 | ||||||||||||||||||
Construction in progress | 11,084,915 | (2,854,594 | ) | — | (19,883 | ) | — | (286,591 | ) | 7,923,847 | ||||||||||||||||||
Other | 1,122,072 | 383,245 | (73 | ) | (47,147 | ) | (184,528 | ) | (48,396 | ) | 1,225,173 | |||||||||||||||||
62,170,792 | 8,383,745 | 49,629 | (548,958 | ) | (5,209,757 | ) | (2,304,331 | ) | 62,541,120 |
Consolidated | December 31, 2021 | Acquired in business combinations | Additions net of transferences | Business combination adjustments |
Disposals |
Depreciation | Exchange rate variation | December 31, 2022 | ||||||||||||||||||||||||
Buildings | 19,536,418 | 633,561 | 1,861,044 | 68 | (20,389 | ) | (1,214,083 | ) | (1,073,905 | ) | 19,722,714 | |||||||||||||||||||||
Land | 5,273,139 | 423,806 | 133,401 | (80 | ) | (27,878 | ) | — | (289,419 | ) | 5,512,969 | |||||||||||||||||||||
Machinery and equipment | 19,921,569 | 476,647 | 3,821,093 | 339 | (32,915 | ) | (2,943,965 | ) | (1,244,230 | ) | 19,998,538 | |||||||||||||||||||||
Facilities | 2,717,858 | 4,379 | 444,915 | — | (476 | ) | (166,165 | ) | 1,178 | 3,001,689 | ||||||||||||||||||||||
Computer equipment | 680,594 | 3,686 | 208,025 | (1 | ) | (21,223 | ) | (213,284 | ) | (51,174 | ) | 606,623 | ||||||||||||||||||||
Vehicles (land and air) | 1,009,846 | 64,643 | 322,705 | 57 | (38,326 | ) | (179,086 | ) | (58,567 | ) | 1,121,272 | |||||||||||||||||||||
Construction in progress | 6,802,002 | 26,144 | 4,609,549 | 4 | (5,149 | ) | — | (347,635 | ) | 11,084,915 | ||||||||||||||||||||||
Other | 1,025,930 | 32,465 | 317,990 | 63 | (8,011 | ) | (180,856 | ) | (65,509 | ) | 1,122,072 | |||||||||||||||||||||
56,967,356 | 1,665,331 | 11,718,722 | 450 | (154,367 | ) | (4,897,439 | ) | (3,129,261 | ) | 62,170,792 |
(1) | Additions for each category includes transfer from construction in progress during the period. |
(2) | Refers to incorporation of a direct subsidiary Brazservice Ltda, during the first quarte at 2023. |
(3) | Refers to business combination adjustment in TriOak, acquired during the year ended at December 22, as described in the footnote 3 - Business Combination. |
For the year ended December 31, 2023, the amount of capitalized interest added to construction in progress and included in additions in the Company was R$130,127 (R$79,855 at December 31, 2022) and in the Consolidated R$346,155 (R$369,155 at December 31, 2022). The capitalization rate used at December 31, 2023 was 8,41% p.y., in Brazil and 4,40% p.y. in the United States (5,90% p.y., in Brazil and 3,70%% p.y. in the United States at December 31, 2022)
37
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
13 | Leases |
The Company recognizes a right of use asset and a lease liability at the lease commencement date. The right of use asset is initially measured at cost and subsequently, at cost less any accumulated depreciation and impairment and adjusted for certain remeasurement of lease liabilities.
The lease liability is initially measured at the present value of the lease payments that were not paid at the start date, discounted at the interest rate implicit in the lease agreement. When the implicit rate cannot be readily determined, the incremental borrowing rate is used as discount rate.
The Company when measuring and remeasuring its lease liabilities and the right of use, used the discounted cash flow technique without considering projected future inflation in the flows to be discounted. Such technique generates significant distortions in the information provided, given the current reality of long-term interest rates in the Brazilian economic environment.
The nature of the expenses related to these leases is recognized as cost of depreciation of right of use assets. Financial expenses on lease obligations are recognized and demonstrated as interest expense.
The Company uses the optional exemption to not recognize a right of use asset and lease liability for short term (less than 12 months) and low value leases. The average discount rate used for the present value’s calculation of the lease provision of the identified assets and, consequently, for the monthly accrual of financial interest were 6.68% (8.25% at December 31, 2022) in the Company, and 5.85% (7.30% at December 31, 2022) in the Consolidated, in accordance with the term of each lease agreement and the economic policy of each subsidiary’s domicile.
13.1 | Right of use asset |
Net amount | ||||||||||||||||||
Company | Average lease term | Cost | Accumulated amortization | December 31, 2023 | December 31, 2022 | |||||||||||||
Buildings | 3 to 20 years | 49,975 | (27,342 | ) | 22,633 | 30,041 | ||||||||||||
Computer equipment | 1 to 3 years | 82,527 | (31,287 | ) | 51,240 | 10,728 | ||||||||||||
Machinery and equipment | 1 to 4 years | 60,677 | (22,721 | ) | 37,956 | 12,747 | ||||||||||||
Operating plants | 1 to 4 years | 27,164 | (15,165 | ) | 11,999 | 623 | ||||||||||||
Land | 1 to 4 years | 1,609 | (1,104 | ) | 505 | 253 | ||||||||||||
Vehicles (land) | 1 year | 13,361 | (1,893 | ) | 11,468 | 272 | ||||||||||||
— | — | — | — | |||||||||||||||
235,313 | (99,512 | ) | 135,801 | 54,664 |
Net amount | ||||||||||||||||||
Consolidated | Average lease term | Cost | Accumulated amortization | December 31, 2023 | December 31, 2022 | |||||||||||||
Growing facilities | 1 to 13 years | 6,182,222 | (2,283,192 | ) | 3,899,030 | 4,299,324 | ||||||||||||
Buildings | 2 to 30 years | 3,809,084 | (1,232,991 | ) | 2,576,093 | 2,227,940 | ||||||||||||
Computer equipment | 1 to 5 years | 134,310 | (59,107 | ) | 75,203 | 48,089 | ||||||||||||
Machinery and equipment | 1 to 10 years | 1,274,315 | (838,111 | ) | 436,204 | 547,282 | ||||||||||||
Operating plants | 1 to 11 years | 176,154 | (80,806 | ) | 95,348 | 97,601 | ||||||||||||
Land | 1 to 30 years | 189,395 | (96,513 | ) | 92,882 | 102,478 | ||||||||||||
Vehicles (land, air and sea) | 1 to 20 years | 2,116,354 | (1,033,259 | ) | 1,083,095 | 1,052,178 | ||||||||||||
— | — | — | — | |||||||||||||||
13,881,834 | (5,623,979 | ) | 8,257,855 | 8,374,892 |
38
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Changes in the right of use assets: | ||||||||||||||||||||
Company | December 31, 2022 | Additions (1) | Terminated contracts | Amortization | December 31, 2023 | |||||||||||||||
Buildings | 30,041 | 12,358 | (3,557 | ) | (16,209 | ) | 22,633 | |||||||||||||
Computer equipment | 10,728 | 53,587 | — | (13,075 | ) | 51,240 | ||||||||||||||
Machinery and equipment | 12,747 | 41,686 | 275 | (16,752 | ) | 37,956 | ||||||||||||||
Operating plants | 623 | 16,958 | — | (5,582 | ) | 11,999 | ||||||||||||||
Land | 253 | 793 | — | (541 | ) | 505 | ||||||||||||||
Vehicles (land) | 272 | 12,896 | (54 | ) | (1,646 | ) | 11,468 | |||||||||||||
Furniture and appliances | — | — | — | — | — | |||||||||||||||
54,664 | 138,278 | (3,336 | ) | (53,805 | ) | 135,801 |
Company | December 31, 2021 | Additions | Terminated contracts | Amortization | December 31, 2022 | |||||||||||||||
Buildings | 18,789 | 24,587 | — | (13,335 | ) | 30,041 | ||||||||||||||
Computer equipment | 18,531 | — | — | (7,803 | ) | 10,728 | ||||||||||||||
Operating plants | 4,146 | 13,927 | (352 | ) | (4,974 | ) | 12,747 | |||||||||||||
Machinery and equipment | 3,365 | 852 | — | (3,594 | ) | 623 | ||||||||||||||
Land | 437 | 213 | — | (397 | ) | 253 | ||||||||||||||
Vehicles (land) | 222 | 255 | (13 | ) | (192 | ) | 272 | |||||||||||||
Furniture and appliances | 93 | — | (75 | ) | (18 | ) | — | |||||||||||||
45,583 | 39,834 | (440 | ) | (30,313 | ) | 54,664 |
Consolidated | December 31, 2022 | Additions (1) | Business combinations adjustments (3) | Terminated contracts | Amortization | Exchange rate variation | December 31, 2023 | |||||||||||||||||||||
Growing facilities | 4,299,324 | 731,620 | (51,501 | ) | (83,196 | ) | (834,205 | ) | (163,012 | ) | 3,899,030 | |||||||||||||||||
Buildings | 2,227,940 | 950,069 | — | (131,832 | ) | (418,286 | ) | (51,798 | ) | 2,576,093 | ||||||||||||||||||
Computer equipment | 48,089 | 53,144 | — | — | (26,027 | ) | (3 | ) | 75,203 | |||||||||||||||||||
Machinery and equipment | 547,282 | 168,949 | — | (5,565 | ) | (255,494 | ) | (18,968 | ) | 436,204 | ||||||||||||||||||
Operating plants | 97,601 | 30,754 | — | (686 | ) | (31,534 | ) | (787 | ) | 95,348 | ||||||||||||||||||
Land | 102,478 | 7,103 | — | (117 | ) | (13,000 | ) | (3,582 | ) | 92,882 | ||||||||||||||||||
Vehicles (land, air and sea) | 1,052,178 | 469,394 | — | (4,579 | ) | (362,638 | ) | (71,260 | ) | 1,083,095 | ||||||||||||||||||
Furniture and appliances | — | — | — | — | — | — | — | |||||||||||||||||||||
8,374,892 | 2,411,033 | (51,501 | ) | (225,975 | ) | (1,941,184 | ) | (309,410 | ) | 8,257,855 |
39
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Consolidated | December 31, 2021 | Acquired in business combinations | Additions | Business combinations adjustments | Terminated contracts | Amortization | Exchange rate variation | December 31, 2022 | ||||||||||||||||||||||||
Growing facilities | 3,406,396 | 751,741 | 1,155,480 | — | (204,573 | ) | (673,210 | ) | (136,510 | ) | 4,299,324 | |||||||||||||||||||||
Buildings | 2,211,045 | 1,062 | 656,716 | — | (22,431 | ) | (325,494 | ) | (292,958 | ) | 2,227,940 | |||||||||||||||||||||
and sea) | 67,004 | — | — | — | (257 | ) | (17,982 | ) | (676 | ) | 48,089 | |||||||||||||||||||||
equipment | 693,677 | 9,447 | 195,106 | — | (22,168 | ) | (279,475 | ) | (49,305 | ) | 547,282 | |||||||||||||||||||||
Operating plants | 113,605 | — | 32,261 | — | (21,618 | ) | (23,212 | ) | (3,435 | ) | 97,601 | |||||||||||||||||||||
Land | 109,926 | 3,474 | 14,491 | 253 | (71 | ) | (14,195 | ) | (11,400 | ) | 102,478 | |||||||||||||||||||||
equipment | 1,231,095 | 3,196 | 441,334 | — | (41,851 | ) | (459,164 | ) | (122,432 | ) | 1,052,178 | |||||||||||||||||||||
appliances | 94 | — | — | — | (76 | ) | (18 | ) | — | — | ||||||||||||||||||||||
7,832,842 | 768,920 | 2,495,388 | 253 | (313,045 | ) | (1,792,750 | ) | (616,716 | ) | 8,374,892 |
(1) | Additions for each category includes PIS and COFINS to be paid. |
(2) | Refers to the TriOak business combination adjustment, the most relevant, acquired during the year ended in 2022, as described in the footnote 3 - Business Combination. |
13.2 | Lease liabilities |
Company | Consolidated | |||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||
Lease liability | 168,452 | 71,666 | 10,953,118 | 10,903,766 | ||||||||||||
Present value adjustment | (17,422 | ) | (8,968 | ) | (2,039,185 | ) | (1,919,758 | ) | ||||||||
151,030 | 62,698 | 8,913,933 | 8,984,008 | |||||||||||||
Breakdown: | ||||||||||||||||
Current liabilities | 62,454 | 27,675 | 1,707,172 | 1,788,353 | ||||||||||||
Non-current liabilities | 88,576 | 35,023 | 7,206,761 | 7,195,655 | ||||||||||||
151,030 | 62,698 | 8,913,933 | 8,984,008 |
Changes in the lease liabilities:
Company | December 31, 2022 | Additions | Interest accrual | Payments | Terminated contracts | December 31, 2023 | ||||||||||||||||||
Lease liabilities | 62,698 | 138,324 | 6,646 | (52,232 | ) | (4,406 | ) | 151,030 |
Company | December 31, 2021 | Additions | Interest accrual | Payments | Terminated contracts | December 31, 2023 | ||||||||||||||||||
Lease liability | 52,599 | 39,881 | 4,863 | (34,330 | ) | (315 | ) | 62,698 |
Consolidated | December 31, 2022 | Acquired in business combinations | Additions | Interest accrual | Payments | Terminated contracts | Exchange rate variation | December 31, 2023 | ||||||||||||||||||||||||
Lease liabilities | 8,984,008 | (51,501 | ) | 2,444,826 | 495,138 | (2,384,894 | ) | (238,717 | ) | (334,927 | ) | 8,913,933 |
40
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Consolidated | December 31, 2021 | Acquired in business combinations | Additions | Interest accrual | Payments | Terminated contracts | Exchange rate variation | December 31, 2023 | ||||||||||||||||||||||||
Lease liability | 8,404,474 | 768,920 | 2,526,801 | 425,418 | (2,243,385 | ) | (314,239 | ) | (583,981 | ) | 8,984,008 |
The amounts recognized as lease expense are shown below:
Company | Consolidated | |||||||||||||||
31.12.23 | 31.12.22 | 31.12.23 | 31.12.22 | |||||||||||||
Variable lease payments | 10,514 | 5,468 | 2,537,828 | 2,577,122 | ||||||||||||
Short term lease liability | 24,510 | 28,962 | 733,593 | 635,972 | ||||||||||||
Non-material lease liability | 7,172 | 7,709 | 21,712 | 20,026 | ||||||||||||
42,196 | 42,139 | 3,293,133 | 3,233,120 |
The non-current portion of the lease liabilities schedule is as follows:
December 31, 2023 | ||||||||
Company | Consolidated | |||||||
2025 | 41,810 | 1,420,650 | ||||||
2026 | 22,467 | 1,185,846 | ||||||
2027 | 16,129 | 955,326 | ||||||
2028 | 14,070 | 727,973 | ||||||
2029 | 464 | 657,798 | ||||||
Maturities thereafter 2029 | 3,054 | 3,979,877 | ||||||
Total Future Minimum Lease Payments | 97,994 | 8,927,470 | ||||||
Present value adjustment | (9,418 | ) | (1,720,709 | ) | ||||
88,576 | 7,206,761 |
14 | Intangible assets |
Intangible assets are carried at acquisition cost, net of accumulated amortization and impairment, if applicable. Intangible assets are recognized when it is expected that the assets will generate future economic benefits, taking into consideration the intangible assets’ economic and technological viability. Intangible assets are primarily comprised of trademarks, customer relationships, water and mineral rights, supplier contracts, software and others.
Intangible assets with finite useful lives are amortized over the period of effective use using the straight-line method or a method that reflects the economic benefits of the asset. Intangible assets that are subject to amortization are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized when the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher amount of an asset’s fair value less costs to sell and its value in use.
The carrying value of indefinite-lived intangible assets, which refers to trademarks and water rights, are tested at least annually for impairment or more frequently if events or changes in circumstances indicate that the assets may be impaired. If impairment exists, a loss is recognized to write down the indefinite-lived assets to their recoverable amount.
Management understands that certain trademarks have indefinite lives due to verifiable history, the nature of the assets and expected use of the asset by the Company. These acquired trademarks have no legal, regulatory or contractual limits on their use, do not depend on the useful life of any asset or group of assets as they existed independently for a substantial time prior to the acquisitions, and they are not related to sectors subject to technological obsolescence or other forms of deterioration in value.
41
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Intangible assets acquired in a business combination are recognized at fair value based on valuation methodologies and techniques that often involve the use of a third- party valuation firm’s expertise to calculate estimates of discounted cash flows. Intangible assets are composed as follows:
Company | Consolidated | |||||||||||||||||||||
Net amount | Net amount | |||||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
Useful life | 2023 | 2022 | Useful life | 2023 | 2022 | |||||||||||||||||
Trademarks | Indefinite | — | — | Indefinite | 5,290,539 | 5,479,137 | ||||||||||||||||
Trademarks | 5 years | 171,628 | 10,487 | 2 to 20 years | 1,651,771 | 1,648,336 | ||||||||||||||||
Software | 5 years | 30,448 | 20,534 | 2 to 15 years | 120,746 | 109,985 | ||||||||||||||||
Water rights | — | — | — | Indefinite | 55,147 | 59,205 | ||||||||||||||||
Customer relationships | — | — | — | 3 to 20 years | 2,353,676 | 2,868,194 | ||||||||||||||||
Supplier contract | — | — | — | 7 to 17 years | 135,931 | 159,187 | ||||||||||||||||
Other | Indefinite | 2,236 | — | 2 to 17 years | 5,049 | 4,345 | ||||||||||||||||
204,312 | 31,021 | 9,612,859 | 10,328,389 |
Changes in intangible assets: | ||||||||||||||||||||
Company | December 31, 2022 | Additions | Disposals | Amortization expenses | December 31, 2023 | |||||||||||||||
Amortizing: | ||||||||||||||||||||
Trademarks | 10,487 | 171,829 | — | (10,688 | ) | 171,628 | ||||||||||||||
Softwares | 20,534 | 15,360 | (304 | ) | (5,142 | ) | 30,448 | |||||||||||||
— | 2,236 | — | — | 2,236 | ||||||||||||||||
31,021 | 189,425 | (304 | ) | (15,830 | ) | 204,312 |
Company | December 31, 2021 | Additions | Disposals | Amortization | December 31, 2022 | |||||||||||||||
Amortizing: Trademarks | 15,448 | — | — | (4,961 | ) | 10,487 | ||||||||||||||
Software | 17,991 | 7,733 | (13 | ) | (5,177 | ) | 20,534 | |||||||||||||
33,439 | 7,733 | (13 | ) | (10,138 | ) | 31,021 |
Consolidated | December 31, 2021 | Additions | Disposals | Amortization expenses | Exchange rate variation | December 31, 2023 | ||||||||||||||||||
Amortizing: | ||||||||||||||||||||||||
Trademarks | 1,648,336 | 175,794 | — | (120,624 | ) | (51,735 | ) | 1,651,771 | ||||||||||||||||
Softwares | 109,985 | 37,558 | (636 | ) | (25,551 | ) | (610 | ) | 120,746 | |||||||||||||||
Customer relationships | 2,868,194 | 11,566 | (11,884 | ) | (370,675 | ) | (143,525 | ) | 2,353,676 | |||||||||||||||
Supplier contract | 159,187 | — | — | (19,086 | ) | (4,170 | ) | 135,931 | ||||||||||||||||
Others | 4,345 | 2,486 | (146 | ) | (1,377 | ) | (259 | ) | 5,049 | |||||||||||||||
Non-amortizing: | ||||||||||||||||||||||||
Trademarks | 5,479,137 | 1,810 | — | — | (190,408 | ) | 5,290,539 | |||||||||||||||||
Water rights | 59,205 | — | — | — | (4,058 | ) | 55,147 | |||||||||||||||||
10,328,389 | 229,214 | (12,666 | ) | (537,313 | ) | (394,765 | ) | 9,612,859 |
42
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Consolidated | December 31, 2021 | Acquired in business combination | Additions | Acquired in business combinations | Disposals | Amortization | Exchange rate variation | December 31, 2022 | ||||||||||||||||||||||||
Amortizing: | ||||||||||||||||||||||||||||||||
Trademark | 1,871,992 | 110,374 | 28 | — | (12 | ) | (114,717 | ) | (219,329 | ) | 1,648,336 | |||||||||||||||||||||
Software | 92,689 | 320 | 41,481 | — | (284 | ) | (23,254 | ) | (967 | ) | 109,985 | |||||||||||||||||||||
Customer relationships | 3,602,262 | 14,739 | — | 5,410 | — | (395,347 | ) | (358,870 | ) | 2,868,194 | ||||||||||||||||||||||
Supplier contract | 183,974 | — | — | — | — | (19,478 | ) | (5,309 | ) | 159,187 | ||||||||||||||||||||||
Others | 5,583 | 3,120 | 199 | — | — | (3,887 | ) | (670 | ) | 4,345 | ||||||||||||||||||||||
Non-amortizing: | ||||||||||||||||||||||||||||||||
Trademarks | 6,183,153 | 19,931 | 1,652 | 3,848 | — | — | (729,447 | ) | 5,479,137 | |||||||||||||||||||||||
Water rights | 64,706 | — | — | — | — | — | (5,501 | ) | 59,205 | |||||||||||||||||||||||
12,004,359 | 148,484 | 43,360 | 9,258 | (296 | ) | (556,683 | ) | (1,320,093 | ) | 10,328,389 |
Impairment test:
Annualy, the Company tests the recoverability of its assets using the concept of value in use through cash flow models and at the year ended at December 31, 2022, there were no indications of impairment.
15 | Goodwill |
In the Company, goodwill is recognized under the caption “Investments in subsidiaries, associate and joint venture” because for the investor it is part of its investment in the subsidiary’s acquisition; and as goodwill, in the Consolidated because it refers to expectation of future earnings from the acquired subsidiary, which assets and liabilities are consolidated with the Company’s. Therefore, in the Company there is only goodwill from incorporations in the amount of R$9,085,970 and in the Consolidated all goodwill are recognized as intangible. For tax purposes, all the goodwill recorded in the Company was fully amortized in the year ended December 31, 2021.
Goodwill is an indefinite lived asset and is required to be tested for impairment annually or whenever there is evidence of a decline in fair value. Assets and liabilities are grouped into CGU’s (Cash generating units) for impairment testing purposes. Any impairment loss is recognized immediately in the statement of income and cannot be reversed.
For impairment testing, assets grouped together into the group of assets which generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash generating units (CGUs). Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination. CGUs are tested for impairment annually or whenever events and circumstances indicate that the recoverable amount of the CGU is less than its carrying amount. The recoverable amount is the higher of fair value less cost to sell or value in-use. The Company first estimates the value in-use of CGUs and if lower than the carrying amount, the Company will estimate the fair value less cost to sell. During the years ended at December 31, 2023 and 2022, our estimates of the CGU groups’ value in-use exceeded their carrying amounts and therefore estimates of fair value less cost to sell were not determined. The Company estimates of value in- use contain uncertainties due to judgments used in assumptions, including revenue growth, costs and expenses, capital expenditures, working capital and discount rates. The assumptions are based on Management’s estimates as well as comparable data available for market and economic conditions which generate the cash flows.
Upon the sale of a business, the goodwill or corresponding portion of goodwill is included in the calculation of profit or loss on disposal.
43
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Useful life | December 31, 2023 | December 31, 2022 | ||||||||
Goodwill | Indefinite | 29,556,234 | 30,412,362 |
Consolidated | ||||||||
Changes in goodwill: | December 31, 2023 | December 31, 2022 | ||||||
Balance at the beginning of the period | 30,412,362 | 32,564,548 | ||||||
Acquired in business combination | — | 95,628 | ||||||
Business combination adjustments (1) | 64,206 | 30,877 | ||||||
Write-off for recoverability | — | (85,601 | ) | |||||
Exchange rate variation | (920,334 | ) | (2,193,090 | ) | ||||
Balance at the end of the period | 29,556,234 | 30,412,362 |
(1) | Refers to business combination adjustments from the acquisition of TriOak acquired during the 2022 financial year, as described in explanatory note 3 - Business combinations. During 2022, refers to the business combination adjustment of the acquisitions made in fiscal 2021, Randall Parker, International Food Company Seara LLC., Sunnyvaley and Pilgrim’s Food Masters and BMF (“Bait Almakoolat Food”). |
Impairment test of goodwill
At December 31, 2023 and 2022, the Company tested the recoverability of goodwill of each CGU group using the concept of value in use through discounted cash flow models based on the balances at September 30, 2022 and 2022. The determination of the value in use involves using assumptions about cash flows, such as rates of revenue growth, costs and expenses, capital expenditures, working capital requirements and discount rates.
Management projects cash flows for a maximum period of 5 years for the CGU groups of Brazil Beef and USA Pork, to better reflect the long cycle of each group when it refers to the useful life of the animals used in production. The terminal value was assigned based on an expected growth rate of perpetuity for the CGU groups. The weighted average rate of the cost of capital (WACC), used as the discount rate, was estimated on a post-tax basis based on the historical industry performance for to each CGU group and external sources of information regarding market risks.
The impairment testing were assigned to the CGUs groups which were allocated.
For the purposes of impairment testing CGUs have been aggregated into the following groups representing the lowest level within the Company at which the goodwill is monitored for internal management purposes and that have significant goodwill:
Consolidated | ||||||||
CGU Groups | December 31, 2023 | December 31, 2022 | ||||||
Brazil Beef | 9,069,926 | 9,069,926 | ||||||
Seara | 3,713,132 | 3,714,070 | ||||||
Moy Park | 3,764,512 | 3,837,113 | ||||||
USA Pork | 3,362,447 | 3,623,871 | ||||||
Australia Meat | 1,359,994 | 1,445,908 | ||||||
Australia Smallgoods | 1,503,698 | 1,598,730 | ||||||
Pilgrim’s Food Masters (PFM) | 1,629,983 | 1,673,144 | ||||||
Others CGUs without significant goodwill (1) | 5,152,542 | 5,449,600 | ||||||
Total | 29,556,234 | 30,412,362 |
44
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
For the years ended at December 31, 2023 and 2022 there were no indications that goodwill within any CGU group was impaired.
i. | Brazil Beef |
The key assumptions used in the estimation of the value in-use are set out below. The values assigned to the key assumptions represent management’s assessment of future trends in the relevant industries and have been based on historical data from external and internal sources.
2023 | 2022 | |||||||
Discount rate (pre tax) | 13.5 | % | 13.2 | % | ||||
Terminal value growth rate | 3.5 | % | 4.3 | % | ||||
Estimated growth rate (average for the next 5 years) | 7.2 | % | 6.6 | % |
Estimated growth rate was projected considering past experiences and forecasts as follows:
● | Revenue of this CGU group includes sales from beef operations in Brazil. Revenues growth was projected considering the availability of cattle, total slaughtering capacity and utilization of facilities related to production, and price increases/decreases based on estimatives of inflation for the domestic market and exchange rate variation for exports. |
● | Operating costs and expenses were projected considering the historical performance of the CGU group and prices trends of the primary raw materials, especially cattle. In addition, it was considered efficiency improvements related to the integration of acquisitions. |
● | Capital expenditures were estimated assuming the maintenance of existing infrastructure in order to continue to be operated for an indefinite period. |
For the years ended December 31, 2023 and 2022, estimated value in-use exceeded the carrying amount of the CGU group.
ii. | Seara |
The key assumptions used in the estimation of the value in-use are set out below:
2023 | 2022 | |||||||
Discount rate (pre tax) | 15.8 | % | 15.2 | % | ||||
Terminal value growth rate | 3.3 | % | 3.3 | % | ||||
Estimated growth rate (average for the next 5 years) | 13.2 | % | 13.3 | % |
Estimated growth rate was projected considering past experiences and forecasts as follows:
● | Revenue includes sales from pork, chicken and other products in Brazil. Revenue growth was projected considering the availability of chicken and pork, total slaughtering capacity and utilization of facilities related to production, and price increases/decreases based on estimated inflation for the domestic market and exchange rate variation for exports. |
● | Operating costs and expenses were projected considering the historical performance of the CGU group and prices trends of primary raw materials. In addition, it was considered efficiency improvements related to the integration of acquisitions. |
● | Capital expenditures were estimated assuming the maintenance of existing infrastructure in order to continue to be operated for an indefinite period. |
45
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
For the years ended December 31, 2023 and 2022, estimated value in use exceeded the carrying amount of the CGU group.
iii. | Moy Park |
The key assumptions used in the estimation of the value in-use are set out below:
2023 | 2022 | |||||||
Discount rate (pre tax) | 14.0 | % | 10.2 | % | ||||
Terminal value growth rate | 2.0 | % | 1.0 | % | ||||
Estimated growth rate (average for the next 5 years) | 7.4 | % | 6.4 | % |
Estimated growth rate was projected considering past experiences and forecasts as follows:
● | Revenue of this CGU group includes sales from chicken operations in Europe, which consists of Moy Park’s operations. Revenue growth was projected considering the availability of chicken, total slaughtering capacity and utilization of facilities related to production, and price increases/decreases based on estimated inflation for the domestic market and exchange rate variation for exports. |
● | Operating costs and expenses were projected considering the historical performance of the CGU group and prices trends of primary raw materials. In addition, it was considered efficiency improvements related to the integration of acquisitions. |
● | Capital expenditures were estimated assuming the maintenance of existing infrastructure in order to continue to be operated for an indefinite period. |
For the years ended December 31, 2023 and 2022, estimated value in-use exceeded the carrying amount of the CGU group.
iv. | USA Pork |
The key assumptions used in the estimation of the value in-use are set out below:
2023 | 2022 | |||||||
Discount rate (pre tax) | 9.8 | % | 10.7 | % | ||||
Terminal value growth rate | 2.5 | % | 0.5 | % | ||||
Estimated growth rate (average for the next 5 years) | 2.8 | % | 0.8 | % |
Estimated growth rate was projected considering past experiences and forecasts as follows:
● | Revenue of this CGU group includes sales from pork operations in the U.S. Revenue growth was projected considering the availability pork, total slaughtering capacity and utilization of facilities related to production, and price increases/decreases based on estimated inflation for the domestic market and exchange rate variation for exports. |
● | Operating costs and expenses were projected considering the historical performance of the CGU group and prices trends of primary raw materials. |
● | Capital expenditures were estimated assuming the maintenance of existing infrastructure in order to continue to be operated for an indefinite period. |
46
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
For the years ended December 31, 2023 and 2022, estimated value in-use exceeded the carrying amount of the CGU group.
v. | Australia Meat |
The key assumptions used in the estimation of the value in-use are set out below:
2023 | 2022 | |||||||
Discount rate (pre tax) | 9.1 | % | 9.3 | % | ||||
Terminal value growth rate | 2.0 | % | 2.0 | % | ||||
Estimated growth rate (average for the next 5 years) | 2.3 | % | 2.7 | % |
Estimated growth rate was projected considering past experiences and forecasts as follows:
● | Revenue of this CGU group includes sales from beef operations in Australia. Revenue growth was projected considering the availability of cattle and pork, total slaughtering capacity and utilization of facilities related to production, and price increases/decreases based on estimated inflation for the domestic market and exchange rate variation for exports. |
● | Operating costs and expenses were projected considering the historical performance of the CGU group and prices trends of the primary raw materials. In addition, we considered efficiency improvements related to the integration of the acquisition. |
● | Capital expenditures were estimated assuming the maintenance of existing infrastructure in order to continue operating for an indefinite period. |
For the years ended December 31, 2023 and 2022, estimated value in-use exceeded the carrying amount of the CGU group.
vi. | Australia Smallgoods |
The key assumptions used in the estimation of the value in-use are set out below.
2023 | 2022 | |||||||
Discount rate (pre tax) | 9.0 | % | 9.4 | % | ||||
Terminal value growth rate | 2.0 | % | 2.0 | % | ||||
Estimated growth rate (average for the next 5 years) | 8.9 | % | 6.9 | % |
Estimated growth rate was projected considering past experiences and forecasts as follows:
● | Revenue of this CGU group includes sales from the Smallgoods operations in Australia, consisting of Primo’s operations. Revenue growth was projected considering the availability of cattle and pork, total slaughtering capacity and utilization of facilities related to production, and price increases/decreases based on estimated inflation for the domestic market and exchange rate variation for exports. |
● | Operating costs and expenses were projected considering the historical performance of the CGU group and prices trends of the primary raw materials, primarily hogs. In addition, we considered efficiency improvements related to the integration of the acquisition. |
● | Capital expenditures were estimated assuming the maintenance of existing infrastructure in order to continue operating for an indefinite period. |
47
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
For the years ended December 31, 2023 and 2022, estimated value in-use exceeded the carrying amount of the CGU group.
vii. | Pilgrim’s Food Masters |
The key assumptions used in the estimation of the value in-use are set out below:
2023 | 2022 | |||||||
Discount rate (pre tax) | 13.0 | % | 10.2 | % | ||||
Terminal value growth rate | 2.7 | % | 3.0 | % | ||||
Estimated growth rate (average for the next 5 years) | 6.3 | % | 6.9 | % |
Revenue of this CGU group includes sales from the Pilgrim´s Food Masters operations in United Kingdom, includes sales from frozen entrees to customers. Revenue growth was projected the utilization of facilities related to production, and price increases/decreases based on estimated inflation for the domestic market and exchange rate variation for exports.
● | Operating costs and expenses were projected considering the historical performance of the CGU group and prices trends of the primary raw materials, primarily hogs. In addition, we considered efficiency improvements related to the integration of the acquisition. |
● | Capital expenditures were estimated assuming the maintenance of existing infrastructure in order to continue operating for an indefinite period. |
For the years ended December 31, 2023 and 2022, the estimated value in use exceeded the carrying value of this UGC group.
16 | Trade accounts payable |
Trade accounts payable correspond to the amounts owed to suppliers in the ordinary course of business. If the payment period is equivalent to one year or less, the amount is classified as current liabilities, otherwise the corresponding amount is classified as non-current liabilities. Accounts payable are recognized initially at their fair value and are subsequently measured at amortized cost using the effective interest method. Accounts payable by major type of supplier is as follow:
Company | Consolidated | |||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||
Domestic: | ||||||||||||||||
Commodities | 2,613,599 | 2,657,465 | 8,527,807 | 9,564,105 | ||||||||||||
Materials and services | 1,103,675 | 1,163,927 | 15,120,057 | 20,253,472 | ||||||||||||
Finished products | 251,126 | 229,817 | 184,266 | 71,860 | ||||||||||||
Adjustment to present value | (36,772 | ) | (15,601 | ) | (95,094 | ) | (78,670 | ) | ||||||||
3,931,628 | 4,035,608 | 23,737,036 | 29,810,767 | |||||||||||||
Foreign: | ||||||||||||||||
Commodities | 55,948 | 75,910 | 151,795 | 190,976 | ||||||||||||
Materials and services | 480,235 | 183,605 | 1,552,561 | 1,003,257 | ||||||||||||
Finished products | 325 | 2,732 | 9,582 | 4,515 | ||||||||||||
536,508 | 262,247 | 1,713,938 | 1,198,748 | |||||||||||||
Total suppliers | 4,468,136 | 4,297,855 | 25,450,974 | 31,009,515 | ||||||||||||
Supply chain finance (1) | ||||||||||||||||
Domestic | 1,466,235 | 1,263,694 | 4,552,484 | 2,996,425 | ||||||||||||
Foreign | — | — | 37,386 | 74,674 | ||||||||||||
1,466,235 | 1,263,694 | 4,589,870 | 3,071,099 | |||||||||||||
Total | 5,934,371 | 5,561,549 | 30,040,844 | 34,080,614 |
(*) | In order to allow better comparability, the comparative balances from December 31, 2021 were reclassified between lines. |
(1) | The Company and its indirect subsidiary Seara Alimentos carry out transactions with financial institutions that allow the suppliers to anticipate their receivables in the domestic market. It should be emphasized, operationally and commercially, there are no identifiable changes to the conditions applied in the negotiations with suppliers such as price or flexibility on payment terms. In addition, this operation did not bring any other cost to the Group and all financial costs of the operation are the responsibility of the suppliers. |
48
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
The Company has commitments to purchase cattle for future delivery signed with certain suppliers, including the related party JBJ, guaranteeing the acquisition of cattle at a fixed price, or to be fixed, without there being a cash effect on the Company until the delivery of the cattle and maturity. of the operation. Based on this future delivery contract, these suppliers already make advance payments to the banks for this operation in the risk-drawn modality. On December 31, 2023, the amount of this transaction was R$358,139 (R$451,800 on December 31, 2022), this operation is recorded from its origin as Suppliers risk drawn.
17 | Loans and financings |
Loans and financing are initially recognized at fair value upon receipt of the proceeds, net of transaction costs, and subsequently measured at amortized cost. Below is a schedule showing the Company loans and financing instruments by foreign and local currency. Local currency indicates loans denominated in the functional currency of the borrower. All borrowings denominated in currencies other than the presentation currency (Brazilian Reais) are translated to presentation currency each reporting period. Current amounts include accrued but unpaid interest at period-end. Premiums, discounts and transaction costs are amortized to finance expense using the effective interest method.
Debt Registration with the Securities Exchange Commission (SEC): On July 24, 2023, the Company registered with the United States Securities and Exchange Commission (“SEC”) relating to exchange offers for 11 series of debt securities (“Bonds”). As a result of the declaration of effectiveness, the Company becomes obliged to disclose information in the United States of America and, therefore, is subject to the information disclosure requirements provided for by the SEC and other regulations and standards relating to securities in the United States of America and compliance obligations under the Sarbanes-Oxley Act (“SOX”).
Company | ||||||||||||||||||||||||||||||||
Average | Current | Non-current | ||||||||||||||||||||||||||||||
Type | annual interest rate | Currency | Index on variable rate loans | Payment terms | December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||
Foreign currency | ||||||||||||||||||||||||||||||||
ACC (1) | 8.40 | % | USD | — | 2024 | 252,514 | 2,174,591 | — | 266,395 | |||||||||||||||||||||||
Prepayment | 7.38 | % | USD | SOFR | 2024 - 27 | 26,776 | 1,034,831 | 844,059 | 1,225,211 | |||||||||||||||||||||||
FINIMP (2) | 6.48 | % | USD and EUR | Euribor | 2025 | 151,490 | 525,112 | 3,131 | 15,867 | |||||||||||||||||||||||
Working capital - American Dollar | 8.97 | % | USD | SOFR | 2024 - 30 | 1,751 | 1,821 | 12,359 | 14,824 | |||||||||||||||||||||||
CRA (3) | 4.92 | % | USD | — | 2028 | 2,139 | 484 | 186,218 | 66,564 | |||||||||||||||||||||||
434,670 | 3,736,839 | 1,045,767 | 1,588,861 | |||||||||||||||||||||||||||||
Local currency | ||||||||||||||||||||||||||||||||
Export credit facility | 14.20 | % | CDI | 2024 - 30 | 11,066 | 274,829 | 1,035,206 | 1,478,966 | ||||||||||||||||||||||||
CRA (3) | 10.38 | % | BRL | CDI e IPCA | 2024 - 37 | 721,645 | 853,054 | 9,746,977 | 7,618,405 | |||||||||||||||||||||||
Working capital - Brazilian Reais | 17.45 | % | — | CDI e TJLP | 2023 - 28 | 24,597 | 85,648 | 79,061 | 3,378 | |||||||||||||||||||||||
CDC (5) | 15.97 | % | BRL | — | 2024 - 28 | 103,101 | 40,298 | 43,670 | 467 | |||||||||||||||||||||||
FINAME (4) | 5.98 | % | BRL | — | 2024 - 25 | 2,314 | 4,618 | 27 | 2,299 | |||||||||||||||||||||||
FINEP (6) | 9.00 | % | BRL | — | — | — | 4,643 | — | 7,277 | |||||||||||||||||||||||
862,723 | 1,263,090 | 10,904,941 | 9,110,792 | |||||||||||||||||||||||||||||
1,297,393 | 4,999,929 | 11,950,708 | 10,699,653 |
49
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Consolidated | ||||||||||||||||||||||||||||
Average | Current | Non-current | ||||||||||||||||||||||||||
Type | annual interest rate | Currency | Indexer | Payment terms | December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | ||||||||||||||||||||
Foreign currency | ||||||||||||||||||||||||||||
ACC (1) | 8.40 | % | USD | — | 2024 | 252,514 | 2,174,591 | — | 266,395 | |||||||||||||||||||
Prepayment | 7.38 | % | USD | SOFR | 2024 - 27 | 26,776 | 2,074,077 | 844,059 | 1,974,791 | |||||||||||||||||||
FINIMP (2) | 6.48 | % | USD e EUR | Euribor | 2024 - 25 | 151,490 | 525,112 | 3,131 | 15,867 | |||||||||||||||||||
White Stripe credit facility | 8.45 | % | USD e CAD | — | — | 14,001 | 15,757 | — | — | |||||||||||||||||||
Working capital - American Dollar | 8.97 | % | USD | SOFR | 2024 - 30 | 1,751 | 9,055 | 12,359 | 14,824 | |||||||||||||||||||
CRA (3) | 4.92 | % | USD | — | 2028 | 2,139 | 484 | 186,218 | 66,564 | |||||||||||||||||||
Scott credit facilities | 2.20 | % | USD | — | 2025 | — | — | 8,787 | 9,361 | |||||||||||||||||||
Export credit facility | USD | — | — | — | — | — | ||||||||||||||||||||||
448,671 | 4,799,076 | 1,054,554 | 2,347,802 | |||||||||||||||||||||||||
Local currency | ||||||||||||||||||||||||||||
FINAME (4) | 5.98 | % | BRL | — | 2024 - 25 | 2,314 | 4,618 | 27 | 2,299 | |||||||||||||||||||
FINEP (6) | — | BRL | — | — | 4,643 | — | 7,277 | |||||||||||||||||||||
Prepayment | 8.22 | % | GBP, USD | BoE, SOFR | 2024 - 25 | 265,814 | 49,792 | 290,478 | — | |||||||||||||||||||
JBS Lux 2.50% Notes 2027 | 2.50 | % | USD | — | 2027 | 55,878 | 58,339 | 4,774,587 | 5,124,220 | |||||||||||||||||||
JBS Lux 5.13% Notes 2028 | 5.13 | % | USD | — | 2028 | 93,045 | 123,675 | 4,291,318 | 4,611,232 | |||||||||||||||||||
JBS Lux 6.50% Notes 2029 | 6.50 | % | USD | — | 2029 | 5,248 | 5,218 | 377,065 | 406,297 | |||||||||||||||||||
JBS Lux 3.00% Notes 2029 | 3.00 | % | USD | — | 2029 | 36,106 | 37,567 | 2,838,018 | 3,044,523 | |||||||||||||||||||
JBS Lux 5.50% Notes 2030 | 5.50 | % | USD | — | 2030 | 154,486 | 160,429 | 6,002,878 | 6,460,823 | |||||||||||||||||||
JBS Lux 3.75% Notes 2031 | 3.75 | % | USD | — | 2031 | 7,567 | 6,793 | 2,398,080 | 2,581,447 | |||||||||||||||||||
JBS Lux 3.00% Notes 2032 | 3.00 | % | USD | — | 2032 | 18,557 | 17,829 | 4,746,125 | 5,102,849 | |||||||||||||||||||
JBS Lux 3.63% Notes 2032 | 3.63 | % | USD | — | 2032 | 80,990 | 84,589 | 4,766,124 | 5,126,840 | |||||||||||||||||||
JBS Lux 5.75% Notes 2033 | 5.75 | % | USD | — | 2033 | 142,668 | 316,062 | 9,687,901 | 10,422,947 | |||||||||||||||||||
JBS Lux 6.75% Notes 2034 | 6.75 | % | USD | — | 2034 | 149,596 | — | 7,630,203 | — | |||||||||||||||||||
JBS Lux 4.38% Notes 2052 | 4.38 | % | USD | — | 2052 | 78,957 | 82,179 | 4,295,380 | 4,626,984 | |||||||||||||||||||
JBS Lux 6.50% Notes 2052 | 6.50 | % | USD | — | 2052 | 40,648 | 36,508 | 7,394,040 | 7,966,046 | |||||||||||||||||||
JBS Lux 7,25% Notes 2053 | 7.25 | % | USD | — | 2053 | 90,382 | — | 4,275,904 | — | |||||||||||||||||||
PPC 5.88% Notes 2027 | 5.88 | % | USD | — | 2027 | — | 62,247 | — | 4,393,351 | |||||||||||||||||||
PPC 4.25% Notes 2031 | 4.25 | % | USD | — | 2031 | 43,436 | 43,735 | 4,765,795 | 5,125,076 | |||||||||||||||||||
PPC 3.50% Notes 2032 | 3.50 | % | USD | — | 2032 | 50,834 | 52,506 | 4,314,489 | 4,644,343 | |||||||||||||||||||
PPC 6.25% Notes 2033 | 6.25 | % | USD | — | 2033 | 212,649 | — | 4,763,926 | — | |||||||||||||||||||
PPC 6.88% Notes 2034 | 6.88 | % | USD | — | 2034 | 36,983 | — | 2,345,983 | — | |||||||||||||||||||
PPC - Term loan | — | — | — | — | 139,459 | — | 2,359,382 | |||||||||||||||||||||
Working capital - Brazilian Reais | 17.45 | % | BRL | CDI e TJLP | 2024 - 28 | 24,597 | 85,648 | 79,061 | 3,378 | |||||||||||||||||||
Working capital - Euros | 3.10 | % | EUR | Euribor | 2024 - 28 | 83,507 | 60,867 | 49,314 | 9,929 | |||||||||||||||||||
Export credit facility | 14.20 | % | BRL | CDI | 2024 - 30 | 14,103 | 757,171 | 1,039,597 | 1,538,653 | |||||||||||||||||||
CDC (5) | 15.97 | % | BRL | — | 2024 - 28 | 103,101 | 40,298 | 43,670 | 467 | |||||||||||||||||||
Rural - Credit note - Pre fixed | 10.73 | % | BRL | — | 2024 | 1,176,088 | 185,020 | — | — | |||||||||||||||||||
CRA (3) | 10.38 | % | BRL | CDI e IPCA | 2024 - 37 | 721,645 | 853,054 | 9,746,977 | 7,618,405 | |||||||||||||||||||
Scott credit facilities | 7.69 | % | USD, EUR | — | 2025 | 97,247 | 70,168 | 2,561 | 209 | |||||||||||||||||||
Beardstown Pace credit facility | 3.65 | % | USD | — | 2050 | 32,383 | 38,741 | 313,232 | 328,553 | |||||||||||||||||||
JBS Australia feedlot agreement | 2.76 | % | AUD | — | 2028 | 4,807 | 1,346 | 164,861 | 175,273 | |||||||||||||||||||
Local line of credit | 2.30 | % | EUR | Euribor | 2023 | — | 10,772 | — | — | |||||||||||||||||||
Other | 4.68 | % | Others | Others | 2031 | 44,053 | 40,208 | 53,317 | 96,899 | |||||||||||||||||||
3,867,689 | 3,429,481 | 91,450,911 | 81,777,702 | |||||||||||||||||||||||||
4,316,360 | 8,228,557 | 92,505,465 | 84,125,504 |
(1) | Advances on Exchange Contracts. |
(2) | Financing for Imports. |
(3) | Agribusiness Credit Receivable Certificates. |
(4) | Financing for Acquisition of Industrial Machinery and Equipment. |
(5) | Financing for Studies and Projects. |
(6) | Direct Credit to Consumers. |
50
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Average annual interest rate: Refers to the weighted average nominal interest cost on the base date. Loans and financing are fixed at a fixed rate or indexed to rates: CDI, Euribor, SOFR, IPCA, TJLP, among others.
On December 31, 2023, the availability under Brasil revolving credit facilities was US$450 million (equivalent to R$2.18 billion) and US$450 million (equivalent to R$2,4 billion) on December 31, 2022 . In the United States the revolving credit facilities on December 31, 2023, was US$2.9 billion (equivalent to R$14 billion) and US$2.8 billion (R$$14.35 billion at December 31, 2022).
The non-current portion of the principal payment schedule of loans and financing is as follows:
December 31, 2023 | December 31, 2022 | |||||||||||||||
Maturity | Company | Consolidated | Company | Consolidated | ||||||||||||
2024 | — | 2,331,959 | — | 3,388,155 | ||||||||||||
2025 | 434,060 | 660,181 | 828,968 | 864,506 | ||||||||||||
2026 | 29,187 | 391,802 | 91,974 | 2,529,051 | ||||||||||||
2027 | 991,389 | 457,728 | 5,778,285 | 9,974,327 | ||||||||||||
2028 | 870,390 | 422,178 | 5,338,878 | 5,249,823 | ||||||||||||
2029 | 162,746 | — | 166,623 | — | ||||||||||||
Maturities thereafter 2029 | 9,462,936 | 6,435,805 | 80,300,737 | 62,119,642 | ||||||||||||
11,950,708 | 10,699,653 | 92,505,465 | 84,125,504 |
17.1 | Guarantees and contractual restrictions (“covenants”) |
Type | Issuer and guarantors | Covenants / Guarantees | Events of default | |||
JBS USA Revolving Credit Facility | Issuer: -JBS USA Holding Lux S.à.r.l.; -JBS USA Food Company; -JBS Australia Pty. Ltd.; -JBS Food Canada ULC
Guarantors: -JBS S.A.; -JBS Global Luxembourg S.à.r.l.; -JBS Global Meat Holdings Pty. Limited. | Usual and customary for investment grade facilities of this type and subject to customary exceptions, but limited to: (i) incurrence of “priority debt”, (ii) liens; (iii) fundamental changes, (iv) sale lease-backs, (v) sales of all or substantially all of the assets of the Borrowers and their subsidiaries, (vi) changes in line of business and (vii) changes in fiscal year.
The credit agreement also require compliance with a maximum total debt to capitalization of 55.0% (the “Financial Maintenance Covenant”). The Borrowers may give collateral cure notice to the administrative agent, electing to provide full unconditional guarantee perfected by first priority security interest in substantially all US assets. From and after the collateral cure date the financial maintenance covenant shall no longer be in effect, availability under the Revolving Credit Facility shall be limited to collateral coverage and there shall be limitations on 1) liens, 2) indebtedness, 3) sales and other dispositions of assets, 4) dividends, distributions and other payments in respect of equity interest, 5) investments, acquisitions, loans and advances, and 6) voluntary prepayments, redemptions or repurchases of unsecured subordinated material indebtedness. In each case, clauses 1 to 6 are subject to certain exceptions which can be material. | The facility contains customary events of default. (1) |
51
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Type | Issuer and guarantors | Covenants / Guarantees | Events of default | |||
Notes 2.50% JBS Lux 2027
Notes 3.63% | Issuer: -JBS USA Holding Lux S.à.r.l.; -JBS USA Food Company (JBS USA); -JBS Luxembourg Company S.à
Guarantor: -JBS S.A.; -JBS Global Luxembourg S.àr.l (JBS Global Lux); -JBS Global Meat Holdings Pty. Limited (JBS Global Meat). | On September 12, 2022, the Company received offers to exchange 99.14% of the 2.50% senior notes due 2027 and 96.85% of the 3.625% sustainability-linked senior notes due 2032, issued by JBS USA Food Company (originally issued by JBS Finance Luxembourg S.a.r.l.), for new notes issued by JBS USA Lux SA, JBS USA Food Company and JBS USA Finance Inc. and cash consideration.
The new exchanged notes contain proposed amendments that permanently eliminated certain covenants, restrictive provisions, events of default and related provisions for the Company.
The new exchanged notes contain restrictive covenants applicable to the Company and its Significant subsidiaries including limitation on liens, limitation on sale and leaseback transactions, limitation on merger, consolidation and sale of assets. These limitations are subject to certain exceptions, which can be material. | The covenants contains customary events of default.(1) | |||
Notes 3,00% JBS Lux 2029
Notes 6,50% JBS Lux 2029
Notes 5,50% JBS Lux 2030
Notes 3.75% JBS Lux 2031
Notes 3,00% JBS Lux 2032
Notas 4,38% JBS Lux 2052 | Issuer: -JBS USA Holding Lux S.à.r.l ;
Guarantor: | On August 15, 2022, the Company announced expiration of, and receipt of requisite consents in connection with its consent solicitations for each of its 3.00% senior notes due 2029, 6.50% senior notes due 2029, 5.50% senior notes due 2030, 3.75% senior notes due 2031, 3.00% sustainability-linked senior notes due 2032 and 4.38% senior notes due 2052. The proposed amendments conform certain provisions and restrictive covenants in each indenture to the corresponding provisions and restrictive covenants set forth in each indenture dated June 21, 2022, governing the 5.13% senior notes due 2028, the 5.75% senior notes due 2023 and the 6.50% senior notes due 2052. | ‘The covenants contains customary events of default (1). | |||
Notes 5,13% JBS Lux 2028
Notes 5,75% JBS Lux 2033
Notes 6,75% JBS Lux 2034
Notes 4,38% JBS Lux 2052
Notes 7,25% JBS Lux 2052
Notes 6,50% JBS Lux 2052 | Issuer: JBS USA Holding Lux S.A. (JBS Lux);
Guarantor: JBS S.A. (JBS S.A.); | These notes contain restrictive covenants applicable to the Company and its Significant subsidiaries including limitation on liens, limitation on sale and leaseback transactions, limitation on merger, consolidation and sale of assets. These limitations are subject to certain exceptions, which can be material. | ‘The covenants contains customary events of default.(1) |
52
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Type | Issuer and guarantors | Covenants / Guarantees | Events of default | |||
Notes 4,25%
Notes 3,50% | Issuer: Pilgrim’s Pride Corporation.
Guarantor: Pilgrim’s Pride Corporation of West Virginia, Inc.; | On September 22, 2022 PPC announced expiration and receipt of requisite consent in its consent solicitation for certain amendments to its Senior Notes due 2031 and 2032. The consent solicitation contained proposed amendments that permanently eliminated certain covenants, restrictive provisions, events of default and related provisions for the Company. After the consent, these notes are subject to restrictive covenants applicable to PPC and its Significant subsidiaries including limitation on liens, limitation on sale and leaseback transactions, limitation on merger, consolidation and sale of assets. These limitations are subject to certain exceptions, which can be material. | ||||
Notes 6,25%
Notes 6,88% | Issuer: Pilgrim’s Pride Corporation.
Guarantor: -Pilgrim’s Pride Corporation of West Virginia, Inc.; -Gold’N Plump Poultry, LLC; -Gold’N Plump Farms, LLC; JFC LLC | These notes were issued in investment-grade format and contain customary investment-grade clauses related to limitations on encumbrances, sale and lease transactions, change of control, and customary merger and consolidation clauses. These limitations are subject to certain exceptions, which may be relevant. | ||||
PPC Revolving Credit Facility | Borrowers: -Pilgrim’s Pride Corporation; -To-Ricos Ltd. -To-Ricos Distribution, LTD. | On October 4, 2023, PPC and certain of its subsidiaries entered into an unsecured Revolving Credit Agreement with CoBank, ACB as administrative agent and other involved lenders that replaced the 2021 U.S. Credit Facility.
The credit agreement increased its availability under the revolving loan commitment from US$800.0 million to US$850.0 million, in addition to changes to clauses and the extension of the maturity date from August 2026 to October 2028.
The RCF also requires compliance with a minimum interest coverage ratio of 3.50:1.00 (the “Financial Maintenance Covenant”). The Borrowers may give collateral cure notice to the administrative agent, electing to provide full unconditional guarantee perfected by first priority security interest in substantially all U.S. assets. From and after the collateral cure date the financial maintenance covenant shall no longer be in effect, availability under the RCF shall be limited to collateral coverage, may be subject to a minimum fixed charge coverage ratio if utilization is above 80% and there shall be limitation on 1) liens, 2) indebtedness, 3) sales and other dispositions of assets, 4) dividends, distributions, and other payments in respect of equity interest, 5) investments, acquisitions, loans and advances, and 6) voluntary prepayments, redemptions or repurchases of unsecured subordinated material indebtedness. In each case, clauses 1 to 6 are subject to certain exceptions which can be material. | The facility also contains customary events of default. (1) |
53
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Type | Issuer and guarantors | Covenants / Guarantees | Events of default | |||
Primo ANZ credit facility | Borrowers: - Primo Foods Pty Ltd.
Guarantors: - Industry Park Pty Ltd; - Primo Foods Pty Ltd; - Australian Consolidated Food Holdings Pty Limited; - Australian Consolidated Food Investments Pty Limited; - Primo Group Holdings Pty Limited; - Primo Meats Pty Ltd; - Hans Continental Smallgoods Pty Ltd; - P& H Investments 1 Pty Ltd; - Hunter Valley Quality Meats Pty Limited; - Seven Point Pork Pty Ltd; - P&H Investments 2 Pty Ltd; - Primo Retail Pty Ltd; - Primo Meats Admin Pty Ltd; - Premier Beehive Holdco Pty Ltd; - Premier Beehive NZ. | Customary covenants that may limit Primo’s ability and the ability of certain subsidiaries to, among other things: - sell or dispose of certain assets; - change the general nature of the core business of the company; - incur certain additional indebtedness; - declare certain dividends, share premiums, or repurchases of equity. | The facility also contains customary events of default. (1) | |||
Huon credit facility | Borrowers: Huon Aquaculture Group Limited
Guarantors: -Industry Park Pty Ltd; -Huon Aquaculture Group Limited; -Huon Aquaculture Company Pty Ltd; -Springs Smoked Seafoods Pty Ltd ; -Springfield Hatcheries Pty Ltd; -Huon Ocean Trout Pty Ltd; -Meadow Bank Hatchery Pty Ltd; -Morrison’s Seafood Pty Ltd; -Southern Ocean Trout Pty Ltd; -Huon Shellfish Co Pty Ltd; -Spring Smoked Salmon Pty Ltd; -Huon Salmon Pty Ltd; -Huon Smoked Salmon Pty Ltd; -Huon Smoked Seafoods Pty Ltd; -Huon Seafoods Pty Ltd; -Huon Tasmanian Salmon Pty Ltd. | Customary covenants that may limit Huon’s ability and the ability of certain subsidiaries to, among other things: - sell or dispose of certain assets; - change the general nature of the core business of the company; - incur certain additional indebtedness; - declare certain dividends, share premiums, or repurchases of equity. | The facility also contains customary events of default. (1) |
54
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Type | Issuer and guarantors | Covenants / Guarantees | Events of default | |||
Credit facility JBS Australia & Rivalea | Borrowers: -JBS Australia Pty Limited; -Rivalea (Australia) Pty Ltd.
Guarantors: -JBS Australia Pty Limited; -Diamond Valley Pork Pty Ltd; -Oxdale Dairy Enterprise Pty Ltd; -Rivalea (Australia) Pty Ltd Industry Park Pty Ltd. | Customary covenants that may limit JBS Australia´s and Rivalea’s ability and the ability of certain subsidiaries to, among other things: - sell or dispose of certain assets; - change the general nature of the core business of the company; - incur certain additional indebtedness; - declare certain dividends, share premiums, or repurchases of equity. | The facility also contains customary events of default. (1) | |||
Credit facility AMI | Borrowers: -Andrews Meat Industries Pty Ltd. | Customary covenants that may limit JBS AMI ability and the ability of certain subsidiaries to, among other things: - sell or dispose of certain assets; - change the general nature of the core business of the company; - incur certain additional indebtedness; - declare certain dividends, share premiums, or repurchases of equity. | The facility also contains customary events of default. (1) | |||
Credit facility WSF NAB | Borrowers: -White Stripe Foods Pty Ltd. | Customary covenants that may limit JBS WSF ability and the ability of certain subsidiaries to, among other things: - sell or dispose of certain assets; - change the general nature of the core business of the company; - incur certain additional indebtedness; - declare certain dividends, share premiums, or repurchases of equity. | The facility also contains customary events of default. (1) | |||
Credit facility Mexico | Borrowers: -Avícola Pilgrim’s Pride de Mexico, SA de CV.
Guarantors: -Comercializadora de Carnes de Mexico, S de RL de CV; -Pilgrim’s Pride de S de RL de CV; -Pilgrim’s Operaciones Laguna S de RL de CV | Customary covenants that may limit the Company´s ability to realize new investments and be a guarantor for third party loans, change the general nature of the core business of the company or line of business and initiate the liquidation process. These limitations are subject to certain exceptions, which may be material. | The facility also contains customary events of default. (1) |
55
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Type | Issuer and guarantors | Covenants / Guarantees | Events of default | |||
4° issuance of debentures CRA CRA | Borrowers: JBS S.A | Customary covenants that may limit the Company´s ability of certain subsidiaries to, among other things: -incur certain additional indebtedness;, if the net debt/EBITDA in R$ exceeds 4.75/1.0; - sell or dispose of certain assets; - consolidate, merge or dissolve substantially all the assets; - declare certain dividends, if the issuer is in default with respect to any of its pecuniary obligations under the terms of the indenture. | The facility also contains customary events of default. (1) | |||
8° issuance of debentures CRA 9° issuance of debentures CRA 10° issuance of debentures CRA | Borrowers: JBS S.A | Standard contractual restrictions that may limit the Group’s ability, among other things, to: -create liens; -sell or transfer to third parties all or substantially all assets; -carry out spin-offs, mergers or incorporations of the Group and/or its Subsidiaries by third parties; -pay dividends if the issuer is in default with respect to any of its pecuniary obligations under the indenture | The facility contains customary events of default. (1) |
(1) | Customary events of default includes failure to perform or observe terms, covenants or other agreements in the facility, defaults on other indebtedness if the effect is to permit acceleration, failure to make a payment on other indebtedness unless waived or extended within the applicable grace period, entry of unsatisfied judgments or orders against the issuer or its subsidiaries and certain events related to bankruptcy and insolvency matters. |
The Company was in compliance with all of its debt covenant restrictions at December 31, 2023 and until the date that these financial statements were approved.
On December 2023, JBS Holding Lux merged with its wholly-owned direct subsidiary, JBS USA Lux S.A (“JBS Lux”), with JBS Holding Lux as the surviving entity. As a result, all obligations of JBS Lux are now obligations of JBS Holding Lux - including the BMO revolving credit facility, in which JBS Holding Lux became a borrower, and all senior unsecured notes, in which JBS Holding Lux became a issuer.
On December 2023 JBS USA Finance Inc (“JBS USA Finance”) was dissolved and consequently is no longer a borrower under the BMO revolving credit facility. At the beginning of 2024 JBS USA Finance was replaced by JBS Luxembourg Company Sarl (“JBS Luxembourg”), formerly JBS Luxembourg Sarl, in all JBS’s senior unsecured notes.
The Company declares that it was in compliance with all contractual financial restrictions as of December 31, 2023 and until the date of approval of these financial statements.
56
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
17.2 | Financing activities |
Company | Note | Balance at January 1, 2023 | Cash flows | (Financial) Revenue | Non-cash transactions (1) | Balance at December 31, 2023 | |||||||||||||||||
Loans and financing | 17 | (15,699,582 | ) | 3,752,651 | (1,171,044 | ) | (130,126 | ) | (13,248,101 | ) | |||||||||||||
Lease liability | 13.2 | (62,698 | ) | 52,232 | (6,646 | ) | (133,918 | ) | (151,030 | ) | |||||||||||||
Derivative liabilities | (180,093 | ) | 62,308 | 514,715 | 1 | 396,931 | |||||||||||||||||
Margin cash | 4 | 80,434 | (15,680 | ) | — | — | 64,754 | ||||||||||||||||
Profit reserves | (18,689,553 | ) | 2,218,118 | — | 1,060,969 | (15,410,466 | ) | ||||||||||||||||
Total | (34,551,492 | ) | 6,069,629 | (662,975 | ) | 796,926 | (28,347,912 | ) |
Consolidated | Note | Balance at January 1, 2023 | Cash flows | (Financial) Revenue | Non-cash transactions (1) | Balance at December 31, 2023 | |||||||||||||||||
Loans and financing | 17 | (92,354,061 | ) | (4,407,128 | ) | 284,374 | (345,010 | ) | (96,821,825 | ) | |||||||||||||
Lease liability | 13.2 | (8,984,008 | ) | 2,384,894 | (160,211 | ) | (2,154,608 | ) | (8,913,933 | ) | |||||||||||||
Derivative liabilities | 6,608 | 58,050 | 367,060 | (308,338 | ) | 123,380 | |||||||||||||||||
Margin cash | 4 | 679,391 | 130,759 | (168,867 | ) | — | 641,283 | ||||||||||||||||
Profit reserves | (18,689,553 | ) | 2,218,118 | — | 1,060,969 | (15,410,466 | ) | ||||||||||||||||
Non-controlling interest | (3,464,765 | ) | 33,015 | — | (215,417 | ) | (3,647,167 | ) | |||||||||||||||
Total | (122,806,388 | ) | 417,708 | 322,356 | (1,962,404 | ) | (124,028,728 | ) |
Company | Note | Balance at January 1, 2021 | Cash flows | (Financial) Revenue | Non-cash transactions (1) | Balance at December 31, 2022 | |||||||||||||||||
Loans and financing | 17 | (15,762,140 | ) | 971,280.9015 | (828,868 | ) | (79,855 | ) | (15,699,582 | ) | |||||||||||||
Lease liability | 13.2 | (52,599 | ) | 34,330 | (4,863 | ) | (39,566 | ) | (62,698 | ) | |||||||||||||
Derivative liabilities | (67,428 | ) | 1,259,815 | (1,372,478 | ) | (2 | ) | (180,093 | ) | ||||||||||||||
Margin cash | 4 | 168,808 | (88,374 | ) | — | — | 80,434 | ||||||||||||||||
Actions in Treasury | 3,037,837 | 2,823,778 | — | (5,861,615 | ) | — | |||||||||||||||||
Profit reserves | (13,529,553 | ) | 4,436,232 | — | (9,596,232 | ) | (18,689,553 | ) | |||||||||||||||
Total | (26,205,075 | ) | 9,437,062 | (2,206,209 | ) | (15,577,270 | ) | (34,551,492 | ) |
Consolidated | Note | Balance at January 1, 2021 | Cash flows | (Financial) Revenue | Non-cash transactions (1) | Balance at January 1, 2021 | |||||||||||||||||
Loans and financing | 17 | (92,518,154 | ) | 1,239,318 | (208,273 | ) | (866,952 | ) | (92,354,061 | ) | |||||||||||||
Lease liability | 13.2 | (8,404,474 | ) | 2,453,073 | 158,563 | (3,191,169 | ) | (8,984,007 | ) | ||||||||||||||
Derivative liabilities | (58,285 | ) | 1,342,179 | (1,283,307 | ) | 6,021 | 6,608 | ||||||||||||||||
Margin cash | 4 | 1,245,354 | (570,288 | ) | 4,325 | — | 679,391 | ||||||||||||||||
Actions in Treasury | 3,037,837 | 2,823,778 | — | (5,861,615 | ) | ||||||||||||||||||
Profit reserves | (13,529,553 | ) | 4,436,242 | — | (9,596,242 | ) | (18,689,553 | ) | |||||||||||||||
Non-controlling interest | (3,677,428 | ) | 537,932 | — | (325,269 | ) | (3,464,765 | ) | |||||||||||||||
Total | (113,904,703 | ) | 12,262,234 | (1,328,692 | ) | (19,835,226 | ) | (122,806,387 | ) |
57
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
18 | Other taxes payable |
Income and other taxes payable are comprised of the following:
Company | Consolidated | |||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||
Taxes payable in installments | 288,891 | 421,221 | 329,110 | 469,228 | ||||||||||||
PIS / COFINS tax payable | 74,531 | 87,732 | 158,964 | 157,670 | ||||||||||||
ICMS / VAT / GST tax payable | 52,630 | 40,592 | 171,067 | 146,518 | ||||||||||||
Withholding income taxes | 48,137 | 42,399 | 50,966 | 44,796 | ||||||||||||
Others | 6,141 | 2,758 | 443,915 | 513,550 | ||||||||||||
Subtotal | 470,330 | 594,702 | 1,154,022 | 1,331,762 | ||||||||||||
Income taxes | — | — | 403,022 | 475,174 | ||||||||||||
Total | 470,330 | 594,702 | 1,557,044 | 1,806,936 | ||||||||||||
Breakdown: | ||||||||||||||||
Current liabilities | 238,006 | 281,532 | 1,100,179 | 1,200,895 | ||||||||||||
Non-current liabilities | 232,324 | 313,170 | 456,865 | 606,041 | ||||||||||||
470,330 | 594,702 | 1,557,044 | 1,806,936 |
Decree 8,426/2015 - PIS/COFINS over financial income: In July 2015, the Company filed an injunction to suspend the enforceability of PIS and COFINS debts over financial income. The Decree 8,426/2015 reestablished the levy of PIS and COFINS on financial revenues obtained by companies subject to the PIS and COFINS noncumulative regime, at the rates of 4.65%. In March, 2020, the STF (Federal Supreme Court) judged the Extraordinary Appeal n. 1.043.313/RS (Theme 939 of the General Repercussion and ADIN n. 5277/DF) and recognized the constitutionality of the rates established in Decree 8426/15, however, the sentence obtained by the Company has not yet been amended.
As of December 31, 2023 the Company has recognized under the caption “Income taxes and other taxes payable” the amount of R$74,531 (R$87,732 at December 31, 2022) in the Company and R$147,745 (R$153,927 at December 31, 2022) in the Consolidated, regarding to PIS/COFINS over financial income.
19 | Payroll and social charges |
Payroll and social charges are comprised of the following:
Company | Consolidated | |||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||
Taxes payable in installments | 2,344,071 | 2,214,052 | 2,369,913 | 2,249,109 | ||||||||||||
Bonus and vacation along with related social charges | 335,059 | 272,304 | 3,563,866 | 3,839,027 | ||||||||||||
Salaries and related social charges | 478,270 | 445,929 | 2,437,111 | 2,276,815 | ||||||||||||
Others | 16,403 | 10,829 | 283,826 | 265,151 | ||||||||||||
3,173,803 | 2,943,114 | 8,654,716 | 8,630,102 | |||||||||||||
Breakdown: | ||||||||||||||||
Current liabilities | 1,208,139 | 1,083,670 | 6,280,042 | 6,251,132 | ||||||||||||
Non-current liabilities | 1,965,664 | 1,859,444 | 2,374,674 | 2,378,970 | ||||||||||||
3,173,803 | 2,943,114 | 8,654,716 | 8,630,102 |
58
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Taxes payable in installments: In December 2022, the Federal Supreme Court (STF), in a decision in favor of the Direct Action of Unconstitutionality (ADI nº 4,395) declared unconstitutional the subrogation of the collection of social security contributions referring to the Rural Workers Assistance Fund (FUNRURAL) to meatpacking plants , consumer companies, consignees or cooperatives purchasing production. As of December 31, 2023, the Company and its subsidiaries have recorded under the heading “Instalments of social charges” a provision in the amount of R$1.69 billion (R$1.68 billion as of December 31, 2022), in the Parent Company and R$1.71 billion (R$1.71 billion on December 31, 2022), in Consolidated, relating to FUNRURAL installments. On December 31, 2023, the Company and its subsidiaries settled installments in cash and offset it against the recoverable tax balance in the total amount of R$1.17 billion (R$1.02 billion on December 31, 2022), in the Parent Company and R$1.22 billion (R$1.03 billion on December 31, 2022), in Consolidated. The Company continues to await the approval of the trial minutes that will proclaim the result, as well as possible modulation of effects by the STF, which will define the period for which the decision will take effect.
20 | Dividends payable |
The Company’s bylaws requires the payment of dividends equal to at least 25% of the annual net income attributable to company shareholders. The Company recognizes a liability at year-end for the minimum unpaid yearly dividend amount. Dividends payable are recognized as a liability at December 31 of each year.
Company | Consolidated | |||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||
Declared dividends on 2019 - Residual | — | 2 | — | 8 | ||||||||||||
Declared dividends on 2020 - Residual | 29 | 29 | 29 | 39 | ||||||||||||
Declared dividends on 2021 - Residual | 61 | 61 | 61 | 93 | ||||||||||||
Declared dividends on 2022 - Residual | 42 | 43 | 42 | 43 | ||||||||||||
Declared dividends on 2023 - Residual | 28 | — | 1,806 | — | ||||||||||||
Subtotal | 160 | 135 | 1,938 | 183 |
The residual amount of dividends corresponds to the unpaid dividends due to a lack of updated payment information. This pending information related to some minority shareholders precludes the Company from fully paying the dividends declared. The Company sends notification to such shareholders to update their payment information so the amount can be paid. The reversal of dividends are absorbed under the caption “Profit reserves” due to the non-distribution after three years. A liability for unpaid dividends will be maintained during the statutory period and classified as short term, since once the shareholder’s information is updated, the payment will be made.
On June 19, 2023, the Company approved the distribution of proposed interim dividends referring to the net profit calculated on December 31, 2022, in the total amount of R$2.22 billion, corresponding to R$1.00 (one real) per common share, using the shareholder base of June 22, 2023. Interim dividends were paid to shareholders on June 29, 2023. The Company ended the year ended December 31, 2023 with an accumulated loss, therefore, it is not configured the mandatory distribution of minimum dividends.
The distributed dividends per share were:
2023 | 2022 | |||||||
Dividends to be distributed | 2,218,116 | 4,436,232 | ||||||
Number of outstanding shares of share capital – ordinary shares | 2,218,116,370 | 2,218,116,370 | ||||||
Dividends per share | 1.00 | 2.00 |
21 | Provisions for legal proceedings |
The preparation of these consolidated financial statements requires Management to make estimates and assumptions regarding civil, labor and tax matters which affect the valuation of assets and liabilities at the reporting date, as well as the revenues and expenses during the reported period.. Due to the uncertain nature of Brazilian tax legislation, the assessment of potential tax liabilities requires significant judgment from the Management and the outcome may differ when liabilities are realized.
59
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
The Company is subject to lawsuits, investigations and other claims related to employment, environmental, product, taxes and other matters. Management is required to assess the likelihood of any adverse judgments or outcomes, as well as the amount of probable losses, for these matters.
Provisions are recognized when losses are considered probable and the amount can be reliably measured. No provision is recognized if the risk of loss is assessed to be reasonably possible but not probable. Reasonably possible losses are disclosed in the notes to these financial statements. If the risk of loss is assessed as remote, no provision or disclosure is necessary.
The Company is part of several lawsuits arising in the ordinary course of business for which provisions are recognized based on estimated costs determined by management as follows:
Company | Consolidated | |||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||
Labor | 252,703 | 252,392 | 522,881 | 517,958 | ||||||||||||
Civil | 128,135 | 77,765 | 1,311,937 | 1,162,505 | ||||||||||||
Tax and Social Security | 178,472 | 148,028 | 650,672 | 550,049 | ||||||||||||
Total | 559,310 | 478,185 | 2,485,490 | 2,230,512 |
Breakdown: | ||||||||||||||||
Company | Consolidated | |||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||
Current liabilities | — | — | 955,866 | 909,132 | ||||||||||||
Non-current liabilities | 559,310 | 478,185 | 1,529,624 | 1,321,380 | ||||||||||||
559,310 | 478,185 | 2,485,490 | 2,230,512 |
Changes in provisions | ||||||||||||||||||||
Company | ||||||||||||||||||||
December 31, 2022 | Additions, disposals and changes in prognosis | Payments | Monetary correction | December 31, 2023 | ||||||||||||||||
Labor | 252,392 | 137,754 | (159,407 | ) | 21,964 | 252,703 | ||||||||||||||
Civil | 77,765 | 92,591 | (72,201 | ) | 29,980 | 128,135 | ||||||||||||||
Tax and social security | 148,028 | 5,788 | (14 | ) | 24,670 | 178,472 | ||||||||||||||
Total | 478,185 | 236,133 | (231,622 | ) | 76,614 | 559,310 |
Company | ||||||||||||||||||||
December 31, 2021 | Additions, disposals and changes in prognosis | Payments | Monetary correction | December 31, 2022 | ||||||||||||||||
Labor | 252,496 | 110,884 | (132,668 | ) | 21,680 | 252,392 | ||||||||||||||
Civil | 55,658 | 17,565 | (4,722 | ) | 9,264 | 77,765 | ||||||||||||||
Tax and social security | 174,439 | (34,331 | ) | (15,158 | ) | 23,078 | 148,028 | |||||||||||||
Total | 482,593 | 94,118 | (152,548 | ) | 54,022 | 478,185 |
60
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Consolidated | ||||||||||||||||||||||||
December 31, 2022 | Additions, disposals and changes in prognosis | Payments | Monetary correction | Exchange rate variation | December 31, 2023 | |||||||||||||||||||
Labor | 517,958 | 302,616 | (345,907 | ) | 48,376 | (162 | ) | 522,881 | ||||||||||||||||
Civil | 1,162,505 | 711,953 | (562,228 | ) | 74,841 | (75,134 | ) | 1,311,937 | ||||||||||||||||
Tax and social security | 550,049 | 23,088 | (3,495 | ) | 81,269 | (239 | ) | 650,672 | ||||||||||||||||
Total | 2,230,512 | 1,037,657 | (911,630 | ) | 204,486 | (75,535 | ) | 2,485,490 |
December 31, 2021 | Additions, disposals and changes in prognosis | Payments | Monetary correction | Exchange rate variation | December 31, 2022 | |||||||||||||||||||
Labor | 538,804 | 246,094 | (316,525 | ) | 49,691 | (106 | ) | 517,958 | ||||||||||||||||
Civil | 1,568,873 | 543,916 | (899,909 | ) | 22,161 | (72,536 | ) | 1,162,505 | ||||||||||||||||
Tax and social security | 560,164 | (48,162 | ) | (15,848 | ) | 53,957 | (62 | ) | 550,049 | |||||||||||||||
Total | 2,667,841 | 741,848 | (1,232,282 | ) | 125,809 | (72,704 | ) | 2,230,512 |
In the Company:
a. | Tax and Social Security Proceedings |
a1. Profits earned by foreign subsidiaries: Between the calendar years 2006 and 2018, the Company suffered fines arising from charges relating to taxation on profits earned abroad that were supposed to be included in the IRPJ and CSLL calculation basis, also covering disallowances of guides paid by investees abroad, under the argument that they could not have been used for the purposes of offsetting IRPJ and CSLL owed in Brazil. These charges also involve the imposition of an official fine, an isolated fine and interest. The Company clarifies that a large part of the IRPJ and CSLL collection on profits originating abroad refers to profits originating from investees located in jurisdictions with which Brazil maintains treaties to avoid double taxation. Furthermore, a relevant part of the charge covers the discussion regarding formal requirements required by the inspectorate for the purpose of consolidating the results abroad of its direct or indirect investees, given that the Company disagrees with the criteria applied by the inspectorate and presented a defense. For almost all of the debts, the Company is defending itself at the administrative level and is awaiting judgment. Management understands that considering the values updated until December 31, 2023, for approximately R$699,933, there are remote chances of loss and, for the approximate value of R$11.3 billion, there are possible chances of loss. Therefore, no provision was made.
a2. Decision on subjects 881 and 885 by the Federal Supreme Court: As of February 8, 2023, the Brazilian Supreme Court (Supremo Tribunal Federal - STF) has unanimously decided that a final decision favorable to companies regarding taxes paid on a continuous basis will lose its effect if the STF subsequently decides otherwise, regarding themes 881 – Extraordinary Resources nº 949.297 and 885 – Extraordinary Resources nº 955.227. The Company also evaluated with its legal advisors the issue judged in this decision, which covers CSLL and informs that it regularly collects the contribution.The Company also evaluated other taxes that fit the definition contained in the decision and there are no cases with a final and unappealable decision in favor of the Company and which have an unfavorable decision in the STF. Therefore, there no accrual was recognized.
a3. Other tax and social security procedures: As of December 31, 2023, the Company was party to another 835 tax and social security processes (1,093 processes as of December 31, 2022), involving the total amount under discussion of R$16.5 billion (R$22.4 billion as of December 31, 2023). December 2022), in which the contingencies individually are not relevant in their context. We highlight that those considered at risk of probable loss are duly provisioned, totaling R$178,472 (R$148,028 as of December 31, 2022). The majority of the claims concern issues involving taxes such as ICMS, PIS, COFINS and CSLL.
b. | Labor Proceedings |
As of December 31, 2023, the Company was party to 6,386 legal actions (5,926 actions as of December 31, 2022) of a labor nature, involving a total amount under discussion of R$ 1.1 installment (1.2 fraction as of December 31 2022). Based on the risk assessment carried out by legal consultants, the Company set up provisions in the amount of R$ 252,703 (R$ 252,392 as of December 31, 2022), relating to such processes to face possible adverse results in the processes to which it is a party. , including social security taxes owed by the employee and the Company. The actions are, for the most part, motivated by former employees of the Company’s factories and the main requests concern working hours, unhealthy conditions and the alleged occurrence of work accidents and occupational diseases. Among the labor actions, mobile actions are underway by the Public Ministry of Labor with topics related to the sector.
61
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
c. | Civil Proceedings |
As of December 31, 2023, the Company was party to 2,371 lawsuits (2,375 shares as of December 31, 2022) of civil and administrative nature, involving the total amount under discussion of R$3.08 billion (R$3.39 billion in 31 December 2022). In the assessment of Management and its legal advisors, the expected loss is R$128,135 (R$77,765 on December 31, 2022) and the amount is provisioned.
d. | Other proceedings with possible outcome |
On December 31, 2023, the Company had shares, the materialization of which, in the assessment of legal advisors, is possible, of labor, tax and civil natures, for which there is no provision constituted in the amount of R$11.5 billion (R$9.99 billion on December 31, 2022) which correspond mainly to civil and tax actions, and in the Consolidated, in the amount of R$17.8 billion (15.2 billion on December 31, 2022). The Company’s Management understands that it is not necessary to set up a provision for possible losses.
In subsidiary Seara Alimentos:
a. | Labor Proceedings |
As of December 31, 2023, Seara Alimentos subsidiaries were party to 13,302 labor proceedings (11,940 labor proceedings at December 31, 2022) labor proceedings, involving the total amount of 1,77 billion ((R$1,66 billion at December 31, 2022). Based on the opinion of the Company’s legal counsel, an accrual has been made in the amount of R$269,866 (R$265,134 at December 31, 2022) for losses arising from such proceedings, already including payable social charges by the employee and Seara Alimentos. Most of these lawsuits were filed by former employees of Seara Alimentos seeking overtime payments and payments relating to their exposure to health hazards, commuting time, alleged work accidents and recovery time. Among other labor proceedings, there are ongoing proceedings filed by the Labor Ministry (Ministério do Trabalho) related to labor issues.
b. | Civil proceedings |
As of December 31, 2023, Seara Alimentos subsidiaries were party to 4,119 civil and administrative proceedings (3615 civil an administrative proceedings at December 31, 2022), involving the total amount of R$1.1 billion (R$936,779 at December 31, 2022). Based on the opinion of the Company’s legal counsel, an accrual has been made in the amount of R$227,709 (R$175,497 at December 31, 2022) for losses arising from such proceedings. Most of these lawsuits are related to indemnity for collective moral damage, moral damage for improper protest, repairing damages for poultry partnership or pigs integration, cancellation of industry or trade mark complaints and consumer con - product quality.
c. | Tax and social security proceedings |
As of December 31, 2023, Seara Alimentos and its subsidiaries are party to 836 (838 tax and social security proceedings at December 31, 2022), involving the total amount of R$7.54 billion (R$R$6.39 billion at December 31, 2022). Proceedings with a probable loss risk have contingencies, in the amount of R$465,452 (R$395,268 at December 31, 2022).
d. | Other proceedings with possible outcome |
As of December 31, 2023, Seara Alimentos and its subsidiaries had other ongoing proceedings in the amount of R$6.3billion (R$5,2, billion at December 31, 2022) which refer to labor, civil and tax and social security proceedings, whose loss potential according to the evaluation of its legal advisors is possible but not probable, therefore there is no accrual recognized.
In the subsidiary JBS USA:
a. | Civil proceedings |
a1. Antitrust Pig
During the year ending 2018, a series of class action lawsuits were filed against the indirect subsidiary JBS USA, Agri Stats, Inc., and several other pork producers in Minnesota, USA, on behalf of direct and indirect buyers of pigs. Plaintiffs allege violations of federal and state antitrust and consumer protection laws, unfair competition, unjust enrichment, and deceptive trade practices, which were consolidated into a single proceeding. JBS USA signed agreements to settle the allegations of three classes of plaintiffs in the lawsuit in the total amount of US$57.3 million (equivalent to R$277,406 as of December 31, 2023). JBS USA continues to seek resolution of the allegations of the other authors, as well as other counterparties that chose not to adhere to the agreements. JBS USA will seek to enter into reasonable agreements on the matter, whenever possible. JBS USA recognized US$80.7 million (equivalent to R$390,693) relating to agreements negotiated with counterparties that did not adhere to the initial agreements. The amount was recognized in profit or loss as general and administrative expenses.
During fiscal 2021, the attorneys general of the states of New Mexico and Alaska in the USA filed complaints against the indirect subsidiary JBS USA with allegations similar to those described in the pork antitrust lawsuits. JBS USA responded to these complaints and continues to monitor the progress of the process.
62
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
a2. Bovine Antitrust:
During the year ended 2019 and 2020, a series of class action lawsuits were filed in the state of Minnesota, USA, against the Company and its indirect subsidiaries JBS USA, Swift Beef Company, JBS Packerland, Inc., as well as other food processors. beef, in which the plaintiffs allege violations of the antitrust law known as the Sherman Antitrust Act. During fiscal 2022, two class action lawsuits were filed in Canada against indirect subsidiaries JBS USA, Swift Beef Company, JBS Packerland, Inc., JBS Food Canada ULC and a number of other beef processors, alleging violations similar to those noted above. JBS USA entered into an agreement with two of the classes of authors for a total amount of US$77.0 million (equivalent to R$372,780 on December 31, 2023). JBS USA and its affiliates continue to seek resolution of the allegations of the other authors, as well as other counterparties that chose not to adhere to the agreements. JBS USA will seek to enter into reasonable agreements on the matter, whenever possible. Until the date of approval of these financial statements, JBS USA recognized US$21.4 million (equivalent to R$103,604 on December 31, 2023) relating to agreements negotiated with counterparties that did not adhere to the initial agreements. The amount was recognized in profit or loss as general and administrative expenses.
In 2022, a class action lawsuit was filed against the indirect subsidiary JBS USA and several other meatpacking companies, in Colorado, USA. The plaintiffs allege purposeful fixing and reduction of wages paid to workers at pork and beef processing plants, violating antitrust laws. JBS USA entered into an agreement to settle the allegations in the total amount of US$55.0 million (equivalent to R$266,272 as of December 31, 2023). In March 2024, the agreement was signed and approved by the Colorado Court. The amount was recognized in profit or loss as general and administrative expenses.
During fiscal 2020 and 2021, JBS USA received civil investigation demands from the United States Department of Justice (“DOJ”) related to the cattle industry. JBS USA cooperated with the DOJ to respond to the investigations. The attorneys general of several American states participated in the investigation in coordination with the DOJ.
a3. Chicken Antitrust:
During fiscal 2016, a series of federal class actions were filed against indirect subsidiary PPC and other defendants by and on behalf of direct and indirect purchasers of broiler chickens alleging violations of federal antitrust laws and unfair competition laws, unjust enrichment, unusual commercial practices, and consumer protection laws in the sale of chicken meat (“Broiler Antitrust Litigation”). The complaints seek, among other measures, compensation for an alleged conspiracy between the defendants to reduce production and increase the prices of broiler chickens from January 2008 to the present date of these financial statements. PPC entered into agreements to resolve all complaints made in the total amount of US$195.5 million (equivalent to R$946,474 on December 31, 2023). PPC continues to negotiate with counterparties that have not chosen to join collective agreements. PPC will seek reasonable agreements where available. PPC recognized the total amount of US$537.4 million (equivalent to R$2.6 billion on December 31, 2023) to cover the agreements signed. The amount was recognized in profit or loss as administrative and general expenses when the agreements were signed.
During fiscal 2016, a series of class action lawsuits were filed in the U.S. District Court for the District of Maryland (“Court of Maryland”) against PPC and several other chicken producers. The plaintiffs allege purposeful fixing and reduction of wages paid to poultry workers in violation of antitrust law. PPC entered into an agreement to settle all claims made for a total amount of US$29.0 million (equivalent to R$140,398 as of December 31, 2023). The settlement is subject to final approval by the Maryland Court. The amount was recognized in profit or loss as administrative and general expenses when the agreement was signed.
On January 27, 2017, a class action lawsuit on behalf of broiler chicken farmers was filed against PPC and other chicken producers, alleging, among other things, violations of laws dealing with unfair competition and lowering the price paid to producers . PPC continues to contest this action. No provisions were recorded as of December 31, 2023.
From February 21, 2017, through May 4, 2021, the attorneys general of several U.S. states issued civil investigative demands (“CIDs”). The investigation is related to data and information on the acquisition and processing of broiler chickens, and the marketing of chicken-derived products. PPC is cooperating with the attorneys general of these states in producing documents required by this investigation.
Between fiscal 2020 and 2021, the attorneys general of New Mexico, Alaska, and Washington brought actions against PPC based on allegations similar to those asserted in Broiler Antitrust Litigation. The PPC recognized a provision in the amount of US$11 million (equivalent to R$53,254 on December 31, 2023) to cover agreements with these states. The amount was recognized in profit or loss as administrative and general expenses.
On February 9, 2022, PPC was informed that the DOJ opened a civil investigation related to human resources antitrust. Furthermore, on October 6, 2022, PPC was also informed that the DOJ opened a civil case investigating contracts with poultry producers and payment practices to them. On October 2, 2023, the civil investigation process was initiated, of which PPC is cooperating with the DOJ to respond to the investigations.
63
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
b. | Tax claims and proceedings |
During the 2017 financial year, the Australian Tax Office (Australian Tax Office - “ATO”) began a review of the documents delivered by JBS Australia relating to the tax years 2015 to 2017. The review of the 2015 tax year has already been finalized and the decision was the payment of an immaterial amount of tax. For fiscal years 2016 and 2017, the review is ongoing and no loss provisions have been recorded.
During the 2014 and 2015 fiscal years, the Mexican Federal Revenue Service (Tax Administration Service - “SAT”) initiated a review process for the 2009 and 2010 fiscal years in the indirect PPC Mexico. The lawsuit alleged that controlled company status did not exist for certain subsidiaries because PPC México did not own 50% of the voting shares of Incubadora Hidalgo, S. de R.L de C.V. and Comercializadora de Carnes do México S. de R.L de C.V. (both in 2009), and Pilgrim’s Pride, S. de R.L. de C.V. (in 2010). PPC Mexico appealed the opinion and, on January 31, 2023, the appeal for fiscal year 2009 was rejected by the Supreme Court of Mexico. Thus, PPC paid US$25.9 million (equivalent to R$125,390 on December 31, 2023) for fiscal year 2009. The opinion for fiscal year 2010 is still under review. PPC México recorded a provision of US$17.2 million (equivalent to R$83,270 on December 31, 2023).
On May 12, 2022, the Mexican Federal Revenue Service (Tax Administration Service - “SAT”) issued tax assessment notices against Pilgrim’s Pride, S. de R.L. de C.V. and Provemex Holdings, LLC in connection with PPC’s acquisition of Tyson México . Following the acquisition, PPC returned home to Provemex Holdings, LLC from the US to Mexico. Tax authorities alleged that Provemex Holdings, LLC was a Mexican entity at the time of the acquisition and, as a result, was required to pay taxes on the sale. The Mexican deliberations of the PPC evaluated a petition to annul these assessments, which is still under evaluation. The amounts under appeal are approximately US$287.1 million (equivalent to R$1.4 billion as of December 31, 2023) for each of the two tax assessments. No loss allowance has been recorded at this time for these amounts.
c. | Other civil proceedings |
On October 20, 2016, Patrick Hogan and certain PPC shareholders filed a class action lawsuit against PPC and its executive officers (“Hogan Litigation”). Plaintiffs allege that documents filed by PPC with the U.S. Securities and Exchange Commission (“SEC”) contained misleading statements due to a lack of disclosure of information. PPC continues to contest this action. No provisions were recorded as of December 31, 2023.
64
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
22 Equity
a. Share capital: Share capital on December 31, 2023 and 2022 was R$23,576,206, represented at December 31, 2023 by 2,218,116,370 (2,218,116,370 at December 31, 2022) common shares, having no nominal value. The Company is authorized to increase its capital by an additional 1.375.853.183 common shares. According to statute, the Board of Directors shall determine the number, price, payment term and other conditions of the issuance of shares. The Company may grant options to purchase shares to directors, employees or persons who will provide services, or the directors, employees or person providing the services under its control.
December 31, 2023 | December 31, 2022 | |||||||||||||||
Quantity | R$ thousand | Quantity | R$ thousand | |||||||||||||
Initial balance | 2,218,116,370 | 23,576,206 | 2,373,866,570 | 23,576,206 | ||||||||||||
Cancellation of treasury shares | — | — | (155,750,200 | ) | — | |||||||||||
Final balance | 2,218,116,370 | 23,576,206 | 2,218,116,370 | 23,576,206 |
.
b. Capital reserves:
b1. Premium on issue of shares: refers to the difference between the subscription price that the stockholders pay for the shares and their fair value;
b2. Capital transaction: Includes transactions resulting from equity changes resulting from the repurchase of PPC shares and the compensation plan with shares of subsidiaries.
c. Other reserves: Refers to revaluations of fixed assets prior to IFRS adoption. Other reserves are transferred to retained earnings in proportion with the realization of revalued assets through depreciation, disposal and retirement.
d. Profit reserve:
d1. Treasury shares:
Treasury share activity were as follows:
December 31, 2023 | December 31, 2022 | |||||||||||||||
Quantity | R$ thousand | Quantity | R$ thousand | |||||||||||||
Balance at the beginning of the period | — | — | 80,062,600 | 3,037,838 | ||||||||||||
Purchase of treasury shares | — | — | 97,687,600 | 3,648,028 | ||||||||||||
Disposal of treasury shares | — | — | (22,000,000 | ) | (834,181 | ) | ||||||||||
Cancellation of treasury shares | — | — | (155,750,200 | ) | (5,851,685 | ) | ||||||||||
Balance at the end of the period | — | — | — | — |
d2. Dividends: On June 19, 2023, the Company approved the distribution of proposed interim dividends referring to the net profit calculated on December 31, 2022, in the total amount of R$2.22 billion, corresponding to R$1.00 (one real) per common share, using the shareholder base of June 22, 2023. Interim dividends were paid to shareholders on June 29, 2023. The Company ended the year ended December 31, 2023 with an accumulated loss, therefore, it is not configured the mandatory distribution of minimum dividends.
d3. Legal reserve: In accordance with the Brazilian Corporate Law and the Company’s by-laws, 5% of the net profits must be allocated for each fiscal year to the legal reserve until the aggregate amount of the reserve equals 20% of the share capital.
d4. Investments statutory: Constituted on the basis of the remaining balance of net profit after the allocations for the constitution of the legal reserve and distribution of dividends, which will have the purpose of financing the investment in operational assets, absorption of losses, and repurchase of own shares (to remain in treasury or cancel) This reserve cannot exceed the share capital.
d5. Tax incentive reserve: Arise from investments grants given by State governments such as partial or full reduction of in the calculation basis of certain goods in the production chain, in accordance with the regulations of each State. The amounts related to tax incentive recorded as income in the statements of income, if used to reduce profit taxes, they will be transferred from retained earnings to the tax incentive reserve in the years in which the Company presents net income in a higher amount of the reclassification amount.
65
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
During the year ended December 31, 2023, the Company and its subsidiaries recorded the amount of government subsidies in the amount of R$3.97 billion. Of this amount, R$97,536 from the indirect subsidiary Seara, was constituted on tax incentives due to the Company having recorded a profit in the 2023 fiscal year, the difference of R$2.99 billion will be recognized in the tax incentive reserve account to the extent that the accumulated loss is absorbed by future profits, and that such amount will reduce the value of dividends in subsequent periods.
e. Other comprehensive income: Composed by gain on cash flow hedge, Gains (losses) associated with pension and other postretirement benefit obligations, valuation adjustments to equity in subsidiaries, loss on net investment in foreign operations and gain on foreign currency translation adjustments. In the financial statement which includes the foreign entity, such exchange variations must be recognized, initially, in other comprehensive income in a specific equity account, and must be transferred from equity to the income statement when the net investment is written off.
e1. Gain (loss) on net investment in foreign operations: The Company has certain intercompany loans balances with the subsidiaries JBS Luxembourg S.à.r.l and JBS Investments Luxembourg S.à.r.l which will not be settled through cash but with equity transactions, through capital reduction. Therefore, the Company understands that these balances are an extension of the subsidiary’s investment, thus they are considered as net investment on foreign operations. The exchange variation is reclassified from income statement to equity, during the period.
f. Non-controlling interest: The balance representing non-controlling interests refers to the interest in common shares, of 17.5% on December 31, 2023 (17.3% on December 31, 2022), of PPC not held by JBS USA. JBS USA’s voting rights in Pilgrim’s Pride Corporation (PPC) are limited to 82.5% of the total as of December 31, 2023 (82.7% as of December 31, 2022). PPC is one of the largest chicken producing companies in the world, with operations in the United States, France, Mexico, Puerto Rico and the United Kingdom. The profit attributed to non-controlling interests of PPC was US$67.1 million (equivalent to R$328,865 on December 31, 2023) and US$147.4 million (equivalent to R$772,886 on December 31, 2022), respectively. PPC’s accumulated non-controlling interest was US$728.6 million (equivalent to R$3.53 billion on December 31, 2023) and US$639.6 million (equivalent to R$3.34 billion on December 31, 2023) 2022). Below are PPC’s total net sales, net income, cash generated from operations, total assets and total liabilities for the periods indicated
2023 | 2022 | |||||||
NET REVENUE | 85,027,030 | 91,576,775 | ||||||
NET INCOME | 1,574,827 | 3,910,487 | ||||||
Net cash provided by operating activities | 3,319,730 | 3,511,711 |
December 31, 2023 | December 31, 2022 | |||||||
Total assets | 47,494,901 | 48,293,826 | ||||||
Total liabilities | 31,012,322 | 33,406,288 |
23 Net revenue
The vast majority of the Company’s revenue is derived from contracts which are based upon a customer ordering our products. Revenues are recognized when there is a contract with the customer, the transaction price is reliably measurable and when the control over the goods sold is transferred to the customer. The Company accounts for a contract, which may be verbal or written, when it is approved and committed by both parties, the rights of the parties are identified along with payment terms, the contract has commercial substance and collectability is probable. While there may be master agreements, the contract is only established when the customer’s order is accepted by the Company.
The Company evaluates the transaction for distinct performance obligations, which are the sale of its products to customers. Each performance obligation is recognized based upon a pattern of recognition that reflects the transfer of control to the customer at a point in time, which is upon destination (customer location or port of destination), which faithfully depicts the transfer of control and recognition of revenue. There are instances of customer pick-up at the Company’s facility, in which case control transfers to the customer at that point and the Company recognizes revenue. The Company’s performance obligations are typically fulfilled within days to weeks of the acceptance of the order.
The measurability of the transaction price can be impacted by variable consideration i.e. discounts, rebates, incentives and the customer’s right to return products. Some or all of the estimated amount of variable consideration is included in the transaction price but only to the extent that it is highly probable a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. This is usually at the point of dispatch or on delivery of the products. This varies from customer to customer according to the terms of sale. However, due to the nature of our business, there is minimal variable consideration.
66
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Allocating the transaction price to a specific performance obligation based upon the relative standalone selling prices includes estimating the standalone selling prices including discounts and variable consideration.
Shipping and handling activities are performed before a customer obtains control of the goods and its obligation is fulfilled upon transfer of the goods to a customer. Shipping and handling costs are recorded within cost of sales. The Company can incur incremental costs to obtain or fulfill a contract such as broker expenses which are not expected to be recovered. The amortization period for such expenses is less than one year; therefore, the costs are expensed as incurred and included in deductions from sales.
The Company disaggregates its revenues by (i) domestic sales, (ii) export sales and (iii) segment information:
(i) | Domestic sales refers to internal sales of each geographical location: |
(ii) | Export sales refers to external sales of each geographical location; |
(iii) | Segment information as disclosed in Note 27. |
The Company also disaggregated its revenues between Brazil, Seara, Beef North America, Pork USA, Chicken USA, Australia and Others to align with our segment presentation in Note 27:
Company | Consolidated | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
GROSS REVENUE | ||||||||||||||||
Sales of products | ||||||||||||||||
Domestic sales | 31,300,727 | 32,059,168 | 284,652,376 | 287,967,513 | ||||||||||||
Export sales | 22,916,932 | 25,774,988 | 91,803,102 | 98,797,322 | ||||||||||||
54,217,659 | 57,834,156 | 376,455,478 | 386,764,835 | |||||||||||||
SALES DEDUCTION | ||||||||||||||||
Returns and discounts | (1,758,333 | ) | (2,095,356 | ) | (8,718,421 | ) | (8,287,129 | ) | ||||||||
Sales taxes | (1,024,939 | ) | (795,949 | ) | (3,920,520 | ) | (3,626,106 | ) | ||||||||
(2,783,272 | ) | (2,891,305 | ) | (12,638,941 | ) | (11,913,235 | ) | |||||||||
NET REVENUE | 51,434,387 | 54,942,851 | 363,816,537 | 374,851,600 |
23.1 Customer contract balances
Customer contract liabilities are relate to payments received in advance of satisfying the performance obligation under the contract. The Company recognizes revenue in the carry out of the respective performance obligation. Contractual liabilities are presented as advances from customers, under “Other current liabilities” in the balance sheet.
Company | Consolidated | ||||||||||||||||||
Note | 2023 | 2022 | 2023 | 2022 | |||||||||||||||
Trade accounts receivable | 5 | 2,575,423 | 4,380,011 | 16,416,149 | 20,234,895 | ||||||||||||||
Contract liabilities | (652,228 | ) | (449,744 | ) | (1,571,478 | ) | (1,124,306 | ) | |||||||||||
Total accounts receivable net of advance | 1,923,195 | 3,930,267 | 14,844,671 | 19,110,589 |
24 | Financial income (expense) |
Net finance expense includes (i) interest payable on borrowings and direct issue costs; (ii) results from the daily settlements of future contracts used to protect assets and liabilities, as well as the fair value adjustments for derivative instruments that are described within Note 29, (iii) interest receivable on funds invested which is recognized in profit or loss as it accrues using the effective interest method; and (iv) gains and losses associated with transactions denominated in foreign currencies.
67
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Net finance expense consisted of the following for the years ended December 31, 2023 and 2022 are as follows:
Company | Consolidated | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Exchange rate variation | 232,871 | 1,630,075 | 294,593 | 2,206,643 | ||||||||||||
Derivative transactions, net | 514,715 | (1,372,479 | ) | 411,361 | (1,797,444 | ) | ||||||||||
Interest expense (1) | (3,760,867 | ) | (3,246,367 | ) | (8,647,104 | ) | (6,930,469 | ) | ||||||||
Interest income (2) | 608,440 | 443,926 | 1,627,501 | 1,387,720 | ||||||||||||
Taxes, contribution, fees and others (3) | (224,700 | ) | (184,629 | ) | (434,335 | ) | (1,218,790 | ) | ||||||||
(2,629,541 | ) | (2,729,474 | ) | (6,747,984 | ) | (6,352,340 | ) | |||||||||
Financial income | 1,752,934 | 2,665,385 | 2,913,998 | 4,215,115 | ||||||||||||
Financial expense | (4,382,475 | ) | (5,394,859 | ) | (9,661,982 | ) | (10,567,455 | ) | ||||||||
(2,629,541 | ) | (2,729,474 | ) | (6,747,984 | ) | (6,352,340 | ) |
(1) | For the years ended at December 31, 2023 and 2022, the amounts of R$1,702,470 and R$1,233,139, respectively, in the Company and R$5,888,325 and R$4,696,402, in the Consolidated. These balances refer to interest expenses from loans and financings expenses recognized under the caption “Interest expense”. |
(2) | For the years ended at December 31, 2023 and 2022, the amounts of R$239,555 and R$65,029, respectively, in the Company and R$525,603 and R$353,284, respectively, in the Consolidated refers to interest income from short investments recognized under the caption “Interest income”. |
(3) | Under the caption “Taxes, contribution, fees and others” in the years ended at December 31, 2023 and 2022, includes the issue premium, in the Consolidated, of the JBS Lux 5.13% Notes 2028, JBS Lux 6.75% Notes 2028, JBS Lux. 6.50% Notes 2029 and Term loan JBS Lux 2026 in the amount of US$20,7 million (R$101,344 at December 31, 2023) and US$167,8 million (R$875,280 at December 31, 2022), respectively. |
25 Earnings per share
Basic: Earnings (loss) per share is calculated by dividing net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding during the year, excluding common shares purchased and held as treasury shares (shares in thousands).
Diluted: Diluted earnings (loss) per share is calculated by dividing net income (loss) of the period attributable to common shareholders by the weighted average number of common shares outstanding during the year, adjusted for the effects of all potential common shares that are dilutive and adjusted for treasury shares held. Since the first quarter of 2021, there are no shares available in the stock options plan, therefore, the calculation of the diluted and basic earnings per share are the same.
2023 | 2022 | |||||||
Net income attributable to shareholders | (1,060,972 | ) | 15,457,836 | |||||
Weighted average common shares outstanding | 2,218,116,370 | 2,254,344,774 | ||||||
Weighted average - treasury shares | — | (23,932,565 | ) | |||||
Weighted average - common shares outstanding (basic) | 2,218,116,370 | 2,230,412,209 | ||||||
Basic and diluted earnings per share - (R$) | (0.48 | ) | 6.93 |
26 Share-based compensation
JBS and Seara - Share-based variable compensation plan
In the variable remuneration plan, the Company’s directors and executive officers are rewarded with remuneration based on the pricing of the Company’s shares and paid on a deferred basis, 1/3 per year, for three years.
68
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
These plans consist of cash compensation, since there is no effective negotiation of the Company’s shares and there is no issuance and/or transfer of shares to settle the plan. The determination of the unit value equivalent to the number of shares to be used in the calculation basis is defined with reference to the monthly salary of the eligible participant, a multiple salary and the average of the closing prices of the Company’s common shares traded on B3 over the last 30 trading sessions. prior to the release of the annual results.
The amount of R$11.838 in December 31, 2023 (R$12.400 in December 31, 2022) was recognized under the caption “General and administrative expenses” in the income statement.
PPC long-term incentive plan
PPC sponsors a performance-based, omnibus long-term incentive plan (the “LTIP”) that provides for the grant of a broad range of long-term equity-based and liability- based awards PPC’s officers and other employees, members of the Board of Directors and any consultants. Awards that may be granted under the LTIP include “incentive stock options,” within the meaning of the Internal Revenue Code, nonqualified stock options, stock appreciation rights, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”).
Equity-based awards are converted into shares of PPC’s common stock shortly after award vesting. Compensation cost to be recognized for an equity-based awards grant is determined by multiplying the number of awards granted by the closing price of a share of PPC’s common stock on the award grant date. Liability based awards granted under the LTIP are converted into cash shortly after award vesting. Compensation cost to be recognized for a liability-based awards grant is first determined by multiplying the number of awards granted by the closing price of a share of PPC’s common stock on the award grant date. However, the compensation cost to be recognized is adjusted at each subsequent milestone date (i.e., forfeiture date, vesting date or financial reporting date) by multiplying the number of awards granted by the closing price of a share of PPC’s common stock on the milestone date. The PPC’s Chairman establishes the criteria of granting the options and selecting the employees.
In December 31, 2023, the expenses recognized in stock-based and cash-based compensation plans were R$28.522 (R$29,589 at December 31, 2022) and R$9,352 (R$6,926 at December 31, 2022).
The following table presents the changes of restricted stock units (“RSUs”):
December 31, 2023 | December 31, 2022 | |||||||||||||||
Equity-based RSU, payments in cash: | Quantity | Price | Quantity | Price | ||||||||||||
Outstanding at beginning of year | 993 | 114.79 | 554 | 110.06 | ||||||||||||
Granted | 324 | 117.25 | 405 | 123.33 | ||||||||||||
Vested | (378 | ) | 110.21 | (266 | ) | 120.08 | ||||||||||
Forfeited reinstated | (28 | ) | 123.79 | 300 | 121.47 | |||||||||||
Outstanding at end of the year | 911 | 110.96 | 993 | 114.79 |
December 31, 2023 | December 31, 2022 | |||||||||||||||
Equity-based RSU, payments in shares: | Quantity | Price | Quantity | Price | ||||||||||||
Outstanding at beginning of year | 377 | 124.18 | 574 | 148.63 | ||||||||||||
Granted | 158 | 119.92 | 269 | 114.09 | ||||||||||||
Vested | (196 | ) | 125.17 | (139 | ) | 142.29 | ||||||||||
Forfeited | (97 | ) | 112.99 | (327 | ) | 127.62 | ||||||||||
Outstanding at end of the year | 242 | 137.01 | 377 | 124.18 |
There were no cancellations or modifications to the awards in 2023 or 2022.
69
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
The total fair values of equity-based awards and liability-based awards vested during the year ended December 31, 2023 were R$45,024 (R$39,133 at December 31, 2022) and R$24,207 (R$31,251 at December 31, 2022), respectively. On December 31, 2023 the total unrecognized compensation cost related to all nonvested equity- based awards was R$43.572 (R$53.015 at December 31, 2022), which cost is expected to be recognized over a weighted average period of 1.93 years (2.17 years as of December 31, 2022). On December 31, 2023, the total unrecognized compensation cost related to all nonvested equity-based awards paid in cash was R$19,849 (R$13,951 at December 31, 2022) which cost is expected to be recognized over a weighted average period of 1,73 years (1,60 years as of December 31, 2022).
Historically, PPC has issued new shares, as opposed to treasury shares, to satisfy equity-based award conversions.
The expected life of the share options is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.
27 Operating segments and geographic reporting
The Company’s Management has defined operating segments based on the reports that are used to make strategic decisions, analyzed by the Chief Operating Decision Maker (CODM)—our Chief Executive Officer (CEO), there are seven reportable segments: Brazil, Seara, Beef North America, Pork USA, Chicken PPC, Australia and Others. The segment operating profit or loss is evaluated by the CODM, based on Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization)..
Adjusted EBITDA consists of all the items of profit and loss that compose the Company’s profit before taxes, applying the same accounting policies as described in these financial statements, except for the following adjustments as further described below: exclusion of financial income and financial expenses, exclusion of depreciation and amortization expenses; exclusion of share of profit of equity-accounted investees, net of tax; exclusion of expenses with DOJ and antitrust agreements described in note 21; exclusion of donations and social programs expenses; exclusion of extemporaneous tax credits impacts; exclusion of J&F Leniency expenses refund - net of PIS/ COFINS; exclusion of JBS fund for the Amazon and exclusion of certain other income (expenses).
Brazil: this segment includes all the operating activities from the Company, mainly represented by slaughter facilities, cold storage and meat processing, fat, feed and production of beef by-products such as leather, collagen and other products produced in Brazil. Revenues are generated from the sale of products predominantly to restaurant chains, food processing companies, distributors, supermarket chains, wholesale supermarket and other significant food chains.
Seara: this segment includes all the operating activities of Seara and its subsidiaries, mainly represented by chicken and pork processing, production and commercialization of food products and value-added products. Revenues are generated from the sale of products predominantly to restaurant chains, food processing companies, distributors, supermarket chains, wholesale supermarket and other significant food chains.
Beef North America: this segment includes JBS USA beef processing operations in North America and the plant-based businesses in Europe. Beef also sells by-products to the variety meat, feed processing, fertilizer, automotive and pet food industries and also produces value-added meat products including toppings for pizzas. Finally, Sampco LLC imports processed meats and other foods such as canned fish, fruits and vegetables to the US and Vivera produces and sells plant-based protein products in Europe.
70
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Pork USA: this segment includes JBS USA’s pork operations, including Swift Prepared Foods. Revenues are generated from the sale of products predominantly to retailers of fresh pork including trimmed cuts such as loins, roasts, chops, butts, picnics and ribs. Other pork products, including hams, bellies and trimmings, are sold predominantly to further processors who, in turn, manufacture bacon, sausage, and deli and luncheon meats. In addition, revenues are generated from the sale of case ready products. As a complement to our pork processing business, we also conduct business through our hog production operations, including four hog farms and five feed mills, from which, JBS Lux will source live hogs for its pork processing operations.
Chicken PPC: this segment includes PPC’s operations, including Moy Park, Tulip and Pilgrim’s Consumer Foods as well, mainly represented by chicken processing, production and commercialization of food products and prepared foods in the EUA, Mexico, United Kingdom and France. The fresh chicken products consist of refrigerated (non-frozen) whole or cut-up chicken, either pre-marinated or non-marinated, and pre-packaged chicken in various combinations of freshly refrigerated, whole chickens and chicken parts. The prepared chicken products include portion-controlled breast fillets, tenderloins and strips, delicatessen products, salads, formed nuggets and patties and bone-in chicken parts. These products are sold either refrigerated or frozen and may be fully cooked, partially cooked or raw. The segment also sells prepared pork products through PPL, a subsidiary acquired by PPC in October 2019. The segment includes Pilgrim’s Food Masters, subsidiary, acquired in September 2021, and generates revenues from private label meats, meat snacks, food-to-go products, and ethnic chilled and frozen ready meals.
Australia: this segment includes our fresh, frozen, value-added and branded beef, lamb, pork and fish products in Australia and New Zealand. The majority of our beef revenues from our operations in Australia are generated from the sale of fresh beef products (including fresh and frozen chuck cuts, rib cuts, loin cuts, round cuts, thin meats, ground beef, offal and other products). We also sell value-added and branded beef products (including frozen cooked and pre-cooked beef, corned cooked beef, beef cubes and consumer-ready products, such as hamburgers and sausages). We also operate lamb, sheep, pork and fish processing facilities in Australia and New Zealand, including the Rivalea and Huon acquisitions. JBS Australia also generates revenues through their cattle hoteling business. We sell these products in the countries where we operate our facilities, which we classify as domestic sales, and elsewhere, which we classify as export sales.
Others: includes certain operations not directly attributable to the primary segments, such as corporate expenses, international leather operations and other operations in Europe.
There are no revenues arising out of transactions with any single customer that represents 5% or more of the total revenues.
The Company manages its loans and financing and income taxes at the corporate level and not by segment.
The information by consolidated operational segment are as follows:
Product type report:
2023 | ||||||||||||||||||||||||||||||||||||||||
Brazil | Seara | Beef North America | Pork USA | Chicken PPC | Australia | Others | Total reportable segments | Elimination (1) | Total | |||||||||||||||||||||||||||||||
Net revenue | 55,531,836 | 41,300,262 | 116,254,130 | 38,494,563 | 86,609,179 | 30,974,314 | 4,473,893 | 373,638,177 | (9,821,640 | ) | 363,816,537 | |||||||||||||||||||||||||||||
Adjusted EBITDA (2) | 2,330,653 | 1,803,676 | 563,537 | 2,605,546 | 7,639,896 | 2,241,315 | (25,640 | ) | 17,158,983 | (12,885 | ) | 17,146,098 |
2022 | ||||||||||||||||||||||||||||||||||||||||
Brazil | Seara | Beef North America | Pork USA | Chicken PPC | Australia | Others | Total reportable segments | Elimination (1) | Total | |||||||||||||||||||||||||||||||
Net revenue | 58,948,888 | 42,967,751 | 113,979,241 | 42,086,620 | 90,064,833 | 32,630,114 | 4,340,796 | 385,018,243 | (10,166,643 | ) | 374,851,600 | |||||||||||||||||||||||||||||
Adjusted EBITDA (2) | 2,407,017 | 4,605,767 | 10,712,187 | 3,922,011 | 10,690,926 | 2,281,911 | (40,122 | ) | 34,579,697 | (11,269 | ) | 34,568,428 |
(1) | Includes intercompany and intersegment transactions. |
(2) | The Adjusted EBITDA is reconciled with the consolidated operating profit, as follows below: |
71
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
2023 | 2022 | |||||||
Operating profit | 5,302,294 | 24,575,690 | ||||||
Depreciation and amortization | 10,725,449 | 9,853,829 | ||||||
DOJ and Antitrust agreements (1) | 510,230 | 516,354 | ||||||
Donations and social programs (2) | 90,365 | 117,398 | ||||||
J&F Leniency expenses refund - net of PIS/ COFINS | — | (492,922 | ) | |||||
JBS Fund For The Amazon | — | 5,500 | ||||||
Asset impairment (3) | 135,206 | 85,601 | ||||||
Restructuring (4) | 261,006 | — | ||||||
Other operating income (expense), net (5) | 121,548 | (93,022 | ) | |||||
Total EBITDA - without elimination | 17,146,098 | 34,568,428 | ||||||
Elimination | 12,885 | 11,269 | ||||||
Total Adjusted EBITDA for operating segments | 17,158,983 | 34,579,697 |
(1) | Refers to the agreements entered by JBS USA and its subsidiaries as described in Note 21 – Provisions for legal proceedings. |
(2) | Refers to the donations, as described in Note 28 – Expenses by nature. |
(3) | Refers to the Arbitration process agreement that J&F agreed to pay to JBS, net of taxes. |
(4) | Mainly refers to the impairment of assets of the Planterra business unit, which had its activities closed during the 2023 financial year. |
(5) | Refers to the project to implement multiple restructuring initiatives mainly at the indirect subsidiary Pilgrim’s Pride Corporation (PPC). |
(3) | Refers to various adjustments, basically abroad, such as expenses with acquisitions, marketing with social programs, insurance compensation, among others. |
Net revenue and total assets are presented below, separated by geographic area, for additional information only.
Geographic reporting
2023 | ||||||||||||||||||||||||||||||||
North and Central America (2) | South America | Australia | Europe | Others | Total reportable segments | Elimination(1) | Total | |||||||||||||||||||||||||
Net revenue | 215,154,865 | 90,563,994 | 28,814,097 | 29,852,345 | 1,320,875 | 365,706,176 | (1,889,639 | ) | 363,816,537 | |||||||||||||||||||||||
Total assets | 84,846,413 | 85,569,078 | 27,941,006 | 28,545,693 | 10,110,309 | 237,012,499 | (30,880,430 | ) | 206,132,069 |
72
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
2022 | ||||||||||||||||||||||||||||||||
North and Central America | South America | Australia | Europe | Others | Total reportable segments | Elimination | Total | |||||||||||||||||||||||||
Net revenue | 221,656,694 | 98,206,795 | 32,891,669 | 28,862,297 | 979,182 | 382,596,637 | (7,745,037 | ) | 374,851,600 | |||||||||||||||||||||||
Total assets | 151,146,037 | 88,094,837 | 18,844,673 | 26,276,425 | 11,261,253 | 295,623,225 | (87,512,597 | ) | 208,110,628 |
(1) | Includes intercompany and intersegment transactions. |
(2) | Including the holdings located in Europe that are part of the North American operation. |
28 Expenses by nature
The Company’s policy is to present expenses by function on the consolidated statement of income (loss). Expenses by nature are disclosed below:
Company | Consolidated | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Cost of sales | ||||||||||||||||
Cost of inventories, raw materials and production inputs | (40,271,915 | ) | (44,074,367 | ) | (276,675,975 | ) | (270,949,960 | ) | ||||||||
Salaries and benefits | (2,634,409 | ) | (2,031,846 | ) | (38,139,921 | ) | (35,904,513 | ) | ||||||||
Depreciation and amortization | (497,316 | ) | (436,003 | ) | (9,351,644 | ) | (8,519,055 | ) | ||||||||
(43,403,640 | ) | (46,542,216 | ) | (324,167,540 | ) | (315,373,528 | ) | |||||||||
Selling | ||||||||||||||||
Freights and selling expenses | (3,219,679 | ) | (3,205,014 | ) | (19,218,137 | ) | (20,513,888 | ) | ||||||||
Salaries and benefits | (456,478 | ) | (317,100 | ) | (1,508,744 | ) | (1,251,493 | ) | ||||||||
Depreciation and amortization | (85,286 | ) | (90,795 | ) | (319,753 | ) | (321,398 | ) | ||||||||
Advertising and marketing | (183,223 | ) | (164,576 | ) | (1,566,842 | ) | (1,745,639 | ) | ||||||||
Commissions | (100,741 | ) | (139,630 | ) | (290,572 | ) | (340,277 | ) | ||||||||
Net impairment losses on financial assets | (7,282 | ) | (15,101 | ) | (37,120 | ) | (11,765 | ) | ||||||||
(4,052,689 | ) | (3,932,216 | ) | (22,941,168 | ) | (24,184,460 | ) | |||||||||
General and administrative | ||||||||||||||||
Salaries and benefits | (1,332,195 | ) | (1,531,120 | ) | (6,225,177 | ) | (6,704,271 | ) | ||||||||
Fees, services held and general expenses | (1,100,759 | ) | (1,100,829 | ) | (3,668,261 | ) | (3,472,648 | ) | ||||||||
Depreciation and amortization | (274,434 | ) | (267,605 | ) | (1,053,042 | ) | (1,013,376 | ) | ||||||||
Antitrust agreements | — | — | (510,230 | ) | (516,354 | ) | ||||||||||
Donations and social programs (1) | (90,365 | ) | (117,398 | ) | (90,365 | ) | (117,398 | ) | ||||||||
JBS Fund For The Amazon | — | (5,500 | ) | — | (5,500 | ) | ||||||||||
(2,797,753 | ) | (3,022,452 | ) | (11,547,075 | ) | (11,829,547 | ) |
(1) | This refers to donations made to the J&F Institute to renovate the school’s facilities; to the social program “Doing good is good” created by the Company, with the aim of supporting actions for social transformation where the Company is present and donations to the JBS Fund For The Amazon. |
73
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
As of December 31, 2023 in the Company and Consolidated, other income (expenses) includes gain (losses) of sale of assets, effects of intangible impairment accrual, insurance claim, indemnity of expenses received from the parent Company J&F, among others.
The Company incurred expenses with internal research and development, in the amount of R$4,449 (R$1,425 at December 31, 2022), in the Company and R$36,114 (R$42,922 at December 31, 2022), in the Consolidated.
29 Risk management and financial instruments
The Company and its subsidiaries recognizes financial assets and liabilities at fair value upon initial recognition, except for trade accounts receivable that are measured at the transaction price and subsequently classified at amortized cost or at fair value through profit or loss based on the business model for asset management and the contractual cash flow characteristics of the financial asset. Purchases or sales of financial assets or liabilities are recognized on the trade date.
Financial assets are classified, at initial recognition, as subsequently measured at amortized cost, fair value through other comprehensive income (OCI), and fair value through profit or loss. The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Company’s business model for managing them:
i. Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated at initial recognition at fair value through profit or loss. In this category the Company classifies mainly “CDBs and treasury bills” and “Derivative financial instruments”.
ii. Amortized cost: Represent financial assets and liabilities which Company’s business model is to maintain financial assets in order to receive contractual cash flows and that exclusively constitute principal and interest payments on the principal amount outstanding. Financial assets at amortized cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognized when the asset is written off, modified or has a reduction in its recoverable value. In this category the Company classifies mainly “Trade accounts receivable”, “Cash and cash equivalents”, “Trade accounts payable” and “Loans and financing”.
Financial assets and liabilities are offset and presented net in the balance sheet when there is a legal right to offset the amounts recognized and there is an intention to liquidate them on a net basis or to realize the asset and settle the liability simultaneously. The legal right should not be contingent on future events and should be applicable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty.
The Company uses the measurement principles described in Note 2, item 2.6 – Significant accounting judgements and estimates at each statement of financial position date for each classification type of financial assets and liabilities.
74
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Instrumentos financeiros:
Financial instruments are recognized in the consolidated financial statements as follows:
Company | Consolidated | |||||||||||||||||||
Notes | December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | ||||||||||||||||
Assets | ||||||||||||||||||||
Fair value through profit or loss (1) | ||||||||||||||||||||
Financial investments | 4 | 3,594,468 | 151,963 | 12,791,962 | 7,008,149 | |||||||||||||||
National treasury bills | 4 | 397,495 | 204,480 | 1,020,138 | 572,183 | |||||||||||||||
Derivative assets | ||||||||||||||||||||
Loans and receivables at amortized cost (2) | 439,444 | 98,134 | 821,741 | 566,144 | ||||||||||||||||
Cash at banks | 4 | 531,461 | 1,820,325 | 8,863,520 | 5,972,915 | |||||||||||||||
Margin cash | 4 | — | — | 88,068 | 308,302 | |||||||||||||||
Trade accounts receivable | 5 | 2,575,423 | 4,380,011 | 16,416,149 | 20,234,895 | |||||||||||||||
Related party receivables | 9 | 1,807,877 | 1,103,125 | 573,955 | 951,021 | |||||||||||||||
Total | 9,346,168 | 7,758,038 | 40,575,533 | 35,613,609 | ||||||||||||||||
Liabilities | ||||||||||||||||||||
Liabilities at amortized cost | ||||||||||||||||||||
Loans and financing | 17 | (13,248,101 | ) | (15,699,582 | ) | (96,821,825 | ) | (92,354,061 | ) | |||||||||||
Trade accounts payable and supply chain finance | 16 | (5,934,371 | ) | (5,561,549 | ) | (30,040,844 | ) | (34,080,614 | ) | |||||||||||
Related party payables | 9 | (6,402,295 | ) | (10,182,741 | ) | — | — | |||||||||||||
Lease liabilities | 13 | (151,030 | ) | (62,698 | ) | (8,913,933 | ) | (8,984,008 | ) | |||||||||||
Other financial liabilities (3) | (473,930 | ) | (5,180 | ) | (503,702 | ) | (61,964 | ) | ||||||||||||
Fair value through profit or loss | ||||||||||||||||||||
Derivative liabilities | (42,513 | ) | (278,227 | ) | (698,361 | ) | (559,536 | ) | ||||||||||||
Total | (26,252,240 | ) | (31,789,977 | ) | (136,978,665 | ) | (136,040,183 | ) |
(1) | CDBs are updated at the effective rate but have a really short-term and negotiated with financial institutions, and their recognition is similar to fair value; (ii) national treasury bill is recognized according to market value. |
(2) | Loans and receivables are classified as amortized cost, but without any change in their nature or business model; (ii) the accounts receivable are short-term and net from expected losses. |
(3) | The balances are relaed to commitments with third parties for investment. |
Fair value of assets and liabilities through profit or loss: The Company and its subsidiaries determine fair value measurements in accordance with the hierarchical levels that reflect the significance of the inputs used in the measurement, with the exception of those maturing at short term, equity instruments without an active market and contracts with discretionary characteristics that the fair value can not be measured reliably, according to the following levels:
Level 1 | - | Quoted prices in active markets (unadjusted) for identical assets or liabilities; |
Level 2 | - | Inputs other than Level 1, in which prices are quoted for similar assets and liabilities, either directly by obtaining prices in active markets or indirectly through valuation techniques that use data from active markets; |
Level 3 | - | Inputs used for fair value calculations which are not derived from an active market. The Company and its subsidiaries do not have any financial instruments that utilize level 3 inputs. |
75
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Company | ||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||
Level 1 | Level 2 | Total | Level 1 | Level 2 | Total | |||||||||||||||||||
Financial assets | ||||||||||||||||||||||||
Financial investments | 1,000,451 | 2,594,019 | 3,594,468 | — | 151,963 | 151,963 | ||||||||||||||||||
National treasury bills | 397,493 | — | 397,495 | 204,480 | — | 204,480 | ||||||||||||||||||
Derivative assets | — | 439,444 | 439,444 | — | 98,134 | 98,134 | ||||||||||||||||||
Financial liabilities | ||||||||||||||||||||||||
Derivative liabilities | — | 42,513 | 42,513 | — | 278,227 | 278,227 |
Consolidated | ||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||
Level 1 | Level 2 | Total | Level 1 | Level 2 | Total | |||||||||||||||||||
Financial assets | ||||||||||||||||||||||||
Financial investments | 1,000,451 | 11,791,511 | 12,791,962 | — | 7,008,149 | 7,008,149 | ||||||||||||||||||
National treasury bills | 1,020,138 | — | 1,020,138 | 572,183 | — | 572,183 | ||||||||||||||||||
Derivative assets | — | 821,741 | 821,741 | — | 566,144 | 566,144 | ||||||||||||||||||
Financial liabilities | ||||||||||||||||||||||||
Derivative liabilities | — | 698,361 | 698,361 | — | 559,536 | 559,536 |
Fair value of assets and liabilities carried at amortized cost: The fair value of the Notes under Rule 144-A and Regulation S, are estimated using the closing sale price of these securities informed by a financial newswire on December 31, 2023 and December 31, 2022 , considering there is an active market for these financial instruments. The book value of the remaining fixed-rate loans approximates fair value since the interest rate market, the Company’s credit quality, and other market factors have not significantly changed since entering into the loans. The book value of variable-rate loans and financings approximates fair value given the interest rates adjust for changes in market conditions and the quality of the Company’s credit rating has not substantially changed. For all other financial assets and liabilities, book value approximates fair value due to the short duration of the instruments. The following details the estimated fair value of loans and financings:
Consolidated | ||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||
Description | Principal | Price (% of the Principal) | Market Value of the Principal | Principal | Price (% of the Principal) | Market Value of the Principal | ||||||||||||||||||
Notes 2,50% JBS Lux 2027 | 4,841,300 | 92.10 | % | 4,458,643 | 5,217,701 | 86.90 | % | 4,534,182 | ||||||||||||||||
Notes 5,13% JBS Lux 2028 | 4,357,170 | 99.66 | % | 4,342,312 | 4,695,931 | 95.13 | % | 4,467,239 | ||||||||||||||||
Notes 3,00% JBS Lux 2029 | 2,904,780 | 88.24 | % | 2,563,178 | 3,130,620 | 84.02 | % | 2,630,347 | ||||||||||||||||
Notes 6,5% JBS Lux 2029 | 377,491 | 99.27 | % | 374,746 | 406,840 | 98.16 | % | 399,354 | ||||||||||||||||
Notes 5,5% JBS Lux 2030 | 6,051,625 | 98.55 | % | 5,963,876 | 6,522,126 | 95.40 | % | 6,222,108 | ||||||||||||||||
Notes 3,75% JBS Lux 2031 | 2,420,650 | 86.45 | % | 2,092,652 | 2,608,850 | 82.46 | % | 2,151,258 | ||||||||||||||||
Notes 3,00% JBS Lux 2032 | 4,841,300 | 81.66 | % | 3,953,212 | 5,217,701 | 77.61 | % | 4,049,458 | ||||||||||||||||
Notes 3,625% JBS Lux 2032 | 4,841,300 | 85.60 | % | 4,144,298 | 5,217,701 | 82.24 | % | 4,291,037 | ||||||||||||||||
Notes 5,75% JBS Lux 2033 | 9,924,665 | 99.35 | % | 9,860,452 | 10,696,287 | 95.41 | % | 10,205,327 | ||||||||||||||||
Notes 6,75% JBS Lux 2034 | 7,746,080 | 105.27 | % | 8,154,530 | — | — | — | |||||||||||||||||
Notes 4,375% JBS Lux 2052 | 4,357,170 | 74.36 | % | 3,239,817 | 4,695,931 | 71.80 | % | 3,371,678 | ||||||||||||||||
Notes 6,50% JBS Lux 2052 | 7,504,015 | 100.71 | % | 7,557,218 | 8,087,436 | 96.79 | % | 7,827,829 | ||||||||||||||||
Notes 7.25% JBS Lux 2053 | 4,357,170 | 109.34 | % | 4,764,129 | — | — | — | |||||||||||||||||
Notes 5,875% PPC 2027 | — | — | — | 4,435,046 | 99.55 | % | 4,415,088 | |||||||||||||||||
Notes 4,25% PPC 2031 | 4,841,300 | 90.27 | % | 4,369,999 | 5,217,701 | 86.39 | % | 4,507,572 | ||||||||||||||||
Notes 3,5% PPC 2032 | 4,357,170 | 84.47 | % | 3,680,371 | 4,695,931 | 80.72 | % | 3,790,556 | ||||||||||||||||
Notes 6,25% PPC 2033 | 4,841,300 | 102.90 | % | 4,981,794 | — | — | — | |||||||||||||||||
Notes 6,875% PPC 2034 | 2,420,646 | 108.05 | % | 2,615,416 | — | — | — | |||||||||||||||||
80,985,132 | 77,116,643 | 70,845,802 | 62,863,033 |
76
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Finance income (expense) by category of financial instrument:
Company | Consolidated | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Fair value through profit or loss | 836,663 | (1,284,691 | ) | 1,013,345 | (1,421,568 | ) | ||||||||||
Amortized cost | (3,466,204 | ) | (1,444,783 | ) | (7,761,329 | ) | (4,930,772 | ) | ||||||||
Total | (2,629,541 | ) | (2,729,474 | ) | (6,747,984 | ) | (6,352,340 | ) |
Risk management:
The Company and its subsidiaries during the regular course of its operations is exposed to market, credit and liquidity risks. These exposures are managed by the Risk Management Department, following the Financial and Commodities Risk Management Policy defined by the Risk Management Committee and approved by the Board of Directors. The Risk Management Department is responsible for identifying all the risk factors that may cause adverse financial results for the Company and proposing strategies to mitigate those risks. Their proposals are submitted to the Risk Management Committee for submission to the Board of Directors, who supervises the implementation of new solutions, noting limitations of scope and guidelines of the Financial and Commodities Risk Management Policy.
Below are the risks and operations to which the Company is exposed and a sensitivity analysis for each type of risk, consisting in the presentation of the effects in the finance income (expense), net, when subjected to possible changes, of 25% to 50%, in the relevant variables for each risk. For each probable scenario, the Company utilizes the Value at Risk Methodology (VaR),for the confidence interval (C.I.) of 99% and a horizon of one day.
a. | Market Risk: |
The exposure to market risk is continuously monitored, especially the risks related to foreign exchange, interest rates and commodity prices, which directly affect the value of financial assets and liabilities, future cash flows and net investments in foreign subsidiaries In these cases, Company and its subsidiaries may use financial hedge instruments, including derivatives, with the approval by the Board of Directors.
It is the responsibility of the Risk Management Department to ensure that other areas are within the risk exposure limits set by Management to protect against volatility in price, centralize the exposures and apply the Financial and Commodities Risk Management policy.
The Risk Management Department uses proprietary and third party information systems specially developed to control and manage market risk, applying stress scenario and Value at Risk analysis (VaR) to measure Company’s net exposure as well as the cash flow risk with the B3 and the Chicago Mercantile Exchange.
a1. Interest rate risk
Interest rate risk is related to potentially adverse results that Company and its subsidiaries may realize from changes in interest rates, which may be caused by economic crisis, changes in sovereign monetary policy, or market movements. The Company primarily has assets and mainly liabilities exposed to variable interest rates like the CDI (Certificado de Depósito Interbancário - Interbank Deposit Certificate), LIBOR (London Interbank Offer Rate), IPCA (Extended National Consumer Price Index) and SOFR (Secured Overnight Financing Rate), among others. The Company’s Financial and Commodities Risk Management Policy does not define the proportion between float and fixed exposures, but the Risk Management Department monitors market conditions and may propose to the Risk Management Committee strategies to rebalance the exposure.
The risk management committee manages and monitors the Company’s transition to alternative rates. The committee evaluates the extent to which contracts reference LIBOR cash flows, whether such contracts will need to be amended as a result of LIBOR reform and how to manage communication about the reform with counterparties. Therefore, the committee provides periodic reports to management of interest rate risk and risks arising from LIBOR reform.
77
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
The Company understands that the quantitative data referring to the Company’s interest rate exposure risk on December 31, 2023 and 2022, are in accordance with the Financial and Commodity Risk Management Policy and are representative of the exposure incurred during the period. For informational purposes and in accordance with our Financial and Commodities Risk Management Policy, the notional amounts of assets and liabilities exposed to floating interest rates are presented below:
Company | Consolidated | |||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||
Net exposure to the CDI rate: CDB-DI (Bank certificates of deposit) | 75,631 | 151,963 | 4,567,894 | 3,532,181 | ||||||||||||
Treasury bill | — | 124,046 | — | 124,046 | ||||||||||||
Margin cash | 64,754 | 80,444 | 152,822 | 387,344 | ||||||||||||
Related party transactions | 1,223,516 | (8,371,733 | ) | 3,019 | 7,839 | |||||||||||
Credit note - export | (1,046,272 | ) | (1,753,795 | ) | (1,053,700 | ) | (2,301,658 | ) | ||||||||
CRA - Agribusiness Credit Receivable Certificates | (293,753 | ) | (30,692 | ) | (293,753 | ) | (30,692 | ) | ||||||||
Rural - Credit note | — | — | (5,847 | ) | (4,176 | ) | ||||||||||
Rural - Credit note - Pre fixed | — | — | — | — | ||||||||||||
Subtotal | 23,876 | (9,799,767 | ) | 3,370,435 | 1,714,884 | |||||||||||
Derivatives (Swap) | (5,992,578 | ) | (6,788,487 | ) | (6,910,347 | ) | (6,368,342 | ) | ||||||||
Total | (5,968,702 | ) | (16,588,254 | ) | (3,539,912 | ) | (4,653,458 | ) | ||||||||
Liabilities exposure to the LIBOR rate: | ||||||||||||||||
PPC - Term loan | — | — | — | (2,498,841 | ) | |||||||||||
Prepayment | — | — | — | (1,524,660 | ) | |||||||||||
FINIMP | — | (14,729 | ) | — | (14,729 | ) | ||||||||||
Term loan JBS Lux 2026 | — | — | — | — | ||||||||||||
Working Capital - American dollars | — | (16,645 | ) | — | (16,645 | ) | ||||||||||
Others | — | — | — | — | ||||||||||||
Subtotal | — | (31,374 | ) | — | (4,054,875 | ) | ||||||||||
Derivatives (Swap) | — | — | — | 1,541,061 | ||||||||||||
Total | — | (31,374 | ) | — | (2,513,814 | ) | ||||||||||
Net exposure to the IPCA rate: | ||||||||||||||||
Margin cash | — | — | 250,540 | 79,500 | ||||||||||||
CRA - Agribusiness Credit Receivable Certificates | (10,174,868 | ) | (8,398,599 | ) | (10,174,868 | ) | (8,398,599 | ) | ||||||||
Related party transactions | 570,935 | 543,165 | 570,935 | 543,165 | ||||||||||||
Treasury bills | — | — | 134,183 | 77,049 | ||||||||||||
Subtotal | (9,603,933 | ) | (7,855,434 | ) | (9,219,210 | ) | (7,698,885 | ) | ||||||||
Derivatives (Swap) | 6,892,396 | 7,122,166 | 6,892,396 | 7,122,166 | ||||||||||||
Total | (2,711,537 | ) | (733,268 | ) | (2,326,814 | ) | (576,719 | ) | ||||||||
Exposure of liabilities to TJLP: | ||||||||||||||||
Working capital - Reais | (3,734 | ) | (3,378 | ) | (3,734 | ) | (3,378 | ) | ||||||||
Total | (3,734 | ) | (3,378 | ) | (3,734 | ) | (3,378 | ) | ||||||||
Liabilities exposure to the SOFR rate: | ||||||||||||||||
Prepayment | (870,835 | ) | (528,230 | ) | (1,360,264 | ) | (842,188 | ) | ||||||||
Working Capital - USD | (14,110 | ) | — | (14,110 | ) | — | ||||||||||
Total | (884,945 | ) | (528,230 | ) | (1,374,374 | ) | (842,188 | ) | ||||||||
Net exposure to the CPI rate: | ||||||||||||||||
Margin cash | 237,921 | 211,155 | ||||||||||||||
Total | 237,921 | 211,155 |
78
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Sensitivity analysis:
Scenario (I) VaR 99% I.C. 1 day | Scenario (II) Interest rate variation - 25% | Scenario (III) Interest rate variation - 50% | ||||||||||||||||||||||||||||||||||||||||
Contracts | Current | Effect on income | Effect on income | Effect on income | ||||||||||||||||||||||||||||||||||||||
exposure | Risk | scenario | Rate | Company | Consolidated | Rate | Company | Consolidated | Rate | Company | Consolidated | |||||||||||||||||||||||||||||||
CDI | Increase | 11.65 | % | 11.70 | % | (2,838 | ) | (1,685 | ) | 14.56 | % | (173,868 | ) | (103,226 | ) | 17.48 | % | (347,677 | ) | (206,417 | ) | |||||||||||||||||||||
IPCA | Increase | 4.68 | % | 4.69 | % | (366 | ) | (314 | ) | 5.85 | % | (31,725 | ) | (27,224 | ) | 7.02 | % | (63,450 | ) | (54,447 | ) | |||||||||||||||||||||
TJLP | Increase | 6.55 | % | 6.55 | % | — | — | 8.19 | % | (61 | ) | (61 | ) | 9.83 | % | (122 | ) | (122 | ) | |||||||||||||||||||||||
CPI | Reduction | 3.10 | % | 3.09 | % | — | (21 | ) | 2.33 | % | — | (1,844 | ) | 1.55 | % | — | (3,688 | ) | ||||||||||||||||||||||||
SOFR | Increase | 5.38 | % | 5.38 | % | (34 | ) | (53 | ) | 6.73 | % | (11,903 | ) | (18,485 | ) | 8.07 | % | (23,805 | ) | (36,971 | ) | |||||||||||||||||||||
(3,238 | ) | (2,073 | ) | (217,557 | ) | (150,840 | ) | (435,054 | ) | (301,645 | ) |
Company | |||||||||||||||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||||
Instrument | Risk factor | Maturity | Notional | Fair value (Asset) - R$ | Fair value (Liability) - R$ | Fair value | Notional | Fair value (Asset) - R$ | Fair value (Liability) - R$ | Fair value | |||||||||||||||||||||||||||
IPCA | 2024 | 537,534 | 689,751 | (540,408 | ) | 149,343 | 537,534 | 646,186 | (513,673 | ) | 132,513 | ||||||||||||||||||||||||||
IPCA | 2027 | 387,000 | 457,602 | (413,456 | ) | 44,146 | 387,000 | 418,991 | (417,549 | ) | 1,442 | ||||||||||||||||||||||||||
IPCA | 2028 | 442,000 | 526,622 | (484,293 | ) | 42,330 | 442,000 | 481,768 | (489,234 | ) | (7,466 | ) | |||||||||||||||||||||||||
Swap | IPCA | 2030 | 1,400,000 | 1,697,548 | (1,590,808 | ) | 106,740 | 1,400,000 | 1,546,027 | (1,603,211 | ) | (57,184 | ) | ||||||||||||||||||||||||
IPCA | 2031 | 1,398,524 | 1,616,904 | (1,578,406 | ) | 38,498 | 1,430,000 | 1,480,425 | (1,568,962 | ) | (88,537 | ) | |||||||||||||||||||||||||
IPCA | 2032 | 425,166 | 501,657 | (510,557 | ) | (8,900 | ) | 900,000 | 927,182 | (972,097 | ) | (44,915 | ) | ||||||||||||||||||||||||
IPCA | 2036 | 91,135 | 113,710 | (119,336 | ) | (5,625 | ) | 100,000 | 101,869 | (111,699 | ) | (9,830 | ) | ||||||||||||||||||||||||
IPCA | 2037 | 1,040,017 | 1,288,602 | (1,295,723 | ) | (7,120 | ) | 1,272,000 | 1,519,718 | (1,625,735 | ) | (106,017 | ) | ||||||||||||||||||||||||
5,721,376 | 6,892,396 | (6,532,987 | ) | 359,412 | 6,468,534 | 7,122,166 | (7,302,160 | ) | (179,994 | ) |
Consolidated | |||||||||||||||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||||
Instrument | Risk factor | Maturity | Notional (Asset) - R$ | Fair value (Liability) - R$ | Fair value | Fair value | Notional | Fair value (Asset) - R$ | Fair value (Liability) - R$ | Fair value | |||||||||||||||||||||||||||
CDI | 2023 | — | — | — | — | 400,000 | 420,145 | (404,637 | ) | 15,508 | |||||||||||||||||||||||||||
CDI | 2024 | 880,000 | 915,329 | (917,770 | ) | (2,441 | ) | — | — | — | — | ||||||||||||||||||||||||||
LIBOR | 2024 | — | — | — | — | 1,507,335 | 1,541,061 | (1,462,267 | ) | 78,794 | |||||||||||||||||||||||||||
IPCA | 2024 | 537,534 | 689,751 | (540,408 | ) | 149,343 | 537,534 | 646,186 | (513,673 | ) | 132,513 | ||||||||||||||||||||||||||
IPCA | 2027 | 387,000 | 457,602 | (413,456 | ) | 44,146 | 387,000 | 418,991 | (417,549 | ) | 1,442 | ||||||||||||||||||||||||||
Swap | IPCA | 2028 | 442,000 | 526,622 | (484,293 | ) | 42,330 | 442,000 | 481,768 | (489,234 | ) | (7,466 | ) | ||||||||||||||||||||||||
IPCA | 2030 | 1,400,000 | 1,697,548 | (1,590,808 | ) | 106,740 | 1,400,000 | 1,546,027 | (1,603,211 | ) | (57,184 | ) | |||||||||||||||||||||||||
IPCA | 2031 | 1,398,524 | 1,616,904 | (1,578,406 | ) | 38,498 | 1,430,000 | 1,480,425 | (1,568,962 | ) | (88,537 | ) | |||||||||||||||||||||||||
IPCA | 2032 | 425,166 | 501,657 | (510,557 | ) | (8,900 | ) | 900,000 | 927,182 | (972,097 | ) | (44,915 | ) | ||||||||||||||||||||||||
IPCA | 2036 | 91,135 | 113,710 | (119,336 | ) | (5,625 | ) | 100,000 | 101,869 | (111,699 | ) | (9,830 | ) | ||||||||||||||||||||||||
IPCA | 2037 | 1,040,017 | 1,288,602 | (1,295,723 | ) | (7,120 | ) | 1,272,000 | 1,519,718 | (1,625,735 | ) | (106,017 | ) | ||||||||||||||||||||||||
6,601,376 | 7,807,725 | (7,450,757 | ) | 356,971 | 8,375,869 | 9,083,372 | (9,169,064 | ) | (85,692 | ) |
a2. Exchange rate risk:
Exchange rate risk relates to potentially adverse results that the Company may face from fluctuations in foreign currency exchange rates from economic crisis, sovereign monetary policy alterations, or market movements. The Company has assets and liabilities exposed to foreign exchange rates, however the Company’s Financial and Commodities Risk Management Policy states these exposures should not always be netted, since other issues should be considered such as maturities mismatches and market volatility.
The Risk Management Department enters into transaction with derivative instruments previously approved by the Board of Directors to protect financial assets and liabilities and future cash flow from commercial activities and net investments in foreign operations. The Board of Directors has approved the use of future contracts, NDFs (non deliverable forwards), DFs (Deliverable forwards), and swaps that may be applied to hedge loans, investments, cash flows from interest payments, export estimate, acquisition of raw material, and other transactions, whenever they are quoted in currencies different than the Company’s functional currency. The primary exposures to exchange rate risk are in US Dollars (US$), Euro (€), British Pound (£), Mexican Pesos (MXN) and Australian Dollars (AU$).
79
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
The carrying amounts of assets and liabilities and other positions exposed to foreign currency risk at December 31, 2023 and 2022 are presented below along with the notional amounts of derivative contracts intended to offset the exposure, in accordance with the Company’s Financial and Commodities Risk Management Policy. The exposure is related to Brazilian Reais.
Company | ||||||||||||||||||||||||
USD | EUR | GBP | ||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||||||||
OPERATING | ||||||||||||||||||||||||
Cash and cash equivalents | 2,767,180 | 1,646,583 | 161,775 | 150,768 | 16,901 | 1,045 | ||||||||||||||||||
Trade accounts receivable | 1,530,322 | 2,797,281 | 237,649 | 255,159 | 38,864 | 57,115 | ||||||||||||||||||
Sales orders | 2,345,443 | 1,691,501 | 257,417 | 170,821 | 81,782 | 69,810 | ||||||||||||||||||
Trade accounts payable | (246,588 | ) | (217,330 | ) | (27,667 | ) | (28,843 | ) | (237 | ) | 0 | |||||||||||||
Operating subtotal | 6,396,357 | 5,918,035 | 629,174 | 547,905 | 137,310 | 127,970 | ||||||||||||||||||
FINANCIAL | ||||||||||||||||||||||||
Advances to customers | (512,091 | ) | — | (52,330 | ) | — | — | — | ||||||||||||||||
Loans and financing | (1,464,859 | ) | (5,299,683 | ) | (15,579 | ) | (26,017 | ) | — | — | ||||||||||||||
Financial subtotal | (1,976,950 | ) | (5,299,683 | ) | (67,909 | ) | (26,017 | ) | — | — | ||||||||||||||
Operating financial subtotal | 4,419,407 | 618,352 | 561,265 | 521,888 | 137,310 | 127,970 | ||||||||||||||||||
Related parties transaction, net | (1,660,877 | ) | ||||||||||||||||||||||
Total exposure | 4,419,407 | (1,042,525 | ) | 561,265 | 521,888 | 137,310 | 127,970 | |||||||||||||||||
DERIVATIVES | ||||||||||||||||||||||||
Future contracts | 697,909 | 2,557 | (481,644 | ) | (539,980 | ) | (152,117 | ) | — | |||||||||||||||
Non Deliverable Forwards (NDF´s) | (3,582,562 | ) | — | — | — | — | — | |||||||||||||||||
Total derivatives | (2,884,653 | ) | 2,557 | (481,644 | ) | (539,980 | ) | (152,117 | ) | — | ||||||||||||||
NET EXPOSURE IN R$ | 1,534,754 | (1,039,968 | ) | 79,621 | (18,092 | ) | (14,807 | ) | 127,970 | |||||||||||||||
Net debt in foreign subsidiaries | (71,531,166 | ) | (66,873,170 | ) | — | — | — | — |
Consolidated | ||||||||||||||||||||||||||||||||||||||||
USD | EUR | GBP | MXN | AUD | ||||||||||||||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||
OPERATING | ||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | 7,604,779 | 3,848,527 | 329,956 | 209,670 | 97,319 | 63,667 | 1,314,427 | 639,627 | 203 | 37 | ||||||||||||||||||||||||||||||
Trade accounts receivable | 2,806,266 | 6,124,137 | 715,733 | 712,099 | 240,823 | 267,677 | 649,281 | 657,623 | 1,167 | 449 | ||||||||||||||||||||||||||||||
Sales orders | 4,437,512 | 3,116,512 | 356,147 | 218,958 | 1,053,024 | 69,810 | — | — | — | — | ||||||||||||||||||||||||||||||
Trade accounts payable | (846,168 | ) | (805,002 | ) | (362,919 | ) | (481,445 | ) | (76,715 | ) | (98,088 | ) | (1,294,723 | ) | (273,126 | ) | (1,549 | ) | (616 | ) | ||||||||||||||||||||
Provisions | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Purchase orders | (274,549 | ) | (321,825 | ) | (87,203 | ) | (63,557 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||
Operating subtotal | 13,727,840 | 11,962,349 | 951,714 | 595,725 | 1,314,451 | 303,066 | 668,985 | 1,024,124 | (179 | ) | (130 | ) | ||||||||||||||||||||||||||||
FINANCIAL | ||||||||||||||||||||||||||||||||||||||||
Margin cash | — | 1,402 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Advances to customers | (539,165 | ) | (188,904 | ) | (61,100 | ) | (4,468 | ) | (2,474 | ) | — | — | — | — | — | |||||||||||||||||||||||||
Loans and financing | (1,485,299 | ) | (7,108,978 | ) | (15,579 | ) | (26,017 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||
Financial subtotal | (2,024,464 | ) | (7,296,480 | ) | (76,679 | ) | (30,485 | ) | (2,474 | ) | — | — | — | — | — | |||||||||||||||||||||||||
Operating financial subtotal | 11,703,376 | 4,665,869 | 875,035 | 565,240 | 1,311,977 | 303,066 | 668,985 | 1,024,124 | (179 | ) | (130 | ) | ||||||||||||||||||||||||||||
Related party transactions, net | 1,510,817 | |||||||||||||||||||||||||||||||||||||||
Total exposure | 11,703,376 | 4,665,869 | 875,035 | 2,076,057 | 1,311,977 | 303,066 | 668,985 | 1,024,124 | (179 | ) | (130 | ) | ||||||||||||||||||||||||||||
DERIVATIVES Future contracts | (1,214,139 | ) | 2,557 | (663,598 | ) | (539,980 | ) | (213,703 | ) | — | — | — | — | — | ||||||||||||||||||||||||||
Deliverable Forwards (DF´s) | (1,926,954 | ) | (2,417,731 | ) | 325,834 | 438,355 | (69,565 | ) | (27,174 | ) | — | (1,520,318 | ) | 13,778 | 4,920 | |||||||||||||||||||||||||
Non Deliverable Forwards (NDF´s) | (6,326,417 | ) | 15,804 | 24,550 | (61,746 | ) | (470,206 | ) | (103,107 | ) | — | — | — | — | ||||||||||||||||||||||||||
Swap | — | 78,793 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Total derivatives | (9,467,510 | ) | (2,320,577 | ) | (313,214 | ) | (163,371 | ) | (753,474 | ) | (130,281 | ) | — | (1,520,318 | ) | 13,778 | 4,920 | |||||||||||||||||||||||
NET EXPOSURE IN R$ | 2,235,866 | 2,345,292 | 561,821 | 1,912,686 | 558,503 | 172,785 | 668,985 | (496,194 | ) | 13,599 | 4,790 | |||||||||||||||||||||||||||||
Net debt in foreign subsidiaries | (71,531,166 | ) | (66,873,170 | ) | — | — | — | — | — | — | — | — |
80
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
a2.1. Sensitivity analysis and derivative financial instruments breakdown:
a2.1.1 USD - American dollars (amounts in thousands of R$):
Scenario (i) VaR 99% I.C. 1 day | Scenario (ii) Interest rate variation - 25% | Scenario (iii) Interest rate variation - 50% | ||||||||||||||||||||||||||||||||||||||||
Closing | Effect on income | Effect on income | Effect on income | |||||||||||||||||||||||||||||||||||||||
Exposure of R$ | Risk | exchange rate | Exchange rate | Company | Consolidated | Exchange rate | Company | Consolidated | Exchange rate | Company | Consolidated | |||||||||||||||||||||||||||||||
Operating | Appreciation | 4.8413 | 4.7621 | (104,587 | ) | (224,464 | ) | 3.6310 | (1,599,083 | ) | (3,431,946 | ) | 2.4207 | (3,198,178 | ) | (6,863,920 | ) | |||||||||||||||||||||||||
Financial | Depreciation | 4.8413 | 4.7621 | 32,325 | (17,701 | ) | 3.6310 | 494,236 | (270,637 | ) | 2.4207 | 988,475 | (541,276 | ) | ||||||||||||||||||||||||||||
Derivatives | Depreciation | 4.8413 | 4.7621 | 47,167 | 154,803 | 3.6310 | 721,160 | 2,366,868 | 2.4207 | 1,442,327 | 4,733,755 | |||||||||||||||||||||||||||||||
(25,095 | ) | (87,362 | ) | (383,687 | ) | (1,335,715 | ) | (767,376 | ) | (2,671,441 | ) |
Closing | Scenario (i) VaR 99% I.C. 1 day | Scenario (ii) Interest rate variation - 25% | Scenario (iii) Interest rate variation - 50% | |||||||||||||||||||||||||||
Exposure of R$ | Risk | exchange rate | Exchange rate | Effect on income | Exchange rate | Effect on income | Exchange rate | Effect on income | ||||||||||||||||||||||
Net debt in foreign subsidiaries | Depreciation | 4.8413 | 4.9205 | (1,169,605 | ) | 6.0516 | (17,882,865 | ) | 7.2620 | (35,765,583 | ) | |||||||||||||||||||
(1,169,605 | ) | (17,882,865 | ) | (35,765,583 | ) |
Company | ||||||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||
Instrument | Risk factor | Nature | Quantity | Notional (R$) | Fair value | Quantity | Notional (R$) | Fair value | ||||||||||||||||||||
Future Contract | American dollar | Short | 13,958 | 697,909 | (467 | ) | 51 | 2,557 | (4,506 | ) |
Consolidated | ||||||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||
Instrument | Risk factor | Nature | Quantity | Notional (R$) | Fair value | Quantity | Notional (R$) | Fair value | ||||||||||||||||||||
Future Contract | American dollar | Short | 52,199 | (1,214,139 | ) | (10,061 | ) | 51 | 2,557 | (4,506 | ) |
Company | ||||||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||
Instrument | Risk factor | Nature | (USD) | Notional (R$) | Fair value | (USD) | (R$) | Fair value | ||||||||||||||||||||
Non Deliverable Forwards | American dollar | Short | (740,000 | ) | (3,582,562 | ) | 35,174 | — | — | — |
Consolidated | ||||||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||
Instrument | Risk factor | Nature | Notional (USD) | Notional (R$) | Fair value | Notional (USD) | Notional (R$) | Fair value | ||||||||||||||||||||
Deliverable Forwards | American dollar | Short | (398,024 | ) | (1,926,954 | ) | 141,124 | (463,371 | ) | (2,417,731 | ) | 67,658 | ||||||||||||||||
Non Deliverable Forwards | American dollar | Short | (1,306,760 | ) | (6,326,417 | ) | 67,656 | 3,029 | 15,804 | (339 | ) |
81
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
a2.1.2 EUR - EURO (amounts in thousands of R$):
Scenario (i) VaR 99% I.C. 1 day | Scenario (ii) Interest rate variation - 25% | Scenario (iii) Interest rate variation - 50% | ||||||||||||||||||||||||||||||||||||||||
Closing | Effect on income | Effect on income | Effect on income | |||||||||||||||||||||||||||||||||||||||
Exposure of R$ | Risk | exchange rate | Exchange rate | Company | Consolidated | Exchange rate | Company | Consolidated | Exchange rate | Company | Consolidated | |||||||||||||||||||||||||||||||
Operating | Appreciation | 5.3516 | 5.2638 | (10,325 | ) | (15,618 | ) | 4.0137 | (157,294 | ) | (237,929 | ) | 2.6758 | (314,587 | ) | (475,857 | ) | |||||||||||||||||||||||||
Financial | Depreciation | 5.3516 | 5.2638 | 1,114 | 1,258 | 4.0137 | 16,977 | 19,170 | 2.6758 | 33,954 | 38,339 | |||||||||||||||||||||||||||||||
Derivatives | Depreciation | 5.3516 | 5.2638 | 7,904 | 5,140 | 4.0137 | 120,411 | 78,304 | 2.6758 | 240,822 | 156,607 | |||||||||||||||||||||||||||||||
(1,307 | ) | (9,220 | ) | (19,906 | ) | (140,455 | ) | (39,811 | ) | (280,911 | ) |
Company | ||||||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||
Instrument | Risk factor | Nature | Quantity | Notional (R$) | Fair value | Quantity | Notional (R$) | Fair value | ||||||||||||||||||||
Future Contract | Euro | Short | (9,000 | ) | (481,644 | ) | 1,805 | 9,700 | (539,980 | ) | (2,872 | ) |
Consolidated | ||||||||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||
Instrument | Risk factor | Nature | Notional (EUR) | Notional (R$) | Fair value | Notional (EUR) | Notional (R$) | Fair value | ||||||||||||||||||||||
Future Contract | Euro | Long | (5,600 | ) | (663,598 | ) | 2,486 | — | — | — | ||||||||||||||||||||
Deliverable Forwards | Euro | Short | 60,885 | 325,834 | (9,126 | ) | 78,708 | 438,355 | 17,965 | |||||||||||||||||||||
Non Deliverable Forwards | Euro | Short | 4,587 | 24,550 | (3,157 | ) | (11,087 | ) | (61,746 | ) | 47 |
a2.1.3 GBP - British Pound (amounts in thousands of R$):
Closing | Scenario (i) VaR 99% I.C. 1 day | Scenario (ii) Interest rate variation - 25% | Scenario (iii) Interest rate | |||||||||||||||||||||||||||||||||||||||
Exposure of | exchange | Exchange | Effect on income | Exchange | Effect on income | Exchange | Effect on income | |||||||||||||||||||||||||||||||||||
R$ | Risk | rate | rate | Company | Consolidated | rate | Company | Consolidated | rate | Company | Consolidated | |||||||||||||||||||||||||||||||
Operating | Appreciation | 6.1586 | 6.0564 | (2,279 | ) | (21,819 | ) | 4.6190 | (34,328 | ) | (328,613 | ) | 3.0793 | (68,655 | ) | (657,225 | ) | |||||||||||||||||||||||||
Derivatives | Depreciation | 6.1586 | 6.0564 | 2,525 | 12,507 | 4.6190 | 38,029 | 188,369 | 3.0793 | 76,059 | 376,737 | |||||||||||||||||||||||||||||||
246 | (9,271 | ) | 3,701 | (139,625 | ) | 7,404 | (279,251 | ) |
Consolidated | ||||||||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||
Instrument | Risk factor | Nature | Notional (GBP) | Notional (R$) | Fair value | Notional (GBP) | Notional (R$) | Fair value | ||||||||||||||||||||||
Future Contract | British pound | — | (2,470 | ) | (152,117 | ) | 761 | — | — | — |
Consolidated | ||||||||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||
Instrument | Risk factor | Nature | Notional (GBP) | Notional (R$) | Fair value | Notional (GBP) | Notional (R$) | Fair value | ||||||||||||||||||||||
Future Contract | British pound | — | (1,470 | ) | (213,703 | ) | 1,069 | — | — | — |
Consolidated | ||||||||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||
Instrument | Risk factor | Nature | Notional (GBP) | Notional (R$) | Fair value | Notional (GBP) | Notional (R$) | Fair value | ||||||||||||||||||||||
Deliverable Forwards | British pound | Long | (11,296 | ) | (69,565 | ) | 978 | (4,328 | ) | (27,174 | ) | (193 | ) | |||||||||||||||||
Non Deliverable Forwards | British pound | Long | (76,350 | ) | (470,206 | ) | 315 | (16,422 | ) | (103,107 | ) | 1,357 |
82
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
a2.1.4 MXN - Mexican Peso (amounts in thousands of R$):
Scenario (i) VaR 99% I.C. 1 day | Scenario (ii) Interest rate variation - 25% | Scenario (iii) Interest rate variation – 50% | |||||||||||||||||||||||||
Exposure of R$ | Risk | Closing exchange rate | Exchange rate | Effect on income Consolidated | Exchange rate | Effect on income Consolidated | Exchange rate | Effect on income Consolidated | |||||||||||||||||||
Operating | Appreciation | 0.2856 | 0.2815 | (9,721 | ) | 0.2142 | (167,246 | ) | 0.1428 | (334,493 | ) | ||||||||||||||||
(9,721 | ) | (167,246 | ) | (334,493 | ) |
Consolidated | ||||||||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||
Instrument | Risk factor | Nature | Notional (MXN) | Notional (R$) | Fair value | Notional (MXN) | Notional (R$) | Fair value | ||||||||||||||||||||||
Deliverable Forwards | Mexican peso | — | — | — | — | (5,700,480 | ) | (1,520,318 | ) | (30,362 | ) |
a2.1.5 AUD - Australian Dollar (amounts in thousands of R$):
Scenario (i) VaR 99% I.C. 1 day | Scenario (ii) Interest rate variation - 25% | Scenario (iii) Interest rate variation - 50% | ||||||||||||||||||||||||||||
Exposure of R$ | Risk | Closing exchange rate | Exchange rate | Effect on income Consolidated | Exchange rate | Effect on income Consolidated | Exchange rate | Effect on income Consolidated | ||||||||||||||||||||||
Operating | Depreciation | 3.2882 | 3.2319 | 3 | 2.4662 | 45 | 1.6441 | 90 | ||||||||||||||||||||||
Derivatives | Appreciation | 3.2882 | 3.2319 | (236 | ) | 2.4662 | (3,445 | ) | 1.6441 | (6,889 | ) | |||||||||||||||||||
(233 | ) | (3,400 | ) | (6,799 | ) |
Consolidated | ||||||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||
Notional | Notional | Notional | Notional | |||||||||||||||||||||||||
Instrument | Risk factor | Nature | (AUD) | (R$) | Fair value | (AUD) | (R$) | Fair value | ||||||||||||||||||||
Deliverable Forwards | Australian dollar | Long | 4,190 | 13,778 | (5 | ) | — | — | — | |||||||||||||||||||
Deliverable Forwards | Australian dollar | Short | — | — | — | 1,388 | 4,920 | 5 |
a3. Commodity price risk
The Company operates globally (the entire livestock protein chain and related business) and during the regular course of its operations is exposed to price fluctuations in feeder cattle, live cattle, lean hogs, corn, soybeans, and energy, especially in the North American, Australian and Brazilian markets. Commodity markets are characterized by volatility arising from external factors including climate, supply levels, transportation costs, agricultural policies and storage costs, among others. The Risk Management Department is responsible for mapping the exposures to commodity prices of the Company and proposing strategies to the Risk Management Committee, in order to mitigate such exposures.
Biological assets are a very important raw material used by the Company. In order to maintain future supply of these materials, the Company participates in forward contracts to anticipate purchases with suppliers. To complement these forward purchases, the Company use derivative instruments to mitigate each specific exposure, most notably futures contracts, to mitigate the impact of price fluctuations—on inventories and sales contracts. The Company takes the historical average amount spent on materials as an indication of the operational value to be protected by firm contracts.
83
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
a3.1. Position balance in commodities (cattle) contracts of the Company:
Given the nature of its operations, the Company is exposed to volatility in cattle prices, where price fluctuations arise from factors beyond the Company’s control, such as climate, cattle supply, transportation costs and agricultural policies among others. Forward purchases of cattle can be negotiated at floating (prices marked at the delivery day current price) or fixed prices. The Company may use future contracts traded at the B3 to balance these exposures.
The factors that influence the commodity price risk reduction strategy are the timing of term contracts for cattle purchases considering any negotiated values and terms.
The Company’s exposure to cattle price fluctuation as of December 31, 2023 and 2022 are presented below in accordance with the Company’s Financial and Commodities Risk Management Policy and are representative of the exposure at each period end.
Company | ||||||||
EXPOSURE in Commodities (Cattle) | December 31, 2023 | December 31, 2022 | ||||||
Firm contracts of cattle purchase | — | 14,988 | ||||||
Subtotal | — | 14,988 | ||||||
DERIVATIVES | ||||||||
Future contracts | (491 | ) | (2,007 | ) | ||||
Non Deliverable Forwards | — | — | ||||||
Subtotal | (491 | ) | (2,007 | ) | ||||
NET EXPOSURE | (491 | ) | 12,981 |
Sensitivity analysis:
Scenario (i) VaR 99% I.C. 1 day | Scenario (ii) @ Variation - 25% | Scenario (ii) @ Variation - 50% | ||||||||||||||||||||||||||||
Closing | Effect on income | Effect on income | Effect on income | |||||||||||||||||||||||||||
Exposure | Risk | price | Price | Company | Price | Company | Price | Company | ||||||||||||||||||||||
Derivatives | Cattle arroba depreciation | 252.30 | 264.48 | (24 | ) | 315.38 | (123 | ) | 378.45 | (245 | ) | |||||||||||||||||||
(24 | ) | (123 | ) | (245 | ) |
Derivatives financial instruments breakdown:
Company | ||||||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||
Instrument | Risk factor | Nature | Quantity | Notional | Fair value | Quantity | Notional | Fair value | ||||||||||||||||||||
Future Contracts | Commodities (Cattle) | Short | (6 | ) | (491 | ) | 1 | 21 | (2,007 | ) | (99 | ) |
a3.2. Position balance in commodities (grain) derivatives financial instruments of Seara Alimentos:
Seara Alimentos is exposed to price volatility of grain, which changes based on factors beyond the management’s control, such as climate, the supply volume, transportation costs, agricultural policies and others.
Seara Alimentos, in accordance with its policy of inventory management, started the strategy of managing the risk of grain’s price by actively monitoring the Company´s grains needs, including expectations of future consumption, anticipated purchases, combined with future market operations, by hedging with grain futures on B3, CME and Over the Counter (OTC), through Non-Deliverable Forwards (NDFs), in order reduce price volatility.
The internal controls used for coverage and risk management are made through spreadsheets and monitoring of operations performed and calculation of VAR for 1 day, with a confidence interval of 99%.
Management’s estimate at the exposure risk to grain’s price changes at Seara Alimentos at December 31, 2023 and 2022 are presented below in accordance with the Financial and Commodities Risk Management Policy and are representative of the exposure incurred during the period.
84
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Seara Alimentos | ||||||||
EXPOSURE in Commodities (Grain) | December 31, 2023 | December 31, 2022 | ||||||
OPERATING | ||||||||
Purchase orders | 552,376 | 1,172,761 | ||||||
Subtotal | 552,376 | 1,172,761 | ||||||
DERIVATIVES | ||||||||
Future contracts | - | (4,947 | ) | |||||
Non Deliverable Forwards | - | (161,694 | ) | |||||
Subtotal | - | (166,641 | ) | |||||
NET EXPOSURE | 552,376 | 1,006,120 |
Sensitivity analysis:
Scenario (i) VaR 99% I.C. 1 day | Scenario (ii) Price variation - 25% | Scenario (ii) Price variation - 50% | ||||||||||||||||||||||||
Effect on income | Effect on income | Effect on income | ||||||||||||||||||||||||
Exposure | Risk | Price | Seara Alimentos | Price | Seara Alimentos | Price | Seara Alimentos | |||||||||||||||||||
Operating | Depreciation | (2.20 | )% | (12,141 | ) | (25.00 | )% | (138,094 | ) | (50.00 | )% | (276,188 | ) | |||||||||||||
(12,141 | ) | (138,094 | ) | (276,188 | ) |
Derivatives financial instruments breakdown:
Seara Alimentos | ||||||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||
Instrument | Risk factor | Nature | Quantity | Notional | Fair value | Quantity | Notional | Fair value | ||||||||||||||||||||
Future contracts | Commodities (Grains) | Short | — | — | — | 520 | (4,947 | ) | (12,773.912 | ) | ||||||||||||||||||
Non Deliverable Forwards | Commodities (Grains) | Short | — | — | — | 4,000 | (161,694 | ) | 3,571 |
a3.2.1. Hedge accounting of Seara Alimentos:
From the third quarter of 2021, the indirect subsidiary Seara Alimentos reviewed its hedge policies and started to apply hedge accounting in grain operations, aiming at bringing stability to the subsidiary’s results. The designation of these instruments is based on the guidelines outlined in the Financial and Commodity Risk Management Policy defined by the Risk Management Committee and approved by the Board of Directors.
Financial instruments designated for hedge accounting were classified as cash flow hedge. The effective amount of the instrument’s gain or loss is recognized under “Other comprehensive income (expense)” and the ineffective amount under “Financial income (expense), net”, and the accumulated gains and losses are reclassified to profit and loss or to the balance sheet when the object is recognized, adjusting the item in which the hedged object was recorded.
In these hedge relationships, the main sources of ineffectiveness are the effect of the counterparties and the Company’s own credit risk on the fair value of the forward foreign exchange contracts, which is not reflected in the change in the fair value of the hedged cash flows attributable to the change in exchange rates; and changes in the timing of the hedged transactions.
The derivative financial instruments designated at the December 31, 2023, as hedge accounting, according to the cash flow method, to protect the operating results in relation to the price of commodities are:
Seara Alimentos also designates derivatives to hedge the fair value of debt instruments with floating interest rates through swaps of fixed interest rates, measured in accordance with fair value hedge accounting.
a3.2.1.1. Hedge accounting:
Below is shown the effects on income for the period, on other comprehensive income and on the balance sheet of derivative financial instruments contracted for hedging exchange rates, commodity prices and interest rates (cash flow and fair value hedges):
Seara Alimentos | ||||||||
Income statement: | December 31, 2023 | December 31, 2022 | ||||||
Cost of sales before hedge accounting adoption | (38,631,456 | ) | (37,721,539 | ) | ||||
Derivatives operating income (loss) | 156,991 | 319,475 | ||||||
Currency | 7,140 | 52,180 | ||||||
Commodities | 149,851 | 267,295 | ||||||
Cost of sales with hedge accounting | (38,474,465 | ) | (37,402,064 | ) | ||||
Financial income (expense), net excluding derivatives | (383,453 | ) | (234,426 | ) | ||||
Derivatives financial income (expense), net | 71,350 | (239,408 | ) | |||||
Currency | 197,979 | (316,482 | ) | |||||
Commodities | (120,653 | ) | 133 | |||||
Interests | (5,976 | ) | 76,941 | |||||
Financial income (expense), net | (312,103 | ) | (473,834 | ) |
85
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Below are the effects on other comprehensive income (expense), after the adoption of hedge accounting:
Seara Alimentos | ||||||||
December 31, 2023 | December 31, 2022 | |||||||
Statements of other comprehensive income (expense): | ||||||||
Financial instruments designated as hedge accounting: | (2,660 | ) | (40,284 | ) | ||||
Currency | 191 | (13,541 | ) | |||||
Commodities | (2,851 | ) | (26,743 | ) | ||||
Other comprehensive income | 39,041 | (253,193 | ) |
Cash Flow Hedge Movement | December 31, 2022 | OCI | 09.30.23 | |||||||||
Hedge accounting operations at Company Seara | (41,701 | ) | 39,041 | (2,660 | ) | |||||||
Deferred income tax on hedge accounting | 14,179 | (13,274 | ) | 905 | ||||||||
Reflection of Hedge Operations of Subsidiaries | 1,417 | (1,417 | ) | — | ||||||||
Deferred income tax on hedge accounting | (482 | ) | 482 | — | ||||||||
Total of other comprehensive income (expense) | (26,587 | ) | 24,832 | (1,755 | ) |
Below are the effects on the balance sheet, after the adoption of hedge accounting:
Seara Alimentos | ||||||||
December 31, 2023 | December 31, 2022 | |||||||
Balance sheet: | ||||||||
Derivative (liabilities)/assets | — | (9,203 | ) | |||||
Financial instruments designated as hedge accounting: | ||||||||
Currency | — | (9,203 | ) | |||||
Commodities | ||||||||
Derivative (liabilities)/assets | 21,656 | 94,302 | ||||||
Financial instruments not designated as hedge accounting: | ||||||||
Currency | — | |||||||
Commodities | 24,097 | — | ||||||
Interests | (2,441 | ) | 94,302 | |||||
Other comprehensive income (expense) | (2,660 | ) | (40,284 | ) | ||||
Currency | 191 | (13,541 | ) | |||||
Commodities | (2,851 | ) | (26,743 | ) | ||||
Inventories | 31,845 | 36,269 | ||||||
Currency | 660 | 11,991 | ||||||
Commodities | 31,185 | 24,278 |
Open balance sheet position of derivative assets and liabilities:
Seara Alimentos | ||||||||
December 31, 2023 | December 31, 2022 | |||||||
Assets: | ||||||||
Not designated as hedge accounting | — | 94,302 | ||||||
Currency | 24,097 | — | ||||||
Interests | — | 94,302 | ||||||
Current assets | 24,097 | 94,302 | ||||||
Non-current assets | — | 25,081 | ||||||
(Liabilities): | ||||||||
Designated as hedge accounting | — | 9,203 | ||||||
Commodities | 9,203 | |||||||
Currency | — | |||||||
Not designated as hedge accounting | 2,441 | — | ||||||
Currency | 2,441 | — | ||||||
Current liabilities | 2,441 | 9,203 |
86
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
a3.3. Position balance in commodities derivatives financial instruments of JBS USA:
The JBS USA exposure to cattle price fluctuation as of December 31, 2023 and 2022 are presented below in accordance with the Company’s Financial and Commodities Risk Management Policy and are representative of the exposure at each period end.
JBS USA | ||||||||
EXPOSURE in Commodities | December 31, 2023 | December 31, 2022 | ||||||
OPERATIONAL | ||||||||
Firm contracts of cattle purchase | 15,639,117 | 13,120,065 | ||||||
Subtotal | 15,639,117 | 13,120,065 | ||||||
DERIVATIVES | ||||||||
Deliverable Forwards | 1,883,895 | (804,976 | ) | |||||
Subtotal | 1,883,895 | (804,976 | ) | |||||
NET EXPOSURE | 17,523,012 | 12,315,089 |
Sensitivity analysis:
Scenario (i) VaR 99% I.C. 1 day | Scenario (ii) Price variation - 25% | Scenario (iii) Price variation - 50% | ||||||||||||||||||||||||
Effect on income | Effect on income | Effect on income | ||||||||||||||||||||||||
Exposure | Risk | Price | JBS USA | Price | JBS USA | Price | JBS USA | |||||||||||||||||||
Operating | Depreciation | (2.25 | )% | (352,506 | ) | (25.00 | )% | (3,909,779 | ) | (50.00 | )% | (7,819,558 | ) | |||||||||||||
Derivatives | Depreciation | (2.25 | )% | (42,463 | ) | (25.00 | )% | (470,974 | ) | (50.00 | )% | (941,947 | ) | |||||||||||||
(394,969 | ) | (4,380,753 | ) | (8,761,505 | ) |
Derivatives financial instruments breakdown:
Consolidated | ||||||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||
Notional | Notional | Notional | Notional | |||||||||||||||||||||||||
Instrument | Risk factor | Nature | (USD) | (R$) | Fair value | (USD) | (R$) | Fair value | ||||||||||||||||||||
Deliverable Forwards | Commodities (Cattle) | Short | 389,130 | 1,883,895 | (9,595 | ) | (154,278 | ) | (804,976 | ) | (162,698 | ) |
a4. Credit risk
The Company is potentially subject to credit risk related to accounts receivable, financial investments and derivative contracts. For the receivable account the Financial and Commodities Risk Policy significantly understand the diversification of the portfolio contribute significantly to the reduction of credit, but also sets parameters for the credit granting observing the measures, financial and operational, supported by consultations with agencies that also monitor credit. The impairment of these financial assets is carried out based on credit analyses. If the counter party of a financial transaction is a financial institution (financial investments and derivative contracts), the Company establishes exposure limits set by the Risk Management Committee, based on the risk ratings of specialized international agencies.
The Company considers a financial asset to be in default when:
● | the debtor is unlikely to pay its credit obligations to the Company in full, without recourse by the Company to actions such as realizing security (if any is held); or |
● | the losses are expected based on the client’s operational history and credit. |
Amounts invested in private bonds (notably bank certificates of deposit) and receivables transactions contracted with banks must comply with the following table limits such that the total volume does not exceed a specified percentage of the equity of the financial institution (% Equity). Additionally, the maturity of the financial investment should be no longer than the maximum horizon.
Category | % Equity | Maximum horizon | ||||
AAA | 2.00 | % | 5 years | |||
AA | 1.00 | % | 3 years | |||
A | 0.50 | % | 2 years | |||
BBB | 0.25 | % | 1 year |
87
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
The information about the exposure to weighted average loss rate, gross carrying amount, impairment losses recognized in profit or loss and credit-impaired on financial assets were as follows:
Company | ||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||
Weighted | Gross | Impairment | Weighted | Gross | Impairment | |||||||||||||||||||
average loss | carrying | loss | average loss | carrying | loss | |||||||||||||||||||
rate | amount | allowance | rate | amount | allowance | |||||||||||||||||||
Cash and cash equivalents | – | 4,458,670 | – | – | 2,096,334 | – | ||||||||||||||||||
Margin cash | – | 64,754 | – | – | 80,434 | – | ||||||||||||||||||
Trade accounts receivable | (9.05 | )% | 2,575,423 | (232,988 | ) | (5.77 | )% | 4,380,011 | (252,719 | ) | ||||||||||||||
Related party receivables | – | 1,807,878 | – | – | 1,103,125 | – | ||||||||||||||||||
8,906,725 | (232,988 | ) | 7,659,904 | (252,719 | ) |
Consolidated | ||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||
Weighted | Gross | Impairment | Weighted | Gross | Impairment | |||||||||||||||||||
average loss | carrying | loss | average loss | carrying | loss | |||||||||||||||||||
rate | amount | allowance | rate | amount | allowance | |||||||||||||||||||
Cash and cash equivalents | – | 22,122,405 | – | – | 13,182,158 | – | ||||||||||||||||||
Margin cash | – | 641,283 | – | – | 679,391 | – | ||||||||||||||||||
Trade accounts receivable | (2.50 | )% | 16,416,149 | (411,088 | ) | (2.13 | )% | 20,235,112 | (431,170 | ) | ||||||||||||||
Related party receivables | – | 573,955 | – | – | 951,021 | – | ||||||||||||||||||
39,753,792 | (411,088 | ) | 35,047,682 | (431,170 | ) |
a5. Liquidity risk
Liquidity risk arises from the Company’s working capital management and financing costs amortization, specially debt instruments. This is the risk that the Company might have when meeting its financial obligations when they are due.
The Company manages its capital by focusing on liquidity and leverage metrics that enable a return to shareholders over the medium term, consistent with the risks assumed in the transaction.
The Company manages its liquidity risk manly through evaluating its quick ratio, which is computed as cash plus financial investments divided by short-term debt. Liquidity is maintained by managing the overall leverage of the Company to monitoring the ratio of net debt to “EBITDA” at levels considered to be manageable for continuity of operations.
Based on the analysis of these indicators, management of working capital has been defined to include the natural leverage of the Company at levels equal to or less than the leverage ratio that the Company would like to achieve.
The index of liquidity and leverage at the consolidated are shown below:
Consolidated | ||||||||
December 31, 2023 | December 31, 2022 | |||||||
Leverage indicator (R$) (*) | 4.32 x | 2.29 x | ||||||
Leverage indicator (USD) (*) | 4.42 x | 2.26 x |
(*) | To calculate the leverage indicator the Company used the reais and dollar correction rates of the last day of the year (closing rate). This criteria is intended to equalize the net debt and EBITDA at the same exchange rate. |
88
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
The table below shows the contractual obligation amounts from financial liabilities of the Company according to their maturities:
Company | ||||||||||||||||||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||||||||||
Between | Between | Between | Between | |||||||||||||||||||||||||||||||||||||
Less than | 1 and 3 | 4 and 5 | More than | Less than | 1 and 3 | 4 and 5 | More than | |||||||||||||||||||||||||||||||||
1 year | years | years | 5 years | Total | 1 year | years | years | 5 years | Total | |||||||||||||||||||||||||||||||
Trade accounts payable | 5,934,371 | – | – | – | 5,934,371 | 5,561,549 | – | – | – | 5,561,549 | ||||||||||||||||||||||||||||||
Loans and financing | 1,297,393 | 434,060 | 1,020,575 | 10,496,073 | 13,248,101 | 4,999,929 | 2,992,141 | 849,530 | 6,857,983 | 15,699,583 | ||||||||||||||||||||||||||||||
Estimated interest on loans and financing (1) | – | – | – | – | – | 1,217,565 | 1,984,740 | 1,671,359 | 3,710,473 | 8,584,137 | ||||||||||||||||||||||||||||||
Derivatives financing liabilities (assets) | 42,513 | – | – | – | 42,513 | 278,227 | – | – | – | 278,227 | ||||||||||||||||||||||||||||||
Lease liabilities | 53,037 | 41,810 | 38,596 | 17,587 | 151,030 | 27,675 | 33,141 | 2,247 | 4,160 | 67,223 | ||||||||||||||||||||||||||||||
Other financial liabilities | 72,680 | 101,250 | – | 300,000 | 473,930 | 5,180 | – | – | – | 5,180 |
Consolidated | ||||||||||||||||||||||||||||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||||||||||
Between | Between | Between | Between | |||||||||||||||||||||||||||||||||||||
Less than | 1 and 3 | 4 and 5 | More than | Less than | 1 and 3 | 4 and 5 | More than | |||||||||||||||||||||||||||||||||
1 year | years | years | 5 years | Total | 1 year | years | years | 5 years | Total | |||||||||||||||||||||||||||||||
Trade accounts payable | 30,040,844 | – | – | – | 30,040,844 | 34,080,614 | – | – | – | 34,080,614 | ||||||||||||||||||||||||||||||
Loans and financing | 4,316,360 | 828,968 | 5,870,259 | 85,806,238 | 96,821,825 | 8,228,557 | 4,252,661 | 12,503,378 | 67,369,465 | 92,354,061 | ||||||||||||||||||||||||||||||
Estimated interest on loans and financing (1) | 6,598,186 | 5,095,409 | 9,247,444 | 35,778,473 | 56,719,512 | 4,822,959 | 9,587,500 | 7,749,370 | 23,172,460 | 45,332,289 | ||||||||||||||||||||||||||||||
Derivatives financing liabilities (assets) | 698,361 | – | – | – | 698,361 | 559,536 | – | – | – | 559,536 | ||||||||||||||||||||||||||||||
Lease liabilities | (13,537 | ) | 1,420,650 | 2,141,172 | 5,365,648 | 8,913,933 | 1,788,353 | 2,611,660 | 1,634,458 | 4,452,019 | 10,486,490 | |||||||||||||||||||||||||||||
Other financial liabilities | 102,452 | 101,250 | – | 300,000 | 503,702 | 33,903 | 27,793 | 268 | – | 61,964 |
(1) | Includes interest on all loans and financing outstanding. Payments are estimated for variable rate debt based on effective interest rates at December 31, 2023 an December 31, 2022. Payments in foreign currencies are estimated using the December 31, 2023 and 2021 exchange rates. |
89
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
The Company has future commitment for purchase of grains and cattle whose balances at December 31, 2023 in the amount of R$442,817 (R$451,296 at December 31, 2022), in the Company and R$172.4(R$170,5 at December 31, 2022), in the Consolidated.
The Company has securities pledged as collateral for derivative transactions with the commodities and futures whose balance at December 31, 2023 is R$64,754 (R$80,434 at December 31, 2022). This guarantee is larger than its collateral.
The indirect subsidiary JBS USA and its subsidiaries, has securities pledged as collateral for derivative transactions with the commodities and futures whose balance at December 31, 2023 is R$325,989 (R$518,055 at December 31, 2022). This guarantee is larger than its collateral.
Also, the direct subsidiary Seara Alimentos has securities pledged as collateral for derivative transactions with the commodities and futures whose balance at December 31, 2023 is R$250,540 (R$80,902 in 31 de dezembro de 2022). This guarantee is larger than its collateral.
As disclosed in Note 17 – Loans and financings, the Company has a bank loan that contains a loan covenant. A future breach of covenant may require the Company to repay the loan earlier than indicated in the above table.
The interest payments on variable interest rate loans and bond issues in the table above reflect market forward interest rates at the reporting date and these amounts may change as market interest rates change. The future cash flows on contingent consideration and derivative instruments may be different from the amount in the above table as interest rates and exchange rates or the relevant conditions underlying the contingency change. Except for these financial liabilities, it is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.
The Company has no guarantees received from third parties deemed relevant.
a6. Risks linked to climate change and the sustainability strategy
In view the Company’s operations, there is inherent exposure to risks related to climate change. Certain Company assets, which are mainly biological assets that can be measured at fair value, may be impacted by climate change and are considered in the preparation process of these financial statements.
In the year ended December 31, 2023, Management considered as main risk the data and assumptions highlighted below:
(i) | possible impacts on the determination of fair value in biological assets due to the effects of climate change, such as temperature rise, scarcity of water resources, may impact some assumptions used in accounting estimates related to the Company’s biological assets, as follows: |
● | losses of biological assets due to heat waves and droughts which occur with greater frequency and intensity; |
● | reduction in the expected growth of our biological assets due to natural disasters, fires, pandemics or changes in rainfall patterns; and |
● | interruption in the production chain due to adverse weather events, causing power outages, fuel shortages, disruption of transportation channels, among other things. |
(ii) | structural changes and their impacts on the business, such as: |
● | regulatory and legal: regulation and legislation arising from Brazilian and/or international authorities that encourage the transition to a low-carbon economy and/or with greater biodiversity and that increase the risk of litigation and/or commercial restrictions related to the alleged contribution, even if indirect, for the intensification of climate change; |
● | reputational: related to customers’ perceptions and the society in general regarding the positive or negative contribution of an organization to a low carbon economy. |
90
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
30 Subsequent events
On February 28, 2024, the Attorney General of the State of New York filed a civil complaint against our subsidiaries, JBS USA Food Company and JBS USA Food Company Holdings, in the Supreme Court of the State of New York, County of New York, alleging that consumers in New York were misled by statements in which we expressed our goal of reducing greenhouse gas emissions and striving to achieve Net Zero by 2040. The complaint seeks an injunction, disgorgement of profits, civil penalties, attorney’s fees and other relief. We believe we have substantial defenses to this action, and we intend to vigorously defend this matter.
31 Approval of the financial statements
The issuance of these individual and consolidated financial statements was approved by the Board of Directors on March 26, 2024.
BOARD OF DIRECTORS
Chairman: | Jeremiah Alphonsus O’Callaghan |
Vice-Chairman: | José Batista Sobrinho |
Independent Board Member: | Alba Pettengill |
Independent Board Member: | Gelson Luiz Merisio |
Independent Board Member: | Cledorvino Belini |
Independent Board Member: | Francisco Turra |
Independent Board Member: | Carlos Hamilton Vasconcelos Araújo |
Independent Board Member: | Kátia Regina de Abreu Gomes |
Independent Board Member: | Paulo Bernardo Silva |
STATUTORY AUDIT COMMITTEE REPORT
The Statutory Audit Committee reviewed the individual and consolidated financial statements for the years ended at December 31, 2023, at March 26, 2024. Based on the procedures performed, also considering Grant Thorton Auditores Independentes Ltda. audit report, as well as the information and clarifications received during the period, the Committee recommends that these documents are in a position to be considered by the Board of Directors.
STATUTORY AUDIT COMMITTEE
Chairman: | Carlos Hamilton Vasconcelos Araújo |
Committee Member: | Paulo Sérgio Cruz Dortas Matos |
Committee Member: | Gelson Luiz Merisio |
FISCAL COUNCIL REPORT
The Fiscal Council, in the use of its legal and statutory attributions, examined and discussed with the Administration the earnings release and the Company’s individual and consolidated financial statements including the proposal for the earning allocation for the years ended at December 31, 2023, at March 26, 2024, and validated these financial statements approved by the Company’s Board of Directors on this date.
91
Notes to the condensed financial statements for the years ended at December 31, 2023 and 2022
(Expressed in thousands of Brazilian reais)
Based on our review, the information and clarifications received during this period and considering Grant Thornton Auditores Independentes Ltda. audit report on the individual and consolidated financial statements, without reservations, issued on this date, the Fiscal Council was not aware of any additional fact that would lead us to believe that the aforementioned financial statements do not reflect in all material respects the information contained therein and that are in a position to be disclosed by the Company.
FISCAL COUNCIL | |
Chairman: | Adrian Lima da Hora |
Council Member: | Demetrius Nichele Macei |
Council Member: | José Paulo da Silva Filho |
Council Member: | Orlando Octávio de Freitas Júnior |
Council Member: | Patrícia da Silva Barros |
STATEMENT OF OFFICERS ON THE FINANCIAL STATEMENTS AND ON THE INDEPENDENT AUDITORS REPORT
The Company’s Officers declare at March 26, 2024, for the purposes of Article 25, paragraph 1, item V and VI of CVM Instruction No. 480 of December 7, 2009, that:
(i) | They reviewed, discussed and agreed with the independent auditors report on the individual and consolidated financial statements for the years ended at December 31, 2023, and |
(ii) | They reviewed, discussed and agreed with the financial statements for the years ended at December 31, 2023. |
STATUTORY BOARD | |
Global Chief Executive Officer: | Gilberto Tomazoni |
Administrative and Control Officer: | Eliseo Santiago Perez Fernandez |
Chief Financial Officer: | Guilherme Perboyre Cavalcanti |
Officer: | Jeremiah Alphonsus O’Callaghan |
Global Chief Operating Officer: | Wesley Mendonça Batista Filho |
Director of Accountant: | Agnaldo dos Santos Moreira Jr. (CRC SP: 244207/O-4) |
* * * * *
92