JBS Q1 2026 Earnings Report

JBS EPS Results

• Actual EPS: $0.20
• Consensus EPS: $0.28
• Beat/Miss: Missed by -$0.08
• One Year Ago EPS: N/A

JBS Revenue Results

• Actual Revenue: $21.61 billion
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: +10.70%

JBS Announcement Details

• Quarter: Q1 2026
• Date: 5/12/2026
• Time: After Market Closes
• Conference Call Date: Wednesday, May 13, 2026
• Conference Call Time: 9:00AM ET

JBS (NYSE:JBS) S.A. is a global leader in the production and processing of meat products, with a focus on beef, pork and poultry. Headquartered in São Paulo, Brazil, the company operates through an extensive network of owned facilities and partnerships that span the Americas, Europe and the Asia-Pacific region. JBS supplies fresh, frozen and value-added protein solutions for retail, foodservice and industrial customers, and is active across the entire supply chain—from livestock procurement and feed production to slaughtering, processing, packaging and distribution.

Founded in 1953 by José Batista Sobrinho in Anápolis, Goiás, JBS began as a small slaughterhouse and expanded rapidly through strategic acquisitions and organic growth. Over the decades, the company has acquired major meat processors such as Swift & Company in the United States, Pilgrim’s Pride in North America, Moy Park in Europe and Five Star Beef in Australia, establishing JBS as the world’s largest processor of beef and one of the leading producers of poultry and pork.

JBS’s product portfolio includes a wide range of fresh cuts, ground meats, sausages, deli meats and ready-to-cook items under various regional brands. The company also produces leather, collagen, biodiesel and pet food, leveraging by-products to diversify its offerings and enhance sustainability. Operations are supported by integrated feedlots, grain storage facilities and cold-chain logistics to ensure quality control and traceability from farm to fork.

The company is led by Chief Executive Officer Gilberto Tomazoni, who oversees a management team committed to innovation, food safety and environmental stewardship. Under his leadership, JBS continues to invest in technology, sustainable ranching practices and renewable energy initiatives. With a presence in over 190 countries, JBS remains focused on meeting global protein demand while upholding regulatory compliance and responsible sourcing standards.

JBS Q1 2026 Earnings Call Transcript

Key Takeaways

• Neutral Sentiment: JBS reported record first-quarter net sales of about $21 billion to $22 billion, with adjusted EBITDA around $1.1 billion and net income of roughly $222 million. Management said the quarter was difficult due to volatility, seasonality, and trade-flow disruptions, but diversified operations helped offset weakness in some segments.
• Negative Sentiment: North American beef remained the biggest pressure point, with negative EBITDA and management describing the cattle cycle as highly constrained and slower to recover than expected. Wesley Filho said 2026 should be more challenging than 2025, though results may improve sequentially as the year progresses.
• Positive Sentiment: Seara, Brazil beef, and Australia all delivered comparatively strong performance, supported by solid demand, innovation, and in some cases favorable market conditions. Management highlighted Seara’s strong export demand and value-added mix, Brazil beef’s resilient domestic demand, and Australia’s positive cattle and pasture conditions.
• Negative Sentiment: Free cash flow was heavily negative at $1.5 billion in Q1, driven by weaker EBITDA, a sharp increase in expansion CapEx, and working-capital use tied to deferred livestock payments. Management said the company expects stronger cash generation in the second half, but leverage may end the year closer to the upper end of its target range.
• Positive Sentiment: JBS is continuing to strengthen its balance sheet by extending debt maturity to about 15.6 years, keeping no major maturities until 2031, and maintaining ample liquidity. The company also said its planned move to file 10-K, 10-Q, and 8-K reports with the SEC could improve access to major U.S. equity indexes and attract more passive investment.

Presentation

[Operator]

Good morning, and welcome to JBS's first quarter of 2026 results conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session and instructions will be given at that time. As a reminder, this conference is being recorded. Any statements eventually made during this conference call in connection with the company business outlook, projections, operating and financial targets, and potential growth should be understood as merely forecasts based on the company's management expectations in relation to the future of JBS. Such expectations are highly dependent on the industry and market conditions, and therefore are subject to change. Are present with us today, Gilberto Tomazoni, Global CEO of JBS, Guilherme Cavalcanti, Global CFO of JBS, Wesley Batista Filho, CEO of JBS USA, and Christiane Assis, Investor Relations Director. Now, I'll turn the conference over to Gilberto Tomazoni, Global CEO of JBS.

[Operator]

Mr. Tomazoni, you may begin your presentation.

[Gilberto Tomazoni, Global CEO at JBS]

Good morning, everyone. Thank you for joining us today. The first quarter of 2026 was a challenging period for JBS, shaped by market volatility, seasonality, operational disruption, and change in a global trade flow. This is consistent with what we have been saying. We understand the nature of our business and the cycles we operate in, and we manage the company with that in mind. In the environment, we remain focused on what we can control: operational excellence, cost discipline, agility, and long-term value creation. JBS delivered net sales growth of 11%, reaching $21 billion, and is a record for a first quarter. Net income was $221 million and EBITDA total approximately $1.1 billion with a margin of 5.2%.

[Gilberto Tomazoni, Global CEO at JBS]

Leverage increased to 2.77x, reflecting pressure on earnings and cash generation, while we continue to strengthen our liability profile, extending average debt maturity to approximately 15.6 years. From an operation perspective, the quarter reflected both the challenge of the cycle and the resilience of our platform. In beef North America, the environment remained very difficult. EBITDA was -$230 million, with margin at -2.3%, impacted by constrained cow supply and higher costs. During the quarter, we advanced organizational and operational adjustment across our U.S. beef platform, focused on rationalizing, reversion, and simplifying our structure in more challenging phase of the cattle cycle. That business has evolved, several areas were already operating in increased integrated way.

[Gilberto Tomazoni, Global CEO at JBS]

Building on that, we brought together fed beef, the three business units: fed-beef, regional-beef, and case-ready into a more unified structure. This is a natural step. It reduce duplication, improve coordination, and allow us to leverage our scales and talent more efficiently, while strengthening decision-making and position the business to improve its performance over time. These actions are part of a broader effort driving efficiency across the company. Our focus is to extract more value from existing assets, improve productivity, and enhance execution through technology, automation, and data. At Friboi and Pilgrim's, we have been developing pilot artificial intelligence initiatives for over a year to support better decision-making, commercial execution, and operational efficiency. We are now scaling this capability globally.

[Gilberto Tomazoni, Global CEO at JBS]

At Seara, we continue to advance automation and process improvement to increase productivity, improve product quality, and support expansion of higher value-added categories. This reflect our approach to the sizing. We act early, focus on what we control, and position the business for a stronger performance ahead. This quarter, once again, highlight the importance of our diversified platform. Despite the headwinds, our business helped balance the consolidation performance. Seara delivered an EBITDA margin of 15.5%, supported by strong export demand, innovation, and growth in value-added products despite currency pressure and cost inflation. The outlook for poultry in Brazil remain positive, supported by balancing supply demand, including adjustment and breeder placement and continuous demand growth.

[Gilberto Tomazoni, Global CEO at JBS]

JBS Brazil reported an EBITDA margin of 4.5%, a second to higher first quarter margin in its history, supported by a disciplined commercial execution and favorable demand. Friboi also delivered a strong top line performance with a solid demand, both domestic and in exports. The China trade wars created an adjustment in the global trade flow during the quarter, but our team responded quickly, managed volume within the quarter structure, and developed alternative markets such as United States, Mexico, Indonesia, preserving value and expanding our commercial footprint. In Australia, margin reached 7.1% and operational fundamentals remain positive. In Queensland, cattle conditions are the best we have seen in the last three years, reinforcing our positive outlook for the business. In the United States, Pilgrim's had a softer quarter impacted by seasonality and planned plant adjustment.

[Gilberto Tomazoni, Global CEO at JBS]

These actions were necessary to improve efficiency, enhance productivity mix, and better align our footprint with demand. The adjustments have been completed, we have already seen improvement trends. U.S. pork remains stable, with the sign of gradual improvements supported by more balanced supply and demand dynamics. Cash flow in the quarter was also impactful for growth CapEx, with investment focused on efficiency, especially in value-added products and strengthening our global footprint, truly aligning with our long-term value creation. Looking ahead, the fundamental of our global protein remains strong. Beef supply continues to be constrained in key markets. Poultry demand remains solid, our brands continue to gain relevance with the consumers. Seasonality, we are very important low. The start of barbecue season in the United States, typically supports stronger consumption across protein and improve the industrial conditions to coming quarters.

[Gilberto Tomazoni, Global CEO at JBS]

At the same time, we will remain disciplined. Our priorities are clear. Operational excellence, strict control on cash generation. We also remain focused on addressing the company's long-term position in a global capital market, including creating the conditions for further expand our participation in relevant equity indices over time. We continue to review costs, optimize resources, and improve productivity across the business. We understand the cycle. We operate with discipline, and we are taking the right action to navigate the current environment while strengthening the companies for the future. Thank you. I will now turn the call over to Guilherme, who will be through the financial results in more details. Guilherme, please.

[Guilherme Cavalcanti, Global CFO at JBS]

Thank you, Tomazoni. Let's now move on to the operational and financial highlights of the first quarter 2026. Net sales reached a record of $22 billion for a first quarter. Adjusted EBITDA in IFRS totaled $1.1 billion, which represents a margin of 5.2% in the quarter. Adjusted EBITDA in U.S. GAAP totaled $960 million, which represents a margin of 4.2% in the quarter. Adjusted operating income was $560 million with a margin of 2.4% in IFRS and $444 million in U.S. GAAP with a margin of 2.5%. Net income was $222 million in the quarter and an earnings per share of $0.21.

[Guilherme Cavalcanti, Global CFO at JBS]

Excluding the non-recurring items, adjusted net income would be $241 million and an earnings per share of $0.23 per share in the quarter. Finally, the return on equity was 22% and return on invested capital was 15%. Free cash flow in the first quarter of 2026 was -$1.5 billion compared to a cash consumption of $970 million in the first quarter of 2025. In addition to the seasonal cash consumption that typically occurs in the first quarter, the main drivers of a higher cash burn compared to the same period last year were a decline in adjusted EBITDA of approximately $400 million, reflecting the weaker operating results.

[Guilherme Cavalcanti, Global CFO at JBS]

An increase in capital expenditures, which more than doubled compared to the first quarter 2025, totaling $566 million, driven primarily by expansion CapEx of $390 million compared to a $79 million in the first quarter of 2025. An additional of $252 million working capital impact resulting from the higher livestock suppliers paid in deferral, as previously flagged in our last earnings call. It is worth noting that if we execute the same level of livestock deferral in the fourth quarter 2026, this impact will be offset on the free cash flow for the full year.

[Guilherme Cavalcanti, Global CFO at JBS]

Notably, working capital consumption was already below the same period last year because excluding the additional $252 million in deferred livestock payments, working capital would have been approximately 23% better compared to the first quarter 2025. In the first quarter, we also strengthened our balance sheet with the issuance of $2.5 billion in bonds in the market and a tender offer of $1.45 billion. This allowed us to extend our debt maturity profile, reaching an average debt term of 15.6 years and an average cost of 5.7%. We have no significant debt maturities until 2031. Our leverage ended the year at 2.77x, in line with our long-term target of keeping net debt to be between 2x and 3x.

[Guilherme Cavalcanti, Global CFO at JBS]

Our $3.4 billion in revolving credit lines and $3.5 billion in available cash provide us with the flexibility to continue executing our expansion CapEx, value creation projects and shareholder returns while maintaining a healthy and robust balance sheet. Last night, we also announced that beginning next quarter, we will voluntarily file forms 10-K, 10-Q, and 8-K with the SEC, prepared under IFRS and supplemented on the earnings release by certain indicators reported under U.S. GAAP. This initiative is expected to broaden our eligibility for key benchmark indexes, such as S&P Composite 1500 family. With that in mind, I would like to open up for the question and answer session.

[Operator]

Thank you. The floor is now open for questions from investors and analysts. If you have a question, please click the raise hand at this time. If at any point your question is answered, you can remove yourself from the queue by clicking the lower hand, and questions will be answered in the order they are received. Ladies and gentlemen, the first question comes from Isabella Simonato from Bank of America. Ms. Simonato, you may go ahead.

[Isabella Simonato, Analyst at Bank of America]

Thank you. Good morning, Tomazoni, Guilherme, Chris, thank you for the time. I have a couple of questions. First, Guilherme, if I may ask you for that breakeven EBITDA exercise you do every quarter. That's really helpful. If you could just walk through that, we really appreciate. Also to the point of cash, right? Your leverage is pretty close to 3x, right? I know that's not how rating agencies look at that. If you look to the EBITDA U.S. GAAP, right, is even higher than that. I was wondering, you mentioned before, right, a CapEx of $2.4 billion for this year and $1.3 billion of expansion. If that continues to be the goal, right? Or if you are reviewing that not only for this year but going forward, what type of levers you have, right, to bring leverage down?

[Isabella Simonato, Analyst at Bank of America]

Assuming you don't have a big jump, right, in your EBITDA for the next 18 months-24 months. That would be my first point. Now also about the U.S. beef business, right? I think we have been discussing that for a while now about how the cycle apparently has changed, right? It is being different than the previous down cycles. There's a matter of really how the cattle herd can be rebuilt at this point as the sector goes through generational transitions and issues. I mean, do you see the business model changing going forward? I mean, any type of vertical integration that would make sense on the cattle part for you to be supportive of the cattle herd growth over time? That would be my second point. Thank you.

[Guilherme Cavalcanti, Global CFO at JBS]

Hi, Isabella. So, on the first question, I think it's early. We still re-reviewing our estimates. Again, there's a lot of variables that's not in our control. I would say that for this year, the breakeven EBITDA, the cash flow breakeven EBITDA will be anything between $5.7 billion and $6 billion. That's our best estimation at this moment. In terms of cash usage, you're right, the leverage reaches 2.77x. We bear in mind that our long-term target is to be between two and three times. Being in this range, we think we keep investment grade, be above three times, we enter on the attention zone, where we are aware when we start reviewing things like you mentioned, capital expenditures, dividends and so on.

[Guilherme Cavalcanti, Global CFO at JBS]

Our dividend limit is at $3.75. I think it's worth mentioning that, in 2023, our leverage reached 4.84x in the third quarter, and we kept investment grade because of the cyclicality nature of our business. Because in 2024, the leverage came down without any effort to 1.89x. In fact, in 2024 I even unwind the discount receivables. In 2024, we will be printing a $2.8 billion free cash flow, but I used $500 million to unwind discount receivables, so I printed $2.3 billion free cash flow. That's the kind of leverage that we have to use. Because we don't use these levers recurrently. We expect it to be able to use whenever we need. For example, I could increase my discount receivables again for anything from $500 million-$1 billion in discount receivables that I unwinded in 2024 when the cash flow was robust.

[Guilherme Cavalcanti, Global CFO at JBS]

I can also increase my supplier vendor finance because we have space for that. These all have costs, you know, so we use only if needed. That's how we will be managing leverage. Second quarter, we may be closer to our upper range with limit on the long-term target. Bear in mind that the second semester, there's always a strong free cash flow generation. We expect to end up the year in our target zone of between 2x and 3x net debt to EBITDA. As long as we keep inside this range, we've been managing to keep the billion-dollar dividends that we already announced and around about more than a billion dollars in growth CapEx.

[Guilherme Cavalcanti, Global CFO at JBS]

If you look at since 2019, we did an average of expansion CapEx of almost a billion dollars with an almost a billion dollars average dividend as well. I think being in this range, I think we can keep this pace of growth CapEx and dividends. But we will always be monitoring according to our leverage, which is our main variable for capital allocation decisions.

[Wesley Batista Filho, CEO at JBS USA]

Isabella, good morning. Obviously this herd rebuild in the cycle of the U.S. business is taking longer than we all wish for. For the industry to have any integration on the especially on the cow-calf side of the business is just not realistic for a few reasons. It's very specialized and the people that do it have very special knowledge that's very different than what we do. Other than that, especially on the cow-calf side of this supply chain, it's very expensive, right? Expensive not as in price. I mean, it's expensive. You need a lot of land and you need to manage a lot of land to be able to have a significant amount of livestock. That's not our business. We're not looking into that.

[Isabella Simonato, Analyst at Bank of America]

Super helpful. Thank you.

[Operator]

Thank you. Ladies and gentlemen, the next question comes from Henrique Brustolin with Bradesco. You may go ahead, Mr. Brustolin.

[Henrique Brustolin, Analyst at Bradesco]

Hello. Good morning, everyone. Thank you for taking my questions. I have two also on U.S. beef. The first is to understand, you know, a little bit more the profitability you delivered in the quarter. We know it's a seasonally weak [evolving] into the barbecue season, right? We continue to see spreads that seem to be pressured as they were.

[Wesley Batista Filho, CEO at JBS USA]

Henrique, maybe can you repeat the question? We lost half of the question. Can you repeat, please?

[Henrique Brustolin, Analyst at Bradesco]

Sorry. Sure. The first one is if there was anything extraordinary in Q1 U.S. beef margins such as hedges or even the impact from the Greeley strike. The second is how you see margins evolving into the barbecue season. Spreads appear to be pressured back to the levels they were in the beginning of the year. You know, how you see this favorable seasonality playing out under the current environment?

[Wesley Batista Filho, CEO at JBS USA]

No, there wasn't anything extraordinary from a hedge perspective or even the whole strike situation didn't have a meaningful impact on our quarterly results. Nothing to do with that. It was simply, margins, especially in January and February were for sure very challenging and probably one of the most challenging periods we've ever seen in history. Talking about the next quarters, you know, we expect obviously to be better than what we had in Q1. For sure, 2026 will be a more challenging year than 2025.

[Henrique Brustolin, Analyst at Bradesco]

That's clear, Wesley. Thank you very much.

[Operator]

Thank you. Our next question comes from Benjamin Theurer with Barclays. Mr. Theurer, you may go ahead.

[Benjamin Theurer, Analyst at Barclays]

Hey, good morning, Tomazoni, Guilherme. Just two very quick ones. First, can we talk a little bit about Australia and some of the cost headwinds, what you're seeing on the Australian cattle cycle maybe, and if there was something in particular in the first quarter that drove the little over 300 basis points in the margin contraction? Then second, if you could share a few thoughts as it relates to the cattle price in Brazil to be very erratic and volatile? Any background, any interpretation of what we should think about going forward for the Brazilian cattle price, that would be helpful. Thank you very much.

[Gilberto Tomazoni, Global CEO at JBS]

Hi, Ben. Thank you for your question. Related to Australia, the operation was very strong. We had a good quarter in terms of volume and sales. The impact when you compare to the first quarter last year was FX. Was around 15%, the devaluation, the valuation of the Aussie. This is the only impact of the business. The business remains strong in Queensland that where we have 40% of the cattle herds. The conditions, the environment conditions for pasture is the best we have seen in the last three years. We remain very positive with Australian business. About the volatility in Brazil, it's cattle, it's normal because, as you know, Brazil is focusing to accomplish the quota in a China quota.

[Gilberto Tomazoni, Global CEO at JBS]

All of the players in the market try to produce as much as they can in order to able to reach a part, a share of the quota. It is normal. The price of the cattle increase. You saw in the last weeks, the price start to go down. We see that if the quota will be achieved, we believe it at the end of June, the volume should be cool down, and the price of the cattle should be down as well, in a way to accommodate that, to where Brazil will be put an additional 100,000 tons per month. This is normally what we see in the situation that less cattle will be harvested and the price of the cattle will be down. I think it's a part of the we see it as a normal.

[Benjamin Theurer, Analyst at Barclays]

Okay, perfect. Thank you very much.

[Operator]

Thank you. Now, Guilherme Guttilla from BTG would like to ask a question. You may go ahead, Mr. Guttilla.

[Guilherme Guttilla, Analyst at BTG]

Hi, Tomazoni, Guilherme and Wesley. Good morning. We have two questions here also. The first one is regarding Seara. Just want to discuss a little bit more about the margin of the company. Margins stay at quite strong levels, but they decline sequentially. If you could provide us a bit more information on what drove the sequential decline, if it was more related to the pork business, to the chicken, or maybe something else, like any color you can provide us would be very helpful. If I may just do a quick follow-up also in the U.S. beef. There was some new reports like pointing to the postponing of the measure, but there was also the possibility of lower U.S. beef import tariffs.

[Guilherme Guttilla, Analyst at BTG]

How are you guys seeing this for the U.S. beef segment and also for JBS Brazil and Australia that should also benefit kind of from this? Thank you.

[Gilberto Tomazoni, Global CEO at JBS]

Guilherme, related to Seara, increases its sales volume both domestic or in export. Demand for all of the products remain very strong. The only explanation is the FX. If you take the FX compared to the last quarter, you'll see the FX, the impact will be around 10%. This is more than justify all of the business is very strong. We are very confident with the results of Seara in the coming quarters.

[Wesley Batista Filho, CEO at JBS USA]

On the U.S. beef, Guilherme. If tariffs are lowered, I actually see this and there is a more, a bigger income of Australian and Brazilian beef and from other geographies as well. I see this as mostly in a big sense, very complementary. The U.S. has really gone into a production system that prioritizes Prime and Choice and heavier cattle. Today, just the percentage of Select cattle that we see is a lot smaller than what we're used to have. It's basically a very small minority of cattle nowadays is ungraded or low-graded cattle. I think, you know, that increase in imports, potential increase in imports could complement that production that we're doing a lot less of.

[Wesley Batista Filho, CEO at JBS USA]

I actually think that, you know, when the byproduct of having this priority of higher marbled, more premium beef that we're production system that we have in the U.S., is that we have a lot of fat trim as part of our production. Actually, you could almost argue it's one of the main primals. One of the main products that comes out of cattle is fat trim. The only reason why our fat trim is valued so high and it has such a good value is because we have available lean. If we don't have that available lean, we actually could see our fed cutout actually reduce. The price of that, you know, well-marbled beef actually have to be higher because we don't have the credits for that fat trim.

[Wesley Batista Filho, CEO at JBS USA]

My point is I, you know, in some cuts, yes, it would probably be in a way competitive, you know, with domestic production. I would say that the majority of what potentially would come in would actually be pretty complementary and not what we're targeting to produce in the U.S. right now.

[Guilherme Guttilla, Analyst at BTG]

Very clear. Thank you.

[Operator]

Thank you. Our next question comes from John Baumgartner from Mizuho. You may go ahead, Mr. Baumgartner.

[Isabella Sun, Analyst at Mizuho]

Hi, this is Isabella Sun on for John. Thank you for taking our question. Could you please discuss the next step that JBS plans to take in terms of increasing its presence in value-added meat? Is there still more to do on the M&A front to secure assets? Does JBS have the necessary brands and assets right now for, you know, the next steps in its growth? In terms of going to market, should we expect a strategy similar with the partnership between Seara and Netflix in Brazil, or is there a different approach that you plan to take? Thank you.

[Gilberto Tomazoni, Global CEO at JBS]

I think it's M&A. Isabella, in terms of M&A, it's part of our routine to look all the times the opportunities for M&A for growth. But this moment we are focused on the cash generation and to perform excellence and this is the focus of the company now.

[Isabella Sun, Analyst at Mizuho]

Okay, thanks.

[Operator]

Thank you. Our next question comes from Laura Hirata from Santander. Mrs. Hirata, you may go ahead. Mrs. Hirata, if you're trying to speak, you might be on mute.

[Laura Hirata, Analyst at Santander]

Hi. Good morning. Can you hear me? Good morning, everyone. Thanks for taking my questions. Actually, I have two from my end, first on Seara. The exports narrow approach to have become somewhat more challenging into markets as a result of disruptions in the Middle East, while we also saw the European Union considering banning protein exports from Brazil. It would be very helpful to understand how Seara adjusted its commercial strategy in response to that environment, both in terms of logistics and also in terms of pricing. If I may add, you announced, you're gonna start publishing 10-Q and 10-K filings, which we see as positive in terms of eligibility for U.S. indexes. In this sense, what are your expectations for JBS's next step towards being included in those indexes?

[Laura Hirata, Analyst at Santander]

I was wondering if you could share with us some thoughts on the accounting standards that this broader discussion could potentially bring. That's all from my end. Thank you so much.

[Gilberto Tomazoni, Global CEO at JBS]

Laura, I will start to answer the question about Seara that you have made, and Guilherme will be answering you about this, the 10-Q, 10-K we are published. First, you asked about the Middle East war and how this impact the business. I'll tell you this is the neutral impact because we have input of costs additional, because you need to skip some port, and you need to use trucks for internal transportation to reach the customers. Demand in terms of volume is remain the same, remain strong as it was before. The extra cost is bearing by the market, means that we can say it is neutral, this war in the business so far.

[Gilberto Tomazoni, Global CEO at JBS]

Related to the European that you mentioned, it's very new. I know that Brazil will provide the necessary clarification to the European Union regarding to the technical guidance related to the subject. For our side, we see Brazil is fully compliant with European Union requirements. The other thing is important to clarify, import point that e-export have been not been suspended. I think we have a period of clarifications, and this has not impacted the business so far. We are very confident Brazil will be fine, will be reaching agreement with the European Union. For our side, we continue to monitor the matter.

[Guilherme Cavalcanti, Global CFO at JBS]

Hi. Regarding indices, it's worth mentioning that today only around 40% of our free float comes from passive funds, which in this sector generally this number is 60%. The reason is that is because we are not on the main indexes yet. However, we think we already have the necessary criteria for the Russell. We entered last year, last September, in the FTSE U.S. as a U.S. company. Now, May, June, we have rebalancing of Russell. It's not in our control, there's chances that we enter into Russell, creating demand for the shares.

[Guilherme Cavalcanti, Global CFO at JBS]

Having more than 50% of our sales in U.S. If we do 10-K and 10-Qs, and in June we'll complete one year of having our primary listing in U.S., this makes us eligible to the S&P family. That's the perspectives in terms of the index. In terms of accounting standards, we are Netherlands incorporated, so the IFRS is the accounting standard for that. In our press release, we put all the relevant information in U.S. GAAP, so you can compare, and also the bridge from IFRS to U.S. GAAP. With that, we think we can reach U.S. investors that are used to U.S. GAAP, and we have the comparability, and reach also European investors and Latin American investors that are used to IFRS.

[Laura Hirata, Analyst at Santander]

That's super clear. Thank you, guys.

[Operator]

Our next question comes from Leonardo Alencar with XP Investimentos. You may go ahead, Mr. Alencar.

[Leonardo Alencar, Analyst at XP Investimentos]

Morning, Tomazoni, couple of questions for you. Thank you for taking my questions. I would like to discuss a little bit more about U.S. beef. Firstly, you mentioned that the strike in the first quarter wasn't really impactful for the results. Would you say that without the strikes, situation would be a little worse for the first quarter or not? Or even if there's any lingering effects for the Q2 from these strikes? Another thing I would like to understand from your side that we've been discussing this for the last few quarters, but just to get an update regarding the Mexican border, if you're expecting that to open anytime soon, if you think that would change the supply side in the short term, could be a fair wind for this second quarter, maybe for the second semester?

[Leonardo Alencar, Analyst at XP Investimentos]

Two questions for U.S. beef. Just one thing about Seara. You mentioned, Tomazoni, regarding the exports Middle East, and I agree with that. Looking on the domestic side, we've been seeing some erratic performance from prices between Natura or fresh and processed goods. It looks like in the beginning of the year, we saw some strength from the processed side, and now we are seeing some transitioning to more to the Natura. Just to get an understanding here, what you're seeing, if there's a demand is softening or if it's just a short-term hiccup, let's say? Just to get a better view from Seara on the domestic market as well. Thank you.

[Wesley Batista Filho, CEO at JBS USA]

Leonardo, good morning. Just on the strike situation. You know, we were able to redirect volumes in other plants, so we didn't lose, you know, volume because of this, because of the strike. There were maybe, you know, costs here and there that were extraordinary, but nothing significant enough to justify, you know, doing any adjustment or anything like that that's relevant to the market. We decided to just leave it as is with the result because it wasn't significant. Mexico border opening for feeder cattle, absolutely no question, is the most important thing that could ever happen in the short term to get, you know, some sort of relief on the supply side on beef in the U.S.

[Wesley Batista Filho, CEO at JBS USA]

Obviously, the USDA has been super, as always, very responsible in making sure that that's done whenever they feel the situation or they have assurance that the situation from the Mexico side is exactly how they want, so that they keep screwworm outside of the U.S. Having said that, whenever that, whenever and if that ever happens with the U.S. government feeling that is the right time, absolutely would be the most significant thing that could happen to normalize supply in this industry in the short term.

[Gilberto Tomazoni, Global CEO at JBS]

Leonardo, related to your question about chicken in Brazil, we start the year, beginning of the year. I think January was a little bit softening this quarter. February and March, that recovery, I think, is the market demand in Brazil very strong. The demand in the export is strong. That time with the last quarter, we discussed that the statistics show that Brazil will grow high volume because of the genetics will be higher. At that moment I saw that, I said that we're not seeing the market, I don't know a statistical, the reality statistical was some mistake that the association that republish the numbers and incorrect the information that the market will be grow around 10%. You're talking more about 4%. 4% is really, it is I think it's balanced with the demand. We have a standard demand with the normal grow in domestic market.

[Leonardo Alencar, Analyst at XP Investimentos]

Okay. Thank you. Just to be clear, you said there's improvement, it's mostly in Natura or processed or both?

[Gilberto Tomazoni, Global CEO at JBS]

No. processed, the market is, we can say stable. The market is not grow, but we are flat, but we sell more value added, more premium products than the, the low, the more commodity products. The demand, it's just the demand in general was weak, but they recover in March. We made a very good sales that we are still confident that this is a combination of our strategy to distribute in domestic market, different retail, different category of product. We are able to manage this situation. For chicken, it's very strong, the demand. For processed product, is strong in the premium and soft in the more commodity.

[Leonardo Alencar, Analyst at XP Investimentos]

That's clear. Thank you.

[Operator]

Thank you. Our next question comes from Heather Jones. From Heather Jones Research. You may go ahead, Mrs. Jones. Mrs. Jones, if you're trying to speak, you may be on mute.

[Heather Jones, Analyst at Heather Jones Research]

Hi, are you able to hear me now?

[Operator]

We can hear you.

[Heather Jones, Analyst at Heather Jones Research]

Thank you. My question is on North American beef. Just due to a variety of factors, including drought, it just seems like the herd rebuild is getting pushed out and likely be much more slow and meager than expected. Then, like you mentioned, the border reopening. It just seems like even if everything goes right from here, we're looking at, like, late 2028 before any significant increase in cattle availability. It would seem additional industry rationalization is required. I was just wondering when do you see that happening and wondering if JBS has considered rationalizing some capacity, maybe one of your smaller facilities. Just hoping you could help me how to think through that? Thank you.

[Wesley Batista Filho, CEO at JBS USA]

Heather, you're right. Especially with this drought, it's going to delay the herd rebuild. I don't think it will further liquidate, but it's probably going to delay the herd rebuild here. Look, we're not really focused on that right now, with this, you know, talking about rationalization and all of that. We're focused just on making our business better with the things that we can control given the footprint we have. That's not something that we're looking at the moment. It's very difficult for me to speculate on anything else, right? Because, anyway, it wouldn't be right. It wouldn't be, you know, appropriate for me to speculate on other players in the market. We're not looking at that right now.

[Operator]

Okay. Thank you. Our next question comes from Ricardo Alves from Morgan Stanley. You may go ahead, Mr. Alves.

[Ricardo Alves, Analyst at Morgan Stanley]

Thanks, everybody. Good morning. Thanks for the call. One question for Wesley, one for Guilherme. First on U.S. beef, Wesley, please. As we think about the grilling season, protein inventories are down big time in the U.S. Red meat is down, chicken is down. When you look at beef purchases to be delivered in June, July, also down big time, 15% or so. How do you feel about channel inventory today when you're thinking about retailers and food service as we head into the grilling season? These data points, I think that my point is that these data points would indicate to us that there's a lot of upside to cattle prices in the very near term. I wanted to see if you have that view or on the flip side, maybe it could also indicate that demand is expected to be softer, I guess. I don't know.

[Ricardo Alves, Analyst at Morgan Stanley]

I don't think that that's the case, but it is a possibility. I just wanted to hear from you, what you get from retailers and food service, you know, in your conversations on ground? I think that that would be helpful for the very short term on the cutouts. That's my first question. The second question, really a quick one to Guilherme. The pretty significant CapEx expansion that we've been discussing for the past couple of months, and we saw that taking place in the first quarter. Could you detail a little bit more, I know that maybe you cannot quantify by division, but at least, you know, the main projects that you're working on for the rest of this year, just so that we have a better idea of you know, what's going on in your U.S. pork division?

[Ricardo Alves, Analyst at Morgan Stanley]

Even projects that you're doing on U.S. beef, PPC and so forth. I think that that would be helpful as well. Just a reminder of the CapEx expansion. Thanks, everybody.

[Wesley Batista Filho, CEO at JBS USA]

Ricardo, on beef, cutouts is already started the year already compared to the same time last year, 15% higher than on the whole quarter than compared to the period, same period of time. The reason is lower volume and demand continues to be strong. You have a constant demand and a shorter supply. Price tends to go up when that happens. Looking forward, I would expect it's difficult to we have to wait and see and see how that's gonna impact demand, this potentially higher prices, but supply is tighter. We'll see what happens there. We'll probably see demand continue to stay strong, and we know the supply is kind of short. There is a potential for it, but we have to wait and see.

[Guilherme Cavalcanti, Global CFO at JBS]

Hi, Ricardo. The main projects continue to be ones announced. The Pilgrim's Prepared Foods facility in Marshall County, the Ankeny, Iowa, fully cooked bacon and sausage facility, the Perry, Iowa, fresh sausage plant, Cactus, Texas, and Greeley, Colorado, modernization of the beef processing plants. We have investment in Brazil with Biodiesel, in the Paraguay chicken plant, and also the Oman acquisition. Bear in mind that the Oman acquisition will not be a cash effort, given that it will all be financed with the local banks there.

[Operator]

Our next question comes from Lucas Ferreira with JPMorgan. You may go ahead, Mr. Ferreira.

[Lucas Ferreira, Analyst at JPMorgan]

Hi, everyone. Thanks for taking my questions. Two follow-ups. One is on Australia. It seems like you guys have a sort of a constructive view there on the quality of pastures in the business. I just wanted to understand, you know, potentially the trend for margins there once, at least, if you look at Australian dollar remains even a bit stronger than the levels we've seen in the first quarter? Cattle prices seems to be sort of stable, but with the MLA outlook of some reduction in slaughtering this year, right? With the changing cycle. I don't know, in the regions you guys operate and all the other, you know, businesses in Australia, how to think about margins going from here, if it's also some seasonal effects that should help lifting the margins going forward?

[Lucas Ferreira, Analyst at JPMorgan]

Number two is still on the U.S. beef. Wesley, just so I understand your comment, you mentioned that you expect 2026 to be more challenging than 2025. Last year you had a -1.5% margin. Should we expect a weaker margin this year given your comments? Then 3Q was particularly weak last year, right, with a -3.9% margin. Again, remember the issues with the hedging, et cetera. Should this sort of weakness more skewed towards the second half? How to think about also the evolution of the business from here? Thank you.

[Gilberto Tomazoni, Global CEO at JBS]

Lucas, thank you for your question. Related to Australia, I think, where we operate, we are very positive in terms of the volume that will be harvested this year. I think we'll be not dependent than last year. Some period of the year I think will be higher. I mentioned the beginning in one of the answer that we are Queensland that where we are main operation, that the climate condition is very positive. I think it's the best in the last three years. That and this is this show us that will be the coming months will be a good supplier. You talk about supplier, then you talk about demand. Demand is very, very strong. I think it's not just in U.S., but all of the premium markets that Australia sell that Japan, Korea and other ones.

[Gilberto Tomazoni, Global CEO at JBS]

Australia is very well positioned for catch this benefit from this demand, the growth demand, global protein growth demand. We are positive where we operate that will be a great year for this JBS Australia.

[Wesley Batista Filho, CEO at JBS USA]

Lucas, I'm going to say this without giving any guidance, but, you know, you could expect this year, versus last year, I'm talking market in general to be 1 percentage point-1.5 percentage point worse than last year. About 1% I think is fair. Obviously, we have our internal dynamics, right? How our operations are. Like you said, last year we had some hedging impact in a specific quarter. Overall, we could expect the market to be 1 precentage point-1.5 percentage point worse than last year.

[Lucas Ferreira, Analyst at JPMorgan]

Perfect. Thank you very much, everyone.

[Operator]

Thank you. Next, Jack Hardin from Stephens would like to ask a question. You may go ahead, Mr. Hardin.

[Jack Hardin, Analyst at Stephens]

Yes. Hi, this is Jack Hardin on for Pooran Sharma. Thanks for the question. For U.S. Chicken, consumer demand remains strong, partly supported by tight beef supplies, but broiler processing margins remain below mid-cycle levels. How do you assess the current supply-demand balance in chicken? Do today's margin levels suggest the industry needs to moderate production growth? Thanks.

[Gilberto Tomazoni, Global CEO at JBS]

We see very balance in the chicken demand in U.S. We had in the beginning of the year that the big bird was a little bit very challenged and but that the price of breast recovered during the quarter. We see that demand is strong in value added and prepared, we are very strong demand and all of the business, all of the other categories that Pilgrim's sell in domestic market in the U.S., it's all of them are positive. When you look for the side in the supply, we see better balance supply demand. We are positive with our business in Pilgrim's business.

[Operator]

Our next question comes from Thiago Bortoluci from Goldman Sachs. You may go ahead, Mr. Bortoluci.

[Thiago Bortoluci, Analyst at Goldman Sachs]

Hey, guys. Good morning, everyone. It's always a pleasure to talk to you. Thanks for the Q&A. I think the question goes to Tomazoni, and this is just to try to gain perspective beyond the quarter on the benefits from diversification and portfolio. Tomazoni, this was a very rare quarter where we saw very strong demand. Actually, you mentioned in three business units record high sales for our first quarter. At the same time, virtually all the business units delivered lower margins versus last year. I think the exception was Brazil beef. Which, you know, one could argue that this quarter particularly diversification didn't quite help you. I think my question for you is, once you think about the year and the buildup, you mentioned the grilling season in the U.S., obviously the year end brings seasonality also to Brazil.

[Thiago Bortoluci, Analyst at Goldman Sachs]

Where are the opportunities where you think margins could show some clearer sequential improvements? Where are the main risks, and how would you expect diversification to help you going forward? Thank you very much.

[Gilberto Tomazoni, Global CEO at JBS]

Okay, Thiago. Good question, Thiago. I'm very positive for diversification because when you look for our results this quarter, if you compare to the last quarter, the difference is around $400 million-quarter. We can explain this difference with two business units. First, beef U.S. I think the results of the beef U.S. was impact around 50% of the difference of our EBITDA. Wesley Filho have explained about that. I think we reached the bottom of the results. We are, we see that the coming quarter, we cannot say they will be improved a lot, but I think will be better than was this quarter.

[Gilberto Tomazoni, Global CEO at JBS]

The market condition didn't change, but I think we are more balanced and we made some adjustment in our structure that I think will help us to navigate even inside of the company with the low cost of operation, more synergy and outside synergy in terms of commission. I think this is one of the things that give us more confidence that the results will be better than was this quarter. If you can add anything, Wesley?

[Wesley Batista Filho, CEO at JBS USA]

No, I was just gonna add, Thiago, that I, you know, I think the a good way to think about diversification is always, you know, more so than comparing every time to the, you know, always on the comp versus last year. If you look just at the absolute number, right, you have Pork USA and Seara with double digit margins. You have Australia, even though this quarter was a lower quarter than what it has been, it's still in a very positive high-single digit. Right when you have the beef U.S. at the low cycle. If you went back five years ago, you'll probably see all of the other businesses at a lower margin and beef higher.

[Wesley Batista Filho, CEO at JBS USA]

I think the other way to look at the diversification as, you know, working even in this quarter is when you compare our portfolio of businesses with any one of our peers, right. Each one of them could be that they are in a singularly in a market, and that market is really good or really bad. Our portfolio of businesses is always gonna give a more stable kind of result versus our peers just based on the uniqueness of our diversification. I think, you know, I'll say that even in this quarter that was a weaker quarter, the diversification thesis that we have is actually pretty evident, in my opinion.

[Gilberto Tomazoni, Global CEO at JBS]

Just to end, finish my point of view that we start, that 50% was beef in U.S. The other 50 was Pilgrim's. Pilgrim's need to adapt its portfolio to the market demand. We, before, U.S. was just focused to export, they use the breast, the white meat and export the dark meat as this part of leg quarters. The market changes. There is a demand in domestic market now in U.S. for dark meat, and Pilgrim's need to adapt its layout of the three factories in order to be able to supply the demand of the market. We stop for two weeks, three plants, then this was affected the results, and the climate conditions affect as well.

[Gilberto Tomazoni, Global CEO at JBS]

These two things explain the difference in terms of the results compared to the last year. $400 million. That $200 million in the pig and around $200 million in the beef. This is one thing about that. The other thing is, you mentioned that the other business not delivered the result, but that was the FX. FX was affect Seara and FX was affect Australia. If you want to explain the business, it is FX, Seara in Australia and the pig that I explained and beef in U.S. This is one thing about the results. The other thing, if you talk about diversification, of course, if you have just the beef in U.S., we have a really tough situation.

[Gilberto Tomazoni, Global CEO at JBS]

As we have managed different business in different geography, we are able to compensate. If you compare just a single company with a one business, that will be a huge difference. Of course, the diversification is working, and I believe that this difference in terms of cycle is normal our business. We need to be able and to focus and manage the business. When we have this low level, we need to be better than the other competition. In the high level, we'll be better than the competition. This is the part. This is the game.

[Thiago Bortoluci, Analyst at Goldman Sachs]

Very true. Thank you very much, Tomazoni and Wesley.

[Operator]

Thank you. Our next question comes from Renata Cabral at Citi. You may go ahead, Mrs. Cabral.

[Renata Cabral, Analyst at Citi]

All right. Thank you so much for this space for questions. My first one is a follow-up, related to the last one, diversification, but in the angle of GLP-1 adoption. It was already mentioned by company's management that the adoption of GLP-1 is a structural shift towards hyper-lean diet, of course, particularly in the U.S. as the adoption is higher right now due to costs. Could you please calibrate to us how tangible this trend is already in your day-to-day business? Are you seeing measurable change in the consumer behavior already? For instance, it was shifted the different perceptions of the consumers for PPC. In terms of innovation, GLP-1 is something that you think about when you are elaborating a new product, and mix in terms of smaller portion or anything different.

[Renata Cabral, Analyst at Citi]

This focus to in the U.S., but even for Brazil, are you seeing already this trend or you think the contribution can come in the future? Since you are investing in expansion for Seara, do you have this in mind in terms of the future products that you are gonna release on those investments? This is my first question. The second one is related to grain prices that has been positive for the company for a while. Right now there's the discussions on the potential risks on the meal and fertilizers costs. If you can share your outlook for 2026, 2027, it would be great as well. Thank you so much.

[Gilberto Tomazoni, Global CEO at JBS]

Thank you for your question. When you talk about GLP-1, I think GLP-1 is one of the factors that is affecting the global consumption of protein. When we are saying here that a strong demand for protein is globally in all of the market, this is affected by, of course, as you mentioned, GLP-1. GLP-1 I think is not the most important issue. I think is the, this is the perception and not just perception, but the knowledge that protein is very important for to have the. Even in the new generations or in the older generations. If you want to have longer life, you need to eat more protein.

[Gilberto Tomazoni, Global CEO at JBS]

If you want to have muscle in the beginning, you need to have to eat protein. That protein become very important for all of the generations. The second, the regulatory. If you saw that U.S. FDA change the parameter, they invert the parameter because that they put that you need to have more protein in order to have more health than to eat more protein is healthier. This is globally. There is about this new technology about medicine that is because you want to lose weight, and if you lose weight, you need to eat more protein in order not to lose muscle, just lose fat. This is not in one country. I think this is globally. We see this will be continuous high protein, the consumption.

[Gilberto Tomazoni, Global CEO at JBS]

It's not new that in order. Now what we see the new now, all the companies try to adapt the portfolio to have more protein. Even that the companies that work in high carbohydrate product, now they want to adapt for more protein. This, but if you look our core, our core is focused on protein, that we don't need to adapt our core. We need this to accelerate what we have done so far. For example, we have launched high protein line of products in Seara, in other parts of the world. We are work in innovation in order to facilitate how the people eat protein.

[Gilberto Tomazoni, Global CEO at JBS]

For example, use air fryer for simplify the life if you want to cook at home. You will see that people cook more at home. If they if I say you, we have the right portfolio for the right brand, and we not see that tendance, we see that in the structural, they eat more protein. We are investing that in all of the innovation in order to facilitate that. The second question, I understood that you asked about grain, about the cost of course, of the nutrition of the animal. Look, if you look for this, I say you, despite the global inventories being at a comfortable level, there is significant volatility in the market.

[Gilberto Tomazoni, Global CEO at JBS]

I think is a lot of uncertainty regarding to the weather conditions and the fertilizer costs. If you look for, corn, globally, demand remain very strong. It will support the market even with the recent, pressure in the grain price. I think is, the tendancy is to, increase the price because of the weather, because of the fertilizers. But in terms of what is part of our company, I can say you that we believe that we are well-positioned from a risk management perspective. While the crop conditions have improved, we remain prepared for the potential volatility, including the possible reduction in the Brazilian safrinha crops.

[Renata Cabral, Analyst at Citi]

Thank you so much, Tomas. It's super clear. Thanks for sharing your thoughts on GLP-1 as well. Very complete answer. Thank you.

[Operator]

Thank you. Our next question comes from Ricardo Boiati, with Safra. You may go ahead, Mr. Boiati.

[Ricardo Boiati, Analyst at Safra]

Hi. Good morning, everyone. Wesley, a couple of follow-ups here regarding North America. The first one, besides the tariffs discussions this week, right, there were some reports about the potential deregulation in the cattle industry. In your view, what can be really done to incentivize ranchers to raise more cattle sustainably, I mean, in the longer term? And what is the likelihood of any potential policy change happening this year in that regard? The second point here on the overall protein demand in North America. This summer, we have the FIFA World Cup happening in North America, right? Can we expect here any meaningful impact coming from that event specifically in North America, maybe a stronger than usual barbecue season or something like that? Lastly, on prepared foods, this is a more broad question for the company.

[Ricardo Boiati, Analyst at Safra]

We see many CapEx initiatives to build or expand capacity in prepared foods. My question is if you can quantify a little more how fast prepared foods are growing within JBS portfolio. Do you have any particular long-term target for this category to represent in our overall portfolio in the long term? Thank you, guys.

[Wesley Batista Filho, CEO at JBS USA]

Good morning. On the deregulation for sure, I mean, as we, you know, see cow-calf producers and ranchers in general trying to rebuild herd and deciding to rebuild herd, regulation and overregulation can be, you know, an obstacle. Anything the government does to help the ranchers is very helpful and for sure it's important. On the protein side, demand is pretty strong overall. You know, how we backfill the FIFA World Cup, I don't know. I think it's helpful. It's not negative. I, you know, there is, I think it might be relevant in a few days of the next few months. But I don't think it moves the needle enough to say that there's substantially structurally changes the how we're gonna see the overall summer and spring here for this demand.

[Gilberto Tomazoni, Global CEO at JBS]

What about our strategy for value added? We don't have a specific target for value added. We want to increase the share of prepared foods in our portfolio. Why we want to do that? Because when we talk now a lot about cycle, where is the low part of the cycle or high part of the cycle. Prepared, there is practically no cycle. The demand normally is very stable and with higher margin. Because of that, we are prioritize our investment in the prepare and prepared food and brands. We are investing in brands, and we are investing in the line of prepared foods. If you saw that investment we have, Guilherme just mentioned before, the investment in U.S. about sausages. It's breakfast sausage. It's value-added. Pilgrim's are value-added from breaded plant.

[Gilberto Tomazoni, Global CEO at JBS]

You saw in Brazil some investment on case ready was focused on that. We are prioritizing investments in value-added. This is the fact. We are not at a specific target on that.

[Ricardo Boiati, Analyst at Safra]

That's clear. Thank you very much, guys.

[Operator]

Thank you. Our next question comes from Priya Ohri-Gupta with Barclays. You may go ahead, Ms. Gupta.

[Priya Ohri-Gupta, Analyst at Barclays]

Great. Thank you so much for taking the questions. Guilherme, can we talk a little bit about how we should think about net leverage trending through the end of the year? I think earlier, you know, a couple months ago at CAGNY in particular, we had talked about scope for net leverage to be below 2.5x this year. It sounds like it could be ending the year sort of in the upper range of that 2.5x-3x area. I just wanna make sure that we're thinking about that correctly. Then as part of that, you highlighted through the new issuance and tender that you did recently. However, it does look like you tendered less than you issued.

[Priya Ohri-Gupta, Analyst at Barclays]

Should we expect, some of that incremental amount to get deployed to debt reduction later this year or just kept on the balance sheet? The second question I had was just on the free cash flow breakeven. You talked about it being $5.7 billion-$6 billion now. Last quarter you had said it would be $5.7 billion. If you could just walk us through, what's driving the higher end of that range now, that would be helpful? Thank you.

[Guilherme Cavalcanti, Global CFO at JBS]

Hi, Priya. From a net leverage perspective, you're right. I think the perspective to end this year are more likely to be between 2.5x and 3x, given in the weaker results we had in the first quarter. In terms of the tender we did, bear in mind we have $1 billion in dividends to be paid in June, but our cash position is still at $3.5 billion, which is around $500 million-$600 million above our minimum cash, given our cash conversion cycle and the different geographies that we are around the world. We have space to buy bonds with this excess cash. This decision will probably be done in the second semester when is the period where our cash generation is stronger. In terms of the free cash flow breakeven, it's just an estimate. I think the accounts that we have counting should be on $5.7 billion.

[Guilherme Cavalcanti, Global CFO at JBS]

Working capital in the first quarter was better than the first quarter last year. Going forward, I just gave this range because there's a lot of moving things like energy prices that could impact grains. We don't know how much will be this impact basically on the fertilizers and energy in the grain prices. That could move working capital if prices go up. That's why I gave the range from $5.7 billion-$6 billion because all the uncertainties that we have, given all the volatility in the markets.

[Priya Ohri-Gupta, Analyst at Barclays]

Great. Thank you. Just a quick follow-up. If you do think about, looking at further debt pay down, should we expect you to use a similar approach to what you did in the beginning of the year? Could you take other considerations into account, sort of thinking through the interest expense reduction versus maturity management and absolute debt reduction? Thank you.

[Guilherme Cavalcanti, Global CFO at JBS]

Yes. The approach will be absolutely the same, given that all my debt, including the $2.9 billion maturing, in 2032, all the coupons are below Treasury, so it's not worth it to pay any of those debts. Any repurchase would be on 34, 33, 35 spots. The 34, for example, is the highest coupon, which we still have $300 million outstanding. That could be a possible target.

[Priya Ohri-Gupta, Analyst at Barclays]

Thank you. Very clear.

[Operator]

Thank you. Our next question comes from Matheus Enfeldt with UBS. You may go ahead, Mr. Enfeldt.

[Matheus Enfeldt, Analyst at UBS]

Hi, all. Morning. Thank you for your time. My first question on the beef demand in Brazil. We're still seeing it quite resilient in spite of prices. I'm just trying to get a sense if you're getting pushback from retailers, or pushback on the margin on demand growth and or demand reduction, and what's the size or scale that we could expect for demand down in Brazil, in U.S. beef as a result of higher prices? My second question is on sort of a longer term view around production. We're seeing quite a lot of restrictions to trade flows, be it quotas or sanitary barriers for exports.

[Matheus Enfeldt, Analyst at UBS]

I know the company's planning to diversify, whether there are some additional regions that could become focused for investments in the midterm, such as rest of Latam or more investments in Europe that could help circumvent those sanitary and trade flow restrictions in general, and how you're incorporating that into the longer term investment decisions that the company is taking? Those are the two questions. Thank you.

[Gilberto Tomazoni, Global CEO at JBS]

If understood well, you ask for about the demand for beef in Brazil and beef in U.S.

[Matheus Enfeldt, Analyst at UBS]

Yeah. That was that.

[Gilberto Tomazoni, Global CEO at JBS]

But look, we in Brazil, given that we have the higher price of cattle and the higher price of meat, the demand in Brazil remains strong for beef and for all of the proteins. We talk about JBS. We now with, I think, is with the end of the quotas of China, may the price of cattle will be decreased, and I think it will be more favorable to sell in domestic markets. It is important that we have developed a category management 2.0, say that we call Açougue Reserva. It's in Brazil that we manage inside of the store of our customers, the budget area.

[Gilberto Tomazoni, Global CEO at JBS]

This show that the store they have our model, they sell not just more meat, but they sell more for all of the stores. This project is yet a strong perception from our customers. Because of that, I see that even now with this situation that after the quota of China end, we are, I think is we are very well structured, even in Brazil, even in U.S., to manage the volume for our business Friboi. I think it's in U.S. where the not You have to comment a little bit about the demand.

[Wesley Batista Filho, CEO at JBS USA]

The demand continues strong, Matheus, we think all the things already mentioned before on just the overall pro-protein trend and people understanding more about nutrition, prioritizing protein. We've seen that. And just the overall preference also for protein and especially beef has been pretty strong. That's how we see the demand in the U.S.

[Gilberto Tomazoni, Global CEO at JBS]

I think this is related to the first, the question first we answered about the demand of pro-protein, GLP-1 and other factor that is boosted all of the consumption, protein consumption globally. I think it's, if Matheus, if I'm right, your question about the investment and the future participation of our investment. Is it correct?

[Matheus Enfeldt, Analyst at UBS]

Yeah. How you're considering restrictions to trade flows with quotas and sanitary barriers into your investment process and investment decision for the mid-, long-term? Thank you.

[Gilberto Tomazoni, Global CEO at JBS]

I think is we are very well positioned where we produce and where we sell our product. I think is we built this global platform, and you look for, we are produced where is the most competitive way to produce, and we are present to sell where the market demand is. I think is in terms of balance, we are well balanced. Of course, now our focus now for this year is to cash generation. We are not looking for to a new project in our portfolio. We just start with the project in Paraguay. We start the project in Oman. I think now we need to develop this project in the greenfield that we are working on. No any new projects in our pipeline now.

[Matheus Enfeldt, Analyst at UBS]

Awesome. Super clear. Thank you.

[Operator]

Thank you. Our next question comes from Igor Guedes with Genial Investimentos. You can go ahead, Mr. Guedes.

[Igor Guedes, Analyst at Genial Investimentos]

Can you hear me?

[Operator]

Yes.

[Igor Guedes, Analyst at Genial Investimentos]

Okay. Thank you very much for the opportunity. The first question is about CapEx. We observed CapEx essentially doubling year-over-year, and it came slightly higher than expected, reflecting an acceleration across the platform, but mainly related to renovation projects stemming from the downtime at PPC, with capacity expansion initiatives. It would be interesting to understand if you can share with us how the capacity expansion is progressing from a numerical standpoint, how much of increase you expect to achieve, based on what production levels and whether we can expect CapEx to normalize as early as second quarter? My second question, I would like to get your perspective on what might happen in the second half of the year regarding the filling of China's quotas.

[Igor Guedes, Analyst at Genial Investimentos]

As you have already mentioned, it's possible that cattle prices will fall in Brazil, given the quota is being front loaded faster than initially expected, which could reduce the number of slaughters in the second half of the year, leaving more cattle on hand and lowering price per arroba. My question is more focused on the cattle side of the domestic market. Do you think it's possible that with the reduction in exports, part of the volume will be directed to the domestic market and with more meat supply here, the cattle price might face downward pressure? I would like to take your view on this variable going forward. Thank you very much.

[Gilberto Tomazoni, Global CEO at JBS]

When you talk about the CapEx, we are put $1 billion in CapEx for expansions. The grow CapEx, as we call, grow CapEx. We are not disclosure one-by-one, because many business unit in different types of the CapEx, it will be different. It is difficult to explain volume because one is number of chicken, the other is a volume of well-prepared food and to put together will be difficult to explain. That we are not disclosing. The CapEx is, as you mentioned, if you compare for the last years is higher because we are seeing the strong demand. We are not seeing now any moment that we need to review the CapEx because we are see the cash generation for the second semester of the year will be strong.

[Gilberto Tomazoni, Global CEO at JBS]

It is something we can see in the future because it's capital expenditure, we can postpone or we can give more time to do. We are not looking now because we are not see that it's necessary for now on. Could be in the future is something that we can take a look. The other thing about the Brazilian situation, about the market situation about beef. We said that the end of quota of China, the number of cattle will be harvest for the industry will be down. Should be down because we need to accommodate these 120,000 tons per month for beef. We need to find a market for that. The industry will be reduced the number of cattle will be harvest.

[Gilberto Tomazoni, Global CEO at JBS]

If you reduce the number of cattle will be harvest, combined with more availability of cattle for feedlot, we believe that the price of cattle will be down as well. Means that cutout could be down because more volume domestic, the price of beef will be down as well. I see that the spread between the both price, the cutout and the live cattle, will be remain. Depends in our case could be enhanced that we have value-added product. When you talk value-added product, not with processed product, it's value-added raw products. That I mentioned you better representation, better way to serve the customer in different cuts of beef. That if you look for our side, I think is we are very well structured in Brazil and outside to Brazil to take the advantage, the impact of this end of the quotas of China.

[Igor Guedes, Analyst at Genial Investimentos]

Okay. Super clear. Thank you very much.

[Operator]

Ladies and gentlemen, there being no further questions, I would like to pass the floor to Mr. Gilberto Tomazoni.

[Gilberto Tomazoni, Global CEO at JBS]

I would like to thank you everyone for joining us today and all JBS team members for their dedication. You look ahead, we have not changed our focus, execution, efficiency and disciplined capital allocation and cash generation. That is what allow us to deliver consistent result and build a long-term value creation. Thank you.

[Operator]

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

Participants

Executives

• Gilberto Tomazoni, Global CEO
• Guilherme Cavalcanti, Global CFO
• Wesley Batista Filho, CEO

Analysts

• Benjamin Theurer, Analyst at Barclays
• Guilherme Guttilla, Analyst at BTG
• Heather Jones, Analyst at Heather Jones Research
• Henrique Brustolin, Analyst at Bradesco
• Igor Guedes, Analyst at Genial Investimentos
• Isabella Simonato, Analyst at Bank of America
• Isabella Sun, Analyst at Mizuho
• Jack Hardin, Analyst at Stephens
• Laura Hirata, Analyst at Santander
• Leonardo Alencar, Analyst at XP Investimentos
• Lucas Ferreira, Analyst at JPMorgan
• Matheus Enfeldt, Analyst at UBS
• Priya Ohri-Gupta, Analyst at Barclays
• Renata Cabral, Analyst at Citi
• Ricardo Alves, Analyst at Morgan Stanley
• Ricardo Boiati, Analyst at Safra
• Thiago Bortoluci, Analyst at Goldman Sachs