JBS Q2 2026 Earnings Report

JBS EPS Results

• Actual EPS: $0.20
• Consensus EPS: $0.32
• Beat/Miss: Missed by -$0.12
• One Year Ago EPS: N/A

JBS Revenue Results

• Actual Revenue: $23.90 billion
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: +13.80%

JBS Announcement Details

• Quarter: Q2 2026
• Date: 8/10/2026
• Time: After Market Closes
• Conference Call Date: Tuesday, August 11, 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 Q2 2026 Earnings Call Transcript

Key Takeaways

• Neutral Sentiment: JBS reported record second-quarter sales of $24 billion and adjusted net income of $218 million, while adjusted EBITDA was $1.143 billion under IFRS and $1.3 billion under U.S. GAAP. Reported net loss of $102 million was weighed down by nonrecurring financial expenses, antitrust settlements, and other charges.
• Positive Sentiment: U.S. Beef’s EBITDA margin improved to negative 1.3% from negative 3.9% a year earlier as plant performance, productivity, commercial execution, and capacity optimization improved. Management expects the reopening of Mexican cattle ports and early signs of U.S. herd rebuilding to support more normalized slaughter volumes through 2027.
• Negative Sentiment: Net leverage rose to 3.1 times EBITDA, above JBS’s 2–3 times long-term target, and management expects year-end leverage to remain slightly above 3 times. Although second-quarter free cash flow improved to $130 million and liquidity reached approximately $7.7 billion, higher debt increased interest expense.
• Positive Sentiment: JBS announced a strategic partnership with Danantara involving a $2.5 billion investment for a 25% stake in its Australia and New Zealand operations, creating access to up to $5 billion for acquisitions and projects in Indonesia and Southeast Asia. Management expects the platform to accelerate regional growth without adding pressure to JBS’s consolidated balance sheet.
• Neutral Sentiment: Protein trends were mixed: JBS Pork delivered an improved 8.9% EBITDA margin, while Pilgrim’s Pride faced pressure from U.S. chicken oversupply and Seara’s margins softened sequentially due mainly to weaker domestic-market conditions. Management expects industry supply to rebalance but emphasized execution, product mix, and cash generation.
• Neutral Sentiment: Global CEO Gilberto Tomazoni will transition leadership to Wesley Batista Filho in January 2027. Management characterized the internally planned succession as providing strategic and operational continuity.

Presentation

[Operator]

Good morning, and welcome to JBS' second quarter of 2026 results conference call. At this time, all participants are in listen-only mode. Following management's remarks, we will open the floor to a question-and-answer session, and instructions on how to participate will be provided at that time. Please note that to ensure all analysts have an opportunity to ask a question, we kindly request that each analyst limit themselves to just one question. As a reminder, this conference is being recorded. Any statements eventually made during this conference call in connection with the company business outlook, projections, operating and financial targets, and potential growth should be understood as merely forecasts based on the company's management 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.

[Operator]

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. Mr. Tomazoni, you may begin your presentation.

[Gilberto Tomazoni, Global CEO at JBS]

Is in on leading the business and ensuring a smooth transition. We have been planning this succession carefully from a position of strength and nothing change in our strategy, our priorities, or the way we operate. This decision reflects the strength of the company we have built. Over the past several years, we have transformed JBS in many ways, building a more diversified, more global, and more resilient business. Our dual listing was a defining milestone in that journey, positioning the company for its next phase on the value creation. With a strategy clear and a strong leadership team in place, I believe this is the right moment for JBS to begin in the next chapter under Wesley's leadership. Turning to our results, the second quarter once again demonstrated the resilience of our global operating model in an environment that remain complex and volatile.

[Gilberto Tomazoni, Global CEO at JBS]

Supply and demand dynamic vary across geographies and proteins, while currency movements, trade disruption, and geopolitical events underpin more complexity. Against this backdrop, our priorities are clear: improving efficiency, protecting margin and strengthening commercial performance, allocation production to the markets where we create the most value. Adjusted net income was $218 million. Adjusted EBITDA total $1.43 billion under IFRS, with a margin at 6% and $1.3 billion under U.S. GAAP, with a 5.3% margin. Compared to the first quarter, profitability already show an improvement in the majority of our business units. Net income was significant affected by not recurring items. While important to understand, these item do not change how we assess the business. Our focus is on operating performance, cash generation, and balance sheet discipline. Performance improved across several business during the quarter, although important part of our portfolio is still operate in a challenged environment.

[Gilberto Tomazoni, Global CEO at JBS]

While U.S. beef continues to operate in a challenged environment, we have reorganizing our operating structure and are very confident at the results of those changes. I will leave the discussion to the business, to Wesley, who will provide more details on the quarter and our outlook for beef and pork in North America. In Australia, results improved further, supported by robust global demand for beef and attractive export opportunities. Before moving on, I would like to comment briefly on the strategic partnership we announced last Friday with Danantara Investment Management. The transaction includes a $2.5 billion active investment by Danantara in exchange for a 25% stake in our Australia and New Zealand operation. Together, the additional funding capacity expected through the joint venture. This gives us access to up to $5 billion to fund acquisition, greenfield projects, and other growth opportunities across Indonesia and Southeast Asia.

[Gilberto Tomazoni, Global CEO at JBS]

This creates a well-capitalized platform to accelerate our expansion in one of the fastest-growing protein consumption regions in the world, while preserving the strength of JBS's balance sheet and reinforcing Australia as a strategic hub within our global operation. Importantly, this does not change how we manage the business. Our Australia and New Zealand operations remain fully consolidated under the same leadership and operating model. With that, let's turn to our operating performance. Global beef fundamentals remain constructive, although conditions vary considerably across markets. Supply is limited in several regions. Demand remains resilient, and our global footprint allows us to direct products to the markets where returns are the strongest. JBS Brazil delivered a strong quarter, driven by export demand and disciplined commercial execution. Under IFRS, adjusted EBITDA totaled $269 million, with a margin of 5.9%. Even with elevated cattle prices, JBS reported its highest EBITDA for second quarter.

[Gilberto Tomazoni, Global CEO at JBS]

Cattle availability has improved in Brazil. Our focus has been on maximizing the value of every animal through our integrated commercial network. China remains an important destination, and recent shifts in trade flow reinforce the importance of maintaining balanced exposure across export and domestic markets. By balancing volumes across China, other export markets, and the domestic market, we protect margins and maximize value per animal. Our domestic business is another important competitive advantage. Through the Friboi brand and long-standing customer relationships, we work alongside retailers and category partners, helping them to grow value across the beef category. During the quarter, our barbecue portfolio performed particularly well. We have expanded commercial initiatives with major retailers across Brazil. In chicken, both Pilgrim's Pride and Seara delivered solid results, although market dynamics evolved differently across regions. At PPC, demand remained healthy across retail and food service, although industry supply expanded faster than demand.

[Gilberto Tomazoni, Global CEO at JBS]

Even so, results improved from Q1 as operating conditions normalized, planned upgrades were completed, and expanding assets continued to mature. At Seara, margins remained strong despite a tougher year-over-year comparison, a less favorable currency environment, and changing export market dynamics. The business grew volumes, reflecting improvements in operating, quality, and commercial execution. We see further opportunities to improve mix, distribution, and execution in domestic markets while converting volume growth into sustainable profitability. Our priorities for the second half are clear: execution and cash generation. We expect leverage increased during the quarter, and reducing it remains a priority. We are focused on strong cash generation, disciplined working capital management, and prudent capital allocation. The environment remains dynamic, but our priorities are unchanged. We are focused on execution, cash generation, and disciplined capital allocation.

[Gilberto Tomazoni, Global CEO at JBS]

With a diversified portfolio, a strong market position, and experienced teams around the world, we believe we are well-positioned to create value through the cycle. Thank you, and I will now turn the call over to Wesley.

[Wesley Batista Filho, CEO at JBS USA]

Tomazoni, thank you for everything you've done for JBS over the past 15 years, and congratulations on the leadership you have shown. You have lived our values every day, challenged our teams to keep raising the bar, and helped us deliver stronger results. We've worked together for more than a decade, and I've learned a lot from working alongside you, and I'm very grateful for the trust and partnership we've built over the past years, which will help ensure a smooth transition and continuity in our strategy and priorities. I'm incredibly proud and excited to have the opportunity to lead JBS starting in January 2027. This is a company where I've spent my entire professional life, and it means a great deal to me. We're fortunate to have an exceptionally strong leadership team and an extraordinary group of 280,000 team members around the world.

[Wesley Batista Filho, CEO at JBS USA]

I'm very excited about what we can accomplish together. As we look forward, my focus remains the same, operational excellence, disciplined capital allocation, customer service, and creating long-term value across our diversified global platform. We'll continue to live our values, strengthen our culture, and build on the tremendous work you've done over the past eight years. We'll keep evolving, growing, and making JBS an even stronger company for the future. With that, let me turn to our U.S. operations. The second quarter reflected resilient protein consumption in the United States, despite a challenging environment for the beef industry, where tight cattle supplies and historically high cattle costs continue to pressure margins. Even so, U.S. beef delivered a quarter of solid improvement.

[Wesley Batista Filho, CEO at JBS USA]

Our EBITDA margin improved from a -3.9% in the second quarter of last year to a -1.3% this year, reflecting an important step forward despite the ongoing challenges of the cattle cycle. Over the past several quarters, we have improved plant performance, optimized our operating footprint, strengthened our commercial capabilities, and increased productivity across our plants. Many of the operational initiatives we've been working on are already translating into better results, and the announced capacity optimization will continue to contribute progressively as they are fully implemented. At the same time, we're beginning to see early signs that industry fundamentals are moving in the right direction. The gradual reopening of the Mexican border and the first indications of herd rebuilding reinforce our confidence that supply and demand are heading towards a healthier balance over time. The reopening of the Mexican border is particularly important.

[Wesley Batista Filho, CEO at JBS USA]

The expected reopening of the three ports of entry should restore most of the historical flow of cattle from Mexico into the United States. Cattle from Mexico have represented about 5% of U.S. slaughter, so restoring that flow is very meaningful for the industry. We also expect many of the first cattle crossing the border to be heavier than what they used to be prior to the border closure. That should allow them to reach slaughter weight much sooner than normal. Assuming the ports reopen as expected, we believe we will continue to see an increasing cattle available for slaughter during the first quarter of 2027, with slaughter volumes returning to a more normal level by the second quarter. Turning to pork. Market fundamentals proved more challenging during this quarter. Even so, our pork business delivered another quarter of solid performance. EBITDA margin reached 8.9% compared to 6.5% a year ago.

[Wesley Batista Filho, CEO at JBS USA]

Our pork business once again demonstrated its ability to compete at the highest level. We will continue focusing on operational excellence, customer service, disciplined capital allocation, and continuous improvement. Those are the levers we control, and they position us to create greater value over the long term as cattle supplies recover. I will now turn the call over to Guilherme.

[Guilherme Cavalcanti, Global CFO at JBS]

Thank you, Tomazoni and Wesley. Before we move on to the quarter's operating results, I would like to highlight that starting in the second quarter, we voluntarily began reporting results as a U.S. domestic company and therefore reporting Forms 10-Q and 10-K in IFRS for the time being. We believe this initiative represents a significant step in our strategy of alignment with the U.S. capital markets and may expand our eligibility for inclusion in a more ample group of stock indexes. In this regard, I would like to highlight JBS's inclusion in the Russell 1000 and Russell 3000 indexes in June. This inclusion, as well as the potential for inclusion in additional indexes going forward, is key to expanding our investor base, increasing liquidity, enhancing global visibility, and unlocking value to shareholders. Let's now move on to the operational and financial highlights of the second quarter 2026.

[Guilherme Cavalcanti, Global CFO at JBS]

Net sales reached a record of $24 billion for the second quarter. Adjusted EBITDA in IFRS totaled $1.4 billion, which represents a margin of 6% for the quarter. Adjusted EBITDA in U.S. GAAP totaled $1.3 billion, which represents a margin of 5.3% for the quarter. Adjusted operating income was $790 million with a margin of 3.3% in IFRS and $866 million in U.S. GAAP with a margin of 3.6%. The quarter's net loss was $102 million with a negative EPS of $0.10. In addition to the year-over-year decline in operating results, we also reported $319 million increase in net financial expenses. The main drivers were $172 million in premiums, interest, and costs related to the tender offer for the bond and the CRA, Brazilian local debenture, of which $147 million had a cash impact.

[Guilherme Cavalcanti, Global CFO at JBS]

It's worth remembering that this reflects the liability management we carried out in the first quarter, in which we issued $2.5 billion in bonds at more attractive rates and longer tenors. Mark-to-market of derivatives, net of exchange rate variation of $53 million. Monetary restatements and high interest expenses relate to increasing debt, which together amounted to approximately $120 million. Additionally, the net loss was also impacted by the final calculation of the bargain price gain of the acquisition of Mantiqueira Alimentos, with no cash impact, totaling $81 million, and antitrust settlements totaling $133 million. Excluding the non-recurring items adjusted, net income was $218 million, and the earnings per share was worth $0.20 for the quarter. Free cash flow.

[Guilherme Cavalcanti, Global CFO at JBS]

Free cash flow in the second quarter of 2026 improved by $185 million year-over-year, reaching a positive of $130 million compared to a cash consumption of $55 million in the second quarter 2025. This improvement was mainly driven by working capital, particularly the accounts receivable line reflecting higher receivable discounts and larger advanced payments from Chinese customers related to JBS Brazil's exports. The accounts payable line also increased, mainly driven by higher cattle prices and increased slaughter volumes, particularly in Brazil. This improvement was partially offset by a decline in adjusted EBITDA of $324 million, high net cash interest expenses of $129 million due to a higher concentration in the second quarter of interest related to the bonds issued in 2025, real appreciation that increased interest expenses in U.S. dollars of the Brazilian local debentures, and increasing total debt.

[Guilherme Cavalcanti, Global CFO at JBS]

Moreover, total capital expenditures increased by $163 million, of which $159 million was expansion CapEx. Finally, we had lower tax payments year-over-year of $135 million. Not considering guidance, but simply updating the cash flow breakeven EBITDA exercise for this year, we expect $5.1 billion in 2026, driven by capital expenditure of $2 billion in 2026, $400 million reduction versus the initial estimate. The expectation of -$350 million of working capital in 2026, a $500 million improvement versus last year, driven by higher receivables discounts as mentioned previously. Legal settlements of $100 million already realized in 2026. Biological assets of $850 million, flat versus 2025. Interest expenses of $1.3 billion, an increase of $150 million versus the initial estimates due to higher net debt. Leasing expenses flat at $500 million in 2026, an effective tax rate estimated at 25%. We continue to strengthen our liquidity position.

[Guilherme Cavalcanti, Global CFO at JBS]

In August, we announced an increase in our revolving credit line from $3.5 billion to $4.2 billion while reducing the owing cost of this line. Our cash liquidity, combined with the revolving credit facility, totaled approximately $7.7 billion. Our average debt term reached 15.3 years and an average cost of 5.7%. As we anticipated in our last conference call, due to the $1 billion dividend payment in June and the typical cash consumption of the first half of the year, our net leverage ended up the quarter at 3.1x. It's slightly above our long-term target of keeping net debt-to-EBITDA between 2x and 3x. It's important to highlight that we have no significant debt maturities for the next five years until 2031. Up to 2032, all the coupons are below the current treasury rates, and 35% of our gross debt is beyond 2050.

[Guilherme Cavalcanti, Global CFO at JBS]

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. As previously mentioned, we kindly request that each analyst limit themself to just one question. With your excuse, if you have any questions, please press the Raise Hand button. Thank you. Ladies and gentlemen, our first question comes from Thiago Bortoluci with Goldman Sachs. Mr. Bortoluci, you may go ahead.

[Thiago Bortoluci, Analyst at Goldman Sachs]

Yes. Hi. Thank you. Good morning, everyone.

[Wesley Batista Filho, CEO at JBS USA]

Good morning, Thiago.

[Thiago Bortoluci, Analyst at Goldman Sachs]

My question. Thank you, Wesley. I cannot start this call other than say congrats to Tomazoni on what has been a remarkable job not just in JBS, but also in the animal protein industry. Also wishing you, Wesley, continued success on your extended responsibilities in a chair that I think is sensitive not only to your investors, but also for the country. We will be looking forward to keeping up with the conversation. My question-

[Wesley Batista Filho, CEO at JBS USA]

Thanks, Thiago.

[Thiago Bortoluci, Analyst at Goldman Sachs]

On how you are seeing, Wesley, the state of the U.S. demand. Throughout your press release, I see comments of sticky demand on beef and poultry, but then on the other hand, I also see you mention that inflation is weighing down on pork. You had negative chicken sales growth on food service and retail, and some of your peers, like Tyson, Smithfield, and even Gruma, are cutting their guidance. When I look to the beef cutout, it seems it has reached somehow of a ceiling, not necessarily following the seasonality, and this is the reason for my question. What gives you comfort that demand remains healthy, and why should we think that spreads cannot erode more prominently going forward? This is the question. Thank you.

[Wesley Batista Filho, CEO at JBS USA]

Thiago, good morning. We still think that demand is very strong. What we have seen, and we can tell this by everything we look on protein trends in general, there is plenty of data in the market about that, and we can see that when we talk to our customers and what we see in the marketplace. We have found out, actually, and we used to think that proteins had more of a substitution effect, depending on prices. That was a big surprise of the inelasticity of protein demand when it comes to demand for beef, demand for pork, and demand for chicken not being so substituted to each other. We see that in demand a little bit. We see pork demand a little bit weaker than chicken and beef.

[Wesley Batista Filho, CEO at JBS USA]

Beef demand is very strong, and I actually think that, again, I keep on saying, a few years ago, a cutout about $300, I would have thought we would have a tough time achieving that, and we have reached way above that, almost into the $400. Look, I think demand is still pretty strong. What we are seeing is where the consumer is consuming that protein changing and going more into retail, more eating at home than away from home and food service. That is something we have seen. But again, for the time being, as we see the marketplace right now, we think the protein demands will continue to be strong.

[Thiago Bortoluci, Analyst at Goldman Sachs]

That is helpful, Wesley. Thanks very much.

[Wesley Batista Filho, CEO at JBS USA]

Thanks.

[Operator]

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

[Ricardo Alves, Analyst at Morgan Stanley]

Hello, everybody. Tomazoni, Guilherme, Wesley, congrats to both of you. Tomazoni on the great tenure, for sure, and Wesley on the CEO appointment. Looking forward to continue the interaction. This is great news for everybody. I have another one on the U.S., but specifically on the side. I think the question that we asked the last time. The spreads indicated much tougher second quarter versus the first quarter, but your numbers obviously showed actually a pretty significant improvement. So I wanted to explore more of that. I remember, Wesley, during the JBS Day, you spent quite some time talking about the in-house initiatives that you guys were looking at to improve the beef margin. So I am just wondering if there are more details that you can provide there, some of the initiatives that may have already kicked in and helped the quarter.

[Ricardo Alves, Analyst at Morgan Stanley]

And if you can specifically say what you are doing differently, that would be helpful. Or even if there were a couple of issues in the first quarter that were not present, if we are able to quantify that would be helpful, just so that we have a better base now to model the U.S. beef going forward. But it does seem like there has been a significant de-risking of a division that some people were really concerned about. Thank you very much.

[Wesley Batista Filho, CEO at JBS USA]

Ricardo, good morning. First, when we look at the comp, obviously last year, the same quarter we are comparing last year was a quarter where we had some extraordinaries. It was a tough quarter and had some other impacts like hedging that kind of mixed the number a little bit. And that's the second quarter of 2026 does not have anything that's very material. There is only minor things, so nothing related to hedging or anything like that. So the comparison is something to keep in mind. But even when you just compare the second quarter to the first quarter and just the business in general, it was relatively solid-performing compared to the performance given the market conditions. Look, we used to run our business in two different business units.

[Wesley Batista Filho, CEO at JBS USA]

The reason for that is when we acquired Swift and afterwards the Packerland acquisition, Packerland focused on a completely different type of cattle, different types of size of plants, different kind of cattle procurement. So we used to run those two business units very separate. The market has changed then, has changed quite a lot. And actually, that separation didn't make sense anymore. So we went ahead and put those two business units together and run nowadays the business unit as one. Look, there is on both sides of the business, there is strengths that one had and the other one didn't have. And we think that there is going to be a lot of synergies there, and a lot of them are on the sales side. We've done a lot of work over the past three, four years in terms of yields.

[Wesley Batista Filho, CEO at JBS USA]

There is always a little bit more, but most of the plan that I presented in New York was not related to yields, was related to being able to sell more ground beef, sell more value-added ground beef, sell more value-added items. You might have seen that we actually had announced the plant closure of Souderton, but now we have reversed and decided to run that as a value-added facility. Just shows the size of the demand that we have actually for value-added items and that we can continue to supply. So, a lot of that's going to be in terms of sales that we're going to get most of that difference. I actually had a breakdown there on the presentation that talked about that. But we are seeing that, and we are very confident. Actually, after we've done this integration, we're even more confident.

[Wesley Batista Filho, CEO at JBS USA]

The last thing I would say is most of that capture has not been seen yet, and we are just beginning. We've performed this result that we have here. But we are just getting started on that 3% improvement plan that we think we have.

[Ricardo Alves, Analyst at Morgan Stanley]

That's very clear. Thanks, Wesley.

[Operator]

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

[Leonardo Alencar, Analyst at XP Investimentos]

Good morning, everyone. Thanks for taking my question. Also congrats for your move, and also for you, Wesley. I've been enjoying discussing U.S. beef free fuel a lot. Sticking with that point, Wesley, just to understand it better. Mexican border is open now. It's expected to the first few cattle to arrive by the end of the month, right? It's just one port open. I wanted to hear from you, both from the volume that is expected, the pace of this volume growing. You said already that you're expecting even heavier cattle to come from Mexico. But if we talk about the pace of imports and connect that information with capacity utilization, would you say this opening is already relevant for any changes in strategies?

[Leonardo Alencar, Analyst at XP Investimentos]

Would you say, talking about this historical level of 1.5 million-2 million heads per year, would you expect that number to happen by the end of this year, only 2027? Or at least the volume will be enough for us to expect a higher capacity utilization. Just understand how you're seeing the pace of impact from the Mexican border opening that just happened, or if it is more like, since it opened, there is a ceiling for the cattle prices, and that is already helping margins, but then no direct, real impact yet. Just to get your ideas on that. Thank you.

[Wesley Batista Filho, CEO at JBS USA]

Leonardo, good morning. Yes, obviously, we are forecasting the market, and there is a lot of things that we do not know. But what we know is the first port is going to open is here on the 24th. That is the Port of Douglas, Arizona. That port by itself could probably handle 300,000, 400,000 head. That is just an estimate. It is difficult to predict. Something around 300,000, 400,000 is. So a third of what the usual amount that uses to come from Mexico can come from that port. But then, in the announcement that the U.S. made is they are going to analyze how that port opening in Douglas looks like and open two more ports in New Mexico, so Santa Teresa and Columbus. With those three ports open, they have right around over 1 million head capacity of flow capacity.

[Wesley Batista Filho, CEO at JBS USA]

Those three ports should be able to handle a big part, if not 100% of the normalization of the border. Again, these are all estimates that we have. We are looking at historical numbers and looking at numbers provided for the public. So, I think it is going to be possible within those three ports, if those three ports opening, to have a big part of what Mexico uses to trade flow to the U.S. Only two Mexican states got approval to export to the U.S., so Chihuahua and Sonora. Those two states are the biggest states. Both of them are over two-thirds of the Mexican flow of cattle to the U.S. The other thing that I would mention is, yes, we have information from the market that, obviously, that cattle use it to become very young to the U.S. and get backgrounded in the U.S.

[Wesley Batista Filho, CEO at JBS USA]

Once the border shut, and especially after two years of the border shutdown, that cattle had to be backgrounded somewhere else, and it was backgrounded in Mexico. So there is cattle that is in the process of being backgrounded or cattle that is backgrounded and just waiting to go to a feedlot and to get finished in Mexico. Obviously, there will be a part of feedlots in the U.S. actually buying that cattle and actually having that flow happen. But we do not see any reason why that would not happen. We also think that there is, because the 1.2 million head of cattle that came were just the calf crop that was destined to the U.S. On top of that, there is the cattle that is being fed. So we think that the cattle that is available it is bigger than the traditional 1.2 million.

[Wesley Batista Filho, CEO at JBS USA]

On one hand, you only have two states, so about two-thirds of the cattle being able to come to the U.S. On the other hand, you probably have a little bit of a bigger number of cattle in further phases of the cattle feeding and cattle raising process. Bottom line is, we think that because there is a lot of cattle that is already in further stages of cattle production and are heavier, that we are going to start seeing flows, obviously, end of this month and into the end of the year. And expecting that the two next ports of New Mexico open, we think beginning somewhere in the first quarter, we should start seeing cattle ready for slaughter that were born in Mexico.

[Wesley Batista Filho, CEO at JBS USA]

If all goes according to plan, we should go back to a much more normalized, if not all, most of the volume, or a big part of the volume that we had coming from Mexico and ready for slaughter in the second quarter.

[Leonardo Alencar, Analyst at XP Investimentos]

Okay. That is great information. Thank you, Wesley.

[Operator]

Our next question comes from Pooran Sharma with Stephens. Mr. Sharma, you may go ahead.

[Pooran Sharma, Analyst at Stephens]

Hey, good morning. Thanks for the question. Tomazoni, congrats on a successful tenure here. Wesley, congrats to you on the new role, and really looking forward to continuing to work together here. I really wanted to get your thoughts on U.S. beef. I know everybody's asking about Mexican border flow, so maybe I'll ask. Just updated thoughts on heifer retention, and can you maybe give us your thoughts, any updated thoughts on the timeline for fed cattle supplies to be rebuilt? What you saw in the report, was that a surprise, just given all the commentary with drought concerns regarding heifer retention in the U.S.?

[Wesley Batista Filho, CEO at JBS USA]

Pooran, good morning. So yeah, we obviously think that heifer retention and U.S. cattle herd rebuild is more timid than we expected and than obviously we wished for to get back to a more balanced stage of a situation in cattle supply. But at the end of the day, what really matters is, number one, it seems like it has, for now, it has stopped dropping, and that's a big deal. I think we're going to start seeing, we see signals that we might going to start going up.

[Wesley Batista Filho, CEO at JBS USA]

One thing that I'll just mention, and not to keep on going back to Mexico, but I think it's, again, I think it's super relevant, is that, for us to wait for a cattle herd rebuild that takes a little bit longer with another 1 million head, 1.5 million head, whatever that ends up coming from Mexico, is a much more different situation than without that. It gives us a lot more balance and a lot more structure for us to see and wait this cattle rebuild without the margins that we have seen in 2025, 2026. I think it probably brings us more to a little bit, if all goes according to plan, right, and all the ports open, we should go back to an equilibrium more like what we saw in 2024, maybe 2023, depending on the amount of cattle that come.

[Wesley Batista Filho, CEO at JBS USA]

I think it brings us a lot more, and it gives us more patience to see what's going to happen. Weather is a big deal. Weather is a big deal for sure, and we will have to see what comes out of that. One part of the number that doesn't get shown, Pooran, that I think it's relevant and we have anecdotally heard that it seems pretty promising, is the heifer retention and just cattle rebuild that we're seeing in Canada. We don't see obviously in those reports, but it's very relevant because it's a market that U.S. cattle goes to Canada, Canadian cattle goes to the U.S. So that's a big deal. Look, I think we should see, over the next years, couple of years, three years, starting to see much stronger rebuild.

[Wesley Batista Filho, CEO at JBS USA]

But again, it's a very different situation having the Mexican cattle and waiting for a more longer-term herd rebuild in the U.S. The other thing that I would just mention, not to take this too long here, but when you look at, there is two things that you need to look at, right? Heifer retention, but also the amount of cows that get processed to slaughter, right? And that number has been going down very fast as well. So if you look at the number compared to 2026 or 2022, we're processing half of the beef cows that we were processing in 2022. So I think that's relevant as well.

[Pooran Sharma, Analyst at Stephens]

Great. Thank you for the color.

[Operator]

Thank you. And our next question comes from Henrique Brustolin with Bradesco BBI. Mr. Brustolin, you may go ahead.

[Henrique Brustolin, Analyst at Bradesco BBI]

Hello, everyone. Thank you for taking my questions. Tomazoni and Wesley, congratulations on the transition, and wishing you both all the best. My question is on Seara. We see another strong quarter, right, but margins weakening relative to Q1. So I would just like to hear a little more, if you could qualify, where the sequential margin drop came from. If we're mostly talking about export markets or the domestic market, and what are the main trends you are seeing for both of these going into the second half of the year? Thank you very much.

[Gilberto Tomazoni, Global CEO at JBS]

Thank you, Henrique, for your question, and thank you for your words. Seara, let's say, if you compare the quarter, a little bit below, but it's still a healthy margin. 14%, 15% is really a healthy margin for this business. It is what we look for from this business. When you compare quarter to quarter, there is some difference. The main difference is pork. Pork price in domestic market was below. Some of the market chicken was below, the other would be higher. But look, in reality was many change across the one category to the other category. But if I make a summary, it was weaker in the domestic market.

[Henrique Brustolin, Analyst at Bradesco BBI]

Thank you very much, Tomazoni.

[Operator]

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

[Benjamin Theurer, Analyst at Barclays]

Yeah. Good morning, and I will just follow suit with those wishes to you, Tomazoni and Wesley. Looking forward to working more with you together. Just coming back to the U.S., and we haven't talked much about the pork business, so if you could maybe explain to us a little bit more what you are seeing within the pork. You have highlighted that you expected it to kind of gain a little bit of these replacement dynamics, but it hasn't turned out to be the case. So the demand picture for pork, so maybe just talk a little bit what you are seeing, what are the differences across the different cutouts and what has been a little bit of a headwind, if you want to call it this way.

[Benjamin Theurer, Analyst at Barclays]

Not major, but just a little bit obviously, in terms of profitability in pork as we look into where it stands right now, slightly below what usually the target is for you guys, closer to the very high end of the high single digit. Thank you.

[Wesley Batista Filho, CEO at JBS USA]

Ben, good morning. Pork has had a weaker demand than chicken and beef, for sure. Look, I think the biggest thing is, first of all, if you look at just the volume processed by the industry, it is kind of stable and the cutout is lower. That just tells you that demand seems weaker because it is the same amount of supply and lower price. We think that part of that comes from a little bit of a weakness in, not necessarily our prepared foods, but just in general, the market of prepared foods, just the demand that we are seeing from customers and internal as well, being a little bit more pressured, and consumers deciding to cut back maybe a little bit on those options. It is a quarter, so I would not say that that is a long-term trend that we should expect for the coming quarters and years.

[Wesley Batista Filho, CEO at JBS USA]

But that is something just to keep in mind that we have seen a little bit more weakness coming from processors that we sell to and just in our prepared foods business in general, a little bit weaker demand than usual.

[Benjamin Theurer, Analyst at Barclays]

All right. Thank you very much.

[Operator]

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

[Lucas Ferreira, Analyst at JPMorgan]

Hi. Good morning, everybody. First of all, congrats, Tomazoni, on the tenure, and Wesley, for the new position. Very well deserved. My question is on the U.S. poultry industry, which clearly is suffering from lower spreads, especially on the commodity part of the business on the big birds. My question to you guys is where you guys think we are in this cycle. If you already see some sort of a capacity reduction and volume production cuts in the industry, or when do you guys think we should see that happening, especially on, like I said, on the most commoditized part of the business and especially on the big bird. That's my question. Thank you very much.

[Gilberto Tomazoni, Global CEO at JBS]

Thank you, Lucas. In Q2, chicken supply grew 4.5% in the U.S., was above expectation of the industry. The growth was driven by the higher egg sets and chicken placement. The most significant was the better bird survival rates compared with last year, when respiratory disease and low pathogenicity avian influenza increased mortality. It means that the industry had taken historical rates of the survival rates, and based on that, placed the chickens for this year. And how the rate was better, we had more chicken. What do we expect from? We expect that the industry will be adjusted in the coming months. If you look for the historical, the industry is very disciplined in terms of to manage the supply-demand in this business.

[Lucas Ferreira, Analyst at JPMorgan]

Thanks, Tomazoni.

[Operator]

Our next question comes from Thiago Duarte with BTG. Mr. Duarte, you may go ahead.

[Thiago Duarte, Analyst at BTG]

Hello, guys. Good morning, everybody. Tomazoni, Wesley, same from me. Congrats on the transition and good luck to you both. I will stick to the chicken business, but in a different way. It is interesting to see how Pilgrim's has been suffering from this higher supply of chicken and translating into lower chicken prices, and hence into lower margins. While Seara doesn't seem to be suffering from the same phenomenon, you guys mentioned in the press release, the strong export markets and the Middle Eastern market in particular, sustaining good profitability in the chicken exports out of Brazil. My question to you is how you see those two moving parts unfolding in the coming months and quarters.

[Thiago Duarte, Analyst at BTG]

Whether do you see this chicken price pressure at some point spilling over into Seara's export business, or you expect the other way, you expect Pilgrim's margins to eventually improve before any erosion on the Seara business? How you expect this global chicken price environment to unfold into the two subsidiaries? That would be my question. Thank you.

[Gilberto Tomazoni, Global CEO at JBS]

Thiago, thank you for the question. I think you mentioned that as compared Pilgrim's and Seara, they are really different. Even both of them export, but they export different type of products. They compete in very few markets, mainly in Africa, with the like quarters. Otherwise, there is no competition on that. For Seara, export are very important. For Pilgrim's is less important. This come from this a little bit, the explanation about what the difference. In U.S., Pilgrim's has a diversified portfolio. I think you had the opportunity to hear from Fabio. But what is suffered in U.S. is the category of big bird. This is a commodity, that the product that we sell for processors. We increase too much the volume and the demand is not enough to meet the supply.

[Gilberto Tomazoni, Global CEO at JBS]

Because of it, this is the Pilgrim's, as a part of 25% of the business, is around 25% of the business is commodity. This part of the business suffer. Even little before we transformed two factories, from big bird to case ready. Because case ready demand is strong as well as I mentioned, when they talk about the U.S. market for beef. Consumers eat more at home. Because of that, the demand in retail for chicken increase. But of course, as we have a balanced portfolio, we suffer with the commodity. We see that this, I mentioned in the question that I answered before. If you look for the historical, normally, the industry, they have a very discipline in terms of supply and demand in U.S. for this last, I think is many years.

[Gilberto Tomazoni, Global CEO at JBS]

This we are expecting for the future because the additional supply we have in the market, it was mainly because of the historic. We planned it before the survival rates for chicken lower than was in the fact in the quarter is because of that is oversupply. When you go to Brazil, we see now that the less numbers of the Brazilian Association, that the production grow 5.6%. I think this export increased 20%, means that because of that, the availability in domestic market was 3.1%. In export market, sorry, in export market, demand remain health even at price below previous level. We believe that when you look ahead, it's difficult to predict or forecast what we have. I think just the number of the association means that they forecast for 2027. The production will be grow 2.8% and the export will be grow through.

[Gilberto Tomazoni, Global CEO at JBS]

The availability will be 2.7%. If that numbers is the normal numbers that the market could be accept because it's normal growth of the market. Means as we see that today, we have the level of placement of chicken is higher, but we see that the demand for export in Brazil is high, I believe that it will be possible to compensate, well, not all of them, but industries should be normal if you look for the price. Again, historic, you see that industry normally rebalance when we have this imbalance in the market. We see this quarter, the coming quarter, I think we are confident in terms of what market, what we'll be able to do with Seara. We see, it's something that we are not managed, something that we not control. We focus in our Q1 to control.

[Gilberto Tomazoni, Global CEO at JBS]

We control the mix, we control the price, we control the diversification of chains and what we are doing.

[Thiago Duarte, Analyst at BTG]

Thank you so much, Tomazoni.

[Operator]

And gentlemen, our next question comes from Mrs. Isabella Simonato with Bank of America. Mrs. Simonato, you may go ahead.

[Isabella Simonato, Analyst at Bank of America]

Thank you. Good morning, everyone. Echoing my colleagues, congratulations, Tomazoni. It's been a pleasure interacting with you in the last years. And Wesley, congratulations as well. We wish you all the best in the years ahead. My question is on Australia. I think we saw a very important growth in top line, which you mentioned about JBS Brazil, how China quota impacted exports. But I wanted to understand if we can assume this is the same reason why Australia's top line has been so strong this quarter. And on top of that, how can we think our performance ahead, not only in terms of revenues, but in terms of maybe the impact on the profitability of this division? Thank you.

[Gilberto Tomazoni, Global CEO at JBS]

Isabella, Australia is, we see that we are very excited with the business in Australia. We are in middle of the cycle. We see two, three years very positive for our Australia business. And all of the business in Australia performs well. When you look for the Australia results below the comparison of the same period last year, mainly because of the currency. But business and because of the climate, we dry a lot in Australia, right? And we are not able to bring the cow to the plants. And because of a little bit volume, we are able to produce more. And this is what we are seeing in the next quarter. And as you saw that with this joint venture we had done with Danantara, we're recreating a platform for grow in Australia, in Indonesia, and Southeast Asia. Australia is really well-

[Wesley Batista Filho, CEO at JBS USA]

Asia.

[Gilberto Tomazoni, Global CEO at JBS]

Asia. Sorry. Asia. In Australia is very well-positioned. It's close to this market, and we have a strong team. So look, we are bullish on Australia.

[Isabella Simonato, Analyst at Bank of America]

Thank you, Tomazoni.

[Operator]

Thank you. Our next question comes from Heather Jones, from Heather Jones. You may go ahead, Mrs. Jones. Mrs. Jones, if you are speaking, you may be muted. As we wait to get connected with Mrs. Jones, the next question comes from Gustavo Troyano from Itaú. Mr. Troyano, you may go ahead.

[Gustavo Troyano, Analyst at Itaú]

Hello, everyone. Thanks for taking my question. Congrats, Wesley, on your new position at the company and best of luck to you both and Tomazoni in your new role starting next year. My question actually relates to free cash flow going forward. A couple of months ago in the JBS Day presentation, it was mentioned that CapEx for 2026 should be slightly lower than previously stated in other conference calls, reaching something close to $2 billion. My question is on what to expect for 2027, and if you understand that the current cycle conditions at this point, especially with the Mexican border reopening, enables a re-acceleration of the expansion CapEx agenda for next year. If the JV in Australia changes your appetite towards accelerating the consolidated investment level going forward, since this new variable was added into the equation last week. Thank you very much.

[Guilherme Cavalcanti, Global CFO at JBS]

Thank you, Gustavo. Beginning with the joint venture, that's a way for us to continue with the agenda of growth, and accelerate this agenda in that region of the world without putting more pressure on the balance sheet. Bear in mind that Danantara is to build $800 million in first place, and then adding up to $2.5 billion in equity. After that, we'll start to raise that. Basically, there will be no pressure in terms of free cash flow from the investments in that region, given this capital structure that was designed. Coming back to JBS' consolidated free cash flow. Remember that last year we had a working capital consumption of $850 million, mainly due to increasing prices, which continue to happen this year. We see that this second quarter we had record revenues of $24 billion.

[Guilherme Cavalcanti, Global CFO at JBS]

Increasing prices, increasing revenues drags working capital. However, we had anticipation of Chinese, and we had receivables discount. With that's why we are forecasting that this year the working capital consumption will be $500 million better. For next year, again, because of the U.S. beef, if we don't have any inflationary pressure, we should be a good year for in terms of releasing working capital. Of course, that all depends on grain prices, cattle prices, and cutout prices.

[Guilherme Cavalcanti, Global CFO at JBS]

All the other lines are right in line, I think just interest expense is also in line what we've been presenting. This all depends now on each one estimates of EBITDA to plug into this equation.

[Gustavo Troyano, Analyst at Itaú]

Thanks. That was clear.

[Operator]

Thank you. For the next question, we will go back to Mrs. Heather Jones from Heather Jones. You may go ahead with your question, Mrs. Jones.

[Heather Jones, Analyst at Heather Jones]

Good morning. Thank you for the questions. My congratulations to Tomazoni and Wesley as well. My question is for Wesley on U.S. beef. In 2024, Douglas represented about 15% of imports from Mexico. I was just wondering if there's been some expansion there that would allow for greater flows through that port. If Mexico cattle flows return to levels approximately two-thirds of where they were prior to the closing, is that factor alone enough to return JBS' U.S. beef EBITDA levels to break even? Thank you.

[Wesley Batista Filho, CEO at JBS USA]

Heather, good morning. Yes, for sure. It wasn't as much as what I'm predicting. Obviously there were many options, right? There were options all over Texas. All of the options were open. Obviously if you have just Douglas opening, it's going to be more than if you have Douglas and plus five more ports, or I don't know how many there were back then. We expect obviously, especially for a while, it's going to be the only port, that's going to be more than usual. The way that we are looking at that volume, it's pretty simple. We look at the volume, how we estimate. We're basically looking at what was a high volume day back then. What was a very high day for Douglas? How much could Douglas handle?

[Wesley Batista Filho, CEO at JBS USA]

We're just multiplying that and trying to estimate how much that means in a year. That's how we're getting that number. Look, obviously we're dealing with a lot of assumptions here and things that we're going to know pretty soon if they're going to come up, turn out to be as expected or not. We're going to know pretty soon, actually, how this all is going to look like. But we think that with another, let's say just another 1 million head of cattle in the balance here. If we're right now at around between 2% and 1%-, we should be closer to a breakeven. I don't know if it's going to be enough for us to be at a breakeven or above breakeven. I'm pretty sure that 1 million head makes a big difference. It's the size of a two-shift plant, right?

[Wesley Batista Filho, CEO at JBS USA]

It is a big deal. We think that it is going to be much better. How much, if it is going to be above or right below the breakeven, I am not quite sure yet. It is going to be much better than where we are right now. That is what I mean. That is what I think.

[Heather Jones, Analyst at Heather Jones]

Wonderful. Thank you so much.

[Wesley Batista Filho, CEO at JBS USA]

Thank you.

[Operator]

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

[Matheus Enfeldt, Analyst at UBS]

Hi. Morning. Thank you for your time. Also wish both Tomazoni and Wesley success in the new positions. On my question, I know you touched a bit on this for Seara, but wanted to get a sense of the demand landscape in Brazil. Retailers are quite negative on the outlook for the second half of 2026 and early 2027. My question is, how are you seeing that? If you are already seeing some impact on demand weakness throughout the operations there, some shift from beef to pork to chicken to eggs. What is your perception around that and the risk on margins if we do see the consumer sort of downgrading their protein consumption? That is it. Thank you.

[Gilberto Tomazoni, Global CEO at JBS]

Thank you for the question, Matheus. I think we are not seeing, so far, weak demand for our products. We see strong demand for all of the proteins. The price of pork is a little bit depressing because the supply is higher than demand. But for chicken and the value added, our value-added business, the demand is strong. It is normal. We are not seeing depressing. We do not see that people downgrade in terms of one product to the other. We see that protein now is on the top of the priority for all of the population. Many reasons, you know that. Many reasons of that protein become very strong globally, in Brazil even. This GLP-1 in Brazil is spent a lot now with the new brands come to the market of this GLP-1. I believe the accessibility of them will be higher.

[Gilberto Tomazoni, Global CEO at JBS]

We are so positive on that. Of course, we see that we have, today, when you look for the market, as I mentioned, I answered Thiago before, there is a higher production of volume of chicken, and I think the industry should rebalance that. Even the domestic export of chickens is very high, and the global demand is high for chicken. But I think will be revealed the level of the chicken placed in Brazil. About the margin. Look, we are not giving forecast of that, but you can see that we have a strong gain of efficiency inside of the company, innovations and the new mix, and we are confident that the Seara will keep continue deliver good margins.

[Matheus Enfeldt, Analyst at UBS]

We are clear. Thank you.

[Operator]

Our next question comes from Renata Cabral with Citi. Ms. Cabral, you may go ahead.

[Renata Cabral, Analyst at Citi]

Thanks for taking my question. Good morning, everyone. Congratulations to Wesley for the appointment. Wishing you every success in the role. Tomazoni, congratulations on the extraordinary run as global CEO. My question is, I am going to shift to Brazil beef. The company had a strong quarter with record second quarter in EBITDA growth. The exports were clearly an important part of that performance, particularly, because of the purchase of China. Now we have July export data for the industry that gives a first indication of post-quota environment. My question for you is if you could help us to understand whether what you have seen so far in terms of exports volumes, for the company, and pricing is broadly in line with your expectations for this environment.

[Renata Cabral, Analyst at Citi]

Looking through the reminder of the year, the second half, how should we think about China demand and the ability to redirect volumes to other markets?

[Gilberto Tomazoni, Global CEO at JBS]

Thank you, Renata. I give you an overview about the beef in Brazil because it is very complex environment now with the China quotas. Based on the current expectation, Brazil should resume production for China in October, with the shipment restarting in November. Given the normal transit times, that commercial impact of those shipment will be reflected primarily in 2027. As always, we continue to manage our commercial strategy dynamically, optimization, production allocation across export market, domestic market in order to maximize the demand. There is not market that can accommodate the volume of 150,000 tons that China was exporting this period that will be restart China, and now we have this volume. The harvest of the animal has fallen 20% in the first month, but the price of the live animal did not fall, and should fall, because the animal is in the field.

[Gilberto Tomazoni, Global CEO at JBS]

I believe that the farmers have prepared for the end of the quota. The cattle, as I mentioned before, are there, and the price should fall, and then we recalibrate the cutout and the margin in this business. Because, of course, Brazil will be with this without quota of China and probably with the European restriction that we have. I believe that you need to reduce the number of cattle harvest in Brazil. For this period, we do not have the quota of China. When the quota of China restart again, October, that will be different. But so far, till October, we see that the price of cattle should fall, because the number of cattle will fall, harvest will fall.

[Gilberto Tomazoni, Global CEO at JBS]

I think Friboi has a unique conditions because we have brand, we have category management with retails that provide I think it is when you combine this category manage and the brand that we have, provide for us a very competitive advantage in the sector. So look, we see tough now the market for this period of the time, but we believe that the market here will be back on a healthy situation very soon, in the coming months.

[Renata Cabral, Analyst at Citi]

That is helpful context, Tomazoni. Thank you so much.

[Operator]

Our next question comes from Guilherme Palhares with Santander. Mr. Palhares, you may go ahead with your question.

[Guilherme Palhares, Analyst at Santander]

Good morning, Wesley, Tomazoni, Guilherme. Thank you for taking my question. Again, as everyone mentioned, congrats on the move, Wesley and Tomazoni. You will be truly missed as one of the key executives on the protein space, and not only for JBS but for the entire sector, as a great voice defending the sector globally. Wesley, I know that you have not taken office already, but you have been with JBS in any part of the organization, I think now, right? You have been all over the place in many divisions. You get a company now that it is a company listed in the U.S., a global player, which in the last couple of years changed out a bit of the strategy from M&A and integration as it was in the past, towards more of an organic growth value added.

[Guilherme Palhares, Analyst at Santander]

I want to take your thoughts, having experience in all divisions so far, seeing every operation. What do you think lies ahead for the organization? What is the agenda that you will try to pursue? What will be the JBS of Wesley Filho from now on?

[Wesley Batista Filho, CEO at JBS USA]

Guilherme, thanks for the question. The good thing about a transition that is internal, like what we are doing, is that there is a lot of continuity, right? When you get a new CEO that comes from the market or that is not on the day-to-day of the operations, and the guy is new and they have to come up with something completely new and something completely different sometimes, right? Just to maybe mark kind of what direction that they think is relevant then, and that is exactly not the case, right? Tomazoni and I have been working together for the past 10 years, a lot of what has been done within JBS for the past decade here, in a lot of ways, I have had the privilege to be part of that team that was doing that. It was alongside Tomazoni all the time here, doing that.

[Wesley Batista Filho, CEO at JBS USA]

You should not at all see JBS have a big change in the strategy, in the way we do things. Again, because we are just one team, and we have been working together for all of that time. There is a lot of alignment, in terms of leadership, and in this transition here. The other thing, too, I would not at all consider a JBS of Wesley or JBS. JBS has 280,000 team members and a very strong leadership team that I think, maybe I am biased, but I think it is the best in the industry. I think that is something else that I just mentioned. Now, in terms of where we are going to go, Guilherme, for sure, we have a lot of new avenues of growth that have been opened in the last few years that need to continue to mature and need to continue to evolve.

[Wesley Batista Filho, CEO at JBS USA]

We just announced, really just last week about this whole Danantara deal and all of the potential that we have in Southeast Asia. That is a market population of 700 million. If you consider the ASEAN block plus Oceania, Australia, and New Zealand, you are talking about 750 million people. So it is a huge market that we trade a little bit, but not very much. That opens a whole new avenue of growth for us. Australia is a huge platform for us to get started in that, a huge competitive advantage for us to grow in that area of the world. We have the project in Oman that continues to grow our business in the Middle East.

[Wesley Batista Filho, CEO at JBS USA]

Obviously, I am talking about new geographies, but even in our traditional geographies like the U.S. and continue to evolve our agenda on brands like what we are doing with Just Bare. In Brazil, a lot of the growth that we have done in Seara has been matured, but there is still some to go, and there is a lot for us to get done there. Our business in the U.K. is a business that gets talked relatively little about, but it is a great business, about a $5 billion business within Pilgrim's, that $5 billion, that we do not talk quite as often. Anyway, we are going to continue to grow on the avenues that we have been growing and you will see a lot of continuity and alignment, going forward. Thank you for your question, Guilherme.

[Guilherme Palhares, Analyst at Santander]

Thank you, Wesley.

[Operator]

Our next question comes from Ricardo Boiati with Safra. You may go ahead, Mr. Boiati. Mr. Boiati, it is possible you may be on mute if you are trying to speak.

[Ricardo Boiati, Analyst at Safra]

Hi, good morning, everyone. I would like to join the crowd here on the compliments. Tomazoni, congrats on a job well done. Thank you for the interactions during these years. It has been a pleasure, and hope to keep in touch. Wesley, congrats on the new role. Truly a well-deserved step, and wish you all the best on the new position. My question is on Australia. I would like to continue this conversation, Wesley, about the potential of Australia, as a production platform. Obviously, you are relevant there. But in terms of JBS's global platform, it is not that relevant. In the scope of the partnership with Danantara, and when you look at the country's potential there in terms of grain production, land availability, and so on, how big an opportunity Australia could be, especially for the production of chicken, in the future?

[Ricardo Boiati, Analyst at Safra]

Logistics-wise, it seems to be very competitive, right? To have Australia as a production platform in chicken. How do you think about this, and how is this being considered in the scope of the deal with Danantara? Thank you.

[Gilberto Tomazoni, Global CEO at JBS]

Thank you, Ricardo, for the question. I think it is important to discuss a bit what is the long-term strategy of this partnership. It is to expand our investment capacity in Southeast Asia, and when we preserve our operating model and give us a financial discipline and a full operating control. The priority in these first two years is to invest in the regions for Indonesia. Indonesia is the focus, and it is the main focus on us with this partnership is these first two years in Indonesia. After that, we can invest in Australia or other places in South Asia. But you mentioned that in Australia, we are a very diversified platform, just we missed the chicken. Of course, chicken is something that we have all the times considered the opportunity to enter this sector.

[Gilberto Tomazoni, Global CEO at JBS]

But we did not find the right conditions that we believe that is accretive for us to go in. But it is still open as an opportunity. We do not have a pipeline of investment or acquisition to announce. But in reality, we are looking for good opportunity that could be M&A or greenfield, and with a focus in Indonesia now. Why we are so confident? Because of the size of the market. We talked about 640 million population in this area. We cannot go alone in this, something that is safe. The way that we have organized this deal with the create conditions that we will not stress our balance sheet. I think it was, we have assessed additional capital. It is not changed our investment discipline. At the same time, we can catch the opportunity. There is this growth market, and then growth consumption of proteins.

[Gilberto Tomazoni, Global CEO at JBS]

And we have a strong team there. We didn't change the business. JBS remains fully responsibility for the manage the platform. And we will retain full operational control. I think this was a perfect movement in the strategic area for the increase the consumption of protein.

[Ricardo Boiati, Analyst at Safra]

Great, Tomazoni. Thank you very much.

[Operator]

Our next question comes from Carla Casella with JPMorgan. You may go ahead, Mrs. Casella. Mrs. Casella, if you are speaking, you may be on mute. Moving to our next question comes from Priya Ohri-Gupta with Barclays. Mrs. Ohri-Gupta, you may go ahead with your question.

[Analyst at Barclays]

Hi, good morning. This is Teresa on for Priya. Thank you for taking our questions. And congrats, Tomazoni and Wesley, on the transition to your new roles. We're really looking forward to work with you and wish you both the best. So our question is, will we continue to expect that net leverage will end the year at or below 3x? And in support of this, how should we think about the potential for any debt repayment over the rest of the year? Thank you.

[Guilherme Cavalcanti, Global CFO at JBS]

Hi, thank you, Teresa. Bear in mind that on a last 12-month rail, we are replacing very strong, especially from the chicken U.S., EBITDA of last year, to a more normalized margins for chicken U.S. this year. This statistical effect tends to pressure the leverage. However, second half of the year is where we generate the bulk of our free cash flow. One thing probably tends to balance the other. We are thinking that we will be finishing the year in the levels more or less the same as we got in the second quarter, slightly above 3x.

[Guilherme Cavalcanti, Global CFO at JBS]

As we generate free cash flow, and given we have no debt maturities in the short term, and because all of the coupons up to 2032 are below treasury the efficient debt to be repurchased, I would say probably the 2034, which have a 6.75% coupon, we should have still $300 million outstanding there, and some 2033s or 2035s. Let's see how the second half behaves, and then we can make a decision of repaying or not those more expensive debt.

[Analyst at Barclays]

Great. That is helpful. Thank you.

[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]

Before we close, I want to just to thank all of you for your kind words and congratulations today for me on behalf of Wesley. I also thank you for the attention, respect, and support you have showed me. Over these past eight years, our interactions have always been very productive. Your questions, your perspective, even your challenges have helped us improve the way we communicate, sharpen our focus, and become a better company. I have learned a great deal from all of you. Of course, I want to thank our entire team around the world. Everything we have accomplished over these years has been a team effort, and I am very proud of what we have built together.

[Gilberto Tomazoni, Global CEO at JBS]

We still have a few important months ahead of us, and my focus remains fully on leading JBS to continue to deliver strong results and working closely with Wesley to ensure a smooth transition, a successful transition. Thank you again for your trust, for your engagement, and your partnership over all these years. 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
• Wesley Batista Filho, CEO
• Guilherme Cavalcanti, Global CFO

Analysts

• Thiago Bortoluci, Analyst at Goldman Sachs
• Ricardo Alves, Analyst at Morgan Stanley
• Leonardo Alencar, Analyst at XP Investimentos
• Pooran Sharma, Analyst at Stephens
• Henrique Brustolin, Analyst at Bradesco BBI
• Benjamin Theurer, Analyst at Barclays
• Lucas Ferreira, Analyst at JPMorgan
• Thiago Duarte, Analyst at BTG
• Isabella Simonato, Analyst at Bank of America
• Gustavo Troyano, Analyst at Itaú
• Heather Jones, Analyst at Heather Jones
• Matheus Enfeldt, Analyst at UBS
• Renata Cabral, Analyst at Citi
• Guilherme Palhares, Analyst at Santander
• Ricardo Boiati, Analyst at Safra
• Analyst at Barclays