JBS may leave Argentina due to government export restrictions, large inflation-related salary increases, CEO says; company has already closed five of its six slaughterhouses in country

Nevin Barich

LOS ANGELES , March 22, 2012 (Industry Intelligence) – JBS SA CEO Wesley Batista said the company may leave Argentina due to a difficult business environment including government export restrictions and large inflation-related salary increases, MarketWatch reported March 22.

Swift, JBS’ Argentinean subsidiary, has already closed five of its six slaughterhouses in Argentina, Batista said, with the most recent closure occurring in February. Argentina now accounts for less than 1% of total revenue generated by JBS.

The remaining slaughterhouse is located in Rosario, which is the largest city in the Argentinean province of Santa Fe. It was the largest of JBS’ Argentinean slaughterhouses. In addition, Swift has a meat-processing plant in Argentina.

Even closing a plant in Argentina is expensive due to the required severance payments.

JBS Mercosul’s division, which includes Argentina, Brazil, Paraguay and Uruguay, reported fourth-quarter EBITDA of 408 million Brazilian reais (US$223 million), 10% less than the same period the previous year. During the fourth quarter, sales fell 2.7% to 3.8 billion Brazilian reais.

During the last six months of 2011, JBS closed leather and meat factories spread throughout Mercosul in an attempt to improve future efficiency.

In 2011, the broader Argentinean broader beef sector underwent a 9% decrease in terms of the number of animals that were slaughtered because ranchers were attempting to rebuild their cattle herds following a 2009 drought. Argentina’s beef exports fell as a result.

Batista said the company was hoping that its one remaining Argentinean slaughterhouse would break eve  and return to profitability in "a year or two or three." He added that the company was not going to allow itself to continue losing money in Argentina.

The primary source of this article is MarketWatch, New York, New York, on March 22, 2012.

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