LatAm Agri & Foods "Weekly news recap: JBS, SMTO, RAIZ, Brazil Beef, Bra..."

Research evidence excerpt

LatAm Agri & Foods "Weekly news recap: JBS, SMTO, RAIZ, Brazil Beef, Bra..."

sales in 3Q26-4Q26, when the company expects prices to recover from

current levels.

Costs outlook: Management expects a ~7-10% unit cost reduction next

cycle (vs. before Middle East conflict 10–15% expectation) due to higher

input costs, with fertilizers accounting for ~R$250-350mn of capex of

which ~60% is already secured. CFO Vicchiato also stated the new baseline

for maintenance capex R$2bn given the addition of 8k ha from Santa Elisa

plant.

El Niño concerns: The company highlighted significant uncertainty around

El Niño, with potential for heavy rainfall disrupting harvesting, which could

negatively impact sugar output. The company is accelerating crushing to

mitigate risks, while noting that adverse weather in Brazil and lower

output in other key producing regions could tighten global supply.

Capital allocation strategy: Management reinforced a conservative capital

allocation approach, ruling out near-term M&As given high cost of capital

in Brazil, weak S&E cycle, and ongoing corn ethanol investments,

prioritizing operational efficiency over expansion. The company didn’t

renew the buyback program.

Operational strategy: The company stated that with Santa Elisa ramp-up

in 2027, sugarcane crushing should reach 24.5-25mn tons. Additionally,

CFO Vicchiato said that the company will prioritize margins optimization

using own sugarcane in better soil and closer to the mills over exposure to

higher-cost third-party sugarcane.

Corn ethanol outlook: Management anticipates slightly lower corn results

due to a -5% YoY drop in production, at ~R$300-400mn EBITDA depending on

prices, while maintaining flexibility to defer ~60% of sales to later in the

crop year.