JBS N.V. (JBS) Earnings Call Transcript

Good morning, and welcome to JBS Second Quarter of 2026 Results Conference Call. [Operator Instructions] 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 forecast 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. Mr. Tomazoni, you may begin your presentation.

[Audio Gap] is leading the business and ensuring a smooth transition. We have been planning this succession carefully from a position of stress and nothing changed 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 in business. Our dual listing was a defining milestone in that journey, positioning the company for its next phase on 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 of underway leadership. Turning to our results. The second quarter once again demonstrated resilience of our global operating model in an environment that remains complex and volatile. Supply and demand dynamics vary across geographies and proteins, while currency movements, trade disruption and geopolitical events under far 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 USD 218 million. Adjusted EBITDA totaled USD 1.43 billion under IFRS with a margin of 6% and USD 1.3 billion under U.S. GAAP with a 5.3% margin. Compared to the first quarter, profitability already showed an improvement in the majority of our business units. Net income was significantly affected by nonrecurring items. While important to understand, this items 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 still operate in a challenging environment. While U.S. beef continues to operate in a challenging environment, we have reorganized our operating structure and are very confident 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 USD 2.5 billion equity 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 USD 5 billion to fund acquisition, greenfield projects and other growth opportunities across Indonesia and Southeast Asia. This creates a well-capitalized platform to accelerate our expansion in one of the fastest-growing protein consumption region in the world, while preserving the strength of JBS balance sheet and reinforce Australia as a strategic hub within our global operation. Importantly, it 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 fundamentally remain constructive, although conditions vary considerably across markets. Supply is limited in several regions. Demand remains resilient and our global footprint allow us to direct products to the market where returns are the strongest. JBS Brazil delivered a strong quarter, driven by export demand and disciplined commercial execution. Under IFRS, adjusted EBITDA totaled USD 269 million with a margin of 5.9%. Even with elevated cattle price, JBS reported its highest EBITDA for a second quarter. Our cattle availability has improved in Brazil. Our focus has been on maximize the value of every animal through our integrated commercial network. China remains an important destination and recent shift in trade flow reinforce the importance of maintaining balance exposure across export and domestic markets. By balancing volumes across China, other markets, 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 a long-standing customer relationship, we work alongside retailers and categories 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 foodservice, although industry supply expanded faster than demand. Even so, results improved from the first quarter as operating conditions normalized. Plant upgrades were completed and expanding assets continue to mature. At Seara, margin 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 market while converting volume growth into a sustainable profitability. Our priorities for the second half are clear: execution and cash generation. We expect leverage increase during the quarter and reducing remain a priority. We are focused on strong cash generation, disciplined working capital management and a prudent capital allocation. The environment remains dynamic, but our priorities are unchanged. We are focused on execution, cash generation and disciplined capital allocation. With a diversified portfolio, a strong market position and experienced team around the world, we believe we are well positioned to create value through the cycle. Thank you, and I will turn now the call over to Wesley.

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. 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 have done over the past 8 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. Our EBITDA margin improved from a negative 3.9% in the second quarter of last year to a negative 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 -- contribute progressively as they are fully implemented. At the same time, we are 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. The expected reopening of the 3 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'll 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. Our pork business once again demonstrated its ability to compete at the highest level. We'll 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'll now turn the call over to Guilherme.

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 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. 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. 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 a 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 related to increasing debt, which together amounted of 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 nonrecurring items, adjusted net income was $218 million, and the earnings per share was worth $0.20 for the quarter. Free cash flow. 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 of 2025. This improvement was mainly driven by working capital, particularly the accounts receivable line, reflecting higher receivables 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 increase in total debt. 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. Working capital expectation of negative $350 million of working capital in 2026, a $500 million improvement versus last year, driven by higher receivables discounts and 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 and effective tax rate estimated at 25%. We continue to strengthen our liquidity position. In August, we announced an increase in our revolving credit line from $3.5 billion to $4.2 billion, while reducing the all-in 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, slightly above our long-term target of keeping net debt to EBITDA between 2 and 3x. It's important to highlight that we have no significant debt maturities for the next 5 years until 2031. And up to 2032, all the coupons are below the current treasury rates and 35% of our gross debt is beyond 2050. With that in mind, I would like to open up for the question-and-answer session.

[Operator Instructions] Ladies and gentlemen, our first question comes from Thiago Bortoluci with Goldman Sachs.

I can't start this call other than saying congrats to Tomazoni on what has been a remarkable job, not just in JBS, but also on the animal protein industry. And 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, right? We'll be looking forward to keeping up with the conversation. My question on how you're seeing, Wesley, the state of the U.S. demand, right? Throughout your press release, I see comments of sticky demand on beef and poultry. But then on the other hand, I also see you mentioned that inflation is weighing down pork. You had negative chicken sales growth on foodservice and retail and some of your peers like Tyson, Smithfield and even Gruma are cutting their guidance, right? 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, right? What gives you comfort that demand remains healthy? And why should we think that spreads can't erode more prominently going forward? This is the question.

So 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 that -- and we didn't think it -- we used to think that proteins had more of a substitution effect depending on prices. And 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. And we see that in demand a little bit. We see pork demand a little bit weaker than chicken and beef. Beef demand is very strong. And actually think that again, I keep on saying a few years ago, I cut out about $300, I would have thought it was going to be a very tough -- we would have a tough time achieving that, and we reached way above that almost into the $400. So 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's something we've seen. But again, we -- for the time being, as we see the marketplace right now, we think the protein demand will continue to be strong.

And our next question comes from Mr. Ricardo Alves with Morgan Stanley.

Tomazoni, Guilherme, Wesley. Congrats to both of you, Tomazoni on the great tenure for sure and Wesley on the CEO appointment, looking forward to continued 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 a 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'm just wondering if there is more -- there are more details that you can provide there, some of the initiatives that may have already kicked in and helped the quarter. And if you can specifically say what you're doing differently, that would be helpful. Or even if there are a couple of issues in the first quarter that were not present, if we're able to quantify that, 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 derisking of a division that some people were overly concerned about.

Ricardo, so 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's only minor things, and 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 performance given the market conditions. So look, we used to run our business in 2 different business units. And 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. And so we used to run those 2 business units very separate. And the market has changed and has changed quite a lot. And actually, that separation didn't make sense anymore. So we went ahead and put those 2 business units together and run nowadays the business unit as one. And 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 3, 4 years in terms of yields. 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 on -- 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. The last thing I would say is most of that capture has not been seen yet, and we are just beginning. So we performed this result that we had here. But this is without the -- we are just getting started on that 3% improvement plan that we think we have.

And our next question comes from Leonardo Alencar with XP Investimentos.

Congrats for your move and also for you, Wesley. I've been enjoying discussing USDA officials a lot. And sticking with that point, Wesley, just to understand it better. So Mexican border is open now, well, it's expected to the first few cattle to arrive by the end of the month, right? And 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? Would you say talking about the 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 to understand how you're seeing the pace of impact from the Mexican border opening that just happened? Or if it's more like since it opened, there's a on the cattle prices and that is already helping margins, but then no direct -- not real impact yet. Just to get your ideas on that.

Leonardo. So yes, obviously, we're forecasting the market, and there's a lot of things that we don't know. But what we know is the first port is going to open is here on the 24th. That's the Port of Douglas, Arizona. That port by itself could probably handle 300,000, 400,000 heads. It's just an estimate. It's difficult to predict. Something around 300,000, 400,000. So 1/3 of what the usual amount they used to come from Mexico can come from that port. But then in the announcement that the USDA made is they're going to analyze how that port opening in Douglas looks like and open 2 more ports in New Mexico, so Santa Teresa and Columbus. So with those 3 ports open, we are going to have -- they have right around over 1 million head capacity of flow capacity. So those 3 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, right? We're looking at historical numbers and looking at numbers provided in the public -- for the public. So it's -- I think it's going to be possible within those 3 ports, if those 3 ports opening to have a big part of what Mexico used to trade flow to the U.S. Only 2 states, Mexican states got approval to export to the U.S., so Chihuahua and Sonora. Those 2 states are the biggest states. Both of them are over 2/3 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 used to come very young to the U.S. and get backgrounded in the U.S. Once the border shut and especially after 2 years of the border shutdown, that cattle had to be backgrounded somewhere else, and it was backgrounded in Mexico. So there is cattle that's in the process of being backgrounded or cattle that's backgrounded and just waiting to go to a feedlot and to get finished in Mexico. So obviously, there will be a part of feedlots in the U.S. actually buying that cattle and actually having that flow happen, but we don't see any reason why that wouldn't happen. We also think that there is -- because the 1.2 million head of cattle that came were just the cattle crop that was destined to the U.S. On top of that, there is the cattle that's being fed. So we think that the cattle that's available is bigger than the traditional 1.2 million. So on one hand, you only have 2 states, so about 2/3 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. So bottom line is we think that because there is a lot of cattle that's already in further stages of cattle production and are heavier that we're going to start seeing flows, obviously, end of this month and into the end of the year and expecting that the 2 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. And 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 for -- coming from Mexico and into ready for slaughter in the second quarter.

And our next question comes from Pooran Sharma with Stephens.

And Tomazoni, congrats on a successful tenure here. And 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. And I know everybody is asking about Mexican border flow. So maybe I'll ask just updated thoughts on heifer retention? And can you maybe give us the -- your thoughts -- any updated thoughts on the time line for fed cattle supplies to be rebuilt? Was the -- 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.?

So yes, we obviously think that heifer retention and U.S. cattle herd rebuild is more timid than we expected than obviously we wished for to get back to a more balanced stage in this -- 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. And I think we're going to start seeing -- we see signals that we might going to start going up. One thing that I'll just mention and not to keep on going back to Mexico and -- but it's -- 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. So it gives us a lot more a lot more balanced 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 comes. So 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'll have to see what comes out of that. One part of the number that doesn't get shown, Pooran, that I think is relevant and it's -- 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 that -- in those reports, but it's very relevant because it's an open -- it's a market that U.S. cattle goes to Canada, Canadian cattle goes to the U.S. So that's a big deal. And look, I think we should see over the next years, a couple of years, 3 years, starting to see much stronger rebuild. 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 2 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 have -- we're processing half of the beef cows that we were processing in 2022. So it's -- I think that's relevant as well.

And our next question comes from Henrique Brustolin with Bradesco BBI.

Tomazoni, 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 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, Ricardo, for your question, and thank you for your words. Seara, let's say, you still -- if you compare the quarter a bit below, but it's still a healthy margin, 14%, 15% is really a healthy margin for this business is what we look for this business. When you compare quarter-to-quarter, there is some difference. The main difference is a pork. Pork price in domestic market was below. Some of the market ticket was below, the other will 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.

And our next question comes from Benjamin Theurer with Barclays.

I'll 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 us a little bit more what you're seeing within the pork. You've highlighted that you expected it to kind of like gain a little bit of these like 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're seeing? What are the differences across the different cutouts and what's been a little bit of a headwind, if you want to call it this way, not major, just a little bit, obviously, in terms of profitability in pork as we look into where it is -- 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.

Ben. So pork has had a weaker demand than chicken and beef for sure. And look, I think the biggest thing is, first of all, if you look at just the volume processed by the industry, it's kind of stable and the cutout is lower. So that just tells you that demand seems weaker because it's the same amount of supply and lower price. So -- and we think that part of that comes from a little bit of a weakness in the prepared -- not necessarily our prepared foods, but just in general, the market of prepared foods, just the demand that we're 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's a quarter. So I wouldn't say that, that's a long-term trend that we should expect for the coming quarters and years. But that's something just to keep in mind that we've 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.

Your next question comes from Lucas Ferreira with JPMorgan.

So first of all, congrats, Tomazoni on the tenure and Wesley for the new position. So 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. So my question to you guys is where we think -- where you guys think we are in the cycle. So if you already see some sort of capacity reduction and volume production cuts in the industry? When do you guys think we should see that happening, especially on, like I said, on the most commoditized part of the business, especially on the big bird. So that's my question.

Thank you, Lucas. In Q2, chicken supply grew 4.5% in U.S. was above expectation, above expectation of the industry because the growth was driven by the higher egg sets and chicken placement, but the most significant was the better bird survival rates compared with last year when respiratory disease and low path avian influenza risk increase in the mortality means that the industry taken historical rates of the survival rates and based on that, placed the chicken 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. It's -- if you look for the historical, the industry is very disciplined in terms of to manage the supply-demand in this business.

And our next question comes from Thiago Duarte with BTG.

Tomazoni and Wesley, same from me. Congrats on the transition and good luck to you both. Yes. So I'll stick to the chicken business, but in a different way. It's 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. And while Seara doesn't seem to be suffering from the same phenomenon, and you guys mentioned in the press release, strong export markets and the Middle Eastern market, in particular, sustaining good profitability in the chicken exports out of Brazil. So my question to you is how you see those 2 moving parts unfolding in the coming months and quarters, 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. So how do you expect this global chicken price environment to unfold into the 2 subsidiaries? That would be my question.

Thiago, thank you for the question. And I think it's -- you mentioned that as compare 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 leg quarters. Otherwise, there is no competition than that. And for Seara, exports are very important. For Pilgrim's is less important. That show this comes from this a little bit the explanation about what is different. In U.S., Pilgrim's has a diversified portfolio. I think you had the opportunity to hear from Fabio. But what is suffering in the U.S. is the category of big bird this is a commodity that the product that we sell for processors. We increased too much the volume and the demand is not enough to met the supply. And because of this is -- and Pilgrim's has a part of 25% of the business is around 25% of the business is commodity. And this part of the business even before we transformed 2 factories and from big bird to case-ready because case-ready demand is strong, as mentioned, when they talk about the U.S. market for beef, consumers eat more at home. And then because of that, the demand in retail for chicken increased. But of course, as we have a balanced portfolio, we suffer with the commodity. And we see that this -- I mentioned the question that I answered before. If you look for the historical, normally, the industry, they have a very disciplined in terms of supply and demand in the U.S. for this last, I think it's many years. And this we are expecting for the future because the additional supply we have in the market, it was because -- mainly because of the historic we [indiscernible] before the survival rates for chicken lower than it was in the fact in the quarter because of that is oversupply. When you go to Brazil, we see now that the last numbers of the Brazilian Association that the production grew 5.6%. I think this -- but export increased 20% means that because of that, the availability in domestic market was 3.1%. In the export market, demand remained healthy even at price below previous level. We believe that when you look ahead, I can -- 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 grown 2.8% and the export will be grown through the availability will be 2.7%. If that number is the normal numbers that the market could accept because it's normal growth of the market. Means 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. And I believe that it will be possible to compensate, not all of them, but industry should be normally, if you look for the -- again, historic, you'll see that industrial normally rebalance when we have this disbalance in the market. We see this quarter, the next -- the coming quarter, we will be -- I think we are confident in terms of what market -- what we will be able to do with Seara. And see, it's something that we are not managed, something that we not control. We focus on our what we control. We control the mix. We control the price, we control the diversification of change and what we are doing.