JBS (JBSAY) 6-K Statements of financial position

Exhibit 99.1

JBS S.A.

Condensed interim financial statements and the report on review of the interim financial information

As of September 30, 2023 and 2022

 

Statements of financial position

In thousands of Brazilian Reais - R$

		Company				Consolidated
	Note	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents	4		13,112,607		2,096,334		26,789,824		13,182,158
Margin cash	4		68,311		80,434		935,258		679,391
Trade accounts receivable	5		2,343,288		4,380,011		16,454,419		20,234,895
Inventories	6		4,051,009		4,633,201		26,557,280		28,142,094
Biological assets	7		—		—		8,406,750		9,710,693
Recoverable taxes	8		1,395,218		1,473,985		4,463,272		5,330,928
Derivative assets			1,181		—		775,316		442,929
Other current assets			375,050		197,463		1,867,069		1,667,982
TOTAL CURRENT ASSETS			21,346,664		12,861,428		86,249,188		79,391,070
NON-CURRENT ASSETS
Recoverable taxes	8		5,350,520		6,128,844		8,122,149		9,165,569
Biological assets	7		—		—		2,679,843		2,619,066
Related party receivables	9		1,112,361		1,103,125		976,466		951,021
Deferred income taxes	10		—		—		4,052,949		3,161,300
Derivative assets			375,315		98,134		375,315		123,215
Other non-current assets			214,632		226,679		1,187,442		1,118,115
			7,052,828		7,556,782		17,394,164		17,138,286
Investments in equity-accounted investees, associates and joint venture	11		41,112,369		55,399,509		308,061		294,837
Property, plant and equipment	12		13,316,688		13,027,863		62,583,352		62,170,792
Right of use assets	13		81,078		54,664		8,663,251		8,374,892
Intangible assets	14		37,813		31,021		9,605,592		10,328,389
Goodwill	15		9,085,970		9,085,970		29,710,948		30,412,362
TOTAL NON-CURRENT ASSETS			70,686,746		85,155,809		128,265,368		128,719,558
TOTAL ASSETS			92,033,410		98,017,237		214,514,556		208,110,628

The accompanying notes are an integral part of these condensed interim financial statements.

 

2

Statements of financial position

In thousands of Brazilian Reais - R$

		Company						Consolidated
	Note	September 30, 2023			December 31, 2022			September 30, 2023			December 31, 2022
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Trade accounts payable	16		3,598,691			4,297,855			25,165,682			31,009,515
Supply chain finance	16		1,298,007			1,263,694			3,577,372			3,071,099
Loans and financing	17		6,565,805			4,999,929			9,239,304			8,228,557
Income taxes	18		—			—			158,305			475,174
Other taxes payable	18		210,270			281,532			674,483			725,721
Payroll and social charges	19		1,126,789			1,083,670			6,038,359			6,251,132
Lease liabilities	13		47,040			27,675			1,746,548			1,788,353
Dividends payable			161			135			2,484			183
Provisions for legal proceedings	20		—			—			631,659			909,132
Derivative liabilities			255,882			278,227			1,019,384			559,536
Other current liabilities			1,189,086			954,745			2,599,660			2,141,820
TOTAL CURRENT LIABILITIES			14,291,731			13,187,462			50,853,240			55,160,222
NON-CURRENT LIABILITIES
Loans and financing	17		13,723,611			10,699,653			98,874,394			84,125,504
Income and other taxes payable	18		248,520			313,170			527,174			606,041
Payroll and social charges	19		2,001,654			1,859,444			2,414,136			2,378,970
Lease liabilities	13		46,323			35,023			7,551,213			7,195,655
Deferred income taxes	10		3,145,763			2,995,114			6,673,968			7,112,102
Provisions for legal proceedings	20		560,442			478,185			1,574,078			1,321,380
Related party payables	9		15,819,561			22,066,929			—			—
Other non-current liabilities			223,348			38,091			528,053			401,823
TOTAL NON-CURRENT LIABILITIES			35,769,222			38,485,609			118,143,016			103,141,475
EQUITY	21
Share capital - common shares			23,576,206			23,576,206			23,576,206			23,576,206
Capital reserve			(781,644	)		(807,955	)		(781,644	)		(807,955	)
Other reserves			31,975			36,497			31,975			36,497
Profit reserves			18,653,056			18,653,056			18,653,056			18,653,056
Accumulated other comprehensive income			3,850,035			4,886,362			3,850,035			4,886,362
Accumulated losses			(3,357,171	)		—			(3,357,171	)		—
Attributable to company shareholders			41,972,457			46,344,166			41,972,457			46,344,166
Attributable to non-controlling interest			—			—			3,545,843			3,464,765
TOTAL EQUITY			41,972,457			46,344,166			45,518,300			49,808,931
TOTAL LIABILITIES AND EQUITY			92,033,410			98,017,237			214,514,556			208,110,628

The accompanying notes are an integral part of these condensed interim financial statements.

3

Statements of income for the nine month period ended September 30, 2023 and 2022

In thousands of Brazilian Reais - R$

		Company						Consolidated
	Note	2023			2022			2023			2022
NET REVENUE	22		37,643,281			41,832,940			267,475,824			281,986,115
Cost of sales	26		(32,102,908	)		(35,246,695	)		(238,921,578	)		(233,195,937	)
GROSS PROFIT			5,540,373			6,586,245			28,554,246			48,790,178
Selling expenses	26		(2,933,304	)		(2,854,595	)		(16,963,953	)		(17,872,513	)
General and administrative expenses	26		(1,905,327	)		(2,369,377	)		(8,107,110	)		(9,025,962	)
Other incomes			10,561			2,217			588,084			487,603
Other expenses			(46,074	)		(95,138	)		(545,174	)		(280,679	)
NET OPERATING EXPENSES			(4,874,144	)		(5,316,893	)		(25,028,153	)		(26,691,551	)
OPERATING PROFIT			666,229			1,269,352			3,526,093			22,098,627
Finance income	23		1,140,412			2,449,109			1,719,701			3,870,347
Finance expense	23		(3,340,821	)		(4,119,470	)		(6,780,820	)		(8,088,931	)
FINANCE INCOME (EXPENSE)			(2,200,409	)		(1,670,361	)		(5,061,119	)		(4,218,584	)
Share of profit of equity-accounted investees, net of tax	11		562,736			13,948,627			49,087			50,828
PROFIT (LOSS) BEFORE TAXES			(971,444	)		13,547,618			(1,485,939	)		17,930,871
Current income taxes	10		(21,391	)		(504,582	)		(671,596	)		(4,895,587	)
Deferred income taxes	10		(150,741	)		65,110			1,220,473			951,545
TOTAL INCOME TAXES			(172,132	)		(439,472	)		548,877			(3,944,042	)
NET INCOME (LOSS)			(1,143,576	)		13,108,146			(937,062	)		13,986,829
ATTRIBUTABLE TO:
Company shareholders			(1,143,576	)		13,108,146			(1,143,576	)		13,108,146
Non-controlling interest			—			—			206,514			878,683
			(1,143,576	)		13,108,146			(937,062	)		13,986,829
Basic and diluted earnings (losses) per share - common shares (R$)	24		(0.52	)		5.87			(0.52	)		5.87

The accompanying notes are an integral part of these condensed interim financial statements.

4

Statements of income for the three month period ended September 30, 2023 and 2022

In thousands of Brazilian Reais - R$

		Company						Consolidated
	Note	2023			2022			2023			2022
NET REVENUE	22		13,378,517			15,242,067			91,409,464			98,928,157
Cost of sales	26		(11,293,389	)		(12,645,278	)		(80,356,865	)		(82,692,148	)
GROSS PROFIT			2,085,128			2,596,789			11,052,599			16,236,009
Selling expenses	26		(1,068,866	)		(1,172,659	)		(5,509,930	)		(6,408,938	)
General and administrative expenses	26		(761,135	)		(793,967	)		(2,906,942	)		(3,076,259	)
Other incomes			3,413			428			87,289			328,444
Other expenses			(30,352	)		(4,462	)		(112,504	)		(86,530	)
NET OPERATING EXPENSES			(1,856,940	)		(1,970,660	)		(8,442,087	)		(9,243,283	)
OPERATING PROFIT			228,188			626,129			2,610,512			6,992,726
Finance income	23		323,736			114,148			602,145			642,765
Finance expense	23		(1,154,294	)		(1,037,606	)		(2,441,283	)		(2,139,063	)
FINANCE INCOME (EXPENSE)			(830,558	)		(923,458	)		(1,839,138	)		(1,496,298	)
Share of profit of equity-accounted investees, net of tax			1,215,064			4,335,855			19,661			14,801
PROFIT BEFORE TAXES			612,694			4,038,526			791,035			5,511,229
Current income taxes	10		(138,192	)		(97,304	)		(478,625	)		(1,316,906	)
Deferred income taxes	10		98,149			72,386			378,196			69,613
TOTAL INCOME TAXES			(40,043	)		(24,918	)		(100,429	)		(1,247,293	)
NET INCOME			572,651			4,013,608			690,606			4,263,936
ATTRIBUTABLE TO:
Company shareholders			572,651			4,013,608			572,651			4,013,608
Non-controlling interest			—			—			117,955			250,328
			572,651			4,013,608			690,606			4,263,936
Basic and diluted earnings (loss) per share - common shares (R$)	24		0.26			1.81			0.26			1.81

The accompanying notes are an integral part of these condensed interim financial statements.

5

Statements of comprehensive income for the nine month period ended September 30, 2023 and 2022

In thousands of Brazilian Reais - R$

		Company						Consolidated
	Note	2023			2022			2023			2022
Net income (loss)			(1,143,576	)		13,108,146			(937,062	)		13,986,829
Other comprehensive income
Items that are or may be subsequently reclassified to statement of income:
Loss on foreign currency translation adjustments			(1,627,483	)		(7,515,417	)		(1,740,085	)		(8,121,643	)
Gain on net investment in foreign operations			589,207			283,784			589,207			283,784
Gain (losses) on cash flow hedge	27 c3.1		15,306			(415,468	)		15,306			(415,468	)
Deferred income tax on cash flow hedge	27 c3.1		(5,204	)		141,259			(5,204	)		141,259
Valuation adjustments to equity in subsidiaries			(38,328	)		(28,608	)		(38,328	)		(28,608	)
Items that will not be subsequently reclassified to statement of income:
Gain associated with pension and other postretirement benefit obligations			42,152			79,426			51,100			99,826
Income tax on gain associated with pension and other postretirement benefit obligations			(11,977	)		(21,516	)		(14,784	)		(26,478	)
Total other comprehensive loss			(1,036,327	)		(7,476,540	)		(1,142,788	)		(8,067,328	)
Comprehensive income (loss)			(2,179,903	)		5,631,606			(2,079,850	)		5,919,501
Total comprehensive income (loss) attributable to:
Company shareholders			(2,179,903	)		5,631,606			(2,179,903	)		5,631,606
Non-controlling interest			—			—			100,053			287,895
			(2,179,903	)		5,631,606			(2,079,850	)		5,919,501

The accompanying notes are an integral part of these condensed interim financial statements.

6

Statement of comprehensive income for the three month period ended September 30, 2023 and 2022

In thousands of Brazilian Reais - R$

		Company						Consolidated
	Note	2023			2022			2023			2022
Net income			572,651			4,013,608			690,606			4,263,936
Other comprehensive income (loss)
Items that are or may be subsequently reclassified to profit or loss:
Loss on foreign currency translation adjustments			(621,996	)		(2,048,345	)		(587,072	)		(2,255,043	)
Loss on net investment in foreign operations			(336,229	)		(429,927	)		(336,229	)		(429,927	)
Gain on cash flow hedge	27 c3.1		30,284			55,236			30,284			55,236
Deferred income tax on cash flow hedge	27 c3.1		(10,297	)		(18,777	)		(10,297	)		(18,777	)
Valuation adjustments to equity in subsidiaries			(17,605	)		(35,623	)		(17,605	)		(35,623	)
Items that will not be subsequently reclassified to profit or loss:
Gain (loss) associated with pension and other postretirement benefit obligations			(3,368	)		11,759			(3,676	)		15,103
Income tax on gain associated with pension and other postretirement benefit obligations			(6,339	)		(3,507	)		(6,339	)		(4,242	)
Total other comprehensive loss			(965,550	)		(2,469,184	)		(930,934	)		(2,673,273	)
Comprehensive income (loss)			(392,899	)		1,544,424			(240,328	)		1,590,663
Total comprehensive income (loss) attributable to:
Company shareholders			(392,899	)		1,544,424			(392,899	)		1,544,424
Non-controlling interest			—			—			152,571			46,239
			(392,899	)		1,544,424			(240,328	)		1,590,663

The accompanying notes are an integral part of these condensed interim financial statements.

 

7

Statements of changes in equity for the nine month period ended September 30, 2023 and 2022

In thousands of Brazilian Reais - R$

				Capital reserves										Profit reserves												Other comprehensive income
	Note	Share capital		Premium on issue of shares		Capital transaction (1)			Stock options		Other reserves			Legal		Investments statutory			Treasury shares			Dividends		Tax incentive		VAE			FCTA			Retained (loss) earnings			Total			Non-controlling interest			Total equity
BALANCE ON DECEMBER 31, 2021			23,576,206		211,879		(628,199	)		30,464		43,957			2,028,293		11,457,300			(3,037,838	)		—		—		334,646			10,102,584			—			44,119,292			3,677,428			47,796,720
Net income			—		—		—			—		—			—		—			—			—		—		—			—			13,108,146			13,108,146			878,683			13,986,829
Foreign currency translation adjustments			—		—		—			—		—			—		—			—			—		—		—			(7,515,417	)		—			(7,515,417	)		(606,226	)		(8,121,643	)
Gain on net investment in foreign operations (2)			—		—		—			—		—			—		—			—			—		—		—			283,784			—			283,784			—			283,784
Losses on cash flow hedge, net of tax			—		—		—			—		—			—		—			—			—		—		(274,209	)		—			—			(274,209	)		—			(274,209	)
Valuation adjustments to equity in subsidiaries			—		—		—			—		—			—		—			—			—		—		(28,608	)		—			—			(28,608	)		—			(28,608	)
Losses associated with pension and other postretirement benefit obligations, net of tax			—		—		—			—		—			—		—			—			—		—		57,910			—			—			57,910			15,438			73,348
Total comprehensive income			—		—		—			—		—			—		—			—			—		—		(244,907	)		(7,231,633	)		13,108,146			5,631,606			287,895			5,919,501
Purchase of treasury shares			—		—		—			—		—			—		—			(3,648,028	)		—		—		—			—			—			(3,648,028	)		—			(3,648,028	)
Sales of treasury shares			—		—		—			—		—			—		(9,931	)		834,181			—		—		—			—			—			824,250			—			824,250
Cancellation of treasury shares			—		—		—			—		—			—		(5,851,685	)		5,851,685			—		—		—			—			—			—			—			—
Share-based compensation			—		—		26,993			—		—			—		—			—			—		—		—			—			—			26,993			6,271			33,264
Realization of other reserves			—		—		—			—		(5,910	)		—		—			—			—		—		—			—			5,910			—			—			—
Distribution of interim dividends			—		—		—			—		—			—		—			—			—		—		—			—			(2,218,116	)		(2,218,116	)		—			—
Shares repurchased by Pilgrim’s Pride Corporation			—		—		(453,923	)		—		—			—		—			—			—		—		—			—			—			(453,923	)		(512,060	)		(965,983	)
Interim dividends			—		—		—			—		—			—		—			—			2,218,116		—		—						(2,218,116	)		—			—			—
Prescribed dividends			—		—		—			—		—			—		—			—			—		—		—						15			15			—			15
Dividend to non-controlling			—		—		—			—		—			—		—			—			—		—		—			—			—			—			(11,025	)		(11,025	)
Others			—		—		—			—		—			—		—			—			—		—		—			—			—			—			706			706
SEPTEMBER 30, 2022			23,576,206		211,879		(1,055,129	)		30,464		38,047			2,028,293		5,595,684			—			2,218,116		—		89,739			2,870,951			8,677,839			44,282,089			3,449,215			47,731,304
DECEMBER 31, 2022			23,576,206		211,879		(1,050,298	)		30,464		36,497			2,801,185		11,848,048			—			—		4,003,823		174,904			4,711,458			—			46,344,166			3,464,765			49,808,931
Net income (loss)			—		—		—			—		—			—		—			—			—		—		—			—			(1,143,576	)		(1,143,576	)		206,514			(937,062	)
Foreign currency translation adjustments			—		—		—			—		—			—		—			—			—		—		—			(1,627,483	)		—			(1,627,483	)		(112,602	)		(1,740,085	)
Gain on net investment in foreign operations (2)			—		—		—			—		—			—		—			—			—		—		—			589,207			—			589,207			—			589,207
Losses on cash flow hedge, net of tax	27 c3.1		—		—		—			—		—			—		—			—			—		—		10,102			—			—			10,102			—			10,102
Gain associated with pension and other postretirement benefit obligations, net of tax			—		—		—			—		—			—		—			—			—		—		30,175			—			—			30,175			6,141			36,316
Valuation adjustments to equity in subsidiaries			—		—		—			—		—			—		—			—			—		—		(38,328	)		—			—			(38,328	)		—			(38,328	)
Total comprehensive income			—		—		—			—		—			—		—			—			—		—		1,949			(1,038,276	)		(1,143,576	)		(2,179,903	)		100,053			(2,079,850	)
Share-based compensation			—		—		26,311			—		—			—		—			—			—		—		—			—			—			26,311			5,019			31,330
Realization of other reserves			—		—		—			—		(4,522	)		—		—			—			—		—		—			—			4,522			—			—			—
Distribution of interim dividends	21 b2		—		—		—			—		—			—		—			—			—		—		—			—			(2,218,116	)		(2,218,116	)		—			(2,218,116	)
Dividend to non-controlling			—		—		—			—		—			—		—			—			—		—		—			—			—			—			(23,602	)		(23,602	)
Others			—		—		—			—		—			—		—			—			—		—		—			—			—			—			(392	)		(392	)
SEPTEMBER 30, 2023			23,576,206		211,879		(1,023,987	)		30,464		31,975			2,801,185		11,848,048			—			—		4,003,823		176,853			3,673,182			(3,357,170	)		41,972,458			3,545,843			45,518,301

⁽¹⁾ Refers to changes in the equity of investees arising from PPC’s share repurchase and share-based compensation.

⁽²⁾ Refers to the net investment on foreign operations of intercompany balances between JBS S.A. and its indirect subsidiaries JBS Luxembourg S.à.r.l. and JBS Investments Luxembourg S.à.r.l.. Thus, since the balances are an extension of that entity’s investment, they are considered as equity instruments.

The accompanying notes are an integral part of these condensed interim financial statements.

8

Statements of cash flows for the nine month period ended September 30, 2023 and 2022

In thousands of Brazilian Reais - R$

		Company						Consolidated
	Notes	2023			2022			2023			2022
Cash flows from operating activities
Net income (loss)			(1,143,576	)		13,108,146			(937,062	)		13,986,829
Adjustments for:
Depreciation and amortization	7, 12, 13 e 14		639,286			593,939			7,865,984			7,228,807
Expected credit losses	5		35,454			43,299			49,075			75,272
Share of profit of equity-accounted investees	11		(562,736	)		(13,948,627	)		(49,087	)		(50,828	)
(Gain) Loss on sales of assets			13,695			4,021			(32,886	)		(32,531	)
Tax expense (benefit)	10		172,132			439,472			(548,877	)		3,944,042
Net finance income/expense	23		2,200,409			1,670,361			5,061,119			4,218,584
Share-based compensation			—			—			31,330			33,264
Provisions for legal proceedings	20		182,064			49,394			429,710			124,065
Net realizable value inventory adjustments	6		(24,560	)		(1,190	)		(87,880	)		(1,876	)
Antitrust agreements	20		—			—			211,536			491,632
Impairment of goodwill and property, plant and equipment			—			—			127,889			—
Fair value adjustment for biological assets	7		—			—			419,255			135,289
			1,512,168			1,958,815			12,540,106			30,152,549
Changes in assets and liabilities:
Trade accounts receivable			2,002,395			353,620			3,346,138			(2,238,536	)
Inventories			572,148			(105,288	)		811,024			(4,198,817	)
Recoverable taxes			(103,050	)		(1,641,209	)		115,357			(3,015,247	)
Other current and non-current assets			(31,356	)		325,613			(410,617	)		916,515
Biological assets			—			—			(1,888,893	)		(3,661,994	)
Trade accounts payable and supply chain finance			(1,049,485	)		(1,416,324	)		(5,411,013	)		(1,046,103	)
Taxes paid in installments			(143,443	)		(295,296	)		(143,443	)		(297,123	)
Other current and non-current liabilities			1,020,843			357,273			135,134			344,502
Antitrust agreements payment			—			—			(442,854	)		(873,107	)
Income taxes paid			—			—			(121,425	)		(4,591,668	)
Changes in operating assets and liabilities			2,268,052			(2,421,611	)		(4,010,592	)		(18,661,578	)
Cash provided by (used in) operating activities			3,780,220			(462,796	)		8,529,514			11,490,971
Interest paid			(1,004,321	)		(729,371	)		(4,554,913	)		(3,499,009	)
Interest received			165,465			78,247			652,936			565,199
Net cash flows provided by (used in) operating activities			2,941,364			(1,113,920	)		4,627,537			8,557,161
Cash flow from investing activities
Purchases of property, plant and equipment			(600,376	)		(944,657	)		(5,501,456	)		(7,785,772	)
Proceeds from sale of property, plant and equipment			10,194			29,929			96,327			127,859
Proceeds of intangible assets	14		(14,341	)		(4,701	)		(33,012	)		53,883
Additional investments in equity-accounted investees			(9,934	)		—			—			(10,811	)
Acquisitions/ incorporations, net of cash acquired			680			—			(9,939	)		(765,314	)
Dividends received	11		32,500			6,000			32,500			6,000
Related party transactions			(6,586,812	)		8,234,946			3,897			2,603
Other			—			—			102,511			38,525
Cash provided by (used in) investing activities			(7,168,089	)		7,321,517			(5,309,172	)		(8,333,027	)
Cash flow from financing activities
Proceeds from loans and financings			13,204,373			5,134,977			40,047,077			38,772,668
Payments of loans and financings			(8,975,510	)		(5,426,901	)		(21,810,707	)		(36,100,302	)
Derivatives instruments received/settled			(181,348	)		(1,056,957	)		(104,117	)		(1,139,321	)
Margin cash withdraw/(applied in)			12,123			85,722			(6,098	)		511,863
Dividends paid	21.b2		(2,218,116	)		(2,218,126	)		(2,218,116	)		(2,218,126	)
Dividends paid to non-controlling interest			—			—			(23,602	)		(9,592	)
Capital reduction of controlled companies			13,184,553			—			—			—
Purchase of PPC treasury shares			—			—			—			(965,983	)
Purchase of treasury shares	21.b1		—			(3,648,028	)		—			(3,648,028	)
Sales of treasury shares			—			824,250			—			824,250
Payments of leasing contracts			(34,588	)		(24,774	)		(1,595,295	)		(1,659,838	)
Cash provided by (used in) financing activities			14,991,487			(6,329,837	)		14,289,142			(5,632,409	)
Effect of exchange rate changes on cash and cash equivalents			251,511			(61,613	)		159			(1,165,747	)
Net change in cash and cash equivalents			11,016,273			(183,853	)		13,607,666			(6,574,022	)
Cash and cash equivalents beginning of period			2,096,334			2,654,374			13,182,158			23,239,150
Cash and cash equivalents at the end of period			13,112,607			2,470,521			26,789,824			16,665,128

Non-cash transactions:
		Company						Consolidated
	Notes	2023			2022			2023			2022
Non-cash additions to right of use assets and lease liabilities	13		60,815			13,172			2,105,268			1,958,972
Capitalized interests	12		(86,837	)		(53,159	)		(284,894	)		(166,521	)
Increase/decrease in share capital subsidiaries through assumption of debt			—			(13,579,986	)		—			—
Cancellation of treasury shares	21.b1		—			(5,851,685	)		—			(5,851,685	)

The accompanying notes are an integral part of these condensed interim financial statements.

9

Statements of economic value added the nine month period ended September 30, 2023 and 2022

In thousands of Brazilian Reais - R$

	Company						Consolidated
	2023			2022			2023			2022
Revenue
Sales of goods and services		38,386,005			42,398,227			270,271,487			284,571,750
Other income (expense)		(21,417	)		(1,355	)		183,679			116,536
Expected credit losses		(35,454	)		(43,299	)		(49,071	)		(75,272	)
		38,329,134			42,353,573			270,406,095			284,613,014
Goods
Cost of services and goods sold		(28,808,820	)		(32,826,519	)		(172,114,475	)		(168,630,255	)
Materials, energy, services from third parties and others		(5,245,480	)		(5,211,523	)		(50,026,970	)		(51,231,254	)
		(34,054,300	)		(38,038,042	)		(222,141,445	)		(219,861,509	)
Gross added value		4,274,834			4,315,531			48,264,650			64,751,505
Depreciation and Amortization		(639,286	)		(593,939	)		(7,865,984	)		(7,228,807	)
Net added value generated		3,635,548			3,721,592			40,398,666			57,522,698
Net added value by transfer
Share of profit of equity-accounted investees, net of tax		562,736			13,948,627			49,004			50,828
Financial income		1,140,412			2,449,109			1,719,701			3,870,347
Others		11,412			17,362			(77,783	)		211,284
		1,714,560			16,415,098			1,690,922			4,132,459
NET ADDED VALUE TOTAL TO DISTRIBUTION		5,350,108			20,136,690			42,089,588			61,655,157
DISTRIBUTION OF ADDED VALUE
Labor
Salaries		2,084,221			2,041,710			26,907,939			26,787,216
Benefits		352,890			302,275			5,493,124			5,237,154
FGTS (Brazilian Labor Social Charge)		145,261			124,919			391,677			331,822
		2,582,372			2,468,904			32,792,740			32,356,192
Taxes and contribution
Federal		49,391			82,494			213,022			4,475,190
State		499,192			371,319			1,653,479			1,472,060
Municipal		17,758			17,206			18,905			18,422
		566,341			471,019			1,885,406			5,965,672
Capital Remuneration from third parties
Interests and exchange variation		3,221,562			3,986,576			6,571,557			6,936,076
Rents		33,629			38,806			576,511			546,153
Others		89,780			63,239			1,200,436			1,864,235
		3,344,971			4,088,621			8,348,504			9,346,464
Owned capital remuneration
Net income (loss) attributable to company shareholders		(1,143,576	)		13,108,146			(1,143,576	)		13,108,146
Non-controlling interest		—			—			206,514			878,683
		(1,143,576	)		13,108,146			(937,062	)		13,986,829
ADDED VALUE TOTAL DISTRIBUTED		5,350,108			20,136,690			42,089,588			61,655,157

The accompanying notes are an integral part of these condensed interim financial statements.

 

10

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

1 Background Information

JBS S.A (“JBS” or the “Company”), is a corporation with its headquarters office in Brazil, in the City of São Paulo, and is controlled by J&F Investimentos S.A. The Company has its shares publicly traded and listed on the “Novo Mercado” segment of the Sao Paulo Stock Exchange (B3 - Bolsa de Valores, Mercadorias & Futuros) under the ticker symbol “JBSS3”. In addition, American Depository Receipts related to shares issued by JBS are also publicly traded in the United States of America under the symbol “JBSAY”. These individual and consolidated financial statements comprise the Company and its subsidiaries (collectively, the ‘Company’) for the period ended September 30, 2023 and were authorized by the Board of Directors on November 13, 2023.

The financial statements presented below include, in addition to the individual operations of JBS in Brazil, the activities of its subsidiaries, in Brazil and abroad.

1.1 Main operating events that occurred during the period:

1.1.1 Dual listing in Brazil and the United States: On July 12, 2023, the Company announced the dual listing structure of its shares in Brazil and United States of America, through JBS B.V, Company, located in Netherlands. The operation will be submitted to the approval of the Extraordinary General Boarding Meeting, to be convened. If this transaction is approved, following its completion at the Brazilian Securities Commission (Comissão de Valores Mobiliários -CVM), JBS B.V will be registered as a foreign issuer to have Brazilian Depositary Receipts - BDRs level II listed on B3 representing its Class A Shares. At the SEC, the JBS B.V. will be registered as a foreign issuer (Foreign Private Issuer – FPI) in order to have its Class A Shares listed on the New York Stock Exchange (NYSE), located in the United States of America.

1.1.2 Debt registration with the Securities Exchange Commission (SEC): On July 24, 2023, the Company obtained the effectiveness of the registration presented to the securities commission of the United States of America, the Securities and Exchange Commission (“SEC”) relating to exchange offers for 11 series of debt securities (” Bonds”). As a result of the declaration of effectiveness, the Company becomes obliged to disclose information in the United States of America and, therefore, is subject to the information disclosure requirements provided for by the SEC and other regulations and standards relating to securities in the United States of America and the compliance obligations of the Sarbanes-Oxley Act (“SOX”).

1.1.3 Senior Notes (Bonds): On September 5, 2023, the indirect subsidiaries JBS USA Lux S.A., JBS USA Food Company and JBS Luxembourg S.à r.l. priced senior notes in the total amount of US$1.57 billion (equivalent to R$7.9 billion on September 30, 2023), maturing in 2034 (JBS Lux 2034 6.75% Notes), and US$900 million (equivalent to R$4.4 billion on September 30, 2023), due in 2053 (7.25% JBS Lux 2053 Notes). On September 19, 2023, the offering of these notes was terminated and the funds raised were mainly used to pay short-term debts.

1.2 Seasonality: In the chicken business, globally, fluctuations are historically greater in the first half of the year, in which the sales volume of some of our special product lines suffers, variations resulting from some holidays, such as Christmas, New Year and Easter. For the beef industry in the United States, during the second and third quarters, the beef industry experiences seasonal demand for beef products that is highest in the summer and fall months in the Northern Hemisphere when weather patterns allow for more activity around the world. outdoors, however in Australia at the end of the fourth quarter a reduction in slaughter was observed due to the lower availability of cattle during the rainy season, which makes transporting the animals difficult. As for the pork sector in the United States and Australia, the greatest demand for pork occurs in the first and fourth quarters, when the availability of pigs combined with holidays increase demand.

2 Basis of preparation and presentation of financial statements

The financial statements were prepared in accordance with the standard CPC 21 (R1) - Interim Statements, approved by the Brazilian Accounting Standards Committee and equivalent to International Accounting Standard “IAS” 34 - Interim Financial Reporting, issued by the International Accounting Standards Board (IASB). Therefore, these Interim Condensed Financial Statements as of September 30, 2023 do not include all footnotes and information required to be considered “complete financial statements” due to redundancy in relation to what is presented in the individual and consolidated annual financial statements (December 31, 2022) prepared in accordance with the accounting practices adopted in Brazil (BRGAAP) and with International Financial Reporting Standards (IFRS), approved by the Board of Directors on March 21, 2023. The parent company’s individual financial statements are identified as “Company” and the consolidated financial statements are identified as “Consolidated”.

2.1 Functional and presentation currency

These condensed interim financial statements are presented in Brazilian reais (R$), which is the Company’s presentation and functional currency. All financial information is presented in thousands of reais, except when indicated otherwise.

 

11

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

2.2 New standards, amendments and interpretations

a. Standards, amendments and interpretations recently issued and adopted by the Company

Accounting Policies, Changes in Accounting Estimates and Errors: Amendments to IAS 8/CPC 23

As of January 1, 2023, the amendments clarify the distinction between changes in accounting estimates, changes in accounting policies and correction of errors, to assist in correctly applying the guidance. The Company did not identified any significant impacts as a result of this change.

Deferred Tax related to Assets and Liabilities arising from a Single Transaction: Amendments to IAS 12/CPC 32

As of January 1, 2023, the amendments narrow the scope of the initial recognition exemption (IRE) so that it no longer applies to transactions that, among other things, on initial recognition, give rise to equal taxable and deductible temporary differences. As a result, a deferred tax asset and a deferred tax liability should be recognized for temporary differences arising on initial recognition of a lease and decommissioning provision. The Company did not identify any significant impacts as a result of this change.

b. New standards, amendments and interpretations that are not yet effective

Presentation of Financial Statements: Amendments to IAS 1/CPC 26

As of January 1, 2023, sets out the requirements to defer settlement of a liability and whether the Company has reached these requirements at the end of the reporting period and, also, whether the classification between current and non-current would impact the entity’s ability to exercise the postponement right. The amendments also clarify that a derivative embedded in a convertible liability does not affect the classification of the liability if the derivative itself is an equity instrument. The Company is following the discussions and so far has not identified significant impacts as a result of this change.

3 Business combination

The acquisitions accounted for as business combinations are presented bellow. Management considers an acquisitions significant for disclosure when total assets exceeds US$50 million (R$250.4 million at September 30, 2023). Acquisitions are paid with cash and cash equivalents, except where otherwise indicated.

Acquired company	Acquiror	(%) of voting interests acquired			Background and rationale for acquisition	Goodwill deductible for tax (1)	Acquisition date	Acquisition price		Goodwill
TriOak Foods (“TriOak”) (2)	Swift Pork		100	%	Operates in several states in the United States, in the hog processing and commercialization of grains with operations. Swift Pork was the exclusive purchaser of TriOak´s hogs. The acquisition ensures access to a consistent supply of premium hogs for the Company’s pork processing facilities.	Yes	2.12.22		1,211,909		67,719

(1)	The tax deductibility of goodwill follows the legislation of each country, considering that the acquirer’s country of domicile does not coincide with the country of domicile of the acquiree.
(2)	The allocation of TriOak’s acquisition price was adjusted during nine-month of 2023, with a reduction in biological assets of R$127,014, increase in permanent assets of R$49,629, reduction in right of use and leasing provision of R$51,500, and reduction in goodwill in the amount of R$64,206.

 

12

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

The assets acquired and liabilities assumed in the business combination were measured at fair value as presented below:

	Acquisitions
	2022
FAIR VALUE	TriOak
Cash and cash equivalents		19,509
Trade accounts receivable		32,657
Inventories		81,408
Biological assets		689,969
Property, plant and equipment		653,139
Right of use assets		646,627
Other assets		10,004
ASSETS		2,133,313
Trade accounts payable		111,191
Loans and financing		219,747
Accrued income taxes, other taxes, payroll and social charges		11,558
Lease liabilities		646,627
LIABILITIES		989,123
Total identifiable net assets fair value		1,144,190
Purchase consideration transferred		1,211,909
Goodwill		67,719

4 Cash and cash equivalents and margin cash

	Company				Consolidated
	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Cash on hand and at banks		6,217,297		1,820,325		11,971,199		5,972,915
CDB (bank certificates of deposit) and National Treasury Bill (Tesouro Selic) (1)		6,895,310		276,009		14,818,625		7,209,243
Cash and cash equivalents total		13,112,607		2,096,334		26,789,824		13,182,158

⁽¹⁾ CDBs are held at high quality financial institutions and earn interest based on floating rates and are pegged to the Brazilian overnight interbank lending rate (Certificado de Depósito Interbancário - CDI). Tesouro Selic are bonds purchased from financial institutions having conditions and characteristics that are similar to CDB’s.

	Company				Consolidated
	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Margin cash		—		—		601,428		308,302
Investments in Treasury bills		68,311		80,434		333,830		371,089
Margin cash total		68,311		80,434		935,258		679,391

5 Trade accounts receivable

	Company						Consolidated
	September 30, 2023			December 31, 2022			September 30, 2023			December 31, 2022
Current receivables:
Domestic sales		1,070,144			1,414,055			10,435,313			11,152,049
Foreign sales		1,045,405			2,315,482			3,254,487			5,058,255
Subtotal		2,115,549			3,729,537			13,689,800			16,210,304
Overdue receivables:
From 1 to 30 days		176,699			325,741			1,850,618			2,515,484
From 31 to 60 days		29,668			142,384			242,378			590,988
From 61 to 90 days		15,148			133,895			164,134			346,939
Above 90 days		260,089			310,931			952,100			1,038,761
Expected credit losses		(244,671	)		(252,719	)		(418,944	)		(431,170	)
Present value adjustment		(9,194	)		(9,758	)		(25,667	)		(36,411	)
Subtotal		227,739			650,474			2,764,619			4,024,591
Trade accounts receivable, net		2,343,288			4,380,011			16,454,419			20,234,895

 

13

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

Present value adjustment: The Company discounts its receivables to present value using interest rates directly related to customer credit profiles. The monthly interest rate used to calculate the present value of outstanding receivables on September 30, 2023 was 1.8% per transaction (1.3% per transaction at December 31, 2022).The present value adjustment is recognized as an offset to sales of products and services.

The Company and its subsidiaries enter into credit assignment transactions with financial institutions, where these institutions acquire trade accounts receivable balances held against certain third-party customers in the domestic and foreign markets. The terms of the assignment transactions result in a permanent transfer of the risks and benefits to the financial institutions.

Changes in expected credit losses:

	Company						Consolidated
	September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Initial balance		(252,719	)		(262,431	)		(431,170	)		(459,378	)
Additions		(35,454	)		(43,299	)		(49,075	)		(75,272	)
Write-offs/ Reversals		36,041			28,677			50,456			36,163
Exchange rate variation		7,461			5,768			10,845			20,804
Closing balance		(244,671	)		(271,285	)		(418,944	)		(477,683	)

6 Inventories

	Company				Consolidated
	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Finished products		2,605,136		2,906,265		16,567,672		17,199,677
Work in process		642,877		529,556		2,912,174		2,730,386
Raw materials		536,053		963,523		3,944,003		4,864,552
Supplies		266,943		233,857		3,133,431		3,347,479
		4,051,009		4,633,201		26,557,280		28,142,094

Changes in the realizable value of inventories is recognized in the financial statements as “Cost of sales” and is presented below:

	Company						Consolidated
	September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Initial balance		(58,110	)		(6,742	)		(310,581	)		(248,637	)
Additions		(32,542	)		(2,327	)		(189,591	)		(183,271	)
Incorporation (1)		(332	)		—			—			—
Write-offs		57,102			3,517			277,471			185,147
Exchange rate variation		—			—			3,016			12,626
Closing balance		(33,882	)		(5,552	)		(219,685	)		(234,135	)

⁽¹⁾ Refers to the direct subsidiary´s Brazservice Ltda. incorporation which occurred during the first half of 2023.

 

14

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

7 Biological assets

Changes in biological assets:

	Consolidated
	Current						Non-current
	September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Initial balance		9,710,693			7,420,848			2,619,066			2,245,019
Acquired in business combinations		—			183,617			—			71,973
Business combination adjustments (1)		(127,014	)		—			—			—
Increase by reproduction (born) and cost to reach maturity		48,358,432			46,861,166			3,168,961			2,939,192
Reduction for slaughter, sale or consumption		(50,770,468	)		(47,651,993	)		(238,184	)		(261,758	)
Purchase		1,666,769			2,084,504			672,269			659,193
Decrease by death		(898,916	)		(274,841	)		(69,970	)		(58,834	)
Fair value adjustments		(419,255	)		(135,384	)		—			95
Reclassification from non-current to current		1,154,996			1,090,237			(1,154,996	)		(1,090,237	)
Exchange rate variation		(268,487	)		(877,462	)		(87,794	)		(118,902	)
Changes in fair value (including amortization of breeders)		—			—			(2,229,509	)		(1,918,667	)
Closing balance		8,406,750			8,700,692			2,679,843			2,467,074

⁽¹⁾ Refers to the TriOak business combination adjustments, acquired during the year ended at 2022, as described in the footnote 3 - Business Combination.

8 Recoverable taxes

	Company				Consolidated
	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Value-added tax on sales and services - ICMS/IVA/VAT/GST		1,227,379		2,040,368		4,649,084		5,253,253
Social contribution on billings - PIS and COFINS		1,613,906		1,502,722		2,373,801		2,752,896
Withholding income tax - IRRF/IRPJ		3,829,097		3,981,884		5,350,167		6,257,710
Excise tax - IPI		18,981		21,748		106,749		127,719
Reintegra		30,011		32,463		44,353		49,832
Other		26,364		23,644		61,267		55,087
		6,745,738		7,602,829		12,585,421		14,496,497
Current		1,395,218		1,473,985		4,463,272		5,330,928
Non-current		5,350,520		6,128,844		8,122,149		9,165,569
		6,745,738		7,602,829		12,585,421		14,496,497

 

15

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

9 Related parties transactions

The main balances of assets and liabilities, as well as the transactions resulting in income (loss) for any period, arise from transactions between related parties at market conditions and prices. Amounts charged include borrowing costs, interest and rate differences, when applicable. The following table includes balances and the net effect on income of intercompany financing transactions between the Company and its subsidiaries:

	Company						Consolidated
	September 30, 2023			December 31, 2022			September 30, 2023		December 31, 2022
Related party receivables		1,112,361			1,103,125			976,466		951,021
Related party payables		(15,819,561	)		(22,066,929	)		—		—
		(14,707,200	)		(20,963,804	)		976,466		951,021

		Transference of	Statement of financial position accounts						Financial income (expense)
	Currency	costs (administrative and funding)	September 30, 2023			December 31, 2022			2023			2022
Direct subsidiaries
JBS Investments Luxembourg S.à.r.l	US$	2.52% to 3.64% p.y.		(8,262,270	)		(10,047,675	)		(176,428	)		(155,730	)
JBS Confinamento Ltda.	R$	CDI + 4% p.y.		126,039			109,696			14,598			11,547
JBS Embalagens Metálicas Ltda	R$	CDI + 4% p.y.		52			14			3			1
JBS Finance Luxembourg S.à.r.l	US$	2.52% to 3.64% p.y.		—			—			—			(74,322	)
Brazservice Ltda. (1)	R$	CDI + 4% p.y.		—			32,502			1,546			4,202
Enersea Ltda. (1)	R$	CDI + 4% p.y.		—			80			4			758
Indirect subsidiaries
Seara Holding Ltda. (2)	R$	—		(6,398,511	)		—			—			—
JBS Luxembourg S.à.r.l	US$	1.83% to 7.3%  p.y.		—			(3,497,390	)		(74,948	)		(211,020	)
Seara Alimentos Ltda. (2)	R$	CDI + 4%  p.y.		(1,158,779	)		(8,521,864	)		(663,460	)		(282,629	)
JBS Leather Paraguay Srl	GUA	7.00%  p.y.		9,803			9,812			337			361
Other related parties
J&F Investimentos S.A.	R$	IPCA		566,505			543,165			10,189			—
J&F Oklahoma Holdings, Inc.	R$	3.4%(*)		405,708			400,017			5,690			(5,495	)
Flora Produtos de Higiene e Limpeza S.A.	R$	Selic		4,253			7,839			—			358
Total				(14,707,200	)		(20,963,804	)		(882,469	)		(711,969	)

^(*) Interest rate for the contract term.

⁽¹⁾ The direct subsidiaries Brazservice Ltda. and Enersea Ltda were incorporated by the Company for corporate structure simplification purposes.

⁽²⁾ Related to the partial transfer of the open balance with the indirect subsidiary Seara Alimentos Ltda. to the indirect subsidiary Seara Holding Ltda.

The transactions above refer to working capital funding. Settlement in the future shall be through a capital contribution/ capital reduction or dividends distribution.

Related party receivable

	Consolidated
	September 30, 2023		December 31, 2022
J&F Investimentos S.A.		566,505		543,165
J&F Oklahoma Holdings, Inc.		405,708		400,017
Flora Produtos de Higiene e Limpeza S.A.		4,253		7,839
		976,466		951,021

 

16

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

The disclosure of significant intercompany commercial transactions is in accordance with the criteria established by Management, by disclosing individual balances which are equal to or higher than 2% of the total of each transaction (sale of products, purchases, accounts receivable and accounts payable). Additionally, transactions which are below the described criteria will be disclosed if the information is relevant. This analysis is performed for each related party. If any related party has not met this criteria in the past but does in the current period, the comparative balance will be disclosed.

	Accounts receivable				Accounts payable				Purchases/Services rendered				Sale of products/Services provided
COMPANY	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022		2023		2022		2023		2022
Direct subsidiaries
JBS Confinamento Ltda.		1,015		2,300		31,989		119,563		547,567		878,269		9,350		11,272
JBS Toledo N.V.		26,719		8,577		—		—		—		3		245,651		267,843
JBS Chile Limitada		13,860		6,514		2,537		730		6,037		3,786		85,283		39,700
Brazservice Ltda.		—		2,977		—		14,283		39,878		98,827		16,704		90,608
Conceria Priante Srl		4,543		15,479		—		—		—		—		14,006		35,944
Indirect subsidiaries
Seara Alimentos Ltda.		181,473		215,066		45,068		58,663		166,153		211,183		1,851,243		2,170,944
JBS Global UK Limited		113,475		138,313		—		—		—		—		356,172		270,361
JBS Aves Ltda.		4,371		5,523		20,861		20,757		2,168		5,251		101,617		104,076
Weddel Limited		10,791		22,402		—		—		—		—		61,545		42,686
Sampco, LLC		135,454		108,359		—		—		—		—		642,742		712,723
Meat Snacks Partners do Brasil Ltda.		16,486		3,547		4		128		—		—		265,395		396,668
JBS Asia Limited		—		—		187,020		82,036		142,662		89,584		—		—
JBS Leather Asia Limited		59,717		70,780		89		—		—		—		238,869		198,024
JBS USA Holding Lux S.à.r.l.		18,052		520,893		—		715		20		—		645,808		585,814
Seara Comércio de Alimentos Ltda.		435		4,349		2,462		1,680		20,448		15,184		12,955		9,009
JBS Australia Pty.Ltd.		3,667		9,298		—		678		—		—		160,907		243,834
Zenda Leather Uruguay S.A		14,355		—		—		—		33		—		27,336		—
Swift Beef Company		—		—		11,606		—		1,321		—		—		—
Other related parties
Agropecuária Santa Luzia Ltda.		603		1,772		30		134		15,543		—		3,878		—
JBJ Agropecuária Ltda.		1,457		2,912		263,348		486,357		1,313,154		1,064,975		17,330		21,850
Flora Produtos de Higiene e Limpeza S.A		57,665		34,359		2		—		11		4,505		244,815		277,880
Eldorado Brasil Celulose S.A.		293		314		—		6		59		214		2,561		6,819
Banco Original S.A		—		5		—		9		—		—		54		61
Prima Foods S.A.		190		315		2,593		4,012		49,706		80,607		2,520		10,618
		664,621		1,174,054		567,609		789,751		2,304,760		2,452,388		5,006,741		5,496,734

 

17

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

Other financial transactions in the Company

The Company and a few of its subsidiaries entered into an agreement in which Banco Original (Related party) acquires trade accounts receivables held against certain of the Company’s customers in the domestic and foreign markets. The assignments are measured at market value through a permanent transfer of the risks and benefits to Banco Original of all trade accounts receivable. At September 30, 2023, the unpaid balance of transferred receivables was R$2,130,322 (R$969,151 at December 31, 2022) in the Company, and R$4,085,524 (R$2,133,083 at December 31, 2022) in the Consolidated, respectively. For the nine month period ended September 30, 2023, the Company incurred financial costs related to this operation in the amount of R$164,405 (R$120,880 at September 30, 2022) in the Company, and R$350,287 (R$274,142 at September 30, 2022) in the Consolidated, respectively, recognized in these interim financial statements as financial expenses.

At September 30, 2023, the Company and a few of its subsidiaries hold investments with Banco Original, in the amount of R$1,536,291 (R$477,103 at December 31, 2022) in the Company and R$3,624,030 (R$1,869,825 at December 31, 2022) in the Consolidated, recognized as cash and cash equivalents, respectively. The short term investments, CDB and similar investments have earnings similar to CDI (Certificado de Depósito Interbancário), according to both maturity and amount established at the start date of the investment, following market practices. For the nine month period ended September 30, 2023, the Company earned interest from these investments in the amount of R$6,764 (R$5,370 at September 30, 2022) in the Company, and R$69,257 (R$11,449 at September 30, 2022) in the Consolidated, respectively, recognized in these interim financial statements as financial income.

The Company enters into future delivery agreements for livestock with certain suppliers, including the related party JBJ Agropecuária Ltda.(“JBJ”), ensuring a fixed price when purchasing cattle without a cash impact in the Company until the maturity date of these commitments. Based on this contract of future delivery, JBJ already anticipated with the financial institutions in the supply chain finance modality. At September 30, 2023 the balance of this transaction was R$239,350 (R$446,000 at December 31, 2022).

The Company purchases residues generated from cattle slaughter for rendering operations with Prima Foods S.A. (formerly called Mata Boi Alimentos S.A.).

The Company sponsor´s a youth-directed business school, whose mission is to educate future leaders by offering free, high-quality education. During the nine month period ended September 30, 2023 the Company made donations in the amount of R$76,723 (R$147,179 at September 30, 2022) recognized in these interim financial statements as general and administrative expenses.

The Company includes the related party Original Corporate Corretora de Seguros Ltda. on the bid for insurance renewal. If hired, the contracts are carried out at market value.

PicPay salary advance - Employees from the Company can opt to receive a salary advance every day 15 of each month. This advance will be deducted from the employee’s salary when the total payroll is paid at month end. PicPay pays the Company a fee of R$1.48 cents for each beneficiary who adhere the salary advance. At September 30, 2023, the total amount of the operation was R$238 (R$114 on September 30, 2022), recorded in the interim financial statements as revenue from sales of products and services.

No expected credit losses or bad debts relating to related party transactions were recorded during the nine month period ended September 30, 2023 and 2022.

Remuneration of key management

The Company’s key management is comprised of its Executive Officers and Board of Directors. The aggregate amount of compensation received by the Company’s key management during the nine month period ended September 30, 2023 and 2022 is the following:

	2023		2022
Salaries and wages		29,958		27,738
Variable cash compensation		96,876		98,000
		126,834		125,738

The Chief Executive Officer, the Administrative and Control Officer, the Chief Financial Officer and Investor Relations and the Executive Officers are parties to the Brazilian employment contract regime referred to as CLT (which is the Consolidation of Labor Laws), which follows all the legal prerogatives of payments and benefits.

Except for those described above, the Board of Directors members are not party to any employment contract or any other contracts for additional business benefits such as post-employment benefits or other long-term benefits, termination of work that does not conform to those requested by the CLT.

 

18

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

10 Income taxes

a. Composition of deferred tax income and social contribution

	Company						Consolidated
	September 30, 2023			December 31, 2022			September 30, 2023			December 31, 2022
Deferred income taxes assets		—			—			4,052,949			3,161,300
Deferred income taxes liabilities		(3,145,763	)		(2,995,114	)		(6,673,968	)		(7,112,102	)
		(3,145,763	)		(2,995,114	)		(2,621,019	)		(3,950,802	)

	Company
	December 31, 2022			Income statement			Other adjustments (1)		September 30, 2023
Expected credit losses on trade accounts receivable		88,021			(2,879	)		—		85,142
Provisions for contingencies		162,583			27,967			—		190,550
Present value adjustment - Trade accounts receivable		3,318			(191	)		—		3,127
Right of use assets		2,732			1,445			—		4,177
Goodwill amortization		(3,277,762	)		—			—		(3,277,762	)
Present value adjustment - Trade accounts payable		2,090			(7,237	)		—		(5,147	)
Hedge operations (2)		61,197			(101,833	)		—		(40,636	)
Accrued liabilities		184,190			(76,868	)		—		107,322
Realization of other reserves		(257,332	)		2,329			—		(255,003	)
Other temporary differences		35,849			6,526			92		42,467
Deferred taxes, net		(2,995,114	)		(150,741	)		92		(3,145,763	)

	Company
	December 31, 2021			Income statement			September 30, 2022
Expected credit losses on trade accounts receivable		91,840			2,493			94,333
Provisions for contingencies		164,082			(8,187	)		155,895
Present value adjustment - Trade accounts receivable		3,671			(682	)		2,989
Right of use assets		3,622			(893	)		2,729
Goodwill amortization		(3,277,762	)		—			(3,277,762	)
Present value adjustment - Trade accounts payable		2,694			(449	)		2,245
Hedge operations (2)		16,236			10,997			27,233
Accrued liabilities		134,382			28,622			163,004
Realization of other reserves		(260,867	)		2,735			(258,132	)
Other temporary differences		(19,363	)		30,474			11,111
Deferred taxes, net		(3,141,465	)		65,110			(3,076,355	)

	Consolidated
	December 31, 2022			Income statement			Exchange variation			Other adjustments (1)			September 30, 2023
Tax losses and negative basis of social contribution		3,387,144			1,483,096			(62,966	)		—			4,807,274
Expected credit losses on trade accounts receivable		164,732			2,058			(1,791	)		—			164,999
Provisions for contingencies		716,633			(15,373	)		(8,733	)		—			692,527
Present value adjustment - Trade accounts receivable		59,095			(23,406	)		—			—			35,689
Tax credits - Foreign subsidiaries		68,855			(722	)		(2,642	)		109			65,600
Labor accidents accruals		32,032			6,212			(1,312	)		—			36,932
Pension plan		54,708			499			(2,927	)		(19,995	)		32,285
Accrued liabilities		1,257,677			353,120			(34,776	)		2			1,576,023
Non-deductible interests		399,481			571,200			(8,398	)		—			962,283
Right of use assets		117,832			123,613			(2,736	)		—			238,709
Goodwill amortization		(4,100,891	)		(28,314	)		17,627			—			(4,111,578	)
Present value adjustment - Trade accounts payable		(42,292	)		7,570			—			—			(34,722	)
Business combination		(2,303,239	)		20,953			87,699			—			(2,194,587	)
Inventory valuation		(572,398	)		(813,202	)		21,818			—			(1,363,782	)
Hedge and hedge accounting operations (2)		42,831			(68,787	)		—			2,482			(23,474	)
Realization of other reserves		(575,927	)		12,311			—			—			(563,616	)
Accelerated depreciation and amortization		(3,061,949	)		(136,056	)		110,518			—			(3,087,487	)
Other temporary differences		404,874			(274,299	)		(2,255	)		17,586			145,906
Deferred taxes, net		(3,950,802	)		1,220,473			109,126			184			(2,621,019	)

 

19

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

	Consolidated
	December 31, 2021			Income statement			Exchange variation			Other adjustments (1)			September 30, 2022
Tax losses and negative basis of social contribution		2,407,989			426,519			(23,659	)		—			2,810,849
Expected credit losses on trade accounts receivable		146,544			(67	)		(1,250	)		1			145,228
Provisions for contingencies		544,132			(8,566	)		—			—			535,566
Present value adjustment - Trade accounts receivable		45,564			5,272			—			—			50,836
Tax credits - Foreign subsidiaries		74,993			(4,745	)		(2,256	)		(205	)		67,787
Labor accidents accruals		218,775			(49,975	)		(9,618	)		—			159,182
Pension plan		120,970			47,442			(4,040	)		(25,494	)		138,878
Accrued liabilities		1,478,003			(174,581	)		(50,586	)		(1	)		1,252,835
Non-deductible interests		32,889			143,732			4,264			—			180,885
Right of use assets		33,884			14,248			141			—			48,273
Goodwill amortization		(3,937,854	)		(45,050	)		10,949			—			(3,971,955	)
Present value adjustment - Trade accounts payable		(33,568	)		(7,480	)		—			—			(41,048	)
Business combination		(2,641,925	)		303,067			94,572			47,265			(2,197,021	)
Customer returns accruals - Foreign subsidiaries		(186,478	)		29,172			7,357			—			(149,949	)
Inventory valuation		131,675			34,514			1,013			—			167,202
Hedge and hedge accounting operations (2)		(150,686	)		56,133			432			140,128			46,007
Realization of other reserves		(592,204	)		12,451			—			—			(579,753	)
Accelerated depreciation and amortization		(2,748,785	)		395,250			106,722			—			(2,246,813	)
Other temporary differences		135,629			(225,791	)		238,292			(1,502	)		146,628
Deferred taxes, net		(4,920,453	)		951,545			372,333			160,192			(3,436,383	)

(1)

Changes in the deferred tax balance sheet accounts that do not directly impact profit & loss accounts, are shown in a specific column in the footnotes. These changes refer mainly to the direct subsidiary Brazservice Ltda. incorporated in the Company; deferred taxes on cash flow hedge operations recognized in equity, carried out by the subsidiary Seara Alimentos; gains associated with pension and other postretirement benefit obligations in the United States of America; impacts related to the acquisitions of the King´s group in Italy and Rivalea in Australia.

(2)

The hedge and hedge accounting operations are demonstrated in footnote 27 - Risk management and financial instruments.

b. Reconciliation of income tax and social contribution expense:

	Company						Consolidated
	nine month period ended September 30, 2023						nine month period ended September 30, 2023
	2023			2022			2023			2022
Profit (loss) before income taxes (PBT)		(971,444	)		13,547,618			(1,485,939	)		17,930,871
Brazilian statutory corporate tax rate		-34	%		-34	%		-34	%		-34	%
Expected tax credit (expense)		330,291			(4,606,190	)		505,219			(6,096,496	)
Adjustments to reconcile taxable income:
Share of profit of equity-accounted investees		191,330			4,742,533			16,661			17,281
Investments grants (3)		732,398			434,080			1,838,797			745,736
International rate differences  - Foreign subsidiaries		—			—			(218,804	)		1,725,748
Net income arising from foreign subsidiaries (4)		(1,359,809	)		(803,918	)		(1,359,809	)		(803,918	)
Transfer pricing adjustment		(12,673	)		(12,459	)		(12,673	)		(12,459	)
Unrecognized tax benefits		—			—			(929,353	)		(30,775	)
Withholding tax expense - Foreign subsidiaries		—			—			—			(13,313	)
Non-taxable interest - Foreign subsidiaries		—			—			495,239			448,754
Donations and social programs (3)		(26,086	)		(559	)		(26,086	)		(559	)
SELIC interests on tax credits		8,548			6,458			21,449			10,035
Other permanent differences		(36,131	)		(199,417	)		218,237			65,924
Current and deferred income tax (expense) income		(172,132	)		(439,472	)		548,877			(3,944,042	)
Current income tax		(21,391	)		(504,582	)		(671,596	)		(4,895,587	)
Deferred income tax		(150,741	)		65,110			1,220,473			951,545
		(172,132	)		(439,472	)		548,877			(3,944,042	)
% IT/PBT		-17.72	%		-3.24	%		36.94	%		-22.00	%

 

20

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

	Company						Consolidated
	Three month period ended September 30,						Three month period ended September 30,
	2023			2022			2023			2022
Profit (loss) before income taxes (PBT)		612,694			4,038,526			791,035			5,511,229
Brazilian statutory corporate tax rate		-34	%		-34	%		-34	%		-34	%
Expected tax credit (expense)		(208,316	)		(1,373,099	)		(268,952	)		(1,873,818	)
Adjustments to reconcile taxable income:
Share of profit of equity-accounted investees		413,122			1,474,191			6,656			5,032
Investments grants (3)		253,450			153,136			636,233			261,882
International rate differences		—			—			(72,494	)		541,963
Net income arising from foreign subsidiaries (4)		(470,475	)		(161,729	)		(470,475	)		(161,729	)
Transfer pricing adjustment		(3,246	)		(3,147	)		(3,246	)		(3,147	)
Unrecognized tax benefits		—			—			(201,287	)		(265,162	)
Withholding tax expense - Foreign subsidiaries		—			—			—			—
Non-taxable interest - Foreign subsidiaries		—			—			170,425			220,895
Donations and social programs (5)		(6,128	)		(15	)		(6,128	)		(15	)
SELIC interests on tax credits		3,650			2,969			8,994			7,773
Other permanent differences		(22,100	)		(117,224	)		99,845			19,033
Current and deferred income tax expense		(40,043	)		(24,918	)		(100,429	)		(1,247,293	)
Current income tax		(138,192	)		(97,304	)		(478,625	)		(1,316,906	)
Deferred income tax		98,149			72,386			378,196			69,613
		(40,043	)		(24,918	)		(100,429	)		(1,247,293	)
% IT/PBT		-6.54	%		-0.62	%		-12.70	%		-22.63	%

Additional information: analysis of the variation in the effective rate:

The Company believes that due to the origin and non-recurrence of specific events certain items should not be excluded from the effective tax rate disclosure such as deferred tax effects on goodwill amortization; unrecognized tax benefits and income tax on realization of the other reserves (since it is not relate to the net operating income); and v) effects of investments grants from priors years.. Therefore, the adjusted effective rate excluding the aforementioned effects, in the nine month period ended at September 30, 2023 and 2022, the adjusted effective rate would be -17.96% and-3.26% in the Company and +73,52% and -21.57% in the Consolidated; and in the three month period ended September 30, 2023 and 2022, the adjusted effective rate would be -6.66% and -0,64% in the Company and -12,37% and -17,35% in Consolidated.

⁽³⁾ The Company and its subsidiaries recognize investments grants given by state governments as a presumed credit, partial and full reduction of the ICMS calculation base of certain goods in its production chain, in accordance with the regulations of each state. The amounts appropriated from these tax incentives as revenue in the income statement are excluded from the calculation of taxes on income, when the requirements set forth in current legislation are achieved. During the nine month period ended September 30, 2023, the Company and its subsidiaries recorded the amount of government subsidies in the amount of 5,4 billion (R$2.1 billion as of the nine month period ended September 30, 2022), of which R$2.18 billion of presumed credit (R$2.1 billion as of the nine month period ended September 30, 2022) and R$3.22 billion of reduction and exemption from ICMS, (zero as of the nine month period ended September 30, 2022) excluded from its calculation basis for income tax and social contribution.

The exclusion of this tax benefit from the income tax and social contribution calculation base on net income reflected a tax gain in the nine month period ended September 30, 2023 of R$744,002 referring to the presumed credit (R$745,736 as of the nine month period ended September 30, 2022) and R$1,094,794 of exemption and base reduction (zero as of the nine month period ended September 30, 2022).

On June 12, 2023, the ruling on Special Appeals n. 1,945,110 and 1,987,158 (Repetitive Topic 1182), which discusses the requirement for IRPJ and CSLL on amounts related to ICMS tax incentives, different from those granted in the form of presumed credits. The ruling in question stated that the taxes in question are not due, as long as the requirements of article 30 of Law no. 12,973/2014, given that the Company recorded the profit reserve referred to in article 195-A of Law no. 6,404/76. On August 31, 2023, Provisional Measure no. 1185/23 which changed the investment subsidy regime for tax purposes and revoked article 30 of Law no. 12,973/14. However, any changes, if confirmed, would only be effective from 01/01/2024.

⁽⁴⁾ According to Law No. 12,973/14, the income from foreign subsidiaries must be taxed at the Brazilian statutory tax rate of 34%, and the income tax paid abroad by these subsidiaries may be used to compensate income taxes to be paid in Brazil. The results obtained from foreign subsidiaries are subject to taxation by the countries where they are based, according to applicable rates and legislation (profits taxed by-foreign jurisdictions included in the reconciliation of income tax and social contribution expense). The Group analyzes the results of each subsidiary for the application of its income tax legislation, in order to respect the treaties signed by Brazil and avoid double taxation.

⁽⁵⁾ Refers to the donations made by the Company, as described in Note 26 – Expenses by nature.

 

21

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

11 Investments in equity-accounted investees, associates and joint venture

Changes in the Company’s investments:

										Equity
	December 31, 2022			Addition (disposal)			Exchange rate variation			Changes in the equity of investees (1)			Proportionate share of income (loss)			September 30, 2023
JBS Embalagens Metálicas Ltda.		80,777			—			—			—			(110	)		80,667
JBS Confinamento Ltda.		377,409			—			—			—			(94,338	)		283,071
Conceria Priante Srl		120,500			—			(5,507	)		—			(13,589	)		101,404
JBS Leather International B.V. (2)		635,828			19,707			(24,706	)		(709	)		(11,000	)		619,120
Brazservice Ltda. (3)		43,940			(43,304	)		—			—			(636	)		—
Meat Snacks Partners, LLC. (4)		209,092			(32,500	)		8,997			(9,000	)		45,195			221,784
Enersea Ltda. (3)		350			(356	)		—			—			6			—
JBS Asset Management Corporation		111,742			—			(4,659	)		—			(2,895	)		104,188
JBS Investments Luxembourg S.à.r.l. (5)		53,603,571			(13,194,616	)		(2,610,488	)		1,059,042			622,562			39,480,071
JBS B.V.		(27	)		264			(1	)		(1	)		(235	)		—
JBS Toledo N.V.		195,970			—			(9,784	)		—			12,662			198,848
JBS Chile Limitada		19,953			—			(2,239	)		—			5,153			22,867
JBS Finance Luxembourg S.à.r.l.		404			—			(16	)		—			(39	)		349
Total		55,399,509			(13,250,805	)		(2,648,403	)		1,049,332			562,736			41,112,369

⁽¹⁾ Refers to changes in the equity of investees arising from subsidiaries of the functional currency dollar of the direct subsidiary JBS Investments Luxembourg S.à.r.l. (JBS Investments Lux) to the functional currency of its subsidiaries, such as Australian dollar, Canadian dollar, Pound sterling, Euro, Mexican peso, among others.

⁽²⁾ The Company increased capital contribution in the indirect subsidiary Leather International.

⁽³⁾ The directs subsidiaries Brazservice Ltda. and Enersea Ltda. were incorporated in the Company for corporate structure simplification purposes.

⁽⁴⁾ The joint venture Meat Snacks Partners LLC distributed profits to the Company.

⁽⁵⁾ The Company reduced capital in the direct subsidiary JBS Investments Lux, and sent cash for JBS S.A.

Changes in the Consolidated’s investments:

Refers to investments in associate and joint venture:

									Equity
	Participation			December 31, 2022		Profit distribution			Changes in the equity of investees			Proportionate share of income			September 30, 2023
Meat Snacks Partners, LLC.(4)		50	%		209,092		(32,500	)		(3	)		45,195			221,784
JBS Foods Ontario, Inc.		100	%		75,720		—			(2,966	)		5,419			78,173
Birla Societá Agricola Srl		20	%		10,025		—			(394	)		(1,527	)		8,104
Total					294,837		(32,500	)		(3,363	)		49,087			308,061

 

22

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

Changes in the Company’s investments:
										Equity
	December 31, 2021			Addition (disposal)			Exchange rate variation			Changes in the equity of investees			Proportionate share of income (loss)			September 30, 2022
JBS Embalagens Metálicas Ltda. (1)		80,852			25			—			—			(80	)		80,797
JBS Confinamento Ltda. (1)		5,029			460,601			—			—			(57,207	)		408,423
Conceria Priante Srl		151,113			—			(24,476	)		—			(3,586	)		123,051
JBS Leather International B.V. (2)		806,120			(85,601	)		(37,601	)		(253	)		(8,965	)		673,700
Brazservice Ltda.		45,376			—			—			—			(2,165	)		43,211
Meat Snacks Partners, LLC (3)		169,050			(6,000	)		—			—			48,124			211,174
Enersea Ltda.		(7,193	)		8,573			—			—			(1,075	)		305
JBS Asset Management Corporation		114,814			—			(3,312	)		—			3,029			114,531
JBS Investments Luxembourg S.à.r.l. (4)		58,900,478			(14,049,185	)		(2,420,649	)		(5,663,282	)		13,961,457			50,728,819
Swift Foods B.V.		109			—			(3	)		—			(71	)		35
JBS Toledo N.V.		211,470			—			(34,882	)		—			8,091			184,679
JBS Chile Limitada		18,431			—			(2,739	)		—			999			16,691
JBS Finance Luxembourg S.à.r.l.		381			—			(5	)		—			76			452
Total		60,496,030			(13,671,587	)		(2,523,667	)		(5,663,535	)		13,948,627			52,585,868

⁽¹⁾ The Company increased capital in the direct subsidiaries JBS Embalagens Metálicas and JBS Confinamento, through partial settlement of intercompany loans.

⁽²⁾ The Company recognized an impairment provision in intangible assets in one of its subsidiaries, with operations in South America.

⁽³⁾ The indirect subsidiary Meat Snacks Partners, LLC distributed dividends to the Company.

⁽⁴⁾ The direct subsidiary JBS Investments Luxembourg reduced capital, through partial settlement of intercompany loans.

Changes in the Consolidated’s investments:

											Equity
	Participation			December 31, 2021		Addition		Dividends distribution			Changes in the equity of investees			Proportionate share of income		September 30, 2022
Meat Snacks Partners, LLC (3)		50	%		169,050		—		(6,000	)		—			48,124		211,174
JBS Ontario		100	%		74,140		—		—			(2,259	)		2,704		74,585
Birla Societá Agricola (5)		20	%		—		10,811		—			(1,288	)		—		9,523
Total					243,190		10,811		(6,000	)		(3,547	)		50,828		295,282

⁽⁵⁾ The indirect subsidiary Rigamonti Salumificio acquired the King’s group, as described in the footnote 3, also acquiring 20% of the shares in the associated Birla Societá Agricola (“Birla”). Birla operations are pork raising and fattening for the King’s group in Europe.

12 Property, plant and equipment

Changes in property, plant and equipment:

Company	December 31, 2022		Additions net of transferences (1)			Incorporation (2)		Disposals			Depreciation expense			September 30, 2023
Buildings		3,580,188		481,578			14,402		(42,912	)		(185,806	)		3,847,450
Land		1,749,340		293,857			276		(83	)		—			2,043,390
Machinery and equipment		3,066,247		323,003			14,181		(38,886	)		(234,457	)		3,130,088
Facilities		1,797,795		190,242			7,852		(843	)		(86,104	)		1,908,942
Computer equipment		41,814		17,859			178		(702	)		(12,644	)		46,505
Vehicles (land and air)		515,344		273,194			371		(25,766	)		(69,324	)		693,819
Construction in progress		2,214,667		(636,295	)		—		—			—			1,578,372
Other		62,468		15,899			642		(1,535	)		(9,352	)		68,122
		13,027,863		959,337			37,902		(110,727	)		(597,687	)		13,316,688

 

23

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

Company	December 31, 2021		Additions net of transferences (1)		Disposals			Depreciation expense			September 30, 2022
Buildings		3,746,613		38,991		(411	)		(160,749	)		3,624,444
Land		1,748,561		870		—			—			1,749,431
Machinery and equipment		3,131,222		226,061		(2,389	)		(252,667	)		3,102,227
Facilities		1,680,385		147,554		(245	)		(78,151	)		1,749,543
Computer equipment		35,229		13,648		(189	)		(11,037	)		37,651
Vehicles (land and air)		442,619		155,755		(30,596	)		(53,090	)		514,688
Construction in progress		1,419,799		408,035		—			—			1,827,834
Other		64,412		6,902		(120	)		(8,613	)		62,581
		12,268,840		997,816		(33,950	)		(564,307	)		12,668,399

Consolidated	December 31, 2022		Additions net of transferences (1)			Business combination adjustments (5)			Disposals			Depreciation expense			Exchange rate variation			September 30, 2023
Buildings		19,722,714		2,734,217			21			(77,737	)		(957,115	)		(545,816	)		20,876,284
Land		5,512,969		305,349			—			(1,445	)		—			(131,678	)		5,685,195
Machinery and equipment		19,998,538		3,715,403			49,681			(152,052	)		(2,226,492	)		(598,574	)		20,786,504
Facilities		3,001,689		777,783			—			(4,339	)		(164,523	)		(800	)		3,609,810
Computer equipment		606,623		243,593			—			(2,951	)		(162,590	)		(11,729	)		672,946
Vehicles (land and air)		1,121,272		395,802			—			(29,463	)		(158,952	)		(37,179	)		1,291,480
Construction in progress		11,084,915		(2,356,037	)		—			(10,551	)		—			(206,447	)		8,511,880
Other		1,122,072		228,206			(73	)		(46,601	)		(131,288	)		(23,063	)		1,149,253
		62,170,792		6,044,316			49,629			(325,139	)		(3,800,960	)		(1,555,286	)		62,583,352

Consolidated	December 31, 2021		Acquired in business combinations (3)		Additions net of transferences (1)		Business combination adjustments (4)		Disposals			Depreciation expense			Exchange rate variation			September 30, 2022
Buildings		19,502,310		267,885		1,134,645		23		(4,690	)		(915,362	)		(907,680	)		19,077,131
Land		5,291,972		125,139		98,086		—		(19,042	)		—			(169,990	)		5,326,165
Machinery and equipment		20,191,401		187,489		2,635,185		366		(13,462	)		(2,158,149	)		(1,046,354	)		19,796,476
Facilities		2,717,858		4,257		318,129		—		(402	)		(131,020	)		1,617			2,910,439
Computer equipment		680,011		3,686		135,614		—		(20,979	)		(158,607	)		(45,354	)		594,371
Vehicles (land and air)		715,171		8,698		198,155		57		(32,737	)		(113,104	)		(12,482	)		763,758
Construction in progress		6,805,741		18,469		3,252,598		—		—			—			(211,507	)		9,865,301
Other		1,011,842		20,103		179,881		61		(4,016	)		(123,074	)		(57,081	)		1,027,716
		56,916,306		635,726		7,952,293		507		(95,328	)		(3,599,316	)		(2,448,831	)		59,361,357

⁽¹⁾ Additions for each category includes transfer from construction in progress during the period.

⁽²⁾ Related to the direct subsidiary Brazservice Ltda. incorporated in the second quarter of 2023.

⁽³⁾ Refers to the 2022´s first semester acquisitions, King´s and Rivalea during the first quarter, and Biotech during the second quarter.

⁽⁴⁾ Refers to the business combination adjustment in the BMF´s (“Bait Almakoolat Food”) acquisition at December 31, 2021. Due its immateriality, the adjustments were made at the first half of 2022 changes.

⁽⁵⁾ Refers to the business combination adjustment of the acquisition of TriOak acquired during the 2022 financial year, as described in explanatory note 3 - Business combination

For nine month period ended September 30, 2023, the amount of capitalized interest added to construction in progress and included in additions in the Company was R$100,994 (R$79,855 at December 31, 2022) and R$284,594 (R$369,155 at December 31, 2022) in the Consolidated. The capitalization rate used at September 30, 2023 was 8.97% p.y., in the Company and 2.57% p.y. in the Consolidated (7.05% p.y., in The Company and 3.70 a.a% p.y. in the Consolidated at December 31, 2022 )

 

24

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

Annually, the Company tests the recoverability of its assets that were identified as having any indicator of impairment using the concept of value in use through discounted cash flow models). The tests for recoverability of assets are applied at the end of each fiscal year on December 31, follow by indications of impairment during the course of the year. For the nine month period ended September 30, 2023, the Company recognized an impairment in fixed assets in the amount of US$20,8 million (R$108,300 million at September 30, 2023), related to the indirect subsidiary Planterra Foods Company, located at United States, due the closing of its operations.

13 Leases

The Company uses the optional exemption to not recognize a right of use asset and lease liability for short term (less than 12 months) and low value leases. The average discount rate used for the present value’s calculation of the lease provision of the identified assets and, consequently, for the monthly accrual of financial interest were 4.99% (8.25% at December 31, 2022) in the Company, and 8.07% (7.30% at December 31, 2022) in the Consolidated, in accordance with the term of each lease agreement and the economic policy of each subsidiary’s domicile.

13.1 Right of use asset

Changes in the right of use assets:

Company	December 31, 2022		Additions (1)		Terminated contracts			Amortization			September 30, 2023
Buildings		30,041		4,112		—			(11,654	)		22,499
Computer equipment		10,728		—		—			(6,950	)		3,778
Machinery and equipment		12,747		35,589		(263	)		(10,186	)		37,887
Operating plants		623		16,958		—			(4,225	)		13,356
Land		253		793		—			(425	)		621
Vehicles (land)		272		3,329		(54	)		(610	)		2,937
		54,664		60,781		(317	)		(34,050	)		81,078

Company	December 31, 2021		Additions (1)		Terminated contracts			Amortization			September 30, 2022
Buildings		18,789		648		—			(9,459	)		9,978
Computer equipment		18,531		—		—			(5,854	)		12,677
Machinery and equipment		4,146		11,294		(323	)		(3,222	)		11,895
Operating plants		3,365		852		—			(3,071	)		1,146
Land		437		213		—			(297	)		353
Vehicles (land)		222		133		—			(129	)		226
Furniture and appliances		93		—		(74	)		(19	)		—
		45,583		13,140		(397	)		(22,051	)		36,275

Consolidated	December 31, 2022		Business combination adjustments (3)			Additions (1)			Terminated contracts			Amortization			Exchange rate variation			September 30, 2023
Growing facilities		4,299,324		(51,500	)		742,291			(56,016	)		(621,214	)		(90,285	)		4,222,600
Buildings		2,227,940		—			794,113			(29,262	)		(308,629	)		(42,759	)		2,641,403
Computer equipment		48,089		—			(162	)		—			(16,645	)		(2	)		31,280
Machinery and equipment		547,282		—			125,734			(5,456	)		(191,645	)		(16,326	)		459,589
Operating plants		97,601		—			27,156			(686	)		(23,734	)		(789	)		99,548
Land		102,478		—			6,955			(117	)		(9,650	)		(2,316	)		97,350
Vehicles (land, air and sea)		1,052,178		—			388,571			(3,341	)		(269,761	)		(56,166	)		1,111,481
		8,374,892		(51,500	)		2,084,658			(94,878	)		(1,441,278	)		(208,643	)		8,663,251

 

25

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

Consolidated	December 31, 2021		Acquired in business combinations (2)			Additions (1)		Business combination adjustments (3)			Terminated contracts			Amortization			Exchange rate variation			September 30, 2022
Growing facilities		3,406,396		53,608			912,306		—			(181,661	)		(489,568	)		(79,252	)		3,621,829
Buildings		2,162,882		1,062			578,333		—			(16,534	)		(225,687	)		(285,728	)		2,214,328
Computer equipment		67,004		—			—		—			(15,092	)		(12,995	)		2			38,919
Machinery and equipment		748,637		(3,401	)		141,317		—			(14,053	)		(242,727	)		(47,366	)		582,407
Operating plants		113,605		—			27,836		—			(38,088	)		(16,751	)		(3,878	)		82,724
Land		365,027		12,603			5,732		(209,306	)		(71	)		(10,435	)		(23,930	)		139,620
Vehicles (land, air and sea)		1,095,266		17,269			269,352		—			(41,834	)		(294,184	)		(90,947	)		954,922
Furniture and appliances		94		—			—		—			(76	)		(18	)		—			—
		7,958,911		81,141			1,934,876		(209,306	)		(307,409	)		(1,292,365	)		(531,099	)		7,634,749

⁽¹⁾ Additions for each category includes PIS and COFINS to be paid.

⁽²⁾ Refers to the Rivalea’s acquisition, during the first quarter of 2022.

⁽³⁾ Refers to the business combination adjustment of the acquisition of TriOak acquired during the 2022 financial year, as described in explanatory note 3 - Business combination.

13.2 Lease liabilities

	Company						Consolidated
	September 30, 2023			December 31, 2022			September 30, 2023			December 31, 2022
Undiscounted lease payments		103,662			71,666			11,371,091			10,903,766
Present value adjustment		(10,299	)		(8,968	)		(2,073,330	)		(1,919,758	)
		93,363			62,698			9,297,761			8,984,008
Breakdown:
Current liabilities		47,040			27,675			1,746,548			1,788,353
Non-current liabilities		46,323			35,023			7,551,213			7,195,655
		93,363			62,698			9,297,761			8,984,008

Changes in the lease liabilities:

Company	December 31, 2022		Additions		Interest accrual		Payments			Terminated contracts			September 30, 2023
Lease liabilities		62,698		60,815		4,773		(34,588	)		(335	)		93,363

Company	December 31, 2021		Additions		Interest accrual		Payments			Terminated contracts			September 30, 2022
Lease liabilities		52,599		13,172		3,482		(24,774	)		(179	)		44,300

Consolidated	December 31, 2022		Business combination adjustments (3)			Additions		Interest accrual		Payments			Terminated contracts			Exchange rate variation			September 30, 2023
Lease liabilities		8,984,008		(51,501	)		2,105,268		367,535		(1,777,882	)		(39,545	)		(290,122	)		9,297,761

Consolidated	December 31, 2021		Acquired in business combinations (2)		Additions		Interest accrual		Payments			Terminated contracts			Exchange rate variation			September 30, 2022
Lease liabilities		8,344,280		81,141		1,958,972		318,720		(1,659,838	)		(315,951	)		(485,247	)		8,242,077

 

26

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

The amounts recognized as lease expense are shown below:

	Company		Consolidated
	2023		2023
Variable lease payments		6,330		2,265,973
Short term lease liability		18,176		969,567
Non-material lease liability		7,597		23,542
		32,103		3,259,082

The non-current portion of the lease liabilities schedule is as follows:

	September 30, 2023
	Company			Consolidated
2024		7,916			1,272,989
2025		27,618			1,246,766
2026		8,463			981,515
2027		2,454			728,913
2028		1,086			593,799
Maturities thereafter 2028		3,704			4,384,157
Total Future Minimum Lease Payments		51,241			9,208,139
Present Value of Lease Liabilities		(4,918	)		(1,656,926	)
		46,323			7,551,213

14 Intangible assets

Changes in intangible assets:

Company	December 31, 2022		Additions		Amortization expenses			September 30, 2023
Amortizing:
Trademarks		10,487		2,228		(3,721	)		8,994
Softwares		20,534		12,113		(3,828	)		28,819
		31,021		14,341		(7,549	)		37,813

Company	December 31, 2021		Additions		Disposals			Amortization expenses			September 30, 2022
Amortizing:
Trademarks		15,448		—		—			(3,721	)		11,727
Softwares		17,991		4,701		(13	)		(3,860	)		18,819
		33,439		4,701		(13	)		(7,581	)		30,546

Consolidated	December 31, 2022		Additions		Disposals			Amortization expenses			Exchange rate variation			September 30, 2023
Amortizing:
Trademarks		1,648,336		2,228		—			(84,363	)		(38,720	)		1,527,481
Softwares		109,985		29,895		(72	)		(19,013	)		(293	)		120,502
Customer relationships		2,868,194		11,566		(11,884	)		(275,498	)		(101,928	)		2,490,450
Supplier contract		159,187		—		—			(14,339	)		(2,521	)		142,327
Others		4,345		181		(146	)		(1,024	)		(176	)		3,180
Non-amortizing:
Trademarks		5,479,137		1,244		—			—			(214,879	)		5,265,502
Water rights		59,205		—		—			—			(3,055	)		56,150
		10,328,389		45,114		(12,102	)		(394,237	)		(361,572	)		9,605,592

 

27

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

Consolidated	December 31, 2021		Acquired in business combination (1)		Additions		Business combination adjustments (2)		Disposals			Amortization expenses			Exchange rate variation			September 30, 2022
Amortizing:
Trademarks		1,871,992		110,375		25		—		—			(86,506	)		(268,796	)		1,627,090
Softwares		92,689		320		30,304		—		(286	)		(16,936	)		(607	)		105,484
Customer relationships		3,602,262		—		—		5,420		—			(298,982	)		(366,770	)		2,941,930
Supplier contract		183,974		—		—		—		—			(14,557	)		(2,954	)		166,463
Others		5,583		3,120		—		—		—			(1,478	)		(324	)		6,901
Non-amortizing:
Trademarks		5,962,710		67		1,389		4,093		—			—			(658,233	)		5,310,026
Water rights		64,706		—		—		—		—			—			(3,855	)		60,851
		11,783,916		113,882		31,718		9,513		(286	)		(418,459	)		(1,301,539	)		10,218,745

⁽¹⁾ Refers to the 2022´s first semester acquisitions, King´s in the first quarter, and Biotech during the second quarter.

⁽²⁾ Refers to the business combination adjustment in the BMF´s (“Bait Almakoolat Food”) acquisition at December 31, 2021. Due its immateriality, the adjustments were made at the first semester of 2022 changes.

Impairment test:

Annualy, the Company tests the recoverability of its assets using the concept of value in use through cash flow models and at the nine month period ended September 30, 2023, there were no indications of impairment.

15 Goodwill

In the Company, goodwill is recognized under the caption “Investments in subsidiaries, associate and joint venture” because for the investor it is part of its investment in the subsidiary’s acquisition; and as goodwill, in the Consolidated because it refers to expectation of future earnings from the acquired subsidiary, which assets and liabilities are consolidated with the Company’s. Therefore, in the Company there is only goodwill from incorporations in the amount of R$9,085,970 and in the Consolidated all goodwill are recognized as intangible. For tax purposes, all the goodwill recorded in the Company was fully amortized in the year ended December 31, 2021.

Changes in goodwill:

	Consolidated
	September 30, 2023			September 30, 2022
Initial balance		30,412,362			32,564,548
Acquired in business combination (1)		—			207,269
Business combination adjustments (2)		64,206			30,877
Write-off for recoverability (3)		—			(85,601	)
Exchange rate variation		(765,620	)		(2,340,368	)
Closing balance		29,710,948			30,376,725

⁽¹⁾ Refers to the King´s acquisition, during the first quarter of 2022.

⁽²⁾ Refers to the TriOak´s business combination adjustments, acquired during the year ended at 2022, as described in the footnote 3 - Business Combination. During 2022, refers to the business combination adjustment in the acquisitions during the years ended in December 31, 2021, Randall Parker, BMF, Sunnyvaley and Pilgrim’s Food Masters. Due the immateriality, the adjustments were made to the movement in the first quarter of 2022.

⁽³⁾ Refers to the impairment provision that the Company recognized in intangible assets in one of its subsidiaries, with operations in South America.

	Consolidated
CGU	September 30, 2023		December 31, 2022
Brazil Beef		9,069,926		9,069,926
Seara		3,713,542		3,714,070
Moy Park		3,740,601		3,837,113
USA Pork		3,477,948		3,623,871
Australia Meat		1,330,384		1,445,908
Australia Smallgoods		1,470,967		1,598,730
Vivera		625,574		649,682
Pilgrim’s Food Masters (PFM)		1,623,869		1,673,144
Others CGUs without significant goodwill		4,658,137		4,799,918
Total		29,710,948		30,412,362

The Company tests annually for the nine month period ended September 30, 2023 there were no indications that goodwill within any CGU was impaired.

 

28

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

16 Trade accounts payable

	Company						Consolidated
	September 30, 2023			December 31, 2022			September 30, 2023			December 31, 2022
Domestic
Commodities		1,905,329			2,657,465			6,859,409			9,564,105
Materials and services		1,216,324			1,163,927			16,798,058			20,253,472
Finished products		237,082			229,817			182,784			71,860
Present value adjustment		(30,750	)		(15,601	)		(84,490	)		(78,670	)
		3,327,985			4,035,608			23,755,761			29,810,767
Foreign
Commodities		55,947			75,910			138,301			190,976
Materials and services		200,493			183,605			1,263,717			1,003,257
Finished products		14,266			2,732			7,903			4,515
		270,706			262,247			1,409,921			1,198,748
Total trade accounts payable		3,598,691			4,297,855			25,165,682			31,009,515
Supply chain finance (1)
Domestic		1,298,007			1,263,694			3,536,571			2,996,425
Foreign		—			—			40,801			74,674
Total supply chain finance		1,298,007			1,263,694			3,577,372			3,071,099
Total		4,896,698			5,561,549			28,743,054			34,080,614

⁽¹⁾ The Company and its indirect subsidiary Seara Alimentos carry out transactions with financial institutions that allow the suppliers to anticipate their receivables in the domestic market. It should be emphasized, operationally and commercially, there are no identifiable changes to the conditions applied in the negotiations with suppliers such as price or flexibility on payment terms. In addition, this operation did not bring any other cost to the Group and all financial costs of the operation are the responsibility of the suppliers.

The Company enters into purchase agreements for livestock with certain suppliers ensuring a fixed price, or to fix, when purchasing cattle, without a cash impact in the Company until the receiving the cattle or maturity date of these commitments. Based on this future commitment contract, JBJ has already advanced this operation with the banks under the supply chain finance modality. At September 30, 2023 the balance of this transaction was R$320,300 (R$451,800 at December 31, 2022).

17 Loans and financing

	Company
	Average				Index on		Current				Non-current
Type	annual interest rate			Currency	variable rate loans	Payment terms	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Foreign currency
ACC (1)		7.28	%	USD	SOFR	2023 - 24		4,786,273		2,174,591		—		266,395
Prepayment		6.68	%	USD	SOFR	2023 - 27		834,754		1,034,831		2,600,245		1,225,211
FINIMP (2)		6.29	%	USD e EUR	Libor and Euribor	2023 - 25		239,537		525,112		10,787		15,867
Working capital - American Dollar		8.93	%	USD	Libor	2030		1,794		1,821		13,142		14,824
CRA (3)		3.98	%	USD	—	2027		1,929		484		102,661		66,564
								5,864,287		3,736,839		2,726,835		1,588,861
Local currency
Credit note - export		14.99	%	BRL	CDI	2023 - 28		441,337		274,829		2,117,550		1,478,966
CRA (3)		8.97	%	BRL	CDI and IPCA	2023 - 37		144,643		853,054		8,732,127		7,618,405
Working capital - Brazilian Reais		18.91	%	BRL	TJLP	2023 - 28		17,479		85,648		86,044		3,378
CDC (5)		16.17	%	BRL	—	2023 - 28		90,329		40,298		56,918		467
FINAME (4)		5.83	%	BRL	—	2023 - 25		3,063		4,618		274		2,299
FINEP (6)		9.01	%	BRL	—	2025		4,667		4,643		3,863		7,277
								701,518		1,263,090		10,996,776		9,110,792
								6,565,805		4,999,929		13,723,611		10,699,653

 

29

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

	Consolidated
	Average						Current				Non-current
Type	annual interest rate			Currency	Indexer	Payment terms	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Foreign currency
ACC (1)		7.28	%	USD	SOFR	2023 - 24		4,786,273		2,174,591		—		266,395
Prepayment		6.68	%	USD	Libor and SOFR	2023 - 27		834,754		2,074,077		2,600,245		1,974,791
FINIMP (2)		6.29	%	USD and EUR	Libor and Euribor	2023 - 25		239,537		525,112		10,787		15,867
White Stripe credit facility		8.46	%	USD and CAD	—	2023		13,475		15,757		—		—
Working capital - American Dollar		8.93	%	USD	Libor	2030		1,794		9,055		13,142		14,824
CRA (3)		3.98	%	USD	—	2027		1,929		484		102,661		66,564
Scott credit facilities		2.20	%	USD	—	2024		—		—		8,863		9,361
								5,877,762		4,799,076		2,735,698		2,347,802
Local currency
FINAME (4)		5.83	%	BRL	—	2023 - 25		3,063		4,618		274		2,299
FINEP (6)		9.01	%	BRL	—	2025		4,667		4,643		3,863		7,277
Prepayment		7.70	%	GBP, USD	SOFR	2023		164,093		49,792		400,608		—
Notes 2,50% JBS Lux 2027		2.50	%	USD	—	2027		24,342		58,339		4,933,121		5,124,220
Notes 5,13% JBS Lux 2028		5.13	%	USD	—	2028		34,648		123,675		4,434,524		4,611,232
Notes 6,50% JBS Lux 2029		6.50	%	USD	—	2029		11,282		5,218		389,997		406,297
Notes 3,00% JBS Lux 2029		3.00	%	USD	—	2029		13,270		37,567		2,931,909		3,044,523
Notes 5,50% JBS Lux 2030		5.50	%	USD	—	2030		66,942		160,429		6,206,854		6,460,823
Notes 3,75% JBS Lux 2031		3.75	%	USD	—	2031		29,730		6,793		2,479,673		2,581,447
Notes 3,00% JBS Lux 2032		3.00	%	USD	—	2032		54,247		17,829		4,906,045		5,102,849
Notes 3,63% JBS Lux 2032		3.63	%	USD	—	2032		35,299		84,589		4,927,347		5,126,840
Notes 5,75% JBS Lux 2033		5.75	%	USD	—	2033		285,298		316,062		10,013,701		10,422,947
Notes 6.75% JBS Lux 2034		6.75	%	USD		2034		9,014		—		7,889,217		—
Notes 4,38% JBS Lux 2052		4.38	%	USD	—	2052		29,029		82,179		4,442,331		4,626,984
Notes 6,50% JBS Lux 2052		6.50	%	USD	—	2052		159,762		36,508		7,646,974		7,966,046
Notes 7.25% JBS Lux 2053		7.25	%	USD		2053		5,443		—		4,422,161		—
Notes 5,88% PPC 2027		5.88	%	USD	—	2027		121,559		62,247		4,222,618		4,393,351
Notes 4,25% PPC 2031		4.25	%	USD	—	2031		94,589		43,735		4,926,646		5,125,076
Notes 3,50% PPC 2032		3.50	%	USD		2032		10,516		52,506		4,461,275		4,644,343
Notes 6,25% PPC 2033		6.25	%	USD	—	2033		135,621		—		4,925,304		—
PPC term loan				USD	Libor	2023		—		139,459		—		2,359,382
Working capital - Brazilian Reais		18.91	%	BRL	TJLP	2023		17,479		85,648		86,044		3,378
Working capital - Euros		4.26	%	EUR	Euribor	2023		104,186		60,867		10,672		9,929
Credit note - export		14.95	%	BRL	CDI	2023 - 28		443,827		757,171		2,122,638		1,538,653
CDC (5)		16.17	%	BRL	—	2023 - 28		90,329		40,298		56,918		467
Rural - Credit note - Prefixed		11.00	%	BRL	—	2023		1,144,570		185,020		—		—
Rural - Credit note				BRL	CDI	2024		—		4,176		—		5,834
CRA (3)		8.97	%	BRL	CDI and IPCA	2024 - 37		144,643		853,054		8,732,127		7,618,405
Scott credit facilities		7.32	%	AUD, EUR and USD	—	2023-24		35,754		70,168		1,057		209
Beardstown Pace credit facilities		3.66	%	USD	—	2035 - 50		36,370		38,741		331,929		328,553
JBS Australia feedlot		2.76	%	AUD	—	2023-24		4,091		1,346		161,270		175,273
Other		5.28	%	Others	Others	2024 - 31		47,879		46,804		71,599		91,065
								3,361,542		3,429,481		96,138,696		81,777,702
								9,239,304		8,228,557		98,874,394		84,125,504

⁽¹⁾ Advances on Exchange Contracts.

⁽²⁾ Financing for Imports.

⁽³⁾ Agribusiness Credit Receivable Certificates.

⁽⁴⁾ Financing for Acquisition of Industrial Machinery and Equipment.

⁽⁵⁾ Direct Credit to Consumers.

⁽⁶⁾ Financing for Studies and Projects.

 

30

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

The amendments to IFRS for Interest Rate Benchmark Reform are effective for annual periods beginning on or after January 1, 2021. In line with the LIBOR and other Interbank Offered Rates (IBORs) transition project, the Group has been following the evolution of this matter with its partner banks and been discussing how to replace the index in current contracts. The new contracts are negotiated at the Overnight Guaranteed Financing Rate (“SOFR”), and the current contracts remain indexed to LIBOR until the settlement date, without conversion impacts.

Average annual interest rate: Refers to the weighted average nominal cost of interest at the reporting date. The loans and financings are fixed by a fixed rate or indexed to rates: CDI, LIBOR, Euribor, SOFR, IPCA, TJLP, among others.

At September 30, 2023, the availability under Brasil revolving credit facilities was US$450 million (R$2.3 billion at September 30, 2023) and US$450 million (R$2.4 billion at December 31, 2022). In the United States the revolving credit facilities at September 30, 2023, was US$2.9 billion (R$14.5 billion at September 30, 2023) and US$2.8 billion (R$14.4 billion at December 31, 2022).

The non-current portion of the principal payment schedule of loans and financing is as follows:

	September 30, 2023
Maturity	Company		Consolidated
2024		887,008		1,041,276
2025		1,988,687		2,360,748
2026		984,118		1,032,977
2027		1,371,874		10,536,423
2028		749,779		5,386,751
Maturities thereafter 2028		7,742,145		78,516,219
		13,723,611		98,874,394

17.1 Guarantees and contractual restrictions (“covenants”)

The Company was in compliance with all of its debt covenant restrictions at September 30, 2023 and until the date that these financial statements were approved.

The Company, together with its indirect subsidiaries JBS Global Luxembourg S.à.r.l., JBS Holding Luxembourg S.à r.l., JBS USA Holding Lux S.à r.l. and JBS Global Meat Holdings Pty. Limited, are guarantors of certain senior notes listed in the SEC, located in the United States of America.

18 Other taxes payable

	Company				Consolidated
	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Taxes payable in installments		305,804		421,221		347,331		469,228
PIS / COFINS tax payable		74,531		87,732		159,817		157,670
ICMS / VAT / GST tax payable		43,582		40,592		147,449		146,518
Withholding income taxes		29,896		42,399		32,376		44,796
Others		4,977		2,758		514,684		513,550
Subtotal		458,790		594,702		1,201,657		1,331,762
Income taxes payable		—		—		158,305		475,174
Total		458,790		594,702		1,359,962		1,806,936
Breakdown:
Current liabilities		210,270		281,532		832,788		1,200,895
Non-current liabilities		248,520		313,170		527,174		606,041
		458,790		594,702		1,359,962		1,806,936

 

31

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

19 Payroll and social charges

	Company				Consolidated
	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Social charges in installments		2,372,818		2,214,052		2,402,984		2,249,109
Bonus and vacation along with related social charges		496,404		272,304		3,616,797		3,839,027
Salaries and related social charges		242,693		445,929		2,156,721		2,276,815
Others		16,528		10,829		275,993		265,151
		3,128,443		2,943,114		8,452,495		8,630,102
Breakdown:
Current liabilities		1,126,789		1,083,670		6,038,359		6,251,132
Non-current liabilities		2,001,654		1,859,444		2,414,136		2,378,970
		3,128,443		2,943,114		8,452,495		8,630,102

Labor taxes payable in installments: In December 2022, the Federal Supreme Court (STF) in a decision favorable to the Direct Action of Unconstitutionality (ADI No. 4,395), declared that was unconstitutional the subrogation of the collection of social security contributions referring to the Assistance Fund for Rural Workers (FUNRURAL) to slaughterhouses, consumer companies, consignees or cooperatives purchasing production. The Company is also waiting for the approval of the minute of judgment and the decision by the STF that will define the period for which the decision will take effect. On September 30, 2023, the Company and its subsidiaries have recognized under “Social charges in installments” the amount of R$1.73 billion, in the Company and R$1.76 billion, in the Consolidated related to the FUNRURAL. For the nine month period ended September 30, 2023, the Company and its subsidiaries paid installments in cash and offset with the balance of recoverable taxes the amount of R$1.09 billion, in the Company and R$1.13 billion in the Consolidated.

20 Provisions for legal proceedings

The Company is part of several lawsuits arising in the ordinary course of business for which provisions are recognized based on estimated costs determined by Management as follows:

	Company				Consolidated
	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Labor		254,587		252,392		530,427		517,958
Civil		117,640		77,765		971,857		1,162,505
Tax and Social Security		188,215		148,028		703,453		550,049
Total		560,442		478,185		2,205,737		2,230,512

	Company				Consolidated
	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Current liabilities		—		—		631,659		909,132
Non-current liabilities		560,442		478,185		1,574,078		1,321,380
		560,442		478,185		2,205,737		2,230,512

 

32

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

Changes in provisions:

	Company
	December 31, 2022		Additions, disposals and changes in prognosis		Payments			Monetary correction		September 30, 2023
Labor		252,392		102,253		(118,445	)		18,387		254,587
Civil		77,765		64,651		(50,691	)		25,915		117,640
Tax and social security		148,028		15,160		—			25,027		188,215
Total		478,185		182,064		(169,136	)		69,329		560,442

	Company
	December 31, 2021		Additions, disposals and changes in prognosis			Payments			Monetary correction		September 30, 2022
Labor		252,496		74,865			(94,668	)		15,216		247,909
Civil		55,658		18,314			(4,003	)		7,176		77,145
Tax and social security		174,439		(43,785	)		(7,760	)		10,566		133,460
Total		482,593		49,394			(106,431	)		32,958		458,514

	Consolidated
	December 31, 2022		Additions, disposals and changes in prognosis		Payments			Monetary correction		Exchange rate variation			September 30, 2023
Labor		517,958		227,664		(254,920	)		39,837		(112	)		530,427
Civil		1,162,505		320,371		(532,390	)		67,530		(46,159	)		971,857
Tax and social security		550,049		93,211		(2,782	)		63,205		(230	)		703,453
Total		2,230,512		641,246		(790,092	)		170,572		(46,501	)		2,205,737

	Consolidated
	December 31, 2021		Additions, disposals and changes in prognosis			Payments			Monetary correction		Exchange rate variation			September 30, 2022
Labor		538,804		181,302			(230,822	)		35,218		(79	)		524,423
Civil		1,568,873		514,294			(895,961	)		16,594		(40,334	)		1,163,466
Tax and social security		560,164		(79,899	)		(7,846	)		32,128		(112	)		504,435
Total		2,667,841		615,697			(1,134,629	)		83,940		(40,525	)		2,192,324

 

33

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

In the subsidiary JBS USA:

a. Civil Proceedings: Refers to several class action lawsuits, alleging violations of federal and state antitrust, unfair competition, unfair enrichment, deceptive trade practice, and consumer protection laws on sales of beef, pork and chicken. For the nine month period ended September 30, 2023 the indirect subsidiary JBS USA recognized an accrual in the amount of 42,2 million (R$211,321 at September 30, 2023), in the three month period ended at September 30, 2023 in the amount of US$10.5 million (R$52,580 at September 30, 2023). Also at September 30, 2023, were paid US$60.0 million (R$300,456 at September 30, 2023). At September 30, 2023, the remaining accrual is 126,140 million (R$631,659 at September 30, 2023).

The Company, together with its legal department and hired external offices, continues to monitor the developments of the antitrust proceedings and understand that the accounting provisions measured and known up to the date of approval of these financial statements are sufficient for risk coverage.

21 Equity

a. Share capital: Share capital on September 30, 2023 was R$23,576,206 (R$23,576,206 at December 31, 2022), represented by 2,218,116,370 common shares, having no nominal value.

	September 30, 2023				December 31, 2022
	Quantity		R$ thousand		Quantity			R$ thousand
Initial balance		2,218,116,370		23,576,206		2,373,866,570			23,576,206
Cancellation of treasury shares		—		—		(155,750,200	)		—
Final balance		2,218,116,370		23,576,206		2,218,116,370			23,576,206

b. Profit reserve:

b1. Treasury shares: Treasury shares include self-issued shares repurchased by the Company. As of September 30, 2023, the Company had no balance in treasury shares.

b2. Dividends: On June 19, 23, the Company approved the distribution of interim dividends referring to the net income from the year ended at December 31, 2022 in the amount of R$R$2.22 billion, corresponding to R$1,00 per ordinary share, in accordance with the shareholder´s base at June 22, 2023. The interim dividends were paid at June 29, 2023.

b3. Tax incentive reserve: The Company and its subsidiaries have grants granted by state governments, such as partial and full reduction of the tax base of certain goods in its production chain, in accordance with the regulations of each state and presumed ICMS tax credits. The appropriated amounts of these tax incentives as income in income are excluded in the calculation of taxes on income when the requirements set forth in current legislation are met.

During the nine month period ended September 30, 2023, the Company and its subsidiaries calculated the amount of government grants in the amount of R$3.22 billion that were not recognized since the Company registered losses up to the approval of these financial statements. The Company also informs that such amounts will be recognized in the tax incentive reserve as the accumulated loss are absorbed by future profits and that such amount will reduce the amount of dividends in subsequent periods.

c. Other comprehensive income: Composed by gain (loss) on cash flow hedge, gain (loss) associated with pension and other postretirement benefit obligations, valuation adjustments to equity in subsidiaries, gain (loss) on net investment in foreign operations and gain (loss) on foreign currency translation adjustments. In the financial statement which includes the foreign entity, such exchange variations must be recognized, initially, in other comprehensive income in a specific equity account, and must be transferred from equity to the income statement when the net investment is written off.

c1. Net investment of foreign operations: The Company has certain intercompany loans balances with the subsidiaries JBS Luxembourg S.à.r.l and JBS Investments Luxembourg S.à.r.l which will not be settled through cash but with equity transactions, such as capital contribution or capital reduction. Therefore, these balances are an extension of the subsidiary’s investment, thus they are considered as net investment on foreign operations. The exchange variation is recognized in other comprehensive income (loss) and reclassified from equity to profit or loss on disposal of net investment, during the period.

 

34

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

22 Net revenue

	Company												Consolidated
	Nine month period ended September 30,						Three month period ended September 30,						Nine month period ended September 30,						Three month period ended September 30,
	2023			2022			2023			2022			2023			2022			2023			2022
GROSS REVENUE
Sales of products and services
Domestic sales		22,743,164			23,901,631			7,945,427			7,975,290			209,048,897			214,909,867			71,076,830			73,695,651
Export sales		16,903,540			20,084,905			6,124,198			7,870,807			67,585,006			75,760,365			23,581,882			28,086,207
		39,646,704			43,986,536			14,069,625			15,846,097			276,633,903			290,670,232			94,658,712			101,781,858
SALES DEDUCTION
Returns and discounts		(1,260,699	)		(1,588,309	)		(417,888	)		(445,321	)		(6,362,416	)		(6,098,482	)		(2,218,612	)		(1,974,055	)
Sales taxes		(742,724	)		(565,287	)		(273,220	)		(158,709	)		(2,795,663	)		(2,585,635	)		(1,030,636	)		(879,646	)
		(2,003,423	)		(2,153,596	)		(691,108	)		(604,030	)		(9,158,079	)		(8,684,117	)		(3,249,248	)		(2,853,701	)
NET REVENUE		37,643,281			41,832,940			13,378,517			15,242,067			267,475,824			281,986,115			91,409,464			98,928,157

22.1 Customer contract balances

Customer contract liabilities relate to payments received in advance of satisfying the performance obligation under the contract. A contract liability is recognized when the Company has an obligation to transfer products to a customer from whom the consideration has already been received. The recognition of the contractual liability occurs at the time when the consideration is received and settled. The Company recognizes revenue upon fulfilling the related performance obligation. Contract liabilities are presented as advances from customers in the balance sheet.

		Company				Consolidated
	Note	2023		2022		2023		2022
Trade accounts receivable	5		2,343,288		4,380,011		16,454,419		20,234,895
Contract liabilities			736,906		449,744		1,678,205		1,124,306

23 Net finance income (expense)

	Company												Consolidated
	Nine month period ended September 30,						Three month period ended September 30,						Nine month period ended September 30,						Three month period ended September 30,
	2023			2022			2023			2022			2023			2022			2023			2022
Exchange rate variation		386,885			1,532,326			186,648			(100,543	)		520,625			2,324,439			223,759			175,461
Fair value adjustments on derivatives		119,358			(1,073,396	)		(242,893	)		(177,615	)		(279,297	)		(1,411,829	)		(278,004	)		(159,873	)
Interest expense (1)		(2,980,155	)		(2,308,565	)		(860,889	)		(717,354	)		(6,237,591	)		(5,019,638	)		(2,092,755	)		(1,730,055	)
Interest income (2)		391,276			325,398			137,088			114,148			1,123,863			1,042,952			378,386			467,304
Bank fees and others		(117,773	)		(146,124	)		(50,512	)		(42,094	)		(188,719	)		(1,154,508	)		(70,524	)		(249,135	)
		(2,200,409	)		(1,670,361	)		(830,558	)		(923,458	)		(5,061,119	)		(4,218,584	)		(1,839,138	)		(1,496,298	)
Financial income		1,140,412			2,449,109			323,736			114,148			1,719,701			3,870,347			602,145			642,765
Financial expense		(3,340,821	)		(4,119,470	)		(1,154,294	)		(1,037,606	)		(6,780,820	)		(8,088,931	)		(2,441,283	)		(2,139,063	)
		(2,200,409	)		(1,670,361	)		(830,558	)		(923,458	)		(5,061,119	)		(4,218,584	)		(1,839,138	)		(1,496,298	)

(1)	For the nine month period ended September 30, 2023 and 2022, the amounts of R$1,322,522 and R$939,437, respectively, in the Company and R$4,260,522 and R$3,381,195, in the Consolidated refers to interest expenses from loans and financings expenses recognized under the caption “Interest expense”.
(2)	For the nine month period ended September 30, 2023 and 2022, the amounts of R$116,509 and R$45,632, respectively, in the Company and R$307,483 and R$262,432, respectively, in the Consolidated refers to interest income from short investments recognized under the caption “Interest income”.

 

35

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

24 Earnings (loss) per share

Basic and diluted: There were no changes in the basic earnings (loss) per share calculation assumptions since the disclosed financial statements from December 31, 2022.

	Nine month period ended September 30,						Three month period ended September 30,
	2023			2022			2023		2022
Net income attributable to Company shareholders		(1,143,576	)		13,108,146			572,651		4,013,608
Weighted average common shares outstanding		2,218,116			2,254,345			2,218,116		2,218,116
Weighted average - treasury shares		—			(21,967	)		—		—
Weighted average - common shares outstanding		2,218,116			2,232,378			2,218,116		2,218,116
Basic and diluted earnings (losses) per share - (R$)		(0.52	)		5.87			0.26		1.81

25 Operating segments and information by geographic area

There are no changes in the structure of operating segments and geographic reporting since the disclosed financial statements from December 31, 2022.

The information by consolidated operational segments is as follows:

Nine month period ended September 30, 2023
	Brazil		Seara		Beef North America		Pork USA		Pilgrim’s Pride		Australia		Others			Total reportable segments		Elimination (1)			Total
Net revenue		40,626,948		30,847,785		85,181,321		28,081,100		64,196,657		22,404,287		3,229,244			274,567,342		(7,091,518	)		267,475,824
Adjusted EBITDA (2)		1,456,614		1,133,285		1,052,054		1,638,866		5,449,311		1,357,407		(36,766	)		12,050,771		(9,033	)		12,041,738
Nine month period ended September 30, 2022
	Brazil		Seara		Beef North America		Pork USA		Pilgrim’s Pride		Australia		Others			Total reportable segments		Elimination (1)			Total
Net revenue		44,677,563		31,935,400		85,316,000		31,491,081		68,389,470		24,393,701		3,346,729			289,549,944		(7,563,829	)		281,986,115
Adjusted EBITDA (2)		2,067,105		3,901,880		9,685,106		2,911,737		9,798,371		1,650,822		(12,832	)		30,002,189		(8,211	)		29,993,978
Nine month period ended September 30, 2023
	Brazil		Seara		Beef North America		Pork USA		Pilgrim’s Pride		Australia		Others			Total reportable segments		Elimination (1)			Total
Net revenue		14,441,141		10,207,775		29,054,246		9,890,497		21,261,373		7,687,894		686,660			93,229,586		(1,820,122	)		91,409,464
Adjusted EBITDA (2)		484,386		566,440		502,726		1,020,860		2,195,034		664,625		(21,658	)		5,412,413		(3,011	)		5,409,402
Nine month period ended September 30, 2022
	Brazil		Seara		Beef North America		Pork USA		Pilgrim’s Pride		Australia		Others			Total reportable segments		Elimination (1)			Total
Net revenue		16,240,155		11,767,558		29,155,843		11,154,779		23,441,131		8,736,383		1,191,158			101,687,007		(2,758,850	)		98,928,157
Adjusted EBITDA (2)		825,673		1,780,289		2,525,431		999,168		2,955,145		493,353		(30,503	)		9,548,556		(2,739	)		9,545,817

⁽¹⁾ Includes intercompany and intersegment transactions.

 

36

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

⁽²⁾ The Adjusted EBITDA is reconciled with the consolidated operating profit, as follows below:

	Operating profit (loss)
	Nine month period ended September 30,					Three month period ended September 30,
	2023		2022			2023			2022
Operating profit		3,526,093		22,098,627			2,610,512			6,992,726
Depreciation and amortization		7,865,984		7,228,807			2,615,613			2,438,839
Antitrust agreements (1)		211,536		491,629			51,245			164,307
Donations and social programs (2)		55,286		104,493			18,050			12,024
Impairment assets (3)		108,300		85,601			(4,434	)		—
JBS Fund for the Amazon		—		5,500			—			2,500
Restructuring (4)		193,390		—			4,587			—
Other operating income (expense), net (5)		81,149		(20,679	)		113,829			(64,579	)
Elimination		9,033		8,211			3,011			2,739
Total Adjusted EBITDA for operating segments		12,050,771		30,002,189			5,412,413			9,548,556

⁽¹⁾ Refers to the agreements entered by JBS USA and its subsidiaries as described in Note 20 – Provisions for legal proceedings.

⁽²⁾ Refers to the donations, as described in Note 26 – Expenses by nature.

⁽³⁾ Refers to the impairment of assets related to Planterra’s plant closure during the year ended at 2023.

⁽⁴⁾ Refers to the project to implement multiple restructuring initiatives mainly at the indirect subsidiary Pilgrim’s Pride Corporation (PPC). Refers to the project to implement multiple restructuring initiatives at the indirect subsidiary Pilgrim’s Pride Corporation (PPC).

⁽⁵⁾ Refers to several adjustments basically in JBS USA’s jurisdiction such as third-party advisory expenses acquisitions, marketing of social programs, insurance claims, among others.

For additional information, the net revenue and total assets are present below segregated by geographic area.

Nine month period ended September 30, 2023
	North and Central America (2)		South America		Australia		Europe		Others		Total reportable segments		Intercompany elimination (1)			Total
Net revenue		158,196,178		66,791,584		20,827,112		22,259,364		953,908		269,028,146		(1,552,322	)		267,475,824
Total assets		169,391,117		88,387,080		18,035,723		25,687,713		10,333,315		311,834,948		(97,320,392	)		214,514,556
Nine month period ended September 30, 2022
	North and Central America (2)		South America		Australia		Europe		Others		Total reportable segments		Intercompany elimination (1)			Total
Net revenue		167,834,368		72,372,091		24,655,257		21,534,236		771,378		287,167,330		(5,181,215	)		281,986,115
Total assets		151,146,037		88,094,837		18,844,673		26,276,425		11,261,253		295,623,225		(87,512,597	)		208,110,628
Three month period ended September 30, 2023
	North and Central America (2)		South America		Australia		Europe		Others		Total reportable segments		Intercompany elimination (1)			Total
Net revenue		53,586,027		23,207,199		7,214,114		7,339,259		392,501		91,739,100		(329,636	)		91,409,464
Three month period ended September 30, 2022
	North and Central America (2)		South America		Australia		Europe		Others		Total reportable segments		Intercompany elimination (1)			Total
Net revenue		58,753,657		25,069,596		8,997,939		7,722,249		261,684		100,805,125		(1,876,969	)		98,928,156

(1)	Includes intercompany and intersegment transactions.
(2)	Including the holdings located in Europe that are part of the North American operation.

 

37

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

26 Expenses by nature

The Company’s policy is to present expenses by function on the consolidated statement of income (loss). Expenses by nature are disclosed below:

	Company												Consolidated
	Nine month period ended September 30,						Three month period ended September 30,						Nine month period ended September 30,						Three month period ended September 30,
	2023			2022			2023			2022			2023			2022			2022			2021
Cost of sales
Cost of inventories, raw materials and production inputs		(29,802,125	)		(33,479,700	)		(10,529,540	)		(11,968,289	)		(204,252,299	)		(200,301,264	)		(68,795,014	)		(71,259,767	)
Salaries and benefits		(1,923,489	)		(1,442,617	)		(642,889	)		(565,478	)		(27,792,595	)		(26,665,122	)		(9,293,106	)		(9,324,771	)
Depreciation and amortization		(377,294	)		(324,378	)		(120,960	)		(111,511	)		(6,876,684	)		(6,229,551	)		(2,268,745	)		(2,107,610	)
		(32,102,908	)		(35,246,695	)		(11,293,389	)		(12,645,278	)		(238,921,578	)		(233,195,937	)		(80,356,865	)		(82,692,148	)
Selling
Freights and selling expenses		(2,346,524	)		(2,333,778	)		(856,711	)		(929,925	)		(14,244,185	)		(15,143,411	)		(4,609,830	)		(5,364,167	)
Salaries and benefits		(333,752	)		(213,832	)		(114,994	)		(98,692	)		(1,116,042	)		(927,786	)		(381,038	)		(359,203	)
Depreciation and amortization		(67,302	)		(62,327	)		(22,881	)		(27,162	)		(242,631	)		(234,016	)		(81,030	)		(81,691	)
Advertising and marketing		(110,141	)		(115,682	)		(34,289	)		(51,132	)		(1,147,634	)		(1,244,650	)		(364,911	)		(456,020	)
Commissions		(73,447	)		(110,949	)		(28,854	)		(54,386	)		(212,129	)		(280,140	)		(76,335	)		(105,347	)
Net impairment losses		(2,138	)		(18,027	)		(11,137	)		(11,362	)		(1,332	)		(42,510	)		3,214			(42,510	)
		(2,933,304	)		(2,854,595	)		(1,068,866	)		(1,172,659	)		(16,963,953	)		(17,872,513	)		(5,509,930	)		(6,408,938	)
General and administrative
Salaries and benefits		(839,233	)		(1,251,481	)		(356,360	)		(398,923	)		(4,359,486	)		(5,146,699	)		(1,575,463	)		(1,715,633	)
Fees, services held and general expenses		(816,118	)		(800,669	)		(309,149	)		(319,857	)		(2,734,133	)		(2,512,401	)		(996,345	)		(932,257	)
Depreciation and amortization		(194,690	)		(207,234	)		(72,713	)		(60,663	)		(746,669	)		(765,240	)		(265,839	)		(249,538	)
DOJ and Antitrust agreements		—			—			—			—			(211,536	)		(491,629	)		(51,245	)		(164,307	)
Donations and social programs (1)		(55,286	)		(104,493	)		(22,913	)		(12,024	)		(55,286	)		(104,493	)		(18,050	)		(12,024	)
JBS Fund For The Amazon		—			(5,500	)		—			(2,500	)		—			(5,500	)		—			(2,500	)
		(1,905,327	)		(2,369,377	)		(761,135	)		(793,967	)		(8,107,110	)		(9,025,962	)		(2,906,942	)		(3,076,259	)

⁽¹⁾ Refers to donations made to Instituto J&F regarding improvements on school’s building, the social program “Fazer o Bem Faz Bem” created by the company to support actions for social transformation where the Company is present and donations to the JBS Fund For The Amazon.

 

38

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

As of September 30, 2023 in the Company and Consolidated, other income (expenses) includes gain (losses) of sale of assets, insurance claim, asset impairment expenses, restructuring expenses, among others.

The Company incurred expenses with internal research and development, in the amount of R$3,289 (R$915 at September 30, 2022), in the Company and R$29,482 (R$31,168 at September 30, 2022), in the Consolidated.

27 Risk management and financial instruments

Financial instruments are recognized in the consolidated financial statements as follows:

			Company						Consolidated
	Notes		September 30, 2023			December 31, 2022			September 30, 2023			December 31, 2022
Assets
Fair value through profit or loss (1)
Financial investments		4		6,870,652			151,963			14,646,409			7,008,149
National treasury bills		4		92,969			204,480			506,046			572,183
Derivative assets				376,496			98,134			1,150,631			566,144
Loans and receivables at amortized cost (2)
Cash at banks		4		6,217,297			1,820,325			11,971,199			5,972,915
Margin cash		4		—			—			601,428			308,302
Trade accounts receivable		5		2,343,288			4,380,011			16,454,419			20,234,895
Related party receivables		9		1,112,361			1,103,125			976,466			951,021
Total				17,013,063			7,758,038			46,306,598			35,613,609
Liabilities
Amortized cost
Loans and financing		17		(20,289,416	)		(15,699,582	)		(108,113,698	)		(92,354,061	)
Trade accounts payable and supply chain finance		16		(4,896,697	)		(5,561,549	)		(28,743,053	)		(34,080,614	)
Related party payables		9		(7,557,290	)		(10,182,741	)		—			—
Lease liabilities		13		(93,363	)		(62,698	)		(9,297,761	)		(8,984,008	)
Other financial liabilities (3)				(190,805	)		(5,180	)		(227,875	)		(61,964	)
Fair value through profit or loss
Derivative liabilities				(255,882	)		(278,227	)		(1,019,384	)		(559,536	)
Total				(33,283,453	)		(31,789,977	)		(147,401,771	)		(136,040,183	)

⁽¹⁾ CDBs are updated at the effective rate but have a really short-term and negotiated with financial institutions, and their recognition is similar to fair value; (ii) national treasury bill is recognized according to market value.

⁽²⁾ Loans and receivables are classified as amortized cost, but without any change in their nature or business model; (ii) the accounts receivable are short-term and net from expected losses.

⁽³⁾ The balances are related to commitments with third parties for investment.

 

39

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

Fair value of assets and liabilities through profit or loss: The Company and its subsidiaries determine fair value measurements in accordance with the hierarchical levels that reflect the significance of the inputs used in the measurement, with the exception of those maturing at short term, equity instruments without an active market and contracts with discretionary characteristics that the fair value can not be measured reliably, according to the following levels:

Level 1 - Quoted prices in active markets (unadjusted) for identical assets or liabilities;

Level 2 - Inputs other than Level 1, in which prices are quoted for similar assets and liabilities, either directly by obtaining prices in active markets or indirectly through valuation techniques that use data from active markets;

Level 3 - Inputs used for fair value calculations which are not derived from an active market. The Company and its subsidiaries do not have any financial instruments that utilize level 3 inputs.

		Company
		September 30, 2023						December 31, 2022
	��	Level 1		Level 2		Total		Level 1		Level 2		Total
Financial assets
Financial investments			—		6,870,652		6,870,652		—		151,963		151,963
National treasury bills			92,969		—		92,969		204,480		—		204,480
Derivative assets			—		376,496		376,496		—		98,134		98,134
Financial liabilities
Derivative liabilities			—		255,882		255,882		—		278,227		278,227

	Consolidated
	September 30, 2023						December 31, 2022
	Level 1		Level 2		Total		Level 1		Level 2		Total
Financial assets
Financial investments		—		14,646,409		14,646,409		—		7,008,149		7,008,149
National treasury bills		506,046		—		506,046		572,183		—		572,183
Derivative assets		—		1,150,631		1,150,631		—		566,144		566,144
Financial liabilities
Derivative liabilities		—		1,019,384		1,019,384		—		559,536		559,536

Fair value of assets and liabilities carried at amortized cost: The fair value of the Notes under Rule 144-A and Regulation S, are estimated using the closing sale price of these securities informed by a financial newswire on September 30, 2023 and December 31, 2022 , considering there is an active market for these financial instruments. The book value of the remaining fixed-rate loans approximates fair value since the interest rate market, the Company’s credit quality, and other market factors have not significantly changed since entering into the loans. The book value of variable-rate loans and financings approximates fair value given the interest rates adjust for changes in market conditions and the quality of the Company’s credit rating has not substantially changed. For all other financial assets and liabilities, book value approximates fair value due to the short duration of the instruments. The following details the estimated fair value of loans and financings:

	Consolidated
	September 30, 2023							December 31, 2022
Description	Principal		Price (% of the Principal)			Market Value of the Principal		Principal		Price (% of the Principal)			Market Value of the Principal
Notes 2,50% JBS Lux 2027		5,007,599		88.86	%		4,449,953		5,217,701		86.90	%		4,534,182
Notes 5,13% JBS Lux 2028		4,506,839		95.61	%		4,308,854		4,695,931		95.13	%		4,467,239
Notes 3,00% JBS Lux 2029		3,004,559		84.61	%		2,542,098		3,130,620		84.02	%		2,630,347
Notes 6,5% JBS Lux 2029		390,459		95.21	%		371,747		406,840		98.16	%		399,354
Notes 5,5% JBS Lux 2030		6,259,499		94.07	%		5,888,123		6,522,126		95.40	%		6,222,108
Notes 3,75% JBS Lux 2031		2,503,800		81.30	%		2,035,639		2,608,850		82.46	%		2,151,258
Notes 3,00% JBS Lux 2032		5,007,599		76.49	%		3,830,262		5,217,701		77.61	%		4,049,458
Notes 3,625% JBS Lux 2032		5,007,599		80.70	%		4,040,982		5,217,701		82.24	%		4,291,037
Notes 5,75% JBS Lux 2033		10,265,578		92.55	%		9,501,100		10,696,287		95.41	%		10,205,327
Notes 6,75% JBS Lux 2034		8,012,158		99.02	%		7,933,880		—		—			—
Notes 4,375% JBS Lux 2052		4,506,839		68.53	%		3,088,447		4,695,931		71.80	%		3,371,678
Notes 6,50% JBS Lux 2052		7,761,778		92.42	%		7,173,436		8,087,436		96.79	%		7,827,829
Notes 7.25% JBS Lux 2053		4,506,839		99.62	%		4,489,578		—		—			—
Notes 5,875% PPC 2027		4,256,459		99.01	%		4,214,363		4,435,046		99.55	%		4,415,088
Notes 4,25% PPC 2031		5,007,599		84.91	%		4,251,802		5,217,701		86.39	%		4,507,572
Notes 3,5% PPC 2032		4,506,839		78.25	%		3,526,557		4,695,931		80.72	%		3,790,556
Notes 6,25% PPC 2033		5,007,599		96.16	%		4,815,457		5,217,701		—			—
		85,519,641					76,462,278		76,063,503					62,863,033

 

40

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

Risk management:

The Company during the regular course of its operations is exposed to a variety of financial risks that include the effects of changes in market prices, (including foreign exchange, interest rate risk and commodity price risk), credit risk and liquidity risk. Such risks are fully disclosed in the financials statements at December 31, 2022. There were no changes in the nature of these risks in the current period. Below are the risks and operations to which the Company is exposed and a sensitivity analysis for each type of risk, consisting in the presentation of the effects in the finance income (expense), net, when subjected to possible changes, of 25% to 50%, in the relevant variables for each risk. For each probable scenario, the Company utilizes the Value at Risk Methodology (VaR),for the confidence interval (C.I.) of 99% and a horizon of one day.

a. Interest rate risk

The Company understands that the quantitative data referring to the Company’s interest rate exposure risk on September 30, 2023 and December 31, 2022, are in accordance with the Financial and Commodity Risk Management Policy and are representative of the exposure incurred during the period. For informational purposes and in accordance with our Financial and Commodities Risk Management Policy, the notional amounts of assets and liabilities exposed to floating interest rates are presented below:

	Company						Consolidated
	September 30, 2023			December 31, 2022			September 30, 2023			December 31, 2022
Net exposure to the CDI rate:
CDB-DI (Bank certificates of deposit)		73,484			151,963			3,652,270			3,532,181
Treasury bills		—			124,046			—			124,046
Margin cash		68,311			80,444			655,457			387,344
Related party transactions		(1,028,434	)		(8,371,733	)		6,662			7,839
Credit note - export		(2,558,887	)		(1,753,795	)		(2,566,465	)		(2,301,658	)
CRA - Agribusiness Credit Receivable Certificates		(31,817	)		(30,692	)		(31,817	)		(30,692	)
Rural - Credit note		—			—			(8,356	)		(4,176	)
Subtotal		(3,477,343	)		(9,799,767	)		1,707,751			1,714,884
Derivatives (Swap)		(5,895,349	)		(6,788,487	)		(6,787,801	)		(6,368,342	)
Total		(9,372,692	)		(16,588,254	)		(5,080,050	)		(4,653,458	)
Liabilities exposure to the LIBOR rate:
PPC term loan		—			—			—			(2,498,841	)
Prepayment		—			—			—			(1,524,660	)
FINIMP		—			(14,729	)		—			(14,729	)
Working Capital - American dollars		—			(16,645	)		—			(16,645	)
Subtotal		—			(31,374	)		—			(4,054,875	)
Derivatives (Swap)		—			—			—			1,541,061
Total		—			(31,374	)		—			(2,513,814	)
Net exposure to the IPCA rate:
Margin cash		—			—			23,963			79,500
CRA - Agribusiness Credit Receivable Certificates		(8,844,954	)		(8,398,599	)		(8,844,954	)		(8,398,599	)
Related party transactions		566,505			543,165			566,505			543,165
Treasury bills		—			—			147,557			77,049
Subtotal		(8,278,449	)		(7,855,434	)		(8,106,929	)		(7,698,885	)
Derivatives (Swap)		6,562,520			7,122,166			6,562,520			7,122,166
Total		(1,715,929	)		(733,268	)		(1,544,409	)		(576,719	)
Liabilities exposure to the SOFR rate:
Prepayment		(1,406,470	)		(528,230	)		(1,922,905	)		(842,188	)
Prepayment - exchange agreement		(14,935	)		—			(14,935	)		—
Total		(1,421,405	)		(528,230	)		(1,937,840	)		(842,188	)
Assets exposure to the CPI rate:
Margin cash		—			—			241,557			211,155
Total		—			—			241,557			211,155

 

41

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

Sensitivity analysis:

					Scenario (I) VaR 99% I.C. 1 day									Scenario (II) Interest rate variation - 25%									Scenario (III) Interest rate variation - 50%
Contracts		Current						Effect on income						Effect on income									Effect on income
exposure	Risk	scenario			Rate			Company			Consolidated			Rate			Company			Consolidated			Rate			Company			Consolidated
CDI	Increase		12.65	%		12.71	%		(5,373	)		(2,841	)		15.81	%		(296,458	)		(156,770	)		18.98	%		(592,823	)		(313,490	)
IPCA	Increase		4.61	%		4.62	%		(212	)		(191	)		5.76	%		(19,785	)		(17,807	)		6.92	%		(39,552	)		(35,599	)
SOFR	Increase		5.31	%		5.32	%		(86	)		(117	)		6.64	%		(18,876	)		(25,735	)		7.97	%		(37,738	)		(51,450	)
CPI	Decrease		3.70	%		3.69	%		—			(27	)		2.78	%		—			(2,234	)		1.85	%		—			(4,469	)
									(5,671	)		(3,176	)					(335,119	)		(202,546	)					(670,113	)		(405,008	)

				Company
				September 30, 2023										December 31, 2022
Instrument	Risk factor	Maturity		Notional		Fair value (Asset) - R$		Fair value (Liability) - R$			Fair value			Notional		Fair value (Asset) - R$		Fair value (Liability) - R$			Fair value
Swap	IPCA		2024		537,534		689,053		(546,719	)		142,334			537,534		646,186		(513,673	)		132,513
	IPCA		2027		387,000		452,811		(429,941	)		22,870			387,000		418,991		(417,549	)		1,442
	IPCA		2028		442,000		521,053		(503,221	)		17,832			442,000		481,768		(489,234	)		(7,466	)
	IPCA		2030		1,400,000		1,673,183		(1,652,913	)		20,270			1,400,000		1,546,027		(1,603,211	)		(57,184	)
	IPCA		2031		1,021,654		1,160,535		(1,163,531	)		(2,996	)		1,430,000		1,480,425		(1,568,962	)		(88,537	)
	IPCA		2032		626,237		716,550		(740,025	)		(23,475	)		900,000		927,182		(972,097	)		(44,915	)
	IPCA		2036		93,940		110,889		(119,422	)		(8,533	)		100,000		101,869		(111,699	)		(9,830	)
	IPCA		2037		1,054,162		1,238,447		(1,286,296	)		(47,850	)		1,272,000		1,519,718		(1,625,735	)		(106,017	)
					5,562,527		6,562,521		(6,442,068	)		120,452			6,468,534		7,122,166		(7,302,160	)		(179,994	)
				Consolidated
				September 30, 2023										December 31, 2022
Instrument	Risk factor	Maturity		Notional		Fair value  (Asset) - R$		Fair value (Liability) - R$			Fair value			Notional		Fair value  (Asset) - R$		Fair value (Liability) - R$			Fair value
Swap	CDI		2023		100,000		100,617		(101,142	)		(525	)		400,000		420,145		(404,637	)		15,508
	LIBOR		2024		780,000		788,205		(791,310	)		(3,105	)		1,507,335		1,541,061		(1,462,267	)		78,794
	IPCA		2024		537,534		689,053		(546,719	)		142,334			537,534		646,186		(513,673	)		132,513
	IPCA		2027		387,000		452,811		(429,941	)		22,870			387,000		418,991		(417,549	)		1,442
	IPCA		2028		442,000		521,053		(503,221	)		17,832			442,000		481,768		(489,234	)		(7,466	)
	IPCA		2030		1,400,000		1,673,183		(1,652,913	)		20,270			1,400,000		1,546,027		(1,603,211	)		(57,184	)
	IPCA		2031		1,021,654		1,160,535		(1,163,531	)		(2,996	)		1,430,000		1,480,425		(1,568,962	)		(88,537	)
	IPCA		2032		626,237		716,550		(740,025	)		(23,475	)		900,000		927,182		(972,097	)		(44,915	)
	IPCA		2036		93,940		110,889		(119,422	)		(8,533	)		100,000		101,869		(111,699	)		(9,830	)
	IPCA		2037		1,054,162		1,238,447		(1,286,296	)		(47,850	)		1,272,000		1,519,718		(1,625,735	)		(106,017	)
					6,442,527		7,451,343		(7,334,520	)		116,822			8,375,869		9,083,372		(9,169,064	)		(85,692	)

 

42

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

b. Exchange rate risk:

Below are presented the risks related to the most significant exchange rates fluctuation given the relevance of these currencies in the Company’s operations and the stress analysis scenarios and VaR to measure the total exposure as well as the cash flow risk with B3 and the Chicago Mercantile Exchange. In the Consolidated, the Company discloses these exposures considering the fluctuations of a exchange rate in particular towards the functional currency of each subsidiary.

	Company
	USD						EUR						GBP
	September 30, 2023			December 31, 2022			September 30, 2023			December 31, 2022			September 30, 2023			December 31, 2022
OPERATING
Cash and cash equivalents		12,840,644			1,646,583			128,504			150,768			5,806			1,045
Trade accounts receivable		994,301			2,797,281			102,964			255,159			47,183			57,115
Sales orders		2,262,670			1,691,501			206,557			170,821			112,015			69,810
Trade accounts payable		(235,934	)		(217,330	)		(24,367	)		(28,843	)		(19	)		—
Operating subtotal		15,861,681			5,918,035			413,658			547,905			164,985			127,970
FINANCIAL
Loans and financing		(8,569,249	)		(5,299,683	)		(21,872.00	)		(26,017	)		—			—
Financial subtotal		(8,569,249	)		(5,299,683	)		(21,872	)		(26,017	)		—			—
Operating financial subtotal		7,292,432			618,352			391,786			521,888			164,985			127,970
Related parties transaction, net		—			(1,660,877	)		—			—			—			—
Total exposure		7,292,432			(1,042,525	)		391,786			521,888			164,985			127,970
DERIVATIVES
Future contracts		21,642			2,557			(423,936	)		(539,980	)		(151,045	)		—
Swap		—			—			—			—			—			—
Total derivatives		21,642			2,557			(423,936	)		(539,980	)		(151,045	)		—
NET EXPOSURE IN R$		7,314,074			(1,039,968	)		(32,150	)		(18,092	)		13,940			127,970
Net debt in foreign subsidiaries (1)		(77,410,591	)		(66,873,170	)		—			—			—			—

 

43

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

	Consolidated
	USD						EUR						GBP						MXN						AUD
	September 30, 2023			December 31, 2022			September 30, 2023			December 31, 2022			September 30, 2023			December 31, 2022			September 30, 2023			December 31, 2022			September 30, 2023			December 31, 2022
OPERATING
Cash and cash equivalents		15,431,614			3,848,527			227,624			209,670			76,767			63,667			1,593,623			639,627			25			37
Trade accounts receivable		3,637,353			6,124,137			592,108			712,099			442,033			267,677			603,491			657,623			1,452			449
Sales orders		2,919,534			3,116,512			223,343			218,958			112,015			69,810			—			—			—			—
Trade accounts payable		(795,277	)		(805,002	)		(379,592	)		(481,445	)		(80,271	)		(98,088	)		(710,433	)		(273,126	)		(3,877	)		(616	)
Purchase orders		(283,671	)		(321,825	)		(28,065	)		(63,557	)		—			—			—			—			—			—
Operating subtotal		20,909,553			11,962,349			635,418			595,725			550,544			303,066			1,486,681			1,024,124			(2,400	)		(130	)
FINANCIAL
Margin cash		14,282			1,402			—			—			—			—			—			—			—			—
Advances to customers		(188,015	)		(188,904	)		(6,775	)		(4,468	)		(1,234	)		—			—			—			—			—
Loans and financing		(8,589,905	)		(7,108,978	)		(21,872	)		(26,017	)		—			—			—			—			—			—
Financial subtotal		(8,763,638	)		(7,296,480	)		(28,647	)		(30,485	)		(1,234	)		—			—			—			—			—
Operating financial subtotal		12,145,915			4,665,869			606,771			565,240			549,310			303,066			1,486,681			1,024,124			(2,400	)		(130	)
Related party transactions, net		—			—			—			1,510,817			—			—			—			—			—			—
Total exposure		12,145,915			4,665,869			606,771			2,076,057			549,310			303,066			1,486,681			1,024,124			(2,400	)		(130	)
DERIVATIVES
Future contracts		31,792			2,557			(498,125	)		(539,980	)		(212,197	)		—			—			—			—			—
Deliverable Forwards (DF´s)		(3,335,932	)		(2,417,731	)		334,573			438,355			(58,293	)		(27,174	)		(1,933,875	)		(1,520,318	)		12,880			4,920
Non-Deliverable Forwards (NDF´s)		(52,415	)		15,804			12,829			(61,746	)		(432,917	)		(103,107	)		—			—			—			—
Swap		(3,630	)		78,793			—			—			—			—			—			—			—			—
Total derivatives		(3,360,185	)		(2,320,577	)		(150,723	)		(163,371	)		(703,407	)		(130,281	)		(1,933,875	)		(1,520,318	)		12,880			4,920
NET EXPOSURE IN R$		8,785,730			2,345,292			456,048			1,912,686			(154,097	)		172,785			(447,194	)		(496,194	)		10,480			4,790
Net debt in foreign subsidiaries (1)		(77,410,591	)		(66,873,170	)		—			—			—			—			—			—			—			—

⁽¹⁾ For currency hedging purposes, the Company includes in its exposure the net debt of foreign subsidiaries. Although these debts do not generate currency exposure in the Company’s results (since they are abroad, and in the functional currency of each country), these debts in the consolidation are affected by the exchange rate, impacting shareholders’ equity as exchange variation on investment, influencing the consolidated debt of the Company, and consequently the leverage indicators.

 

44

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

b1. Sensitivity analysis and derivative financial instruments breakdown:

b1.1 USD - American dollars (amounts in thousands of R$):

			Scenario (i) VaR 99% I.C. 1 day								Scenario (ii) Interest rate variation - 25%								Scenario (iii) Interest rate variation - 50%
		Closing	Effect on income								Effect on income								Effect on income
Exposure of R$	Risk	exchange rate	Exchange rate		Company			Consolidated			Exchange rate		Company			Consolidated			Exchange rate		Company			Consolidated
Operating	Appreciation	5.0076		4.9165		(288,530	)		(380,352	)		3.7557		(3,965,420	)		(5,227,388	)		2.5038		(7,930,840	)		(10,454,776	)
Financial	Depreciation	5.0076		4.9165		273,291			190,571			3.7557		3,755,995			2,619,118			2.5038		7,511,991			5,238,235
Derivatives	Depreciation	5.0076		4.9165		(394	)		61,123			3.7557		(5,411	)		840,046			2.5038		(10,821	)		1,680,092
						(15,633	)		(128,658	)				(214,836	)		(1,768,224	)				(429,670	)		(3,536,449	)

		Closing		Scenario (i) VaR 99% I.C. 1 day				Scenario (ii) Interest rate variation - 25%				Scenario (iii) Interest rate variation - 50%
Exposure of R$	Risk	exchange rate		Exchange rate	Effect on income			Exchange rate	Effect on income			Exchange rate	Effect on income
Net debt in foreign subsidiaries	Depreciation		5.0076	5.0987		(1,408,126	)	6.2595		(19,352,648	)	7.5114		(38,705,295	)

			Company
			September 30, 2023									December 31, 2022
Instrument	Risk factor	Nature	Quantity			Notional (R$)			Fair value			Quantity			Notional (R$)			Fair value
Future Contract	American dollar	Short		433			21,642			2,288			51			2,557			(4,506	)
			Consolidated
			September 30, 2023									December 31, 2022
Instrument	Risk factor	Nature	Quantity			Notional (R$)			Fair value			Quantity			Notional (R$)			Fair value
Future Contract	American dollar	Short		636			31,792			2,799			51			2,557			(4,506	)
			Consolidated
			September 30, 2023									December 31, 2022
Instrument	Risk factor	Nature	Notional (USD)			Notional (R$)			Fair value			Notional (USD)			Notional (R$)			Fair value
Deliverable Forwards	American dollar	Short		(666,174	)		(3,335,932	)		(51,824	)		(463,371	)		(2,417,731	)		67,658
Non-Deliverable Forwards	American dollar	Short		(10,467	)		(52,415	)		305			—			—			—
Non-Deliverable Forwards	American dollar	Long		—			—			—			3,029			15,804			(339	)

 

45

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

b1.2 EUR - EURO (amounts in thousands of R$):

			Closing		Scenario (i) VaR 99% I.C. 1 day								Scenario (ii) Interest rate variation - 25%								Scenario (iii) Interest rate variation - 50%
			exchange		Exchange		Effect on income						Exchange		Effect on income						Exchange		Effect on income
Exposure of R$	Risk		rate		rate		Company			Consolidated			rate		Company			Consolidated			rate		Company			Consolidated
Operating		Appreciation		5.3000		5.2040		(7,496	)		(11,514	)		3.9750		(103,415	)		(158,854	)		2.6500		(206,829	)		(317,709	)
Financial		Depreciation		5.3000		5.2040		396			519			3.9750		5,468			7,162			2.6500		10,936			14,324
Related party		Appreciation		5.3000		5.2040		—			(27,931	)		3.9750		—			(385,340	)		2.6500		—			(770,680	)
Derivatives		Appreciation		5.3000		5.2040		7,682			2,731			3.9750		105,984			37,681			2.6500		211,968			75,361
								582			(36,195	)				8,037			(499,351	)				16,075			(998,704	)

			Company
			September 30, 2023								December 31, 2022
Instrument	Risk factor	Nature	Quantity		Notional (R$)			Fair value			Quantity		Notional (R$)			Fair value
Future Contract	Euro	Long		8,000		(423,936	)		(956	)		9,700		(539,980	)		(2,872	)

			Consolidated
			September 30, 2023							December 31, 2022
Instrument	Risk factor	Nature	Notional (EUR)		Notional (R$)		Fair value			Notional (EUR)			Notional (R$)			Fair value
Deliverable Forwards	Euro	Long		63,127		334,573		(2,258	)		78,708			438,355			17,965
Non-Deliverable Forwards	Euro	Short		2,421		12,829		(856	)		(11,087	)		(61,746	)		47

b1.3 GBP - British Pound (amounts in thousands of R$):

		Closing		Scenario (i) VaR 99% I.C. 1 day								Scenario (ii) Interest rate variation - 25%								Scenario (iii) Interest rate variation - 50%
		exchange		Exchange		Effect on income						Exchange		Effect on income						Exchange		Effect on income
Exposure of R$	Risk	rate		rate		Company			Consolidated			rate		Company			Consolidated			rate		Company			Consolidated
Operating	Appreciation		6.1158		6.2332		3,166			10,565			7.6448		41,246			137,636			9.1737		82,492			275,272
Financial	Depreciation		6.1158		6.2332		—			(24	)		7.6448		—			(309	)		9.1737		—			(617	)
Derivatives	Depreciation		6.1158		6.2332		(2,898	)		(13,498	)		7.6448		(37,761	)		(175,852	)		9.1737		(75,523	)		(351,704	)
							268			(2,957	)				3,485			(38,525	)				6,969			(77,049	)

			Consolidated
			September 30, 2023									December 31, 2022
Instrument	Risk factor	Nature	Notional (GBP)			Notional (R$)			Fair value			Notional (GBP)			Notional (R$)			Fair value
Deliverable Forwards	British pound	Short		(9,532	)		(58,293	)		851			(4,328	)		(27,174	)		(193	)
Non-Deliverable Forwards	British pound	Short		(70,787	)		(432,917	)		(881	)		(16,422	)		(103,107	)		1,357

 

46

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

b1.4 MXN - Mexican Peso (amounts in thousands of R$):

					Scenario (i) VaR 99% I.C. 1 day					Scenario (ii) Interest rate variation - 25%					Scenario (iii) Interest rate variation - 50%
			Closing exchange		Exchange		Effect on income			Exchange		Effect on income			Exchange		Effect on income
Exposure of R$	Risk		rate		rate		Consolidated			rate		Consolidated			rate		Consolidated
Operating		Appreciation		0.2879		0.2928		25,045			0.3599		371,696			0.4319		743,341
Derivatives		Depreciation		0.2879		0.2928		(32,578	)		0.3599		(483,502	)		0.4319		(966,937	)
								(7,533	)				(111,806	)				(223,596	)

			Consolidated
			September 30, 2023									December 31, 2022
Instrument	Risk factor	Nature	Notional (MXN)			Notional (R$)			Fair value			Notional (MXN)			Notional (R$)			Fair value
Deliverable Forwards	Mexican peso	Short		(6,717,175	)		(1,933,875	)		(821	)		(5,700,480	)		(1,520,318	)		(30,362	)

b1.5 AUD - Australian Dollar (amounts in thousands of R$):

					Scenario (i) VaR 99% I.C. 1 day					Scenario (ii) Interest rate variation - 25%					Scenario (iii) Interest rate variation - 50%
			Closing exchange		Exchange		Effect on income			Exchange		Effect on income			Exchange		Effect on income
Exposure of R$	Risk		rate		rate		Consolidated			rate		Consolidated			rate		Consolidated
Operating		Depreciation		3.2299		3.1653		48			2.4224		600			1.6150		1,200
Derivatives		Appreciation		3.2299		3.1653		(258	)		2.4224		(3,220	)		1.6150		(6,440	)
								(210	)				(2,620	)				(5,240	)

Consolidated

September 30, 2023

December 31, 2022

Instrument

Risk factor

Nature

Notional (AUD)

Notional (R$)

Fair value

Notional (AUD)

Notional (R$)

Fair value

Deliverable Forwards

Australian dollar

Long

3,988

12,880

5

1,388

4,920

5

 

47

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

c. Commodity price risk

The Company operates globally (the entire livestock protein chain and related business) and during the regular course of its operations is exposed to price fluctuations in feeder cattle, live cattle, lean hogs, corn, soybeans, and energy, especially in the North American, Australian and Brazilian markets. Commodity markets are characterized by volatility arising from external factors including climate, supply levels, transportation costs, agricultural policies and storage costs, among others. The Risk Management Department is responsible for mapping the exposures to commodity prices of the Company and proposing strategies to the Risk Management Committee, in order to mitigate such exposures.

c1. Position balance in commodities (cattle) contracts of the Company:

	Company
EXPOSURE in Commodities (Cattle)	September 30, 2023		December 31, 2022
Firm contracts of cattle purchase		—		14,988
Subtotal		—		14,988
DERIVATIVES
Future contracts		7		(2,007	)
Subtotal		7		(2,007	)
NET EXPOSURE		7		12,981

Sensitivity analysis:

				Scenario (i) VaR 99% I.C. 1 day				Scenario (ii) @ Variation - 25%					Scenario (ii) @ Variation - 50%
		Closing				Effect on income				Effect on income					Effect on income
Exposure	Risk	price		Price		Company		Price		Company			Price		Company
Derivatives	Cattle arroba depreciation		236.15		223.83		—		177.11		(2	)		118.07		(4	)
							—				(2	)				(4	)

Derivatives financial instruments breakdown:

			Company
			September 30, 2023							December 31, 2022
Instrument	Risk factor	Nature	Quantity		Notional		Fair value			Quantity		Notional			Fair value
Future Contracts	Commodities (Cattle)	Long		—		7		(1	)		—		—			—
Future Contracts	Commodities (Cattle)	Short		—		—		—			21		(2,007	)		(99	)

 

48

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

c2. Position balance in commodities (grain) derivatives financial instruments of Seara Alimentos:

	Seara Alimentos
EXPOSURE in Commodities (Grain)	September 30, 2023			December 31, 2022
OPERATING
Purchase orders		746,768			1,172,761
Subtotal		746,768			1,172,761
DERIVATIVES
Future contracts		(82,756	)		(4,947	)
Non-Deliverable Forwards		—			(161,694	)
Subtotal		(82,756	)		(166,641	)
NET EXPOSURE		664,012			1,006,120

Sensitivity analysis:

		Scenario (i) VaR 99% I.C. 1 day						Scenario (ii) Price variation - 25%						Scenario (ii) Price variation - 50%
					Effect on income						Effect on income						Effect on income
Exposure	Risk	Price			Seara  Alimentos			Price			Seara  Alimentos			Price			Seara  Alimentos
Operating	Depreciation		(1.99	)%		(14,831	)		(25.00	)%		(186,692	)		(50.00	)%		(373,384	)
Derivatives	Apreciation		(1.99	)%		1,644			(25.00	)%		20,689			(50.00	)%		41,378
						(13,187	)					(166,003	)					(332,006	)

Derivatives financial instruments breakdown:

			Seara Alimentos
			September 30, 2023								December 31, 2022
Instrument	Risk factor	Nature	Quantity		Notional			Fair value			Quantity		Notional			Fair value
Future contracts	Commodities (Grains)	Short		2,627		(82,756	)		(559	)		520		(4,947	)		(12,773.912	)
Non-Deliverable Forwards	Commodities (Grains)	Short		—		—			—			4,000		(161,694	)		3,571

c3. Hedge accounting of Seara Alimentos:

From the third quarter of 2021, the indirect subsidiary Seara Alimentos reviewed its hedge policies and started to apply hedge accounting in grain operations, aiming at bringing stability to the subsidiary’s results. The designation of these instruments is based on the guidelines outlined in the Financial and Commodity Risk Management Policy defined by the Risk Management Committee and approved by the Board of Directors.

Financial instruments designated for hedge accounting were classified as cash flow hedge. The effective amount of the instrument’s gain or loss is recognized under “Other comprehensive income (expense)” and the ineffective amount under “Financial income (expense), net”, and the accumulated gains and losses are reclassified to profit and loss or to the balance sheet when the object is recognized, adjusting the item in which the hedged object was recorded.

In these hedge relationships, the main sources of ineffectiveness are the effect of the counterparties and the Company’s own credit risk on the fair value of the forward foreign exchange contracts, which is not reflected in the change in the fair value of the hedged cash flows attributable to the change in exchange rates; and changes in the timing of the hedged transactions.

The derivative financial instruments designated at the September 30, 2023, as hedge accounting, according to the cash flow method, to protect the operating results in relation to the price of commodities are:

Hedge accounting - Derivative instruments	Risk factor	Quantity			Notional			Fair value
Future contracts	Commodities		2,627			(82,756	)		(559	)
Future contracts	American Dollar		203			10,151			511
Future contracts	Euro		1,400			(74,189	)		(167	)
Future contracts	British Pound		1,000			(61,152	)		(61	)
Non Deliverable Forwards	Renminbi		(50,000	)		(34,290	)		(51	)

Seara Alimentos also designates derivatives to hedge the fair value of debt instruments with floating interest rates through swaps of fixed interest rates, measured in accordance with fair value hedge accounting.

 

49

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

c3.1. Hedge accounting:

Below is shown the effects on income for the period, on other comprehensive income and on the balance sheet of derivative financial instruments contracted for hedging exchange rates, commodity prices and interest rates (cash flow and fair value hedges):

	Seara Alimentos
Income statement:	2023			2022
Cost of sales before hedge accounting adoption		(29,170,133	)		(27,270,532	)
Derivatives operating income (loss)		137,088			149,840
Currency		7,697			12,995
Commodities		129,391			136,845
Cost of sales with hedge accounting		(29,033,045	)		(27,120,692	)
Financial income (expense), net excluding derivatives		(97,587	)		87,991
Derivatives financial income (expense), net		(127,915	)		(242,536	)
Currency		50			(316,482	)
Commodities		(120,800	)		699
Interests		(7,165	)		73,247
Financial income (expense), net		(225,502	)		(154,545	)

Below are the effects on other comprehensive income (expense), after the adoption of hedge accounting:

	Seara Alimentos
	September 30, 2023			December 31, 2022
Statements of other comprehensive income (expense):
Financial instruments designated as hedge accounting:		(24,681	)		(202,560	)
Currency		(24,978	)		(19,451	)
Commodities		297			(183,109	)
Other comprehensive income		15,306			(415,468	)

Cash Flow Hedge Movement	December 31, 2022			OCI			September 30, 2023
Hedge accounting operations at Company Seara		(41,701	)		16,723			(24,978	)
Deferred income tax on hedge accounting		14,179			(5,686	)		8,493
Reflection of Hedge Operations of Subsidiaries		1,417			(1,417	)		—
Deferred income tax on hedge accounting		(482	)		482			—
Total of other comprehensive income (expense)		(26,587	)		10,102			(16,485	)

 

50

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

Below are the effects on the balance sheet, after the adoption of hedge accounting:

	Seara Alimentos
	September 30, 2023			December 31, 2022
Balance sheet:
Derivative (liabilities)/assets		(327	)		(9,203	)
Financial instruments designated as hedge accounting:
Currency		232			—
Commodities		(559	)		(9,203	)
Derivative (liabilities)/assets		(3,630	)		94,302
Financial instruments not designated as hedge accounting:
Interests		(3,630	)		94,302
Other comprehensive income (expense)		(24,978	)		(40,284	)
Currency		297			(13,541	)
Commodities		(25,275	)		(26,743	)
Inventories		25,574			36,269
Currency		1,110			11,991
Commodities		24,464			24,278

Open balance sheet position of derivative assets and liabilities:

	Seara Alimentos
	September 30, 2023			December 31, 2022
Assets:
Not designated as hedge accounting		—			94,302
Interests		—			94,302
Current assets		—			69,221
Non-current assets		—			25,081
		-
(Liabilities):
Designated as hedge accounting		559			9,203
Currency		(232	)		—
Commodities		559			9,203
Current liabilities		—			9,203

c4. Position balance in commodities derivatives financial instruments of JBS USA:

	JBS USA
EXPOSURE in Commodities	September 30, 2023			December 31, 2022
OPERATIONAL
Firm contracts of cattle purchase		17,789,095			13,120,065
Subtotal		17,789,095			13,120,065
DERIVATIVES
Deliverable Forwards		(912,084	)		(804,976	)
Subtotal		(912,084	)		(804,976	)
NET EXPOSURE		16,877,011			12,315,089

 

51

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

Sensitivity analysis:

		Scenario (i) VaR 99% I.C. 1 day						Scenario (ii) Price variation - 25%						Scenario (iii) Price variation - 50%
					Effect on income						Effect on income						Effect on income
Exposure	Risk	Price			JBS USA			Price			JBS USA			Price			JBS USA
Operating	Depreciation		(1.98	)%		(352,580	)		(25.00	)%		(4,447,274	)		(50.00	)%		(8,894,547	)
Derivatives	Appreciation		(1.98	)%		18,078			(25.00	)%		228,021			(50.00	)%		456,042
						(334,502	)					(4,219,253	)					(8,438,505	)

Derivatives financial instruments breakdown:

				Consolidated
				September 30, 2023									December 31, 2022
Instrument	Risk factor	Nature		Notional (USD)			Notional (R$)			Fair value			Notional (USD)			Notional (R$)			Fair value
Deliverable Forwards	Commodities (Cattle)		Short		(182,140	)		(912,084	)		(506,464	)		(154,278	)		(804,976	)		(162,698	)

d. Liquidity risk

The table below shows the contractual obligation amounts from financial liabilities of the Company according to their maturities:

	Company
	September 30, 2023										December 31, 2022
	Less than 1 year		Between 1 and 3 years		Between 4 and 5 years		More than 5 years		Total		Less than 1 year		Between 1 and 3 years		Between 4 and 5 years		More than 5 years		Total
Trade accounts payable and supply chain finance		4,896,698		—		—		—		4,896,698		5,561,549		—		—		—		5,561,549
Loans and financing		6,565,805		2,875,695		2,355,992		8,491,924		20,289,416		4,999,929		2,992,141		849,530		6,857,983		15,699,583
Estimated interest on loans and financing (1)		1,211,418		1,064,453		1,270,816		2,203,256		5,749,943		1,217,565		1,984,740		1,671,359		3,710,473		8,584,137
Derivatives liabilities		255,882		—		—		—		255,882		278,227		—		—		—		278,227
Payments of leases		42,123		35,534		10,917		4,789		93,363		27,675		33,141		2,247		4,160		67,223
Other financial liabilities		1,189,086		84,375		101,250		37,723		1,412,434		5,180		—		—		—		5,180

 

52

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

	Consolidated
	September 30, 2023										December 31, 2022
	Less than 1 year		Between 1 and 3 years		Between 4 and 5 years		More than 5 years		Total		Less than 1 year		Between 1 and 3 years		Between 4 and 5 years		More than 5 years		Total
Trade accounts payable and supply chain finance		28,743,054		—		—		—		28,743,054		34,080,614		—		—		—		34,080,614
Loans and financing		9,239,304		3,402,024		11,569,399		83,902,971		108,113,698		8,228,557		4,252,661		12,503,378		67,369,465		92,354,061
Estimated interest on loans and financing (1)		6,850,255		10,056,494		9,033,090		32,028,295		57,968,134		4,822,959		9,587,500		7,749,370		23,172,460		45,332,289
Derivatives liabilities		1,019,026		—		—		—		1,019,026		559,536		—		—		—		559,536
Payments of leases		89,622		2,519,755		1,710,428		4,977,956		9,297,761		1,788,353		2,611,660		1,634,458		4,452,019		10,486,490
Other financial liabilities		2,599,660		92,321		101,334		334,398		3,127,713		33,903		27,793		268		—		61,964

⁽¹⁾ Includes interest on all loans and financing outstanding. Payments are estimated for variable rate debt based on effective interest rates at September 30, 2023 an December 31, 2022. Payments in foreign currencies are estimated using the September 30, 2023 and 2021 exchange rates.

The Company has future commitment for purchase of grains and cattle whose balances at September 30, 2023 in the amount of R$320,299 (R$451,296 at December 31, 2022), in the Company and R$161,7 billion (R$170,5 billion at December 31, 2022), in the Consolidated.

The Company has securities pledged as collateral for derivative transactions with the commodities and futures whose balance at September 30, 2023 is R$68,311 (R$80,434 at December 31, 2022). This guarantee is larger than its collateral.

The indirect subsidiary JBS USA and its subsidiaries, has securities pledged as collateral for derivative transactions with the commodities and futures whose balance at September 30, 2023 is R$828,703 (R$518,055 at December 31, 2022). This guarantee is larger than its collateral.

Also, the direct subsidiary Seara Alimentos has securities pledged as collateral for derivative transactions with the commodities and futures whose balance at September 30, 2023 is R$38,245 (R$80,902 in 31 de dezembro de 2022). This guarantee is larger than its collateral.

As disclosed in Note 17 – Loans and financings, the Company has a bank loan that contains a loan covenant. A future breach of covenant may require the Company to repay the loan earlier than indicated in the above table.

The interest payments on variable interest rate loans and bond issues in the table above reflect market forward interest rates at the reporting date and these amounts may change as market interest rates change. The future cash flows on contingent consideration and derivative instruments may be different from the amount in the above table as interest rates and exchange rates or the relevant conditions underlying the contingency change. Except for these financial liabilities, it is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

 

53

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

e. Risks linked to climate change and the sustainability strategy

In view the Company’s operations, there is inherent exposure to risks related to climate change. Certain Company assets, which are mainly biological assets that can be measured at fair value, may be impacted by climate change and are considered in the preparation process of these financial statements.

For the nine-month period ended September 30, 2023,, Management considered as main risk the data and assumptions highlighted below:

(i) possible impacts on the determination of fair value in biological assets due to the effects of climate change, such as temperature rise, scarcity of water resources, may impact some assumptions used in accounting estimates related to the Company’s biological assets, as follows:

● losses of biological assets due to heat waves and droughts which occur with greater frequency and intensity;

● reduction in the expected growth of our biological assets due to natural disasters, fires, pandemics or changes in rainfall patterns; and

● interruption in the production chain due to adverse weather events, causing power outages, fuel shortages, disruption of transportation channels, among other things.

(ii) structural changes and their impacts on the business, such as:

● regulatory and legal: regulation and legislation arising from Brazilian and/or international authorities that encourage the transition to a low-carbon economy and/or with greater biodiversity and that increase the risk of litigation and/or commercial restrictions related to the alleged contribution, even if indirect, for the intensification of climate change;

● reputational: related to customers’ perceptions and the society in general regarding the positive or negative contribution of an organization to a low carbon economy.

28 Subsequent events

a. In reference to the conflict in the Middle East between Israel and Palestine, the Company is monitoring its evolution and development and its potential impacts on its operations. The Company does not have manufacturing operations in these countries, and is monitoring the economic effects on the sector and its operations as a reflection of this conflict, and to date in these interim financial statements no representative impacts have been measured.

b. On October 5, 2023, a new issue of private debentures was carried out by the Company of up to R$1.7 billion, in five series maturing in 5, 7, 10 and 15 years, intended for the formation of Agribusiness Credit Rights that will constitute backing for the Public Offering of Agribusiness Receivables Certificates.

c. On October 12, 2023, the indirect subsidiary Pilgrim’s Pride Corporation (PPC) completed the offering of senior notes in the amount of US$500 million (equivalent to R$2.5 billion on September 30, 2023), at an interest rate of 6.875% p.a and maturity in 2034 (“Notes 6.875% PPP 2034”). The resources arising from this offer were used to pay the PPC 2027 Notes.

* * * * *

 

54

Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

29 Approval of the financial statements

The issuance of these individual and condensed interim financial statements was approved by the Board of Directors on November 13, 2023.

BOARD OF DIRECTORS

Chairman:	Jeremiah Alphonsus O’Callaghan
Vice-Chairman:	José Batista Sobrinho
Independent Board Member:	Alba Pettengill
Independent Board Member:	Gelson Luiz Merisio
Independent Board Member:	Cledorvino Belini
Independent Board Member:	Francisco Turra
Independent Board Member:	Carlos Hamilton Vasconcelos Araújo
Independent Board Member:	Kátia Regina de Abreu Gomes
Independent Board Member:	Paulo Bernardo Silva

STATUTORY AUDIT COMMITTEE REPORT

The Statutory Audit Committee reviewed the individual and consolidated condensed interim financial statements for the nine month period ended September 30, 2023, at November 13, 2023. Based on the procedures performed, also considering KPMG Auditores Independentes Ltda. review report, as well as the information and clarifications received during the period, the Committee recommends that these documents are in a position to be considered by the Board of Directors.

STATUTORY AUDIT COMMITTEE

Chairman:	Carlos Hamilton Vasconcelos Araújo
Committee Member:	Paulo Sérgio Cruz Dortas Matos
Committee Member:	Gelson Luiz Merisio

 

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Notes to the condensed financial statements for the nine month period ended September 30, 2023 and 2022 (Expressed in thousands of Brazilian reais)

FISCAL COUNCIL REPORT

The Fiscal Council, in the use of its legal and statutory attributions, examined and discussed with the Administration the earnings release and the Company’s individual and consolidated condensed interim financial statements including the proposal for the earning allocation for the nine month period ended September 30, 2023, at November 13, 2023, and validated these financial condensed interim financial statements approved by the Company’s Board of Directors on this date.

Based on our review, the information and clarifications received during this period and considering KPMG Auditores Independentes Ltda. audit report on the individual and consolidated financial statements, without reservations, issued on this date, the Fiscal Council was not aware of any additional fact that would lead us to believe that the aforementioned financial statements do not reflect in all material respects the information contained therein and that are in a position to be disclosed by the Company.

FISCAL COUNCIL

Chairman:	Adrian Lima da Hora
Council Member:	Demetrius Nichele Macei
Council Member:	José Paulo da Silva Filho
Council Member:	Orlando Octávio de Freitas Júnior
Council Member:	Patrícia da Silva Barros

STATEMENT OF OFFICERS ON THE FINANCIAL STATEMENTS AND ON THE INDEPENDENT AUDITORS REPORT

The Company’s Officers declare at November 13, 2023, for the purposes of Article 25, paragraph 1, item V and VI of CVM Instruction No. 480 of December 7, 2009, that:

(i) They reviewed, discussed and agreed with the independent auditors report on the individual and consolidated condensed interim financial statements for the nine month period ended September 30, 2023, and

(ii) They reviewed, discussed and agreed with the condensed interim financial statements for the nine month period ended September 30, 2023.

STATUTORY BOARD

Global Chief Executive Officer:	Gilberto Tomazoni
Administrative and Control Officer:	Eliseo Santiago Perez Fernandez
Chief Financial Officer:	Guilherme Perboyre Cavalcanti
Officer:	Jeremiah Alphonsus O’Callaghan
Global Chief Operating Officer:	Wesley Mendonça Batista Filho
Accountant:	Agnaldo dos Santos Moreira Jr. (CRC SP: 244207/O-4)

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