| Risk management and financial instruments | 25 Risk management and financial instruments Financial instruments: Financial instruments are recognized in the unaudited condensed consolidated financial statements as follows:
Note
June 30,
December 31,
Assets
Fair value through profit or loss (1)
Financial investments
3 2,318,011
2,642,258
National treasury bills
3 121,895
210,716
Derivative assets 49,258
169,736
Amortized cost (2)
Cash at banks
3 1,322,154
1,830,814
Margin cash
3 90,761
18,191
Trade accounts receivable
4 3,290,534
3,390,856
Related party receivables
8 105,791
118,554
Total 7,298,404
8,381,125
Liabilities
Amortized cost
Loans and financing
15 (18,612,249
) (19,999,137
)
Trade accounts payable and supply chain finance
14 (5,437,437
) (6,205,119
)
Lease (1,715,235
) (1,841,227
)
Other financial liabilities (3) (76,862
) (104,043
)
Fair value through profit or loss
Derivative liabilities (230,108
) (144,251
)
Total (26,071,891
) (28,293,777
) (1) -term (2) -term (3) Fair value of assets and liabilities through profit or loss: Level 1 — Quoted prices in active markets (unadjusted) for identical assets or liabilities; Level 2 — Inputs other than Level Level 3 — Inputs used for fair value calculations which are not derived from an active market. The Group do not have any financial instruments that utilize significant level 3 inputs.
June 30, 2024
December 31, 2023
Level 1
Level 2
Total
Level 1
Level 2
Total
Financial assets
Financial investments
— 2,318,011 2,318,011 206,650 2,435,608 2,642,258
National treasury bills 121,895
— 121,895 210,716
— 210,716
Derivative assets
— 49,258 49,258
— 169,736 169,736
Financial liabilities
Derivative liabilities
— 230,108 230,108
— 144,251 144,251 Fair value of assets and liabilities carried at amortized cost: -rate -rate fair value given the interest rates adjust for changes in market conditions and the quality of the Group’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 the notes:
June 30, 2024
December 31, 2023
Description
Principal
Price (% of the Principal)
Fair value
Principal
Price (% of the Principal)
Fair value
Notes 2.50% JBS Lux 2027 1,000,000 92.88 % 928,810 1,000,000 92.10 % 920,960
Notes 5.13% JBS Lux 2028 899,740 98.77 % 888,682 900,000 99.66 % 896,931
Notes 3.00% JBS Lux 2029 600,000 89.13 % 534,792 600,000 88.24 % 529,440
Notes 6.50% JBS Lux 2029 69,906 100.00 % 69,907 77,973 99.27 % 77,406
Notes 5.50% JBS Lux 2030 1,249,685 98.50 % 1,230,940 1,250,000 98.55 % 1,231,875
Notes 3.75% JBS Lux 2031 493,000 87.48 % 431,267 500,000 86.45 % 432,250
Notes 3.00% JBS Lux 2032 1,000,000 85.99 % 859,880 1,000,000 81.66 % 816,560
Notes 3.62% JBS Lux 2032 969,100 85.99
% 833,310 1,000,000 85.60
% 856,030
Notes 5.75% JBS Lux 2033 1,661,675 99.44 % 1,652,420 2,050,000 99.35 % 2,036,736
Notes 6.75% JBS Lux 2034 1,507,046 105.77
% 1,593,927 1,600,000 105.27
% 1,684,368
Notes 4.37% JBS Lux 2052 900,000 74.11
% 666,972 900,000 74.36
% 669,204
Notes 6.50% JBS Lux 2052 1,548,000 99.55 % 1,541,065 1,550,000 100.71 % 1,560,989
Notes 7.25% JBS Lux 2053 900,000 108.58 % 977,193 900,000 109.34 % 984,060
Notes 4.25% PPC 2031 856,407 91.07 % 779,956 1,000,000 90.27 % 902,650
Notes 3.50% PPC 2032 900,000 84.62
% 761,616 900,000 84.47
% 760,203
Notes 6.25% PPC 2033 980,000 101.52
% 994,895 1,000,000 102.90
% 1,029,020
Notes 6.87% PPC 2034 500,000 106.08
% 530,400 499,999 108.05
% 540,230
16,034,559
15,276,032 16,727,972
15,928,912 Risk management: The Group 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 last annual financial statements. There were no changes in the nature of these risks in the current period. Below are the risks and operations to which the Group 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 Group 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 quantitative data referring to the risk of exposure to the Group’s interest rates on June 30, 2024 and December 31, 2023, are in accordance with the Financial and Commodity Risk Management Policy of the Group and are representative of the exposure incurred during the period. The main exposure to financial risks as of June 30, 2024 and December 31, 2023 are shown below:
June 30, 2024
December 31, 2023
Net exposure to the CDI rate:
CRA – Agribusiness Credit Receivable Certificates
—
(60,676
)
Credit note – export (2,266
) (217,648
)
Rural – Credit note – Prefixed (150
) (1,208
)
Related party transactions 166
624
CDB-DI (Bank certificates of deposit) 1,124,949
943,526
Margin cash 90,761
31,566
Subtotal 1,213,460
696,184
Derivatives (Swap) (1,681,736
) (1,427,374
)
Total (468,276
) (731,190
)
Net exposure to the IPCA rate:
Treasury bills 22,820
27,716
CRA – Agribusiness Credit Receivable Certificates (1,843,390
) (2,101,681
)
Margin cash 18,506
51,751
Related party transactions 105,625
117,930
Subtotal (1,696,439
) (1,904,284
)
Derivatives (Swap) 1,606,215
1,423,667
Total (90,224
) (480,617
)
Assets exposure to the CPI rate:
Margin cash 16,133
49,144
Total 16,133
49,144
Liabilities exposure to the SOFR rate:
Prepayment
—
(280,971
)
Prepayment – exchange agreement (2,762
) (2,915
)
Total (2,762
) (283,886
)
Liabilities exposure to the TJLP rate:
Working Capital
—
(771
)
Total
—
(771
) Sensitivity analysis as of June 30, 2024: Contracts exposure Risk Current scenario Scenario (I) VaR 99% C.I. 1 day Scenario (II) Interest rate variation – 25% Scenario (III) Interest rate variation – 50% Rate Effect on income Rate Effect on income Rate Effect on income CDI Increase 10.40 % 10.44 % (214 ) 15.60 % (25,946 ) 20.80 % (51,892 ) IPCA Increase 3.93 % 3.94 % (6 ) 4.91 % (945 ) 5.90 % (1,889 ) CPI Increase 3.30 % 3.30 % (1 ) 2.48 % (142 ) 1.65 % (284 ) SOFR Decrease 5.33 % 5.33 % — 6.66 % (39 ) 8.00 % (78 ) (221 ) (27,072 ) (54,143 )
June 30, 2024
December 31, 2023
Instrument
Risk factor
Maturity
Notional
Fair value (Asset) – US$
Fair value (Liability) – US$
Fair value
Notional
Fair value (Asset) – US$
Fair value (Liability) – US$
Fair value
Swap
CDI
2024 158,305 172,986 (137,722
) (736
) 181,769 189,067 (189,571
) (504
)
IPCA
2024 96,698 128,160 (97,858
) 30,301
111,031 142,472 (111,625
) 30,847
IPCA
2027 245,626 258,963 (254,437
) 4,526
79,937 94,520 (85,402
) 9,118
IPCA
2028
—
—
—
—
91,298 108,777 (100,034
) 8,743
IPCA
2030 251,848 296,032 (282,762
) 13,270
289,179 350,639 (328,591
) 22,048
IPCA
2031 271,401 301,323 (306,416
) (5,093
) 288,874 333,981 (326,029
) 7,952
IPCA
2032 207,452 221,637 (234,321
) (12,684
) 87,821 103,620 (105,459
) (1,839
)
IPCA
2034 143,913 145,789 (147,941
) (2,152
)
—
—
—
—
IPCA
2036
—
—
—
—
18,824 23,487 (24,650
) (1,163
)
IPCA
2037 217,487 254,311 (282,138
) (27,826
) 214,822 266,169 (267,639
) (1,470
)
IPCA
2038 158,537 167,949 (173,545
) (5,595
)
—
—
—
—
IPCA
2039 23,230 23,975 (24,074
) (99
)
—
—
—
—
1,774,497 1,971,125 (1,977,214
) (6,088
) 1,363,555 1,612,732 (1,539,000
) 73,732
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 Group’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. The Group discloses these exposures considering the fluctuations of an exchange rate in particular towards the functional currency of each subsidiary.
USD
EUR
GBP
MXN
AUD
June 30,
December 31,
June 30,
December 31,
June 30,
December 31,
June 30,
December 31,
June 30,
December 31,
OPERATING
Cash and cash equivalents 1,595,660
1,570,813
47,936
68,154
7,326
20,102
— 271,503
134
42
Trade accounts receivable 644,217
579,651
159,539
147,839
64,311
49,743
— 134,113
472
241
Sales orders (1) 1,035,922
916,595
83,228
73,564
125,720
217,509
—
—
—
—
Trade accounts payable (257,107
) (174,781
) (68,210
) (74,963
) (10,779
) (15,846
)
— (267,433
) (93
) (320
)
Purchase orders (84,177
) (56,710
) (19,523
) (18,012
)
—
—
—
—
—
—
Subtotal 2,934,515
2,835,568
202,970
196,582
186,578
271,508
— 138,183
513
(37
)
FINANCIAL
Margin cash
—
—
—
—
—
—
—
—
—
—
Advances to customers (3,918
) (111,368
) (1,076
) (12,621
) (1,178
) (511
)
—
—
—
—
Loans and financing (256,204
) (306,798
) (2,461
) (3,218
) (12,927
)
—
—
—
—
—
Subtotal (260,122
) (418,166
) (3,537
) (15,839
) (14,105
) (511
)
—
—
—
—
Subtotal 2,674,393
2,417,402
199,433
180,743
172,473
270,997
— 138,183
513
(37
)
Total exposure 2,674,393
2,417,402
199,433
180,743
172,473
270,997
— 138,183
513
(37
)
DERIVATIVES
Future contracts (177,124
) (250,788
) (119,600
) (137,070
) (33,746
) (44,142
)
—
—
—
—
Deliverable Forwards (DF’s) (706,508
) (398,024
) 50,482
67,303
(21,781
) (14,369
)
—
—
2,100
2,846
Non-Deliverable Forwards (NDF’s) (2,012,135
) (1,306,760
) (5,593
) 5,071
(53,962
) (97,124
)
—
—
—
—
Total derivatives (2,895,767
) (1,955,572
) (74,711
) (64,696
) (109,489
) (155,635
)
—
—
2,100
2,846
NET EXPOSURE (221,374
) 461,830
124,722
116,047
62,984
115,362
— 138,183
2,613
2,809
____________ (1) b1 Sensitivity analysis and derivative financial instruments breakdown: b1.1 US Dollar (amounts in thousands of US$): Exposure of US$ Risk Current exchange rate Scenario (i) VaR 99% Scenario (ii) Interest – 25% Scenario (iii) Interest – 50% Exchange rate Effect on income Exchange rate Effect on income Exchange rate Effect on income Operating Appreciation 5.5589 5.4742 (47,620 ) 6.9486 781,705 8.3384 1,563,404 Financial Depreciation 5.5589 5.4742 4,221 6.9486 (69,292 ) 8.3384 (138,584 ) Derivatives Depreciation 5.5589 5.4742 46,991 6.9486 (771,383 ) 8.3384 (1,542,760 ) Exposure of US$ Risk Current exchange rate Scenario (i) VaR 99% Scenario (ii) Interest – 25% Scenario (iii) Interest rate – 50% Exchange rate Effect on equity Exchange rate Effect on equity Exchange rate Effect on equity Net debt in foreign subsidiaries Depreciation 5.5589 5.6436 (209,377 ) 6.9486 (3,437,009 ) 8.3384 (6,873,993 ) June 30, 2024 December 31, 2023 Instrument Risk factor Nature Quantity Notional (US$) Fair value Quantity Notional (US$) Fair value Future Contract American dollar Short 220 (177,124 ) (4,861 ) 52,199 (250,788 ) (2,078 ) June 30, 2024 December 31, 2023 Instrument Risk factor Nature Notional (USD) Notional (US$) Fair value Notional (USD) Notional (US$) Fair value Deliverable Forwards American dollar Short (706,508 ) (706,508 ) 15,990 (398,024 ) (398,024 ) 29,150 Non-Deliverable Forwards American dollar Short (2,012,135 ) (2,012,135 ) (62,659 ) (1,306,760 ) (1,306,760 ) 13,975 b1.2 € — EURO (amounts in thousands of US$): Scenario (i) VaR 99% Scenario (ii) Interest rate variation – 25% Scenario (iii) Interest – 50% Exposure of US$ Risk Current Exchange Effect on Exchange Effect on Exchange Effect on Operating Appreciation 5.9547 5.8724 (2,989 ) 4.4660 (54,067 ) 2.9774 (108,135 ) Financial Depreciation 5.9547 5.8724 52 4.4660 942 2.9774 1,884 Derivatives Depreciation 5.9547 5.8724 1,100 4.4660 19,902 2.9774 39,803 June 30, 2024 December 31, 2023 Instrument Risk factor Nature Notional (EUR) Notional (US$) Fair Notional (EUR) Notional (US$) Fair Future Contract Euro Long (1,321 ) (119,600 ) (7 ) (1,157 ) 5,071 513 Deliverable Forwards Euro Short 8,478 50,482 (1,137 ) 12,576 67,303 (1,885 ) Non-Deliverable Forwards Euro Long (939 ) (5,593 ) 84 947 5,071 (652 ) b1.3 £ — British Pound (amounts in thousands of US$): Scenario (i) VaR 99% Scenario (ii) Interest rate variation – 25% Scenario (iii) Interest rate variation – 50% Exposure of US$ Risk Current exchange Exchange rate Effect on income Exchange rate Effect on income Exchange rate Effect on income Operating Appreciation 7.0259 6.9260 (2,827 ) 5.2694 (49,701 ) 3.5130 (99,402 ) Financial Depreciation 7.0259 6.9260 214 5.2694 3,757 3.5130 7,515 Derivatives Depreciation 7.0259 6.9260 1,659 5.2694 29,166 3.5130 58,332 June 30, 2024 December 31, 2023 Instrument Risk factor Nature Notional (GBP) Notional (US$) Fair Notional (GBP) Notional (US$) Fair Deliverable Forwards British pound Short (3,100 ) (21,781 ) 239 (2,333 ) (14,369 ) 202 Non-Deliverable Forwards British pound Short (7,680 ) (53,962 ) (704 ) (15,771 ) (97,124 ) (579 ) b1.4 AUD — Australian Dollar (amounts in thousands of US$): Exposure of US$ Risk Current exchange rate Scenario (i) VaR 99% Scenario (ii) Interest – 25% Scenario (iii) Interest – 50% Exchange rate Effect on income Exchange rate Effect on income Exchange rate Effect on income Operating Appreciation 3.7106 3.6598 (7 ) 2.7830 (137 ) 1.8553 (274 ) Derivatives Appreciation 3.7106 3.6598 (31 ) 2.7830 (559 ) 1.8553 (1,119 ) June 30, 2024 December 31, 2023 Instrument Risk factor Nature Notional (AUD) Notional (US$) Fair value Notional (AUD) Notional (US$) Fair value Deliverable Forwards Australian dollar Short 566 2,100 4 865 2,846 (1 ) c. Commodity price risk The Group 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 Group and proposing strategies to the Risk Management Committee, in order to mitigate such exposures. c1. Position balance in commodities (cattle) contracts of JBS S.A.:
Exposure in Commodities (Cattle)
June 30, 2024
December 31, 2023
DERIVATIVES
Future contracts 144,225 (101
)
NET EXPOSURE 144,225 (101
) Sensitivity analysis as of June 30, 2024: Exposure Risk Current Scenario (i) VaR 99% C.I. 1 day Scenario (ii) Variation – 25% Scenario (ii) Variation – 50% Price Effect on Price Effect on Price Effect on Derivatives Appreciation 41 39 (5,134 ) 30 (38,419 ) 20 (76,838 ) Derivatives financial instruments breakdown: June 30, 2024 December 31, 2023 Instrument Risk factor Nature Quantity Notional Fair value Quantity Notional Fair value Future Contracts Commodities (Cattle) Long 10,177 144,225 (501 ) (6 ) (101 ) — c2. Position balance in commodities (grain) derivatives financial instruments of Seara Alimentos:
EXPOSURE in Commodities (Grain)
June 30, 2024
December 31, 2023
OPERATING
Purchase orders 65,686 114,097
Subtotal 65,686 114,097
DERIVATIVES
Future contracts 38,524
—
Subtotal 38,524
—
NET EXPOSURE 104,210 114,097 Sensitivity analysis as of June 30, 2024: Scenario (i) VaR 99% Scenario (ii) Price Scenario (ii) Price Exposure Risk Price Effect on income Price Effect on income Price Effect on income Operating Depreciation (1.69 )% (1,181 ) (25 )% (17,498 ) (50 )% (34,995 ) Derivatives Depreciation (1.69 )% (693 ) (25 )% (10,262 ) (50 )% (20,524 ) Derivatives financial instruments breakdown: June 30, 2024 December 31, 2023 Instrument Risk factor Nature Quantity Notional Fair value Quantity Notional Fair value Future contracts Commodities (Grains) Short 7,698 38,524 (667 ) — — — c3. Hedge accounting of Seara Alimentos: The derivative financial instruments designated for the three -month Hedge accounting – Derivative instruments Risk factor Quantity Notional Fair value Future contracts Commodities 7,698 38,524 (740 ) c3.1. Hedge accounting: The Group applies hedge accounting for grain purchases by the subsidiary Seara Alimentos, aiming at bringing stability to the 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 Group’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; changes in commodities prices; and changes in the timing of the hedged transactions. Below are the effects on the statement of income, after the adoption of hedge accounting:
June 30, 2024
June 30, 2023
Statements of income:
Cost of sales before hedge accounting adoption (3,544,719
) (3,965,870
)
Derivatives operating income (loss) 1,741
20,458
Currency
—
1,640
Commodities 1,741
18,818
Cost of sales with hedge accounting (3,542,978
) (3,945,412
)
Financial income (expense), net excluding derivatives (22,565
) 29,633
Derivatives financial income (expense), net (136,505
) (24,777
)
Currency (109,852
) (3
)
Commodities (26,337
) (24,060
)
Interest (316
) (714
)
Financial income (expense), net (159,070
) 4,856
Below are the effects on other comprehensive income (expense), after the adoption of hedge accounting:
June 30, 2024
June 30, 2023
Statements of other comprehensive income (expense):
Financial instruments designated as hedge accounting: (129
) (11,161
)
Currency
—
(895
)
Commodities (129
) (10,266
)
Gain on cash flow hedge 380
(3,025
)
Deferred income tax on hedge accounting
1,029
Total of other comprehensive income (expense) 380
(1,996
)
Hedge cash flow movement
December 31, 2023
OCI
June 30, 2024
Hedge accounting operations at the parent company (510
) 357
(153
)
(-) IR/CS 173
(121
) 52
Impact of Hedge Operations on Subsidiaries (337
) 236
(101
) Below are the effects on the statement of financial position, after the adoption of hedge accounting:
June 30, 2024
December 31, 2023
Statement of financial position:
Derivative (liabilities)/assets (667
)
—
Financial instruments designated as hedge accounting:
Commodities (667
)
—
Derivative (liabilities)/assets (65,764
) 4,473
Financial instruments not designated as hedge accounting:
Exchange (65,028
) 4,977
Interest (736
) (504
)
Other comprehensive income (expense) (121
) (550
)
Currency
—
39
Commodities (121
) (589
)
Inventories 55
6,577
Currency 91
136
Commodities (36
) 6,441
Open amounts in statement of financial position of derivative assets and liabilities:
June 30, 2024
December 31, 2023
Assets:
Not designated as hedge accounting
—
—
Interest
—
—
Current assets
— 4,977
Non-current assets
—
—
(Liabilities):
Designated as hedge accounting 667 750
Interest
— 750
Current liabilities 66,431
—
Not designated as hedge accounting 65,764 504
Commodities 65,028
—
Interest 736 504 c4. Position balance in commodities derivatives financial instruments of JBS USA:
Exposure in Commodities
June 30, 2024
December 31, 2023
OPERATIONAL
Firm contracts of cattle purchase 2,869,811
3,230,355
Subtotal 2,869,811
3,230,355
DERIVATIVES
Deliverable Forwards (672,494
) 389,130
Subtotal (672,494
) 389,130
NET EXPOSURE 2,197,317
3,619,485 Sensitivity analysis as of June 30, 2024: Exposure Risk Scenario (i) VaR 99% I.C. 1 day Scenario (ii) Price variation – 25% Scenario (iii) Price variation – 50% Price (USD Effect on income Price Effect on income Price Effect on income Operating Depreciation (2.08 )% (63,634 ) (25.00 )% (764,466 ) (50.00 )% (1,528,932 ) Derivatives Appreciation (2.08 )% 14,912 (25.00 )% 179,140 (50.00 )% 358,281 Derivatives financial instruments breakdown: Instrument Risk factor Nature June 30, 2024 December 31, 2023 Notional Notional (R$) Fair value Notional (USD) Notional (R$) Fair value Deliverable Forwards Commodities (Cattle) Short (120,976 ) (672,494 ) (17,113 ) 80,377 389,130 (1,982 ) d. Credit risk The information about the exposure to weighted average loss rate, gross carrying amount, expected credit loss recognized in profit or loss and credit -impaired
Weighted average loss rate
Gross carrying amount
Expected credit loss
June 30, 2024
Cash and cash equivalents
—
3,690,302
—
Margin cash
—
162,519
—
Trade accounts receivable (2.61
)% 3,290,534 (85,805
)
Related party receivables
—
511,538
—
—
7,654,893 (85,805
) e. Liquidity risk The table below shows the contractual obligation amounts from financial liabilities of the Group according to their maturities:
June 30, 2024
December 31, 2023
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 5,437,437
—
—
— 5,437,437 6,205,119
—
—
— 6,205,119
Loans and financing 875,763 12,556 1,087,561 16,636,371 18,612,251 891,570
171,228 1,212,538 17,723,802 19,999,138
Estimated interest on loans and financing (1) 1,359,711 782,310 1,598,217 7,913,301 11,653,539 1,362,896
1,052,488 1,910,116 7,390,262 11,715,762
Derivatives liabilities (assets) 229,904
—
—
— 229,904 144,251
—
—
— 144,251
Payments of leases 332,800 221,369 335,999 825,068 1,715,236 (2,796
) 293,444 442,272 1,108,307 1,841,227
Other liabilities 20,465 53,874
— 15 74,354 21,162
20,914
— 61,967 104,043 (1) -month The Group has future commitment for purchase of grains and cattle whose balances for the six -month 32,2 $35,6 The Group has securities pledged as collateral for derivative transactions with the commodities and futures whose balance for the six -month The indirect subsidiary JBS USA and its subsidiaries, has securities pledged as collateral for derivative transactions with the commodities and futures whose balance for the six -month Also, the direct subsidiary Seara Alimentos has securities pledged as collateral for derivative transactions with the commodities and futures whose balance for the six -month A future breach of covenant may require the Group 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 derivative instruments may be different from the amount in the above table as interest rates and exchange rates or the relevant conditions underlying the derivative 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. e. Risks linked to climate change and the sustainability strategy In view the Group’s operations, there is inherent exposure to risks related to climate change. Certain Group 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 six -month (i) • • • (ii) • -carbon • | 27 Risk management and financial instruments Financial instruments: The Group recognizes financial assets and liabilities at fair value upon initial recognition, except for trade accounts receivable that are measured at the transaction price and subsequently classified at amortized cost or at fair value through profit or loss based on the business model for asset management and the contractual cash flow characteristics of the financial asset. Purchases or sales of financial assets or liabilities are recognized on the trade date. Financial assets are classified, at initial recognition, as subsequently measured at amortized cost, fair value through other comprehensive income (OCI), and fair value through profit or loss. The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them: 1. 2. Financial assets and liabilities are offset and presented net in the balance sheet when there is a legal right to offset the amounts recognized and there is an intention to liquidate them on a net basis or to realize the asset and settle the liability simultaneously. The legal right should not be contingent on future events and should be applicable in the normal course of business and in the event of default, insolvency or bankruptcy of the Group or the counterparty. The Group uses the measurement principles described in Note 2.6 — Significant accounting judgements and estimates at each statement of financial position date for each classification type of financial assets and liabilities. Financial instruments: Financial instruments are recognized in the consolidated financial statements as follows:
Note
December 31,
December 31,
Assets
Fair value through profit or loss (1)
Financial investments
3 2,642,258
1,343,149
National treasury bills
3 210,716
109,662
Derivative assets 169,736
108,505
Amortized cost (2)
Cash at banks
3 1,830,814
1,144,741
Margin cash
3 18,191
59,088
Trade accounts receivable
4 3,390,856
3,878,125
Related party receivables
8 118,554
182,268
Total 8,381,125
6,825,538
Liabilities
Amortized cost
Loans and financing
15 (19,999,137
) (17,700,148
)
Trade accounts payable and supply chain finance
14 (6,205,119
) (6,531,731
)
Lease (1,841,227
) (1,721,833
)
Other financial liabilities (104,043
) (11,876
)
Fair value through profit or loss
Derivative liabilities (144,251
) (107,238
)
Total (28,293,777
) (26,072,826
) (1) -term (2) -term Fair value of assets and liabilities through profit or loss:
Level 1
—
Quoted prices in active markets (unadjusted) for identical assets or liabilities;
Level 2
—
Inputs other than Level
Level 3
—
Inputs used for fair value calculations which are not derived from an active market. The Group do not have any financial instruments that utilize significant level 3 inputs.
December 31, 2023
December 31, 2022
Level 1
Level 2
Total
Level 1
Level 2
Total
Financial assets
Financial investments 206,650 2,435,608 2,642,258
— 1,343,149 1,343,149
National treasury bills 210,716
— 210,716 109,662
— 109,662
Derivative assets
— 169,736 169,736
— 108,505 108,505
Financial liabilities
Derivative liabilities
— 144,251 144,251
— 107,238 107,238 Fair value of assets and liabilities carried at amortized cost: -A -rate -rate
December 31, 2023
December 31, 2022
Description
Principal
Price
Fair value
Principal
Price
Fair value
Notes 5.85% PPC 2027 — — — 850,000 99.55 % 846,175
Notes 2.50% JBS Lux 2027 1,000,000 92.10 % 920,960 1,000,000 86.90 % 869,040
Notes 5.13% JBS Lux 2028 900,000 99.66 % 896,931 900,000 95.13 % 856,188
Notes 3.00% JBS Lux 2029 600,000 88.24 % 529,440 600,000 84.02 % 504,108
Notes 6.5% JBS Lux 2029 77,973 99.27 % 77,406 77,973 98.16 % 76,537
Notes 5.5% JBS Lux 2030 1,250,000 98.55 % 1,231,875 1,250,000 95.40 % 1,192,475
Notes 3.75% JBS Lux 2031 500,000 86.45 % 432,250 500,000 82.46 % 412,280
Notes 4.25% PPC 2031 1,000,000 90.27 % 902,650 1,000,000 86.39 % 863,940
Notes 3.00% JBS Lux 2032 1,000,000 81.66 % 816,560 1,000,000 77.61 % 776,110
Notes 3.62% JBS Lux 2032 1,000,000 85.60 % 856,030 1,000,000 82.24 % 822,410
Notes 3.5% PPC 2032 900,000 84.47 % 760,203 900,000 80.72 % 726,498
Notes 5.75% JBS Lux 2033 2,050,000 99.35 % 2,036,736 2,050,000 95.41 % 1,955,885
Notes 6.25% PPC 2033 1,000,000 102.90 % 1,029,020 — — —
Notes 6.75% JBS Lux 2034 1,600,000 105.27 % 1,684,368 — — —
Notes 6.87% PPC 2034 499,999 108.05 % 540,230 — — —
Notes 4.37% JBS Lux 2052 900,000 74.36 % 669,204 900,000 — 646,182
Notes 7.25% JBS Lux 2053 900,000 109.34 % 984,060 — — —
Notes 6.50% JBS Lux 2052 1,550,000 100.71 % 1,560,989 1,550,000 96.79 % 1,500,276
16,727,972
15,928,912 13,577,973
12,048,104 Finance income (expense) by category of financial instrument:
2023
2022
2021
Fair value through profit or loss 204,573
(277,875
) 77,969
Amortized cost (1,566,845
) (963,823
) (1,019,327
)
Total (1,362,272
) (1,241,698
) (941,358
) Risk management: The Group during the regular course of its operations is exposed to market, credit and liquidity risks. These exposures are managed by the Risk Management Department, following the Financial and Commodities Risk Management Policy defined by the Risk Management Committee and approved by the Board of Directors. The Risk Management Department is responsible for identifying all the risk factors that may cause adverse financial results for the Group and proposing strategies to mitigate those risks. Their proposals are submitted to the Risk Management Committee for submission to the Board of Directors, who supervises the implementation of new solutions, noting limitations of scope and guidelines of the Financial and Commodities Risk Management Policy. Below are the risks and operations to which the Group 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 Group utilizes the Value at Risk Methodology (VaR),for the confidence interval (C.I.) of 99% and a horizon of one day. a Market Risk: The exposure to market risk is continuously monitored, especially the risks related to foreign exchange, interest rates and commodity prices, which directly affect the value of financial assets and liabilities, future cash flows and net investments in foreign subsidiaries. In these cases, Group may use financial hedge instruments, including derivatives, with the approval by the Board of Directors. It is the responsibility of the Risk Management Department to ensure that other areas are within the risk exposure limits set by Management to protect against volatility in price, centralize the exposures and apply the Financial and Commodities Risk Management policy. The Risk Management Department uses proprietary and third -party a1. Interest rate risk Interest rate risk is related to potentially adverse results that Group may realize from changes in interest rates, which may be caused by economic crisis, changes in sovereign monetary policy, or market movements. The Group primarily has assets and mainly liabilities exposed to variable interest rates like the CDI Interbank Deposit Certificate), IPCA (Extended National Consumer Price Index) and TJLP (Long Term Interest Rate), among others. The Group’s Financial and Commodities Risk Management Policy does not define the proportion between float and fixed exposures, but the Risk Management Department monitors market conditions and may propose to the Risk Management Committee strategies to rebalance the exposure. The quantitative data referring to the risk of exposure to the Group’s interest rates on December 31, 2023 and December 31, 2022, are in accordance with the Financial and Commodity Risk Management Policy of the Group and are representative of the exposure incurred during the period. The main exposure to financial risks as of December 31, 2023 and December 31, 2022 are shown below:
December 31,
December 31,
Net exposure to the CDI rate:
CRA – Agribusiness Credit Receivable Certificates (60,676
) (5,882
)
Credit note – export (217,648
) (441,125
)
Rural – Credit note – Prefixed (1,208
) (800
)
Related party transactions 624
1,502
CDB-DI (Bank certificates of deposit) 943,526
676,961
Margin cash 31,566
74,237
Treasury bills
—
23,774
Subtotal 696,184
328,667
Derivatives (Swap) (1,427,374
) (1,220,527
)
Total (731,190
) (891,860
)
Liabilities exposure to the LIBOR rate:
Prepayment
—
(292,209
)
FINIMP
—
(2,823
)
PPC term loan
—
(478,916
)
Working Capital – Dollars
—
(3,190
)
Subtotal
—
(777,138
)
Derivatives (Swap)
—
295,353
Total
—
(481,785
)
Net exposure to the IPCA rate:
Treasury bills 27,716
14,767
CRA – Agribusiness Credit Receivable Certificates (2,101,681
) (1,609,636
)
Margin cash 51,751
15,237
Related party transactions 117,930
104,100
Subtotal (1,904,284
) (1,475,532
)
Derivatives (Swap) 1,423,667
1,365,001
Total (480,617
) (110,531
)
Assets exposure to the CPI rate:
Margin cash 49,144
40,469
Total 49,144
40,469
Liabilities exposure to the SOFR rate:
Prepayment (280,971
) (161,410
)
Prepayment – exchange agreement (2,915
)
—
Total (283,886
) (161,410
)
Liabilities exposure to the TJLP rate:
Working Capital (771
) (647
)
Total (771
) (647
) Sensitivity analysis as of December 31, 2023: Contracts exposure Risk Current Scenario (I) VaR Scenario (II) Scenario (III) Rate Effect Rate Effect Rate Effect CDI Increase 11.65 % 11.70 % (340 ) 14.56 % (20,839 ) 17.48 % (41,671 ) IPCA Increase 4.68 % 4.69 % (63 ) 5.85 % (5,496 ) 7.02 % (10,992 ) CPI Decrease 3.10 % 3.09 % (4 ) 2.33 % (372 ) 1.55 % (745 ) SOFR Increase 5.38 % 5.38 % (11 ) 6.73 % (3,732 ) 8.07 % (7,464 ) (418 ) (30,439 ) (60,872 )
Instrument
Risk
Maturity
December 31, 2023
December 31, 2022
Notional
Fair value (Asset) –
Fair
Fair
Notional
Fair (Asset) –
Fair
Fair
Swap
LIBOR
—
—
—
—
—
288,889 295,353 (280,251
) 15,102
CDI
2023
—
—
—
—
76,662 80,523 (77,551
) 2,972
CDI
2024 181,769 189,067 (189,571
) (504
)
—
—
—
—
IPCA
— 111,031 142,472 (111,625
) 30,847
103,021 123,845 (98,448
) 25,397
IPCA
2027 79,937 94,520 (85,402
) 9,118
74,171 80,302 (80,025
) 277
IPCA
2028 91,298 108,777 (100,034
) 8,743
84,712 92,333 (93,764
) (1,431
)
IPCA
2030 289,179 350,639 (328,591
) 22,048
268,317 296,304 (307,264
) (10,960
)
IPCA
2031 288,874 333,981 (326,029
) 7,952
274,067 283,731 (300,700
) (16,969
)
IPCA
2032 87,821 103,620 (105,459
) (1,839
) 172,490 177,699 (186,308
) (8,609
)
IPCA
2036 18,824 23,487 (24,650
) (1,163
) 19,166 19,524 (21,408
) (1,884
)
IPCA
2037 214,822 266,169 (267,639
) (1,470
) 243,786 291,262 (311,581
) (20,319
)
1,363,555 1,612,732 (1,539,000
) 73,732
1,605,281 1,740,876 (1,757,300
) (16,424
) a2. Exchange rate risk Exchange rate risk relates to potentially adverse results that the Group may face from fluctuations in foreign currency exchange rates from economic crisis, sovereign monetary policy alterations, or market movements. The Risk Management Department enters into transaction with derivative instruments previously approved by the Board of Directors to protect financial assets and liabilities and future cash flow from commercial activities and net investments in foreign operations. The Board of Directors has approved the use of future contracts, NDFs (non deliverable forwards), DFs (Deliverable forwards), and swaps that may be applied to hedge loans, investments, cash flows from interest payments, export estimate, acquisition of raw material, and other transactions, whenever they are quoted in currencies different than the entity’s. functional currency. The primary exposures to exchange rate risk are in US Dollars (US$), Euro (€), British Pound (£), Mexican Pesos (MXN) and Australian Dollars (AU$). The carrying amounts of assets and liabilities and other positions exposed to foreign currency risk at December 31, 2023, and 2022 are presented below along with the notional amounts of derivative contracts intended to offset the exposure, in accordance with the Group’s Financial and Commodities Risk Management Policy. The exposure is related to Brazilian Real.
USD
EUR
GBP
MXN
AUD
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
OPERATING
Cash and cash equivalents 1,570,813
737,591
68,154
40,184
20,102
12,202
271,503
122,588
42
7
Trade accounts receivable 579,651
1,173,723
147,839
136,478
49,743
51,302
134,113
126,037
241
86
Sales orders 916,595
597,296
73,564
41,964
217,509
13,379
—
—
—
—
Trade accounts payable (174,781
) (154,283
) (74,963
) (92,271
) (15,846
) (18,799
) (267,433
) (52,346
) (320
) (118
)
Purchase orders (56,710
) (61,679
) (18,012
) (12,181
)
—
—
—
—
—
—
Operating subtotal 2,835,568
2,292,648
196,582
114,174
271,508
58,084
138,183
196,279
(37
) (25
)
FINANCIAL
Margin cash
—
269
—
—
—
—
—
—
—
—
Advances to customers (111,368
) (36,204
) (12,621
) (856
) (511
)
—
—
—
—
—
Loans and financing (306,798
) (1,362,474
) (3,218
) (4,986
)
—
—
—
—
—
—
Financial subtotal (418,166
) (1,398,409
) (15,839
) (5,842
) (511
)
—
—
—
—
—
Operating financial subtotal 2,417,402
894,239
180,743
108,332
270,997
58,084
138,183
196,279
(37
) (25
)
Related party transactions, net
—
—
—
289,556
—
—
—
—
—
—
Total exposure 2,417,402
894,239
180,743
397,888
270,997
58,084
138,183
196,279
(37
) (25
)
DERIVATIVES
Future contracts (250,788
) (103,000
) (137,070
) (103,490
) (44,142
)
—
—
—
—
—
Deliverable Forwards (398,024
) (463,371
) 67,303
84,013
(14,369
) (5,208
)
—
(291,377
) 2,846
943
Non-Deliverable Forwards (NDF’s) (1,306,760
) 3,029
5,071
(11,834
) (97,124
) (19,761
)
—
—
—
—
Swap
—
15,101
—
—
—
—
—
—
—
—
Total derivatives (1,955,572
) (548,241
) (64,696
) (31,311
) (155,635
) (24,969
)
—
(291,377
) 2,846
943
NET EXPOSURE IN US$ 461,830
345,998
116,047
366,577
115,362
33,115
138,183
(95,098
) 2,809
918
Net debt in foreign subsidiaries (1) (14,775,198
) (12,816,599
)
—
—
—
—
—
—
—
—
(1) a2.1. Sensitivity analysis and derivative financial instruments breakdown: a2.1.1 US Dollar (amounts in thousands of US$): Current Scenario (i) VaR 99% Scenario (ii) Interest Scenario (iii) Interest Exposure of US$ Risk Exchange Effect on Exchange Effect on Exchange Effect on Operating Appreciation 4.8413 4.7621 (45,314 ) 3.6310 (692,836 ) 2.4207 (1,385,677 ) Financial Depreciation 4.8413 4.7621 (3,573 ) 3.6310 (54,636 ) 2.4207 (109,272 ) Derivatives Depreciation 4.8413 4.7621 31,251 3.6310 477,820 2.4207 955,643 Current exchange Scenario (i) VaR 99% Scenario (ii) Interest Scenario (iii) Interest rate Exposure of US$ Risk Exchange Effect on Exchange Effect on Exchange Effect on Net debt in foreign subsidiaries Depreciation 4.8413 4.9205 (241,589 ) 6.0516 (3,693,815 ) 7.2620 (7,387,599 ) December 31, 2023 December 31, 2022 Instrument Risk factor Nature Quantity Notional (US$) Fair value Quantity Notional (US$) Fair value Future Contract American dollar Short 52,199 (250,788 ) (2,078 ) 51 490 (872 ) December 31, 2023 December 31, 2022 Instrument Risk factor Nature Notional (US$) Notional (US$) Fair value Notional (US$) Notional (US$) Fair value Deliverable Forwards American dollar Short (398,024 ) (398,024 ) 29,150 (463,371 ) (2,417,731 ) 67,658 Non-Deliverable Forwards American dollar Short (1,306,760 ) (1,306,760 ) 13,975 3029 15804 (339 ) a2.1.2 € – EURO (amounts in thousands of US$): Current Scenario (i) VaR 99% Scenario (ii) Interest Scenario (iii) Interest Exposure of US$ Risk Exchange Effect on Exchange Effect on Exchange Effect on Operating Appreciation 5.3516 5.2638 (3,153 ) 4.0137 (48,033 ) 2.6758 (96,065 ) Financial Depreciation 5.3516 5.2638 254 4.0137 3,870 2.6758 7,740 Derivatives Appreciation 5.3516 5.2638 1,038 4.0137 15,808 2.6758 31,616 December 31, 2023 December 31, 2022 Instrument Risk factor Nature Notional Notional Fair Notional Notional Fair Non-Deliverable Euro Long (1,157 ) 5,071 513 78,708 85,306 3,443 Deliverable Forwards Euro Short 12,576 67,303 (1,885 ) (11,087 ) (12,016 ) 9 a2.1.3 £ – British Pound (amounts in thousands of US$): Current Scenario (i) VaR 99% Scenario (ii) Interest Scenario (iii) Interest Exposure of US$ Risk Exchange Effect on Exchange Effect on Exchange Effect on Operating Appreciation 6.1586 6.0564 (4,405 ) 4.6190 (66,340 ) 3.0793 (132,680 ) Financial Depreciation 6.1586 6.0564 8 4.7134 125 3.1423 250 Derivatives Depreciation 6.1586 6.0564 2,525 4.6190 38,028 3.0793 76,055 December 31, 2023 December 31, 2022 Instrument Risk factor Nature Notional Notional Fair value Notional Notional Fair value Deliverable Forwards British pound Short (2,333 ) (14,369 ) 202 (829 ) (4,869 ) (193 ) Non-Deliverable British pound Short (15,771 ) (97,124 ) (579 ) (3,147 ) (18,476 ) 1,357 a2.1.4 MXN – Mexican Peso (amounts in thousands of US$): Current Scenario (i) VaR 99% Scenario (ii) Interest Scenario (iii) Interest Exposure of US$ Risk Exchange Effect on Exchange Effect on Exchange Effect on Operating Appreciation 0.2856 0.2815 (1,962 ) 0.2142 (33,763 ) 0.1428 (67,527 ) December 31, 2023 December 31, 2022 Instrument Risk factor Nature Notional Notional Fair value Notional Notional Fair value Deliverable Forwards Mexican peso Short — — — (1,092,527 ) (272,434 ) (30,362 ) a2.1.5 AUD – Australian Dollar (amounts in thousands of US$): Current Scenario (i) VaR 99% Scenario (ii) Interest Scenario (iii) Interest Exposure of US$ Risk Exchange Effect on Exchange Effect on Exchange Effect on Operating Depreciation 3.2882 3.2319 1 2.4662 9 1.6441 18 Derivatives Appreciation 3.2882 3.2319 (48 ) 2.4662 (695 ) 1.6441 (1,391 ) December 31, 2023 December 31, 2022 Instrument Risk factor Nature Notional Notional Fair Notional Notional Fair Deliverable Forwards Australian dollar Long 865 2,846 (1 ) 266 943 5 b. Commodity price risk The Group 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 Group and proposing strategies to the Risk Management Committee, in order to mitigate such exposures. Biological assets are a very important raw material used by the Group. In order to maintain future supply of these materials, the Group participates in forward contracts to anticipate purchases with suppliers. To complement these forward purchases, the Group use derivative instruments to mitigate each specific exposure, most notably futures contracts, to mitigate the impact of price fluctuations — on inventories and sales contracts. The Group takes the historical average amount spent on materials as an indication of the operational value to be protected by firm contracts. b.1 Position balance in commodities (cattle) contracts of JBS S.A.: Given the nature of its operations, the Group is exposed to volatility in cattle prices, where price fluctuations arise from factors beyond the Group’s control, such as climate, cattle supply, transportation costs and agricultural policies among others. Forward purchases of cattle can be negotiated at floating (prices marked at the delivery day current price) or fixed prices. The Group may use future contracts traded at the B3 to balance these exposures. The factors that influence the commodity price risk reduction strategy are the timing of term contracts for cattle purchases considering any negotiated values and terms. The Group’s exposure to cattle price fluctuation as of December 31, 2023, are presented below in accordance with the Group’s Financial and Commodities Risk Management Policy and are representative of the exposure at each period end.
Exposure in Commodities (Cattle)
December 31,
December 31,
Firm contracts of cattle purchase
—
2,873
Subtotal
—
2,873
DERIVATIVES
Future contracts (101
) (385
)
Subtotal (101
) (385
)
NET EXPOSURE (101
) 2,488
Sensitivity analysis as of December 31, 2023: Scenario (i) VaR 99% Scenario (ii) Scenario (ii) Exposure Risk Current Price Effect on Price Effect on Price Effect on Derivatives Cattle depreciation 52 55 (5 ) 65 (25 ) 78 (49 ) Derivatives financial instruments breakdown: December 31, 2023 December 31, 2022 Instrument Risk factor Nature Quantity Notional Fair value Quantity Notional Fair value Future Contracts Commodities (Cattle) Long (6 ) (101 ) — 21 (385 ) (19 ) b2. Position balance in commodities (grain) derivatives financial instruments of Seara Alimentos: Seara Alimentos is exposed to price volatility of grain, which changes based on factors beyond the management’s control, such as climate, the supply volume, transportation costs, agricultural policies and others. Seara Alimentos, in accordance with its policy of inventory management, started the strategy of managing the risk of grain’s price by actively monitoring the Group´s grains needs, including expectations of future consumption, anticipated purchases, combined with future market operations, by hedging with grain futures on B3, CME and Over the Counter (OTC), through Non -Deliverable Management’s estimate at the exposure risk to grain’s price changes at Seara Alimentos at December 31, 2023, 2022 and 2021 are presented below in accordance with the Financial and Commodities Risk Management Policy and are representative of the exposure incurred during the period.
EXPOSURE in Commodities (Grain)
December 31,
December 31,
December 31,
OPERATING
Purchase orders 114,097 224,766
346,574
Subtotal 114,097 224,766
346,574
DERIVATIVES
Future contracts
— (948
) (17,218
)
Brazil Cash basis
—
—
3,542
Non-Deliverable Forwards
— (30,990
) (202,375
)
Subtotal
— (31,938
) (216,051
)
NET EXPOSURE 114,097 192,828
130,523
Sensitivity analysis as of December 31, 2023: Scenario (i) VaR 99% Scenario (ii) Price Scenario (ii) Price Exposure Risk Price Effect on Price Effect on Price Effect on Operating Depreciation (2.19 )% (2,451 ) (25.00 )% (27,878 ) (50.00 )% (55,756 ) Derivatives financial instruments breakdown: December 31, 2023 December 31, 2022 Instrument Risk factor Nature Quantity Notional Fair value Quantity Notional Fair value Future contracts Commodities (Grains) Short — — — 520 (948 ) (2,448 ) Non-Deliverable Forwards Commodities (Grains) Short — — — 4,000 (30,990 ) 684 b3. Hedge accounting of Seara Alimentos: b3.1. Hedge accounting: The Group applies hedge accounting for grain purchases by the subsidiary Seara Alimentos, aiming at bringing stability to the 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 statement of financial position 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 Group’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; changes in commodities prices; and changes in the timing of the hedged transactions. Below are the effects on the statement of income, after the adoption of hedge accounting:
December 31,
December 31,
Statements of income:
Cost of sales before hedge accounting adoption (7,798,858
) (7,303,648
)
Derivatives operating income (loss) 31,693
61,857
Currency 1,441
10,103
Commodities 30,252
51,754
Cost of sales with hedge accounting (7,767,165
) (7,241,791
)
Financial income (expense), net excluding derivatives (77,411
) (45,390
)
Derivatives financial income (expense), net 14,405
(46,354
)
Currency 39,968
(61,277
)
Commodities (24,357
) 26
Interest (1,206
) 14,897
Financial income (expense), net (63,006
) (91,744
) Below are the effects on other comprehensive income (expense), after the adoption of hedge accounting:
December 31, 2023
December 31, 2022
Statements of other comprehensive income (expense):
Financial instruments designated as hedge accounting: (537
) (7,800
)
Currency 39
(2,622
)
Commodities (576
) (5,178
)
Gain (loss) on cash flow hedge 7,882
(48,526
)
Deferred income tax on hedge accounting
16,499
Total of other comprehensive income (expense) 7,882
(32,027
)
Hedge cash flow movement
December 31, 2022
OCI
December 31, 2023
Hedge accounting operations at the parent company (7,992
) 7,482
(510
)
(-) Income tax 2,717
(2,544
) 173
Impact of Hedge Operations on Subsidiaries 272
(272
)
—
(92
) 92
—
Impact of Hedge Operations on Subsidiaries (5,095
) 4,758
(337
) Below are the effects on the statement of financial position, after the adoption of hedge accounting:
December 31,
December 31,
Statement of financial position:
Derivative (liabilities)/assets
—
(1,765
)
Financial instruments designated as hedge accounting:
Commodities
—
(1,765
)
Currency
—
—
Derivative (liabilities)/assets 4,473
18,073
Financial instruments not designated as hedge accounting:
Exchange 4,977
—
Interest (504
) 18,073
Other comprehensive income (expense) (550
) (7,720
)
Currency 39
(2,595
)
Commodities (589
) (5,125
)
Inventories 6,577
6,951
Currency 136
2,298
Commodities 6,441
4,653
Open amounts in statement of financial position of derivative assets and liabilities: December 31, December 31, Assets: Not designated as hedge accounting — 18,074 Interest — 18,074 Current assets 4,977 13,267 Non-current assets — 4,807 (Liabilities): Designated as hedge accounting 750 1,764 Commodities — 1,764 interest 750 — Current liabilities — 1,765 Not designated as hedge accounting Currency 504 — interest 504 — b4. Position balance in commodities derivatives financial instruments of JBS USA:
Exposure in Commodities
December 31,
December 31,
OPERATIONAL
Firm contracts of cattle purchase 3,230,355 2,514,530
Subtotal 3,230,355 2,514,530
DERIVATIVES
Deliverable Forwards 389,130 (154,278
)
Subtotal 389,130 (154,278
)
NET EXPOSURE 3,619,485 2,360,252
Sensitivity analysis as of December 31, 2023: Scenario (i) VaR 99% Scenario (ii) Price Scenario (iii) Price Exposure Risk Price (US$ Effect on Price Effect on Price Effect on Operating Depreciation (2.25 )% (71,163 ) (25.00 )% (789,300 ) (50.00 )% (1,578,600 ) Derivatives Appreciation (2.25 )% (8,572 ) (25.00 )% (95,079 ) (50.00 )% (190,159 ) Derivatives financial instruments breakdown: December 31, 2023 December 31, 2022 Instrument Risk factor Nature Notional Notional Fair value Notional Notional Fair Deliverable Forwards Commodities (Cattle) Short 80,377 389,130 (1,982 ) (29,568 ) (154,278 ) (31,182 ) c. Credit risk The Group is potentially subject to credit risk related to accounts receivable, financial investments and derivative contracts. For the receivable account the Financial and Commodities Risk Policy significantly understand the diversification of the portfolio contribute significantly to the reduction of credit, but also sets parameters for the credit granting observing the measures, financial and operational, supported by consultations with agencies that also monitor credit. The impairment of these financial assets is carried out based on credit analyses. If the counter party of a financial transaction is a financial institution (financial investments and derivative contracts), the Group establishes exposure limits set by the Risk Management Committee, based on the risk ratings of specialized international agencies. The Group considers a financial asset to be in default when: 1. 2. Category % Equity Maximum AAA 2.00 5 years AA 1.00 3 years A 0.50 2 years BBB 0.25 1 year The information about the exposure to weighted average loss rate, gross carrying amount, impairment losses recognized in profit or loss were as follows:
Weighted
Gross
Expected
December 31, 2023
Cash and cash equivalents
—
4,569,517
—
Margin cash
—
132,461
—
Trade accounts receivable 2.50
% 3,390,856 (84,913
)
Related party receivables
—
118,554
—
—
8,211,388 (84,913
) d. Liquidity risk Liquidity risk arises from the Group’s working capital management and obligations to pay interest and principal on its financing, especially debt instruments. Liquidity risk is the risk that the Company may not have available liquidity to meet its financial obligations when they are due. The Group’s key management personnel manage liquidity risk primarily by assessing the Group’s overall leverage by monitoring the net debt ratio. This ratio compares the Group’s net debt (total loans and financing less the total of cash and cash equivalents) to “Adjusted EBITDA” for the preceding 12 months. The Group’s working capital management strategy includes maintaining its leverage at or below its target leverage ratio in order to ensure that the Group can meet its financial obligations while achieving efficiency in its cost of funding. The leverage ratio is shown below: December 31, December 31, Leverage indicator (USD) 4.42x 2.26x The table below shows the contractual obligation amounts from financial liabilities of the Group according to their maturities:
December 31, 2023
December 31, 2022
Less than
Between
Between
More than
Total
Less than
Between
Between
More than
Total
Trade accounts payable and supply chain finance 6,205,119
—
—
— 6,205,119 6,531,731
—
—
— 6,531,731
Loans and financing 891,570
171,228 1,212,538 17,723,802 19,999,138 1,577,047 815,045 2,396,339 12,911,717 17,700,148
Estimated interest on loans and financing (1) 1,362,896
1,052,488 1,910,116 7,390,262 11,715,762 924,346 1,837,495 1,485,208 4,441,125 8,688,174
Derivatives liabilities (assets) 144,251
—
—
— 144,251 107,238
—
—
— 107,238
Other liabilities 21,162
20,914
— 61,967 104,043 6,498 5,327 51
— 11,876
Payments of leases (2,796
) 293,444 442,272 1,108,307 1,841,227 342,747 500,539 313,253 853,253 2,009,792
Total 8,622,202
1,538,074 3,564,926 26,284,338 40,009,540 9,489,607 3,158,406 4,194,851 18,206,095 35,048,959 (1) The Group has future commitment for purchase of grains and cattle whose balances at December 31, 2023 is US$35.6 billion (December 31, 2022 is US$32.9 billion). The Group has securities pledged as collateral for derivative transactions with the commodities and futures whose balance at December 31, 2023 is US$13,575 (US$15,416 at December 31, 2022). This guarantee exceeds the amount of the 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 December 31, 2023 is US$67,335 (US$99,288 at December 31, 2022). This guarantee exceeds the amount of the collateral. Also, the direct subsidiary Seara Alimentos has securities pledged as collateral for derivative transactions with the commodities and futures whose balance at December 31, 2023 is US$51,751 (US$15,505 at December 31, 2022). This guarantee exceeds the amount of the collateral. As disclosed in Note 15 Loans and financing, the Group has multiple bank loans that contains a loan covenants. A future breach of covenant may require the Group 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 derivative instruments may be different from the amount in the above table as interest rates and exchange rates or the relevant conditions underlying the derivative 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. e. Risks linked to climate change and the sustainability strategy In view of the Group’s operations, there is inherent exposure to risks related to climate change. Certain Group assets, including biological assets that can be measured at fair value, may be impacted by climate change which is considered in the preparation process of these financial statements. For the year ended December 31, 2023, Management considered as main risk th |
