JBS S.A. (JBSAY), a leading global food company, has announced its fourth-quarter and full-year financial results for 2023. The company reported net revenues of $19.4 billion for the quarter and $73 billion for the year. Despite a net profit of $16.7 million in the fourth quarter, JBS experienced a net loss of $200 million over the full year. The adjusted EBITDA stood at $1 billion for the quarter and $3.5 billion for the year. The company managed to generate $875 million in free cash flow in the fourth quarter, with a yearly total of $448 million.
Notably, JBS reduced its gross debt by $1.6 billion in the fourth quarter, ending the year with a net debt of $15.3 billion and a decreased leverage ratio of 4.42x. The company's CEO, Gilberto Tomazoni, expressed optimism for the medium-term, particularly for the beef markets in Brazil and Australia, the Seara division, and the chicken and pork businesses in the US, Mexico, and Europe.
Key Takeaways
- JBS reported $19.4 billion in Q4 net revenues, with a full-year total of $73 billion.
- The company saw a net profit of $16.7 million in Q4, but a net loss of $200 million for the full year.
- Adjusted EBITDA reached $1 billion in Q4, totaling $3.5 billion for the year.
- Free cash flow was $875 million for the quarter and $448 million for the year.
- Gross debt was reduced by $1.6 billion in Q4, with a net debt of $15.3 billion at year-end.
- Leverage ratio decreased to 4.42x, with a target below 3.25x by the end of 2024.
- The company is optimistic about 2024, especially in beef in Brazil and Australia, and the Seara business unit.
Company Outlook
- JBS expects double-digit margins for Seara in Q1 2024.
- Growth anticipated in Australian and Brazilian operations.
- Improvements seen in chicken and pork businesses.
- A cultivated protein facility in Spain set to complete in 2024.
- The company is pursuing a dual listing process and has updated registration requests.
Bearish Highlights
- Challenges in the U.S. Beef and Seara businesses addressed through operational excellence.
- The company expects a cash burn in Q1 2024 but aims for improved cash generation year-over-year.
- Net loss of $200 million reported for the full year.
Bullish Highlights
- JBS demonstrated financial strength by reducing gross debt and decreasing leverage ratio.
- Long-term strategy includes investing in strong brands, value-added products, and strategic partnerships.
- Optimism for the medium-term outlook, especially in key business units.
Misses
- Hedging losses impacted the North American beef segment in Q4, but profitability is expected to improve in Q1 2024.
- A net loss of $200 million for the full year despite positive quarterly profit.
Q&A Highlights
- The company sources cattle from various regions, including Texas, Nebraska, Colorado, and Canada.
- Minor signs of heifer retention and promising weather conditions could improve the U.S. cattle market.
- Excess cash will be used to continue reducing debt in Q2, including repaying a capital market bond.
In summary, JBS S.A. has navigated through a challenging year with a focus on operational excellence and strategic investments. The company remains optimistic about its future performance, driven by positive trends in key markets and a commitment to financial prudence.
InvestingPro Insights
JBS S.A. (JBSAY) has shown resilience in a tough market, with several indicators suggesting a mixed financial landscape. According to InvestingPro data, JBSAY's market capitalization stands at $9.77 billion, reflecting the scale of its operations in the global food industry. Despite a challenging year, the company's P/E ratio has adjusted to 38.93, which might interest investors looking for established companies with potential for future growth.
InvestingPro Tips highlight that JBSAY pays a significant dividend to shareholders, with a current yield of 8.45%, which could be particularly attractive for income-focused investors. Moreover, the company has a track record of maintaining dividend payments for 11 consecutive years, underscoring its commitment to returning value to its shareholders. These dividends are supported by the fact that JBSAY's liquid assets exceed its short-term obligations, indicating a healthy liquidity position.
Investors should also note that while JBSAY suffers from weak gross profit margins, currently at 10.9%, it remains a prominent player in the Food Products industry. Additionally, it's trading at a low revenue valuation multiple, which might suggest that the company's stock is undervalued compared to its revenue generation.
For those interested in a deeper dive into JBSAY's financials and future outlook, there are additional InvestingPro Tips available. By using the coupon code PRONEWS24, readers can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, granting access to comprehensive analysis and insights that could further inform investment decisions. There are 11 more tips available on InvestingPro that could provide a more nuanced view of JBSAY's potential.
In conclusion, while JBSAY has faced its share of challenges, the company's ability to maintain a strong dividend and its position as a key industry player may offer some reassurance to investors. The company's upcoming earnings date on May 14, 2024, will be an important event for investors to watch for further indications of JBSAY's performance trajectory.
Full transcript - JBS SA (OTC:JBSAY) Q4 2023:
Montreal: Carla Casella - JPMorgan Orges Asllani - Barclays
Operator: Good morning, and welcome to JBS S.A. and JBS U.S.A. Fourth Quarter and Full Year 2023 Results Conference Call. At this time all participants are in a listen-only mode. Later, we’ll be conducting a question-and-answer session and instructions will be given at that time. As a reminder, this conference is being recorded. The link for download of the presentation is available on the IR site and in the chat. Any statements eventually made during this conference call in connection with the company's business outlook, projections, operating and financial targets and potential growth should be understood as nearly forecasts based on the company's management expectations in relation to the future of JBS. Such expectations are highly dependent on market conditions, on Brazil's overall economic performance and on industry and international market behavior, and therefore are subject to change. Our present with us today, Gilberto Tomazoni, Global CEO of JBS; Guilherme Cavalcanti, Global CFO of JBS; Wesley Batista Filho, CEO of JBS USA; and Christiana, Investor Relations Director. Now, I will turn the call first over to Gilberto Tomazoni, Global CEO of JBS. Mr. Tomazoni, you may begin your presentation.
Gilberto Tomazoni: Good morning, everyone. Thank you for participating in our earning calls. Year-after-year we have emphasizes the importance of our global platform. In periods of challenge conditions like those we faced in 2023. This platform has proven its strength. It has allowed us to continue generating cash in distributing dividends, despite the persistent negative effects of the capital cycle in U.S. The operational management measure adopted last year and improvements in the medium-term outlook enable us to enter 2024 on the path of margin recovery. It's important to emphasize that our focus on operational excellence was the key to correcting the course of two our business that underperformance in 2023, U.S. Beef and Seara. We identified issues and took action to adopt measurement based on our culture with a focus on people and discipline in execution. The results of these measures are already being felt. At Seara, the outlook of 2024 is positive with the possibility of margin exceeding double-digits already present in the first quarter of the year, a traditionally challenged period of December, as supply and demand rebalance bringing resilience in as grain price normalize. Seara is well positioned to reward of operational improvements implemented in recent months and the investments in expansion made in recent years. I take this opportunity to reiterate that our multi-protein and our multi-geography strategy puts us in an unmatched position in the global industry. This strength allows us to capitalize on the cattle cycle upswings in Brazil and Australia, whereas our American operation faces margin decline due to current market conditions. In Australia, the improvement in our outlook is reflected in a significant increase in margin in the fourth quarter in '23 compared to the same period last year. In Brazil, where the situation is similar significant growth in cattle processing volume, increased value-added product sales, the authorization of new plants to supply the Chinese market as well as improving the profitability of export, offering a promising prospects for the beef business in the short- and long-term. The chicken and pork business faced persistent pressure on production costs throughout '23, but are already benefited from the normalization of grain prices. This is evident in the Pilgrim’s in U.S. Pork results. The recovery of margins of these businesses also reflects a better rebalancing of supply and demand. Pilgrim's margins saw a strong growth, rising by 1.5% in the fourth quarter of '22 to 6.8% in the fourth quarter of '23. Similar, U.S. Pork results jumped from 4.8% to 9% in the same period. Through our global platform, we operate successfully in all relevant proteins with results exceeding expectation. Our growth in aquaculture reaffirms our belief that we will replicate what we have done previously with chicken, pork and value added products. Likewise, we continue to invest in research and development of alternative proteins such as plant based and cultivated protein. In 2024, we will complete a cultivated protein facility in San Sebastian in Spain. We are also building in JDS Biotech Innovation center in Brazil, which is a research developing innovation biotechnology center. We are a food company and our focus is to meet consumer demand for all protein options. We also want to highlight that 2023, we once again demonstrate our financial strength. The maintenance of our health care generation allowed us to distribute $448 million in dividend for the year, create value for our shareholders. We reduced our gross debt by $1.6 million for the third quarter of -- to the fourth quarter, which we plan to continue in 2024. As a result, our financial discipline we began the company leverage process at the end of 2023. The leverage ratio decreased from 4.87x in the third quarter to 4.42x in the fourth quarter. We remain confident in our long-term strategy. We will continue to reinforce our diversified platform by geography and by protein style, investing in strong brands, value added products and strategic partnership with our customers. This set of action is crucial for creating better margin and reducing volatility. Investments we made in 2023 are significant milestones that support this direction. In Brazil, we opened two new factories in the state of Parana that will allow Seara to advance in expansion strategy in value added products. Similarly, we commenced operation at the new Principi Italian meat facility in Columbia, Missouri and invested in our Kingsley Park unit in UK to make is a center of excellence in cold cuts. JBS has demonstrated resilience and stress over its 70 years. The company's diversified platform, committed to excellence, innovation and sustainability, focus on people and culture and the dual list in Brazil and United States put the company in a unique position to embark in a new cycle of acceleration, growth and shareholder returns. We remain focused on the dual listing process. Today we took another step to our goal by filing an update to registration requests to sacrifice. These include our figures of December 2031. Thank you all for the participation and this earning call. And now I hand over to Guillermo who will detail our financials. Guilherme please.
Guilherme Cavalcanti: Thank you Tomazoni. Now let's move on to the operational and financial highlights of the year and the fourth quarter of 2023. Starting on Slide 16 please, I would like to start by highlighting some important events that took place over the past year and I would like to take the opportunity to update you on some of those processes. The first point to be highlighted is the registration of eleven senior notes with the SEC in August. This step was fundamental for both the company and investors as it brought a series of significant benefits. Among them we can mention the expansion of investor base, the increase in the liquidity of the notes and the obligation to adapt to rules and regulations such as SOX, FCPA and PCAOB. In addition to the publication of new reports such as 20-F, which we have just published for the first time. We also just announced that we will register new senior notes issued in September 2023 in the amount of $2.5 billion. We will also take the opportunity to reopen the exchange period for the eleven senior notes which have already been registered. However, some investors did not exchange their notes at the time and therefore we are offering a new opportunity at the request of these investors. Given the announcement of the registration of the senior notes, we have made public orientation to have our shares listed in U.S. and Brazil, as mentioned by Tomazoni. Taking advantage of the end of the fiscal year, we just filed a new F4 form which is now available for public consultation, allowing all interested parties to follow the progress of the process. In relation to the new issuance on September 2023, we issued $2.5 billion of senior notes at JBS USA. In October, JBS SA issued agri business receivable certificates in the amount of BRL1.7 billion. Additionally, through our subsidiary Pilgrim's Pride (NASDAQ:PPC), we carried out two issuance totaling $1.5 billion. With the resources retained, we significantly reduced our short-term and medium-term debt, practically eliminating the need for debt payments until 2027, as I will detail later. Now let's move on Slide 17, where we have the operational and financial highlights of the quarter. Net revenues in the fourth quarter of 2023 was $19.4 billion. Adjusted EBITDA totaled $1 billion and represents a margin of 5.3% for the quarter. Net profit was $16.7 million in the quarter. On Slide 18 we have the highlights of the year. Net revenues in 2023 of $73 billion, adjusted EBITDA of $3.5 billion and representing a margin of 4.7% for the year. Net loss was $200 million in the year. Please now moving to the Slide 19 before commenting on free cash flow generation, it's important to highlight that as of the fourth quarter 2023, we began to increase leasing expenses in the calculation of free cash flow, aiming to more accurately represent the company's cash generation and be greatly in line with the variation in the net debt. Therefore, this adjustment was considered for both current period and for the period that serves as a basis for comparison. Operating cash flow in the quarter was $1.7 billion. Free cash flow for the quarter was $875 million. The free cash flow generation was positively impacted by improving operating results at Pilgrim’s, JBS, Brazil and Australia, release of working capital mainly in inventories and suppliers, which combined total a positive variation of $570 million and the reduction in capital expenditures by $253 million against the fourth quarter last year of 2022. Moving on the next slide, at the beginning of last year, during the first quarter results release call, we had commented on what we would do to compensate for the cash burn of $1.3 billion in the first quarter of 2023. Remembering that seasonally the first quarter consumes cash throughout the year, we provided updates to the market to the previously discussed value totaling $1.4 billion considering the necessary revisions. And now as the year ends, even in the face of a difficult and volatile year, we not only reversed the first quarter results but also generated $448 million in free cash flow in 2023. The main developments were positive working capital in the amount of $380 million, considering inventory accounts, receivables and suppliers, reduction in capital expenditures of $670 million and tax refunds in the U.S. and monetization of tax credits in Brazil, which totaled $360 million. For 2034 without providing guidance, we expect our cash generation to follow a similar seasonality as the previous year. This means that it is likely that we will have cash burn in the first quarter, but we expect that it will be around half of the value reported in the same period last year. Taking into account the evolution of Seattle's results and the maintenance of attractive margins in Australia, U.S. Pork and Pilgrim’s. For the update exercise of the EBITDA necessary for free cash flow breakeven we consider net financial expenses for 2024 similar to 2023 at $1.1 billion, leasing expenses which we are estimating $500 million versus $430 million in 2033, reflecting the increase in status capacity. In the same way as rental expenses the increase in our production capacity also increases the consumption of biological assets, therefore, disregarding possible variations linkage to grain prices, we are estimating a biological asset consumption of approximately $650 million. Capital expenditures in 2033 totaled $1.5 billion, which approximately $500 million was expansion CapEx for 2024 a total cash CapEx of $1.3 billion was approved, of which $50 million was for carryover from the previous year and $250 million for expansion in continuity of the plants inaugurated last year. Thus disregarding capital variations outside the company's control and without given -- and without considering this as a guidance, the EBITDA that corresponds to the free cash flow breakeven point is estimated at $3.5 billion. It is worth noting that differences above this amount will be subject to the application of the effective tax rate that is in average globally in 25%. Moving to the Slide 21, we have the evolution of our debt profile. In the fourth quarter, we used cash to reduce gross debt in $1.6 billion. Until February 2024, we already used $566 million of our cash position to reduce gross debt and we intend to continue this movement in the second quarter. Net debt for 2023 ended at $15.3 billion, stable in relation to the previous years as the company's free cash flow was sufficient to cover the payment of dividends that totaled $448 million. Leveraging dollars reduced to 4.42 and in reals to 4.3x in the quarterly comparison confirming that the deleveraging path that we had indicated in previous calls using market consensus leverage will follow the downward trajectory that began in the fourth quarter, 2023. Therefore, according to market consensus for 2024, margins that is reflected on the Bloomberg consensus is 6.5%, 7% for 2025 and 7.8% for 2026. Therefore, using these numbers as a reference, we would reach the end of 2024 with a leverage ratio below 3.25, reach the end of 2025 below 3x, and the end of 2026 below 2.5x. Now I will briefly go through the business units. Starting with Seattle on Slide 22. Net revenue for the quarter fell 5% in the fourth quarter 2023 and 4% for the year. 2023 was very challenging with margins below the ideal levels due to several external and internal challenges such as the global excess of poultry and high production costs and challenges in the upstream part of the business, as well as a lower dilution of fixed costs due to our plants inaugurated in 2023, which are still in the ramp up process. However, by maintaining focus on the fundamentals of the business, we managed to end the year on a positive trend, leaving us very optimistic for 2024. Moving now to Slide 23 JDS Brazil recorded net revenue 4% higher than the fourth quarter 2022, reflecting higher volumes sold but 6% lower than 2022, due to the decline in prices in the domestic and international markets. 2023 was marked by high volatility in the markets, mainly due to self-embargo of beef exports to China, the main destination for Brazilian industry, and the favorable livestock cycle which increases the viability of animals for slaughter and reduces the price of live cattle in Brazil. In this scenario, we strengthened international relationships, gained new plant certifications, further improving the level of service for key partners and brought out brands closer to the consumers. For the fourth time, the Friboi brand was top of mind. As a result of everything above, both for the quarter and for the year, we improved the profitability. Moving on to Slide 24 and speaking now -- from now on in dollars and in U.S. GAAP. JBS Beef North America net revenue grew 15% year-over-year in the quarter and 6% year-over-year in 2023. Despite the increase in revenue resulting from higher prices in the period, profitability was impacted by growth in the price of live cattle at a faster pace than the increase in sales price, reflecting the increasing costs resulting from cattle cycle in the U.S. Additionally, the company uses future contract as a short-term protection measure. However, in the fourth quarter, the business unit ended up being adversely affected as the price of lived cattle fluctuated in an atypical way. On September 2022, it was approximately $1.87 per pound. On December 7, it fell to $1.62 and quickly returned to $1.88 in the beginning of the year. Therefore, the negative impact of the fourth quarter has already been partially offset by gains in the first quarter. In the quarter, revenue growth was the result of higher volumes sold, reflecting the greater availability of cattle in the market. However, during the year, the increase in volume sold did not fully compensate for the reduction in prices in both domestic and international markets. Despite this, both periods there was an improvement in profitability mainly due to the reduction in the price of cattle acquisition, result from greater availability of animals due to the more favorable cycle in the country and efficient gains in several areas in the sub segments of these business units. Turning now to the U.S. State Pork net revenue for the quarter was 4% higher compared to the fourth quarter 2022, but a reduction of 5% in 2023 against 2022. At the beginning of 2023, we faced challenges in price and profitability due to excess supply of hogs in the domestic market. However, throughout the year we observed a normalization in production accompanied by a reduction in grain costs as well as average price of live hogs. Furthermore, through continuous efforts to improve results such as expanding the value added portfolio and improving commercial and operational execution, the EBITDA margin returned to normalized levels in the second half of the year. Pilgrim’s price, as highlighted on Slide 27, recorded an increase in net revenue of 10% in the fourth quarter 2023 compared to fourth quarter 2022 and remained stable in 2023 in the end of comparison. Like other business units mentioned previously, 2023 was marked by high volatility in the commodities market. At the beginning of the year, poultry prices began at historical low levels due to the oversupply in the industry, especially in the heavy bird segments now known as big bird in the EU, in the U.S. However, through a better balance between supply and demand, prices gradually stabilized, although cost inflation remained high. Despite the challenges faced, the company remained focused on executing its strategy and managed to improve its results throughout the year in all regions. As you could see, and as we had indicated, the improvement in profitability occurred in all business units throughout 2023, with the exception of this North America. Similarly, the path remains positive for 2024, with emphasis on JBS, Australia, Seattle, PPC and USA Pork. I would like to open up for our question-and-answer session.
Operator: [Operator Instructions] Our first question comes from Ben Terry with Barclays.
Ben Terry: Just following up on what you've already discussed during the call a while ago on the translated one. So my first question, Seara, can you elaborate a little bit more as to what's different in 1Q versus 4Q? As you've talked about the double-digit margin potential, just given that the fourth quarter was obviously flat on a year-over-year basis, so that we better understand what are the drivers that basically help you boost that margin, as you've talked about, into the double-digits? That would be my first question. I have one quick one more.
Gilberto Tomazoni: I think is before to go to the detail, I want to clarify that Seara did not -- has not have any market problem -- does not have any. I want to reinforce that because consumer preference rates have increased, the brand has increased penetration to 90% ohms of products and repurchase of product is 89%. Strong numbers means that we don't have any problem with the marketing, with the perception, with the consumer preference, with the relation with the customers. We had -- we’re probably with the operational efficiencies indexes related to productivity indicators, processes, performance and equipment availability. These costs have been identified and contra measures are in place. The result of this action is still at a small impact in the fourth quarter but will begin to appear much more in the stretch from the first quarter of the year. Furthermore, we have not reached yet the optimal point of deficiency in the ramp up of the Rolandia factory. It is high automated factory that requires time to parameterize and synchronize all stage of the process of the process. It is normal for a factory with a lot of embedded technology. However, the adjusted completed, the competitiveness will be with greater increase for all of these. We are optimistic for the Seara next quarters.
Ben Terry: And then just coming back to some of the technical things and that's most likely question for Guil. So with the new filing and the new registration and everything you've been doing, obviously on the fixed income side as it relates to the equity listing, do you have any estimate as to the timeline for that? A 3Q thing? Is that a 4Q thing? What are the next steps you need to kind of get over to actually get this listing finally done.
Guilherme Cavalcanti: So as you saw, we just filed a new F4, updating the 2003 numbers and including the previous comments from SEC. Now we have to wait if SEC has more comments on the document, and if it has, we have to do another filing with the new comments at the point that SEC doesn't have any comments anymore. Then we can ask a registration of the equity. And then when SEC gives the go ahead, the green light for the registration, then we can call a general assembly which will be in at least 45 days, as we mentioned previously. So this timeframe, it's uncertain given that what I mentioned, but it's possible that we could finalize this year still.
Operator:
Montreal.:
Andrew Strelzik: I wanted to start maybe at a high level and in the release and the CEO comments, there was a line that referenced an improvement in the medium-term outlook. And so, I was hoping you could maybe elaborate on where you're seeing those improvements or where you're now more optimistic than you would have been three or four months ago the last time you reported.
Gilberto Tomazoni: We are very optimistic in beef in Brazil and in Australia. I think they start a new cycle. We see that the margin will grow because with the beginning of the cycle of the beef, when I say positive outlook is for the year, maybe you need to remind that the first quarter -- in the fourth quarter is the tough quarter in the medium quarter is the better quarter for the company. But this is both. We are on a positive outlook then we have Seara. Maybe Seara is the most positive outlook. If you compare the results of the fourth quarter, we see that Seara this quarter, the results was below the potential of the company. And in the beginning of the first quarter of the year, we can see that much more results we have done and to change I mentioned before the parameters and the alignment with the process. We have a long chain and will take time to get the results of the improvements in the balance sheet. But we all see in the first quarter. We see the chicken, numerous positive outlook we have chicken positive in the U.S, even Mexico and Europe. We are positive in terms of results. We are positive on pork in U.S. and remain a challenge of this of our U.S. beef business. That is we are in the cycle and we are commented before hat is a tough moment. But even in this business, when you look for the year, the results should be positive. Is not as we was before, but it's more positive that when you compare the last quarter -- this quarter that we now show the results.
Andrew Strelzik: And then on the North American beef performance in the quarter, you talked about a hedging loss, I think it was in the quarter and then that's reversing in the first quarter. Just trying to get a sense for kind of the steady state profitability right now in that business. Can you quantify that loss? That was in the 4Q and did you say, I know you said profit positive for the year. Are you expecting positive in 1Q as well? Did you say that?
Guilherme Cavalcanti: About half of the negative EBITDA came from this impact. Like I said, very unusual to have such a big variance in futures, like what we had about 2020, some cents in three months. So pretty atypical. Our outlook for 2024 would be low single-digits. We expect that it is possible to have a breakeven scenario in a worst case scenario -- but in a worse scenario. But there is a seasonality of the business. So we should expect to see a first quarter of ‘24 and the last quarter of ‘24 being the worst quarters and the second third quarter, like always being better quarters and on average being able to do that mid-single-digits to breakeven sort of result. Being that the first and the fourth quarter being -- bringing the average lower and the second and third bringing the average higher.
Operator: And our next question comes from Carla Casella with JPMorgan.
Carla Casella: My question somewhat of a follow-up on that prior question. Can you just talk about the U.S. cattle availability and can you also remind us where you source most of your cattle from and kind of where you have a preferred sourcing or relationship so we can kind of track it as we see weather develop over the next few months?
Gilberto Tomazoni: Carla, we buy cattle. Our footprint, if you look, it's very, very geographically diverse. We obviously -- our large plants are in Texas, Nebraska, Colorado. So those are the big plants in Texas, Midwest. But we also have our regional business, right? So in our regional business, we have plants in Arizona, in Pennsylvania, so we’re pretty well spread out. We are seeing and we also have our Canadian operation, which is a relevant part of our business. Part of our business the regional business where we source has always been a business that has sourced a lot of cow product and also a lot of Holstein cattle. Obviously that always swings as we go into a scenario where we have less cows. We're going to see an increase in our hosting as part of a share of that business raw materials sourcing. But we're pretty, pretty good proxy to the -- to what the cattle market is across the country. We don't one region which is much more impactful than what the national average was. Carla, sorry, but there was a first part of your question. I think I'm missing it. What was that?
Carla Casella: No, I think that was it. But I think the last we spoke you talked about some green shoots you were seeing in terms of heifer retention and that being the first potential like step towards an improving cycle in the U.S. or any update there?
Gilberto Tomazoni: Look, pasture conditions are better than in the previous, we're seeing promising weather forecast especially the center of the United States. So far that's good news, but it's promising. But we have seen still minor, minor signs of heifer retention. We still believe that the economic signals are all there and weather being better than last year, we should start seeing heifer retention. But obviously we still have to see significant half a retention and half a retention numbers. But we do expect and like I said before, Carla, in that scenario, we will start seeing first in our regional business the lower availability of cows. And we believe that if weather is -- and we have a wet spring here, we could expect heifer retention to get started.
Operator: Our next question comes from Orges Asllani with Barclays.
Orges Asllani: Are you still expecting incremental debt using free cash flow generation between 2Q and 4Q?
Gilberto Tomazoni: So first you saw that we finished the year with the cash position, which we already used to repay that on an amount of $566 million up to February. We still have excess cash. So we intend to continue reducing gross debt in the second quarter. Then basically repayment, most of our debt is today is capital markets. So would be repayment of probably a capital market bond.
Orges Asllani: And just very quick on the registration that was announced today, should we expect any future issuance that you do to be fully registered or is there any administrative reason for you to use reg rights?
Gilberto Tomazoni: The reg rights is to speed up the process. So last September, in order to make the issuance quicker, we did 144A with reg rights, we already asked SEC to be [a week c], which is a frequent issuer. So then when we are a week or a frequent issuer, then we can have a registered issuance very quickly as well. So as long why we don't have that we will continue to do 144 A and giving reg rights.
Operator: Ladies and gentlemen, there have been no further questions. Now I would like to pass the floor to Mr. Gilberto Tomazoni. Please go ahead.
Gilberto Tomazoni: I'd like to thank you all for participating in our calls and to thank you for our global team for your dedication, the determination to make our business better every day. Thank you.
Operator: This is the end of the conference call held by JBS. Thank you very much for your participation and have a nice day.
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