JBG defends forensic inaction in US probe

The market was already primed to expect bad outcomes from the cleanup under way in Jamaica Broilers’ US operations, but when the report finally dropped the scope of the fallout, still rattled investor confidence due to the wipe out of the company’s capital.

The poultry company also reported historic losses of $7 billion, heaped on top of rewritten results for FY2024 that also showed a near $3 billion of losses, flowing from irregularities in the US operations.

Jamaica Broilers Group Limited, JBG, is now racing to repair its balance sheet after a bruising year that saw equity of $30 billion initially reported in 2024 being decimated and restated to a deficit of $1 billion; while in the 2025 period, that negative equity has sprouted further to $10 billion.

The company, which operates businesses in Jamaica and the United States, is also in the final stages of a $24 billion debt restructuring deal aimed at stabilising liquidity and restoring trust.

Jamaica Broilers is also now on the defensive after its external auditor, PricewaterhouseCoopers, revealed in its audit report that JBG did not pursue particular forensic investigations relating to electronic communications, which would normally be expected in a probe of such irregularities.

“As a result we were unable to obtain appropriate evidence regarding the completeness of the full extent of the reporting irregularities,” PwC Jamaica reported, having noted that the US accounts for 40 per cent of JBG’s assets and 28 per cent of revenue.

Broilers responded in a market filing that it acted on legal vice not to review email communications, saying doing so would breach both Jamaica’s Data Protection Act and US data privacy laws. The company said a request was made to the auditors to make note of its reasons in its audit opinion, in order to provide context, but the auditors refused.

Group Vice President of Finance and Corporate Planning, Ian Parsard, told investors at the Mayberry Forum last Friday that JBG is close to sealing a complex refinancing package involving multiple banks and bondholders. The arrangement, described as a “club deal”, will convert unsecured borrowings into secured debt, backed by Jamaican landholdings and specialised buildings.

“This is not a syndicated deal, but it’s extremely complex,” Parsard explained. “We’re talking inter-creditor agreements, collateral agent arrangements, and bondholder agreements layered on top of existing loan contracts.”

The package includes bonds with three to 14-year tenors at rates between 10.5 per cent and 11.5 per cent, a $4 billion eight-year bank loan priced at floating rates.

Nearly all of the poultry company’s debt is now booked as a current liability after breach of its convents, but the restructuring will allow JBG to reclassify the borrowings back to long-term debt, which will ease pressure on working capital.

Additionally, Jamaica Broilers has commissioned a valuation of its assets and has advised that it expects the value of its fixed holdings to grow by around $40 billion, once the assessment is published around December, further repairing the company’s balance sheet.

President and CEO Christopher Levy described the past year as “an extremely difficult period” as the company unravelled a web of fraudulent transactions in its US poultry meat business.

“Every day, you were just waiting for the next blow,” Levy said, recalling how a whistleblower triggered a forensic audit that exposed overstated inventories and off-balance-sheet financing.

The fallout was severe. The probe highlighted accumulated errors over four years, misreported vendor financing, and liabilities hidden through pretext invoices, and led to the restatement of inventory and biological assets amounting to billions of dollars.

“The first thing that hit us was seeing profits on paper but no cash,” Levy said. “That’s when we knew something was completely off the rails,” he said.

Asked for comment on the likelihood of law enforcement involvement in the aftermath of the findings Levy told the Financial Gleaner he was not prepared to comment further along those lines.

As to whether there will be any to recover the losses, Levy left options open.

“That’s a very difficult question to answer at this point. We just got out our reports. I’m not taking anything off the table at all,” he said.

Parsard stressed that the crisis was isolated to the US meat business, one of four “engines” driving JBG, the others being Best Dressed Chicken and Hi-Pro in Jamaica, and the fertile egg business in the US. While fertile eggs remain robust in the American market, the meat division faces collapsing prices and structural inefficiencies, Parsard said.

To prevent a recurrence, JBG has replaced leadership across all US entities, implemented tighter ERP controls, and engaged IBM to review processes.

It was previously disclosed in a market filing that Levy’s brother, Stephen Levy, who was president in charge of the US operations, resigned from the company and from JBG’s board on May 3 of this year.

Additionally: “We’ve changed auditors to firms with deep poultry expertise,” Parsard said last Friday. “We’re confident the numbers are now clean,” he reported

Amid the fallout, Jamaica Broilers has been stressing the company’s history of profitability, and the corrective measures under way to right its ship.

In its first quarter results for the new fiscal year, May 4 to August 2, JBG posted $1.6 billion in profit, which served to carve down its negative equity to $8.5 billion.

However, Levy cautioned that the period ahead quarter will be tough due to falling US meat prices, even as the Jamaica operations remain a “steady cash cow”.

“Fertile egg sales are buoyant, aided by global supply disruptions, but may not fully offset meat segment weakness,” Levy said.

Parsard said the revaluation of fixed assets will move equity off its negative position to “positive $32 billion”. He adds that there was an additional upside of a potential $30 billion in US tax credits, but said the realisation of the credits depends on IRS negotiations and future profitability.

Meanwhile, with liquidity being tight, dividends to shareholders will hinge on cash availability rather than policy for the time being.

“It’s ridiculous to borrow money to pay dividends,” Levy said, hinting at lean payouts for the next four to six quarters as the company prioritises debt reduction and operational stability.

The poultry company’s falling stock price reflects the strain, wiping more than $5 billion off JBG’s market cap.

“We need steady deleveraging and smart asset sales to accelerate recovery,” Parsard said.

neville.graham@gleanerjm.com