(Bloomberg) -- The world’s largest meat producer JBS SA increased the most in more than three weeks after it announced plans to participate in a $2.5 billion project for the construction of meatpacking facilities in Nigeria — its first expansion into Africa.
JBS signed a memorandum of understanding with the Nigerian government to build three poultry plants as well as two for beef and one for pork in five years, the Brazilian company said in a statement.
More than half the investment forecast for the next five years should come from the company, according to JBS Global Chief Executive Officer Gilberto Tomazoni. The Nigerian government and local businesses are expected to become partners with a minority stake in the business.
Investing in Africa would give JBS, which owns processing facilities spanning from Colorado to New Zealand, an opportunity to diversify away from more mature markets including the US. The economy of Nigeria, which has a population larger than Brazil, is expected to more than double by 2050, the company said.
The company gained as much as 3.3% in Sao Paulo on Friday, the biggest intraday increase since Oct. 28.
“Our goal is to establish a solid partnership and support Nigeria in addressing food insecurity,” said Tomazoni. “Developing a sustainable food production chain generates a virtuous cycle of socioeconomic progress for the population, especially the most vulnerable groups.”
Brazilian meat producers have been preparing to expand after slashing debt as they seek to further capitalize on a surge in chicken profits.
“We see the strategic merit of such an operation,” Goldman Sachs analyst Thiago Bortoluci wrote in a note to clients. Nigeria’s growing population may create enough demand for JBS to build a business similar in size to that of its Brazilian chicken unit Seara, he said.
JBS is targeting a country with low meat consumption that has growth potential over the next decades, Tomazoni said in an interview. “Nigeria has a great consuming market there, so it is highly attractive,” he said.
JBS plans to initially build its own hatcheries and chicken farms needed to provide meat for slaughtering units. It will also develop small local producers to supply the company with chicken in the future.
Recent visits by Nigerian government representatives and talks with President Bola Ahmed Tinubu during the G-20 meeting this month were crucial for the company’s decision, Tomazoni said.
--With assistance from Gerson Freitas Jr. and Tarso Veloso.
(Adds CEO’s comments starting in ninth paragraph. Previous version was corrected to show that the $2.5 billion investment will be shared by JBS and other partners.)
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