Slide 1: Institutional Presentation Jan 2011
INSTITUTIONAL PRESENTATION JAN 2011
Slide 2: Agenda
Agenda 1. Company Overview 2. Business Divisions (proteins) 3. Financial and Operational Performance 4. Capital Markets 5. Scenario, Opportunities and Challenges 2
Slide 3: Marfrig Group Worldwide
Marfrig Group MORE THAN 90,000 EMPLOYEES Marfrig WITH WORLDWIDE 151 PRODUCTION COMMERCIAL AND Marfrig is one of the LARGEST and DISTRIBUTION UNITS MOST DIVERSIFIED global food companies, long term oriented on PRESENCE IN increasing further PROCESSED PRODUCTS participation in sales 22 COUNTRIES 5 and
Slide 4: Marfrig Group: Broad portfolio with strong brands
Marfrig Group 3rd LARGEST PLAYER Broad portfolio with strong brands in the global meat sector LEADING POSITIONS in domestic markets with significant OPPORTUNITIES for growth FOCUS on industrialized products with high VALUE ADDED EXPERTISE in the supply of food products to the FOOD SERVICE industry C
Slide 5: Vision, Mission and Values
Vision, Mission and Values Vision To be recognized as a company Values of excellence in the Brazilian Commitment to Clients and and international markets in Consumers the processing and sale of high- quality products, in all of its Respect for the Environment segments and for all of the Excellen
Slide 6: Corporate Governance – Respect and Contact with Shareholders
Corporate Governance – Respect and Contact with Shareholders Ethics, Transparency, Equal Rights and Accountability HIGH STANDARDS of Corporate Governance 3 BOARD SUPPORT COMMITEES A SINGLE class of shares Auditing and Controllership Professionalized MANAGEMENT Finance and Investment List
Slide 7: Experienced Management Team
Experienced Management Team Marcos Molina More than 25 years of experience in the sector. CEO and Chairman of the Board He initiated his entrepreneur career with a food distribution business at the age of 16 Alexandre Mazzuco Ricardo Florence Eduardo Miron Finance – Brazil Strategic Planning and Inv
Slide 8: Drivers of the Marfrig Group's strategy
Drivers of the Marfrig Group’s strategy Principal production base in South America with low costs (cattle and grains) and productive chain optimization Streamlined, agile and Risk mitigation, Focus on low-cost structure diversified and deleveraging with a comfortable cash • Principal base global pro
Slide 9: Strong presence in the global market
Global Food Production and Distribution Platform Strong presence in the global market 14 01 11 11 02 04 04 02 01 04 52 14 01 03 08 01 05 04 01 07 02 01 97 Industrial Protein Units 14 Industrial Units / Leather Offices 40 Distribution Centers 9
Slide 10: Protein Diversification: Installed Capacity
Protein Diversification: Installed Capacity Beef Brazil Argentina Uruguay New Seara Europe Keystone TOTAL Cattle 23,450 3,900 3,900 - - - 31,250 (head/day) Lamb 2,000 - 8,400 - - - 10,400 (head/day) Chicken - - - 2,443,000 767,000 530,000 3,740,000 (head/day) Pork - - - 10,400 - - 10,400 (head/day)
Slide 11: Revenue Breakdown by Protein and by Division
Revenue Breakdown by Protein and by Division Strategy focused on geographic and protein diversification 9M10 9M07 10.7% 33.2% 9.3% 23.9% 10.8% by 79.9% 29.1% protein 3.0% Beef Poultry Pork Industrialized Other 9M10 9M07 18.7% 30.7% 2.0% 8.1% 17.8% by 5.5% 7.4% division 74.7% 35.0% Beef Brazil & Food
Slide 12: Consolidation of the Global Food Market
Consolidation of the Global Food Market Net Revenue (R$ billion) 28.6 * CAGR: 65.3 %* 16.5 * 9.6 6.2 1.4 2.1 3.3 2005 2006 2007 2008 2009 2010 2011 Protein diversification Consolidation of global Strategy Increased capacity Focus on processed foods platform with international Phases Regional diversi
Slide 13: Sustainability
Sustainability Sustainable growth and environmental conservation integrated into all of its operations INNOVATIVE ACTIONS towards SUSTAINABILITY Projects to reduce greenhouse gas emissions Strong standards of governance of work Animal well-being programs Improved effluent treatment systems
Slide 14: 2010 Awards and Recognitions
2010 Awards and Recognitions 2010 Entrepreneur of the Year Isto É Dinheiro Magazine - Industries category Best Agribusiness Company Best Company in the Beef Industry Maiores e Melhores de 2010, Exame Magazine Top 5 ranking: Best IR Professional IR Magazine Awards Best in Financial Sustainability Ist
Slide 15: 2010 Highlights
2010 Highlights The acquisition of KEYSTONE FOODS resulted in CONSOLIDATION of the global platform, adding international distribution capabilities With the CONSOLIDATION of SEARA, Marfrig Group became Brazil’s 2nd LARGEST PLAYER in the poultry, pork and industrialized food products market STREN
Slide 16: Agenda
Agenda 1. Company Overview 2. Business Divisions (proteins) 3. Financial and Operational Performance 4. Capital Markets 5. Scenario, Opportunities and Challenges 16
Slide 17: Beef: Operational Performance
Beef (Brazil, Argentina and Uruguay): Operational Performance Scenario in 2010 Gradual recovery of domestic and foreign demand Restricted cattle supply in Brazil, Argentina and Uruguay, with higher prices Higher demand has favored passing along price increases Given this scenario, Beef Brazil
Slide 18: Beef Brazil, Argentina and Uruguay: Prices x Costs
Beef Brazil, Argentina and Uruguay: Prices x Costs Marfrig – Beef Brazil Marfrig – Argentina Marfrig – Uruguay (R$/Kg) (R$/Kg) (R$/Kg) 8,0 25,0 10,0 7,0 20,0 8,0 6,0 15,0 6,0 5,0 10,0 4,0 4,0 5,0 2,0 3,0 - - 3Q09 4Q9 1Q10 2Q10 3Q10 3Q09 4Q9 1Q10 2Q10 3Q10 3Q09 4Q9 1Q10 2Q10 3Q10 Fresh meat - DM* Fre
Slide 19: Beef Brazil: Market Share
Beef Brazil: Market Share Brazil: Market share gains in slaughter Growth in cattle slaughtering: Brazil and Marfrig Beef in Brazil (in heads – base of 100) 300 Marfrig: +167% In thousand 250 1Q09 3Q10 heads 200 Marfrig 281 750 150 Brazil: +9% Brazil 5,044 5,482 100 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
Slide 20: Beef Brazil: Market Share (Exports)
Beef Brazil: Market Share Brazil: Market share gains in exports Growth in Beef Exports: Brazil and Marfrig Brazil (in USD – base of 100) 300 Marfrig: +183% 250 200 USD million 1Q09 3Q10 Brazil: +70% 150 Marfrig 88.6 251.0 100 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 Brazil 778.4 1,325.8 Brazil Marfrig Gro
Slide 21: Beef Brazil: Outlook
Beef Brazil: Outlook Cattle prices in Brazil: Average of the 17 main areas in Brazil and ESALQ index Source: Bloomberg (R$/@) 120 BM&FBovespa Future Index : 110 Tendency to decline during the season 100 90 80 Average of the 17 main areas in Brazil 70 ESALQ Index 60 Total slaughter in Brazil and % of
Slide 22: Beef Brazil: Food Service Outlook
Beef Brazil: Food Service Outlook The Brazilian food service sector has outperformed overall food industry sales Food Service Segment Participation in overall Food Industry Sales (R$ billion and %) 29.1% 28.8% 28.8% 28.2% 26.7% 25.4% 24.8% CAGR: 13.9% 24.4% 64.4 58.2 50.3 38.6 43.4 29.5 34.1 25.9 20
Slide 23: Beef Argentina: Market Share
Beef Argentina: Market Share Argentina: Gains in market share in hamburger and hot dog in the domestic market 62.3% 64.2% 60.2% 60.2% 55.1% 48.5% 59.8% 44.7% 57.5% 55.1% 55.1% 40.6% 49.2% 41.2% 38.3% 33.0% 15.1% 14.8% 14.1% 13.2% 11.7% 10.3% 10.1% 10.7% 2003 2004 2005 2006 2007 2008 2009 2010 Quickf
Slide 24: Beef Argentina: Outlook
Beef Argentina: Outlook Factors that impacted the cattle herd in Argentina: Barriers to export and price controls discouraged investments Largest drought in 50 years that struck the country in 2009 Cattle herd in Argentina Total slaughter and % of cow Source: Argentine Ministry of Agriculture (mi
Slide 25: Beef Uruguay: Scenario and Outlook
Beef Uruguay: Scenario and Outlook In 2010, the sector was affected by 2009’s strong drought. Prices went up and the cattle herd declined: Cattle price and meat export price Total slaughter and % of cows Source: INAC (carcass USD/kg and USD/kg) Source: INAC (thousand heads) $4,0 +57.9% 1200 57.7% 55
Slide 26: Beef Brazil, Argentina and Uruguay: Brands and Products
Beef Brazil, Argentina and Uruguay: Brands and Products 26
Slide 27: New Seara: Breakdown of Revenue and Volume
New Seara: Breakdown of Revenue and Volume The consolidation of SEARA in 2010 contributed to the significant increase in volumes and the higher average price compared to 9M09 Revenue Volume Average Price (million) (thousand tons) (R$/Kg) 3,723 1,129 3.81 3.89 + 131.0% + 159.4% 3.30 2,348 603 2.94 1,
Slide 28: New Seara: Grain Prices in Brazil
New Seara: Grain Prices in Brazil Corn Price Corn (R$/60 kg ) (% change) 30 R$ 24.45 25 42.4% 20 15 R$ 17.17 10 jan feb mar apr may jun jul aug sep oct nov dec -3.2% 2009 2010 11M10 x 11M09 YTD Soybean Price Soybean (R$/60 kg ) (% change) 60 11.3% 50 R$ 47.79 40 R$ 42.95 30 20 -16.5% jan feb mar apr
Slide 29: New Seara: Product Portfolio
New Seara: Product Portfolio SEARA has a complete portfolio, with more than 2,200 SKUs... Over 100 items launched in the Brazilian market and 20 items in the international market 29
Slide 30: New Seara: Presence of the Seara brand
New Seara: Presence of the Seara brand In 2010, SEARA increased its exposure to consumers throughout sports sponsorship 30
Slide 31: New Seara: Marketing actions
New Seara: Marketing actions… ...helped to increase the brand awareness • + more than 8 million hits: Number of views of “Single Ladies” clip (YouTube) • 1st place award: Most popular brands at the World Cup (Predicta) • 2nd place award : Most remembered campaigns by Internet users (Qualibest) • 3rd
Slide 32: New Seara: Increased Market Share in the Domestic Market
New Seara: Increased Market Share in the Domestic Market Marketing actions led to gains in domestic market share... Domestic Sales of Industrialized Meat Domestic Sales of Frozen Meat (thousand tons and %) (thousand tons and %) 7.7% 7.8% 6.9% 16 7.1% 7.1% 6.7% 6.2% 4 5.9% 6.0% 6.0% 12 3 8 2 4 1 0 0
Slide 33: New Seara: Increased Share in Export Market
New Seara: Increased Share in Export Market Gains of market share in the Brazilian exports 20.2% 19.9% 19.6% USD million 8.2% 8.2% 9.1% 7.5% % Share 326.8 362.2 280.0 96.3 115.4 128.9 78.7 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 13.9% 14.0% 9.5% 6.4% 6.0% 5.0% 4.5% USD million 50.5 % Share 39.6 33.7 10.8
Slide 34: New Seara: Outlook
New Seara: Outlook Make Seara the 2nd choice among the brands of industrialized and frozen products in Brazil, being recognized by consumers as a synonymous of flavor and quality. 34
Slide 35: Europe: Revenue and Volume Breakdown
Europe: Revenue and Volume Breakdown The acquisition of O’Kane Poultry in the third quarter of 2010 contributed to increase sales volume Revenue Volume Average Price (£ million) (thousand tons) (£/kg) 730.9 727.6 +12.5% 2.52 325.8 2.23 289.6 9M09 9M10 9M09 9M10 9M09 9M10 35
Slide 36: Europe: International Grain Prices
Europe: International Grain Prices Soybean Price Soybean (USD/bushel) (% change) 14 USD 12.52 21.5% 12 USD 10.31 10 8 6 jan feb mar apr may jun jul aug sep oct nov dec -0.8% 2009 2010 11M10 x 11M09 YTD Wheat Price Wheat (USD/bushel) (% change) 8 USD 6.74 6 26.6% USD 5.32 4 6.5% 2 jan feb mar apr may
Slide 37: Europe: Poultry Consumption Growth
Europe: Poultry Consumption Growth Retail Price of Fresh Chicken in the U.K. (cent £/kg) 310 300 290 287 2010 280 285 2009 270 jan feb mar apr may jun jul aug sep oct nov dec Poultry Consumption in the U.K. (last 12 months) (thousand tons ) 1.750 1,720 1.700 1.650 1,613 2010 1.600 2009 1.550 jan feb
Slide 38: Europe: Brands and Products
Europe: Brands and Products 38
Slide 39: Europe: Outlook
Europe: Outlook Sales growth on the European market Gains in market share in the retail, quick service restaurants and food service segments Strengthening of the poultry segments Diversification of complementary segments within the foods sector Innovation, new products and brand developmen
Slide 40: Keystone Foods: Rationale behind the Acquisition
Keystone Foods: Rational behind the Acquisition Operational Benefits: The combination with Marfrig improves the business, particularly the ability to meet the needs of our clients (quick service restaurant chains) Focus on prepared products for the Food Service Industry Global platform with ac
Slide 41: Keystone: Overview
Keystone: Overview A global company focused on prepared products and direct distribution to Food Services Chains Global supplier of animal protein products (poultry, pork, beef and fish) and distribution services to the largest global quick service restaurant chain Market leader in the U.S. (East
Slide 42: Keystone: Synergies
Keystone: Synergies Estimated synergies of US$ 100 million by 2013 PRODUCTION DISTRIBUTION IN EUROPE Marfrig’s protein sales to Keystone Integration between Moy Park and Keystone’s Increased use of Keystone distribution chains in the U.K. processing plants with and in France accompanying cost
Slide 43: Agenda
Agenda 1. Company Overview 2. Business Divisions (proteins) 3. Financial and Operational Performance 4. Capital Markets 5. Scenario, Opportunities and Challenges 43
Slide 44: Net Revenue and Volume
Net Revenue and Volume Revenue – 9 months (R$ million) CAGR: 67.8% 44% 39% Export markets 50% 56% Domestic markets 61% 57% 43% 50% 9M07 9M08 9M09 9M10 Volume – 9 months (thousand tons) CAGR: 56.4% 2,513.9 1,580.0 993.4 657.3 9M07 9M08 9M09 9M10 44
Slide 45: Marfrig Group: Consolidated Exports
Marfrig Group: Consolidated Exports In terms of sales, Marfrig Group implements the following strategy: Balancing domestic and foreign market sales Not concentrating exports on a single destination Not concentrating sales on a single client 9M09 9M10 2.5% 1.2% 2.5% 2.4% 3.9% Europe 5.7% Middle Ea
Slide 46: EBITDA, EBITDA Margin and Net Profit
EBITDA, EBITDA Margin and Net Profit Increasing the participation of industrialized products in its revenues, Marfrig Group expects to obtain more stable and sustainable margins EBITDA (9 months) Net Profit (9 months) (R$ million and %) (R$ million and %) 11.4% 11.5% 8.8% 9.1% 567.4 964.7 619.5 437.
Slide 47: Indebtedness - Consolidated
Indebtedness - Consolidated 2,4x 2,4x 1,9x * Regarding debt, Marfrig Group’s goals for the1,4x coming years are: 1,3x 1,3x Deleveraging 1,0x 1,0x Lengthening debt maturity 36,6% 36,6% Reducing the cost of 28,6% debt 31,3% 25,8% 26,2% 28,6% 25,8% Net Debt and Net Debt/EBITDA Short-term Debt and Ca
Slide 48: Investments
Investments CAPEX (R$ million) Investment Activities 1Q10 2Q10 3Q10 9M10 CAPEX – Invested in fixed assets (110.0) (96.5) (143.2) (349.7) CAPEX – Invested in breed stocks (39.0) (40.9) (83.2) (163.1) Payment of prior acquisitions (612.1) - - (612.1) Payment of acquisitions in the period - - (67.4) (6
Slide 49: Agenda
Agenda 1. Company Overview 2. Business Divisions (proteins) 3. Financial and Operational Performance 4. Capital Markets 5. Scenario, Opportunities and Challenges 49
Slide 50: Bonds
Bonds Bonds Ratings Issued in Nov/06 Apr/10 Agency Scale Rating Outlook Last Report Maturity Nov/16 Apr/20 Domestic BBB+ Fitch Ratings Stable Sep/10 Global B+ Principal (US$ M) 375 500 Standard & Global B+ Stable Sep/10 Coupon (annual) 9.625% 9.50% Poor’s Moody’s Global B1 Stable Nov/10 Current Yiel
Slide 51: Capital Market Performance
Capital Market Performance Share Price and Shareholders Equity / Share R$ 25,00 R$ 20,00 15,50 R$ 15,00 R$ 10,00 R$ 5,00 R$ 0,00 Shareholders' Equity / Share MRFG3 Quote (Closing) ¹ Adjusted by the highest amount of shares to be issued in 2015 Average daily volume Indexes entrance (R$ million) Trade
Slide 52: Agenda
Agenda 1. Company Overview 2. Business Divisions (proteins) 3. Financial and Operational Performance 4. Capital Markets 5. Scenario, Opportunities and Challenges 52
Slide 53: Estimate of Global Protein Consumption in 2010
Estimate of Global Protein Consumption in 2010 (million tons) NORTH AMERICA EUROPE ASIA Beef 12.9 Beef 12.2 Beef 18.0 Pork 9.7 Pork 25.6 Pork 63.2 Poultry 16.9 Poultry 16.9 Poultry 37.8 CENTRAL AND AFRICA OCEANIA SOUTH AMERINCA Beef 5.4 Beef 1.1 Beef 15.2 Pork 1.3 Pork 0.7 Pork 6.3 Poultry 5.1 Poult
Slide 54: Global Protein Demand to Grow by 22.8% until 2019
Global Protein Demand to Grow by 22.8% until 2019… Consumption by type of protein 22.8% (million tons) 331.3 269.8 27.8% 23.3% 14.5% 2007-09 126.4 23.4% 116.0 102.5 2019 73.6 90.8 64.2 12.4 15.3 Beef Poultry Pork Lamb Total Protein consumption per country category Per capita consumption (million ton
Slide 55: Brazilian Scenario
Brazilian Scenario Macroeconomics Demographic Consumer Trends • Solid fundamentals • Growth of middle class • More demanding consumers • Increases in income and • Smaller family size • Price and quality greater purchasing power for • Preference for differentiation • Aging of population families and
Slide 56: Beef Brazil, Argentina and Uruguay: Drivers of Growth
Beef Brazil, Argentina and Uruguay: Drivers of Growth Low production costs Lack of religious Most-consumed protein restrictions worldwide Quality of the cattle (Nelore and British races) Flexibility, simplicity and High potential of export Export quotas for Europe short production cycle growt
Slide 57: Asia: Scenario and Outlook
Asia: Scenario and Outlook Asia is the main growth driver in the global meat market Population growth, changes in nutritional habits and increases in income have resulted in increases in meat consumption; The BRIC nations will account for the largest share of animal protein demand by 2025; In
Slide 58: China: Conditions and Outlook
China: Conditions and Outlook China’s market opening in the late 1980s combined with per capita income increases served as catalysts for leveraging both the production and consumption of meat products Population Per capita Income (billion) (USD/year) 20,000(f) 1,321 1,203 +10% +757% 8,500(f) 3,000 3
Slide 59: Opportunities in a Global World
Opportunities in a Global World 1 Access to growing global markets 2 A world with tariff and sanitary barriers 3 Global supply chain 4 Development of domestic capital markets and access to global capital markets 5 Opportunities for Brazilian talent and access to talent from abroad 59
Slide 60: Challenges in a Globalized World
Challenges in a Globalized World 1 Volatility 2 Think globally, act locally… 3 Cultural integration of 90 thousand employees on 5 continents 4 Follow an extremely fast-paced world 60
Slide 61: Disclaimer
Disclaimer This presentation may include statements representing expectations about future events or results according to the Brazilian and international securities regulation. These statements are based on certain assumptions and analyses made by the Company according to its experience and the econ
Slide 62: Contacts – Investor Relations Department
Contacts – Investor Relations Department Ricardo Florence Planning and IR Officer Remi Kaiber Junior www.marfrig.com.br/ir IR Manager ri@marfrig.com.br Marfrig Alimentos S/A Av. Chedid Jafet, 222 Bl. A 1º andar CEP: 04551-065 – Vl. Olímpia São Paulo – SP – Brazil Phone: (55 11) 3728-8600/8650 62