Slide 1: Marfrig Group October 2012
(Y MARFRIG GROUP @ October/12 a
Slide 2: Company Overview
COMPANY OVERVIEW One of the world’s largest food companies: Net Revenue of R$ 21.9 billion, with cumulative growth of 564% from 2007 to 2011 - CAGR of 60%; Top five poultry, pork and processed food producer in the world and Brazil’s 2nd largest poultry producer and exporter; 3rd largest beef
Slide 3: Marfrig in Numbers
MARFRIG IN NUMBERS 140 PRODUCTION UNITS, COMMERCIAL OFFICES AND DISTRIBUTION CENTERS R$ 21.9 BILLION IN NET REVENUE IN 2011 17 PRESENT IN COUNTRIES ON 5 CONTINENTS 4.8 MILLION TONNES OF FOOD SOLD IN 2011 90,502 ¹ EMPLOYEES 1.7 160 MILLION TONNES OF PROCESSED FOOD SOLD IN COUNTRIES Total Capacity/Yea
Slide 4: Organizational Structure
ORGANIZATIONAL STRUCTURE CEO – MARFRIG GROUP Marcos Molina VP - INSTITUTIONAL VP - HUMAN RESOURCES VP - FINANCE AND IR VP - LEGAL RELATIONS Célia Silvério Ricardo Florence Heraldo Geres João Sampaio SEARA FOODS MARFRIG BEEF CEO Marcos Molina CFO Eduardo Miron COO David Palfenier CEO / COO James Crud
Slide 5: Sustainable Growth Strategy Based on Diversification and Value-Added Products
SUSTAINABLE GROWTH STRATEGY BASED ON DIVERSIFICATION AND VALUE-ADDED PRODUCTS 2006 2007 2008 2009 2010 2011 2012 Strategy Steps: PROTEIN CAPACITY INCREASE CONSOLIDATION OF FOCUS ON BRANDED DIVERSIFICATION AND GEOGRAFIC THE GLOBAL AND VALUE ADDED AND FOCUS ON DIVERSIFICATION PLATAFORM PROCESSED FOODS
Slide 6: Historical Financial Performance
HISTORICAL FINANCIAL PERFORMANCE Net Revenue Gross Income and Gross Margin (R$ million) (R$ million and %) 20,0% 21,4% 21.885 14,4% 16,4% 14,4% 15,0% 15.878 3.143 2.601 11.051 9.616 1.656 6.204 1.327 1.381 3.340 667 2007 2008 2009 2010 2011 6M12 2007 2008 2009 2010 2011 6M12 EBITDA and EBITDA Margin
Slide 7: Corporate Governance Structure
CORPORATE GOVERNANCE STRUCTURE Ownership Structure¹: Corporate Governance Structure: 49,0% MMS Participações + Marfrig Alimentos S.A. 26,1% Marcos/Marcia Molina BNDESPar Board of Fiscal Council OSI International Directors 0,2% Templeton Board Committees: 5,0% - Audit Treasury Shares - Financial - Co
Slide 8: Capital Markets
CAPITAL MARKETS 50% MRFG3: 29.39% Share Performance: IBx50: 9.88% IBOV: 8.90 % 40% DÓLAR: 8.47% • Ticker: MRFG3 30% • Market: Novo Mercado BM&FBOVESPA (BRASIL) 20% • Major Indexes: IBOVESPA, IBX-50, IGC • Average trade volume: 2,444,691 shares 10% • Average quantity share transactions: 4,471 0% -10%
Slide 9: Sustainable Development
SUSTAINABLE DEVELOPMENT Sustainable business management. Creation of value over long term. CORPORATE GOVERNANCE COMMUNICATION ECONOMIC EDUCATION ENVIRONMENT Opportunity and Risk Management Climate Change Long-Term Vision ETHICS Natural Resources Cost Management PRODUCT Energy Matrix Nutritional Valu
Slide 10: Seara Foods
SEARA FOODS 10
Slide 11: Seara Foods
SEARA FOODS A Global Leader in the Food Industry • Top Five poultry, pork and processed food producer in the world • 2nd largest Brazilian poultry producer and exporter Integrated Global Platform with Diversified Products • Variety of proteins with an integrated production and marketing platform Str
Slide 12: Seara Foods
SEARA FOODS Brand recognized by consumers European leader in private-label Global food service platform around the world brands Focus on increasing distribution of Focus on efficiently serving large Global company focused on food higher-value products retail clients through innovations service segme
Slide 13: Seara Foods Footprint
SEARA FOODS Footprint Capacity/Year Seara Brasil Moy Park Keystone Total Processed (‘000 tonnes) 965 183 604 1,752 Chicken (million head) 663 222 184 1,069 Turkeys (‘000 head) 5,292 5,040 - 10,332 Hogs (‘000 head) 4,239 - - 4,239 # Plants / DC 54 13 17 84 # Employees1 43,940 7,845 13,139 64,924 Reve
Slide 14: Seara Brasil
SEARA BRASIL 2nd largest Brazilian producer of processed and higher-value food products Seara: Strong Presence in Brazil Brand Strategy Sponsorships • Integrated and vertically-oriented poultry and pork operations • # of Plants: 54 • # of Employees: 43,940 • Main export destinations: Asia, Middle Ea
Slide 15: Brazil: Integration of BRF Assets by Seara
BRAZIL: INTEGRATION OF BRF ASSETS BY SEARA Assets and Brands Acquired Processed Foods Plants Poultry and Pork Plants • Acquired brands: 12 • Distribution Centers: 8 • Industrial Plants: 9 • Hog Processing Units: 2 • Poultry Processing Units: 2 • Poultry Incubators: 1 New Assets New Assets • Breeding
Slide 16: Brazil: Integration of BRF Assets by Seara
BRAZIL: INTEGRATION OF BRF ASSETS BY SEARA Significant Growth in Client Base Potential Market Share Gains (‘000 clients) Frozen Processed 56 New Brands New Brands 90 Seara 17.4 17.3 Seara -15 + 11.2 p.p. + 9.4 p.p. 7,8 9 9,6 40 9,6 7,9 6,2 7,7 Seara Clients Seara Clients Client Base Overlap Total Se
Slide 17: Seara Brasil: Products and Investment
SEARA BRASIL: PRODUCTS AND INVESTMENT 17
Slide 18: International Operations: Moy Park
INTERNATIONAL OPERATIONS: MOY PARK Focus on major retail chains and food service clients in Europe’s domestic market Moy Park: Strong Presence in UK Brands: • Integrated and vertically-oriented poultry, turkey and processed food operations • # of Plants: 13 Premium • # de Employees: 7,845 • Main Mar
Slide 19: Moy Park: Market Share
MOY PARK: MARKET SHARE One of the UK’s largest and one of Europe’s leading poultry companies • Moy Park is the only UK & European poultry company with 3 generations of livestock. • Supplying approximately 21% of the total European chicken parent market Moy Mark is the UK's largest producer of organi
Slide 20: Moy Park: Products
WY MARFRIG GROUP MOY PARK: PRODUCTS © Kane Poult lity chicker Highest qua Moy, Park Foodservice... A compfapensive rangertor the Brick
Slide 21: International Operations: Keystone Foods
INTERNATIONAL OPERATIONS: KEYSTONE FOODS Global company focused on food service segment with presence on 5 continents Keystone: a Global Company Relationship with largest food service chains Revenue 2011¹ Main food service chains • Integrated and vertically-oriented operations US$15 bi + in poultry
Slide 22: Keystone Foods: Growth Pillars
KEYSTONE FOODS: GROWTH PILLARS Combination of scale, broad product portfolio, diversified proteins and Value expertise in product development offers a comprehensive value proposition Proposition for clients Larger presence in the country to support the strong growth in demand China for animal pr
Slide 23: Keystone Foods: China
KEYSTONE FOODS: CHINA China’s demand for protein has grown five-fold in 20 years, driven by economic growth and new eating habits GDP per capita, PPP (constant USD, 2007) Protein per capita 23 40 43 47 52 (kg/person) Total protein 26.1 48.1 54.1 60.8 69.2 (MM tonnes) 12.220 7.544 4.102 2.379 1.515 7
Slide 24: Marfrig Beef
MARFRIG BEEF 24
Slide 25: Marfrig Beef
MARFRIG BEEF A Global Leader in the Food Industry • 3rd largest beef producer in the world • One of the largest lamb producers in South America Lean, Agile, Competitive and Diversified Structure • Low-cost production base in South America • Mitigation of sanitary and political risks • Access to main
Slide 26: Marfrig Beef
MARFRIG BEEF Beef, Lamb and Leather Operations in Brazil, Argentina and Uruguay Brazil Operations International Operations Balance between domestic and export markets, Uruguay focuses on exporting to the most with focus on profitability and operational demanding markets in terms of sanitary and leve
Slide 27: Marfrig Beef
MARFRIG BEEF Integrated operations in Brazil, Argentina Uruguay and Chile Capacity/year Brazil Ops. Intl. Ops. Total Brands – Brazil Operations Processed (‘000 tonnes) 144 22 166 Cattle (‘000 head) 4,178 1,222 5,400 Lamb (‘000 head) 882 2,117 2,999 Leather (‘000 pieces) 1,764 1,764 3,528 Brands – In
Slide 28: Marfrig Beef
MARFRIG BEEF Competitive production base combining low cost with high-quality standards Export by Destination Q212 Scenario in main markets: BRAZIL - Improvement in beef production cycle and cattle supply 11% Europe AUSTRALIA - Destination of exports different than that of Brazil 11% 36% Russia 11%
Slide 29: Marfrig Beef
MARFRIG BEEF Positive period for Brazil’s beef cattle cycle Price of Finished Cattle – 2011/2012 (USD/arroba) Size of Brazil’s Cattle Herd $70 $65 $60 $55 $50 $45 $40 EUA USA Austrália Australia Argentina Argentina Uruguai Uruguay Brasil Brazil Beef Processing (thousands heads) – Brazil¹ Market Shar
Slide 30: Financial Performance
. | MARFRIG GROUP FINANCIAL PERFORMANCE 7 \ = ~* nr . ry we cs a en . Ay - se © a Tr, a he
Slide 31: 2Q12 Highlights
2Q12 HIGHLIGHTS Financial Highlights Record quarterly revenue of R$5.82 billion, up 9.3% from 2Q11; Gross Margin expansion of 130 bps from 2Q11, to 14.7%; EBITDA of R$767.6 million, increase of 176.4% from 2Q11; Net Income of R$15.5 million, reversing the net loss in 2Q11; Operating cash generation
Slide 32: Consolidated Financial Highlights
CONSOLIDATED FINANCIAL HIGHLIGHTS Revenue by Product (R$ million) + 9.3% 5.818 5.322 Processed + 38.8% Fresh meat 2.722 8,7% 1.961 3.558 Other 2.406 858 2Q12 46,8% 44,5% 708 2.653 1.217 2.588 2.302 207 1.502 870 397 708 508 140 196 2Q08 2Q09 2Q10 2Q11 2Q12 Revenue by Segment (R$ million) 5.818 5.322
Slide 33: Consolidated Financial Highlights
CONSOLIDATED FINANCIAL HIGHLIGHTS Evolution in Margins (R$ Kg) 5,18 4,49 4,68 4.42 3,89 3.96 15,4% 14,7% 13,4% 0.76 0,60 0.72 2Q12 2Q11 1Q12 Gross Margin % Average Price / Kg COGS/Kg Gross Income / Kg Breakdown of Expenses (R$ million) 7,3% 6,9% 6,6% 4,0% 4,0% 381,9 389,8 3,6% 362,7 210,4 211,1 211,
Slide 34: Net Income of R$15.5 million, for EPS of R$0.04
CONSOLIDATED FINANCIAL HIGHLIGHTS EBITDA and EBITDA Margin Adjusted EBITDA and Adjusted EBITDA Margin (R$ million) (R$ million) 13,2% 767,6 7,8% 7,9% 7,9% 5,2% 5,4% 410,7 460,8 415,9 277,8 288,7 2Q12 2Q11 1Q12 2Q12 2Q11 1Q12 EBITDA EBITDA Margin Adjusted EBITDA Adjusted EBITDA Margin Net Income of R
Slide 35: Capital Structure Management
CAPITAL STRUCTURE MANAGEMENT Focus on managing the capital structure and debt profile Debt Maturity Profile (R$ million) Short Term 26.4% ST Debt: R$3.1 billion 2.389 Long Term 73.6% • 68% ACC/NCE / PPE • 32% Other 1.454 1.477 1.100 1.076 894 980 851 651 707 164 10 3Q12 4Q12 1Q13 2Q13 2013 2014 2015
Slide 36: Cash Flow and Operational Cash Generation
CASH FLOW AND OPERATIONAL CASH GENERATION Reduction in Net DEBT/EBITDA ratio to 3.73 times Simplified Cash Flow (in million R$) 2Q12 1Q12 Operating Activities Net Income for the period 15,5 34,5 Items not affecting cash 393,6 389,1 Working capital changes – operating accounts 1 7,3 (375,0) Accounts
Slide 37: Capex: Focus on Optimizing Operational Structure and Generating Results
CAPEX: FOCUS ON OPTIMIZING OPERATIONAL STRUCTURE AND GENERATING RESULTS Focus on managing the capital structure and debt profile Investments (R$ million) 2Q12 1Q12 Investments in Fixed Assets 232.8 189.5 Fixed 131.6 103.5 Breeding stocks 101.2 86.0 Investment in Intangible Assets 17.0 2.0 Total CAPE
Slide 38: Final Message and Priorities for 2012
FINAL MESSAGE AND PRIORITIES FOR 2012 Increasing the share of higher-value products in the sales mix; Integrating the new assets; SEARA FOODS: capturing potential synergies of R$230 – R$330 million annually within 5 years; Focusing on food service industry through Keystone Foods and Keystone Foods L
Slide 39: 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 Corporation according to its experience and the
Slide 40: Contacts – Investor Relations Department
Contacts – Investor Relations Department Ricardo Florence CFO and IRO Remi Kaiber Junior www.marfrig.com.br/ri IR Director ri@marfrig.com.br Marfrig Alimentos S/A Av. Chedid Jafet, 222 Bloco A 1º andar CEP: 04551-065 – Vila Olímpia Tel: 55 (11) 3792-8600/8650 40
Slide 41: Appendix
| MARFRIG GROUP APENDIX
Slide 42: Marfrig Beef Highlights
MARFRIG BEEF HIGHLIGHTS Financial Highlights Revenue of R$1.90 billion, in line with R$1.86 billion in 2Q11; Adjusted EBITDA of R$221.9 million, up 61.3% from 2Q11; Gross Margin expansion of 540 bps over 2Q11. Operating Highlights In the Brazilian operations, capacity utilization at operating plants
Slide 43: Marfrig Beef – Revenue Breakdown
MARFRIG BEEF – REVENUE BREAKDOWN 2Q12 - R$1.90 billion 2Q11 - R$1.86 billion 1Q12 - R$1.74 billion Brazil Op. - Domestic 20,1% 18,1% 31,2% 20,5% Revenue by 32,7% 34,6% Brazil Op. - Export 14,7% Intl. Op. - Domestic Operation 15,8% 10,7% Intl. Op. - Export 14,3% 18,6% 13,0% 23,1% 17,3% 15,3% Other 2Q
Slide 44: Marfrig Beef – Revenue Breakdown
MARFRIG BEEF – REVENUE BREAKDOWN Brazil – Domestic Market Brazil – Export Market (R$ million) (R$ million) -1.6% +32.9% 601 353 591 +1.5% -3.0% 266 +24.3% +6.9% 1Q12 Volume Average Price 2Q12 1Q12 Volume Average Price 2Q12 International Operation – Domestic Market International Operation – Export Ma
Slide 45: Marfrig Beef - Brazil
MARFRIG BEEF - BRAZIL Beef Processing – Brazil¹ Market Share in Beef Exports – Brazil² 23,7% 5.455 5.761 5.758 5.375 317 15,7% 15,4% 11,7% 10,8% 10,4% 11,9% 215 9,0% 202 112 2Q09 2Q10 2Q11 2Q12 2Q09 2Q10 2Q11 2Q12 Total Beef Processing (thousand heads) Market Share - Marfrig Marfrig Exports (USD Mil
Slide 46: Marfrig Beef - Financial Highlights
MARFRIG BEEF - FINANCIAL HIGHLIGHTS Evolution in Margins (R$ Kg) 6,17 6,12 5,39 4.83 4.81 4,52 21,6% 21,4% 16,2% 1.33 1.31 0,88 2Q12 2Q11 1Q12 Gross Margin % Average Price / Kg COGS/Kg Gross Income / Kg Breakdown of Expenses (R$ million) 7,2% 7,1% 4,9% 4,7% 6,8% 134,1 93,7 3,3% 82,3 129,6 61,1 124,2
Slide 47: Marfrig Beef - Financial Highlights
MARFRIG BEEF - FINANCIAL HIGHLIGHTS EBITDA and EBITDA Margin Adjusted EBITDA and Adjusted EBITDA Margin (R$ million) (R$ million) 17,3% 11,7% 11,5% 327,5 11,6% 221,8 7,4% 200,1 7,5% 202,1 137,6 139,7 2Q12 2Q11 1Q12 2Q12 2Q11 1Q12 EBITDA EBITDA Margin Adjusted EBITDA ADJUSTED EBITDA Margin Margin exp
Slide 48: Seara Foods Highlights
SEARA FOODS HIGHLIGHTS Financial Highlights Quarterly revenue of R$3.92 billion, increasing 13.3% from 2Q11; Adjusted EBITDA of R$239.0 million, up 58.2% from 2Q11; Average price increased 16.6% from 2Q11 and 14.6% from 1Q12. Operating Highlights Share of processed (higher-value) products at 59.3% i
Slide 49: Seara Foods – Revenue Breakdown
SEARA FOODS – REVENUE BREAKDOWN 2Q12 - R$3.92 billion 2Q11 - R$3.46 billion 1Q12 - R$3.49 million 3,2% 9,4% Brazil Op. - Domestic 6,2% 14,2% 12,9% 9,4% 15,1% Revenue by 6,1% 5,7% Brazil Op. - Export Operation 25,5% 28,2% 23,3% Intl. Op. - Domestic 50,9% 43,4% Intl. Op. - Export 46,5% Other 2Q12 2Q11
Slide 50: Seara Foods – Revenue Breakdown
SEARA FOODS – REVENUE BREAKDOWN Brazil – Domestic Market Brazil – Export Market (R$ million) (R$ million) +6.1% +22.6% 558 1.000 526 +0.1% +6.0% 816 +9.1% +12.3% 1Q12 Volume Average Price 2Q12 1Q12 Volume Average Price 2Q12 International Operations – Domestic Market International Operations – Export
Slide 51: Seara Foods – Market Share
SEARA FOODS – MARKET SHARE Frozen Meat¹ Processed Meat Products² New Units Seara 17.4 New Units Seara 16.7 + 12.3 p.p. + 8.9 p.p. 7,8 9,2 + 4.5 p.p. 9,6 7,8 7,5 7,5 6,2 5,1 Seara Seara Seara + New Brands TCD Seara Seara Seara + New Brands TCD (Apr-May/10) (Apr-May/11) (Apr-May/12) (May-Jun/10) (May-
Slide 52: Seara Foods
SEARA FOODS Evolution in Margins (R$ Kg) 4.80 4.26 4.12 4.19 3.63 3.67 11.9% 12.3% 11.3% 0.54 0.49 0.52 2Q12 2Q11 1Q12 Gross Margin % Average Price / Kg COGS/Kg Gross Income / Kg Breakdown of Expenses (R$ million) 4.3% 7.4% 6.8% 3.7% 6.4% 255,7 150,0 252,3 3.0% 238,5 128,7 116,6 2Q12 2Q11 1Q12 2Q12
Slide 53: Seara Foods
SEARA FOODS EBITDA and EBITDA Margin Adjusted EBITDA and Adjusted EBITDA Margin (R$ million) (R$ million) 11.2% 6.1% 6.2% 4.4% 239,0 6.0% 215,8 440,2 4.0% 151,1 208,6 138,0 2Q12 2Q11 1Q12 2Q12 2Q11 1Q12 EBITDA EBITDA Margin Adjusted EBITDA Adjusted EBITDA Margin Margin expansion reflects the improve