Slide 1: Marfrig Group November/12
(Y MARFRIG GROUP @ November/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 138 PRODUCTION UNITS, COMMERCIAL OFFICES AND DISTRIBUTION CENTERS R$ 21.9 BILLION IN NET REVENUE IN 2011 18 PRESENT IN COUNTRIES ON 5 CONTINENTS 4.8 MILLION TONNES OF FOOD SOLD IN 2011 91,340 EMPLOYEES 1.7 160 MILLION TONNES OF PROCESSED FOOD SOLD IN COUNTRIES Total Capacity/Year¹
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% 15,2% 17.352 15.878 3.143 2.646 2.601 9.616 6.204 1.327 1.381 3.340 667 2007 2008 2009 2010 2011 9M12 2007 2008 2009 2010 2011 9M12 EBITDA and EBITDA Margin
Slide 7: Corporate Governance Structure
CORPORATE GOVERNANCE STRUCTURE Ownership Structure¹: Corporate Governance Structure: 49,6% MMS Participações + Marfrig Alimentos S.A. 25,4% Marcos/Marcia Molina BNDESPar Board of Fiscal Council OSI International Directors 0,2% Templeton Board Committees: 5,0% - Audit Treasury Shares - Financial 5,8%
Slide 8: 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 9: Seara Foods
SEARA FOODS 9
Slide 10: 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 11: 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 12: Seara Foods Footprint
SEARA FOODS Footprint Capacity/Year Seara Brasil Moy Park Keystone Total Processed (‘000 tonnes) 903 183 604 1.690 Chicken (million head) 651 222 184 1.057 Turkeys (‘000 head) 5.292 5.040 - 10.332 Hogs (‘000 head) 4.270 - - 4.270 # Plants / DC 54 13 17 84 # Employees 44.309 7.754 13.166 65.229 Reven
Slide 13: 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: 44,309 • Main export destinations: Asia, Middle Ea
Slide 14: 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 15: 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 50 New Brands New Brands 90 Seara 17.4 17.3 Seara -15 + 11.2 p.p. + 9.4 p.p. 15 7,8 9,6 40 9,6 7,9 6,2 7,7 Seara Clients Seara Clients Client Base Overlap Total S
Slide 16: Seara Brasil: Products and Investment
SEARA BRASIL: PRODUCTS AND INVESTMENT 16
Slide 17: 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: 7,754 • Main Mar
Slide 18: 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 19: Moy Park: Products
WY MARFRIG GROUP MOY PARK: PRODUCTS © Kane Poult lity chicker Highest qua Moy, Park Foodservice... A compfapensive rangertor the Brick
Slide 20: 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 21: 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 22: 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 23: Efforts Should Allow Seara Foods to Capture Synergies of up to R$330MM p.a.
THESE EFFORTS SHOULD ALLOW SEARA FOODS TO CAPTURE SYNERGIES OF UP TO R$330MM P.A. Potential synergies: R$ 230 – R$ 330 million annually Cost synergies Revenue synergies Other synergies Total synergies R$ 130 – 230 mm ~ R$ 100 mm Not quantified R$ 230 – 330 mm • Share of best practices (such as centr
Slide 24: Synergies – R$314M Identified to Date
SYNERGIES – R$314M IDENTIFIED TO DATE 6 committees developed to identify and drive synergies among the Seara Foods businesses Operational Talent Synergy with Results & Europe Global Excellence and Management Marfrig Beef Finance Commercial Accounts Supply Chain Global Leader Ivo Dreher Celia Silveri
Slide 25: Marfrig Beef
MARFRIG BEEF 25
Slide 26: 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 27: 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 28: 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) 3.591 1.222 4.813 Lamb (‘000 head) 882 2.117 2.999 Leather (‘000 pieces) 1.764 1.764 3.528 Brands – In
Slide 29: Marfrig Beef
MARFRIG BEEF Competitive production base combining low cost with high-quality standards Export by Destination Q312 Scenario in main markets: BRAZIL - Improvement in beef production cycle and cattle supply 3% 7% Europe 8% AUSTRALIA - Destination of exports different than that of Brazil 35% Central /
Slide 30: 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 31: Financial Performance
. | MARFRIG GROUP FINANCIAL PERFORMANCE 7 \ = ~* nr . ry we cs a en . Ay - se © a Tr, a he
Slide 32: 3Q12 Highlights
3Q12 HIGHLIGHTS Financial Highlights Record quarterly revenue of R$6.30 billion, up 14.1% from 3Q11; Gross Margin expansion of 100 bps from 3Q11, to 15.7%; EBITDA of R$549.8 million with EBITDA margin of 8.7%; Net Income of R$10.4 million, reversing the net loss in 3Q11; Operating cash generation of
Slide 33: Consolidated Financial Highlights
CONSOLIDATED FINANCIAL HIGHLIGHTS Revenue by Product + 14.0% (R$ million) 6.301 Processed 10,0% 5.524 + 39.0% Fresh meat 2.876 45,6% Other 3.806 2.068 3Q12 44,4% 883 2.405 1.524 670 2.730 2.797 2.521 245 1.531 1.131 402 727 628 147 203 3Q08 3Q09 3Q10 3Q11 3Q12 Revenue by Segment (R$ million) 6.301 S
Slide 34: Consolidated Financial Highlights
CONSOLIDATED FINANCIAL HIGHLIGHTS EBITDA and EBITDA Margin Adjusted EBITDA and Adjusted EBITDA Margin (R$ million) (R$ million) 13,2% 11,5% 767,6 8,7% 8,2% 7,8% 7,9% 637,5 549,8 513,8 430,9 460,8 3Q12 3Q11 2Q12 3Q12 3Q11 2Q12 EBITDA EBITDA Margin Adjusted EBITDA Adjusted EBITDA Margin Net Income of
Slide 35: Capital Structure Management
CAPITAL STRUCTURE MANAGEMENT Focus on managing the capital structure and debt profile Debt Maturity Profile (R$ million) Short Term 26.6% R$ 3.2 billion ST debt: 2.811 • 70% ACC/NCE / PPE Long Term 73.4% • 30% Other 1.610 1.485 1.081 1.170 1.007 814 655 684 658 165 1 4Q12 1Q13 2Q13 3Q13 2013 2014 20
Slide 36: Cash Flow and Operational Cash Generation
CASH FLOW AND OPERATIONAL CASH GENERATION Simplified Cash Flow (R$ million) 3Q12 2Q12 1Q12 Operating Activities Net Income for the period 10,415 15,451 34,476 Noncash Items 496,717 393,582 389,110 Working capital changes – operating accounts 1 (354,643) 15,998 (374,997) Accounts Receivable (270,043)
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) 3Q12 2Q12 1Q12 Investments in Fixed Assets 202.3 232.8 189.5 Fixed 113.2 131.6 103.5 Breeding stocks 89.1 101.2 86.0 Investment in Intangible Asse
Slide 38: Appendix
| MARFRIG GROUP APENDIX
Slide 39: Marfrig Beef Highlights
MARFRIG BEEF HIGHLIGHTS Financial Highlights Gross Income grew 22.3% on 3Q11 to reach R$432.2 million, with Gross Margin expanding 420 bps to 22.1%; Adjusted EBITDA of R$236.8 million, up 28.0% on 3Q11, with Adjusted EBITDA Margin expanding 270 bps to 12.1%. Operating Highlights The Brazilian operat
Slide 40: Marfrig Beef – Revenue Breakdown
MARFRIG BEEF – REVENUE BREAKDOWN 3Q12 - R$1.96 billion 3Q11 - R$1.86 billion 2Q12 - R$1.90 billion Brazil Op. - DM 19,4% Revenue by 21,6% 38,6% 20,1% 31,2% Brazil Op. - EM 40,9% Operation 14,4% 10,8% 15,8% Int. Op. - DM 13,4% Int. Op. - EM 11,2% 14,2% 15,6% 14,3% 18,6% Other 3Q12 3Q11 2Q12 18,3% 19,
Slide 41: Marfrig Beef - Financial Highlights
MARFRIG BEEF - FINANCIAL HIGHLIGHTS EBITDA and EBITDA Margin Adjusted EBITDA and Adjusted EBITDA Margin (R$ million) (R$ million) 17,3% 12,1% 11,7% 12,7% 327,5 236,8 9,4% 221,8 247,7 9,4% 185,0 184,6 3Q12 3Q11 2Q12 3Q12 3Q11 2Q12 EBITDA EBITDA Margin Adjusted EBITDA Adjusted EBITDA Margin Margin exp
Slide 42: Seara Foods Highlights
SEARA FOODS HIGHLIGHTS Financial Highlights Revenue of R$4.34 billion, increasing 22.3% from 3Q11; Adjusted EBITDA of R$277.3 million, up 12.7% on 3Q11; Gross Margin expansion of 150 bps from 3Q11. Operating Highlights Share of higher-value processed products grows to 58.0% in 3Q12, from 51.5% in 3Q
Slide 43: Seara Foods – Revenue Breakdown
SEARA FOODS – REVENUE BREAKDOWN 3Q12 - R$4.34 billion 3Q11 - R$3.55 billion 2Q12 - R$3.92 billion 4,7% 9,7% 13,6% 3,2%14,2% Brazil Op. - DM 5,9% 20,6% 6,2% 5,4% Revenue by Brazil Op. - EM Int. Op. - DM Operation 45,5% 23,3% 27,8% 25,5% 43,5% 50,9% Int. Op. - EM Other 3Q12 3Q11 2Q12 4,7% 9,7% 3,2% Pr
Slide 44: Seara Foods – Market Share
SEARA FOODS – MARKET SHARE Frozen Meat Products¹ Processed Meat Products² 15.5 + 6.5 p.p. + 3.3 p.p. 11.0 9,7 9.00 7,7 7,5 Seara Seara Seara + New Brands TCD Seara Seara Seara + New Brands TCD (Feb-Mar/12) (Apr-May/12) (Jun-Jul/12) (Mar-Apr/12) (May-Jun/12) (Jul-Aug/12) ¹ Ready-to-eat meals, Hamburg
Slide 45: Seara Foods - Financial Highlights
SEARA FOODS - FINANCIAL HIGHLIGHTS EBITDA and EBITDA Margin Adjusted EBITDA and Adjusted EBITDA Margin (R$ million) (R$ million) 12,8% 11,2% 452,9 440,2 6,9% 7,0% 6,4% 6,1% 302,1 277,3 246,0 239,0 3Q12 3Q11 2Q12 3Q12 3Q11 2Q12 EBITDA EBITDA Margin Adjusted EBITDA EBITDA Margin Satisfactory operation
Slide 46: Final Message and Priorities for 2012
FINAL MESSAGE AND PRIORITIES FOR 2012 Scale gains at Marfrig Beef driven by a gradual increase in production capacity; Increasing the share of prepared and processed products by increasing production at the Seara Brasil assets; Growing markets in Brazil and China; Lowering financial leverage by redu
Slide 47: 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 48: 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