1Q18 Results
May 11, 2018
1Q18 Results May 11, 2018 Disclaimer This presentation may contain - - PowerPoint PPT Presentation
1Q18 Results May 11, 2018 Disclaimer This presentation may contain certain statements that express BRF S.A. (BRF) managements expectations, beliefs and assumptions about future events or results. Such statements are not historical facts
May 11, 2018
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This presentation may contain certain statements that express BRF S.A. (“BRF”) management’s expectations, beliefs and assumptions about future events or results. Such statements are not historical facts and are based on currently available competitive, financial and economic data
The verbs “anticipate”, “believe”, “estimate”, “expect”, “forecast”, “plan”, “predict”, “project”, “target” and other similar verbs are intended to identify these forward-looking statements, which involve risks and uncertainties that could cause actual results to differ materially from those projected in this presentation and do not guarantee any future BRF performance. The factors that might affect performance include, but are not limited to: (i) market acceptance of BRF’s products; (ii) volatility related to the Brazilian economy, as well as the economies of the other countries in which BRF has relevant operations, the financial and securities markets and the highly competitive industries BRF operates in; (iii) changes in domestic and foreign legislation and taxation, as well as government policies related to the domestic and foreign animal protein markets and related markets; (iv) increasing competition from new entrants to the Brazilian and international markets; (v) ability to keep up with rapid changes in the regulatory and technological environments; (vi) ability to maintain an ongoing process for introducing competitive new products and services while maintaining the competitiveness of existing ones; (vii) ability to attract customers in domestic and foreign
Securities and Exchange Commission, particularly under the “Risk Factors” session. All forward-looking statements in this presentation are based on information and data available as of the date they were made and BRF undertakes no obligation to update them in light of new information or future development.
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+5.0% y/y in Net Operating Revenues, expansion of
gross margin by 1.1 p.p. y/y to 18.7% and one of the lowest LTM SG&A levels since 2014: 15.9%
Increase in the number of points of sales in Brazil →
191,000 (+13.5% y/y)
Adjusted EBITDA reached R$802MM → margin of 9.8% Europe: none official publication yet published by the
European Commission. In 2017: volume to Europe
5% of Net Operating Revenues
Launching of campaigns: Qualy – “A Vida Mais Qualy”
and Perdigão – “É Brasa”
Election of the Board of Directors → 10 members with a
mandate of 2 years; 6 new members and 4 with experience from previous mandates
Poultry 46% Pork 6% Processed Foods 41% Others 7% Brazil 44% OneFoods 23% International 23% Southern Cone 5% Others 5%
(1Q17 Volume | 1,158k tons)
(7%) (43%) (42%) (7%) (7%) (43%) (17%) (29%) (5%)
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9.9% growth in sales of In
Natura products and 1.0% growth in Processed Foods
Free Cash Flow: (R$238) million
in 1Q18, an improvement of R$1,361 million
CAPEX: R$467 million Net Debt/Adjusted EBITDA LTM
= 4.44x
Robust liquidity = R$7.3 billion
in cash + US$1.0 billion in revolver credit facility Indicators 1Q18 1Q17 Var. Volume (Ktons) 1,225 1,158 +5.7% Net Revenues (R$ MM) 8,203 7,809 +5.0% Gross Profit 1,537 1,376 +11.7% Gross Margin 18.7% 17.6% +1.1 p.p. EBIT (R$ MM) 296 68 333.4% EBIT Margin 3.6% 0.9% +2.7 p.p. EBITDA (R$ MM) 783 506 +54.8% EBITDA Margin 9.5% 6.5% +3.0 p.p. Adjusted EBITDA (R$ MM) 802 570 +40.7% Adjusted EBITDA Margin 9.8% 7.3% +2.5 p.p. Net Income (R$ MM) (114) (286) +60.2% Net Margin (1.4%) (3.7%) +2.3 p.p.
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Poultry 25% Pork 5% Processed Foods 70%
In Natura → +22.7% Processed
Foods → +4.7% y/y
# Clients: 191,000 points of sales
(+13.5% y/y)
45.7% market share, +1.1 p.p. y/y,
primarily in the self-service wholesale channel
Indicators 1Q18 1Q17 Var. Volume (Ktons) 545 498 +9.6% Net Revenues (R$ MM) 3,746 3,654 +2.5% Average Price (R$/kg) 6.87 7.34
Gross Profit 780 942
Gross Margin 20.8% 25.8%
EBIT (R$ MM) 155 307
EBIT Margin 4.1% 8.4%
EBITDA (R$ MM) 374 514
EBITDA Margin 10.0% 14.1%
Adjusted EBITDA (R$ MM) 351 496
Adjusted EBITDA Margin 9.4% 13.6%
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142 126 130 120 121 131 147 126
2015 2016 2017 1Q17 2Q17 3Q17 4Q17 1Q18
Higher sales volume of In Natura products
continued to pressure average price comparisons y/y Sell in – Processed Foods Volume (Ktons), avg./month Sell in – In Natura Volume (Ktons), avg./month
3.0% 4.7% 41 40 47 45 44 48 50 56
2015 2016 2017 1Q17 2Q17 3Q17 4Q17 1Q18
18.4% 22.5%
Portfolio vs. Average Price Evolution (NOR/kg)
7,34 7,13 6,97 7,19 6,87 364 361 393 443 376 134 134 146 148 169
2014 2015 2016 2017 1Q18 Processed Foods In Natura Average Price (NOR/kg)
498 495 539 590 545
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Price Index (PI) Evolution – Processed Foods* Price Index (PI) Evolution – Margarines
Source: BRF and Nielsen (*) Filled/ Frozen/ Cold Cuts
+1.1 p.p. y/y increase in BRF market share Price index detachment vs. largest
competitor
Increase of number of clients in +23k
clients a/a, expanding distribution coverage
CLIMOV Index: Number of Clients (000)
168 171 175 187 191
1Q17 2Q17 3Q17 4Q17 1Q18
13.5% 118% 113% 115% 113% 116%
100,0 97,0 96,0 94,0 96,0 1Q17 2Q17 3Q17 4Q17 1Q18
Relativity (%) Processed Foods PI* (100 basis) Share of Processed Food* 42.4% 43.5% 44.1% 44.4% 43.5%
137% 134% 129% 123% 127%
100,0 99,0 97,0 91,0 93,0 1Q17 2Q17 3Q17 4Q17 1Q18
Relativity (%) Margarines PI (100 basis) Share of Margarines 59.7% 59.1% 59.8% 60.2% 59.8%
8 Ex-Banvit: strong margin expansion
and recovery
Average prices in US$: +8.8% → best
supply-demand balance
DDP Volume: 65.9% of total → +9.7%
y/y Indicators 1Q18 1Q18* 1Q17 Var.* Volume (Ktons) 277 199 222
Net Revenues (R$ MM) 1,838 1,334 1,316 +1.4%% Average Price (R$/kg) 6.63 6.70 5.94 +12.8% Gross Profit 380 317 213 +48.4% Gross Margin 20.7% 23.7% 16.2% +7.5 p.p. EBIT (R$ MM) 57 49 (44)
3.1% 3.7% (3.4%) +7.0 p.p. EBITDA (R$ MM) 157 113 21 +435.2% EBITDA Margin 8.5% 8.4% 1.6% +6.8 p.p. Adjusted EBITDA (R$ MM) 148 103 35 +199.0% Adjusted EBITDA Margin 8.0% 7.7% 2.6% +5.1 p.p.
Poultry 87% Processed Foods 13%
* Pro forma ex-Banvit
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Indicators 1Q18 1Q17 Var. Volume (Ktons) 276 331
Net Revenues (R$ MM) 1,824 2,113
Average Price (R$/kg) 6.61 6.38 +3.6% Gross Profit 266 176 +51.1% Gross Margin 14.6% 8.3% +6.2 p.p. EBIT (R$ MM) 82 (44)
4.5% (2.1%) +6.6 p.p. EBITDA (R$ MM) 227 103 +119.7% EBITDA Margin 12.4% 4.9% +7.5 p.p. Adjusted EBITDA (R$ MM) 239 109 +119.7% Adjusted EBITDA Margin 13.1% 5.2% +8.0 p.p.
Poultry 61% Pork 12% Processed Foods 19% Others 8%
Adjusted EBITDA margin → 13.1%
(+8.0 p.p. y/y)
Average prices in Reais: +3.6%,
(↑Europe/Africa and ↓Japan)
Volume restrictions
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Indicators 1Q18 1Q17 Var. Volume (Ktons) 61 54 +13.2% Net Revenues (R$ MM) 592 527 +12.4% Average Price (R$/kg) 9.67 9.74
Gross Profit 60 59 +1.6% Gross Margin 10.2% 11.3%
EBIT (R$ MM) (16) (16)
EBIT Margin (2.7%) (3.0%)
EBITDA (R$ MM) 2 (3)
0.3% (0.5%) +0.8 p.p. Adjusted EBITDA (R$ MM) 3 (2)
0.5% (0.4%) +0.9 p.p.
Poultry 18% Pork 20% Processed Foods 62%
DDP Volume: 61.5% of total Volumes: +13.2% y/y, highest sale of
turkey to Chile
21.8% depreciation of the Argentine
Peso (ARS) in 2018
Higher raw material costs pressured
gross margin
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Consolidation of the crop failure in Argentina
In Brazil, seasonal climate issues and exchange
rate volatility may impact grain prices
Cost of feed in 2Q18 will be higher in the
annual and quarterly comparisons
Potential USA-China relationship issues may
impact commodity prices Soy Meal – CBOT (US$/ton) Corn – BMF (R$/bag)
250 300 350 400
Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18
20 25 30 35 40 45 50
Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18
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Source: SECEX, JOX, BM&F and APINCO; (*) chicken placement volumes in April 2018 are preliminary numbers (APINCO).
Spread of the Brazilian Producer Chicken Placement in Brazil| Monthly Chicken Production in Brazil| LTM
Higher domestic supply and 14.5% y/y
reduction in average prices for whole chickens in 1Q18
Slowdown of chicken placement levels by
1.3% y/y in 1Q18
0% 5% 10% 12,0 12,5 13,0 13,5 14,0 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
Volume (million tons) Variation y/y (%)
0% 5% 10% 15% 450 470 490 510 530 550 570 590 jan/15 mar/15 mai/15 jul/15 set/15 nov/15 jan/16 mar/16 mai/16 jul/16 set/16 nov/16 jan/17 mar/17 mai/17 jul/17 set/17 nov/17 jan/18 mar/18
Volume* (thousand heads) Variation y/y (%)
Poultry price / Feed Cost Average
4 4,5 5 5,5 6 6,5 7 7,5 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18
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Adequance of Quality and Food Safety Structure
▪ Centralization of Quality Regulatory
area:
✓ Agribusiness ✓ Factory ✓ Logistics ✓ Markets ▪ Specialization of factory quality: ✓ By protein ✓ By activity ✓ By factory ▪ International
Senior Technical Consultant dedicated for Food Safety;
▪ Ajusted and skilled teams for support.
Reorganization of Governance and Management of Indexes
▪ Formation of “Techinical Consultant
Committees” with KPIs management;
▪ External certifications and internal
audit in the chain with weekly management of KPIs deviations;
▪ IFS Certification for more than 50% of
third-parties / suppliers, expectative
▪ Partnerships
with institutions and research entities (Embrapa, USP, MAPA, etc.);
▪ Lower
container returns to below 0.7%, the best result compared to competition.
Consolidation of Quality Culture as Business Modeo
▪ Formation of Quality MBA in company
with 120 employees from several areas of BRF, 18-month program;
▪ BRF Representation at Food Safety
Conference and GFSI 2018;
▪ Closer
relationship between employees and clients: SAC VIVO;
▪ Sample Plan with statistic significance
and 14 million tests/month in our internal laboratories.
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Free Cash Flow (FCFF, in R$ million)
1Q17 4Q17 1Q18 Cash Flow from Operating Activities (264) 1.027 215 Cash Flow from Investing Activities (474) (275) (448) Cash Flow from Financing Activities (862) 7 (5) Free Cash Flow (1,599) 758 (238) Ending Cash (liquidity) 8,148 7,434 7,274
Financial cycle: average of 35.3 days in 1Q18
→ down by 2.8 days vs. average in 1Q17 and down by 3.9 days vs. average in 4Q17
Free cash flow generation (FCFF) of (R$238)
million, improved by R$1,361 million y/y
CAPEX discipline
Financial Cycle (Acc. Receivable + Inventories - Acc. Payable)
10,8% 10,8% 8,9% 6,8% 9,2% 11,2% 12,2% 9,6% 10,3% 37,7 37,1 32,8 22,4 32,9 38,2 42,4 31,8 35,6 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 Working Capital / NOR Financial Cycle* (*) End of period.
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7.274 4.045 5.070 1.491 124 9.583
Cash & Equivalents 2018 2019 2020 2021 2022+ Capital markets
Real Other currencies
44% 56% 62%
Trade finance Other and tax incentives; 4% Agribusiness loans
10% 22%
Subsidized lines; 2%
Debt Profile (R$ MM)
Average Maturity: 3.1 years
CAPEX (R$ MM)
2.048 2.482 2.595 1.617 1.615
2014 2015 2016 2017 LTM1Q18
(*) Revolver = US$1 billion
3,500*
Financial Leverage (R$ MM)
12.243 13.310 14.019
4,73x 4,46x 4,44x 1Q17 4Q17 1Q18 Net Debt Net Debt / Adjusted EBITDA LTM
Debt Breakdown| R$21.3 Bn (March 31, 2018)
Investor Relations acoes@brf-br.com +55 11 2322 5377 ri.brf-global.com/en/