Company Presentation June, 2020 Marfrig A T A G L A N C E - - PowerPoint PPT Presentation

SLIDE 1

Investor Relations

Company Presentation

June, 2020

SLIDE 2

Marfrig

A T A G L A N C E

Company Highlights

2nd largest beef producer worldwide Cattle slaughtering capacity of 31,200 head/day and lamb slaughtering capacity

• f 6,500 head/day

Largest beef patties producer worldwide Production capacity of 232 thousand tons

• f beef patties/year

Production in the best geographies in the world with access to premium markets National Beef is one of the most profitable and efficient beef companies in the US South America operation has the highest number of plants certified to export to China Expertise in industrialized and plant-based products coupled with strategic partnerships

Net Revenue 1Q20²

R$ 13.5bn

Adjusted EBITDA 1Q20²

R$ 1.2bn

Net Debt/Adj. EBITDA1,3

2.8x

Note: (1) As of 4Q20 LTM; (2) As of 4Q20; (3) Presented on a pro forma basis to give effect to the acquisition of national beef, Iowa Premium, LLC, and Quickfoods S.A. as if they had occurred on January 1, 2018 and certain related indebtedness incurred in connection with each acquisition Source: Company

Financial Highlights

72%

North America

Revenue¹ by business unit

North America South America

8% 3%

Revenue¹ by Currency

US$ BRL Others

89%

In US$

2

SLIDE 3

A c q u i s i t i o n s p h a s e

2007 2008 2009 2010 2011

IPO(B3: Brazil)

Acquisition of beef processing units in Brazil, in Mato Grosso, Mato Grosso do Sul and São Paulo

Moy Park

Acquisition of the first international asset of global scale

Seara

Acquisitions of Seara; Grupo Zenda; Brazilian turkey

• peration owned

by Doux Frangosul; Leasing of 12 slaughter facilities

Keystone

Acquisition of Keystone Foods

Greenpeace

First food company in the world to sign a public commitment

A global path

3

SLIDE 4

A global path

Asset Sales

Divestment of Seara and Zenda businesses units. Launch new

• rganizational

culture “Focus to Win”

Moy Park

Sale of Moy Park. Company's strategy to focus

• n food service

National Beef and Keystone

Shift in Marfrig’s strategic direction towards beef protein and higher value products, Attainment of a low-leverage capital structure.

Added value

Acquisition of BRF assets, Quickfood and Várzea Grande Plant Based Burger

2013 2014 2018 2019

R e a d j u s t m e n t

Portfolio

4

SLIDE 5

Revenue by Region

DIVERSIFIED REVENUE GENERATION WITH ACCESS TO MAIN MARKETS:

78%

Solid market (US, Europe and Japan)

Market Profile

19%

Growing Market (Brazil and China)

5% 10%

Brazil

9% 4%

Argentina, Chile & Uruguay

64%

USA Japan China Middle East

1%

4%

Europe Others

3%

Base: 3rd quarter

5

SLIDE 6

Marfrig’s superior production and sales presence

W I D E P RO D U C T I O N C A PA C I T Y I N T H E A M E R I C A S W I T H S U P E R I O R S A L E S P L AT F O R M A N D A C C E S S TO P R E M I U M M A R K E T S

G L O B A L S A L E S F O R C E

Source: Company

Sales offices 78% 19% 3%

Solid markets Growing markets Others

Breakdown by source

• f revenue

58% 42%

South America North America

Cattle slaughtering capacity

6

SLIDE 7

6

MMS + Controlling Holders

46,01%

Management +Treasury

2,29%

Other

51,70%

Marfrig

GLOBAL FOODS

OWNERSHIP STRUCTURE

7

as of 06/10/2020

SLIDE 8

Management

Board of Directors

Marfrig GlobalFoods

Operations

SouthAmerica Operations Miguel Gularte

CEO

North America Operations Tim Klein

CEO

Marcos Molina

Controlling Shareholder and Chairman of the Board Tang David

CFO

Simon McGee

CFO

35+ years of experience in the beef industry. Began career at Cooperativa Industrial de Cames e Derivados. Former president of Uruguayan Meatpacker PUL, international VP of Minerva, and president of JBS Mercosul Prior to joining Marfrig in 2007, worked for 11 years in the Treasury department of Asea Brown Boveri— ABB Brasil, where his last position was Executive Officer of their financial arm. Also worked for 4 years in the Treasury department of JBS Friboi 30+ years of experience in the beef industry. Joined National Beef in 1992 and has served as CEO since 2009. Prior VP as Cargill, VP of Operations at Armour Food Company (of ConAgra Foods), and VP of Sales and Pricing at EA Miller Joined National Beef in 2006. Former investment banker with Christenberry Collet & Company and founder and majority owner of McGee Ranch Company, Inc.

Miguel Gularte CEO, South America Tang David CFO, South America Tim Klein CEO National Beef Simon McGee CFO, National Beef

20+ years in the food industry, where he began at age 16 in the food distribution business. Mr. Molina is also the CEO of MMS Participações ltda

SLIDE 9

High Corporate Governance Standards

B E N C H M A R K AT C O R P O R AT E G OV E R N A N C E P R A C T I C E S

Years on the Board Experience

Marcos Molina Santos

12+

Antonio Maciel Neto

12+

Herculano Anibal Alves

1+

Roberto Faldini

3+

Roberto Silva Waack

12+

Marcia A. M. Santos

12+

Rodrigo Marçal Filho

12+

Alain Emilie Martinet

10+

Chairman Independent members Board members

Board of Directors Supporting Committees

Audit

Antonio Maciel Neto* José Mauro Depes Lorga Lúcio Abrahão Monteiro Bastos

Financial and Risk Management

Herculano Aníbal Alves* Marcia Aparecida Pascoal Marçal dos Santos Tang David

Sustainability

Roberto Silva Waack Daniela Martins Mariuzzo (IDH) Alain Emilie Martinet Paulo Pianez Junior

Compensation, Corporate Governance and Human Resources

Antonio Maciel Neto Roberto Faldini Heraldo Geres

Note: (1) Transparência Internacional (TI); (2) Considered as protein industry Marfrig, BRF, JBS and Minerva Source: Company

SLIDE 10

Our Operations

North America

% of Consolidated Revenue 4th Largest beef processing company in the U.S.² Cattle slaughtering capacity: 13,100 head per day

72%

% of Consolidated Ebitda

64%

South America

Leading beef processing companies in South America Cattle slaughtering capacity: 18,100 head per day

28% 36%

Plant Plus Foods

Recent created JV with ADM to explore the meat alternative market in North and South America. PlantPlus Foods merges Marfrig’s global leadership in hamburger production and protein processing with ADM’s unique technical ingenuity and complete portfolio of natural ingredients and flavor. PlantPlus Foods is conceived as an organization with unmatched end to end capabilities and scale to further meet consumer needs % of Consolidated Revenue % of Consolidated Ebitda

SLIDE 11

N o r t h A m e r i c a O p e r a t i o n

SLIDE 12

North America Operation

U N I Q U E C O M B I N A T I O N O F P R O F I T A B I L I T Y A N D S C A L E

Cattle slaughtering capacity: 13,100 head per day, 14% of slaughtering capacity share in the U.S. 87% of sales to the U.S. internal market targeting premium customers Unique sourcing capability: ~25% coming from USPB (association), ensuring quality and consistency One of the largest and most technologically advanced Wet Blue tannery in the world State-of-the-art e-commerce for high-end and customized products Transportation services in 48 states through National Carriers Exports to premium markets such as Japan and South Korea

One of the most profitable and efficient beef companies in the U.S. 4th Largest beef processing company in the U.S.²

IO KS MO OH PA GA

3

slaughtering plants

5

further processing plants

Note: (1) As of 1Q20 LTM; (2) In terms of production capacity Source: Company

12

SLIDE 13

North America Operation

V A L U E A D D E D S T R A T E G Y

7,4% 9,6% 11,1% 10,7% 6,2% 7,7% 8,7% 8,3%

2017 2018 2019 TTM March 2020

Fiscal Year EBITDA Margin % Comparison

National Beef Peer2

• National Beef sells a higher % of its products in value-

added format vs. the competition while still maintaining a low cost structure

• Value-added product mix provides a more attractive

and insulated margin profile

• Leading global market share for US Chilled Beef;

especially notable in Japan (35+%) – the premium export market for US Beef

• Leading producer of Certified Angus Beef
• Tightly synchronized cattle procurement and sales

team enable more effective margin capture

25% 22% 21% 19% 13% 0% 10% 20% 30%

National Beef Peer1 Peer2 Peer3 Others

2019 YTD US Chilled Beef Exports

13

Note: In US GAAP Source: Companies financial statements

VALUE-ADDED MINDSET HAS ENABLED THE COMPANY TO ROUTINELY ACHIEVE HIGHER MARGINS VS. THE COMPETITION

SLIDE 14

North America Operation

S T R A T E G I C P A R T N E R S H I P I N C A T T L E P R O C U R E M E N T

Cattle Procurement

• National Beef strives to procure the best, most profitable, cattle from the best
• feedyards. More than 70% were Black Angus.
• ~85% of National Beef’s cattle come from the primary procurement area of KS, TX and

OK and within a 250 mile radius of the plants. The remainder of the company’s cattle come primarily from the key cattle feeding states of Nebraska, Iowa, Colorado and South Dakota

• US Premium Beef owns 15.1% of National Beef and its members provide us with

approximately 25% of the cattle that we process.

• In addition to USPB, the company has several other significant supplier appliances that

provide another ~35-45% of our cattle each year.

SLIDE 15

O p e r a t i n g H i g h l i g h s t N O R T H A M E R I C A

• Increased availability of fed cattle led to additional throughput in the beef plants which allowed for a 19.5% growth in sales volume.
• The revenue growth is mainly explained by the strong and continuous demand for beef products mainly in the domestic market and by the increase

in the sales volume of case ready and direct-to-consumer businesses.

355 419 65 83

502 420 1Q19 1Q20

19.5%

Exports Domestic Market

275 287

1Q19 1,759 1,898 1Q20 2,034 2,185

7.4%

Exports Domestic Market

18% 27%

Volume

(thousand tons)

Net Revenue

(US$ million)

8% 5%

6,149 1Q19 1Q20 6,465

5.1%

Market Data Kills

(USDA F.I. Steer/Heifer Kill)

218.4 215.6 1Q19 1Q20

• 1.3%

Domestic Price

(USDA Comprehensive Cutout $/cwt)

15

SLIDE 16

178 229

8.7% 1Q19 10.5% 1Q20 +29.1%

Gross Margin Gross Profit

131 175

8.0% 6.5% 1Q19 1Q20 +33.5%

EBITDAaj Margin EBITDAaj

Gross Profit

(US$ million)

EBITDAAJ & Margin

(US$ million)

Market Data Cattle Prices

(USDA KS Steer $/cwt)

1.82 1Q19 1Q20 1.74

+4.6%

Spread

(Cutout Ratio)

1Q19 1Q20 125.4 118.8

• 5.2%

* cutout ratio: average USDA reported prices for beef price divided by average USDA reported live prices for fed cattle “USDA KS Steer”: cattle price reference in the U.S. state of Kansas A “hundredweight,” or Cwt, is a weight-measuring unit used in certain commodity contracts. In North America, a hundredweight equals 100 pounds.

• Margins expansions are explained by the improvement in 1Q20 cutout ratio* of 1.74x, up 4.6% over 1Q19 as fed cattle prices declined

more than beef values.

• The combination of increased throughput and higher per unit margins resulted in increased gross profit versus Q1-2019.

16

O p e r a t i n g H i g h l i g h s t N O R T H A M E R I C A

SLIDE 17

S o u t h A m e r i c a O p e r a t i o n

SLIDE 18

South America Operation

L E A D I N G P O S I T I O N A C RO S S A L L S O U T H A M E R I C A O P E R AT I O N S

Slaughtering capacity in Brazil

Cattle slaughtering capacity: 18,100 head/day Geographic footprint diversity, plants in 4 countries and 7 states in Brazil Footprint improvement keeping the same slaughter capacity with less plants 17,500+ cattle farmers Exports to ~100 countries Food-service provider for the premier restaurants and steakhouses Reference in Brazil for plant-based burger Diversified industrialized portfolio focused on premium brands and markets Access to all premium export markets South America leader in certified

• rganic beef production

Superior capacity to serve growth markets

2nd

Largest beef producer in Uruguay

1st

Largest beef importer in Chile

1st

Largest hamburger producer in Argentina

1st

18

SLIDE 19

South America Operation

A N I N T E G R AT E D E X P O RT S P L AT F O R M W I T H T H E B E S T F O OT P R I N T TO A C C E S S T H E M O S T I M P O RTA N T M A R K E T S

19

M a r f r i g ’ s C u r r e n t E x p o r t P r o f i l e a s % o f R e v e n u e s ( a s o f 1 Q 2 0 ) E x p o r t t o : S o u t h A m e r i c a T o t a l M a r f r i g B r a z i l M a r f r i g U r u g u a y M a r f r i g A r g e n t i n a C h i n a & H o n g K o n g 5 9 , 5 % 3 3 , 9 % 4 2 , 5 % 3 1 , 4 % E u r o p e 2 5 , 2 % 1 0 , 8 % 3 4 , 6 % 1 9 , 8 % M i d d l e E a s t 8 , 7 % 7 , 2 % 0 , 7 % 0 , 0 % U S A 6 , 5 % 5 , 2 % 0 , 9 % 0 , 3 % O t h e r s 0 , 1 % 4 2 , 9 % 2 1 , 3 % 4 8 , 5 % T o t a l 1 0 0 % 1 0 0 % 1 0 0 % 1 0 0 %

Source: Company

SLIDE 20

South America Operation

M A R F R I G H A S T H E L A G E S T P R O D U C T I O N A V A I L A B I L T Y C E R T I F I E D T O E X P O R T T O C H I N A

20

70%

S l a u g h t e r i n g c a p a c i t y a v a i l a b l e c e r t i f i e d t o e x p o r t t o C h i n a

1Q20 1Q19 17% 34%

+97

E x p o r t f r o m S o u t h A m e r i c a t o C h i n a a % o f r e v e n u e s

SLIDE 21

245 229 88 111

1Q19 1Q20 333 340

+2.1%

Domestic Market Exports

1,637 3,766 1,350 2,222 1Q19 1,544 1Q20 2,987

+26.1%

Exports Domestic Market

• 6%

+26%

Volume

(thousand tons)

Net Revenue

(R$ million)

+65%

• 6%

1Q20

60% 45%

1Q19 Exports

(% of revenue)

Exports by destination

(% of exports revenue)

19% 8%

31%

2% China & Hong Kong Europe Middle East USA Other

8%

25%

7%

• Growth of 26.1% in net revenue is mainly explained by the increase in the volume and average price of exports, a consequence (i) of the

higher number of permissions for China, which, added to Hong Kong, now represents 60% of the exports sales destination, (ii) 87% increase in processed food revenue, (iii) better commercial and pricing strategy adopted at the end of 2019 improving the mix of destination countries, and (iv) the effect of the 18.2% devaluation of the real against the dollar (1Q20 R$ 4.46 vs R$ 3.77 in 1Q19).

40% 60%

1Q19 1Q20

21

S O U T H A M E R I C A O p e r a t i n g H i g h l i g h s t S O U T H A M E R I C A

21

SLIDE 22

280 621

9.4% 1Q19 16.5% 1Q20 +122%

Gross Margin Gross Profit

104 464

3.5% 1Q19 12.3% 1Q20 +346%

EBITDAaj Margin EBITDAaj

Gross Profit

(R$ million)

EBITDAAJ & Margin

(R$ million) ▪ Footprint optimization: closing inefficient plants and potentializing the efficient ones ▪ Better yield of de-boned products ▪ Increased productivity and reduced fixed costs

• The record performance is explained by: (i) better export results, (ii) increase in processed food results, and (iii) reduction in costs, expenses and fixed

cost dilution given the operational improvement & efficiency program started in 2019 and continued in 2020, which offset the increase in COGS (+ 16.2%) due to the increase in production and cattle prices in Brazil (+ 30%) and Uruguay (+ 13%).

Operational Improvement & Cost Management

▪ Strategic purchase of meat for patties production ▪ Best mix of cattle purchase and production carried out ▪ Increased productivity and reduced industrialization costs ▪ Better yield of de-boned and trimmings products ▪ Higher production of value-added products and organic meat ▪ Better yield of de-boned and trimmings products ▪ Reduction of industrialization costs ▪ Start of operation of the new Distribution Center ▪ Increased sales capillarity through new channels

22

South America Operation: ▪ Integrated platform with consolidated directories: Exports; Financial; IT; Sustainability

S O U T H A M E R I C A S O U T H A M E R I C A O p e r a t i n g H i g h l i g h s t S O U T H A M E R I C A

22

SLIDE 23

P a t t i e s

SLIDE 24

the world

T H E B I G G E S T P R O D U C E R O F B E E F P A T T I E S

Várzea Grande - BRAZIL: Beef patties, meatballs and kibbeh QuickFood - Argentina: Leaders in the production of beef products in Argentina and controllers of the Paty and Vienissima brands

8% 17% 30% 45%

Uruguay Argentina Brazil USA

Patties Production by Countries Ohio Facility: Beef patties 106,000 tons/year

24

SLIDE 25

P l a n t b a s e d

SLIDE 26

Meat Alternative

Marfrig,

• ne
• f

the largest beef and hamburger producer in the world, and ADM, a global leader in nutrition, have a success history in working together to develop and manufacture sustainable and plant-based products, including The Rebel Whopper hamburgers, from Burger King, and the Aussie Plant Burger, from Outback Steakhouse, in Brazil, as well as products marketed under the Revolution brand, from Marfrig Now, PlantPlus Foods will enable the expansion of this successful relationship and unique specialization to offer hamburgers, nuggets, cold meats, sausages and other highest quality plant-based products to their clients

26

SLIDE 27

Technical ingenuity and complete portfolio of natural ingredients and flavors One of the world’s leading meat producers and the global leader in hamburger production

Contributions

Manufacturing Natural Ingredients Technical Expertise

Contributions

Application Development Sales & Distribution Customer Access 27

SLIDE 28

S u s t a i n a b i l i t y I n i t i a t i v e s

SLIDE 29

Customers

Food safety, innovation and growth, engagement and communication with stakeholders, nutritional value and value generation

Economic

Value creation, free cash flow, reduction

• f leverage and increasing profitability

Work Environment

Compliance, diversity and inclusion, employee development, ethics and integrity, health and well being

Suppliers

Sustainable supply chain, free deforestation, animal welfare, slave labor prevention

Communities

Community engagement, volunteering among employees, social economic development and social entrepreneurship

Environment

Emission reduction, energy, water, environmental management system – waste and effluent

Sustainability

S T R A T E G I C

Pillars

R e f e r e n c e i n t h e e f f i c i e n t u s e

• f n a t u r a l r e s o u r c e s and

e n v i r o n m e n t a l preservat i o n

Best ranked Brazilian Company in the FAIRR Protein Producer Index 20191

1°

100% compliant for the 7th consecutive year on cattle sourcing in the Amazon Biome2

2°

29

SLIDE 30 Source: Company; Coller FAIRR Protein Producer Index 2019 RESPONSIBLE

Deforestation and Biodiversity Loss Global movements tracking forest loss target factory farming companies and can lead to shareholder divestment and/or weaken customer loyalty

14 LIFE BELOOW WATER LIFE 15 ON LAND

2

Water Use and Water Scarcity Beef, pork, dairy, and poultry companies consume large quantities of water both directly and indirectly via their purchase of animal feed

6 CLEAN WATER A ND SA NITA TION 15 LIFE ON LAND

3

Waste and Water Pollution Companies are facing greater scrutiny about the impact of waste on surrounding communities and the environment, meaning potential fines and regulation

GOODHEALTH 3 A ND WELL-BEING CLEAN WATER 6 A ND SA NITA TION

4

Antibiotics Drug-resistant infections are a serious public health threat which will likely impact productivity on a national scale

GOODHEALTH 3 A ND WELL-BEING

5

Working Conditions Operational risks, which can involve worker injuries and reputational risk, as well as food product contaminated by sick workers

DECENT WORK 8 A ND ECONOMIC GROWTH

6

Animal Welfare Poor animal welfare presents operational and reputational risks for the companies

12 CONSU MPTION A ND PRODUCTION

7

60

Global companies

09

Risk and opportunity factors

30

KPIs

FAIRR

Protein

P R O D U C E R I N D E X 2 0 1 9

Greenhouse Gas Emissions Disproportionate amount of GHGs generated by livestock makes companies engaged in factory farming vulnerable to transition and physical risks

13 CLIMATE ACTION

1

Sustainable Proteins Reduced reliance on animal protein sources is key to sustainable development

GOOD HEALTH 3 A ND WELL-BEING12 RESPONSIBL E CONSUMPTIO N A ND PRODUCTION LIF E 15 ON LAND 1 3 CLIMAT E 1 4 LIFE BELOW ACTION WA TER

9

Food Safety A series of high profile food safety incidents in meat and dairy have focused consumers concerns on threat of food contamination and foodborne illnesses

GOODHEALTH 3 A ND WELL-BEING 2 ZERO HUNGER

8

SLIDE 31

FAIRR

Protein

P R O D U C E R I N D E X 2 0 1 9

Mowi Leroy Seafood Bakkafrost Fonterra Grieg Seafood Tassal Group SalMar Tyson Foods Hormel Foods Charoen Pokphand Foods Thai Union Group Empresas AquaChile WH Group GFPT Grupo Nutresa Maple Leaf Foods BRF JBS Cranswick Minerva Marfrig Global Foods Salmones Camanchaca

0% 70% 60% 50% 40% 30% 20% 10%

Avarege

Risk Score

MEDIUM RISK LOW RISK HIGH RISK

31

SLIDE 32

Ta k e a w ay s

SLIDE 33

Takeaways

K E Y

C l e a r v a l u e c r e a t i o n s t r a t e g y S o l i d f i n a n c i a l p e r f o r m a n c e c o m b i n i n g c o n s i s t e n t m a r g i n s a n d d e l e v e r a g i n g T o p -n o t c h m a n a g e m e n t t e a m i n c o n n e c t i o n w i t h h i g h l e v e l o f c o r p o r a t e g o v e r n a n c e D i v e r s i f i e d p r o d u c t i o n a n d d i s t r i b u t i o n p l a t f o r m e v o l v i n g t o w a r d s v a l u e -a d d e d p r o d u c t s R o b u s t a n d e f f i c i e n t n o r t h a m e r i c a n

• p e r a t i o n c o m p r i s i n g a u n i q u e

s o u r c i n g c a p a b i l i t y A c c e s s t o h i g h g r o w t h m a r k e t s t h r o u g h t h e s o u t h a m e r i c a o p e r a t i o n W o r l d l e a d i n g s t r o n g s e c t o r B e e f p l a t f o r m , w e l l -p o s i t i o n e d t o b e n e f i t f r o m m o m e n t u m

SLIDE 34

34

Appendix

1Q20 Consolidated Financial Results

SLIDE 35

Net Revenue & EBITDA 72%

1Q19

72%

1Q20 10,668 13,502 +26.6% Net Revenue

(R$ million)

8% 3%

5.5%

83%

1Q20 1Q19 9.1%

64%

584 1,223 112%

South America EBITDAaj Margin North America

EBITDAAJ & Margin

(R$ million)

Norht America South America

• Consolidated net revenue 26.6% higher than 1Q19 due to the continued excellent performance of the North America Operation, the 46.5% increase in

export revenues in South America and the 18.2% devaluation of the real against the dollar, which had an average rate of R$ 4.46 16% at closing R$ 5.20. In Q1 only 8% of revenues was in reais.

• The excellent performance is explained by (i) the higher sales volume in the North America Operation given the solid and continuous growth in

demand for beef protein in the USA and (ii) the increase in the average price and higher volume of exports in South America, (iii) the improvements in productivity efficiency and cost reduction promoted by Operation South America; and (iv) the greater devaluation of the real against the dollar.

89%

In US$

Net Revenue profile

(% by currency)

In US$ In R$ Outher

35

SLIDE 36

Cash Flow

(R$ million)

• In continuity with the debt and financial expenses reduction plan, we settled R$ 938 million in

1Q20 in working capital operations that burdened financial expenses, a significant milestone in the execution of our liability management strategy.

• Recurring free cash flow was positive by R$ 243 million after the reversal of one-off items, such as

the elimination of working capital operations and the payment of the bonus related to the North American operation.

• 971

726 243

Operational C.F. Recurrent Capex 759 938 One-off effects Adjusted OCF

• 190
• 293

Interest FCF

North America Bonus Settlement of Working Capital Operations

18

Source: Company, ¹ Forbes 2018, ² Rabobank

SLIDE 37

Amort.of Issuance Cost and 23’ Bond Buyback Premium 4Q19 Net Debt

4,251

FX Variation Share Buyback FCF

1,454 78 188 19,385 44 64

Settlement of Leases Other Net Debt 1Q20

13,306

Evolution of Net Debt & Leverage

(R$ million)

In US$

3,301 3,729

2.84x 2.74x

In US$

3,56x 2,77x

• The net debt of US$ 3,729 million was 13% higher than 4Q19 mainly (i) due to the impacts on free cash flow such as the elimination of

working capital operations, payment of taxes and bonuses related to the North American operation; and (ii) the non-cash effect of the write-off of the amortization cost of the issue of Senior Notes due 2023, settled in advance in January 2020. 37

37

SLIDE 38

Debt Profile

1Q19 1Q20

5.81% 6.94%

• 113 bps

(-16%) Average Cost of Debt

(% a.a.)

In US$

Short Term

Long Term

• In this quarter we reached another important milestone in the execution of the liability management strategy with the average

cost of debt reaching 5.81% a.a., a reduction of 16% or 113 bps compared to 1Q19.

• The downward movement in the cost of the Company's debt is one of the main indicators of the success of the work in

progress to reduce financial expenses and increase profitability.

97%

In US$

75%

Long Term

SLIDE 39

• Financial expenses were reduced by 31% or R$ 135 million compared to 4Q19 (i) by the

elimination of working capital operations with greater emphasis in 1Q20, (ii) by the settlement

• f R $ 616 million in Refills and (iii ) for the interest savings of under US$ 466 million of Senior

Notes due 2023 repurchased in January.

• The one-off expense of R $ 244 million is a consequence of the early settlement of the Senior

Notes mentioned above. Of this amount, R $ 169 million have no effect since they are the write-off of the amortized issue costs.

Net Financial Result

4Q19 1Q20

Δ Provisioned Net Interest

(283) (248) 35

Other Income and Expenses

(160) (60) 100

Recurrent Financial Result

(443) (308) 135

Non Recurrent Expenses

(244) (244)

FX Variation

(167) (632) (465) Net Financial Result (610) (1,183) (572)

(R$ million)

224 242 254 283 248 182 147 170 160 60

1Q19 2Q19 3Q19 4Q19 1Q20 406 389 423 443 308

• 31%

Provisioned Net Interest Other Financial Income and Expenses

39

SLIDE 40

• In the quarter, the negative FX variation of R$ 632 million was the main impact of the net result, which,

adjusted for the non-cash effect of the early repurchase of the Senior Notes due in 2023, was positive by R$ 32 million.

Net Result

(R$ million)

32 169

Adj Net Result Net Result before FX Variation Bond 2023 Adj of Amortization Cost

• 632

FX Variation Aj Net Result

495 664

22

SLIDE 41