Earnings Conference Call 1Q20 May, 2020 Disclaimer This material - - PowerPoint PPT Presentation

earnings conference call 1q20 may 2020 disclaimer
SMART_READER_LITE
LIVE PREVIEW

Earnings Conference Call 1Q20 May, 2020 Disclaimer This material - - PowerPoint PPT Presentation

Earnings Conference Call 1Q20 May, 2020 Disclaimer This material is a presentation of general information about Marfrig Global This presentation includes forward-looking statements. Such statements do not Foods S.A. and its consolidated


slide-1
SLIDE 1

Earnings Conference Call – 1Q20 May, 2020

slide-2
SLIDE 2

Disclaimer

This material is a presentation of general information about Marfrig Global Foods S.A. and its consolidated subsidiaries (jointly the “Corporation”) on the date hereof. The information is presented in summary form and does not purport to be complete. No representation or warranty, either expressed or implied, is made regarding the accuracy or scope of the information herein. Neither the Corporation nor any

  • f

its affiliated companies, consultants

  • r

representatives undertake any liability for losses or damages arising from any

  • f the information presented or contained in this presentation. The

information contained in this presentation is up to date as of March 31, 2020, and, unless stated otherwise, is subject to change without prior notice. Neither the Corporation nor any of its affiliated companies, consultants or representatives have signed any commitment to update such information after the date hereof. This presentation should not be construed as a legal, tax or investment recommendation or any other type of advice. The data contained herein were obtained from various external sources and the Corporation has not verified said data through any independent source. Therefore, the Corporation makes no warranties as to the accuracy or completeness of such data, which involve risks and uncertainties and are subject to change based on various factors. This presentation includes forward-looking statements. Such statements do not constitute historical fact and reflect the beliefs and expectations

  • f

the Corporation’s management. The words “anticipate,” “hope,” “expect,” “estimate,” “intend,” “project,” “plan,” “predict,” “aim” and other similar expressions are used to identify such statements Although the Corporation believes that the expectations and assumptions reflected by these forward-looking statements are reasonable and based on the information currently available to its management, it cannot guarantee results or future events. Such forward-looking statements should be considered with caution, since actual results may differ materially from those expressed or implied by such statements. Securities are prohibited from being offered or sold in the United States unless they are registered or exempt from registration in accordance with the U.S. Securities Act of 1933, as amended (“Securities Act”).Any future offering of securities must be made exclusively through an offering memorandum. This presentation does not constitute an offer, invitation or solicitation to subscribe or acquire any securities, and no part of this presentation nor any information or statement contained herein should be used as the basis for or considered in connection with any contract or commitment of any nature. Any decision to buy securities in any offering conducted by the Corporation should be based solely on the information contained in the

  • ffering documents, which may be published or distributed opportunely in

connection with any security offering conducted by the Corporation, depending on the case.

2

slide-3
SLIDE 3

North America South America

Record First Quarter

Revenue USD2.1 billion EBITDAAJMargin 8%

EBITDAAJ Margin Record

Revenue R$3.8 billion EBITDAAJ Margin 12,3%

Consolidated Net Revenue Consolidated EBITDAAJ

R$ 13.5 billion

+27% vs 1Q19

R$ 1.2 billion Margin 9.1%

+109% vs 1Q19 +360 bps vs 1Q19

Record Financial Expense Reduction Capital Structure Bond 2023 Early Settlement Historical Lower Cost

  • f Debt

US$ 446 million 5,81% p.a.

Decrease of 16% vs 1Q19

  • 113 bps vs 1Q19

Savings of R$ 160 million in interest per year

R$ 135 million

  • 31% vs 4Q19

Record Settlement of Working Capital Operations

Refis Settlement

R$ 614 million

Net Profit AJ

R$ 32 million

3

New Organizational Structure

More Simple More Focused More Agile

Another quarter of record-high operating results, reinforcement

  • f capital structure and all time low debt cost

7x vs 1Q19

slide-4
SLIDE 4

Operational Results

4

slide-5
SLIDE 5

North America – 1/2

1Q19 1Q20 6,149 6,465

5.1%

355 419 65 83 502 1Q20 1Q19 420

19.5%

Exports Domestic Market

275 287 1,759 1Q20 1Q19 1,898 2,034 2,185

7.4%

Exports Domestic Market

18% 27%

Volume

(thousand tons)

Net Revenue

(US$ million)

8% 5%

Market Data Kills

(USDA F.I. Steer/Heifer Kill)

215.6 1Q20 1Q19 218.4

  • 1.3%

Domestic Price

(USDA Comprehensive Cutout $/cwt)

❑ 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.

5

slide-6
SLIDE 6

North America – 2/2

178 229 10.5% 8.7% 1Q19 1Q20 +29.1%

Gross Margin Gross Profit

131 175 6.5% 1Q19 8.0% 1Q20 +33.5%

EBITDAaj Margin EBITDAaj

Gross Profit

(US$ million)

EBITDAAJ & Margin

(US$ million)

Market Data Cattle Prices

(USDA KS Steer $/cwt)

1Q20 1Q19 1.82 1.74

+4.6%

Spread

(Cutout Ratio)

125.4 1Q19 1Q20 118.8

  • 5.2%

6

* 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.

slide-7
SLIDE 7

South America – 1/2

245 229 88 111 340 1Q19 1Q20 333

+2.1%

Exports Domestic Market

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

+26.1%

Exports Domestic Market

  • 6%

+26%

Volume

(thousand tons)

Net Revenue

(R$ million)

+65%

  • 6%

45%

1Q20 1Q19

60%

Exports

(% of revenue)

Exports by destination

(% of exports revenue)

31%

19% 8% 2% China & Hong Kong Europe USA Middle East Other

25%

8% 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

7

slide-8
SLIDE 8

South America – 2/2

280 621 1Q20 9.4% 1Q19 16.5% +122%

Gross Margin Gross Profit

104 464 1Q20 3.5% 1Q19 12.3% +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

8

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

slide-9
SLIDE 9

Consolidated Results

9

slide-10
SLIDE 10

Net Revenue & EBITDA 72%

1Q19

72%

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

(R$ million)

8% 3%

5.5% 1Q19

83%

9.1%

64%

1Q20 584 1,223 112%

North America EBITDAaj Margin South America

EBITDAAJ & Margin

(R$ million)

South America Norht 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)

Outher In US$ In R$

10

slide-11
SLIDE 11

Cash Flow

(R$ million)

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

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

❑ In continuity with the debt and financial expenses reduction plan, we settled R$ 938 million in 1Q20 in working capital

  • perations that burdened financial expenses, a significant milestone in the execution of our liability management strategy.

11

  • 971

726 243 Adjusted OCF Operational C.F. 759 Recurrent Capex 938 One-off effects

  • 190
  • 293

Interest FCF

North America Bonus Settlement of Working Capital Operations

slide-12
SLIDE 12

Amort.of Issuance Cost and 23’ Bond Buyback Premium

188

4Q19 Net Debt

19,385

FX Variation FCF

44

Share Buyback

64

Settlement of Leases

78

Other Net Debt 1Q20

13,306 4,251 1,454

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.

12

slide-13
SLIDE 13

Debt Profile

1Q19

5.81%

1Q20

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

13

slide-14
SLIDE 14

❑ Financial expenses were reduced by 31% or R$ 135 million compared to 4Q19 (i) by the elimination of working capital

  • perations with greater emphasis in 1Q20, (ii) by the settlement of 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)

14

(R$ million) 224 242 254 283 248 182 147 170 160 60 1Q19 2Q19 406 4Q19 3Q19 1Q20 389 423 443 308

  • 31%

Other Financial Income and Expenses Provisioned Net Interest

slide-15
SLIDE 15

❑ 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)

15

32 169

Net Result before FX Variation

  • 632

FX Variation Aj Net Result Adj Net Result

495

Bond 2023 Adj of Amortization Cost

664

slide-16
SLIDE 16

Final Remarks

16

slide-17
SLIDE 17

Thank You!

17