3Q18 Earnings Release

Transcription

1 3Q18 Earnings Release Barretos, November 6, 2018 Minerva S.A. (BM&FBOVESPA: BEEF3 OTC - Nasdaq International: MRVSY), the South American leader in the export of fresh beef and cattle byproducts, which also operates processed foods segment, announces today its results for the third quarter of 2018 (3Q18). The financial and operating information herein is presented in BRGAAP and Brazilian reais (R$), in accordance with International Financial Reporting Standards (IFRS). 3Q18 Highlights Minerva (BEEF3) Price on 11/6/2018: R$ 5.60 Market cap: R$1,267.9 million 226,418,459 shares Free Float 48% Conference Call November 7, 2018 Portuguese 9:00 a.m. (Brasília) 6:00 a.m. (US EST) Phone: +55 (11) Code: Minerva English 10:30 a.m. (Brasília) 7:30 a.m. (US EST) Phone: +1 (844) Code: Minerva IR Contacts: Eduardo Puzziello Kelly Barna Matheus Oliveira Luiza Puoli Operating cash flow reached R$406.5 million and recurring free cash flow to equity was R$93.5 million in 3Q18. Consolidated capacity utilization grew almost 5 p.p. to 79.8% this quarter. Gross revenue reached R$4,594.0 million in 3Q18, of which 43%, or R$2.0 billion, from the Brazilian Industry Division; 40% or R$1.8 billion from Athena Foods; and 17% or R$782 million from the Trading Division. LTM gross revenue was once again an all-time high, at R$16,652 million, 44% higher than in the same period last year. Exports accounted for 61% of the Company s gross revenue in the quarter. In the last twelve months ended September 30, 2018, Minerva accounted for 21% of South American exports, or around 7% of global exports, and once again consolidated its position as the leading beef exporter in the region. Minerva s net revenue reached R$4,337.7 million in 3Q18. In LTM3Q18, net revenue reached R$15.6 billion, up 17% year on year. Based on these results, the Company maintained its net revenue guidance for 2018 at between R$15.0 billion and R$16.0 billion. EBITDA totaled R$449.2 million in 3Q18, up 44% over 3Q17, while the EBITDA margin stood at 10.4%, 130 bps more than in 3Q17. In LTM3Q18, adjusted EBITDA amounted to R$1,451.0 million, 21% higher than in the same period in 2017, with an EBITDA margin of 9.3%. The cash position totaled R$4.2 billion and net debt stood at R$7.2 billion on 9/30/2018. At the close of 3Q18, financial leverage, measured by the net debt/ltm adjusted EBITDA ratio, was 5.0x, in line with the previous quarter. In order to accelerate the financial deleveraging process, the Extraordinary Shareholders Meeting held on October 15, 2018 approved the proposal for a capital increase through the private subscription of up to R$1,059 million through the issue of up to 165 million shares at R$6.42. As an additional advantage, subscription warrants were issued to the subscribers of the capital increase shares. On November 1 st, the Company announced the Offer for the Early Repurchase of its 8.75% perpetual bonds, issued through its subsidiary Minerva Luxembourg S.A., currently in the international market. Phone: (11) ri@minervafoods.com

2 Message from Management The combination of the effective implementation of a diversification strategy in South America, with decision-making based on focus, discipline and consistency, and excellence in risk management was translated into the Company s results in the third quarter of Gross revenue came to an all-time high of R$4.6 billion in 3Q18. The EBITDA margin stood at 10.4%, returning to the level prior to the acquisition of assets in 2017, as the integration process was completed. Despite the recent appreciation of the U.S. dollar, net financial leverage remained flat at 5.0x at the end of September 2018, thanks to the successful hedging strategy and free cash generation of R$94 million in the quarter. At the end of September, the Company had R$4.2 billion in cash, which is sufficient to amortize its debt through 2026, and the debt duration remained at over five years. Sales were once again led by exports, which accounted for 61% of consolidated gross revenue, at R$2.8 billion, up 32% over 3Q17 and approximately 12% higher than in 2Q18. The two Divisions (Brazilian Industry and Athena Foods) had an excellent export performance. We were able to achieve these results thanks to the strategic positioning of our units, allowing greater arbitrage between the regions, and to our extensive reach in the global beef market. We are currently the leading South American exporter in terms of revenue, with 21.4% of total exports in the last 12 months, while we account for approximately 7% of global exports. Minerva continues seeking to improve its capital structure, which is why it is presenting two projects designed to accelerate the deleveraging of its balance sheet, a process that is already in progress and includes the recent announcement of the repurchase of perpetual bonds. The first project was the announcement of studies on the IPO of our international units, Athena Foods. After completing the integration process of the units, we identified opportunities for extracting value from the operations in Paraguay, Argentina, Uruguay and Colombia, as well as distribution in Chile, and we announced our intention to hold an initial public offering on the Santiago Stock Exchange, in Chile, in our 2Q18 earnings release. We chose Chile for this IPO, since the country is characterized by high corporate governance standards and high domestic savings rate, among others. This process is in an advanced stage of development, and we expect to conclude this operation in the first half of The second project was the announcement, in September, of the Private Capital Increase of up to R$1.1 billion. The transaction was authorized by the Extraordinary Shareholders Meeting held on October 15. The subscription price of the capital increase was set at R$6.42 per share, based on the average price in the last 30 trading sessions before September 11, We also offered an additional advantage to our investors who participated in the capital increase: a subscription warrant valid for three years. When exercised, these warrants will have the same rights as those granted by the Company s registered common shares. We believe that the successful completion of these two operations will strengthen the Company from a financial point of view and prepare it for renewed value creation for our shareholders. Fernando Galletti de Queiroz, CEO 2

3 Results Analysis Key Consolidated Indicators R$ Million 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg Total slaughter ( 000 head) % % 3, , % Slaughter - Brazil % % 1, , % Slaughter - Athena % % 1, % Total sales volume ( 000 tons) % % % Volume - Brazil % % % Volume - Athena % % % Gross revenue 4, , % 3, % 16, , % Export market 2, , % 2, % 10, , % Domestic market 1, , % 1, % 6, , % Net revenue (1) 4, , % 3, % 15, , % Adjusted EBITDA (1) % % 1, , % Adjusted EBITDA margin (1) 10.4% 9.1% 1.3 p.p. 9.5% 0.9 p.p. 9.3% 9.0% 0.3 p.p. Net debt/ltm adjusted EBITDA (1) (x) Net income (loss) n.a % -1, n.a. (1) LTM3Q17 includes pro-forma net revenue and EBITDA figures for the plants of the Mercosur assets acquired on August 1, New Areas of Operation In order to improve communication with the market and facilitate the understanding of its business areas, Minerva has adopted, as of the 1Q18 earnings release, a new revenue reporting structure based on the areas of operation described below: Brazilian Industry Division: It consists of the result from production of fresh beef, slaughter byproducts, such as offal, tripe, tallow, bone meal, biodiesel and leather, and processed foods, such as portioned meals and Minerva Fine Foods products, in Brazil, sold both in the domestic and the export market. Colombia Figures 1 and 2 Brazilian Industry Division and % of Gross Revenue Brazil (% of Gross Revenue in 3Q18) Paraguay Athena Foods 40% Chile Uruguay Brazilian Industry Division 43% Trading Division 17% Argentina 3

4 Athena Foods: It consists of the result from production and/or distribution of fresh beef, slaughter byproducts, such as offal, tripe, tallow, bone meal, biodiesel and leather, and processed foods, such as portioned meals and Swift products, in Paraguay, Argentina, Uruguay, Colombia and Chile, sold both in the domestic and the export market. Figures 3 and 4 Athena Foods and % of Gross Revenue Colombia Brazil (% of Gross Revenue in 3Q18) Trading Division 17% Paraguay Chile Uruguay Athena Foods 40% Brazilian Industry Division 43% Argentina Trading Division: The production units of this division are spread across South America and Oceania. It consists of the result from the Live Cattle and Protein Trading segments in the export market, the Protein Trading and Resale of Thirdparty Products segments in the domestic market and the Energy Trading segment in the Brazilian market. Colombia Figures 5 and 6 Trading Division and % of Gross Revenue Paraguay Brazil Trading Division 17% (% of Gross Revenue in 3Q18) Brazilian Industry Division 43% Athena Foods 40% Chile Argentina Uruguay Australia New Zealand 4

5 You can find the new breakdown since 2015 in Excel at in the Investor Services section Fundamentals and Spreadsheets. Results by Division Slaughter BRAZILIAN INDUSTRY DIVISION In 3Q18, the Company's slaughter volume in Brazil came to 451,800 head of cattle, 17.3% more than in 3Q17, with a capacity utilization rate of 78.1%, up 6.1 p.p. over 2Q18. This increase over the previous quarter was due to (i) lower slaughter volume in 2Q18, due to the truck drivers strike in May and (ii) an exchange rate favorable to exports, combined with stronger demand in the export market in the period. Figure 7 - Installed Capacity Utilization - Brazil 84.1% 81.0% 80.1% 72.0% 78.1% 3Q17 4Q17 1Q18 2Q18 3Q18 Source: Minerva ATHENA FOODS In 3Q18, slaughter volume in Paraguay, Argentina, Uruguay and Colombia came to 451,000 head of cattle, up 7.6% over 2Q18, but the capacity utilization rate of this Division reached 81.5%, 3.4 p.p. more than in 2Q18 and 12.9 p.p. more than in 3Q17. The upturn was fueled by (i) higher slaughter volume in Paraguay to meet demand from Russia, (ii) the fact that 3Q18 was the first quarter in which the units were fully integrated into Minerva s system and (iii) increased production and exports from the Rosário unit, in Argentina. Figure 8 - Installed Capacity Utilization - Athena Foods 78.1% 81.5% 68.6% 68.6% 71.5% 3Q17 4Q17 1Q18 2Q18 3Q18 Source: Minerva Based on the above information, the Company s consolidated capacity utilization came to 79.8% in 3Q18, an increase of 4.8 p.p. over 2Q18 and 2.7 p.p. over 3Q17, as shown below: 5

6 Figure 9 - Installed Capacity Utilization - Consolidated 77.1% 74.4% 75.5% 75.0% 79.8% 3Q17 4Q17 1Q18 2Q18 3Q18 Source: Minerva Gross Revenue by Division BRAZILIAN INDUSTRY DIVISION Gross revenue from the Brazilian Industry Division totaled R$1,995.9 million in 3Q18, an increase of 7.6% over 3Q17 and 16.5% over 2Q18. In the last 12 months ended September 2018, gross revenue from this division came to R$7,435.9 million, up 13% over LTM3Q17. Export Market 67.1% of Gross Revenue from the Brazilian Industry Division in 3Q18 Brazilian exports generated R$1,339.5 million in gross revenue in 3Q18, 11% more than in 3Q17 and up 17% over 2Q18. The strong revenue performance was due to a scenario that favors Brazilian exports in the period, fueled by (i) the appreciation of the dollar against the real (+4% vs. 2Q18) and (ii) the growing demand from the export market, especially in Asia and Americas, which was intensified in 3Q18. In LTM3Q18, gross revenue totaled R$4,860.1 million, up 17% year on year. We present below the Division s exports by region between LTM3Q17 and LTM3Q18: Africa: In LTM3Q18, Africa accounted for 14% of the Brazilian Division s total exports, remaining flat year on year. Americas: In LTM3Q18, the Americas received 15% of the Brazilian Division s total exports, up 7 p.p. year on year, as a large share of exports was routed to Chile in the period. Asia: Asia s share of the Brazilian Division s exports grew 4 p.p. between LTM3Q17 and LTM3Q18, to 27%, mainly driven by a year-on-year increase of around 50% in consumption in China and Hong Kong. CIS (Commonwealth of Independent States): The Commonwealth of Independent States, represented mainly by Russia, accounted for 3% of the Brazilian Division s exports in LTM3Q18, 4 p.p. less than in LTM3Q17. It is worth noting that Russia has banned Brazilian beef imports since December As a result, Athena Foods now supplies this region. Europe: Europe was the destination of 14% of the Brazilian Division s exports in the last 12 months ended September 2018, remaining virtually flat year on year. Middle East: The Middle East accounted for 27% of the Brazilian Division s exports, 4 p.p. less than in the twelve months ended September

7 America 8% Figures 10 and 11 - Breakdown of Exports by Region Brazil LTM3TQ17 CIS NAFTA 7% 2% Middle East 31% EU 14% LTM3Q18 CIS 3% Middle East 27% Africa 14% Africa 14% EU 15% Asia 23% America 15% Asia 27% Source: Minerva We present below a complete breakdown of the Brazilian Industry Division: Gross Revenue (R$ Million) 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg Fresh beef EM 1, , % 1, % 4, , % Byproducts EM % % % Processed foods EM % % % Subtotal EM 1, , % 1, % 4, , % Fresh beef DM % % 1, , % Byproducts DM % % % Processed foods DM % % % Subtotal DM % % 2, , % Total 1, , % 1, % 7, , % Volume ( 000 tons) 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg Fresh beef EM % % % Byproducts EM % % % Processed foods EM % % % Subtotal EM % % % Fresh beef DM % % % Byproducts DM % % % Processed foods DM % % % Subtotal DM % % % Total % % % Average Price EM (US$/kg) 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg Fresh beef EM % % % Byproducts EM % % % Processed foods EM % % % Total % % % Average dollar (Source: BACEN) % % % Average Price EM (R$/Kg) 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg Fresh beef EM % % % Byproducts EM % % % Processed foods EM % % % Total % % % 7

8 Average Price DM (R$/Kg) 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg Fresh beef DM % % % Byproducts DM % % % Processed foods DM % % % Total % % % EM - Export Market, DM Domestic Market Domestic Market 32.9% of Gross Revenue from the Brazilian Industry Division in 3Q18 Gross revenue from the Brazilian Industry Division totaled R$656.5 million in 3Q18, 2% higher than in 3Q17 and up 15.5% over 2Q18. This excellent performance was due to our focus on small and medium retailers and the food service segment, which represented for around 56% of the domestic sales. In 2018, the Company has focused on increasing the type of customers in the food service segment, mainly on bars & snack bars, restaurants, buffets and steakhouses, which together account for 95% of this segment s customers. In addition, sales of third-party products accounted for 37% of the domestic market sales in the 9M18, in products such as frozen fish, potatoes, cheeses, pork, lamb, among others. In LTM3Q18, gross revenue in the Brazilian domestic market totaled R$2,575.8 million, up 6.0% year on year. ATHENA FOODS Gross revenue from Athena Foods, comprising production units in Paraguay, Argentina, Uruguay and Colombia, as well as distribution in these countries and in Chile, totaled R$1,816.2 million in 3Q18, 63.3% higher than in 3Q17 and 14.9% more than in 2Q18. In the last 12 months ended September 2018, gross revenue from this division totaled R$6,357.6 million, up 121.3% over LTM3Q17. Export Market 72.0% of Gross Revenue from Athena Foods in 3Q18 In 3Q18, gross revenue from Athena Foods exports totaled R$1,307.9 million, 75.8% more than in 3Q17 and up 12.8% over 2Q18. The result was positively impacted by (i) strong exports in Argentina, due to the completed integration of the Rosario unit, (ii) the depreciation of the regional currencies against the dollar and (iii) constant growth in Paraguayan exports to Russia due to the ban on Brazilian exports. Gross revenue from Athena Foods exports totaled R$4,460.4 million in LTM3Q18, up 113.5% year on year. We present below Athena Foods exports by region between LTM3Q17 and LTM3Q18: Africa: Africa accounted for 1% of Athena Foods' exports in the last 12 months ended September 2018, down 200 p.p. year on year. Americas: The Americas accounted for 22% of Athena Foods exports in LTM3Q18, down 10 p.p. year on year, since Paraguayan units are less focused on Chile, but are working to supply Russia, as shown below. Asia: In LTM3Q18, Asia substantially increased its share of Athena Foods exports, with 34% of the total, 14 p.p. more than in the same period last year. The region has thus consolidated its position as the main destination of Athena Foods exports in the period. CIS (Commonwealth of Independent States): The Commonwealth of Independent States accounted for 18% of Athena Foods exports in LTM3Q18, 10 p.p. more than in LTM3Q17. Athena Foods only destination in this region is Russia, whose share of exports has been growing consistently since the ban on Brazilian beef exports. Europe: In LTM3Q18, Europe was the destination of 13% of Athena Foods exports, 2 p.p. more than in LTM3Q17. NAFTA: NAFTA accounted for 5% of Athena Foods beef exports in LTM3Q18, 6 p.p. less than in the same period last year. 8

9 Middle East: In LTM3Q18, the Middle East accounted for 7% of Athena Foods total export revenue, down 8 p.p. year on year. Figures 12 and 13 - Breakdown of Exports by Region Athena Foods EU 11% CIS 8% LTM3Q17 Africa 3% Americas 32% EU 13% Middle East 7% NAFTA 5% LTM3Q18 Africa 1% Asia 34% NAFTA 11% Middle East 15% Asia 20% CIS 18% Americas 22% Source: Minerva We present below a complete breakdown of Athena Foods: Gross Revenue (R$ Million) 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg Fresh beef EM 1, % 1, % 3, , % Byproducts EM % % % Processed foods EM % % % Subtotal EM 1, % 1, % 4, , % Fresh beef DM % % 1, % Byproducts DM % % % Processed foods DM % % % Subtotal DM % % 1, % Total 1, , % 1, % 6, , % Volume ( 000 tons) 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg Fresh beef EM % % % Byproducts EM % % % Processed foods EM % % % Subtotal EM % % % Fresh beef DM % % % Byproducts DM % % % Processed foods DM % % % Subtotal DM % % % Total % % % Average Price EM (US$/kg) 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg Fresh beef EM % % % Byproducts EM % % % Processed foods EM % % % Total % % % Average dollar (Source: BACEN) % % % 9

10 Average Price EM (R$/Kg) 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg Fresh beef EM % % % Byproducts EM % % % Processed foods EM % % % Total % % % Average Price DM (R$/Kg) 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg Fresh beef DM % % % Byproducts DM % % % Processed foods DM % % % Total % % % EM - Export Market, DM Domestic Market Domestic Market 28.0% of Gross Revenue from Athena Foods in 3Q18 Domestic gross revenue from this Division totaled R$508.2 million in 3Q18, 38.2% more than in 3Q17 and up 20.7% over 2Q18. In the last 12 months ended September, gross revenue from Athena Foods reached R$1,897.2 million, up 142.1% year on year. The result reflects the strategy of repositioning the processed products under the brand Swift in Argentina, through 5 distribution centers to more than 60 thousand points of sales, mailing in the physical distribution in the traditional retail and the Company s focus on domestic distribution to more resilient markets, such as small and medium retailers, especially those operating in the food service segment under the one-stop-shop concept (sales of third parties products). TRADING DIVISION Exports accounted for 21.5% of gross revenue from this Division, bringing in R$167.9 million in revenue, down 2.9% from 3Q17 and 22.6% lower than in 2Q18. In the last 12 months ended September, gross revenue from exports came to R$764.9 million, up 52.0% year on year. Live cattle exports account for the lion s share of this Trading Division s export revenue. Domestic sales accounted for 78.5% of gross revenue from the Trading Division, which totaled R$614.0 million in 3Q18, 18.0% higher than in 3Q17 and 38.7% more than in the previous quarter. In LTM3Q18, gross revenue came to R$1,993.5 million, up 32.9% year on year. Gross Revenue (R$ Million) 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg Trading gross revenue % % 2, , % Export market % % % Domestic market % % 1, , % Consolidated Results Analysis Exports - Market Share by Country In 3Q18, Minerva remained one of the leading exporters in the countries where it operates. In Brazil, the Company had a market share of 14% in the period. Minerva reached a market share of 42% and 17% in Paraguay and Uruguay, respectively. Minerva also accounted for 15% and 82% of exports in Argentina and Colombia, respectively. 10

11 Figures 14, 15, 16, 17 and 18 3Q18 Market Share (% of Revenue) Brazil Paraguay Uruguay Minerva 14% Minerva 42% Minerva 17% Argentina Colombia Minerva 18% Minerva 82% Source: Minerva, Secex, INAC, SENACSA, IPCVA and DANE In the last twelve months ended September 2018, Minerva remained the leading South American beef exporter, with a market share of 21% As South America is responsible for 33% of global exports according to United States Department of Agriculture, Minerva accounted for around 7% of all exports in this period. Figure 19 LTM3Q18 Market Share (% of Revenue) South America Minerva 21% Gross Revenue Source: Minerva, Secex, INAC, SENACSA, IPCVA and DANE Third-quarter net revenue came to R$4,594.0 million, up 25.5% over 3Q17 and 16.2% over 2Q18. In the last 12 months ended September 2018, gross revenue stood at R$16,551.6 million, up 44.4% over LTM3Q17. R$ Million 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg Gross revenue (R$ Million) 4, , % 3, % 16, , % Brazilian Industry Division 1, , % 1, % 7, , % Athena Foods 1, , % 1, % 6, , % Trading Division % % 2, , % 11

12 Net Revenue Net revenue totaled R$4,337.7 million in 3Q18, 26.9% more than in 3Q17 and up 16.1% over 2Q18. In the last 12 months ended September 2018, net revenue came to R$15,569.5 million, up 45.6% over LTM3Q17. R$ Million 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg Gross revenue 4, , % 3, % 16, , % Deductions and discounts % % % Net revenue (1) 4, , % 3, % 15, , % % Gross revenue 94.4% 93.4% 1.0 p.p. 94.5% -0.1 p.p. 94.1% 93.3% 0.8 p.p. (1) LTM3Q17 excludes pro-forma net revenue figures of the Mercosur assets acquired on August 1, 2017 Cost of Goods Sold (COGS) and Gross Margin In 3Q18, COGS came to 81.0% of net revenue, or 19.0% in terms of gross margin, 80 bps more than in 3Q17. The increase in COGS was proportional to the upturn in net revenue, both in year-on-year and quarter-on-quarter terms. R$ Million 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg Net revenue 4, , % 3, % 15, , % COGS -3, , % -3, % -12, , % % Net revenue 81.0% 81.9% -0.9 p.p. 81.9% -0.9 p.p. 82.2% 81.4% 0.8 p.p. Gross profit % % 2, , % Gross margin 19.0% 18.1% 0.9 p.p. 18.1% 0.9 p.p. 17.8% 18.6% -0.8 p.p. Selling, General and Administrative Expenses Selling expenses represented 6.1% of 3Q18 net revenue, up 0.2 p.p. over 3Q17 and down 0.8 p.p. from 2Q18. Selling expenses as a percentage of net revenue were in line with the same quarter last year and the average of the last 12 months, while general and administrative expenses remained virtually flat as percentage of net revenue compared with 2Q18 and 3Q17. R$ Million 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg Selling expenses % % -1, % % Net revenue 6.1% 5.9% 0.2 p.p. 7.0% -0.8 p.p. 6.5% 5.9% 0.6 p.p. G&A expenses % % % % Net revenue 4.0% 4.1% -0.1 p.p. 4.1% 0.0 p.p. 4.0% 4.1% -0.1 p.p. EBITDA Third-quarter EBITDA totaled R$449.2 million, climbing 44.1% over 3Q17 and 27.1% over 2Q18. The EBITDA margin reached 10.4% in 3Q18, up 130 bps over 3Q17 and 90 bps more than in 2Q18. In the last twelve months ended September 2018, EBITDA adjusted for non-recurring items amounted to R$1,451.0 million, with a margin of 9.3%. R$ Million 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg Net income (loss) n.a % -1, n.a. (+/-) Deferred income and social contribution taxes % % n.a. (+) Asset impairment n.a. 0.0 n.a % (+/-) Financial result % 1, % 2, % (+/-) Depreciation and amortization % % % (+/-) Proforma EBITDA from Mercosur assets n.a. 0.0 n.a % (+/-) Adjustments to other expenses % % % 12

13 Adjusted EBITDA % % 1, , % Adjusted EBITDA margin 10.4% 9.1% 1.3 p.p. 9.5% 0.9 p.p. 9.3% 9.0% 0.3 p.p. Financial Result The financial result was negative by R$530.3 million in 3Q18 and a negative R$2,611.6 million in the last 12 months ended September. The line was impacted by the strong FX variation in the period, as the dollar appreciated 3.8% against the real since 2Q18, with a negative (non-cash) impact of R$354.6 million. Financial expenses totaled R$265.1 million in 3Q18, down 2.3% from 3Q17 and up 1.4% over 2Q18. On the other hand, Other Revenue/Expenses came in as revenue of R$69.3 million, thanks to result of the FX hedge adopted in late 2Q18. R$ Million 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg Financial expenses (interest) % % % Financial income % % % FX variation % % -1, % Other revenue/expenses % % % Financial result % -1, % -2, % Average dollar (R$/US$) (Source: BACEN) % % % Closing dollar (R$/US$) (Source: BACEN) % % % (*) Other expenses (R$ Million) 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg FX hedge % % n.a. Commodities hedge % % % Fees, commissions and other financial expenses % % % Total n.a % % 13

14 Net Result In 3Q18, the Company posted a net loss before income and social contribution taxes of R$129.2 million. After income and social contribution taxes, the net loss totaled R$132.0 million, accompanied by a negative net margin of 3.0%, around 22 p.p. more than in 2Q18. After adjusting the net result for the non-cash effects of FX variation and FX hedging, and for income and social contribution taxes, the Company recorded net income of R$78.3 million. R$ Million 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg Net income (loss) before income and social contribution taxes n.a. -1, % -2, n.a. Income and social contribution taxes % % n.a. Net income (loss) n.a % -1, n.a. % Net margin -3.0% 2.5% -5.5 p.p % 21.8 p.p. -9.5% 0.4% -9.9 p.p. R$ Million 3Q18 3Q17 % Chg 2Q18 % Chg LTM3Q18 LTM3Q17 % Chg Net income (loss) n.a % -1, n.a. FX variation n.a % 1, n.a. FX hedge n.a % n.a. Income and social contribution taxes % % n.a. Adjusted income (loss) % % % Cash Flow Operating Cash Flow In the third quarter of 2018, operating cash flow was a positive R$406.5 million. The variation in working capital requirements was negative by R$133.7 million in the quarter. The impact on the working capital line came from Receivables (-R$391 million), due to the higher sales volume, up 16.8% from volume sold in 2Q18 and also the sales (especially of fresh beef) focused on the export market, which has longer payment terms. Working capital consumption was also fueled by Suppliers (-R$23.5 million), as the Company paid cash for most raw material acquisitions in order to benefit from discounts in the off-season (higher cattle prices due to lower supply). On the other hand, Other Payables had a positive variation of R$389.1 million in 3Q18. This variation was mainly driven by Customer Advances (+R$400.4 million), which reflects the result of the Company s credit policy of requiring advances based on the customer/country profile. R$ Million 3Q18 3Q17 2Q18 LTM3Q18 Net income (loss) ,486.1 (+) Net income adjustments ,264.0 (+) Variation in working capital requirements (1)(2) Operating cash flow (1) Excluding equity valuation adjustments and accumulated conversion amounts. (2) Including the Deferred Taxes line totaling R$470.3 million in 2Q18. 14

15 R$ Million 3Q18 2Q18 Change Advances from clients Other Other payables Free Cash Flow Cash flow after capex, interest payments and working capital was positive by R$93.5 million in 3Q18. The cash financial result, i.e. excluding the FX variation and the positive result of FX hedging (both of which have no cash effect), totaled R$176.0 million in the quarter. Working capital requirements were negative by R$133.7 million, as mentioned earlier. In the last 12 months ended September 30, 2018, free cash flow was negative by R$51.4 million. R$ Million 3Q18 2Q18 1Q18 4Q17 LTM3Q18 EBITDA ,451.0 (+) Capex (on a cash basis - ex-mercosur) (+) Financial result (on a cash basis) (1) (+) Variation in working capital requirements (2)(3) Free cash flow to equity (1) Excluding the cash result from FX hedge. (2) Excluding equity valuation adjustments and accumulated conversion amounts. (3) Excluding the Deferred Taxes line of R$470.3 million in 2Q18. Capital Structure Minerva closed the third quarter of 2018 with cash and cash equivalents of R$4.2 billion, which is sufficient to amortize its debt through Approximately 86% of total debt was exposed to the exchange rate variation at the end of June Leverage measured by the net debt/ltm adjusted EBITDA ratio was 5.0x on 9/30/2018, with debt duration of 5.4 years. On November 1, the Company announced the Offer for the Early Repurchase of its 8.75% perpetual bond. The Company will use the proceeds from the capital increase to repurchase the bonds. Figure 20 Debt Amortization Schedule on 9/30/2018 (R$ million) 4, ,395.9 Short-term Debt 1, , , Cash 4Q18 1Q19 2Q19 3Q

16 R$ Million 3Q18 3Q17 % Chg 2Q18 % Chg Short-term debt 3, , % 2, % % Short-term debt 27.4% 27.1% 0.3 p.p. 24.6% 2.8 p.p. Local currency 1, , % % Foreign currency 2, % 1, % Long-term debt 8, , % 8, % % Long-term debt 72.6% 72.9% -0.3 p.p. 75.4% -2.8 p.p. Local currency % % Foreign currency 7, , % 7, % Total debt 11, , % 11, % Local currency 1, , % 1, % Foreign currency 9, , % 9, % (Cash and cash equivalents) -4, , % -4, % Net debt (1) 7, , % 6, % Net debt/ltm EBITDA (x) (1) Net debt includes FIDC subordinated shares totaling R$6.7 million in 3Q18, R$4.7 million in 3Q17 and R$7.1 million in 2Q18. Investments Investments in fixed assets totaled R$46.1 million in 3Q18, of which R$34.6 million went to operational maintenance and R$11.5 million to expansion of operations See below the breakdown of investments by quarter in the last twelve months: CAPEX (R$ Million) 3Q18 2Q18 1Q18 4Q17 LTM3Q18 Maintenance Expansion Total

17 Subsequent Events Extraordinary Shareholders Meeting On October 15, 2018, the shareholders approved a capital increase through the private subscription of up to R$1,059 million through the issue of up to 165 million shares at R$6.42. As an additional advantage, three-year subscription warrants were issued to the subscribers of the capital increase shares. The shareholders of record by the end of October 15, 2018 had the right to subscribe to the shares. These shareholders have the right to subscribe to up to new registered, book-entry common shares for each common share held on that date. The preemptive right to subscribe to the new shares can be exercised between October 16, 2018, and November 14, 2018, inclusive. See below an illustrative example to help the comprehension of the private capital increase operation: This image is part of the Subscription Booklet, available on the Company s Investor Relations website at the Download Center. The main purpose of the operation is to accelerate the Company s deleveraging process, which now has a high net debt/ltm EBITDA: 5.0x. In addition, was approved the increase of the percentage established for the mandatory tender offer for the acquisition of the shares issued by the Company as a mechanism to protect the dispersion of the Company s equity distribution, as commonly called poison pill, that was 20% and now, 33,34%. Offer for the Early Repurchase of its Perpetual Bonds On November 1, 2018, the Company launched the offer for the early repurchase of perpetual bonds representing debt issued abroad by its subsidiary Luxembourg S.A. at an interest rate of 8.75%. These bonds are currently outstanding in the international market. 17

18 Minerva Day Sao Paulo and New York 18

19 About Minerva S.A. Minerva Foods is the South American leader in beef exports and it also operates in the processing segment, selling its products to over 100 countries. Currently, the Company has a daily slaughtering capacity of 26,380 head of cattle and daily beef deboning capacity equivalent to 27,966 head of cattle. Present in Brazil, Paraguay, Argentina, Uruguay and Colombia, Minerva operates 26 slaughter and deboning plants and 3 processing plants. In the 12 months ended September 30, 2018, the Company recorded gross sales revenue of R$16.6 billion, 44% more than in the same period in Relationship with Auditors In accordance with CVM Instruction 381/03, we announce that our auditors did not provide services other than those related to the external audit in 2017 and 9M18. Statement from Management In compliance with CVM Instructions, Management declares that it has discussed, reviewed and agreed with the individual and consolidated accounting information related to the fiscal year ended September 30, 2018 and the opinions expressed in the independent auditors review report, hereby authorizing their disclosure. 19

20 APPENDIX 1 - INCOME STATEMENT (CONSOLIDATED) (R$ thousand) 3Q18 3Q17 2Q18 Revenue from domestic sales 1,778,654 1,531,767 1,432,406 Revenue from exports 2,815,304 2,127,763 2,521,205 Gross sales revenue 4,593,958 3,659,530 3,953,611 Revenue deductions taxes and other -256, , ,869 Net operating revenue 4,337,676 3,417,814 3,735,742 Cost of goods sold -3,515,248-2,797,691-3,059,785 Gross profit 822, , ,957 Selling expenses -264, , ,733 General and administrative expenses -174, , ,114 Other operating revenues (expenses) 17,883-15, ,212 Result before financial expenses 400, , ,102 Financial expenses -265, , ,404 Financial income 20,028 19,318 17,834 FX variation -354, , ,441 Other expenses 69,308-25,804 36,229 Financial result -530, ,744-1,164,782 Result before taxes -129, ,997-1,480,884 Income and social contribution taxes - current -14,018-19,826-1,796 Income and social contribution taxes - deferred 11,200-1, ,705 Result before non-controlling interest -132,027 85, ,975 Controlling shareholders -132,027 85, ,975 Net income (loss) -132,027 85, ,975 20

21 APPENDIX 2 - BALANCE SHEET (CONSOLIDATED) (R$ thousand) 3Q18 4Q17 ASSETS Cash and cash equivalents 4,173,266 3,807,342 Accounts receivable from clients 1,503,631 1,385,460 Inventories 879, ,809 Biological assets 197, ,317 Taxes recoverable 884, ,515 Other receivables 271, ,408 Total current assets 7,909,929 7,351,851 Taxes recoverable 179, ,747 Deferred tax assets 193,365 95,148 Other receivables 13,922 11,514 Judicial deposits 28,150 21,792 Fixed assets 3,300,574 3,498,652 Intangible assets 690, ,621 Total non-current assets 4,406,245 4,553,474 Total assets 12,316,174 11,905,325 LIABILITIES Loans and financing 3,116,500 2,187,470 Suppliers 864,904 1,048,399 Labor and tax liabilities 219, ,970 Other payables 963, ,391 Total current liabilities 5,164,805 3,947,230 Loans and financing 8,272,117 7,419,538 Labor and tax liabilities 75,611 51,449 Provision for contingencies 51, ,343 Accounts payable 16,975 38,382 Deferred tax liabilities 101, ,306 Total non-current liabilities 8,517,124 7,887,018 Shareholders equity Capital stock 144, ,854 Capital reserves 120, ,504 Revaluation reserves 52,549 53,710 Accumulated profit (loss) -1,306, ,683 Treasury shares -36,846-99,679 Equity valuation adjustments -339,929-64,629 Total shareholders equity attributed to controlling shareholders -1,365,753 71,077 Total shareholders equity -1,365,753 71,077 Total liabilities and shareholders equity 12,316,174 11,905,325 21

22 APPENDIX 3 CASH FLOW (CONSOLIDATED) (R$ thousand) 3Q18 3Q17 2Q18 Cash flow from operating activities Net income (loss) -132,027 85, ,975 Reconciliation of net income to net cash provided by operating activities: Depreciation and amortization 48,318 33,546 55,521 Estimated loss on doubtful accounts 1,582 2,847 1,864 Proceeds from the sale of fixed assets 1, ,393 Fair value of biological assets 14,585-23,932-11,894 Realization of deferred taxes temporary differences -11,200 1, ,705 Financial charges 264, , ,326 FX variation not realized 368, , ,299 Provision for contingencies -15,153-1,454-45,171 Accounts receivable from clients and other receivables -391, ,624 11,766 Inventories -145,542 10,403 67,606 Biological assets 30, ,944 Taxes recoverable -27,143-42,479 34,895 Deferred taxes ,344 Judicial deposits -1, Suppliers -23, ,607 74,432 Labor and tax liabilities 35, ,665 34,624 Other payables 389, , Cash flow from operating activities 406, , ,759 Cash flow from investing activities Acquisition of subsidiary less cash on acquisition 0-1,113,574 0 Acquisition of intangible assets ,488-3,950 Acquisition of fixed assets -45,493-49,635-46,876 Cash flow from investing activities -46,098-1,171,697-50,826 Cash flow from financing activities Loans and financing 459, ,580 1,058,461 Loans and financing settled -798,662-1,233, ,195 Variation in minority interest 0-1,784 0 Capital payment in cash 15, Treasury shares 0-39,821 0 Cash flow from financing activities -323, , ,266 FX variation on cash and cash equivalents -62,282-17, ,550 Net increase/decrease in cash and cash equivalents -25,698-1,177, ,649 Cash and cash equivalents Beginning of period 4,198,964 4,376,795 3,877,315 End of period 4,173,266 3,199,691 4,198,964 Net increase/decrease in cash and cash equivalents -25,698-1,177, ,649 22

23 APPENDIX 4 EXCHANGE RATE 3Q18 3Q17 2Q18 (USD- Closing) Brazil (BRL/USD) Paraguay (PYG/USD) 5, , , Uruguay (UYU/USD) Argentina (ARG/USD) Colombia (COP/USD) 2, , ,