Positive free cash flow of R$68 million in 4Q16

Transcription

1 Positive free cash flow of R$68 million in São Paulo, February 23, 2017 Marfrig Global Foods S.A. Marfrig (BM&FBOVESPA Novo Mercado: MRFG3 and Level 1 ADR: MRTTY) announces today its results for the fourth quarter and fiscal year of 2016 ( and 2016). Except where stated otherwise, the following operating and financial information is presented in nominal Brazilian real, in accordance with International Financial Reporting Standards (IFRS), and should be read together with the financial statements and respective notes for the period ended December 31, 2016 filed at the Securities and Exchange Commission of Brazil (CVM). HIGHLIGHTS In, Marfrig generated operating cash flow of R$528 million, for positive free cash flow of R$68 million. As part of its Liability Management strategy, Marfrig repaid all of its outstanding Senior Notes maturing in November 2016, with aggregate face value of US$141 million. Marfrig posted consolidated Net Revenue of R$5.0 billion in. Marfrig reported consolidated Adjusted EBITDA in the quarter of R$394 million, with margin of 7.9%. Keystone recorded Adjusted EBITDA of US$66 million, with margin above 9% for the 5 th consecutive quarter. The Beef Division posted Adjusted EBITDA of R$177 million, with margin of 6.6%. The debentures due on January 25, 2017, held primarily by the BNDES, were converted into 99,979,068 common shares, in accordance with the Issue Indenture. In the same period, the final interest payment under the operation was made to debenture holders, in the amount of R$327 million. Also in January, the credit rating agency Moody s reaffirmed Marfrig s B2 corporate credit rating and revised its outlook from stable to positive. 1

2 GUIDANCE 2016 Guidance 2016 (1) Actual 2016 R$19 to R$20 R$19 Net Revenue billion billion Adjusted EBITDA Margin (2) 8.5% 9.0% 8.2% Investment (CAPEX) Free Cash Flow to shareholders (3) R$450 to R$550 million R$0 to R$100 million R$526 million R$39 million (1) Assumptions based on the exchange rate of R$3.47/US$1.00 (average exchange rate: 1Q16 - R$ 3.91; 2Q16 - R$3.51; 3Q16 - R$3.25; e - R$3.20/US$1.00). (2) Excludes non-recurring items. (3) Operating cash flow after capital expenditure, interest expenses and income tax. It includes the discontinued operations effects. SUMMARY In line with expectations, the results for the fourth quarter reflect the continued solid performance of the Keystone Division and slight improvement in the still-challenging scenario for the Beef Division. In this context, Marfrig reported Adjusted EBITDA of R$394 million in the and positive free cash flow of R$68 million. In the year, the results delivered were in line with the guidance. Adjusted EBITDA margin was slightly below guidance, due to the slower-than-expected recovery in beef margins in the fourth quarter. The negative cash flow in the first 9 months was reversed and Marfrig ended the year with positive free cash flow of R$39 million. Important to note that the Company maintained its investment planned for the year, which amounted to R$526 million, near to the upper level of the guidance range. In a year marked by an adverse scenario for the global industry, the results delivered in the period reflect the Company s commitment to operational and financial discipline, focusing on serving more resilient and higher-value channels, while prioritizing its organic expansion projects, with a higher contribution from the Keystone Division, in order to create an even more solid and profitable company. 2

3 CONSOLIDATED RESULTS Net Revenue Company s consolidated net revenue in amounted to R$5 billion. The solid result at the Keystone Division, driven by strong sales volume growth, was offset by the effects from the 14.3% depreciation of the U.S. dollar against the Brazilian real on revenue from the international operations and Brazilian exports, and by the lower sales volume at the Beef Division; leading net revenue in the quarter to contract by 6.3% compared to. Net Revenue (R$ million) -6% 5,335 5,000 Revenue Breakdown By Operation By Product By Currency Marfrig is a global company, with a large part of its revenue generated in currencies other than the Brazilian real: 60% of net revenue came from the international operations (Keystone USA and APMEA, and Beef International); 75% of sales was linked to currencies other than the Brazilian real. 3

4 Gross Profit and Gross Margin Consolidated gross profit came to R$530 million in, down 23% from the same period last year, due to the appreciation in the Brazilian real and the lower sales volume at the Beef Division; partially offset by the higher sales volume at the Keystone Division. The gross margin of 10.6% is 230 bps lower than in, which is explained by the narrower beef spreads in U.S. dollars (beef sales price less cattle costs) and the lower, albeit still high margin at Keystone. Gross Profit (R$ million) and Gross Margin (%) 12.9% 10.6% % 530 Selling, General and Administrative Expenses In the quarter, SG&A expenses as a ratio of net revenue stood at 5.0%, down 50 bps from the year-ago period. In nominal terms, SG&A expenses improved by R$43 million compared to, which is explained by the actions to capture productivity gains in the sales and administrative areas at the Beef Division and by the effects from exchange variation on the translation of expenses at the international operations. SG&A and SG&A/NOR (R$ million and %) 5.5% 5.0% -15%

5 Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA in was R$394 million, with margin of 7.9%. The solid performance of Keystone, which in the quarter accounted for 55% of the Adjusted EBITDA of Marfrig Global Foods, partially offset the performance of the Beef Division, which led to margin contraction of 180 bps on the same period last year. Adjusted EBITDA and Adjusted EBITDA Margin (R$ million and %) 9.7% 7.9% -24% Financial Result The net financial result in was an expense of R$611 million, an increase from the expense of R$476 million in 3Q16. Excluding exchange variation from the analysis, the net financial result was an expense of R$515 million, R$60 million higher from 3Q16, mainly explained by the reduction of the financial revenues. As a highlight for the quarter, the interest expenses decreased by R$12 million compared to the previous quarter, due to the repayment of the senior note due in November, as well as the sequence of reduction in the total financial expenses in the last quarters. 3Q16 R$ R$ R$ % FINANCIALS REVENUES (80.5) -57.0% Interest income, income from marketablesecurities (33.5) - Market transactions (16.9) - Other revenues (30.1) - FINANCIALS EXPENSES (575.8) (595.9) % Interests provisioned, debentures and lease (293.8) (306.1) Market transactions (46.3) (50.6) Bank fees, commissions, finance. disc. and other (235.8) (239.2) FINANCIAL RESULT EX-EXCHANGE VAR. (515.0) (454.6) (60.5) 13.3% Exchange Variation (95.7) (20.9) (74.8) - NET FINANCIAL RESULT (610.8) (475.5) (135.2) 28.4% Note: the exchange variation on debt contracted by subsidiaries abroad, whose functional currency differs from that of the parent company, is recorded under shareholders equity. 5

6 Net Earnings For comparison purposes and due to the asset divestment process, the following analysis considers only the net result from continuing operations*. On this basis, the net result was R$241 million loss in, an increase from R$169 million from the same quarter last year. In the year, Marfrig posted a net loss of R$726 million, an improvement of 50% or R$ 698 million from Net Income from Continuing Operations (R$ million) (72) (726) (241) (1,424) * Results from Continuing Operations exclude the gain from asset and equity divestments as well as their operating results. Debt Because a large portion of Marfrig s debt is denominated in U.S. dollar (BRL-denominated debt ended at 6% of total debt), for analysis purposes, the variations discussed in this section are based on the amounts in U.S. dollar. On December 31, 2016, Marfrig held gross debt of US$3.4 billion, down 4% from 3Q16, due to the repayment of the outstanding balance of senior notes due in November 2016 in the aggregate principal of US$141 million. The balance of cash and marketable securities stood at US$1.6 billion, decreasing by approximately US$145 million from 3Q16, which is explained by the aforementioned factors. Consequently, Marfrig s net debt remained stable in relation to to end the last quarter of the year at US$1.8 billion. 6

7 Debt in US$ million Debt in R$ million Short Term Long Term 11,585-4% 11,150-4% 3,569 3,421 2,949 2, ( 1,620 ) 1,802 3Q16 Cash & Equiv. Net Debt 9,573 2,012 1,455 9,696 5,872 (5,279) 3Q16 Cash & Equiv. Net Debt On December 31, 2016, the average debt term was 3.9 years, and only 13% of the total debt matured in the short term, while the average debt cost was 7.3% p.a. Debt Maturity Schedule (R$ million) 5,279 3,146 1,455 1,222 2,131 1,906 1,290 Cash & Equiv Indicators Avg. Cost (% p.a.) Avg. Term (years) Current Liquidity Net Debt/ Total Assets Cash and Equiv. / Short-Term Debt 7.3% x 0.3x 3.6x Management believes that the ratio that best reflects the current leverage is the ratio of net debt to Adjusted EBITDA from continuing operations. The ratio ended at 3.7x, an increase of 30 7

8 bps from 3Q16, as a consequence of a lower EBITDA, as explained. The result for 2016 was affected by performance of the Beef Division, which an EBITDA margin dropped from 9,8% in toof 6.6% in, down from 9.8% in. The calculation of the leverage ratio of bank and capital market funding transactions includes provisions that allow for excluding exchange-variation effects. Accordingly, the ratio for this purpose ended at 2.4x (for more information, see Note 35.6 to the financial statements). Leverage Ratios Net Debt / Adj. EBITDA LTM* 3.7x Net Debt / EBITDA LTM Ex FX,2.4x *Adjusted EBITDA from continuing operations in the last 12 months. Cash Flow Marfrig s operating cash flow amounted to R$528 million in. The factors contributing to this result were: (i) the positive variation in inventories due to the sale of Beef division exports postponed in the previous quarter; (ii) the positive variation in trade payables due to the lower slaughter volumes; and (iii) the optimization of accounts receivable from international operations. Total free cash flow, including the effects from transactions with discontinued 1 operations, was positive R$68 million. Cash Flow (R$ million) 11 In the fourth quarter of 2016, was registered a positive effect of R$ 2.5 million from discontinued operations: (i) receipt of the quarterly installment from the sale of the feedlot operation; which was partially offset by (ii) the payment of the expenses with the transfer of the plants in Argentina. 8

9 Capital Expenditure Marfrig s CAPEX amounted to R$182 million in the quarter. As a result, total CAPEX in the year came to R$526 million, in line with the guidance. One of the highlights was the investment begun in the second half of the year to expand Keystone s presence in Thailand, which is of strategic importance to the Company s growth plans. (R$ Millions) 2016 R$ R$ Investments Investments in Fixed Assets Fixed Assets Breeding Stock Investment in Intangigle Assets TOTAL

10 KEYSTONE Keystone generated another outstanding performance in the fourth quarter, which contributed to the trend of above +9% EBITDA margin for the last five consecutive quarters. These results are driven by (i) consistent growth in its customer base and (ii) continued operational and strategic discipline Net Revenue Keystone posted net revenue of US$712 million in, which is up 12.1% from the same quarter of Sales were positively influenced by: (i) the continued two-digit volume growth in Key Accounts in the U.S. and better mix due to No Antibiotic Ever (NAE) products; (ii) the double-digit sales growth in APMEA, especially in Australia and Malaysia; and (iii) improved leg quarter prices as more markets for U.S. exports began to open. In Brazilian real, net revenue was R$2.3 billion. Revenue (US$ Million) Volume ( 000 tons) +12% +17% Gross Profit and Gross Margin In, gross profit reached US$69 million and gross margin 9.7%, which is an increase of 6.6% and decrease of 50 bps from last year ( gross profit was US$65 million and margin 10.2%). In Brazilian real, gross profit amounted to R$227 million, 8.9% lower than in. The expansion in gross profit is mainly explained by; (i) improved profit in the U.S. driven by a better sales mix with a solid contribution from NAE/ABF products; (ii) better leg quarter sales prices (approximately 40% higher than last year) driven by the return of the demand after the export ban lift; (iii) higher volume in APMEA region with double-digit expansion in Australia and Malaysia; and (iv) lower feed costs by 6.9% compared to. 10

11 Gross Profit and Gross Margin Gross Profit and Gross Margin (US$ million and %) (R$ million and %) 10.2% 9.7% +7% % 9.7% 250-9% 227 Selling, General and Administrative Expenses In, SG&A expenses reached US$20 million. As a ratio of NOR, SG&A stood at 2.8%, which is within the historical range. Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA reached a fourth quarter record of US$66 million in, up 8.6% from. Adjusted EBITDA margin reached 9.3%, a decrease of 30 bps. As mentioned above, we have maintained a +9% EBITDA margin for over a year now. These improvements reflect the same drivers described for the increase in Gross Profit. Considering the impact from exchange variation, Keystone recorded Adjusted EBITDA of R$218 million in, down 7.3% from. Adjusted EBITDA and Margin (US$ million and %) Adjusted EBITDA and Margin (R$ million and %) 9.6% 9.3% 9.6% 9.3% +9% -7%

12 BEEF The results of the Beef Division in reflected the challenging scenario in the beef industry, with a still-limited cattle supply in Brazil and international prices beginning to stage a recovery, but with a reversal as of December in the upward trend in prices. In Brazil, the average price of fed cattle, based on the ESALQ index, increased 1.7% from. Export spreads (average sales price less cattle costs), considering the average price based on Secex data, fell 24% in USD compared to the prior-year period. In Uruguay, export spreads based on INAC data were 10% down from the. Net Revenue Net revenue from the Beef Division was R$2.7 billion in the quarter, down 8% from. The 14% depreciation of the U.S. dollar against the Brazilian real and 11% drop in export volumes were partially offset by higher volumes and prices in the domestic market. Due to the limited cattle availability, Beef operations slaughter volume was 3% down compared to. This effect let the Brazilian operation effective capacity utilization to 79%. Revenue (R$ million) Volume ( 000 tons) -8% % Export Market Domestic Market The Company s strategy remained focused on optimizing its sales mix by prioritizing higher-value channels. In this context, the growth in domestic sales is explained by higher demand, increasing 9% in Brazil, partially offset by the Argentina operation contraction. Highlights the priority given to the food service and small retailer channels, which posted stronger sales volumes growth rates (+18%) than the other channels. For exports, the focus was on more profitable destinations, such as Asia and Europe, which volumes expanded by 1,000 and 400 bps, respectively. The lower spreads recorded at the Brazilian operation contributed to the volumes swaps from exports market to domestic, which had more attractive margins for certain products. Compared to 3Q16, due to the sales strategy and higher cattle supply in Uruguay, the Beef Division posted export sales growth of 49%, returning to a more normalized level. 12

13 Beef Exports (Brazil + International) (% of Volume) Gross Profit and Gross Margin Gross profit in was R$303 million, down R$133 million on the year-ago period. Gross margin stood at 11.4%, down 370 bps, which is explained by: (i) the 14% depreciation of the U.S. dollar against the Brazilian real; (ii) the adverse effect from higher cattle costs in the Brazilian operation; and (iii) the lower total sales volume; which were partially offset by (iv) higher domestic prices (+7%). Gross Profit (R$ million) and Gross Margin (%) 15.1% % 11.4% 303 Selling, General and Administrative Expenses SG&A expenses came to R$182 million in, down R$28 million from, despite the period inflation (IPCA) of 6.29%, due to: (i) the actions to capture productivity gains in the administrative and sales departments, which accounted for savings of R$7 million; (ii) the reduction in logistics expenses of approximately R$6 million; (iii) the effects from exchange variation on the translation of expenses at the international operations. 13

14 Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA in amounted to R$177 million, with Adjusted EBITDA margin of 6.6%. The decline compared to R$283 million in explained by the same factors described above. Adjusted EBITDA and Adjusted EBITDA Margin (R$ million and %) 9.8% 6.6% %

15 OUTLOOK AND CLOSING REMARKS The outlook for 2017 is positive, with forecasts pointing to moderate growth in comparison with The IMF projects world GDP growth of 3.4%, driven by better prospects for the United States, China, Europe and Japan. The recovery in oil and commodity prices should relieve some of the pressure on export markets. In the United States, promises of fiscal stimulus and infrastructure investments support GDP growth forecasts of 2.3%, according to the latest IMF report. In China, the expectation is for a continuation of the stimulus measures approved by the government. In Brazil, after two years of recession, forecasts point to GDP growth of 0.5% in the year. In this context, the expectation is for growth in per-capita income and consequently in per-capita consumption of animal proteins at the global level. In the global beef industry, the expectation is for a favorable scenario. In the United States, the expectation is for a more balanced market with better margins, reflecting the higher supply. Meanwhile, Australia should continue to reduce its presence in global markets to rebuild its herd. In China, the combination of stable domestic supply and growing demand should support higher beef imports. In Brazil s beef industry, the expectation of a higher supply of fed cattle should support a recovery in domestic beef consumption and also boost exports. The Brazilian Association of Meat Exporters (ABIEC) forecasts growth in beef exports of 11% in In the chicken industry, the consensus is that the current level of commodity prices will support industry margins. At the global level, production is projected to increase in leading producer countries, such as the United States and Brazil. In China, supply should remain stable with growing demand from the food service industry and from food at home. The risk factors to this scenario are associated with a slowdown in world economic growth and sharper depreciations in the currencies of emerging countries, which could lead to contraction in household consumption. Specifically in relation to the protein industry, disease remains a key risk factor for the business. Marfrig s strategy will remain focused on capturing potential growth in the global protein industry and on creating value for shareholders by maintaining its commitment to strengthening its business through: 1. Operational improvements, productivity and margin expansion. 2. Diversifying the client base and organic growth projects at the Keystone Division. 3. Capturing market share gains in value-added channels in the Beef Division. 4. Accelerating growth in the Asian market by expanding Keystone s operations in the food service channel and growing exports from the Beef Division. 5. Financial discipline, with a permanent focus on deleveraging and increasing free cash flow. 15

16 UPCOMING EVENTS Earnings Conference Call Date: February 24, 2017 Portuguese English 2:30 p.m. (Brasília) 1:00 p.m. (Brasília) 12:30 p.m. (US EST) 11:00 a.m. (US EST) 5:30 p.m. (London) 4:00 p.m. (London) Dial-in: Brazil: + 55 (11) or Code: Marfrig Dial-in: Other countries: + 1 (786) Code: Marfrig Live audio webcast with slide presentation. Replay available for download: Investor Relations + 55 (11) ri@marfrig.com.br 16

17 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 of its affiliated companies, consultants or representatives undertake any responsibility for any losses of damages arising from any of the information presented or contained in this presentation. The information contained in this presentation is up to date as of December 31, 2016, 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 of the Corporation s management. The words anticipates, hopes, expects, estimates, intends, projects, plans, predicts, projects, aims and other similar expressions are used to identify such statements. Although the Corporation believes that the expectations and assumptions reflected by these forwardlooking 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 offering documents, which may be published or distributed opportunely in connection with any security offering conducted by the Corporation, depending on the case. 17

18 APPENDIX LIST APPENDIX I: Consolidated Quarterly and Full Year Income Statement 19 and 20 APPENDIX II: EBITDA Calculation 22 APPENDIX III: Income Statement Keystone 22 and 23 APPENDIX IV: Operating Indicators Keystone 24 APPENDIX V: Income Statement Beef 25 APPENDIX VI: Operating Indicators Beef 26 APPENDIX VII: Balance Sheet 27 APPENDIX VIII: Cash Flow 28 18

19 APPENDIX I Income Statement Consolidated Quarterly (R$ million) (a) (*) Excludes the effects from other operating income/expenses. (b) 3Q16 (c) (a/c) R$ %NOR R$ %NOR R$ %NOR R$ % R$ % Net Revenues 5, % 5, % 4, % (334.6) -6.3% % COGS (4,470.0) -89.4% (4,649.0) -87.1% (3,964.1) -89.1% % (505.8) 12.8% Gross Profit % % % (155.6) -22.7% % SG&A (248.4) -5.0% (291.2) -5.5% (259.0) -5.8% % % Commercial (134.8) -2.7% (153.1) -2.9% (156.4) -3.5% % % Administratives (113.6) -2.3% (138.1) -2.6% (102.6) -2.3% % (11.0) 10.7% Adj. EBTIDA* % % % (123.2) -23.8% % Others revenues/expenses (38.8) -0.8% (53.3) -1.0% (18.8) -0.4% % (20.0) 106.3% EBITDA % % % (108.7) -23.4% % Equity Account (0.4) 0.0% (8.1) -0.2% (2.9) -0.1% % % D&A (112.4) -2.2% (122.9) -2.3% (112.7) -2.5% % % EBIT % % % (90.6) -27.2% % Financial Results (610.8) -12.2% (435.4) -8.2% (475.5) -10.7% (175.4) 40.3% (135.2) 28.4% Financial revenues/expenses (515.0) -10.3% (394.0) -7.4% (454.6) -10.2% (121.0) 30.7% (60.5) 13.3% Exchange rate variation (95.7) -1.9% (41.4) -0.8% (20.9) -0.5% (54.4) 131.3% (74.8) 357.1% Minority Stake (8.6) -0.2% (18.4) -0.3% (11.7) -0.3% % % EBT (376.6) -7.5% (120.5) -2.3% (280.9) -6.3% (256.1) 212.6% (95.7) 34.1% Taxes % % % % % Controller Shareholder Net Profit (241.0) -4.8% (72.1) -1.4% (170.4) -3.8% (168.9) 234.3% (70.5) 41.4% Descontinued Ops. + Capital Gain (29.7) -0.6% (122.8) -2.3% - 0.0% % (29.7) 0.0% Controller Shareholder Net Profit (270.7) -5.4% (194.9) -3.7% (170.4) -3.8% (75.8) 38.9% (100.2) 58.8% P&L - USD x BRL R$ 3.29 R$ 3.84 R$ % % BS - USD x BRL R$ 3.26 R$ 3.90 R$ % % 19

20 APPENDIX I Income Statement Full Year Consolidated (R$ million) 2016 (a) 2015 (b) R$ %NOR R$ %NOR R$ % Net Revenues 19, % 19, % (215.9) -1.1% COGS (17,157.4) -88.7% (17,249.9) -88.2% % Gross Profit 2, % 2, % (123.3) -5.4% SG&A (1,047.5) -5.4% (992.0) -5.1% (55.5) 5.6% Commercial (599.7) -3.1% (571.7) -2.9% (28.1) 4.9% Administratives (447.7) -2.3% (420.3) -2.2% (27.4) 6.5% Adj. EBTIDA* 1, % 1, % (148.4) -8.5% Others revenues/expenses (109.0) -0.6% (249.5) -1.3% % EBITDA 1, % 1, % (8.0) -0.5% Equity Account (6.4) 0.0% (23.8) -0.1% % D&A (464.8) -2.4% (434.4) -2.2% (30.4) 7.0% EBIT 1, % 1, % (21.0) -2.0% Financial Results (2,034.7) -10.5% (3,099.4) -15.9% 1, % Financial revenues/expenses (1,955.7) -10.1% (2,046.6) -10.5% % Exchange rate variation (79.0) -0.4% (1,052.9) -5.4% % Minority Stake (46.4) -0.2% (47.1) -0.2% % EBT (1,067.9) -5.5% (2,112.3) -10.8% 1, % Taxes % % (346.7) -50.4% Controller Shareholder Net Profit (726.4) -3.8% (1,424.1) -7.3% % Descontinued Ops. + Capital Gain % % (790.9) -94.4% Controller Shareholder Net Profit (679.2) -3.5% (586.0) -3.0% (93.2) 15.9% P&L - USD x BRL R$ 3.49 R$ % BS - USD x BRL R$ 3.26 R$ % 20

21 APPENDIX II EBITDA Calculation - Quarterly (R$ million) RECONCILIATION OF ADJUSTED EBITDA (R$ million) 3Q16 Net Profit / Loss (241.0) (72.1) (170.4) (+) Provision for income and social contribution taxes (135.6) (48.4) (110.5) (+) Non-controlling Interest (+) Net Exchange Variation (+) Net Financial Charges (+) Depreciation & Amortization (+) Equity Income EBITDA (+) Other Operacional Revenues/Expenses Adj. EBITDA EBITDA Calculation Full Year (R$ million) RECONCILIATION OF ADJUSTED EBITDA (R$ million) Net Profit / Loss (726.4) (1,424.1) (+) Provision for income and social contribution taxes (341.5) (688.2) (+) Non-controlling Interest (+) Net Exchange Variation ,052.9 (+) Net Financial Charges 1, ,046.6 (+) Depreciation & Amortization (+) Equity Income EBITDA 1, ,492.3 (+) Other Operacional Revenues/Expenses Adj. EBITDA 1, ,

22 APPENDIX III Income Statement Keystone (a) (*) Excludes the effects from other operating income/expenses. (b) Quarterly (US$ million) 3Q16 (c) (a/c) $ %NOR $ %NOR $ %NOR $ % $ % Net Revenues % % % % % COGS (643.0) -90.3% (570.6) -89.8% (628.9) -91.3% (72.4) 12.7% (14.1) 2.2% Gross Profit % % % % % SG&A (20.0) -2.8% (20.9) -3.3% (15.2) -2.2% % (4.8) 31.4% Commercial (1.8) -0.3% (1.7) -0.3% (1.6) -0.2% (0.1) 4.8% (0.2) 14.7% Administratives (18.2) -2.6% (19.2) -3.0% (13.6) -2.0% % (4.5) 33.4% Adj. EBTIDA* % % % % % Others revenues/expenses - 0.0% (2.3) -0.4% - 0.0% % - 0.0% EBITDA % % % % % P&L - USD x BRL R$ 3.29 R$ 3.84 R$ % % (a) (*) Excludes the effects from other operating income/expenses. (b) Quarterly (R$ million) 3Q16 (c) (a/c) R$ %NOR R$ %NOR R$ %NOR R$ % R$ % Net Revenues 2, % 2, % 2, % (99.9) -4.1% % COGS (2,115.5) -90.3% (2,193.1) -89.8% (2,042.7) -91.3% % (72.7) 3.6% Gross Profit % % % (22.3) -8.9% % SG&A (65.9) -2.8% (80.5) -3.3% (49.4) -2.2% % (16.6) 33.6% Commercial (6.0) -0.3% (6.7) -0.3% (5.2) -0.2% % (0.8) 16.4% Administratives (59.9) -2.6% (73.9) -3.0% (44.2) -2.0% % (15.7) 35.6% Adj. EBTIDA* % % % (17.1) -7.3% % Others revenues/expenses - 0.0% (8.9) -0.4% - 0.0% % - 0.0% EBITDA % % % (8.1) -3.6% % P&L - USD x BRL R$ 3.29 R$ 3.84 R$ % % 22

23 APPENDIX III Income Statement Keystone Full Year (US$ million) 2016 (a) 2015 (b) $ %NOR $ %NOR $ % Net Revenues 2, % 2, % % COGS (2,445.4) -90.7% (2,475.2) -92.0% % Gross Profit % % % SG&A (69.1) -2.6% (69.7) -2.6% % Commercial (6.8) -0.3% (7.1) -0.3% % Administratives (62.3) -2.3% (62.6) -2.3% % Adj. EBTIDA* % % % Others revenues/expenses % (2.4) -0.1% % EBITDA % % % (*) Excludes the effects from other operating income/expenses. Full Year (R$ million) (*) Excludes the effects from other operating income/expenses. 23

24 APPENDIX IV Operating Indicators Keystone Volume (000 Tons) (a) (b) 3Q16 (c) (a/c) 2016 (a) 2015 (b) USA % 6.6% % ASIA % 13.0% % TOTAL KEYSTONE % 7.7% 1, , % Receita (US$ Milhões) Revenues (US$ Million) Revenues (US$ Million) (a) (b) 3Q16 (c) (a/c) 2016 (a) 2015 (b) USA % 1.5% 1, , % ASIA % 8.2% % TOTAL KEYSTONE % 3.4% 2, , % Preço Médio (US$/Kg) Average Price (US$/Kg) Average Price (US$/Kg) (a) (b) 3Q16 (c) (a/c) 2016 (a) 2015 (b) USA % -4.8% % ASIA % -4.2% % TOTAL KEYSTONE % -4.0% % Receita (R$ Milhões) Revenues (R$ Million) Revenues (R$ Million) (a) (b) 3Q16 (c) (a/c) 2016 (a) 2015 (b) USA 1, , , % 2.8% 6, , % ASIA % 9.7% 2, , % TOTAL KEYSTONE 2, , , % 4.8% 9, , % Preço Médio (R$/Kg) Average Price (R$/Kg) Average Price (R$/Kg) (a) (b) 3Q16 (c) (a/c) 2016 (a) 2015 (b) USA % -3.6% % ASIA % -2.9% % TOTAL KEYSTONE % -2.8% % 24

25 APPENDIX V Income Statement Beef (a) (*) Excludes the effects from other operating income/expenses. (b) Quarterly (R$ million) 3Q16 (c) (a/c) R$ %NOR R$ %NOR R$ %NOR R$ % R$ % Net Revenues 2, % 2, % 2, % (234.7) -8.1% % COGS (2,354.5) -88.6% (2,455.9) -84.9% (1,921.4) -86.8% % (433.1) 22.5% Gross Profit % % % (133.2) -30.5% % SG&A (182.4) -6.9% (210.7) -7.3% (209.6) -9.5% % % Commercial (128.8) -4.8% (146.5) -5.1% (151.3) -6.8% % % Administratives (53.6) -2.0% (64.2) -2.2% (58.4) -2.6% % % Adj. EBTIDA* % % % (106.1) -37.5% % Others revenues/expenses (38.8) -1.5% (44.3) -1.5% (18.8) -0.8% % (20.0) 106.3% EBITDA % % % (100.6) -42.2% % P&L - USD x BRL R$ 3.29 R$ 3.84 R$ % % Full Year (R$ million) 2016 (a) 2015 (b) R$ %NOR R$ %NOR R$ % Net Revenues 9, % 10, % (610.6) -5.8% COGS (8,649.9) -86.9% (8,995.7) -85.2% % Gross Profit 1, % 1, % (264.8) -16.9% SG&A (806.6) -8.1% (757.1) -7.2% (49.4) 6.5% Commercial (575.9) -5.8% (547.9) -5.2% (28.0) 5.1% Administratives (230.6) -2.3% (209.2) -2.0% (21.4) 10.2% Adj. EBTIDA* % 1, % (293.3) -29.0% Others revenues/expenses (109.0) -1.1% (240.4) -2.3% % EBITDA % % (161.9) -21.0% (*) Excludes the effects from other operating income/expenses. 25

26 APPENDIX VI Operating Indicators Beef Volume (000 Tons) (a) (b) 3Q16 (c) (a/c) 2016 (a) 2015 (a) Local Market % -0.1% % Fresh Beef % -3.2% % Further Processed % 1.3% % Other % 2.5% % Export Market % 48.6% % Fresh Beef % 67.7% % Further Processed % 29.8% % Other % 6.8% % TOTAL BEEF % 10.7% 1, , % Revenues (R$ Millions) (a) (b) 3Q16 (c) (a/c) 2016 (a) 2015 (a) Local Market 1, , , % 4.6% 5, , % Fresh Beef 1, , % 3.9% 3, , % Further Processed % 8.1% % Other % 5.7% , % Export Market 1, , % 49.3% 4, , % Fresh Beef , % 63.4% 3, , % Further Processed % 0.1% % Other % 9.2% % TOTAL BEEF 2, , , % 20.0% 9, , % Average Price (R$/Kg) (a) (b) 3Q16 (c) (a/c) 2016 (a) 2015 (a) Local Market % 4.7% % Fresh Beef % 7.4% % Further Processed % 6.7% % Other % 3.1% % Export Market % 0.5% % Fresh Beef % -2.6% % Further Processed % -22.9% % Other % 2.2% % TOTAL BEEF % 8.4% % 26

27 APPENDIX VII Balance Sheet (R$ 000) ASSETS 4Q5 LIABILITIES CURRENT ASSETS CURRENT LIABILITIES Cash and cash equivalents 3,291,705 1,630,368 Trade accounts payable 1,853,426 1,734,425 Marketable securities 1,986,936 3,373,842 Supply chain finance 149,331 84,566 Trade accounts receivable - domestic 396, ,010 Accrued payroll and related charges 346, ,015 Trade accounts receivable - foreign 393, ,707 Taxes payable 175, ,961 Inventories of goods and merchandise 1,257,616 1,496,964 Loans and financing 1,198,039 1,772,411 Biological assets 112, ,174 Notes payable 372, ,645 Recoverable taxes 1,240,328 1,289,571 Lease payable 11,936 38,166 Prepaid expenses 132, ,733 Interest on debentures 256, ,807 Notes receivable 353,548 48,034 Advances from customers 695, ,304 Advances to suppliers 23,988 45,274 Mandatory deed convertible into shares 2,147,392 0 Held-for-sale assets - 529,981 Liabilities related to held-for-sale assets 0 163,711 Other receivables 113,893 66,797 Other payables 175, ,638 9,303,178 9,842,455 7,382,969 5,406,649 NON CURRENT ASSETS NON CURRENT LIABILITIES Marketable securities Loans and financing 9,695,799 10,112,889 Court deposits 65,427 50,834 Taxes payable 723, ,116 Notes receivable 96, ,868 Deferred income and social contribution 269, ,683 Deferred income and social contributio 2,135,395 1,657,342 Provisions for contingencies 87,739 46,219 Recoverable taxes 1,723,660 1,595,672 Lease payable 26,560 23,520 Other receivables 41,493 53,036 Debentures payable 0 0 4,063,594 3,718,663 Notes payable 488, ,474 Advances from customers 375,448 0 Investments 16,268 26,024 Mandatory deed convertible into shares 0 2,129,720 Property, plant and equipment 4,009,397 4,311,263 Other 108, ,577 Biological assets 51,236 59,804 11,775,032 14,353,198 Intangible assets 2,815,130 2,645,270 6,892,031 7,042,361 Non-controlling interest 194, ,374 C ON T R OLLIN G SHAREHOLDER S EQUITY Share Capital 5,169,917 5,168,468 Capital reserve 184, ,642 Profit reserves 40,122 39,580 Other comprehensive income -241,972-1,083,142 Equity amounts related to held-for-sale a 0-90,887 Accumulated losses -4,246,093-3,575, , ,258 TOTAL ASSETS 20,258,803 20,603,479 TOTAL LIABILITIES 20,258,803 20,603,479 27

28 APPENDIX VIII Cash Flow (R$ million) 1Q16 2Q16 3Q16 4T Net Income/Loss (104.9) (210.2) (170.4) (241.0) (726.4) (+/-) Non cash items ,580.6 (+/-) Change in working capital ,190.1 (+/-) Other (87.7) (187.1) (3.1) (90.4) (368.3) (=) Operational Cash Flow ,676.0 (-) Capex (107.9) (61.4) (175.2) (181.6) (526.1) (-) Interest expenses (312.2) (280.6) (292.0) (280.2) (1,165.0) Continued Free Cash Flow (147.1) (4.1) (15.1) Descontinued Free Cash Flow (30.8) Total Free Cash Flow (137.6)