(CONVENIENCE TRANSLATION INTO ENGLISH FROM THE ORIGINAL PREVIOUSLY ISSUED IN PORTUGUESE) Identification Capital Stock Breakdown 2

Transcription

1 Index Identification Capital Stock Breakdown 2 Individual Financial Statements Balance Sheet Assets 3 Balance Sheet Liabilities 4 Statement of Income 6 Statement of Comprehensive Income 7 Statement of Cash Flows 8 Statement of Changes in Shareholders' Equity Statement of Changes in Shareholders' Equity - from 01/01/2018 to 03/31/ Statement of Changes in Shareholders' Equity - from 01/01/2017 to 03/31/ Statement of Added Value 11 Consolidated Financial Statements Balance Sheet Assets 12 Balance Sheet Liabilities 13 Statement of Income 15 Statement of Comprehensive Income 16 Statement of Cash Flows 17 Statement of Changes in Shareholders' Equity Statement of Changes in Shareholders' Equity - from 01/01/2018 to 03/31/ Statement of Changes in Shareholders' Equity - from 01/01/2017 to 03/31/ Statement of Added Value 20 Management Report Breakdown of the Capital by Owner 134 Declarations and Opinion Independent Auditors' Report on Review of Quartely Financial Information 135 Opinion of the Audit Commitee 137 Statement of Executive Board on the Quartely Financial Information and Independent Auditor's Report on Review of Interim Financial Information 138 1

2 Identification / Capital Stock Breakdown Number of shares Current Quarter (Units) Paid-in Capital Common 812,473,246 Preferred - Total 812,473,246 Treasury Shares Common 1,333,701 Preferred - Total 1,333,701 2

3 Individual FS / Balance Sheet Assets Account Code Account Description Current Quarter Previous Year Total Assets 37,325,846 39,983, Current Assets 14,493,048 17,371, Cash and Cash Equivalents 1,825,671 3,584, Marketable Securities 155, , Financial Investments Evaluated at Fair Value 155, , Held for Trading 155, , Trade Accounts Receivable 5,948,177 7,433, Trade Accounts Receivable 5,840,917 7,325, Other Receivables 107, , Inventories 2,828,567 2,817, Biological Assets 1,270,330 1,261, Recoverable Taxes 829, , Current Recoverable Taxes 829, , Income and social contribution tax (IR/CS) 392, , Recoverable Taxes 464, , Provision for losses (26,742) (19,739) Other Current Assets 1,634,912 1,265, Other 1,634,912 1,265, Interest on Shareholders' Equity Receivable 1,163 7, Derivatives 121,552 49, Accounts Receivable from Disposal of Equity Interest - 28, Restricted Cash 416, , Other 1,095,209 1,071, Non-current Assets 22,832,798 22,612, Non-current Assets 5,547,926 5,523, Financial Investments Evaluated at Fair Value 196, , Available for Sale 196, , Marketable Securities Valued at Amortized Cost 83,731 82, Held to Maturity 83,731 82, Trade Accounts Receivable 118, , Trade Accounts Receivable 5,667 5, Other Receivables 112, , Biological Assets 781, , Deferred Taxes 957, , Deferred Income Tax and Social Contribution 957, , Other Non-current Assets 3,410,749 3,384, Judicial Deposits 674, , Income and social contribution tax (IR/CS) 15,794 15, Provision for losses from Income and social contribution tax (IR/CS) (8,985) (8,985) Recoverable Taxes 2,358,551 2,344, Provision for losses (112,445) (118,684) Restricted Cash 418, , Other 64,643 67, Investments 5,178,494 4,960, Investments 5,178,494 4,960, Equity in Associates 12,569 7, Interest on Wholly-owned Subsidiaries 5,164,818 4,952, Other 1,107 1, Property, Plant and Equipment, Net 9,101,053 9,189, Property, Plant and Equipment in Operation 8,542,925 8,611, Property, Plant and Equipment Leased 233, , Property, Plant and Equipment in Progress 324, , Intangible 3,005,325 2,939, Intangible 3,005,325 2,939, Software 211, , Trademarks 1,173,000 1,173, Goodwill 1,542,929 1,542, Software Leased 43,984 12, Other 34,135 22,267 See accompanying notes to the consolidated financial statements. 3

4 Individual FS / Balance Sheet Liabilities Account Code Account Description See accompanying notes to the consolidated financial statements. Current Quarter Previous Year Total Liabilities 37,325,846 39,983, Current Liabilities 14,691,567 14,391, Social and Labor Obligations 195, , Social Obligations 120, , Labor Obligations 75,557 86, Trade Accounts Payable 4,912,881 5,284, Domestic Suppliers 4,073,591 4,503, Domestic Suppliers 3,653,796 4,026, Supply Chain Finance 419, , Foreign Suppliers 839, , Foreign Suppliers 658, , Supply Chain Finance 180, , Tax Obligations 204, , Federal Tax Obligations 37,909 50, Other Federal 37,909 50, State Tax Obligations 164, , Municipal Tax Obligations 1,985 2, Short Term Debts 6,788,142 4,038, Short Term Debts 6,788,142 4,038, Local Currency 6,075,916 3,401, Foreign Currency 712, , Other Obligations 1,666,952 3,776, Advances from related parties 874,064 3,051, Advances from related parties 874,064 3,051, Other 792, , Dividends and Interest on Shareholders' Equity Payable 2,088 1, Derivatives 496, , Management and Employees Profit Sharing 4,183 95, Other Obligations 290, , Provisions 923, , Tax, Social Security, Labor and Civil Risk Provisions 548, , Tax Risk Provisions 50,506 51, Social Security and Labor Risk Provisions 303, , Civil Risk Provisions 194, , Other Provisons 375, , Vacations & Christmas Bonuses Provisions 298, , Employee Benefits Provisions 76,610 76, Non-current Liabilities 11,557,883 14,392, Long-term Debt 6,940,980 9,508, Long-term Debt 6,940,980 9,508, Local Currency 2,439,651 4,970, Foreign Currency 4,501,329 4,538, Other Obligations 3,519,531 3,614, Liabilities with Related Parties 2,454,558 2,634, Advances from Related Parties and Other Liabilities 2,454,558 2,634, Other 1,064, , Other Obligations 1,064, ,565 4

5 Individual FS / Balance Sheet Liabilities Account Code See accompanying notes to the consolidated financial statements. Current Quarter Previous Year Account Description Provisions 1,097,372 1,270, Tax, Social Security, Labor and Civil Risk Provisions 816, , Provisions for Tax Contingencies 225, , Social Security and Labor Risk Provisions 166, , Provisions for Civil Contingencies 54, , Contingent Liability 370, , Other Provisons 280, , Employee Benefits Plans 280, , Shareholders' Equity 11,076,396 11,200, Paid-in Capital 12,460,471 12,460, Paid-in Capital 12,553,418 12,553, Cost of Shares Issuance (92,947) (92,947) Capital Reserves 43,144 43, Goodwill on the Shares Issuance 166, , Granted Options 261, , Treasury Shares (71,483) (71,483) Gain on Disposal of Shares (73,094) (73,094) Goodwill on Acquisition of Non-Controlling Entities (40,534) (40,534) Acquisition of Non-Controlling Entities (199,296) (199,296) Profit Reserves 101, , Legal Reserves 101, , Accumulated Earnings (Losses) (140,018) Other Comprehensive Income (1,388,568) (1,405,241) Derivative Financial Intruments (491,676) (572,152) Financial Instruments (Available for Sale) (118,909) (56,258) Cumulative Translation Adjustments of Foreign Currency (771,345) (766,959) Actuarial Losses (6,638) (9,872) 5

6 Individual FS / Statement of Income Account Code Account Description See accompanying notes to the consolidated financial statements. Accumulated Current Year to Accumulated Previous Year to Net Sales 5,910,489 6,652, Cost of Goods Sold (4,976,025) (5,484,356) 3.03 Gross Profit 934,464 1,168, Operating (Expenses) Income (627,719) (1,191,307) Selling (756,366) (753,189) General and Administrative (54,993) (56,571) Other Operating Income 94,751 58, Other Operating Expenses (66,602) (152,942) Income from Associates and Joint Ventures 155,491 (287,236) 3.05 Income Before Financial and Tax Results 306,745 (23,122) 3.06 Financial Results (515,657) (319,161) Financial Income 190, , Financial Expenses (706,502) (696,790) 3.07 Income Before Taxes (208,912) (342,283) 3.08 Income and Social Contribution 84,590 60, Current - (34,243) Deferred 84,590 95, Net Income from Continued Operations (124,322) (281,434) 3.11 Net Income (124,322) (281,434) 3.99 Earnings per Share - (Brazilian Reais/Share) Earnings per Share - Basic ON ( ) ( ) Earning per Share - Diluted ON ( ) ( ) 6

7 Individual FS / Statement of Comprehensive Income Account Code Account Description See accompanying notes to the consolidated financial statements. Accumulated Current Year to Accumulated Previous Year to Net Income (124,322) (281,434) 4.02 Other Comprehensive Income 16,673 (26,869) Gains (Losses) in Foreign Currency Translation Adjustments (4,386) (33,178) Unrealized Gains (Losses) in Available for Sale Marketable Securities (92,771) (63,588) Taxes on Unrealized Gains (Losses) on Investments on Available for Sale Marketable Securities 30,120 19, Unrealized Gains (Losses) on Cash Flow Hedge 119,985 77, Taxes on Unrealized Gains (Losses) on Cash Flow Hedge (39,509) (31,354) Actuarial Gains (Losses) on Pension and Post-employment Plans 5,520 6, Taxes on Realized Gains (Losses) on Pension Post-employment Plans (2,286) (2,248) 4.03 Comprehensive Income (107,649) (308,303) 7

8 Individual FS / Statement of Cash Flow (Indirect method) Account Code See accompanying notes to the consolidated financial statements. Accumulated Current Year to Accumulated Previous Year to Account Description 6.01 Net Cash Provided by Operating Activities (1,154,135) 251, Cash from Operations 83, , Net Income (Loss) for the Period (124,322) (281,434) Depreciation and Amortization 189, , Depreciation and Depletion of Biological Assets 148, , Results on Disposals of Property, Plant and Equipments 6,930 (6,999) Deferred Income Tax (84,590) (95,092) Provision for Tax, Civil and Labor Risks 24,558 97, Interest and Exchange Rate Variations 57,126 16, Equity Pick-Up (155,491) 287, Others 21,969 13, Changes in Operating Assets and Liabilities (1,237,733) (103,946) Trade Accounts Receivable 1,517,286 1,126, Inventories 7,848 97, Trade Accounts Payable (417,071) (536,846) Supply Chain Finance (48,219) (397,753) Payment of Tax, Civil and Labor Risks Provisions (83,078) (59,999) Others Operating Assets and Liabilities (2,519,764) (63,571) Redemption of Held for Trading Securities 13,428 25, Fair value for for Assets and Liabilities 355,066 (39,301) Payment of Interest (98,932) (374,875) Interest on Shareholders' Equity Received 6,189 7, Biological assets - Current (8,774) 50, Interest received 38,288 62, Net Cash Provided by Investing Activities (593,502) (687,689) Redemptions of Available for Sale - 15, Redemptions of Restricted Cash (Investments) (303,787) Additions to Property, Plant and Equipment (161,420) (233,736) Receivable from Disposals of Property, Plant and Equipment 19,775 33, Additions to Intangible (5,597) (39,554) Additions to Biological Assets - Non-current (142,178) (151,412) Investments in Associates and Joint Venturies (295) (305) Net Cash Transferred to Subsidiaries - (309,615) Advance for Future Capital Increase - (1,205) 6.03 Net Cash Provided by Financing Activities (8,627) 119, Proceeds from Debt Issuance 239, , Payment of Debt (248,303) (595,661) 6.04 Exchange Rate Variation on Cash and Cash Equivalents (2,766) (112) 6.05 Increase (Decrease) in Cash and Cash Equivalents (1,759,030) (315,902) At the Beginning of the Period 3,584,701 3,856, At the End of the Period 1,825,671 3,540,603 8

9 Individual FS / Statement of Changes in Shareholders Equity for the Period from 01/01/2018 to 03/31/2018 Account Code Account Description Paid-in Capital See accompanying notes to the consolidated financial statements. Capital Reserves, Granted Options and Treasury Shares Profit Reserves Retained Earnings Other Comprehensive Income Shareholders' Equity 5.01 Balance at January 1, ,460,471 43, ,367 - (1,405,241) 11,200, Previous Year Adjustment (15,696) - (15,696) 5.03 Opening Balance Adjusted 12,460,471 43, ,367 (15,696) (1,405,241) 11,184, Share-based Payments - (470) (470) Options Granted - (470) (470) Non-Controlling Interests Total Comprehensive Loss (124,322) 16,673 (107,649) Net Loss for the Period (124,322) - (124,322) Other Comprehensive Income ,673 16, Financial Instruments Adjustments , , Tax on Financial Instruments Adjustments (39,509) (39,509) Unrealized Loss in Available for Sale Marketable Securities (92,771) (92,771) Tax on Unrealized Loss in Available for Sale Marketable Securities ,120 30, Actuarial Gains on Pension and Post-employment Plans ,234 3, Cumulative Translation Adjustments of Foreign Currency (4,386) (4,386) 5.07 Balance at March 31, ,460,471 43, ,367 (140,018) (1,388,568) 11,076,396 9

10 Individual FS / Statement of Changes in Shareholders Equity for the Period from 01/01/2017 to 03/31/2017 Account Code Account Description Paid-in Capital Capital Reserves, Granted Options and Treasury Shares Profit Reserves Retained Earnings Other Comprehensive Income Shareholders' Equity 5.01 Balance at January 1, ,460,471 (680,850) 1,350,675 - (1,290,318) 11,839, Opening Balance Adjusted 12,460,471 (680,850) 1,350,675 - (1,290,318) 11,839, Share-based Payments - 10, , Options Granted - 10, , Non-Controlling Interests Total Comprehensive Income (281,434) (26,869) (308,303) Net Income for the Period (281,434) - (281,434) Other Comprehensive Income (26,869) (26,869) Financial Instruments Adjustments ,619 77, Tax on Financial Instruments Adjustments (31,354) (31,354) Unrealized Gain in Available for Sale Marketable Securities (63,588) (63,588) Tax on Unrealized Gain in Available for Sale Marketable Securities ,271 19, Actuarial gains on pension and post-employment plans ,361 4, Cumulative Translation Adjustments of Foreign Currency (33,178) (33,178) 5.07 Balance at March 31, ,460,471 (670,259) 1,350,675 (281,434) (1,317,187) 11,542,266 See accompanying notes to the consolidated financial statements. 10

11 Individual FS / Statement of Value Added Account Code See accompanying notes to the consolidated financial statements. Accumulated Current Year to Accumulated Previous Year to Account Description 7.01 Revenues 6,730,770 7,421, Sales of Goods, Products and Services 6,631,580 7,414, Other Income (21,084) (183,374) Revenue Related to Construction of Own Assets 126, , (Provision) Reversal for Doubtful Accounts Reversal (6,095) 5, Raw Material Acquired from Third Parties (4,543,748) (4,999,143) Costs of Products and Goods Sold (3,987,342) (4,332,080) Materials, Energy, Third Parties Services and Other (588,716) (659,714) Recovery (Loss) of Assets Values 32,310 (7,349) 7.03 Gross Added Value 2,187,022 2,422, Retentions (337,418) (325,591) Depreciation, Amortization and Exhaustion (337,418) (325,591) 7.05 Net Added Value 1,849,604 2,097, Received from Third Parties 346,874 90, Equity Pick-Up 155,491 (287,236) Financial Income 190, , Other Added Value to be Distributed 2,196,478 2,187, Distribution of Added Value 2,196,478 2,187, Payroll 841, , Salaries 602, , Benefits 189, , Government Severance Indemnity Fund for Employees Guarantee Fund for Length of Service - FGTS 49,487 48, Taxes, Fees and Contributions 719, , Federal 262, , State 448, , Municipal 8,390 8, Capital Remuneration from Third Parties 759, , Interests 711, , Rents 48,210 45, Interest on Own Capital (124,322) (281,434) Retained Earnings (124,322) (281,434) 11

12 Consolidated FS / Balance Sheet Assets Account Code Account Description Current Quarter Previous Year Total Assets 44,997,619 45,228, Current Assets 18,992,897 19,185, Cash and Cash Equivalents 5,515,699 6,010, Marketable Securities 390, , Financial Investments Evaluated at Fair Value 222, , Held for Trading 208, , Available for Sale 14,550 15, Marketable Securities Evaluated at Amortized Cost 167,622 16, Held to Maturity 167,622 16, Trade Accounts Receivable 3,866,332 4,032, Trade Accounts Receivable 3,756,716 3,919, Other Receivables 109, , Inventories 4,949,268 4,948, Biological Assets 1,490,183 1,510, Recoverable Taxes 1,281,270 1,228, Current Recoverable Taxes 1,281,270 1,228, Income and social contribution tax (IR/CS) 572, , Recoverable Taxes 738, , Provision for losses (29,923) (23,103) Other Current Assets 1,499,547 1,227, Other 1,499,547 1,227, Interest on Shareholders' Equity Receivable - 6, Derivatives 137,095 90, Accounts Receivable from Disposal of Equity Interest - 28, Restricted Cash 436, , Other 925, , Non-current Assets 26,004,722 26,042, Non-current Assets 6,652,326 6,586, Financial Investments Evaluated at Fair Value 238, , Available for Sale 238, , Marketable Securities Evaluated at Amortized Cost 136, , Held to Maturity 136, , Trade Accounts Receivable 118, , Trade Accounts Receivable 6,430 6, Other Receivables 112, , Biological Assets 976, , Deferred Taxes 1,512,786 1,369, Deferred Income Tax and Social Contribution 1,512,786 1,369, Other Non-current Assets 3,668,872 3,622, Judicial Deposits 689, , Income and social contribution tax (IR/CS) 28,520 29, Provision for losses from Income and social contribution tax (IR/CS) (9,029) (9,029) Recoverable Taxes 2,593,242 2,555, Provision for losses (134,917) (137,400) Restricted Cash 418, , Other 83,272 87, Investments 75,520 68, Investments 75,520 68, Equity in Associates 67,369 60, Other 8,151 7, Property, Plant and Equipment, Net 12,057,494 12,190, Property, Plant and Equipment in Operation 11,381,154 11,508, Property, Plant and Equipment Leased 245, , Property, Plant and Equipment in Progress 431, , Intangible 7,219,382 7,197, Intangible 7,219,382 7,197, Software 230, , Trademarks 1,626,447 1,649, Goodwill 4,217,264 4,192, Software Leased 43,984 12, Other 1,100,939 1,132,765 See accompanying notes to the consolidated financial statements. 12

13 Consolidated FS / Balance Sheet Liabilities Account Code See accompanying notes to the consolidated financial statements. Current Quarter Previous Year Account Description 2 Total Liabilities 44,997,619 45,228, Current Liabilities 17,553,261 14,907, Social and Labor Obligations 323, , Social Obligations 168, , Labor Obligations 154, , Trade Accounts Payable 6,719,078 7,160, Domestic Suppliers 4,585,234 4,937, Domestic Suppliers 4,107,230 4,418, Supply Chain Finance 478, , Foreign Suppliers 2,133,844 2,223, Foreign Suppliers 1,948,260 2,026, Supply Chain Finance 185, , Tax Obligations 432, , Federal Tax Obligations 172, , Income Tax and Social Contribution Payable 123,475 93, Other Federal 48,955 67, State Tax Obligations 257, , Municipal Tax Obligations 2,637 2, Short Term Debts 7,891,438 5,031, Short Term Debts 7,891,438 5,031, Local Currency 6,245,479 3,592, Foreign Currency 1,645,959 1,438, Other Obligations 1,148, , Liabilities with Related Parties Other 1,148, , Dividends and Interest on Shareholders' Equity Payable 2,088 1, Derivatives 529, , Management and Employees Profit Sharing 8,950 95, Other Obligations 608, , Provisions 1,039, , Tax, Social Security, Labor and Civil Risk Provisions 569, , Tax Risk Provisions 50,506 51, Social Security and Labor Risk Provisions 319, , Civil Risk Provisions 200, , Other Provisons 469, , Vacations and Christmas Bonuses Provisions 384, , Employee Benefits Provisions 85,185 85, Non-current Liabilities 15,832,295 18,607, Long-term Debt 12,872,296 15,413, Long-term Debt 12,872,296 15,413, Local Currency 3,219,651 5,750, Foreign Currency 9,652,645 9,662, Other Obligations 1,451,225 1,492, Other 1,451,225 1,492, Other Obligations 1,451,225 1,492, Deferred Taxes 164, , Deferred Income Tax and Social Contribution 164, ,303 13

14 Consolidated FS / Balance Sheet Liabilities Account Code See accompanying notes to the consolidated financial statements. Current Quarter Previous Year Account Description Provisions 1,344,639 1,546, Tax, Social Security, Labor and Civil Risk Provisions 1,023,303 1,237, Provisions for Tax Contingencies 243, , Social Security and Labor Risk Provisions 322, , Provisions for Civil Contingencies 87, , Contingent Liabilities 370, , Other Provisons 321, , Employee Benefits Plans 321, , Shareholders' Equity 11,612,063 11,712, Paid-in Capital 12,460,471 12,460, Paid-in Capital 12,553,418 12,553, Cost of Shares Issuance (92,947) (92,947) Capital Reserves 43,144 43, Goodwill on the Shares Issuance 166, , Granted Options 261, , Treasury Shares (71,483) (71,483) Gain on Disposal of Shares (73,094) (73,094) Goodwill on Acquisition of Non-Controlling Interests (40,534) (40,534) Acquisition of Non-Controlling Interests (199,296) (199,296) Profit Reserves 101, , Legal Reserves 101, , Accumulated Earnings / Loss (140,018) Other Comprehensive Income (1,388,568) (1,405,241) Derivative Financial Instruments (491,676) (572,152) Financial Instrument (Available for Sale) (118,909) (56,258) Cumulative Translation Adjustments of Foreign Currency (771,345) (766,959) Actuarial Losses (6,638) (9,872) Non-controlling Interest 535, ,571 14

15 Consolidated FS / Statement of Income Account Code See accompanying notes to the consolidated financial statements. Accumulated Current Year to Accumulated Previous Year to Account Description 3.01 Net Sales 8,203,033 7,809, Cost of Goods Sold (6,666,457) (6,433,502) 3.03 Gross Profit 1,536,576 1,375, Operating (Expenses) Income (1,240,993) (1,307,746) Selling (1,134,146) (1,086,898) General and Administrative (133,185) (130,316) Other Operating Income 99,506 64, Other Operating Expenses (78,684) (162,534) Income from Associates and Joint Ventures 5,516 7, Income Before Financial and Tax Results 295,583 68, Financial Results (516,824) (412,545) Financial Income 385, , Financial Expenses (902,123) (938,114) 3.07 Income Before Taxes (221,241) (344,344) 3.08 Income and Social Contribution 107,435 58, Current (30,120) (88,290) Deferred 137, , Net Income from Continued Operations (113,806) (285,734) 3.11 Net Income (113,806) (285,734) Attributable to: Controlling Shareholders (124,322) (281,434) Attributable to: Non-controlling Interest 10,516 (4,300) 3.99 Earnings per share - (Brazilian Reais/Share) Earnings per Share - Basic ON ( ) ( ) Earning per Share - Diluted ON ( ) ( ) 15

16 Consolidated FS / Statement of Comprehensive Income Account Code Account Description See accompanying notes to the consolidated financial statements. Accumulated Current Year to Accumulated Previous Year to Net Income (113,806) (285,734) 4.02 Other Comprehensive Income 16,673 (26,869) Gains (Losses) in Foreign Currency Translation Adjustments (4,386) (33,178) Unrealized Gains (Losses) in Available for Sale Marketable Securities (92,771) (63,588) Taxes on Unrealized Gains (Losses) on Investments on Available for Sale Marketable Securities 30,120 19, Unrealized Gains (Losses) on Cash Flow Hedge 119,985 77, Taxes on Unrealized Gains (Losses) on Cash Flow Hedge (39,509) (31,354) Actuarial Gains (Losses) on Pension and Post-employment Plans 5,520 6, Taxes on Realized Gains (Losses) on Pension Post-employment Plans (2,286) (2,248) 4.03 Comprehensive Income (97,133) (312,603) Attributable to: BRF Shareholders (107,649) (308,303) Attributable to: Non-Controlling Interests 10,516 (4,300) 16

17 Consolidated FS / Statement of Cash Flow (Indirect method) Account Code See accompanying notes to the consolidated financial statements. Accumulated Current Year to Accumulated Previous Year to Account Description 6.01 Net Cash Provided by Operating Activities 196,155 (1,043,467) Cash from Operations 454,079 96, Net Income for the Period (113,806) (281,434) Non-controlling Interest - (4,300) Depreciation and Amortization 289, , Depreciation and Depletion of Biological Assets 197, , Results on Disposals of Property, Plant and Equipments 10,434 (4,327) Deferred Income Tax (137,555) (146,900) Provision for Tax, Civil and Labor Risks 12, , Interest and Exchange Rate Variations 155,365 (19,164) Equity Pick-Up (5,516) (7,533) Others 45,902 21, Changes in Operating Assets and Liabilities (257,924) (1,139,983) Trade Accounts Receivable 183,856 (52,057) Inventories 32,570 (124,856) Trade Accounts Payable (507,527) (338,138) Supply Chain Finance (51,629) (325,842) Payment of Tax, Civil and Labor Risks Provisions (89,597) (60,793) Others Operating Assets and Liabilities (126,324) 83, Investment in Held for Trading Securities (42,289) (73,034) Redemption of Held for Trading Securities 33,057 76, Fair value for for Assets and Liabilities 408,717 (41,665) Payment of Interest (161,727) (434,644) Payment of Income Tax and Social Contribution (198) (32,868) Interest on Shareholders' Equity Received 6,187 7, Biological Assets - Current 14, , Interest Received 42,708 72, Net Cash Provided by Investing Activities (787,766) (393,485) Marketable Securities (35,476) Redemptions of Available for Sale Securities - 104, Redemptions of Restricted Cash (Investments) (304,696) Additions to Property, Plant and Equipment (207,394) (281,603) Receivable from Disposals of Property, Plant and Equipment 19,775 33, Additions to Intangible (5,636) (39,625) Additions to Biological Assets - Non-current (254,044) (183,321) Investments in Associates and Joint Venturies (295) (305) Business Combination, net of cash - (26,370) 6.03 Net Cash Provided by Financing Activities 77,175 1,396, Proceeds from Debt Issuance 733,639 2,425, Payment of Debt (656,464) (1,028,888) 6.04 Exchange Rate Variation on Cash and Cash Equivalents 19,306 (9,062) 6.05 Decrease (Increase) in Cash and Cash Equivalents (495,130) (49,902) At the Beginning of the Period 6,010,829 6,356, At the End of the Period 5,515,699 6,307,017 17

18 Consolidated FS / Statement of Changes in Shareholders Equity for the period from 01/01/2018 to 03/31/2018 Account Code Account Description Paid-in Capital Capital Reserves, Granted Options and Treasury Shares Profit Reserves Retained Earnings Other Comprehensive Income Shareholders' Equity Non-Controlling Interests Total Shareholders' Equity 5.01 Balance at January 1, ,460,471 43, ,367 - (1,405,241) 11,200, ,571 11,712, Previous Year Adjustment (15,696) - (15,696) - (15,696) 5.03 Opening Balance Adjusted 12,460,471 43, ,367 (15,696) (1,405,241) 11,184, ,571 11,697, Share-based Payments - (470) (470) 12,580 12, Options Granted - (470) (470) - (470) Non-Controlling Interests ,580 12, Total Comprehensive Loss (124,322) 16,673 (107,649) 10,516 (97,133) Net Loss for the Period (124,322) - (124,322) 10,516 (113,806) Other Comprehensive Income ,673 16,673-16, Financial Instruments Adjustments , , , Tax on Financial Instruments Adjustments (39,509) (39,509) - (39,509) Unrealized Loss in Available for Sale Marketable Securities (92,771) (92,771) - (92,771) Tax on Unrealized Loss in Available for Sale Marketable Securities ,120 30,120-30, Actuarial Gains on Pension and Post-employment Plans ,234 3,234-3, Cumulative Translation Adjustments of Foreign Currency (4,386) (4,386) - (4,386) 5.07 Balance at March 31, ,460,471 43, ,367 (140,018) (1,388,568) 11,076, ,667 11,612,063 See accompanying notes to the consolidated financial statements. 18

19 Consolidated FS / Statement of Changes in Shareholders Equity for the period from 01/01/2017 to 03/31/2017 Account Code Account Description Paid-in Capital Capital Reserves, Granted Options and Treasury Shares Profit Reserves Retained Earnings Other Comprehensive Income Shareholders' Equity Non-Controlling Interests Total Shareholders' Equity 5.01 Balance at January 1, ,460,471 (680,850) 1,350,675 - (1,290,318) 11,839, ,375 12,219, Opening Balance Adjusted 12,460,471 (680,850) 1,350,675 - (1,290,318) 11,839, ,375 12,219, Share-based Payments - 10, ,591 5,796 16, Options Granted - 10, ,591-10, Non-Controlling Interests ,796 5, Total Comprehensive Income (281,434) (26,869) (308,303) (4,300) (312,603) Net Income for the Period (281,434) - (281,434) (4,300) (285,734) Other Comprehensive Income (26,869) (26,869) - (26,869) Financial Instruments Adjustments ,619 77,619-77, Tax on Financial Instruments Adjustments (31,354) (31,354) - (31,354) Unrealized Gain in Available for Sale Marketable Securities (63,588) (63,588) - (63,588) Tax on Unrealized Gain in Available for Sale Marketable Securities ,271 19,271-19, Actuarial gains on pension and post-employment plans ,361 4,361-4, Cumulative Translation Adjustments of Foreign Currency (33,178) (33,178) - (33,178) 5.07 Balance at March 31, ,460,471 (670,259) 1,350,675 (281,434) (1,317,187) 11,542, ,871 11,923,137 See accompanying notes to the consolidated financial statements. 19

20 Consolidated FS / Statement of Value Added Account Code See accompanying notes to the consolidated financial statements. Accumulated Current Year to Accumulated Previous Year to Account Description 7.01 Revenues 9,136,405 8,715, Sales of Goods, Products and Services 9,014,128 8,677, Other Income (12,613) (193,829) Revenue Related to Construction of Own Assets 158, , (Provision) Reversal for Doubtful Accounts Reversal (23,721) 5, Raw Material Acquired from Third Parties (6,094,863) (5,875,442) Costs of Products and Goods Sold (5,284,637) (4,941,216) Materials, Energy, Third Parties Services and Other (857,575) (921,589) Recovery of Assets Values 47,349 (12,637) 7.03 Gross Added Value 3,041,542 2,840, Retentions (487,073) (437,504) Depreciation, Amortization and Exhaustion (487,073) (437,504) 7.05 Net Added Value 2,554,469 2,402, Received from Third Parties 391, , Equity Pick-Up 5,516 7, Financial Income 385, , Other Added Value to be Distributed 2,945,609 2,936, Distribution of Added Value 2,945,609 2,936, Payroll 1,247,910 1,254, Salaries 941, , Benefits 247, , Government Severance Indemnity Fund for Employees Guarantee Fund for Length of Service - FGTS 59,102 56, Taxes, Fees and Contributions 822, , Federal 374, , State 435, , Municipal 12,133 11, Capital Remuneration from Third Parties 989,199 1,031, Interests 909, , Rents 79,757 81, Interest on Own Capital (113,806) (285,734) Retained Earnings (124,322) (281,434) Non-Controlling Interest 10,516 (4,300) 20

21 MANAGEMENT REPORT ON THE RESULTS OF THE FIRST QUARTER OF 2018

22 General Information...Page 03 Shareholder Letter...Page 04 Africa...Page 28 Southern Cone...Page 29 INDEX Financial Highlights...Page 05 Adjusted EBITDA...Page 06 Results of 1Q18...Page 07 Industry Scenario and Dynamics...Page 08 Consolidated Results of 1Q18...Page 13 Performance by Region...Page 18 Brazil...Page 19 OneFoods...Page 22 International......Page 24 Asia...Page 25 Europe / Eurasia...Page 26 Americas.....Page 27 Other Segments...Page 30 Corporate...Page 30 Investiments (CAPEX)...Page 31 Financial Cycle...Page 32 Managerial Free Cash Flow...Page 33 Indebtedness...Page 36 Slaughtering and Production...Page 38 Relationship with Independent Auditors...Page 38 Disclaimer...Page 38 P&L...Page 39 Balance Sheet...Page 40

23 GENERAL INFORMATION MARKET CAPITALIZATION R$19.5 billions US$5.5 billions Relatório Management da Administração Report on the dos Results Resultados do of the Primeiro First Quarter Trimestre of 2018 e do Ano de 2018 STOCK PRICES BRFS3 R$24.00 BRFS US$6.85 Date: SHARES OUTSTANDING ordinary shares treasury shares Date: WEBCAST Date: :00am - Brasilia Time Portuguese (with simultaneous translation into English) TELEPHONE Dial-in with connections in Brazil: or Dial-in with connections in the Unites States: IR CONTACTS Lorival Luz Global Chief Executive Officer Chief Financial and Investor Relations Officer acoes@brf-br.com 03 01

24 SHAREHOLDER LETTER Dear shareholders, Management Report on the Results of the First Quarter of The disclosure of the results of the first quarter of 2018 signals a new period ahead for BRF. Notwithstanding a turbulent beginning of the year, the Company underwent management changes that will reflect positively on the business and, consequently, on the entire production chain, employees and the wide range of partners that helped us build our history. This balance already points towards some material operating advances, such as the recovery of our profitability and sales. Sales volumes increased by almost 6% in the period, especially led by the in natura products segment. This growth resulted in a 5% increase in net operating revenue. The performance of the domestic market stood out and more than offset the decrease in international sales, which were negatively affected by the restrictions imposed by Russia and Europe. Accordingly, we and Brazilian authorities have been dedicating all our attention to this matter. In Brazil, sales volume increased by approximately 10% in the quarter, and the in natura category increased by more than 20%. The improvement in commercial execution, the increased number of points of sale and market share gain were key for this increase. Accordingly, we highlight investments in marketing campaigns of the Qualy brand A more Qualy life (A Vida Mais Qualy), portraying the modern Brazilian family, and the Perdigão brand It s hot (É Brasa), focused on the brazilian soccer fans. OneFoods also accounted for significant gains, having increased its prices and profitability. Inventory levels returned to normal, which allowed the recovery of prices in U.S. dollars in the local market. In the International segment, we highlight China, with increased volumes, in addition to Africa and Europe, with higher average prices, notwithstanding lower sales volumes. Although BRF has not yet been officially notified of the decision of the European Commission about the exclusion of 12 of its plants from the list of establishments authorized to export chicken to the European bloc, the Company has been discussing the matter with the relevant appeal bodies to address the situation, especially with the participation of representatives of the Brazilian Ministry of Agriculture, Livestock and Food Supply (Ministério da Agricultura, Pecuária e Abastecimento) and Brazilian diplomats. While seeking a solution, BRF already prepares to make some adjustments, commencing initiatives to balance the supply of products, including collective vacations in five of its plants. This preparation will speed up the planning of our production area for any changes in commercial dynamics. In 2017, approximately 5% to 6% of BRF s global sales were made to the European bloc, and Brazil accounted for approximately 65% of this sales volume. Capital structure and financial deleverage are central themes in this recovery context. The extension of the Company s debt profile, strict allocation of capital and incessant pursuit for operating efficiency by exploring business opportunities and reducing costs are the main drivers and beacons for this journey. Some efforts in this sense are already visible: in the first quarter of 2018, SG&A expenses reached one of the lowest level since 2014, which contributed to increase EBITDA in terms of absolute numbers and margins. It is important to remember that BRF continues to be committed to its values, including the incessant pursuit for quality in its products and constant improvement in all its processes. Issues such as compliance, in addition to health, food safety and security and environment (HSSE) also deserve special attention. These policies are part of our identity and are non-negotiable. The next quarters will be extremely challenging. Important themes, such as those mentioned above, will influence the results for the year. However, all executives, under the leadership of the new Board of Directors, are dedicated and motivated to resume our growth track. The new Chairman of the Board of Directors, Pedro Parente, and the other board members have already shown their full commitment to the structuring of a new moment for the Company. Lorival Nogueira Luz Jr. Global Chief Executive Officer, Chief Financial and Investor Relations Officer

25 FINANCIAL HIGHLIGHTS A 9.9% increase in sales of in natura products and a 1.0% increase in sales of processed products in the y/y comparison. Considering the global aggregate volume, sales volume increased by 5.7% compared to 1Q17. Net Operating Revenues reached R$8,203 million, representing a 5.0% increase compared to 1Q17. The 0.7% decrease in average prices reflects a larger share of natura products in the mix marketed in 1Q18. Gross profit totaled R$1.5 billion in 1Q18 (+11.7% y/y), with a Gross Margin of 18.7%, representing a 1.1 p.p. increase compared to 1Q17. Focus on the control of expenses. SG&A for the last 12 months accounted for 15.9% of NOR, one of the lowest levels since Adjusted EBITDA totaled R$802 million and adjusted EBITDA margin was 9.8%, representing an increase of 40.7% and 2.5 p.p. compared to 1Q17, respectively. Net Loss of R$114 million and net margin of -1.4% in 1Q18, representing a decrease of 60.2% and 2.3 p.p., respectively, compared to 1Q17. Capex totaled R$467 million in 1Q18. Management Report on the Results of the First Quarter of 2018 In 1Q18, our average financial cycle totaled 35.3 days, representing 3.9 and 2.8 fewer days compared to 4Q17 and 1Q17, respectively. Free Cash Flow (FCF) totaled an expense of R$238 million in 1Q18, representing an improvement of R$1.4 billion compared to the reported cash used in 1Q17. Cash position of R$7,274 million and leverage of 4.4x in 1Q18. 05

26 Adjusted EBITDA Pursuant to CVM Instruction 527/2012, Companies may adjust their EBITDA for items derived from their audited Financial Statements that help to understand the potential for generation of gross operating revenue. Accordingly, as of 4Q17, BRF introduced (added) Adjusted EBITDA information in its disclosure material, as part of the business performance evaluation process established by the Management team. The Company intends to provide further details about the items that affect its activities and how it assesses its business lines. Comparative information related to the adjustment items was derived from the audited/restated financial statements published for the relevant periods. The introduction of this concept does not change the accounting information that has already been published pursuant to applicable law, it rather complements it. The Company sets forth below the reconciliation of EBITDA to Adjusted EBITDA and the nature of the reconciliation items. EBITDA - R$ Million 1Q18 1Q17 Var y/y 4Q17 Var q/q EBITDA % % EBITDA Margin (%) 9.5% 6.5% 3.1 p.p. 5.6% 3.9 p.p. Non controlling shareholders (11) 4 n.m. (22) (53.1%) Impacts of Carne Fraca/Trapaça Operations (67.8%) 206 (93.8%) Costs on business diposed (21.2%) - n.m. Non-cash items (13) - n.m. (7) 77.9% Tax recoveries (21) (40) (47.6%) (37) (43.5%) Debt designed as Hedge Accounting (5.4%) % Adjusted EBITDA % % Adjusted EBITDA Margin (%) 9.8% 7.3% 2.5 p.p. 7.2% 2.5 p.p. The Company took into account the effect of the following items in the calculation of Adjusted EBITDA: Non-controlling shareholders. The amount corresponding to minority shareholders was excluded from the net income of the entities in which they hold equity interest. Management Report on the Results of the First Quarter of Impacts of Carne Fraca/Trapaça Operations. (i) Amounts directly attributable to these operations, including expenses with media, attorney s fees, freight and storage expenses and losses related to product returns; and (ii) realizable value of inventories: certain finished products that could not be exported as planned were used as raw material in production. Accordingly, the cost of these products has been adjusted to their realizable value. Costs on business disposed. The Company adjusted prices in the sale of the dairy segment, upon the partial disbursement of amounts from the escrow account. Costs on business disposed also include the cost related to the termination of the agreements related to the assets of the Performance Commitment Instrument (Termo de Compromisso de Desempenho TCD). Non-cash items. Non-cash items include fair value adjustments to meet accounting rules in effect. However, these adjustments do not contribute to the Company s generation of cash. In 1Q18, non-cash items include an adjustment to reflect the fair value of forests (biological asset) in the amount of R$13 million. Tax recoveries. Tax recoveries include gains from favorable decisions in lawsuits seeking credits as recoveries due to changes in tax positioning. In 1Q18, we highlight the recognition of sales tax (ICMS). Debt designated as Hedge Accounting. Debt designated as Hedge Accounting refers to the effects regarding the hedge accounting of export debts (designated when contracted). The Company recorded impacts in 1Q18 and will observe the impacts that will be reported in Gross Revenue, as the case may be, in future years, according to the maturity of the designated debts.

27 1ST QUARTER RESULTS (1Q18) Key Financial Indicators Results - R$ Million 1Q18 1Q17 Var y/y 4Q17 Var q/q Volume (Thousand Tons) 1,225 1, % 1,306 (6.2%) Net Revenues 8,203 7, % 8,901 (7.8%) Gross Profit ² 1,537 1,376 11,7% 1,820 (15.6%) Gross Margin (%) 18.7% 1 7.6% 1.1 p.p. 20.4% (1.7) p.p. EBIT % 0 n.m. EBIT Margin (%) 3.6% 0.9% 2.7 p.p. 0.0% 3.6 p.p. EBITDA % % EBITDA Margin (%) 9.5% 6.5% 3.1 p.p. 5.6% 3.9 p.p. Adjusted EBITDA % % Adjusted EBITDA Margin (%) 9.8% 7.3% 2.5 p.p. 7.2% 2.5 p.p. Net Income (114) (286) (60.2%) (784) (85.5%) Net Margin (%) (1.4%) (3.7%) 2.3 p.p. (8.8%) 7.4 p.p. Earnings per share¹ (0.14) (0.35) (60.2%) (0.97) (85.5%) 1 Consolidated Earnings per Share (in R$), excluding Treasury Shares. 2 In 2018, in order to better present expenses by type, the Company reclassified the following expenses: employee benefits plan, share-based payments, labor contingencies (public-interest civil actions (Ações Civis Públicas ACP)) and discontinued operations. For comparability purposes with the previous year, the Company reclassified the amount of R$78,849 thousand for the period ended March 31, 2017, from other operating results to: (i) cost of sales, in the amount of R$73,562 thousand; (ii) selling expenses, in the amount of R$4,122 thousand; and (iii) administrative expenses, in the amount of R$1,165 thousand. The fundamentals spreadsheet including data for the other quarters of 2017, updated according to this new segment classification, is available at BRF s Investor Relations website (ri.brf-global.com). Highlights of the Quarter and Subsequent Events Management Report on the Results of the First Quarter of In February 2018, we started to sell Kidelli products, distributed in 19 States in Brazil and focused on the cash & carry channel and distributors, through 13 SKUs. Launch of the marketing campaigns for the Qualy and Perdigão brands. Furthering the Full Table (Mesa Cheia) Perdigão campaign, the Company launched the É Brasa initiative, focused on the brazilian soccer fans. Qualy s campaign A Vida Mais Qualy A Série resumes the tradition and quality of the brand. Resignation of our Global Chief Executive Officer, José A. Drummond Jr., on April 23, Election of ten sitting members of the Company s Board of Directors: Augusto Marques da Cruz Filho (independent director), Dan Ioschpe (independent director), Flávia Buarque de Almeida (independent director), Francisco Petros Oliveira Lima Papathanasiadis (independent director), José Luiz Osório (independent director), Luiz Fernando Furlan (independent director), Pedro Pullen Parente (independent director), Roberto Antonio Mendes (independent director), Roberto Rodrigues (independent director) and Walter Malieni Jr., for a term of two years. Election of Pedro Pullen Parente as Chairman and Augusto Marques da Cruz Filho as Vice-Chairman of the Board of Directors.

28 INDUSTRY SCENARIO AND DYNAMICS The first quarter of 2018 was marked by the increase in the price of grains, primarily due to increased expectations related to the soy crop failure in Argentina. Considering that Argentina accounts for 46% of soy meal world exports, the worst drought in decades in Argentina directly affected the sales price of soy. CBOT Soybean Meal BM&F Corn Price USD/Ton Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16 Jul/16 Oct/16 Jan/17 Apr/17 Jul/17 Oct/17 Jan/18 Apr/18 BRL/bag Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16 Jul/16 Oct/16 Jan/17 Apr/17 Jul/17 Oct/17 Jan/18 Apr/18 Management Report on the Results of the First Quarter of 2018 Source: Bloomberg. Accordingly, strongly capitalized by a successful soy crop, Brazilian producers continued to stock corn looking for better business opportunities, which directly reflected in the price of corn. This is evidenced by the commercialization levels of corn crops set forth in the chart below: 08

29 INDUSTRY SCENARIO AND DYNAMICS Commercialization of Corn Crops in Brazil (MT) 2014/ / / /18 100% Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun % of Total Crop 80% 60% 40% 20% Jul 0% Source: IMEA. As a result, in 1Q18, the prices of corn and soy meal broke their historical average prices. The average prices of corn and soy meal closed 1Q18 at R$34/bag and R$1,198/ton, respectively, representing an increase of 6.5% y/y and 9.7% y/y, respectively. Management Report on the Results of the First Quarter of 2018 However, the price of corn is expected to return to normal in the second corn crop (safrinha), period between June and August, as producers expect a healthy crop and inventories must be sold for storage of the new crop. According to the Brazilian Supply Company (Companhia Nacional de Abastecimento Conab), the second corn crop 2017/2018 is expected to total 62 million tons of corn, which is well above historical production levels. The 2017/2018 crop is expected to total 87 million tons of corn (-11.7% y/y), which still is the second-best crop in history in Brazil. Notwithstanding higher prices of grains in 1Q18, their impact on the cost of feed will be more evident as of 2Q18 due to the inertia of the life cycle of animals and inventories in the chain. Accordingly, Brazil maintained the lowest production cost among other selected markets and continues to be the most competitive global chicken producer. 09

30 INDUSTRY SCENARIO AND DYNAMICS Cost of feed USD/ton Cost of Feed in Brazil and Selected Markets Brazil EUA Europe Thailand Ukraine Poland Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Source: CEPEA/ESALQ, CBOT, Euronext, Bloomberg e BM&F. The increased supply of chicken in the domestic market, resulting from the growing local production and the lower exports volume, continued to pressure chicken prices. According to JOX Assessoria Agropecuária, in 1Q18, the average price of whole chicken decreased by 14.5% y/y. As a result, the profitability of Brazilian chicken producers decreased even further, below historical levels, which will influence future production decisions in Brazil. JOX Whole Chicken Price Margin of Brazilian Producers of Chicken Management Report on the Results of the First Quarter of 2018 BRL/kg Jan/15 May/15 Sep/15 Jan/16 May/16 Sep/16 Jan/17 May/17 Sep/17 Jan/ Mar/11 Chicken Price/Feed Cost Sep/11 Mar/12 Sep/12 Mar/13 Sep/13 Mar/14 Sep/14 Mar/15 Sep/15 Mar/16 Sep/16 Average Mar/17 Sep/17 Mar/18 10 Source: SECEX, JOX and BM&F.

31 INDUSTRY SCENARIO AND DYNAMICS The levels of chicken placement in Brazil already reflect these factors, having decreased by 1.3% y/y in 1Q18. On the other hand, the production of chicken slightly increased by 0.8% y/y, indicating that oversupply may still affect production levels. Million heads Chicken Placement in Brazil LTM Volume y/y % 6% 4% 2% 0% -2% -4% -6% Thousand tons Chicken Production in Brazil LTM Volume y/y % 12% 8% 4% 0% -4% -8% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 Source: APINCO. As mentioned above, the sales volume of chicken exports decreased by 6.0% y/y in 1Q18, according to the Foreign Trade Office (Secretaria de Comércio Exterior SECEX). This decrease was due to a lower supply of meat exported to Europe/ Eurasia, lower volumes exported to Japan and higher volatility in exports to the Middle East. Brazilian Chicken Exports Volume y/y % % Management Report on the Results of the First Quarter of Thousand tons Source: SECEX. 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q % 0.0% -10.0% -20.0%

32 INDUSTRY SCENARIO AND DYNAMICS In Japan, chicken prices remained pressured due to local inventories, which are still high. On the other hand, China is undergoing a favorable industry scenario, for both pork and chicken, whose price levels continue to attract exports to the country. Thousand Tons SECEX Price vs. Inventory of Imported Products in Japan USD/ton Management Report on the Results of the First Quarter of Source: SECEX and ALIC. Feb/14 Apr/14 Jun/14 Aug/14 Oct/14 Dec/14 Feb/15 Apr/15 Jun/15 Aug/15 Oct/15 Dec/15 Feb/16 Apr/16 Jun/16 Aug/16 Oct/16 Dec/16 Feb/17 Apr/17 Jun/17 Aug/17 Oct/17 Dec/17 Feb/18 Lower volumes exported to Europe continued to support the prices of chicken and turkey at attractive levels. On the other hand, the embargo imposed by Russia on Brazilian exports, which took effect in December 2017, affected the volumes of pork exported to the region during the entire quarter. Moreover, the elimination of electric desensitization in the slaughtering of halal chicken, as a potential new requirement of the Saudi Arabian market, brought volatility to Brazilian exports to the Middle East region. Thousand Tons Europe SECEX Chicken Volume Volume y/y % 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 20% 10% 0% -10% -20% -30% -40% Russia SECEX Pork Volume Source: SECEX. In summary, 1Q18 was marked by a slowdown in the Japanese market due to high inventory levels and trade barriers in Europe, in addition to a more demanding market in China. Thousand Tons Volume y/y % 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 100% 60% 20% -20% -60% -100%

33 1Q18 CONSOLIDATED RESULT Net Operating Revenues (NOR) Volumes - Thousand Tons 1Q18 1Q17 Var y/y 4Q17 Var q/q Poultry (In Natura) % % Pork and Others (In Natura) (11.7%) 77 (3.8%) Processed foods % 586 (13.9%) Others Sales % 91 (3.8%) Total 1,225 1, % 1,306 (6.2%) NOR - R$ Million 8,203 7, % 8,901 (7.8%) Average Price (NOR) (0.7%) 6.82 (1.8%) In 1Q18, consolidated NOR totaled R$8.2 billion, representing a 5.0% increase y/y, due to higher sales volumes (+5.7% y/y) in Brazil, Turkey and Asia. However, in 1Q18, average prices slightly decreased by 0.7% y/y. The improved sales performance in Europe (due to higher prices in the region) and the continuous recovery of prices in U.S. dollars of OneFoods partially offset the decrease in prices in the domestic market, which in turn, continued to be pressured by a mix of products consisting of more in natura products in the portfolio (30.6% of total portfolio in 1Q18 compared to 27.4% in 1Q17). In 1Q18, in natura products increased by 9.9% y/y and processed products increased by 1.0%, considering consolidated volumes. Cost of Sales COGS - R$ Million 1Q18 1Q17 Var y/y 4Q17 Var q/q Cost of Goods Sold (6,666) (6,433) 3.6% (7,081) (5.9%) R$/Kg (2.0%) % Management Report on the Results of the First Quarter of 2018 In 1Q18, cost of sales increased by 3.6% in the annual comparison, reflecting increased sales volumes. The average cost of sales decreased by 2.0% y/y, reflecting lower costs of live animals, due to the grain prices in However, cost of idleness and losses partially offset these gains. Gross Profit Gross Profit - R$ Million 1Q18 1Q17 Var y/y 4Q17 Var q/q Gross Profit 1,537 1, % 1,820 (15.6%) Gross Margin (%) 18.7% 1 7.6% 1.1 p.p. 20.4% (1.7) p.p. Gross Margin reached 18.7% in 1Q18, representing a 1.1 p.p. increase in the annual comparison, primarily due to a better operating performance of the OneFoods and International business units. 13

34 1Q18 CONSOLIDATED RESULT Operating Expenses Operating Expenses - R$ Million 1Q18 1Q17 Var y/y 4Q17 Var q/q Selling Expenses (1,134) (1,087) 4.3% (1,358) (16.5%) % of the NOR (13.8%) (13.9%) 0.1 p.p. (15.3%) 1.4 p.p. General and Administrative Expenses (133) (130) 2.2% (149) (10.7%) % of the NOR (1.6%) (1.7%) 0.0 p.p. (1.7%) 0.1 p.p. Operating Expenses (1,267) (1,217) 4.1% (1,507) (15.9%) % of the NOR (15.4%) (15.6%) 0.1 p.p. (16.9%) 1.5 p.p. Operating Expenses increased 4.3% on a yearly basis in 1Q18. Considering that part of such amount is directly attributed to the higher volume sold in the period, the variable parcel of Selling Expenses increased on average 10.1% a/a. This increase is explained by the following impacts: (i) increase of freight expenses in the year-end 2017, and (ii) extension of logistics network, given increased number of PoS. The fixed parcel of Selling Expenses slightly declined 1.5% a/a due to the postponement of some marketing and trade-marketing initiatives for post-1q18, given the weaker seasonality of first quarter. General and Administrative Expenses increased 2.2% a/a as a result of the inflation pass-through. In 1Q18, operating expenses as a percentage of NOR reached 15.4%, representing a 0.1 p.p. decrease in the annual comparison. The Company s SG&A LTM as a percentage of NOR reached approximately 15.9% in 1Q18, representing a 0.4 p.p. decrease in the annual comparison % SG&A LTM - % NOR 16.74% 16.50% 16.43% 16.43% Management Report on the Results of the First Quarter of Média: 16.24% 16.29% 15.92% 16.42% 16.10% 16.35% 16.36% 16.05% 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 % NOR AVERAGE 16.20% 16.14% 15.79% 15.86% 15.85%

35 1Q18 CONSOLIDATED RESULT Other Operating Results Other Operating Results - R$ Million 1Q18 1Q17 Var y/y 4Q17 Var q/q Other Operating Income % % Other Operating Expenses (79) (163) (51.6%) (414) (81.0%) Other Operating Results 21 (98) n.m. (318) n.m. % of the NOR 0.3% (1.3%) 1.5 p.p. (3.6%) 3.8 p.p. In 1Q18, other operating results totaled a net income of R$21 million, representing a decrease of R$119 million y/y, primarily due to: (i) reversals of tax and civil contingencies, in the amount of R$22 million; (ii) reversal of other provisions recognized in 2017, in the amount of R$33 million; and (iii) extraordinary expenses (consulting services and attorney s fees, among others.) related to the Trapaça Operation, in the amount of R$13 million. Adjusted EBITDA Management Report on the Results of the First Quarter of 2018 EBITDA - R$ Million 1Q18 1Q17 Var y/y 4Q17 Var q/q Consolidated Net Income (114) (286) (60.2%) (784) (85.5%) Income Tax and Social Contribution (107) (59) 83.3% 161 n.m. Net Financial % 623 (17.1%) Depreciation and Amortization % 499 (2.5%) EBITDA % % EBITDA Margin (%) 9.5% 6.5% 3.1 p.p. 5.6% 3.9 p.p. Non controlling shareholders (11) 4 n.m. (22) (53.1%) Impacts of Carne Fraca/Trapaça Operations (67.8%) 206 (93.8%) Costs on business diposed (21.2%) - n.m. Non-cash items (13) - n.m. (7) 77.9% Tax recoveries (21) (40) (47.6%) (37) (43.5%) Debt designed as Hedge Accounting (5.4%) % Adjusted EBITDA % % Adjusted EBITDA Margin (%) 9.8% 7.3% 2.5 p.p. 7.2% 2.5 p.p. 15

36 1Q18 CONSOLIDATED RESULT In 1Q18, Adjusted EBITDA totaled R$802 million, representing a 40.7% increase in the annual comparison. Adjusted EBITDA margin was 9.8%, representing a 2.5 p.p. increase y/y. This result reflects basically: (i) the improvement in gross margin, primarily due to the decrease in the price of grains in 1Q18 compared to 1Q17; and (ii) a better control of SG&A expenses, which were at one of their lowest levels since EBIT EBIT - R$ Million 1Q18 1Q17 Var y/y 4Q17 Var q/q Gross Profit 1,537 1,376 11,7% 1,820 (15.6%) Operating Expenses (1.267) (1.217) 4.1% (1.507) (15.9%) Other Operating Results 21 (98) n.m. (318) n.m. Equity Income 6 8 (26.8%) 6 (2.0%) EBIT % 0 n.m. EBIT Margin (%) 3.6% 0.9% 2.7 p.p. 0.0% 3.6 p.p. In 1Q18, EBIT totaled R$296 million, representing an increase of R$228 million y/y, reflecting a higher gross profit, lower SG&A expenses, as well as lower extraordinary operating expenses in the period, as mentioned above. Financial Result Management Report on the Results of the First Quarter of 2018 Financial Results - R$ Million 1Q18 1Q17 Var y/y 4Q17 Var q/q Financial Income (26.7%) % Financial Expenses (902) (938) (3.8%) (953) (5.4%) Net Financial Result (517) (413) 25.3% (623) (17.1%) In 1Q18, net financial result totaled an expense of R$517 million. The main components were grouped into the following categories: (i) Net interest related to debt and cash totaled R$268 million in 1Q18. This improvement compared to 4Q17 was primarily due to a lower average cost of debt, partially explained by a lower accumulated CDI rate in the period; (ii) Adjustment to present value (AVP) totaled an expense of R$77 million. AVP segregates the portion of financial income (expenses) of the business structure of customers/suppliers. This amount is offset in the operating result; 16

37 1Q18 CONSOLIDATED RESULT (iii) Expenses with interest and/or monetary restatement on right, obligations and taxes, among others, of R$10 million. The improvement in results in 1Q18 compared to the previous quarter is primarily due to the recognition of an extraordinary gain of R$89 million related to a specific contingency of more than 20 years; and (iv) Exchange rate variation and others totaled an expense of R$162 million, reflecting the Company s dynamics of assets and liabilities in foreign currency, as well as mark-to-market adjustments to derivatives, which primarily consisted in the mark-to-market of a Total Return Swap derivative instrument, as disclosed in the Material Fact dated August 10, 2017, which had a negative effect in the amount of R$176 million. Net Income (Loss) Net Income (Loss) - R$ Million 1Q18 1Q17 Var y/y 4Q17 Var q/q Consolidated Net Income (114) (286) (60.2%) (784) (85.5%) Net Margin (%) (1.4%) (3.7%) 2.3 p.p. (8.8%) 7.4 p.p. Earnings per share¹ (0.14) (0.35) (60.2%) (0.97) (85.5%) 1 Consolidated Earnings per Share (in R$), excluding Treasury Shares. Management Report on the Results of the First Quarter of 2018 In 1Q18, the Company s net loss totaled R$114 million, primarily due to: (i) income tax in the amount of an income of R$107.4 million, as a result of the adjustment of the estimated effective tax rate for 2018; and (ii) the mark-to-market adjustment of the Total Return Swap derivative instrument, in the amount of R$(176) million, as detailed in Financial Result above. 17

38 PERFORMANCE BY REGION Results by Region 1Q18 Total Brazil OneFoods International Southern Cone Other Segments Corporate Volume (Thousand Tons) NOR (R$ Million) 8,203 3,746 1,838 1, Average Price NOR - R$ Gross Profit (R$ Million) 1, Gross Margin (%) 18.7% 20.8% 20.7% 14.6% 10.2% 24.9% - EBIT (R$ Million) (16) 37 (18) EBIT Margin (%) 3.6% 4.1% 3.1% 4.5% (2.8%) 18.0% - EBITDA (R$ Million) (18) EBITDA Margin (%) 9.5% 10.0% 8.5% 12.4% 0.3% 20.4% - Management Report on the Results of the First Quarter of 2018 Adjusted EBITDA (R$ Million) Adjusted EBITDA Margin (%) 9.8% 9.4% 8.0% 13.1% 0.5% 20.4% - 18

39 PERFORMANCE BY REGION BRAZIL Brazil 1Q18 1Q17 Var y/y 4Q17 Var q/q Volume (Thousand Tons) % 591 (7.6%) Poultry (In Natura) % % Pork and Others (In Natura) % % Processed foods % 440 (14.1%) Net Operating Revenues (R$ Million) 3,746 3, % 4,244 (11.7%) Average price (R$/Kg) (6.5%) 7.19 (4.4%) Gross Profit (R$ Million) (17.2%) 1,080 (27.8%) Gross Margin (%) 20.8% 25.8% (5.0) p.p. 25.5% (4.6) p.p. EBIT (R$ Million) (49.4%) 178 (12.7%) EBIT Margin (%) 4.1% 8.4% (4.3) p.p. 4.2% (0.0) p.p. EBITDA (R$ Million) (27.2%) 433 (13.6%) EBITDA Margin (%) 10.0% 14.1% (4.1) p.p. 10.2% (0.2) p.p. Adjusted EBITDA (R$ Million) (29.2%) 431 (18.5%) Adjusted EBITDA Margin (%) 9.4% 13.6% (4.2) p.p. 10.2% (0.8) p.p. In 1Q18, sales volume increased by 9.6% y/y, both in the in natura (+22.5% y/y) and in the processed foods (+4.7% y/y) categories, in line with (i) our strategy of working with a portfolio of products that is more suitable to the current consumption scenario in Brazil, (ii) the improvement in our commercial execution and (iii) the larger availability of in natura products, considering the restrictions on sales to Europe and Russia. Moreover, sales volume was also driven by a higher number of customers, which reached 191,000 points of sales in 1Q18, representing an increase of 13.5% y/y. Management Report on the Results of the First Quarter of 2018 On the other hand, average sales price decreased by 6.5% due to a higher increase in sales volume of in natura products (+22.5% y/y), which have lower prices, compared to processed products. Considering a separate business analysis, although prices continue to be pressured by excess supply in the market of in natura products, our chicken price decreased by 8% y/y, while chicken prices in the market decreased by 14.5% y/y, according to JOX. our pork prices decreased by 4.8% y/y, while the CEPEA/ESALQ market indicator decreased by 21% y/y. Accordingly, in 1Q18, NOR totaled R$3.7 billion, representing an increase of 2.5% y/y. Average unit cost remained stable in the annual comparison due to the improvement in the cost of animals, primarily as a result of the price of grains in However, difficulties to dilute fixed costs due to production idleness and changes in the production mix, with higher share of in natura, offset this positive effect. Accordingly, in 1Q18, our gross margin decreased by 5.0 p.p. y/y. On the other hand, our operating expenses as a percentage of NOR improved by 0.7 p.p. due to a more efficient management of expenses, notwithstanding the increase in our sales force as of 2H17. Moreover, the result was positively affected by the recovery of taxes and reversal of provisions. As a result, in 1Q18, Adjusted EBITDA totaled R$351 million, with a margin of 9.4% in the region. 19

40 PERFORMANCE BY REGION BRAZIL Market Share As of 1Q18, the Company started to include in its market share readings the Cash & Carry channel, which accounts for approximately 20% of the total market (market share) and in which BRF holds a lower market share. Moreover, other items, which were not previously included in the market readings, were also added: (i) fresh sausage in the Filled category; (ii) hamburgers, ready-to-eat snacks, pies and portions (kibes and meatballs) in the Frozen category; cold cuts and hamlike (afiambrado) cuts in the Cold Cuts category. In order to provide a better understanding and ensure transparency to all stakeholders, all historical data included in this report takes into account these adjustments. In the first two months of 2018, the Company s consolidated market share reached 45.7%, representing an increase of 1.1 p.p. y/y, primarily due to the Cash & Carry channel, in which our execution and in-store presence have been significantly improving. BRF 48.3% 47.3% 46.7% 45.8% 44.6% 45.9% 46.4% 46.6% 45.7% Management Report on the Results of the First Quarter of Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 20

41 PERFORMANCE BY REGION BRAZIL Market Share The highlight was the Filled category, whose market share increased by 3.1 p.p. y/y, in all channels. We also gained market share in the Margarines category, capturing 1.4 p.p. y/y in market share, primarily with the Qualy brand in the self-service channel, which increased by 4.0 p.p. y/y. The market share of the Frozen category increased by 0.5 p.p. y/y, especially Perdigão lasagnas, whose market share increased to 17.3% since its return to the shelves in July Finally, the Cold Cuts category interrupted a downward trend and showed stability in 1Q18 compared to the last quarter of 2017, maintaining its market share of 50.4%. This is the result of a better commercial execution, considering that we maintained relative prices compared to those of our competitors. 52.5% 53.0% Frozen Meals 55.0% Cold Cuts 49.6% 49.7% 48.7% 46.7% 47.7% 49.4% 49.1% 53.4% 52.7% 53.0% 51.6% 51.3% 50.8% 50.4% 50.4% 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 Margarines Filled Management Report on the Results of the First Quarter of % 61.9% 60.4% 60.0% 1Q16 2Q16 3Q16 4Q % 59.1% 59.9% 60.2% 59.1% 1Q17 2Q17 3Q17 4Q17 1Q % 36.9% 36.5% 35.4% 34.7% 38.0% 39.0% 39.6% 37.9% Source: Nielsen Bimonthly Retail Margarines and Frozen (reading Feb/Mar); Filled and Cold Cuts (reading Jan/Feb). 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 21

42 PERFORMANCE BY REGION ONEFOODS OneFoods 1Q18 1Q17 Var y/y 4Q17 Var q/q Volume (Thousand Tons) % 297 (6.8%) Poultry (In Natura) % 259 (6.7%) Others (In Natura) 0 1 (45.0%) % Processed foods % 38 (7.9%) Net Operating Revenues (R$ Million) 1,838 1, % 1,871 (1.8%) Average price (R$/Kg) % % Gross Profit (R$ Million) % % Gross Margin (%) 20.7% 16.2% 4.5 p.p. 19.2% 1.4 p.p. EBIT (R$ Million) 57 (44) n.m % EBIT Margin (%) 3.1% (3.4%) 6.4 p.p. 2.0% 1.1 p.p. EBITDA (R$ Million) % % EBITDA Margin (%) 8.5% 1.6% 6.9 p.p. 7.2% 1.3 p.p. Adjusted EBITDA (R$ Million) % % Adjusted EBITDA Margin (%) 8.0% 2.6% 5.4 p.p. 5.8% 2.2 p.p. Management Report on the Results of the First Quarter of 2018 Volume CFR* (Thousand Tons) (2.5%) 116 (18.5%) *CFR (Cost and freight) % in total volume 34.1% 43.7% (9.7) p.p. 39.0% (4.9) p.p. 22

43 PERFORMANCE BY REGION ONEFOODS NOR of OneFoods totaled R$1.8 billion in 1Q18 (+39.6% y/y), driven by: (i) an inorganic volume growth, due to the acquisition of Banvit, which accounted for 78,000 ton in the quarter; and (ii) higher average prices in Reais (11.6% y/y), reflecting an increased balance between offer and supply in the region, as well as a local effort to recover margin. If we exclude the impacts of the acquisition of Banvit, which accounted for R$504 million of NOR and R$44 million of EBITDA, the results of OneFoods continued to increase in both the annual and the quarterly comparisons. In addition to a lower level of inventories in the region, the uncertain scenario around the discussions about animal electric desensitization positively affected prices in Saudi Arabia. These factors, together with the management of operating expenses in these markets, resulted in an increase of 5.1 p.p. q/q in Adjusted EBITDA margin (excluding Banvit) in the period. The market share of OneFoods decreased by 4.1 p.p. y/y in Gulf countries due to a more aggressive price competition faced in the market. As a result, OneFoods had a total market share of 39.6% in 1Q18, which continues to represent an ample leadership. Our market share per category is as follows: (i) griller: 44.6% (-4.8 p.p. y/y); (ii) chicken cuts: 57.7% (-6.5 p.p. y/y); and (iii) processed products: 20.6% (+0.2 p.p. y/y). Management Report on the Results of the First Quarter of 2018 Our direct distribution operations (DDP), including Banvit, accounted for 65.9% of the total volume in the quarter (+9.7 p.p. y/y), constituting 87.3% of the gross profit in the region, with an average gross margin that was 17.1 p.p. higher compared to our indirect distribution (CFR exports) operations. 23

44 PERFORMANCE BY REGION INTERNATIONAL International 1Q18 1Q17 Var y/y 4Q17 Var q/q Volume (Thousand Tons) (16.7%) 292 (5.4%) Poultry (In Natura) (3.8%) % Pork and Others (In Natura) (30.0%) 35 (7.7%) Processed foods (33.5%) 67 (18.3%) Others Sales (24.7%) 33 (31.4%) Net Operating Revenues (R$ Million) 1,824 2,113 (13.7%) 1,965 (7.2%) Average price (R$/Kg) % 6.74 (1.9%) Gross Profit (R$ Million) % 316 (15.9%) Gross Margin (%) 14.6% 8.3% 6.2 p.p. 16.1% (1.5) p.p. EBIT (R$ Million) 82 (44) n.m % EBIT Margin (%) 4.5% (2.1%) 6.6 p.p. 3.6% 0.9 p.p. EBITDA (R$ Million) % % EBITDA Margin (%) 12.4% 4.9% 7.5 p.p. 9.6% 2.8 p.p. Adjusted EBITDA (R$ Million) % % Adjusted EBITDA Margin (%) 13.1% 5.2% 8.0 p.p. 9.6% 3.6 p.p. Volume CFR* (Thousand Tons) (15.9%) 223 (2.4%) % in total volume 79.0% 78.2% 0.7 p.p. 76.5% 2.4 p.p. *CFR (Cost and freight) Management Report on the Results of the First Quarter of 2018 In 1Q18, NOR of the International division totaled R$1.8 billion, representing a 13.7% decrease y/y. In 1Q18, sales volumes decreased by 16.7% y/y, due to the sales volume restrictions and limitations in Europe and Russia, together with lower settled sales volume in Africa, considering the improved management of customers, countries and channels. As a result, prices significantly increased in Europe and Africa, supporting the increase of 3.6% y/y in average prices in the period. This increase was partially affected by prices that were still pressured in Japan, due to high local inventory levels and excess supply in Thailand, which also negatively affected prices in that country. In terms of costs and expenses, lower costs incurred with grains y/y, together with the rationalization of the structure of expenses of the International division, allowed a better operating performance in the region in 1Q18. Accordingly, Adjusted EBITDA reached R$239 million in 1Q18, with a margin of 13.1%, representing an increase of 8.0 p.p. in the annual comparison. We set forth below the main highlights of the sub-regions: 24

45 PERFORMANCE BY REGION ASIA Asia 1Q18 1Q17 Var y/y 4Q17 Var q/q Volume (Thousand Tons) % % Poultry (In Natura) % % Pork and Others (In Natura) % % Processed foods % 8 (13.7%) Others Sales (24.8%) 33 (31.5%) Net Operating Revenues (R$ Million) 1, % 1, % Average price (R$/Kg) (0.7%) 5.67 (0.6%) Gross Profit (R$ Million) % 143 (24.5%) Gross Margin (%) 10.1% 11.2% (1.1) p.p. 14.2% (4.1) p.p. EBIT (R$ Million) (13.8%) 47 (32.2%) EBIT Margin (%) 3.0% 3.9% (0.9) p.p. 4.7% (1.7) p.p. EBITDA (R$ Million) % % EBITDA Margin (%) 11.0% 11.5% (0.5) p.p. 10.6% 0.3 p.p. Adjusted EBITDA (R$ Million) % % Adjusted EBITDA Margin (%) 11.6% 11.3% 0.3 p.p. 10.3% 1.3 p.p. Volume CFR* (Thousand Tons) % % % in total volume 88.5% 88.5% (0.0) p.p. 87.2% 1.3 p.p. Management Report on the Results of the First Quarter of 2018 *CFR (Cost and freight) In 1Q18, NOR increased by 12.9% y/y in Asia, due to higher sales volumes in the region (+13.7% y/y). The highlight was China, whose sales increased by 56.6% y/y, due to the reversal of pork intra-cycles in Russia. However, as mentioned above, the sales dynamics in Japan continued to be affected by lower prices (-12.4% y/y), due to local inventories that are still high. Nonetheless, in 1Q18, Adjusted EBITDA totaled R$124 million (+16.0% y/y), with a margin of 11.6%, representing an increase of 0.3 p.p. in the annual comparison. 25

46 PERFORMANCE BY REGION EUROPE/ EURASIA Europe/Eurasia 1Q18 1Q17 Var y/y 4Q17 Var q/q Volume (Thousand Tons) (56.9%) 71 (36.8%) Poultry (In Natura) 8 22 (62.7%) 10 (20.5%) Pork and Others (In Natura) 0 24 (98.4%) 15 (97.4%) Processed foods (37.6%) 46 (20.9%) Net Operating Revenues (R$ Million) (39.7%) 761 (26.5%) Average price (R$/Kg) % % Gross Profit (R$ Million) % 129 (11.0%) Gross Margin (%) 20.5% 4.4% 16.0 p.p. 16.9% 3.5 p.p. EBIT (R$ Million) 29 (55) n.m % EBIT Margin (%) 5.3% (6.0%) 11.2 p.p. 1.1% 4.1 p.p. EBITDA (R$ Million) % % EBITDA Margin (%) 13.6% 0.6% 13.0 p.p. 7.7% 5.9 p.p. Adjusted EBITDA (R$ Million) % % Adjusted EBITDA Margin (%) 14.4% 1.3% 13.2 p.p. 7.8% 6.7 p.p. Volume CFR* (Thousand Tons) 9 52 (82.8%) 26 (65.5%) % in total volume 19.7% 49.4% (29.7) p.p. 36.1% (16.4) p.p. *CFR (Cost and freight) Management Report on the Results of the First Quarter of 2018 NOR decreased by 39.7% y/y in Europe, due to lower sales volumes to the region. The main barriers in the Europe sub-region, together with the Russian embargo to Brazilian pork exports, continued to affect the meat industry in Brazil, thereby justifying the 56.9% decrease y/y in our sales volumes. On the other hand, the lower availability of products in the local market and the better execution in our direct distribution (DDP) operations resulted in significant increases in average prices in the region of nearly 40% y/y. As a result, in 1Q18, Adjusted EBITDA totaled R$81 million, with a margin of 14.4%, representing an increase of 13.2 p.p. y/y. 26

47 PERFORMANCE BY REGION AMERICAS Americas 1Q18 1Q17 Var y/y 4Q17 Var q/q Volume (Thousand Tons) (22.5%) 14 (3.1%) Poultry (In Natura) (22.5%) 12 (5.0%) Pork and Others (In Natura) % % Processed foods 1 2 (38.8%) 1 5.0% Net Operating Revenues (R$ Million) (17.9%) % Average price (R$/Kg) % % Gross Profit (R$ Million) (12.7%) 12 (6.9%) Gross Margin (%) 13.4% 12.6% 0.8 p.p. 14.4% (1.0) p.p. EBIT (R$ Million) % % EBIT Margin (%) 4.3% 3.1% 1.3 p.p. 2.1% 2.3 p.p. EBITDA (R$ Million) 9 9 (5.1%) % EBITDA Margin (%) 10.8% 9.3% 1.4 p.p. 6.2% 4.5 p.p. Adjusted EBITDA (R$ Million) 9 9 (3.9%) % Adjusted EBITDA Margin (%) 11.2% 9.6% 1.6 p.p. 6.4% 4.8 p.p. Volume CFR* (Thousand Tons) (22.5%) 14 (3.1%) % in total volume 100.0% 100.0% 0.0 p.p % 0.0 p.p. Management Report on the Results of the First Quarter of 2018 *CFR (Cost and freight) NOR decreased by 17.9% y/y in the Americas, due to lower sales volumes in the region (-22.5% y/y), considering the lower availability of credit in some countries in the region. On the other hand, we were able to increase our average prices by 6.0% y/y through a better commercial execution. Accordingly, in 1Q18, Adjusted EBITDA margin increased by 1.6 p.p. y/y to 11.2%. 27

48 PERFORMANCE BY REGION AFRICA Africa 1Q18 1Q17 Var y/y 4Q17 Var q/q Volume (Thousand Tons) (34.0%) 29 (2.5%) Poultry (In Natura) (39.5%) 14 (1.3%) Pork and Others (In Natura) 5 5 (12.0%) % Processed foods (33.6%) 11 (13.1%) Net Operating Revenues (R$ Million) (17.2%) % Average price (R$/Kg) % % Gross Profit (R$ Million) % 33 (0.6%) Gross Margin (%) 27.4% 11.4% 16.0 p.p. 27.6% (0.2) p.p. EBIT (R$ Million) 17 (29) n.m % EBIT Margin (%) 14.5% (20.1%) 34.6 p.p. 11.4% 3.2 p.p. EBITDA (R$ Million) 25 (19) n.m % EBITDA Margin (%) 21.2% (13.6%) 34.9 p.p. 16.4% 4.8 p.p. Adjusted EBITDA (R$ Million) 26 (19) n.m % Adjusted EBITDA Margin (%) 21.8% (13.3%) 35.1 p.p. 16.6% 5.2 p.p. Volume CFR* (Thousand Tons) (34.0%) 29 (2.5%) % in total volume 100.0% 100.0% 0.0 p.p % 0.0 p.p. *CFR (Cost and freight) Management Report on the Results of the First Quarter of Q18 in the Africa region was marked by an improvement in operating management. The decrease of 14.6k tons (-34.0% y/y) is due to the lower settlement volume in the quarter, partially offset by a better management of customers, countries and channels in order to capture better prices. Thus, NOR decreased by 17.2% in the annual comparison. On the other hand, the increased inventory control and the rationalization of the structure of expenses were the main factors responsible for the maintenance of profitability in the region. Accordingly, Adjusted EBITDA totaled R$26 million (+R$45 million y/y) in the quarter, representing an increase of 35.1 p.p. y/y in Adjusted EBITDA margin to 21.8%. 28

49 PERFORMANCE BY REGION SOUTHERN CONE Southern Cone 1Q18 1Q17 Var y/y 4Q17 Var q/q Volume (Thousand Tons) % 63 (2.5%) Poultry (In Natura) % % Pork and Others (In Natura) % 13 (2.5%) Processed foods % 41 (10.5%) Net Operating Revenues (R$ Million) % 623 (5.0%) Average price (R$/Kg) (0.8%) 9.92 (2.6%) Gross Profit (R$ Million) % 3 n.m. Gross Margin (%) 10.2% 11.3% (1.1) p.p. 0.5% 9.6 p.p. EBIT (R$ Million) (16) (16) 3.0% (93) (82.2%) EBIT Margin (%) (2.8%) (3.0%) 0.3 p.p. (14.9%) 12.1 p.p. EBITDA (R$ Million) 2 (3) n.m. (71) n.m. EBITDA Margin (%) 0.3% (0.5%) 0.8 p.p. (11.4%) 11.7 p.p. Adjusted EBITDA (R$ Million) 3 (2) n.m. (63) n.m. Adjusted EBITDA Margin (%) 0.5% (0.4%) 0.9 p.p. (10.1%) 10.6 p.p. Volume CFR* (Thousand Tons) % 24 (2.8%) % in total volume 38.5% 38.7% (0.1) p.p. 38.6% (0.1) p.p. *CFR (Cost and freight) Management Report on the Results of the First Quarter of 2018 As of 1Q18, the Company started to consolidate Beef Desk data, which was previously recorded in Other Segments, in the Southern Cone division, as the entire production and sales occur in Argentina. The fundamentals spreadsheet including updated historical data of this new segmentation is available at BRF s Investors Relations website (ri.brf-global.com). In 1Q18, NOR increased by 12.4% y/y in the Southern Cone and sales volume increased by 13.2% y/y. This increase in NOR was positively affected by increased sales of turkey in Chile. On the other hand, higher cost of raw materials of beef, turkey, pork and chicken pressured the gross margin in the region by 1.1 p.p. y/y. However, the improved efficiency in the management of expenses contributed to the increase in Adjusted EBITDA margin by 0.9 p.p. y/y. 29

50 OTHER SEGMENTS Other Segments + Ingredients 1Q18 1Q17 Var y/y 4Q17 Var q/q Volume (Thousand Tons) % % Poultry (In Natura) 1 0 n.m. 6 (87.3%) Pork and Others (In Natura) % 0 (17.3%) Processed foods 0 1 (65.3%) % Others Sales % % Net Operating Revenues (R$ Million) % % Average price (R$/Kg) (15.6%) % Gross Profit (R$ Million) 51 (12) n.m. 60 (16.1%) Gross Margin (%) 24.9% (6.0%) 30.9 p.p. 30.5% (5.7) p.p. EBIT (R$ Million) 37 (31) n.m. 42 (12.5%) EBIT Margin (%) 18.0% (15.3%) 33.3 p.p. 21.1% (3.2) p.p. EBITDA (R$ Million) 42 (26) n.m. 47 (11.5%) EBITDA Margin (%) 20.4% (12.8%) 33.3 p.p. 23.8% (3.3) p.p. Adjusted EBITDA (R$ Million) 42 (26) n.m. 47 (11.5%) Adjusted EBITDA Margin (%) 20.4% (12.8%) 33.3 p.p. 23.8% (3.3) p.p. NOR of BRF Ingredients totaled R$108 million, Adjusted EBITDA totaled R$33 million and Adjusted EBITDA margin was 31.0%. BRF Ingredients accounted for approximately 80% of the Adjusted EBITDA of Other Segments in 1Q18. It is worth noting that we also included in this segment all sales volumes of BRF s non-core products, such as feed and meals, among others, which are managed by Global Desk. However, Beef Desk started to be consolidated in the results of the Southern Cone, as mentioned in the item above. Corporate Management Report on the Results of the First Quarter of 2018 Corporate - R$ Million 1Q18 1Q17 Var y/y 4Q17 Var q/q Other Operating Results (18) (102) (81.9%) (234) (92.1%) EBIT (18) (104) (82.3%) (234) (92.1%) EBITDA (18) (104) (82.3%) (234) (92.1%) Adjusted EBITDA 19 (42) n.m. (67) n.m. Adjusted EBITDA of the Corporate segment, in the amount of R$19 million, primarily reflects: (i) the reversal of R$22 million in tax and civil contingencies; (ii) the reversal of other provisions recognized in 2017, in the amount of R$33 million; and (iii) R$13 million in extraordinary expenses (consulting services and attorney s fees, among others) related to the Trapaça Operation. 30

51 INVESTMENTS (CAPEX) Investments made in the quarter totaled R$467 million, of which R$146 million was invested in growth, efficiency, and support; R$254 million was invested in biological assets; R$33 million was invested in leases; and R$35 million referred to other investments. We highlight the decrease in Company investments by R$13 million in 1Q18 compared to 1Q17, due to a more discerning allocation of capital and the Company s commitment to decrease leverage levels. The main projects in 1Q18 are, among others: Quality: (i) investments in the improvement and control of production processes in meat processing units, feed units and farms, and modernization of laboratories. Market Demand: (i) increase in the production of the mix of in natura Griller chicken cuts for the Middle East and chicken cuts for Brazil; and (ii) increase in the hog slaughtering capacity, primarily to meet the requirements from China and to supply raw material to Brazil. Efficiency and Support/IT: (i) updates to transaction systems and compliance with new legislations; (ii) structural improvements in hog farms; (iii) projects to reduce costs in chicken and hog farms; and (iv) improvement in working conditions of employees in production processes. Management Report on the Results of the First Quarter of

52 FINANCIAL CYCLE The Company s financial cycle totaled 35.6 days in 1Q18, primarily because the cycle of accounts payable returned to normal. In 4Q17, the balance of accounts payable was higher than the year average due to one-off purchases. In 1Q18, average financial cycle totaled 35.3 days, representing 3.9 and 2.8 fewer days compared to the average financial cycle in 4Q17 and 1Q17, respectively. This improvement in our financial cycle in 1Q18 is due to the increased efficiency in capital management, grounded on our commitment to the generation of free cash. Financial Cycle (Accounts Receivable + Inventories Accounts Payable) % 14.6% 14.0% 13.0% 11.0% 9.8% Management Report on the Results of the First Quarter of % 10.1% 8.8% 9.5% 10.8% 10.3% 10.8% 10.8% 8.9% 6.8% 9.2% 11.2% 12.2% 9.6% 10.3% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 3 Accounts/NOR Financial Cycle Note: the calculation of financial cycle takes into account the proforma adjustment of Cost of Sales LTM and NOR LTM from acquisitions. 32

53 MANAGERIAL CASH FLOW In order to better reflect the statement of managerial free cash flow, the Company took into account certain reclassifications as of 4Q17 and, for comparative purposes, recalculated the three previous quarters. The cash flow reclassifications include: (i) the segregation of the effect of the exchange rate variation on the non-realized debt; (ii) the segregation of the effect of appropriated and non-realized interest; (iii) the segregation of the effect of other non-cash financial liabilities, including gross debt; and (iv) the change in the method of segregation of financial effects in working capital accounts. The generation of operating cash in 1Q18 totaled R$215 million, above the amount of R$264 million in cash used in the same period of last year, due to a better performance of the results in the period and the allocation of working capital. CAPEX investments totaled R$467 million, maintaining the same level as that of 1Q17. Accordingly, total cash from operations after CAPEX investments totaled R$253 million in 1Q18. Also in 1Q18, the sale of non-strategic assets totaled R$20 million. Management Report on the Results of the First Quarter of

54 MANAGERIAL CASH FLOW R$ million 1Q17 2Q17 3Q17 4Q Q18 EBITDA , , Working Capital (738) (319) (459) 744 (772) (340) Accounts Receivable (50) (346) (322) 185 (533) 206 Inventories (24) 82 (14) Suppliers (664) (55) (124) 387 (455) (559) Others (32) 243 (13) (216) (18) (228) Taxes (192) (10) (167) 204 (165) (143) Provisions (Net of Payments) (49) (77) Salaries/Benefits (92) 164 (31) Others (394) (86) 23 Cash Flow from Operating Activities (264) ,027 1, CAPEX (481) (457) (369) (310) (1,617) (467) M&A and Sale of Assets 7 (523) (247) 35 (729) 20 Cash Flow from Investing Activities (474) (981) (617) (275) (2,346) (448) Cash Flow from Operations with Capex (745) (253) Cash Financial Results (498) (205) (358) 235 (827) 72 Interest Income Interest Expenses (435) (286) (256) (393) (1,369) (162) Management Report on the Results of the First Quarter of 2018 FX Variation on Cash and Cash Equivalents (32) 156 (127) Treasury Shares Disposals Cash Flow from Financing Activities (862) (232) (144) 7 (1,231) (5) Free Cash Flow (1,599) (713) (158) 758 (1,713) (238) Dividends New Debt/Amortizations 1,396 2,877 (276) (3,300) Cash Variations (203) 2,163 (434) (2,542) (1,016) (160) 34

55 MANAGERIAL CASH FLOW R$ million 1Q17 2Q17 3Q17 4Q Q18 Cash and Cash Equivalents - Initial 8,351 8,148 10,410 9,976 8,351 7,434 Cash Variation (203) 2,163 (434) (2,542) (1,016) (160) Banvit Cash and Cash Equivalents - Final 8,146 10,410 9,976 7,434 7,434 7,274 Total Debt - Initial 19,492 20,391 24,203 23,398 19,492 20,744 New Debt / Amortization 1,396 2,877 (276) (3,300) FX Variation on Total Debt (247) 615 (587) Debt Interest and Derivatives (250) (68) (176) 389 Banvit Gross Debt Total Debt - Initial 20,391 24,203 23,398 20,744 20,744 21,293 Net Debt 12,245 13,793 13,423 13,310 13,310 14,019 Evolution of Quarterly Cash Generation (Operating Cash Flow CAPEX) R$MM Management Report on the Results of the First Quarter of (232) (743) 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q (253) 1Q18

56 INDEBTEDNESS R$ Million % Debt Current Non-current Total Total Local Currency (6,245) (3,220) (9,465) (9,343) 1.3% Foreign Currency (2,175) (9,653) (11,828) (11,401) 3.7% Gross Debt (8,421) (12,872) (21,293) (20,744) 2.6% Cash Investments Local Currency 2, ,420 4,941 (30.8%) Foreign Currency 3, ,854 2, % Total Cash Investments 6, ,274 7,434 (2.2%) Net Debt (1,940) (12,079) (14,019) (13,310) 5.3% Total Gross Indebtedness in the amount of R$21,293 million, as set forth above, includes total financial indebtedness, plus other financial liabilities, in the amount of R$529 million, according to Note 22 of the ITR as of and for the period ended March 31, Management Report on the Results of the First Quarter of 2018 In 1Q18, the Company s net debt totaled R$14.0 billion, representing an increase of R$709 million compared to R$13.3 billion in 4Q17, due to: (i) the negative generation of free cash flow in the amount of R$238 million; and (ii) interest, exchange rate variation and mark-to-marked derivatives in the amount of R$471 million, which do not have a cash effect. Net leverage, as the net debt to LTM Adjusted EBITDA ratio, was 4.44x in 1Q18, representing an improvement of 0.02x compared to 4Q17. The Company acknowledges that its current leverage level is well above that considered ideal in terms of capital structure and is endeavoring to reposition it at lower levels. Finally, we do not have financial covenants related to our financial obligations. 36

57 INDEBTEDNESS Evolution of Net Debt/EBITDA (and Adjusted EBITDA) , , , , , , ,459 11, ,243 13,793 13,423 13,310 14,019 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 Net Debt Net Debt/EBITDA Net Debt/EBITDA (Adjusted) Note: the net leverage in June 2017 excluded 40% of the net debt of Banvit and included the pro forma LTM EBITDA considering Banvit. Quarterly Net Debt Variation (R$ Million) Cash from Operating Activities = R$215 MM Management Report on the Results of the First Quarter of ,310 14,019 Net Debt 4Q EBTIDA WK + Others Capex M&A Cash Financial Interest FX Variation on FX Variation Results Income Cash and Cash on Interests + Equivalents Derivatives Net Debt 1Q18 37

58 Slaughtering and Production Production 1Q18 1Q17 Var y/y 4Q17 Var q/q Poultry Slaughter (Million Heads) (4.3%) % Hog Slaughter (Thousand Heads) 2,470 2, % 2, % Cattle Slaughter (Thousand Heads) % % Production (Thousand Tons) 1,404 1,441 (2.5%) 1,444 (2.8%) Meats (3.2%) % Other Processed Products (0.9%) 480 (8.4%) Feed and Premix (Thousand Tons) (2.6%) (0.1%) In 1Q18, the production of meat decreased by 2.5% y/y, due to the need to adapt the production plan, as a result of the adjustments to meet demand. Relationship with Independent Auditors Pursuant to CVM Instruction No. 381, dated January 14, 2003, the Company informs that its policy of engagement of services unrelated to external audit is based on principles that protect auditor s independence. Pursuant to CVM Instruction No. 381/03, in the period ended March 31, 2018, KPMG Auditores Independentes was engaged to provide services unrelated to external audit (support on the preparation of applications for tax refund in Europe), constituting approximately 41.7% of consolidated value of fees related to external audit for BRF and its subsidiaries. KPMG Auditores Independentes informed us that the services provided did not affected its independence and objectivity, due to the definition of scope and procedures executed. Management Report on the Results of the First Quarter of 2018 Pursuant to CVM Instruction No. 480/09, the Company s management represents that, at a meeting held on May 10, 2018, it discussed, reviewed and agreed with the information included in the independent auditor s review report about the financial information for 1Q18. Disclaimer The representations included in this report concerning prospective businesses of the Company, projections and results, and the Company s potential growth are mere forecasts based on the expectations of management with regards to the future of the Company. These expectations rely heavily on market changes and the general economic performance of the country, industry, and international market, and are therefore subject to change. 38

59 P&L Management Report on the Results of the First Quarter of Financial Statement - R$ Million 1Q18 1Q17 Var y/y 4Q17 Var q/q Net Operating Revenues 8,203 7, % 8,901 (7.8%) Cost of Sales (6,666) (6.434) 3.6% (7,081) (5.9%) % of the NOR (81.3%) (82.4%) 1.1 p.p. (79.6%) (1.7) p.p. Gross Profit 1,537 1, % 1,820 (15.6%) % of the NOR 18.7% 1 7.6% 1.1 p.p. 20.4% (1.7) p.p. Operating Expenses (1,267) (1,217) 4.1% (1,507) (15.9%) % of the NOR (15.4%) (15.6%) 0.1 p.p. (16.9%) 1.5 p.p. Selling Expenses (1,134) (1,087) 4.3% (1,358) (16.5%) % of the NOR (13.8%) (13.9%) 0.1 p.p. (15.3%) 1.4 p.p. Fixed (724) (735) (1.5%) (923) (21.5%) Variable (410) (352) 16.6% (435) (5.8%) General and Administrative Expenses (133) (130) 2.2% (149) (10.7%) % of the NOR (1.6%) (1.7%) 0.0 p.p. (1.7%) 0.1 p.p. Honorary of our Administrators (7) (7) 4.2% (11) (32.2%) % of the NOR (0.1%) (0.1%) 0.0 p.p. (0.1%) 0.0 p.p. General and Administrative (126) (123) 2.1% (138) (9.0%) % of the NOR (1.5%) (1.6%) 0.0 p.p. (1.6%) 0.0 p.p. Operating Income % 313 (13.9%) % of the NOR 3.3% 2.0% 1.2 p.p. 3.5% (0.2) p.p. Other Operating Results 21 (98) n.m. (318) n.m. Equity Income 6 8 (26.8%) 6 (2.0%) EBIT % 0 n.m. % of the NOR 3.6% 0.9% 2.7 p.p. 0.0% 3.6 p.p. Net Financial Income % 623 (17.1%) Income before Taxes (221) (344) (35.8%) (623) (64.5%) % of the NOR (2.7%) (4.4%) 1.7 p.p. (7.0%) 4.3 p.p. Income Tax and Social Contribution (107) (59) 83.3% 161 n.m. % of Income before Taxes 48.6% 17.0% 31.5 p.p. (25.9%) 74.4 p.p. Consolidated Net Income (114) (286) (60.2%) (784) (85.5%) % of the NOR (1.4%) (3.7%) 2.3 p.p. (8.8%) 7.4 p.p. Non controlling Shareholders 11 (4) n.m. 22 (53.1%) EBITDA % % % of the NOR 9.5% 6.5% 3.1 p.p. 5.6% 3.9 p.p. Adjusted EBITDA % % % of the NOR 9.8% 7.3% 2.5 p.p. 7.2% 2.5 p.p.

60 BALANCE SHEET Balance Sheet - R$ Million Assets Current Assets Cash and Cash Equivalents 5,516 6,307 6,011 Financial Investments Accounts Receivable 3,757 3,147 3,919 Recoverable Taxes 1,281 1,256 1,228 Dividends/Interest on shareholders' equity receivable Securities Receivable Inventories 4,949 4,919 4,948 Biological Assets 1,490 1,541 1,510 Other Financial Assets Other Receivables Anticipated expenses Restricted Cash Non-Current Assets held to sale and discontinued operation Total Current Assets 18,993 18,938 19,186 Non-Current Assets Long-term assets 6,652 6,005 6,587 Cash Investments Accounts Receivable Judicial Deposits Biological Assets Management Report on the Results of the First Quarter of Securities Receivable Recoverable Taxes 2,478 1,609 2,438 Deferred Taxes 1,513 1,547 1,369 Restricted Cash Other Receivables Permanent Assets 19,352 18,428 19,456 Investments Properly, Plant and Equipment 12,057 11,767 12,191 Intangible 7,219 6,594 7,198 Total Non-Current Assets 26,005 24,433 26,043 Total Assets 44,998 43,371 45,228

61 BALANCE SHEET Balance Sheet - R$ Million Liabilities and Equity Current Liabilities Loans and Financing 7,891 3,603 5,031 Suppliers 6,055 5,513 6,445 Supply Chain Risk 664 1, Payroll and Mandatory Social Charges Taxes Payable Dividends/Interest on Shareholders Equity Management and Staff Profit Sharing Other Financial Liabilities Provisions Employee Pension Plan Other Liabilities Total Current Liabilities 17,553 12,333 14,908 Non-Current Liabilities Loans and Financing 12,872 16,411 15,413 Suppliers Taxes and Social Charges Payable Provision for Tax, Civil and Labor Contingencies 1,023 1,167 1,237 Deferred Taxes Employee Pension Plan Other Liabilities 1, ,125 Total Non-Current Liabilities 15,832 19,114 18,608 Management Report on the Results of the First Quarter of Total Liabilities 33,386 31,448 33,516 Shareholders Equity Capital Stock 12,460 12,460 12,460 Capital Reserves Profit Reserves 101 1, Other Related Results (1,389) (1,317) (1,405) Retained Profits (140) (281) - Treasury Shares (71) (722) (71) Non-Controling Shareholders Total Shareholders Equity 11,612 11,923 11,713 Total Liabilities and Shareholders 44,998 43,371 45,228

62 1. COMPANY S OPERATIONS BRF S.A. ( BRF ) and its consolidated subsidiaries (collectively the Company ) is a multinational Brazilian Company, which owns a comprehensive and diverse portfolio of products and it is one of the world s largest producers of foods. With a focus on raising, producing and slaughtering of poultry and pork for processing, production and sale of fresh meat, processed products, pasta, sauce, mayonnaise, frozen vegetables and soybean by-products, among which the following are highlighted: Whole chickens and frozen cuts of chicken, turkey and pork; Ham products, bologna, sausages, frankfurters and other smoked products; Hamburgers, breaded meat products and meatballs; Lasagnas, pizzas, cheese breads, pies and frozen vegetables; Margarine, sauces and mayonnaise; and Soy meal and refined soy flour, as well as animal feed. BRF is a public company, listed on the New Market of B3 ( Brasil, Bolsa, Balcão ), under the ticker BRFS3, and listed on the New York Stock Exchange ( NYSE ), under the ticker BRFS. Its headquarters are located at 475 Jorge Tzachel street, in the City of Itajaí, State of Santa Catarina. Our portfolio strategy is focused on creating new, convenient, practical and healthy products for our consumers based on their needs. We seek to achieve that goal through strong innovation to provide us with increasing value-added items that will differentiate us from our competitors and strengthen our brands. The Company's business model is by means of a vertical and integrated production system, which are distributed through an extensive distribution network, reaching the 5 continents, to meet the supermarkets, retail stores, wholesalers, restaurants and other institutional customers. In addition, our facilities are strategically located near to their raw material suppliers or its main consumption centers. The Company has as main brands Sadia, Perdigão, Qualy, Chester, Perdix, Paty and Banvit that are highly recognized, especially in Brazil, Argentina, Turkey and the Middle East. On February, 2018 the Company launched in Brazil the Kidelli brand that presents a portfolio of products different from other brands and very diversified, based on poultry and pork, offer our quality products with competitive price. 62

63 1.1. Equity interest % equity interest Entity Main activity Country Participation Accounting method BRF Energia S.A. Commercialization of eletric energy Brazil Direct Consolidated % % BRF GmbH Holding Austria Direct Consolidated % % BRF Foods LLC Import and commercialization of products Russia Indirect Consolidated 99.90% 99.90% BRF France SARL Marketing and logistics services France Indirect Consolidated % % BRF Global Company Nigeria Ltd. Marketing and logistics services Nigeria Indirect Consolidated 99.00% 99.00% BRF Global Company South Africa Proprietary Ltd. Import and commercialization of products South Africa Indirect Consolidated % % BRF Global Company Nigeria Ltd. Marketing and logistics services Nigeria Indirect Consolidated 1.00% 1.00% BRF Global GmbH (b) Holding and trading Austria Indirect Consolidated % % BRF Foods LLC Import and commercialization of products Russia Indirect Consolidated 0.10% 0.10% Qualy 5201 B.V. (b) Import, commercialization of products and holding The Netherlands Indirect Consolidated % % Xamol Consultores Serviços Ltda. Import and commercialization of products Portugal Indirect Consolidated % % BRF Japan KK Marketing and logistics services Japan Indirect Consolidated % % BRF Korea LLC Marketing and logistics services Korea Indirect Consolidated % % BRF Shanghai Management Consulting Co. Ltd. Advisory and related services China Indirect Consolidated % % BRF Shanghai Trading Co. Ltd. Commercialization and distribution of products China Indirect Consolidated % % BRF Singapore PTE Ltd. Marketing and logistics services Singapore Indirect Consolidated % % BRF Germany GmbH Import and commercialization of products Germany Indirect Consolidated % % BRF GmbH Turkiye Irtibat Import and commercialization of products Turkey Indirect Consolidated % % BRF Holland B.V. Import and commercialization of products The Netherlands Indirect Consolidated % % Campo Austral S.A. Industrialization and commercialization of products Argentina Indirect Consolidated 2.66% 2.66% Eclipse Holding Cöoperatief U.A. Holding The Netherlands Indirect Consolidated 0.01% 0.01% BRF B.V. Industrialization, import and commercialization of products The Netherlands Indirect Consolidated % % ProudFood Lda Import and commercialization of products Angola Indirect Consolidated 10.00% 10.00% BRF Hungary LLC Import and commercialization of products Hungary Indirect Consolidated % % BRF Iberia Alimentos SL Import and commercialization of products Spain Indirect Consolidated % % BRF Invicta Ltd. Import, commercialization and distribution of products England Indirect Consolidated 69.16% 69.16% Invicta Food Products Ltd. Import and commercialization of products England Indirect Consolidated % % BRF Wrexham Ltd. Industrialization, import and commercialization of products England Indirect Consolidated % % Invicta Food Group Ltd. (b) Import, commercialization and distribution of products England Indirect Consolidated % % Invicta Foods Ltd. Import, commercialization and distribution of products England Indirect Consolidated % % Invicta Foodservice Ltd. Import, commercialization and distribution of products England Indirect Consolidated % % Universal Meats (UK) Ltd. (b) Import, Industrialization, commercialization and distribution of products England Indirect Consolidated % % BRF Italia SPA Import and commercialization of products Italy Indirect Consolidated 67.00% 67.00% Compañía Paraguaya Comercial S.A. Import and commercialization of products Paraguay Indirect Consolidated 99.00% 99.00% Campo Austral S.A. Industrialization and commercialization of products Argentina Indirect Consolidated 50.48% 50.48% Itega S.A. Holding Argentina Indirect Consolidated 96.00% 96.00% Eclipse Holding Cöoperatief U.A. Holding The Netherlands Indirect Consolidated 99.99% 99.99% Buenos Aires Fortune S.A. Holding Argentina Indirect Consolidated 5.00% 5.00% Campo Austral S.A. Industrialization and commercialization of products Argentina Indirect Consolidated 8.44% 8.44% Eclipse Latam Holdings Holding Spain Indirect Consolidated % % Buenos Aires Fortune S.A. Holding Argentina Indirect Consolidated 95.00% 95.00% Campo Austral S.A. Industrialization and commercialization of products Argentina Indirect Consolidated 6.53% 6.53% Campo Austral S.A. Industrialization and commercialization of products Argentina Indirect Consolidated 31.89% 31.89% Itega S.A. Holding Argentina Indirect Consolidated 4.00% 4.00% Golden Foods Poultry Limited Holding Thailand Indirect Consolidated 48.52% 48.52% Golden Poultry Siam Limited Holding Thailand Indirect Consolidated 51.84% 51.84% Golden Poultry Siam Limited Holding Thailand Indirect Consolidated 48.16% 48.16% BRF Thailand Limited Import, Industrialization, commercialization and distribution of products Thailand Indirect Consolidated % % BRF Feed Thailand Limited Import, Industrialization, commercialization and distribution of products Thailand Indirect Consolidated % % Golden Foods Sales (Europe) Limited Holding and trading England Indirect Consolidated % % Golden Quality Foods Europe BV Import, commercialization and distribution of products The Netherlands Indirect Consolidated % % Golden Quality Foods Netherlands BV Import, commercialization and distribution of products The Netherlands Indirect Consolidated % % Golden Foods Siam Europe Limited (b) Import, commercialization and distribution of products England Indirect Consolidated % % Golden Quality Poultry (UK) Ltd Import, commercialization and distribution of products England Indirect Consolidated % % Perdigão Europe Lda. Import and export of products Portugal Indirect Consolidated % % Perdigão International Ltd. Import and export of products Cayman Island Indirect Consolidated % % BFF International Ltd. Financial fundraising Cayman Island Indirect Consolidated % % Highline International (a) Financial fundraising Cayman Island Indirect Consolidated % % Sadia Overseas Ltd. Financial fundraising Cayman Island Indirect Consolidated 98.00% 98.00% ProudFood Lda Import and commercialization of products Angola Indirect Consolidated 90.00% 90.00% Sadia Chile S.A. Import and commercialization of products Chile Indirect Consolidated 40.00% 40.00% Sadia Foods GmbH Import and commercialization of products Germany Indirect Consolidated % % SATS BRF Food PTE Ltd. Import, industrialization, commercialization and distribution of products Singapore Joint venture Equity pick-up 49.00% 49.00% BRF Global Namíbia Import and commercialization of products Namibia Indirect Consolidated % % Wellax Food Logistics C.P.A.S.U. Lda. Import and commercialization of products Portugal Indirect Consolidated % % BRF Luxembourg Sarl Holding Luxemburgo Direct Consolidated % % BRF Austria GmbH Holding Austria Indirect Consolidated % % One Foods Holdings Ltd Holding United Arab Emirates Indirect Consolidated % % Al-Wafi Food Products Factory LLC Industrialization and commercialization of products United Arab Emirates Indirect Consolidated 49.00% 49.00% Badi Ltd. Holding United Arab Emirates Indirect Consolidated % % Al-Wafi Al-Takamol International for Foods Products Import and commercialization of products Saudi Arabia Indirect Consolidated 75.00% 75.00% BRF Al Yasra Food K.S.C.C. ("BRF AFC") Import, commercialization and distribution of products Kuw ait Indirect Consolidated 49.00% 49.00% BRF Foods GmbH Industrialization, import and commercialization of products Austria Indirect Consolidated % % Al Khan Foodstuff LLC ("AKF") Import, commercialization and distribution of products Oman Indirect Consolidated 70.00% 70.00% FFM Further Processing Sdn. Bhd. Industrialization, import and commercialization of products Malaysia Indirect Consolidated 70.00% 70.00% SHB Comércio e Indústria de Alimentos S.A. Industrialization and commercialization of products Brazil Indirect Consolidated 99.99% 99.99% TBQ Foods GmbH Commercialization of products Austria Indirect Consolidated 60.00% 60.00% Banvit Bandirma Vitaminli Holding Turkey Indirect Consolidated 91.71% 91.71% Banvit Enerji ve Elektrik Üretim Ltd. Sti. Commercialization of eletric energy Turkey Indirect Consolidated % % Banvit Foods SRL Industrialization of grains and animal feed Romania Indirect Consolidated 0.01% 0.01% Nutrinvestments BV Holding The Netherlands Indirect Consolidated % % Banvit ME FZE Marketing and logistics services United Arab Emirates Indirect Consolidated % % Banvit Foods SRL Industrialization of grains and animal feed Romania Indirect Consolidated 99.99% 99.99% BRF Malaysia Sdn Bhd Marketing and logistics services Malaysia Indireta Consolidated % % Federal Foods LLC Import, commercialization and distribution of products United Arab Emirates Indirect Consolidated 49.00% 49.00% Federal Foods Qatar Import, commercialization and distribution of products Qatar Indirect Consolidated 49.00% 49.00% SHB Comércio e Indústria de Alimentos S.A. Industrialization and commercialization of products Brazil Indirect Consolidated 0.01% 0.01% BRF Hong Kong LLC Import, commercialization and distribution of products Hong Kong Indirect Consolidated % % 63

64 % equity interest Entity Main activity Country Participation Accounting method Establecimiento Levino Zaccardi y Cia. S.A. (a) Industrialization and commercialization of dairy products Argentina Direct Consolidated 99.94% 99.94% Industrialization and commercialization and distribution of feed and nutrients for BRF Pet S.A. animals Brazil Direct Consolidated % % PP-BIO Administração de bem próprio S.A. Management of assets Brazil Affiliate Equity pick-up 33.33% 33.33% PSA Laboratório Veterinário Ltda. Veterinary activities Brazil Direct Consolidated 99.99% 99.99% Sino dos Alpes Alimentos Ltda. (a) Industrialization and commercialization of products Brazil Indirect Consolidated 99.99% 99.99% PR-SAD Administração de bem próprio S.A. Management of assets Brazil Affiliate Equity pick-up 33.33% 33.33% Quickfood S.A. Industrialization and commercialization of products Argentina Direct Consolidated 91.21% 91.21% Sadia Alimentos S.A. Holding Argentina Direct Consolidated 43.10% 43.10% Avex S.A. Industrialization and commercialization of products Argentina Indirect Consolidated 33.98% 33.98% Sadia International Ltd. Import and commercialization of products Cayman Island Direct Consolidated % % Sadia Chile S.A. Import and commercialization of products Chile Indirect Consolidated 60.00% 60.00% Sadia Uruguay S.A. Import and commercialization of products Uruguay Indirect Consolidated 5.10% 5.10% Avex S.A. Industrialization and commercialization of products Argentina Indirect Consolidated 66.02% 66.02% Compañía Paraguaya Comercial S.A. Import and commercialization of products Paraguay Indirect Consolidated 1.00% 1.00% Sadia Alimentos S.A. Holding Argentina Indirect Consolidated 56.90% 56.90% Sadia Overseas Ltd. Financial fundraising Cayman Island Direct Consolidated 2.00% 2.00% Sadia Uruguay S.A. Import and commercialization of products Uruguay Direct Consolidated 94.90% 94.90% UP Alimentos Ltda. Industrialization and commercialization of products Brazil Affiliate Equity pick-up 50.00% 50.00% Vip S.A. Empreendimentos e Participações Imobiliárias Commercialization of owned real state Brazil Direct Consolidated % % Establecimiento Levino Zaccardi y Cia. S.A. (a) Industrialization and commercialization of dairy products Argentina Indirect Consolidated 0.06% 0.06% PSA Laboratório Veterinário Ltda. Veterinary activities Brazil Indirect Consolidated 0.01% 0.01% Sino dos Alpes Alimentos Ltda. (a) Industrialization and commercialization of products Brazil Indirect Consolidated 0.01% 0.01% (a) Dormant subsidiaries. (b) The wholly-owned subsidiary BRF Global GmbH, operates as a trading in the European market and owns 101 direct subsidiaries in Madeira Island, Portugal, with an investment as of March 31, 2018 of R$3,415 (R$3,617 as of December 31, 2017) and a direct subsidiary in Den Bosch, The Netherlands, denominated Qualy 20 with an investment as of March 31, 2018 of R$6,735 (R$6,471 as of December 31, 2017). The wholly-owned subsidiary Qualy 5201 B.V. owns 212 subsidiaries in The Netherlands being the amount of this investment as of March 31, 2018 of R$24,090 (R$20,210 as of December 31, 2017). The indirect subsidiary Invicta Food Group Ltd. owns 120 direct subsidiaries in Ashford, England, with an investment of R$131,162 as of March 31, 2018 (R$126,570 as of December 31, 2017). The indirect subsidiary Universal Meats (UK) Ltd owns 99 direct subsidiaries in Ashford, England with an investment of R$41,950 as of March 31, 2018 (R$41,636 as of December 31, 2017). The indirect subsidiary Golden Foods Siam Europe Ltd (GFE) owns 32 subsidiaries in Ashford. England with an investment of R$375 as of March 31, 2018 (R$16 as of December 31, 2017). The purpose of these subsidiaries is to operate in the European market to increase the Company s market share, which is regulated by a system of poultry and turkey meat import quotas Carne Fraca Operation BRF's Statutory Audit Committee has initiated an investigation with respect to the allegations involving BRF employees in the Carne Fraca Operation and it involved outside counsel. The investigation is substantially concluded. The Company revisited food quality and safety processes and reinforced our internal control and compliance Trapaça Operation On March 5, 2018, the Company learned of a decision issued by a federal judge of the 1 st Federal Court of Ponta Grossa/PR, authorizing the search and seizure of information and documents from us and certain current and former employees, and the temporary detention of eleven individuals, who have already been released. Current or former employees of BRF were identified for questioning. Based on the judge s decision authorizing the temporary detention and the search and seizure, the main allegations at this stage involve alleged misconduct relating to quality violations, improper use of feed components, and falsification of tests at certain BRF manufacturing plants and accredited labs. 64

65 The Company is cooperating with authorities and initiated an internal investigation with respect to the allegations. BRF s Statutory Audit Committee has initiated an investigation with respect to the alleged misconduct involving BRF employees in the Trapaça Operation and it involved outside counsel. The investigation is still at its early stages and at this point the results obtained have not indicated necessary adjustments in BRF s financial statements. As a result of the Trapaça Operation, on March 5, 2018, BRF received notice from Ministry of Agriculture, Livestock and Food Supply ( MAPA ) that it immediately suspended exports from its Rio Verde/GO, Carambeí/PR and Mineiros/GO plants to 12 (twelve) countries that require specific sanitary requirements for the control of the bacteria group Salmonella spp and Salmonella pullorum. On March 15, 2018, MAPA suspended exports from 9 (nine) other BRF plants to the European Union, but revoked the temporary suspension on April 18, Although to date, the Company have not received any formal notice from Brazilian or European authorities, media reports indicate that the European Union is considering suspending imports of poultry from certain production facilities in Brazil, including supposedly due to sanitary concerns. If the European Union, were to implement any such ban of imports from BRF s production facilities, the Company may not be able to sell its products from such embargoed production plants in the European Union, and depending on the extension of such suspension, it s results of operations may be adversely affected if BRF are not capable of directing any exceeding production capacity resulting from suspension to other markets at similar prices. The outcome of this operation may result in penalties, fines and sanctions from governmental authorities or other forms of liabilities. Also, as a result of this operation, the Company may present losses related to contingencies, adjustments to net realizable value of inventories and recoverability of certain assets, all of which are not possible to be estimated at this moment and therefore, no provision has been recorded, except for expenses incurred and disclosed in note U.S. Class Action On March 12, 2018, a purported shareholder class action lawsuit was filed in U.S. Federal District Court in the Southern District of New York alleging, among other things, that BRF and certain of its officers and/or directors engaged in securities fraud or other unlawful business practices related to the regulatory issues or other illegal commercial acts related to Trapaça and Carne Fraca Operation. Because this lawsuit is in its early stage, the possible loss or range of losses, if any, arising from this litigation cannot be estimated. While BRF believes that the claims are without merit and will continue to defend against the litigation vigorously, in the event that this litigation is decided against the Company, or BRF enter into an agreement to settle, there can be no assurance that an unfavorable outcome would not have a material impact. 65

66 1.5. Extraordinary General Shareholders Meeting for change of Board of Directors On March 5, 2018, the Company was called for an Extraordinary General Shareholders Meeting to be held jointly with the Ordinary General Shareholders Meeting on April 26, 2018 to deliberate on the requests: (i) removal of all current members of the Board of Directors; (ii) approval of the number of 10 members to compose the Board of Directors; (iii) election of new members to fill the positions on the Board of Directors; and (iv) election of the Chairman and Vice-Chairman of the Board of Directors Seasonality In Brazil and Southern Cone operating segments, in months of November and December of each year, the Company is impacted by seasonality due to Christmas and New Year s Celebrations, being the best-selling products in this period: turkey, Chester, ham and pork loins. In One Foods operating segment, seasonality is due to Ramadan, which is the holy month of the Muslim Calendar. The start of Ramadan depends on the beginning of the moon cycle and therefore can vary each year. 2. MANAGEMENT S STATEMENT AND BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS The Company s consolidated financial statements are prepared in accordance with the International Financial Reporting Standards ( IFRS ) issued by the International Accounting Standards Board ( IASB ) and interpretations issued by the International Financial Reporting Interpretations Committee ( IFRIC ), introduced in Brazil through Brazilian Accounting Pronouncements Committee ( CPC ) and its technical interpretations ( ICPC ) and guidelines ( OCPC ), approved by the Brazilian Securities Exchange Commission ( CVM ) and applicable to the preparation of quarterly financial information. The Company s individual and consolidated financial statements are expressed in thousands of Brazilian Reais ( R$ ), as well as the amounts of other currencies disclosed in the financial statements, when applicable, were also expressed in thousands, unless otherwise stated. The preparation of the Company s financial statements requires Management to make judgments, use estimates and adopt assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, as well as the disclosures of contingent liabilities, as of the reporting date. However, the uncertainty inherent to these judgments, assumptions and estimates could result in material adjustments to the carrying amount of the affected assets and liabilities in future periods. 66

67 The Company reviews its judgments, estimates and assumptions on a quarterly basis as disclosed of financial statements for the year ended December 31, 2017 (note 3.28). The individual and consolidated financial statements were prepared on the historical cost basis except for the following items which are measured at fair value: i. derivative and non-derivative financial instruments measured at fair value; ii. iii. share-based payments and employee benefits at fair value, and biological assets at fair value. The Company s Management notes that the consolidated financial statements were prepared considering the continuing capacity of the Company s operating activities, demonstrated through several acquisitions and maintenance of its operations in the operating segments in which it operates. In addition, all the relevant information was disclosed in the explanatory notes, in order to clarify and complement the accounting basis used in the preparation of the financial statements and used by the Management. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The quarterly financial information have been prepared according to CVM Deliberation Nº 673/11, that approved CPC 21 (R1), which is consistent with IAS 34, which establishes the minimum content of interim financial statement and the principles for measurement and recognition of a full or condensed set of financial statements for an interim period. The interim financial statements, in this case denominated as quarterly financial information, aim to provide updated information based on the last annual financial statements disclosed. Therefore, the quarterly financial information focus on new activities, events and circumstances and do not duplicate the information previously disclosed, except in the case where Management judged that the maintenance of the information was relevant. The current quarterly financial information was consistently prepared based on the accounting policies and estimates calculation methodology adopted in the preparation of the annual financial statements for the year ended December 31, 2017 (note 3). There were no changes on such policies and estimates calculation methodology, except for those related to the adoption of CVM Deliberation 762/16, which regulates revenue from contracts with customers and nº 763/16, which regulates instruments financial, corresponding to IFRS 15 and 09, respectively, set forth below. As allowed by CVM Deliberation Nº 673/11, Management decided not to disclose again the details of the accounting policies adopted by the Company. Hence, the quarterly financial information 67

68 should be read in conjunction with the annual financial statements for the year ended December 31, 2017, in order to allow the users of this financial information to further understand the Company s capacity of profit and future cash flows generation as well as its financial conditions and liquidity IFRS 15 Revenue from contracts with customers The Company assessed the content of IFRS 15 and based on its operations considers that revenues are recognized when it products are delivered to the customer and therefore, determining when the customer accepts the products and the risks and benefits related to the property are transferred. The revenue recognition occurs when (i) revenue and cost can be reliably measured (ii) receipt of consideration is probable and (iii) there is no continued involvement of the Company with the products. The standard established that revenue must be recognized when the customer obtains the control of products. In this assessment, recognition and measurement of revenue, rebates, discounts and returns, as well as policies, processes and individual relevant agreements, have not been substantially changed by the new standard. Then, the accounting policy applied by the Company did not change significantly IFRS 9 Financial Instruments The Company adopted IFRS 9 Financial Instruments in replacement of IAS 39 Financial Instruments: Recognition and measurement from January 01, 2018, as per CVM Deliberation Nº 763/16. The changes in accounting policies and its impacts to the financial statements are described below: Classification of Financial Assets IFRS 9 contains a new classification and measurement approach for financial assets which contains three principal classification categories: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit and loss (FVTPL). The standard eliminates the IAS 39 categories of held to maturity, held for trading, loans and receivables and available for sale. This change did not cause any retrospective impact in the measurement of the Company s financial assets. Prospectively, for equity instruments measured at FVOCI, when settled or transferred, the gains and losses accumulated in other comprehensive income no longer affect income statement, being immediately reclassified to accumulated profits or losses, in equity. The classification of financial assets is based on individual characteristics of the instrument and the management model of the asset or portfolio in which it is contained. For already existent financial instruments on January 01, 2018, the Company has adequate the categories on the following manner: 68

69 (i) Financial assets held to maturity and loans and receivables were transferred to the amortized cost category; (ii) Financial assets held for trading were transferred to the FVTPL classification; (iii) Financial assets available for sale were transferred to the FVOCI classification; The charts related to financial instruments in Notes 4 and 7 now follow the categories described above. Hedge accounting The Company has chosen to apply the new hedge accounting requirements of IFRS 9. The standard requires that hedge accounting relationships are aligned with the Company s risk management objectives and strategy, the application of a more qualitative and forward-looking approach to assessing hedge effectiveness and prohibits voluntary discontinuation of hedge hedge accounting. For financial instruments designated into cash flow hedge relations, the Company has begun to account for the time value of purchased options, the forward element of forward contracts and foreign currency basis spreads as cost of hedging, into other comprehensive income. When the instrument is terminated, the costs of hedge are reclassified to the income statement together with the intrinsic values of the instrument. The categories and designation models for hedge accounting remain unchanged, Impairment of Financial Assets IFRS 9 replaces the incurred loss model in IAS 39 with a forward-looking expected credit loss model. This model is applicable to financial assets measured at amortized cost or at FVOCI, except for equity instruments and contractual assets. For financial investments and cash and equivalents, the Company did not have any relevant impact on credit losses, due to the elevated ratings of its counterparties. For trade receivables and notes receivables, the Company has elected the practical expedient of the aging-based provision matrix in paragraph B of IFRS 9, with the appropriate groupings of the receivables. The Company prepared a study of historical losses of its customers portfolios for every acting region, taking into consideration the dynamics of the markets and the instruments hired to reduce credit exposures, such as: letters of credit, insurances and guarantees. In addition to the analysis of the consolidated portfolios, specific clients with different credit risks were treated separately. 69

70 Based on the studies, expected losses indexes were calculated for each portfolio and aging class. The indexes were applied to the accounts receivable balances and generated the amounts of expected credit losses. The Company monitors the indexes, customers and portfolios constantly, recognizing the respective changes into the commercial expense account. The adoption of the new policy has impacted the Company s equity as per below: Retained Earnings Impact of IFRS 9 adoption Increase in expected credit losses with trade accounts receivable 12,613 Increase in expected credit losses with notes receivable 6,499 Deferred taxes (5,963) Non-controlling interest 2,547 Impact on ,696 Transition Changes in accounting policies resulting from the adoption of IFRS 9 were applied retrospectively, except as described below: The Company took advantage of the exemption allowing it not to restate comparative information for prior periods with respect to classification and measurement (including impairment) changes. Differences in carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 were recognized in retained earnings at January 01, The new hedge accounting requirements were applied prospectively Comparability of the statement of income In 2018, for a better presentation of expenses by function, the Company reclassified expenses with employee benefits plan, share-based payment, labor contingencies (public civil actions) and disabled operations. For the purposes of comparability with the previous year, the Company reclassified the amount of R$78,849 for the period ending from other operating income (expenses), net, to (i) cost of sales in the amount of R$73,562 (ii) selling expenses in the amount of R$4,222 and (iii) administrative expenses in the amount of R$1, Exchange rates The exchange rates in Brazilian Reais that are effective at the balance sheet dates are as follows: 70

71 Average rates Bath (THB) Kwait Dinar (KWD) Dirham (AED) Singapore Dollar (SGD) U.S. Dollar (US$ or USD) Euro ( or EUR) Forint Hungary (HUF) Yen (JPY) Pound Sterling ( or GBP) Turkish Lira (TRY) Argentine Peso ($ or ARS) Chilean Peso (CLP) Uruguayan Peso (UYU) Rande Africa (ZAR) Renminbi Yuan China (CNY) Saudi Riyal (SAR) Qatar Riyal (QAR) Omani Riyal (OMR) Ringgit Malaysia (MYR) Ruble Russia (RUB) Won South Korea (KRW)