POSITIVE CASH FLOW OF R$43 MILLION IN 4Q15

Transcription

1 4Q15 and 2015 Earnings Release POSITIVE CASH FLOW OF R$43 MILLION IN 4Q15 São Paulo, February 29, 2016 Marfrig Global Foods S.A. Marfrig (BM&FBOVESPA NOVO MERCADO: MRFG3 and Level 1 ADR : MRTTY) announces today its results for the fourth quarter and fiscal year of 2015 (4Q15 and 2015). Except where stated otherwise, the following operating and financial information is presented in nominal Brazilian real, in accordance with International Financial Reporting Standards (IFRS), and should be read together with the income statement and notes to the financial statements for the period ended December 31, 2015 filed at the Securities and Exchange Commission of Brazil (CVM). HIGHLIGHTS Marfrig continued to deliver a solid operating performance. In the fourth quarter, Net Revenue 1 amounted to R$5.2 billion, increasing 18.5% from 4Q14. In line with its strategy to capture efficiency and productivity gains, Marfrig Beef s units in Brazil operated at a capacity utilization rate of 90.1%. Marfrig Global Foods Adjusted EBITDA¹ was R$527 million, increasing 19.4% from 4Q14. Adjusted EBITDA margin was 10.2%, expanding around 10 bps. Keystone posted Adjusted EBITDA of US$61 million in 4Q15, for growth of 12% compared to 4Q14. Double-digit growth was supported by continued growth in Key Accounts, the solid results in the APMEA region and the favorable environment for commodities. In Brazilian real, Adjusted EBITDA in 4Q15 was R$235 million, accounting for 45% of Marfrig s total Adjusted EBITDA. Marfrig Beef posted Adjusted EBITDA of R$292 million in 4Q15, down 3.1% from the same period last year. The solid performance of the Brazilian operation was partially offset by the weak performance in Uruguay. Adjusted EBITDA Margin in 4Q15 was 10.7%. In 2015, consolidated Adjusted EBITDA was R$1.8 billion, growing 32.3% from The result was supported by the better operating performances at Marfrig Beef Brazil and Keystone, which was partially offset by lower margins at the Uruguayan operation in the second half of In line with its commitment to improve its capital structure, Marfrig launched its Liability Management strategy by repurchasing US$470 million in senior notes. With this, the Company expects to capture annual savings in interest expenses of around US$40 million. In December 2015, Keystone amended and extended its existing credit facilities. These facilities, which were increased by US$270 million, consist of a US$530 million revolving credit facility maturing in 2020 and a US$370 million term loan maturing in Marfrig was recognized by The Business Benchmark on Animal Welfare, which identifies companies with the best animal welfare practices in the world, as the best ranked Brazilian multinational. In the 2015 report, the Company was classified as Tier 2. 1 In the fourth quarter of 2015, the Management of Marfrig decided to divest MFG Agropecuária, the company responsible for the feedlot operations in Brazil. The results for 2014 and 2015 of these operations are presented under Net income (loss) from Discontinued Operations. The assets and liabilities of the company are presented under Assets Held for Sale and Liabilities Related to Assets Held for Sale. 1

2 GUIDANCE 2015 Target Range 2015 (1) 2015 Combined Actual (4) R$23 to R$25 R$25 Net Revenues billion billion Adjusted EBITDA Margin (2) 8.0% - 9.0% 8.5% R$650 R$556 Capex million million Free Cash Flow to Shareholders (3) R$100 to R$200 million R$213 million (1) Assumptions based on the exchange rates of R$2.70/US$1.00 and R$4.30/ (2) Excludes non-recurring items. (3) Operating cash flow after capital expenditure, interest expenses and income tax. (4) Unaudited pro-forma amounts including the discontinued operations: Moy Park, Argentina, Marfood and MFG Agro. Does not include the capital gain from the divestment of Moy Park. On Marfrig Day, the Company announced its guidance for 2015, which considered the Moy Park operations and its assets in Argentina, Marfood and MFG Agropecuária, which are currently classified as discontinued operations. Therefore, for comparison purposes, the above table includes these operations. The Company met its guidance for the third straight year. In 2015, Combined Adjusted EBITDA was R$2.1 billion, with adjusted margin of 8.5% and free cash flow of R$213 million. If we analyze solely the continued operations, consolidated Adjusted EBITDA came to R$1.8 billion, with margin of 9.5%. Free cash flow was R$103 million. Continued Operations 2015 Net Revenues R$19 billion Adjusted EBITDA Margin (2) 9.5% Capex Free Cash Flow to Shareholders (3) R$448 million R$103 million (1) Excludes non-recurring items. (2) Excludes the effects of transactions with the discontinued operations in the approximate amount of R$308 million. (3) Consolidated free cash flow, including Moy Park sale and discontinued operations, was R$4.9 billion. Marfrig s results reinforce its commitment to capturing operational efficiency gains through its strategic plan Focus to Win and reflect the consistent improvement in its cash generation capacity. The Company further announces that, as part of its strategy to focus on its core assets, it decided to divest MFG Agropecuária, the company responsible for the feedlot operations in Brazil. The decision is in line with the Company s commitment to focus more on the food service channel and on Keystone through organic growth, especially in the APMEA region and Key Accounts. 2

3 CONSOLIDATED RESULTS Net Revenue Consolidated net revenue in 4Q15 was R$5.2 billion, up 18.5% from 4Q14, which is mainly explained by the effect from the 51.0% appreciation of the U.S. dollar against the Brazilian real on revenue from the international units and from Brazilian exports. Net Revenue (R$ millions) 24% 18% In the year, Marfrig s consolidated net Revenue was R$18.9 billion, advancing 24.2% from The main factors include (i) the positive impact from the 41.6% depreciation of the Brazilian real against the U.S. dollar; (ii) the 7.6% increase in Keystone s net revenue in U.S. dollar; (iii) which were partially offset by the weaker sales volume at Marfrig Beef. Revenue Breakdown 4Q15 By business By product By currency 59% of revenue came from the international operations (Keystone and Beef International); 80% of sales is linked to currencies other than the BRL. 3

4 Gross Profit and Gross Margin Consolidated gross profit in 4Q15 was R$683 million, advancing 16.3% from 4Q14, and also benefitting from the depreciation of the Brazilian real. Margin stood at 13.2%, contracting 30 bps from 4Q14, which is explained by margin contraction at Marfrig Beef, especially in the International Operations, which were affected by a longer dry season in Uruguay and by lower prices in USD, in line with the international market dynamic. Gross Profit (R$ million) and Margin (%) 16% 16% In the year, gross profit amounted to R$2.3 billion, growing 16.2% from Of this amount, 42% came from the International Operations (Keystone and Marfrig Beef International). One of the highlights was the contribution by Keystone, which accounted for R$732 million or 32% of consolidated gross profit. Gross margin stood at 12.2%, down 80 bps from 2014, which is explained by the weak performance in 1Q15 due to the lower margins on Brazilian exports, resulting from the reduction in purchases from Russia in the global beef market, and by the margin contraction at the Uruguay operation in the second half of Selling, General and Administrative Expenses (SG&A) In 4Q15, SG&A expenses as a ratio of net revenue (SG&A/NOR) stood at 5.4%, virtually stable compared to 4Q14. In nominal terms, SG&A increased R$46.9 million, primarily explained by the depreciation of the Brazilian real between the periods. Compared to 3Q15, SG&A/NOR posted a slight increase of 100 bps, mainly due to (i) the exchange variation on the translation of amounts from the international units into BRL; (ii) the higher personnel expenses due to annual wage increases under the collective bargaining agreement; and (iii) the seasonal review and restatement of provisions. 4

5 SG&A e SG&A/NOR (R$ million and %) -1% 20% In the year, SG&A/NOR decreased 130 bps to 5.0%, compared to 6.3% in the prior year, supported by continuous efforts to capture operational improvements and efficiency gains through the strategic plan Focus to Win. Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA in 4Q15 was R$ 527 million and advanced 19.4% in relation to 4Q14. Adjusted EBITDA Margin stood at 10.2%, benefitting from the margin expansion at Keystone. Adjusted EBITDA (R$ million) and Adjusted EBITDA Margin (%) 32% 19% In 2015, consolidated adjusted EBITDA amounted to R$1.8 billion, growing 32.3% on the prior year. Adjusted EBITDA margin was 9.5%, a 60 bps expansion from the 8.9% margin in The key factors in this performance were (i) the recovery in beef spreads in the Brazilian operation; (ii) the 17.2% growth in Keystone s Adjusted EBITDA in U.S. dollar; and (iii) the depreciation of the Brazilian real against the U.S. dollar; which were partially offset by (iv) the lower sales volume in the Brazilian operation; and (v) the margin contraction at the Uruguay operation in the second half of The international units accounted for 47% of adjusted EBITDA in the year, a 200 bps expansion from 45% in Keystone, in particular, accounted for 41% of Adjusted EBITDA, increasing its contribution by 900 bps. 5

6 Financial Result The net financial result in 4Q15 was an expense of R$439 million, compared to an expense of R$1.2 billion in the previous quarter. Marfrig holds net exposure to the U.S. dollar (more dollar-denominated liabilities than dollardenominated assets), which means that any change in the exchange rate has an impact on the accounting financial result. However, any exchange variation on debt contracted by operational subsidiaries abroad, whose functional currency differs from that of the parent company, is recorded under equity, with no impact on profit or loss. As a result, the effect of the 1.7% appreciation of the BRL against the USD on the consolidated net exposure adversely affected the financial result by R$45 million. Excluding exchange variation effects, the financial result was an expense of R$394 million, down R$312 million from the net financial expense recorded in the previous quarter. The main factors were (i) the nonrecurring gain of R$136 million related to the repurchase of senior notes below their face value; (ii) the lower provision for the payment of interest expenses due to the reduction in gross debt; and (iii) the net gain of R$185 million from market operations; which were partially offset by (iv) the one-off, noncash expense of R$83 million from the write-down of the issuance costs associated to the repurchased senior notes. FINANCIALS REVENUES/EXPENSES (R$ million) 4Q15 3Q15 4Q FINANCIALS REVENUES Interest income, income from marketablesecurities Market transactions Other revenues FINANCIALS EXPENSES , , Interests provisioned, debentures and lease , , Market transactions Bank fees, commissions, finance. disc. and other EXCHANGE VARIATION , NET FINANCIAL RESULT , , ,061.9 In 2015, the net financial result, excluding exchange variation effects, was an expense of R$2.0 billion, increasing 25.1% from 2014, which is explained by (i) the R$113 million increase in the line Bank fees, commissions, finance.disc. and other, mainly due to the non-cash write-down of the issuance costs associated to the repurchase of the senior notes; and (ii) the net mark-to-market adjustment of derivative instruments; (iii) which were partially offset by the gain from the repurchase of senior notes, as explained above. 6

7 Net Income (Loss) In 4Q15, Marfrig posted a net loss of R$194 million, an improvement of R$90 million from the same period last year. The highlights were the improvement in operational performance and the lower financial result. In the year, Marfrig posted a net loss of R$586 million, an improvement of 20.8% from the net loss of R$739 million in The result was influenced by the better operating result and the positive impact from the gain from the Moy Park divestment in 3Q15. Net Income (R$ million) and Net Margin (%) Indebtedness and Debt Profile On December 31, 2015, Marfrig recorded gross debt of US$3.1 billion, declining 18.0% and 25.4% from 3Q15 and 4Q14, respectively. The reduction is mainly explained by the repurchase of senior notes and the settlement of other debts. Gross debt denominated in Brazilian real corresponded to 6.7% of the total. Measured in BRL, gross debt stood at R$12.1 billion, down 19.4% from 3Q15. Compared to 4Q14, gross debt increased 9.6% due to exchange variation in the period. Cash and marketable securities amounted to US$1.3 billion or R$5.0 billion. Consequently, net debt was US$1.8 billion, or R$7.1 billion, in line with the previous quarter. Indebtedness (R$ million) 7

8 As a relevant increase in liquidity, highlights the amendment and extension, in December 2015, of existing credit facilities at Keystone, a wholly owned subsidiary of Marfrig Global Foods. The credit facilities available increased by US$270 million to US$900 million, and consist of a US$530 million revolving credit facility maturing in 2020 and a US$370 million term loan maturing in Debt Maturity Schedule (R$ million) On December 31, 2015, the average debt term was 4.1 years and the average debt cost was 7.88% p.a. Only 16.6% of total debt matures in the short term. The liquidity level ensures that cash and equivalents cover all maturities through 2018 (2.9 years), without considering Keystone s new credit facilities. Debt Profile (R$ million) Leverage Ratios Net Debt / EBITDA LTM Ex FX Var,0.54x Net Debt / Annualized Adj. EBITDA..3.38x The growth in LTM EBITDA, combined with the capital gain of R$1.4 billion from the Moy Park divestment, had a positive impact on financial leverage measured by the ratio of net debt to LTM EBITDA, which ended the quarter at 2.26x. The calculation of the leverage ratio of bank and debt market funding transactions includes provisions that allow for excluding exchange variation effects from the leverage ratio calculation. Accordingly, the ratio for this purpose ended 4Q15 at 0.54x, significantly lower than the ratio of 3.42x at the end of 4Q14 (for more information, see Note 33.6 to the financial statements). Management believes that the ratio that best reflects the current leverage is the ratio of net debt to annualized Adjusted EBITDA from continued operations in 4Q15. This ratio was 3.38x. In the quarter, the ratio improvement reflected the exchange variation impact on operations, given the difference of only 1.6% between the end-of-period exchange rate in 4Q15 (R$3.90/US$1.00) 8

9 of the financial statements, which is used to translate net debt, and the average exchange rate in the quarter (R$3.84/US$1.00). Average Cost (%p.a.) Average Term (months) Current Liquidity Net Debt/ Total Assets Cash & Equiv / Short Term Debt 7.88% x 0.34x 2.49x Cash Flow Free cash flow from continued operations in 4Q15 was R$43 million. Compared to the 3Q15 the increase in accounts receivable, due to the lower volume of working capital transactions, and the reduction in inventories were partially offset by the improvement in suppliers due to the seasonally longer payment terms. In the year, free cash flow from continued operations, excluding the effects of transactions with discontinued operations, was R$103 million, reflecting the Company s commitment to generate cash through the program Focus to Win. Capital Expenditure (CAPEX) Capital expenditure of continued operations remained in line with the initial expectations. R$ million Investments in Fixed Assets Fixed Assets Biological Assets Investments in Intangible Assets & Investments TOTAL

10 KEYSTONE Keystone growth pillars remain (i) growth in the APMEA region, led by Thailand and China and (ii) further growth in Key Accounts globally, maintaining existing client base and further diversifying into additional food service channels. The subsidiary s result for this quarter continues to reflect its operational and strategic discipline, as well as proving the low volatility of its business model. Net Revenue Keystone posted net revenue of US$636 million in 4Q15, down 3.4% from the same quarter of The sales reduction was largely due to lower prices that followed the ban imposed on US poultry products following cases of Avian Influenza in the U.S. in late 2014/early Keystone sales of poultry parts (e.g. Leg Quarters) was impacted by this market situation. Net revenue in 4Q15 decreased 9% compared to the US$697 million posted last quarter affected by the same factors. In BRL, revenue amounted to R$2.4 billion, increasing 45.6% from 4Q14 and reflecting the 51.0% depreciation of the Brazilian real against the U.S. dollar between the periods. For the year ended 2015, net revenue came to US$2.7 billion, up 7.6% from The main driver for the growth was the success in the Key Accounts strategy. Both the US and APMEA businesses each generated 20%+ growth in sales and volume. In Brazilian real, net revenue advanced 52.4%. Revenue Profile 4Q14 4Q Gross Profit and Gross Margin In 4Q15, gross profit was US$65 million, with gross margin of 10.2%, increasing 19.6% from 4Q14 gross profit of US$54 million and margin of 8.3%. Including the exchange variation effect, 4Q15 gross profit was R$250 million, increasing 80% from 4Q14 (R$ 139 million). The expansion in gross margin is explained by (i) lower costs in meat purchases (12% drop in perton cost) and animal feed (12% drop in per-ton cost) in the U.S.; (ii) efficiency gains in APMEA (Thailand and Malaysia) and U.S. operations and (ii) better sales mix, with an increase in the share of higher-margin Key Accounts. Compared to 3Q15, gross profit in U.S. dollar in 4Q15 increased 22.8% in value and 260 bps. 10

11 Gross Profit and Margin (US$ million) Gross Profit and Margin (R$ million) 76% 20% 24% 80% For the year ended 2015, gross profit was US$216 million, with margin of 8.0%, an increase of 24% from 2014 gross profit of US$175 million and margin of 7.0%. The main factors in this performance were (i) Key Accounts double digit volume increase of 23%; (ii) lower meat cost per ton of 13% in the U.S.; (iii) lower grain prices in the U.S., reducing feed cost by 11%/ton (iv) efficiency gains in both the US and APMEA operations. Including the exchange variation effect, for the year ended 2015 gross profit came to R$732 million, advancing 76.1% from 2014 (R$416 million). Selling, General and Administrative Expenses SG&A expenses stood at US$21 million (3.3% of net revenue in 4Q15), increasing 25.8% and 20.1% versus 3Q15 and 4Q14, respectively. SG&A in 4Q14 was impacted by seasonal review and update of accruals and reserves. For the year ended 2015, SG&A Expenses as a ratio of NOR stood at 2.6%, in line with the ratio of 2.5% in It demonstrates Keystone s cost control focus and objective to keep expenses within the range of 2.5% to 3.0% of NOR. Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA and Margin (US$ million and %) Adjusted EBITDA and Margin (R$ million and %) 67% 12% 17% 68% 11

12 Adjusted EBITDA in 4Q15 was US$61 million, increasing 11.7% from 4Q14. Adjusted EBITDA margin was 9.6%, an increase of 130 bps from 4Q14 and reflects the improvements in Gross Profit described previously. Considering the impact from exchange variation, Keystone recorded Adjusted EBITDA of R$235 million in 4Q15, increasing 68.0% from 4Q14. For the year ended 2015, Adjusted EBITDA was US$216 million, representing an increase of 17.2% from EBITDA Margin at the end of 2015 was 8.0%, 60 bps higher than the 7.4 % margin achieved in The increase in Adjusted EBITDA and margin is explained by the same points which are described under the Gross Profit improvement as well as continued effort to control costs. Considering the impact from exchange variation, Keystone recorded Adjusted EBITDA of R$730 million in 2015, increasing 66.7% from 4Q14. 12

13 MARFRIG BEEF Marfrig Beef s strategy continues to be capturing operating efficiency gains and strengthening its operational focus while pursuing higher profitability and cash generation at the expense of volumes. In line with this strategy, in the fourth quarter, the Company decided to divest the company MFG Agropecuária, which is responsible for the feedlot operation in Brazil. The transaction was concluded in 1Q16 for R$95 million (for more information, see Note 37 to the Financial Statements Events after the reporting period). In 2015, beef slaughter volume at Marfrig Beef Brazil fell 12.9% from 2014, which represents a reduction of 333,000 heads of cattle out of a total of approximately 2.5 million. This reduction reflects the Company s strategic decision to temporarily reduce its slaughter capacity in Brazil to adjust to the current scenario of lower cattle supply, with the closure of 5 units, or approximately 30% of authorized capacity. Effective capacity, which takes into account the current labor force and the number of deboning lines, stood at 90.1% in 4Q15, confirming the goal of maintaining high effective capacity utilization rates. The efforts to optimize production resulted in a utilization rate of 79.0% of authorized capacity in 4Q15. In line with its strategy to increase profitability and achieve an optimal sales mix to improve margins at the Business Unit, in 4Q15, Brazilian exports accounted for 52% of Marfrig Beef Brazil revenue, compared to 49% in 3Q15 and 46% in 4Q14. In 2015, exports from Brazil reached 48% of revenue, compared to 44% in In the domestic market, our strategy continues to be increasing our market share in the food service and small retailer channels, which accounted for 39.4% of this market s revenue in 2015, compared to 36.0% in Exports and the international operations combined accounted for 59.4% of the unit s revenue. Net Revenue Net Revenue (R$ million) 2% 4Q15 Revenue Profile Net revenue amounted to R$2.72 billion in 4Q15, growing 1.5% from R$2.68 billion in 4Q14. Compared to 3Q15, net revenue increased 11.0%. Net revenue from the Brazilian operation came to R$2.1 billion in the quarter, representing 78% of the Unit s consolidated revenue and a decline of 4.4% from the same period of

14 The international operations accounted for 22% of total revenue and amounted to R$601 million, growing 30.1% from 4Q14 and reflecting the BRL depreciation between the periods. In USD, 4Q15 revenue was US$156 million, declining 13.9% from 4Q14. Net Revenue (R$ million) 2015 Revenue Profile 6% In 2015, Marfrig Beef posted net revenue of R$9.9 billion, increasing 6.4% compared to The lower sales volume was offset by the higher average price in the Brazilian market and the weaker Brazilian real against the U.S. dollar. Brazil Domestic Market Net revenue from the domestic market in 4Q15 came to R$1.0 billion, down 15.3% compared to 4Q14. The lower sales volume, in line with the slowdown in the Brazilian market and also reflecting the lower cattle supply, was partially offset by the higher average price resulting from the strategy to optimize the sales mix and capture market share gains in the food service and small retailer channels. In 2015, net revenue came to R$4.0 billion, down 5.5% from 2014, due to the same factors mentioned above. Brazil Export Market Net revenue from the export market was R$1.1 billion in 4Q15, increasing 8.6% from 4Q14. The higher average price, which benefitted from the continued weakening of the Brazilian real, offset the lower export volume. In USD, net revenue was US$284.7 million, down 28.2% from 4Q14, while the overall industry posted a reduction of around 19.5%, according to Brazil s foreign trade department Secex. Regarding its share on revenue, exports represented 52% of Brazil s revenue in 4Q15, up 600 bps from 4Q14, which reflects the unit s strategy of capturing the best market opportunities. The following chart presents the main export destinations of Marfrig Beef Brazil, which clearly shows the growing share of exports to Asia: 14

15 Exports Revenue Exports Volume In 2015, export revenue amounted to R$3.7 billion (US$1.11 billion), growing 10.0% from R$3.4 billion (US$1.4 billion) in International Units In 4Q15, consolidated net revenue from the international units amounted to US$156 million, down 13.9% from the same period a year ago. The lower average price, in line with the international market trend, was partially offset by the 2.7% increase in total sales volume. In BRL, revenue came to R$601 million, increasing 30.1% from 4Q14, reflecting the 51.0% depreciation of the BRL against the USD between the periods. The following chart presents the main export destinations of Marfrig Beef Uruguay: Exports Revenue Exports Volume Net revenue in the year from the international units amounted to US$650 million, down 8.3% from 2014, mainly due to (i) the lower export prices and lower domestic prices, following the global market trend; (ii) and by the 17.4% depreciation of the Uruguayan Peso; which were partially offset by the increase of 4.8% in domestic volume. Gross Profit and Gross Margin Gross profit in 4Q15 was R$434 million (gross margin of 16.0%), down 3.3% from R$449 million (gross margin of 16.8%) in 4Q14. The 80 bps contraction in gross margin is explained mainly by the lower operating margin at the Uruguayan operation, due to lower prices in USD in the domestic and export markets. 15

16 Gross Profit (R$ million) and Margin (%) 0,3% -3% In 2015, gross profit was R$1.6 billion, virtually in line with Gross margin stood at 15.9%, down 90 bps. The performance is mainly explained by (i) the weak performance in the first quarter of Brazilian exports, which were affected by the imbalance in international markets caused by the reduction in Russian demand; and (ii) the margins contraction at the Uruguay operation in the second half of 2015, reflecting a longer dry season and the lower average sales price. In Brazil, gross profit was affected by the cost of cattle, whose average price increased 15%, according to ESALQ. Selling, General and Administrative Expenses (SG&A) In 4Q15, SG&A expenses stood at R$198 million and corresponded to 7.3% of net revenue, which is practically in line with the 7.0% in 4Q14 and 80 bps higher than in 3Q15. In 2015, Selling, General and Administrative (SG&A) expenses amounted to R$709 million, down 12.2% from 2014, representing savings in nominal terms of R$98 million. In line with the Focus to Win strategy, which aims to structurally reduce fixed costs and expenses, SG&A expenses corresponded to 7.2% of net revenue, declining 150 bps from 8.7% in The productivity agenda led to savings in costs and expenses of R$48 million in 4Q15, for total annual savings of R$96 million. Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA amounted to R$292 million in 4Q15 (margin of 10.7%), a decrease of 3.1% from R$302 million (margin of 11.3%) in 4Q14. The reduction is mainly due to (i) lower sales volume and (ii) margin contraction, influenced by the poor performance of the Uruguay operation. 16

17 Adjusted EBITDA (R$ million) and EBITDA Margin (%) 16% -3% In 2015, Marfrig Beef posted Adjusted EBITDA of R$1.1 billion, up 15.8% from The increase was mainly supported by BRL depreciation and lower SG&A expenses. Adjusted EBITDA margin stood at 10.7%, expanding 90 bps from the 9.8% margin in MARFRIG GLOBAL FOODS DIFFERENTIALS Marfrig Global Foods rose one tier in the ranking published by the Business Benchmark on Farm Animal Welfare (BBFAW), which recognizes companies with the world s best animal welfare practices. In the 2015 report, the Company was classified as Tier 2, making it the best ranked Brazilian multinational. According to the BBFAW's 2015 Report, highlights at Marfrig include its commitment to animal welfare in all countries where it operates, and Marfrig Club, a cattle farmer development program that is present in all Brazilian states where it operates and has over 3,500 member properties. OUTLOOK AND CLOSING REMARKS The slowdown in the Chinese economy, the recession in Russia and the downward revision in expectations for commodity exports led the International Monetary Fund (IMF) to revise downward to 3.7% its forecast for world GDP growth for On the other hand, lower crude oil prices are expected to boost consumption, especially in developed markets and in countries that import the commodity. In this context, the IMF projects growth of 3.6% in the U.S. economy. In the case of China, GDP growth is forecasted at 6.8%, reflecting the shift in government policy from exports towards internal consumption, a change that could leverage growth in the consumption of fresh beef and processed food products. In this still challenging scenario, though with various opportunities, Marfrig s strategy will remain focused on capturing potential growth in the global protein industry and on maximizing value creation and returns for shareholders by maintaining its commitment to strengthening its business through: 17

18 1. Organic growth, operational improvements, productivity and margin expansion. 2. Adjustment of the Marfrig Beef business, prioritizing food service channels and growing exports. 3. Financial discipline through deleveraging and consequently reducing financial expenses and boosting free cash flow. 4. Accelerating growth in the Asian market by expanding Keystone s operations in the food service channel and by growing exports from the Marfrig Beef unit. 18

19 UPCOMING EVENTS Earnings Conference Call Date: February 29, 2016 Portuguese English 9 a.m. (Brasília) 1 p.m. (Brasília) 9 a.m. (US EST) 11 a.m. (US EST) 6 a.m. (Los Angeles) 8 a.m. (Los Angeles) 2 p.m. (London) 4 p.m. (London) Dial-in: Brazil: + 55 (11) or Code: Marfrig Dial-in: Other countries: + 1 (786) Code: Marfrig Live audio webcast with slide presentation. Replay available for download: Apimec Meeting SP Date: February 29, 2016 Place: Auditório Condomínio Millenium Av. Chedid Jafet, 222 Time: 8:30 a.m. (breakfast) and start at 9:00 a.m. (Brasília) Investor Relations + 55 (11) ri@marfrig.com.br 19

20 DISCLAIMER This material is a presentation of general information about Marfrig Global Foods S.A. and its consolidated subsidiaries (jointly the Corporation ) on the date hereof. The information is presented in summary form and does not purport to be complete. No representation or warranty, either expressed or implied, is made regarding the accuracy or scope of the information herein. Neither the Company nor any of its affiliated companies, consultants or representatives undertake any responsibility for any losses of damages arising from any of the information presented or contained in this presentation. The information contained in this presentation is up to date as of December 31, 2015, and, unless stated otherwise, is subject to change without prior notice. Neither the Corporation nor any of its affiliated companies, consultants or representatives have signed any commitment to update such information after the date hereof. This presentation should not be construed as a legal, tax or investment recommendation or any other type of advice. The data contained herein were obtained from various external sources and the Corporation has not verified said data through any independent source. Therefore, the Corporation makes no warranties as to the accuracy or completeness of such data, which involve risks and uncertainties and are subject to change based on various factors. This presentation includes forward-looking statements. Such statements do not constitute historical fact and reflect the beliefs and expectations of the Corporation s management. The words anticipates, hopes, expects, estimates, intends, projects, plans, predicts, projects, aims and other similar expressions are used to identify such statements. Although the Corporation believes that the expectations and assumptions reflected by these forwardlooking statements are reasonable and based on the information currently available to its management, it cannot guarantee results or future events. Such forward-looking statements should be considered with caution, since actual results may differ materially from those expressed or implied by such statements. Securities are prohibited from being offered or sold in the United States unless they are registered or exempt from registration in accordance with the U.S. Securities Act of 1933, as amended ( Securities Act ). Any future offering of securities must be made exclusively through an offering memorandum. This presentation does not constitute an offer, invitation or solicitation to subscribe or acquire any securities, and no part of this presentation nor any information or statement contained herein should be used as the basis for or considered in connection with any contract or commitment of any nature. Any decision to buy securities in any offering conducted by the Corporation should be based solely on the information contained in the offering documents, which may be published or distributed opportunely in connection with any security offering conducted by the Company, depending on the case. 20

21 APPENDIX LIST APPENDIX I: Consolidated Income Statement 21 and 22 APPENDIX II: EBITDA Calculation 23 APPENDIX III: Income Statement Keystone 24 and 25 APPENDIX IV: Operating Indicators Keystone 26 APPENDIX V: Income Statement Marfrig Beef 27 APPENDIX VI: Operating Indicators Marfrig Beef 28 to 30 APPENDIX VII: Balance Sheet 31 APPENDIX VIII: Cash Flow 32 21

22 APPENDIX I Income Statement Consolidated Quarterly (R$ million) 4Q15 (A) 4Q14 (B) R$ %NOR R$ %NOR R$ %NOR R$ % R$ % Net Revenues 5, % 4, % 4, % % % COGS -4, % -3, % -4, % % % Gross Profit % % % % % SG&A % % % % % Commercial % % % % % Administratives % % % % % Adj. EBTIDA* % % % % % Others revenues/expenses % % % % % EBITDA % % % % % D&A + Equity Account % % % % % EBIT % % % % % Financial Results % % -1, % % % Financial revenues/expenses % % % % % Exchange rate variation % % % % % Minority Stake % % % % % EBT % % % % % Taxes % % % % % Controller Shareholder Net Profit % % % % % Descontinued Ops. + Capital Gain % % % % % Controller Shareholder Net Profit % % % % % P&L - USD x BRL R$ 3.84 R$ 2.55 R$ % % BS - USD x BRL R$ 3.90 R$ 2.66 R$ % % 3Q15 (C) (A/B) Var. (A/C) Var. Note: financial information for Argentina, Marfood, Moy Park and MFG Agropecuária is presented under Discontinued Operations. 22

23 Annual Consolidated (R$ million) Change R$ %NOR R$ %NOR R$ % Net Revenues 18, % 15, % 3, % COGS -16, % -13, % -3, % Gross Profit 2, % 1, % % SG&A % % % Commercial % % % Administratives % % % Adj. EBTIDA* 1, % 1, % % Others revenues/expenses % % % EBITDA 1, % 1, % % D&A + Equity Account % % % EBIT 1, % % % Financial Results -3, % -2, % -1, % Financial revenues/expenses -2, % -1, % % Exchange rate variation -1, % % % Minority Stake % % % EBT -1, % -1, % % Taxes % % % Controller Shareholder Net Profit -1, % % % Descontinued Ops. + Capital Gain % % % Controller Shareholder Net Profit % % % P&L - USD x BRL R$ 3.33 R$ % BS - USD x BRL R$ 3.90 R$ % Note: financial information for Argentina, Marfood, Moy Park and MFG Agropecuária is presented under Discontinued Operations. (*) Excludes the effects from other operating income/expenses. 23

24 APPENDIX II EBITDA Calculation (R$ million) CONTINUED ADJUSTED EBTIDA RECONCILIATION 4Q14 3Q15 4Q15 (A/B) (R$ million) (B) (C) (A) Var Var. (%) Net Profit / Loss (292.5) (534.2) (62.6) -78.6% (834.5) (1,173.3) 40.6% (+) Provision for income and social contribution taxes (80.6) (395.8) (45.3) -43.7% (305.2) (682.5) 123.6% (+) Non-controlling Interest % % (+) Net Exchange Variation % , % (+) Net Financial Charges % 1, , % (+) Depreciation & Amortization % % (+) Equity Income % % EBITDA % 1, , % (+) Other Operacional Revenues/Expenses % % Adj. EBITDA % 1, , % 24

25 APPENDIX III Income Statement KEYSTONE Quarterly (US$ million) 4Q15 (A) 4Q14 (B) 3Q15 (C) (A/B) Var. (A/C) Var. $ %NOR $ %NOR $ %NOR $ % $ % Net Revenues % % % % % COGS % % % % % Gross Profit % % % % % SG&A % % % % % Commercial % % % % % Administratives % % % % % Adj. EBTIDA* % % % % % Others revenues/expenses % % % % % EBITDA % % % % % USD x BRL R$ 3.84 R$ 2.55 R$ % % (*) Excludes the effects from other operating income/expenses. Quarterly (R$ million) 4Q15 (A) 4Q14 (B) 3Q15 (C) (A/B) Var. (A/C) Var. R$ %NOR R$ %NOR R$ %NOR R$ % R$ % Net Revenues 2, % 1, % 2, % % % COGS -2, % -1, % -2, % % % Gross Profit % % % % % SG&A % % % % % Commercial % % % % % Administratives % % % % % Adj. EBTIDA* % % % % % Others revenues/expenses % % % % % EBITDA % % % % % USD x BRL R$ 3.84 R$ 2.55 R$ % % (*) Excludes the effects from other operating income/expenses. 25

26 Annual (US$ million) Variation $ %NOR $ %NOR $ % Net Revenues 2, % 2, % % COGS -2, % -2, % % Gross Profit % % % SG&A % % % Commercial % % % Administratives % % % Adj. EBTIDA* % % % Others revenues/expenses % % % EBITDA % % % USD x BRL R$ 3.33 R$ % (*) Excludes the effects from other operating income/expenses Variation R$ %NOR R$ %NOR R$ % Net Revenues 8, % 5, % 3, % COGS -8, % -5, % -2, % Gross Profit % % % SG&A % % % Commercial % % % Administratives % % % Adj. EBTIDA* % % % Others revenues/expenses % % % EBITDA % % % USD x BRL R$ 3.33 R$ % (*) Excludes the effects from other operating income/expenses. Annual (R$ million) 26

27 APPENDIX IV Operating Indicators KEYSTONE Volume ( 000 tons) VOLUME ('000 TONS) 4Q15 4Q14 3Q15 (A/B) (A/C) (A) (B) (C) Var. Var (%) Var. US % -6.9% % ASIA % -5.0% % KEYSTONE TOTAL % -6.6% 1, , % Revenue (US$ million) and Average Price (US$/kg) Revenues (US$ Million) 4Q15 4Q14 3Q15 (A/B) (A/C) (A) (B) (C) Var. Var (%) Var. US % -9.3% 1, , % ASIA % -7.7% % KEYSTONE TOTAL % -8.8% 2, , % AVERAGE PRICE (US$/KG) 4Q15 4Q14 3Q15 (A/B) (A/C) (A) (B) (C) Var. Var (%) Var. US % -2.5% % ASIA % -2.8% % KEYSTONE TOTAL % -2.4% % Revenue (R$ million) and Average Price (R$/kg) Revenues (R$ Million) 4Q15 4Q14 3Q15 (A/B) (A/C) (A) (B) (C) Var. Var (%) Var. US 1, , , % -2.5% 6, , % ASIA % -0.3% 2, , % KEYSTONE TOTAL 2, , , % -1.8% 8, , % AVERAGE PRICE (R$/KG) 4Q15 4Q14 3Q15 (A/B) (A/C) (A) (B) (C) Var. Var (%) Var. US % 4.8% % ASIA % 5.0% % KEYSTONE TOTAL % 5.1% % 27

28 APPENDIX V Income Statement MARFRIG BEEF Quarterly (R$ million) 4Q15 (A) 4Q14 (B) 3Q15 (C) (A/B) Var. (A/C) Var. R$ %NOR R$ %NOR R$ %NOR R$ % R$ % Net Revenues 2, % 2, % 2, % % % COGS -2, % -2, % -2, % % % Gross Profit % % % % % SG&A % % % % % Commercial % % % % % Administratives % % % % % Adj. EBTIDA* % % % % % Others revenues/expenses % % % % % EBITDA % % % % % (*) Excludes the effects from other operating income/expenses. Annual (R$ million) Variation R$ %NOR R$ %NOR R$ % Net Revenues 9, % 9, % % COGS -8, % -7, % % Gross Profit 1, % 1, % % SG&A % % % Commercial % % % Administratives % % % Adj. EBTIDA* 1, % % % Others revenues/expenses % % % EBITDA 1, % % % (*) Excludes the effects from other operating income/expenses. 28

29 APPENDIX VI Operating Indicators MARFRIG BEEF Volume ( 000 tons) VOLUME ('000 TONS) 4Q15 4Q14 3Q15 (A/B) (A/C) (A) (B) (C) Var. Var (%) Var. MARFRIG BEEF - BRAZIL % 2.9% , % Domestic Market % 2.1% % FRESH % -3.3% % FURTHER PROCESS % 5.1% % OTHERS % 5.6% % Exports % 4.5% % FRESH % 12.3% % FURTHER PROCESS % 22.6% % OTHERS % -31.1% % MARFRIG BEEF - INTERNATIONAL OPERATIONS % 11.3% % Domestic Market % 9.9% % FRESH % 0.3% % FURTHER PROCESS % 15.5% % OTHERS % 15.6% % Exports % 13.9% % FRESH % 7.5% % FURTHER PROCESS % 55.4% % OTHERS % 37.9% % MARFRIG BEEF TOTAL % 4.4% 1, , % FRESH % 4.0% % FURTHER PROCESS % 18.4% % OTHERS % 3.1% % 29

30 Revenue (R$ million) Revenues (R$ Million) 4Q15 4Q14 3Q15 (A/B) (A/C) (A) (B) (C) Var. Var (%) Var. MARFRIG BEEF - BRAZIL 2, , , % 11.1% 7, , % Domestic Market 1, , % 5.6% 4, , % FRESH % 1.5% 2, , % FURTHER PROCESS % 36.5% % OTHERS % 7.7% % Exports 1, , % 16.8% 3, , % FRESH % 30.2% 2, , % FURTHER PROCESS % -21.0% % OTHERS % -19.7% % MARFRIG BEEF - INTERNATIONAL OPERATIONS % 10.8% 2, , % Domestic Market % 3.9% % FRESH % 5.1% % FURTHER PROCESS % 23.2% % OTHERS % -11.0% % Exports % 15.5% 1, , % FRESH % 11.0% 1, % FURTHER PROCESS % 54.8% % OTHERS % 35.7% % MARFRIG BEEF TOTAL 2, , , % 11.0% 9, , % FRESH 2, , , % 14.1% 7, , % FURTHER PROCESS % 7.3% % OTHERS % -1.5% 1, , % 30

31 Average Price (R$ / Kg) AVERAGE PRICE (R$/KG) 4Q15 4Q14 3Q15 (A/B) (A/C) (A) (B) (C) Var. Var (%) Var. MARFRIG BEEF - BRAZIL % 8.0% % Domestic Market % 3.4% % FRESH % 4.9% % FURTHER PROCESS % 29.9% % OTHERS % 2.0% % Exports % 11.8% % FRESH % 15.9% % FURTHER PROCESS % -35.6% % OTHERS % 16.6% % MARFRIG BEEF - INTERNATIONAL OPERATIONS % -0.5% % Domestic Market % -5.4% % FRESH % 4.8% % FURTHER PROCESS % 6.7% % OTHERS % -23.0% % Exports % 1.4% % FRESH % 3.2% % FURTHER PROCESS % -0.4% % OTHERS % -1.6% % MARFRIG BEEF TOTAL % 6.4% % FRESH % 9.7% % FURTHER PROCESS % -9.4% % OTHERS % -4.5% % 31

32 APPENDIX VII Balance Sheet (R$ million) ASSETS 4Q15 4Q14 LIABILITIES 4Q15 4Q14 CURRENT ASSETS CURRENT LIABILITIES Cash and cash equivalents 1,630,368 1,091,685 Suppliers 1,818,991 2,028,303 Marketable securities 3,373,842 1,567,112 Accrued payroll and related charges 338, ,979 Trade accounts receivable 182, ,312 Taxes payable domestic 528, ,277 Trade accounts receivable 1,772,411 1,470,237 Loans and financing international 475, ,483 Inventories of goods and 38,166 69,229 Leasing payable merchandise 1,496,964 2,027,919 Biological assets 160, ,200 Notes payable 323, ,895 Recoverable taxes 1,289,571 1,361,635 Advances from clients 378,304 72,645 Prepaid expenses 197, ,030 Interest on Debentures - Convertible 236, ,582 Notes receivable 48,034 58,261 Liabilities held for sale 163,711 0 Advances to suppliers 45,274 57,204 Other payables 153, ,283 Assets held for sale 529,981 0 Other receivables 66,797 66,711 5,406,649 4,662,465 9,842,455 8,368,517 NON-CURRENT LIABILITIES Loans and financing 10,11,889 9,400,106 Leasing payable 23,520 70,745 Taxes payable 699, ,545 NON-CURRENT ASSETS Deferred taxes 607, ,758 Marketable securities Demand deposits 50,834 64,972 Notes receivable 360, ,664 Deferred taxes 1,969,812 1,708,437 Provisions 46,219 40,448 Notes payable 931, ,570 Mandatory convertible instruments 2,129,720 2,121,470 Other 115, ,076 Recoverable taxes 1,595,672 1,509,169 14,665,668 13,451,718 Other receivables 53,036 42,773 4,031,133 3,671,985 NON-CONTROLLING INTEREST 200, ,260 CONTROLLING SHAREHOLDERS' EQUITY Share Capital 5,276,678 5,276,678 Share issue expenses (108,210) (108,210) Investments 26,024 36,934 Capital reserve 184, ,642 Property, plant and equipment 4,311,263 4,961,623 Profit reserves 39,580 36,449 Biological assets 59, ,140 Other comprehensive income (1,083,142) (438,071) PL Values related to asset held for sale (90,887) 0 Intangible assets 2,645,270 3,004,709 Accumulated losses (2,989,381) (2,258,551) 7,042,361 8,145,406 Net income (loss) for the year (586,022) (739,472) 843,632 2,071,725 TOTAL ASSETS 20,915,949 20,185,908 TOTAL LIABILITIES 20,915,949 20,185,908 32