Institutional Presentation December, 2014
Marfrig Global Foods Profile
3 History and Overview 1986: Startup of operations in Brazil with the distribution of premium beef cuts 1986-2005: Diversification into new regions across Brazil and start of exports 2005-2006: International expansion through acquisitions in South America 2007: IPO in Novo Mercado segment of BM&FBOVESPA 2008: Acquisition of Moy Park, one of the largest food companies in the UK 2009: Acquisition of Seara, one of the largest food companies in Brazil 2010: Acquisition of Keystone, one of the world's largest food suppliers to restaurant chains and quick service restaurants 2012: Divestment of Keystone's logistics services business and focus directed to the protein business 1H13: Divestment of the Seara and Zenda business units
4 History and Overview 2H13: Launch of strategic plan FOCUS TO WIN 2014 Target Range 9M14 % achieved 2018 Target Range Net Revenue (1) R$21.0bn to R$23.0bn R$15.1bn 72% - 66% 7.5% to 9.5% (CAGR 2012-18) EBITDA Margin (2) 7.5% - 8.5% 8.2% 109% - 96% 8.5% to 9.5% Investment (CAPEX) R$600MM R$447MM 75% n/d Free Cash Flow to Shareholders Breakeven to R$100MM R$71MM R$650MM to R$850MM Note: (1) Revenue calculated in R$ billion based on FX rate of R$2.40/US$ in 2014 and stable going forward, with no projected inflation. (2) Excludes non-recurring items.
5 Corporate Profile Marfrig is one of the largest and most diversified global food companies World s 3 rd largest beef producer and one of South America s largest lamb suppliers One of the world s largest providers of processed food to major restaurant chains One of the largest poultry-based processed products suppliers in the UK and Europe Diversified presence in animal protein, serving the Retail and Food Service Channels More than 45,000 78 commercial production and employees distribution units Presence in 16 Serving global retail countries in the and food chains in Americas, Europe, over Asia and countries 110 Oceania
6 Corporate Profile Net Revenue (R$ billion) 15.9 21.9 23.7 18.8 21.0 23.0 1.0 1.3 1.4 2.1 3.3 6.2 9.6 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* Revenue Breakdown - 9M14 % by Business % by Currency % by Product 46% 28% 26% 42% 26% 21% 11% 46% 44% 10% * Guidance 2014 Marfrig Beef Keytone Moy Park USD EUR/GBP BRL Other Processed Fresh Other
7 Corporate Governance Structure Marcos Molina Chairman of the Board Audit Board Sergio Rial CEO - Marfrig Global Foods CEOs Business Units Corporate Vice-Presidents Heraldo Geres VP - Legal Andrew Murchie Marfrig Beef Brasil Martin Secco Marfrig Beef Southern Cone Frank Ravndal Keystone Foods Janet McCollum Moy Park Jaime Singer VP Strategic Planning Marcello Zappia VP Human Resources Ricardo Florence VP Finance and IRO - CFO
8 Corporate Governance Structure Variable compensation plan Individual targets for each area Financial targets connected with guidance Net Revenue EBITDA Margin CAPEX Free Cash Flow Weight 20% Weight 20% Weight 10% Weight 50% Weights: CEO, Vice Presidents, Officers: 70% Financial Targets and 30% Individual Targets Managers: 50%-40% Financial Targets and 60%-50% Individual Targets
9 Commitment to Sustainability Greenpeace Pact: higher exports to European market and sales of canned meat at Tesco Rainforest Alliance Certified: sales of beef with social and environmental responsibility seal to Carrefour and of sustainable leather to Gucci Carbon Disclosure Project and GHG Emission Inventory: first company in industry to report Scope 3 emissions The Nature Conservancy: participation on the organization's board for Latin America Business Benchmark on Farm Animal Welfare (BBFAW): elected one of the world s leading companies in animal welfare in 2013
Marfrig Beef
11 Marfrig Beef Overview One of the world's largest beef and lamb producers Strong expertise in supplying food service chains in Brazil Pioneer in the development of new export markets Geographic diversification in South America helps mitigate sanitary risks Brands recognized for quality and diversified product portfolio World s 3 rd largest beef producer and Brazil's 2 nd largest beef operation Uruguay's leading primary processor and Chile's largest meat importer
12 Marfrig Beef Overview Production Structure Brazil Uruguay/Chile Argentina 19 units 17,200 employees 3.7 million head of cattle/year 7 units 3,300 employees 930,000 head of cattle/year 2.0 million lamb/year 2 units 1,400 employees 390,000 head of cattle/year Revenue Breakdown 3Q14 % by Channel/Market % by Protein 44% 36% 15% 5% 76% 7% 17% Brazil Domestic Uruguay/Chile Brazil Export Argentina Fresh Beef Processed Lamb, Leather and Other
13 Marfrig Beef 3Q14 Highlights Net Revenue (R$ million) 2,240 2,256 2,075 2,365 2,482 9M14: R$6.9bn + 11% 3Q13 4Q13 1Q14 2Q14 3Q14 3T13 4T13 1T14 2T14 3T14 Stronger exports from Brazil Continued good performances at the Uruguay and Chile operations Lower average price in Brazil's domestic market due to the shift in the product mix
14 Marfrig Beef 3Q14 Highlights Adjusted EBITDA and Margin (R$ million and %) 9.0% 202 8.6% 10.0% 9.5% 10.2% 253 226 197 203 9M14: R$653MM 9.4% + 25% 3T13 4T13 1T14 2T14 3T14 3Q13 4Q13 1Q14 2Q14 3Q14 Higher raw material (cattle) costs passed through to export sales The Productivity Agenda Project in Brazil yielded initial savings of over R$13 million from the implementation of a series of actions to improve expense management
15 Marfrig Beef Strategic Goals Productivity Agenda Project in Brazil Rigorous monthly budget with diminishing cost targets Better management of overtime, attendance and shifts Restructuring of the sales/marketing team and redesign of route map Greater control of travel/transportation expenses Review and renegotiation of various contracts Review of procurement/expense model for maintenance, laundry, uniforms, etc Use of cheaper energy sources (steam) and reduction of cold-storage temperature losses Raise performance and optimization levels at production units to meet the company s internal benchmarks Estimated annual savings of R$30MM
16 Marfrig Beef Strategic Goals Segmentation of service to Food Service channel Large Chains Service Providers Specialized relationship Negotiations Pricing dynamics Product customization Street Business Independent Establishments Delivery times Logistics management
17 Marfrig Beef Strategic Goals Retail Higher sales to small retailers Partnerships with large retailers for portioned cuts based on specific consumer demands Pilot Project
Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 Oct-13 Mar-14 Aug-14 18 Marfrig Beef Outlook & Scenario Brazil Brazil enjoys a very competitive position in world beef exports Beef Cattle by Country (million head) India Brazil 209 330 CAGR 10-14 1.0% 3.0% Cattle Price (USD/KG Carcass Weight) BRAZIL BRASIL AUSTRÁLIA USA EUA URUGUAI URUGUAY $5.44 China EU 104 88-0.3% -0.6% $3.72 $3.68 USA 88-1.5% $3.27 Argentina 52 1.6% Colombia 30-0.6% Australia 28 0.4%
19 Marfrig Beef Outlook & Scenario Brazil The opening up of new markets to Brazilian beef should drive export growth Share in Exports Marfrig Beef Brazil (R$ million and % of Revenue) 33% 1,473 42% 1,734 45% 1,971 3Q12 3T12 3T13 3Q13 3Q14 3T14 Exports by Destination 3Q14 Marfrig Beef Brazil (% of Revenue) Europe Asia South/Central America Middle East Russia Other
20 Marfrig Beef Outlook & Scenario Brazil Despite its competitive advantages, Brazil still lacks access to the world's largest beef importers Main import markets Import volume ( 000 tons/year) Share of world imports Restrictions on Brazil USA 1,055 13.6% Negotiation Russia 1,020 13.1% Open Japan 760 9.8% Negotiation Hong Kong 575 7.4% Open China 550 7.1% Open European Union 380 4.9% Open / Hilton South Korea 360 4.6% Closed Venezuela 300 3.9% Open Canada 290 3.7% Closed Chile 255 3.3% Open Mexico 235 3.0% Closed
21 Marfrig Beef Outlook & Scenario Uruguay Uruguay enjoys access to main beef import markets Exports by destination 3Q14 Marfrig Beef Uruguay (% of Revenue) Main import markets USA Russia Japan Hong Kong China European Union South Korea Venezuela Canada Chile Mexico Restrictions on Uruguay Open Open Negotiation Open Open Open Open Open Open Open Open Share of Exports Marfrig Beef Uruguay (R$ million and % of Revenue) 55% 268 49% 347 Europe Asia South/Central America Middle East Russia Other 56% 379 3Q12 3Q13 3Q14 3T12 3T13 3T14
22 Marfrig Beef Outlook & Scenario Argentina 15% tax levied on all exports from the country Each export transaction must be informed to and approved by the Trade Department Some items in the domestic market have price caps set by the government Marfrig Beef temporarily cut back its operations to two production units
Keystone Foods
24 Keystone Foods Overview Tradition stretching back over 50 years A leading global supplier of products to the food service industry and QSR chains Over 30,000 clients in North America and APMEA (Asia, Pacific, Middle East and Africa) Important protein supplier to McDonald's (61% of unit s sales in 3Q14) Committed to the highest food safety and quality standards Long-standing history of innovation
25 Keystone Foods Overview Production Structure United States 7 units 6,200 employees 190 million birds/year 400,000 tons of processed food/year APMEA 7 units 5,400 employees 40 million birds/year 150,000 tons of processed food/year Revenue Breakdown - 3Q14 % by Channel/Market % by Protein 76% 24% 74% 22% 4% USA APMEA Further processed poultry Further processed beef Other
26 Keystone Foods 3Q14 Highlights Net Revenue (R$ million) 1,483 1,390 1,391 1,414 1,412 9M14: R$4.2bn - 5% 3T13 3Q13 4T13 4Q13 1T14 1Q14 2T14 2Q14 3Q14 3T14 In the USA: Pricing model adopted with our main client whereby product prices reflect drops in raw material costs Change in sales mix to QSRs In APMEA: Sales mix was impacted by an incident involving a competitor food supplier to our main client in China
27 Keystone Foods 3Q14 Highlights Adjusted EBITDA and Margin (R$ million and %) 6.4% 6.9% 8.0% 7.1% 6.1% 111 95 96 100 87 9M14: R$298MM 7.1% - 9% 3T13 3Q13 4T13 4Q13 1T14 1Q14 2T14 2Q14 3Q14 3T14 Impact of mark-to-market adjustments of unrealized hedge losses Higher outside meat costs Lower feed costs
28 Keystone Foods Strategic Goals Comprehensive product portfolio for food service industry and QSR chains Poultry-based products Beef-based products Nuggets Chicken patties Grilled strips Beef patties Other Coated seasoned cuts Fish patties Bacon and Halal Bacon Desserts
29 Keystone Foods Strategic Goals Integrated production chain allows greater control and ensures product availability, consistency and quality Vertical integration corresponding to 70% poultry supply in Keystone s operation in the U.S. Bird Selection Selection of breeds based on performance Pullet Farms Hens raised until they reach sexual maturity Feed Plant High quality feed is produced to optimize the performance of chickens. Breeder Farms Hens lay eggs that are taken to the hatchery Further Processing Creation of chickenbased fully-cooked, parfried and marinated products. Primary Processing Poultry slaughter with the carcass forwarded to the further processing units Broiler Farms Broilers are raised until they reach the targeted weight. Fertile Hatchery Fertile hatching eggs are incubated and hatched.
30 Keystone Foods Strategic Goals Established a Broad Footprint in APMEA Supplying 19 Countries Across the Region APMEA Sales Well Diversified (% of revenue by country of destination - 2013) Volume growth in all markets where we have production presence ( 000 pounds) United Arab Emirates 5% Australia 6% Other 3% China 30% 12.4% CAGR 313 Australia Singapore 8% South Korea Middle East 11% 109 Thailand Malaysia South Korea 12% Malaysia 12% Japan 13% 2004 2013 China
31 Keystone Foods Outlook & Scenario Potential QSR segment growth in USA Sales of major QSR chains (US$ billion) Expected market growth (US$ billion) 5.5% CAGR 35.9 12.7 11.7 Keystone Customer 8.8 8.5 265 3.7% CAGR 250 236 214 225 204 195 185 188 09 10 11 12 13 14E 15E 16E 17E Source: Euromonitor / U.S. Fast Food, QSR 50 Report 2012
32 Keystone Foods Outlook & Scenario Potential QSR segment growth in APMEA Per-capita poultry consumption by country (2013) India Pakistan Indonesia Philippines Thailand China Vietnam Korea Turkey Saudi Arabia Malaysia Growth drivers Higher per-capita GDP Population growth Growing middle class Rural flight 0 10 20 30 40 50 Kg / inhabitant / year Source: OECD-FAO Agricultural Outlook 2014-2023
33 Keystone Foods Outlook & Scenario Potential QSR segment growth in APMEA Yum Brands expects to open 700 new stores in China in 2014 KFC chain has over 4,500 restaurants in over 1,000 cities in China Pizza Hut chain has over 1,200 restaurants in over 300 cities in China McDonalds has opened an average of 190 stores per year since 2008 in China, and currently has 2,000 stores McDonalds has opened an average over 300 stores per year since 2008 in APMEA, and currently has some 10,000 stores Source: websites of Yum Brands and McDonald s
Moy Park
35 Moy Park Overview Over 70 years of tradition and growth One of the 15 largest food companies in the UK and largest company in Northern Ireland Relationships with leading retailers and food service operators in UK and continental Europe Unique and comprehensive poultry production platform with high quality standards Clear opportunities for growth and operational excellence to drive margin expansion Pioneer in the production of free range and organic poultry
36 Moy Park Overview Production Structure UK and Continental Europe 14 units 12,000 employees 240 million birds/year 270,000 tons of processed food/year Revenue Breakdown - 3Q14 % by Market % by Channel % by Protein 74% 25% 1% 61% 29% 10% 53% 40% 7% UK Continental Europe Other Retail Food Service Other Processed Fresh Other
37 Moy Park 3Q14 Highlights Net Revenue (R$ million) 1,332 1,321 1,338 1,345 1,222 9M14: R$4.0bn +10% 3T13 3Q13 4T13 4Q13 1T14 1Q14 2T14 2Q14 3Q14 3T14 Sales growth in the retail channel in UK and Ireland, led by fresh meats Positive contribution from currency variation in the period (7%) Consolidation of Marfrig's convenience beef business in Europe
38 Moy Park 3Q14 Highlights Adjusted EBITDA and Margin (R$ million and %) 6.4% 78 101 7.6% 7.2% 7.0% 7.1% 95 94 96 9M14: R$284MM 7.1% +24% 3T13 3Q13 4T13 4Q13 1T14 1Q14 2T14 2Q14 3Q14 3T14 Grantham Project for optimizing the further processing unit in England: lower production and labor costs Lower grain costs Higher freight expenses resulting from the consolidation at Moy Park of Marfrig Beef Brazil's beef business in Europe
39 Moy Park Strategic Goals Moy Park has leading positions in the highest value, growing retail segments in poultry Fresh poultry Chilled ready-to-eat Chilled fresh coated 25% 46% 52% 75% 54% 48% Second largest producer in the UK Leading market positions in higher growth convenience food categories (growth of over 6% p.y.) Source: Kantar Worldpanel, Euromonitor
40 Moy Park Strategic Goals Unique Comprehensive Poultry Farming Production Platform Completely vertical integration Grandparent stock Parent hatchery Parent rearing Parent laying Broiler hatchery Broiler housing Feed mill Slaughterhouse/Portioning Further processing Commercial/Marketing High animal welfare Free range and organic 45% of Moy Park s broiler housing is less than 10 years old, vs. 8% for the industry
41 Moy Park Strategic Goals Longstanding relationships with customer base Working to enhance product offerings Developing partnership for future growth opportunities Key Clients Competitive advantages Retail Food Service v Long-term relationships Focus on win-win profitability with customers Enhanced risk management Developing deep customer access and insights Drive growth in new channels and with new, innovative products Sustainability
42 Moy Park Strategic Goals Innovation and food development Delivered an average of 1 to 2 new innovations per year during the last 10 years with growing NPD pipeline 2011 Jamie Oliver 2012 Meals 2013 Snacks 2014 Kitchen Menu launched in supermarkets High-quality meals made with Irish ingredients Convenient snacking products Ready meals in convenient pouches
43 Moy Park Outlook & Scenario UK poultry dynamics Retailer and consumer focus on UK provenance Growth in demographics: UK population forecasted to grow from 63 to 70 million by 2030 Consumer preference for fresh, convenience and locally farmed products Most versatile and healthy protein, also consumed by most religions
44 Moy Park Outlook & Scenario UK protein production Kill per week (million head) Origin of UK poultry 20 Birds 19 Hogs¹ Cattle¹ 18 17.2 19.1 Imported 38% UK produced 62% 17 16 14.7 15 14 13 Jan-08 Jan-14 Source: DEFRA UK broiler slaughter (rolling weekly average) ¹ Pork and Beef in 000 tons, indexed to 2008 Dec-16 UK production expected to increase 4% p.a.
45 Moy Park Outlook & Scenario Poultry is the most affordable protein Cost per ton ( ) 1 1,300 1,590 4,420 UK sales volume ( 000 tons) 800 700 CAGR 1.6% CAGR 1.6% 778 746 600 Chicken Pork Beef Evolution of UK consumption 2007-2012 ( 000 tons) 500 400 CAGR 0.1% 442 Chicken Pork Beef 175 300 CAGR 0.1% 314 38 200 2012A 2013A 2014E 2015E 2016E 2017E Source: Euromonitor, USDA 1 Production price -125 Chicken Fish Beef Pork
EBITDA 2014E (USD MM) 46 Moy Park Outlook & Scenario Peer comparison EV/EBITDA14E (Circle size = Enterprise Value) 400 HILTON 300 GREENCORE CRANSWICK SCANDI STANDARD 200 100 67 175 121 62 EBITDA LTM MOY PARK USD 170 MM 0 6,5 7,0 7,5 8,0 8,5 9,0 9,5 10,0 10,5 11,0 11,5 Source: Factset EV/EBITDA
47 Moy Park Outlook & Scenario Pricing Dynamics of UK IPOs 2013 1Q14 2Q14 3Q14 Under Bottom Middle Top Upper Source: Dealogic
Consolidated Financial Performance
49 Financial Performance Consolidated Net Revenue (R$ million) Breakdown by Business (%) Receita por Negócio - 3T13 Receita por Negócio 45% 3Q13 25% 47% 3Q14 26% + 6% 30% 27% Compared to 3Q13: Moy Park +10% to R$1,345MM Keystone -5% to R$1,412MM Marfrig Beef +11% to R$2,482MM
50 Financial Performance Consolidated Gross Income and Gross Margin (R$ million and %) Breakdown by Business (%) Lucro por Negócio - 3T13 Lucro por Negócio - 3 3Q13 3Q14 63% 21% 65% 22% + 11% 16% 13% Gross margin growth vs. 3Q13: Moy Park + 80 bps to 10.7% Keystone - 60 bps to 6.0% Marfrig Beef + 50 bps to 16.9%
51 Financial Performance Consolidated SG&A and SG&A/NOR (R$ million and %) Breakdown by Business (%) 3Q13 3Q14 58% 29% 58% 30% + 5% 13% 12% SG&A/NOR vs. 3Q13: Moy Park + 20 bps to 8.2% Keystone stable at 3.0% Marfrig Beef - 50 bps to 8.4%
52 Financial Performance Consolidated Adjusted EBITDA and Margin (R$ million and %) EBITDA Breakdown por Negócio by Business - 3T13 (%) EBITDA por Negócio - 54% 3Q13 21% 58% 3Q14 22% +16% 25% 20% EBITDA Margin vs. 3Q13: Moy Park + 70 bps to 7.1% Keystone - 30 bps to 6.1% Marfrig Beef + 120 bps to 10.2% Consolidated adjusted EBITDA margin of 8.2% in 9M14, reaching the upper level of the target range in the FOCUS TO WIN strategy
53 Liquidity and Debt Consolidated Debt (R$ million) Strong BRL depreciation at end-3q14 increased net debt, with no cash effect BRL depreciation of 11% (R$2.20/US$ at end-2q14 vs. R$2.45/US$ at end-3q14) Operating income has yet to capture the BRL depreciation that occurred late in 3Q14, since the average FX rate in the quarter was R$2.28/US$, virtually flat from R$2.23/US$ in 2Q14
54 Liquidity and Debt Consolidated Net Debt in USD (US$ million) Marfrig s debt in USD remained stable
55 Liquidity and Debt Consolidated Indicators 3Q14 2Q14 Net Debt / EBITDA LTM 4.84x 3.71x Net Debt / Annualized Adjusted EBITDA 4.33x 4.23x Net Debt / Total Assets 0.37x 0.37x Cash and Equivalents / Short- Term Debt 2.47x 2.52x Current Liquidity (*) 2.18 2.18 Duration (months) 50 54 Average Cost ** (p.y.) 7.6% 7.0% Short Term (%) 11.7% 11.2% Long Term (%) 88.3% 88.8% In BRL (%) 5.8% 4.1% Other Currencies (%) 94.2% 95.9% * Current Liquidity = Current Assets / Current Liabilities ** Excludes the interest paid on the mandatorily convertible debentures Leverage ratio for bank and market financing excludes FX effects, resulting in a ratio of 3.64x at end- 3Q14 EBITDA LTM does not yet fully reflect BRL depreciation Average exchange rate in LTM of R$2.29/US$, vs. R$2.45/US$ at end- 3Q14
56 Liquidity and Debt Consolidated Maturity Schedule in 3Q14 (R$ million) Short Term: R$1.2bn Longer debt maturity profile, with first large maturity due only in 2018
57 Liquidity and Debt Consolidated Liability Management Operations - 2014 Transaction Period Amount (million) Coupon Maturity 2020 Bond Re-tap 1Q14 US$ 275 9.500% 2020 Moy Park Bond Issue 2Q14 GBP 200 6.250% 2021 2019 Bond Issue 2Q14 US$ 850 6.875% 2019 Repurchase 2016 2Q14 US$ 191 9.625% 2016 Repurchase 2017 2Q14 US$ 349 11.250% 2021 Repurchase 2021 3Q14 US$ 448 9.875% 2017 Bond issue of US$850MM: company's largest ever and Brazil's largest until May 2014 Demand breakdown % by region 44% 39% 5% 4% 8% Order book (US$4.9bn) exceeded the issue by 5.6x, which allowed for lowering the cost to 6.875% p.y. Repurchase of 2017 and 2021 Senior Notes, significantly reducing the cost and realigning the maturity profile % investor type Europe US Asia LatAm Other 45% 17%14%12%13% Asset Mgmt Private Bank Other Hedge Fund Bank
58 Cash Flow Consolidated Cash Flow Bridge 3Q14 (R$ million) Better working capital management, especially at Marfrig Beef Brazil Improvement in trade accounts receivable term from 28 days in 2Q14 to 27 days in 3Q14 Incident involving a supplier to our main client in China contributed to the temporary increase in inventories The line Other increased, mainly due to non-cash items related to market transactions, such as swap and commodity contracts
59 Cash Flow Consolidated Free Cash Flow (after CAPEX and Interest) (R$ million) 1Q13 1T13 2T13 2Q13 3T13 3Q13 4T13 4Q13 1T14 1Q14 2T14 2Q14 3Q14 3T14 16 84 (295) (135) (30) (628) (932) Free cash flow was positive R$84 million in the quarter, despite the higher export volumes and payments related to the renegotiation of tax liabilities under REFIS In 9M14, free cash flow was positive R$71 million, reaffirming our commitment to deliver positive free cash flow in 2014
60 Cash Flow Consolidated Net Income (R$ million) 3Q13 4Q13 1Q14 2Q14 3Q14 (83,4) (96,4) (55,1) Currency variation (R$226MM) (194,1) - 56% REFIS expenses (R$93MM) (303,3)
61 Cash Flow Consolidated Investments (R$ million) 3Q14 2Q14 1Q14 4Q13 3Q13 Investments in fixed assets 119.3 172.7 139.0 236.1 204.7 Fixed Assets 75.0 130.8 95.5 192.8 165.7 Breeding stock 44.3 41.9 43.5 43.3 39.0 Investments in intangible assets 8.0 4.1 3.6 3.3 3.2 Total investment in the period 127.3 176.8 142.6 239.4 207.9
Ownership Structure and Capital Markets
63 Ownership Structure October 2014 Share Capital Free-float 520,747,405 shares 1 255,183,732 shares Officers/ Management 0.1% Treasury 0.1% 11.0% MMS Part. 31.2% Other 42.7% 15.2% 8.2% Other 11.1% 30.7% BNDES 19.6% 23.7% 6.3% 1 In January 2007, up to 100 million shares will be issued following maturity of the mandatory convertible bond
64 Sell-Side Assessment Covered by 14 institutions Recommendation Manter 46% 39% 38% 15% Average TP: R$7.71 Buy Hold Sell
65 100% Share Performance 2014 80% 60% 52% 40% 20% 0% 27% 3% 3% -20% dez-13 jan-14 fev-14 mar-14 abr-14 mai-14 jun-14 jul-14 ago-14 set-14 out-14 nov-14 Source: Bloomberg To November 12, 2014 *Peers: average of JBS, BRF and Minerva MRFG3 Peers* Ibovespa
jan-14 fev-14 mar-14 abr-14 mai-14 jun-14 jul-14 ago-14 set-14 out-14 nov-14 jan-14 fev-14 mar-14 abr-14 mai-14 jun-14 jul-14 ago-14 set-14 out-14 nov-14 jan-14 fev-14 mar-14 abr-14 mai-14 jun-14 jul-14 ago-14 set-14 out-14 nov-14 66 Bond Performance 2014 2018 2020 2021 24% 24% 24% 20% 20% 20% 16% 12% 13% 16% 12% 13% 16% 12% 15% 8% 8% 8% 4% 0% 1% 4% 0% 2% 4% 0% 1% -4% -4% -4% MRFG3 Peers* Source: Bloomberg To November 12, 2014 * Peers: average of bonds issued by JBS, BRF and Minerva with same maturities
Final Remarks
68 Final Remarks Consolidated Results We are on track to delivering our 2014 guidance, which is an important milestone for Marfrig and for our shareholders We delivered another quarter of steady performance that included: (i) an undivided commitment to Free Cash Flow (FCF); (ii) a totally re-designed debt maturity profile (with the first material payment only in 2018); and (iii) improved operating performance All businesses posted EBITDA margins above 7% in the year to date, which has allowed the group to stay on the high end of its 2014 EBITDA target margin The business portfolio is well positioned to capture this unique high margin/price environment in the animal protein industry, which is further supported by a potentially stronger dollar in the near future
69 Final Remarks Marfrig Beef The world needs beef and we are well positioned (world's thirdlargest beef producer) to capture this opportunity Our shift to a much higher share of exports in our Beef business in Brazil (45% in 3Q14, vs. 41% in 3Q13 and 33% in 3Q12) is underpinned by our belief in the current supply and demand situation in the international market We believe there are plenty of opportunities to improve results further, especially in terms of FCF and margin. We assumed a commitment to a serious productivity agenda at Marfrig Beef Brazil, which is starting to pay off, as seen in this quarter with the improvement in cost management. Note that the same productivity agenda is being rolled out in Uruguay, Argentina and Chile
70 Final Remarks Marfrig Beef The gains captured in the third quarter signal a good probability of delivering annual cost savings (in Brazil alone) greater than the initial target of R$30 million Uruguay continues to post strong results, but we believe the best is yet to come in the fourth quarter of the year We do not see any short term concerns, with cattle prices most likely remaining under pressure, but with relatively strong international demand helping to keep domestic margins at reasonable levels
71 Final Remarks Keystone Foods Our further processing operations in the US will benefit as meat costs are moving toward seasonal lows Lower grain costs are flowing through our integrated operations in the US leading to improved cost We have secured new volumes in APMEA and expect to see an impact in Q4 2014 as consumer confidence begins to return We are focused on managing costs and expect to drive SG&A savings in the 4 th quarter We expect growth in EBITDA in the 4 th market dynamics in both the US and Asia quarter due to improving
72 Final Remarks Moy Park The fourth quarter should be strong, with turkey sales adding to the bottom line and a better grain environment We will also focus more intensely on SG&A expenses, but while keeping an eye on making good inroads in terms of innovation and service quality Moy Park is an unquestionable growth story. Annual sales increased from 800 million in 2008 (at the time of its acquisition by Marfrig) to approximately 1.45 billion estimated for 2014, which confirms the enormous potential of the European market, which remains promising
73 Final Remarks Capital Structure Our operating performance has not yet benefitted from the stronger dollar, but the fourth quarter will hopefully provide some signs of this In 2015, if market conditions permit, we will carry out Moy Park s IPO
74 Final Remarks We will remain very focused on our full-year results. We want to finish 2014 with strong operating performance and meeting all targets in our 2014 guidance We see ourselves as a multi-year deleveraging story marked by (i) improved operating performance; (ii) lower interest expenses (and consequently expanding FCF); and (iii) attracting equity through the subsidiaries to accelerate debt reduction in absolute terms
75 Next Steps 1. Continue expanding margins by fully capitalizing on the current positive trends in the animal protein industry 2. Share our two-year plan (part of our current Focus to Win strategy), which will set more comprehensive targets that will enable a better assessment of the Group s operating performance and capital structure 3. We are planning a Marfrig Day event in the first half of 2015 to share management's views for the next two years, culminating in January 2017. On that occasion, the BNDES will convert its R$ 2.1 billion mandatory convertible bond into equity, which should provide annual cash flow relief of around US$100 million (based on the exchange rate of R$2.50/US$), representing another concrete step towards strengthening our capital structure 4. Management, across all businesses, remains highly committed and aligned to improving current performance. Worth sharing that management 2014 current variable compensation program, is tied up to meeting our 2014 guidance. We are on track
Questions and Answers
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 or 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 September 30, 2014, 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 forward-looking statements are reasonable and based on the information currently available to its management, it cannot guarantee results or future events. Such forward-looking statements should be considered with caution, since actual results may differ materially from those expressed or implied by such statements. Securities are prohibited from being offered or sold in the United States unless they are registered or exempt from registration in accordance with the U.S. Securities Act of 1933, as amended ( Securities Act ). Any future offering of securities must be made exclusively through an offering memorandum. This presentation does not constitute an offer, invitation or solicitation to subscribe or acquire any securities, and no part of this presentation nor any information or statement contained herein should be used as the basis for or considered in connection with any contract or commitment of any nature. Any decision to buy securities in any offering conducted by the Corporation should be based solely on the information contained in the offering documents, which may be published or distributed opportunely in connection with any security offering conducted by the Company, depending on the case.
IR Contacts Address Telephone E-mail Website @ Avenida Chedid Jafet, 222 Bloco A 5º andar - São Paulo - SP SP: +55 (11) 3792-8650 NY: +001 484 362 8645 - ri@marfrig.com.br www.marfrig.com.br/ri