Meeting with Investors 4Q17 results March 2018
Disclaimer This material is a presentation of general information about Marfrig Global Foods S.A. and its consolidated subsidiaries (jointly the Corporation ) on the date hereof. The information is presented in summary form and does not purport to be complete. No representation or warranty, either expressed or implied, is made regarding the accuracy or scope of the information herein. Neither the Corporation nor any of its affiliated companies, consultants or representatives undertake any liability for 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 December 31, 2017, 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 anticipate, hope, expect, estimate, intend, project, plan, predict, aim 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 Corporation, depending on the case. 2
1. MARFRIG GLOBAL FOODS OVERVIEW 2. BEEF DIVISION 3. KEYSTONE DIVISION Agenda 4. CONSOLIDATED RESULTS 4Q17 & 2017 5. FINAL COMMENTS 6. Q&A 3
Overview
Who we are Marfrig is one of the world s largest animal protein producers 2.3 millions +30.000 Located in 46 tons 4 continentes Employees Commercial, Production R$ 19 billions and Distribution Units Net Revenue * 12countries R$ Serving around 100countries 1.7 billions Brand and quality Adj* EBITDA recognition 5 * LTM (2017)
MARFRIG IS NOW MORE Leaner and focused COMPANY Operational improvement at business units Liability management 6 2013 Implementation of Focus to Win Plan Long-term guidance 2013-2018 Productivity agenda 2017 Optimization of organizational structure without loosing global footprint - Beef and Keystone divisions
growth D R I V E R S O F Focus on customer Expansion through organic projects Strong presence in the foodservice, retail and export channels Investments in innovation Leadership in sustainability 7
Beef division
+ 20 mil employees 2 nd largest beef operation in Brazil overview B E E F D I V I S I O N Leader in beef production in Uruguay Largest beef importer in Chile ~ 50% of Marfrig Global Foods revenue 20 slaughtering plants in operation 9
STRATEGIC G O A L S Focus on profitability Maximizing asset utilization Focus on serving higher valueadded channels South America as a supply platform for global demand growth Operational efficiency gains
B R A Z I L I A N L I V E S TO C K competitive advantages Production with strategic advantages, such as grass-fed cattle» low fat content Hormone free Excellent sanitary conditions Abundance of land, water and labor - natural platform for supporting global demand growth Management experience, highly adapted to breeds and growing use of genetic enhancement 11
B R A Z I L I A N L I V E S TO C K outlook A P E C U Á R I A B R A S I L E I R A Brazilian Cattle Herd Projections (million head) 7.1% 234.8 Brazilian Beef Production Projections (million tons) +13.6% 10.5 218.8 9.3 2016 2017e 2018e 2019e 2020e 2021e 2022e 2016 2017e 2018e 2019e 2020e 2021e 2022e Source: Outlook Fiesp and preparation : FIESP/DEAGRO and MBAGRO Brazilian Beef Consumption Projections (million tons) Brazilian Beef Exports Projections (million tons) +8.6% 8.4 +25.1% 1.7 2.1 7.7 2016 2017e 2018e 2019e 2020e 2021e 2022e 2016 2017e 2018e 2019e 2020e 2021e 2022e 12 Source: CGEA/DCEE/SPA/Mapa and SGI/Embrapa with data from CONAB and USDA
beef C GE NL OÁ RB IA O L GD LE OM BA AN L D DS E COE NF EA RTAR I O 2017e (1000 MT CWE) COUNTRY IMPORT 1 USA 1,245 2 China 950 3 Japan 760 4 South Korea 535 5 Russia 485 USA, although a relevant player, is a net importer of beef Better income distribution and global GDP growth, highlighting China, have supported higher beef consumption Selected Beef Importing Countries (million kg) COUNTRY EXPORT 1200 CAGR: 31% 1 India 1,850 2 Brazil 1,800 3 Australia 1,400 4 USA 1,236 5 New Zealand 545 1000 800 600 400 200 0 China Russia Australia Europe Egypt 13 Source: USDA (Updated October, 2017) 2016 2017 2018 2019 2020
B E E F D I V I S I O N competitive advantages Access to key international markets Production system based on natural pastures Uruguay: unique portfolio of British breeds and organic certification for USA Processed products for local and export markets Brazil & Uruguay s Beef Acess to Global Market Ranking Country Brazil & Uruguay 1 USA 2 China 3 Japan 4 Russia 5 South Korea 6 Hong Kong 7 European Union 8 Egypt 9 Canada 10 Chile 11 Malaysia 12 Mexico 13 Saudi Arabia 14 Philippines 15 Iran Rest of the world Brazil & Uruguay Uruguay No access 14
MARFRIG x STATE Ji-Paraná PA 5% Tucumã Reopening of idled plants to capture the positive cattle cycle share S L A U G H T E R RO 17% Chupinguaia Pontes e Lacerda MT 26% Tangará Paranatinga Mineiros MS 14% Bataguassu Nova Xavantina GO 14% Paranaíba Promissão SP 11% Pirenópolis Adjusted capacity to 300,000 head/month BRAZILIAN FOOTPRINT Alegrete São Gabriel RS 12% Bagé Slaughtering plants 15 Source: Abiec Calculation base: May % of Beef division slaughtering
S A L E S P R O F I L E 13% 2% 18% 4% 4% 1% Africa 27% 20% 2014 2% Central America North America Asia 2017 45% Europe 25% 20% Middle East Russia 20% B E E F D I V I S I O N Brazil M A R K E T S H A R E 2% 13% 20% 18% 20% Marfrig Others E X P O R T S 12% 1% 0.7% 3% 20% 19% 16% Marfrig Others 16 20% 80% 80% 25% 2014 2014 2% 20% Africa Central America North America Asia Europe Middle East Russia 19% 80% 81% 2017 2014 47%
Repositioning of Montana and Bassi brands Expansion of product line Foodservice + 38% + 48% B R A Z I L I A N M A R K E T * (4Q17, yoy) Sales Volume* Sales expansion to the Midwest and Northeast regions Actions with the main regional customers of foodservice and retail Sales Volume* Portfolio expansion Consolidation and expansion of the portfolio of products distributed by the division (bakery, fish and cheese) Support for Hospital do Amor in Barretos 17
Foodservice & B E E F C o n s u m p t i o n During the last decade, the foodservice industry in Brazil presented a CAGR of 12.6% in the 2010-2016 period. Growth in 2016 for Brazil s foodservice industry was slower than in previous years, but it is expected to pick up in 2017. Beef domestic consumption is expected to improve with the recovery of the domestic economy. Brazil s Foodservice Industry (R$ Billion) 75.6 87.9 CAGR 2010-2016: 12.6% 100.9 116.5 132.8 144.0 154.2 Beef Domestic Consumption (Kg per capita) 2010 2011 2012 2013 2014 2015 2016 37.9 38.1 38.2 38.4 38.7 39.0 39.3 39.6 40.0 40.3 40.7 18 Source: ABIA (Associação Brasileira das Industrias da Alimentação), FIESP, IBGE 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
further processed Products Development of new products Corned Beef, Cold Packs, Hot Packs, Extrato, Pouch, Beef Jerky New line of rice-based products with New line of sauces in partnership with 19
VOLUME Fresh Beef 30% ( 000 tons) ADJUSTED EBITDA AND MARGIN 37% (R$ million and %) 84 63 81 103 4Q16 4Q17 Domestic Market Export Market B E E F D I V I S I O N Result 4 Q 1 7 350 300 250 200 150 100 50 7.5% 192 8.7% 262 9,00% 7,00% 5,00% 3,00% 1,00% -1,00% -3,00% 275 352 0 4Q16 4Q17-5,00% 4.000 3.400 2.800 2.200 1.600 1.000 400 2,556 1,102 Total Volume ( 000 tons) NET REVENUE 18% 3,006 1,426 1,454 1,580 (R$ million) Volume increase reflecting the continued plan of reopening plants in Brazil EBITDA impacted by better market spreads and greater operating efficiency. Utilization rate of 96% -200 4Q16 4Q17 20 Domestic Maket Export Market
Keystone division
at a Glance Leading supplier of high-quality, value-added food products to the world s leading foodservice, retail & convenience, and industrial brands Trusted supplier to a high-quality and growing customer base Large scaled, global business with $2.8 billion of revenue* and Adj EBITDA* $282 millions Focused on large and fastgrowing global foodservice channel, providing nearly 70% of revenue Longstanding customer relationships with over 45-year tenure serving McDonald s, our largest customer Food safety and quality is at the heart of our unique business model Global reach with 69% of revenue* from US and 31% from APMEA ~75% of value-added product portfolio is poultry, a fast-growing category 22 * LTM (2017)
G E O G R A P H I C footprint United States Scaled processing platform to support customers growing needs All facilities are ISO or GFSI certified Operate 15 processing facilities located in the U.S., China, Malaysia, Thailand, Korea and Australia Manage three vertically-integrated poultry complexes in the U.S. that met 63% of our U.S. further processing needs in 2017 APMEA Primary Processing Further Processing Other New facility 23
O U R value-added C H A N N E L S Foodservice Retail & Convenience Industrial CAGR: 5.6% CAGR: 9.4% CAGR: 31.6% Revenue ($m) Description 2014 2017 2014 2017 Food away from home Focus on QSR chains One of largest suppliers in product categories Focus on private label products in supermarket deli areas Also serves customers in fast growing convenience store segment 2014 2017 Built strategic alliances with leading, global food manufacturers, such as General Mills and Conagra, to help develop on-trend product offerings 24
D I V E R S I F I E D P RO D U C T portfolio Beef 21% Other 4% Poultry 75% Value-Added Poultry Ready-to-Cook Par-Fried Poultry Fully Cooked Frozen Poultry Fresh, Marinated Deli-Rotisserie Poultry Value-Added Beef Raw Beef Patties Value-Added Fish and Other Fish Patties, Fish Fingers, and Fish Nuggets Pork Patties, Shredded Pork, Bacon, and Pork Sausages Veggie Patties Halal Bacon Substitutes and Bakery Products Fully Cooked Beef Products 25
C O L L A B O R AT I V E A P P RO A C H TO product innovation Collaboration with our customers to create customized products based on the unique needs and attributes of the brand No Antibiotics Ever (NAE) Health Halo Unique and regional product offerings Team extends through innovation, product development, food technology and project management Innovation centers include test kitchen and presentation center for product and customer demonstrations USDA-inspected, state-of-the-art Innovation Center in the U.S. China and Thailand Innovation Centers Foster creativity in product development while adding value in processing Optimize production process Equipment discovery 190 products commercialized worldwide in 2016 26
excellence I N F O O D S A F E T Y A N D Q U A L I T Y Keystone expertise recognized by peers Leader of Meat and Poultry Food Safety Group for International Food Protection Association Board of Directors for International Audit Standards (BRC) Speaker at World Food Safety Symposium Keystone Holds Food Safety Leadership Positions in the Industry Core capabilities include food safety, reliability, consistency and assurance of supply History of providing safe and high-quality products so customers can protect their brands Industry-leading food safety team led by Barb Masters, VP of Food Safety and Quality Assurance Internationally recognized Quality Management System Comprehensive testing program to ensure that all raw materials meet strict microbiological and chemical standards 27
Expand Partner Drive Unlock Invest S T R AT E G Y 2021 Expand customer relationships Be the partner of choice for our customers Drive mix to higher valueadded products Unlock growth with commercial capabilities Robust Investment plan to increase capacity 28
355 305 255 205 155 105 55 5-45 ADJUSTED EBITDA & MARGIN K E Y S TO N E D I V I S I O N 87 9.6% -4% 9.4% (US$ million and %) 9,70% 9,50% 9,30% 4Q17 results 57 27 69 66 9,10% 8,90% 8,70% 8,50% NET REVENUE (US$ million) -1% 712 705-3 4Q16 4Q17 Volume reduction reflecting an additional week in the previous fiscal quarter. Excluding this effect, the normalized volume would be stable in the annual comparison. 8,30% 8,10% 4Q16 4Q17 TOTAL VOLUME ( 000 tons) -5% 305 289 Growth of 2.5% in APMEA Profitability was negatively impacted by down-time associated with new production ramp-up and operational efficiency improvements 29 4Q16 4Q17
Consolidated result 4Q17
NET REVENUE (R$ million) ADJUSTED EBITDA & MARGIN 24% (R$ million & %) 5200 4700 4200 3700 3200 4,899 4Q16 8% 5,298 4Q17 900 800 700 600 500 400 300 200 100 0-100 8.1% 398 4Q16 700 650 600 550 500 450 400 31 TOTAL VOLUME ( 000 tons) 11% 641 580 4Q16 4Q17 consolidated 9.3% 493 4Q17 10,00% 9,00% 8,00% 7,00% 6,00% 5,00% 4,00% 3,00% 2,00% perfomance 4 Q17 High revenue driven by the expansion of beef sales volume Increase of 120 bps in EBITDA margin, as a result of the 37% increase in Beef division and Keystone's continued solid performance
leverage & debt Leverage and Adjusted EBITDA 4.36x 4.55x 3.94x Goal 2.5x by 2018 4 Q17 1,613 1,708 3Q17 4Q17 1,972 4Q17* LTM Adj. EBITDA * Normalized ** Normalized Adj. EBITDA and annualized US$ million 15% Short term Gross Debt 3% Cash & Equiv. -7% 32 85% Long term Medium Cost (% a.a.) 6.38% Average Term 3.8 years 3,650 3,757 3Q17 4Q17 1,428 1,331 3Q17 4Q17
cash flow consolidated R$ million OCF 88 4 Q17 (247) Capex (192) Interest (350) FCL Improvement of operational flow, and lower consumption of working capital Interest expenditure stability (236) PERT (12) FCL discontinued (599) Total FCF 33 Maintaining the high level of investments Adhesion to the Special Tax Regularization Program ("PERT")
Net Result Consolidated NET LOSS CONTINUED (R$ million) 4 Q17 50 0-50 -100-150 -200-250 -300 4Q16 (230) 4Q17 (8) In 4Q17 net income from continuing operations recorded a loss of approximately R$ 8 million, the lowest since 2015 34
Consolidated result 2017
NET REVENUE (R$ million) ADJUSTED EBITDA & MARGIN (R$ million & %) 19450 18950 18450-1% 6% 17950 17450 16950 16450 15950 15450 14950 18,828 18,578 2016 2017 M A R F R I G Result 2859 2359 1859 1359 859 359 8.6% 9.2% 1,614 1,708 2016 2017 10,00% 9,00% 8,00% 7,00% 6,00% 5,00% 4,00% 3,00% 2,00% 2017 TOTAL VOLUME ( 000 tons) The appreciation of the real and the lowest price in the Brazilian domestic market (which followed the cattle trend) contributed to moderate decline in 2017 revenue 2500 2300 2100 1900 1700 1500 1300 36 5% 2,138 2,254 2016 2017 Expansion of volumes in the two divisions Adjusted EBITDA of R$ 1.7 million, reflecting: Resuming Beef growth in Brazil, with margin improvement; and Keystone score another record
final considerations
Closing Remarks Perspective 2 0 1 8 S C E N A R I O Outlook for the protein sector remains favorable Positive Free Cash Flow expected Capital restructuring through equity sale at Keystone Achieving leverage ratio of 2.5x Investments returning to historical levels 38
Why Marfrig? One of the largest and most diversified protein player worldwide Solid position & strong reputation for food safety and quality. Strategic supplier of proteins products for the QSR, foodservice and retail channels Leading processed food supplier in the US and APMEA regions and well positioned to capture market growth in Asia and Middle East One of the dominant players in South America: main region to support the growing international demand with grass fed, hormone - free beef Largest player in Uruguay, already supplying in the US market, with high quality, organic and fully traceable meat; Leadership and pioneering when it comes to sustainability 39
To be recognized as one of the global leaders and the partner of choice strategic G U I D E L I N E S 2021 in the segments where it operates, generating value for its stakeholders 40
Appendix
Shareholder Structure MMS + Controlling Holders BNDES Participações Brandes Investments Management +Treasury Others 35.0% 33.7% 10.0% 0.0% 21.2% 42 As of March 2018
Outstanding Bonds & Ratings Maturity Bonds Outstanding Currency Out. Amount (US$ mm) Coupon Ratings Agency National Scale Global Scale Outlook 2018 USD 88.6 8.375% Standard & Poor s Br A- B+ Stable 2019 USD 508.4 6.875% Fitch Ratings A bra BB- Stable 2021 USD 27.8 11.250% 2023 USD 1,000 8.000% Moody s - B2 Stable 2024 USD 750 7.000% 2025 (NEW) USD 1,000 6.875% 43
1200 1000 800 600 400 200 0 S c h e d u l e ( Maturity of Bonds) Before Issuance Average Term: 5.4 years 1,000 P RO C E S S O F 660 750 Liability Management 2018 216 28 2018 2019 2021 2023 2024 Pró Forma After Issuance 2018 2019 2020 2021 2023 2024 2025 Dec 2017, Balance 215.8 660.3 27.8 1,000.0 750.0 Issuance 1,000.0 1200 1000 800 600 Average Term: 6.2 years 1,000 1,000 750 Repurchase -123.2-151.9 400 Payable Balance -92.7-508.4 200 0 28 2021 2023 2024 2025 44 Pro-forma Balance 27.8 1,000.0 750.0 1,000.0
Keystone Credit lines Keystone credit lines 4Q15 - Amendment and extension of existing credit lines: Limit: + USD 270 million Maturity: + 2 years Line Limit Maturity Rate Values in U$ million From To From To From To Revolver 430 530 2018 2020 Libor+ 150 to 250 bps Term Loan 200 370 2020 2022 Libor+ 175 to 275 bps Total 630 900 Libor+ 125 to 225 bps Libor+ 150 to 250 bps Pool of 20 Banks, with Rabobank as the lead arranger. 45
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