JBS S.A. A GLOBAL FOOD COMPANY 2017 Earnings Presentation São Paulo
DISCLAIMER We make statements about future events that are subject to risks and uncertainties. Such statements are based on the beliefs and assumptions of our Management and information to which the Company currently has access. Statements about future events include information about our current intentions, beliefs or expectations, as well as those of the members of the Company's Board of Directors and Officers. Disclaimers with respect to forward-looking statements and information also include information on possible or presumed operating results, as well as statements that are preceded, followed or that include the words "believe," "may," "will," "continue," expects," "predicts," "intends," "plans," "estimates," or similar expressions. Forward-looking statements and information are not guarantees of performance. They involve risks, uncertainties and assumptions because they refer to future events, depending, therefore, on circumstances that may or may not occur. Future results and shareholder value creation may differ materially from those expressed or implied by the forward-looking statements. Many of the factors that will determine these results and values are beyond our ability to control or predict. 2
2017 HIGHLIGHTS F Y net rev enue was R$163.2bn C onsolidated gross profi t i ncreased by 11.5% to R$23.8bn C onsolidated EBI TDA i ncreased by 18.9% to R$13.4bn C onsolidated EBI TDA m argi n i ncreased to 8.2% from 6.6% A d j usted net i ncome¹ was R$2.1bn Operati onal C ash Flow of R$5.2bn and Free Cash Flow of R$2.8bn Lev erage reduced to 3.38x from 4.16x S h o r t - t e r m d e b t r e d u c e d b y 25% Note 1: Adjusted to reflect the net effect of one-time tax charge (PERT) 3
RELENTLESS FOCUS TO DRIVE RESULTS & POSITION THE COMPANY FOR THE FUTURE R E L E N T L E S S P U R S U I T O F O P E R A T I O N A L E X C E L L E N C E T O D R I V E R E S U L T S S T R O N G C U L T U R E A N D T E A M O F P R O V E N L E A D E R R E D U C E D L E V E R A G E A N D I N C R E A S E D L I Q U I D I T Y E X T E N D E D D E B T M A T U R I T I E S I M P L E M E N T A T I O N O F W O R L D - C L A S S C O M P L I A N C E P R O G R A M 4
A UNIQUE GLOBAL PLATFORM 1 facility ~2,800 employees 47 facilities ~67,000 employees 52% 3% CANADA USA 17 facilities ~14,000 employees 5% EUROPE RUSSIA 1% 13% 8 facilities ~12,000 employees MEXICO 4% AFRICA & MIDDLE EAST 3% ASIA 1 facility ~1,000 employees BRAZIL SOUTH AMERICA 1% 14% 114 facilities ~127,000 employees 23 facilities ~11,300 employees 4% AUSTRALIA & NEW ZEALAND % As % of Total Revenue Note: total employees includes third parties Beef Pork Poultry Lamb Leather 5
A DIVERSIFIED GLOBAL PRODUCT PORTFOLIO W O R L D S L A R G E S T B E E F P R O D U C E R W O R L D S L A R G E S T L E A T H E R P R O C E S S O R W O R L D S L A R G E S T C H I C K E N P R O D U C E R S E C O N D L A R G E S T P O R K P R O D U C E R S E C O N D L A R G E S T L A M B P R O D U C E R G L O B A L L E A D E R S H I P I N P R E P A R E D F O O D S 6
Tim Schellpeper President JBS USA Fed Beef Al Byers President JBS USA Regional Beef Marty Dooley President JBS USA Pork Bill Lovette CEO Pilgrim s Global Janet McCollum President Moy Park STRONG GLOBAL OPERATIONAL TEAM DRIVING INDUSTRY-LEADING RESULTS Charles Von Der Heyde President Pilgrim s Mexico Brent Eastwood David Colwell Thomas Lopez Joanita Karoleski Renato Costa Roberto Motta Nelson Dalcanale President JBS Australia President JBS Canada President Plumrose USA President Seara President JBS Brazil Beef President JBS Leather President JBS Brazil New Business 7
COMPLIANCE JBS is implementing initiatives to strengthen its Compliance and establish a new industry standard. In 2017, the Company: Appointed respected lawyer & academic Marcelo Proença as Global Head of Compliance Hired White & Case to support implementation of the JBS Global Compliance Program and to advise on the development of best compliance practices Hired Deloitte to conduct a thorough review of all third-party contracts Established new Whistleblower Hotline Launched the Always Do It Right compliance program Strengthened role of the Compliance Department which now reports directly to the JBS SA Board Worked with Transparency International, to improve transparency in corporate reports 8
DIVESTMENT PLAN COMPLETED JBS RAISED ~R$6.0 Billion Through the Divestment Plan Jun 20, 2017 Announcement of the Divestment Plan Oct 2, 2017 Sale of Moy Park to PPC for ~ 1 billion Oct 30, 2017 Sale of feedlot and farm in Canada for C$50 million July 31, 2017 Sale of beef operations in Argentina, Paraguay and Uruguay for US$300 million* Oct 26, 2017 Sale of 19.43% stake in Vigor for ~R$1.1 billion March 16, 2018 Sale of Five Rivers in the US for ~US$200 million The sale of the majority of the assets included in the Divestment Plan was concluded in 2017. A substantial portion of the proceeds received from these asset sales was used to reduce debt. At the end of 2017, leverage was 3.38x. *The intention to sell these assets was announced on June 6, 2017 9
2017 Consolidated Results 10
2017 CONSOLIDATED RESULTS Net Revenue (R$ million) Gross Profit (R$ million) 170,381 163,170 Gross margin (%) 12.5% 14.6% -4.2% 21,314 23,772 11.5% Net revenue in 2017 was R$163.2Bn Reduction of 4.2% compared with 2016 Gross profit in 2017 was R$23.8Bn Increase in gross margin from 12.5% in 2016 to 14.6% in 2017 11
2017 CONSOLIDATED RESULTS Adjusted EBITDA (R$ million) EBITDA margin (%) Net Income (R$ million) 8.2% 0.75 6.6% 11,287 18.9% 13,416 0.09 2,111.4 0.19 804.0% 534.2 233.6 ¹ 2017 Adjusted¹ EBITDA in 2017 was Adjusted¹ net income in 2017 was R$13.4Bn Increase in EBITDA margin from 6.6% in 2016 to 8.2% in 2017 R$2.1Bn Reported net income in 2017 was R$534.2 million, a 128.7% increase in relation to 2016, with EPS of R$0.19 Note 1: adjusted by the net effect of PERT 12
2017 CONSOLIDATED RESULTS Operational Cash Flow (R$ million) Free Cash Flow (R$ million) 5,204 2,778 3,667 41.9% 2070% 128 Cash flow generated by operational activities increased by 41.9% in 2017, reaching R$5.2Bn Free cash flow in 2017 increased by 2070%, reaching R$2.8Bn 13
4Q17 CONSOLIDATED RESULTS Net Revenue (R$ million) Gross Profit (R$ million) Gross margin (%) 41,631 42,734 Net revenue in 4Q17 was 14.3% 14.8% 5,936 6,341 R$42.7Bn 2.7% 6.8% 2.7% increase compared with 4Q16. Gross profit in 4Q17 was R$6.3Bn Increase in gross margin from 14.3% in 4Q16 to 14.8% in 4Q17 4Q16 4Q17 4Q16 4Q17 EBITDA (R$ million) Net Income / Loss (R$ million) EBITDA margin (%) 7.5% 7.5% EBITDA in 4Q17 de Loss in 4Q17 was 3,113 3,198 2.7% R$3.2Bn 7.5% EBITDA margin in both quarters 663 R$451.7mn 4Q16 4Q17 4Q16 4Q17-452 14
2017 CONSOLIDATED NET DEBT Net Debt (R$ million) / Leverage 4.16x 3.38x Leverage Net debt reduced by R$1.6Bn Including FX impact 46,905-3.5% 45,283 In US$ terms, Net debt was reduced by US$700 million Leverage reduced to 3.38x in 2017 from 4.16x at the end of 2016 Net Debt (US$ million) Cash at the end of 2017 was 14,392-4.9% 13,689 R$11.7Bn In addition, JBS USA has a US$1.0 billion (R$3.5 billion)¹ fully available unencumbered line under revolving credit facilities Note 1: Converted using the prevailing FX rate at the end of the period 15
2017 DEBT PROFILE Breakdown by Currency and Interest Rate Debt Profile ST/LT 2016 2017 9.13% p.a. R$ 5.0% US$ 95.0% 5.40% p.a. LT 68% ST 32% LT 76% ST 24% % Short Term Debt R$18.1 bn R$13.5 bn -25% Total liquidity was R$15.2 Billion R$1.7 billion higher than short-term debt 16
2017 Business Unit Performance 17
SEARA Net Revenue (R$ million) EBITDA (R$ million) 18,154.6 17,473.1 8.8% 9.0% -3.8% 1,595.3 1,568.7-1.7% 2017 HIGHLIGHTS Increase in exports to Asia and MENA Launching of 94 new products in Brazil Leadership position in several regions in the domestic market Best Holiday campaign of the last three years in terms of profitability Continuous focus on reduction of cost and expenses Increase in brand preference 18
JBS BRAZIL (BEEF, LEATHER AND RELATED BUSINESSES) Net Revenue (R$ million) EBITDA (R$ million) 28,204.3 23,446.9 6.0% 0.4% -16.9% 1,701.3-95% 84.3 2017 PERFORMANCE Revenue and margin were directly impacted by a 14% decrease in livestock processed in Brazil Revenue was also impacted by the sale of the company s beef operations in Argentina, Paraguay and Uruguay This business unit was also affected by a relevant cyclical downturn in the leather operation Annual results were affected by non-recurring expenses 19
JBS USA BEEF (INCLUDING AUSTRALIA AND CANADA) Net Revenue (US$ million) EBITDA (US$ million) 20,560.7 21,663.6 2.3% 6.0% +5.4% 1,308.6 472.2 +177% Swift (bolinha) e Primo 2017 HIGHLIGHTS 177% increase in EBITDA Increase in demand in the domestic and in international markets and increase in beef prices Growing availability of cattle with stable production capacity in the US In Australia, industry-wide limited availability of cattle throughout the year affected the Company s performance Primo Smallgoods, which operates in the increasingly attractive prepared foods segment, produced encouragingly positive results 20
JBS USA PORK Net Revenue (US$ million) EBITDA (US$ million) 5,345.8 6,210.6 11.5% 12.6% +16.2% 612.7 779.9 +27.3% 2017 HIGHLIGHTS Increase in revenue was driven by growth in the demand for pork in domestic and international markets and by the Plumrose acquisition Despite an increase in domestic market competitiveness, EBITDA margin increased from 11.5% in 2016 to 12.6% in 2017 Unrelenting focus on operational efficiencies, as well as the decision to diversify into higher value-added products, was reflected in the excellent results 21
PILGRIM S PRIDE Net Revenue (US$ million) EBITDA (US$ million) 9,878.6 10,767.9 12.9% +9.0% 10.4% 1,029.7 1,388.0 +34.8% 2017 HIGHLIGHTS Net revenue increased in all regions Growth of 34.8% in EBITDA, with EBITDA margin increasing from 10.4% in 2016 to 12.9% in 2017 PPC completed several strategic investments during the year that contributed to positioning the company as a leader in the production of organic chicken, focused its operations on the enhancement of its relationship with key-customers, differentiated its brand and product portfolio, and improved its margin profile 22
Focus on the Future 23
RAISING THE BAR IN FOOD SAFETY AND QUALITY In 2017, JBS appointed Alfred Almanza, former U.S. Under Secretary for Food Safety as Global Head of Food Safety Almanza spent nearly 40 years with the U.S. Department of Agriculture, Food Safety and Inspection Service - USDA FSIS Almanza is globally recognized as an expert on food safety, risk management and international market access for meat and poultry Strategic Focus Drive continuous improvement and harmonize the Company s global approach to food safety Adopt innovative technologies to improve performance Promote knowledge-sharing and best practice management across the global business Establish JBS as the global standard-bearer for food safety and quality assurance 24
PRODUCT INNOVATION AND TECHNOLOGY Seara launched lasagna with an innovative new packaging that enables the product to be heated uniformly Primo launched a range of prepared meats, including ham, bacon and salami, as well as a range of innovative prepared food products designed specifically for Christmas Pilgrim s is investing in organic and natural products and expanding Just Bare s brand presence throughout the United States JBS acquired Scott Technologies in 2015 giving direct access to state-ofthe-art food technologies that improve yield efficiency and lower costs across its production platform 25
LONG-TERM STRATEGY Continue to build a globally diversified production and distribution platform with an increasing focus on valueadded products with recognized consumer brands Branding \\\\\\\\\\\\ Value-added products Sales and distribution platform +350,000 customers and sales to +150 countries Production platform +400 production units in +15 countries 26
JBS PRIORITIES C onti nuous focus on operational efficiency Organic g rowth I nv estments i n innovation D elev erage target: 2 0 1 8 : l o we r t h a n 3.0x 2 0 1 9 : a r o u n d 2.0x I m plementati on of a world- c l a s s C o m p l i a n c e P r o g r a m 27
OUR MISSION To be the best in all that we do, completely focused on our business, ensuring the best products and services to our customers, a relationship of trust with our suppliers, profitability for our shareholders and the opportunity of a better future for all of our team members. 28