Institutional Presentation November, 2014
Transcription
Institutional Presentation November, 2014
Institutional Presentation November, 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” Net Revenue (1) EBITDA Margin (2) Investment (CAPEX) Free Cash Flow to Shareholders 2014 Target Range 9M14 % achieved 2018 Target Range R$21.0bn to R$23.0bn R$15.1bn 72% - 66% 7.5% - 8.5% 8.2% 109% - 96% 8.5% to 9.5% R$600MM R$447MM 75% n/d Breakeven to R$100MM R$71MM R$650MM to R$850MM 7.5% to 9.5% (CAGR 2012-18) Note: (1) Revenue calculated in R$ 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 3rd largest beef producer and one of South America’s largest lamb suppliers More than 45,000 employees One of the world’s largest providers of processed food to major restaurant chains 78 commercial production and distribution units One of the largest poultry-based processed products suppliers in the UK and Europe 16 Presence in countries in the Americas, Europe, Asia and Oceania Diversified presence in animal protein, serving the Retail and Food Service Channels Serving global retail and food chains in over countries 110 6 Corporate Profile Net Revenue 21.9 (R$ billion) 23.7 21.0 – 23.0 18.8 15.9 9.6 1.0 1.3 1.4 2.1 2003 2004 2005 2006 3.3 2007 6.2 2008 2009 2010 2011 2012 2013 2014* Revenue Breakdown - 9M14 % by Business 46% 28% Marfrig Beef Keytone Moy Park * Guidance 2014 26% % by Currency 42% 26% 21% 11% USD EUR/GBP BRL Other % by Product 46% Processed Fresh Other 44% 10% 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 Jaime Singer Andrew Murchie Martin Secco Marfrig Beef Marfrig Beef Brasil Southern Cone Frank Ravndal Janet McCollum Keystone Foods Moy Park 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 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 on the 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 portfolio recognized for quality and diversified product World’s 3rd largest beef producer and Brazil's 2nd 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 7 units 2 units 17,200 employees 3,300 employees 1,400 employees 3.7 million head of cattle/year 930,000 head of cattle/year 390,000 head of cattle/year 2.0 million lamb/year Revenue Breakdown – 3Q14 % by Channel/Market 44% % by Protein 36% 15% 5% Brazil Domestic Brazil Export Uruguay/Chile Argentina 76% 7% 17% Fresh Beef Processed Lamb, Leather and Other 13 Marfrig Beef | 3Q14 Highlights Net Revenue (R$ million) 2,482 2,365 2,240 9M14: R$6.9bn 2,256 2,075 + 11% 3T13 3Q13 4T13 4Q13 1T14 1Q14 2T14 2Q14 3T14 3Q14 Stronger exports from Brazil Continued good performances at the Uruguay and Chile operations Lower average price in Brazil's domestic market due to the shift in the product mix 14 Marfrig Beef | 3Q14 Highlights Adjusted EBITDA and Margin (R$ million and %) 10.0% 9.0% 9.5% 10.2% 8.6% 253 226 202 197 203 9M14: R$653MM 9.4% + 25% 3T13 3Q13 4T13 4Q13 1T14 1Q14 2T14 2Q14 3T14 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 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 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 Estimated annual savings of R$30MM 16 Marfrig Beef | Strategic Goals Segmentation of service to Food Service channel Large Chains Service Providers Street Business Independent Establishments Specialized relationship Negotiations Pricing dynamics Product customization 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 18 Marfrig Beef | Outlook & Scenario Brazil Brazil enjoys a very competitive position in world beef exports Beef Cattle by Country (million head) Cattle Price (USD/KG – Carcass Weight) CAGR 10-14 India 330 Brazil 209 China 104 BRAZIL BRASIL AUSTRÁLIA USA EUA URUGUAI URUGUAY 1.0% 3.0% $5.44 -0.3% EU 88 -0.6% $3.72 $3.68 USA 88 -1.5% $3.27 Aug-14 Mar-14 0.4% Oct-13 28 May-13 Australia Dec-12 -0.6% Jul-12 30 Feb-12 Colombia Sep-11 1.6% Jun-10 52 Jan-10 Argentina Apr-11 Nov-10 19 Marfrig Beef | Outlook & Scenario Brazil The opening up of new markets to Brazilian beef should drive export growth Share in Exports Marfrig Beef Brazil Marfrig Beef Brasil (R$ million and % of Revenue) 42% 33% Exports by Destination 3Q14 (% of Revenue) 45% 1,971 1,734 Europe Asia South/Central America 1,473 Middle East Russia Other 3T12 3Q12 3T13 3Q13 3T14 3Q14 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% Closed Hong Kong 575 7.4% Open China 550 7.1% Negotiation 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) Europe Main import markets Restrictions on Uruguay USA Open Russia Open Japan Negotiation Hong Kong Open China Open European Union Open South Korea Open Venezuela Open Canada Open Chile Open Mexico Open Asia South/Central America Middle East Russia Other Share of Exports Marfrig Beef Uruguay (R$ million and % of Revenue) 55% 49% 347 56% 379 268 3Q12 3T12 3Q13 3T13 3Q14 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 APMEA 7 units 7 units 6,200 employees 5,400 employees 190 million birds/year 40 million birds/year 400,000 tons of processed food/year 150,000 tons of processed food/year Revenue Breakdown - 3Q14 % by Channel/Market 76% % by Protein 24% 74% 22% 4% USA Further processed poultry APMEA 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$4.2bn - 5% In the USA: 3T13 3Q13 4T13 4Q13 1T14 1Q14 2T14 2Q14 3T14 3Q14 Pricing model adopted with our main client whereby product prices reflect drops in raw material costs Change in sales mix to QSRs In APMEA: Sales mix was impacted by an incident involving a competitor food supplier to our main client in China 27 Keystone Foods | 3Q14 Highlights Adjusted EBITDA and Margin (R$ million and %) 6.4% 6.9% 8.0% 111 95 96 7.1% 6.1% 100 87 9M14: R$298MM 7.1% - 9% 3Q13 3T13 4Q13 4T13 1Q14 1T14 2Q14 2T14 3Q14 3T14 Impact of mark-to-market adjustments of unrealized hedge losses Higher outside meat costs Lower feed costs 28 Keystone Foods | Strategic Goals Comprehensive product portfolio for food service industry and QSR chains Poultry-based products Nuggets Chicken patties Beef-based products Grilled strips Beef patties Other Coated seasoned cuts Fish patties Bacon and “Halal” Bacon Desserts 29 Keystone Foods | Strategic Goals Integrated production chain allows greater control and ensures product availability, consistency and quality Vertical integration corresponding to 70% poultry supply Bird Selection Pullet Farms Selection of breeds based on performance Hens raised until they reach sexual maturity in Keystone’s operation in the U.S. Further Processing Creation of chickenbased fully-cooked, parfried and marinated products. Breeder Farms Hens lay eggs that are taken to the hatchery Feed Plant High quality feed is produced to optimize the performance of chickens. Primary Processing Poultry slaughter with the carcass forwarded to the further processing units Broiler Farms Broilers are raised until they reach the targeted weight. Fertile Hatchery Fertile hatching eggs are incubated and hatched. 30 Keystone Foods | Strategic Goals Established a Broad Footprint in APMEA Supplying 19 Countries Across the Region APMEA Sales Well Diversified (% of revenue by country of destination - 2013) Volume growth in all markets where we have production presence (‘000 pounds) United Arab Emirates 5% Australia 6% Other 3% 12.4% CAGR 313 Australia China 30% South Korea Singapore 8% Thailand Middle East 11% South Korea 12% 109 Malaysia Japan 13% Malaysia 12% China 2004 2013 31 Keystone Foods | Outlook & Scenario Potential QSR segment growth in USA Sales of major QSR chains (US$ billion) Expected market growth (US$ billion) 5.5% CAGR 35.9 265 Keystone Customer 12.7 11.7 8.8 250 3.7% CAGR 8.5 185 188 09 Source: Euromonitor / U.S. Fast Food, QSR 50 Report 2012 10 195 11 204 12 214 13 225 236 14E 15E 16E 17E 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 0 10 20 30 40 Kg / inhabitant / year Source: OECD-FAO Agricultural Outlook 2014-2023 50 Higher per-capita GDP Population growth Growing middle class Rural flight 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 61% 29% 10% 74% 25% 1% UK Continental Europe Other Retail Food Service Other % by Protein 53% Processed Fresh Other 40% 7% 37 Moy Park | 3Q14 Highlights Net Revenue (R$ million) 1,332 1,321 1,338 1,345 9M14: R$4.0bn 1,222 +10% 3T13 3Q13 4T13 4Q13 1T14 1Q14 2T14 2Q14 3T14 3Q14 Sales growth in the retail channel in UK and Ireland, led by fresh meats Positive contribution from currency variation in the period (7%) Consolidation of Marfrig's convenience beef business in Europe 38 Moy Park | 3Q14 Highlights Adjusted EBITDA and Margin (R$ million and %) 7.6% 6.4% 101 7.2% 7.0% 7.1% 95 94 96 78 9M14: R$284MM 7.1% +24% 3Q13 3T13 4Q13 4T13 1Q14 1T14 2Q14 2T14 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 46% 25% 52% 48% 75% Second largest producer in the UK Source: Kantar Worldpanel, Euromonitor 54% Leading market positions in higher growth convenience food categories (growth of over 6% p.y.) 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 Competitive advantages Key Clients Retail Food Service 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 v 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 Menu launched in supermarkets 2012 Meals High-quality meals made with Irish ingredients 2013 Snacks Convenient snacking products 2014 Kitchen 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) 20 Birds 19.1 Hogs¹ 19 Cattle¹ 18 Origin of UK poultry Imported UK produced 38% 17.2 62% 17 16 14.7 15 14 13 Jan-08 Jan-14 Dec-16 Source: DEFRA UK broiler slaughter (rolling weekly average) ¹ Pork and Beef in ‘000 tons, indexed to 2008 UK production expected to increase 4% p.a. 45 Moy Park | Outlook & Scenario Poultry is the most affordable protein Cost per ton (£)1 UK sales volume (‘000 tons) 4,420 CAGR 1.6% 800 1,300 778 746 1,590 700 CAGR 1.6% 600 Chicken Pork Beef 500 CAGR 0.1% Evolution of UK consumption 2007-2012 (‘000 tons) Chicken 400 Pork Beef 175 CAGR 0.1% 300 38 Source: Euromonitor, USDA 1 Production price 442 314 200 2012A 2013A 2014E 2015E 2016E 2017E -125 Chicken Fish Beef Pork 46 Moy Park | Outlook & Scenario Peer comparison – EV/EBITDA14E (Circle size = Enterprise Value) EBITDA 2014E (USD MM) 400 HILTON GREENCORE 300 CRANSWICK SCANDI STANDARD 200 175 EBITDA LTM MOY PARK USD 170 MM 121 100 67 62 0 6,5 Source: Factset 7,0 7,5 8,0 8,5 9,0 EV/EBITDA 9,5 10,0 10,5 11,0 11,5 47 Moy Park | Outlook & Scenario Pricing Dynamics of UK IPOs 2013 1Q14 Under Source: Dealogic Bottom 2Q14 Middle Top 3Q14 Upper Consolidated Financial Performance 49 Financial Performance | Consolidated Net Revenue (R$ million) Breakdown by Business (%) Receita por Negócio - 3T13 Receita por Negócio 3Q14 3Q13 45% 25% 47% 26% + 6% 30% Compared to 3Q13: Moy Park +10% to R$1,345MM Keystone -5% to R$1,412MM Marfrig Beef +11% to R$2,482MM 27% 50 Financial Performance | Consolidated Gross Income and Gross Margin (R$ million and %) Breakdown by Business (%) Lucro por Negócio - 3T13 Lucro por Negócio - 3 3Q13 63% + 11% 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% 3Q14 21% 16% 65% 22% 13% 51 Financial Performance | Consolidated SG&A and SG&A/NOR (R$ million and %) Breakdown by Business (%) 3Q13 58% 3Q14 29% 58% 30% + 5% 13% SG&A/NOR vs. 3Q13: Moy Park + 20 bps to 8.2% Keystone stable at 3.0% Marfrig Beef - 50 bps to 8.4% 12% 52 Financial Performance | Consolidated Adjusted EBITDA and Margin (R$ million and %) por Negócio - EBITDA 3T13 por Negócio EBITDA Breakdown by Business (%) 3Q13 54% +16% EBITDA Margin vs. 3Q13: Moy Park + 70 bps to 7.1% Keystone - 30 bps to 6.1% Marfrig Beef + 120 bps to 10.2% 3Q14 21% 25% 22% 58% 20% 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 0.37x 0.37x 2.47x 2.52x 2.18 2.18 50 7.6% 11.7% 88.3% 5.8% 94.2% 54 7.0% 11.2% 88.8% 4.1% 95.9% Net Debt / Total Assets Cash and Equivalents / ShortTerm Debt Current Liquidity (*) Duration (months) Average Cost ** (p.y.) Short Term (%) Long Term (%) In BRL (%) Other Currencies (%) * 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 end3Q14 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 end3Q14 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 Order book (US$4.9bn) exceeded the issue by 5.6x, which allowed for lowering the cost to 6.875% p.y. Repurchase of 2017 and 2021 Senior Notes, significantly reducing the cost and realigning the maturity profile 44% Europe LatAm % investor type 39% 5% 4% 8% US Other Asia 45% 17%14%12% 13% Asset Mgmt Private Bank Other Hedge Fund Bank 58 Cash Flow | Consolidated Cash Flow Bridge – 3Q14 Better working capital management, especially at Marfrig Beef Brazil The line “Other” increased, mainly due to non-cash items related to market transactions, such as swap and commodity contracts (R$ million) 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 59 Cash Flow | Consolidated Free Cash Flow (after CAPEX and Interest) (R$ million) 1Q13 1T13 2Q13 3T13 3Q13 2T13 4Q13 1T14 1Q14 4T13 2Q14 2T14 16 (135) 3Q14 3T14 84 (30) (295) (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 (83,4) (194,1) 1Q14 2Q14 3Q14 Currency variation (R$226MM) (55,1) (96,4) REFIS expenses (R$93MM) - 56% (303,3) 61 Cash Flow| Consolidated Investments (R$ million) 3Q14 2Q14 1Q14 4Q13 3Q13 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 8.0 4.1 3.6 3.3 3.2 127.3 176.8 142.6 239.4 207.9 Investments in fixed assets Investments in intangible assets Total investment in the period Ownership Structure and Capital Markets 63 Ownership Structure | October 2014 Share Capital 520,747,405 shares1 Officers/ Management 0.1% Free-float 255,183,732 shares Treasury 0.1% 11.0% 15.2% MMS Part. 31.2% Other 42.7% 8.2% Other 11.1% 30.7% 23.7% BNDES 19.6% 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 46% Manter 15% 39% 38% Recommendation Buy Hold Sell Average TP: R$7.71 65 Share Performance | 2014 100% 80% 60% 52% 52% 40% 27% 27% 20% 3% 3% 0% -20% dez-13 jan-14 fev-14 mar-14 MRFG3 Source: Bloomberg To November 12, 2014 *Peers: average of JBS, BRF and Minerva abr-14 mai-14 jun-14 Peers* jul-14 ago-14 set-14 Ibovespa out-14 nov-14 66 Bond Performance | 2014 2018 2020 2021 24% 24% 24% 20% 20% 20% 16% 16% 16% 12% 8% 8% 4% 4% 12% 8% 4% 2% 1% MRFG3 nov-14 set-14 out-14 ago-14 jun-14 jul-14 abr-14 mai-14 fev-14 mar-14 jan-14 nov-14 -4% set-14 out-14 -4% ago-14 -4% jun-14 jul-14 0% abr-14 mai-14 0% fev-14 mar-14 0% jan-14 15% Peers* Source: Bloomberg To November 12, 2014 * Peers: average of bonds issued by JBS, BRF and Minerva with same maturities 1% jan-14 fev-14 mar-14 abr-14 mai-14 jun-14 jul-14 ago-14 set-14 out-14 nov-14 13% 12% 13% 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 4th quarter We expect growth in EBITDA in the 4th quarter due to improving market dynamics in both the US and Asia 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 Avenida Chedid Jafet, 222 Bloco A 5º andar São Paulo - SP Telephone SP: +55 (11) 3792-8650 NY: +001 484 362 8645 - E-mail @ [email protected] Website www.marfrig.com.br/ri