3Q19 Earnings
November 8, 2019
Disclaimer
This presentation may contain statements that express BRF S.A. ("BRF") management's expectations, beliefs and assumptions about future events or results. Such statements are not historical facts and are based on currently available competitive, financial and economic data of the industries in which BRF operates.
The verbs "anticipate", "believe", "estimate", "expect", "forecast", "plan", "predict", "target", "aim", "seek" and other similar verbs are intended to identify these forward-looking statements, which involve risks and uncertainties that could cause actual results to differ materially from those projected in this presentation and do not guarantee any future BRF performance. The factors that might affect performance include, but are not limited to: (i) market acceptance of BRF's products;
- volatility related to the Brazilian economy, as well as the economies of the other countries in which BRF also has relevant operations, the financial and securities markets and the highly competitive industries BRF operates in; (iii) changes in domestic and foreign legislation and taxation, as well as in government policies related to the domestic and foreign animal
protein and related markets; (iv) increasing competition from new entrants to the Brazilian and international markets; (v) ability to keep up with rapid changes in the regulatory and technological environments; (vi) ability to maintain an ongoing process for introducing competitive new products and services while maintaining the competitiveness of existing ones; (vii) ability to attract customers in domestic and foreign jurisdictions. Other factors that could materially affect results can be found in BRF's Reference Form and in the annual report on Form 20-F, as filed with the U.S. Securities and Exchange Commission, particularly under the "Risk Factors" session.
All forward-looking statements in this presentation are based on information and data available as of the date they were made and BRF undertakes no obligation to update them in light of new information or future development.
This presentation does not constitute an offer to sell or a solicitation to purchase any security.
2
OPENING REMARKS
LORIVAL LUZ
GLOBAL CEO
3
Consolidated results (Continuing operations)
3Q19 results reflect the evolution of our business fundamentals
- Net Revenue of R$8.5 billon with gross margin of 24.8%
- Adjusted EBITDA of R$1,609 million and Adjusted EBITDA margin of 19.0%
- Excluding tax-relatedevents1, Adjusted EBITDA of R$1.142 million and Adjusted EBITDA margin of 13.5%
- Net income of R$446 million in 3Q19 and accumulated R$523 million in 2019
- Free cash generation of R$1.4 billion in 3Q19 and R$3.0 billion in 2019
1 Net effect of R$467 million related to the ICMS exclusion from the PIS/COFINS calculation basis. | 4 |
Consolidated results (Continuing operations)
3Q19 results reflect the evolution of our business fundamentals
- Cash position of R$7.7 billion with net debt of 13.8 billion and an average maturity of 4.4 years
- Drop in net leverage to 2.90x1 (3.21x excluding IFRS16 effects)
- Revision1 of net leverage guidance to 2.75x at the end of 2019
- 3 plants licensed to export to the Chinese market
- Pork: Lucas do Rio Verde (MT) - incremental potential of 40% vs. current volume2
- Poultry: Lucas do Rio Verde (MT) - incremental potential of 20% vs. current volume2
- Offals: Campos Novos (SC) - incremental volume of approximately 5,000 tons/year2
1 According to Material Fact released on November 8, 2019;
2 Compared to current volumes exported to China. | 5 |
Memorandum of Understanding (MOU) - SAGIA
Expand and consolidate our presence in the Saudi market
Saudi Arabia | ||||||||
Turkey | » | |||||||
Syria | » Represent | ~1/4 | of | total | ||||
Iraq | volume the Halal market | » | ||||||
Egypt | Saudi | » #1 | Market | Share | with | |||
Arabia | EAU | approx. 35% | ||||||
Oman | ||||||||
Yemen | » #1 Top of Mind | with Sadia | » | |||||
brand | ||||||||
» Own distribution |
CAPEX of around US$120 million
Estimated installed capacity of 50,000 tons/years for the production of breaded and marinated products, hamburgers, among others
Products will be mostly destined to the Saudi market, which can
also be an exportation hub in the region
6
Grains environment and protein performance
Higher protein prices boosted producer's margin
Soybean & Corn Price | Whole Chicken and Pork Carcass Price | ||||||||||||||||||||||||||||||||
Cepea/ESALQ | |||||||||||||||||||||||||||||||||
B3 | |||||||||||||||||||||||||||||||||
8,5 | 8,5 | ||||||||||||||||||||||||||||||||
55 | 100 | ||||||||||||||||||||||||||||||||
3Q18 | 3Q19 | 3Q18 | 3Q19 | ||||||||||||||||||||||||||||||
50 | +3% | 90 | 7,5 | 7,5 | |||||||||||||||||||||||||||||
+36% | |||||||||||||||||||||||||||||||||
(R$/bag)Corn | 45 | 80 | (R$/bag)Soybean | (R$/kg)ChickenWhole | 6,5 | 6,5 | (R$/kg)CarcassPork | ||||||||||||||||||||||||||
40 | 70 | ||||||||||||||||||||||||||||||||
5,5 | 5,5 | ||||||||||||||||||||||||||||||||
35 | -1% | 60 | |||||||||||||||||||||||||||||||
4,5 | 4,5 | ||||||||||||||||||||||||||||||||
30 | 50 | ||||||||||||||||||||||||||||||||
25 | 40 | 3,5 | 3,5 | ||||||||||||||||||||||||||||||
+16% | |||||||||||||||||||||||||||||||||
20 | 30 | 2,5 | May-18 | May-19 | 2,5 | ||||||||||||||||||||||||||||
Sep-17 | Nov-17 | Jan-18 | Mar-18 | May-18 | Jul-18 | Sep-18 | Nov-18 | Jan-19 | Mar-19 | May-19 | Jul-19 | Sep-19 | Nov-19 | Jan-20 | Mar-20 | May-20 | Sep-17 | Nov-17 | Jan-18 | Mar-18 | Jul-18 | Sep-18 | Nov-18 | Jan-19 | Mar-19 | Jul-19 | Sep-19 | ||||||
Corn | Future Corn² | Soybean | Future Soybean¹ | Average Price | Whole Chicken | Pork Carcass | Average Price |
»
»
Corn: significant supply in Brazil, but with currency volatility and uncertainties related to the US harvest
Soybean: Unstable scenario due to China-US trade war and smaller US crop
- Better balance between supply/demand in local market benefitted price recovery
- African Swine Fever impacts on demand reflect on protein prices in the international market
¹ Source: Bloomberg; ² B3 quotes in October 2019. | 7 |
African Swine Fever (ASF) impacts
Reduction in the Chinese herd size has affected international pork market prices
China's Inventory | China's Reference Price |
(100 Base = Sep-18) | |
(in million heads) | |
425 | 70 | 250 | ||||||||||||||||||||||||
403,0 | -44% | 230 | ||||||||||||||||||||||||
63,7 | ∆ since lowest levels: | +153p.p. | ||||||||||||||||||||||||
375 | ∆ since | -47% | +104p.p. | |||||||||||||||||||||||
Sep-18: | -40% | 60 | 210 | +79p.p. | ||||||||||||||||||||||
325 | ||||||||||||||||||||||||||
+70p.p. | ||||||||||||||||||||||||||
190 | ||||||||||||||||||||||||||
275 | 50 | |||||||||||||||||||||||||
170 | ||||||||||||||||||||||||||
225 | 226,0 | |||||||||||||||||||||||||
40,7 | 150 | |||||||||||||||||||||||||
175 | 40 | |||||||||||||||||||||||||
130 | ||||||||||||||||||||||||||
125 | 34,0 | |||||||||||||||||||||||||
110 | ||||||||||||||||||||||||||
30 | ||||||||||||||||||||||||||
75 | 24,3 | 90 | ||||||||||||||||||||||||
25 | 20 | 70 | ||||||||||||||||||||||||
Sep-18 | Oct-18 | Nov-18 | Dec-18 | Jan-19 | Feb-19 | Mar-19 | Apr-19 | May-19 | Jun-19 | Jul-19 | Aug-19 | Sep-19 | Sep-18 | Oct-18 | Nov-18 | Dec-18 | Jan-19 | Feb-19 | Mar-19 | Apr-19 | May-19 | Jun-19 | Jul-19 | Aug-19 | Sep-19 | |
# Pork | # Sow herd | # Piglet | Piglet | Sow Herd | Live Hog | Pork Carcass Wholesale |
Source: Ministry of Agriculture of the People's Republic of China (MOA)
Source: Bloomberg and Boyar (Sow herd)
8
São Paulo | Nova York |
12 de novembro | November 14th |
Horário: 8h às 12h | From 8:30 am to 12:00 pm |
Local: Casa Charlô | Venue: NYSE |
Rua Tabapuã, 1353 | 11 Wall Street, NY |
9
FINANCIAL PERFORMANCE
3Q19
CARLOS MOURA
CHIEF FINANCIAL AND
INVESTOR RELATIONS OFFICER
10
Disciplined execution of the Strategic Plan
Continued recovery path
Adjusted EBITDA | |
and Margin* | |
Gross Profit and Margin | (R$ million) |
+178% | |
(R$ million) | |
+4.0% |
Volumes
(Thousand, Tons)
-1% | ||
+1.3% | ||
1.120 | ||
1.104 | ||
1.090 | ||
3Q18 | 2Q19 | 3Q19 |
Net Revenue
(R$ million)
+8% | ||
+1.5% | ||
8.338 | 8.459 | |
7.802 | ||
3Q18 | 2Q19 | 3Q19 |
+58% | ||
+0.2% | ||
25,1% | 24,8% | |
17,0% | 2.092 | 2.096 |
1.324 | ||
3Q18 | 2Q19 | 3Q19 |
18,6% 19,0%
7,4% 14,6% 13,5%
1.547 1.609
328 467
1.219 1.142
579 Ex-ICMSEx-ICMS
3Q18 2Q19 3Q19
*Includes net effect of R$328 million in 2Q19 due to the payment of ICMS for staple basket products provision and the excluding ICMS from PIS/COFINS calculation basis, and net
effect of R$467 million in 3Q19 due to the exclusion of ICMS from PIS/COFINS calculation basis. | 11 |
On a positive track to recover margins
Improved operational performance reflects our new momentum
Gross Margin | Adjusted EBITDA & Adjusted EBITDA Margin | |
25,1%
24,8% 23,5%
19,6% | 18,9% | 20,6% |
17,0% | 15,0% |
24.156
21.899
8,4%
7.031 | 7.067 | 7.802 | 8.289 | 7.359 | 8.338 | 8.459 | |
1Q18 | 2Q18 | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | 9M18 | 9M19 |
Net Revenue | Gross Margin | |
18,6% | 19,0% | ||
16,2% | |||
14,6% | |||
9,7% | 10,2% | 10,2% | 13,5% |
12,9% | |||
7,4% | |||
5,0% | 7,4% | 7,4% | |
3.904 | |||
795 |
1.547 | 1.690 | 3.109 | ||||||
328 | 467 | |||||||
843 | 1.620 | |||||||
226 | 1.219 | 1.142 | ||||||
685 | 579 | 617 | 748 | |||||
356 | ||||||||
1Q18 | 2Q18 | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | 9M18 | 9M19 |
Adj. EBITDA ICMS Adj. EBITDA Margin Adj. EBITDA Margin ex-ICMS
12
Net Debt Evolution: 3Q19 vs. 3Q18
Overcoming 2019 proposed goal
BRL million
16.323 | ||||||
-R$2.538 | ||||||
Cash Flow from Investments | million | |||||
4.672 | +R$226 milhões | 13.785 | ||||
1.737 | 1.963 | 2.359 | ||||
6,74x | 2,90x | |||||
4,00 | 4,16 | |||||
Net Debt | Operating | CAPEX | M&As | Cash Flow from | Net Debt | |
3Q18 | Cash Flow | Financing Activities | 1 | 3Q19 | ||
Real | Real | |||||
Net leverage (Net Debt/Adjusted EBITDA)
USD/BRL (PTAX)
¹ Including R$79 million effect from discontinued operations | 13 |
Leverage & Debt Profile
Reduction in net leverage and debt reprofiling
Financial Leverage 3Q19 (R$ million)
6,74x | 5,64x 2 | Ex-IFRS16: | ||
1 | ||||
3,21x | ||||
5,12x | ||||
15.498 | 3,74x | 2,9x | ||
15.610 | ||||
2.206 | 1.260 | |||
16.323 | 13.404 | 14.238 | 13.900 | 13.744 |
3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | ||
Pro forma Net Debt | Net Debt | Net Debt / Adj. EBITDA LTM | ||||
Debt Schedule 2Q19 | (R$ million)
Average Maturity: 3.2 years
1
6.999 | 8.734 | |||||
4.543 | 3.118 | 3.139 | ||||
1.247 | ||||||
Cash and | 2019 | 2020 | 2021 | 2022 | 2023+ | |
equivalents |
Gross Debt 3Q19 | R$21.5 billion
Subsidized lines | Capital | |
Agribusiness | 1% | markets |
Real | ||
loans 21%
42%
Other and tax | 2% | 65% | 58% |
incentives | 11% | ||
Trade finance | Other | ||
currencies |
Debt Schedule 3Q19 | (R$ million)
Average Maturity: 4.4 years
1
11.746
7.673
651 3.559 2.980 2.141
Caixa e equivalentes 2019 | 2020 | 2021 | 2022 | 2023+ |
- Including pro forma adjustments from incoming funds related to the sale of assets in Argentina, Europe, and Thailand, the non-transferred portion to FIDC and FX=R$3.80/US$. Taking into consideration the accounting numbers, leverage is 5.97x in 4Q18.
- Including pro forma adjustments from incoming funds remaining from the sale of assets in Argentina, Europe, and Thailand. Taking into consideration the accounting numbers, leverage is 6.14x in 1Q19.
3 Excludes R$118 million in 2Q19 and R$381 million in 3Q19 related to Derivative Financial Instruments Liabilities. | 14 |
OPERATING
AND FINANCIAL PERFORMANCE
3Q19
SIDNEY MANZARO
VICE-PRESIDENT
BRAZIL MARKET
15
Brazil Segment
Profitable growth, aligned to the strategic planning
- Net Revenue up +6.3% y-o-y
- Continued increase in gross margin, reaching 24.6% in 3Q19, due to prices, better mix and operating efficiency
- Excluding ICMS effects, Adjusted EBITDA of R$541 million with 12.3% margin, up +35.8% y-o-y
- Continued focus on Innovation: 4 new cuts of seasoned pork ready for cooking, under Perdigão's "Na Brasa" line were launched in the quarter
- Brands recognized in the Top of Mind Award
- Sadia: frozen meals category
- Qualy: Top Margarine category
- Deline: North region Top of Mind category
16
Brazil Segment
Rising profitability
Gross Margin | Adjusted EBITDA & Adjusted EBITDA Margin | |
24,6% | 23,0% | ||
24,0% | 23,3% | ||
19,4% | |||
20,8% | 21,1%20,9% | 21,2% | 17,3% |
19,9% |
17,9% | 12% | ||||||||||||||||
11,7% | 11% | ||||||||||||||||
11% | |||||||||||||||||
9,7% | 9,5% | ||||||||||||||||
12.404 | 9,4% | ||||||||||||||||
2.172 | |||||||||||||||||
4.736 | 11.556 | ||||||||||||||||
4.123 | 4.082 | 4.382 | 8,0% | ||||||||||||||
3.748 | 3.685 | 3.940 | 5,0% | 7,0% | 795 | ||||||||||||
790 | 1.008 | ||||||||||||||||
556 | 467 | ||||||||||||||||
328 | 1.377 | ||||||||||||||||
226 | 933 | ||||||||||||||||
352 | 398 | 374 | 462 | 541 | |||||||||||||
183 | 330 | ||||||||||||||||
1Q18 | 2Q18 | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | 9M18 | 9M19 | 1Q18 | 2Q18 | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | 9M18 | 9M19 |
Net Revenue | Gross Margin | |
Adj. EBITDA ICMS Adj. EBITDA Margin Adj. EBITDA Margin ex-ICMS
17
Brazil Segment
Consistent improvement in results
Adjusted EBITDA
and Margin
Volumes
(Thousand, Tons)
-2%
+8%
569 | 559 | |
519 | ||
3Q18 | 2Q19 | 3Q19 |
Gross Profit and Margin
(R$ million)
Net Revenue
(R$ million) | +24% |
+6% | +10% | |||
+7% | 21,1% | 24,0% | 24,6% | |
1.077 | ||||
982 | ||||
870 | ||||
4.382 | ||||
4.123 | 4.082 | |||
3Q18 | 2Q19 | 3Q19 | ||
3Q18 | 2Q19 | 3Q19 |
(R$ million)
+36% | ||
+17% | ||
19,4% | 23,0% | |
9,7% | 11,3% | 12,3% |
1,008 | ||
790 | ||
467 | ||
328 | ||
398 | 462 | 541 |
3Q18 | 2Q19 | 3Q19 |
18
OPERATING
AND FINANCIAL PERFORMANCE
3Q19
PATRICIO ROHNER
VICE-PRESIDENT
INTERNATIONAL MARKET
19
International Segment - Consolidated
EBITDA margin improvement despite seasonality
Adjusted EBITDA
and Margin
(R$ million)
Gross Profit and Margin
(R$ million) | +193.7% |
Volumes
(Thousand, Tons)
+0.8%
-5.3 %
474 | 504 | 478 |
3Q18 | 2Q19 | 3Q19 |
Net Revenue
(R$ million)
+10.6% | ||
-4.8% | ||
3.985 | 3.796 | |
3.432 | ||
3Q18 | 2Q19 | 3Q19 |
-2.2% | ||||
+66.3% | 17,4% | 17,9% | ||
-7.8% | ||||
26,3% | 6,7% | 693 | 678 | |
25,4% | ||||
16,9% | 1.047 | 231 | ||
965 | ||||
580 | 3Q18 | 2Q19 | 3Q19 | |
3Q18 | 2Q19 | 3Q19 |
20
International Segment - Consolidated
Sales breakdown
Volume 3Q19 | 478 Thousand Tons
(Volume 3Q18 | 474 Thousand Tons)
Per Geography | Per Protein |
Other 13% | |
Non-Halal | |
41% | Swine 8% |
Halal
59%Poultry
79%
Per Product
FPP | Poultry Whole |
12% | |
37% | |
Swine
9%
Poultry Parts
41%
21
Halal Market
High profitability in the region despite restriction in some markets
Volume 3Q19 | 275 Thousand Tons
(Volume 3Q18 | 281 Thousand Ton)
Processed
14%
(14%)Poultry
86%
(86%)
Net Revenue
(R$ MM)
-5.2% | ||
-11.6% | ||
2.370 | ||
2.210 | 2.095 | |
3Q18 | 2Q19 | 3Q19 |
Adjusted EBITDA (R$ MM)
Adj. EBITDA Margin (%)
-4.6% | ||
370 | -22.5% | |
301 | 287 | |
13,6% | 15,6% | 13,7% |
3Q18 | 2Q19 | 3Q19 |
- Iraqi was partially restricted to import products from Turkey
- Lower operating leverage, offset by strict expense control
- Prioritization of market's most profitable countries and channels
22
Other International Markets (Asia, Africa, Americas and Europe)
African Swine Fever has favored price dynamics in Asia
Volume 3Q19 | 203 Thousand Tons | Net Revenue |
(Volume 3Q18 | 193 Thousand Tons) | (R$ MM) |
+39.2% | |||
Pork | +5.3% | ||
18% | 1.615 | 1.701 | |
(17%) | |||
1.222 | |||
Poultry | |||
69% | |||
(71%) | Processed | ||
13% | |||
(12%) | |||
3Q18 | 2Q19 | 3Q19 |
- Average sale price: +32.3%
- Higher shipped volumes: +5.2%
- EBITDA Margin of 23.0% (+28.7 p.p. y-o-y), highest margin in recent years
- Best profitability of the last 3 years
Adusted EBITDA (R$ MM)
Adj. EBITDA Margin (%)
+21.2%
391 | ||
323 | ||
23,0% | ||
20,0% | ||
-5,7% | ||
-70 | ||
3Q18 | 2Q19 | 3Q19 |
23
Q&A
24
Contatos RI:
+55 11 2322 5377 acoes@brf-br.com
25
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Disclaimer
BRF SA published this content on 08 November 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 November 2019 13:14:01 UTC