minerva day v
TRANSCRIPT
Minerva Day VBarretos - SP
Agenda
§ Opening
§ Scenarios and alliances
§ Domestic Market and Distribution
§ Export Market
§ Export Market – Russia
§ Export Market – Middle East and North Africa
§ Industry
§ Processes
§ International Expansion
§ MDF
§ Brand
§ Financials
Executive summary
§ Cash position: R$818.5 million at the end of2Q12
§ Focus on financial deleveraging§ Most efficient cash conversion cycle in the
industry§ Proactive monitoring and management of risk
factors
§ Brazil’s second largest beef exporter, with 22.3% market share in LTM 2Q12
§ 55 years of industry experience, with a close relationship with cattle producers
§ High degree of diversification in origination, production and distribution
§ Sophisticated risk management
§ Efficient working capital management (industry benchmark)
§ Differentiated strategy tailored to different businesses
§ BMF&BOVESPA Novo Mercado
§ Level 1 ADR (OTC market)
§ Share Buyback Program
§ Ratings: S&P: B+ / Fitch: B+ / Moody’s: B2
Tradition, Experience and Operational Excellence
Capital Markets Financial discipline
Organizational Chart
Source: Minerva
Fernando Galletti de QueirozCEO
Luis RicardoVP - Brazil Operations
Miguel GularteVP – International
Operations
Frederico de QueirozVP – Related Businesses
Edison TicleVP - Finance
Fabio TallesChief Industrial
Officer
Celia SampaioExecutive Officer ME
Rustam GarevRussia
Mohammad CherabMiddle East
Eduardo RotaController
Roberto AlvesChief Adm. Officer
Wagner AugustoCattle Purchase
Officer
Eduardo PuzzielloIR Officer
Fabiano TitoHead of Research
Leonardo AlencarAnalyst
Iain Anderson MarsCEO MDF
Minerva Day VScenarios and AlliancesFabiano Tito Rosa and Leonardo Alencar
Source: IBGE/Minerva
Reversal of cycleSlaughter
25%30%35%40%45%50%55%60%65%70%75% Ox Cows + Calf
Annual slaughter (million heads) Cow slaughter – IBGE (% total slaughter)
Ox and cow/calf - % Cow and calf slaughter
5060708090
100110120130140150
jan/
06ab
r/06
jul/0
6ou
t/06
jan/
07ab
r/07
jul/0
7ou
t/07
jan/
08ab
r/08
jul/0
8ou
t/08
jan/
09ab
r/09
jul/0
9ou
t/09
jan/
10ab
r/10
jul/1
0ou
t/10
jan/
11ab
r/11
jul/1
1ou
t/11
jan/
12
Index 100 = Jan/06
Vacas Novilhas
14,9 14,9 16,8 17,1 18,4
19,9 21,6
25,9 28,0
30,4 30,7 28,7 28,1 29,3 28,8 30,2
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
29%25% 26% 26%
23% 24%
31%34%
37% 37%34% 33%
31% 30%34%
38%
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
1T12
Cow Calf
Source: Minerva
Cattle cycleBreeding marginBreeding margin vs. cow slaughter
Breeding margin vs. Selic rate
-1%0%0%0%1%1%1%2%2%2%3%3%
25%
27%
29%
31%
33%
35%
37%
39%
41%
43%
jan-
03
abr-
03
jul-0
3
out-0
3
jan-
04
abr-
04
jul-0
4
out-0
4
jan-
05
abr-
05
jul-0
5
out-0
5
jan-
06
abr-
06
jul-0
6
out-0
6
jan-
07
abr-
07
jul-0
7
out-0
7
jan-
08
abr-
08
jul-0
8
out-0
8
jan-
09
abr-
09
jul-0
9
out-0
9
jan-
10
abr-
10
jul-1
0
out-1
0
jan-
11
abr-
11
jul-1
1
out-1
1
jan-
12
abr-
12
jul-1
2
Cow Slaughter Breeding Margin Moving average LTM (Cow Slaughter) Moving average LTM (Breeding Margin)
-1%
0%
1%
1%
2%
2%
3%
jan-
03m
ar-0
3m
ai-0
3ju
l-03
set-0
3no
v-03
jan-
04m
ar-0
4m
ai-0
4ju
l-04
set-0
4no
v-04
jan-
05m
ar-0
5m
ai-0
5ju
l-05
set-0
5no
v-05
jan-
06m
ar-0
6m
ai-0
6ju
l-06
set-0
6no
v-06
jan-
07m
ar-0
7m
ai-0
7ju
l-07
set-0
7no
v-07
jan-
08m
ar-0
8m
ai-0
8ju
l-08
set-0
8no
v-08
jan-
09m
ar-0
9m
ai-0
9ju
l-09
set-0
9no
v-09
jan-
10m
ar-1
0m
ai-1
0ju
l-10
set-1
0no
v-10
jan-
11m
ar-1
1m
ai-1
1ju
l-11
set-1
1no
v-11
jan-
12m
ar-1
2m
ai-1
2ju
l-12
Breeding Margin Selic Average annual margin
Source: Cepea/WBR/Minerva
Competitiveness / spreads cattle
Brazil vs. Competitors in Export Market
Spread Brazil vs. Australia Spread Brazil vs. U.S.
-40%-30%-20%-10%0%10%20%30%40%50%
0
50
100
150
200
250
jan-08
mar-08
mai-08
jul-08
set-08
nov-08
jan-09
mar-09
mai-09
jul-09
set-09
nov-09
jan-10
mar-10
mai-10
jul-10
set-10
nov-10
jan-11
mar-11
mai-11
jul-11
set-11
nov-11
jan-12
mar-12
mai-12
jul-12
Brazil Competitors BRA/COMP Competitors: 35%ARG; 35%URU; 15%U.S. and 15%AUS
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
-60%-40%-20%
0%20%40%60%80%
100%120%140%
Source: Minerva
Brazil Feedlot
Brazil ‘s Advantages
29,1 30,3 37,0 36,8 40,8 44,9 43,9 40,4 38,7 39,3 38,8 39,6
6,5%6,7%6,5%8,1%
6,3%6,4%7,9%
9,7%8,6%
6,8%8,7%
10,1%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Animals in feedlot
Slaughtered animals (million) Feedlot
§ Brazil’s competitive advantage is the creation in pastures. § Feedlot guarantees supply during off-season. § Quality raw material and supply well distributed throughout the year.§Flexible management of pasture, increase in production (@/ha/year), increase in output rate and shortening of the production cycle.§ Flexibility to develop niche products.
Feedlot rationale
Diet; 25%
Unfinished cattle; 70%
Other; 5% § Brazil feedlot period: 90 days (fattening period).§ Diet flexibility: citrus pulp; grains; sugarcane byproducts; cotton byproducts and pasture.§ 95% of the Brazilian feedlot supply in the second half.
Source: Minerva
Minerva Feedlot
Minerva’s competitive advantage
§ Well-structured market research department with daily meetings (BEEF DESK).
§ Barretos –SP§ Araguaína – TO§ Rolim de Moura – RO§ Asunción – Paraguay
Grains hedge (futures, forward and storage)Unfinished cattle hedge (forward )Possibility of arbitrage
Source: Minerva
2012 Feedlot
0% 2%3%
9%
14%
20% 22%18%
11%
0%
5%
10%
15%
20%
25%
050.000
100.000150.000200.000250.000300.000350.000400.000450.000500.000
abr mai jun jul ago set out nov dez
Distribution of supply
2011 2012 Chg.SP 442,470 419,059 -5%MS 120,661 137,120 14%GO 393,338 397,730 1%RO 100,100 165,300 65%TO 35,432 46,234 30%MG 185,823 266,020 43%Total 1,277,824 1,431,463 12%
MT 813,947 740,422 -9%Total 2,091,771 2,171,885, 4%
1st 2nd Chg.SP 351,440 361,056 3%MS 170,100 170,500 0%GO 654,190 460,874 -30%RO 115,050 129,750 13%TO 41,250 45,702 11%MG 217,030 224,420 3%
Total 1,549,060 1,392,302 -10%
MT 929,947 740,422 -20%Total 2,479,007 2,132,724 -14%
Growth of Brazilian feedlot 1st and 2nd feedlot
Source: Minerva
CompetitivenessSpread in beef
Cattle (forequarters, hindquarters and ribs)vs. Poultry (R$/Kg)
Cattle (forequarters, hindquarters and ribs)vs. Pork (R$/Kg)
Poultry vs. Soybean (R$/Kg) Pork vs. Soybean (R$/Kg)
1,4
1,6
1,8
2,0
2,2
2,4
2,6
1,50
2,50
3,50
4,50
5,50
6,50
7,50ag
o/07
dez/
07ab
r/08
ago/
08de
z/08
abr/0
9ag
o/09
dez/
09ab
r/10
ago/
10de
z/10
abr/1
1ag
o/11
dez/
11ab
r/12
ago/
12
B. casado Frango Resfriado Boi x Frango
0,8
1,0
1,2
1,4
1,6
1,8
2,0
1,50
2,50
3,50
4,50
5,50
6,50
7,50
ago/
07de
z/07
abr/0
8ag
o/08
dez/
08ab
r/09
ago/
09de
z/09
abr/1
0ag
o/10
dez/
10ab
r/11
ago/
11de
z/11
abr/1
2ag
o/12
B. casado Suíno Carcaça Boi x Frango
1,0
1,5
2,0
2,5
3,0
3,5
0,00
0,50
1,00
1,50
2,00
2,50
ago/
07de
z/07
abr/0
8ag
o/08
dez/
08ab
r/09
ago/
09de
z/09
abr/1
0ag
o/10
dez/
10ab
r/11
ago/
11de
z/11
abr/1
2ag
o/12
Frango Granja Soja Paraná Frango x Soja
1,01,52,02,53,03,54,04,55,0
0,000,501,001,502,002,503,003,504,00
ago/
07de
z/07
abr/0
8ag
o/08
dez/
08ab
r/09
ago/
09de
z/09
abr/1
0ag
o/10
dez/
10ab
r/11
ago/
11de
z/11
abr/1
2ag
o/12
Suíno Vivo Soja Paraná Suíno x Soja
Source: Minerva/CONAB
Harvest estimates
Corn and soybean production – millions of tonnes
Corn production – millions of tonnes
59,0 59,5 60,359,2
60,8 61,7
65,1 65,9
67,869,5
72,873,3 73,071,3 71,8
69,2 68,7
65,666,7
66,4 66,4 66,4
55,0
60,0
65,0
70,0
75,0
out/11 nov/11 dez/11 jan/12 fev/12 mar/12 abr/12 mai/12 jun/12 jul/12 ago/12
Milho Soja
37,5 38,2 39,0 37,9 35,0 35,9 36,1 35,7 34,9 34,9 34,2
21,5 21,3 21,3 21,3 25,8 25,8 29,0 30,2 32,9 34,6 38,6
59,0 59,5 60,3 59,2 60,8 61,7 65,1 65,9 67,8 69,5 72,8
0,0
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
out/11 nov/11 dez/11 jan/12 fev/12 mar/12 abr/12 mai/12 jun/12 jul/12 ago/12
1ª safra 2ª safra
Corn Soybean
1st
harvest2nd
harvest
Source: NOA
U.S. weather conditions
Source: NOA/CEPEA/Mbagro/agroconsult
U.S. weather conditionsPastures and plantations
Corn - % bad or terrible weather condition
Pastures – % bad or terrible weather condition Soybean - % bad or terrible weather condition
5 710
16
28 29
50 5045
4851 52 53
46 46 45
3 5 58 9
14
22
30
38
4548 50 51
20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35
1988 2012
17
25
33 31
37
30
2024
32 3235
28 28 29 28
610 12
15
2227
3035 37 39 38
22 23 24 25 26 27 28 29 30 31 32 33 34 35 36
1988 2012
0
10
20
30
40
50
60
70
17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43
2010 2011 2012 2005-10
Source: CBOT/CEPEA/Minerva
U.S. weather conditionsImpact on Corn and Soybean prices
R$37.94
R$33.19
70
80
90
100
110
120
130
140
150
jan/12 fev/12 mar/12 abr/12 mai/12 jun/12 jul/12 ago/12
Corn- Jan/12 = index 100
CBOT Cepea
R$74.02
R$84.00
90
100
110
120
130
140
150
160
170
jan/12 fev/12 mar/12 abr/12 mai/12 jun/12 jul/12 ago/12
Soybean - Jan/12 = index 100
CBOT Cepea
0%
0% 50% 100%
Pasture cattle x Corn/Soybean
13%
0% 50% 100%
Feedlot cattle x Corn/Soybean
70%
0% 50% 100%
Pork x Corn/Soybean
70%
0% 50% 100%
Poultry x Corn/Soybean
Minerva Day VDomestic Market and DistributionLuis Ricardo Alves Luz
Diversification supported by efficient distribution logistics
§ One-stop-shop concept, involving the resale of
third-party products, such as poultry, pork, fish,
French fries and frozen vegetables, among
others.
§ Focus on small- and medium-sized retailers
§ Timely service (less than 24 hours)
§ Broad coverage: 1,260 cities and 25,000 clients
§ Sale of third-party products increased 71% in
2011 over 2010
Araguaína – TO
Asunción – Paraguay
Araraquara - SP
Belo Horizonte - MG
Brasília - DF
Fortaleza - CE
Itajaí - SC
Palmeiras de Goiás - GO
São Paulo - SP
Viana - ES
8,337,86 8,01
9,11
7,80 7,587,10
6,617,12 7,48
6,86 6,58
1T11 2T11 3T11 4T11 1T12 2T12
Minerva Players' Weighted Average
Fresh beef average price (R$/Kg)
Geographic Presence
575679
878989
1.260
2007 2008 2009 2010 2011
Cities served
Commercial segmentation (1H12 revenue)
26,5%
19,9%
54,0%
Hypermarket
Manufacturing industry
Small- and medium-sized retailers
Minerva Day VExport MarketCélia Sampaio
Source: Minerva
Export Market - Brazil
§ Fresh beef average export prices in 1H12 were comparatively higher than Brazilian average prices.§ Growth in billed volume of fresh beef (SoS) significantly higher than Brazil’s total export volume;§ Market research conducted by our sales offices in Russia, Algeria, Lebanon, Chile, Iran and Saudi Arabia to help in taking business decisions and risk diversification;§ Direct relationship with clients instead of through trading companies, thus increasing profitability;
CIS; 29,3%
Africa; 21,9%Americas;
19,1%
Middle East; 18,0%
Europe; 7,1%
Asia; 4,6%
Highlights Share by market (USD) 1st half 2012
Fresh beef average price (USD/KG) 1H11/2H12 Fresh beef exports (USD)
5,36 5,32
5,075,13 5,11
4,96
4,935,04 5,02 5,07
4,94,77
jan/12
fev/12
mar/12
abr/12
mai/12
jun/12
Minerva
Brazil
2.025.003 1.997.744
361.960 416.460
17,9%
20,8%
1H11
1H12
Brazil
Minerva
Share Minerva
Minerva (SoS): +15.1%Brazil (SoS): -1.3%
0,0
2,0
4,0
J F M A M J J A S O N D
Israel – ‘000tonnes
Source: Minerva
Export Market - Brazil
§ The Company’s exports have been increasing, gainingmarket share in ME, on both MoM and YoY bases,among the main markets.
§ Gain in share driven by excellent sales performance inRussia, Chile and a few Middle East countries andNorth Africa, which were the key growth drivers.
Highlights Share Expansion Minerva Brazil
0,010,020,030,040,050,060,070,080,090,0
J F M A M J J A S O N D
Total - mil tSHARE
2011 2012Minerva - 2011 Minerva - 2012
0,0
5,0
10,0
J F M A M J J A S O N D
Chile - '000 tonnes
0,0
10,0
20,0
J F M A M J J A S O N D
Egypt ‘000tonnes
0,0
5,0
J F M A M J J A S O N D
Saudi Arabia –'000 tonnes
0,0
2,0
4,0
J F M A M J J A S O N D
Libya – ‘000tonnes
0,0
20,0
40,0
J F M A M J J A S O N D
Russia – ‘000tonnes
0,0
10,0
20,0
J F M A M J J A S O N D
Venezuela – ‘000tonnes
Source: Minerva
Export Market - Brazil
§ Focus on sale of frozen beef cuts (higher value added), which have a minimum premium of U$200/tonne.§ The proximity of our international offices to our clients, combined with our efficient logistics and production schedule, allows our frozen fresh beef exports to be more competitive and constant .
Frozen fresh beef exports (USD thousand)
13.109 11.215 16.004 17.368 17.421 16.295
40.741
49.632
72.214 72.889 67.806
62.794
32%
23% 22% 24%26% 26%
0%
5%
10%
15%
20%
25%
30%
35%
jan/12 fev/12 mar/12 abr/12 mai/12 jun/12
Minerva Brazil Market share (%)
Minerva Day VExport Market – RussiaRustam Gareev
RussiaBeef consumption
Source: Minerva
§ Brazil’s share of Russian beef imports is45%. Latin America’s share is 80%.Paraguay and Uruguay increased theirshare.
§ Russia has a population of 140 million, of which 30% are Muslims.
§ Per capita beef consumption is 64kg (42kg in 2002).
§ Russia has had a quota system for beef and poultry imports since 2003 and in effectuntil 2018. Quotas for 2012 are 330 tonnes of poultry, 400 tonnes of pork and 530tonnes of beef.
Brazil; 46%
Paraguay; 17%
Uruguay; 13%
USA; 9%
Australia; 6%
Others; 9%
Russian imports 2012
RussiaBeef
Source: Minerva
§ Minerva increased its share of Brazilian beef exports to Russia from 19 to 22% in thepast 3 years to rank 2nd.
§ Minerva had 8 clients in Russia in 2008 and 40 in 2012. Our clients are top 20Russian importers that are gaining quota with Russian market consolidation.
32%
21%19%
8%
6%
14%
2010
JBS S/A MARFRIG ALIMENTOS S/A
MINERVA S.A. FRIGORIFICO MATABOI SA
BRF - BRASIL FOODS S.A. OTHERS
30%
24%
22%
7%
4%
13%
2011
JBS S/A MARFRIG ALIMENTOS S/A
MINERVA S.A. MATABOI
IRMAOS GONCALVES OTHERS
39%
22%
16%
6%
6%
11%
2012 (JAN-JULY)
JBS S/AMINERVA S.A.MARFRIG ALIMENTOS S/AMATABOIIRMAOS GONCALVES
RussiaChilled Beef
Source: Minerva
§ Russia is a heavy poultry and pork consumer. Government has encouragedmassive investments in domestic pork and poultry local production. In 2011, itmade essential investments and offered incentives for beef cattle raising, which willtake at least 8-10 years to produce results.
§ Grain prices increased by over 40% this year and should lead to increases inpoultry and pork prices shortly, which, we expect, should drive beef prices andconsumption.
Conclusion
§ Minerva started exporting chilled beef toRussia in late 2011. Our market share isnow 70% and growing. Our clients inchilled projects are investing in logisticsand distribution to deal with all mainSuperstores under federal contracts.
Minerva; 74,0%
JBS; 20,9%
Marfrig; 5,2%
Market Share Chilled Beef
Minerva Day VExport Market – Middle East and North AfricaMohammad Chehab
Middle East and North Africa (MENA)Population and lack of arable land
Source: Minerva
§ IRAN : 79 MILLION § TURKEY : 80 MILLION§ SAUDI ARABIA : 27 MILLION§ KUWAIT : 2,7 MILLION§ QATAR : 1,9 MILLION§ BAHRAIN: 1,25 MILLION § UNITED ARAB EMIRATES : 5,3 MILLION§ SULTANATE OF OMAN : 3 MILLION§ YEMEN : 25 MILLION§ JORDAN : 6,5 MILLION§ SYRIA : 23 MILLION§ LEBANON : 4 MILLION§ IRAQ : 32 MILLION § EGYPT : 84 MILLION § LIBYA : 6,7 MILLION§ TUNISIA: 11 MILLION§ KUWAIT : 2,7 MILLION§ ALGERIA: 36 MILLION§ MOROCCO: 33 MILLION
Population: 460 millionGDP: USD 3.5 trillion
§ Desertification process increasing pressure on land use.
§ Iran reduced production over the past 3 years from 1 million tons p.a. to 700,000 tonnes p.a.
§ 98 % of the population are Muslims.
Middle East and North Africa (MENA)Minerva’s footprint
Source: Minerva
Lack of arable land
§ Direct sales with final importers, avoiding any middlemen or brokers: better margins and clientperception.
§ Fresh Chilled Beef (Minerva ranks 1st) and Frozen Beef (Minerva ranks 2nd).
§ In the past years, heavy investments were made in freezing tunnels
Iran
Saudi Arabia
Algeria
Lebanon
Minerva Day VIndustryFabio Talles
Quality Workshop
Revision of Plans (BPF/HACCP/etc.)
Implementation of FSSC 22000 = ISO 22000 + PAS 220 at Palmeiras de Goiás launched
Barretos Certification Laboratory awaiting ISO 17025 certification
2012 Quality Plan
Unit committed to Quality
Industrial Managers = Quality Godfathers
Produce safe and quality food
Active leaders and supervisors
Sign and check the monitoring function on a daily basis
Participation and functioning of monthly audits, with scoring
• Participation of Managers:
• Industrial;• Administrative;• HR;• Controllership;• Q.C. Sup.
Minerva Day VProcessesEduardo Rota and Roberto Alves
Restructuring in Admn./Support Areas
CSC Project
Administrative projects and actions
üChoice: Unification of the strategic management tool (planning) andthe managerial result generation tool;
üSAP: Conclusion of SAP implementation in the Company and itssubsidiaries in June 2011;
üBudget: Stricter budgetary control (Operating expenses and Capex)in the SAP system; and
üCommittees (Desks) Business Unit (BUs): Though each BU hasExecutive Officer or Manager to lead it, strategic planning andmonitoring committees were created for all BUs;
Strategic controllership
Minerva Day VInternational ExpansionMiguel Gularte
One region looking at the worldOne region looking at the world
Seeking quality beefSeeking quality beef
A model that capitalizes on local competitive advantagesA model that capitalizes on local competitive advantages
Uruguay and Paraguay: niches, excellence and benchmark.Uruguay and Paraguay: niches, excellence and benchmark.
International expansion process
International expansion process
One region looking at the worldOne region looking at the world
Seeking quality beefSeeking quality beef
A model that capitalizes on local competitive advantagesA model that capitalizes on local competitive advantages
Uruguay and Paraguay: niches, excellence and benchmark.Uruguay and Paraguay: niches, excellence and benchmark.
It is impossible to have one view of a single country
Systemic view
Volume of
supply
Price
Country’s costs
Currency value
Huge potential
BrazilBigger scaleInternational viewProfessionalismGrowth potential.
Uruguay:Niche producerHigh quality cattle, Broad and flexible presence in international trade.
Paraguay:Competitive supply and prices due to sanitary restrictions
Argentina:Absent historic player, perfect manual of wrong practices.
Unavoidable trend towards ARBITRAGEbetween South America and the world.
Depends only on smoothening the sharp distortions.
This arbitrage is the result not only of supply conditions but is also sought and caused by demand.
A world with more elderly people than youth, families with fewer members, seeking quality food
Scarce production resources for the available land, care for the environment and animal welfare
Convergence of consumption standards
Healthy living in harmony with the environment
3 billion new consumers entering the middle class and looking for more meat
Food (basic human right)Food (basic human right)
Choice (consumer right)Choice (consumer right)
Sustainability (environmental right/duty)Sustainability (environmental right/duty)
The challenge lies in meeting this demand while respecting the three basic consumer rights
One region looking at the worldOne region looking at the world
Seeking quality beefSeeking quality beef
A model that capitalizes on local competitive advantagesA model that capitalizes on local competitive advantages
Uruguay and Paraguay: niches, excellence and benchmark.Uruguay and Paraguay: niches, excellence and benchmark.
Who looks for quality beef?
U.S.13.7%
Japan7.6%
Russia10.4%
NAFTA20.3%
Mercosur 23.3%
Oceania23.1%
Who sells to the world?
One region looking at the worldOne region looking at the world
Seeking quality beefSeeking quality beef
A model that capitalizes on local competitive advantagesA model that capitalizes on local competitive advantages
Uruguay and Paraguay: niches, excellence and benchmark.Uruguay and Paraguay: niches, excellence and benchmark.
• Efficient research department• Modern plants with homogeneous practices and competitive
costs.• Human resources in permanent development.• Unique domestic and international production language.• Business offices in key regions.• Constant pursuit of commercial, industrial and administrative
excellence, generating internal benchmark.• Total commitment to quality and customer.
Minerva ModelA strategy that capitalizes on domestic and international advantages
§ In 20 years, cattle inventories and slaughter increased, so did genetics and producers’ professionalism.
§ Sanitary achievements and business diversification drove up exports.§ Cattle prices increased, significantly contributing to improved productivity in cattle
raising.
§ Minerva chooses regional opportunities as it is located in two countries with excellent future prospects.§ The expertise of Minerva in Brazil and of Minerva/PUL in Uruguay, applied to a favorable environment in Paraguay marked by low costs, a cattle farming industry in expansion, as well as qualified and abundant manpower generate significant results.
Minerva ModelA strategy that capitalizes on domestic and international advantages
Minerva Mercosur
Paraguay and Uruguay
One region looking at the worldOne region looking at the world
Seeking quality beefSeeking quality beef
A model that capitalizes on local competitive advantagesA model that capitalizes on local competitive advantages
Uruguay and Paraguay: niches, excellence and benchmark.Uruguay and Paraguay: niches, excellence and benchmark.
Strategic vision
Relation with producers
Business flexibility
Processes
InformationMinerva Model:5 steps
ProducersProducers
RegularRegular
SporadicSporadic
Rotation circuit
Rotation circuit
Relation with producers – PUL benchmarking
Business flexibility – PUL Benchmarking
Highlights
§ 11 million heads of cattle, 95% of them from British stock§ Slaughter capacity 1,200 heads/day§ ISO 9000 and ISO 22000 certified§ Modern structure§ Business rationale – niche player§ Benchmark
§ 12 million heads of cattle and growing§ Competitive advantage§ Cheap energy§ Low labor costs§ Qualified manpower§ High productivity§ Excellent upside for Minerva/PUL synergy
Paraguay
Uruguay
§ The sanitary incident was transferred into an opportunity.§ With international prices remaining stable, the 80% of the cost dropped by over 30%.
Highlights
Uruguay
Quality is the foundation of profitability.Transparency and strict compliance with international standards are the path to sustainable development.All of us at MINERVA are engaged in a process whose ultimate objective is having customers satisfied with our products, which ensures us improved profitability.
Final message
Minerva Day VMinerva Dawn Farms
Minerva Dawn FarmsProfile
MDF is a producer of meat-based “ready to eat” food products.
The “ready to eat” concept implies strict controls in the production process to ensure that the products are 100% microbiologically safe.
MDF’s activities are focused on the ingredient and processed protein industry and are targeted exclusively at the food services market and industries in both Brazil and abroad.
MDF has no products for the retail market. Its entire production is directed to customers such as Subway, Pizza Hut, Baked Potato, Salad Creations, Spoletto and many other restaurants, cafeterias, fast food chains, industries and industrial kitchens.
Minerva Dawn FarmsProfile
Minerva Dawn Farms is a company with the know-how and experience to create, develop and produce food products based on cooked, roasted and grilled poultry, pork and beef using diverse processing technologies.
It is a novel concept that uses cutting-edge technology and equipment, which enable significant flexibility in processes and specifications.
Minerva Dawn FarmsCurrent scenario
§ Adaptation of the company’s production and sales mix to the newscenario – development of new products for the domestic market
§ Increased share of domestic sales§ Continuation of exports of products with adequate margin – MDF
purchases / processes and sells – cooking is not an extension ofslaughter as it is in other integrated businesses.
§ Strong growth in the key account of the segment that acquires 100%of ready-to-eat cooked proteins– Subway
§ MDF became Subway’s main supplier in Brazil§ Expanded operations in the school food market – state and municipal
schools– SP (in operation), RS, SC, PR, DF, MG, RJ (in thedevelopment stage)
§ Redefinition of the business strategy, with the focus on largeaccounts, rationalization of operations in the generic food servicesegment – market not mature yet to accept this concept
Minerva Dawn FarmsSubway
§ Subway is the fastest growingQSR (quick service restaurants)chain in Brazil – all the proteinacquired is under the RTE (ready-to-eat) concept
§ MDF became the largest proteinsupplier to the Subway chain inBrazil – approximately 80 %
§ MDF became Subway’s preferredpartner for new products – launchof the barbecue steak and themain supplier for Subway’spromotions
YearProjected number of
storesDec/2011 788Dec/2012 1,088Dec/2013 1,286Dec/2014 1,484Dec/2015 1,682
Minerva Dawn FarmsShort-term Prospects§ Continued strong growth in major accounts in the domestic QSR
(quick service restaurants) / fast food market – Subway
§ Need for additional investments to meet Subway’s demands in 2012and open room for growth in other customers / markets
§ Gradual growth in other QSR customers – Spoleto, Baked Potato,China in Box and Pizza Hut
§ Expand presence in the school food segment in state and municipalschools of São Paulo and other states
§ Continuation of operations in export markets through thedevelopment of new products, clients and destinations.
Minerva Dawn FarmsMedium- and long-term prospects
§ If Subway maintains its current growth pace in Brazil and if MDFcontinues to be its preferred supplier of cooked beef, thecurrent plant will be operating at 100% capacity in 2013 / 2014
§ Pepperoni / salami – demand from the major chains (Subway,Pizza Hut) for dedicated products is not being met and there isroom for building a plant dedicated to this segment.
Minerva Day VBrandFabio Teixeira
WHY?• 20 years
• Evolving market
• Growing diffusion of brand
• Clear positioning
• A business group (Pul, Friasa)
• Distribution chain for consolidated MI and
ME
WHAT?CONSUMER
• Strengthen what he
believes in
• Needs
• Perception
• Scarcity of time
• Emotion
MARKET
• Strengthen what we are
• Authenticity
• Identity
• Relationship
• Reason
HOW?1. The foundation of Minerva’s position in the market is its risk
management capacity and operational flexibility.
2. Its market strength and perpetuity is due to the meticulous
management of assets, its superior capacity to anticipate
developments and maintain a clear and safe strategy.
3. Its distribution structure and service level provided to the food chain gives it a clear competitive advantage in MI and ME.
The most efficient global food company in the market, with top quality products and high service standards.
BRANDS
BRANDS
Minerva Day VFinancialsEdison Ticle
190,9143,1
214,1
21,5%
15,2%19,8%
2Q10 2Q11 2Q12
Net revenue
Adjusted EBITDA and Adjusted EBITDA Margin
920 1.0151.141
2Q10 2Q11 2Q12
69,6 79,7112,7
7,8% 8,5%10,5%
2Q10 2Q11 2Q12
62,5 69,3100,0
7,0% 7,4%
9,3%
2Q10 2Q11 2Q12
Gross profit and Gross margin
EBIT and EBIT Margin
Financial highlights
Source: Minerva
YoY: +25.2%QoQ: +12.4%
YoY: +12.1%QoQ: +49.6%
YoY: +61.9%QoQ: +41.4%
YoY: +60.0%QoQ: +44.3%
§ Risk management strategy designed to mitigate the impacts of exposure to diverse risk factors
§ Reduction in the volatility in cash generation: margin lock-up mentality
§ High liquidity: Cash of R$818.5 million at the end of 1Q12
§ Policy of minimum cash equivalent to 2 months‘ raw material purchases
§ Efficient working capital management: shortening of the cash conversion cycle
467 424
577
746819
2008 2009 2010 2011 2Q12
48
3833 36 34
23 22 22 2227 24
2009 1Q102Q103Q104Q101Q112Q113Q114Q111Q122Q12
Risk managementConservative financial and risk policies
Cash position (R$ million) Inventory turnover (in days)
Source: Minerva
504614
818
2Q10 2Q11 2Q12
4,25
3,99 3,99
2Q10 2Q11 2Q12
819
13577 50 18
12022
14591
29 698
749
5 5
910
Cash 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: Minerva
Capital structure
Minerva’s debt profile
Cash position (R$ million) Deleverage (Net debt)/EBITDA
Cash generationOperating and free
§ Free cash flow in 2Q12 was R$44.1 million.
§ Moreover, our operating activities generated positive cash flow of R$122.7 million, continuing theexcellent performance that began in 4Q11.
R$ million 2Q12
Net income -130,855
Net income adjustments 232,423
(+/-) Change in NCG 21,125
Operating cash flow 122,693
Operating cash flow (2Q12) Gross profit and Gross margin
R$ million 2Q12
EBITDA -130,855
(+/-) Change in NCG 21,125
Maintenance capex -28,245
Financial expense (cash) -61,435
Free cash flow 44,138
Source: Minerva
Share buyback program: Started on April 3, 2012 and ends onApril 3, 2013, limited to the acquisition of 3,290,179 commonshares, equivalent to 10% of the free float
Market Maker: 05/13/11 - BTG Pactual
Level 1 ADR: Launched on 07/04/2011
Domestic 64%
Intl. 36%
80
100
120
140
160
180
200
jan-12 fev-12 mar-12 abr-12 mai-12 jun-12 jul-12 ago-12
BEEF3 IBOVESPA
Ativa Coinvalores Safra Banco do Brasil Deutsche BofAML Barclays SLW Santander Bradesco Fator BTG HSBC Itaú JPM
Capital market
Performance - BEEF3 vs. IBOVESPA Free float breakdown (39%)
Analyst coverage (15 institutions) Recent measures
Source: Minerva, Bloomberg and Economomática
2017 Notes: US$35 million; maturity 2017
2019 Notes: US$250 million; maturity 2019
Debentures: R$200 million; maturity 2013/2014/2015
Convertible debentures: R$200 million; maturity 2015
2022 Notes: US$350 million + retap US$100 million; maturity 2022
65
75
85
95
105
115
65
75
85
95
105
115
Attachment2019 and 2022 Notes2019 Notes 2022 Notes
Issues
Source: Minerva and Bloomberg
Minerva Day VQ&A