BRF S.A.

unprecedented for many of us because of the COVID pandemic. And this was a year in which we had to take care of people, do everything that we had to, and still maintain our responsibility of producing food so that we could supply our consumers. Even with all of the effects and challenges, the company continued to deliver its results, which were very robust. And this was the fruit of very good execution focused on financial discipline, operational efficiency, commercial services. And this year, as you'll see, our mix of products has been changed. In 2020, we reached nearly $40 billion in net revenue, a margin of 18% year-on-year, or 23% in the fourth quarter. Our adjusted EBITDA was also robust at $5.2 billion. Even despite such a challenging year in which the company had to do so much, Our net income was also up to $902 million in the fourth quarter and nearly $1.4 billion in 2020 total. And this continues our successful pathway in managing our leverage. Our leverage is now at 2.73 times, but our debt has been managed very well. Our debt maturity profile is nearly 10 years. So this is due to very good management that was executed throughout 2020. These results, as we've been saying, show the consistency of everything that we've done. in operational execution and commercial execution, logistics, and all of the initiatives that we have started and carried out over the last years. A strong effort in culture, people management, and over the last seven quarters, we have posted stable and positive results. Obviously, even despite the challenges that appeared over 2020. This can be seen very clearly in our slides. So how have we done it? You have heard about our strategy and how we're focused on launching more products, especially higher added value products. whether they are processed, industrialized products, or high added value products in Natura. So if you look at Brazil, this has happened year on year on processed goods, and this growth was over 10%, which shows that we are focused in management. And as you can see in our graphs, in Brazil, 84% of everything we've sold so far has a high added value and carries the strength of our brands. These are brands that are leaders and are preferred by our customers. So we are expanding the revenue percentage from innovation and from the launch of new products. And we've focused a lot on this over 2020. we launched over 280 SKUs. In Brazil, we have launched 140. And in the international market, we've launched 150 new SKUs, which shows the direction we took on our expansion. Thank you. And this, of course, represents the strength of our brands. Thank you.

Okay, let's continue.

I apologize for this technical issue that we just had, but to continue, BRF is a company that has a leading brand portfolio. These are brands that are preferred by our consumers. we have brands that are at the top of mind and are desired by our consumers. And this is in Brazil with Sadia and Perdigon and Quali, but also in the international market with Sadia, Banvit, and others, which also lead this market internationally. And now, in Brazil, we also have the Mercado em Casa, which we've just started and which has been very successful since 2020. This is very important because we've expanded our focus. We are expanding our client base. So, in Brazil, we have 278,000 clients, which are now being serviced directly by This also improves our services when we talk about deliveries and commercial services. So with all of this together, the last quarter showed that the company has expanded its client base and recovered its brands in terms of market share and market share growth in different categories. Now we're going to change gears for a bit. Instead of talking about our brands, we're going to be talking about our competitiveness and how we've managed our assets, how we've managed our inputs, and what we've been doing. Many of you have seen our results and noticed how we've increased our inventories, how it impacted our cash flow and our working capital in the last quarter. This was the right decision to make, and we did it because it provided, as you can see, very efficient cost management, although it's still far below normal. from the official indicators when we look at Embrapa production costs. As you can see on this graph, we see the average consolidated price for the company. We can also see that the producer margins are at their lowest level when we look at the average for the last years. What's important to see here is that these costs went up over the second quarter of 2020. This goes for corn, which basically doubled in price, or other inputs, which went up by 10% to 20%. Some of them even went up by 40%. So these costs have already affected many of these producers. This will probably continue to happen still in this first quarter. And this will make growers overall to have to adapt this equation between cost and prices. And as a consequence, so will we. This is based, of course, on all of the information we have available. The company has... created its strategy. We've tried to be preventive in the way we work, and this led to good results in the fourth quarter of 2020. It also ensures that we will remain competitive for the first and second quarter of 2021 when it comes to inputs. Another important point is this, and this can also have an impact on the demand for our products over the first quarter. There's an impact from the so-called Krona voucher or any government aids that we might receive during the first quarter. Our products, the RF product portfolio, whether they are natural products or products higher added value products present some resilience and price competitiveness. You can see on the data in this graph that the proportion between beef for rib prices versus whole chicken are at their highest historical levels since 2016. It's now at 11.66 times the price of chicken. When we compare to pork carcasses, this scene can be seen. This is the highest spread from this historical series, which is at 7.26. It shows how competitive the BRF will be over 2021. And this, of course, is connected to the decisions we've made and our management of our cost basis. So both of them together and the strength of our brands and the expansion that we've had gives us a very good position. So we're very confident about 2021. Another important aspect is reinforcing African swine fever and the impact on the Chinese market. So the company has been able to increase its results by 20% by exporting to China. China has been recovering its own production, as you can see on this graph. So the number of female hogs has been on the rise, but this is still very low. So that means that their productivity is lower. The takeaway message here from our point of view is that 2021 and probably 2022 as well will not be years in which China will recover completely. They won't go back to the same production level that you see in 2018 on this graph. This is not going to happen in the short run. So the demand from China will continue to be high and robust. So we are going to remain competitive in supplying Brazil and will also have opportunities in the international market. Looking at a different topic, which is also very important, the company's capital structure. This shows how focused we've been in reducing our financial leverage, even despite the increase in foreign exchange, which obviously has an impact on our debt. So even going from 4 to over 5.2 in the U.S. dollar exchange rate, we've reinforced the guidance that we had provided last year, which was to reduce our leverage to under 2.75. And at the time, the dollar exchange was still under 5, and we had a high level of uncertainty. So even despite that adverse factor, we've reached our guidance, and the operational cash flow has been over $5 billion. And the company's net debt is went up by $883 million, but this was mostly due to foreign exchange variation of over $3 billion.