BRF S.A.

Good morning and thank you for standing by. Welcome to the conference call BRF to discuss the results related to the first quarter 2022. We'd like to inform you that this event is being recorded and that all participants will be in listen-only mode during the company's presentation. We will then start the Q&A session when further instructions will be provided. Should you require any assistance during the conference call, please request an operator's assistance by pressing star zero. This event is also being broadcast simultaneously over the internet by webcast and can be accessed at ri.drf.global.com. The replay of this event will be available soon after it's completed. We'd like to remind you that the attendees may post questions to BRF, which will be answered after the end of the conference by the IRT. Before moving on, we'd like to clarify that any forward-looking statements that may be made during this conference call related to the business perspectives, projections, operating, and financial targets and goals are beliefs and assumptions of the company's management, as well as information currently available to the company. Overlooking statements are no guarantee of performance, since they involve risk uncertainties and assumptions, because they refer to future events and, therefore, depend on circumstances that may or may not occur. Investors and analysts must understand that general conditions, sector conditions, and other operating factors may affect the future results of BRF, leading to results that may differ materially from those expressed in such forward-looking statements. I would now like to turn the floor to Mr. Lourdes Baulus, Global CEO of the company, who will begin the presentation. You may proceed, sir. Good morning, everyone. Thank you once again to be here attending our conference to discuss the results from the first quarter of 2022. Here with me, we have our CFO, Mr. Mariano, who will also address the presentation to you and other members of the executive committee. Something else I would like to mention, as you probably noticed, we are discussing the results in a different way from the way we were doing in the previous quarters. Now we are using the telephone from BRF, different from what we did in the previous times, in a studio with images and a complete infrastructure. I would like to notice that this shows our focus, our plan, our objective to simplify the way we work, the way we operate. However, I would like to talk a little bit more about this as we complete this presentation as regards this topic. Now, moving on to the next slide, I would like to show you the main indicators of BRF. the main indicators of this first quarter. As you can see, we really had some headway in our income. Our revenues with operating results, which were different from what we expected, much away from our capacity to generate results. I would like to make it clear that these results of the first quarter does not please us in any way, and the results do not reflect what BRF really is, and our potential results in the next quarters. And I'm going to discuss this as we move on along the presentation. Now, talking about the first quarter, the results of BRF, as you can see, was strongly impacted by the performance of the Brazilian economy. The Brazilian performance, especially in January, our sales in January in the retail market were much below what we had planned. That generated a mismatch in our production chain. And a company of living and long chain, such as ours, has to... considered that these are all very relevant, and we made the decision to make those adjustments, to make adjustments to this chain. Additionally, I'm going to talk about it in the next slides. In addition to this, we also had the impact of the effects of the war that strongly impacted our results, our costs still in the first quarter. especially in terms of logistics, transportation, freight, in addition to the impact of grains that we felt. Now, moving on to the next slide, as you can see, I would like to show you the impacts of our decisions, the decisions that we made. We made the decision to face the situation phase this moment and make the proper adjustments for production and make adjustments to our inventories. And those two events in an agile, quick, accelerated manner so that these would not continue in the next quarters. And This quarter has been strongly affected. We made important decisions, responsible decisions. We had to make those decisions so that those effects would be left behind so that we could look at the results and look ahead and capture all the opportunities and leave those $400 million behind us. We had an impact of about 400 million, 406 million in relation to the recognition of a hedge in our balance sheet. But I would like to make it clear to you that our objective is not to exclude those impacts from the EBITDA. EBITDA is this, 121 million. What we really want is to show that we had Extraterraneous effects that impacted our results, but this is not something current in our operations. But rather, they are effective impacts that happened in this quarter, and those coming quarters will not have this order of magnitude. and the impact will not be as relevant in the future. Now, leaving the first quarter a little bit behind, I would like to start and discuss our perspectives for 2022. What to expect for 2022. And before anything, I would like to use the slide and I would like you to look at the left side to show what was the impact of January. and what the quarter represents to BRF. We had two blocks in the base of $100. We show what happened to our sales. So you can see that sales in January in base $100 in March. We can see that we had a very relevant recovery at $140. So we use this base 100 just for you to have an idea. The same can be applied in the gross profit. It shows the positive variation of made influence to financial impact, also in March. So we show exactly this recovery and what we have been doing. Likewise, if we look at the central block, the central column, I would like to share the headway we've made in terms of price of the chicken and the price of the pork that has been materializing in Brazil. Likewise, we use phase 100. We can see that mass from 100 to 141 in April for whole chicken price and a little less in but still showing a recovery for our poor carcass, showing a new repositioning of our company that we have been seeing as a result of everything that has been happening in the global scenario. And I would like to reassure our presence and positioning into relevant proteins that continue growing rapidly in terms of per capita consumption year after year. And this is a result that we can see in the graph to the right. So the message is we have a new positioning of the protein, so we can see this growing trend, and there has been a recovery of prices in those markets. Now moving on to the next slide, talking about halal. We had a quarter... which showed excellent results showing that our strategy to make headway in a portfolio of products with value-added product has been very assertive. In addition to the work that we have been doing, we have considered the scarcity of offer of chicken from the most important exporters in the world brought us important opportunities that we managed to capture. So we have seen this excellent result in the first quarter. We made advances in the market share. both in GCC and other areas, showing that the strategy is very adequate and the performance has been very well implemented. The scenario ahead can be seen in a very positive way, considering what has been happening in this market. As we see the return of religious tourists, commercial tourism, and also for leisure, and we can see the positive results, especially at the end of the year. Now, moving on and talking about exports and the international scenario. Today, we are... Seeing, as you have been monitoring, we have seen that there has been a worsening in the offer of chicken in the international markets. And the impact comes from two exporters, two of the major exporters of chicken in the world, after Brazil, the United States and Ukraine. Ukraine, needless to say, would... In fact, the war has caused, and for the United States, we have to mention the avian flu that reached 31 American states. And those states as a whole represent about 60% of the American production of chicken. When we put those two factors together, the effect of Ukraine and the United States together, That led to a price correction in the national market in such a way that it's so sharp, especially as of January. So the graph on the right, on the top part, we can see the advance of the chicken breast in the American market. Maybe prices that have never been seen before. especially in the past few years. And as a consequence, this has already started to bring some corrections here in terms of chicken breast in Brazil that we can see in the graph below. And we can also see a growth both in volumes of exports in Brazil and also in the exports price in Brazil. Here I would like footprint is well positioned. Our plans are extremely well positioned from the commercial viewpoint. The relationship with clients and all that is associated with this. We have the capacity and we are prepared to capture in a very efficient manner this new movement. that the market shows with the increase of exports, the increase of international demand, and also with this readaptation, readjustment of prices. I can say to you that I see that our company is better position to capture this, and no other company is better than us, considering our sales, the quality of our products, our distribution chain. And this is a scenario that we are looking very attentively, and we are making decisions to direct our focus, direct our objective, so that we can capture this market. that is available to us. And now? Now I would like to talk about our capture structure. I'm going to turn the call to our CFO, Fabio Mariano, and he's going to address the topic, and then I'll be back for the final remarks. Thank you, Ludival. Good morning, everyone, everyone who's attending our conference and talking about our collaborative structure. I would like to highlight a point which has a lot to the reduction of our indebtedness of 4.7 billion rials. And as a natural reflect, there has been a reduction in the leverage from 3.12 times to 2.83 times in the current quarter. Obviously, we cannot fail to consider the inflow of capital, which was very relevant after we finished. The follow-on that was in the beginning of the year, that reduces the leverage. And this results to lower performance than expectation. And this has to do with the performance of the quarter, as mentioned by Lodifal. So we have a replacement of an important quarter, the first quarter of 2021. with a weaker quarter in terms of results generation. And this puts a lot of pressure on our EBITDA in the past 12 years, and we can see the decline of the leverage could be lower, and it's not as representative as it could be. Another thing that has to do with our indebtedness profile is the fact that the company has a very comfortable liquidity position yet in terms of availabilities and resources at 10 billion rials. We would also like to mention that we have a credit line with Banco do Brasil at the amount of 3 billion rials with an immediate liquidity amounting to close to 13 billion rials. When we analyzed the profile of indebtedness, we noticed that there's no pressure in the short term related to refinancing activity, and this makes us very comfortable so that we can execute all the activities and make all the investments that we had planned up to the end of the year and the years to come.

Now, a little bit of our debt profile, we can see that between currencies, we see some indexation still to strong currencies, especially the U.S. dollar. So about 70% of our current debt is denominated in foreign currency. And everyone knows a little bit of our hedging policy, and we'll be talking about some of the side effects and losses we've had in derivatives. But we invest in derivatives precisely so that we can prevent the company from suffering from these changes in foreign exchange. The next slide shows the conciliation of our indebtedness already allowed 0.12%. 12 million reais, and we see that the operating cash flow was much below what we expected and ultimately insufficient to cover our investments, our capex, as well as our capital burdens. Lastly, we tried to combine both cash and non-cash debts, and between the loss of derivative cash, which is part of our strategy to cover our balance sheet, plus the indebtedness that's connected with an appreciation of the Brazilian currency of nearly 15% between the last quarter of last year and the first quarter of this year, We see the about $12.5 billion, which is what's reflected in our balance sheet. So we have an increase in debt of about half a billion reais, even though we've consumed about $3.6 billion of our cash flow, which we'll be showing in the next slide. So just to understand our free cash flow a little bit better, we go from a corporate EBITDA, a reported corporate EBITDA of $152 million and a negative working capital. We stress that our net working capital performs really well. We have about 10 days of cash. So our inventory cycles is doing very well. So 10 days is even below our record in this sense. And we see other effects from our liabilities and assets, which affect the ultimate performance of our working capital. Then we have our investment cash flow of about $900 million and the net interest and financials effect. then we perform an exercise where if we disregard the effect of currency, we would have about $1.6 billion in free cash flow, excluding those effects. And with that, we would have an effect with derivatives and availabilities of about $2 billion. That includes or excludes the foreign exchange effects and the free cash flow effects. So anytime the company loses money in derivatives, that is offset in the reduction of our indebtedness as we saw in the previous slide. With that, I will interrupt my remarks and turn the floor back to Lorval for his final remarks. Thank you, Fabio, for your excellent presentation. Now, concluding our presentation, earnings presentation before we open for remarks for questions i would like to first of all address the first quarter you guys have seen the numbers as was said this was not on par with our abilities but it is what it is we've made the decisions we were supposed to to make and this quarter is now behind us is a time we are now looking on the looking at on the rearview mirror. As you've seen, our prospects are positive. We still have some challenges ahead of us in Brazil, but an extremely positive international market. which opens more opportunities for us. And as I said, BRF is extremely well positioned to seize these gains and make the best of this scenario that we currently have. That makes us extremely confident in the possibility of reversing these results. Now, another thing I'd like to stress, still addressing 2022, I wanted to tell you assertively that we are fully in line with our board F, more agile, efficient, and dynamic. We will become more agile and seize all opportunities the market presents us, such as the one we see right now in the international marketplace, and focus even more on meeting the needs of our clients and adjusting our offerings properly. generating better results for our shareholders. That in combination with our streamlining initiative is a huge focus for us right now. In addition to that, we will reinforce and reinvigorate our sustainable growth strategy. We will simplify the organization as a whole in our strategy, operation strategy and across all our fronts.

We will even stop some of our initiatives.