BRF S.A.

Good morning, ladies and gentlemen. Welcome to the web conference of BRF to discuss the results related to the fourth quarter of 2022. This web conference has been recorded and the replay may be accessed at the company's website. The presentation is also available for download at ri.brf.com. At this time, all participants are connected in listen-only mode. We will then begin the Q&A session when further instructions will then be provided. Before proceeding, I would like to point out that forward-looking statements are based on BRFs, beliefs and assumptions, and on information currently available to the company. Forward-looking statements may involve risks and uncertainties, since they refer to future events and, therefore, depend on circumstances that may or may not occur. Here with us at the web conference are Mr. Miguel Goulart, Global CEO, and Mr. Fabio Mariano, CFO. I would now like to turn the call over to Mr. Miguel Goulart, who will begin the presentation. You may proceed, sir. Good morning. I would like to thank you all for attending our fourth quarter 2022 earnings conference call. During this period, we have already begun to reap the benefits of executing the plan drawn up in September of last year with a focus on improving our operating performance. We made progress in virtually all operating indicators with emphasis on feed conversion, manufacturing, productivity and logistics, in addition to expanding the occupation of our industrial assets, providing greater production and sales volumes. To present the results for the quarter, I call our CFO, Fabio Mariano. I will return shortly to detail our advances and make the final remarks on the release. Good morning, everyone attending this event. I point out on the initial page the main financial indicators for our fourth quarter and full year of 2022, starting with net revenue, evolution of 8% compared to the same period of the previous year. reaching more than 14 billion reals in the fourth quarter and 53.8 billion in the year. More than 11% growth versus 2021. Just below, I mentioned the performance of Justed EBITDA, an amount close to 1 billion reals in the quarter, reaching 3.9 billion in the year, which results in an EBITDA margin of approximately 7%. The net result for the period was a loss of R$ 609 million when excluding the impact of the DNC agreement and the hyperinflation in Turkey. Next, we report an operating cash flow of more than R$ 1,300,000,000, 60% higher than the cash generation in the same period of the previous year, which, once again, proves the sequential upward trend since the beginning of 2022. As to working capital, we made substantial advances in inventories with a reduction of 11 days compared to the last quarter, or 25 days versus the same period of 2021. Major reduction is concentrated in finished products, which allow the cash conversion cycle to reach nine days in the period, one of the lowest financial cycles historically. Thus, boosting cash generation. Ending the slide with net leverage, we reached 3.75 times the EBITDA of the last 12 months, still driven by the non-ordinary performance of the quarter. First quarter, we remain committed to expanding cash generation as a driver for reducing net debt and, consequently, interest-related charges so that net leverage can return to adequate levels as quickly as possible. On the next slide, on the left, we show the historic evolution of gross profit. We maintained a profitability of around 80%. We disclosed a gross profit of approximately 2.5 billion reals. On the right, we also noticed the evolution of adjusted habitable a performance already highlighted previously. On the next slide, we present the performance by market and business segment. Starting with Brazil, we noticed a progressive evolution of EBITDA margins quarter on quarter in 2022, but still below historical performance and consistent with the company's potential. I would like to highlight new advances in the business fundamentals in the Brazilian market, which will allow us to become ever more competitive. Among the advances, I mentioned the improvement in the commercial execution, ensuring greater adherence to retail prices and greater performance of the shelf strategy, such as exhibition space, trade material, and by-grant planogram. The best execution allowed us, in another two months, important market share gains in practically all categories, particularly in spreads, 3.6 percentage points, franks and sausages, 1 point, and cold cuts, 0.7 points. I also highlighted a good commemorative campaign and the new round of portfolio simplification related to the reduction of low representative STUs with a focus on value creation, growth, and profitability. On the next slide, we discuss halal. On the chart on the left, we see EBITDA and margins below historical levels as a result of the oversupply of chicken in the region, especially griller and cuts, putting pressure on sales prices. Turkey continues to pose challenges in the face of the current macroeconomic scenario. We increased the offer of value-added products in the Turkish market and balanced production as a way to reverse the price trend locally. we expect a reaction at the beginning of the year. On the chart to the right, we can see the retraction of prices in the region. I also mentioned the increase in the share of exports to the Gulf, a gain of six points according to SESEC's data. I conclude the segment highlighting the advance of more than two points in the share of value-added products in the volumes sold in the GCC. In direct exports, in the graph on the left, we see a material reduction in profitability due to the global imbalance in supply and demand of proteins, especially chicken, with implications on prices, as we can see on the right with information released by CESAX. We continue to expand market alternatives with new qualifications for Japan, Mexico, Canada, and Singapore. On the next slide, we show the performance of Asia. As in the other export markets, we observe a decrease in margin in comparison to the previous quarter due to the slowdown in the local demand in markets such as Japan and Korea, which have higher levels of inventories. We reported 4.7% of EBITDA margin in the quarter. We highlight all the right gains in the market share in chicken exports to Japan and China and pork exports to Southeast Asia and Singapore. I finished the presentation of business segments on the next slide with the performance of ingredients and pets. The segment reported 18% of EBITDA margin, 131 million reels in pork. We continue advancing in capturing synergies in PAT, expanding our presence in direct channels in new regions. We promoted efficiencies in logistics and also invested in production flexibility at the company's various units. As to ingredients, we advanced into new market by expanding business alternatives. We remain committed to adding value to our co-products in order to maximize business integration. In the quarter, we also had highlights in sustainability. We see on the next slide achievements such as the mapping of crops using satellite technology reaching 100% traceability of direct grain suppliers in the Amazon and Cerrado biomes and 45% of indirect suppliers. We maintain our presence in EZ portfolio in B3, reinforcing our evolution of our corporate governance and sustainability standards. We signed a leniency agreement with CGU and AGU, and that reinforces the collaboration, transparency, and improvement of the company's processes and internal controls. Closing the year of 2022, we reduced our absolute emissions of this coal one and two greenhouse gases by 20%. We fulfilled our animal welfare commitment to put an end to the surgical castration in the swine herd and completed 10 years of the BRF Institute benefiting communities through initiatives in education, food security and reduction of food waste. We now present the information related to the company's cattle tractor. The chart on the left shows the evolution of net debt and leverage, indicators that were already mentioned in the beginning of the conference. On the right, we highlight the debt profile, which remains diversified and extended, with no concentration of short-term amortizations and a liquidity position of more than 12 billion reals. In 2022, we carried out operations of liability management which allowed us to capture 276 million in final financial results with buyback of international bonds. On the next slides, we show the free cash flow. The bridge shows us an operating cash generation of 1.3 billion real. Investment flow of almost 900 million and 515 million in financial flow without FX effects, thus resulting in free cash consumption of 16 million reals. Cash flow has been sequentially recovering each quarter as shown in the charts on the right. On the final slide, we can analyze the evolution of the net debt. We reduced the net debt by 232 million when compared to the previous quarter. Thank you for attending our conference and I will now hand over to CEO for him to make his final remarks. Thank you, Fabio. I would like to point out, as you saw throughout the presentation, that the new management model focused on operational efficiency and profitability started in September is already bringing positive results in the amount of 210 million reals. We captured approximately 130 million reals with improvements of operational indicators such as mortality, feed conversion and productivity. We reduced idle costs by R$ 50 million and carried out a review of logistic efficiency in transport, distribution and energy. In Brazil, we made progress in simplifying our portfolio and optimizing our innovations, which enabled us to capture R$ 30 million. We improved our commercial execution, pricing model and actions at the point of sale. with a greater mix of products in stores and increasing the exposure of the brand portfolio. We also expanded our active customer base by 3.7%, adding more than 9,000 active customers. As a result, we evolved in market share in all categories. We have grown 2.2 percentage points since the third quarter in process two and spreads, which are categories of extreme importance for us. Our commemorative campaign at the end of last year was a success and maintained Cedia and Perdigão brands as leaders in the Christmas segment with 64% market share in special poetry and 72% in turkeys. On the international front, we continue to advance in our strategy of market and product diversification. We achieve new qualifications for Canada, Japan, Mexico, Singapore, and the United States. capitalizing on the fact that we are recognized worldwide as a company committed to safety, quality, and integrity. We increased our chicken meat export share by 2.5 percentage points and continue to advance in market share in the Halal market, reinforcing our leadership in the region. Sadia achieved 38.1% market share in the Gulf and Banvit brand reached 21.8% in the Turkish market. In the Gulf, we also increased the share of value-added products in the portfolio by 2 percentage points, which reached 23% of our sales volume in the region. In the financial aspect, as already mentioned by Fabio, we maintained a diversified and extended debt profile with adequate liquidity for the current scenario. We reduced working capital and improved the occupation of our assets. We have made important investments in expanding our production capacity in recent years, and we will dedicate it to organic growth. We will remain judicious and disciplined in future decisions regarding the allocation of our financial capital. We have been working simply and in an agile way in business decisions to capture greater competitiveness and opportunities. always committed to consistently maximizing results throughout the year. We remain very confident to continue improving our efficiency and productivity. The advances we present here are just the beginning. I conclude by thanking the entire BRF team for their contribution to these deliveries, which allow the company to be ready for the advantages and take the best opportunities in the face of a more stable and microeconomic scenario as from the coming quarters. We will now start the Q&A session for investors and analysts. If you wish to ask a question, please click on the raise hand icon. If your question has been answered, click on the same button to leave the queue. Please wait while we collect questions.

Our first question comes from Gustavo Troiana from Itaú BBA. You may open your microphone, Gustavo. Good morning, Miguel, Fabio. Good morning, everyone.

There are two points that I would like to dive into. First, related to the improvements and similar to the question that I asked on the previous call to you, Miguel. Today, you are now getting into the numbers. I know that you have... all the figures regarding the transportation contract. So I want to understand, are these numbers annualized or where do you expect to reach as far as efficiency? So whatever details you may share with regards to the timing on delivering on those improvements, that'll be really appreciated. Now, the second point that I would like to dive into is with regards to working capital. We see the stocks here on this quarter and we see some clearing of those stocks. And Fabio was talking about finished product adjustments throughout 2022. So I wanted you to shed some light if it was everything on the same line or if there's any other improvements, especially from a finished products perspective. Thank you. good morning gustavo thank you for your question so let me start by answering the question about efficiency and then i'll hand it over to fabio here in our presentation is information that happened in the fourth quarter and that 210 million if we were to measure that We can see that it happened later in the quarter. So we are working with the year 2023 in our program where we are outlining some actions for all categories of improvements and divided by cluster. On chicken, we have better mortality rates, we have better yields. From a swine perspective, we have the same items. And speaking of the industry, we have productivity, energy consumption, input consumption, We also have on logistics, we have freight cost, we have idle fleet, we have detention, storage cost. If you speak about the industrial side, we have operations where we can improve our assets with regards to our facilities, optimizing those, and also the commercial execution, which definitely impacts FIFO and the execution overall. so in the fourth quarter we have 210 million but we didn't include an important effect which we had on FIFA which would add an additional 186 million to that 210 so to us our price structure doesn't allow us to isolate effect and efficiency on what gets converted into price so we chose not to include that as an improvement we are trying to have a more accurate pricing system for us to separate and be able to measure that efficiency and put that on our program. And to answer your question with regards to the year or annualized, if we were to get into the major numbers, BRF without question has a robust program that is all based in its plans and it's going to happen as the quarters unravel. This is a ramp-up process. We are advancing If you ask about the pace, we are advancing at a very rapid pace in those improvements, which should give the company some 4.6 EBITDA. I mean, we are working with our team to make it happen. These are improvements that are definitely here to stay. And our idea, as we make more progress in 2023, is to be able to incorporate, more specifically, these gains in our information so I can tell you that we are very much pleased with the advancements that we have made and I can tell you that 2022 the year that just concluded you know brought us to a good position and the results right now are turning out to be very positive Fabio I'll hand it over to you to answer the second bit of the question I don't know if I answered Gustavo yes it's clear Miguel thank you for your answer