BRF S.A.

Good morning, ladies and gentlemen. Welcome to BRF's conference call to discuss results regarding the first quarter of 2023. This conference is being recorded, and the replay can be accessed on the company's IR website at ir.brf-global.com. The presentation is also available for download. At this point, all participants are connected in listen-only mode. And later on, we start the Q&A session when instructions will then be provided. Before proceeding, we would like to clarify that any forward-looking statements are based on the beliefs and assumptions of BRF's management and the current information available to the company. These statements may involve risks and uncertainties as they relate to future events and therefore depend on circumstances that may or may not occur. Investors, analysts, and journalists must understand that events related to the macroeconomic environment, industry, and other factors could cause results to differ materially from those expressed in the respective forward-looking statements. Here with us today in this conference call are Mr. Michael Goulart, CEO, and Fabio Mariano, CFO. I would now like to turn the floor over to Mr. Goulart, who will start the presentation. Mr. Goulart, if you may proceed. Good morning. I would like to thank everyone for attending our first quarter 2023 earnings conference call. During this period, we remained focused on executing our efficiency plan, which advanced consistently, showing progress on all our work fronts. We have evolved in our operational indicators with emphasis on food conversion, mortality, yield, daily costs, and level of the logistics service. We also advanced in commercial execution and in the share of higher added value items in our portfolio. I now invite our CFO Fabio Mariano to present the results for the quarter and I return afterwards to provide more detail of our progress and make the final remarks on this call.

Good morning to everyone joining us. In the opening slide, I'd like to highlight our main financial indicators for the first quarter, starting with net revenue, which increased by nearly 10% over the same period of last year, coming to R$13.2 billion.

As for EBITDA, we reported R$607 million in the quarter, an EBITDA margin of 4.6%. Our operating cash flow was 872 million reais, far outperforming our cash generation one year ago. In working capital, we continue to make substantial headway, reducing the financial stock.

Cycled to 7.6 days, one of our shortest financial cycles on record. Inventory turnover reached 80 days, 14 days less than in 2022.

Ending the slide with leverage, we reached 3.35 times our EBITDA for the last 12 months.

Our focus is to strengthen our capital structure, promote the reduction of our net debt, and consequently our interest charges so that leverage reduces as quickly as possible to adequate levels.

In the next slide, on the left-hand side,

We show you the historical evolution of our gross profit with profitability of close to 13% in a period. We're reporting gross profit of 1.7 billion reais. To the left, we also notice the performance of our EBITDA as we highlighted earlier. In the next slides, we present the performance per market in business segment. Starting with Brazil on slide 5, we notice progressive development in our EBITDA margins, especially when we disregard seasonal sales of commemorative products.

This performance is even more significant when we look only at the portfolio for processed products. I'd like to highlight for the Brazilian market new progress we've made and business fundamentals which have allowed us to gain competitiveness.

In this progress, I'd like to mention the improvement in our commercial execution, ensuring greater capability with an increased number of active customers, and greater adoption of the prices suggested for the retail market. This improved execution also allowed us to make progress in our service-level metrics, growing up by more than 10 percentage points. I'd also like to underscore the launch of Sadia's HopPulse line, a result of our prioritization project with greater commercial impact. On the next slide, we see slightly more promising macroeconomic scenario, and we see progress in indicators such as consumer confidence and income levels, which are closely related to sales of processed foods in Brazil, which account for 75% of our sales.

On the next slide, we bring you the international scenario outlook, and the chart on the left

On the left, we see an EBITDA that's been heavily impacted by the adverse scenario for protein exports. Our EBITDA margin was negative by 1.7%, mirroring the persistent kitchen chicken oversupply, pressuring our sales prices. However, we can already see significant price recovery early in the second quarter. We continue to expand our market alternatives with eight new licenses, 13 suspended reversions, and In the slide posterior, qualitatively, we highlight the halal market, such as China, Malaysia, Chile, Mexico, Peru, and others.

On the following slide, on the qualitatively, qualitatively terms, we highlight the halal market with the rebound in

Results for Turkey are mirroring the increased supply of high-valuated products in the Turkish market and a production that's balanced as a way to reverse the price trend locally.

We reached and allow about 26% share in value-added products, seeing the region's turnover. We maintain our market share leadership with Saudi and Benfit, With 37% and 22% market share rates in their respective markets, we also saw a higher than 50% share in resilient exports to the GCC area.

Next, I'll show you the highlights of our direct exports.

On the left-hand side,

Benefit from greater product availability, giving increased productivity and efficacy gains, especially in yield, which we will detail further. Our direct experts from Africa, Japan, and Korea do this. In Alige, we're in a more favorable scenario in Asia because of the higher consumption of wheat in China. amount of capital we've employed. We've seen gains in participation in chicken exports to the Americas, Africa, Japan, and South Korea. I'd like to end by talking about the more favorable scenario in Asia given the higher chicken sales in China. In pork, we continue to gain market share in Brazilian exports to the Chinese market. And I'd like to conclude the presentation on business segments talking about our performance in ingredients and pet. The industry reported a 19% EBITDA margin, or R$19 million in the quarter.

We continued to realize synergies in PED,

Expanding our storage capacity, increasing our level of service, and increasing our presence in the direct-to-serve channel. We've also started operations on the product line in Bastos, focusing on the food channel. In ingredients, we've made progress into new markets, broadening our business alternatives and

Increasing our line of hydrolysis for domestic market and exports. We continue to add value to our byproducts in order to maximize business integration.

Moving on to the following slide, I'd like to draw your attention to our business outlook for the company with highlights on the first chart on the left, the sharp price recovery from most chicken cuts in April, compared to the average prices during the first quarter of 2023.

We've seen double-digit increases for high-volume cuts.

The data sources are the prices charged by BRF itself. We also show you a Lastly, we'd like to reinforce that we are experiencing the materialization of a scenario of decreasing grain prices, which we had already anticipated to some extent. Substantial drops have begun in March with results in our COTS expected to

become more visible starting in the second half of the year. Next, I will share some progress in our efficiency program, which will be quantified in numbers by Miguel later on.

I'd like to show you the comparison with the same period last year, even though the basis for comparison can be seen in our material. We noted a decrease in feed conversion for

poultry and pigs by 4.3% and 1.8% respectively, and the chicken was telling you right, which decreased by 1.4% in the process. In manufacturing, we increased our yields by 1.6% in the process, and have to process losses.

In logistics, we reduced our

Over the quarter, we also saw highlights in sustainability with achievements such as reduced water consumption by 4% per ton compared to the base year of 2020.

We expect to To deliver on our commitment to ensure 100% cage-free birds in our integration system, we have made progress in the traceability and indirect grain suppliers in the Amazon and Cerrado biomes from 45% to 75%, reinforcing our commitment to a deforestation-free chain. And lastly, we've advanced in mapping and mitigating the reduction of Scope 3 greenhouse gas emissions We forward with 20% reductions as we discuss Scope 1 and Scope 2 in terms of absolute interest. Now we'd like to show you some information about the company's capital structure. The chart on the left shows you the development of our net debt and leverage levels, indicators we have already underscored early in this conference. On the right, I'd like to point out the debt profile which is still diversified and elongated With no concentration of amortizations in the short term. And a liquidity position that's still higher than, that's still over 12 billion reais.

There's cash available to face amortizations until 2027.

In the next slide, we show you our free cash flow, operating cash generation of R$ 872 billion, investment cash flow of R$ 824 billion, and R$ 958 million in cash flow without exchange rate effects, leading to a free cash consumption of R$ 910 billion. On slide 13, the final slide, we can see the development of our net debt

Thank you, Fabio.

To end our presentation, I would like to highlight, as previously mentioned here, that throughout this quarter, we made consistent progress on all fronts of our efficiency plan. the BRF Plus capturing 418 million reais. We improved our key operating indicators compared to the first quarter of 2022. We advanced 4.3% in food conversion and reduced animal mortality by 1.4 percentage points. In industry, we advanced 1.6 percentage points in yield and also cut production waste by half. In Brazil, we continue to make progress in terms of commercial execution, increasing customer base, and at the same time, increasing the number of items sold. The level of logistics service has also improved significantly, as already pointed out. Our demand and production planning, pricing strategy, and more disciplined inventory management boosted the process category profitability gains in yet another quarter. In the international market, We also advanced in our strategy of diversification for exports with the achievement of three new qualifications and three reverses of suspensions, one of which was for China. We increased by 1.7 percentage points the share of higher value-added items in Gulf countries and Turkey, where we reached 45.9% of share of this type of products in sales. Our liquidity position remains comfortable and our debt is extended and diversified. We are carrying out the divestment plan announced in the last quarter at the plant base and with all fronts underway. Looking at the market and at the variables that are not directly under our control, we can observe a recovery trend in chicken export prices compared to those in the beginning of the year. We are also experiencing a scenario of sharp drop in the cost of grains which will boost, together with the gains from efficiency plans, the company's profitability gains over the coming quarters. Last but not least, our leaders remain committed to boosting high-performance management. We are dedicated to the search for greater efficiency, simplicity and agility to obtain increasingly consistent results. without neglecting our non-negotiable commitment of safety, quality, and integrity. We are all working hard and focused to face the challenges and capture the opportunities that the coming quarters will bring.

Thank you. We will now begin our question and answer session for investors and analysts.

If you'd like to ask a question, please press the reaction button and then select raise hand. If your question has been answered, you can leave the queue by clicking lower hand. Please wait as we pull for questions.

Our first question comes from Mr. Gustavo Troiano from Itaú BBA.

Good morning, Fabio. Good morning, Miguel.

I have a couple of questions. First of all, I'd like to talk about the two cases of bird flu we saw on the news yesterday. I'd like to hear from you, even if qualitatively, what's the probability of working with internally that an embargo could And if possible, I'd like to make an exercise to compare this with 2018 when we had the same case occur with Europe and we needed a reallocation for the domestic market here in the domestic market in terms of supply and demand. So if we could compare this situation with that of 2018, what has changed and what could be different if an embargo was created? I'd also like to understand on the international side, we saw an improvement in prices, we saw double-digit prices in April versus Q3, but I wanted to understand this improvement in your margins. If these wider margins over the quarter that we've seen in the last quarter is only in terms of prices, should we expect also some decrease in unit costs? That should be more significant in the second half. But I also wanted to understand what Q2 would look like if we should expect some improvement and how significant that would be in the near term. Should we expect high single-digit margins on the international side? I would like to know if that makes any sense. Thank you, guys.

Good morning, Gustavo. I will take your first question and Fabio will take your second. We were informed by the Ministry of the Agriculture in a technical note and then with a note from ABPA mentioning the first case of high pathogen bird flu. These were three wild birds that were found in the state of Espírito Santo with the disease. Article 10.4.1 determined that if that occurred with migrating birds and not in production birds, the health state for the country would not change status. The communication about the case was immediate, both from the Ministry of Agriculture and ABPA. So currently, there's been no communication in terms of closing the market. As the article we've mentioned, 10.4.8, mentioned, evidently Brazil's entire sanitary system is robust and the steps that have been taken in the last few years and even more intensely so in the last few quarters are still in effect so that this status remains the same so that Brazil doesn't lose its licenses, its sanitary licenses. So I'd like to ensure that there's no evidence and there's no imminent embargo for the Brazilian bird export.

There's no case of bird flu in industrial production animals. This was reported for wild animals. So we do not expect any news, any major news on this end. The steps have been taken and the good practices and the robustness of the Brazilian market allows us to navigate this moment, a time all of us are ready for, Not only us companies, but also the control systems with our associations and regulating agencies. About a potential impact, I think it's important to...

understand that Brazil's current situation in terms of commercial alternatives is very different to the 18th group.

Brazil has gained access to many access that were not available to us in 2018, which allows us a geographic diversification that also works as a sanitary hedging strategy, and even timely, or even temporarily, allows us to not have such a great impact from embargoes of this kind. And here at BRF, with the Portugal and Sadia brands, we can navigate any type of scenario, adverse as it may be.

And so I'd now like to turn over to Fabio

who will add to my answer to your second question.

Good morning, Gustavo.

I'd like to address the exports issue. I think it's important to bear in mind that any protein export platform have its performance affected by supply and demand cycles. You are right by saying that export prices are already rebounding significantly early in Q2.

But I'd like to call your attention to the fact that this is not the only lever for capturing effectiveness.

It may be an important one, but it's not the only one. I'd like to remind you that we are also capturing opportunities in the efficiency plan which will affect the sales cost and also the materialization of the price decrease in rains whose results should become clear as of the second half but the inventory turnover is already being affected by the average cost so In Q2, we should already see some effect of that change. About our margins, as you know, we cannot offer you direct guidance, so I prefer not to address that issue, but I'd like to reinforce that starting in Q2, we expect to see a different market reality in terms of exports, especially poultry exports to all destinations. That was perfect, everyone. Thank you for your answers.

Our next question comes from Isabella Simonato with Bank of America. You may proceed, ma'am. Good morning, Miguel. Good morning, Fabio. Thank you. I have two questions on my side. The first one is related to the cash flow. and the working capital that you mentioned in the release. You mentioned an improvement in the cycle. Could you provide more detail? What were the variables involved, especially looking at inventory levels? And still on the same topic, when we think about inventories of raw materials and inputs, and looking at the downward trend of grain prices, could you tell us what would be the average time you have greens stored so that we can have a better clarity on the capture of lower prices? This would be my first question and the second one. As you mentioned at the beginning of the presentation, Fabio, you mentioned also in the release that there were increases of prices in the first quarter Could you provide more color on the consumer sentiment that you feel in terms of the mix? And how are you looking at that down the road and how you see the other players considering the increasing prices that you have practiced? Thank you.

Good morning, Isabella.

Now, beginning from cash flow, as you noticed. you saw the inventory turnover. And the main highlight in this sense, maybe the company has provoked this result because we extended the inventory levels for raw materials. I refer to grains because we have anticipated this scenario of downturn and the cost of wheat and soy. So we are shortening the time between the commodities and consumption. And as a result, we can see the reflects in the cost of product sold. As for the timing of the strategy, I understand this is a very sensitive information to provide you with. I'd rather not. And addressing the second part of your question related to the environment of the domestic market. I would like to point out that we understand that as of the second quarter, we are going to have a more attractive environment if we consider consumption. I showed you the confidence of consumers, of Brazilians, that have to do with the deacceleration of inflation levels. And what I can also say from the strategic viewpoint is that BRF the leader of the main categories of processed food will influence in a positive way the competitive world by means of the price pass through. We have already started this movement more intensively in April and this has been well received by the consumer as well as by the competition. So we expect that this will also offer a higher profitability capture. I would also like to say that in Brazil, product price is not the only source of intensive fire or result. During the presentation, we mentioned the headway we made in the commercial execution. So I would like you to look at that. And pay attention to the number of clients we added to our basis, more than 10,000. and the efforts we made at the points of sales to improve the diversity of the portfolio, the trading materials, the organization chart, and all the suggested prices that are being observed by the retailers. If you allow me, Fabio, I will add to your answer in relation to the grades. In the past quarters, we have been discussing the excellence of information about the predictive models that we have. Those models pointed to this drop in the grain prices. So we use this model in order to project our strategy. And today we see that this strategy is very successful and aligned with this drop that we are experiencing grains.

Thank you.

Our next question comes from Thiago Bortolucci with Birdman Sachs.

Thiago, you can now activate your microphone. Good morning, everyone.

Thank you for your presentation.

Miguel and Fabio, thank you for taking my questions. I have two.

First of all, I'd like to follow up on the Brazilian side.

You mentioned a slightly more resilient pricing.

Granted, when we look at the release, excluding the Christmas prices, it seems that the portfolio saw a 1% increase, quarter of a quarter, 4% in process moves. So, indeed, we are seeing a P&L statement that's very reliable. However, the consolidated saw a decrease year over year, and this is at a time when, in theory, you're still... So my first question is, moving forward, how should we think about the mix, price, and life-for-life growth in product mix, life-for-life sales, considering that there's more capacity to be added to the industry?

That's my first question.

And the second, I think you changed your disclosure with a shorter breakdown. And if you could talk even qualitatively, how did your volume price and margins performed for Halal and other products? These are my questions. Well, I will turn over to Fabio.

Good morning, Thiago.

So, starting with Brazil, your analysis is accurate when you compare our regular portfolio for the first quarter with the fourth quarter of last year, whether we disregard the...

holiday celebratory product portfolio, I think that also if we were to disregard the result of fresh products,

This is also being hurt in Brazil because of a protein oversupply that's taking place worldwide, affecting sales of goods for essentially every destination we sell to. So if we were to disregard that effect as well, we could say that the profitability for fresh products in Brazil is already over two digits as well. especially when compared to processed foods, which account for 75% of our domestic sales. You pointed out the decrease in volumes. I don't think this is a good basis for comparison, even because in Q1 of last year, we faced a sales and production issue and we found ourselves in a situation where we had to address an excess inventory for processed products both in Brazil and overseas and we needed to essentially liquidate some of that volume to better accommodate our inventory turnover, especially for finished products.

Now, what we see moving forward in that sense is, well,

The company has proposed to adopt a commercial plan and an execution plan, and this is very much in line with what we expected. And the indicators I offered for the macroeconomic scenario will also help to make that execution feasible in the next few quarters.

Adding to Fabio's answer, I'd also like to say that when we

Delved into the commercial execution plan, we have a more assertive plan now that's supported by a more efficient logistics operation. All of that allow us to expect good performance and to seize the opportunities that the market will certainly offer us, not only with regard to the domestic scenario, but also in the international scenario.

Now, Tiago, I would like to take your second question, and I will answer you qualitatively about the breakdown of our international market sales.

And what I would like to point out in Halal is that we are still increasing the representativeness of our high-value-added products in our sales in the area.

In the presentation, we underscored that we increased our market share for these products to 26%, so this is an increment of over 2 percentage points. The same can be said about Turkey.

I remember that when transitioning between 2021 and 2022, we opened a new line of processed products in the area, which has also allowed us to move forward in high-value added product sales to the Turkish market.

And thinking of Halal in general, we are still absolute leaders when it comes to

the market share for processed products.

In the GCC area, that's about 37% market share, and in Turkey, Now, moving towards the sub-area of Asia and indirect sales, despite the more adverse scenario we have discussed earlier, we continue to gain market share in Brazil and exports from Brazil.

Just to give you an example, we gained 7 points

in exports to the Americas, 3 points in exports to Africa, 1.5 points in exports to Japan. And I'm talking about poultry exports.

And for pork, we gained over 10 percentage points in our exports to China.

So I think it's important to remind everyone about the Rehabilitation of Morale Plan for China, which allowed us greater flexibility and also a potential to maximize our revenue.

Not a long time ago, we also talked about the rehabilitation of our lupus to revert a plant, both to sell chicken cuts and also pork cuts. This is one of our most important plants in terms of production capacity and efficiency. So this is also very important. representative for us when it comes to the exports environment. So qualitatively, these are the items I can break down for you about our international market operations. That was great. Thank you, guys.

Our next question comes from Tiago Duarte with BTG Pact Law. Tiago, your line is open and you may proceed. Hello, good morning, Miguel, Fabio, everyone. I would like to ask two questions. The first one is related to an industry view in relation to offer. So we see this high at the end of the first quarter, April, when we look at prices. But when we see supply increases, We do not see any drop when we look at the slaughter and storage related to chicken. So I would like you to explain what explains this high prices. Do you see this rationalization in offered some degree by other competitors and for BRF specifically? Could you disclose numbers related to slaughter, total production, if they are consistent with the figures in terms of sales volume, or if there's any mismatch that we could look at? That would be my first question. And the second one is related to what Miguel mentioned in his presentation about the sales of assets. The divestment plan, is it according to schedule? Is there any expectation? Would you have any detail to provide in terms of timing or even the amount of divestments that we should consider in addition to what we have already seen in the results of the first quarter? Okay, thank you. Hello, Tiago. Answering the first part of your question and then I'll turn it over to Fabio. Obviously, when you use efficiency plan model, such as the case of BRF, you make the perfect adjustment, both for production, operation, and sales. So you have an alignment considering the three segments, how you produce, how you convert, and how you sell. You maximize all the logistics and the commercial execution as well. So in both in the domestic as in the international markets. And that would lead to an adjustment that would allow your planning or demands that your plan should also be more accurate. You probably remember when we mentioned in the last quarter of 2022, we said that BRF made adjustments of the inventories at the turn of the year. And that made us to be very well positioned for the beginning of the year with the perfect level of volume, good commercial execution, also aligned with the capacity that the market would have to absorb to take our product. So that proved to be very successful. We also made a good position in the grain inventory levels and also finished products And these are results that we are going to see as the quarters move along. So I will now turn to Fabio and he will provide more detail about those concepts and he will answer your second question. Good morning, Thiago. Okay, adding to the first answer, So what I can offer in terms of the information related to the slaughter processes, our position in this regard has not changed in any significant manner. You can consider a share, thinking about a protein equivalent to 24 or 25%. And when we think about swine, a share, a lot that happens in the market, about 20 or 21%, and that will probably help you quantify and reach a figure. When we think about the circumstances involved that had putting pressure on the import prices, and you consider the supply, we do not have access to a lot of data. We have access to the American data, as you mentioned, data in Brazil. But this is something that would involve the whole world. So I would say that in Europe, for example, there is a downturn estimate in production. There is a reduction of storage when we compare the quarter with the immediate quarter. previous quarter. Yes, we need to consider those data, but it's a sign that the direction of the cycle has changed. I would also like to point out the demand, the demand I mentioned. When we consider sales possibilities, we see a scenario which is much more favorable when we think about the Asian continent. of course, led by China specifically, that shared very interesting information about sales with this opening in the market, favoring retail and conversion. And we can see that there's a recovery on chicken price, which is something very remarkable, very visible. And I would like to say that the company and it continues very focused in the diversification of what we do in the market. Whenever we see opportunities, we see we also have licenses, , which is also very representative, something that is new today. We want to amplify and broaden the exports platform. And I did not even mention the sanitary problem, which is something that we have been monitoring very closely with China, which is something that can affect the swine population. And this is something that we are going to monitor closely because this can cause a very positive result for the prices. Very clear. Thank you. Thank you. I'm going to make a follow up on what Miguel said on the answers. When we look at the numbers of deduction on gross revenue, especially in Brazil, they have been the lowest for many years, suggesting that this is already a result of an evolution that you mentioned. related to price adherence and reduction of discounts and FIFO, which is one of the topics that Miguel mentioned repeatedly. So I would like to ask if this level that you saw in the first quarter, based on the improvements that Miguel mentioned in the first answer to my first question, Is this a level which is sustainable? Can we improve it even further or not? It's important to take this opportunity. Thank you very much for the question, Tiago. The answer is yes. It's a sustainable level that we have reached. And I have to say that, yes, there's room for improvement. We are working hard to improve this number. And obviously, in a situation when we have options of imports, the situation will help so that this level will be maintained or will be improved. I always say that the best option is to have many options. And as Fabio said, We have Lucas facilities, which is one of the most important facilities for BRF, of course, wine and poultry. And now it's going to be integrated in our number of options in the negotiations with China. But behind all the numbers of FIFO, there is also the commercial execution. There's a lot of dedication from our sales teams. There's a lot of dedication from our logistics teams and also from our marketing team, production team, quality. In other words, this is a number that does not come out of a single initiative, but rather from a number of initiatives when the company is going back to basics, simplify and go straight to the point. So let me provide some context based on the question you asked it. Our scenario is very important in relation to grains market. It's not typical when we consider volumes and the significant drop. It hadn't happened for many years. and with a company that is planning well, executing well, doing well, focused on improving, and we have the humility to understand that we can move further and we will capture the opportunities in this challenging scenario. So we had lots of problems last semester, but we are working by diversifying our products, our portfolio, and increasing our So we had 16 new licenses in this quarter. And so we are prepared to face the challenges of this moment. But we're also working so that the next quarters will bring better results. Excellent. Thank you.

Our next question comes from Leonardo Alencar with XP.

Leonardo, you can open your microphone.

Good morning, Miguel.

Good morning, Fabio. In fact, I'd like to maybe hear a little bit more color in terms of your operations and improvements. You talked about the 418, the score you added to the 180 that came last year. This is a... talking about over $600 million in efficiency gains, and you say you don't have any specific guidance for that, but at the same time, as you dive into this opportunity in front, production, operations, logistics, you can usually see more clearly precisely where the opportunities are. So if you could just maybe update us on what's been done so far.

Of course, you've reported on

conversion and reduced mentality rate, but I wanted to hear if the level of efficiency or opportunities for value capturing is what you were expecting or if you already see opportunities to continue to do that. And if you could also give us some profit, we're talking about over 600 million, is this even quicker than expected when you begin to address this or tap into this

since you've joined BRF.

Leonardo, I'll start answering this from the generic perspective, and then Leonardo will quantify and give you more detail. To answer you very honestly, what I found here is really exceeding my expectations.

I found a company that was ready to

reap benefits that it could with all the information it needed.

And if we were to quantify these gains, I'd say that we established a plan that expected 24.5% inefficiency gains over the figure that we had.

We are 0.5 percentage points over that at 25.5%. And BRF is still working to grow this figure every quarter. Evidently, every efficiency plan, as you begin to execute it, that gains... And as you bear or as you see the benefits, you feel compelled to gain more benefits.

And I'd also like to point out the efficacy of information, which allows us to make more accurate information. But not only that. the sheer capacity of our over 97,000 associates in every way, the ability and the resilience that they have shown to go after these results have been critical for us to obtain the results that we have.

So after 42 years working in this industry, I can't stop thinking

being pleasantly surprised by BRF.

This situation that we faced in these first few months is a challenging one, but I still see BRF as being motivated, prepared, and working hard and humbly to seize all of these opportunities that this highly qualified information system allows us to to navigate all of this. So if you could please quantify that for Leonardo, please. Good morning, Leonardo. So quantitatively, we reported in this first quarter of 2023, 218 million reais.

Just to remind you, this efficiency is being obtained by the improved performance of each one of those operating readings.

And we mentioned what the most important indicators were.

And if you think of the previous year, 2022, as the starting point, you compare each indicator with the same period one year earlier.

So where is each one of these millions of rise coming from? On the agribusiness side, we have 110 million rise between mortality rates that have been reduced and an improved efficiency.

So with that, you can expect a slightly longer period until this can be seen in the cost of the product sold.

We're talking about a positive impact of the cost. of the living cattle. The cattle will be slaughtered and then the raw material will be processed and then it will be sold. So that will ultimately reflect on the cost of the product sold.

So there's some turnover in the entire chain.

And then thinking about manufacturing one step further, we are capturing 86 million and profitability.

And then in logistics, by reducing our storage costs per deal costs, we add another 87 million.

And this is immediate. We can tell you that this is already reflecting in our Q3 2023 results. And then we have reduced Iowa capacity and Process losses, which account for about the...

88 million reais that we have left.

Just to finalize the answer to your question, I would remember this when I was at Marfrig.

I was asked this question when we compared quarter to quarter at Marfrig. And now we have the opportunity to apply this efficiency plan here at BRF as well.

which has a huge impact on the company's operations as well.

Yes, absolutely. And I'd like to thank you, Miguel and Fabio, for the details, but if you could do an exercise.

Tell us about what is your company doing in terms of when we compare it to the industry, and especially considering the strategies that you have on the commercial front, which I understand also include your international operations. You already break down the efficiency, but can you already see

gains in efficiency on the commercial side for international operations.

Well, we usually say that the best practice for the company is to repeat the same performance that it had in one place, a different place, whether that's abroad or not.

And our practice...

if we have one practice in Moral, we can adopt the same practice, some of the same practices in a plant in Turkey.

This is something we do every day. We are constantly measuring and monitoring our efficiency and profitability KPIs and replicating that in a highly professional way and highly detailed way elsewhere. This is one

great advantage, and once again, this company, as if you had a 3D panel, and this 3D panel, if you look at the right indicators, you can capture what has the best impact, and also the information allows you to replicate that in different locations. That was very clear. Thank you, Miguel, and thank you, Fabio.

Our next question comes from Lucas Ferreira with JP Morgan. You may proceed, sir. Hello, everyone. Good morning. Two follow-ups here. Miguel, I remember in the conference call of last quarter, you mentioned about the expectations of recovering four to six percentage points using the by applying the efficiency plans. If I'm not mistaken, the comparison basis that you mentioned was to be a better BRF, maybe number similar to 2019. But my question, considering the time you've been with the company, you saw some processes and you understand that there are some costs that could be brought to a better level considering your history. And what do you see this process is? Where do you see that the company has the best opportunities to deliver its historical results? And maybe a follow-up to Fabio about prices. Fabio, what I understood You have already started some initiatives in April, but you also see some opportunities of having some additional increases in prices, some categories that you did not increase, those prices that you did not increase, which would be those categories, if so, and the domestic price of chicken is still a bit impacted. Where do you see room for increasing prices? Thank you. Lucas? Answering your question. Yes, you're right. 2019 was the base zero. And what we see in practice is that this was the correct base to be used because there was a gap between 2019 and 2022. We understand that 2022 is going to be exceeded and we are going to work hard for that purpose. We are focused on that. We have all those indicators that are monitored daily, if not hourly. BRF system is a nearly online system. We understand how things are happening online so that we can make decisions. In 2019, that was the top of our plan. So today we're much closer to it. And of course, this is going to be a milestone that we are going to exceed. I have no questions about it. Some KPIs, considering the KPIs that we used as a basis, considering 2019, have already been exceeded. And now... Answer your question, we see gains in all segments. If we go to the field, we understand which are the ones that are going to have a better performance than in 2019. If we go to the commercial area, both can see during exports and domestic market, we are sure that we are going to exceed the numbers, the KPIs that we use as basis. All our departments, PPEs, We are all working to that end. And it's not only a matter of willing to do. We have a plan. And we are implementing this plan in a very dedicated and disciplined way.

Good morning, Lucas.

Now addressing the second part of your question. I assume that when you mention prices, you refer to the domestic Brazilian market. If not, let me know. Yes, I said that we've been trying to impact the categories of which we are leaders by price pass-through, and this is something that happened in April. And when you ask about opportunities of new increases of prices, I prefer to look at the capacity of the market to manage this. This was something that was done recently. And sometimes the reaction can be felt immediately by the competition. In some cases, the response will be partially. And so what I need to say is that we have to understand the capacity of the market to absorb those cost-pass-throughs. or price pass-throughs, and we also have to understand the competitive environment. When we increase prices, we do all the calculations in terms of elasticity of the categories. What I can say is that this is a movement that is well accepted. If there will be future opportunities to increase prices, it's too early to say. The market will tell whether or not this is going to materialize, and we are going to monitor this very closely.

Thank you. This concludes the question and answer session and BRS conference.

We'd like to thank everyone for joining and wish you a great day.