BRF S.A.

good morning ladies and gentlemen welcome to brf conference for the results related to the second quarter of 2025. this teleconference is being recorded and the replay can be accessed at the company website at ribrf.southglobesouth.com the presentation is also available for download in this moment All the participants are connected only as listeners, and then we'll start our session for question and answer when more instructions will be provided. Before we proceed, I would like to take the advantage to reinforce that prospective statements are based on beliefs and assumptions of BRF direction and information available for the company. These statements may involve risks and uncertainties happening inside that they are about future events, and therefore depends on circumstances that may or may not happen. Investors, analysts, and reporters may take into account that events related to the macroeconomic environment segment and other factors may make the results be materially and relevantly different from those expressed in the prospective statements present in this report. conference miguel gulad and fabio mariano i'd like to give the floor now to mr miguel who will start the presentation please mr miguel you can go on Good morning. We would like to thank everyone for joining our conference for the results for the second quarter of 2025. We concluded the first half of the year reporting the best first half of the year in the BRF's history with a bid of 5.3 billion reals and an income of 1.9 billion reals. The results show that the company's operational excellence, strategic vision and financial discipline, and even in an adverse scenario such as the one presented in the quarter, marked by restrictions and poultry exports. We continue to make consistent progress in our market diversification strategy, increasing our active customer base and strengthening our portfolio of high-quality, value-added products with the service of innovations. I'd like now for PFO Mario Fabriano to present the detailed results for the quarter, after which I will return for the closing remarks.

Good morning, everyone connected. On the opening page, I would like to highlight the main financial indicators for the second quarter of 2025, starting with net revenue, which reached 15.4 billion reais, 3% higher than in the same period of 2024. EBITDA came to $2.5 billion for the quarter, totaling $5.3 billion year-to-date. The best first half in our history, with performance 11% above the same period last year. This contributed to a net income of $735 million. In the quarter, 1.9 billion for the semester. Free cash flow performance was approximately 850 million, or 1.3 billion when we're excluding the impact of hand-in-plan acquisition in China and the exchange rate variation on cash. Concluding this slide with leverage, we reached 0.43 times the LTM EBITDA, the lowest leverage in our history. On our next slide, page 4, on the left-hand side, we show the historical evolution of gross profit, with profitability of 26.9% for the period. We reported gross profit of 4.2 billion reais, 7% higher than in the second quarter of 2024. On the right-hand side, we can also see the evolution of EBITDA and margins, highlighting the stability for operational results. We will now present performance by market business segment. Starting with Brazil, we continue to evolve consistently. we reported EBITDA of 1.3 billion, of a margin of 16.4%, with successive volume growth, especially in the process products category. On the next page, page 6, we emphasize our ongoing journey of commercial execution improvement, enabling us to achieve the highest second-quarter sales volume in Brazil in a customer base now exceeding 330,000 points of sale. We also observed greater adherence to suggested pricing and increased product assortment in stores. Logistics service levels remain at excellent levels despite the significant increase in volumes. We remain attentive to the needs of our consumers, launching new products in the pies and ready-to-eat snack categories, as well as cold cuts. We also promoted new campaigns and sponsorships, strengthening brand visibility and supporting consumer preference. We also highlight the positive results from the recently implemented initiative to expand our budget portfolio through the partnership between BRF and Marfrick Brands. Now, on the following page, we present the international market. We observed healthy margins in this segment, with the contribution of geographic diversification helping to mitigate the effects of avian influenza, which imposed numerous restrictions on chicken exports to several destinations. EVDA margin was 17.3% for the quarter. On the following slide, we highlight on the hollow market the launch of CediaFresh, chilled chicken line in Saudi Arabia through the Invesi Doha poultry. We recorded 1.4-point percentage market share gain in processed products in GCC, driven by the breeded products category. In Turkey, we continue to focus on increasing processed product volumes, which grew 7% year-per-year. helping to mitigate the effects of higher local supply of fresh chicken and lower disposable income, both of which have pressured local price levels. We maintain market share leadership with Sadia at 36.2% and Banff at 24.1% in their respective markets. On the right-hand side, we present highlights from direct export segment. We expanded business opportunities with 11 new export authorizations in 2025, contributing to price maximization. Since 2022, there have been 198 new exports licenses. which has allowed us to offset part of the effect caused by restriction on chicken exports. We also highlight the launch of new products, advances in processed products in the southern cone, and the first shipments of beef cuts under Saria brand to key destination. Now, I would like to conclude the business segment presentation on the next slide with the performance of ingredients and diets. The segment reported EBITDA of 52 million reais. In part, we complemented SAP implementation, strengthening controls, unlocking administrative synergy capture, and expanding our customer base by 8%. In ingredients, we continue to diversify both of our product and market portfolio. Next, we share the progress of our efficiency, and now also growth program presented in base 100 format. On the left-hand side, we can see annual improvements in poultry and swine feed conversion and yield indicators, with relevant gain captured. On the right-hand side, we present improvements in plant utilization and volume sold. We have made significant progress since 2022. at a pace of 50% higher than the historical average of the last six years. On page 12, we consolidate the following ESG highlights. Important recognition in climate change initiatives, especially for greenhouse emission management through supplier engagement and the offsetting of emissions from the quality advertising campaign, which earned the carbon-free seal. Promotion of the Education for the Future campaign of our institute benefiting over 5,000 people. Lastly, the publication of the fifth Transparency Integrity Report reaffirming our commitment to ethics and compliance. On page 14, we present information related to the company's capital structure. On the left-hand side, we can see the reduction in net debt and leverage, the lowest in-depthness since 2011. On the right-hand side, we can see the debt profile, which remains diversified and long-term, with no short-term maturity concentration, a very comfortable liquidity position. On the next slide, we show free cash flow. The chart shows operating cash generation of 2.5 billion reais in the quarter, investment outflows of 1.3 billion including the Henan plant acquisition in China, and financial outflows of 400 million. resulting in free cash flow of 842 million reais or 1.3 billion excluding acquisitions exchange rate variation. On slide 16, we can see the reduction in net debt during the period. We reported net debt of 4.7 billion reais after shareholder remuneration versus 6 million in the first quarter. Lower repayments will continue contributing to lower interest expenses in 2025. Thank you for your attention, and I'll hand it over to our CEO, Miguel Goulart, for his closing remarks.

Thank you, Fabio. To conclude our presentation, we would like to highlight that the solid results for the period demonstrate our consistent track record of efficiency and value creation, which translated into the best EBITDA for the first half of the year of 5.3 billion reals, Also, the lowest labor ratio ever recorded in the company's history at 0.43 times. We also highlight the maintenance of our efficiency program, BR+, which, through continuous process improvement, continues to generate gains for the company. In this quarter, we recorded a capture of 208 million reels, optimizing our results with actions aimed at improving management indicators. We also emphasize an important step towards growth and strengthening of our presence in the halal market through a Doha Poultry Company. We launched it in July, the Sadia Fresh line of chilled poultry produced in Saudi Arabia, further strengthening our strategic partnership with the kingdom. In addition, we increased our shared and processed products in the GCC product countries driven by breaded products category. In Brazil, we had another quarter of consistent progress in our commercial execution. The growth in volume and net revenue of 15.4 billion reals We're strongly driven by the increase in the customer base, which now exceeds 330,000. We continue to expand our offering of value-added products with assertive innovations in portfolios both for Sadia and PrettyGo. We also highlight the positive results of the expansion of our hamburger portfolio through the partnership between Sadia Basi and Vertigo Montana, brands leveraged by the breadth of our sales and distribution force. We reiterate that the market diversification strategy remains to be essential for BRF. We will continue to expand our export options, strengthening our global presence. Together with our robust data intelligence system, this strategy has given us an important competitive edge for timely decisions according to the scenario at hand. We continue to value our teams. In the last 12 months alone, we filled more than 70% of leadership positions through recruitment and recognition of our internal talent. Guided by the pursuit of operational excellence and financial discipline, we remain steadfast and optimistic in the company's journey towards sustainable growth. Based on our commitment to quality, safety, and integrity in everything we do. I would like to conclude by thanking our Chairman and Controller, Marcus Molina, for his support and strategic direction, our shareholders and the Board of Directors for their support along the way. Our sincere thanks to our customers, integrated producers, suppliers, and communities where we operate. And finally, I'd like to thank you for more than our 100,000 BRF employees for their commitment for the excellent quarter that we have achieved together. Thank you. Well, we'll now start the Q&A session for investors and analysts. In case you want to make a question, please press the button, raise your hand. If your question has been answered, you can leave the queue clicking on the same button. Wait until we collect the questions. Our first question comes from Gustavo Troiano from BBA. Please, Mr. Troiano, your microphone is open. Good morning, everybody. Thank you for taking our questions. People, we have two points that we would like to explore with you today. The first one related to avian flu. When we look at the impact in the semester, it was very limited. The impact was very limited when we look at the numbers. What I wanted to hear from you, Miguel, focused on the part of reallocation and the permits that you developed in the past few years. What was the impact like? How did you mitigate the impact in China with this permit and more focused on Paul Cutt, which is a relevant market when we look at China and CISACs? It suggests that basically exportations were zero to there. So I understand that in other cuts you're able to reallocate with more facilitation after all these permits, but I wanted to focus on this cut specifically to understand on the limit potential to recover the margin from now on in case we see the rehabilitation of the market. I wanted to hear from you about these reallocations within the international market. and how you specifically deal with this cut that we know that is very important for the profitability of the company. And the second point related to cost, when we get the prices of commodities up to the moment in the year, they have dropped, especially grain. And we haven't seen a reflection in your costs, even internationally, raised a little bit, and you mentioned them in fact. But I wanted to hear from you the perspective of this specific line of unit costs going forward in line with the commodities that are decreasing that we have seen over the year, if we should expect any decrease in this unit cost line in 2025. Thank you. Good morning, Gustavo. Talking about avian flu, it's very important to analyze the aspects from the perspective. In the perspective aspect, in the past two years, BRF has worked and has been able to open permits, to get permits and plan permits in over 198 occasions. This has obviously allowed us to go through this episode in... much more agile manner and assertive manner than the episode that we had last year on Newcastle disease in Rio Grande do Sul in Brazil. For me, on the other hand, it's important to see that the agricultural ministry has done an excellent work together with BPA the sense of all the information and agility and transparency would reach all the markets in the timely manner this allowed that all the process of closing would have its process shortened and more agile so we knew exactly what to do for that country and we were able to execute what we should do in an assertive manner it's also evident that in the case of avian flu and safety of biosecurity in a Brazilian production system, a disease that is endemic. So we only had only one case in our method. Brazil in the work and all the technical area either for production or the ministry has been doing in the past few years that allowed us very fast to resume most of the markets even with a much shorter time than it was estimated we continue close today the Chinese market it is extremely relevant and markets in Europe I highlight that on the 18th of June Brazil delivered the documents with international bodies and we should have these reopening taking place in the next coming days or weeks. Everything indicates that this should happen. Over the aspect of reallocation of products, when you have 198 new options, you are able to transit in different locations and destinations and mitigate impacting volume and price. BRF also moves really well in the internal market with Asagiya and Ferdigon brand. We have been able very quickly to make decision in face of the episode of the avian flu. We were able to redirect to the internal market products that before were reallocated from exportation to internal market. In the case of China, specifically answering your question about Pong, Obviously, China has a compensation value for this product much higher than all the other markets, but it's not the only market. We could sell and sell feet in Hong Kong or Africa, then obviously there is a downgrade in price that we can mitigate in volume, but not in financial impact. And I also like to remind you that BRF has the pet food division, so animal feed can be turned into product for pet food, pet feed.

So these...

We always have contingency plans, and what we did, the question of the contingency that we had executed during the new capital in Rio Grande do Sul last year, we, as time passed, the experiences were acquired. We improved these plans that allowed BRF as a company to mitigate in a very effective manner that this episode had an impact, is still impacting for two important destinations, China and Europe. I would give the floor to Fabio to answer the second question. Good morning, Gustavo. I'm going to address your question about costs. In fact, we see in the market... especially in grains of retraction especially in corn I see that the disclosing of the first quarter we anticipated that movement our strategy was to keep less long position especially so in the short harvest we would have corn origination and that happened it happened within the planning so we were able to acquire the amount that we had imagined and this happened during the transition from the second to the third quarter so it's natural that respecting this movement of the inventory cycle until this consumption cost has an impact our product sold product cost this should happen now in the second half of the year we imagine that the impact in cpv is going to happen we have the possibility of seeing a retraction for the cost of animal feed around two percent in the second half of the year i'd like to mention that And we'd like to mention in the case of soybean flour, we could prolong the orders, not only for the second half of the year, but also thinking of the first quarter of 2026. So we understand that we can have some benefit in the consumption in the next year. Perfect.

Thank you so much.

Our next question comes from Julia Zamiello, Bank of Americas. Your mic is enabled. Good morning, everybody. Thank you so much for picking my question. I would like to talk a little bit about prices. We saw prices very strong for this quarter, and I would like to understand what is going to be the capacity of carrying this price at a higher point. If you're going to increase additional prices when it comes to the international side with this volume recap, should we see a better mixed prices for the next quarters?

I will get started, Julia, and then Fabio will compliment.

Let's remember what was happening when it comes to the price dynamics in this quarter. So we started the first 45 days of the quarter with increasing prices at all markets, including the local market, the domestic market. And on May 15th,

With the focus declaration of avian flu, we saw many markets closing down,

The markets that opened or closed, partially, regionally, they showed a big inflection regarding decrease, but this inflection wasn't like a sharp decrease, which explains a mild impact on the international market prices with excellent results that we were able to gather. On the other side, the possibility of having all the destinations quickly re-established and these 108 new licenses also mitigated the effect of the price impact without providing you with the guidance, which is not the case. We expect that if we can keep the licenses conditions, because since June, June 26th, ONSA has been publishing Brazil as a country that is free of avian flu. We still have some other markets like China and Europe. They have the expectation that these markets will open. This happened. So we will have possibilities of gaining some traction in these destinations.

When it comes to Brazil,

We're experiencing a moment of full employment. The consumption is very high. The numbers show that. And in consequence, the possibility that prices are going to be resilient. This is concrete. Now I would like to pass the floor over to Fabio for him to complement my question.

My answer, excuse me.

Good morning, Julia. The only compliment that I would make has to do with the process goods portfolio. So volumes have a big association with income, which has also an association with employment, which I think that he has just said. We had the opportunity to lead some adjustments, right, in good part of the portfolio. And the market... accommodated this prices rounds when it comes to the consumption as well as the sales channels the competitive environment always enhanced this reallocation of prices so we observe that in Brazil prices year per year it increased 11% specifically when it comes to processed portfolio prices advanced 8% and on the Quarter after quarter, we see an advancement of almost 3%. So we understand that we can have other possibilities in terms of leading new rounds. I'm not going to say that it's going to happen for the entire portfolio of processed goods. We have to respect the strategies of each category, as well as the regional strategy, understanding where we should act, what are the channels.

And this should happen still on the third quarter.

This is what we believe in. Okay, thank you so much.

Our next question comes from Henrique Brustolin, Bradesco BBI.

I would like to make another question in this discussion about Brazil. You delivered a gross margin in this quarter that was the largest ever since 2015, if I'm not wrong. And the discussion, the price discussion caused discussion from the prior question. They seem to be really favorable when we look forward. My question is if there is any seasonal component or mix effect that was relevant in this quarter during the gross margin composition, or does it make sense to think at least carry over of these levels when we look ahead? Well, in this question, was there any relevant mixed effects that we should consider? And the second, also in Brazil, you have been delivering growth that is really relevant in terms of processed products volume. The question is, how can we think about that ahead? There's been that discussion over the past few years about the idle capacity and how you have been doing that, especially the filling of this capacity. The question is how much idle capacity you still have, and if we should think of this space of growth is slowing down a little bit, even the investments that are being made now, they have reached a point that they can be more mature. Thank you.

Good morning, Henrique.

I'm going to start answering this question. I'll hand it over to Miguel. About the profitability of Brazil, you talked about the gross margin. I would say that in the mixed aspect, we have advances in some categories versus others. For example, margarine and processed products categories. But this is not enough to provoke a change in profitability of the company. I would say that structurally... we shouldn't expect some regression in the second half of the year. I would like to remind you of what was said in the first question. This is their cost aspect, which is an advantage. So the animal feed cost is a margin benefit over the reduction of CPV. This is going to happen gradually in the third and fourth quarter. imagining that we also would have the possibility of readjusting prices obviously depending on the market conditions we have the potential of increasing profitability in Brazil specifically talking about process products and about the capacity idle capacity I think that we have already been doing the work since 2022 of intensifying the use of our assets And this has a lot to do with the growth of volumes that we have observed in the company. We have grown since 2022 in a pace that one and a half fold compared to the pace that we had in the past six years. And obviously that has been said before, but we have to invest in our capacity because we identify a very steady, solid demand for the next coming year. So if you want to have the opportunity of capitalizing this possibility of new volumes, we have to go back to investing in our plants that is very much occupied. Idle capacity, I don't want to give you a percentage because it depends on category, line, it depends if you're referring to the field or to slaughtering or to processing. But I'll tell you the idle capacity, the large idle capacity that we had in the company in the past, it doesn't exist anymore. And many of the categories that we operate, I'm going to hand it over to Miguel so he can add. so adding to fabio's answer we saw the occupancy of either capacity but we continue at a growth pace and productivity and if we compare our internal benchmark and among some units or some locations we see that we created the capacity to grow many of the lines and categories that we work with. So BRF continues being a company with organic growth capacity beyond investments that are for-cap assets and that are for execution. in that only in this quarter we have brf plus delivering gain of 208 million uh real so we are in the half of the year in the middle of the year and our expectation our planning is extremely assertive in this aspect we have an important opportunity to capture synergy of organic growth. All this makes us provoke even some elasticity in our operational capacity and also we have the combination of organic capacity and investment so we have sustainable growth for the company for the coming years.

It's very clear. Thank you.

Our next question from Lucas Ferreira from JP Morgan. Your mic is on.

Hello, everyone.

Good morning. I know that it's still early to talk about 2026, but when you look at the fundamentals of the industry, of chicken industry as well as swine industry in Brazil as well as the main markets that you operate, my question is whether you see a change a relevant change when it comes to fundamentals uh to the future or have you been seeing like some matrix um reimbursement uh if you see like markets reacting to increase uh the the offer so as well as the asian markets as well like saudi arabia My question is to understand how do you see this moment of the cycle, and if you see any fundament when it comes to the changes considering this cycle. My second question, maybe it might be a little bit more difficult to answer. So, we talked a lot about... of brazil's profitability there are many factors right that explain but since 2023 you've been operating in brazil with a ebitda margin that it's over 15 even though we have some exchange variation rate raw material and the market i know that we are in a favorable scenario when it comes to grains but on the other side we have many um questions regarding the company like brf plus as well as the other commercial aspects and the advancements that you've been making. My question is, imagine that we go through a more competitive market or maybe a more enhanced market. level a little bit over the history. Do you think that this level of operation of 15% of margin, it's a level that makes sense looking to the future, the categories that we are operating nowadays? This is the question. Thank you. Lucas, when you see the international scenario, starting with exports, as well as the different geographies that BRF works on, do you see like a perfect balance between offer and demand? Having a perfect balance, very... It's not likely for you to see an alteration that will touch the fundaments of the business. We're talking about a business that the demand is perfectly balanced with the offer. I would say that on our segment, food segment, of chicken, as well as poultry, as well as the beef, we have a demand that will keep overcoming the demand. So we don't see any scenario where this can see a change. You have some episodes, like the sanitary episode that we saw with avian flu, but even though these things happen, the importance of having Brazil It's something that we can go about the opening of markets that close.

Maybe in the past these markets would be closed.

On the other hand, the company has been investing in the last years in products of like added value. Products of added value, it means products with constant demand and price resilience. So this is also something that makes us excited, and we see this in the geographies. So the strategical moments that our controller referred to the company, especially in the Middle East, we are starting to see results, our BRF association.

our choice for the Middle East with a growth focus.

If you take a look at the CX data, you will see that quarter after quarter, the Middle East has a consumption in its higher destination. We've also seen growth. In other words, you see all the international scenario, and in this scenario, we also apply the same metrics of management and measurement that we apply in Brazil. So we always think and pursue the possibility of getting better in all scenarios that we act, if it's related to export or the local market. When it comes to Brazil, We have to understand that it's not only what the Brazilian market offers as opportunities, but also the way that we, as company, we grasp these opportunities. BRF has constantly, through the commercial excellence of its teams, as well as the acknowledgement of its brands. We've been grasping these opportunities, right? The market finds a company that delivers what it sells.

A company, it delivers quality according to demand.

And we also cover like innovation aspects that fill out in a very clear way, an assertive way, the expectation of the consumer of having quality with practice, practicity. So I believe we are on the right track. We don't see like in a short term that I would... risk maybe talking about like the long term nothing that justifies the scenario because i will try to translate what uh miguel mentioned when it comes to numbers right regarding the fundamentals of the industry in brazil we see that even though we have an increase of around three percent We don't really predict a production growth that goes above 1.5%. In the United States, this growth won't go over 2%. Maybe in Europe, it won't go beyond 2%. Maybe the only exception would be China.

That might...

present a higher growth. But let's consider that 2024 was a retraction year. When it comes to swine, it's not very different. We work with a global growth of around 2% as well. So I don't think this would be enough to provoke like an offer unbalance, and eventually it will be converted in like changing prices or trying to reversion. About the margins, right, if you ask,

if we can ensure it. Obviously, we cannot.

We are part of a cycling industry, but we can say that VRF nowadays is much stronger, resilient, and competitiveness to navigate the different scenarios, as well as the more challenging scenarios. This is something that we can ensure.

Okay, thank you so much.

Our next question comes from Guilherme Padares from something there. Mr. Padares, the microphone is open.

Good morning, Miguel.

Good morning, Fabio. Leticia, thank you for taking my questions. Two questions here from our side. If you already commented very well about the question of cost of animal feed looking ahead, we were looking inside your demonstration. We saw in your statements, we have seen some advances in this second quarter I would like to hear when we think about others' costs in this environment of employment that is very low in Brazil, what can we expect given that we have some inflationary, inflation pressure in terms of salaries I would like to hear something in this sense and also hear about Enrique's questions. The product, we had a certain increase in expenditure if you could go through expenditure in this third quarter. And, Miguel, I would like to hear from you, given that we have all this experience with avian flu. I would like to get a little bit of your impression about the learnings that come from the operational standpoint to going through periods that, by any chance, obviously, we don't want to happen. But if this ever happens again, does it change anything in terms of operation for you so you can get ready for an event like that? having an inventory in other countries. I would like to hear a little bit now looking back and if there would have been anything different to be done that you could have prepared to deal with the situation if by any chance it happens again. Thank you. I'm going to start by your second question, then I'll hand it over to Fabio to answer the first one. Obviously, last year we had the episode of Newcastle disease in Rio Grande do Sul, an episode that was traumatic. Let's remember, you are Gaúcho from Rio Grande do Sul, a person from Rio Grande do Sul is Gaúcho, so we had... recently comes from the tragic process of the floods in Rio Grande do Sul that had been an extremely challenging not only from the human standpoint that really concerned us but also from the logistic and execution standpoint in that moment when we had a new castle Brazil was facing the situation that was uncertain, we didn't have the dimension exactly what the consequences would be, the outcomes would be of an episode that had been left behind for many years in the modern world, and the path that we trailed were completely unknown. The choice that we made as a country and as a company today shows to be correct and assertive. The path chosen was transparency and the way was done with competence. So the agricultural ministry made the communications timely. Also the animal, the world animal division provided all the information. acted and received the information timely, and we as a sector and association, MBPA, together with the MAPA, we had the perfect disclaimer of all the actions, all the events. This brought us two consequences, two outcomes. The first one, the most important, was high credibility. And credibility, once earned, has to be kept. avian flu now in May I think that the learnings from Newcastle came back and they were put on the table and recently and evidently credibility earned in the prior episode had an important role first because we had a fluid communication and we knew the communication channels with different countries Second, we as a company, I'm talking the case of BRF, it was also, we had the lessons learned and there we established a strategy that was preparing to have similar episodes, although in any moment for us it was placed any doubt about Brazil's biosecurity or the Brazilian production system. We truly believe and believe in the system still, and we have contingency plans that should be active. When the avian flu sets in on May 15th, we quickly, as a company, took a position of choosing options that we had been working in the past two years at 198 new permits that showed to be extremely... assertive for the moment that we were facing of the agent club so we were a company much more solid with very strong brands and internal market with commercial execution that was extremely assertive in the local market and in addition to exportations being more fluid. So when you have this possibility of brands like Sadia and Perdigon to be well executed in the local market, you can mitigate the effect, which is an impacting effect of the avian flu. I repeat, as I said in the prior question, still persists in two markets, China and Europe, extremely relevant. I would say that the good thing in our sector is that we always have the possibility of continued learning. And humility also tells us that we can do better. This is not a speech in the company. This is the practice. And I would say that we have three times a week here at BRF talking a little bit of the backstage experience. Three times a week we get together, we meet, and we discuss the aspects of avian flu with the perspective of learning and decision-making, and the decision-making is collective. In this company, there is not an individual level. We have a group working together to mitigate a challenging situation for the company and for the sector. And we, I would say that looking at this perspective with humility, we have navigated really well in this scenario. I would say, as I repeat, this is a very challenging scenario. I hand over to Fabio so he can answer the first question that you made. Good morning, Guilherme. I'm going to talk about the costs. As it was said, the cost of animal feed should provide a reduction of CPV in the second half of the year, very much because of origination. of the corn in the short harvests and prolonged on soybean meal. When we refer specifically to labor, the labor cost, we compare this For the half of the year with the prior half of the year, we see the correlation with inflation. This is also valid for goods and services. So the expectation is that full employment should place a challenge of a higher adjustment than the inflation. I don't know if it's going to be the case. I can't anticipate that. But nothing that would significantly change the representativeness of labor costs in regards to the total cost of sold product.

Miguel is going to add something.

I want to add, I wanted to say when I mentioned our work, our teamwork, I wanted to take advantage of your question to thank our 100,000 employees in all geographies. They have worked really hard so we could overcome the challenging episode of avian flu. When the avian flu was informed, we, in the following day, we executed the contingency plans that we had designed. A lot of work, a lot of effort and dedication and deliveries. So we are thankful to all of them. I'm going to close with the second half of the first question about expenditure. What I can tell you is that structurally at BRF we have expenditure equivalent to 15 points of the revenue. This hasn't changed and shouldn't change. What we have done spatially on the commercial side is to increase the sales force, sales people and promoters. This wouldn't affect productivity. On the opposite, when we analyze expenses in comparison to revenue, this should bring captures. We have six points of variable expenses. At the moment that we increase volumes, these nominal expenses, they increase. But structurally, SG&A's representation of revenue should continue its 15 points. This quarter, specifically, we have a one-off adjustment that we have highlighted in other operational results, which was the adhesion of renegotiation in the state of Minas Gerais. But excluding that is going to value to the 15 points that I have just mentioned.

Thank you, Miguel.

Thank you, Fabio. Great day.

Our next question comes from Lucas from Morgan Stanley. Please, your microphone is on. Good morning, everyone. Thank you so much for picking my question, Fabio Miguel. My first question has to do with the domestic market. The price and volume combination was very strong when it comes to the domestic division. It really called our attention. So if you could provide us with more details, what were some of the main highlights of the water, perhaps in the processed goods, maybe if you can see a big collaboration with Marfrig and the Hamburger Line, or if it was another processed line, that you've invested more in the last years. So if you could just provide us with a little bit more details, maybe the highlights of the processed goods category. And my second question, perhaps focusing more on the detail of what you mentioned, Fabio, about the storage, around 3%, but the production expectation is still on the 1.5% or 2%, so clearly we can see a loss between one stage and another. I would like to hear a little bit about what are you seeing in terms of supply or the industry performance, if it's connected to mortality or hatchability, So maybe a little bit more of perspective in terms of what we're seeing in terms of the supply. And how do you see this for next year? If you can see, like, improvement of the indicators, like something regarding the genetics companies, like a new line. So more detail considering this specific part here of supply in Brazil. Thank you so much. Lucas, we would like to take advantage, well, since Morpherga and BRF, when they started working together, a combination that starts very well, like iconic brands like Saidi and Ferdigão, as well as Basi combined with Cedia, and Perdigon combined with Montana. So the result, it's evident. So when we put this combination on the hands of the commercial teams, Marfrig and BRF, the excellence of commercial execution, and then you have a result that we see happening practically wise, and makes us very enthusiastic towards the future. because this combination, it's a combination that we've been using in the internal market, but we also started using Sadia as a B-friend in the international market. So we see this future scenario being unfolded. In a combined performance, it will represent gains without a shadow of a doubt.

We have plans of growing, of adding value.

This is something that we've been looking for by the controller orientation. In the sense of working with added value products, this is something that's suitable for BRF or Marfrig. We've been working a lot on that. Fabio, in the last... he mentioned the increase of our processed goods of our value-added products. This happened not only in Brazil, but in different geographies as well, like in Turkey, and at least it happens, considering the investments that we've made, as well as the construction of a new factory in Agenda. So, this is something that has been happening, it's going to be a constant practice, a company that looks at future opportunities and works for it to be concrete and concluded. Lucas, just to complement, and then I will also answer your second question according to the production. But I believe that in figures, Brazil's revenue grew 18% during this period versus the last year. So we have a combination of the two elements that you've mentioned. So the volume increased, the average prices as well advanced. I don't think we have only one explanation. We have all the precise goods portfolio performing very well in all the categories, and also the contribution of the in natura process, even though we don't have as much opportunities. We took some passive decisions of redirecting products due to the export restrictions. So when this is done in an adequate moment, we can perform prices in a very competitive way. Everything influenced like a very good development of the domestic market. The second question, obviously, right, we have a very specialized industry in genetics, so the continuous improvements work, they exist either for us to solve the equation problem or

like the conversion, the food conversion of poultry, as well as the swine industry.

This is something that will never end. It's applied science. What happens, we have an imbalance, right? So we see that the growth doesn't really translate into the production growth. So this should happen for a while. I cannot really precise how long, but maybe... we might see an opportunistic scenario like in 2025 and the beginning of 2026. Okay. That was very clear. Thank you.

Our next question from Tiago Bertolucci from Goldman Sachs. Bertolucci, please, your microphone is open. Hello, everybody. Good morning, everybody. Miguel, Fabio, it's always a pleasure to talk to you. I have one follow-up. It's somehow related to the avian flu topic. I don't want to be exhausting on this topic, but obviously, as everybody pondered so far, the surprising results for such a challenging scenario. And we understand that we have a lot of moving parts, so I wanted to explore particularly the topic of inventory formation properly. The company and the market in general chose for a strategy of preserving domestic demand and not throwing the exceeding production at once. And we noticed that at BRF, an increase of a little bit more than $1.5 billion of the inventory of finished product, which is natural for this moment. The question is more, what is the pay of releasing for this level of storage that we should have, that we should imagine for the second half of the year? And how dependent is this release or strategy of VRF product positioning today depends on an evolution, particularly from the trade with China. Thank you. with thiago we work here in the company with the philosophy of not keeping inventory without sales we have been repeating that we say or to produce we don't produce to sales so even in a continuous change sector like in the case of swines and poultry. So our idea as the markets reopen, we have today most of them reopened and I repeat, we still have European market and Chinese market too. I would say these two markets resume, the trend is to go back to inventory levels that are basically zero inventory without sale in the company. this doesn't mean that we are not going to have the care in the sense of not destroying value because you have today with the the company has conditions to make this movement and reduces inventory, we have an inventory that is not exorbitant. Along the next quarters, there is no chance of destroying, but even if I have to make an analysis, I think that we have, because of seasonality, great possibility of resuming at international market level the price dynamics that we had before so you see that happening in certain geographies already and we are paying a lot of attention to these movements BRF works here with the pricing system that allows us quickly to identify opportunities and over these opportunities we can act as it happened during the avian flu. One thing is to know what needs to be done, and the other thing is to see what can be done, and something else is to do what you saw happening. So in this quarter, we clearly had the example of that. We identified the opportunity and executed it. in time and weight destined of products without destroying value, either in the internal market or other destinations, 188 that had opened. Thiago, what I would like to add to Miguel's answer is just to remind it that there is a stock formation of celebration products that influences this picture that you report. So it is correct, the magnitude, the inventories are elevated very much because of important restrictions to exportation and the pace is to enjoy the best opportunities. So depending on market conditions, the speed of opening the original markets like China and the market in Europe. But we have already established all the targets so we can have the inventory normalized the fastest possible.

Is it clear?

Thank you, Miguel Fabio. Just an international follow-up. Excellent results. Given the moment we're going through, in spite of that, when we look at the bandwidth, we see an EBITDA margin that is negative in the quarter. In your remarks, you commented scenario that it's a little bit more tight in terms of supply and more focused on prepared product, processed products, mix and added value within the portfolio. I just wanted to understand how these two forces should have an impact in the P&L, particularly Banvit, in the perspective of six months helping us understand this location until the end of the year. Well, Thiago, I think that the context of the plant-based performance go through what we have influence on, but also go through what we don't. So, today we live in the region, excess of poultry offer, growth of the production of 12% for the half of the year for half of the year, and this puts pressure on poultry prices. A little bit of 70 more, 70% that will be sold in Turkey. We are talking about chilled poultry, and we have, as possible, we have increased our added value products offer. That is over 25%. So the company's strategy is to continue increasing this added value products offer, much more resilient to this offer shocks. Recently, we have adopted an adjustment of slaughter in the region to decrease a little bit our offer. our own offer so this because the variable cost part is higher in this and the platform in Turkey than it is in the platform in Brazil so we relieve the cost structure to influence positively price reaction so we already have an action plan we understand that the performance in this region is going to improve gradually This is not going to happen overnight, but we see an improvement in the second half of the year when you compare to the performance in the first half of the year. On the other hand, Tiago, we also have been doing the work in the past few months. in a way to integrate better the Turkish platform with the Brazilian operation, both for the agribusiness and industry, as you could call the Turkey Plus, like BRF Plus for Turkey. And we are very confident that there are many opportunities to apply knowledge and the way we work both in agro and in industry. And there are key platforms as you have commercial different aspects for the internal and exportation markets. The company as a whole has looked at this more challenging moment for bandwidth operation, and we're really confident that the foundations of these operations can recover as short as possible, that we could indicate that any analysis, more surface analysis could indicate for that. Thank you, and Fabio and Miguel, congratulations for the results again.

The Q&A session as well as BRF teleconference is over. I would like to thank everyone's participation and have a wonderful day.