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Institutional Presentation
September 2015
2
2007 2008 2009 2010 2011 2012 2013 2014
• Marfrig IPO
• Strong global expansion
• Growth based on acquisitions
• 3 Main Acquisitions
• Moy Park (2008)
• Seara (2009)
• Keystone (2010)
• Diversification of proteins
• Establishment of a global production,
processing and distribution platform of
animal protein
• High leverage
Footprint Turnaround
• Integration of acquired operations
• Capture of synergies
• Optimization of organizational structure
• Sale of Seara and Zenda
• “Focus to Win” Strategic Plan
• “Productivity agenda” Project
• Operational improvements of BU’s
Chronology
Strategic Overview
3V
ALU
E
LE
VE
RS Continuous
operational improvement and
greater operational cash flow generation
Capital structure optimization and cost
of debt reduction
Profitable growth and global leadership in
food service
FOCUS TO WIN
STA
GE
IN
IT
IA
TIV
ES
TA
KEN
TOTAL SUPPORT FROM THE CONTROLLING SHAREHOLDERS
GR
EA
TER
VA
LU
E F
OR
S
HA
REH
OLD
ER
S
Productivity Agenda
Marfrig Beef SG&A
Operational Capacity Rationality
Capacity Utilization
Beef Brasil Sales Mix Improvement New synergies
Moy Park sale
Liability Management
Prioritization of organic grow opportunities at Marfrig Beef and Keystone
2Q14 2Q15
1Q15 2Q15 1H14 1H15
2T14 2T15 1H14 1H15
Food Service Share in Total Revenues
Marfrig is one of the largest and most diversified global food companies
4
12
30,600
46
100
Continued Operations| Profile
World’s 3rd largest beef producer and one of South America’s largest
lamb suppliers
Diversified geographic presence in animal protein, serving the Retail and Food Service
Channels
Presence incountries in the Americas, Europe, Asia and Oceania
One of the world’s largest providers of processed food to
major QSRsServing global retail and food chains in overcountries
Over
employees
commercial production anddistribution units
Andrew Murchie
Marfrig Beef Brazil
Marcelo Secco
Marfrig BeefSouthern
Cone
Corporate Structure
Martin SeccoCEO - Marfrig Global Foods
CEOs - Business Units
Ricardo FlorenceVP – Finance - CFO
Marcelo Di LorenzoVP – Strategic Planning & IRO
Heraldo GeresVP – Legal & HR
Marcos MolinaChairman of the Board
CorporateVice-Presidents
Frank Ravndal
KeystoneFoods
5
Audit CommitteeMarcelo Correa
Finance CommitteeCarlos Langoni
HR and Corporate Governance Committee
Antonio Maciel
Keystone Foods
Keystone | Profile
7
Diversified food company focused on value-added protein to theFood Service industry (US/APMEA)
- Focus on QSR
- Poultry, beef, pork, fish and other (bakery, etc.)
Key partner of several leading brands
- 40 year relationship with McDonald’s
- Strategic supplier: Wendy’s, Subway, Iceland Foods, Campbell’s amongst other
Poultry vertical integration in the U.S. covering 70%+ of thesupply, largely through contract growers
- Global slaughtering capacity of over 4.5 million head per week
2Q15 Sales Breakdown
38% 62%
Key Account / Others McDonald´s
Keystone | Profile
8
Revenue Breakdown – 2Q15
11 units
6,300 employees
196 million birds/year
400,000 tons of processed food/year
72% 28% 71% 24% 5%
% by Channel/ Market % by Protein
Production Structure
United States
7 units
5,100 employees
40 million birds/year
150,000 tons of processed food/year
APMEA
USA
APMEA
Further processed poultry
Further processed beef
Other
Keystone | Strategic Goals
9
Leverage Global Poultry
Demand
Key Account Penetration
Geographic Expansion
Key Accounts | Accelerate Growth and Margin
10
Significant business with global brand playersin the QSR, Foodservice, Retail and Industrial channels
Key Account Further Processing and Value Added Sales (US$ millions)
U.S. APMEA
Select
Key
Accounts
CAGR 2009-14 +16.4%
225 232 273373
458 485
269
39 4954
57
7378
48
2009 2010 2011 2012 2013 2014 1S15
264 281327
430
531563
317
1H15
Asia | Differentiated Positioning
11
Keystone is well positioned to capture growth of the region
Slaughtering Processing Others
7 production units
20+ presented in the region
Food Safety acknowledgement in the industry
... with operations in the high-growth markets
Global Fast Food Market
2013 – 2018 CAGR %
도니버거숙대점-Doni Burger11.6%
10.3%
7.4%
7.2%
6.2%
4.9%
4.4%
1.5%
Middle East & Africa
Eastern Europe
Asia-Pacific
Latin America
Global
North America
Western Europe
Australasia
Source: Euromonitor International, November 2014
2004 2014 1H20115
China
Malaysia
Tailand
South Korea
Australia
109
344382
1H15
CAGR 2004-1412%
Revenues in USD Million
Local QSR
QSR Global
Food Service
Local Food Service
Retail
Exports
12
China
Complete country coverage
Global QSR, local QSR, Food Service, Retail
Thailand
Export-oriented, Japan, UK, EU, Singapore
Retail, Food Service, QSR
South Korea
Domestic focus
Global QSR, local food service
Malaysia
Malaysia, Middle East, Singapore
Retail & export, Halal certification
Australia
Beef focus
Global QSR
Asia | Differentiated Positioning
Keystone | Financial Projections
13
AdjustedEBITDA Margin
2014A 2018 Target
7.4%
Net SalesR$ 5.9 bn
7.5% - 9.0%CAGR 14-18
2013A
6.4%
R$ 5.3 bn
8.0% - 9.0%
Note: Values in R$ million, except when stated otherwise Projections considered FX rate of R$/US$ = 2.70 in 2015 and flat onwards, no projected inflation Projected Adjusted EBITDA does not consider non-recurring items
Marfrig Beef
Marfrig Beef | Profile
15
Geographic Footprint
Slaughtering
Processed food
Distribution Center
Other
Beef and lamb-based meatpacker with wide footprintin South America
- Revenues of R$9.7 billion (46% of Marfrig Group) in 2014
- Vast brand portfolio, with increasing export focus
3rd largest beef producer in the world, 2nd in Brazil and1st in Uruguay
Unique South American footprint, with +20% ofslaughtering coming from non-Brazilian plants
- 22 production sites and 5 distribution centers in Brazil, Argentina,Uruguay and Chile
- Unique positioning in the South American beef region, enhanceslocal and international competitiveness and sanitary risk control
Marfrig Beef | Profile
16
Revenue Breakdown – 2Q15
17 units
15,400 employees
2.5 million heads of
cattle/year
Brazil
Uruguai/Chile
Argentina
76% 18% 6%
Fresh Beef
Processed
Lamb, Leather and Other
76% 10% 14%
% by Channel/ Market % by Protein
Production Structure
Brazil Uruguay/Chile Argentina
8 units
3,300 employees830 mil thousand heads of cattle/year2.1 million heads oflamb/year
2 units
900 employees
340 thousand heads
of cattle/year
Marfrig Beef | Strategic Goals
17
Grow volume and average
prices
Continuous focus on cash
generation
Productivity Agenda
Maximize South
America’s exporting platform
Marfrig Beef| Productivity Agenda
18
Use of benchmarks to improve efficiency in alloperations
Adoption of a rigorous budget process with diminishingcost targets:
Maintenance;
Overtime;
Telecom;
Utilities;
Traveling expenses;
IT;
General expenses and other costs.
Use of cheaper energy sources and reduction in theloss of temperature in the cold chambers
Improvement of performance level and optimizationthe production units, aligning with internal benchmarks
Productivity Agenda’s Conceptual Savings Curve and Actual/Projected Savings
Initial Level
After first improvement
cycle
Benchmark
Costs
Time
2H14R$30m
2015R$50m to R$60m
Expected additional savings between R$50.0 and R$60.0 million in 2015
2015 Actual Savings
1Q15 2Q15 3Q15 4Q15
R$ 13m - R$23mR$ 37m
Food service
Strategy to optimize the sales team with aview to boost productivity implemented
Improvements in service quality level in allsegments (OTIF, on-time delivery, etc.)
Marfrig Beef | Domestic Market
19
Growth in Revenue per Sales Rep
(R$ million/salesman)
Retail Focus to grow volume on small/medium
retail channel
Partnership with large retailers inportioned cuts products
New strategically located DCs andcommercial partnerships inNorth/Northeast regions
Innovation and brand managementdedicated to higher-margin products
14.917.6
25.2
14.7
2012 2013 2014 1S2015
Marfrig Beef | Brazil Exports
20
The opening of new markets promotes growth in exports forBrazilian beef
Share of ExportsMarfrig Beef Brazil (R$ million and % on revenues)
2Q15 Export destinationsMarfrig Beef Brazil (% on revenues)
31%
7%
15%31%
7%
535
766 955
749 901
36% 41% 44% 41% 46%
2Q13 2Q14 4Q14 1Q15 2Q15
Marfrig Beef | Brazil Exports
21
The recent opening of USA and China to Brazilian Beef brings a significant opportunity
Main import marketsImport Volume(‘000 ton/ year)
Share of world imports Restrictions on Brazil
USA 1,027 13.7% Newly opened
Russia 1,020 13.6% Open
Japan 781 10.4% Negotiation
Hong Kong 550 7.3% Open
China 475 6.3% Newly opened
South Korea 398 5.3% Closed
E.U 350 4.7% Open / Hilton
Canada 315 4.2% Closed
Mexico 235 3.1% Closed
Egypt 230 3.1% Open
Venezuela 225 3.0% Open
2Q15 Export destinationsMarfrig Beef Uruguay (% on revenues)
24%
2%
34%
2%
22%
Marfrig Beef | Uruguay Exports
22
Uruguay has access to the mainbeef import markets
Share of ExportsMarfrig Beef Uruguay (R$ million and % on revenues)
Main import markets
Status for Uruguay exports
EUA Open
Russia Open
Japan Negotiation
Hong Kong Open
China Open
U.E. Open
South Korea Open
Venezuela Open
Canada Open
Chile Open
Mexico Open
6%
207 286 265 324 283
58%66%
59% 64% 61%
2Q13 2Q14 4Q14 1Q15 2Q15
Inventory Management
Improvements in Sales & Operations (S&OP) and demand planning
More efficient logistics on redesign of DC network (new DCs in Itupeva and Santo André and 3 more in Brazil)
Optimization of product mix, simplifying the sales strategy
Commercial Terms and Tax Credits
Reduction in cash conversion cycle of 8-9 days in the beef operation, improving Marfrig Global’s in 4-5 days
Focus on monetizing tax credits more efficiently
23
Total SKUs Beef Brazil
Marfrig Beef| Focus on Cash Generation
2013 2014 2015
>30k
5k <3k
Marfrig Beef | Marfrig+
24
Innovative program to foster significant improvement in beef quality
Use of technology and elite cattle on an industrial scale
Reproduction of embryos with high genetic quality to produce hybrid males
Productivity, quality and profitability gains throughout the chain
Advantages for Marfrig:
Slaughter predictability, better meat quantity and quality, guaranteed origin,carcass standardization, sustainability
In 2013Beef Production
(TEC)Cattle (head)
Slaughter (head)
Herd Yield Ratio (%)
Carcass Weight (kg)
USA 11.7 mn 88.3 mn 33.4 mn 37% 350.8
Brazil 10.2 mn 209.1 mn 43.0 mn 20% 237.3
Marfrig Beef | Financial Projections
25
AdjustedEBITDA Margin
2014A 2018 Target
9.7%
Net Sales R$ 9.7 bn7.0% - 9.0%
CAGR 14-18
2013A
9.2%
R$ 8.7 bn
8.0% - 10.0%
Note: Values in R$ million, except when stated otherwise Projections considered FX rate of R$/US$ = 2,70 in 2015 and flat onwards, no projected inflation Projected Adjusted EBITDA does not consider non-recurring items
Financial Results
2Q15
294 415
595 759
7,8%8,8%
8,2% 8,3%
2T14 2T15 1S14 1S15
3.789 4.728
7.265
9.099
2T14 2T15 1S14 1S15
Continuing Operations | Financial Performance
27
Net Revenue (R$ million)
Adjusted EBITDA and Margin(R$ million and %)
25%
25%
41%
27%
Revenue Breakdown
45%
42%
13%
Business
Keystone
Beef Brasil
Beef Intr. Ops.
63%
22%
15%
Currency
USD
BRL
Other
2Q14 2Q15 6M14 6M15
2Q14 2Q15 6M14 6M15
51%
41%
8%
Product
Other
Fresh
Processed
Net Income
28
Net Income and Net Margin(R$ million)
The capture of operating efficiency gains and the lower effect from exchange variation on the financial result contributed to reductions in the net loss of 99% compared to 1Q15 and 89% compared to 2Q14.
(55)(6)
(152)
(577)-1,1%
-0,1%
-1,5%
-4,7%
2T14 2T15 1S14 1S152Q14 2Q15 6M14 6M15
36 53
83 99
5,7%
7,6%6,8% 7,3%
2T14 2T15 1S14 1S152Q14 2Q15 6M14 6M15
45 54
92 102
7,1%7,7% 7,5% 7,5%
2T14 2T15 1S14 1S152Q14 2Q15 6M14 6M15
8
17
26
32
1,3%2,4% 2,1% 2,4%
2T14 2T15 1S14 1S152Q14 2Q15 6M14 6M15
634 698
1.223 1.359
2T14 2T15 1S14 1S152Q14 2Q15 6M14 6M15
Keystone | 2Q15 Highlights
29
Net Revenue (USD million)
SG&A and SG&A/Net Revenue(USD million and %)
Gross Profit and Gross Margin(USD million and %)
Adjusted EBITDA and Margin(USD million and %)
10%
11%
47%
18%
20%
11%
109%
25%
2T14 2T152Q14 2Q15
211 226
3747
2T14 2T152Q14 2Q15
471 500
163198
2T14 2T15
EUA APMEA
2Q14 2Q15
Keystone | Operating Performance
30
Total Volume (‘000 ton)
Net Revenue(USD million)
25% 22%
7% 6%
Net Revenue Key Accounts (1)
(USD million)
19%
(1) Processed, value-added products
137
163
10%
634
698
10%
248272
USA
194 250
384 454
8,1%
9,7%8,6% 9,0%
2T14 2T15 1S14 1S15
239195
450
382
10,0%
7,6%10,1%
7,6%
2T14 2T15 1S14 1S15
391 398
754 743
16,5%15,4% 16,9% 14,7%
2T14 2T15 1S14 1S15
Marfrig Beef | 2Q15 Highlights
31
Net Revenue (R$ million)
SG&A and SG&A/Net Revenue(R$ million and %)
Gross Profit and Gross Margin(R$ million and %)
Adjusted EBITDA and Margin(R$ million and %)
29%
18%
-2%2%
-15%
-18%
2.375 2.581
4.459
5.044
2T14 2T15 1S14 1S15
9%
13%
2Q14 2Q15 6M14 6M15
2Q14 2Q15 6M14 6M15
2Q14 2Q15 6M14 6M15
2Q14 2Q15 6M14 6M15
32
Marfrig Beef | Operating Performance
Share of Net Revenue(%)
By Country
By Product
By Market
79% 76%
18% 18%3% 6%
2T14 2T15
BRL
URG/CHL
ARG
74% 75%
8% 10%18% 15%
2T14 2T15
Carne in natura
Processados
Ovinos, Couro,Outros
45% 48%
55% 52%
2T14 2T15
Exportação
MercadoInterno
Net Revenue Brazil (R$ million)
Net Revenue Int’l Operations(R$ million)
766 901
1.0991.055
2T14 2T15
Exportação
MercadoInterno
301 329
210296
2T14 2T15
Exportação
MercadoInterno
1.8651.956
625
511
-4%
18%
5%
41%
9%
22%
2Q14 2Q15
2Q14 2Q15
2Q14 2Q15
2Q14 2Q15
2Q14 2Q15
Fresh meat
processed
Lamb, leather and others
Domestic
Exports
Domestic
Exports
Domestic
Exports
33
Marfrig Beef | Operating Performance
Slaughter Volume(‘000 head)
Total Brazil
Capacity Utilization(% of authorized capacity in operation)
Temporary closure of 5 of the 15 slaughtering plants, or approximately 29% of the total authorized capacity in operation.
The objective is to achieve capacity utilization of 90-95%.
Conclusion of the restructuring of production units.
1.562 1.555
1S14 1S15
1.220 1.206
1S14 1S15
-0.5% -1.1%
66,9%
82,9%
1T15 2T15
65,0%
74,9%
1S14 1S15
6M14 6M15 6M14 6M15
6M14 6M151Q15 2Q15
353 373
2T14 2T15
Beef Brasil | Domestic Market
34
Food Service share in TotalDomestic Revenue(R$ million)
1.098 1.055
6%
Others
Food Service
Fresh and Processed Meat
Net Revenue (R$ million)
Volume('000 ton)
Average Price(R$/Kg)
79 70 70
2T14 1T15 2T15
-11%
861852
873
2T14 1T15 2T15
10,9512,14 12,50
2T14 1T15 2T15
14%
1%
2Q14 2Q15
2Q14 1Q15 2Q15
2Q14 1Q15 2Q15
2Q14 1Q15 2Q15
343
261293
2T14 1T15 2T15
73
65
78
2T14 1T15 2T15
Exports | Beef Brasil
35
Market Share Fresh Meat(% Volume (1))
Export Volume('000 ton)
Share of Exports(% Beef Brasil Revenue )
Export Revenue(USD million)
7%
-14%
41% 41%
46%
2T14 1T15 2T15
19.0%19.9%
20.6%19.8%
21.6%
14,0%
15,0%
16,0%
17,0%
18,0%
19,0%
20,0%
21,0%
22,0%
0
200
400
600
800
2T14 3T14 4T14 1T15 2T15
(1) Secex
2Q14 1Q15 2Q15
2Q14 1Q15 2Q152Q14 1Q15 2Q15
2Q14 3Q14 4Q14 1Q15 2Q15
Debt
36
R$ millionProforma Leverage
Ratio of 3.8x
2,564
450 1,066
246 196 677 757
3,0142,392
2,993
145
6,317
Cash 3Q15 4Q15 1Q16 2Q16 2016 2017 2018 2019 2020 2021
Short Term R$ 2.0 bn
37
Cont. Operations | Debt Maturity Schedule
R$ million
(1) Cash to be received from the sale of Moy Park.
3,753(1)
Considering the Moy Park transaction, leverage ratio would be 3.8x.
The operating result is yet to capture the weaker BRL in the last 12 months.
The average exchange rate in the last 12 months was R$2.69/US$, which is still well below the closing rate of R$3.10/US$ this quarter.
38
*Current Liquidity = Current Assets/Current Liabilities.
** Excludes interest paid on mandatorily convertible debentures.
.
Financial Ratios
Ratios | ex-Moy Park 1Q15 2Q15
Leverage:
Net Debt / EBITDA LTM (XFxv) 3.36x 2.77x
Net Debt / EBITDA LTM 6.20x 4.77x
Proforma Net Debt / EBITDA LTM N/A 3.79x
Proforma Net Debt / Annualized Adj.
EBITDAN/A 3.36x
Net Debt / Total Assets 0.49x 0.41x
Liquidity:
Cash and Equiv./Short-Term Debt 1.23x 1.36x
Current Liquidity* 1.59x 1.57x
Duration and Cost:
Duration (months) 47 43
Avg. Cost ** (p.a.) 7.7% 8.2%
Debt Breakdown:
Short-Term Debt 16.2% 16.4%
Long-term debt 83.8% 83.6%
Debt in BRL 6.5% 8.5%
Debt in other currencies 93.5% 91.5%
Bonds & Rating
39
Maturity CurrencyNotion(mm)
Cupom
2016 USD 183.8 9.625%
2017 USD 155.3 9.875%
2018 USD 724.8 8.375%
2019 USD 850.0 6.785%
2020 USD 775.0 9.500%
2021 USD 51.3 11.25%
Issued Bonds Rating
AgencyNational
ScaleIternacional
ScalePerspective
S&P br BBB B+ Stable
FitchRatings BBB+bra B+ Stable
Moody´s - B2 Stable
390
300
9046 136
FC LivreIncl. Retap
RecursosRetap
FC Op.Cont.
FC MoyPark
FC LivreTotal
40
Free Cash Flow BridgeR$ million
Free CF Proceeds CF Cont. CF Moy Total incl. Retap Bond Retap Ops. Park Free CF
Closing Remarks
Closing Remarks
We generated strong free cash flow, transformed Marfrig Beef Brazil andsigned an agreement to sell Moy Park.
The strategic decision to divest Moy Park leaves Marfrig with a stronger focuson the foodservice channel, which offers excellent opportunities for growth inthe key markets of Asia and the United States.
This transaction significantly reduces Marfrig’s net debt, which ended thequarter with a ratio of Pro-Forma Net Debt to EBITDA from ContinuingOperations of 3.8x in 2Q15.
Cash generation in the quarter confirms our determination and financialdiscipline, and was the result of our pursuit of increased operating efficiencyand better working capital management.
42
Closing Remarks
Marfrig Beef posted margin of 9.7%, driven by greater efficiency, improvedsales mix and continuous improvement in the management of costs andexpenses. The second-quarter results only partially reflect these changes,since many are still in the implementation phase.
The opening up of the U.S. and Chinese markets to Brazilian beef importsshould generate volume growth in the medium term. We have already begunshipments to China and hope to make our first shipments to the United Statesbefore year-end.
Marfrig Beef’s international operations continue to make a positive contributionto the division's results.
43
Closing Remarks
Keystone continues to contribute to free cash flow, posting accelerated growthand benefitting from its impeccable reputation for customer service andexecution excellence in its industrial operations.
Strategically, Marfrig's priorities are:
expanding Keystone's food service business in both Asia and the United States;
optimizing production capacity at Marfrig Beef;
growing beef exports from Brazil; and
strengthening the capital structure and increasing free cash flow.
44
This material is a presentation of general information about Marfrig GlobalFoods S.A. and its consolidated subsidiaries (jointly the “Corporation”) on thedate hereof. The information is presented in summary form and does notpurport to be complete.
No representation or warranty, either expressed or implied, is made regardingthe accuracy or scope of the information herein. Neither the Company nor anyof its affiliated companies, consultants or representatives undertake anyresponsibility for any losses or damages arising from any of the informationpresented or contained in this presentation. The information contained in thispresentation is up to date as of June 30, 2015, and, unless stated otherwise, issubject to change without prior notice. Neither the Corporation nor any of itsaffiliated companies, consultants or representatives have signed anycommitment to update such information after the date hereof. Thispresentation should not be construed as a legal, tax or investmentrecommendation or any other type of advice.
The data contained herein were obtained from various external sources andthe Corporation has not verified said data through any independent source.Therefore, the Corporation makes no warranties as to the accuracy orcompleteness of such data, which involve risks and uncertainties and aresubject to change based on various factors.
This presentation includes forward-looking statements. Such statements donot constitute historical fact and reflect the beliefs and expectations of theCorporation’s management. The words “anticipates,” “hopes,” “expects,”“estimates,” “intends,” “projects,” “plans,” “predicts,” “projects,” “aims” andother similar expressions are used to identify such statements.
Although the Corporation believes that the expectations and assumptionsreflected by these forward-looking statements are reasonable and based onthe information currently available to its management, it cannot guaranteeresults or future events. Such forward-looking statements should beconsidered with caution, since actual results may differ materially from thoseexpressed or implied by such statements. Securities are prohibited from beingoffered or sold in the United States unless they are registered or exempt fromregistration in accordance with the U.S. Securities Act of 1933, as amended(“Securities Act”). Any future offering of securities must be made exclusivelythrough an offering memorandum. This presentation does not constitute anoffer, invitation or solicitation to subscribe or acquire any securities, and nopart of this presentation nor any information or statement contained hereinshould be used as the basis for or considered in connection with any contractor commitment of any nature. Any decision to buy securities in any offeringconducted by the Corporation should be based solely on the informationcontained in the offering documents, which may be published or distributedopportunely in connection with any security offering conducted by theCompany, depending on the case.
Disclaimer
IR Contacts
Website
www.marfrig.com.br/ri
Address
Avenida
Chedid Jafet, 222
Bloco A 5º andar -
São Paulo - SP SP: +55 (11) 3792-8650
Telephone
@