Marcos Antonio Molina - Chairman Martin Secco Arias - CEO Frank Ravndal - CEO-Keystone Division Eduardo Miron - Global IRO and CFO

Teo Lasarte - Insight Investment

Good morning, everyone. First of all, I would like to thank the Marfrig’s team for the 2017 results and achievements.

2017 was a challenging year to the sector in Brazil, but we were able to demonstrate our flexibility, agility and positive while growing quickly with operational efficiency. Following the growth and supply as well as the growing demand for our products by our customers, consolidating our position and brand in the market.

In the fourth quarter, we're able to prove the point of our asset and teams and both are reflected in our results. Based on that, this demand and supply, we haven't backed this in organic growth, adding capacity to our production globally.

For 2018, we are estimated to our leverage target of 2.5 times net debt to EBITDA which is non-negligible and crucial for our business. Our view is that 2018 will be again another challenging year but with significant opportunities.

We are pretty sure that we are all prepared for the year which is in front of us. Thank you again.

I'd like to pass the word to Mr. Martin.

Thank you, Marcos. Good morning.

I want to start by thanking everyone for participating in another earnings conference call of Marfrig Global Foods. Today, we will be commenting on the results for the fourth quarter and fiscal year 2017.

I would like to apologize that I am not actually present in the same local that the rest of the team. I need to leave San Paolo yesterday for personal reason and I would like to apologize, if you have some technical problems on the line.

With the on the call to share with you all the reports and information will be the Frank Ravndal the COO of Keystone Division; Eduardo Miron, our Global IRO and CFO. Before commenting on the fourth quarter results, I want to give a brief retrospective of 2017.

We began the year with an important mark in January. We carry out our mandatory conversion of debentures, which is an important step in our liability management process.

With the global economy is still recovering, we faced a turbulent political and economic scenario in Brazil. And specifically in this beef industry, we were affected by the exogenous factor and related to the market fundamental.

In the first half of the year, however, this challenging scenario also highlight the opportunity arising from the already expect positive phase of the cattle cycle in Brazil, which is one of the catalyst of our strategy to adjust our production footprint and the distribution, which stage our recurring growth in the second half. At the Keystone Division, for the first year of the 2021 strategic plan and we were delighted with another record result.

In anticipation to a possible question about Keystone sale participation as you know, we cannot give in too much detail, but it remained an alternative for us. The sale of Keystone stake is crucial to our deleveraging plan and reaching the 2.5 target in the end of 2018.

Again, our commitment to the deleveraging is now is non-negotiable and we are focused on it. Let’s go to Slide number 3.

The last quarter of the year was marked by the good performer of the global economy. In this industry, we observed firm demand and better margin in relation to the same quarter of 2016.

The Beef Division continues its plan to reopen plans which gradually increased the Brazilian operation slaughtering capacity to around 300,000 heads per month, the volume reached in December. This support grows in the division total sales volume of 28% while fresh beef export grew by 34%.

In regard to the Keystone Division despite the more rigorous winter in North America, we changed up weighting on store traffic and demand in the quarter, continued to deliver solid results. These results were also influenced by the startup of the new plant in Thailand, which is in the ramp up phase.

In other words, we’re having third all the associated fixed cost but haven’t yet to reach full cash generation capacity. Another highlight was the Company decision to participate in the tax amnesty program known as PERT.

This finally allowed us to resolve all pending figures of tax claim. Please let’s go to Page number 4.

The last quarter of the year was marked by the volume increased due to the continued ramp up of the plant we open on the third quarter. With nominal capacity returning to the level of 2014 which is before the capacity closure due to the negative freight of capital cycle.

The average of the capacity utilization rate of the Brazilian operation reached 96%, demonstrating the improvement in operating efficiency between periods, net revenue accompanying the expansion in capacity to BRL3 billion growing a 10% on the fourth quarter of 2016. The highlights were the higher volume due to the plant we open, higher prices in U.S.

dollar, which offset a lower domestic prices by the stronger Brazilian real. In the fourth quarter, fresh beef sales volume in the domestic market grew 27% year-over-year with this performance playing by the higher production and the strong demand even it below the initial expectation for the quarter.

The highlight was a higher share of the Montana brand in total domestic sales 53% compared to 49% on the fourth quarter. Just to remember that in the local market, we have a lot of product that is on brand like leather and some purse.

For that, this increase is a very good performer for the sales peak. Meanwhile, fresh beef export grow 34% with Asia remain the main destination accounting 51% of the total export.

Know that even during the ramp up process, export registered a strong growth reflecting the Company capacity to optimize the production footprint in making sale from each plant already in operation to the export market while the recently open plants which lack the necessary certification direct the production to the Brazilian market. The export revenues were 47% of the total division sales versus 43% in the previous year.

The Beef Division ended the quarter with adjusted EBITDA of BRL262 million, increasing 67% on the fourth quarter of 2016. The result is explained by the registering both local and export market and by the higher volume with consequent operational efficiency gains due to the increasing the capacity utilization.

I will pass now the call to Frank who will comment on the results of Keystone Division.

Thank you, Martin. Good morning everyone.

Keystone had a solid finish to what ended up being a record year in 2017. Adjusted EBITDA for the fourth quarter was $66 million and the adjusted EBITDA margin was 9.4%.

On a year-over-year basis, adjusted EBITDA was down 4% and the adjusted EBITDA margin decreased 27 basis points. It's important to note that the fourth quarter of 2016 as a basis for comparison was an exceptional quarter for several reasons.

One factor was an extra week of results in the U.S. segment to the U.S.

accounting procedures and another factor was strong results as the poultry markets recovered from avian influenza outbreaks earlier in 2016. During the past quarter, we continued to experience strong customer demand and to operate at high levels of capacity utilization.

In fact, we leverage manufacturing partners to meet demand that exceeded our capacity for certain products. In parallel, we began to ramp new capabilities and expanded capacity which will allow us to better meet the dynamic needs of our customers.

The food service channel was particularly strong during the quarter as some of the leading QSR brands, which are Keystone's biggest customers, are significantly outperforming their peer group. These QSRs are increasing both store traffic and average check size through value promotions and by adopting new technologies and approaches like home delivery.

Let's turn to the slide and take a look at the numbers. Please remember that all financial information that is presented by Keystone Foods is presented in U.S.

dollars. First in the lower left corner of the slide, let's take a look at sales volume.

Volume reached 289,000 metric tons in the fourth quarter, a 5% decrease on a consolidated basis when compared to the same period last year. However, if we look at the historical quarterly volume, the fourth quarter of 2017 was the second highest quarterly volume in Keystone’s history.

In the U.S., we saw a strong volume growth of 4% in the food service channel, which is more than offset by decreases in the retail and convenience and industrial channels. The increase in food service was driven by the value, technology and innovation initiatives launched by the several of the leading QSR brands.

The decreases in retail and convenience and industrial or for the most part strategic decisions made by the Keystone to focus limited available capacity and higher value products and prioritize the more favorable product mix. In the case of the industrial channel, the decrease was the result of the final period of transition from one large industrial customer to newer customer.

During the quarter, one of these newer customers experienced operational disruptions, which stands in demand in the quarter. The shift in the newer customers in this channel represents a higher overall value opportunity for us with less seasonality.

In APMEA, volume increased 3% driven by strong food service growth partially offset by a modest volume decrease in retail and convenience. The increase in food service was driven by the ongoing success of the large QSR brands and expanding their business in the high growth global markets for Keystone operation.

With respect to revenue now on the upper left corner of the slide, the consolidated net revenue for the quarter was 705 million a decrease of 1% over the same period in 2016. Revenue decreased 4% in the U.S.

driven by the volume decrease but partly offset by higher pricing associated with higher value products as well as the past through of higher raw material input cost. In APMEA, revenue grew by over 6% driven by volume increases, price improvements and foreign exchange.

Now moving to the right side of the page, adjusted EBITDA was $66 million and the adjusted EBITDA margin was 9.4% down 4% and 27 basis points respectively from the fourth quarter 2016. Beyond the basis for comparison issue, which I have already mentioned, there was some operational disruption that impacted profitability during the quarter.

In the U.S., there were industry wide disruptions throughout the supply chain caused by hurricanes and unseasonably cold weather. Additionally, Keystone had some downtime associated with certain production modifications which will improve operational flexibility and driver greater efficiency in the future.

In APMEA, there was downtime associated with the ramp up of s new production line in Malaysia as well as a new production facility in Thailand. Commodity pricing also had an impact during the quarter.

In both the U.S. and APMEA, an increase in raw meat pricing impacted profitability so in many cases we were able to pass-through these higher input cost.

Feed pricing continues to be favorable -- continues to be favorable in the quarter. Turning to SG&A, it has historically been trending around 2.2% of sales.

During the fourth quarter of 2017, SG&A was approximately 1.6% of sales as a result of certain corporate adjustments. SG&A for the full year 2017 was in line with historical levels and we would anticipate that being the case in 2018 as well.

Reflecting on the record full year in 2017, adjusted EBITDA increased 21 million or 8% to 282 million and the adjusted EBITDA margin increased 44 basis points to 10.1%. We continue to deliver on the core objectives of our strategy 2021 plan including growing volume with exciting core customers, establishing Keystone as the partner of choice with new customers across multiple channels and driving towards a higher value product mix.

2017 was the first year of our longer term strategy 2021 initiative, and we executed well during the year and continue to build the solid foundation for future performance. We have invested a considerable amount of CapEx into the growth of the business including new capacity in Malaysia and a new plan in Thailand and the new capabilities including fresh beefs in the U.S., and we will continue to invest an additional capacity and capabilities over the next few years to capitalize on the significant commercial opportunities we have in front of us.

Now I'll pass the call to Eduardo.

Thank you, Frank. Going to Slide number 6, I'll comment on Marfrig's consolidated results.

For 2018, we -- in the fourth quarter of 2017, Marfrig's consolidated net results -- net revenue was BRL5.3 billion, growing 8% on the prior year quarter. The Beef Division supported by higher production volume was the main responsible for the results.

And at the Keystone Division, the highlight was the 6% growth in revenue from APMEA region namely Malaysia, Australia and China. Sales volumes came to 641,000 tons, 11% higher than in the fourth quarter of 2016, once again driven by the Beef Division which accounted for 55% of this total from 47% in the previous year.

Consolidated adjusted EBITDA grew by 24% to BRL493 million while EBITDA margin stood at 9.3% expanding 120 basis points from the fourth quarter of 2016 basically reflecting the margin gains at the Beef Division which exceeded 120 basis points as well. Let's turn to Slide number 7.

This slide slows Marfrig's key financial indicators. As you can see at the top of the chart, Marfrig excluding the non-recurring effect from the tax plan called PERT at the end of the year with the leverage ratio of 4.55 times.

If we take annualized adjusted EBITDA which we believe is the indicator that that reflects the current footprint of the Beef Division, the leverage ratio was 3.94 times. On semi basis, the leverage ratio increased from the third quarter well stood at 3.69 times.

As I mentioned last quarter, our projections for the fourth quarter was the leverage ratio to remain stable. Despite the fact that the results deliver in this last quarter of the year were good, they fell short of our initial expectations.

As I've already mentioned, the results of Keystone Division were affected by the weather in North America and by the ramp up in capacity. At Beef Division despite the improvement, the expectation was for a better Brazilian economy growth and a better year-end.

And before I continue the presentation, I want to take a little time to go up a little bit further or deeper on the leverage ratio. 2017 was a difficult year and we have to make some tough choice about cash and leverage.

We believe that these decisions would have one-off impact in our indicators but that in the long-term it would help to support and ensure our future profitability. In the Beef Division, scale is fundamental for a more commodity oriented business.

Meanwhile, at Keystone, the ongoing investments made were crucial to maintaining and growing our business as for the strategic plan 2021. For 2018, we should continue to see the rewards from this investment which will help to support the Company leveraging process.

And to accelerate this process and reach our target leverage ratio up 2.5 times, I and everyone else on the Marfrig executive team are 100% committed to executing our strategic plan to achieve this goal. And among the many alternatives, the Keystone participation sale was the path that we decided to pursue during 2017 and we remain focused on concluding this process in 2018.

It is important to note, that even with this process already ongoing from the listing, the Company can issue setup to asses all it’s the strategic option and is certainly monitoring opportunities in the market that could help us to achieve this leveraging commitment. Going back to the presentation, now on the chart at the bottom of the slide, I will comment on the Company’s debt.

Since 98% of our debt is in U.S. dollar as well as most of our cash, the following analysis is same currency.

As you can see gross debt ended the year at $3.8 billion while our cash position stood at $1.3 billion, down 70% from the previous quarter. As a result, net debt and debt the year at $2.4 billion.

In line with what we already anticipated, our expectation was for our net debt to increase due to investments made to implement the capacity adjustment and expansion plan carry out during the second half of 2017. Our highlight however is the long-term profile of our debt where only 50% coming due in the short-term and our debt cost is more than 24% decline is 6.38% per annum in this quarter.

Let’s go to the next slide. So, in this slide, we are going to be talking about the cash flow.

The Marfrig ratio positive operating cash flow of BRL88 million influenced by the results delivered by division and by the lower use of working capital. As expected, the continued production ramp up at Beef Division and this preparation of promotional activities for the quick service channel at Keystone Division led to higher EBITDAR.

On the other hand, most of this negative effect was offset by seasonal increase in payments terms to suppliers. As a result, working capital consumption in the quarter was BRL200 million lower than in the third quarter.

In CapEx, despite the reductions, we maintained our robust level of investments of BRL247 million in the last quarter of the year. We made investments continues to be related to the reopening of the plant at the Beef Divisions and the growth projects at the Keystone Division, which are aligned to its 2021 strategic plan.

Meanwhile, the interest expenses came to BRL192 million in line with the third quarter. Recognition of this factor led to a negative cash flow BRL350 million in this quarter.

Considering the non-recurring expenditures related to the Company's decision to participate in the stack program together with the discontinued operations in this case our Argentina plant. Cash flow was negative BRL599 million.

Important to highlight that the Company has been delivering positive free cash flow since 2014 and in 2017 as I previously explained to all of you, we ended up with this negative cash flow. Our commitments do not change, and for 2018 we shall deliver positive cash flow again.

Let's move to Slide number 9 please. In slide, as you can see Marfrig posted this quarter its lower I would lowest net loss since 2015 of BRL8 million, which represents important improvement over BRL200 million from the quarter before.

The results reflects company's efforts towards the main drivers, meaning better gross margin, very low control and discipline on fixed cost. And finally cost reductions on the interest line.

Moving to Slide number 10, here, we briefly go over our key indicators in the year. Net revenue was BRL19 billion, down slightly from 2016.

The highlight was the stronger local currency and the lower price in Brazil domestic market, which at company the downward trend in the cattle price. The positive highlight was the growth in sales volumes especially beef products.

The recovery in the growth of Brazil operations at the Beef Divisions during the second half of the year offset the negative impact that the industry suffer in the first half of the year. Consolidated adjusted EBITDA in the year was BRL1.7 million, up 6% on 2016, with margin expanding 60 basis points to 9.2%.

This performance was due to the recovery in the results of the Beef Division and by the delivery of another record breaking result at Keystone Division. With that, I conclude my presentations.

I'd like move this back to Martin for his closing remarks.

Thank you, Miron. On this Slide 11, I will go over to outlook the first quarter and whole of 2018.

As you remind you that the first quarter is seasonally the weakest of the year especially in the beef division, therefore in comparison with the last quarter of 2017, we should expect some margin contraction following the market trend. The perspective for the year remained positive.

The growth in both global and Brazilian economic are expected so that demand is expected to follow. Also the opening of the new markets such as Japan that is expected to open worldwide in the near-term and the U.S.

for the Brazilian beef should positively contribute for the global pricing dynamics. Once, this scenario is confirmed, the margin for the year should remain in healthy level and within this expected range for the beef business with EBITDA margin between 8% to 10%.

At the Keystone Division, the first quarter of the year should continue to show some impact from the store traffic due to the bad weather in the United States while the new plants in Thailand should continue to advancing ramp up. For 2018, we expect the market to normalize and the prospect are for the result to remind robust.

In another context, we expect improvement in the Company operation flows as well as in the free cash flow, which should benefit from the greater working capital and from CapEx returning to its historical level of 2015 and 2016 in the range BRL550 million to BRL600 million. In terms of the leverage as Eduardo mentioned, we remain commitment to the financial discipline and to our deleveraging target.

As I mentioned, the sale of Keystone stake is crucial to our deleveraging plan and reaching the 2.5 times in the end of the year. We conclude with this our presentation and I will like to open the space for question for you.

I was wondering -- first of all, can you comment on the adjustment you made to EBITDA. Is there referring to that leverage slide, I think a slide seven where I think a part -- in terms of the 455 leverage target you, the leverage rate you give there to the adjustments EBITDA, but I think you also count for this impact on the practice settlement for the Brazilian authority.

Exactly how much are you adjusting for this tax settlement in your EBITDA calculation?

The adjustment was not in the EBITDA, the adjustment was in the net debt is around BRL230 million.

Okay, so for the exact amount -- does the cash outflow that's what you're adjusting for the net debt?

Yes and this number, the number that is, you can see this number is the free cash flow. So then you can see in the next page.

Okay, understood. And then just as a going forward after the settlement.

How much should we expect in terms of the cash payments for tax in '18 and '19?

Yes, the remaining payment is small amount of around BRL3 million and this is going to be down for the next 150 -- 45-months.

Okay. And after that, should we expect any further capital outflows to the tax?

I'm sorry?

Will there be any more cash outflows due to tax payments in 2018, this BRL3 million that you mentioned?

In fact, we are expecting a better positive flow in the other direction from the credits that I have. I think that's one of the most important thing and that's the reason why we made that decision.

Because it tend to I would say it normalize our relationship and with the tax authorities. So then we should expect to have some inflow.

Okay. And then for 2019, should we expect any cash outflows due to taxes?

2019?

Yes.

I don't know exactly if I understand I understand your question. So you're talking about the program?

No, no just to general talk of payments for 2019 that which you assume, that you expect to normalize or?

Yes, we paid taxes and seasonally pay taxes. And in Brazil, we have the robust tax credit.

So then we normally have a reduced tax payment because of the negative big loss that we carry.

Okay. And my other question was regarding Keystone.

Can you give us any sense of what your volume targets are for 2018?

Yes, we don't really talk about sort of guidance and what we're looking for. But I would say that, we don't see any kind of structural headwinds from the market, we see continued strong demand really almost everywhere in the world around our main customer bases.

So feel pretty good about the year, but we don't give volume guidance or any other type.

Okay. And is that because of the you attempted the IPO part of the group.

So you don't give any guidance?

No, I think that's just on our general practice.

Okay. And can you at least comment on sort of a normalized margin for this business for Keystone going forward?

I would say that longer range targets that we had issued the number of years in Marfrig today continues to be valid everywhere. We're currently performing well above those, but I don't think we set new longer range targets.

And the that out there…

Can you just remind us what it was?

Those were 8% to 9% longer term.

Okay got it. And just one last one in terms of the BRAF investigation of the headlines, I've realized that the different protein, different company, but have you seen any impact what at all from the BRAF Investigation?

Are you talking about beef or you're talking about of other global projects?

Beef, beef.

Just to remind you that Marfrig doesn't have any participation on the episode of the last year of the weak fresh and also, we don’t have any participation or any movement regarding this last episode. Of course it’s a very bad situation for the chicken sector and we are so attentive to the movement of on the market, I hope to understand value operation because the value was not good.

Just to follow up on that last call. BLF is pressuring chicken prices.

I know Marfrig has got to chicken, but we're understanding that is pressured the beef prices and so want to know how the first quarter is looking, is it stable or you’re going to be pressure on beef prices? Or are you able to export more.

Thank you.

No, thank to you for your question. Of course, there have some relation internally in Brazil regarding the movement between different products.

And the chicken product is very cheap this day on the markets and of course the situation of the DRS in that same sale too much for the situation because margin that most of the volume are attend for Europe for some part staying in Brazil and some part and other part go to other markets. And of course it does help for the prices for the chicken.

But, as you know the even the consumer are making and more reasonable consumption we have very good alternative to go to the export as we mentioned on the call. The growth is very, very much on the export for that we are trying to be out of this situation and internally, we are continue working in our quality as you know Marfrig is the most well known brand regarding quality in Brazil.

And we have the alternative to going to local market or to export where is the situation on the better price for that we are looking with a carefully this situation this days also the Eastern period – very good time to make any conclusion, because there is no doubt typical time to reach this. But we are not seeing too much broaden regarding the situation on chicken.

I mean on beef?

Sorry.

In your point, you mentioned -- you don’t expect you’re not seeing much pressure on these stages and the first quarter. I know first quarter is normally weaker than the other quarters.

So we should not supplied by additional beyond reasonable softness in first quarter '18, is that okay?

But when we say that this is the weak quarter? We are referring to the amount of animals ready to slaughter is the important part of our business when we talk about seasonable on our business.

Regarding the beef, we have different episodes during the year that we must manage between export, local, brands and other things. But our always our attention regarding the margins and more focus on the volume of animals are reasonable under price that we need to practice regarding this.

Okay, so sorry. One more time, just to summarize, you should see any more than usual -- so the first quarter of '18 is stable.

Europe is not impacting too much because you're able to export more.

Yes.

Thank you. I would like to thank you all of you to follow our presentation and to participate in our Q&A session.

And Eduardo, Roberto, and of course me will be waiting if you have more questions in the next days or today. We keep in touch.

Thank you all.