(Convenience translation into English from the
original previously issued in Portuguese)
MARFRIG GLOBAL FOODS S.A.
Individual and consolidated interim
financial statements for the three and six
month-periods ended June 30, 2015 and
independent auditors’ review report on
the interim financial statements
EO/GP/LP
BDOi/15
MARFRIG GLOBAL FOODS S.A.
Individual and consolidated interim financial statements for the three and six
month-periods ended June 30, 2015 and independent auditors’ review report
Contents
Independent auditors’ review report on the interim financial statements
Balance sheets
Statements of income
Statements of comprehensive income
Statements of changes in shareholders’ equity
Statements of cash flows
Statements of added value
Notes to the individual and consolidated interim financial statements
2
Tel.: +55 11 3848 5880
Fax: + 55 11 3045 7363
www.bdobrazil.com.br
Rua Major Quedinho, 90
Consolação – São Paulo, SP - Brasil
01050
1050-030
(Convenience translation into English from the original previously issued in Portuguese)
INDEPENDENT AUDITORS’ REVIEW REPORT ON THE INTERIM FINANCIAL
STATEMENTS
To the Shareholders, Board Members and Management of
Marfrig Global Foods S.A.
São Paulo - SP
Introduction
We have reviewed the individual and consolidated interim financial statements
of Marfrig Global Foods S.A. (the “Company”) contained in the quarterly
information form for the quarter ended June 30, 2015,, which comprises the
balance sheet as of June 30, 2015 and the related statements of income and
comprehensive income for the three and six month-periods then ended, and of
changes in shareholders’ equity and cash flows for the six--month period then
ended, including a summary of the significant accounting practices and other
notes.
Management
anagement is responsible for the preparation of the individual and
consolidated interim financial statements in accordance with CPC Technical
Pronouncement 21 (R1) - Interim Financial Reporting and with International
Accounting Standard (IAS) 34 - Interim Financial Reporting, issued by the
International Accounting Standards Board (IASB),
(IASB), and for the presentation of this
information in accordance with the standards issued by the Brazilian Securities
and Exchange Commission (CVM) applicable to the Quarterly Information. Our
responsibility is to express a conclusion on the interim information
mation based on our
review.
Scope of the review
We conducted our review in accordance with Brazilian and international
standards for reviewing interim financial information (NBC TR 2410 - Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity and ISRE 2410 - Review of Interim Financial Information Performed by the
Independent Auditor of the Entity,
Entity respectively). An interim review consists
principally of applying analytical and other review procedures, and making
maki
enquiries of and having discussions with persons responsible for financial and
accounting matters. An interim review is substantially less in scope than an
audit conducted in accordance with auditing standards. An interim review does
not provide assurance
ce that we would become aware of any or all significant
matters that might be identified in an audit. Accordingly, we do not express
such an audit opinion.
3
Conclusion about the interim financial statements
Based on our review, we are not aware of any fact that leads us to believe that
the individual and consolidated interim financial statements included in the
quarterly information form referred to above have not been prepared, in all
material respects, in accordance with CPC 21 (R1) and IAS 34 applicable to
Quarterly Information and presented in accordance with the standards issued by
the Brazilian Securities and Exchange Commission.
Other matters
Interim statements of value added
We have also reviewed the individual and consolidated interim statements
statement of
added value for the quarter and six month-periods ended June 30, 2015,
prepared by the Company’s Management, which
wh
disclosure in the interim
financial statements is required in accordance with the standards issued by CVM
applicable to the preparation of the Quarterly Information and considered as
supplemental information by IFRS, which do not require the disclosure of the
statement of value added. These statements were submitted to the same
review procedures previously described and,
and based on our review, we are not
aware of any fact that would lead us to believe that they have not been fairly
stated, in all material respects,
respects, in relation to the interim financial statements,
individual and consolidated,
onsolidated, taken as a whole.
The accompanying individual and consolidated interim financial statements have
been translated into English for the convenience of readers outside Brazil.
Brazi
São Paulo, August 10, 2015.
BDO RCS Auditores Independentes SS
CRC 2 SP 013846/O-1
1
Esmir de Oliveira
Accountant CRC 1SP 109628/O-0
109628/O
4
MARFRIG GLOBAL FOODS S.A.
Balance sheet
At June 30, 2015 and December 31, 2014
(In thousands of Brazilian reais – R$)
Assets
Liabilities and Shareholders' Equity
Consolidated
Parent Company
Note
Current assets
Cash and cash equivalents
Marketable securities
Trade accounts receivable - domestic
Trade accounts receivable - foreign
Inventories of goods and merchandise
Biological assets
Recoverable taxes
Prepaid expenses
Notes receivable
Advances to suppliers
Assets held or sale
Other receivables
Non-current assets
Marketable securities
Court deposits
Notes receivable
Deferred income and social contribution taxes
Recoverable taxes
Other receivables
Investments
Property, plant and equipment
Biological assets
Intangible assets
4
5
6
6
7
8
9
10
11
5
10
12
9
13
14
8
15
6/30/2015
171.231
993.368
187.171
105.049
498.918
928.064
9.359
859.239
14.758
3.753
3.770.910
12/31/2014
387.828
455.589
195.800
77.136
708.091
878.476
4.175
842.268
10.532
5.744
3.565.639
6/30/2015
839.152
1.725.191
606.310
418.213
1.406.514
232.795
1.453.621
101.914
55.882
29.709
4.855.217
60.870
11.785.388
Parent Company
12/31/2014
1.091.685
1.567.112
941.277
677.483
2.027.919
352.200
1.361.635
167.030
58.261
57.204
66.711
8.368.517
18.629
2.120.297
1.623.724
1.282.593
3.085
5.048.328
49.375
1.782.199
1.318.082
1.274.998
3.747
4.428.401
940
32.175
417.234
2.056.549
1.530.023
45.213
4.082.134
970
64.972
345.664
1.708.437
1.509.169
42.773
3.671.985
4.194.246
1.825.679
580.701
6.600.626
3.405.345
1.740.465
583.391
5.729.201
35.837
4.279.590
46.939
2.530.376
6.892.742
36.934
4.961.623
142.140
3.004.709
8.145.406
11.648.954
10.157.602
10.974.876
11.817.391
Note
Current liabilities
Trade accounts payable
Accrued payroll and related charges
Taxes payable
Loans and financing
Notes payable
Lease payable
Interest on debentures
Advances from customers
Liabilities held for sale
Other payables
Non-current liabilities
Loans and financing
Taxes payable
Deferred income and social contribution taxes
Provisions for contingencies
Lease payable
Debentures payable
Notes payable
Mandatory deed convertible into shares
Other
Equity
Share Capital
(-) Share issue expenses
Capital reserve
Issue of common shares
Acquisition of shares in subsidiaries
Profit reserves
Legal reserve
Retained earnings
Treasury shares
Treasury shares canceled
Other comprehensive income
Asset valuation adjustment
Cumulative translation adjustment
Equity amounts related to assets held for sale
Accumulated losses
Controlling shareholders' equity
Non-controlling interest
Total assets
15.419.864
13.723.241
22.760.264
20.185.908
Total liabilities and shareholders' equity
16
17
18
21
20
19
11
18
17
24
23
20
19
21
22
25.1
25.1
25.2.1
25.2.2
25.2.2
25.3
25.3.1
25.3.2
23.3.3
25.6
6/30/2015
Consolidated
12/31/2014
6/30/2015
12/31/2014
523.649
76.238
43.976
1.535.305
164.848
2.143
137.680
319.658
23.135
2.826.632
477.679
59.905
43.556
1.147.462
134.125
2.365
232.960
61.931
34.323
2.194.306
1.495.530
296.246
146.560
1.860.458
129.065
32.236
98.155
341.223
2.986.618
115.234
7.501.325
2.028.303
341.979
200.312
1.470.237
129.895
69.229
190.582
72.645
159.283
4.662.465
383.962
531.849
92.771
45.289
1.697
569.846
8.118.678
2.120.568
11.864.660
464.797
528.868
95.795
40.115
1.754
569.816
5.752.855
2.121.470
9.575.470
9.977.664
711.756
517.968
46.219
20.644
880.903
2.120.568
98.965
14.374.687
9.400.106
706.545
635.758
40.448
70.745
353.570
2.121.470
123.076
13.451.718
5.276.678
(108.210)
184.642
184.800
(158)
37.013
44.476
7.348
(3.121)
(11.690)
(1.090.738)
(3.205.051)
2.866.086
(751.773)
(3.570.813)
5.276.678
(108.210)
184.642
184.800
(158)
36.449
44.476
7.348
(3.685)
(11.690)
(438.071)
(1.713.198)
1.275.127
(2.998.023)
5.276.678
(108.210)
184.642
184.800
(158)
37.013
44.476
7.348
(3.121)
(11.690)
(1.090.738)
(3.205.051)
2.866.086
(751.773)
(3.570.813)
5.276.678
(108.210)
184.642
184.800
(158)
36.449
44.476
7.348
(3.685)
(11.690)
(438.071)
(1.713.198)
1.275.127
(2.998.023)
728.572
728.572
1.953.465
1.953.465
728.572
155.680
884.252
1.953.465
118.260
2.071.725
15.419.864
13.723.241
22.760.264
20.185.908
The accompanying notes are an integral part of the parent company and interim individual and consolidated financial statements.
5
MARFRIG GLOBAL FOODS S.A.
Statement of income
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais – R$)
Parent Company
Note
2nd Quarter
2015
Consolidated
Reclassified
2nd Quarter
2014
YTD
2015
Reclassified
YTD
2014
2nd Quarter
2015
YTD
2015
Reclassified
2nd Quarter
2014
Reclassified
YTD
2014
Net Sales
26
1.436.348
2.774.000
1.265.551
2.434.054
4.728.183
9.099.142
3.789.117
7.264.523
Cost of Goods Sold
Gross profit
27
(1.246.078)
190.270
(2.349.369)
424.631
(1.064.570)
200.981
(2.031.936)
402.118
(4.166.757)
561.426
(8.062.001)
1.037.141
(3.317.245)
471.872
(6.318.618)
945.905
(62.095)
(260.360)
(144.830)
(262.829)
(199.924)
(456.421)
(276.803)
(546.796)
(68.351)
(21.471)
(35.702)
63.429
(138.317)
(36.715)
(141.408)
56.080
(94.552)
(32.886)
(8.843)
(8.549)
(183.635)
(47.059)
(23.803)
(8.332)
(140.173)
(107.327)
(2.792)
50.368
(278.741)
(198.311)
(7.084)
27.715
(163.494)
(93.119)
(2.970)
(17.220)
(317.264)
(192.720)
(8.940)
(27.872)
Operating income (expenses)
Selling expenses
General and administrative expenses
Equity in earnings (losses) of subsidiaries
Other operating income (expenses)
27
27
128.175
164.271
56.151
139.289
361.502
580.720
195.069
399.109
(199.165)
(1.084.967)
(171.579)
(434.180)
(392.203)
(1.415.845)
(296.099)
(680.361)
Financial income
Exchange gain
Financial expenses
Exchange Loss
95.561
429.369
(373.822)
(350.273)
99.845
667.281
(812.892)
(1.039.201)
31.566
81.889
(219.261)
(65.773)
36.356
269.137
(469.636)
(270.037)
159.419
579.331
(577.021)
(553.932)
241.725
927.181
(1.183.525)
(1.401.226)
58.590
109.386
(367.538)
(96.537)
104.773
378.096
(767.221)
(396.009)
Loss before tax effects
(70.990)
(920.696)
(115.428)
(294.891)
(30.701)
(835.125)
(101.030)
(281.252)
42.790
308.666
39.938
96.167
11.823
241.440
30.177
91.806
31.463
11.327
226.960
81.706
29.393
10.545
70.738
25.429
157.654
83.786
19.265
10.912
64.776
27.030
(28.200)
(612.030)
(75.490)
(198.724)
(18.878)
(593.685)
(70.853)
(189.446)
22.052
34.976
20.401
47.220
22.052
34.976
20.401
47.220
Net income before net financial income (expenses)
Financial income (expenses)
28
Provision for income and social contribution taxes
Current and deferred income tax
Current and deferred social contribution
34
34
Net income (loss) in the period from continuing operations
Net income (loss) in the period from discontinued operations
36
(313)
12.136
Net income (loss) in the period before interest
(6.148)
(577.054)
(55.089)
(151.504)
3.174
(558.709)
(50.452)
(142.226)
Attributable to:
Marfrig Global Foods - controlling interest - continuing operations
Marfrig Global Foods - controlling interest - discontinued operations
Total controlling interest
(28.200)
22.052
(6.148)
(612.030)
34.976
(577.054)
(75.490)
20.401
(55.089)
(198.724)
47.220
(151.504)
(28.200)
22.052
(6.148)
(612.030)
34.976
(577.054)
(75.490)
20.401
(55.089)
(198.724)
47.220
(151.504)
9.322
9.322
18.345
18.345
4.637
4.637
Non-controlling interest - continuing operations
Non-controlling interest - discontinued operations
Total non-controlling interest
-
-
-
-
(6.148)
(577.054)
(55.089)
(151.504)
3.174
9.278
9.278
(558.709)
(50.452)
(142.226)
Basic and diluted losses per common share - continuing operations
Basic and diluted losses per common share - discontinued operations
30
30
(0,0118)
-
(1,1089)
-
(0,1059)
-
(0,2912)
-
(0,0541)
0,0424
(1,1761)
0,0672
(0,1451)
0,0393
(0,3820)
0,0908
Total basic and diluted losses per common share
30
(0,0118)
(1,1089)
(0,1059)
(0,2912)
(0,0118)
(1,1089)
(0,1059)
(0,2912)
The accompanying notes are an integral part of the parent company and interim individual and consolidated financial statements.
6
MARFRIG GLOBAL FOODS S.A.
Statement of comprehensive income
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais – R$)
Parent Company
Reclassified
YTD
2nd Quarter
2015
2014
2nd Quarter
2015
Net loss in the period
Exchange variation on net investments
Exchange variation on balance sheet translation
Total comprehensive income (loss) for the period
Attributable to:
Marfrig Global Foods - controlling interest - continuing operations
Marfrig Global Foods - controlling interest - discontinued operations
Marfrig Global Foods - Total controlling interest
(6.148)
(577.054)
137.226
(64.274)
Reclassified
YTD
2014
2nd Quarter
2015
(55.089)
(151.504)
3.174
(1.176.055)
525.531
41.543
12.665
106.304
(51.431)
137.226
(64.274)
72.952
(650.524)
54.208
54.873
66.804
(1.227.578)
(881)
44.752
22.052
(1.262.554)
34.976
66.804
Consolidated
Reclassified
YTD
2nd Quarter
2015
2014
(558.709)
Reclassified
YTD
2014
(50.452)
(142.226)
(1.176.055)
525.531
41.543
12.665
106.304
(51.431)
72.952
(650.524)
54.208
54.873
(96.631)
76.126
(1.209.233)
3.756
(87.353)
(21.282)
20.401
(143.851)
47.220
44.752
22.052
(1.262.554)
34.976
(21.282)
20.401
(143.851)
47.220
(1.227.578)
(881)
(96.631)
66.804
(1.227.578)
(881)
(96.631)
Non-controlling interest - continuing operations
Non-controlling interest - discontinued operations
-0
-0
-0
-
9.322
-
18.345
-
4.637
-
9.278
-
Total non-controlling interest
-
-
-
-
9.322
18.345
4.637
9.278
The accompanying notes are an integral part of the parent company and interim individual and consolidated financial statements.
7
MARFRIG GLOBAL FOODS S.A.
Statement of changes in shareholders’ equity
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais – R$)
Attributable to controlling shareholders
Other comprehensive income
Profit reserves
Share capital
Share issue
expenses
Capital
reserve
Legal
reserve
Profit
retention
Treasury
Shares
Treasury
shares
canceled
Cumulative
Equity
valuation
adjustment
translation
adjustments
Accumulated
losses
Total
Total controlling
interest
At December 31, 2013
Exchange variation on net investments
Exchange variation - balance sheet translation
Acquisition of shares in subsidiaries
Realization of Deemed Cost
Interest rate hedge - Parent company and reflecting from Subsidiaries
Write-off (acquisition) of treasury shares
Net loss in the period
5.276.678
-
(108.210)
-
184.800
(158)
-
44.476
-
7.348
-
(4.361)
1
-
(11.690)
-
(969.306)
106.304
3.552
(212)
-
868.895
(51.431)
-
(2.259.304)
(3.552)
(151.504)
3.029.326
106.304
(51.431)
(158)
3.029.326
106.304
(51.431)
(158)
(212)
1
(151.504)
(212)
1
(151.504)
At June 30, 2014
5.276.678
(108.210)
184.642
44.476
7.348
(4.360)
(11.690)
(859.662)
817.464
(2.414.360)
2.932.326
2.932.326
Total noncontrolling
interest
Total
shareholders'
equity
89.696
(6.680)
9.278
3.119.022
99.624
(51.431)
(158)
92.294
3.024.620
(212)
1
(142.226)
Attributable to controlling shareholders
Other comprehensive income
Profit reserves
Treasury
Share capital
At December 31, 2014
Exchange variation on net investments
Exchange variation - balance sheet translation
Realization of Deemed Cost
Interest rate hedge - Parent company and reflecting from Subsidiaries
Write-off (acquisition) of treasury shares
Net loss in the period
At June 30, 2015
5.276.678
5.276.678
OK
Share issue
expenses
(108.210)
(108.210)
OK
Capital
reserve
184.642
184.642
OK
Legal
reserve
44.476
44.476
OK
Profit
retention
7.348
7.348
OK
Treasury
Shares
(3.685)
564
(3.121)
OK
shares
canceled
(11.690)
(11.690)
OK
Equity
valuation
adjustment
Cumulative
translation
adjustments
Equity amounts
related to assets
held for sale
-
Accumulated losses
(1.713.198)
1.275.127
(1.489.710)
(4.264)
2.121
-
1.590.959
-
313.655
(1.065.428)
-
(2.998.023)
4.264
(577.054)
(3.205.051)
OK
2.866.086
OK
(751.773)
VERIFICAR
(3.570.813)
OK
Total
Total controlling
interest
1.953.465
1.953.465
(1.176.055)
525.531
2.121
564
(577.054)
(1.176.055)
525.531
2.121
564
(577.054)
728.572
OK
728.572
OK
Total noncontrolling
interest
118.260
19.075
18.345
155.680
OK
Total
shareholders'
equity
2.071.725
(1.156.980)
525.531
2.121
564
(558.709)
884.252
The accompanying notes are an integral part of the parent company and interim individual and consolidated financial statements.
8
MARFRIG GLOBAL FOODS S.A.
Statements of cash flow
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais – R$)
Parent Company
Net loss in the period in the continued operation
Items not affecting cash
Depreciation
Amortization
Non-controlling interest
Provision for contingencies
Deferred taxes
Equity in earnings (losses) of subsidiaries
Exchange variation on financing
Exchange variation on other assets and liabilities
Interest expenses on financial debt
Interest expenses on financial leasing
Interest expenses on debentures
Cost with issue of financial operations
Leasing adjustment to present value
Estimated non-realization of inventories
Estimated losses with doubtful accounts
Estimated losses with non-realization of recoverable taxes
Bargain purchase
Fixed asset write-off
Equity changes
Trade accounts receivable
Current inventory and biological assets
Court deposits
Accrued payroll and related charges
Trade accounts payable
Current and deferred taxes
Notes receivable and payable
Other assets and liabilities
Cash flow from (used in) operating activities
Investing activities
Investments
Acquisition of subsidiary
Investments in fixed and non-current biological assets
Investments in intangible assets
Cash flow from investing activities
Financing activities
Interest settled debentures / Bonds
Loans and financing
Loans granted
Loans settled
Leasing payable
Leasing granted
Leasing settled
Mandatory deed convertible into shares
Treasury shares
Cash flow from (used in) financing activities
Exchange variation on cash and equivalents
Discontinued operations net of cash (NE 36)
Cash flow in the period
Cash and cash equivalents
Balance at end of period
Balance at start of period
Changes in the period
YTD
2015
(612.030)
Consolidated
Reclassified
YTD
2014
(198.724)
YTD
2015
(612.030)
448.834
240.934
53.820
3.904
5.174
(308.666)
141.408
361.947
9.973
78.848
259
160.084
10.973
(75)
6.001
228
(75.193)
149
43.182
3.930
4.919
(101.169)
23.803
(78.825)
79.725
74.596
151
133.304
8.853
124
3.002
2.933
39.235
3.171
161.710
37.023
18.345
5.771
(290.762)
7.084
360.404
113.641
464.331
1.134
118.710
71.332
(75)
4.327
(856)
(75.193)
7.850
134.117
28.668
9.278
4.934
(107.709)
8.940
(87.527)
105.440
393.471
1.289
90.330
32.693
124
383
5.886
71.455
445.589
642.378
655.227
1.040.481
185.837
203.173
30.746
16.333
20.978
(53.781)
650.910
(13.715)
329.166
(65.234)
801
12.456
209.842
(65.064)
43.351
(19.729)
1.004.776
Reclassified
YTD
2014
(198.724)
279.815
181.237
32.895
5.891
18.287
(91.360)
(2.394)
218.007
40.800
232.349
(42.617)
(1.412)
7.548
(364)
(110.827)
(27.698)
598.248
877.285
487.799
(33.804)
(139.183)
(1.214)
(174.201)
(59.423)
(69.134)
(3.714)
(132.271)
(9.406)
2
(216.639)
(2.313)
(228.356)
5
(105.684)
(7.207)
(112.886)
(255.365)
(135.982)
1.100.858
(1.236.840)
(464)
1.341
(1.805)
(9.651)
564
(107.957)
(91.067)
621.775
(712.842)
(795)
1.263
(2.058)
(4.743)
1
(563.375)
(120.321)
2.779.562
(2.899.883)
(12.250)
1.341
(13.591)
(9.651)
564
(616.282)
368.954
1.721.835
(1.352.881)
(13.599)
1.263
(14.862)
(4.743)
1
(400.898)
(204.561)
(705.033)
(265.669)
(5.597)
-
96.300
(292.489)
(86.203)
121.190
18.996
321.182
145.370
1.164.599
843.417
325.979
180.609
321.182
145.370
1.035.124
732.572
(94.454)
2.564.343
2.658.797
(94.454)
1.189.075
845.507
2.657.043
1.811.536
845.507
The accompanying notes are an integral part of the parent company and interim individual and consolidated financial statements.
9
MARFRIG GLOBAL FOODS S.A.
Statement of added value
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais – R$)
Revenue
Sales of goods and services
Other revenues
Estimated losses with doubtful accounts (Accrual)
Parent Company
Reclassified
YTD
YTD
2015
2014
2.902.267
2.611.696
2.902.495
2.614.629
(228)
(2.933)
Consolidated
Reclassified
YTD
YTD
2015
2014
9.352.015
7.595.129
9.317.673
7.576.698
17.250
21.802
17.092
(3.371)
Inputs purchased from other firms (including taxes
- ICMS, IPI, PIS and Cofins)
Cost of goods sold and services rendered
Material, energy, outsourced services and other
Loss / Recovery of assets
1.704.221
2.052.670
6.578.247
5.961.345
1.270.899
433.322
-
1.519.732
532.938
-
5.207.612
1.355.236
15.399
4.587.467
1.366.142
7.736
Gross value added
Depreciation and amortization
1.198.046
57.724
559.026
47.112
2.773.768
198.733
1.633.784
162.785
Net value created by company
1.140.322
511.914
2.575.035
1.470.999
328.910
(23.803)
305.493
47.220
1.884.072
(7.084)
1.168.906
722.250
Value added received through transfer
Equity In Earnings (Losses) of Subsidiaries
Financial income and exchange rate gains
Other (including Discontinued Operations)
605.060
(141.408)
767.126
(20.658)
806.597
(8.940)
482.869
332.668
Total value added to be distributed
1.745.382
840.824
4.459.107
2.277.596
Value added distribution
1.745.382
840.824
4.459.107
2.277.596
233.816
186.908
36.123
10.785
211.346
167.140
33.681
10.525
1.049.025
854.180
179.025
15.820
822.045
671.384
134.713
15.948
(242.544)
(336.642)
94.061
37
37.093
(102.996)
140.077
12
Employees
Direct compensation
Benefits
FGTS (severance pay fund)
Taxes payable
Federal
State
Municipal
Value distributed to providers of capital
Interest
Rentals
Other (including Discontinued Operations)
Value distributed to shareholders
Operational loss in the period
Non-controlling interest in retained earnings (losses)
2.331.164
1.852.093
35.536
443.535
(577.054)
(577.054)
743.889
739.673
4.216
-
(88.224)
(277.893)
189.398
271
4.057.015
2.584.751
28.868
1.443.396
(151.504)
(151.504)
(558.709)
(577.054)
18.345
108.336
(130.153)
238.357
132
1.489.441
1.163.230
30.296
295.915
(142.226)
(151.504)
9.278
The accompanying notes are an integral part of the parent company and interim individual and consolidated financial statements.
10
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
1.
Operations
Marfrig Global Foods S.A. is a multinational company operating in the food and food service
industries in Brazil and around the world. It has a diversified and comprehensive portfolio
of products and its operations are founded on its commitment to excellence and quality,
which has assured its products presence in the world’s largest restaurant chains and
supermarkets, as well as homes in over 110 countries. The Corporation’s activities include
the production, processing, further processing, sale and distribution of animal proteins
(beef, lamb and poultry, including chicken and turkey) and a variety of other food
products, such as breaded products, ready-to-eat meals, fish, frozen vegetables and
desserts, among others.
Marfrig Global Foods S.A. was incorporated on June 6, 2000 and became a corporation on
March 26, 2007. The Corporation was registered with the Brazilian Securities and Exchange
Commission (CVM) under No. 20.788 on June 18, 2007 and carried out its initial public
offering (IPO) on June 29, 2007. Its shares were listed on the Novo Mercado listing segment
of the BM&FBovespa S.A. - Securities, Commodities and Futures Exchange (Brazilian Stock
Exchange) under the stock symbol MRFG3. On January 22, 2014, the Annual and
Extraordinary Shareholders' Meeting held at the Corporation’s headquarters amended
Article 1 of the Corporation’s Bylaws, altering the Corporation’s name to Marfrig Global
Foods (formerly Marfrig Alimentos S.A.).
On June 30, 2015, its subscribed and paid-in Share Capital was represented by 520,747,405
common shares, of which, as of June 30, 2015, 159,578,621, or 30.64% of the Share Capital,
was controlled by MMS Participações Ltda. and its partners, individually. On the same date,
the free float was 360,448,046 shares, or 69.22% of the Share Capital of the Corporation,
which held 330,074 shares in treasury, representing 0.06% of the total capital, while its
Board of Directors and Executive Board held 390,664 shares, representing 0.08% of the
capital. MMS Participações Ltda. is controlled by Marcos Antonio Molina dos Santos and
Marcia Aparecida Pascoal Marçal dos Santos, each holding a 50% ownership interest.
Because it is listed on the Novo Mercado special corporate governance segment of the
Brazilian Stock Exchange, the Corporation is subject to arbitration under the Market
Arbitration Chamber, pursuant to the arbitration clause in its by-laws.
The Corporation’s stock is also a component of the main performance indicators of Brazil’s
Capital Markets, such as the Bovespa Index (Ibovespa, the most important indicator of the
average performance of Brazilian stocks). Marfrig stock is also a component of the stock
indexes of the Brazilian Stock Exchange: Broad Brazil Index (IBRA); Brazil Index (IBrX);
Consumption Sector Index (ICON); Corporate Governance Trade Index (IGCT); Special
Corporate Governance Stock Index (IGCX); Novo Mercado Corporate Governance Index
(IGNM); Industrial Sector Index (INDX); Special Tag-Along Stock Index (ITAG); Small Cap
Index (SMLL); BM&FBovespa Value Index (IVBX).
The Corporation established an integrated and geographically diversified business model,
which consists of production units located in strategic places, combined with a broad
distribution network with access to the world’s main channels and consumer markets.
Marfrig currently operates 59 processing unit, distribution centers and offices in Brazil and
in 11 other countries in South America, North America, Europe, Oceania and Asia.
11
MARFRIG GLOBAL FOODS S.A.
Notes
otes to the parent company and consolidated interim financial statements
Periods ended June 30,, 2015 and 2014
(In thousands of Brazilian reais)
The Corporation believes that continuous improvement in its internal processes will enable
it to further improve efficiency and cut costs,, which, coupled with a result-driven
result
management that is committed to profitable growth, will drive profitability and cash
generation.
The Corporation’s ownership structure, financial and equity position should be considered
within the context of the integrated activities of the following segments, which are
organized as used by the Management to take decisions,
decisions each with their own structures and
segmented into:
• Marfrig Beef – The Marfrig Beef business unit is a pioneer in the sale and promotion of
beef, with the focus on serving the domestic market in Brazil,
Brazil especially the food
service industry, as well as the export market, with clients from all over the world.
Marfrig Beef is renowned in many countries for the quality of its premium products,
having taken advantage of the favorable scenario in Brazil’s cattle industry and foreign
exchange to strengthen its position in international markets.
Its international operations in South
So
America are concentrated in exporting premium
beef cuts and leveraging its strategic geographic position in Uruguay, which ensures
access
ccess to the world’s main consumer markets.
• Keystone - The Keystone business unit is a supplier of food made from animal protein to
major global restaurant chains, with strong presence in the United States and Asia.
Committed to innovation and the highest food safety and quality standards, it combines
vast expertise
ertise in the food industry with a strong focus on clients to offer a complete mix
of fresh and frozen products.
12
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Summary of the equity interests held by the Corporation:
Equity interests
Business Segment -Beef, Lamb and Leather
MARFRIG BEEF
Parent Company
Marfrig Global Foods S.A.
Core Activity
Country
Processing and marketing of product (formed by nine cattle
slaughter and beef processing facilities, one of which is also used
for slaughtering lamb, two tanneries, one plant producing cleaning
and hygiene products and one pet animal feed plant, located in
the States of São Paulo, Rio Grande do Sul, Goiás, Mato Grosso do
Sul, Mato Grosso and Rondônia, in addition to three Distribution
Centers in the State of São Paulo).
Brazil
Core Activity
Country
Subsidiaries
MFB Marfrig Frigoríficos do Brasil S.A.
Processing and marketing of product (composed of 13 cattle
slaughter and beef processing facilities, one of which is also used
for slaughtering lamb and two for processing beef), and two
distribution centers.
Masplen Ltd
Pampeano Alimentos S.A.
Marfrig Overseas Ltd
Holding company
Producer of canned meat and other processed products
Specific Purpose Entity - SPEs
Marfood USA Inc
Processing and marketing of products
(owner of trademark Pemmican)
MFG Agropecuária Ltda
Agricultural activities
(composed of 6 feedlots)
MFG Comercializadora de Energia Ltda
Brazil
Interest %
6/30/2015 12/31/2014
100%
100%
Jersey Island
Brazil
Cayman Island
100%
100%
100%
100%
100%
100%
USA
100%
100%
Brazil
99.99%
99.99%
Energy trading and associated services
Brazil
99.99%
99.99%
Marfrig Argentina S.A.
Processing and marketing of products
Argentina
99.92%
99.91%
Frigorífico Tacuarembó S.A.
Processing and marketing of products
Uruguay
97.91%
97.91%
Inaler S.A.
Processing and marketing of products
Processing and marketing of products
(composed of 5 primary and further processing units)
Processing and marketing of products
Processing and marketing of products
(lamb meatpacker in from December to May, fish, clam and king
crab processing in other months)
Holding company
Processing and marketing of products: beef and lamb
Processing and marketing of products
Trading company
Processing of products
Marketing, poultry, beef, fish and seafood
Uruguay
Brazil
100%
100%
100%
-
99.50%
99.50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Mercomar Empreendimentos e
Participações Ltda
Marfrig Chile S.A.
Frigorífico Patagônia S.A.
Prestcott International S.A.
Cledinor S.A.
Establecimientos Colonia S.A.
Weston Importers Ltd
CDB Meats Ltd
Marfrig Peru S.A.C.
Chile
Chile
Uruguay
Uruguay
Uruguay
United Kingdom
United Kingdom
Peru
13
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Subsidiaries
Marfrig Holdings (Europe) B.V
KEYSTONE
Keystone International S.a.r.l
Mckey Luxembourg Holdings S.a.r.l
MFG (USA) Holdings Inc
MOY PARK - Discontinued Operation
Moy Park Ltd
Kitchen Range Foods Ltd
Moy Park (BondCo) Plc
Core Activity
Holding company whose purpose is to obtain funding and hold
ownership of the companies Keystone and Moy Park
Country
Interest %
6/30/2015 12/31/2014
Netherland
100%
100%
Holding
Luxembourg
Holding of the companies Keystone with operations focused on Asia Luxembourg
Holding of the companies Keystone with operations focused on the USA USA
(Keystone companies jointly are composed of 4 poultry slaughter
plants 13 further processing plants)
100%
100%
100%
100%
100%
100%
Processing and marketing products
Northern Ireland
(composed of 4 poultry slaughter plants, 14 further processing units)
100%
100%
Processing and marketing products
England
Holding company incorporated to conduct the first issue of Senior
Notes in GBP
Northern Ireland
100%
100%
100%
100%
14
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
2.
Presentation and preparation of the parent company and consolidated financial
statements
2.1. Statement of compliance (with IFRS and CPC accounting standards)
Consolidated financial statements
The Corporation’s consolidated financial statements were prepared and are presented in
accordance with accounting practices adopted in Brazil and with International Financial
Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).
The separate financial statements of the parent company were prepared in accordance
with the accounting practices adopted in Brazil and are disclosed jointly with the
consolidated financial statements.
The accounting practices adopted in Brazil include those provided for in Brazilian
corporations law and the Pronouncements, Guidelines and Interpretations of the
Accounting Pronouncement Committee (CPC), as approved by the Securities and Exchange
Commission of Brazil (CVM). Until December 31, 2013, these practices differed from IFRS,
in relation to the separate financial statements, as they required the valuation of
investments in subsidiaries, associates and joint ventures through the equity method, as
opposed to valuation at cost or fair value under IFRS.
With the revision of IAS 27 (Separate Financial Statements) revised by IASB in 2014, the
separate financial statements in IFRS now allow the use of the equity method to recognize
investments in subsidiaries, associates and joint ventures. In December 2014, CVM issued
Resolution 733/2014, which approved the Document of Revision of Technical
Pronouncements no. 07 addressing Pronouncements CPC 18, CPC 35 and CPC 37, issued by
the Accounting Pronouncements Committee, accepting said revision of IAS 27.
The individual and consolidated Statement of Added Value (DVA) is required under Brazilian
corporations law and the accounting practices adopted in Brazil applicable to public
companies. IFRS standards do not require said statement. As a result, under IFRS, this
statement is being presented as supplementary information, without prejudice to the
complete set of financial statements.
15
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Parent company interim financial statements
The financial statements were prepared based on the accounting practices adopted in
Brazil and resolutions issued by CFC, observing the accounting guidelines based on Brazilian
Corporation Law (Federal Law 6,404/76), which include the provisions introduced,
amended and revoked by Law 11,638 of December 28, 2007 and Law 11,941 of May 27, 2009
(former Provisional Presidential Decree 449 of December 3, 2008).
There is no difference between the Group’s shareholders’ equity and consolidated income
(loss) and the parent company’s shareholders’ equity and income (loss) disclosed in the
parent company interim financial statements. Thus, the Group’s consolidated/individual
interim financial statements are being presented in the same document.
The Management of the Corporation approved the issue of these individual and
consolidated financial statements on August 10, 2015.
2.2. Basis of presentation
The parent company and consolidated interim financial statements are denominated in
Brazilian real, which is the reporting currency, and all amounts are rounded to thousands of
Brazilian real, unless otherwise stated.
The consolidated financial statements were prepared on the historical cost basis, unless
otherwise stated, such as certain assets and financial instruments, which may be stated at
fair value.
The preparation of parent company and consolidated interim financial statements in
accordance with IFRS and CPCs requires Management to make certain accounting
estimates. The areas involving considerable judgment or use of estimates for the parent
company and consolidated financial statements are stated in note 3.1.3 to the financial
statements for the fiscal year ended December 31, 2014.
2.3. Foreign currency translation
Functional and reporting currency
The financial statements of each consolidated subsidiary and those used as a basis for
accounting for investments under the equity method are prepared using the functional
currency of each entity.
Under CVM Resolution 640/10 (CPC 02 (R2) – effect of changes in exchange rates and
translation of financial statements), functional currency is the currency of the primary
economic environment in which the entity operates. To define the functional currency of
each subsidiary, Management considered which currency significantly influences the sale
price of their goods and services and the currency in which most of their production input
costs are paid or incurred. The consolidated financial statements are expressed in Brazilian
real (R$), which is the functional and reporting currency of Marfrig Global Foods S.A..
16
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Transactions and balances
Foreign currency transactions are translated into the functional currency of the Corporation
using the exchange rate at the transaction date. Gains and losses resulting from the
difference between the monetary asset and liability balance translation at the year-end
and the translation of the transaction balances are recognized in the income statement.
Non-monetary assets and liabilities in foreign currency measured at fair value are
translated at the exchange rate on the date on which their fair value is determined and the
differences resulting from such translation will be recognized under other comprehensive
income on the closing date of each period or fiscal year.
Group companies
The results of operations and the financial position of all consolidated subsidiaries and
investments accounted for under the equity method, whose functional currency differs
from the reporting currency, are translated from the reporting currency, as follows:
i.
Asset and liability balances are translated using the exchange rate in effect at the date
of the consolidated interim financial statements;
ii. Statement of operation accounts are translated using the monthly average exchange
rate; and
iii. All differences arising from the foreign currency translation are recognized in
shareholders’ equity and in consolidated comprehensive income (loss) under
“Cumulative translation adjustment.”
17
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
3.
Summary of significant accounting practices
3.1. Significant accounting practices
The quarterly information was prepared in accordance with CVM Resolution 673/11, which
sets forth the minimum interim accounting information to be reported and the principles of
recognition and measurement for complete or condensed interim statements. Thus, the
quarterly information presented here was prepared based on the accounting policies and
estimate calculation methods used while preparing the annual financial statements for the
fiscal year ended December 31, 2014. There has been no change in said policies and
estimate calculation methods.
As allowed by CVM Resolution 673/11, and based on the recommendations contained in
Official Letter CVM/SNC/SEP/No. 003/2011, management chose to not report once again
the details presented in Note 3. “Summary of significant accounting practices”, in order to
avoid repeating the information already disclosed in its latest annual financial statements.
Hence, users must read this quarterly information together with the annual financial
statements for the fiscal year ended December 31, 2014, to have a better understanding.
3.2. Discontinued operations and assets held for sale
An operation is classified as discontinued upon the earlier of its sale or when it meets the
criteria for classification as held-for-sale. When an operation is classified as discontinued,
the comparative statements of income and of cash flow are presented as if the operation
had been discontinued since the beginning of the comparison period, and therefore include
the caption “Reclassified” for the June 30, 2014 statements.
These assets are measured by the lower between their book value and fair value less
selling expenses.
Once they are classified as held-for-sale, intangible and fixed assets can no longer be
amortized or depreciated.
Results from discontinued operations are presented as a single entry in the income
statement, at their net amount after Income and Social Contribution Taxes paid by these
operations, less any impairment losses, and are presented in Notes 3.3 and 36.
3.3. Reclassification in the statements of income and of cash flow in the period ended
June 30, 2014
On June 21, 2015, the Company disclosed through a Material Fact notice the Final
Agreement for the Purchase and Sale of Ownership Interest and Other Covenants with JBS
S/A, which laid out the terms and conditions for the sale to JBS S.A. of all ownership
interests held by Marfrig in Moy Park Holdings Europe Ltd., parent company of the
companies operating the “Moy Park” business unit.
As a result, in compliance with the provisions of CPC 31 and for comparison purposes, the
Corporation and its subsidiaries restated their statements of income, of cash flow, of
comprehensive income and notes to the financial statements for the period ended June 30,
2014.
18
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
4.
Cash and cash equivalents
Cash and cash equivalents consist of cash, banks and cash equivalents, as shown below:
Parent
6/30/15
12/31/14
Cash and banks
Cash equivalents
Consolidated
6/30/15
12/31/14
170,806
367,049
829,707
1,023,213
425
20,779
9,445
68,472
171,231
387,828
839,152
1,091,685
The subsidiaries’ cash and cash equivalents are consolidated as follows:
Brazil
6/30/15
Cash and banks
Cash equivalents
Abroad
12/31/14
106,867
48,963
6/30/15
552,034
12/31/14
607,201
-
-
9,020
47,693
106,867
48,963
561,054
654,894
The Corporation adopts the policy of presenting the following items within the cash and
cash equivalents group:
•
•
Cash on hand;
Demand deposits.
19
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
4.1 Cash and banks by currency
Cash by currency are as follows:
Parent
6/30/15
Consolidated
12/31/14
6/30/15
12/31/14
Cash and banks:
Brazilian real
54,514
136,650
58,453
150,366
US dollar
86,944
230,174
379,001
334,481
Euro
29,348
225
48,564
35,430
Pound sterling
-
-
16,223
266,895
M alaysian ringgit
-
-
26,834
16,850
Chinese Yuan
-
-
163,154
139,539
Australian dollar
-
-
14,038
18,671
Thai Baht (Thailand)
-
-
45,755
19,358
South Korean Won
-
-
36,044
20,429
Honk Kong dollar
-
-
19,301
9,824
Uruguayan peso
-
-
16,568
7,772
Chilean peso
-
-
5,609
3,427
Other
-
-
163
171
170,806
367,049
829,707
1,023,213
4.2 Cash equivalents
Cash equivalents by type are as follows:
Parent
PMPV (1) Currency
Maturities
CDB Automatic savings account (2)
Interest-bearing account (2)
Other (2)
Total
Immediate
Immediate
-
-
BRL
USD
BRL
Average interest
rate p.a.%
8.30
0.20
-
6/30/15
12/31/14
205
220
425
8,039
12,654
86
20,779
Consolidated
PMPV (1) Currency
Maturities
CDB Automatic savings account (2)
Interest-bearing account (2)
Other (2)
Total
(1)
Immediate
9/30/2015
-
-
BRL
USD
BRL
Average
interest rate
p.a.%
8.30
0.20
-
6/30/15
205
9,240
9,445
12/31/14
8,039
60,347
86
68,472
Weighted average maturity in years.
20
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
(2)
Transactions have daily liquidity and can be redeemed at any time. Said maturity refers to the corresponding
instrument.
4.2.1
CDB Automatic savings account
The remaining balances in checking accounts, in Brazilian real, are automatically
transferred to a savings account, which bears interest at financial market rates.
4.2.2
Interest-bearing account
The interest-bearing account consists of amounts received in U.S. dollar from exports
and financial transactions, kept in accounts abroad. It bears interest at a fixed rate.
5.
Marketable Securities
Parent
6/30/15
12/31/14
Marketable securities
Consolidated
6/30/15
12/31/14
993,368
455,589
1,726,131
1,568,082
993,368
455,589
1,726,131
1,568,082
The Corporation’s financial investments by type are as follows:
Parent
Maturities
PMPV (1) Currency
Average interest
rate p.a.%
6/30/15
12/31/14
Held-for-trading:
Bank deposit certificates - CDB (2)
Immediate
-
BRL
12.90
132,050
Repurchase and reverse repurchase agreements
Immediate
-
BRL
4.96
174,272
Interest-bearing deposit
09/18/2015
0.22
USD
2.14
577,814
212,083
Brazilian prize-draw investment bonds
Credit-linked note - CLN (2)
FIDC
Total
Immediate
07/17/2017
06/13/2017
2.08
1.98
BRL
USD
BRL
0.21
17.14
6
93,174
16,052
99
79,762
17,194
993,368
455,589
993,368
455,589
Total current
146,451
-
21
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Consolidated
PMPV (1) Currency
Maturities
Held-for-trading
Bank deposit certificates - CDB (2)
Repurchase and reverse repurchase agreements
Interest-bearing deposits
Interest-bearing deposits
Circular Letter 1456
Brazilian prize-draw investment bonds
Brazilian prize-draw investment bonds
Immediate
Immediate
03/31/2019
09/18/2015
12/31/14
Credit-linked note - CLN (2)
07/17/2017
1.14
USD
FIDC
06/13/2017
1.98
BRL
17.14
16,052
17,194
09/30/2015
0.34
BRL
1.15
47,357
1,726,131
282,414
1,568,082
1,725,191
940
1,567,112
970
Fixed income bonds
Total
-
BRL
BRL
BRL
USD
USD
BRL
USD
6/30/15
11.67
4.96
2.14
6.16
Immediate
0.22
-
Average interest
rate p.a.%
Total current
Total non-current
(1)
(2)
179,211
174,272
214
577,814
6
-
185,664
244
451,215
1,723
99
3,540
731,205
625,989
Weighted average maturity in years.
Transactions have daily liquidity and can be redeemed at any time. Said maturity is the maturity of the
operation.
The Corporation maintains the following types of financial investments:
5.1 Bank Certificate of Deposit (CDB)
Bank certificates of deposit are investments made at prime financial institutions at variable
rates and yield on average 96% to 100% of the variation in the Interbank Deposit Rate (CDI).
5.2 Repurchase and reverse repurchase agreements
Transactions based on outstanding daily cash denominated in Brazilian real that bear
interest at the CDI (Interbank Deposit Rate), which ranges from 80% to 100%. This operation
has immediate liquidity, for it can be early redeemed without yield loss.
5.3 Interest-bearing deposits
The investments of this type are made in Brazilian real and U.S. dollar and bear interest at
fixed rates and measured by the amortized cost.
5.4 Circular Letter 1456
The investments of this type consist of exports denominated in U.S. dollar with the Central
Bank of Uruguay that bear interest at fixed rates, and are made between 180 and 360 days
before the export.
22
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
5.5 Brazilian prize-draw investment bonds
The investments of this type are made in Brazilian real and bear interest at the benchmark
rate (TR).
5.6 Credit linked note (CLN)
The Credit Linked Notes “CLN” comprise a financial instrument exclusively used to
generate resources among the Group’s companies and correspond to a credit note used to
mitigate the Corporation’s credit risk, as presented in Note 18.2.
The resources applied in these instruments derive from funds raised in the international
capital markets issued by Marfrig Group’s foreign subsidiaries, which due to cash
management and liquidity strategy are maintained at the issuing foreign subsidiaries. The
average yield rate is 6.16% p.a. and they are measured by the amortized cost per annum.
5.7 FIDC – Fundos de Investimentos em Direitos Creditórios (Receivables Backed
Investment Funds)
These are shares of an investment fund that invests in receivables rights.
5.8 Fixed Income Bonds
These are investments in fixed income securities issued by top tier financial institutions at
fixed rates.
23
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
6.
Trade accounts receivable – domestic and foreign customers
Parent
6/30/15
Trade accounts receivable - domestic
(-) Discount to present value
12/31/14
192,522
(5,351)
187,171
201,589
(5,789)
195,800
Consolidated
12/31/14
6/30/15
615,454
(9,144)
952,048
(10,771)
606,310
941,277
1,152,249
517,601
538,749
841,063
(399,360)
(447,020)
(399,360)
(13,192)
(14,593)
(23,490)
(27,746)
105,049
77,136
418,213
677,483
292,220
272,936
1,024,523
1,618,760
612,959
702,777
933,469
1,634,272
From 1 to 30 days
35,026
20,300
280,111
293,951
From 31 to 60 days
56,434
11,985
196,904
98,046
From 61 to 90 days
5,704
5,276
46,033
78,028
More than 90 days
7,633
7,405
23,410
35,146
Trade accounts receivable - foreign
(-) Advances on export contracts (ACEs)
(-) Discount to present value
Amounts not yet due
(447,020)
Amounts overdue
(-) Advances on export contracts (ACEs)
(-) Discount to present value
(-) Estimated losses with doubtful accounts
(399,360)
(447,020)
(399,360)
(447,020)
(18,543)
(20,382)
(32,634)
(38,517)
(7,633)
(7,405)
(23,410)
292,220
272,936
1,024,523
(35,146)
1,618,760
The estimated loss with doubtful accounts was set up in an amount deemed sufficient by
Management to cover possible losses on the realization of receivables.
Aiming to achieve the best estimate possible, concerning the realization of such credits,
and therefore duly set up an allowance for estimated losses with doubtful accounts as at
June 30, 2015, the Corporation's Management analyzed particular aspects about its
customers, such as business activity, general credit situation, the market’s economic
situation and notes due for more than 90 days and whose settlement is not considered as
possible.
The Corporation does not have a history of relevant problems with collection, and the
Accounts Receivable Department rates each customer upon acceptance and credit granting.
Changes in estimated losses for credit risks are as follows:
24
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Parent
Consolidated
(7,405)
(35,146)
Estimate accrued in the period
(11,321)
(14,394)
Estimate reversed in the period
Written-off credits
11,093
-
15,948
Exchange rate variation
-
(1,371)
Discontinued operation
Balance on June 30, 2015
(7,633)
Balance on December 31, 2014
14
11,539
(23,410)
A receivables backed investment fund (Fundo de Investimento de Direitos Creditórios FIDC) was created in June 2014 to sell a portion of the receivables from the installment
sale of products in the domestic market, up to the limit of R$160 million (principal), of
which R$ 24 million consists of subordinated shares. On June 30, 2015, the amount of bills
traded with the fund was R$118,349.
For sales paid in installments, the Corporation uses working capital financing lines available
in financial markets.
Receivables were discounted to present value in accordance with CPC Technical
Pronouncement No. 12, approved by CVM Resolution No. 564/08 (CPC 12 – present value
adjustment), as described in note 3.1.6 to the financial statements for the fiscal year
ended December 31, 2014.
25
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
7.
Inventories of products and merchandise
In the years ended June 30, 2015 and 2014, inventories of finished products were carried at
average purchase and/or production cost, as explained in note 3.1.6 to the financial
statements for the fiscal year ended December 31, 2014:
Parent
6/30/15
12/31/14
Finished products
Raw materials
Packaging material and storeroom supplies
(-) Estimated losses
495,669
22,816
(19,567)
498,918
Consolidated
12/31/14
6/30/15
693,276
28,381
(13,566)
708,091
1,105,882
191,212
131,197
(21,777)
1,406,514
1,567,978
320,245
196,843
(57,147)
2,027,919
The Corporation grounds its estimates on historical losses, as follows:
Parent
Reversal of estimates
(57,147)
-
1,621
Recognition of estimates
(6,001)
(5,948)
Translation gains (losses)
-
Discontinued operation
Balance on June 30, 2015
8.
Consolidated
(13,566)
Balance on December 31, 2014
(19,567)
856
38,841
(21,777)
Biological assets
Current
Biological assets - cattle
Biological assets - poultry
Translation gains (losses)
Total current biological assets
Parent
6/30/15
12/31/14
-
-
Non-current
Biological assets - poultry
Translation gains (losses)
-
-
Total non-current biological assets
-
Total biological assets
-
Consolidated
12/31/14
6/30/15
114,100
164,535
97,049
167,688
21,646
19,977
232,795
352,200
42,402
4,537
130,735
11,405
-
46,939
142,140
-
279,734
494,340
The Corporation's current biological assets are composed of live animals segregated among
the categories: poultry and cattle. Animals classified in this group are those intended for
slaughtering for production of fresh meat and/or processed products in the next 12 months.
26
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Due to the short formation period of poultry, as well as not having a quotation to poultry
and pigs market, the Corporation evaluated these biological assets and identified no
material adjustments in relation to acquisition cost. In this case, the Corporation believes
that the fair value of biological assets is substantially represented by the formation cost,
given the short life cycle of the animals.
With respect to beef cattle, these are animals kept in feedlots for fattening and slaughter,
and the balance presented in this item is available for use over the next 12 months. The
Corporation valued these animals at fair value, based on the "Marked to Market - MtM”
concept, considering the market prices of the “arroba”1 of cattle, and recognized the
effects of these valuations directly in the statement of operations.
The Corporation’s non-current biological assets are composed of live poultry, classified as
breeding stock and intended for reproduction. These assets are amortized on a straight-line
basis over the useful life of the animals. Poultry for reproduction have an average useful
life of up to 60 weeks.
The changes in biological assets are as follows:
Current biological assets:
Balance on December 31, 2014
Parent
-
Increase due to purchases
(-) Write-off for slaughter
Costs of input for fattening
(-) Decrease due to sales
Net increase (decrease) due to births (deaths)
Change in fair value less estimated sale expenses (*)
Balance sheet translation
Discontinued operation
Balance on June 30, 2015
Consolidated
352,200
-
49,813
(646,584)
703,018
(134,047)
(753)
1,992
21,646
(114,490)
232,795
Balance on December 31, 2014
-
Consolidated
142,140
Increase due to purchases
(-) Write-off for slaughter
Costs of input for fattening
Amortization
Balance sheet translation
Discontinued operation
Balance on June 30, 2015
-
14,032
(1,953)
17,451
(29,990)
4,537
(99,278)
46,939
(*) Only applies to cattle.
Non-current biological assets:
Parent
1
Arroba = A unit of weight equivalent to 15 Kg.
27
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Parent
Consolidated
ICMS (State VAT)
PIS (tax on sales) credit
Cofins (tax on sales) credit
Income tax
Social contribution tax
IRRF (Withholding Income Tax)
IVA (value-added tax)
Export certificates
Reintegra tax credit
Other
(-) Estimated losses from non-realization
6/30/15
664,195
311,741
1,520,803
79,578
16,457
18,748
50,524
(451,389)
2,210,657
12/31/14
662,735
248,261
1,586,581
47,025
15,001
17,037
28,223
(451,389)
2,153,474
6/30/15
697,116
490,078
2,157,282
101,532
18,206
19,829
75,495
6,954
79,285
14,252
(676,385)
2,983,644
12/31/14
690,541
412,647
2,192,059
64,101
16,793
17,958
92,073
6,526
46,981
7,510
(676,385)
2,870,804
Current assets
Non-current assets
928,064
1,282,593
878,476
1,274,998
1,453,621
1,530,023
1,361,635
1,509,169
9.
Recoverable taxes
9.1
ICMS (State VAT)
The balance of recoverable ICMS derives from credits taken for ICMS paid on the purchase
of raw, packaging and other materials, in amounts higher than the debts generated from
domestic sales, since foreign market sales are free from this tax. Credit realization is made
through offsetting against debts generated in domestic sales or through transfers to third
parties.
9.2
PIS and COFINS taxes
Pursuant to Laws No. 10.637/02 and 10.833/03, this line item consists of noncumulative PIS
and COFINS credits on the acquisition of raw, packaging, and other materials used in the
goods sold in foreign markets.
The Corporation is engaged in registering its rights before the Federal Revenue Service.
9.3
Income and Social Contribution Taxes
This line item consists of income and social contribution taxes prepaid in the period ended
June 30, 2015.
28
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
9.4
Withholding income tax (IRRF)
Withholding income tax consists of income tax withheld on yields from marketable
securities held by the Corporation.
9.5
IVA – Value Added Tax
This caption refers to balances of recoverable value added tax of foreign subsidiaries
resulting from the tax difference between purchases and sales, given that the difference in
the food rate is lower than most transactions.
9.6
Export certificates
Export certificates are certificates issued by the government of Uruguay as return of a
percentage of income tax paid by exporters.
9.7
Reintegra Credit
It refers to the Reintegra tax refund program for exporters, characterized as a tax
incentive by MP 540 of August 2, 2011 and converted into Law 12,546 of December 14,
2011, and regulated by Decree 7,633 of December 1, 2011, reintroduced through Articles 21
to 29 of Provisional Decree (MP) 651 of July 9, 2014, converted into Law 13,043 of
November 13, 2014 and regulated by Decree 8,304 of September 12, 2014 and Ordinance
428 of September 30, 2014, published in the Brazilian Federal Government Gazette (DOU)
on October 1, 2014, by which a part of federal taxes on production chains used for the
export of products covered by the law is refunded.
9.8
Estimated losses from non-realization of tax credits
The estimated losses for non-realization of tax credits were calculated based on the best
expectation of realization of the Corporation’s recoverable taxes balances, in which main
credits are mainly from PIS/COFINS. In the period ended June 30, 2015, there were no
changes in the estimates for non-realization of tax credits.
10.
Notes receivable
Parent
6/30/15
Related-party transactions
Market transactions receivable
Other notes receivable
Total
Current assets
Non-current assets
Consolidated
12/31/14
6/30/15
12/31/14
2,922,947
2,521,877
-
-
1,846
14,376
387,355
275,261
54,743
88,214
85,761
128,664
2,979,536
2,624,467
473,116
403,925
859,239
842,268
55,882
58,261
2,120,297
1,782,199
417,234
345,664
The Parent Company’s notes receivable mostly consist of balances resulting from
transactions with its subsidiaries (related parties), as described in Note 10.1.
29
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
30
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
10.1 Related-party transactions
The following tables, except for transactions with Mr. Marcos Antonio Molina dos Santos and
Mrs. Márcia Aparecida Pascoal Marçal dos Santos, sole partners of MMS Participações Ltda.,
show the transactions between the Corporation and its wholly-owned subsidiaries as at
June 30, 2015:
Parent
6/30/15
June 30, 2015
2015
Accounts
Accounts
Notes
Notes
receivable
payable
receivable
payable
Purchases
Sales
Cledinor S.A.
-
38,552
-
-
5,905
-
Establecimientos Colonia S.A.
-
15,837
-
-
4,109
-
Frigorífico Tacuarembó S.A.
-
25,591
3,748
103,449
5,131
-
Inaler S.A.
-
19,483
-
-
3,847
-
Marfood USA Inc.
-
-
-
-
-
675
Marfrig Argentina S.A
-
2,199
292,409
-
7,560
-
20,620
572
-
-
599
95,606
5,830
-
16,300
6,654,010
-
-
-
-
40,948
541,628
-
-
80,706
63,836
2,224,349
-
319,235
181,485
4,249
23,113
196,425
-
114,271
4,861
-
-
125
7,014
5,198
-
21,384
159
148,643
-
-
76,221
Marcos Antonio Molina dos Santos
-
2,392
-
-
8,909
-
Marcia Aparecida Pascoal Marçal dos Santos
-
1,546
-
-
5,439
-
132,789
193,280
2,922,947
7,306,101
480,203
358,848
Marfrig Chile S.A.
Marfrig Holdings (Europe) BV
Marfrig Overseas Ltd.
MFB Marfrig Frigorificos Brasil S.A
MFG Agropecuária Ltda.
MFG Comercializadora de Energia Ltda
Pampeano Alimentos S.A.
31
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Parent
12/31/14
Accounts
December 31, 2014
receivable
Notes
payable
receivable
Cledinor S.A.
-
27,752
Establecimientos Colonia S.A.
-
12,102
Frigorífico Tacuarembó S.A.
-
17,379
Inaler S.A.
Marfood USA Inc.
Marfrig Argentina S.A
Marfrig Chile S.A.
Marfrig Holdings (Europe) BV
Marfrig Overseas Ltd.
MFB Marfrig Frigorificos Brasil S.A
MFG Agropecuária Ltda.
MFG Comercializadora de Energia Ltda
Pampeano Alimentos S.A.
2014
Accounts
Notes
payable
-
Purchases
Sales
-
11,465
-
-
-
8,967
-
423
64,901
9,140
-
-
13,330
-
-
9,106
-
1,035
-
-
-
-
1,007
-
3,485
245,154
-
12,892
-
49,764
-
-
-
802
161,376
-
-
1,627
4,910,364
-
9,232
-
-
35,057
463,360
-
-
22,287
59,658
1,778,283
-
788,755
321,790
693
19,864
265,813
-
299,596
12,754
-
-
121
2,769
-
-
7,489
82
195,399
-
-
120,407
23,655
-
-
-
-
27,160
Marcos Antonio Molina dos Santos
-
1,754
-
-
2,176
-
Marcia Aparecida Pascoal Marçal dos Santos
-
942
-
-
9,986
-
104,923
156,348
2,521,877
5,441,394
1,152,885
653,726
Weston Importers Ltd.
Marcos Antonio Molina dos Santos
Marcia Aparecida Pascoal Marçal dos Santos
Receivables
6/30/15
12/31/14
23,914
33,479
23,914
33,479
Consolidated
Total purchases in the
Accounts Payable
period
6/30/15
12/31/14
6/30/15
6/30/14
2,572
2,189
9,561
1,644
1,546
8,537
5,677
12,419
4,118
10,726
15,238
14,063
On June 30, 2014, the Corporation signed an Agreement for the Purchase and Sale of Cattle
and Equipment and the Hiring of employees, through its wholly owned subsidiary MFG
Agropecuária Ltda., with the current controlling shareholder of the Grupo Marfrig Global
Foods S/A, Mr. Marcos Antonio Molina dos Santos, by which the Corporation undertakes to
sell said assets and liabilities to the controlling shareholder in an irrevocable manner. The
transaction was duly approved by the Audit Committee the Marfrig Group, led by an
independent director.
32
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
These assets are being sold at the market value and, as for the purchase and sale of cattle,
and purchase of equipment, they are duly registered in the results as of the second quarter
of 2014, without causing any losses to the Corporation. The balance presented in this note,
as Receivables, refers to the net effect of the sale of cattle, acquisition of equipment, less
costs of transfer of labor, less the amounts paid by the controlling shareholder through the
second quarter of 2015. This thus materializes all transfers of assets and liabilities so that
all the underlying items of said agreement have been transferred to the buyer.
The Corporation and the controlling shareholder agreed as consideration for said
transaction, the payment of the balance, in cash, in 9 consecutive quarterly installments
starting from the third quarter of 2014.
By June 30, 2015, the controlling shareholder had settled four installments of said
agreement, in the amount of R$19,131, according to the payment schedule envisaged in
the agreement.
The Corporation’s controlling shareholder, MMS Participações Ltda., and its sole partners,
have endorsed some financial agreements of the Corporation. In case of default, creditors
can demand payment directly from the controlling shareholder and from its partners and, if
they make the payment, they will be entitled to reimbursement from the Corporation.
The Corporation did not pay any commissions or other amounts to the appraisers.
In a meeting held on June 24, 2015, the Board of Directors of the Corporation established
new limits of authority for its Management Bodies. The Management Committee is now
responsible for authorizing a series of acts, with powers over amounts corresponding to
between R$300 million and R$400 million. For acts whose required powers exceed those
determined for the Management Committee, approval is required from the Board of
Directors of the Corporation.
No relations are maintained with other officers and shareholders of Marfrig Group.
The nature of related-party transactions between Marfrig Group companies is represented
by commercial transactions (purchases and sales) and sending of cash for payment of such
transactions, as well as for working capital.
Intercompany loans (instruments receivable and payable) in Brazil (parent company and
subsidiaries) are managed by checking accounts held between the companies based on the
centralized cash system managed by the parent company. For transactions with subsidiaries
abroad, the loan rate is 3% plus 6-month LIBOR (London Interbank Offered Rate).
Purchases and sales of products are made at market values. No guarantees or estimated
losses with doubtful accounts are required. These transactions involve purchase and sale of
fresh meat and cattle, poultry and lamb processed products.
Transactions between subsidiaries do not have an impact on consolidated financial
statements, given that they are eliminated in consolidation.
33
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
11.
Assets and Liabilities Held for Sale
Certain ownership interests in group companies that hold the poultry and beef processed
food products business unit in the United Kingdom and Continental Europe are presented as
a held-for-sale assets and liabilities, following the criteria for classification of such assets,
since there is a firm sale commitment signed with JBS S.A., as per the Material Fact notice
of June 21, 2015. Note 1 presents said ownership interests as business segments of
discontinued operations.
The transaction is subject to the authorizations by applicable authorities typical to
transactions of this nature, including the anti-trust authorities of the European Union. The
transaction is expected to be consummated between the third and fourth quarters of this
year.
On June 30, 2015, the assets and liabilities held for sale were as follows:
Assets
Current assets
Cash and cash equivalents
Domestic and foreign trade accounts receivable
Property, plant and equipment and Biological Assets
Intangible assets
Other assets
Consolidated
6/30/2015
592,488
315,532
1,341,414
1,096,044
1,509,739
Consolidated
6/30/2015
Liabilities
Current liabilities
Trade payables
Loans and financing
Deferred taxes
Other liabilities
871,249
1,507,876
269,057
338,436
Total liabilities
2,986,618
Shareholders' Equity
Amounts related to assets held for sale
Total assets
12.
4,855,217
Total liabilities and shareholders’ equity held for sale
(751,773)
(751,773)
2,234,845
Deferred Income and Social Contribution Taxes - Assets
Income tax
Social contribution tax
Non-current assets
Parent
6/30/15
12/31/14
1,192,660
967,923
431,064
350,159
1,623,724
1,318,082
Consolidated
12/31/14
6/30/15
1,593,797
1,328,587
462,752
379,850
2,056,549
1,708,437
34
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Tax credits consist of deferred Income and Social Contribution Taxes, calculated on
temporary add-backs/exclusions that were added/excluded to the taxable income and the
social contribution tax basis in prior and current years and calculated on tax losses,
temporary add-backs and future utilization for tax purposes of goodwill paid due to future
profitability, which will be realized from 2015 onwards.
Tax credits recognized for income and social contribution tax losses are supported by
taxable income projections based on feasibility studies that are annually reviewed by the
Corporation's Management.
Other tax credits, which are based on temporary differences, especially tax provisions and
estimated losses, were recognized according to the expected realization.
Below are the changes in deferred taxes in the period ended June 30, 2015:
Description
Income Tax
Closing balance on December 31, 2014
967,923
(158,223)
(-) Realization of taxes on tax losses
635,320
Deferred taxes on tax losses
Deferred taxes on social contribution tax loss carryforwards
(-) Realization of deferred taxes on social contribution tax loss carryforwards
179,480
Deferred taxes on temporary add-backs/deductions
(431,840)
(-) Realization of deferred taxes on temporary add-backs/deductions
Translation gain or loss
Other
Discontinued operation
Closing balance on June 30, 2015
1,192,660
June 30, 2015
Parent
Social
contribution tax
Income Tax
350,159
228,715
(56,960)
64,613
(155,463)
431,064
1,328,587
(173,418)
648,158
191,714
(448,316)
46,890
1,229
(1,047)
1,593,797
Consolidated
Social
contribution tax
379,850
236,077
(62,431)
68,995
(159,739)
462,752
The expectations for recoverability of the Corporation's and its subsidiaries' deferred tax
asset balances is based on an appraisal reports and internal analyses prepared by skilled
professionals. The value in use for credits is estimated based on the future estimated
taxable income, which results from the Corporation's estimates for future generations of
taxable income, through stress tests, based on the Corporation’s “Focus to Win” strategic
plan, announced to the market in October 2013 and implemented soon after, and whose
targets were completely met by the end of 2014.
The “Focus to Win” plan has the following pillars: a) specific agenda of productivity gains in
the Beef Brazil business; b) margins under control; c) acceleration of organic growth
in/across regions/key accounts; d) focus on more profitable distribution channels; e) higher
integration of business platforms at the global level.
35
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Note that the projections considered the changes in the economy involving the
Corporation's business markets, as well as assumptions for expected results and history of
profitability for each segment.
For 2015, the Corporation will reinforce its strategic commitments already adopted and will
expand actions both in the productivity agenda (Beef Brazil and Keystone) and in the active
management of the Corporation’s debt.
The expected realization of "Deferred Tax Assets”, based on a technical feasibility study as
per CVM Instruction 371 of June 27, 2002 is as follows:
Year
Parent
2015
-
29,223
2016
-
91,230
2017
20,983
49,056
2018
88,024
117,372
2019
125,611
161,834
2020
180,368
184,536
1,208,738
1,423,298
1,623,724
2,056,549
2021 to 2024
13.
Consolidated
Investments
Parent
6/30/15
12/31/14
Interest in subsidiaries
Other investments
4,194,111
135
4,194,246
3,405,210
135
3,405,345
Consolidated
6/30/15
12/31/14
35,837
36,934
35,837
36,934
36
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
13.1 Investments (Parent)
Investments in subsidiaries on June 30, 2015:
Ownership
percentage in
voting capital
No. of units of
interest/shares
MFB Marfrig Frigorificos do Brasil S.A.
Marfrig Chile S.A.
Inaler S.A
Frigorífico Tacuarembó S.A
Weston Importers Ltd
Masplen Ltd
Prestcott International S.A
Establecimientos Colonia S.A
Marfood USA, Inc
Marfrig Overseas Ltd
MFG Agropecuária Ltda.
Marfrig Argentina S.A.
MFG Comercializadora de Energia Ltda
Marfrig Holdings(Europe) BV
Marfrig Peru S.A.C.
Mercomar Emp. E Participações Ltda.
Total
Trading on the
stock exchange
Share capital
Equity value
according to %
interest
Net income (loss) for
the period
Equity
78,573,743
100.00
No
78,574
103,752
9,950
99.50
No
77,183
91,491
11,474
90,990
66,247,320
100.00
No
4,552
66,455
(1,067)
66,446
163,442,679
97.91
No
20,269
329,284
44,709
320,768
8,101,296
100.00
No
39,530
(22,925)
(1,252)
(22,926)
5,050
100.00
No
11,453
19,577
(12,014)
18,392
79,638,916
100.00
No
9,066
98,545
4,305
98,545
403,237,385
100.00
No
81,447
52,986
(4,511)
52,660
50,000
100.00
No
76,629
(10,190)
(2,430)
(10,190)
1
100.00
No
-
(462,100)
(63,041)
(462,100)
9,999
99.99
No
-
(4,198)
620
(4,197)
854,320,542
99.92
No
442,411
64,566
(32,307)
64,514
149,985
99.99
No
-
1,388
(393)
1,389
2,403,806
100.00
No
3,001,249
3,373,004
(40,977)
3,373,004
5,000
100.00
No
6
(287)
(53)
(287)
441,824,873
100.00
No
441,825
503,351
-
503,351
4,284,194
4,204,699
(106,006)
4,194,111
(9,069)
103,752
37
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
The following table presents a summary of the financial information of the subsidiaries:
Total assets
Total liabilities
2,885,775
2,782,022
Marfrig Chile S.A.
172,277
80,783
Inaler S.A
181,044
114,588
Frigorífico Tacuarembó S.A
535,823
206,539
35,428
58,354
Masplen Ltd
322,922
Prestcott International S.A
Non-controlling
interest
Group's profit/loss
sharing
Net revenue
1,417,025
(9,069)
213,634
11,417
-
207,801
(1,067)
6,882
339,860
43,775
-
45
(1,252)
303,345
-
205,837
(12,014)
202,474
103,928
-
235,352
4,305
Establecimientos Colonia S.A
267,441
214,455
-
192,156
(4,511)
Marfood USA, Inc
153,878
164,068
-
97,843
(2,430)
3,428,651
3,890,751
-
MFG Agropecuária Ltda.
249,191
253,389
-
Marfrig Argentina S.A.
497,721
433,150
8,631
7,243
16,000,851
MFB Marfrig Frigorificos do Brasil S.A.
Weston Importers Ltd
Marfrig Overseas Ltd
MFG Comercializadora de Energia Ltda
Marfrig Holdings(Europe) BV
Marfrig Peru S.A.C.
Mercomar Emp. E Participações Ltda.
Total
457
-
(63,041)
111,273
620
321,145
(32,282)
-
30,901
(393)
12,479,564
-
4,054,984
(40,977)
786
1,073
-
632
(53)
535,046
31,695
-
25,477,939
21,124,947
52
7,391
-
-
7,428,488
(106,972)
38
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
13.2 Breakdown of investments (parent)
Effect of reverse equity interest in the equity accounts of subsidiaries.
Book balance on
12/31/2014
MFB Marfrig Frigorificos do Brasil S.A
Marfrig Chile S.A.
Inaler S.A.
Frigorífico Tacuarembó S.A.
Weston Importers Ltd.
Masplen Ltd
Prestcott International S.A.
Establecimientos Colonia S.A
Marfood USA, Inc
Marfrig Overseas Ltd
MFG Agropecuaria Ltda
Marfrig Argentina S.A.
MFG Comercializadora de Energia Ltda
Marfrig Holdings(Europe) BV
Marfrig Peru S.A.C.
Mercomar Emp. e Participações Ltda.
Total
Asset valuation
adjustment
Capital
increase/
(reduction)
Acquisition/
Write-off
Total
investment in
the period
(2,628)
-
-
-
979
71
(355)
(14,114)
(142,001)
-
503,351
24,499
-
3,405,210
(158,048)
503,351
24,499
115,449
69,936
57,673
234,644
(18,949)
35,155
79,695
48,531
(6,392)
(339,384)
(4,817)
75,447
1,782
3,056,659
(219)
Equity in earnings
(losses) of
subsidiaries (1)
Discontinued
operation
Balance sheet
translation effect
(9,069)
-
-
503,351
11,391
(1,030)
44,690
(1,253)
(12,587)
4,405
(4,486)
(2,430)
(63,041)
620
(32,219)
(393)
(75,953)
(53)
-
34,976
-
9,663
9,803
41,434
(3,703)
(4,176)
14,374
8,615
(1,013)
(59,675)
10,901
499,323
(15)
-
527,850
(141,408)
34,976
525,531
24,499
-
Book balance
on 6/30/2015
103,752
90,990
66,446
320,768
(22,926)
18,392
98,545
52,660
(10,190)
(462,100)
(4,197)
64,514
1,389
3,373,004
(287)
503,351
4,194,111
(1) The balance corresponds to the Corporation’s ownership interest in its subsidiaries.
39
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
13.3 Acquisition of ownership interest
On May 25, 2015, Marfrig acquired a business formed by the following assets: (a)
acquisition of all shares of Mercomar Empreendimentos e Participações Ltda.,
including the previously leased units of Capão do Leão (Rio Grande do Sul), Mato
Leitão (Rio Grande do Sul), Pirenópolis (Goiás), Tucumã (Pará) and Nova Londrina
(Paraná). In consideration, Marfrig will pay the amount of R$428.2 million in cash.
The payment of the amount of R$428.2 million will be divided in two phases: a down
payment of R$4 million and the remaining balance of R$424.2 million divided into 24
quarterly installments with a grace period of three years for the payment of
principal. Interests will be restated at the CDI overnight rate plus 1.5% per year and
will be paid in 36 quarterly installments.
On the acquisition date, in accordance with CPC 15 (R1) – Business Combination, the
Corporation measured the assets acquired and liabilities assumed at fair value,
based on appraisal reports prepared by external experts engaged by the
Corporation, observing fair and consistent criteria, assumptions and projection
methodologies for transactions of this nature. Initially, no liabilities or provisions for
contingencies were identified that should be recognized on the acquisition date, as
the acquired company was incorporated recently and does not have a history of
activities that could generate liabilities of this nature.
The fair value of these assets and liabilities were measured at R$503.4 million, and
any fair value gains associated with said assets were adequately recognized under
property, plant and equipment and intangible assets. The Management of the
Corporation revised the adopted assumptions and criteria and considered that the
value of these assets was fairly measured on the acquisition date. Furthermore, all
deferred tax effects on the fair value gain were duly recognized.
Assets of the c ompany M erc omar e Empreendimentos e Partic ipaç ões Ltda (a)
Cash and equivalents
441,825
2
Property, plant and equipment
441,823
Book value of ac quired assets and assumed liabilities
441,825
Fair value of property, plant and equipment acc ording to expert appraisal report (b)
186,516
Fair value of intangible assets ac c ording to expert appraisal report (c)
348,528
Deferred taxes
Fair value
(31,693)
503,351
Ac quisition value
428,158
(=) Bargain purchase - Gain in the operation (d)
75,193
Inc ome and soc ial contribution tax rate
Inc ome and Soc ial Contribution taxes
(a)
34%
25,566
Mercomar Empreendimentos e Participações Ltda., company that received the assets held by
Frigorífico Mercosul S/A and its affiliates were established in April 27, 2015. These assets are
formed by all goods and rights related to the five (5) units located in: Capão do Leao/RS;
Tucumã/PA; Mato Leitão/RS; Nova Londrina/PR and Pirenópolis /GO.
40
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
(b)
The acquired amount is included in the “Additions” column of the Summary of Changes, in
accordance with the note on property, plant and equipment (Note 14).
(c)
The acquired amount is included in the “Additions” column of the Summary of Changes, in
accordance with the note on intangible assets (Note 15).
(d)
The acquisition resulted in a bargain purchase, the effect of which gain was recorded in the
income statement under “Other operating income (expenses)”. Tax effects were also recognized.
The Management of the Corporation monitors the effects from acquisition, observing
the deadlines for measurement, which may not exceed one year from the
acquisition date, in accordance with CPC 15 (R1) – Business Combination.
14.
Property, plant and equipment
The following tables show the weighted average annual depreciation rate determined using
the straight-line method and based on the economic useful life of the assets and their
balances:
Changes in acquisition cost of the parent company
Parent
6/30/15
Description
Plots of land
Constructions and buildings
Machinery and equipment
Furniture and fixtures
Facilities
Vehicles
IT equipment
Aircraft
Leasehold improvements
Lease - vehicles
Lease - computer hardware
Lease - machinery
Lease - facilities
Lease - buildings
Construction in progress
Other
Average
annual
depreciation
rates
3.06%
13.85%
10.05%
4.53%
18.20%
20.33%
20.00%
14.62%
20.00%
20.00%
10.00%
-
Cost
Additions
Writeoffs
Accumulated
depreciation
Transfers
Cost
28,210
797,940
398,993
15,313
877,357
32,331
12,221
382
9,606
19,231
16,943
12,160
18,240
6,314
8,811
315
56,307
369
11
176
22
1,319
2
80,974
3
(52)
(18)
(1)
(493)
(44)
-
355
128
19,566
3
(361)
51,436
(3)
8
(130)
(71,002)
-
(128,437)
(184,834)
(6,833)
(159,421)
(11,268)
(7,186)
(382)
(1,907)
(18,976)
(13,586)
(9,761)
(18,240)
(6,314)
(118)
28,210
669,503
270,769
8,959
737,501
20,584
4,806
59,135
274
4,684
2,271
18,783
200
2,254,367
139,183
(608)
-
(567,263)
1,825,679
41
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Changes in net balance of the parent company:
Parent
12/31/14
annual
depreciation
rates
Description
Plots of land
Constructions and buildings
Machinery and equipment
Furniture and fixtures
Facilities
Vehicles
IT equipment
Leasehold improvements
Lease - vehicles
Lease - computer hardware
Lease - machinery
Construction in progress
Other
6/30/15
Net Additions
3.06%
13.85%
10.05%
4.53%
18.20%
20.33%
14.62%
20.00%
20.00%
10.00%
-
Writeoffs
28,210
679,192
236,087
9,104
737,263
20,415
5,366
9,081
371
3,882
2,486
8,811
197
56,307
369
11
176
22
1,319
2
80,974
3
(40)
(12)
(54)
(43)
-
1,740,465
139,183
(149)
Transfers
Depreciation
355
128
19,566
3
(361)
51,436
(3)
8
(130)
(71,002)
-
Net
(9,689)
(21,940)
(630)
(19,328)
209
(332)
(1,382)
(116)
(525)
(87)
-
28,210
669,503
270,769
8,959
737,501
20,584
4,806
59,135
274
4,684
2,271
18,783
200
(53,820)
1,825,679
Changes in consolidated acquisition cost:
Consolidated
6/30/2015
Description
Plots of land
Constructions and buildings
Machinery and equipment
Furniture and fixtures
Facilities
Vehicles
IT equipment
Aircraft
Advance for acquisition of
Leasehold improvements
Lease - vehicles
Lease - computer hardware
Lease - machinery
Lease - facilities
Lease - buildings
Construction in progress
Other
Average
annual
depreciatio
n rates
2.38%
7.01%
7.32%
4.59%
13.04%
20.32%
20.00%
5.51%
20.00%
20.00%
0.75%
0.90%
Acquisition
Cost
Additions
Write-offs
Assets Held for
Sale
Transfers
Translation
93,628
2,680,703
2,392,123
142,072
1,073,568
92,428
68,397
382
69
560,893
20,476
17,409
130,308
18,790
11,577
146,761
2,710
12,000
108,901
95,778
3,993
27,449
1,184
383
604
1
1,319
3
119,722
334
(17,567)
(10,168)
(984)
(11)
(2,393)
(4,990)
(7,398)
(25)
(3)
(38)
(655,231)
(460,239)
(42,556)
(5,620)
(9,816)
(68,674)
-
6,142
49,655
3,805
27,629
269
3,547
71,754
(35)
8
(738)
(162,018)
(18)
7,452,294
371,671
(43,577)
(1,242,136)
-
10,364
175,698
96,472
3,370
2,176
2,351
(1,250)
2,223
5,840
57,781
(3)
355,022
Accumulated
Depreciation
Net Cost
(648,568)
(1,322,786)
(80,662)
(218,731)
(51,248)
(50,138)
(382)
(74,806)
(19,997)
(14,053)
(100,005)
(18,790)
(11,577)
(1,941)
115,992
1,650,078
840,835
29,038
912,080
36,971
6,133
69
553,270
420
4,683
35,408
93,569
1,044
(2,613,684)
4,279,590
42
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Changes in consolidated net balance:
Consolidated
12/31/14
Description
Plots of land
Constructions and buildings
Machinery and equipment
Furniture and fixtures
Facilities
Vehicles
IT equipment
Advance for acquisition of
Leasehold improvements
Lease - vehicles
Lease - computer hardware
Lease - machinery
Construction in progress
Other
Average
annual
depreciation
rates
2.38%
7.01%
7.32%
4.59%
13.04%
20.32%
5.51%
20.00%
20.00%
0.75%
0.90%
Net
6/30/2015
Additions
Write-offs
Assets Held for
Sale
Transfers
Translation
Depreciation
Net
93,628
2,050,246
1,132,413
63,424
878,640
41,870
14,349
69
493,993
657
3,883
40,911
146,759
781
12,000
108,901
95,778
3,993
27,449
1,184
383
604
1
1,319
3
119,722
334
(3,331)
(1,154)
(58)
(280)
(13)
(5)
(1)
(38)
(655,231)
(460,239)
(42,556)
(5,620)
(9,816)
(68,674)
-
6,142
49,655
3,805
27,629
269
3,547
71,754
(35)
8
(738)
(162,018)
(18)
10,364
175,698
96,472
3,370
2,176
2,351
(1,250)
2,223
5,840
57,781
(3)
(32,347)
(72,090)
(2,940)
(23,814)
(2,803)
(1,067)
(15,304)
(198)
(527)
(10,608)
(12)
115,992
1,650,078
840,835
29,038
912,080
36,971
6,133
69
553,270
420
4,683
35,408
93,569
1,044
4,961,623
371,671
(4,880)
(1,242,136)
-
355,022
(161,710)
4,279,590
According to CVM Resolution 645/10 (CPC 6(R1) – lease operations), the assets acquired by
the Corporation under a finance lease started to be recorded as property, plant and
equipment, including their respective depreciation, as mentioned above, with an offsetting
entry to lease payable, shown in note 20.
Pursuant to CVM Resolution 639/10 (CPC 01 (R1)- reduction to recoverable value of assets),
an asset is tested for impairment on an annual basis. The asset’s value must be estimated
only if there is any indication of impairment.
If any indication of impairment is found, recoverability analysis comprises projecting the
profitability and future cash of the Corporation’s business units, which are discounted to
present value to identify the degree of recoverability of the asset.
During the period ended June 30, 2015, the book values of the Corporation’s assets were
not higher than the amounts which could be obtained by use or sale. Our assessment also
included temporarily idle assets.
The Corporation and its subsidiaries recorded property, plant and equipment that are fully
depreciated and still in operation, as well as temporarily idle items, as follows:
43
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Parent
6/30/15
Description
Constructions and buildings
Property, plant and
equipment fully depreciated
and still in operation
Temporarily idle property, plant
and equipment
4,273
580
-
36,460
-
1,116
Machinery and equipment
Furniture and fixtures
Facilities
6,714
265
Vehicles
-
36,657
IT equipment
-
20,829
Aircraft
-
382
10,987
96,289
Consolidated
6/30/2015
Description
Temporarily idle property, plant and
equipment
Property, plant and equipment fully
depreciated and still in operation
Constructions and buildings
4,273
580
Machinery and equipment
8,233
42,466
Furniture and fixtures
208
1,407
Facilities
6,714
265
Vehicles
490
36,657
41
21,401
-
382
IT equipment
Aircraft
Leasehold improvements
130,201
-
150,160
103,158
44
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
15.
Intangible assets
The Corporation has the subgroup intangible assets, composed of non-current assets,
presented pursuant to CVM Resolution 644/10 (CPC 4 (R1) – intangible assets), as shown in
the summary below:
Parent
Goodwill
Amortization
rate
-
Trademark and patents
Software
12/31/14
6/30/15
12/31/14
526,791
526,791
762,320
1,061,568
9.24%
9.24
22,883
22,883
299,517
454,572
18.50%
5.36
31,027
33,717
35,993
38,300
Client relationship
9.09%
-
Other intangible assets
6/30/15
-
Client relationship
Sales channels
Useful life
Consolidated
10.00
-
-
29,072
518,113
Indefinite
-
-
1,045,315
896,381
5.50%
10.00
-
-
295,586
-
23.90%
4.25
580,701
583,391
62,573
2,530,376
35,775
3,004,709
Consolidated breakdown of intangible assets
Parent
Balance on December 31, 2014
Consolidated
583,391
3,004,709
(+) Addition
1,214
358,601
(-) Write-off
-
(-) Amortization
(3,904)
(+/-) Exchange variation
-
(-) Discontinued operation
-
Balance on June 30, 2015
580,701
(8,777)
(7,033)
278,920
(1,096,044)
2,530,376
Goodwill from the acquisition of businesses by September 30, 2008 (last acquisition
previous to transition date as of January 1, 2009, referring to complete adoption of CPCs)
was calculated based on the accounting standards previous to CVM Resolution 665/11 (CPC
15 - business combination). According to “IFRS Optional Exemptions”, the Corporation
decided to adopt IFRS in all business acquisitions as from September 30, 2008. These
goodwill amounts were based on expected future profitability, and supported by valuation
reports from experts. The trademarks acquired from third parties, prior to December 31,
2009, were measured at the paid amount, while trademarks and list of clients acquired as
part of business combination after September 30, 2008 were calculated at fair value
pursuant to CVM Resolution 665/11 (CPC 15 (R1) – business combination).
45
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
According to CVM Resolution 639/10 (CPC 1 (R1) – reduction to recoverable value of assets),
the impairment test of goodwill and intangible assets with indefinite useful lives is
conducted annually, and other intangible assets with finite useful lives are tested whenever
there is evidence of non-realization of those items. Intangible assets represented by
patents and a list of clients are amortized at their respective useful lives, if applicable.
Certain intangible assets of the Corporation have undefined useful lives, according to the
experts' valuation, and are annually tested for impairment.
Such analysis comprised projecting the profitability and future cash of the Corporation’s
business units, which are discounted to present value to identify the degree of
recoverability of the asset.
Discounted cash flows to assess asset impairment were prepared for a period close to 10
years. This cash flow is in line with the Corporation’s 2014-2018 strategic plan and growth
projections based on past information and market projections prepared by nongovernmental agencies and entities.
In the period ended June 30, 2015, the Corporation did not identify any indications of asset
recorded at an amount higher than that recoverable through use or sale.
15.1 Changes in intangible assets (parent)
Changes in the Intangible assets accounts of parent company and subsidiaries for the period
ended June 30, 2015 are as follows
Inaler S.A. - Goodwill
Frigorífico Tacuarembó S.A. - Goodwill
Masplen Ltd - Goodwill
Prescott International S.A. -Goodwill
Establecimientos Colonia S.A - Goodwill
Marfood USA Inc. -Goodwill
Keystone International -Goodwill
Software and systems
Trademarks and patents
Total
Balance on December
31, 2014
Acquisition/ write-off
Held for sale
38,379
58,496
17,258
22,922
114,479
308
274,949
33,717
22,883
583,391
1,214
1,214
-
Reclassification /
amortization
(3,904)
(3,904)
Balance on June 30,
2015
38,379
58,496
17,258
22,922
114,479
308
274,949
31,027
22,883
580,701
The goodwill generated in the business acquisitions concluded before the adoption of all
CPCs is expressed in the Corporation’s functional currency.
46
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
15.2 Changes in intangible assets (subsidiaries)
Book balance
on December
31, 2014
Acquisitions
Exchange
variation on
translation
Amortization
(46)
(46)
Marfrig Chile S.A.
Goodwill
Trademarks and patents/software/other
21,369
21,112
257
-
3,589
3,548
41
Weston Importers Ltd.
Goodwill
14,159
14,159
-
2,480
2,480
Masplen Limited
Trademarks and patents/software/other
460
460
-
-
(22)
(22)
Prestcott International S.A
Goodwill
Trademarks and patents/software/other
12,292
11,678
614
-
2,064
1,963
101
Marfood USA
Goodwill
Client relationship
Trademarks and patents/software/other
73,307
53,842
3,474
15,991
-
Frigoríficos Tacuarembó S.A
Trademarks and patents/software/other
888
888
Inaler S.A
Trademarks and patents/software/other
Assets Held
for Sale
Write-off
-
24,912
24,660
252
-
8,879
8,879
-
-
438
438
(51)
(51)
-
-
14,305
13,641
664
12,296
9,048
561
2,687
(502)
(502)
-
-
-
85,101
62,890
3,533
18,678
59
59
147
147
(56)
(56)
-
-
1,038
1,038
524
524
-
86
86
(43)
(43)
-
-
567
567
Establecimientos Colonia S.A
Trademarks and patents/software/other
765
765
-
126
126
(60)
(60)
-
-
831
831
Marfrig Argentina
Goodwill
Trademarks and patents/software/other
109,168
108,902
266
7
7
16,597
16,557
40
(13)
(13)
-
-
125,759
125,459
300
MFB - Marfrig Frig. BR S.A.
Trademarks and patents/software/other
401
401
-
-
(76)
(76)
-
-
325
325
MFG Agropecuária Ltda
Trademarks and patents/software/other
15
15
-
-
(2)
(2)
-
-
13
13
-
348,528
295,586
52,942
-
-
-
-
348,528
295,586
52,942
2,187,970
Marfrig Holdings (Europe)BV
Goodwill
325,084
Client relationship
1,411,019
Trademarks and patents/software/other 451,867
8,793
7,760
1,033
241,535
34,253
153,838
53,444
(2,258)
(2,068)
(190)
(1,017)
(1,017)
(1,096,044)
(359,337)
(499,699)
(237,008)
1,338,979
1,070,850
268,129
2,421,318
357,387
278,920
(3,129)
(8,777)
(1,096,044)
1,949,675
Mercomar
Sales Channel
Client relationship/right to use
Total
-
-
Book balance
on
June 30, 2015
(7,760)
(7,760)
47
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
16.
Accrued payroll and related charges
INSS (social security contribution) payable
Salaries and payroll obligations
Other social charges and benefits payable
Parent
6/30/15
12/31/14
3,545
2,236
70,165
52,974
2,528
76,238
4,695
59,905
Consolidated
12/31/14
6/30/15
14,608
11,558
173,164
218,805
108,474
296,246
111,616
341,979
On November 21, 2005, Law No. 11.196 was enacted allowing the offsetting of INSS debts
against federal tax credits. This procedure was regulated by Interministerial Ordinance No.
23 dated February 2, 2006.
In addition, article 2 of Law 11.457/07 establishes responsibility to the Brazilian Federal
Revenue Service concerning the employees’ social security contributions levied on their
contribution salaries, according to item c, sole paragraph, Article 11 of Law 8.212/91 and
Article 104 of Law 11.196/05.
The Corporation currently has a favorable court decision that determines that the Federal
Revenue Service of Brazil should analyze the requests for Reimbursement filed by the
Corporation and also establishes the recognition of the possibility to offset credits related
to PIS and COFINS taxes with social security contributions, upon use of tax credits to pay
the dues.
The Corporation believes it holds sufficient credits to settle its debits and therefore, based
on the opinion of its legal counsel, is carrying out the offset of social security debts with
PIS/COFINS tax credits.
An Interlocutory Appeal was filed by the National Treasury against said court decision,
which was judged and the decision maintained with regard to the requirement of analysis
by the Federal Revenue Service of Brazil of the requests for Reimbursement filed by the
Corporation. However, the decision was altered regarding the right to suspend the
enforceability of the dues.
As a result, the Corporation requested the court to recognize the possibility of offsetting
the PIS and COFINS credits with social security contributions using the tax credits to pay
the debts, to be undertaken by the Federal Revenue Service of Brazil.
To formalize said credits, the Corporation filed Requests for Reimbursement with the
Federal Revenue Service of Brazil. These requests indicate the existence of sufficient
credits to settle the Corporation’s debts, at the occasion of occurrence of the facts and
events, using the tax credits to pay such debts.
However, given the start of the period to include dues settled with PIS and COFINS credits,
which has been challenged by Brazil’s Federal Revenue Service, in order to improve its
positioning and relationship with the Federal Revenue Service, the Corporation chose to
48
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
include the dues settled until December 2013 in the World Cup REFIS. Consequently, the
credits settled were once again included in the balance sheet.
This does not mean that the Corporation has withdrawn or changed its opinion, as
mentioned above, and therefore for dues after December 31, 2013, use of tax credits to
pay dues will continue to be requested.
In the period ended June 30, 2015, the Corporation does sponsor post-employment benefit
plans with actuarial liability characteristics.
17.
Taxes payable
6/30/15
ICMS (State VAT) payable
Parent
12/31/14
Consolidated
6/30/15
12/31/14
-
-
99
96
527,371
524,865
725,963
719,751
Income tax payable
-
-
38,433
72,958
Social contribution tax payable
-
-
5,792
5,177
45,482
43,092
45,482
43,092
Special tax debt installment payment plan - Refis
Tax payable - PGFN
(2)
Other taxes payable
Current liabilities
Non-current liabilities
(1)
(2)
(1)
2,972
4,467
42,547
65,783
575,825
572,424
858,316
906,857
43,976
43,556
146,560
200,312
531,849
528,868
711,756
706,545
Laws 11,941/09, 12,865/13 and 12,996/14, which reopened the period for adhesion.
Office of the General Counsel to the National Treasury
Special Tax Debt Installment Payment Plan – Law 11,941/09
On September 30, 2009, the Corporation joined the Special Tax Debt Installment Payment
Plan (New REFIS), established by Law No. 11,941, of May 27, 2009. It provides for the
payment in installments of debts due to the Brazilian Federal Revenue Service (SRF), the
Office of the National Treasury Attorney-General (PGNF), and the Brazilian Social Security
Institute (INSS). The Corporation declared debts with those agencies and transferred to the
plan debts included in other payment plans (Special Tax Debt Installment Payment Plan Law No. 10,684/03 – PAES and Extraordinary Tax Debt Installment Payment Plan – Executive
Act No. 303/06 – PAEX), to be settled within 180 months.
During the consolidation process of the abovementioned program, the Corporation decided
not to include the lawsuit 10880.720.016/2008-93, totaling originally R$29,844, which was
reclassified to taxes payable, under non-current liabilities.
In view of the waiver of the installment payment program, debits were adjusted in
accordance with law in effect on the date of the taxable event, resulting in additional fine,
interest and restatement amounting to R$15,638 and a total debit of R$45,482, as
presented below:
49
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Debits reclassified to taxes payable
6/30/15
12/31/14
Social contribution payable- PGFN
10,161
9,627
Income tax payable - PGFN
27,526
26,080
7,795
7,385
45,482
43,092
Withholding income tax payable - PGFN
Reopening of the Period for joining the program – Law 12,865/2013 and Law
12,996/2014
On December 20, 2013 and August 25, 2014, the Corporation joined the Reopening of Law
11,941 of 2009, which governs the payment in installments of dues with the Federal
Revenue Service of Brazil (SRF), the Attorney General of the National Treasury (PGFN) and
the National Social Security Institute (INSS), stating its outstanding dues with these organs,
to be settled within 180 months, as shown below:
Parent
6/30/15
Opening balance
(+) Adhesion to installment payment
(+) Interest rates
12/31/14
Consolidated
6/30/15
12/31/14
(-) Payments made / tax credits
Debt balance
524,865
24,428
(21,922)
527,371
156,299
464,346
44,501
(140,281)
524,865
719,751
35,573
(29,361)
725,963
156,299
692,717
50,057
(179,322)
719,751
Current liabilities
Non-current liabilities
41,004
486,367
39,089
485,776
59,916
666,047
56,557
663,194
50
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
18.
Loans and financing
Parent
Credit facility
Local currency
FINAME
FINEP
NCE
Working Capital
CDCAS
Charges (% p.a.)
Weighted
average interest
rate (p.a.)
TJLP + Fixed Rate
TJLP + 1%
Fixed Rate+%CDI
CDI + Fixed Rate
CDI + 1.5% p.a
5.99%
7.06%
16.03%
20.39%
15.34%
NCE (US$) / ACC
Total foreign currency
Total indebtedness
Current liabilities
Non-current liabilities
3.87
0.79
0.71
1.71
0.75
16.81%
Total local currency
Foreign currency:
Prepayment (US$)
Weighted
average
maturity
(years)
Balance on
6/30/15
Balance on
12/31/14
119
4,780
659,792
177,875
50,001
294
7,648
575,148
120,633
-
892,567
703,723
Libor+Fixed Rate+FX
5.67%
1.23
110,808
84,213
Fixed Rate+ FX
(US$) + Libor
6.58%
0.46
915,892
824,323
6.48%
1,026,700
908,536
11.29%
1,919,267
1,612,259
1,535,305
383,962
1,147,462
464,797
51
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Consolidated
Credit facility
Charges (% p.a.)
Weighted
average interest
rate (p.a.)
Weighted average
maturity (years)
Balance on
6/30/15
Balance on
12/31/14
Local currency
FINAME
TJLP + Fixed Rate
5.99%
3.87
119
294
FINEP
TJLP + 1%
4.45%
4.12
32,445
38,283
NCE
Fixed Rate+%CDI
16.03%
0.71
659,792
575,148
Working capital (R$)
Fixed Rate+%CDI
20.39%
1.71
177,875
120,633
CDCAS
CDI + 1.5% p.a
15.34%
0.75
50,001
Total local currency
16.43%
920,232
734,358
Foreign currency
Prepayment (US$)
Libor+Fixed Rate + FX
5.67%
1.23
110,808
84,213
Bonds (US$)
Fixed Rate + FX
8.52%
4.35
8,163,424
7,749,702
NCE (US$) / ACC
%CDI+Fixed Rate+FX
(US$)+Libor
6.58%
0.46
917,337
825,768
Bank loan (US$)
Fixed Rate + FX
3.99%
3.64
964,928
871,760
Revolving credit facility
Libor + 2.75
2.03%
2.73
701,991
556,781
PAE (US$)
Fixed Rate + FX
1.88%
0.27
34,175
26,160
Tradable liabilities
Fixed Rate
6.50%
0.51
25,227
21,601
Total foreign currency
7.48%
10,917,890
10,135,985
Total indebtedness
8.18%
11,838,122
10,870,343
Current liabilities
1,860,458
1,470,237
Non-current liabilities
9,977,664
9,400,106
The Corporation’s types of loans and financing can be described as follows:
18.1
Senior Notes – BONDS
These are long-term funding operations denominated in foreign currencies involving the
issue of debt securities abroad (Bonds) exclusively to qualified institutional investors (Rule
144A/Reg S), not registered at the Securities and Exchange Commission of Brazil (CVM), in
accordance with the Securities Act of 1933, as amended.
The Corporation, through its subsidiaries, has conducted seven funding operations of this
nature since 2006, as detailed below:
•
The first bond operation was concluded in November 2006, upon the issue by Marfrig
Overseas Ltd., a wholly-owned subsidiary of the Corporation, of US$375 million in
Senior Notes, with a 9.625% p.a. coupon, semi-annual interest payment beginning in
May 2007 and maturity of principal in 10 years (November 2016), which were
assigned foreign currency risk ratings of B1 by Moody’s and B+ by Standard & Poor’s
and Fitch. The proceeds from the issue were used for the acquisition by the
Corporation of business units in Argentina and Uruguay.
52
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
In March 2010, Senior Note holders approved the amendment of certain clauses
included in the indenture that governs this issue, including the change in and/or
omission of restrictions applicable to the guarantees provided by the Corporation
and its subsidiaries. Said amendment did not comprise any change in the financial
conditions of this debt, which maintained the same maturity term and interest rate
originally established (this addendum, jointly with the indenture, the “First Issue”).
The First Issue is guaranteed by Marfrig Global Foods S.A. and Marfrig Holdings
(Europe) BV.;
•
The second operation was conducted in April 2010, upon the issue by Marfrig
Overseas Ltd. of US$500 million in Senior Notes, with a coupon of 9.50% p.a.,
semiannual interest payments beginning in November 2010 and maturity of principal
in 10 years (November 2020), which were assigned foreign currency risk ratings of
B1 by Moody’s and B+ by Standard & Poor’s and Fitch. This operation also was
guaranteed by Marfrig Global Foods S.A. and Marfrig Holdings (Europe) B.V. and its
proceeds were used to lengthen the debt profile of the Corporation (“Second
Issue”).
•
The third operation was concluded in May 2011 and comprised the issue by Marfrig
Holdings (Europe) B.V. of US$750 million in Senior Notes, with a coupon of 8.375%
p.a., semiannual interest payment beginning in November 2011 and maturity of
principal in 7 years (May 2018), which were assigned foreign currency risk ratings of
B1 by Moody’s and B+ by Standard & Poor’s and Fitch. The operation was
guaranteed by Marfrig Global Foods S.A. and Marfrig Overseas Limited and the
proceeds were used to lengthen the debt profile of the Corporation and to
strengthen its working capital (“Third Issue”).
•
The fourth operation was concluded in January 2013 and comprised the issue by
Marfrig Holdings (Europe) B.V. of US$600 million in Senior Notes, with a coupon of
9.875% p.a., semiannual interest payments beginning in July 2013 and maturity of
the principal in 4.5 years (July 2017), which were assigned foreign currency risk
ratings of B2 by Moody’s and B+ by Standard & Poor’s and Fitch. This operation was
guaranteed by Marfrig Global Foods S.A. and Marfrig Overseas Ltd. and the proceeds
were used to lengthen the debt profile of the Corporation and to strengthen its
working capital (“Fourth Issue”).
53
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
•
The fifth operation was concluded in September 2013 and comprised the issue by
Marfrig Holdings (Europe) B.V. of US$400 million in Senior Notes, with a coupon of
11.25% p.a., semiannual interest payments beginning in March 2014 and maturity of
the principal in 8 years (September 2021), which were assigned foreign currency risk
ratings of B2 by Moody’s and B+ by Standard & Poor’s and Fitch. This operation was
guaranteed by Marfrig Global Foods S.A. and Marfrig Overseas and the proceeds
were used to lengthen the debt profile of the Corporation and to strengthen its
working capital (“Fifth Issue”). Also in connection with the Fifth Issue, the
Corporation carried out a consent solicitation and tender offer to acquire the Bonds
of the First Issue, which mature in 2016. Based on the conclusion of this offering,
the Corporation repurchased Bonds in the approximate amount of US$191 million, or
approximately 50.97% of the outstanding bonds of the First Issue. As a result of the
tender offer, the First Issue was amended through a complementary indenture that
sets forth, among other things, the elimination of virtually all the restrictive
covenants of the Indenture.
•
In March 2014, the Corporation concluded the re-tap of its Senior Notes linked to
the Second Issue in the aggregate amount of US$275 million (“Additional Notes”).
The Additional Notes were consolidated into a single series with the Senior Notes of
the Second Issue, with coupon of 9.50% p.a. (yield of 9.43% p.a. for the issue). The
additional notes were assigned foreign currency risk ratings of B2 by Moody’s and B
by Standard & Poor’s and Fitch. The issue of Additional Notes issue is guaranteed by
Marfrig Global Foods. S.A. and its subsidiary Marfrig Holdings (Europe) B.V. In
connection with the Additional Notes, the Corporation carried out a tender offer to
acquire the Bonds of the 2017 Bonds of the Fourth Issue and the 2021 Bonds of the
Fifth Issue. Based on the conclusion of this offering, the Corporation repurchased
Bonds in the approximate amount of (i) US$72.8 million, or 12.14% of the
outstanding Bonds of the Fourth Issue; and (ii) US$57.1 million or 14.28% of the
outstanding Bonds of the Fifth Issue.
•
The sixth operation was concluded in May 2014 and comprised the issue by Moy Park
(Bondco) Plc of the first issue of Senior Notes in pound sterling, in the total amount
of GBP 200 million, with a coupon of 6.25% p.a., semiannual interest payments
starting in November 2014 and maturity of the principal in 7 years (May 2021),
which were assigned foreign currency risk ratings of B1 by Moody’s and B+ by
Standard & Poor’s. This operation was guaranteed by Moy Park Holdings Europe
Ltd., Moy Park Ltd. and some of its affiliates, with no guarantee provided by the
Corporation to the Notes. The proceeds were allocated to the Corporation and used
to repay existing debt (“Sixth Issue”);
54
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
•
The seventh operation was carried out in June 2014 and comprised the issue by
Marfrig Holdings (Europe) B.V. of US$850 million in Senior Notes, with a coupon of
6.875% p.a., semiannual interest payments starting in December 2014 and maturity
of the principal in 5 years (June 2019), which were assigned foreign currency risk
ratings of B2 by Moody’s and B by Standard & Poor’s. This operation was guaranteed
by Marfrig Global Foods S.A. and Marfrig Overseas Ltd., with the proceeds used to
reduce the cost and lengthen the profile of debt (“Seventh Issue”). In connection
with the Seventh Issue, the Corporation carried out a tender offer together with a
consent solicitation, for 2017 Bonds of the Fourth Issue and 2021 Bonds of the Fifth
Issue. Based on the conclusion of these offers, the Corporation repurchased a total
principal amount of about (i) US$291.5 million, or 85.03% of the outstanding Notes
of the Fifth Issue; and (ii) US$371.8 million or 70.54% of the outstanding Notes of
the Fourth Issue. As a result of the early tender offer, the Fourth and Fifth Issues
were amended through a complementary indenture that set forth, among other
things, the elimination of virtually all the covenants in the Indenture.
•
In April 2015, the Corporation, through its subsidiary Moy Park (Bondco) Plc,
concluded the re-tap of Senior Notes connected to the Sixth Issues, in Sterling
pounds, maturing in 2021, in the overall amount of GBP 100 million (“Notes Re-tap”)
at the fixed rate of 6.25% p.a. (yield of 6.55% p.a. for the issue). The operation was
assigned a B1 rating by Moddy´s and a B+ rating by S&P. S&P also assigned Moy
Park the rating of BB-. The Notes Re-tap is guaranteed by Moy Park Holdings Europe
Ltd., by Moy Park Ltd. and by some of its affiliates, with no guarantee provided by
the Corporation to the Notes. The proceeds allocated to Marfrig were used to repay
existing debt.
Due to the sale of the Moy Park business unit, in accordance with Note 11, and in
compliance with CVM Resolution 598/09 (CPC 31 – Non-Current Assets Held for Sale and
Discontinued Operations), the Sixth Issue and the Senior Notes Re-tap by the business
unit were reclassified to the group of held-for-sale liabilities.
Considering that the Senior Notes issued in 2006, 2010, 2011, January 2013, September
2013, May 2014 and June 2014 represent 68.96% of the Corporation’s consolidated debt
as of June 30, 2015 (and represented 71.29% of the Company’s debt on December 31,
2014), the obligation of maintaining a ratio of adjusted net debt to EBITDA in the last
12 months serves as a guide for the other outstanding loans and financing of the
Corporation at the end of the period. Regarding the ratio of adjusted net debt to
EBITDA, note that the (i) The Second Issue, Third Issue and Seventh Issue establish a
maximum ratio of 4.75x (excluding the effects of exchange variation); and (ii) the Sixth
Issue establishes a maximum ratio of 3.5x, applicable only to the Moy Park
conglomerate and not related to the ratio of adjusted net debt to EBITDA applicable to
the Corporation’s consolidated results at December 31, 2014.
55
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
18.2
Guarantees for loans and financing:
Parent
6/30/15
Balance of financing
Consolidated
6/30/15
12/31/14
12/31/14
1,919,267
1,612,259
11,838,122
10,870,343
397,647
404,580
399,091
406,024
66,305
84,878
66,305
120,083
-
-
37,506
30,167
276,697
492,490
276,697
1,306,624
119
294
119
17,368
-
-
61,841
57,603
4,780
7,648
83,520
80,312
60,819
60,707
595,830
518,744
-
-
5,500
-
1,112,900
561,662
10,311,713
8,333,418
Guarantees:
Promissory notes
Trade notes
Bank guarantee
Surety
Leased asset
Export document
Facilities
Marketable securities
Mortgage
No guarantees
18.3
Covenants
The loan agreements are ruled by covenant of 4.75 times, in its most restrictive form, in
relation to consolidated indebtedness level, as maximum quotient of Net Debt/annualized
(last 12 months) EBITDA ratio.
The schedule of maturities is presented in Note 19.
The penalty for breach of this covenant is the same as generally applied in the financial
markets, which is the early maturity of the debt, which is then reclassified as current
liabilities.
The leverage ratio is calculated as follows:
6/30/15
Consolidated gross debt
11,936,277
(-) Consolidated cash and equivalents
2,564,343
Consolidated net debt
9,371,934
LTM EBITDA in the year ended June 30, 2015
1,963,080
EBITDA ratio
4.77x
Consolidated net debt
9,371,934
(-) Effect from exchange variation (carve-out)
3,930,631
Consolidated adjusted net debt
5,441,303
Leverage ratio
2.77x
56
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
In accordance with Note 33.6 – Capital Management, due to the contractual provisions
(carve-out) that allow the exclusion of foreign exchange variation effects from the
calculation of leverage ratio (net debt/EBITDA LTM), the Corporation clarifies that based
on this methodology, the current leverage ratio (net debt/EBITDA LTM) stood at 2.77x.
19.
Debentures payable and interest on debentures
Parent
6/30/15
12/31/14
Debentures payable
(-) Cost with debenture issue
570,000
(154)
Consolidated
6/30/15
12/31/14
570,000
(184)
-
-
-
-
Interest on convertible and non-convertible debentures 159,226
280,606
119,701
238,228
(-) Withholding income tax on debenture interest
(47,646)
(21,546)
(47,646)
(21,546)
707,526
802,776
98,155
190,582
Current Liabilities - Interest on debentures
137,680
232,960
98,155
190,582
Non-Current Liabilities - Debentures payable
569,846
569,816
-
-
The Corporation, with assistance from its financial advisors, structured during the second
quarter of 2013, an issue of non-convertible debentures maturing on January 22, 2019 in the
amount of R$570,000. This operation formalized the process of internalizing a portion of the
financial resources derived from the Senior Notes issued by its subsidiary Marfrig Holding
Europe BV in January 2013. The operation was structured in such a way as to not affect the
Corporation’s consolidated statements.
The Corporation does not have a renegotiation clause for the debentures, and therefore it
does not believe on the need to report the information required under item 18.4.1 of
Circular Letter/CVM/SNC/SEP no. 01/07 in the notes to the interim financial statements.
Interest due on mandatorily convertible debentures was also accrued as per Note 22.
57
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Debt, debentures and interest on debentures were as follows:
6/30/15
Parent
12/31/14
Consolidated
6/30/15
12/31/14
Local currency
Loans and financing
892,567
703,723
920,232
734,358
Interest on debentures
137,680
232,960
98,155
190,582
Debentures payable
569,846
569,816
-
-
1,600,093
1,506,499
1,018,387
924,940
1,026,700
908,536
10,917,890
10,135,985
1,026,700
908,536
10,917,890
10,135,985
2,626,793
2,415,035
11,936,277
11,060,925
Foreign currency
Loans and financing
Loans and financing fall due and pay interest as follows:
Parent
6/30/15
Consolidated
12/31/14
6/30/15
12/31/14
Local currency
1Q15
-
321,989
-
281,145
2Q15
-
203,784
-
205,264
3Q15
199,832
10,660
161,833
12,140
4Q15
492,857
210,848
494,336
212,328
1Q16
191,484
-
192,963
-
2Q16
9,895
-
11,375
-
2016
18,838
72,061
21,797
77,980
2017
68,488
68,488
74,407
74,407
2018
48,827
48,827
54,745
54,745
2019
569,859
569,829
5,932
5,932
2020
12
12
998
998
2021
1
1
1
1
1,600,093
1,506,499
1,018,387
924,940
58
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Parent
6/30/15
Consolidated
12/31/14
6/30/15
12/31/14
Foreign currency
1Q15
-
126,418
-
324,050
2Q15
-
119,947
-
193,029
3Q15
88,207
82,704
288,216
111,863
4Q15
474,543
304,072
571,295
321,000
1Q16
39,901
-
53,524
-
2Q16
176,266
-
185,071
-
2016
61,627
116,023
655,538
636,374
2017
186,156
159,372
682,114
584,840
2018
-
-
2,959,303
2,471,982
2019
-
-
2,385,814
2,008,403
2020
-
-
2,991,676
2,551,992
2021
-
-
145,339
932,452
1,026,700
908,536
10,917,890
10,135,985
2,626,793
2,415,035
11,936,277
11,060,925
Total
20.
Lease payable
The Corporation is a lessee in various agreements, classified as operating or finance leases.
20.1 Finance lease
According to CVM Resolution No. 645/10 (CPC 06 (R1) – commercial leasing), finance lease
operations are now recognized under the Corporation’s current and non-current liabilities,
with an offsetting entry of the leased asset recorded in property, plant and equipment,
according to note 14, while financial leasing operations are guaranteed by the leased assets
themselves:
59
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Parent
Weighted
average
Charges interest rate
(% p.a.)
(p.a.)
Credit facility
Weighted
average
maturity
(years)
Balance
on
6/30/15
Future
payments
6/30/15
Balance
on
12/31/14
Domestic currency
Finance lease of vehicles
Finance lease of IT equipment
Finance lease of machinery and equipment
Interest payable
Finance lease - discount to present value
Total domestic currency
CDI + Rate
CDI + Rate
CDI + Rate
14.78%
10.63%
14.02%
1.0
2.1
1.2
410
3,531
1,680
(1,123)
(658)
3,840
383
3,049
1,530
4,962
509
2,993
2,167
(967)
(583)
4,119
Total Parent Company
3,840
4,962
4,119
Current liabilities
Non-current liabilities
2,143
1,697
2,365
1,754
Consolidated
Weighted
average
interest rate
(p.a.)
Balance
on 6/30/15
Future
payments
6/30/15
Balance on
12/31/14
0.9
2.1
1.2
562
3,531
1,895
(1,236)
(658)
4,094
528
3,049
1,733
5,310
802
2,993
2,527
(1,172)
(583)
4,567
0.0
1.3
48,786
48,786
51,776
51,776
2,935
132,472
135,407
Total Consolidated
52,880
57,086
139,974
Current liabilities
Non-current liabilities
32,236
20,644
Charges
(% p.a.)
Credit facility
Weighted average
maturity (years)
Domestic currency
Finance lease of vehicles
Finance lease of IT equipment
Finance lease of machinery and equipment
Interest payable
Finance lease - discount to present value
Total domestic currency
CDI + Rate
CDI + Rate
CDI + Rate
14.89%
10.63%
14.13%
Rate
Rate
4.64%
Foreign currency
Finance lease of vehicles
Finance lease of machinery and equipment
Total foreign currency
-
69,229
70,745
According to CVM Resolution 564/08 (CPC 12 – present value adjustment), finance lease
payable was discounted to present value, at the initial recognition date, as described in
note 3.1.15 to the financial statements for the fiscal year ended December 31, 2014.
60
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Lease contracts fall due as follows:
Parent
6/30/15
Consolidated
12/31/14
6/30/15
12/31/14
Domestic currency
Up to one year
2,143
2,365
2,358
2,661
From one to five years
1,697
1,754
1,736
1,906
Total domestic currency
3,840
4,119
4,094
4,567
Up to one year
-
-
29,878
66,568
From one to five years
-
-
18,908
68,839
Total foreign currency
-
-
48,786
135,407
3,840
4,119
52,880
139,974
Foreign currency
Total
The schedule for future payments of the finance lease is as follows:
Parent
6/30/15
Consolidated
12/31/14
6/30/15
12/31/14
Domestic currency
Up to one year
2,754
2,899
3,061
From one to five years
2,208
2,189
2,249
3,304
2,388
Total domestic currency
4,962
5,088
5,310
5,692
-
-
33,856
72,035
Foreign currency
Up to one year
From one to five years
-
-
17,920
74,898
Total foreign currency
-
-
51,776
146,933
4,962
5,088
57,086
152,625
Total
61
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
20.2 Operating lease
Operating lease as at June 30, 2015 is as follows:
Parent
Weighted average
interest rate (p.a)
Weighted average Total amount
maturity (years)
financed
Expense at
6/30/15
Financial institution
Leased asset
Start date
BANCO IBM S.A
IT Equip.
08/09/12
11.46%
0.1
619
76
BRASIL FOOD SERV. GROUP .SA BFG
Meatpacking plant
10/01/14
IGP-M year
4.5
70,848
8,250
71,467
8,326
Total Local currency
Foreign currency
AVN AIR LLC
Aircraft
24,631
1,587
Total Foreign currency
12/01/07
3.04%
1.9
24,631
1,587
Total local and foreign currency
96,098
9,913
Consolidated
Weighted average
Start date interest rate (p.a)
Weighted
average
maturity
(years)
BANCO IBM S.A
IT Equip.
BRASIL FOOD SERV. GROUP .SA BFGMeatpacking plant
08/09/12
10/01/14
11.46%
IGP-M year
0.1
4.5
LEONI EMPREENDIMENTOS IMOB.
01/01/14
IGP-M year
4.5
Financial institution
Leased asset
Total amount
financed
Expense at
6/30/15
Local currency
Meatpacking plant
619
70,848
76
8,250
2,520
238
73,987
8,564
1.9
8.0
24,631
96,181
1,587
3,513
Total local currency
AVN AIR LLC
Bank of America
Foreign currency
Aircraft
Aircraft
12/01/07
04/15/11
Ford Motor Credit CO.
Sundry leasers
Vehicles
Property
06/02/15
06/15/14
16.23%
Fixed Installment
0.5
3.6
172
115,236
124
12,038
Sundry leasers
Sundry leasers
Machinery and Equipment
Integrated
03/24/15
12/12/12
Fixed Installment
Fixed Installment
7.1
3.8
138,538
564
9,367
130
Sundry leasers
Vehicles
01/09/15
Fixed Installment
6.0
3.04%
6.61%
12,884
1,174
Total foreign currency
388,206
27,933
Total local and foreign currency
462,193
36,497
62
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
The balance of the operating lease payable falls due as follows:
Parent
Consolidated
6/30/15
6/30/15
(at present value)
(at present value)
Domestic currency
Up to one year
9,855
10,241
29,508
30,669
39,363
40,910
Up to one year
757
50,443
From one to five years
868
291,761
Total foreign currency
1,625
342,204
40,988
383,114
From one to five years
Total domestic currency
Foreign currency
Total
The operating leases the Corporation enters into have no restrictions or contingencies,
follow market practices and include, in some cases, price adjustment clauses during their
effective term.
The value of the leased assets is calculated at total definitive cost, which includes costs of
transportation, taxes and documentation. Finance lease obligations are calculated on the
total definitive cost, by applying a predefined percentage for each agreement.
In the event of termination, the lessor will have the option of cumulatively: (i) unilaterally
cancelling all rights arising from the lease agreement; (ii) claiming the return of the leased
goods; and (iii) accelerating the maturity of the lease agreement. In that case, the lessee
undertakes to pay unsettled debts, including installments overdue and falling due, besides
possible outstanding expenses, taxes and charges, plus a fine of 10% on the debt balance.
The lessee, without prejudice to the lessor, may file a claim for damages.
In relation to the renewal option, the lessee should previously communicate their intention
to renew the lease agreement, otherwise the renewal is automatic, the conditions of which
should be agreed upon between the parties. In the event the parties do not reach an
agreement, the lessee should opt for purchasing the goods at market value or returning
them.
63
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
21.
Notes payable
Parent
6/30/15
Notes payable for investments in Brazil (a)
Consolidated
6/30/15
12/31/14
12/31/14
427,948
3,790
427,948
3,790
Notes payable - Sponsorships (b)
40,882
65,598
40,882
65,598
Market transactions payable (c)
475,807
376,198
507,516
411,320
7,306,101
5,441,394
-
-
32,788
-
33,622
2,757
8,283,526
5,886,980
1,009,968
483,465
164,848
134,125
129,065
129,895
8,118,678
5,752,855
880,903
353,570
Related parties (d)
Other
Current liabilities
Non-current liabilities
(a) On May 25, 2015, Marfrig acquired all shares of the company Mercomar
Empreendimentos e Participações Ltda., as described in Note 13.3.
(b) On March 8, 2010, the Corporation signed a sponsorship agreement with the Brazilian
Football Confederation (CBF) to sponsor the Brazilian football teams, including men’s
and women’s national association football teams administered by the CBF (“Teams”).
The agreement allowed the disclosure of the sponsorship of the “Teams” through
display and associations of various brands owned by MARFRIG. Said contract was
terminated early and the parties are discussing in court the terms of said termination.
On March 29, 2010, the Corporation signed a sponsorship agreement with FIFA
(Fédération Internationale de Football Association) to sponsor the 2010 FIFA World
Cup™, FIFA Confederations Cup 2013 and 2014 FIFA World Cup™. The agreement
permits the use of Marfrig Group brands, such as: MOY PARK AND PEMMICAN, and also
the use of the tournament logo in advertisements and products and its distribution.
(c) In Note 33, we break down financial instrument operations practiced by the
Corporation. The Corporation and its subsidiaries are subject to market risks related to
foreign exchange variations, interest rates fluctuations and commodities prices
variations. These represent the amount of derivatives payable.
(d) The breakdown of balance can be seen in Note 10.1.
64
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
22.
Mandatory deed convertible into shares
6/30/15
Convertible mandatory deed
Cancelation of shares
Issue expenses
Amortization of issue expenses
Parent
12/31/14
2,150,000
2,150,000
Consolidated
6/30/15
12/31/14
2,150,000
2,150,000
(450)
(450)
(450)
(450)
(50,832)
(41,180)
(50,832)
(41,180)
21,850
13,100
21,850
13,100
2,120,568
2,121,470
2,120,568
2,121,470
According to the “Indenture for the Second Issue of Debentures Convertible into Shares of
(Mandatory Deed) Marfrig Global Foods S.A.”, the Corporation issued two hundred and fifty
thousand (250,000) debentures, mainly convertible into shares, with unit par value of R$10,
amounting to R$2,500,000. The Mandatory Deed was issued on July 15, 2010 through
private subscription, with maturity within 60 months, annually restated at the interest rate
at 100% of the accumulated variation of average interbank deposit rates of a day, plus
spread of one per cent (1%). Remuneration of the Mandatory Deed is recognized as current
liabilities and collateralized by a bank guarantee provided by Banco Itaú BBA S.A. All two
hundred and fifty thousand (250,000) debentures were subscribed on various dates during,
and the main debenture holder is BNDES Participações S.A..
As defined in said Indenture and except for the cases of voluntary conversion, the
conversion price will be lower than the following items: (i) R$21.50, plus the percentage of
interest paid to debenture holders over the par value of the issues, less earnings
distributed to each share, both restated at CDI as from the actual payment, in the case of
interest on debentures, or the date of debentures less earnings, in the case of earnings,
until the conversion date; and (ii) the higher between the market price and R$24.50, the
latter without adjustment for earnings in cash or monetary restatement.
The Corporation, based on the essence of the operation (equity) and on the characteristics
thereof, initially recorded the Mandatory Deed (principal) as Capital Reserve, under
Shareholders' Equity. However, the Securities and Exchange Commission of Brazil (CVM),
through Official Letter CVM/SEP/GEA-5/no. 329/2012 dated October 10, 2012, stated its
opinion of this instrument and ordered: (i) the accounting reclassification of the Mandatory
Deed; and (ii) the re-filing of the 2011 financial statements with comparisons to the 2010
financial instatements.
The Corporation abided by the order of the CVM, proceeding with the full reclassification of
the Mandatory Deed to the specific accounting line non-current liabilities. The previous
method of accounting was based on accounting and legal opinions issued specifically
regarding this matter.
Said reclassification does not affect any terms and conditions of the Mandatory Deed and
there is no effect on the financial indebtedness of the Corporation, on the servicing of its
debt or on its financial covenants, since, unlike others items under the liabilities of the
Corporation, the Mandatory Deed may not be liquidated into cash or cash equivalents, but
only into common shares issued by the Corporation.
65
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
The Corporation spent R$12,328 to issue the Mandatory Deed, which was initially recorded
as a valuation allowance to the Capital Reserve account. The surety was renewed annually
bringing the expenses with the issue of the Mandatory Deed to R$41,180 on June 30, 2014.
These expenses were also reclassified under non-current liabilities, as a deduction from the
account “Mandatory Deed Convertible into Shares”. As determined by the Corporation, the
value started to be amortized on a monthly basis.
Because of the paying in of such debentures made by BNDES Participações S.A., MMS
Participações Ltda. and BNDES Participações S.A. have entered into a Shareholders'
Agreement with the purpose of regulating the relationship between the parties as
shareholders of Marfrig Global Foods S.A.
On February 5, 2013 the Corporation conducted a capital increase, within the authorized
limit due to the conversion of thirty-five thousand (35,000) debentures from the 2nd Issue of
Convertible Debentures of the Corporation that were held by BNDES Participações S.A. –
BNDESPAR into forty-three million, seven hundred and fifty thousand (43,750) common
shares issued by the Corporation, in accordance with Item III.16.11 of the “Private Deed of
the 2nd Issue of Debentures Convertible Into Shares of Marfrig Global Foods S.A.” that was
entered into by the Corporation and Planner Trustee DTVM Ltda. on July 22, 2010, and as
per the Material Fact published on October 24, 2012.
The Shares resulting from the conversion have the same characteristics and conditions and
enjoy all of the same rights and advantages ascribed by law and by the bylaws that are
attributed to the existing common shares issued by the Corporation.
As a result of the abovementioned conversion of debentures, there was a material increase
in the ownership interest held by the shareholder BNDESPAR, which now holds common
shares representing 19.63% of the Share Capital of the Corporation.
On January 6, 2014, the Board of Directors of the Corporation approved the submission to
the Meeting of Shareholders of the proposal for Fifth (5th) Issue of Unsecured Convertible
Debentures in a Single Series in the aggregate amount of R$2,150,000 (5th Issue of
Convertible Debentures of the Corporation).
On January 22, 2014, the shareholders of the Corporation, assembled in an Extraordinary
Shareholders' Meeting, approved said Firth Issue of Convertible Debentures of the
Corporation in the aggregate amount of R$2,150,000, in a single series, upon the issue of
215,000 thousand debentures at the unit face value of R$10, restated by an interest rate
corresponding to 100% of the cumulative variation in the average overnight rate for one
day, plus a spread of one percent (1%). The interest will be paid annually on the following
dates: January 25, 2015, January 25, 2016; with the last payment date coinciding with the
maturity date, on January 25, 2017. The Fifth Issue had the objective, within the limits of
its indenture, of fully redeeming the debentures of the Second Issue of Convertible
Debentures of the Corporation.
66
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Likewise, the debentures of the Fifth Issue of Convertible Debentures of the Corporation
are mandatorily convertible into shares of the Corporation on the Maturity Date, with the
conversion price corresponding to the lowest of the following amounts: (i) R$21.50,
restated annually by an interest rate corresponding to the overnight rate plus one percent
(CDI+1%), less any and all payments received by shareholders (dividends or interest on
equity); or (ii) the highest between the market price, as defined in the indenture as the
weighted average market price of MRFG3 stock quoted in the spot market of the
BM&FBovespa in the sixty (60) trading sessions immediately prior to the conversion date,
and R$21.50 (without adjustment for cash dividends or monetary restatement).
On March 17, 2014, the Corporation released a Notice to the Market announcing the
conclusion of the issue and subscription of its Fifth Issue of Convertible Debentures, with
the subscription of 214,955 Debentures, with unit face value of R$10, as per the
information received from the agent bank Itaú Unibanco S.A., and that 45 unsubscribed
debentures were canceled by the Corporation.
Lastly, on March 28, 2014, the Corporation published a Notice to the Market informing that,
as decided in the Meeting of Debenture Holders of the Second Issue of Convertible
Debentures of the Corporation, held on January 22, 2014, of a total of 215,000 debentures
of the Second Issue: a) 214,900 were used by the respective debenture holders to pay up
the debentures of the Fifth Issue of Convertible Debentures of the Corporation; and b) 100
outstanding debentures were fully redeemed, on the date hereof, which resulted in the
cancelation of all 215,000 debentures of the Second Issue of Convertible Debentures of the
Corporation and the consequent conclusion of said Second Issue of Debentures.
23.
Tax, labor and civil contingencies
23.1 Provisions
The Corporation and its subsidiaries are involved in several civil, administrative, tax,
social security and tax proceedings, in the ordinary course of business, for which
provisions based on legal counsel’s estimates have been set up. The principal
information about these proceedings is presented below:
6/30/15
Labor and social security
Parent
12/31/14
30,422
32,400
Tax
1,758
Civil
13,109
45,289
Consolidated
6/30/15
12/31/14
31,302
32,684
3,531
1,758
3,531
4,184
13,159
4,233
40,115
46,219
40,448
The following table shows the changes in provisions in the period ended June 30, 2015:
67
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Parent
Labor and
social security
Balance on December 31, 2014
32,400
Addition
Reversal
Reclassification
Balance on June 30, 2015
6,705
(8,683)
30,422
Consolidated
Tax
3,531
Civil
4,184
Total
40,115
Labor and
social security
32,684
Tax
3,531
Civil
4,233
Total
40,448
17
(1,790)
1,758
242
8,683
13,109
6,964
(1,790)
45,289
7,301
(8,683)
31,302
17
(1,790)
1,758
243
8,683
13,159
7,561
(1,790)
46,219
23.1.1 Labor and social security
As at June 30, 2015, the Corporation and its subsidiaries are parties to various labor
claims. Based on the Corporation’s and its subsidiaries’ payment history, a provision of
R$31,302 was set up. In the opinion of the Management and legal counsel, this provision
is sufficient to face probable losses. Most of the labor claims filed against the
Corporation and its subsidiaries refer to matters usually questioned in this industry, such
as dismissal for just cause, preparation time, breaks for personnel who work in
refrigerated environments, commuting time and ergonomic risk, among others. The
Management of the Corporation believes no individual labor claim is relevant.
23.1.2 Tax
According to the Management and its legal counsel, the tax contingencies of the
Corporation are rated as having a probable unfavorable outcome, totaling R$1,758. They
refer to ICMS in the State of Mato Grosso and arise from the issuance of electronic
invoices.
68
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
23.1.3 Civil
Based on the opinion of legal advisors, the Management recognized on June 30, 2015 a
provision for the amount of shares considered to be of probable risk, totaling R$13,159.
The civil suits of the Corporation and its subsidiaries involve disputes typically related to
business agreements and indemnities. None of those proceedings is individually material.
23.2 Contingent Liabilities
Contingent liabilities, which are not recorded in the books of account, according to
prevailing legislation, are shown below:
6/30/15
Labor and social security
Tax
Civil
Parent
12/31/14
Consolidated
6/30/15
12/31/14
97,167
123,689
119,812
156,313
820,527
782,183
877,976
838,419
2,313
605
2,730
964
920,007
906,477
1,000,518
995,696
23.2.1 Labor and social security
The labor and social security lawsuits in which the Corporation and its subsidiaries are
parties typically involve issues usually claimed in the segment, such as dismissal without
cause, preparation time, breaks for persons working in refrigerated environments,
overtime, ergonomic hazards and others, which are individually insignificant.
23.2.2 Tax
The main tax matters discussed at court that in the opinion of the Management and legal
counsel are rated as possible losses for the Corporation and its subsidiaries is presented
below.
69
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
a)
Federal Taxes and Contributions
As at June 30, 2015, the Corporation was a party to administrative proceedings and court
claims filed by the Federal Government at the total historical value of R$409,806, claiming:
(i)
Deduction of ICMS from PIS and COFINS tax bases. This last lawsuit refers to a refund
request at the historical value of R$68,552, for which a provision was not accrued,
given that according to the opinion of the legal counsel, they are considered only
possible losses. The Corporation has filed administrative defenses that are pending
final judgments and allege non-enforceability due to miscalculation of their tax
bases, and that inspectors estimated the amounts according to assumptions;
(ii)
Income and Social Contribution Taxes due to measurement of profits of foreign
subsidiaries at the historical amount of R$37,279, which is the subject-matter of the
administrative defense under the allegation of failure to comply with the accrual
basis principle, the non-constitutionality of law provision (Article 74 of Provisional
Measure 2158-35/2011) and infringement of dual taxation treaties signed by Brazil,
where also no provision was recorded in view of the possible chance of loss;
(iii) Income and Social Contribution Taxes - Failure to accrue in net income when
determining the taxable base, as well as in the CSLL calculation base, the income
from branches, subsidiaries or affiliated companies determined for fiscal year 2008 in
the historical amount of R$38,094. An administrative defense was presented. It is
important to note that because this does not involve a tax credit, but rather the
disallowance of a tax loss and negative calculation base for CSLL, the effect on
deferred assets is the amount indicated in the proceeding;
(iv)
No increase in taxable income and CSLL base for profits earned abroad in calendar
year 2009, disallowance of goodwill amortization and non-subjection to tax of
interest from loan agreements in force with subsidiaries abroad, in the historical
amount of R$83,910. An administrative defense was submitted.
(v)
Disallowance of the negative balance of income tax (IRPJ) for 2008, with partial
approval of the offsets made, due to the non-recognition of a portion of the credit a
debit was created in the historical amount of R$24,980, against said disallowance a
statement of nonconformance was presented so that the entire credits of the
Corporation could be recognized;
(vi)
Disallowance of the negative balance of income tax (IRPJ) for 2007, whose
disallowances of offsets make up a debit in the historical amount of R$ 8,087, which
arose from the supposed utilization of improper credit to settle the monthly
estimates of the elements that cause the negative balance;
(vii) The Corporation has a tax deficiency notice related to the requirement of additional
contribution to SENAI in the historical amount of R$330. Said action is awaiting
analysis of the appeal and export report presented by the company;
70
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
(viii) The Corporation and its subsidiary MFB have a tax deficiency notice related to the
requirement of additional contribution to SENAI in the historical amount of R$2,015,
for alleged error in taxing the activities of its establishments;
(ix)
MFB has a tax deficiency notice in the amount of R$1,487 filed due to alleged
insufficient non-cumulative credits of PIS/Cofins taxes in domestic and export
markets (first quarter of 2010 to second quarter of 2011), to cancel the PIS/Cofins
dues declared in Dacon. The objection submitted required the suspension of
judgment of the objection until the final analysis of each of the reimbursement
requests, which will prove the existence of credits;
(x)
The Corporation and its subsidiary MFB have administrative proceedings associated
with federal tax credits offset against social security debts, in the amounts of
R$7,144 and R$3,495, respectively. The companies are party to a court action
discussing their right to the offset;
(xi)
The Corporation and its subsidiaries MFB and Pampeano have federal tax debts,
whose collection suits are individually immaterial, totaling R$134,434;
The Corporation joined the tax installment payment program envisaged by Law
12,996/14, which reopened the period for joining the tax installment payment
program provided for by Law 11,941/09, granting the prerogative to taxpayers that
pay their overdue debits in installments by December 31, 2013 – World Cup REFIS. The
following debits were subject to such installment payments: i) social security
contributions, ii) arising from settlements not ratified; and iii) Import PIS/COFINS,
whose amounts are mentioned in Note 17 – Taxes, rates and contributions.
Said adhesion was made effective with tax credits approved and available, which
were duly backed by a court ruling on September 30, 2014.
The subsidiaries MFB, MFG and Pampeano also adhered to the installment payments
program provided for by Law 12,966/14, which reopened the period for joining the
tax installment payment program provided for by Law 11,941/09, granting the
prerogative to taxpayers who pay their overdue debits in installments by December
31, 2013 – World Cup REFIS. Debits subject to the adhesion refer to social security
contributions, whose amounts are mentioned in Note 17 – Taxes payable.
71
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
b)
State VAT – ICMS
On June 30, 2015, the Corporation had administrative proceedings, and court claims in the
historical amount of R$468,103, claiming the following:
(i)
The discussions on ICMS involving the Corporation in administrative proceedings filed
by the Finance Departments of the States of São Paulo, Goiás, Bahia, Rio Grande do
Sul, Rondônia and Ceará that question the credits from the transfer of goods, the
allocation of presumed tax credit arising from slaughtering activities, non-fulfillment
of ancillary obligations, wrong issuance of invoices, credit granted and non-payment
of ICMS ST, claimed credit of ICMS in the acquisition of beef cattle from another
state, which amount to the historical value of R$55,226. Of this amount, R$13,226
was the subject of a court claim related to the credit granted by the State
Government of São Paulo, praying for interlocutory relief against its enforceability;
(ii)
The Corporation is challenging the collection imposed for the lack of supporting
documentation to prove the entrance of goods through the Free-Trade Zone of
Manaus, at the historical value of R$969.
(iii) In the State of Mato Grosso, the actions refer to the disregard of the tax regimen
established with the State, the absence of issuance of electronic invoice, irregular
issue of tax document and export evidence corresponding to R$3,931.
(iv)
The most significant proceedings regarding ICMS were filed by the Finance
Department of the State of São Paulo claiming amounts related to deemed credit
taken on transfer invoices of goods sent by the branch located in the states of Mato
Grosso do Sul and Goiás to the branches in the State of São Paulo, that is, a "Tax
War”. The assessed amounts correspond to the difference between the amount
separately identified in the goods receiving documents at the distribution center and
that paid to the State of origin. The total historical amount claimed in these
proceedings is R$378,261.
(v)
The Corporation has a tax foreclosure action related to the payment of ICMS tax as a
result of an alleged undue credit – Presumed Credit under the Regime AGREGAR/RS,
in the historical amount of R$24,993. The Corporation filed a motion to stay
execution of said foreclosure actions demonstrating the legitimacy of the credits;
(vi)
The subsidiary MFB has a Tax Deficiency Notice regarding the charge of ICMS debits,
issued by the Tax Authority of the State of São Paulo for alleged non-payment of
ICMS-ST for inbound goods acquired from rural agricultural producers, submission of
GIA with incorrect information, alleged undue credits granted in a higher amount
than that established by law, failure to reverse ICMS credits arising from exempt
shipments and non-payment of ICMS for exports outside the period set by law, in the
historical amount of R$4,326;
72
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
(vii) Subsidiary MFB also received Tax Deficiency Notices discussing the collection of ICMS
debts filed by the Finance Departments of the states of Rondônia and Goiás related to
the disallowance of ICMS credits in view of breach of an ancillary obligation, error in
determining the ICMS calculation base, not including freight in the ICMS calculation
base the amount paid for transport services, circulation of goods with invoice
considered questionable, non-compliance with the minimum price in the state and
omission of the ICMS declaration in the Periodic Tax Statement (DIP), all of which led
to the tax collection notice for the historical amount of R$328;
(viii) The subsidiary MFG received a Tax Deficiency Notice involving the collection of ICMS
debts filed by the Finance Department of the State of São Paulo related to the
payment of ICMS, alleging that the Corporation did not record in the specific field of
the GIA the tax amount including the rate differential related to the interstate
acquisition of material for use and consumption, undue booking of ICMS credit, in the
historical amount of R$57;
(ix)
The subsidiary Pampeano has a Tax Deficiency Notice involving the collection of ICMS
debts filed by the Finance Department the State of Rio Grande do Sul, related to the
collection of ICMS debts for the alleged issue of invoice without declaring the ICMS in
the outflow of goods from that state, in the historical amount of R$12.
c)
Taxes on Services of Any Nature (ISSQN)
On June 30, 2015, the Corporation had a tax deficiency notice related to the collection of
ISSQN is related to the alleged retention and nonpayment of the respective tax credit
levied on the provision of services received in the periods of 10/2005, 04, 06, 10 and
12/2006, 04, 08, 09 and 10/2007, 01 and 04/2008, 04, 09 and 12/2009, 04 and 06/2010, in
the historical amount of R$66.
23.2.3 Civil
The civil suits of the Corporation and its subsidiaries involve disputes typically related to
business agreements and indemnities, which are not individually relevant.
23.3 Additional Information on Contingent Liabilities
On June 30, 2015 the Corporation, based on the opinion of its Management and legal
advisors, classified the amount of R$225,772 as Remote Risk, not including it in the balance
informed in Note 23.2 – Contingent Liabilities – Tax.
(i)
Contributions destined to Social Security (FUNRURAL), three deficiency notices, the
first related to 2006 and 2007, the second related to 2008 and the third related to
2009 and 2010, at the historical amount of R$225,772, all of which already were the
subject of an administrative defense alleging the non-constitutionality of said
contribution based on the Federal Supreme Court’s decision, the application of which
at the administrative level is supported by Article 26 – A of Decree 70,235/72;
73
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
(ii)
24.
With regard to federal administrative and judicial proceedings deemed as remote
risk, as described earlier in Note 22.3 for the period ended June 30, 2014, the
Corporation and its subsidiaries MFB and MFG joined the tax installment payment
program instituted by Law 12,966/14, which reopened the period for joining the tax
installment payment program provided for by Law 11,941/09, granting the
prerogative to taxpayers that pay their overdue debits in installments by December
31, 2013 – World Cup REFIS. The debits subject to adhesion refer to social security
contributions and Import PIS/COFINS, whose amounts are mentioned in Note 17 Taxes, rates and contributions.
Deferred Income and Social Contribution Taxes - Liabilities
6/30/15
Income Tax
Social Contribution
Parent
12/31/14
68,214
70,438
Consolidated
6/30/15
12/31/14
486,917
606,676
24,557
25,357
31,051
29,082
92,771
95,795
517,968
635,758
Refer to (i) deferred taxes recorded when property, plant and equipment items adopted
deemed cost as of January 1, 2009 in accordance with CVM Resolution 583/09 (CPC 27 –
property, plant and equipment) and CVM Resolution 619/09 (ICPC 10), which will be settled
as revalue assets are sold, written off, depreciated or amortized, according to their
respective useful lives established in the appraisal report, and (ii) the effect of deferred
federal taxes calculated on the effects of CVM Resolution 665/11 (CPC 15 (R1) – business
combination).
Below are the changes in deferred taxes in the period ended June 30, 2015:
Description
Balance on December 31, 2014
Realization of revaluation reserve
Realization of deemed cost
Deferred taxes on temporary differences
Reversal of deferred taxes on temporary differences
Other
Translation gains/losses
Discontinued operation
Balance on June 30, 2015
Parent
IRPJ
CSL
70,438
25,357
(827)
(298)
(1,397)
(502)
68,214
24,557
Consolidated
IRPJ
CSL
606,676
29,082
(839)
(302)
(3,626)
(582)
3,811
11,326
47,613
2,853
91,013
(269,057)
486,917
31,051
74
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
25.
Shareholders’ equity
25.1 Share capital
Subscribed and paid-in share capital as at June 30, 2015 totals R$5,276,678 and is
represented by 520,747,405 common shares without par value (R$5,276,678 as of December
31, 2014, represented by 520,747,405 shares). Under the scope of the primary public
offering of common shares of the Corporation in December 2012, a total of 131,250,000
common shares were issued at the aggregate subscription price of R$1,050,000, as per the
minutes of the meeting of the Board of Directors held on December 10 and 21, 2012. As
per the Minutes of the Board of Directors’ Meeting held on July 30, 2012, a total of
1,236,549 registered common shares, previously held in treasury, were canceled. Based on
CVM Resolution 649/10 (CPC 08 (R1) – transaction costs and premium on issue of securities),
the Corporation recorded under shareholders’ equity the costs incurred with the processes
of funding (R$108,210) through public share offering and private share issue.
On February 5, 2013, the Corporation carried out a capital increase, within the authorized
limit, in a Meeting of the Board of directors, due to the conversion of thirty-five thousand
(35,000) debentures from the 2nd Issue of Convertible Debentures of the Corporation that
were held by BNDES Participações S.A. (BNDESPAR) into 43,750 million common shares
(“Shares”) issued by the Corporation, as explained in Note 22.
Pursuant to the Corporation’s by-laws, at the discretion of the Board of Directors, Share
Capital can be composed of up to 630 million common shares, including share capital,
regardless of amendments to the by-laws.
Also at discretion of the Board of Directors, the Corporation can issue shares and
debentures convertible into shares or subscription warrants without pre-emptive rights or
with the period reduction provided for in paragraph 4 of article 171 of Law No. 6.404/76.
Their placement should be made through sale on stock exchange or public subscription, or
by means of exchange for shares in a public offering for control acquisition, under the
terms of the law and within the limit of authorized capital.
The Board of Directors defines issuance conditions (prices and periods).
The call option of shares, the conditions under which shareholders will have pre-emptive
rights to subscription, or the inexistence of such right in relation to Management,
employees, or individuals who render services to the Corporation or other companies under
its control are presented in Note 29.5.
25.2 Income reserves
25.2.1 Legal reserve
It is 5% (five per cent) of the Corporation’s net income, as defined in its by-laws and
current legislation.
In 2014, the Corporation did not recognize legal reserve given that it recorded loss.
Accordingly, the balance as of June 30, 2015 remained at R$44,476 (same amount as in
2013).
75
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
25.2.2 Treasury shares
Share buyback program
Shares repurchased were held in treasury for exercise of stock options by the beneficiaries
of the Corporation's Stock option Plan and/or subsequent cancellation or sale.
In the period ended June 30, 2015, there was no ongoing share buyback program and
Marfrig did not acquire any shares.
Treasury shares
On June 30, 2015, Marfrig held three hundred thirty thousand, seventy-four (330,074)
common shares in treasury, representing 0.06% of the Corporation’s total shares, which
were booked at the amount of R$3,121, which corresponds to an average cost of nine reais
and forty-five centavos (R$9.45) per share.
Changes in treasury shares are shown in the table below:
Held in Treasury
Number of
Shares
V alue (R$ '000)
Balanc e as at 12/31/2014
389,729
3,685
(-) Disposal - Stock options
(59,655)
(564)
Balanc e as at 6/30/2015
330,074
3,121
25.3 Other comprehensive income
25.3.1 Asset and liability valuation adjustment
These account records exchange rate gains (losses) on investments in subsidiaries abroad
directly and indirectly held by the Corporation. Such accumulated effect will be
transferred to the statement of operations for the year as gain or loss only upon the
disposal or write-off of the investment. This account also recognized the effects of
adoption of deemed cost.
25.3.2 Cumulative translation adjustment
This account records exchange rate gains (losses) resulting from the translation of the
foreign subsidiaries’ interim financial statements. The investee’s functional currency is
different from that of the Corporation.
76
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
25.3.3 Amounts under Shareholders’ Equity related to assets held for sale
In compliance CVM Resolution 598/09 (CPC 31 – Non-Current Assets Held for Sale and
Discontinued Operation), the Corporation segregated from the balance of other
comprehensive income recorded in its shareholders’ equity the amounts related to assets
held for sale.
25.4 Dividends payable
The Corporation’s mandatory dividend is at least 25% of the adjusted net income
determined in the Corporation’s financial statements, pursuant to Brazilian Corporate Law
and the Corporation’s by-laws. The annual statement of dividends, including their
payment, in addition to mandatory minimum dividends, are approved at an Annual
Shareholders’ Meeting by majority voting of Marfrig’s shareholders and will depend on
various factors. Among these factors are the Corporation’s operating results, financial
conditions, cash needs, future prospects and others which Marfrig’s Board of Directors and
shareholders deem relevant.
At a meeting held on February 27, 2015, in view of the net loss recorded in the period, the
Board of Directors did not submit to the Annual Shareholders’ Meeting the proposal for
distribution of dividends for 2014.
25.5 Interest on equity capital
The Corporation did not recognize interest on shareholders’ equity for the fiscal years
ended December 31, 2014 and 2013.
25.6 Non-controlling interest
Refers to the interest of non-controlling shareholders in the Corporation’s equity.
77
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
26.
Net sales
Parent
6/30/15
Consolidated
6/30/14
6/30/15
Reclassified
6/30/14
Revenue from sales of products
Domestic sales
1,682,936
1,431,755
6,619,066
5,234,514
Foreign sales
1,219,559
1,182,874
2,698,607
2,342,184
2,902,495
2,614,629
9,317,673
7,576,698
Deductions from gross sales
Taxes on sales
Returns and discounts
Net sales
27.
(50,753)
(63,860)
(102,113)
(127,860)
(77,742)
(116,715)
(116,418)
(184,315)
(128,495)
(180,575)
(218,531)
(312,175)
2,774,000
2,434,054
9,099,142
7,264,523
Costs and expenses by nature
The Corporation has decided to present the statements of income by function. The
breakdown by nature is below:
78
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Parent
Consolidated
Reclassified
6/30/14
6/30/15
6/30/14
6/30/15
2,157,924
1,874,106
7,063,611
5,527,347
Depreciation
49,955
37,028
155,570
124,560
Amortization
3,904
3,930
35,750
28,219
137,586
116,872
807,070
638,492
2,349,369
2,031,936
8,062,001
6,318,618
Depreciation
3,722
5,965
5,948
9,235
Amortization
40,457
Employee salaries and benefits
(7,464)
Cost of sales
Inventory costs
Employee salaries and benefits
Administrative expenses
Other
36,715
1,273
449
37,129
-
119,344
103,525
3,965
71,746
79,511
47,059
198,311
192,720
Selling expenses
Depreciation
Employee salaries and benefits
Other
144
190
192
322
13,848
13,613
31,382
31,321
124,325
169,832
247,167
285,621
138,317
183,635
278,741
317,264
79
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
28.
Net financial result
The Corporation’s net financial income (expenses) is as follows:
Parent
6/30/15
Financial income
Financial results with market transactions
Interest received, earnings from marketable securities
Discounts, other
Total financial income
29.
6/30/14
Consolidated
Reclassified
6/30/15
6/30/14
84,082
13,341
2,422
99,845
28,884
5,846
1,626
36,356
192,871
38,421
10,433
241,725
44,562
49,979
10,232
104,773
Exchange rate gains
667,281
269,137
927,181
378,096
Financial expense
Provisioned interest, debentures and leasing with financial institutions
Market transactions
Bank expenses, commissions, fees, other
Total financial expense
(467,970)
(248,591)
(96,331)
(812,892)
(375,334)
(41,214)
(53,088)
(469,636)
(619,563)
(282,418)
(281,544)
(1,183,525)
(514,932)
(73,318)
(178,971)
(767,221)
Exchange rate losses
(1,039,201)
(270,037)
(1,401,226)
(396,009)
Net financial result
(1,084,967)
(434,180)
(1,415,845)
(680,361)
Management compensation
The compensation policy is designed to establish the criteria, responsibilities and directions
for the short and long-term compensation program of Marfrig Group’s Management (Bonus
and Stock Option).
The purpose of this policy is to motivate the Corporation’s executive officers to grow and
develop to achieve maximum performance, in line with the business objectives, through a
short and long-term reward pay-out.
The Compensation, Corporate Governance and Human Resources Committee is the advisory
body to the Board of Directors in assessing management compensation. The committee is
composed solely of members of the Corporation’s Board of Directors and one of them is the
Committee Coordinator.
The parameters used to determine Management’s compensation are based on market
practices.
80
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
29.1 Board of directors
The Board of Directors’ compensation consists of a fixed and variable portion.
Fixed portion – An annual amount is set for each member and paid on a monthly basis.
Variable portion – Short-term bonus or stock option-based payment.
The board members’ compensation is determined through market research with the major
companies in the industry whereby a compensation base is defined and submitted to
Marfrig Global Foods’s Compensation, Corporate Governance and Human Resources
Committee for validation.
29.2 Officers appointed as per Bylaws
The Board of Executive Officers’ compensation consists of a fixed and variable portion.
Fixed portion – An annual amount is set for each member and paid on a monthly basis.
Variable portion – Consists of short-term (bonus) and long-term (stock option)
compensation. In general the goals set by the Corporation for Management evaluation refer
to economic objectives and individual goals.
The gain on the Stock Option Plan is tied to the appreciation of the market price of the
share, i.e. the value added to the Corporation by the performance of the individual and the
Management as a whole will reflect on the gain on the stock option plan. At the same time
the employees’ interests are aligned with the Corporation’s interests in the long term.
The exercise price of the stock options related to share-based compensation under
“Specific Programs” is the average of the last 20 trading sessions prior to the first business
day of March of each year and the grant price with a 50% discount starting with the grants
in 2010.
The vesting period follows these criteria:
•
•
•
•
25%
25%
25%
25%
after 12 months of the
after 24 months of the
after 36 months of the
after 48 months of the
grant;
grant;
grant;
grant.
The officers’ compensation is determined through market research with the major
companies in the industry whereby measurement criteria are established according to the
significance of the position within the organization. The macro policies are approved by the
Compensation, Corporate Governance and Human Resources Committee.
81
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
29.3 Audit Board
The Corporation’s Audit Board was set up after approval at the Annual Shareholders’
Meeting held on April 30, 2010. In the by-laws amended by the Special Shareholders’
Meeting held on March 11, 2011, the Audit Board became a permanent body.
The Audit Board’s is fixed on an annual basis and paid on a monthly basis. There is no
variable portion.
29.4 Consolidated compensation
Management and Board members compensation is made up of the compensation of six
members of the Board of Directors (the other three opted for not receiving compensation
as board members, one of whom is also a member of the Statutory Board of Executive
Officers and receives compensation from that body), six members of the Audit Board (there
of whom are alternate members) and six officers appointed as per the Corporation’s bylaws.
The added value of the compensation received by the Corporation’s Management and Board
members for their services is defined through market practices, with the participation of
the Compensation, Corporate Governance and Human Resources Committee, made up
exclusively of members of the Board of Directors of the Company, one of whom acts as
Coordinator of the Committee.
Key management compensation
Consolidated Management compensation
Total
6/30/15
14,739
14,739
6/30/14
15,805
15,805
29.5 Stock option plan
On May 29, 2009, the Annual Shareholders’ Meeting approved the amendment and
restatement of the Stock Option Plan (Plan), with the purpose of: (i) promoting value
generation to the Corporation’s shareholders, through alignment of their interests with
those of the Management, employees and outsourced employees of Marfrig or its
subsidiaries and (ii) enabling a higher level of attraction, retention and motivation of
strategic employees.
The Plan is managed by the Board of Directors, within the limits established in the general
guidelines and applicable legislation. The general guidelines of the plan are disclosed in
detail in the Corporation’s Reference Form.
The Board of Directors may create stock option programs with specific conditions regarding
the participants, the number of options to be granted, performance targets to be achieved,
exercise price discounts and other conditions (“Specific Programs”). Specific Programs
were created in which the exercise price of the Stock Option is equivalent to the average
stock quote in the last 20 trading sessions of the BM&FBOVESPA S.A. prior to the reference
date of the first business day of March each year, over which a 50% discount shall apply.
82
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
During the period ended June 30, 2015, 59,655 shares were transferred to the Management
of the Corporation under the stock option plans. The changes in options exercised
throughout the period are shown in the tables below:
Total o ptio ns ex erc ised by month
Number of
A verage
shares
Mark et Pric e¹
ex erc ised
(R$ per share)
January/15
-
5.16
February/15
-
4.76
Mar ch/15
11,773
4.27
April/15
28,254
4.23
May/15
9,785
4.25
9,843
4.64
June/15
Optio ns ex erc ised - 2015
59,655
¹ Average monthly quote disclosed by BM&FBOVESPA – Bolsa de Valores, Mercador ias e
Futuros S.A., r elated to Marfrig's common shares, tr aded under ticker MRFG3.
2015
Consolidated Changes
2014
(Options)
Opening balanc e
3,405,169
1,493,501
Options granted
1,581,017
2,499,640
Options exercised
(59,655)
Options canceled and expired
(71,494)
-
Closing balanc e
(516,478)
4,926,531
3,405,169
The expected dilution of ownership interest of current shareholders, when stock options
are exercised at the vesting date, up to the limit of shares held in the treasury for this
purpose, is 0.95% of all shares at June 30, 2015, as detailed in the table below:
Percentage of Dilution
Granting date
Unexercised
Treasury stock
Total outstanding shares except treasury stock
Percentage of dilution
Plano ESP V LP Plano ESP VI LP Plano ESP VII LP Plano ESP VIII LP Plano ESP IX LP
10-11
11-12
12-13
13-14
14-15
4/20/2011
4/24/2012
4/5/2013
4/30/2014
6/24/2015
142,495
498,270
260,716
2,444,033
1,581,017
0.03%
0.10%
0.05%
0.47%
0.30%
Total
4,926,531
(330,074)
520,417,331
0.95%
83
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
The Corporation did recognize expenses relating to granting of plans in effect for the
period ended June 30, 2015, as detailed in the table below:
Effects from the exercise of options (R$ '000)
Amount received from sale of shares - Exercised options
2015
2014
127.9
350.7
(-) Cost of treasury shares disposed of
(564.0)
(675.9)
Effect on disposal of shares
(436.1)
(325.2)
Due to the exercise of stock options, the Corporation incurred costs with the sale of
treasury shares of R$564. At June 30, 2015, the book value of treasury shares was recorded
under the Corporation’s shareholders' equity in the amount of R$3,121 (R$3,685 at
December 31, 2014).
The fair value of the options was measured on an indirect basis, according to the BlackScholes pricing method, based on the following assumptions:
• Standard deviation: 55.04%. Volatility is measured taking into consideration the daily
prices of the Corporation’s shares traded on the Brazilian stock exchange
(BM&FBOVESPA) under the ticker MRFG3, from January 1, 2015 to June 30, 2015;
• Risk-free interest rate: 6.00% p.a. The Corporation uses as risk-free interest rate the
Long Term Interest Rate (TJLP) annualized on calculation date and available on the
federal
revenue
service
website
–
www.receita.fazenda.gov.br/pessoajuridica/refis/tjlp.htm.
The fair value of options as of June 30, 2015 ranged between a minimum of R$0 and a
maximum of R$4.13 per share for SPECIAL plans.
84
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Changes to the stock option programs are presented below:
Plans
Granting
Date
Performanc
Option
e (vesting) expiration
period
date
Options
granted
Vested
options
5,620,658
2,215,214
9/2/2015
142,770
142,770
0
.
142,770
142,770
0
Options exercised / canceled in previous periods
ESP V LP 10-11
4/20/2011
3/3/2015
Options
exercised in
the period
Options
Options
exercised
cancelled
and/or
Unexercised
and/or
cancelled in agreements
expired in
prior
the period
periods
2,215,214
3,405,169
0
275
142,495
0
275
142,495
Option
exercise
price
R$ 7.0251
ESP VI LP 11-12
4/24/2012
3/3/2015
9/2/2015
250,447
250,447
2,624
0
0
247,823
R$ 4.7680
ESP VI LP 11-12
4/24/2012
3/3/2016
9/2/2016
250,447
0
0
0
0
250,447
R$ 4.7680
500,894
250,447
2,624
0
0
498,270
ESP VII LP 12-13
4/5/2013
3/3/2015
9/2/2015
87,380
87,380
1,424
0
0
85,956
R$ 5.0083
ESP VII LP 12-13
4/5/2013
3/3/2016
9/2/2016
87,380
0
0
0
0
87,380
R$ 5.0083
ESP VII LP 12-13
4/5/2013
3/3/2017
9/2/2017
R$ 5.0083
87,380
0
0
0
0
87,380
262,140
87,380
1,424
0
0
260,716
ESP VIII LP 13-14
4/30/2014
3/3/2015
9/2/2015
624,910
624,910
55,607
0
0
569,303
R$ 1.9470
ESP VIII LP 13-14
4/30/2014
3/3/2016
9/2/2016
624,910
0
0
0
0
624,910
R$ 1.9470
ESP VIII LP 13-14
4/30/2014
3/3/2017
9/2/2017
624,910
0
0
0
0
624,910
R$ 1.9470
ESP VIII LP 13-14
4/30/2014
3/3/2018
9/2/2018
624,910
0
0
0
0
624,910
R$ 1.9470
2,499,640
624,910
55,607
0
0
2,444,033
ESP IX LP 14-15
6/24/2015
3/3/2016
9/2/2016
395,316
0
0
0
0
395,316
R$ 2.3720
ESP IX LP 14-15
6/24/2015
3/3/2017
9/2/2017
395,316
0
0
0
0
395,316
R$ 2.3720
ESP IX LP 14-15
6/24/2015
3/3/2018
9/2/2018
395,316
0
0
0
0
395,316
R$ 2.3720
ESP IX LP 14-15
6/24/2015
3/3/2019
9/2/2019
395,069
0
0
0
0
395,069
R$ 2.3720
1,581,017
0
0
0
0
1,581,017
7,201,675
3,320,721
59,655
0
2,215,489
4,926,531
Total at
6/30/2015
Plans
Gr anting Date
ESP V LP 10-11
4/20/2011
M ar k e t value of
unve s te d options at
the e nd of the
pe r iod
M ar k e t value of
outs tanding ve s te d
options at the e nd
of the pe r iod
Effe cts in the futur e
re s ult of the
Cor por ation - doe s not
r e quir e im m e diate
accounting
0.0
0
346.1
0
0
346.1
1,161.3
ESP VI LP 11-12
4/24/2012
0.0
228.5
ESP VI LP 11-12
4/24/2012
395.0
0
230.9
395.0
228.5
1,392.2
ESP VII LP 12-13
4/5/2013
0.0
58.6
382.1
ESP VII LP 12-13
4/5/2013
126.1
0
59.6
ESP VII LP 12-13
4/5/2013
181.1
0
59.6
307.2
58.6
501.3
ESP VIII LP 13-14
4/30/2014
0.0
2,130.9
4,273.7
ESP VIII LP 13-14
4/30/2014
2,389.5
0
2,339.0
ESP VIII LP 13-14
4/30/2014
2,483.5
0
2,339.0
ESP VIII LP 13-14
4/30/2014
2,582.7
0
2,339.0
7,455.7
2,130.9
11,290.7
ESP IX LP 14-15
6/24/2015
1,354.0
0
1,311.7
ESP IX LP 14-15
6/24/2015
1,438.4
0
1,311.7
ESP IX LP 14-15
6/24/2015
1,520.9
0
1,311.7
ESP IX LP 14-15
6/24/2015
1,593.6
0
1,310.8
5,906.9
0
5,245.9
14,064.8
2,148.0
18,776.3
Total at
6/30/2015
85
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
30.
Earnings (loss) per share
The following table shows the calculation of earnings (loss) per share for the years ended
June 30, 2015 and 2014 (in thousands, unless otherwise stated):
Profit (loss) attributable to shareholders of continuing operations
Profit (loss) attributable to shareholders of discontinued operations
Profit (loss) attributable to shareholders of the Corporation
Weighted average number of shares in the period (units)
Weighted average number of shares held in treasury, including stock option
(units)
Weighted average number of outstanding common shares (units)
Basic and Diluted Earnings (Losses) (in R$) from continuing operations
Basic and Diluted Earnings (Losses) (in R$) from discontinued operations
Earnings or losses attributed to shareholders of the Company
6/30/2015
(612,030)
34,976
(577,054)
520,747,405
Reclassified
6/30/2014
(198,724)
47,220
(151,504)
520,747,405
(368,185)
(461,219)
520,379,220
(1.1761)
0.0672
(1.1089)
520,286,186
(0.3820)
0.0908
(0.2912)
The Corporation has debentures mandatorily convertible into common shares, which are
not added to the calculation of diluted earnings per share.
31.
Segment reporting
Marfrig Global Foods S.A. is a multinational Brazilian-originated company dedicated to the
production, processing and sale in domestic and foreign markets of diversified food
products, focusing on products of animal protein.
The Corporation has built an integrated business model, geographically diverse, consisting
of production bases located in places with significant competitive advantages in cost and a
distribution network with access to major consumer markets in the world.
The Corporation is strategically organized into two main reporting segments:
86
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Marfrig Beef
• A pioneer in the Brazilian market in the marketing and promotion of beef and lamb,
Marfrig maintains a strong presence in the food service segment and a significant
presence in export markets. Its international operations in South America are
concentrated in exporting premium beef cuts and leveraging its strategic position in
Uruguay, Argentina, Chile, two trading companies in Europe and Peru and a beef jerky
processing plant in the United States, with access to the world’s main consumer
markets.
Keystone
• A global company focused on producing and developing multi-protein foods to serve
major global restaurant chains, with a strong presence in Asia and the United States.
The group’s global platform is present in four continents, with 59 industrial complexes and
offices in the Americas, Asia, Europe and Oceania, with a distribution system that allows us
to export to over 99 countries.
The Corporation provides information to the market, combined by segment of activity
similar to that considered by its managers when taking strategic decisions.
87
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
The consolidated balance sheet and statement of operations summarized by information segment are as follows:
6/30/2015
Marfrig Beef
Holding BV
Keystone
12/31/2014
Discontinued
Segment
Total
Marfrig Beef
Holding BV
Keystone
Discontinued
Segment
Total
Assets
Current assets
5,353,956
82,002
1,494,213
11,785,388
5,475,710
570,315
1,206,822
1,115,670
8,368,517
Non-current assets
3,538,127
249,742
294,265
-
4,082,134
3,236,996
254,204
179,946
839
3,671,985
Investments
Property, plant and equipment
Biological assets
Intangible assets
4,855,217
170
-
35,667
-
35,837
170
-
36,764
3,219,361
-
1,060,229
-
4,279,590
2,889,923
-
975,307
-
46,939
-
46,939
-
1,338,980
-
2,530,376
816,739
22,760,264
12,419,538
1,191,396
13,303,010
331,744
4,270,293
4,855,217
2,986,618
Current liabilities
3,523,681
33,165
957,861
Non-current liabilities
7,306,841
5,172,164
1,895,682
10,830,522
5,205,329
2,853,543
2,986,618
-
Marfrig Beef
Net Revenue
COGS
Equity income (loss)
Net financial income (loss)
Income and social contribution taxes
Controlling interest in net income (loss) continuing operations
(i)
(ii)
(iii)
5,044,158
(4,301,176)
(1,106,012)
287,365
(429,705)
Holding BV
Keystone
40,597
101,543
142,140
-
1,153,833
1,034,137
3,004,709
3,593,269
3,348,582
20,185,908
824,519
7,501,325
2,737,736
43,204
854,857
1,026,668
4,662,465
6,383,363
4,386,845
1,546,458
1,135,052
13,451,718
21,876,012
9,121,099
4,430,049
2,401,315
2,161,720
18,114,183
Reclassified
Marfrig Beef
Reclassified
Holding BV
06/30/2014
Reclassified
Keystone
Discontinued
Segment
-
(3,760,825)
-
(8,062,001)
(7,084)
-
(7,084)
(28,416)
-
(1,415,845)
(45,925)
-
241,440
109,202
99,700
-
(612,030)
(78,259)
4,054,984
(281,417)
(282,025)
36,934
4,961,623
14,374,687
Total
9,099,142
-
1,096,393
-
06/30/2015
Discontinued
Segment
-
4,459,441
(3,705,232)
(472,437)
-
Total
7,264,523
(2,613,386)
-
(6,318,618)
(8,940)
-
(8,940)
7,782
-
(680,361)
(17,396)
-
91,806
112,931
-
(198,724)
-
2,805,082
(215,706)
(233,396)
Controlling interest in net income (loss) discontinued operations
-
-
-
34,976
34,976
-
-
-
47,220
47,220
Non-controlling interest in net income
(loss) - continuing operations
966
-
17,379
-
18,345
576
-
8,702
-
9,278
This segment reporting reflects the Corporation’s fiduciary structure;
The Corporation believes that Marfrig Holding (Europe) BV, with its business of raising funds and holding ownership interest in other subsidiaries of the Group,
should be segregated from this information in order to better report the Keystone business segments.
Discontinued
operations
refer
to
the
sale
of
the
Moy
Park
group
to
JBS.
For
more
information,
see
Note
11.
88
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
32.
Insurance coverage
The Corporation’s policy is to insure its property, plant and equipment and inventories
subject to risk, at amounts deemed sufficient to cover possible losses, taking into
consideration the nature of its activities and the insurance advisors’ opinion.
The risk assumptions adopted, given their nature, are not part of the scope of an audit of
financial statements and, accordingly, were not reviewed by the Corporation's independent
auditors.
Below is a summary of the amounts insured by the Corporation:
Parent
Description
Buildings and meatpacking plants
Inventories and loss of profit
Third-party warehouse
Consolidated
6/30/15
12/31/14
12/31/14
2,114,604
2,270,800
4,743,048
8,293,987
156,500
129,700
504,636
3,541,264
26,825
13,700
33,928
24,410
Vehicles
18,426
17,826
33,792
30,850
Transportation of goods
62,052
53,124
846,767
788,650
Officers' guarantees
93,078
79,686
155,130
145,581
Civil liability
20,000
20,000
119,129
521,081
501,262
-
501,262
-
463,014
3,455,761
352,813
2,937,649
484,837
7,422,529
408,572
13,754,395
Aircraft
Other
33.
6/30/15
Financial instruments - derivatives and risk management - consolidated
33.1 Overview
The Corporation and its subsidiaries are exposed to market risks related to exchange rate
gains (losses), interest rate and commodities price fluctuations of a nature considered
normal to their business. In order to minimize these risks, the Corporation has policies and
procedures to minimize these exposures and may use hedging instruments, as long as
previously approved by the Board of Directors.
Among the Corporation’s policies we highlight: Monitoring levels of exposure to each
market risk; measuring these risks; setting limits for making decisions and using hedging
mechanisms, always aiming at minimizing the foreign exchange exposure of its debts, cash
flows and interest rates.
In a meeting held on June 24, 2015, the Board of Directors of the Corporation established
new limits of authority for the Corporation’s Management Bodies. The Management
Committee is now responsible for authorizing a series of acts, with authority for between
R$300 million and R$400 million. For acts whose required authority exceeds that defined
for the Management Committee, approval is required from the Corporation’s Board of
Directors.
89
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
The Corporation only enters into transactions with derivatives or similar instruments that
offer a minimum protection against: foreign currencies, interest rates and commodity
prices, and also adopts a conservative policy of not entering into transactions that could
affect its financial position. The Corporation does not enter into leveraged transactions
with derivatives or similar instruments
The Corporation also has a sound financial policy, maintaining a high level of cash balance,
cash equivalents and short-term financial investments. At the same time, the maturity of
the Corporation’s long-term indebtedness is such that it does not impact a single year.
33.2 Financial instruments by category
The Corporation’s financial assets and liabilities are classified as below:
Parent
Financ ial assets
Financ ial assets
Held for
and rec eivables
6/30/15
Cash and cash equivalents
Marketable Securities
Trade accounts receivable
trading
12/31/14
6/30/15
12/31/14
170,806
367,049
425
20,779
93,175
79,762
900,193
375,827
292,220
272,936
Notes receivable - derivatives
-
-
Related parties
2,922,947
2,521,877
Total financial assets
3,479,148
3,241,624
-
-
1,846
14,376
-
-
902,464
410,982
Financ ial liabilities
Financ ial liabilities at
Held for
amortized c ost
6/30/15
Trade accounts payable
Loans, financing and debentures
Financial lease
Notes payable - derivatives
Notes payable - investments Brazil
Notes payable - sponsorship
I nterest on debentures
Related parties
Total financial liabilities
trading
12/31/14
6/30/15
12/31/14
523,649
477,679
-
-
2,489,113
2,182,075
-
-
3,840
4,119
-
-
-
-
475,807
376,198
427,948
3,790
-
-
40,882
65,598
-
-
137,680
232,960
-
-
7,306,101
5,441,395
-
-
10,929,213
8,407,616
475,807
376,198
90
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Consolidated
Financ ial assets
Financ ial assets
Held for
and rec eivables
trading
6/30/15
12/31/14
6/30/15
12/31/14
Cash and cash equivalents
829,707
1,023,213
9,445
68,472
Marketable Securities
731,204
625,989
994,927
942,093
1,024,523
1,618,760
-
-
-
-
387,355
275,261
2,585,434
3,267,962
1,391,727
1,285,826
Trade accounts receivable
Notes receivable - derivatives
Total financ ial assets
Financ ial liabilities
Financ ial liabilities at
Held for
amortized c ost
trading
6/30/15
Trade accounts payable
Loans, financing and debentures
Financial lease
Notes payable - derivatives
Notes payable - investments Brazil
12/31/14
6/30/15
12/31/14
1,495,530
2,028,303
-
-
11,838,122
10,870,343
-
-
52,880
139,974
-
-
-
-
507,516
411,320
427,948
3,790
-
-
Notes payable - sponsorship
40,882
65,598
-
-
I nterest on debentures
98,155
190,582
-
-
13,953,517
13,298,590
507,516
411,320
Total financ ial liabilities
Details of the accounting policies and methods used (including criteria for recognition,
measurement bases and criteria for recognition of gains and losses) for each class of
financial instruments and equity are presented in Note 3.1.4 to the financial statements for
the fiscal year ended December 31, 2014.
33.3 Comparison of market value and respective fair values
Market values for the financial instruments are shown in the following:
91
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Consolidated
6/30/15
Book value
Cash and cash equivalents
12/31/14
Market value
Book value
Market value
839,152
839,152
1,091,685
1,091,685
M arketable Securities
1,726,131
1,726,131
1,568,082
1,568,082
Trade accounts receivable
1,024,523
1,024,523
1,618,760
1,618,760
387,355
387,355
275,261
275,261
Notes receivable - derivatives
Trade accounts payable
Loans and financing
Financial lease
Payables - derivatives
Interest on debentures
1,495,530
1,495,530
2,028,303
2,028,303
11,838,122
11,838,122
10,870,343
10,870,343
52,880
52,880
139,974
139,974
507,516
507,516
411,320
411,320
98,155
98,155
190,582
190,582
The fair value of financial instruments is similar to the book value and largely reflects the
values that would be obtained if they were traded in the market.
33.4 Breakdown of Derivative Financial Instruments
The breakdown of Marfrig Group’s derivative financial instruments follows:
92
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Consolidated
Hedged
Instrument
Item
Exchange
Maturity
Transactions designated as Hedge Accounting
Swap
Interest Rate
CETIP
2015
Swap
Interest Rate
CETIP
2016
Swap
Interest Rate
OTC
2018
Swap
Interest Rate
OTC
2019
Transactions not designated as Hedge Accounting
Swap
Interest Rate
CETIP
2016
Swap
Interest Rate
CETIP
2017
Swap
Interest Rate
OTC
2017
Swap
Interest Rate
CETIP
2018
Notional
R$
Assets
Liabilities
Notional
USD
LIBOR
LIBOR
LIBOR
LIBOR
USD
USD
USD
USD
42,000
68,000
132,500
187,500
130,309
210,977
411,095
581,738
(1,427)
(1,263)
(2,481)
(17,672)
LIBOR
BRL
USD
CDI
USD
USD
BRL
USD
38,462
288,547
288,547
59,827
119,331
570,000
570,000
97,440
(3,740)
(362,959)
361,067
(106,418)
MTM R$
(134,893)
NDF
NDF
NDF
NDF
NDF
NDF
NDF
NDF
NDF
NDF
NDF
NDF
NDF
Exchange Rate
Exchange Rate
Exchange Rate
Exchange Rate
Exchange Rate
Exchange Rate
Exchange Rate
Exchange Rate
Exchange Rate
Exchange Rate
Exchange Rate
Exchange Rate
Exchange Rate
OTC
OTC
OTC
OTC
OTC
OTC
OTC
OTC
OTC
OTC
OTC
OTC
OTC
2015
2016
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
USD
USD
USD
USD
AUD
MYR
MYR
THB
KRW
KRW
GBP
JPY
USD
MYR
MYR
THB
THB
USD
USD
SGD
MYR
USD
USD
THB
THB
CLP
47,565
14,040
26,088
18,823
125
10,582
6,267
1,871
12,119
11,269
10,403
530
9,690
147,577
43,561
80,942
58,399
389
32,833
19,444
5,804
37,599
34,962
32,276
1,644
30,064
919
277
(883)
(1,513)
45
(3,029)
(978)
(10)
(2,474)
(1,268)
(1,429)
1
384
(9,958)
Options
Options
Options
Options
SWAP
Options
Futures
Soy meal
Soy meal
Corn
Corn
Corn
Fed cattle
Fed cattle
CBOT
CBOT
CBOT
CBOT
CBOT
BM&F
BM&F
2015
2016
2015
2016
2015
2015
2015
USD
USD
USD
USD
USD
BRL
BRL
USD
USD
USD
USD
USD
BRL
BRL
953
4,138
13,204
23,357
7,653
7,695
18,839
2,958
12,839
40,966
72,466
23,744
23,873
58,449
1,758
4,357
6,339
8,346
1,170
58
1,787
23,815
(121,036)
(1)
Does not include the available cash balance of R$875 related to the margin adjustment.
Assets and liabilities presented on the balance sheet under “securities receivable” and
“trade accounts payable” regarding derivative transactions, which are intended for equity
hedging, are shown below:
Consolidated
6/30/15
12/31/14
Notes receivable - derivatives (note 10)
Notes payable - derivatives (note 21)
Total, net
387,355
275,261
(507,516)
(411,320)
(120,161)
(136,059)
93
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
In the period ended June 30, 2015, a consolidated net financial loss of R$89,547 was
recorded from market transactions, of which R$282,418 corresponded to expenses and
R$192,871 to income.
33.4.1 Derivative Financial Instruments subject to Cash Flow Hedge Accounting
In November 2013, the Marfrig group adopted hedge accounting policies for financial
instruments exposed to cash flow changes. As a result, the variations in fair value of
derivatives designated as hedge are recognized directly in shareholders' equity, under
“other comprehensive income”. The amounts booked under other comprehensive income
are immediately transferred to the income statement when the transaction underlying the
hedge affects profit or loss.
The Corporation documents, at the start of the operation, the relation between the hedge
instruments and the underlying hedged items, as well as the objectives of the risk
management and the strategy to carry out various hedge operations. The documentation
for operations designated as hedge accounting evidences control of the effectiveness and
the operation, and includes:
•
Hedged item;
•
Financial instrument;
•
Strategy for managing the risk to be hedged;
•
Effectiveness of the hedge instrument, reliably measured;
•
Evaluation of the hedge on an ongoing basis throughout the duration of the contract.
The Corporation also documents its assessment, both at the start of the hedge as well as
periodically, that the derivatives used in the hedge operations are highly effective in
offsetting the variations in the fair value of the underlying hedge items. Therefore, all
instruments designated as hedge accounting are effective, highly probable and neutralize
the exposure to variations in the cash flow that could affect results.
94
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
The effectiveness of the operations is periodically controlled in a reliable and documented
manner throughout the duration of the contract, through statistical correlation between
the fair value or cash flows of the hedged position and the hedging instrument, or by
comparing previous changes in the fair value or cash flows of the hedged position
attributable to the hedged risk with previous changes in the fair value or in the cash flows
of
the
hedging
instrument.
Consolidated
Gain / Loss
Instrument
Asset
(Hedged
Item)
Libor (Risk
Exposure)
Maturity
Notional
USD
Notional
R$
Balance
(MTM) R$
Swap
Swap
Swap
Swap
Libor
Libor
Libor
Libor
USD
USD
USD
USD
2015
2016
2018
2019
42,000
68,000
132,500
187,500
130,309
210,977
411,095
581,738
(1,427)
(1,263)
(2,481)
(17,672)
(22,843)
Equity
(1,427)
(1,263)
(2,323)
(17,215)
(22,228)
Result
(158)
(458)
(616)
33.5 Market risk
The Corporation is exposed to market risks arising from commodity prices, interest rates
and exchange rates. For each risk, the Corporation conducts a continuous management and
sensitivity studies presented in this note.
33.5.1 Commodity price risk management
During its activities, the Corporation and its subsidiaries purchase some commodities, such
as: cattle, grains and energy, which are the biggest individual components of the
production cost and are subject to certain variables.
The price of cattle acquired from third parties is directly related to market conditions, and
is influenced by domestic availability and foreign market demand.
Maize and soya bean meal (“grains”) are subject to volatility resulting from weather
conditions, crop yield, transport costs, warehousing costs, agricultural policy, exchange
rates, international prices, among others, which is not under Management’s control.
So as to reduce the impact over commodities, the Corporation and its subsidiaries manage
inventory levels, keep cattle in feedlots and trade derivative financial instruments in the
futures market.
The Corporation and its subsidiaries purchase financial instruments to reduce the price risk
related to the needs for commodities within 12 months.
A substantial part of these hedge instruments come from the futures market at the Chicago
Board of Trade (CBOT).
95
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
The position of derivatives related to commodity risks is shown below:
Consolidated
Exchange
Instrument
Futures contract
Maturity
CBOT
Options
Soy meal
CBOT
Options
CBOT
CBOT
Options
Options
MTM R$
Result on
Notional USD
Notional R$
2015
953
2,958
1,758
6/30/2015
1,758
Soy meal
2016
4,138
12,839
4,357
4,357
Corn
Corn
2015
2016
13,204
23,357
40,966
72,466
6,339
8,346
6,339
8,346
CBOT
SWAP
Corn
2015
7,653
23,744
1,170
1,170
BM&F
BM&F
Options
Futures
Fed cattle
Fed cattle
2015
2015
7,695
18,838
23,873
58,449
58
1,787
58
1,787
75,838
235,295
23,815
23,815
33.5.1.1 Sensitivity analysis of commodity price risk
To provide information about the behavior of market risks that the Corporation and its
subsidiaries were exposed to as at June 30, 2015, three scenarios are considered and the
probable scenario is the fair value as at June 30, 2015 and two more scenarios with
deterioration of 25% and 50% of the risk variable taken into account, denominated as
Possible and Remote, respectively.
The base prices for commodity futures are referenced to the prices quoted on the Chicago
Board of Trade (CBOT) for contracts maturing on June 30, 2015.
With regard to commodity risk, following are the sensitivity scenarios:
96
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Stress scenario - Derivatives Commodities Consolidated
Probable Scenario
Possible Scenario
Remote Scenario
MTM (1)
23,815
Result
23,815
MTM (1)
17,861
Result
17,861
MTM (1)
11,907
Result
11,907
Stress scenario - Derivatives Commodities Soy Meal
Probable Scenario
Possible Scenario
Remote Scenario
MTM (1)
6,115
Result
6,115
MTM (1)
4,586
Result
4,586
MTM (1)
3,058
Result
3,058
Stress scenario - Derivatives Commodities Corn
Probable Scenario
Possible Scenario
Remote Scenario
MTM (1)
15,854
Result
15,854
MTM (1)
11,890
Result
11,890
MTM (1)
7,927
Result
7,927
Stress scenario - Derivatives Commodities Cattle
Probable Scenario
Possible Scenario
Remote Scenario
MTM (1)
1,846
Result
1,846
MTM (1)
1,384
Result
1,384
MTM
(1)
923
Result
923
33.5.2 Interest rate risk management
Interest rate risk refers to the Corporation’s risk of incurring economic losses due to
negative changes in interest rates. This exposure basically refers to changes in market
interest rates which affect the Corporation’s assets and liabilities indexed to the TJLP
(long-term interest rate), LIBOR (London Interbank Offered Rate) or CDI (interbank deposit
rate).
In order to reduce debt service costs, the Corporation and its subsidiaries continually
monitor market interest rates to assess the need to enter into new derivative contracts to
hedge its operations against the risk of fluctuations of these rates.
97
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
The risk of exposure to interest rate for the Corporation and its subsidiaries as at June 30,
2015 and December 31, 2014 is as follows:
Consolidated
6/30/15
12/31/14
Exposure to CDI rate:
NCE / Working c apital (R$)
1,755,004
(-) CDB-DI (R$)
1,521,548
(179,211)
Subtotal
(185,664)
1,575,793
1,335,884
110,808
84,213
Exposure to LIBOR rate:
Prepayment (US$)
Financing of industrial complex - (US$) / Revolving credit fac ility (US$)
Subtotal
701,991
556,781
812,799
640,994
Exposure to TJLP rate:
FINAM E / FINEM / FINEP
32,564
38,577
32,564
38,577
2,421,156
2,015,455
Subtotal
TOTAL
The Corporation entered into non-speculative swap contracts to minimize the effects of
exchange rates fluctuations on the settlement of its loans and financing, as below:
Consolidated
Instrument
Register
Assets
Liabilities
Notional US$
Notional R$
6/30/15
12/31/14
MTM
MTM
Interest Rate Swap
CETIP
CDI
USD
59,827
97,440
(106,418)
(104,941)
Interest Rate Swap
CETIP
LIBOR
USD
148,462
460,617
(6,430)
(11,531)
Interest Rate Swap
OTC
LIBOR
USD
320,000
992,832
(20,153)
(14,577)
Interest Rate Swap
CETIP
BRL
USD
288,547
570,000
(362,959)
(241,659)
Interest Rate Swap
OTC
USD
BRL
288,547
570,000
361,067
239,699
1,105,383
2,690,889
(134,893)
(133,009)
98
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Consolidated
6/30/15
Instrument
Register
Maturity
Assets
Liabilities
Interest Rate Swap
CETIP
2015
LIBOR
USD
Interest Rate Swap
CETIP
2016
LIBOR
Interest Rate Swap
OTC
2018
LIBOR
Interest Rate Swap
OTC
2019
Interest Rate Swap
CETIP
2016
Interest Rate Swap
CETIP
Interest Rate Swap
Interest Rate Swap
Notional US$
Notional R$
MTM
42,000
130,308
(1,427)
USD
68,000
210,977
(1,263)
USD
132,500
411,095
(2,481)
LIBOR
USD
187,500
581,738
(17,672)
LIBOR
USD
38,462
119,331
(3,740)
2017
BRL
USD
288,547
570,000
(362,959)
OTC
2017
USD
BRL
288,547
570,000
361,067
CETIP
2018
CDI
USD
59,827
97,440
(106,418)
1,105,383
2,690,889
(134,893)
33.5.2.1 Interest rate risk sensitivity Analysis
To provide information about the behavior of market risks that the Corporation and its
subsidiaries are exposed to as at June 30, 2015, three scenarios are considered and the
probable scenario is the fair value as at June 30, 2015 and two more scenarios with
deterioration of 25% and 50% of the risk variable taken into account, denominated as
Possible and Remote, respectively.
Sensitivity scenarios for interest rate risk are below:
99
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Stress scenario - Swap Int Rate - Consolidated
Probable Scenario
Possible Scenario
Remote Scenario
MTM
MTM
MTM
(134,893)
Result
(134,893)
(128,508)
Result
(128,508)
(136,867)
Result
(136,867)
Stress scenario - Swap Int Rate CDI vs. USD
Probable Scenario
Possible Scenario
Remote Scenario
MTM
(106,418)
Result
(106,418)
MTM
(106,418)
Result
(106,418)
MTM
(106,418)
Result
(106,418)
Stress scenario - Swap Int Rate Libor vs. USD
Probable Scenario
Possible Scenario
Remote Scenario
MTM
(26,583)
Result
(26,583)
MTM
(20,198)
Result
(20,198)
MTM
(28,557)
Result
(28,557)
Stress scenario - Swap Int Rate BRL vs. USD / USD vs. BRL
Probable Scenario
Possible Scenario
Remote Scenario
MTM
(1,892)
Result
(1,892)
MTM
(1,892)
Result
(1,892)
MTM
(1,892)
Result
(1,892)
33.5.3 Exchange rate risk management
Exchange rate risk consists of the risk of foreign exchange fluctuations leading the
Corporation and its subsidiaries to incur losses and causing a reduction in the values of
assets or an increase in the values of liabilities. The Corporation’s main current exchange
rate exposure relates to the US dollar fluctuation against the Brazilian real.
Given that approximately 77.7% of the Corporation’s revenues are denominated in
currencies other than the Brazilian real, the Corporation has a natural hedge against the
maturities of future obligations in foreign currency.
The Corporation also has a sound financial policy, maintaining a high level of cash balance
and short-term financial investments with solid financial institutions.
We believe that the Corporation’s and its subsidiaries' consistent financial policy, grounded
in a well-distributed capital structure, allows it to consolidate synergies achieved through
the acquisitions made.
Outstanding foreign currency and derivatives position
Assets and liabilities in foreign currency are presented as follows:
100
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Parent
Effects of exchange
Exposure
rate gains
(losses)
Description
6/30/15
12/31/14
2015
Operating
Trade accounts receivable
ACE (advance on export contracts)
Imports payable
Subtotal
517,601
613,202
(399,360)
(447,020)
(7,568)
(19,536)
(8,276)
72
(20,765)
110,673
146,646
(28,969)
(1,026,700)
(908,536)
(361,947)
Financial
Loans and financing
Balance of banks and marketable securities (*)
212,629
311,906
Subtotal
(814,071)
(596,630)
(342,951)
Total
(703,398)
(449,984)
(371,920)
Exchange rate gains
Exchange rate losses
Exchange rate gains (losses), net
18,996
667,281
(1,039,201)
(371,920)
(*) Refers only to banks and marketable securities that generated exchange rate gains (losses).
101
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Consolidated
Effects of exchange
Exposure
rate gains
(losses)
Description
6/30/15
12/31/14
2015
Operating
Trade accounts receivable
ACE (advance on export contracts)
Imports payable
Other
Subtotal
841,063
1,152,249
(399,360)
(447,020)
(66,135)
(128,322)
(37,855)
337,713
(33,559)
543,348
(24,668)
72
(18,534)
4,537
(38,593)
Financial
Loans and financing
(10,917,890)
Notes payable
Balance of banks and marketable securities (*)
Other
59,152
392,253
(10,135,985)
538,365
(362,304)
(34)
(73,076)
(283,119)
(104,752)
(38)
Subtotal
(10,749,604)
(9,702,372)
(435,452)
Total
(10,411,891)
(9,159,024)
(474,045)
Exchange rate gains
Exchange rate losses
Exchange rate gains (losses), net
927,181
(1,401,226)
(474,045)
(*) Refers only to banks and marketable securities that generated exchange rate gains (losses).
Over the course of 2015, the Corporation contracted NDFs and futures contracts, all of
them non-speculative in nature, to minimize the effects of the foreign exchange variation
on its overseas subsidiaries, as per the breakdown shown in Note 33.4, the results of which
are accounted for under the items "Exchange Rate Gains” and “Exchange Rate Losses”.
33.5.3.1 Exchange rate risk sensitivity Analysis
To provide information about the behavior of market risks that the Corporation and its
subsidiaries were exposed to as at June 30, 2015, three scenarios are considered and the
probable scenario is the fair value as at June 30, 2015 and two more scenarios with
deterioration of 25% and 50% of the risk variable taken into account, denominated as
Possible and Remote, respectively.
The market future curve of June 30, 2015 was applied for currencies, with notional value of
R$/US$ 3.1026.
102
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
As for exchange rate risk, following are the sensitivity scenarios:
Stress Scenario - balance sheet exposure to foreign exchange
6/30/2015
Probable
Possible
Remote
scenario
scenario
scenario
Parent
(371,920)
(175,850)
(351,699)
Subsidiaries
(102,125)
(2,427,123)
(4,854,246)
(474,045)
(2,602,973)
(5,205,945)
33.6 Liquidity risk and capital management
Liquidity risk arises from the Corporation’s and its subsidiaries’ working capital
management and the amortization of the principal and finance charges of debt
instruments. This is the risk that the Corporation and its subsidiaries will find to settle its
falling due payables.
The Corporation and its subsidiaries manage their capital based on parameters to optimize
the shareholding structure focused on liquidity and leverage metrics that enable a return to
shareholders over the medium term, consistent with the risks assumed in the transaction.
The purpose of capital management is to define the best financing structure for the
Corporation and its subsidiaries.
The main indicator for monitoring such management is the modified immediate liquidity
ratio, which is the ratio between cash and cash equivalents and the leverage ratio - current
indebtedness (short term).
Short-term cash, cash equivalents and marketable securities
Short-term loans and financings
Interest on debentures
Modified liquidity ratio
Consolidated
6/30/15
12/31/14
2,564,343
2,658,797
1,860,458
1,470,237
98,155
190,582
1.31
1.60
The main indicators for monitoring such management is the modified immediate liquidity
The leverage ratio - monitoring the ratio of net debt (total debt indebtedness less cash and
cash equivalents) to LTM EBITDA at levels considered to be manageable for continuity of
operations, in accordance with the following calculation method:
103
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
6/30/15
Consolidated gross debt
11,936,277
(-) Consolidated cash and equivalents
2,564,343
Consolidated net debt
9,371,934
(-) Effect from exchange variation (carve-out (1))
3,930,631
Consolidated adjusted net debt
5,441,303
LTM EBITDA for the period ended June 30, 2015
1,963,080
Leverage ratio
2.77x
(1) In this case, contractual provisions refer to exchange variation on loans, which allow
these effects to be excluded while calculating the leverage ratio;
Based on the analysis of these indices, the management of working capital is defined so as
to keep Corporation’s and its subsidiaries’ natural leverage at levels equal or lower than
the leverage ratio deemed adequate.
The following table presents contractual terms (representing undiscounted contractual cash
flows) of financial liabilities:
December 31, 2014
Trade accounts payable
Loans, financing and debentures
Interest on debentures
Derivative financial liabilities
Total
June 30, 2015
Trade accounts payable
Loans, financing and debentures
Interest on debentures
Derivative financial liabilities
Total
2015
2,028,303
1,470,237
190,582
16,911
3,706,033
2015
1,495,530
1,515,680
9,501
3,020,711
Consolidated
2016
2017
714,354
8,418
722,772
659,247
271,450
930,697
2016
2017
1,022,113
98,155
7,784
1,128,052
756,521
362,959
1,119,480
2018
2,526,727
100,437
2,627,164
2018
3,014,048
108,741
3,122,789
After
5,499,778
14,104
5,513,882
After
5,529,760
18,531
5,548,291
Total
2,028,303
10,870,343
190,582
411,320
13,500,548
Total
1,495,530
11,838,122
98,155
507,516
13,939,323
104
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
33.7 Credit risk
The Corporation and its subsidiaries are subject to credit risk. Credit risk deals with group’s
financial losses if a client or counterpart in a financial instrument fails to comply with
contractual obligations, which arise from most receivables.
The Corporation and its subsidiaries limit their exposure by analyzing credit and managing
client’s portfolio, seeking to minimize the economic exposure to a certain client and/or
market that may represent significant losses.
The Global Credit Risk Policy determines the guideline for financial credit risk management
based on the following:
•
Limit of counterparty’s credit risk concentration to 15% of total current assets;
•
Investments in solid and prime financial institutions, based on their financial rating;
•
Balance between assets and liabilities.
Conducted evaluations are based on information flows and follow-up of the volume of
purchases in the market. The internal controls cover the assignment of credit limits.
The maximum exposure to credit risk for the Corporation and its subsidiaries are the trade
accounts receivable shown in Note 6, where the value of the effective risk of possible
losses is presented as provision for credit risk is also shown.
Values subject to credit risk:
Cash and cash equivalents
Marketable securities
Receivables from Brazilian clients
Receivables from foreign clients
Other receivables
Total
6/30/15
171,231
993,368
187,171
105,049
6,838
1,463,657
Parent
12/31/14
387,828
455,589
195,800
77,136
9,491
1,125,844
6/30/15
839,152
1,726,131
606,310
418,213
106,083
3,695,889
Consolidated
12/31/14
1,091,685
1,568,082
941,277
677,483
109,484
4,388,011
33.8 Fair value of financial instruments
The method used by the Corporation to determine market value consists in calculating the
future value based on contracted conditions and determining the present value based on
market curves obtain from Bloomberg’s database, except for futures market derivatives
whose fair values are calculated based on the on daily adjustments of variations in market
prices of commodities and futures acting as consideration.
105
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
According to IFRS 7, the Corporation and its subsidiaries classify the measurement of fair
value according to hierarchical levels which reflect the importance of indices used in such
measurement, as follows:
•
Level 1: Prices quoted in (non-adjusted) active market for identical assets and
liabilities;
•
Level 2: Other available information, except those of Level 1, where quoted prices
relate to similar assets and liabilities, whether directly, by obtaining prices in active
markets, or indirectly, such as evaluation techniques using active market data.
•
Level 3: Indices used for the calculation do not derive from an active market. The
Corporation and its subsidiaries do not have instruments at this measurement level.
Currently, the fair value of all the financial instruments of the Marfrig Group is reliably
measured and hence these are classified as level 1 and 2, as shown below:
Consolidated
Level 1
Level 2
Level 3
Current assets
Cash and cash equivalents
-
-
-
Marketable securities - held for trading
-
994,926
-
26,342
361,067
-
Notes payable - derivatives
(11,611)
(495,960)
-
Total
14,731
860,033
Notes receivable - derivatives
Non-current liabilities
-
Management understands that the results obtained with derivative transactions are in line
with the risk management strategy adopted by the Corporation and its subsidiaries.
34.
Income and social contribution taxes
Income and Social Contribution Taxes were calculated according to prevailing legislation
and the Transition Tax System, provided for in Executive Act No. 449/08 (converted into
law 11,941/09).
Income and Social Contribution Tax calculations and returns, when required, are open to
review by tax authorities for varying statutory years in relation to the payment or filing
date.
Calculation and reconciliation of income and social contribution taxes in the income
statements for the period:
106
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Continued
Parent
6/30/15
6/30/14
(920,696) (294,891)
Tax
Income (loss) before tax effects
Add-backs
Add-backs of corporate income tax (IRPJ)
Add-backs of social contribution tax (CSLL)
841,032
841,032
Continued
Consolidated
6/30/15
6/30/14
(835,125) (281,252)
511,886
511,886
1,081,584
1,065,086
619,975
629,767
(-) Deductions
(-) Deductions from IRPJ
(-) Deductions from CSLL
(1,783,711)
(1,783,711)
(289,986)
(289,986)
(1,858,475)
(1,858,475)
(334,992)
(348,571)
Tax base
Income tax base
Social contribution tax base
(1,863,375)
(1,863,375)
(72,991)
(72,991)
(1,612,016)
(1,628,514)
3,731
(56)
(10,313)
(18,789)
Companies with income tax loss
Companies with social contribution tax loss
carryforwards
-
Calculation base after carry forwards of IRPJ
CSLL
(1,863,375)
(1,863,375)
(-) Tax loss carryforwards
(-) Social contribution tax loss carryforwards
-
Calculation base after carry forwards
Calculation base after carry forwards of IRPJ
CSLL
(1,863,375)
(1,863,375)
(72,991)
(72,991)
(6,435)
(6,435)
(1,622,329)
(1,628,514)
-
(15,058)
(56)
(6,918)
(7,003)
(79,426)
(79,426)
(1,622,329)
(1,628,514)
(21,976)
(7,059)
Income tax (15%)
Surtax (10%)
(-) PAT
Total income tax
Social contribution tax (9%)
-
2,252
1,489
(90)
3,651
1,351
5,002
(73,496)
(73,496)
(73,496)
(24,380)
2,934
(178)
(21,624)
2,673
(18,951)
Rate difference on foreign results
Total taxes
-
5,002
123,307
49,811
34,389
15,438
Effect on Statement of Operations - Current
Taxes (2)
-
5,002
49,811
15,438
Group
Current liabilities (2)
Current liabilities
Non-current assets
Non-current liabilities
Income (loss)
6/30/15
224,737
2,223
226,960
6/30/14
(3,651)
71,997
2,392
70,738
(-) Social contribution tax - current
Current liabilities (2)
Deferred social contribution tax - Assets (1)
Non-current assets
Deferred social contribution tax - Liabilities (1) Non-current liabilities
Net
Income (loss)
80,905
801
81,706
(1,351)
25,919
861
25,429
Tax
(-) Income tax - current
Tax paid abroad
Deferred income tax - Assets (1)
Deferred income tax - Liabilities (1)
Net
6/30/15
(49,811)
218,137
(10,672)
157,654
82,902
884
83,786
6/30/14
(12,765)
(966)
76,537
1,970
64,776
(2,673)
28,497
1,206
27,030
(1)
Refer to deferred Income and Social Contribution Taxes calculated on: taxes whose payment
has been suspended (estimates), and which were added to the calculation of the taxable
income and the social contribution tax basis; utilization for tax purposes of the goodwill paid on
future profitability and income and social contribution tax losses, which are stated in Notes 12
and 24.
(2)
Corresponds to Income Tax and Social Contribution due on the current results of the year and
effectively paid/offset during the year and/or to be paid/offset in subsequent years.
107
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
35.
Sustainable Development
Sustainability is one of the pillars of Marfrig Global Foods corporate strategy and permeates
all of its activities and divisions. The Corporation is committed to continuing to balance the
economic, social and environmental aspects of its business in order to contribute to the
development of society and help preserve the planet.
Marfrig is a reference in sustainability in its operating segments. By respecting the cultural
aspects and practices of the local business community, it adopts a strategy of continuous
improvement and technological innovation, combined with high levels of transparency and
robust corporate governance practices.
Promoting sustainable activities and engaging the entire supply chain is essential to the
success of our strategy. Such effort helped Marfrig Global Foods rank as the Leading
Corporation for Packaged Food and Meat Products for its commitment to the best
environmental risk practices disclosed in the 2012 Annual Report of the Forest Footprint
Disclosure (new CDP Forest), deemed the most complete global study on the impacts of
production activities for tropical forests.
The Corporations efforts also include promoting sustainable agricultural and cattle raising
practices. Through programs like the Marfrig Club, the Corporation acknowledges and
awards conscientious producers, instructing them on how to achieve the most modern
property certifications for food production and also awarding animals from farms with good
agricultural and management practices. Through a professional relationship with suppliers,
Marfrig is able to track animal origins, which guarantees, for example, that there are no
further deforestations and invasions of indigenous land in its supply chain.
As result of such efforts, in June 2012, Marfrig Global Foods became the world’s first food
company in the animal protein segment to track its complete beef production cycle in
accordance with the standards developed by the Agriculture and Forest Management and
Certification Institute (Imaflora), which entitled the Corporation to use the Rainforest
Alliance seal. This seal authorizes four units of Marfrig Beef (Tangará da Serra – MT;
Pampeano – Hulha Negra and Bagé, RS and Promissão I and II – SP) to produce and sell
products with the “green cattle farm seal” in the international market.
The Corporation also entered into, in 2013, a partnership with The Nature Conservancy
(TNC), one of the world’s largest environmental organizations, and Walmart, the world’s
leading retailer, to foster sustainable cattle production in the southeastern region of the
state of Pará, which will help preserve the Amazon biome and promote the adoption of
good social and environmental practices.
For the second consecutive time, the Corporation published a report based on an audit by
DNV-GL (consulting firm hired to independently evaluate the company’s information and
processes) that attested to the its good sustainability practices in cattle sourcing at its
units in the Amazon biome, in accordance with the criteria established in the public
commitment signed with Greenpeace in 2009” and the “2015 Reference Terms.”
108
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
The audit was conducted from March 5 to April 8, 2014 and stated that, in 2014, no cattle
sourcing transactions by Marfrig violated the provisions of the public commitment
undertaken by the Corporation with the non-governmental organization Greenpeace for
responsible production in the Amazon Biome in its supply chain. Marfrig Global Foods is one
of the world’s seven best companies in terms of animal welfare practices, according to
“The Business Benchmark on Farm Animal Welfare” (BBFAW), a leading global report on the
subject, prepared by the World Society for the Protection of Animals (WSPA) and by
Compassion in World Farming. In 2013, for the second consecutive year, Marfrig Global
Foods was the only Brazilian company to be cited in the report, reaching the status
“Integral” and being classified as “Integrated to the Business”.
To create opportunities for educational development and recreation for children,
adolescents and the elderly in socially and economically vulnerable communities in the
cities where the Corporation’s industrial plants are located, Marfrig create the Marfrig
Institute Fazer e Ser Feliz. The Institute currently offers after-school activities in the fields
of education, sports, culture, health and food, benefiting some 100 children in its units
located in the cities of Promissão (SP) and Bataguassu (MS).
More information on the Marfrig Global Foods’s sustainability strategy and its results can be
found at www.marfrig.com.br/sustentabilidade.
36.
Result from discontinued operations
According to the material fact notice released to the market on June 21, 2015, the
Corporation entered into, on June 19, 2015, an Agreement for the Purchase and Sale of
Ownership Interest and Other Covenants, which laid out the terms and conditions for the
sale to JBS S.A. of certain ownership interests in the companies of the Group operating the
Moy Park business unit.
The Moy Park segment was not previously classified as a discontinued operation or held-forsale asset in accordance with CPC 31, and the results and cash flow of discontinued
operations for the six-month periods ended June 30, 2015 and 2014 are presented as
follows:
Result from discontinued operations
6/30/2015 (*)
Net Revenue
Cost of Goods Sold
Gross Profit
Operating income (expenses)
Net operating income (loss)
Provision for income and social contribution taxes
Net income from discontinued operations
6/30/2014 (**)
3,245,990
2,640,626
(2,899,668)
(2,342,746)
346,322
297,880
(295,921)
(230,164)
50,401
67,716
(15,425)
(20,496)
34,976
47,220
109
MARFRIG GLOBAL FOODS S.A.
Notes to the parent company and consolidated interim financial statements
Periods ended June 30, 2015 and 2014
(In thousands of Brazilian reais)
Cash flow of the Discontinued Operation
30/06/2015 (*)
Net income (loss) in the period
34,976
Items not affecting cash
30/06/2014 (**)
47,220
215,695
118,803
Generated by Equity changes
(280,846)
(570,152)
From (used in) operating activities
(110,934)
(206,590)
From (used in) financing activities
428,129
745,072
12,979
(13,163)
Exchange variation on cash and cash equivalents
Derecognition of Cash from discontinued operation
(592,488)
Discontinued operation net of cash
(292,489)
121,190
(*) Operations of the Moy Park segment;
(**) Operations of the Moy Park segment and of the companies in France that, prior to March 31, 2014, were
included in the Keystone segment.
37.
Events after the reporting period
On August 2, 2015, the Corporation executed the Second Amendment to the Shareholders'
Agreement of the Corporation entered into between MMS Participações LTDA. and BNDES
Participações S.A., which entitles MMS Participações LTDA. to unbind up to 20% of its
shares bound to the Shareholders' Agreement, and excludes Clause V of the Shareholders'
Agreement, which set forth call options and preemptive rights.
*
*
*
110
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
POSITIVE
FREE
CASH
FLOW OF DE GUIDANCE E
MARFRIG ENCERRA
O ANO
COM
ENTREGA
R$136 MILLION IN THE QUARTER
São Paulo, August 12, 2015 – Marfrig Global Foods S.A. – Marfrig (BM&FBOVESPA NOVO MERCADO: MRFG3 and
Level 1 ADR: MRTTY) announces today its results for the second quarter of 2015 (2Q15). Except where stated
otherwise, the following operating and financial information is presented in nominal Brazilian real, in accordance
with International Financial Reporting Standards (IFRS), and should be read together with the financial information
(ITR) for the period ended June 30, 2015 filed at the Securities and Exchange Commission of Brazil (CVM).
Total capital
520,747,405 shares
HIGHLIGHTS

Strong growth in Net Revenue (+26%) and Adjusted
EBITDA (+41%) from 2Q14¹.

EBITDA Margin growth at all business units, with
combined1 Adjusted EBITDA of 8.7%.

Positive free cash flow of R$136 million in the quarter and
R$48 million year to date.

Conference call with
Webcast and Presentation
12/08/15
Keystone’s Adjusted EBITDA grew 65% (20% in USD) on
2Q14, to US$54 million. The result was driven by strong
growth in Asia and continued growth in Key Accounts.

9:30 a.m. (Brasília) Portuguese
11:30 a.m. (Brasília) - English
Marfrig Beef’s Adjusted EBITDA Margin stood at 9.7%,
expanding 140 bps on 1Q15, due to a better sales mix
and higher operating efficiency. Exports accounted for
48% of the division’s revenue and SG&A expenses fell
220 bps on 2Q14.

During the quarter, approval was given to open up the
Chinese and U.S. markets to Brazilian beef imports,
representing an important opportunity for Marfrig Beef's
exports.

On June 21, Marfrig signed an agreement to sell Moy
Park for approximately US$1.5 billion.

On a pro-forma basis (considering the Moy Park
divestment), financial leverage ended 2Q15 at 3.8x.
Share price
R5.75
(08/11/15)
Market Cap (R$ '000)
R2,994,000
(Aug. 11, 2015)
Dial-in from Brazil:
+55 (11) 3193-1001
+55 (11) 2820-4001
Dial-in from other countries:
+1 (786) 924-6977
Investor Relations
+55 (11) 3792-8994
[email protected]
www.marfrig.com.br/ir
¹Includes Moy Park for comparison purposes, non audited.
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
1
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
GUIDANCE 2015
2015
Target Range
Net Revenue
R$23 to R$25 billion
R$12.3 billion
Adjusted EBITDA
Margin (2)
8.0% - 9.0%
8.3%
Capital Expenditure
R$650 million
R$339 million
R$100 to R$200
million
R$48 million
Free Cash Flow
(1)
(2)
(3)
(4)
1H15
Actual (4)
(1)
(3)
Assumptions based on the exchange rates of R$2.70/US$1.00 and R$4.30/£1.00.
Excludes non-recurring items.
Operating cash flow after capital expenditure, interest expenses and income tax.
Includes Moy Park for comparison purposes.

The results in the year to June are in line with the achievement of all guidance
targets for 2015.

The Company will revise its 2015 guidance to reflect the effects from the Moy Park
divestment after the closing of the transaction, which is expected in early 4Q15.
2Q15 Highlights
Net Revenue
Adjusted EBITDA
incl. Moy Park
incl. Moy Park
(R$ MM)
(R$ MM)
6,462
560
Net Revenue
Net Debt
Leverage Ratio
(R$ MM)
9,372
4.8x
Adjusted EBITDA
Pro-forma
Continuing Operations
Continuing Operations
Net Debt
Pro-Forma
Leverage Ratio
(R$ MM)
(R$ MM)
(R$ MM)
4,728
415
5,619
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
2
3.8x
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
COMBINED RESULTS INCLUDING MOY PARK*
* non audited
Gross Profit and Gross Margin (R$ million and %)
Net Revenue (R$ million)
12.2%
12,345
11.6%
12.6%
9,905
1,384
25%
6,462
11.2%
5,118
625
26%
752
1,244
11%
20%
2Q14
2Q15
1H14
2Q14
1H15
SG&A and SG&A/NOR (R$ million and %)
1H14
1H15
Adjusted EBITDA and Margin (R$ million and %)
7.3%
7.2%
5.8%
5.8%
726
369
2Q15
7.8%
8.7%
8.1%
719
8.3%
1.022
378
560
801
28%
398
2%
41%
-1%
2Q14
2Q15
1H14
1H15
2Q14
2Q15
1H14
1H15

Strong performance of Net Revenue and Adjusted EBITDA in 2Q15, with growth of
26% and 41%, respectively, compared to 2Q14.

The ongoing efforts to capture operating efficiency gains via the strategic plan
Focus to Win led to a reduction in SG&A/NOR from 7.2% to 5.8% in 2Q15. Despite
the steep currency depreciation and inflation in Brazil, SG&A registered a nominal
increase of only 2% compared to the prior year.
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
3
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
Statement of Income Including Moy Park
2Q15
2Q14
Change
1H15
1H14
Change
R$
% NOR
R$
% NOR
Chg. R$
Chg. %
R$
% NOR
R$
% NOR
Chg. R$
Chg. %
6,462.4
100.0%
5,117.6
100.0%
1,344.8
26.3%
12,345.1
100.0%
9,905.1
100.0%
2,440.0
24.6%
COGS
-5,710.0
-88.4%
-4,492.7
-87.8%
-1,217.3
27.1%
-10,961.7
-88.8%
-8,661.4
-87.4%
-2,300.3
26.6%
Gross Profit
752.4
11.6%
624.9
12.2%
127.4
20.4%
1,383.5
11.2%
1,243.8
12.6%
139.7
11.2%
SG&A
-377.8
-5.8%
-368.6
-7.2%
-9.2
2.5%
-719.3
-5.8%
-725.9
-7.3%
6.6
-0.9%
Selling
-229.0
-3.5%
-241.9
-4.7%
13.0
-5.4%
-446.3
-3.6%
-462.6
-4.7%
16.4
-3.5%
Administrative
-148.8
-2.3%
-126.6
-2.5%
-22.2
17.5%
-273.1
-2.2%
-263.3
-2.7%
-9.8
3.7%
ADJUSTED EBITDA*
560.4
8.7%
397.5
7.8%
162.9
41.0%
1,021.7
8.3%
800.8
8.1%
220.8
27.6%
Other Income/Expenses
50.7
0.8%
-17.8
-0.3%
68.6
-385.0%
28.0
0.2%
-28.3
-0.3%
56.3
-198.8%
EBITDA
611.2
9.5%
379.7
7.4%
231.4
60.9%
1,049.7
8.5%
772.5
7.8%
277.2
35.9%
P&L - USD / BRL
3.07
2.23
0.84
37.8%
2.97
2.30
0.67
29.2%
P&L - GBP / BRL
4.71
3.75
0.96
25.6%
4.52
3.83
0.69
18.1%
Net Revenue
(*) Excludes effects from other operating income/expenses.
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
4
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
SALE OF MOY PARK – A STRATEGIC DECISION
After the changes in management during the 1Q15, the Company opted to conduct a
strategic review of its entire business. It became clear to the officers and directors that
the Company should strengthen its focus on the global food service industry.
Although a good business, the Moy Park unit did not fit perfectly with this strategic
direction, given its greater focus on the retail channel and the lack of significant
operational and commercial synergies with the rest of the group.
Furthermore, it became clear that the option of carrying out an IPO that had been
pursued since March 2014 would not maximize value for shareholders and would
increase the complexity of the group's governance.
Therefore, on June 21, 2015, Marfrig signed an agreement to divest the business unit, at
the price of approximately US$1.5 billion, as follows:

cash payment of US$1.19 billion to Marfrig upon closing of the transaction;

assumption of net debt at Moy Park of £200 million;

any variations in working capital (1) or net debt above or below £200 million will be
reflected by adjusting the amount to be paid upon the closing of the transaction.
The proceeds will be used to reduce the Group’s debt, thereby improving our capital
structure and significantly accelerating the planned reduction in our financial leverage.
The Transaction is expected to be consummated in early 4Q15, subject to the
authorizations by the competent authorities typical to transactions of this type, including
the anti-trust authorities of the European Union.
(1) Based on the estimated Moy Park balance sheet at the end of June/2015.
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
5
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
CONTINUING OPERATIONS
Marfrig remains a global company after the Moy Park transaction in 2Q15:


58% of net revenue will continue to come from its international operations,
78% of the revenue will be pegged to currencies other than the BRL.
Revenue Breakdown
Business
45%
Currency
42%
13%
59%
22%
Product
19%
51%
41%
KEYSTONE
USD
PROCESSED
BEEF BRASIL
BRL
FRESH
BEEF OP. INTERNACIONAIS
OTHER
OTHER
Profile of Continued Operations
Approximately
33.000
46 Comercial,
production and
distribution
units
employees
Operational Presence
in 11 countries in
the Americas, Asia
and Oceania
Serving customers
with our products
in approximately
100
Net Revenue (R$ million)
14,029
15,565
countries
9,099
7,265
17,419
3,789
24%
25%
4,728
25%
2013
2014
LTM
2Q14
2Q15
1H14
1H15
Adjusted EBITDA and Margin (R$ million and %)
8.8%
8.1%
8.8%
1,375
8.2%
8.3%
7.8%
8.7%
759
595
1,522
415
1,137
27%
294
34%
41%
2013
2014
LTM
2Q14
2Q15
Note: Annual and LTM figures presented on a pro-forma basis, non-audited.
IR CONTACTS
1H14
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
6
1H15
8%
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
Statement of Income for the Period
2Q15
2Q14
Change
1H15
R$
%NOR
R$
%NOR
Var . $
Var. %
R$
4,728.2
100.0%
3,789.1
100.0%
939.1
24.8%
9,099.1
COGS
-4,166.8
-88.1%
-3,317.2 -87.5%
-849.5
Gross Profit
561.4
11.9%
471.9
12.5%
SG&A
-247.5
-5.2%
-256.6
Commercial
-140.2
-3.0%
Administrative
-107.3
Adj. EBTIDA*
1H14
Var . $
Var. %
100.0% 1,834.6
25.3%
25.6%
-8,062.0 -88.6% -6,318.6 -87.0% -1,743.4
27.6%
89.6
19.0%
1,037.1
11.4%
945.9
13.0%
91.2
9.6%
-6.8%
9.1
-3.6%
-477.1
-5.2%
-510.0
-7.0%
32.9
-6.5%
-163.5
-4.3%
23.3
-14.3%
-278.7
-3.1%
-317.3
-4.4%
38.5
-12.1%
-2.3%
-93.1
-2.5%
-14.2
15.3%
-198.3
-2.2%
-192.7
-2.7%
-5.6
2.9%
415.3
8.8%
293.9
7.8%
121.4
41.3%
758.8
8.3%
595.4
8.2%
163.5
27.5%
Others revenues/expenses
50.4
1.1%
-17.2
-0.5%
67.6
-392.5%
27.7
0.3%
-27.9
-0.4%
55.6
-199.4%
EBITDA
465.7
9.8%
276.7
7.3%
189.0
68.3%
786.5
8.6%
567.5
7.8%
219.1
38.6%
D&A + Equity Account
-104.2
-2.2%
-81.6
-2.2%
-22.6
27.7%
-205.8
-2.3%
-168.4
-2.3%
-37.4
22.2%
EBIT
361.5
7.6%
195.1
5.1%
166.4
85.3%
580.7
6.4%
399.1
5.5%
181.6
45.5%
Financial Results
-392.2
-8.3%
-296.1
-7.8%
-96.1
32.5%
-680.4
-9.4%
-735.5
108.1%
Financial revenues/expenses
-417.6
-8.8%
-308.9
-8.2%
-108.7
35.2%
-941.8
-10.4%
-662.4
-9.1%
-279.4
42.2%
Exchange rate variation
25.4
0.5%
12.8
0.3%
12.5
97.7%
-474.0
-5.2%
-17.9
-0.2%
-456.1
2,546.4%
Minority Stake
-9.3
-0.2%
-4.6
-0.1%
-4.7
101.0%
-18.3
-0.2%
-9.3
-0.1%
-9.1
97.7%
EBT
-40.0
-0.8%
-105.7
-2.8%
65.6
-62.1%
-853.5
-9.4%
-290.5
-4.0%
-562.9
193.8%
Taxes
11.8
0.3%
30.2
0.8%
-18.4
-60.8%
241.4
2.7%
91.8
1.3%
149.6
163.0%
Controlling Shareholder Net Profit
-28.2
-0.6%
-75.5
-2.0%
47.3
-62.6%
-612.0
-6.7%
-198.7
-2.7%
-413.3
208.0%
9.3
0.2%
4.6
0.1%
4.7
101.0%
18.3
0.2%
9.3
0.1%
9.1
97.7%
Cont. Result. Before Controlling Shareholder
-18.9
-0.4%
-70.9
-1.9%
52.0
-73.4%
-593.7
-6.5%
-189.4
-2.6%
-404.2
213.4%
Discontinued Operations
22.1
0.5%
20.4
0.5%
1.7
8.1%
35.0
0.4%
47.2
0.7%
-12.2
-25.9%
Net Income before Controlling Shareholder
3.2
0.1%
-50.5
-1.3%
53.6
-106.3%
-558.7
-6.1%
-142.2
-2.0%
-416.5
292.8%
Minority Stake
-9.3
-0.2%
-4.6
-0.1%
-4.7
101.0%
-18.3
-0.2%
-9.3
-0.1%
-9.1
97.7%
Net Income
-6.1
-0.1%
-55.1
-1.5%
48.9
-88.8%
-577.1
-6.3%
-151.5
-2.1%
-425.5
280.9%
P&L - USD x BRL
3.07
2.23
0.84
37.8%
2.97
2.30
0.67
29.2%
P&L - GBP x BRL
4.71
3.75
0.96
25.6%
4.52
3.83
0.69
18.1%
BS - USD x BRL
3.10
2.20
0.90
40.9%
3.10
2.20
0.90
40.9%
BS - GBP x BRL
4.88
3.77
1.11
29.5%
4.88
3.77
1.11
29.5%
Net Revenues
Minority Stake
%NOR
100.0% 7,264.5
-1,415.8 -15.6%
Note: this quarter. the financial information for Moy Park is presented under Discontinued Operations.
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
7
R$
Change
%NOR
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
Financial Result
The financial result. excluding currency translation effects, was an expense of R$418
million in 2Q15, down 20% compared to R$524 million in 1Q15.
Exchange variation generated a gain of R$25 million in the period, influenced by the
effect from the appreciation in the BRL against the USD in the quarter.
FINANCIAL INCOME AND EXPENSES (R$ million)
2Q15
1Q15
2Q14
FINANCIAL INCOME
159.4
82.2
58.6
- Interest income. income from marketable securities
20.5
17.8
20.4
- Market transactions
125.7
67.1
33.6
- Other Income
13.2
(2.8)
4.6
FINANCIAL EXPENSES
(577.0)
(606.5)
(367.5)
- Interest provisioned. debentures and lease
(366.1)
(336.5)
(273.6)
- Market transactions
(111.3)
(171.1)
(15.0)
- Bank fees. commissions. financ. disc. and other
(99.7)
(98.9)
(79.0)
EXCHANGE VARIATION
25.4
(499.4)
12.8
NET FINANCIAL RESULT
(392.2)
(1.023.6)
(296.1)
Net Income (Loss)
The capture of operating efficiency gains and the effect of the appreciation of the Real
on the financial result contributed to reductions in the net loss of 99% compared to 1Q15
and 89% compared to 2Q14.
Net Income (Loss) (R$ mm)
2Q14
2Q15
1H14
1H15
(6)
(55)
(152)
-1.5%
-0.1%
-2.1%
(577)
-6.3%
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
8
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
Indebtedness and Debt Profile
 Net debt ended the period at R$9.4 billion.
 On a pro-forma basis. i.e., considering the Moy Park divestment. net debt will decrease
to R$5.6 billion.
Gross Debt (R$ million)
13,400
Net Debt (R$ million)
13,444
9,372
11,936
915
1,508
5,619
4,668
1T15
1Q15
2T15
2Q15
Div.
Bruta
Moy
Park
Gross Debt Moy Park
Ops.
2Q15
Continued
Op.
Cont. Div.Moy
Liq.Park
Moy
2T15
2Q15Op.
Continued 2T15
Ops.
Net
Debt
Park
Cont.
Transaction
Transação
2T152Q15
Proforma
Pro-forma
 Short-term debt as a ratio of total debt was kept at the planned level of 16%.
 Debt in other currencies accounts for 92%, and we consider this profile adequate
given the high foreign-currency exposure in our operations.
Short Term
Curto
Prazo
Em
In R$R$
Long Term
Longo
Prazo
Outras
Moedas
Other Currencies
8%
16%
84%
92%
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
9
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
Debt Maturity Schedule. excluding Moy Park (R$ million)
The payment schedule is highly adequate, considering the cash position of R$2.6 billion.
3,014
2,564
2,993
2,392
Short Term R$ 2.0 bn
1,066
Cash
Caixa
757
677
450
3Q15
3T15
4Q15
4T15
246
196
1Q16
1T16
2Q16
2T16
145
2016
2017
2018
2019
2020
2021
Leverage Ratios
Net Debt/
Net Debt /
Net Debt Pro-forma /
Net Debt Pro-forma /
EBITDA LTM
....
EBITDA LTM ex. FX
….
EBITDA LTM
..............
Annualized Adj.
EBITDA
4.8x
2.8x
3.8x
3.4x
The operating result began to capture the steady weakening of the BRL over recent
quarters. The average exchange rate in 2Q15 was R$3.07/US$. in line with the end-ofperiod rate of R$3.10/US$.
The leverage ratio (Net Debt/EBITDA LTM) ended the period at 4.8x in nominal value. The
USD/BRL exchange rate ended 2Q15 at R$3.10/US$, compared to R$3.21/US$ at the end
of 1Q15, which represents local-currency appreciation of 3.4%, with an impact mainly on
the net debt component of the indicator. Meanwhile. EBITDA in the last 12 months (LTM)
was translated at an average exchange rate of R$2.69/US$, a level that has yet to
accurately reflect exchange variation in the period. Including the Moy Park transaction,
the leverage ratio would be 3.8x. Annualizing the EBITDA, the leverage ratio ended the
quarter on a pro-forma basis at 3.4x.
It is important to note that the bond agreements and market financing transactions
include provisions that allow for the exclusion of exchange variation effects from the
leverage ratio calculation. This adjusted ratio ended 2Q15 at 2.8x. down from 3.4x at the
end of 1Q15. For more information, see Note 33.6 to the financial statements.
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
10
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
The average cost of debt without Moy Park is 8.2% with duration of 43 months.
Average Cost
(% p.a.)
Duration
(months)
Current
Liquidity
Net Debt /
Total Assets
Cash & Equiv. /
ST Debt
8.2%
43
1.6
0.4x
1.4x
Cash Flow
The Company generated positive free cash flow of R$136.1 million in 2Q15, mainly due
to the actions to improve key account lines: accounts receivable from clients, suppliers
and inventories.
Free Cash Flow Bridge (R$ million)
77
152
820
122
(54)
692
(127)
225
390
317
(302)
136
(19)
(254)
Capital Expenditure
Capital expenditure from continuing operations remained in line with Management's
initial expectations.
R$ million
2Q14
1Q15
2Q15
Investments in Fixed Assets
Fixed Assets
108.1
96.3
100.0
84.6
126.0
109.9
11.8
15.4
16.1
Breeding Stock
Investments in Intangible Assets
TOTAL
IR CONTACTS
3.6
0.9
1.4
111.7
100.9
127.4
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
11
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
KEYSTONE | OPERATING HIGHLIGHTS
Net Revenue (R$ mm)
Net Revenue (USD mm)
4,055
2,147
1,414
2,805
1,223
45%
634
2Q15
1H14
7.6%
6.8%
53
47%
1H14
2.1%
1H15
2Q14
1.3%
2.4%
23%
17
8
7,5%
32
26
58%
1H14
2Q14
1H15
112%
2Q15
1H14
Adjusted EBITDA and Margin (USD mm and %)
7.5%
211
100
65%
1H15
7.5%
7.1%
304
165
1H15
2.4%
2.1%
60
Adjusted EBITDA and Margin (R$ mm and %)
7.1%
1H14
2.4%
194%
7.7%
2T15
SG&A and SG&A/NOR (USD mm and %)
95
2Q15
18%
36
2.4%
2Q14
98
83
53%
SG&A and SG&A/NOR (R$ mm and %)
18
7.3%
6.8%
7.6%
102%
52
1H15
Gross Income and Gross Margin (USD mm and %)
5.7%
164
1.3%
1H14
7.3%
192
2Q15
2Q15
1H15
294
5.7%
81
11%
10%
Gross Income and Gross Margin (R$ mm and %)
2Q14
698
52%
2Q14
2Q14
1,359
7.7%
92
44%
45
54
7.5%
102
11%
20%
2T14
2Q15
1H14
2Q14
1H15
IR CONTACTS
2Q15
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
12
1H14
1H15
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
Net Revenue
Keystone recorded net revenue of R$2,147 million (US$698 million) in 2Q15, an increase
of 52% from R$1,414 million (US$634 million) in 2Q14. Excluding the exchange variation
effect from the BRL depreciation against the USD, 2Q15 revenue grew by 10% on 2Q14.
Compared to 2Q14, the 52% growth in net revenue in BRL was driven by: (1) the
exchange variation gain from the BRL depreciation of 38%; (2) the strong sales volume
growth of 25% in APMEA, with particular strength in China, Thailand and South Korea; (3)
the sales volume growth of 7% in the United States; (4) higher fresh beef costs, which
translated into higher sales prices in the QSR channel; and (5) continued double-digit
growth in sales to Key Accounts, with a strong performance in the retail and QSR
channels.
In 1H15, net revenue was R$4.055 million (US$1.359 million), growing 45% from R$2,805
million (US$1,223 million) in 1H14. Excluding the BRL depreciation against the USD, 1H15
revenue grew 11% year over year.
Revenue Profile in 2Q15
2Q15 vs. 2Q14
72%
EUA
US
28%
APMEA
52%|
∆% Revenue
10%|
∆% Volume
38%| ∆% Avg. Price
Gross Profit and Gross Margin
Gross Profit was R$164 million (US$53 million and 7.6% margin) in 2Q15, an increase of
102% on the R$81 million (US$36 million and 5.7% margin) reported in 2Q14. Excluding the
exchange variation effect, 2Q15 gross profit rose 47% against 2Q14.
The gross margin expansion of 190 bps was due to the following factors: (1) lower outside
meat costs (21% drop in cost per ton) and feed costs (14% drop in per-ton cost) in the
United States; (2) an unrealized mark-to-market (MTM) gain of US$450,000 in 2Q15,
compared to the unrealized loss of US$3.0 million in 2Q14, representing a positive yearon-year variation of US$3.5 million; and (3) sales volume growth in the APMEA region.
In 1H15, gross profit was R$294 million (US$98 million and 7.3% margin), increasing 53%
from the R$192 million (US$83 million and 6.8% margin) reported in the same period last
year. Excluding the exchange variation effect, gross profit increased 18% on 1H14.
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
13
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
Selling, General and Administrative Expenses
SG&A Expenses as a ratio of net revenues stood at 2.4% in 2Q15, compared to 1.3% in
2Q14 and 2.3% in 1Q15. SG&A Expenses in 2Q14 benefitted from a non-recurring saving
that reduced the SG&A/NOR ratio. In 2Q15, the expense ratio remained well within the
historical average.
In 1H15, SG&A Expenses as a ratio of NOR stood at 2.4%, in line with 2.1% in the same
period of 2014.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA amounted to R$165 million (US$54 million and 7.7% margin), representing
a 65% increase on the R$100 million (US$45 million and 7.1% margin) in 2Q14, with margin
expansion of 60 bps. Excluding the exchange variation effect, 2Q15 Adjusted EBITDA
increased 20% over 2Q14.
In 1H15 compared to 1H14, Adjusted EBITDA grew 44% in BRL and 11% in USD.
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
14
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
Income Statement (R$ million)
2Q15
Net Revenue
2Q14
R$
% NOR
Change
R$
% NOR
1H15
Chg. R$
Chg. %
1H14
R$
% NOR
Change
R$
% NOR
Chg. R$
Chg. %
44.6%
2,147.2
100.0%
1,414.1
100.0%
733.1
51.8%
4,055.0
100.0%
2,805.1
100.0%
1,249.9
COGS
-1,983.5
-92.4%
-1,333.0
-94.3%
-650.5
48.8%
-3,760.8
-92.7%
-2,613.4
-93.2%
-1,147.4
43.9%
Gross Profit
163.7
7.6%
81.0
5.7%
82.6
102.0%
294.2
7.3%
191.7
6.8%
102.5
53.5%
SG&A
-52.3
-2.4%
-18.1
-1.3%
-34.2
188.5%
-95.5
-2.4%
-59.8
-2.1%
-35.7
59.7%
-5.3
-0.2%
-4.8
-0.3%
-0.5
10.7%
-10.6
-0.3%
-10.4
-0.4%
-0.3
2.5%
Administrative
-47.0
-2.2%
-13.4
-0.9%
-33.7
251.7%
-84.9
-2.1%
-49.4
-1.8%
-35.5
71.7%
ADJUSTED EBITDA*
164.9
7.7%
100.3
7.1%
64.6
64.4%
304.5
7.5%
211.5
7.5%
93.0
44.0%
0.0
0.0%
7.5
0.5%
-7.5
-99.6%
-0.2
-0.0%
8.3
0.3%
-8.4
-101.8%
EBITDA
164.9
7.7%
107.9
7.6%
57.1
52.9%
304.3
7.5%
219.7
7.8%
84.6
38.5%
USD / BRL
3.07
0.84
37.8%
2.97
0.67
29.2%
Selling
Other Income/Expenses
2.23
2.30
Income Statement (US$ million)
2Q15
Net Revenue
2Q14
Change
1H15
1H14
Change
US$
% NOR
US$
% NOR
Chg. US$
Chg. %
US$
% NOR
US$
% NOR
Chg. US$
Chg. %
698.3
100.0%
634.2
100.0%
64.1
10.1%
1,359.1
100.0%
1,223.4
100.0%
135.6
11.1%
COGS
-645.1
-92.4%
-597.8
-94.3%
-47.3
7.9%
-1,260.5
-92.7%
-1,140.2
-93.2%
-120.3
10.6%
Gross Profit
53.2
7.6%
36.3
5.7%
16.9
46.4%
98.5
7.3%
83.2
6.8%
15.3
18.4%
SG&A
-17.0
-2.4%
-8.1
-1.3%
-8.9
109.3%
-32.2
-2.4%
-25.7
-2.1%
-6.4
25.0%
Selling
-1.7
-0.2%
-2.1
-0.3%
0.4
-19.8%
-3.6
-0.3%
-4.5
-0.4%
0.9
-20.7%
Administrative
-15.3
-2.2%
-6.0
-0.9%
-9.3
155.2%
-28.6
-2.1%
-21.2
-1.7%
-7.4
34.8%
ADJUSTED EBITDA*
53.6
7.7%
45.0
7.1%
8.6
19.1%
102.0
7.5%
92.1
7.5%
9.9
10.8%
Other Income/Expenses
0.0
0.0%
3.4
0.5%
-3.4
-99.7%
-0.1
0.0%
3.7
0.3%
-3.8
-101.5%
EBITDA
53.6
7.7%
48.4
7.6%
5.2
10.8%
102.0
7.5%
95.8
7.8%
6.2
6.4%
USD / BRL
3.07
0.84
37.8%
2.97
0.67
29.2%
2.23
2.30
(*) Excludes the effects from other operating income/expenses.
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
15
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
Revenue, Volume and Average Price
Revenue (R$ million)
USA
ASIA
TOTAL KEYSTONE
2Q15
2Q14
1,538.2
608.9
2.147.2
VOLUME (‘000 TONS)
USA
ASIA
TOTAL KEYSTONE
2Q15
2Q14
225.7
46.6
272.3
AVERAGE PRICE (R$/KG)
USA
ASIA
TOTAL KEYSTONE
1.051.4
362.7
1.414.1
2Q15
210.7
37.4
248.1
2Q14
6.81
13.07
7.89
4.99
9.70
5.70
Chg.%
2Q15 x
2Q14
46.3%
67.9%
51.8%
Chg.%
2Q15 x
2Q14
7.1%
24.7%
9.8%
Chg.%
2Q15 x
2Q14
36.6%
34.7%
38.3%
1H15
2,881.2
1,173.7
4,055.0
1H15
1H14
2.077.3
727.7
2,805.1
1H14
438.4
94.9
533.3
1H15
416.8
73.2
490.0
1H14
6.57
12.36
7.60
4.98
9.94
5.72
Chg.%
1h15 x
1h14
38.7%
61.3%
44.6%
Chg.%
1h15 x
1h14
5.2%
29.7%
8.8%
Chg.%
1h15 x
1h14
31.9%
24.3%
32.8%
Revenue, Volume and Average Price (USD)
Revenue (R$ million)
USA
ASIA
TOTAL KEYSTONE
2Q14
500.3
198.0
698.3
VOLUME (‘000 TONS)
USA
ASIA
TOTAL KEYSTONE
2Q15
471.5
162.6
634.1
2Q14
225.7
46.6
272.3
AVERAGE PRICE (R$/KG)
USA
ASIA
TOTAL KEYSTONE
2Q15
2Q15
210.7
37.4
248.1
2Q14
2.22
4.25
2.56
2.24
4.35
2.56
Chg.%
2Q15 x
2Q14
6.1%
21.8%
10.1%
Chg.%
2Q15 x
2Q14
7.1%
24.7%
9.8%
Chg.%
2Q15 x
2Q14
-0.9%
-2.3%
0.3%
IR CONTACTS
1H15
1H14
964.1
394.9
1.359.1
1H15
906.1
317.2
1.223.3
1H14
438.4
94.9
533.3
1H15
416.8
73.2
490.0
1H14
2.20
4.16
2.55
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
16
2.17
4.33
2.50
Chg.%
1h15 x
1h14
6.4%
24.5%
11.1%
Chg.%
1h15 x
1h14
5.2%
29.7%
8.8%
Chg.%
1h15 x
1h14
1.3%
-3.9%
2.1%
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
MARFRIG BEEF | OPERATING HIGHLIGHTS
Net Revenue (R$ mm)
Gross Income and Gross Margin (R$ mm and %)
5,044
16.5%
4,459
16.9%
14.7%
15.4%
754
2,375
13%
%
2,581
391
2%
9%
2Q14
2Q15
1H14
2Q14
1H15
10.1%
7.6%
2Q15
-1%
1H14
1S15
Adjusted EBITDA and Margin (R$ mm and %)
SG&A and SG&A/NOR (R$ mm and %)
10.0%
743
398
8.1%
7.6%
9.7%
8.6%
9.0%
450
381
384
250
238
454
195
193
-15%
2Q14
2Q15
1H14
18%
29%
-18%
2Q14
1H15
IR CONTACTS
2Q15
1H14
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
17
1H15
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
Cattle slaughtering volume at Marfrig Beef in the first six months of the year was
practically stable at 1.6 million heads, decreasing 7,700 heads from the same period of
2014. The decline is due entirely to the lower cattle slaughtering volume in Brazil, which
decreased by 14,000 heads, or 1% of the volume in the Brazilian operation, of 1.2 million
heads.
Based on the current level of available finished cattle, which we expect to remain stable
over the coming quarters, we made a strategic decision to adjust our production
capacity to this new situation. Therefore, we closed temporarily 5 units in Brazil, which
effectively reduced the number of processing plants to 10 and eliminated approximately
29% of authorized slaughtering capacity. This adjustment in capacity will support:


increase in the capacity utilization rate: which in turn should, over the coming
quarters, reduce fixed production costs and consequently improve margins.
Capacity utilization in 2Q15 stood at 83% of authorized capacity. The objective
is to achieve capacity utilization rates above 90% while maintaining current
slaughter levels.
shift in the sales mix towards more profitable channels: we will focus on
rebalancing sales between the domestic and international markets due to (1)
the opening up of the Chinese and U.S. markets, which should increase
international demand for Brazilian beef; and (2) the BRL depreciation against
the U.S. dollar, which increases the profitability of exports. In the domestic
market, we are reducing sales to distributors, a channel that traditionally has a
lower contribution margin, and working to grow sales in the food service and
small/midsized retailer channels by optimizing the use of our sales team and
distribution network. In 2Q15, Brazilian exports accounted for 46% of the revenue
of Marfrig Beef Brazil, compared to 41% in 1Q15 and 41% in 2Q14. The
contribution from the food service and small retailer channel to the domestic
revenue of Marfrig Beef Brazil increased to 35.4% in 2Q15, from 31.2% in 2Q14.
NET REVENUE
Marfrig Beef recorded net revenue of R$2,581 million in 2Q15, up 9% from R$2,375 million
in 2Q14.
Net revenue from the Brazil operation came to R$1,956 million in the quarter, representing
76% of consolidated revenue and growth of 5% year over year.
The international operations accounted for 24%, or R$625 million (US$204 million), up 22%
on 2Q14.
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
18
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
The period highlights were the performance in the domestic market of the international
units, which posted growth of 41% on 2Q14, and the exports by the Brazil operation,
which, after facing a difficult scenario in 1Q15, posted a recovery in sales volume of 20%
sequentially.
In 1H15, net revenue amounted to R$5,044 million, up 13% on 1H14.
BRAZIL – DOMESTIC MARKET
In line with the strategy to rebalance sales and despite Brazil's domestic market remaining
highly challenging due to the economic downturn, as demonstrated by the country's
weak household spending and low consumer confidence, the Brazil operation posted
net revenue from domestic sales of R$1,055 million, down 4% from R$1,099 million in 2Q14.
The drop in domestic revenue was basically due to lower revenue from Lamb, Leather
and Other. Excluding this effect, net revenue from fresh meat and processed products
combined grew 1% to R$872 million.
This 1% increase was exclusively due to the higher average prices in the period, with
domestic sales volumes, for both fresh and processed meat, decreasing 11% and 17%.
respectively, in comparison with the same quarter last year. The higher average prices
demonstrate the success of our strategy to redirect volumes to the food service and small
retailer channels, where we are able to mitigate the impact of the adverse domestic
scenario.
In 1H15, net revenue in Brazil's domestic market was R$2,121 million, a 4% increase on the
R$2,045 million reported in 1H14.
BRAZIL – EXPORT MARKET
Exports in the quarter benefitted from the recovery in exports to the Middle East and the
weaker BRL against the USD. Net revenue from exports from Brazil was R$901 million
(US$293 million), advancing 18% over R$766 million (US$343 million) in 2Q14. In USD, net
revenue from exports fell 14%, compared to the 21% downturn in the overall export
market, according to Secex.
In Brazil's fresh beef exports, Marfrig continues to capture market share gains in terms of
both sales revenue and volume. In terms of sales revenue, Marfrig's market share in 2Q15
stood at 20.5%, expanding 172 bps on 1Q15. In terms of sales volume, Marfrig's market
share gained 185 bps to 21.5%.
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
19
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
The following chart presents the main export destinations of Marfrig Beef Brazil, which
clearly shows the growing share of exports to the Middle East.
% volume
% revenues
2Q15
2T15
1Q15
1T15
2Q14
2T14
31%
15% 7%
40%
29%
17%
31%
8%
18%
20%
Europe
Europa
Asia
Ásia
2T15
2Q15
7% 10%
23%
13%
7% 5%
1T15
1Q15
16% 4%
2T14
2Q14
South America/
Central
América
Central/Sul
24%
31%
25%
MiddleMédio
East
Oriente
15%
14%
18%
21%
Russia
Rússia
31%
14%
24%
24%
7% 8%
7% 7%
14% 13% 4%
Other
Outros
The lower volume of exports to Central/South America in the first half of the year is
explained by the suspension of exports to Venezuela, as the Company is not comfortable
with the country’s credit risk.
In 1H15, net revenue from beef exports from Brazil came to R$1,649 million (US$555
million), up 12% on the R$1,474 million (US$643 million) reported in 1H14.
INTERNATIONAL UNITS
The international units posted net revenue of R$625 million (US$204 million), up 22% on the
R$511 million reported in 2Q14 (US$229 million). Excluding the BRL depreciation against
the USD, net revenue fell 11% on 2Q14.
Despite the positive impact of the 38% local-currency depreciation versus 2Q14, export
volumes from Uruguay fell 29% in the quarter, which was partially offset by the 7% increase
in domestic sales volume at the international units.
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
20
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
The following chart presents the main export destinations of Marfrig Beef Uruguay,
evidencing the volume stability in key destinations, with an increase in Others (especially
the USA):
% volume
% revenues
2Q15
2T15
24%
34%
1T15
1Q15
24%
32%
2T14
2Q14
28%
28%
6%2% 2%
5%
15% 1%
8% 8% 11%
32%
23%
19%
2Q15
2T15
15%
48%
8% 2% 4%
1Q15
1T15
14%
48%
5% 13% 2% 17%
2Q14
2T14
14%
42%
7% 7% 14%
23%
16%
In 1H15, the international units posted net revenue of R$1,274 million (US$411 million), up
35% from R$941 million (US$428 million) in 1H14.
Gross Profit and Gross Margin
Gross Profit in the quarter was R$398 million (gross margin of 15.4%), up 2% from R$391
million (gross margin of 16.5%) in 2Q14.
The 110 bps gross margin compression from 2Q14 is basically explained by higher raw
material costs (fed cattle) in Brazil. According to ESALQ, the average fed cattle price in
Brazil in 2Q15 rose 20% from a year earlier, which were partially offset by the decline in
production costs due to the many initiatives implemented at Brazilian production units
since 2Q14 under the Productivity Project.
In 1H15, gross margin decreased 220 bps to 14.7%, from 16.9% in 1H14, reflecting the
higher raw material costs in the period.
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
21
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
Selling, General and Administrative Expenses
SG&A Expenses as a ratio of net revenues stood at 7.6% in 2Q15, compared to 10.0% in
2Q14.
The decrease of 240 bps from 2Q14 reflects the ongoing process to better manage
expenses and costs launched in mid-2Q14 (Productivity Agenda Project) that involves
implementing a series of initiatives at the units in Brazil.
The productivity project yielded savings in costs and expenses of R$23 million in 2Q15, in
addition to the savings of R$14 million in 1Q15.
The Company's efforts on this front are ongoing, and the expectation is to capture
additional savings in costs and expenses in the second half of 2015.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA amounted to R$250 million in 2Q15 (9.7% margin), up 29% from R$193
million (8.1% margin) in 2Q14. The margin expansion of 160 bps was due to higher revenue
and lower SG&A Expenses.
In 1H15, adjusted EBITDA margin stood at 9.0%, stable in comparison with 1H14.
Statement of Income
2Q15
Net Revenue
2Q14
R$
% NOR
Change
R$
% NOR
Chg. R$
Chg. %
1H15
1H14
R$
% NOR
Change
R$
% NOR
Chg. R$
Chg. %
2,581.0
100.0%
2,375.1
100.0%
206.0
8.7%
5,044.2
100.0%
4,459.4
100.0%
584.7
13.1%
COGS
-2,183.3
-84.6%
-1,984.2
-83.5%
-199.0
10.0%
-4,301.2
-85.3%
-3,705.2
-83.1%
-595.9
16.1%
Gross Profit
397.8
15.4%
390.8
16.5%
6.9
1.8%
743.0
14.7%
754.2
16.9%
-11.2
-1.5%
SG&A
-195.2
-7.6%
-238.5
-10.0%
43.3
-18.1%
-381.5
-7.6%
-450.2
-10.1%
68.7
-15.2%
-134.9
-5.2%
-158.7
-6.7%
23.8
-15.0%
-268.1
-5.3%
-306.9
-6.9%
38.8
-12.6%
Selling
Administrative
-60.3
-2.3%
-79.7
-3.4%
19.4
-24.4%
-113.4
-2.2%
-143.3
-3.2%
29.9
-20.8%
ADJUSTED EBITDA*
250.4
9.7%
193.5
8.1%
56.9
29.4%
454.4
9.0%
383.9
8.6%
70.5
18.4%
Other Income/Expenses
50.3
2.0%
-24.8
-1.0%
75.1
-303.3%
27.9
0.6%
-36.1
-0.8%
64.0
-177.1%
EBITDA
300.7
11.7%
168.8
7.1%
132.0
78.2%
482.2
9.6%
347.7
7.8%
134.5
38.7%
(*) Excludes the effects from other operating income/expenses.
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
22
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
Revenue, Volume and Average Price
MARFRIG BEEF - BRAZIL
1,955.6
1,864.4
Chg. %
2Q15 /
2Q14
4.9%
Domestic Market
Revenue (R$ million)
2Q15
2Q14
3,770.5
3,518.7
Chg. %
1H15 /
1H14
7.2%
3.7%
1H15
1H14
1,055.0
1,098.9
-4.0%
2,121.2
2,044.6
FRESH BEEF
745.4
741.1
0.6%
1,487.0
1,370.4
8.5%
FURTHER PROCESSING
127.1
120.0
5.9%
237.3
250.5
-5.2%
LAMB, LEATHER AND OTHER
182.5
237.7
-23.2%
396.8
423.7
-6.3%
Exports
900.6
765.6
17.6%
1,649.3
1,474.0
11.9%
FRESH BEEF
690.2
598.5
15.3%
1,226.9
1,159.5
5.8%
FURTHER PROCESSING
104.9
63.7
64.8%
198.0
117.8
68.1%
LAMB, LEATHER AND OTHER
MARFRIG BEEF - INTERNATIONAL
OPERATIONS
Domestic Market
105.6
103.5
2.0%
224.3
196.7
14.0%
625.4
510.6
22.5%
1,273.7
940.8
35.4%
296.4
209.6
41.4%
582.1
405.7
43.5%
FRESH BEEF
219.5
138.9
58.1%
419.8
276.2
52.0%
FURTHER PROCESSING
11.1
9.2
19.9%
25.4
20.6
23.4%
LAMB, LEATHER AND OTHER
65.9
61.5
7.0%
136.8
108.9
25.7%
Exports
329.0
301.0
9.3%
691.6
535.1
29.2%
FRESH BEEF
296.9
263.5
12.7%
617.6
469.2
31.6%
4.2
4.7
-12.0%
11.2
9.4
19.1%
27.9
32.7
-14.8%
62.8
56.5
11.1%
TOTAL MARFRIG BEEF
2,581.0
2,375.1
8.7%
5,044.2
4,459.4
13.1%
FRESH BEEF
FURTHER PROCESSING
LAMB, LEATHER AND OTHER
1,951.9
1,741.9
12.1%
3,751.4
3,275.3
14.5%
FURTHER PROCESSING
247.2
197.7
25.1%
472.0
398.3
18.5%
LAMB, LEATHER AND OTHER
381.9
435.5
-12.3%
820.8
785.8
4.4%
R
VOLUME (‘000 TONS)
224.1
146.4
63.1
6.7
76.6
77.7
55.9
8.2
13.6
289.4
216.7
70.6
8.1
138.1
72.7
55.8
4.6
12.3
Chg. %
2Q15 /
2Q14
-22.6%
-32.4%
-10.7%
-16.8%
-44.5%
6.9%
0.3%
77.8%
10.1%
72.2
75.7
52.0
18.0
0.8
33.2
20.2
15.9
0.1
4.2
296.3
152.9
15.8
127.6
48.8
15.1
1.0
32.7
27.0
19.9
0.1
7.0
365.1
161.3
13.7
190.1
2Q15
MARFRIG BEEF - BRAZIL
Domestic Market
FRESH BEEF
FURTHER PROCESSING
LAMB, LEATHER AND OTHER
Exports
FRESH BEEF
FURTHER PROCESSING
LAMB, LEATHER AND OTHER
MARFRIG BEEF - INTERNATIONAL
OPERATIONS
Domestic Market
FRESH BEEF
FURTHER PROCESSING
LAMB, LEATHER AND OTHER
Exports
FRESH BEEF
FURTHER PROCESSING
LAMB, LEATHER AND OTHER
TOTAL MARFRIG BEEF
FRESH BEEF
FURTHER PROCESSING
LAMB, LEATHER AND OTHER
2Q14
IR CONTACTS
441.3
299.1
127.5
12.4
159.1
142.2
102.0
14.4
25.9
566.8
426.2
132.3
16.7
277.2
140.6
107.9
8.5
24.3
Chg. %
1H15 /
1H14
-22.1%
-29.8%
-3.6%
-25.6%
-42.6%
1.1%
-5.4%
69.0%
6.7%
-4.7%
146.8
129.8
13.1%
6.6%
18.8%
-11.9%
1.6%
-25.1%
-19.9%
-45.5%
-39.6%
-18.9%
-5.2%
14.9%
-32.9%
103.2
36.2
2.1
64.9
43.7
33.5
0.2
10.0
588.1
299.2
29.1
259.8
83.8
27.8
2.1
54.0
46.0
33.9
0.3
11.8
696.6
301.9
27.6
367.2
23.1%
30.2%
2.1%
20.2%
-5.0%
-1.4%
-25.1%
-15.0%
-15.6%
-0.9%
5.7%
-29.2%
1H15
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
23
1H14
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
AVERAGE PRICE (R$ / KG)
MARFRIG BEEF - BRAZIL
Domestic Market
FRESH BEEF
FURTHER PROCESSING
LAMB, LEATHER AND OTHER
Exports
FRESH BEEF
FURTHER PROCESSING
LAMB, LEATHER AND OTHER
MARFRIG BEEF - INTERNATIONAL
OPERATIONS
Domestic Market
FRESH BEEF
FURTHER PROCESSING
LAMB, LEATHER AND OTHER
Exports
FRESH BEEF
FURTHER PROCESSING
LAMB. LEATHER AND OTHER
TOTAL MARFRIG BEEF
FRESH BEEF
FURTHER PROCESSING
LAMB, LEATHER AND OTHER
8.73
7.21
11.82
18.97
2.38
11.59
12.34
12.85
7.78
6.44
5.07
10.50
14.90
1.72
10.53
10.73
13.86
8.39
Chg. %
2Q15 /
2Q14
35.5%
42.1%
12.6%
27.3%
38.4%
10.1%
14.9%
-7.3%
-7.3%
8.66
6.74
5.70
12.21
13.21
1.98
16.30
18.68
57.26
6.62
8.71
12.77
15.67
2.99
4.30
9.18
9.70
1.88
11.16
13.27
35.49
4.69
6.50
10.80
14.39
2.29
2Q15
2Q14
8.54
7.09
11.66
19.09
2.49
11.59
12.03
13.78
8.66
6.21
4.80
10.36
14.99
1.53
10.48
10.75
13.86
8.10
Chg. %
1H15 /
1H14
37.6%
47.8%
12.5%
27.3%
63.2%
10.6%
11.9%
-0.5%
6.9%
28.5%
8.67
7.25
19.7%
32.6%
33.1%
36.1%
5.4%
46.0%
40.7%
61.3%
41.0%
33.9%
18.3%
8.9%
30.6%
5.64
11.60
11.96
2.11
15.84
18.46
52.00
6.29
8.58
12.54
16.19
3.16
4.84
9.93
9.90
2.02
11.64
13.83
32.69
4.81
6.40
10.85
14.44
2.14
16.6%
16.8%
20.8%
4.6%
36.1%
33.5%
59.0%
30.7%
34.0%
15.6%
12.1%
47.6%
1H15
1H14
e
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
24
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
MOYPARK | OPERATING HIGHLIGHTS – DISCONTINUED OPERATIONS
Gross Income and Gross Margin (R$ mm and %)
Net Revenue (R$ mm)
3,246
11.5%
11.3%
11.0%
10.7%
2,641
346
298
23%
1,734
191
1,328
153
2Q14
16%
25%
307
%
2Q15
1H14
1H15
2Q14
SG&A and SG&A/NOR (R$ mm and %)
2Q15
1H14
Adjusted EBITDA and Margin (R$ mm and %)
8.2%
8.2%
7.5%
8.1%
8.4%
7.5%
7.7%
7.6%
216
1H15
263
242
202
112
12
%%
130
16%
%
2Q14
2Q15
1H14
145
100
2Q14
1H15
IR CONTACTS
2Q15
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
25
30%
45%
1H14
1H15
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
Net Revenue
In 2Q15, net revenue was R$1,734 million, up 30% on the R$1,328 million reported in 2Q14.
Net revenue growth compared to 2Q14 was mainly driven by the positive effect of the
26% depreciation in the BRL against the GBP.
Despite the sales volume growth of 6%, revenue growth was adversely affected by: (1)
commodity price deflation; (2) the continued weakening of the EUR against the GBP,
which affected the translation into GBP of sales in Europe; and (3) lower sales prices for
dark meat chicken and offals.
In 1H15, net revenue was R$3,246 million, growing 23% from the R$2,640 million reported
in 1H14.
Gross Profit and Gross Margin
Gross Profit in 2Q15 was R$191 million (11.0% gross margin), increasing 23% from R$153
million (11.5% gross margin) in 2Q14. Excluding the effects from exchange variation, gross
profit declined 2% on 2Q14.
Gross margin decreased 50 bps from 2Q14, explained by (1) the 50 bps reduction due to
the negative effect from the reclassification of expenses previously classified as SG&A to
cost of goods sold; (2) which was offset by the 20 bps increase due to sales volume
growth in the period and the capture of operating efficiency gains at the operations in
the United Kingdom and Ireland, which was partially offset by the lower export price in
local currency.
In 1H15, gross profit was R$346 million (10.7% gross margin), increasing 16% from R$298
million (11.3% gross margin) in 1H14.
Selling, General and Administrative Expenses
SG&A Expenses as a ratio of net revenues in the quarter stood at 7.5%, compared to 8.4%
in 2Q14 and 7.4% in 1Q15. The level of 7.5% is explained by the realignment between
SG&A expenses and cost of goods sold and by lower marketing expenses.
In 1H15, SG&A Expenses as a ratio of net revenues stood at 7.5%, decreasing 70 bps from
8.2% in 1H14.
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
26
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA in 2Q15 was R$145 million (8.4% margin), a 45% increase from R$100
million (7.6% margin) in 2Q14.
In 1H15, adjusted EBITDA margin stood at 8.1%, expanding 40 bps on 7.7% in 1H14.
Income Statement (R$ million)
2Q15
Net Revenue
2Q14
Change
1H15
1H14
Change
R$
% NOR
R$
% NOR
Chg. R$
Chg. %
R$
% NOR
R$
% NOR
Chg. R$
Chg. %
1,734.2
100.0%
1,328.5
100.0%
405.7
30.5%
3,246.0
100.0%
2,640.6
100.0%
605.4
22.9%
COGS
-1,543.3
-89.0%
-1,175.4
-88.5%
-367.8
31.3%
-2,899.7
-89.3%
-2,342.7
-88.7%
-556.9
23.8%
Gross Profit
190.9
11.0%
153.0
11.5%
37.9
24.8%
346.3
10.7%
297.9
11.3%
48.4
16.3%
SG&A
-130.3
-7.5%
-111.9
-8.4%
-18.3
16.4%
-242.3
-7.5%
-215.9
-8.2%
-26.4
12.2%
-88.8
-5.1%
-78.5
-5.9%
-10.4
13.2%
-167.5
-5.2%
-145.4
-5.5%
-22.2
15.2%
Administrative
-41.5
-2.4%
-33.5
-2.5%
-8.0
23.8%
-74.8
-2.3%
-70.6
-2.7%
-4.2
6.0%
ADJUSTED EBITDA*
145.1
8.4%
100.3
7.6%
44.8
44.6%
262.8
8.1%
202.1
7.7%
60.7
30.0%
Selling
Other Income/Expenses
0.4
0.0%
-0.6
0.0%
1.0
-165.3%
0.3
0.0%
-0.5
0.0%
0.8
-161.8%
EBITDA
145.5
8.4%
99.7
7.5%
45.7
45.9%
263.1
8.1%
201.7
7.6%
61.5
30.5%
GBP / BRL
4.71
0.96
25.6%
4.52
0.69
18.1%
3.75
3.83
(*) Excludes the effects from other operating income/expenses.
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
27
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
CLOSING REMARKS
 The second quarter was marked by many achievements. We generated strong free
cash flow, transformed Marfrig Beef Brasil and signed an agreement to sell Moy Park.
 The strategic decision to divest Moy Park increases Marfrig's focus on the food service
channel, which offers excellent opportunities for growth and for increasing both cash
flow and shareholder returns.
 This transaction significantly reduces Marfrig’s net debt, which reached a Pro-Forma
Net Debt / EBITDA from Continued Operations ratio of 3.8x at the close of 2Q15. It is
important to note that annualizing the EBITDA from Continued Operations, which
better reflects the recent exchange rate levels, the ratio would stand at 3.4x.
 Cash generation in the quarter confirms our determination and financial discipline,
and was the result of our pursuit of operating efficiency gains and better working
capital management.
 This higher efficiency enabled Marfrig Beef to post adjusted EBITDA margin of 9.7%. The
result is due to the combination of measures adopted to optimize production and
improve the sales mix, with a greater focus on exports and more profitable channels
in the domestic market, as well as our efforts to better manage expenses and costs.
We believe the second-quarter results only partially reflect these efforts, since many
are still in implementation.
 The opening up in 2Q15 of the U.S. and Chinese markets to Brazilian beef imports
should generate volume growth in the medium term. We have already begun
shipments to China and hope to make our first shipments to the United States before
year-end.
 Marfrig Beef’s international operations continue to make a positive contribution to the
division's results, with excellent profitability and strong free cash flow generation.
 In the quarter, Keystone not only continued to make a significant contribution to free
cash flow, but also posted revenue growth in USD of 10% and EBITDA margin of 7.7%,
up 60 bps from 2Q14. The result basically reflects the good performance of Asia, but
was also supported by continued growth in Key Accounts, in line with our Focus to Win
strategy. Keystone continues to post accelerated growth, benefitting from its
impeccable reputation for customer service and execution excellence in its industrial
operations.
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
28
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
 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.
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
29
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
EARNINGS CONFERENCE CALL
Date: August 12, 2015
Portuguese: 9:30 a.m. (Brasília)
English: 11:30 a.m. (Brasília)
Dial-in from Brazil: +55 (11) 3193-1001 / 2820-4001
Dial-in from other countries: +1 (786) 924-6977
Code: Marfrig
Live audio webcast with slide presentation.
Replay available for download on our website: www.marfrig.com.br/ri
ABOUT MARFRIG
Marfrig Global Foods is a global food company operating in the food service, retail and
export segments that offers innovative, safe and healthy food solutions to its clients. With
a diversified and comprehensive product portfolio. Marfrig is committed to excellence
and quality and to ensuring the presence of its products in the largest restaurant chains
and supermarkets, as well as consumers' homes, in around 100 countries.
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
30
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
DISCLAIMER
This material is a presentation of general information about Marfrig Global Foods S.A. and its consolidated
subsidiaries (jointly the “Corporation”) on the date hereof. The information is presented in summary form
and does not purport to be complete.
No representation or warranty, either expressed or implied, is made regarding the accuracy or scope of
the information herein. Neither the Company nor any of its affiliated companies, consultants or
representatives undertake any responsibility for any losses or damages arising from any of the information
presented or contained in this presentation. The information contained in this presentation is up to date as
of June 30, 2015, and, unless stated otherwise, is subject to change without prior notice. Neither the
Corporation nor any of its affiliated companies, consultants or representatives have signed any
commitment to update such information after the date hereof. This presentation should not be construed
as a legal, tax or investment recommendation or any other type of advice.
The data contained herein were obtained from various external sources and the Corporation has not
verified said data through any independent source. Therefore, the Corporation makes no warranties as to
the accuracy or completeness of such data, which involve risks and uncertainties and are subject to
change based on various factors.
This presentation includes forward-looking statements. Such statements do not constitute historical fact
and reflect the beliefs and expectations of the Corporation’s management. The words “anticipates,”
“hopes,” “expects,” “estimates,” “intends,” “projects,” “plans,” “predicts,” “projects,” “aims” and other
similar expressions are used to identify such statements.
Although the Corporation believes that the expectations and assumptions reflected by these forwardlooking statements are reasonable and based on the information currently available to its management,
it cannot guarantee results or future events. Such forward-looking statements should be considered with
caution, since actual results may differ materially from those expressed or implied by such statements.
Securities are prohibited from being offered or sold in the United States unless they are registered or exempt
from registration in accordance with the U.S. Securities Act of 1933, as amended (“Securities Act”). Any
future offering of securities must be made exclusively through an offering memorandum. This presentation
does not constitute an offer, invitation or solicitation to subscribe or acquire any securities, and no part of
this presentation nor any information or statement contained herein should be used as the basis for or
considered in connection with any contract or commitment of any nature. Any decision to buy securities
in any offering conducted by the Corporation should be based solely on the information contained in the
offering documents, which may be published or distributed opportunely in connection with any security
offering conducted by the Company, depending on the case.
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
31
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
Balance Sheet (R$ ‘000)
ASSETS
4Q14
2Q15
LIABILITIES
CURRENT ASSETS
4Q14
2Q15
2,028,303
1,495,530
341,979
296,246
200,312
146,560
1,470,237
1,860,458
CURRENT LIABILITIES
Cash and cash equivalents
Marketable securities
Accounts receivable from domestic
clients
Trade accounts receivable – intern.
clients
Inventories
Biological assets
Recoverable taxes
Prepaid expenses
1,091,685
1,567,112
839,152
1,725,191
941,277
606,310
677,483
418,213
2,027,919
1,406,514
352,200
232,795
1,361,635
1,453,621
167,030
101,914
Suppliers
Accrued payroll and related charges
Taxes payable
Loans and financing
Leasing payable
Notes payable
Prepaid accounts from clients
Interest on Debentures - Convertible
Notes receivable
58,261
55,882
Liabilities held for sale
Advances to suppliers
57,204
29,709
Other payables
Assets held for sale
0
Other receivables
4,855,217
66,711
60,870
8,368,517
11,785,388
69,229
32,236
129,895
129,065
72,645
341,223
190,582
98,155
0
2,986,618
159,283
115,234
4,662,465
7,501,325
9,400,106
70,745
9,977,664
20,644
NON-CURRENT LIABILITIES
Loans and financing
Leasing payable
Taxes payable
706,545
711,756
NON-CURRENT LIABILITIES
Deferred taxes
635,758
517,968
Marketable securities
Provisions
970
940
Demand deposits
64,972
32,175
Notes receivable
345,664
471,234
Deferred taxes
1,708,437
Recoverable taxes
1,509,169
Other receivables
2,056,579
Notes payable
Mandatory convertible instruments
Other
45,213
3,671,985
4,082,134
46,219
353,570
880,903
2,121,470
2,120,568
123,076
98,965
13,451,718
14,374,687
118,260
155,680
Share Capital
5,276,678
5,276,678
Share issue expenses
(108,210)
(108,210)
184,642
184, 642
1,530,023
42,773
40,448
NON-CONTROLLING INTEREST
CONTROLLING SHAREHOLDERS' EQUITY
Investment
Property, plant and equipment
36,934
35,837
Capital reserve
4,961,623
4,279,590
Biological assets
142,140
46,939
Intangible assets
3,004,709
2,530,376
Accumulated losses
8,145,406
6,892,742
Net income (loss) for the year
TOTAL ASSETS
20,185,908
22,760,264
Profit reserves
Other comprehensive income
TOTAL LIABILITIES
IR CONTACTS
37,013
(1,090,738)
(2,258,551)
(2,933,759)
(739,472)
577,054
2,071,725
728,572
20,185,908 22,760,264
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
32
36,449
(438,071)
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
Cash Flow (R$ million)
1Q15
Net Income (Loss) – Continuing Operations
2Q15
(574.8)
(18.9)
(+/-) Items not affecting cash
669.1
317.4
(+/-) Working capital variation
(18.6)
498.0
Accounts Receivable
55.3
224.5
Inventories
29.6
151.6
(103.5)
121.8
139.7
23.3
Court deposits
36.1
(3.2)
Accrued payroll and related charges
11.3
(5.4)
Notes receivable and payable
31.7
(34.1)
(37.3)
(54.0)
98.0
120.0
215.4
819.7
(-) Investments
(100.9)
(127.5)
(-) Interest payable
(281.0)
(302.1)
Continuing Free Cash Flow
(166.5)
390.2
78.2
(254.1)
(88.3)
136.1
Suppliers
(+/-) Other
Taxes
Other assets and liabilities
(=) Operating Cash Flow
Reclassification of Cash from Discontinued
Operations
Total Free Cash Flow
IR CONTACTS
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
33
DRAFT
%INVESTOR RELATIONS
2Q15 EARNINGS RELEASE
Statement of Income for the Period (R$ million)
Consolidated
Reclassified
Net Sales
Reclassified
2nd Quarter
YTD
2nd Quarter
YTD
2015
2015
2014
2014
4.728.183
9.099.142
3.789.117
7.264.523
(4.166.757)
(8.062.001)
(3.317.245)
(6.318.618)
Gross profit
561.426
1.037.141
471.872
945.905
Operating income (expenses)
(199.924)
(456.421)
(276.803)
(546.796)
Selling expenses
(140.173)
(278.741)
(163.494)
(317.264)
General and administrative expenses
(107.327)
(198.311)
(93.119)
(192.720)
Equity in earnings (losses) of subsidiaries
(2.792)
(7.084)
(2.970)
(8.940)
Other operating income (expenses)
50.368
27.715
(17.220)
(27.872)
Net income before net financial income (expenses)
361.502
580.720
195.069
399.109
Financial income (expenses)
(392.203)
(1.415.845)
(296.099)
(680.361)
104.773
Cost of Goods Sold
Financial income
159.419
241.725
58.590
Exchange gain
579.331
927.181
109.386
378.096
Financial expenses
(577.021)
(1.183.525)
(367.538)
(767.221)
Exchange Loss
(553.932)
(1.401.226)
(96.537)
(396.009)
(30.701)
(835.125)
(101.030)
(281.252)
11.823
241.440
30.177
91.806
157.654
19.265
64.776
83.786
10.912
27.030
Loss before tax effects
Provision for income and social contribution taxes
(313)
Current and deferred income tax
12.136
Current and deferred social contribution
(18.878)
Net income (loss) in the period from continuing operations
22.052
Net income (loss) in the period from discontinued operations
Net income (loss) in the period before interest
(593.685)
34.976
(70.853)
20.401
(189.446)
47.220
3.174
(558.709)
(50.452)
(142.226)
(198.724)
Attributable to:
(28.200)
(612.030)
(75.490)
Marfrig Global Foods - controlling interest - discontinued operations
22.052
34.976
20.401
Total controlling interest
(6.148)
Marfrig Global Foods - controlling interest - continuing operations
Non-controlling interest - continuing operations
Non-controlling interest - discontinued operations
Basic and diluted losses per common share - discontinued operations
Total basic and diluted losses per common share
4.637
-
-
-
4.637
9.278
18.345
(558.709)
(50.452)
(142.226)
(0,0541)
(1,1761)
(0,1451)
(0,3820)
0,0424
0,0672
0,0393
0,0908
(0,0118)
(1,1089)
(0,1059)
(0,2912)
Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP – CEP: 04551-065
Tel: (11) 3792-8994
www.marfrig.com.br/ri
e-mail: [email protected]
34
9.278
18.345
Note: this quarter, the financial information of Moy Park is presented under Discontinued Operations.
IR CONTACTS
47.220
(151.504)
-
3.174
Basic and diluted losses per common share - continuing operations
(55.089)
9.322
9.322
Total non-controlling interest
(577.054)