BRF-Brasil Foods' (BRFS) CEO Pedro Faria on Q1 2016 Results - Earnings Call Transcript

| About: BRF-Brasil Foods (BRFS)

BRF-Brasil Foods S.A. (NYSE:BRFS)

Q1 2016 Earnings Conference Call

April 29, 2016, 09:30 ET

Executives

Pedro Faria - CEO

Jose Alexandre Carneiro Borges - Chief Financial & IR Officer

Analysts

Lauren Torres - UBS

Alex Robarts - Citigroup

Jeronimo de Guzman - Morgan Stanley

Isabella Simonato - Bank of America Merrill Lynch

Operator

Welcome to the BRF SA conference call to discuss the First Quarter 2016 Earnings. [Operator Instructions]. Forward looking-statements related to the company's businesses, perspectives, projections, results and the company's growth potential are provisionally based on expectations of the management as to the future of the company. These expectations are highly dependent on market challenges, economic conditions of the country and the sector and international markets, thus are subject to changes. As a reminder this conference is being recorded. This conference will be presented by Mr. Pedro Faria, Chief Executive Officer and Mr. Jose Alexandre Carneiro Borges, Chief Financial and Investor Relations Officer.

I will now hand the call over to Mr. Pedro Faria who will begin the conference call. Mr. Pedro, you may begin.

Pedro Faria

Good morning, ladies and gentlemen. Thank you for participating in today's conference call. In spite of the challenging scenario due to the decline of the Brazilian economy and the rise of corn prices in Brazil, our first quarter results has proven the positive development of our business model. In the first quarter of 2016 we made important strategic progress. We announced another major acquisition, Calchaqui, enhancing our brand and products portfolio in the cold cuts category in Argentina, creating relevant synergies with BRF's operation and acquisitions in the region.

If we combine Calchaqui to the other acquisition, Campo Austral, the combined annual revenue will be around $190 million. With these two acquisitions, our [indiscernible] south cone platform would have pro-forma revenues of over $750 million with iconic brands in its portfolio such as Paty, Vienissima, Calchaqui and Bocatti. Despite this, we concluded the acquisitions of GFS in Thailand, Universal in the United Kingdom and now a distributor in Qatar.

In the case of GFS we had positive surprises this quarter and we have already achieved higher-than-expected results. After this first month we have raised our internal projections and expect an EBITDA of around $50 million for 2016 which makes the acquisition really attractive in comparison to the price that we paid. In addition to volume gains, we're working intensively on the commercial synergies of GFS and Universal EBITDA in our UK platform.

We also have a dedicated supply team of Brazil working alongside our Thailand team aiming for operational enhancement and mutual learning arising from the complementarity of the portfolios. We continue to work on synergy gains, such as the better utilization of our global footprint and better agricultural feed conversion rates in GFS. We also started exporting to new important markets such as Malaysia and Mexico, as well as from the new plants that we have certified with regards to China.

These actions combined, not only bring growth and expand our global footprint but are 100% aligned with our strategy of advancing further down the value chain and transforming BRF into a global consumption company. Nevertheless, a perfect storm hit the sector this quarter and its effects might extend until the end of the semester. The main variables that guide the sector's profitability deteriorated at the same time.

On one hand Brazilian chicken production continues to be at an all-time high, creating oversupply of the international market and strong availability in the domestic market. This is also affecting pressure in dollar prices. On the other hand, we witnessed on appreciation of the FX rate in March that is pressuring our prices in reais alongside, of course, the rise of above 50% year-over-year in corn prices, that was completely uncorrelated with global corn price dynamics, thus reducing the profitability and the competitiveness of the Brazilian industry. However, the results coming from our transformation we're implementing in our international are starting to appear. Volumes rose 17.2% year over year and even if we exclude recent acquisition we would still record double-digit growth in our international platform.

Another important point I would like to highlight and I'd like to give you more details afterwards, is the greater resilience of margins where we have moved forward in the local direct distribution model. Analyzing both Middle East and Europe, regions where this model is already more developed, we noticed that the volatility in margins is much lower in comparison to the markets we're still very much focused on the export of in-natura basic products such as Eurasia and African regions. Thus, in the midst of this very strong unfavorable cycle, our international market reported EBITDA of 12.5% which compared to the maximum margins we used to achieve in previous cycles, worth remembering that in some similar adverse cycles our margins have hovered around zero margin sometimes.

In the Brazilian market our focus is to regain the profitability in our operations. Early January we made a realignment in price of 10% on average. This increase was done in a very granular and specific way, enabling us to make a price repositioning between channels and regions, correctly some distortions that existed. However, the pressure on costs coming from corn prices continues to be high so that increase will not be enough to restore our margins as we would like. So we have already registered a new round of price realignments for May of approximately 7%.

Another very important topic in Brazil is our innovation platform. We launched new products in the quarter, such as Salamitos, a pioneer in the processed snack category and absolute sales success. Also the new lines of ready meals of Sadia and Perdigao which continues to record very favorable sales metrics. These releases are 100% aligned with our strategy of revitalizing our portfolio and our innovation program, especially to support our Sadia brand. In addition, we continue to invest heavily in our team and the improvement of our performance, building up a lot of projects around efficiency and service levels, along with our commercial and logistic teams. This will enhance the relationship we have with our customers and bring further productivity gains to our results.

Regardless of the adverse short term scenario, we're maintaining our investment program of more than R$2 billion in 2016, in order to support our global expansion as well as the long term strategy. Undoubtedly, this is only possible because of our strong cash position of around R$8 billion. We ended the first quarter with a net leverage of 1.69 times our EBITDA, even after the payment of acquisitions, dividends and our buyback program. Worth to remember that in 2012 when we had a similar unfavorable cycle, our leveraged peaked at 3 times our EBITDA and quickly returned back to normal levels once the cycle reversed. We expect the same phenomenon to happen on top of our already very strong financial position.

Finally, we continue very at ease from the financial point of view in order to pass through these challenging years. Without deviating from our long term strategy, we continue our short term efforts to intensify cost and expense cuts and further enhance the commercial logistic performance of our operations. Now I will give the floor to Alex Borges, our CFO, who will discuss in greater detail our financial highlights of first quarter 2016.

Jose Alexandre Carneiro Borges

Thank you, Pedro. I will point out some relevant financial data for the first quarter 2016. Our net revenues increased 15.2% reaching R$8.1 billion in the quarter. Our gross profit dropped by 6.1% and we had a contraction of 5.7 percentage points in our gross margin when compared to last year. This result was a consequence of the cycle we're going through.

On the other hand, we managed to control our SG&A well. If we had to add to the base of the first quarter 2015 the expenses coming from the acquisitions and the increase in volumes, as well as the impact of the foreign exchange variation and the dollar-based operational expenses and the impact of inflation, we should have had an increase of approximately 23% in the SG&A quarter over quarter. Therefore, the increase of only 12.6% year over year in the SG&A represents a strong effort to control our expenses and an operational efficiency gain of about R$125 million in this quarter alone.

In relation to the other operating results, we reported an expense of R$46 million. In this quarter, unlike previous quarters, we didn't have a significant non-recurring event impacting the Company's results. We reached in the quarter at EBITDA of R$1.025 billion in the quarter, an increase of 8.4% versus the previous year, with a margin of 12.6%. Starting from a gross margin that was 5.7 percentage points below last year we had a decrease of only 0.9 percentage point in the consolidated EBITDA margin. It's worth mentioning that this lower margin, impacted mainly by the international market, is still around 4 percentage points higher than the margins that we achieved in 2012, a period when we also faced a down cycle.

About the financial results, I would like to give you more details about the impacts behind this negative result of R$202 million on FX variations and others. In order to give you a better understanding, I would like to highlight that we have around $3 billion in assets and around $3 billion in liabilities running on average in our balance sheet. In our hedge strategy we actively try to match these assets and liabilities in order to have a neutral balance position. In other words, we do not take positions in either directions of the currency and we try to maintain a neutral position as much as possible. But the reality is that this is not a perfect process and we may have some mismatches here and there during the time and that generates impact on our FX variation.

Specifically in March, we were holding an average long position of around $200 million to match the payments of some acquisitions we had to do in the period and this generated a negative impact of R$90 million in our financial results. Besides this negative result we also had a long corn position on the CBOT as part of our commodities hedge policy to protect from potential variations of the corn price in the Brazilian market. The reality was this hedge really did not work, merely because the corn prices in Brazil significantly increased in price and completely decoupled to the Chicago prices expressed in real terms. This generated a negative additional impact of R$50 million in the quarter.

Now going through the results by region, I would like to explain the new format of disclosure of results that we started to use this quarter. First, we started to disclose the gross profit and the EBITDA per region with their respective margins. Second, we now report Africa as an autonomous region. And finally, to better understand our operational performance of each region we have removed the non-core products, the sale of non-core products from the respective results and now they can be found in another segment. And we have also moved the impact of non-recurring and extraordinary expenses or revenues to the line that's now called the corporate category.

We've also started to disclose, for each international region, the CFR export volume on our Brazilian platform, generally composed of the in-natura products, low value-added and more exposure to the fluctuation of our industry cycles. In relation to the results of the Brazilian region, the main highlight we had in the quarter was the increase on average prices conducted early in January of approximately 10%. Although the impact of this increase has not been fully reflected in this last quarter we were able to increase our average price in the quarter 8.4% versus last year, because of this price increase we saw our volumes in Brazil reduce by 10% in the quarter against the previous years, with an approximately 13% drop in the volumes in January and February and a 5% drop in the volumes of March.

For the second quarter we will apply new price increases aiming to continue the process of recovering our profitability in this market even if the result is some additional pressure on our volumes. It's worth calling attention, once again, to our discipline in our expenses. Even with the retraction of the gross margin of 3.8 percentage points in the quarter, we were able to keep our EBITDA margins flat in a year-on-year comparison.

In Middle East, in the first quarter of 2016 we had a 3.9% growth in volume versus previous year, with a special highlight to the 27.1% growth in the volumes of processed products. The result of the region was impacted by the cycle, mainly due to the decline of the margins of direct exports of in-natura products from Brazil. The initiatives to advance in the value chain, especially those related to building our own distribution network and increase the volumes of processed products, were very important initiatives to protect our margin in the region. To give an idea of the relevance of this process - in the relevance of really advancing the supply chain, we had an average gross margin of about 15 percentage points in this last quarter, above the margins achieved in exports, the in-natura business directly from Brazil of 2015.

In Asia, we achieved, in the first quarter a volume of 44.4% higher than the previous year, a result of the entry in new markets and the consolidation of volume of the GFS, our acquisition in Thailand which represented about half of this growth. On the other hand, as the market is predominantly direct exports of in-natura products from Brazil, our results suffered strongly with the cycle, thus the region showed a decrease of 15.8 percentage points in EBITDA margin versus the - in the first quarter 2016 versus the previous year. Still, we kept EBITDA margin above 14% which we believe is a very positive result for the region. In Europe, our margins were also impacted by the cycle, especially in Russia, where we saw negative EBITDA margins in this market.

However, just like Middle East where we moved forward in the value chain and improved our mix of products, the difference in margin between local distribution and export was 14 percentage points. In other words, moving to direct distribution, advancing the chain and increasing our margin is the strategic direction to which we're pursuing in this international markets.

Finally, I would like to end my comments by highlighting that we have ended the quarter with a net debt of R$10.1 billion and a net financial leverage of 1.69 times net debt to EBITDA. Excluding the payments of acquisitions that we have done in this quarter of approximately R$2.3 billion, our leverage would have been 1.37 times.

It's worth noting that in 2012 when we also faced an unfavorable cycle, our leverage got all the way up to nearly three times.

Question-and-Answer Session

Operator

[Operator Instructions]. Our first question comes from Lauren Torres, UBS.

Lauren Torres

I appreciate hearing your confidence on your long term strategy or the ability to execute that strategy and I don't want to be too short term focused here, but you talked a lot about these moving parts more working against you in the short term, so could you flesh those out a bit? I don't know if your worst quarter now is behind you but with respect to chicken supply, currency, corn prices, it seems like you are putting initiatives in place to manage this, but I guess I'm just trying to get a sense that short term, if things get worse for you if you feel you have enough things in place to offset this pressure or we'll see some continued pressure like we did at the first quarter. Thanks.

Pedro Faria

Lauren, thanks for your question, I don't think you're being too short term. We're, of course, carefully managing the variables we control and trying to position ourselves for the variables we cannot control. Of course we're trying to create a clear distinction of what we think is a normal cycle of this industry with oversupply trends which I think would tend to fade into the second half of the year and abnormally high prices in Brazil which represent a complete deviation from any kind of pattern we've seen historically.

We think those are the variables we cannot control. I think we have put in place a number of mitigating actions here, so of course we're not getting the full impact of an increase of more than 60% in our most important raw material, so I think the set of numbers we're showing here proves the resilience of the model in light of the variables we don't control. Should things get worse which I think goes to your point, of course we will need to find additional measures to put in place and, of course, they will go in the line of even strengthening the ZBB and cost control of the variables we can control.

Operator

The next question comes from Alex Robarts, Citi.

Alex Robarts

I wanted to go back to the international business and when you look at the five segments in the quarter including Brazil, the only segment where you get a very clear operating leverage and margin expansion is in Latin America. And so it wasn't really touched on in the Portuguese call, but can you talk to us about how that region has evolved and give yourselves a report card of where you are in the process of building out the three pillars of the Middle East, the local production, the brand and the direct distribution? Can we start thinking about Latin America as a double-digit EBITDA margin business this year? So kind of where are you in this process of rolling out and working toward this distribution local production and branding process that you've done so well in the Middle East? That's the first question.

Pedro Faria

And I think you're right to say that we didn't touch much on the one region which we seem to have expansion in our profits. So we're very excited with the progress being made in the south cone. We announced a series of three acquisitions in the last six to eight months, they all come together to create what we believe is a winning platform in Argentina.

To give you a kind of a ballpark sense of this, once those integrations are in place, south cone and Argentina in particular becomes a platform with a total sales to the tune of $750 million annually, with I think a dramatic opportunity for us to integrate them in a way that we can see margin expansions coming from we having a bigger clout into the market with our clients, with of course a clear leadership in some important categories like burgers and franks and now cold cuts.

So once that platform comes into place then I think we play there from a position strength, combing both Sadia as a global brand but also uniquely positioned iconic brands in that market. We see a very bright future. Of course, short term, a lot of challenges, integration, still too early to tell. Of course a lot of these locations in Argentina with recent change in administrations so of course a big attempt at controlling inflation and other macroeconomic variables, but I'd like to say that we're excited to be building along the three pillars that you have mentioned, distribution capability, local production and iconic brands.

Jose Alexandre Carneiro Borges

Alex, to complement Pedro and with the benefit of being the GM for the region for the last little bit over two years, what we're seeing in the region, it's a gradual improvement on profitability quarter over quarter. Starting from third quarter last year we have consistently seen between 4 to 5 percentage points expansion in the EBITDA margins versus the previous year. So this is a lot of the exercise of recovering the profitability in the region and trying to grow exactly what you were just saying which is a very, very strong local platform of consumer-oriented business, strong brands, distribution and also with the support of the local production.

So if you see what we have disclosed this quarter as well, direct sales from Brazil to the region represents about, between 20% to 25%, so among the regions, international regions, that's the most percentage that we have, meaning that the local business with the local distribution, local dynamics is the strongest. So in one sense this is the closest we have to the Brazilian reality that we have. So our expectations as we consolidate and integrate the acquisitions we have done that should happen at least partially in the second quarter and we have also disclosed the numbers for the combined acquisitions that we did recently for Compo Austral and Calchaqui, those two companies together had close to $190 million in revenues last year with an EBITDA close to $30 million.

So to add all this up we should continue to see growth in the region. It's solid that we grew 16% in processed products in the region so we're expecting to continue to see growth and we're very confident with the long term. But having said that short term has been bumpy, has been bumpy in Argentina, inflation is putting a lot of pressure, we believe the government is taking the right measures and going to the right directions but short term it's been challenging in Argentina. But yes, we're very confident that we're building a very solid platform in LatAm and expect this to continue to deliver solid results going forward.

Alex Robarts

And the last question is just on the Middle East, that was discussed earlier and before this saying this I want to or asking the question, just say I appreciate the increased financial disclosure at a time when certain companies are closing up, this has been a helpful press release. But look, going into the Middle East, one of the things I don't think was discussed a lot, is how you're ramping up in Abu Dhabi. This was something that, I guess you're coming into your second year, you're started to sell into Saudi Arabia, how are you feeling with the ramp-up of that plan? It seems to be obviously driving this 27% growth in the processed volume in the quarter, but are we going to, do you think we'll get and you're on track to get the 1000 ton capacity or are we going to hold back on that? So talk a little bit about your local production footprint in the Gulf with Abu Dhabi, that would be great, thank you.

Pedro Faria

I think we're, as we discussed before, ramping up ahead of the original plan, facing some important challenges that I think are being dealt adequately. I'll give you a sense that, given the corn price situation in Brazil, a lot of the raw material imports coming from Brazil had to be replaced by alternatives, even locally. We're sourcing now raw materials both in the region and globally. So this is one point. When it comes to indirect costs, I think we're diluting them in the factory much ahead of the plan. I'm very positively surprised with the work that the leaders of that factory are doing.

We're still managing that plant which is very satisfactory to me, with impressive accident and AGC ratios, the culture coming together. So yes, we already started on the expansion of that plant which is going towards the lines in which we're seeing the biggest improvement. I'll give you one example, on the poultry part we're now solidly moving into three shifts of that plant and we're even sourcing high value-added poultry cuts from Brazil in a new wave of integration.

So we're expanding that. We also have other areas in which we've seen a little bit less success but I think it's all part of the game. I think the main message here is, yes we're growing 27% year on year on the high value-added offering. Now that we're integrating the Thailand platform, it will become also a supplier of Abu Dhabi factory in a way that we can source very interesting products from Thailand, further process them into Abu Dhabi and then onto Saudi. I don't know if this is known, but Saudi Arabia doesn't have certifications approved for Thailand factories but the fact that we can further process in Abu Dhabi allows us to tap into that market.

So I think it's coming together quite nicely. Of course some challenges as I said, the Brazilian raw materials which are now quote-unquote more expensive than what we can find, but I think we've built a decent sourcing platform there so we're able to mitigate that with a supply of raw materials globally.

Operator

Next question comes from Jeronimo de Guzman, Morgan Stanley.

Jeronimo de Guzman

I wanted to back to the volume performance you had in Brazil, I just wanted to understand this processed foods volume decline 11.4% in process foods relative to the industry growth that you mentioned which was 1.3%. So I just wanted to see if you could help us understand that gap. I understand that pricing had an impact on it but I also had the impression that your main competitor had taken similar pricing, so I wanted to understand what else then could be driving the gap? It is competition, is it channels or something else that we should keep in mind?

Pedro Faria

So I think you are raising a very important point. As we mentioned in the call in Portuguese, we think that we as leaders, we have been impacted by being kind of the first to try and realign prices which has a big impact when you look at it in a more granular fashion into the channels. Because here we're discussing a 10% realignment in prices but the effect it had on some channels was much more pronounced than that.

Meaningfully wholesale and some indirect distribution channel that we operate with. So I think there's also channel stocking, destocking trends here which lead to this big fall in volumes. When we look at our market share losses, we lost about 0.9 percentage points here which would translate with kind of a volume decrease of 2%. You mentioned competitors are also realigning prices, this is true, but they are doing so with the lag from our movement.

So, the natural trend would be for us to short term lose some market share which we expect to gain coming from the several initiatives we have in place to deal with bigger distribution, higher levels of service to certain channels and, of course, the rollout of our innovation platform which is getting a very strong reaction in the marketplace.

Jose Alexandre Carneiro Borges

And just to complement Jeronimo, it's Alex and we're talking about another price increase in the second quarter. And, as Pedro said, as the competition had a delay to follow through in our price increase and they have done so more strongly and more recently, we believe as we implement we will get in the middle of this movement of the competition adjusting the price. So that's why we're also confident that going forward we should successfully be able to make this movement.

Just to highlight, again as we disclosed in our report, the 11% was very concentrated in January and February, those are the months where we saw the mix of the follow-ship of the competition and in March this gap is much lower, only 5%. And remember, as Pedro was saying, this is the sell-in, the sell-in from us to the channels. The sellout, the market shares indicate that we have not lost as much of our ground.

So that's what gives us the confidence that this process of recovering profitability. Yes, we may see some pressure on volumes but we're very confident that we're moving in the right direction here.

Jeronimo de Guzman

And are you seeing any restocking in the channel already as you look at April or is the sell-in still under pressure?

Pedro Faria

We saw a bit of that in March. As we talk about April, of course the market starts to have some kind of an impact of our already announced price increases. And on the same point, Jeronimo, we're discussing this and it's not like the Brazilian market is standing still.

We're seeing down trends, we're still seeing a very difficult situation from the consumer standpoint, so all of this is also impacting the way that we're operating. Having said that, I agree with Alex, this is the moment that we as leaders we need to realign prices, given the cost pressures we're seeing on corn and many of the other inputs, so I think that short term pain should translate into long term gain if we execute well enough.

Operator

The next question comes from Fernando Ferreira, Bank of America.

Isabella Simonato

This is Isabella Simonato. I have two questions. The first one in the Middle East, again, if you could share with us your expectation in terms of what the mix of processed foods should represents in the short term and in the midterm? We understand that volumes have been performing pretty well but still 8% of your mix, so what we can expect going forward?

And also in the Middle East, if you could share with us the difference between own distribution and third party on the EBIT margin basis? We understood the difference on a gross margin basis but if you could share with us on an EBIT margin basis this would be much appreciated. This is the first question, thank you.

Pedro Faria

I'll start with the second part of the question around the local distribution and what I means. We tried to provide some guidance around what are the kind of gross margin improvements we get from changing from our CFR model into the DDP in direction distribution in the Middle East. It's almost 15 percentage points as we recorded in the first quarter. Remember this gap is also dynamic over time, so meaning that when we have a high cycle like we had maybe last year, that 15 percentage points will be likely less and when we have a low cycle the resilience of our distribution model makes that gap increase, okay? So this is what's happening right now.

Of course we had a completely different layer of expenses to be able to operate, so running our distribution, having our sales people, incurring all kinds of trade marketing activities, promotion, etc. But of course improvement by the overall increase in our profitability in the Middle East, it really means that there is a big accretion in the EBITDA margins. I'm not ready to disclose what it means but essentially this is a very positive impact and I think you can correlate that from historical numbers we have disclosed to the market. Can you repeat the second question?

Jose Alexandre Carneiro Borges

The first past about the portfolio--

Pedro Faria

Yes, portfolio, you did mention that processed still represents a shy 8%. I think that's not the way we should look at it, because at the end of the day our game to increase market share and expand penetration of those categories. Of course it's coming from being slightly less than 2% or 3% into 2013 and coming to 8%, so the growth in that line is significant. I would also point out the growth we're having on poultry parts which we expect to be really important and meaningful in terms of shift.

I think the Middle East consumer is really migrating fast from whole birds to poultry parts which, of course, adds a new layer of convenience to the offering, with marination, with pre-washing, cutting, etc. So that's why we're excited, this is why I think it's the one line that we roll out which has a great level of success in Abu Dhabi.

So you could expect a meaningful change in the mix, it will not translate into this becoming half of the business, we do that just because the fundamental base growth of that business continues to be the chicken supply which again, is not a commodity it's a branded offering. It commands a significant premium versus the competitive offering and we continue gain market share in all of those categories.

Isabella Simonato

And the second question would be on working capital. We saw in this quarter that there was a significant impact from suppliers and also other rights and obligations line. If you could give us more details on the reasons for this negative impact in this quarter and how that should perform going forward. Thank you.

Jose Alexandre Carneiro Borges

Obviously, as we move forward in our strategic model to be more present in the distribution, to get closer to our consumers, we do get some impact on our working capital, mainly in stocks and in accounts receivables. In other words, for our model before when you ship out and once you've put the goods on a ship the good are no longer in our balance sheet.

Now we still hold them in the water until they get to the final warehouses and until we get the final distribution and stuff. So we're seeing some impact, on average this change and this advancement of the model has impacted us close to three days in the cycle, of increase in the cycle, the cash cycle, but this is more than mitigated by the increase in profitability that we gain from this movement. What we saw in some of this consumption of working capital has to do with that. It has to do with also the acquisition that we did, GFS, also the whole plant and the inventories and the working capital coming from there and from the acquisitions we did in Europe as well.

So this is a model that we will continue to be very disciplined, to pursue savings and be as efficient as possible, but, yes, we should see some increase, some marginal increase in our cash cycle reflected in our working capital.

Operator

This concludes today's question and answer session. I would like to pass the floor again to Mr. Pedro Faria.

Pedro Faria

Thank you. I would like to appreciate all of those participants in our first quarter conference call. As we said in the previous call in Portuguese, we remain very confident in the long term strategy. I believe that in the light of what we have called a perfect storm from pressures coming from corn prices and of course oversupply hitting our price in dollars and a lot of volatility effect, I think our model has proven resilient.

We're still not satisfied. We think we have still room to improve internally in the variables we control, but I believe we're on solid grounds here and a difficult quarter has proven that our ability to unlock value for shareholders continues intact for the future. Thank you very much.

Operator

That does conclude the BRF SA conference call. Thank you for your participation. Have a good day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!