Marcos Molina – Chairman Martin Secco Arias – Chief Executive Officer Frank Ravndal – Chief Executive Officer-Keystone Division Eduardo Miron – Chief Financial & Admin Officer, Investor Relations Officer

Lauren Torres – UBS Pedro Leduc – JPMorgan Thiago Duarte – BTG Pactual

Good afternoon, ladies and gentlemen. At this time, we would like to welcome everyone to Marfrig Global Foods S.A. Conference Call to present and discuss its Results for the Second Quarter of 2017. The audio for this conference is being broadcast simultaneously through the Internet in the website, www.marfrig.com.br/ir. In that address, you can also find a slideshow presentation available for download. We informed that all participants will only be able to listen to the conference call during the company’s presentation. After the company’s remarks are over, there will be a Q&A session. [Operator Instructions] Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Marfrig’s management and on information currently available to the company. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions because they relate to the future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Marfrig, and could cause results to differ materially from those expressed in such forward-looking statements. Now I’ll turn the conference over to Mr. Marcos Molina, Marfrig Global Foods’ Chairman. Please, Mr. Molina, you may now begin the conference.

[Foreign Language] Good afternoon, everyone. I’d like to start thanking both our division. [Foreign Language] In the case of systems for delivering other quarters of excellent results, which included setting a new record for EBITDA. [Foreign Language] And this division for the fast decision to expand its processing capacity in Brazil. [Foreign Language] We opening plants that had been temporarily shut down due to negative cattle sites. [Foreign Language] Now with a higher supply of cattle than initially expected. [Foreign Language] Is adjusted its production to this new scenario. [Foreign Language] Under a more efficient structure than in 2014, as Martin Secco will explain to all of you later. [Foreign Language] I also want to take this opportunity to emphasize that Marfrig’s strategy remains unchanged. [Foreign Language] Guided by the pursuit of sustainable growth in all divisions. [Foreign Language] And that the teams also remain focused on carrying out the IPO achievement until the end of this year. [Foreign Language] So now with that, I’ll turn the call over to our CEO, Martin.

Thank you, Marcos. Good afternoon, ladies and gentlemen. I want to start by thanking everyone for participating in another Earnings Conference Call of Marfrig Global Foods. Today, we will comment on the result for the second quarter of 2017, and also on our strategy for the second half of this year given the new scenario that emerge following on a typical first half. With me today are Eduardo Miron, our Global IRO and CFO; and Frank Ravndal, CEO of Keystone Division. Please go to the Slide number 3. On this slide, I will cover the highlights of the second quarter of the year. In terms of the global scenario, despite the still volatile political and economic environment, the market in which we operated posted good performance. The Brazilian market was not an exception. In the specific case of Beef segment, the quarter was once again atypical, with significant events during the period. These are typical scenarios led to our sharp drop in cattle prices to a higher supply of finished cattle, which led us even more optimistic on the cattle cycle in Brazil in 2017. And to capitalize on this opportunity, we announced the Beef division decision to expand its existing capacity by reopening plant that had been temporarily shut down. I will comment in more detail about this capacity or adjustment further on. In Keystone division, adjusted EBITDA in the quarter was $69 million, which is an all-time high for the company. The successful strategy of the key accounts program, combined with our history of locking partnership with major companies in the global food service industry, have been the pillar for our success. In terms of investment, we remain committed to maintain and improve our assets. In term of growth project, our focus remain on organic growth project at Keystone, especially in APMEA region, which Frank will comment later on. Please go to Slide number 4. On of this slide, I will comment on the performance of Beef Division in the second quarter. As I note on the previous slide, the scenario was market by volatility. After a weak April, which continued to reflect the effects from operation we face, we observed a robust recovering cattle supply, which enabled us to increase our slaughter volume sequentially. In June, the Beef division in Brazil utilization rate over 90%. As you can see in the chart, on the lower left of the slide, the Beef Division posted net revenue R$2.1 billion, down 10% year-over-year. The result is explained by 9% Brazilian real appreciation, 5% drop in total sales volume, influenced by the lower volume of sub products, which these factors partially offset by the positive effect for the higher average [indiscernible] price. The still challenged macroeconomic scenario in Brazil also weighed on clients and their consumers. However, the highlight was the 4% growth in the fresh Beef sales volume in the domestic market. So 69,000 tons as you can see in the volume chart. The higher volume in the local market offset the lower volume in the export market, which was affect by the many different factors weighing on the Brazilian animal protein industry in the first half of the year. Also, with regards to export, I should note, the combined prices in markets such as China, Hong Kong, Europe, which combined, account for nearly 70% of export revenue, which reflect our strategy to serve channels with solid prospect for growth and profitability. As you can see in the chart on the upper right, adjusted EBITDA was R$170 million, with margin in line with the second quarter of the last year, in relation to the first quarter of this year, EBITDA margin expand 150 basis points. The main factor were the highest break in Brazil sequentially, mainly due to the lower cattle price, which reached diverse levels in June. The stability spread in Uruguay, and the reduction in selling and administrative expenses resulting from the action to streamline the structure, such as the productivity gain from adjusting the sales team and the reduction in variable expenses associated with export. I will hand it now to Frank, to continue with the presentation, especially with the Keystone Division.

Thank you, Martin. Good afternoon, everyone. Thanks for joining us today on a busy release day. Keystone had another excellent quarter. We’re proud to announce that we set a new record for adjusted EBITDA of $69 million in the second quarter. We had strong momentum exiting the first quarter, and that momentum has been sustained throughout the first part of the year. The strong performance resulted from our ongoing strategy to increase volume and migrate our sales mix toward higher-value products. Both in our APMEA segment was particularly strong. We saw favorable demand in key regional domestic markets where we operate as well as in international export markets served by several of our APMEA production facilities. Due to strong demand and growth in our customer base over the past few years, we’re very tight on capacity in many of our plants in the U.S. and in several facilities in APMEA. Consistent with the priorities we established during the longer-term strategy workweek, we concluded at the end of last year, our strategy 2021 plan, we’re actively investing in strategic projects that will expand both our capabilities and our capacity, including fresh beef lines, additional par-fried and fully-cooked chicken capacity, and additional grow-out capacity in the U.S. to support the growth in our further process value-added businesses. As a result, we saw increased CapEx during the second quarter relative to the same period last year. We will begin seeing some additional capacity come online in early 2018. Other projects will be completed later in 2018, and into the next few years, as part of the CapEx plan developed to support our strategy 2021 growth plan. These capability enhancements and capacity expansions will allow us to better meet the growing needs of our expanding base of customers. Now let’s turn to the slides and review the results in greater detail. And again, as a reminder, please remember that all financial data presented by Keystone Foods is presented in U.S. dollars. On Page 5 in the upper left quadrant, you can see that our consolidated volume reached 280,000 metric tons in the second quarter. This represents a 2% increase when compared to the same period last year. In the U.S., we realized a net positive volume increase, which was driven by strong growth of 5% in the food service channel, and was offset by a smaller decrease in our retail and convenience and industrial channels. Our U.S. segment continues to see strong customer demand for our No Antibiotics Ever products. In APMEA, we realized volume growth in our value-added business of 8% compared to the same period last year. Korea experienced particularly strong domestic volume growth, which was the result of new product introductions by multiple customers. In our export markets in APMEA, we experienced increased demand for value-added products destined for the UK and the Middle East markets out of both of our facilities in Thailand and Malaysia. Now moving to the lower left quadrant, our consolidated net revenue increased to R$697 million in the second quarter, which is a 4% increase over the same period last year. In addition to the 2% increase in volume, our net revenue was positively impacted by an overall more favorable sales mix. Our U.S. segment has continued to operate efficiently, and we have successfully directed our available capacity toward higher-value products. Additionally, our U.S. segment has continued to benefit from favorable pricing of dark meat by-product sales. Now moving to the right side of the page, you can see the adjusted EBITDA and adjusted EBITDA margin for the quarter. The adjusted EBITDA grew to R$69 million, again, a record, and representing a 2% increase over the same period last year. The improvement was driven primarily by volume growth and improving product mix. On the cost side, our SG&A has been managed at a level consistent with our historical range of 2.5% of net revenue. As a result, we have achieved a very strong adjusted EBITDA margin of 9.8%, just below our record margin of 9.9%. In summary, Keystone had another positive quarter and a successful first half of 2017. And now I’ll pass the call to Eduardo Miron.

Thanks, Frank, and thank you, Martin, for providing the main drivers for the results of each division. Let’s move to Slide number 6, please. In a consolidated basis, Marfrig posted net revenue of R$4.3 billion in the quarter, down 8% year-over-year. Keystone Division accounted for 52% of the total, and 62% of Marfrig’s total revenue came from operations located outside of Brazil, when we had our Beef international operation. In terms of currency exposure, 79% of the revenue in the second quarter was added to currencies other than the Brazilian real, showing the company’s high level of international migration. Now on the upper right of the slide, you can see adjusted EBITDA in the quarter, which was R$391 million, down 8% year-over-year. Meanwhile, adjusted EBITDA margin stood at 9.1%, in line with year-earlier. This performance is explained by the negative effect from the average Brazilian real appreciation of 9% in comparison period. The result of the Beef division, which was affected by many different factors weighing on the Brazilian animal protein industry in the first half of the year, where these factors partially offset by the reduction in selling, general and administrative expenses at this division and to follow the result of Keystone Division, who posted a record EBITDA of $59 million. In relation to the first quarter of 2017, adjusted EBITDA grew by 17%, with EBITDA margin expanding 100 basis points. I want to note that Marfrig as a group, kept its volume and Marfrig – and margin, relatively stable year-over-year. Slide 7 and debt profile. This 97% of our debt is back to the dollar. Let’s look at it from that perspective. Gross debt stood at $3.7 billion, decreasing $55 million from the previous quarter. The balance of cash and cash equivalent ended the quarter at $1.7 billion. And as a result, net debt in dollar stood at approximately $2 billion, growing in comparison to the previous quarter due to the negative cash flow and the concentration of interest payment in the period. The leveraging ratio, measured by net debt to adjusted EBITDA in the last 12 months, ended the quarter at 4.55 times. And here, I want to comment briefly on our leverage. As you can see, we added a calculation of the leverage using an annualized EBITDA and fixing the FX rate for the net debt. We did this because, in our view, it reflects better our current trends given the growth in this EBITDA, not reflected in the previous quarters, and the noise in the average versus final FX impacting the quarter. Using this normalized calculation, our leverage would be 4.17 times. Finally, I want to highlight that our average debt cost in the quarter improved from 6.97% in the previous quarter to 6.47% due to our ongoing liability management process, which this quarter included exercising the option to fully redeem the outstanding balance of the 2020 balance, which cost was 9.5% per annum, as well as securing more competitive spread facilities to settle other higher-cost liabilities. Let’s go now to Slide number 8. On this slide, I will comment on cash flow in the second quarter. As you can see on the chart, operating cash flow before interest and CapEx was R$205 million. With this number, including the negative effect of R$105 million from working capital, which is explained by the growing inventories due to the higher slaughter volume in the Beef Division this quarter, which reached 200 calfs in June, in the Brazilian operation. And the higher balance of accounts receivable is influenced by the higher level of activity of both divisions, especially the increasing summer promotions in the food service segment in Q2. And the payment of taxes in Brazil and income tax in international operations. Regarding CapEx, we have maintained our robust level of investments, in line with our 2021 vision and we started to grow our value-added product platform. Of the total of R$152 million invested in the second quarter, Keystone accounted for 65%. This includes the expenditures of the new plant in Thailand, and the expansion and improvement projects on production lines in Malaysia, as well as the growth projects in the United States. Interest expenses amounted to R$207 million, or R$6 million lower than in the first quarter, reflecting our [indiscernible] process. As a result, free cash flow ended the quarter negative in R$170 million [ph]. I want to now pass the word back to Martin Secco.

Thank you, Eduardo. I want to talk now about the future, and to share with you a little of our vision for the coming quarters. As I mentioned during our first call – quarter call, in 2017, our idea for this year was to hold another Market Day, to share with you our strategic plan for the next five years, our 2021 vision. However, as you know, due to the regulatory issues involving Keystone IPO process, we have been under limitation on what we can say about our growth strategy for that division. So I will today focus more on this division and less on Keystone. Regarding Keystone, I can say that we have begun the IPO process in the U.S. market and the teams continue to work on updating all of the documents required so that we can conclude the process during the second semester, of course, depending on market condition. On this division, the changes we observed in Brazil during the first half of the year ended up creating a scenario that are further improving the positive face of the cattle cycle. And given this new scenario, we believe it was time to review not Marfrig’s strategy, but whether the action to adopt showed that we could capture this opportunity created. So we decided to accelerate the Beef Division growth strategy and to ramp up our production by reopening part of our production base that have been temporarily shut down in the second quarter of 2015 due to the negative phase of the cattle cycle. We end the second quarter with a slaughter volume of 200,000 heads per month and along with the expansion capacity announced in early July, we should end the third quarter with monthly production of 250,000 heads. This growth of 25% will put us at a production level we already attained in the past, so the execution rate is very low. Following the new announcement made yesterday, we should end 2017 with an install capacity in Brazil of 377,000 heads per month, but we expect to slaughter more than 300,000 heads per month before the end of the year. In other words, we are hoping to be back the same number of facility as in 2014, meaning 15 slaughterhouses in Brazil. However, at higher level of [indiscernible] slaughterhousing capacity, considering we keep, relatively, the same number of employee, we should record improvement in operation facilities efficiency about 40%. This reflects our investment in productivity made in recent years. I would like also to remember that we have other processing plants are currently idle, waiting for the appropriate time for its reopening, with additional slaughtering capacity of 120,000 heads, and this without taking in account our capacity in Uruguay. And here, I should clarify, that these acceleration does not change, in any way, our commitment to operational and financial discipline. Eduardo, I think it will be interesting if you could comment, briefly, our financial strategy.

Of course, Martin. It will be a pleasure. As you all know, we have been working hard to continually improve Marfrig’s balance sheet. Liquidity is key – is a key factor, and today, we have a comfortable cash position, and that guarantees the payment of our broad debt over the next four years. We reduced our debt cost over 8% per annum in the second quarter of 2016 to 6.5% today. We still have a lot of work to do, but today, we’re in a position that allows us to capture the opportunities mentioned by Martin. The reopening of plants will require working capital in advance. Additionally, there will be a natural mismatch between this investment and the cash distribution of this reopening in the short term. So we should expect our free cash flow to remain negative for 2017. I should reinforce that with regards to the leverage ratio, the long-term guidance that we gave on Marfrig Day 2013 has not changed. We remain firmly committed to reaching 2.5 times by the end of 2018. I will pass the call back to Martin.

Thanks for your help, Eduardo. So in summary, I will say that we are prepared to capture this growth opportunity in Beef Division. On the operational front, we have a leaner and more efficient structure, and we have not lost sight of the financial front, maintained the same discipline of recent years. And Keystone Division, we remain focused on successfully IPO before the end of this year. We understand that we have an important role to play as one of the world’s large protein companies, and we are highly motivated to capturing these opportunity. And I reinforce once again that we remain commitment to sustainable growth and to make Marfrig a more solid and profitable company. I would like to invite you to the Q&A session.

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Lauren Torres with UBS.

Hi, yes, everyone. Quick question, and I appreciate the color you gave on your free cash generation and your debt – your leverage target for the end of next year. But curious to get your perspective just on the short-term impacts of this. Seeing the investments that you have to make, the reopening of the facilities, how much of a drag? If you could help us better understand the investment that you’ll have to make in the second half of this year? And what the impact of that will be on your cash flow? And then, I don’t know what that said, if there’s any target that you can give for this year, with respect to leverage, that would be helpful. Thank you.

Thank you, Lauren. As you know, we are in a moment, where we are trying to capture the opportunity, and there’s opportunities now. As you know, we have not provided guidance, so I probably will frustrate you in terms of providing a guidance for the end of the year, our guidance continues to be more in the 2018 as I mentioned before. We – as I mentioned before, our cash flow will continue to be pressured because of the growth opportunities and the CapEx that we’ll continue to invest. At the same time, and I think we have to consider this as well, we are going to grow in volume, and therefore, our operational cash flow shall increase. So the combination of these, in addition to the continued reduction in our interest, shall provide an overall situation that we feel – that is still under full control.

Can I just ask a follow-up? And I’m not sure you’ll give this level of detail, but the investment next quarter, will it be higher than what we’ve seen, I assume, in the second quarter?

Yes. Again, Lauren, as Martin started the call, or this last phase, we would love to have done the Marfrig Day and providing guidance for the end of the year, but because of several different circumstances, including the IPO project, we were unable to do that. So we absolutely understand the question, absolute thought it pertinent, but we are unable to give you any guidance at this point.

That’s it. Thank you.

You’re welcome.

The next question comes from Pedro Leduc with JPMorgan.

Thank you very much for the call, taking my question. Still on the turning on of Beef plants. I do sense a change in strategy. Now you’re talking about capturing a growth opportunity in Beef before – there was a lot of talk on – big focus on deleveraging. So just to make sure I understand the rationale before turning it on, what are the cash payback periods of any plant that you’re turning on today? In other words, when will it be cash positive versus the money that you are employing to turn it back on? And then second, at what price of cattle does it not make sense for you to have these plants back operational? And then last, not least, in other words, for you to capture the good moment on the industry will be perhaps to monetize some of these plants, no matter we have other players looking to consolidate. And did you consider this alternative as well? Thank you.

Pedro, it’s Martin. How are you? Really, with – we took the decision in 2015 because we have the information, the feeling that we need to close a couple here, without a small capacity because we have the information that the cattle that will be available for the slaughter will be less than in the past. As we shared with you with the results of the market, we have the opposite feel in the information that this year will be more animals available for slaughter and start a new cycle of Beef for the next two years, 2018 and 2019. But a lot of events happened in this first half of the year, it makes Marfrig to take the decision to accelerate this process. As you know, we keep this factory ready to work. We mentioned in many calls that we maintain the factory. We take care of all the issues of our slaughter plants to have the factory ready and without high performance and very high professionality. The Beef team opened this factory very quick, I am – it’s one factory per month, with the same team that we are handing the Beef business. For that, we are open these five factory in strategic places around Brazil because – and we decided also to have some number of factories in the same position that we have during 2015 and 2016 because as I mentioned on the call, we have more than 100,000 animal, more on capacity if we can open. But these factories are strategically located in different regions of Brazil, and have – we have expectation of big performance. What about the price of the animal? Nobody know which will be. I can say that the spread that we have this quarter was very, very good as of June. Of course, we know that the price of the animal are cheaper than we state, but also the market are performance freeway. For that, if the animals or the cattle will grow up a little bit on the price. The markets are – the reaction of the markets are very good, Brazil and [indiscernible] And also, you need to know that during this month, July, August, we are in the lowest part of the season of Brazil, and we have a lot of expectation for the last quarter. I will ask Eduardo if he can comment something else.

I think Martin [indiscernible] the most important aspects of this, but as we mentioned, those plants, they – we will break immediately. And then, we will start generating results.

Okay. And Miron, still on the payback. You’re putting in, let’s say, 100,000 more heads of capacity, and it’s going to require maybe R$100 million, R$200 million additional working capital here at first. How much EBITDA do you expect this additional five plants to generate? And in the first year, I’m wondering if this is fully operational, what’s the payback on terms of cash flow, vis-à-vis the initial ramp up?

I’m afraid that I will frustrate you on this one. But our guidance for the business is still the same, between 8% to 10% and this guidance, we have not changed. As Martin mentioned, we see that the market is improving and the acceleration is necessary. So there is an opportunity in the market. We see margins very robust and we feel prepared to capture this opportunity. So the teams are focused on getting the password lock out of those plants.

All right. I’ll follow-up later then. Thank you.

Thank you.

The next question comes from Thiago Duarte with BTG Pactual.

Hi, thank you. I have a question on volumes in the Beef Division. I mean, we saw an acceleration on slaughtering volumes as you guys mentioned in the release, I think you’re talking about a 4% increase year-over-year. But still, we saw almost a 5% decline in the overall volumes for the Beef Division. So I just wanted to understand whether this was, for some reason, maybe concentrated in the beginning of the quarter after the Weak Flesh Operation and whether these volumes recovered, so that we could see some improving volumes in the end of the quarter? And of course, the outlook for the next quarter in particular, again, you guys are restarting another three plants. So just wanted to get a sense why the volumes were so weaker compared to the slaughtering volumes that you guys mentioned, I guess, that would be interesting to understand, if there is a demand impact, if there was a punctual impact, I guess. Some light on that would be helpful. Thank you.

Thiago, it’s Martin. Maybe the picture of the end of the three is not the best, but also, I tried to explain also on the speech some reason about that. We have a ramp-up on the factory that we opened. And also we have, in the middle of this period also, some problem with U.S. market, as you know, that we keep with some product on the stock. That also it doesn’t make a good picture on previous related volume and sales – volume on slaughter change and stock. This is the reason.

I think that explains and helps a lot. And I know you guys cannot talk so much about it, but just to make sure that – on the IPO of Keystone, you guys are reiterating the guidance for having it done before the end of the year. I don’t know if you can give us any more color on that? Or if the process is going on as expected? Or any more color would be very helpful.

Yes, of course. Frank, can you answer Thiago – this question?

Sure. Hi, Thiago. There really isn’t anything else we can add other than that we – that the teams are working on completing everything we can to complete the process. And as you know, it’s a big and complicated process, and we continue to work towards the second half 2017 transaction. And that’s really the same general timing that we pointed to when we first made the announcement about initiating the IPO process. So we’re continuing to work at it.

But it’s not any different or nothing has changed vis-à-vis the scenario that we had like three months ago when you spoke last time on the call, right?

We’re still looking and optimistic about completing the transaction in the second half of 2017.

Perfect. Thank you.

Sure.

The next question comes from [indiscernible] with Insight Investments.

Good afternoon. Regarding your comments on the Beef Division, I mean, given the declining cattle prices in Brazil, would you expect an improvement at all in margins in Q3 and Q4? Or is the effect of the declining cattle prices pretty much already reflected in your Q2 results.

We don’t have expectation to increase the margin if we can see the margins that we have at the end of the second trimester – I mean, about June. During this semester, the margins are very good and we have expectation to have a good margin also on the fourth quarter with the animals that is – on production on the feed lot today that will increase the offer of the cattle ready to slaughter at the end of the year.

Okay. But so in terms of thinking about your EBITDA margins for the Beef Division, just over 8%, that, that is a realistic level to expect, then, for H2?

What? As Miron mentioned a couple of minutes ago, we expect the range between 8% to 10%.

Okay, understood. Thank you.

This concludes today’s question-and-answer session. I’d like to invite Mr. Martin Secco to proceed with his closing statements. Please go ahead sir.

Thank you. I would like to thank you, again, all of you, who joined us. We’ll keep in touch through our IR Department if you have more questions about the call. Thank you.

Thank you. That does conclude our Marfrig’s conference call for today. Thank you very much for your participation. Have a nice day.