Good morning ladies and gentlemen. At this time, we would like to welcome everyone to Marfrig Global Foods SA conference call to present and discuss its results for the first quarter 2019. 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 the slideshow presentation available for download. We inform that all participants will only be able to listen to the conference call during the company's presentation. After the company's remarks, there will be a Q&A period. At that time, further instructions will be given. [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 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. And now, a message from Mr. Marcos Molina, Founder and Marfrig Global Foods Chairman. Please, Mr. Molina, you may begin the conference.

[Foreign Language] Good afternoon everyone. I would like to thank you all for your interest in participating in Marfrig's Q1 2019 earnings release call. [Foreign Language] Before the presentation, I would like to send my regards to our CEO, Eduardo Miron, who is not here today because his has passed away last night. My sincere respects to Eduardo and his family in this moment. [Foreign Language] Now and first of all, I would like to highlight the Q1 2019 Marfrig's performance. [Foreign Language] Q1 was much better compared to Q1 2018 on a pro forma basis. [Foreign Language] Also I would like to highlight the conclusion of Quickfood in Argentina in Varzea Grande acquisition in Brazil. [Foreign Language] Which represents the relevance that forwards one of pillars of our strategy to focus on value-added and industrialized beef products and it strengths our position as a global leader on beef patty production. [Foreign Language] And also serving the major food service customers, demonstrating our relationship with this specific channel. [Foreign Language] Still talking about Quickfood, since we acquired the company, we reported negative profitability to strong results in the first quarter 2019. [Foreign Language] This effort added to our current capacity in South America, putting our South American on excellent position to capture the gains and the profitability of the new scenario for global proteins due to the events in China. [Foreign Language] We are foreseeing that the events in China, they are changing the global protein sector on a global basis and the will create significant opportunities for the company in the near future. [Foreign Language] For last but not the least, I will comment about the levers for both results for North American operations. [Foreign Language] Which demonstrates our conservative strategy to acquire the North American asset and maintain the global presence of the company. [Foreign Language] Being a global company. [Foreign Language] Sustainable. [Foreign Language] Profitable and looking for cash flow generation. [Foreign Language] Thank you all and I pass the call to Marco Spada, CFO and Vice President of Finance. Thank you.

Thank you Marcos. Good afternoon everyone. I want to start by thanking everyone for participating in another earnings conference call of Marfrig Global Foods. Today, we will comment on the results of the first quarter of 2019. Also present here on the call with me Mr. Fabio Vasconcellos, our Vice President of Planning and Management and also I would like to introduce and welcome our new Investor Relation Director, Mr. [indiscernible]. On slide three, I want to start with the highlights of the quarter and to comment on some points we consider important. Before starting the financial highlights, I would like to two mention that from this quarter on, we will disclose the financial and operating information separately for North America and South America operations. Turning to the financial highlights. In first quarter 2019, we have generated more than BRL10 billion in revenue, an increase of 8% over first quarter 2018, already adjusted on a pro forma basis, which means that it already includes the results of Quickfood and National Beef for the numbers using for comparison of first quarter 2018. The gross profit was BRL927 million and we have maintained the margin at the same levels of 2018 at around 9%, even in a more challenging scenario, due to the most adverse weather conditions in both United States and South America. We have increased our EBITDA by 16% compared to first quarter 2018, reaching BRL571 million. The margin was 5.7%, an increase of 0.4 percentage points compared to the first quarter of 2018. In this quarter, the net income was BRL4.3 million, which shows and confirms that our strategy adopted in 2018 were correct. A positive result in the first quarter, which is seasonally the worst one, leave us with a very positive ceiling for a great year of 2019 ahead of us. In order to further assist the projections, I am confident in our strategy. Given the positive momentum for the bovine cycle boosted by the new lower protein scenario in the results of our operations, the company has disclosed it in material fact last night decided to provide our guidance for the year of 2019. Commenting on the recent strategic moves, late last year we have announced the acquisition of Quickfood in Argentina and also the acquisition of the assets in Varzea Grande in the Brazilian state of Mato Grosso, both from BRF. Quickfood, as we have already commented, has some of the most recognized brands in Argentina, including Paty which is synonymous of high-quality beef patties in Argentina and also Vienissima!, another well known brand in sausage, among other products. We hired to serve as the CEO of this operation, Mr. Gustavo Kahl, who is an Argentinean and has over 29 years of experience in the industry including Minerva and Cargill. He knows very well the local market and will play a fundamental role in the success of our strategy. Actually, he has already managed to reverse the results of the operation in just one quarter. In another move to bolster our strategy of growing higher value products, we are still in the process of product operations in Varzea Grande, Mato Grosso under a long-term contract with BRF in which we will supply beef patties, kibbehs and other products that they will sell under the Sadia and Perdigao brands. This operation will be further strengthened by our a long-term partnership with McDonald's since the time of Keystone, which we had maintained the relationship at our beef patty plant in Ohio, which today is run by our National Beef in the North America division. This relationship with McDonald's is fundamental to our strategy of working with key clients in the food service channel and strengthening our position as one of the world's leading beef patty producers with production capacity of over 230,000 tons per year. In corporate governance, to increase transparency, we revised our strategy, various compliance policies which included the revision of anticorruption policies and establishment of the policy for conflict of interest, free competition and relations and communications with government officials which will reinforce our commitment to combine code of conduct. On the sustainability front, which is a fundamental pillar of our strategy, we have created the sustainability committee which is formed by prominent and highly respected professionals. We have also hired a sustainability officer, Mr. [indiscernible], which is responsible for incorporating in our routine activities the actions planned by the committee and for further improving the good practice that the company already has in place. Moving to slide number five. In this slide, we will explain the highlights of the North America operation with further financial and operational details in this quarter. We had a very severe winter in North America, which affected our carcass yield and consequently reduced our sales volume. However, despite this scenario, cattle prices were stable and demand remained solid reinforcing the favorable movements of the cycle in the United States. The indicator for this is the cutout ratio, which is the USDA selling price over the carcass price, which was 1.74 or 3% higher than the first quarter of last year, reflecting a 3% increase in average sales price. Consequently, net revenue grew by 1% and gross revenue in dollars raised to 19%. Let's move now to the South America division. In South America division, we also had adverse weather that affected the supply of the cattle. For example, because of the prolonged rainy season, producers kept their cattle in pasture for longer, which pressured cattle prices and cattle availability. Uruguay also experienced adverse weather and also with the sale of live cattle for export, the primary processing fell 5% on the prior year period, according to INAC. This event had a negative effect on the mix of export destinations and directly impacted the volume of sales and justify the fall of 12% seen in the first chart on the left. Revenue comparing sales volume falling by 11%. Gross margin was 9%, reflecting the higher cattle prices in Brazil and Uruguay due to the reasons I have just mentioned. An important to highlight on this quarter is the turnaround margins at Quickfood, which were negative by the time we have acquired the asset. After adjustments to the operation to streamline the cost structure, we maximized the utilization and we strategically started to focus on exports. Now the asset is presenting very positive margins already in the first quarter. Let's move now to slide number eight. In this slide, we comment on the consolidated performance of the company and I would like to start with our positive result, a net profit of BRL4.3 million. Although the number is not big, we believe that the fact that it is a positive number in the first quarter, which is seasonally the worst one, brings us a very positive message, the strategic move made in 2018 going in the right direction. It's important to note that despite the lower sales volume due to the seasonal and weather factors as mentioned earlier, the company was able to keep its gross margin stable and to expand its EBITDA margin. We have posted growth of 8% in net revenue, 7% in gross income and over 16% in EBITDA, which is explained by the margin improvement in North America division, recovering profitability in Argentina and also the depreciation of the Brazilian Real against the U.S. dollar. Moving to slide number nine. Here, I will comment on cash flow. We had operating cash flow negative of BRL712 million, impacted mainly by two factors. The cash effect of results of the payment in 2018, specifically payment of income tax and bonus payment in the North America operation. Also, changes in working capital, mainly due to the increase in inventories. The payment of the bonus in the North America transaction is related to the excellent result generated in the operations in 2018 and was paid in the first quarter of 2019. The evaluation of stocks of inventory is justified by some factors. The acquisition of the Quickfood operation in its entirety in our balance sheet, the seasonal affect due to the use of our lamb slaughtering facility in Chile and also most important the expected inventory increase mainly in Brazil in preparation to face the new global scenario of proteins preparing us to export more since the end of March onwards. The export-oriented production itself has the largest cycle, which automatically increases the [indiscernible]. This is a very good movement, in fact, has a negative cash impacting the first quarter but leave us in a very good position to take advantage of the new global crisis they represent especially for China. Not to mention here, the potential qualification of new plants for export to this market. We also had the cash consumption in suppliers of the BRL175 million which was due to the reduction in working capital operations, which operates like the reduction in the order line of our financial expenses. Operating cash flow, there were the interest expenses and capital expenditures, which in this quarter has the impact of Quickfood and Varzea Grande acquisitions, leading to a free cash flow generation of negative BRL1.4 billion. Only for illustrative purpose, if we exclude the nonrecurring effect of the payment of bonuses and the acquisitions, the free cash flow would be negative BRL690 million, instead of the BRL1.4 billion. Moving to slide number 10, where we show our debt profile and leverage ratio. Marfrig ended the first quarter with a gross debt of $4.1 billion, up 6% over the prior quarter, mainly due to the securing of new credit facilities to replace working capital operations and cash consumption, which allowed for reducing working capital operations that typically have a higher cost. The leverage ratio in Brazilian real was 2.76 times. It is important to note also the improvement in the debt maturity profile with the larger maturities coming due in the long term. In early May, we issued a new $1 billion bond maturing 2026 with interest of 7% per year. Combined with a tender offer for bond maturing in 2021 and 2023, which pay interest of 11.25% and 8% per year, respectively, which will further lengthen our maturity profile and reduce our cost of debt. The liability management effort was brought after company's commitment to have a low financial leverage and an adequate debt structure. Moving to slide number 11. We would like to present Marfrig's sales profile and export in to countries. Today, 62% of the revenue comes from United States and 12% from Brazil, which shows how our base is diversified in our exposure to the best destinations. China, in the first quarter, accounted for 6% of our revenue. In here, I should mention that in the new global scenario for animal protein due mainly to the swine fever, sales share to China should increase. Japan accounts for 5% of revenue and also has the potential to be explored given the recent authorization of exports from Uruguay. We are already taking advantage of the sales structure that National Beef had to Japan to sell products from Uruguay. This is all part of our map of opportunities and commercial actions that we leverage our sales to the best destinations by drawing on our global coverage to drive our results. I also should mention the various sales channels and client relations, such as the relationship with McDonald's, which National Beef did not have prior to the beef patty business in Ohio, which now is being served by National Beef. In April, we began to produce and sell beef patties to McDonald's in Brazil as well through our new plant in Varzea Grande. We already sell to McDonald's in Uruguay and also now in Argentina we are selling as well. Today, we had important clients, such as Sam's Club, Topco and leading supermarket chains. All of this leaves Marfrig well-positioned to capture opportunities generated by this new global scenario. Moving to slide 13. On this slide, you can see the many actions and fronts which we are focused in line with our strategic pillars and which will guide Marfrig on delivering the guidance that I will comment shortly. Our strategic direction and expectation for the year is to generate positive cash flow, to reduce our leverage compared 2018 and to continue our liability management actions to reduce our cost of debt and lengthen our maturity profile. Another fundamental action is to conclude the acquisition that made jointly with the shareholders of National Beef in the state of Iowa. We will also advance the synergies between North and South America to the operations. We will continue to implement operational improvements and actions and KPIs in South America. I also highlight our actions in sustainability. Marfrig has always had a very strong bias in our culture and we will go deeper into the subject with the recent creation of the committee, the hiring of the sustainability director, [indiscernible], the partnership with Embrapa in the beef harbor issue regarding the low-carbon and neural-carbon beef and many other projects which demonstrate our commitment to this team. Before proceeding with the presentation, going to slide number 14, where I will talk about our guidance for 2019. In order to provide more transparency and to further assist the market projections as we are confident in our strategy, given the positive momentum for the North American operation that has already shown an improvement in the first quarter compared to 2018, there was already a very good result. It is important to mention that. And with a little more favorable perspective for South America, given the new global protein scenario, we are sharing our more optimistic view for 2019 results. As you can see in the table, we are projecting net revenue of BRL47 billion to BRL49 billion in 2019. And also projecting an EBITDA margin of 8.7% to 9.5% and also a free cash flow before dividend to minority shareholders of about BRL1 billion, between BRL1 billion and BRL1.5 billion. Our projections are based on our exchange rate of 3.9 real to dollar. And the results, we started from the results we reported in the first quarter. We reiterate our confidence and the timing of the cycle and believe in our strategy in the adequate footprint to capture the opportunities of the new global protein scenario that is present showing improvement since the end of March. Finally, I would like to thank everyone for following our presentation and inviting you all for the question-and-answer session.

[Operator Instructions]. Our first question comes from Barbara Halberstadt, Bank of America.

Hi. Thank you for taking my question and for the results for the quarter. I actually just have very quick question. I wanted to understand a little bit better what we can expect for working capital for the upcoming quarter? As I understand, this one was atypical. So just wondering when we can see a more normalized level and what level would that be? Thank you.

Hi Barbara. Thank you for the question. Regarding the working capital going forward, I think we haven't achieved a level of working capital usage that is already considering the new export increase scenario, especially in Brazil. So we don't really expect an increase in terms of working capital utilization going forward. You should see stability in the things I mentioned earlier.

Okay. Thank you. And just a follow-up. Regarding, I don't know if you mentioned this in the beginning of the call, but given the escalation of the trade wars between U.S. and China, can expect any negative impact for your U.S. operations for the portion that is exported?

No. Well, China out of the United States does not represent a significant growth in exports for our North America operation. So in that sense, we do not expect an impact of the trade war for our operation there. And just going back to your first question. I reaffirm what I said, in case there is no increase in terms of export volume, okay. So in the case there is new qualifications for new plants now that we are able to export to China, for example, we might have, there is impact in terms of working capital a little bit more.

Okay. Understood. Thank you.

Our next question comes from [indiscernible], Bradesco.

Hi guys. Thanks for the call. Just a couple of questions. Can you give us and I appreciate the guidance through 2019, but just an update on what you expect CapEx to be and also taxes and if we should consider this level of the bonus payment as something a level you would expect to continue in the future?

Hi Richard. Thank you for the question. Regarding CapEx, our expectations is to be around BRL1 billion for the year. So this is the level including the acquisitions that we have mentioned already in this first quarter. So that's basically the number. The second question was regarding taxes. Well, the impact of taxes, we don't expect really to have a huge payment in taxes as we do have some credits in Brazil. Though mostly, you can consider around $30 million or $40 million, that's probably the total amount that we should spend on cash for taxes in 2019.

Okay. And just on the bonus payment? Is that the BRL436 million, is that a level that you would expect to remain fairly steady in 2019 just as we try to model out for cash?

I really hope that the number is going to be repeated or even increased in 2020 actually. So that would mean that we have a very big and huge results of the North America operation. So for 2019, that's the number that was paid. There is nothing else really paid during this year. But as I mentioned, we really do expect and our intention to pay even more next year.

Okay. And just one last question. You mentioned liability management efforts in the presentation. So should we expect that relevant to paydown of short-term bank debt? Or do you think you would call the bonds? And just how should we think about your cash levels going forward with the liability management that's ongoing right now?

So our liability currently and exercise is we still don't know. I mean there are other tender offers still to open. So we don't have the final result for it yet while the tender has already gone but it's still open. So after the conclusion of this, we are going to analyze and see what are the bids we are going to liquidating. I am not sure yet, but if you are going to call the bonds, I am not going to state this at this moment, but it is a possibility.

Thank you very much.

Thank you.

[Operator Instructions]. This concludes today's question-and-answer session. I would like to want to invite Mr. Marco Spada to proceed with his closing statements. Please go ahead, sire.

Thank you. First, I would like to thank all of our team here for their efforts in bringing this result of the first quarter. Also, I would just like to reinforce our commitment to our guidance, our confidence in our two operations, leading to very good results, especially in this new global protein environment. Thank you all for the participation and we are available through our investor relations team here to assist you going forward. Thank you.

Thank you. That concludes the Marfrig's conference call. Thank you very much for your participation and have a nice day.