26
Minerva S.A. Corporate Presentation – February 2011
Minerva S.A.Corporate Presentation – February 2011
22
Why Brazil?
Minerva Investment Highlights
Financial Highlights
Appendix
Agenda
3
Source: Minerva, IBGE, USDA and FAO
Land Availability (in million ha)
Total Renewable Surface Water (109 m3/year)Key Aspects
Brazil: a very competitive platform
Ñ Mild weather conditions
Ñ Rich in natural resources (land, water, feedstock)
Ñ Cheap and abundant labor
Ñ Stable political environment
Ñ Reliable sanitary surveillance
717684138
169189220
269
394
27454796
169128132
188
66
CanadaAustraliaChinaIndiaEU-27RussiaUSA
+44+31+37+420
Brazil *
+61+88
+81
Argentina
+328
Current in UseEstimated Farmable Land
Source: FAO; * Excludes the Legal Amazon
EU-27
2,032
China
2,729
Canada
2,892
USA
2,913
Russia
4,232
Brazil
8,233
Source: FAO
Water Usage per kg of Protein
m3
15
10
5
0Poultry
3.5
Pork
6.0
Beef
15.0
4
Improved competition from Brazil
55%
2009
72%
48%
74%
43%
26%
65%
24%
2000
+5+17
Beef (prod)
Corn (prod)
Beef (export)
Soya (prod)
22%
27%
2009
27%
22%
2000
12%16%
+5+4
7% 7%
Corn (prod)Soya (prod)
Beef (export)Beef (prod)
Source: USDA
Source: USDA
Brazil among the BRICs
Brazil and the World
5
Source: Anualpec 2010Source: USDA and MAPA
Well positioned to capture consumption growth
25
Australia2828
Argentina5052
EU-278893
USA9297
China105
118
22
178168
India281285
Uruguay1112
Canada1213
Russia17
25
Mexico
Brazil
1975 1980 1985 1990 1995 2000 2005 20100
2
4
6
8
10
mill
ion
ha
180
175
170
165
0
mill
ion
tonn
es
Production (rhs)Pasture Area (lhs)
20102001
Brazilian Beef Production World Cattle Herds (million heads)
Although still low, productivities are improving
ÑLargest and fastest growing commercial herd in the world (22% of global)
ÑExtensive cattle ranching: higher quality and lower dependence on grains; hormones prohibited in Brazil
ÑPotential to unlock future growth: Brazil still cannot export to Pacific block countries representing over 56% of total beef importing nations
6
Source: Gira Meat Long-Term Study
Export Growth Driven by Increased Specialization of Production and Export Strategy
500
30200
490
90
100370
OthersEUChinaThailandCanadaUSA
1,200
UruguayAgentinaBrazil
1,420
2010
23,970
2020
28,310
Outstanding perspectives for Brazilian beef
7
The World Beef Market
Minerva Investment Highlights
Financial Highlights
Appendix
Agenda
8
Operational Excellence
Financial Discipline and Sophistication World-Class Sustainability Standards
Ñ Comfortable cash position
Ñ Sharp deleveraging history
Ñ Improving cash conversion rate
Ñ Active monitoring of risk factors
Ñ Daily “Beef Desk Meeting” to analyze marketconditions
Ñ Sophisticated risk management tools and strong focuson research
Ñ Top 3 beef exporter with ≈20% market share in 3Q10
Ñ Largest exporter of Live Cattle in Brazil (≈40% market share in 9M10)
Ñ High degree of diversification in the origination of cattle, production and distribution of products
Ñ Currently active in two main segments:
Ñ Commodities: frozen beef, live cattle and wet blue hides
Ñ Value-added products: chilled beef and a variety of cooked and frozen products
Ñ Long-term relationship with farmers
Ñ 100% of animals registered with Agriculture Ministry
Ñ International Certifications: SGS (Global Standard forFood Safety); HACCP (best practices on productionand food safety)
Ñ Minerva Verde program
Ñ High standards of corporate governance (NovoMercado at BMF&BOVESPA)
Minerva at a glance
9
Net Revenues (R$ million)
1957: Vilela de Queiroz familystarts activities of cattle raising and transportation
1992: Acquisition of the first slaughter-house (Minerva) in Barretos
1999: Acquisition ofJosé Bonifácio plant
2004: Start-up of Palmeiras de Goiás plant, one of themost modern plants in LatinAmerica
2007: IPO and bond issuanceraised US$500m. Joint Venture with Dawn Farms(MDF)
2008: Production expansion ofMinerva through acquisitions andorganic growth
2009: MDF starts up its operations
Minerva has established partnerships andinvested in green- and brownfield projects inthe last years, paving the way for a vigorousand sustainable growth.
159
464627
820940
1.192
1.463
2.121
2.602
1957 1992 1999 2001 2002 2003 2004 2005 2006 2007 2008 2009 9M10
2.543
2010: Start-up of Rolim de Moura and Campina Verde
Successful track record and season management
Origins Beef processing Company Creation
Production increase, geographical expansion and products diversification
Investments consolidation
10
Slaughter Capacity (heads/day) / Deboning (tonnes/day)
Rolim de Moura1,500 / 250
José Bonifácio1,000 / 220
Assunción700 / 130
Redenção (Greenfield– 2011)
Araguaína800 / 300
Goianésia500 / 125
Palmeiras de Goiás2,000 / 400
Campina Verde700 / 0
Barretos840 / 265
Batayporã900 / 200
Geographically dispersed operations
11
Ñ International Distribution: Approximately 1,500 customersin 100 countries across the globe
Ñ Domestic Distribution – “One-Stop-Shop” approach, withdistribution of hundreds of third-party products, as well asfish and lamb imports to more than 25,000 customers inover 920 cities in Brazil
Customer diversification, efficient logistics
12
Ñ Main Products: Frozen beef, live cattle and green hides
Ñ Main Products: Chilled beef for exports, portion-sized beef and a variety of cooked and frozen protein-based products that are customized to the specifications of our customers
Ñ 3Q10 Gross Revenues Breakdown: Ñ 3Q10 Gross Revenues Breakdown:
Ñ Examples: Ñ Examples:
Ñ Strategy:
§ Daily meeting to monitor the risks associated with Minerva’s operations (Beef Desk) – Research
Ñ Strategy:
§ Differentiated logistics treatment, customized products and longer-term contracts
Risk Management + Scale Logistics+ R&D + Customized
ServicesSpecialized
Logistics+
Commodities Value-Added Products
Different management strategies for different businesses
Fresh Beef
9%
67%
Others
24%Live Cattle
Processed 10%
Chilled Beef
22%
Others
67%
13
High quality product portfolio
We develop newproducts accordingto client requests,either with a differentspice, color, taste orother factors
Ñ Joint-venture between Minerva and Dawn Farms (Ireland),focused on the industrialization of three proteins (beef, porkand poultry) for food service clients
Ñ High value added for the Food Services segment due to highcustomization capabilities and degree of automation, controland food safety
Ñ Computerized control at all stages
Ñ Already approved for European exports, the next step beingthe entrance in the United States
Ñ Some examples of Cooked Frozen products of MDF: PizzaToppings, Meatballs, Roast Beef, Shredded Chicken, GrilledChicken and Bacon
Ñ MDF currently produces approximately 80 cooked and frozenproducts
Value-Added Division: Minerva Dawn FarmsÑ Diversified customer base, focusing on small and medium sized
retailers, including Food services segment
Ñ Sales to approximately 25,000 small and medium-sized retailcustomers located in approximately 960 cities in Brazil
Ñ Geographical diversification with exposure to the most profitablemarkets;exports to more than 100 countries
Ñ Market analysis conducted by international sales offices
Ñ Direct relationship with customers, with client and productsegmentation (including Kosher, Halal), providing highprofitability
Source: Minerva, Senacsa, INAC, USDA and SECEX.
Gross Revenues – Fresh Beef
Commodities Division
77.8%
1,253
9M10
69.6%
+23%
64.0%
36.0%
2,138
30.4%
1,967
62.9%
2009
60.0%
2005
1,827
2007
22.2%
2006
37.1%
939
40.0%
2008
1,123
78.8%
21.2%
ExportsDomestic
14
Ñ “Minerva Verde”: Multi-departmental team for environmental, social and economic sustainability promotion:
§ Compliance with social and environmental rules across the entire production channel (suppliers, employees and
clients)
§ Certification of the production units (e.g. ISO 14.000 and OHSAS 18.000)
§ Traceability of fresh beef (1st. Step), gradually increasing across the whole supply chain
Ñ Signatory of the "Minimum Criteria for Industrial Scale Cattle and Beef Product Operations in the Amazon Biome”, a standard developed by Greenpeace
Note: green color denotes the “Legal Amazon” region, units of the Minerva.
Ñ Minerva plays an important social role in the neighboring areas of its production units§Health: Prevention of occupational diseases,
Ergonomic assistance, Identification of risks to employees, among others§ Professional Education: Partnerships with technical
schools, Maintenance training, Ongoing professional technical specialization §Career Plan for employees§ Employee focus: Integration between different
teams, professional education of new hires by more experienced team members, ongoing meetings with management, Project Saber (incentive for employees on rejoining school), Community literacy program
MDF Plant – Cooked Frozen
Production plants - Beef division
Paraguay
Social InitiativesLimited Exploration in the Legal Amazon Area
Leadership in social and environmental sutainability
15
Ñ Risk management strategy designed to mitigate the financial impact derived from exposure to differentrisk factors
Ñ Prioritization of reduction of cashflow volatility: mindset to lock-up margins whenever possible
Ñ High liquidity: prioritization of maintenance of cash position at levels to sustain cattle purchases for thefollowing 2-3 months
Ñ Efficient working capital management: strict reduction of the cash conversion cycle to 28 days in 3Q10from 46 days in 3Q09
Ñ Long-term return: Minerva has been constantly posting above-the-sector ROIC
Conservative financial and risk policy
# da
ys
50
45
40
35
30
02Q10
28.8
1Q10
37.4
4Q09
38.7
3Q09
45.8
2Q09
46.9
3Q10
27.8
Source: Minerva
12.6%
1Q10
14.3%
2Q100
11
12
13
14
15
% p
.a.
2Q09
10.4%
3Q10
11.7%
3Q09
12.6%
4Q09
12.0%
Ø 12.2
Source: Minerva
Cash Conversion Cycle Return on Invested Capital (ROIC)
16
The World Beef Market
Minerva Investment Highlights
Financial Highlights
Appendix
Agenda
17
Source: Minerva
Net Revenues (R$ million) Gross Profit (R$ million) and Gross Margin
EBITDA (R$ million) and EBITDA Margin EBIT (R$ million) and EBIT Margin
Financial highlights
909,9888,2744,4689,1693,4641,4
2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
2,379
Sep-09
3,232
Sep-10
+36%Last 12 months
60,961,953,552,951,844,8
6.7%
3Q10
7.0%
2Q09
7.5%
3Q09
7.7%
4Q09
7.2%
1Q10
7.0%
2Q10
6.7%
158
Sep-09
7.0%
227
Sep-10
+44%Last 12 months
48,249,141,441,241,0
34,9
1Q10
5.3%5.4%
2Q104Q09
5.5%6.0%
3Q09 3Q10
5.6%
2Q09
5.9%5.6%
180
Sep-09 Sep-10
+51%
119
5.0%
Last 12 months
177,0177,5
133,3131,4128,8111,1
19.1%
2Q10
19.5%20.0%
4Q09
17.3% 18.6%
3Q092Q09 1Q10
17.9%
3Q10 Sep-09
+47%
19.2%
Sep-10
61917.7%
420
Last 12 months
18
By Maturity By Currency
Debt Maturity as of Sep 30th, 2010 (R$ million) Debt Breakdown as of 3Q10
Cash Position (R$ million) Leverage
Capital structure
18
419
8
279
24
8898
225
165
7640
20192018201720162015 After 2019
20142013201220114Q10
7%
93%
Short-term
Long-term
61%
US$-denominated
39%
R$-denominated
473505
465424407406
456467
566
2Q09 3Q09 3Q102Q101Q104Q094Q08 1Q093Q08Source: Minerva
972938883799817
937
4.37x
4Q09
4.35x
1Q10
4.25x
3Q092Q09
4.23x
3Q102Q10
Net Debt (R$ million) Net Debt/EBITDA
6.37x5.15x
19
Ñ From 2006 to 2009, investments of approx. R$600million in the expansion of production capacity and inthe diversification of product mix
Ñ Minerva’s plants maintain high standards ofproductivity, quality and food safety, meeting thequality standards of the most demanding markets
§Company invested in state-of-the-art industrial plants, owning the most modern slaughtering
facilities in Brazil
Overview Capital Expenditures (R$ million)
Slaughtering Capacity and Capacity Utilization EBITDA Evolution
Greenfield projects and capacity utilization
117,0127,9
355,0
102,7
9M10200920082007
227,2
182,0153,0
121,0122,0
+14%
LTM Sep-102009200820072006Source: Minerva; * until Sep-10
10.4408.940
6.7406.2005.0004.300
+20%
2011E2010*2009200820072006
90%
Utilization Rate (%)Slaughtering Capacity (heads/day)
80%71%
78%81%
20
Continued Differentiated Management Strategy
Ñ Differentiated managerial strategy related to commodities and value-added productsÑ Focus on the core business, with emphasis on the most profitable marketsÑ Maintain and continue to expand Minerva’s efficient and diversified distribution network
Enhance Our Financial Strength
Ñ New plants and increased capacity (higher expected EBITDA going forward)
Ñ Focus on liability management, extending debt tenures while keeping conservative liquidity policy
Expand Our Production Capacity to Consolidate the Market
Ñ Use acquired experience in selective acquisitions and organic growth to participate more actively in the consolidation of the Brazilian beef market
Ñ Minerva may act as a beef sector consolidator, conditioned by financial discipline and business focus (after an acquisition spree, our counterparts need to digest and rationalize multi-protein assets)
Expand Our Domestic and International Customer Base
Enhance Operating Efficiencies and Lower Operating Costs
Ñ Maintain the current position as a low cost producer of beef and beef byproductsÑ Focus on maintaining operating efficiencies, modernizing plants, reducing operating costs,
capturing economies of scale and integrating logistics network
Excellence in Risk Management
Ñ Mitigate the main factors that affect results from the sales of commodities, including foreign currency risk, and risks associated with the fluctuation in the prices of raw materials used in the business and commodity products
Ñ Ensure that margins are not adversely affected as a result of these factors
Ñ Continue to strengthen our domestic and international customer base through superior service and quality as well as increased product offerings
Ñ Take advantage of the strong Brazilian demand, given favorable macroeconomic dynamics
Ñ Enter new export markets and expand our value-added business
Well positioned to benefit from a favorable scenario
21
Agenda
The World Beef Market
Minerva Investment Highlights
Financial Highlights
Appendix
22
VDQ Holdings
S.A.
MinervaS.A.
Free Float
BrascasingComercial eIndustrial
Ltda.
MinervaOverseas
Ltd.
Minerva DawnFarms Indústriae Comercio de
ProteínasS.A.
Minerva Log S.A. FriasaS.A.
MinervaOverseas
II Ltd.
67.50% 32.50%
50.00% 100.00% 80.00%99.99% 92.00% 100.00%
Ownership structure
23
Performance of stocks
Source: Bloomberg
110
100
Jan-11
60
Sep-10 Oct-10Jul-10
IBOV
Feb-10
120
Feb-11
BEEF3
May-10
70
90
140
Dec-10
80
Jan-10 Apr-10
MRFG3
Nov-10
130
Jun-10
BRFS3
Aug-100
Mar-10
JBSS3
24
Performance of Minerva bonds
Source: Bloomberg
95.0
105.0
107.5
102.5
97.5
Jan-11Apr-10 Oct-10Jul-10Jan-100.0
Feb-11Sep-10Aug-10Jun-10
110.0
100.0
May-10Feb-10 Mar-10 Dec-10Nov-10
MINERV 9.5% due 2017MINERV 10.875% due 2019
25
Ñ According to Scot Consultoria, a renowned consultancyservice, informal slaughtering decreased to 34% in 2007from 48% in 1997, and is continuing its downward trend
Ñ The increase in the female slaughtering ratio during 2005/06caused an scarcity of cattle in future years, imposing anupward pressure on the @ in 2008
Ñ Higher retention of females will generate an increasedsupply of calves and increase the availability of finishedanimals for replacement, promoting some relief in cattleprices for 2011
Brazilian long-term cycle
Highlights Evolution of Cattle Prices
Calf Production (million heads) Slaughtering
46.5
21.6
2005
16.1
20072001 2006
23.617.3
44.3
20.6
44.0
18.1
44.1
2008 2009
46.5
17.9 18.2
40
48.1
18.9
2003
40
2010*0
45.0
2002
10
45
0
50
20
50
30
2004
44.3
47.1
42.0
19.1
Female Slaughtering (lhs)Calf Production (rhs)
Source: AgraFNP; * projection Source: AgraFNP; * projection2001
46%45%
55%
20082002
47%45%
55%
46%
54%
49%
2003 2009
54%
51%
46%
54%
2004
46%
49%
20050
2010*2006
53%
51%
45
49%%
51%
60
55
2007
54%
50
FemaleMale
Source: Esalq; @ ≈ 15kgJan-10
70
Jan-11
90
Jan-090Jan-07 Jan-08
100
R$/
@
80
60
120
110
26
This confidential presentation may contain certain forward-looking statements and information relating to Minerva S.A. (the “Company” or “Minerva”) and itssubsidiaries that reflect the current views and/or expectations of the Company and its management with respect to its performance, business and future events.Forward looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, andmay contain words like “believe”, “anticipate”, “expect”, “may”, “will”, “plan”, “strategy”, “prospect”, “foresee”, “estimate”, “project”, “intend”, “can”, or any other wordsor phrases of similar meaning. Such statements are subject to a number of risks, uncertainties and assumptions. We caution you that a number of importantfactors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in this presentation. In no event,neither the Company nor any of its subsidiaries, directors, officers or employees shall be liable before any third party (including investors) for any investment orbusiness decision made or action taken in reliance on the information and statements contained in this presentation or for any consequential, special or similardamages.
This presentation and its contents are proprietary information and may not be reproduced or otherwise disseminated in whole or in part without Minerva’s priorwritten consent.
All financial information stated in this presentation are reported under Brazilian GAAP.
The market and competitive position data, including market forecasts, used throughout this presentation was obtained from internal surveys, market research,publicly available information and industry publications. Although we have no reason to believe that any of this information or these reports are inaccurate in anymaterial respect, we have not independently verified the competitive position, market share, market size, market growth or other data provided by third parties orby industry or other publications. The Company does not make any representation as to the accuracy of such information.
Disclaimer
