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Minerva Foods demonstrated growth in all of its operational indicators for 2019, a period in which it made full use of the capacity of its abattoirs, accumulating a volume of 3,548,200 head, a gain of 3.4% over the previous year. The capacity utilization rate was 76.7%, which was quite satisfactory for the sector. The sales volume registered an expansion of 6.8% in relation to 2018, closing at 1,158.6 thousand tons.
The results for both the Division in Brazil and Athena Foods were driven by increased imports from emerging markets, especially the significant demand from China due to the outbreak of African swine fever in the country. In relation to Brazilian operations, the accreditation granted to export to Indonesia stands out, which made Minerva Foods the first company in Brazil to export to that country.
Unexpected demand
finds the Company
poised for growth

The Company responded quickly and efficiently to the unexpected rise in demand at the same speed that the business opportunities arose. This capacity has been built up in recent years, with a focus on market trends and an ongoing process of preparation to meet the potential growth in exports of beef produced in South America.

When China lost half of its pig population to health problems in 2019, it quickly increased its demand for a complementary protein, beef, increasing the number of qualifying meatpacking plants around the world. Seven meatpacking plants of Minerva Foods in Brazil in the countries where the Company is present began to produce for the Chinese market. The task involved the following challenges, accompanied by the solutions adopted:

  • Have the suitable raw material available to produce what was requested by the Chinese – The request from China was for specific cuts from young cattle, a segment in which the Company had already begun to operate in, allowing it to supply the requested volume with agility.
  • Accelerate the production of the units – Three industrial units in the Brazil Division operating with a total slaughtering capacity of 4.3 thousand heads/day started production destined for the Chinese market – Rolim de Moura (RO), Barretos (SP) and Palmeiras de Goiás (GO). Athena Foods operated out of Argentina and Uruguay with a daily slaughter capacity of 5,600 head. The volume of exports was 56% higher in Argentina and 4% higher in Uruguay, mainly driven by the demand from China.
  • Adjust the Abattoirs to the required production profile – The plants are designed to have a disassembly around 65% to 70% for frozen cuts and 30% to 35% for chilled cuts. With the increase in demand, the plants working on the production for China began to produce 90% dedicated to frozen cuts.
Programs for efficiency
The programs of operational efficiency implemented by Minerva Foods in the recent years have produced excellent results and have contributed to the company’s ability to meet the growing demand of the market with agility.

Atitude Campeã – This program is designed to promote integration, the exchange of best practices, and employee engagement in a continuous improvement of the processes, with the aim to increase operational efficiency and growth of the company and its employees. Atitude Campeã engages all of the units of the Company in Brazil and Paraguay in a healthy competition in which key production indicators are measured, compared, evaluated, and analyzed on a monthly basis, awarding points to the best units and the best sectors.

These champions are then awarded according to monthly results and consolidated results for the year. It is a resource that, in addition to increasing operational efficiency, motivates employees to advance in their professional practices and develop an awareness of their role in achieving results. Since 2018, other aspects have been considered in relation to the performance of the units based on the pillars of Quality, Occupational Health and Safety, and Human Resources Management, emphasizing the concern of the Company for its employees and customers.

The practices developed since the beginning of this program have yielded excellent results, from a savings of R$ 57 million in 2017 to a savings of over R$ 102 million in 2019. The highlight of the year was the implementation of the program in the units in Paraguay. The plan is to extend it to the other units abroad in addition to other departments.

Osso Branco – The purpose of the osso branco (white bone) initiative is to maximize the deboning capacity, leaving as little product in the bone as possible, which increases the yields of the units through better use of the carcass.
Bíblia – The program is aimed at standardizing the processes in the industrial parks. The Company identifies and records the best practices in each of its units, which then becomes the standard for others. As a result, it increases efficiency and productivity in all operations.
Niche markets lead to
innovative projects in the
company’s profile
In 2019, Minerva Foods intensified an innovation process to further pave its operating profile. Characterized as a commodities company, it has undertaken efforts to expand its operations with portioned and processed niche products. It is a change whose main objective is to create the foundation for the development of greater sustainable and unique business in the global market.

Estância 92

The experience that Minerva Foods has been developing in the niche market had its high point in 2019 with the launch, in Brazil, of the Estancia 92. It is a brand for premium cuts of beef from select young cattle, in the following cuts: chorizo steak, picanha, tri-tip, flank, rump steak, baby beef, rib eye, filet mignon, and beef hump. The name of the line, “Estância”, refers to the origin of the Company’s founding family in cattle production. It was in 19“92” that Minerva Foods was founded.

The products began to be sold in April, starting with a production of around ten tons/month. By the end of the year, the volume had reached approximately 180 tons/month, definitively cementing itself in the Company’s line of special products, which includes the brands of Minerva Angus, Ana Paula Black Angus, Cabaña Las Lilas and Pul.

The project of Estância 92 engaged the area of origin, which worked on defining the characteristics of the animal chosen for the brand; the factories, which underwent adaptations to the process line to meet production, as well as the commercial and distribution areas.

The performance of this new brand affirmed the successful strategy of investing in products with higher added value, causing the project to be extended to the Paraguayan market. In one year, there were more than 7,000 customers and more than 900 tons of product sold.

Brazil achieves
historic result in
export revenues

The Brazilian beef market remained fairly stable compared to the previous year, with a volume of slaughter of 23.5 million head. As for the price of cuts, there was a seasonal increase in the second half of the year, intensified in the last quarter, when the average price of the raw material reached R$ 190.4/@, 23% above the previous three months and 28% above the same period in 2018. The average price of cattle reached US$ 2.7/kg for the year, in line with the previous period.

However, Brazilian exports rose 15% in the same comparison, totaling a record volume of 1,550,000 tons. Of this total, almost one third was shipped only in the last quarter, reflecting the strong demand from the Asian market, especially to China. The volume, of 475,000 tons, was 21% higher than the previous quarter and of the same period for 2018.

The Chinese market has continued to demonstrate an increase in the consumption of beef, primarily due to changes in the eating habits (product of westernization) and an increase in income, coupled with the rise of the social status of a large number of the population. The outbreak of African swine fever had a catalytic effect that strengthened the context of growth in consumption.

The revenue obtained from exports for the year reached a historical record for the Brazilian industry: US$ 6,480 million, an increase of 16% compared to 2018.

Export destination (% of revenue)

Source: Ministry of Development, Industry and International Trade
Argentina exports 56% higher than in 2018

Exports out of Argentina totaled 569,000 tons, a volume 56% higher than the previous year, raising annual revenues from foreign sales by 61% to US$ 3,102 million, the highest level ever recorded in the country. The performance reflects a 22% increase in acquisitions from China, the destination of 67% of the country’s beef shipments.

Slaughter rate in Argentina increased by 4% between 2018 and 2019, totaling 13.9 million head, with the performance in the domestic market, again impacted by the economic crisis, affecting the purchasing power of the local population and consequently restricting beef consumption. It was a year marked by a sharp increase in the price of Argentine cattle, in local currency: the average price rose 61% in the year, reaching 117.0 Argentine pesos per kg, due to the effect of inflation.

On the other hand, affected by the currency devaluation of approximately 60% in the year, the average price of cattle was US$ 2.4/kg in 2019, a decrease of 11% compared to 2018. Nonetheless, due to its efficient cost structure, Argentina remains one of the most competitive global producers of beef.

Colombia reveals a potential for high growth

In 2019, beef exports from Colombia reached 17,300 tons, 4% less than in 2018. Export revenues totaled US$59.0 million, a 17% decrease in annual comparison.

Russia has remained the main destination for Colombian exports, with 36% of the share, followed by Libya and Jordan, both with 15% of the exports. In fourth, responsible for 14%, Egypt.

Colombia has tremendous growth potential with a quality herd of approximately 24 million head, several free trade agreements with important markets and access to the Pacific and Atlantic oceans, which facilitates the flow of production. The strong momentum in the sector is reflected in the recent export certification achieved, such as to Saudi Arabia, one of the main halal meat consuming markets in the world, which opened its market for Colombian beef in November 2019.

Paraguay experiences a year of retraction

The beef sector in Paraguay experienced a downturn in 2019. Slaughter fell by 7% from 2018 to 1.8 million heads, primarily because the country faced adverse weather conditions in the first half of the year that prevented the animals from being transported to the slaughter plants.

In the domestic market, the average price of cattle closed the year at US$ 2.7/kg, 13% lower than in 2018. In exports by the Company, the volume of shipments fell 4% annually and revenues of US$ 1,034 million were 6% lower than the previous year. Chile continues to be the main destination for Paraguay’s exports, with 36% of the total amount.

China boosts purchases from Uruguay

Uruguay increased its export volume by 4% from 2018 to 2019, shipping 339,000 tons, a move that consolidated China as its main destination. The Asian country increased its purchases by 16%, compared to the previous year, making up 61% of the total exported by the country.

In the domestic market, there was a strong increase in prices. The average price of cattle reached US$ 3.8/kg, an increase of 12% compared to the previous year as a result of the increase in exports, combined with a drop in slaughter: 2.2 million head, 5% lower than in 2018.

A record year for
Minerva Foods

Minerva Foods closed 2019 with a consolidated gross revenue of R$ 18.2 million, 5.6% higher than the previous year. Exports accounted for 66% of gross revenue, a record that maintains it as the leader among South American exporters, with a 20% market share.

Net revenue also rose by 5.6% in the same period, accumulating R$ 17.1 billion, and Ebitda reached a record high of over R$ 1.7 billion, a record high. Free cash flow generated, a priority for Minerva, was positive for the eighth consecutive quarter, reaching R$ 787.0 million in the year.

During the 2018-2019 biennium, free cash flow totaled R$ 1.5 billion, which contributed to closing 2019 with the lowest level of leverage in recent years, a Net Debt/Ebitda index of 2.8x. In the last quarter of 2019, a net profit of R$ 243.6 million, with a net margin of 5.0%, reverted the loss accumulated during the year and closed 2019 at R$ 16.2 million.

Internal market
The origination capacity of Minerva Foods in the countries where it operates has allowed it to obtain satisfactory results even in such a strong year for exports within the domestic markets where it maintains its industries. In the Brazil Division, the gross revenue of the domestic market totaled R$ 2,824.2 million, a result of 10.6% higher than in 2018.

At Athena Foods, which comprises the operations of the units in Argentina, Colombia, Paraguay, and Uruguay and the distribution in Chile, gross revenue from the domestic markets totaled R$ 1.8 billion, making up 23.9% of the result. In the Trading Division, domestic sales reached R$ 1,522.7 million in 2019. The volume represents a decrease of 26.9% in relation to 2018.

In 2019, Minerva Foods remained among the main exporters in the countries where it operates. In Brazil, it reached 17% of the market share in exports; in Argentina, the share was 14%; and in Colombia, it was the market leader, with 84% of total exports in the sector; in Paraguay, it remained the leader, with a participation of 45% and in Uruguay, it accounted for 20% of its foreign sales.
Market Share 2019 (% of the revenue)
Sources: Minerva, Secex, Penta-transaction, OCIT, IPCVA and Legiscomex
(1) Based on the net resources of the primary public offering of shares, in the amount of R$ 999.6 million, concluded in January/2020.
The investments for Minerva Foods totaled R$ 221.4 million for 2019.

The resources were allocated for maintenance projects and to expand the operations in order to increase process improvements and productivity, in addition to resources directed to employee and facility safety conditions, and on environmental projects.

Minerva Foods – Industrial Division of Brazil

Gross revenue of the Industrial Division in Brazil grew 13.7% compared to the previous year, reaching R$ 8.5 billion, with 66.8% of the amount resulting from exports. There was an increase of 15.3% in foreign sales, which totaled R$ 5,682.4 million.

This overall result is a reflection of the excellent timing for Brazilian exports as well as the ability of the Company to quickly meet the unexpected and substantial demand from China. Up to date with all the criteria regarding sustainability, operating under the best practices required by the Asian market, ready to produce the type of product required and able to rapidly increase production, the Company obtained approval to export to China in seven of its plants, three of which operate under the Brazilian Division, with a slaughter capacity of 4.3 thousand head/day.

Within this context, Asia has remained the main destination for the sales of the Brazil Division abroad.

Breakdown of export revenue by region – Brazil

Athena Foods

The gross revenue of the Athena Foods Division totaled R$ 7.3 billion (US$ 1.9 billion), 6.7% more than in 2018. Exports accounted for 76.1% of the volume, providing an annual increase of 12.3%, reaching R$ 5,609.8 million. The Chinese market accounted for most of the shipments, originating out of Argentina and Uruguay. In addition, Paraguay showed strong performance in its foreign sales, driven by demand from countries such as Chile, Russia, Brazil and some parts of the Middle East.

Trading Division

The gross revenue for the Trading Division, which comprises the results of trading in live cattle, protein, energy, and resale of third-party products, reached R$ 2,320.7 million for 2019. In exports, with 34.4% of the overall result, the gross revenue totaled R$ 798.0 million, up 5.6% compared to 2018.

Paraguai vive ano de retração

O setor de carne bovina do Paraguai registrou retração em 2019. Os abates, que somaram 1,8 milhão de cabeças, ficaram 7% abaixo do volume de 2018 principalmente porque, no primeiro semestre, o país enfrentou condições climáticas adversas que impediram o transporte dos animais até as unidades de abate.

No mercado doméstico, o preço médio do gado fechou o ano em US$ 2,7/kg, 13% menor que o de 2018. Nas exportações da Companhia, o volume embarcado apresentou uma queda anual de 4%, e a receita de US$ 1.034 milhão ficou 6% abaixo da do ano anterior. O Chile continua sendo o principal destino das exportações do Paraguai, com 36% do total.

China reforça compras do Uruguai

O Uruguai elevou em 4% seu volume de exportações de 2018 para 2019, embarcando 339 mil toneladas, em um movimento que consolidou a China como o principal destino. O país asiático aumentou suas compras em 16%, em relação ao ano anterior, perfazendo 61% do total exportado pelo país.

No mercado interno, houve forte alta de preços – o preço médio do gado alcançou US$ 3,8/kg, aumento de 12% na comparação com o ano anterior – em decorrência da alta das exportações, combinada a uma queda nos abates: 2,2 milhões de cabeças, 5% inferior ante 2018.

Breakdown of exports by region – Athena Foods

Eco-efficiency advances
even with a significant
increase in production

Minerva Foods has established Sistema de Gestão Ambiental (SGA) an environmental management system which, in addition to complying with the applicable legislation for its activities, is dedicated to the pursuit of excellence in the sustainable use of natural resources. The Company has the tools necessary to properly handle solid waste, liquid effluents, and atmospheric emissions in all its units.

Tools such as Diário de Bordo and actions generated by the system Dux, are efficient management tools that allow the environmental supervisors to compile quantitative and qualitative data in order to unite the monitoring and control of operations. This resource assembles performance charts, environmental license and permit records, and for the monitoring of environmental Key Performance Indicators (KPIs) such as water consumption, effluent generation, liquid effluent quality, receiving body quality, operating costs and revenues, and the recovery of oils and fats from the physical-chemical treatment systems.

In 2019, the Company standardized training and tools, further improving the management of indicators such as costs of treated cubic meters of water and effluent, consumption of chemicals, atmospheric emissions and waste generation, among others. Investments towards improvements of indicators are continuous, as are projects for leadership training to incorporate issues of socio-environmental responsibility in decision-making.

103-2 e 103-3: Energy
One of the advances that was much celebrated in 2019, was the administration of the energy matrix. In a year in which operations intensified, with the installed capacity of Minerva Foods and Athena Foods plants reaching 78% in December, the consumption of electricity fell by 5% in Brazil compared to 2018.

The result represents a saving of 7,886,723 kWh and reflects the success of the Company’s Strategic Electric Energy Plan, and the management conducted by the Engineering sector together with those responsible for the units, who continuously strive to seek efficiency in the processes.

In 2019, Minerva Foods made significant advances in the field, such as online monitoring of electricity consumption from the Brazilian plants and defining and implementing the ideal consumption profiles for each plant, thereby optimizing electricity consumption. Depending on the production and refrigeration system of each unit, operating profiles, and electrical energy consumption are defined, which enables certain equipment to be shut down from the machine room at predetermined times thus resulting in the optimization of electrical energy consumption.

Internal energy management is based on the Integrated Management Policy, with standardized objectives for all units that adopt fuels from renewable sources for use in their boilers to generate steam.

The process of determining consumption profiles is underway in other countries and management is being improved through continuous monitoring of consumption and the adoption of new KPIs.

103-2 e 103-3: Water
The use of modern equipment to optimize the use of water resources and leak prevention are some of the tools for managing water consumption at Minerva Foods. Most of the units are supplied with surface water, which passes through treatment plants before being used in production.

Additionally, water withdrawal is controlled by the local environmental teams via calibrated hydrometers and monitored by means of indicators (KPIs) regularly assessed so that any deviations can be identified and treated. Actions to raise awareness were intensified in 2019, primarily through the formation of workgroups made up of employees focused on identifying potential opportunities to reduce water consumption.
When all plants in Brazil are taken into account, this consumption was reduced by 6.5% during the year, compared to 2018, which represented a saving of 48,176 m³.

In addition to monitoring consumption, periodic assessments are made on the quality of water treated in ETAs. These assessments are substantial for the safety and quality of the product. The water treatment at the Company’s units follows the standards established by local legislation and the Standards of Performance established by IFC.

The Company reports on all improvements, primarily in the areas of environment and occupational health and safety at its industrial units, the certifications obtained, performance indicators, sustainability practices and training, among other highlights made during the reported year, to the IFC every year through its Annual Monitoring Report (AMR). 303-2

World Water Day
In celebration of this day, the Every Drop Matters campaign was promoted, which included activities to raise awareness among employees, communities, and nearby schools. Information brochures, interactive games, presentations, and dialogues with employees were also carried out.

103-2 e 103-3: Effluents and waste

Minerva Foods operates Wastewater Treatment Plants (STP) with primary and secondary systems in all its units, carrying out sample monitoring, through which it verifies the effectiveness of the system and identifies areas for improvement.

One of the principles of the Company in this phase is to have the best primary treatment available so that the secondary does not present interference in a manner that reduces the anaerobic or aerobic efficiency of its system, thereby ensuring a removal of the organic load above what is specified in current legislation.

In 2019, an agreement was signed for the chemical program to increase the efficiency of organic load removal in the dissolved air flotation system (DAF). This change required the installation of equipment to optimize applications, reducing costs per cubic meter treated.

Another initiative was the installation of pH and turbidity probes for on-line readings, a quality indicator for assessing the physical characteristics of water in all the treatment plants in Brazil that utilize a Dissolved Air Flotation (DAF) system. This feature makes it easier to make the necessary adjustments for maintaining a removal efficiency of at least 70% in relation to the organic load, regardless of the type and amount of load entering the system.

Routine verification checks on the performance of the equipment were also adopted in order to improve preventive maintenance and reduction of corrective maintenance. Routine laboratory analyses are performed to ensure the efficiency of primary and secondary treatments.

Units that conduct discharge into bodies of water, in addition to the evaluations of strategic points of the system, also conduct upstream and downstream analyses of the discharge, monitoring the quality of the receiving body. For the units that employ release into the soil through fertigation, monitoring of the soil is carried out in addition to monitoring of the effluents.

The volume of effluent generated is managed through the Dux system. On a daily basis, the information is taken from volume gauges located close to the outlets and the measurement is entered into the system. The Company also monitors the quality of the effluent, performing daily internal analysis and monthly analysis at an accredited external laboratory. The units that do not perform direct discharge into a receiving body have their effluent dispersed through a fertigation system at intervals established through their operating licenses.

All these procedures carried out by the Company are monitored by the environmental agency responsible, either in the form of periodic reports or through on-site inspections. 303-4

In São Paulo, work is strengthened by reverse logistics
In 2019 the Company signed the Term of Commitment for the reverse logistics of its packaging in the State of São Paulo, which has begun to produce some practical effects. The agreement was signed jointly with the Federation of Industries of the State of São Paulo (FIESP), the Brazilian Beef Exporters Association ( ABIEC) and the Environmental Company of São Paulo State (CETESB).
A survey was conducted of all products sold in plastic bags and/or cardboard boxes to estimate the amount of each type of packaging involved in operations within the state. Once the volume had been accounted for, the Company participated in an online auction with recycling companies to purchase credits.
103-2 e 103-3: Effluents and waste
Through the Industrial Solid Waste Management Program, the Company seeks to ensure adequate environmental treatment, by adopting specific treatment for the type of waste produced according to the type of activity. Sorting is performed in order to recycle the largest volume of material, a process that selects those that can be reused and/or should be eliminated or decontaminated. After the segregation process, all types of waste are disposed of by licensed companies.

For all classified hazardous waste, a waste transportation manifest is required to control the dispatch, transportation, and receipt of the waste at the disposal unit.

In regards to transportation, the Company adopts Vehicle Inspections, which analyze the vehicle’s maintenance and compliance with the safety regulations for waste transports and whether the driver possesses training and a proper valid drivers license.

In 2019, the Company disposed of 2,984,355 kilos of solid waste from the Brazil Division and 2,127,358 kilos of the Athena Foods operations.

103-2 e 103-3: Emissions
Control of atmospheric emissions is carried out through regular analyses defined in accordance with the legislation applicable in each country where the Company maintains its operations and with the corporate procedures for Monitoring Fixed and Mobile Emissions.
Direct emissions of Scope 1 greenhouse gases for 2019 were 192,897.10 tCO2e. Of this total, 102,024.52 tCO2e correspond to the operations in Brazil. Direct emissions of Scope 2 totaled 17,292.05 tCO2e over the period, of which 13,864.85 tCO2e were generated by the operations in Brazil. 305-1 | 305-2
Climate change
103-2 e 103-3: Economic performance

The Company is always aware of the factors that may be the result of climate change and maintains the subject in focus during its central discussions. Deforestation and burning causes an increase in greenhouse gas emissions and is commonly associated with cattle ranching activities, mainly as a result of land expansion.

Thanks to the high level of monitoring of its supply chain free of deforestation, the Company is the greatest contributor, within the sector, towards combating climate change through the mitigation of Greenhouse Gas (GHG) emissions from changes in land-use.

It privately monitors more than 9,000 suppliers in the Amazon, covering a territory of more than 9 million hectares, an area equivalent to the size of Portugal. This monitoring is based on strict environmental, land, and labor criteria. The list of areas embargoed by IBAMA and the list of suppliers condemned for using slave labor are verified for 100% of raw material that is purchased. In addition to the previously stated criteria, zero deforestation and overlaps with conservation units, protected areas and indigenous lands are also analyzed for the Amazon biome. Thus, 100% mapping is conducted for the suppliers of this biome.

The Company has prepared the Greenhouse Gas Emissions Inventory (GHG) each year since 2014 as a management tool to oversee improvements in environmental and energy efficiency systems. Investments, together with improvements in the treatment of effluents, have resulted in a significant reduction in GHG emissions regulated by the Kyoto Protocol for 2019. A total of 41% compared to the previous year for all units of the Company combined. Taking into account only the units located in Brazil, the reduction of gases regulated by the Kyoto Protocol was 61% in the same comparison.

In 2019, by joining the Brazil GHG Protocol Program, Minerva Foods started to disclose its inventories from the Brazil Division in the Registro Público de Emissões (RPE) a public register pertaining to the program. The 2017 and 2018 inventories are now available for stakeholder access, in addition, the Company has adhered to the 2019 inventory disclosure program. The inventories for 2015 and 2016 will also be added to the RPE. de 2015 e 2016.

See the GRI Appendix for the environmental indicators of the Company.