Minerva S.A.

Beef export prices have grown steadily since February 2019 amid the increasing Chinese demand for protein as hog herds in China continue to decline. China has recently granted export permission to additional 25 meat plants from Brazil, including two plants from Minerva, highlighting China's appetite to intensify imports. Despite the significant herd size in Brazil--estimated at about 232 million heads--cattle prices have been increasing, mainly in the last quarter, due to a growing demand, as farmers also capture part of the favorable industry momentum, and because of seasonality of the fourth-quarter period, preventing a stronger uplift in beef processors' margins. The outlook is stable. We expect Minerva to maintain positive FOCF and gradually deleverage over the next few years. The

...Still high cattle availability and positive pricing environment due to the African Swine Flu (ASF) should support growing cash flows. We expect Minerva to sustain EBITDA margins close to 10% over the next couple of years, resulting in annual free operating cash flow (FOCF)of about R$500 million to R$700 million. This is thanks to strong beef prices stemming from the effects of ASF, more depreciated currencies in Brazil and Argentina, and still high cattle availability in most of the countries it operates, and despite the recent spike in the cost of cattle. Beef export prices have grown steadily since February 2019 amid the increasing Chinese demand for protein as hog herds in China continue to decline. China has recently granted export permission to additional 25 meat plants from Brazil, including two plants from Minerva, highlighting China's appetite to intensify imports....

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