Standard&Poor's Ratings Services' rating assigned to Marfrig Frigoríficos e Comércio de Alimentos S.A. (Marfrig) reflects the company's lower-than-expected cash-flow generation, leading to weak credit metrics for the rating category, associated with the company's aggressive growth strategy in 2007 and beyond. In our opinion, the company will report negative discretionary cash flow in the future, limiting the potential improvement to its financial profile. Negative rating factors are partly offset by the company's improved business diversification, its relatively good distribution of sales in both local and external markets, and the company's competitive cost position with Brazilian beef producers. Although Marfrig's EBITDA margin consistently showed gradual improvement (12.2% in the 12 months ended September 2007 compared to 11.7% in December 2006
