FORM 6-K
U.S. SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 13A-16 OR 15D-16 UNDER THE
dated March 20, 2013
N/A
(Translation of Registrant’s Name)
Jaguare 05350-000 Sao Paulo, Brazil
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes _______ No ___X____If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable.
The BRF logo was created to represent our essence.The adopted symbol represents the globe, with all of its cultural, social, territorial and racial diversity. Each small part is assembled in a larger element, which shows that despite our differences we complete each other, communicate and create ties. In short, we are close to one another. The BRF logo expresses our positioning and our goal of uniting families and friends, of bringing lives together. |
The brand which brings lives |
CONTENTS | ||
MISSION, VISION AND VALUES | 2 | |
PRINCIPAL INDICATORS | 6 | |
Brand | 8 | |
BRF | 10 | |
MESSAGE FROM MANAGEMENT | 16 | |
STRATEGIC MANAGEMENT | 17 | |
COPORATE GOVERNANCE | 18 | |
Ethical behavior | 21 | |
Risk Management | 21 | |
FINANCIAL AND CONSTRUCTED CAPITAL | 22 | |
Operational performance | 27 | |
Economic-financial performance | 30 | |
Shares as an investment | 37 | |
INTELLECTUAL CAPITAL | 38 | |
HUMAN CAPITAL | 42 | |
SOCIAL CAPITAL | 46 | |
Value chain | 48 | |
Responsibility for the product | 50 | |
Animal wellbeing | 51 | |
Society | 52 | |
NATURAL CAPITAL | 54 | |
ABOUT THE REPORT | 60 | |
PRACTICES ALIGNED TO THE GLOBAL COMPACT | 61 | |
GRI CONTENTS INDEX | 62 | |
CORPORATE INFORMATION | 65 |
PRINCIPAL INDICATORS|GRI 2.8| | ||||||
R$ million | 2007 | 2008 | 20091 | 2010 | 2011 | 2012 |
Net sales | 6,633 | 11,393 | 20,937 | 22,681 | 25,706 | 28,517 |
Domestic market | 3,482 | 6,424 | 12,148 | 13,515 | 15,419 | 16,668 |
Export market | 3,151 | 4,969 | 8,789 | 9,166 | 10,287 | 11,849 |
Gross profit | 1,873 | 2,759 | 4,220 | 5,730 | 6,659 | 6,454 |
Gross margin (%) | 28.2 | 24.2 | 20.2 | 25.3 | 25.9 | 22.6 |
Operating income | 504 | 709 | 392 | 1,874 | 2,001 | 1,389 |
Operational margin (%) | 7.6 | 6.2 | 1.9 | 8.3 | 7.8 | 4.9 |
EBITDA | NA | NA | NA | NA | 2,890 | 2,348 |
EBITDA margin (%) | NA | NA | NA | NA | 11.2 | 8.2 |
Adjusted EBITDA | 803 | 1,159 | 1,166 | 2,635 | 3,244 | 2,680 |
Ajusted EBITDA margin (%) | 12.1 | 10.2 | 5.6 | 11.6 | 12.6 | 9.4 |
Net income | 321 | 54 | 225 | 804 | 1,367 | 813 |
Net margin (%) | 4.8 | 0.5 | 1.1 | 3.5 | 5.3 | 2.9 |
Net adjusted income | 321 | 155 | 3572 | 804 | 1,5823 | 813 |
Net adjusted margin (%) | 4.8 | 1.4 | 1.7 | 3.5 | 6.2 | 2.9 |
Market value | 8,230 | 6,155 | 19,792 | 23,853 | 31,776 | 36,810 |
Total assets | 6,543 | 11,219 | 28,384 | 27,752 | 29,983 | 30,772 |
Shareholder’s equity | 3,226 | 4,111 | 12,996 | 13,637 | 14,110 | 14,576 |
Net debt | 429 | 3,390 | 4,193 | 3,634 | 5,408 | 7,018 |
Net debt/EBITDA | 0.53 | 2.92 | 3.60 | 1.38 | 1.67 | 2.62 |
Earnings per adjusted share - R$ | ||||||
(3 and 4) | 1.73 | 0.26 | 0.28 | 0.92 | 1.82 | 0.94 |
Number of shares | 185,957,152 | 206,958,103 | 436,236,623 | 872,473,246 | 872,473,246 | 872,473,246 |
Number of treasury shares | 430,485 | 430,485 | 1,226,090 | 781,172 | 3,019,442 | 2,399,335 |
(1) Pro-forma data for 2009, as if the incorporation of the association with Sadia had occurred on January 1, 2009. (2) Net adjusted result - not considering the absorption of tax losses amounting to R$ 132 million due to the incorporation of Perdigão Agroindustrial S.A. in 1Q09 (3) Net adjusted result - not considering the absorption of the forecasted loss of R$ 215 million in Income Tax with respect to the incorporation of Sadia S.A., expected to takeplace in 2012. (4) Consolidated excluding shares held as treasury stock | ||||||
BRAND | ||
BRF has a new visual identity A logo full of symbolism which seeks to reflect the essence ofthe Company and its global footprint: more than producing food, BRF creates products able to bring lives together andto provide moments of wellbeing. And this principle is also present in the relations with all the brand’s stakeholders,producing a veritable dialog with the world. The BRF logo has been created to represent our essence. Theadopted symbol represents the globe with all its cultural, social, territorial and racial diversity. | Each small component combines into a single larger elementshowing that despite the differences, we are all-embracing, converse with one another and create bonds. In short, we are close to our consumers. The BRF logo expressesour positioning and our objective of bringing families and friends together, of approximating lives. | |
BRF STATEMENT At BRF, we produce food in a special way: we bring ideas together to discover newpossibilities and opportunities. And this begins at the farm gate. We bring together the work of thousands of partners in an unending chain. This is our starting point for food production in various places around the world. When we combine this driving force and knowledge, we multiply our sustainable practices and influence the communities where we work in a positive way. Here in the Company, we bring together different views and preferences. In this way wediscover new possibilities for products that connect people and a universe of tastes. We have a team with a youthful spirit and a vocation for entrepreneurship. These are committed people, open to dialog, who deliver their best results with great energy. All are driven by the mission of being a global food company with admired brands and innovation and which delivers what it promises. For us, major challenges such as this are what motivate us! We want to increasingly participate in the lives and the world of people. This is the way we are going to achieve our purpose, producing food and offering services which bring lives together, share experiences and promote new discoveries. BRF: Bringing lives together. Welcome to BRF’s new visual identity: |
BRF One of the largest protein-based chilled and frozen foodproducers in the world, BRF was created out of the association between Perdigão and Sadia, the merger of which was announcedin 2009 with the signing of the Performance Commitment Agreement (TCD) with the Administrative Council for Economic Defense – the Brazilian anti-trust authority – (Cade) and concluded in 2012. The Company operates in the segments ofmeats (poultry, pork and beef), processed foods from meat, dairyproducts, margarines, pastas, pizzas and frozen vegetables andsold under such household names as Sadia, Perdigão, Batavo, BRF operates 50 plants installed throughout Brazil and has a soliddomestic distribution network which through 33 distribution centers delivers its products to consumers in 98% of the country. |
The Company’s shares have been listed on the stock exchangefor 32 years. Since 2006, BRF has been a component of BM&FBovespa’s Novo Mercado. For eight years now, thecorporate commitment to sustainable development has been recognized through inclusion in the Exchange’s CorporateSustainability Stock Index. The Company is a widely held company, its securities also trading on the New York StockExchange (NYSE - ADR level III). One of the largest employers in Brazil, the Company ended the year with a payroll of 109,473and approximately 20,000 integrated outgrowers.|GRI 2.6, 2.8| The most significant structural change undergone by theCompany in 2012 was the full integration of the Sadia subsidiary. The year also saw the complete implementation of the TCDagreed with Cade, resulting in the divestment of assets and | the suspension of certain brands. BRF ceded to Marfrig tenfood and four animal feed processing plants, two hog and two poultry slaughtering facilities, 12 chicken breeder stock farms,two poultry hatcheries and eight distribution centers. Brands transferred under the agreement were Rezende, Wilson, Texas,Tekitos, Patitas, Escolha Saudável, Light Elegant, Fiesta, Freski, Confiança, Doriana and Delicata. Cade ordered the temporarysuspension from three to five years of some categories sold under the Perdigão and Batavo names.|GRI 2.9| In compensation, BRF took control of Quickfood in Argentina,owner of Paty, the leading hamburger brand name in the local market. In expanding its footprint and operations in SouthAmerica, the company underscored its target of overseas growth and this in conjunction with organic growth in Brazil currentlyunderway, provides the foundations for sustained expansion in line with the objectives of the BRF 15 Strategic Plan. | |
MESSAGE FROM MANAGEMENT|GRI 1.1| Dear Shareholders, The year will go down in the annals of BRF as the one in which we implemented one of the most complex mergers anywhere in the world - that between Perdigão and Sadia - with the Company embarking on a new cycle. During the year, we complied in full with the agreement signed with the Administrative Council for Economic Defense (Cade), the Brazilian anti-trust authority, selling off plants, brands and distribution centers as well as temporarily suspending the use of the Perdigão brand for some product categories. We successfully ended the year by completing the merger process, including the incorporation of Sadia. In the business field, we were faced with an international economic crisis and an unprecedented spike in costs on the back of highly volatile and rising grain prices, characterizing one of the most difficult years for the world animal protein segment. But despite the transfer of assets and the suspension of brands representing about a third of our sales volume to the domestic market, we successfully increased consolidated net sales by 10.9% to R$ 28.5 billion. Adjusted EBITDA reached R$ 2.7 billion, and EBITDA reached R$2.3 billion, while net income totaled R$ 813.2 million, a negative variation of 40.5% over the preceding year. It should be pointed out that in the second half of 2012 following the agreement with CADE, domestic market sales rose 50% on the same comparative basis. This result is a reflection of extremely arduous and consistent work on a process which involved the Company in the implementation of two agendas in parallel: the daily operational routine together with the commitments surrounding the execution of the merger. The result proved a reaffirmation of the capacity of the Company to plan as a critical element in its success and one of its competitive advantages. Since the announcement of the merger, we have reached an average of 30.2% per year in Total Shareholder Return with our market capitalization standing at R$ 36.8 billion, BRF ranking as the 7th largest food company in the world. We experienced a particularly challenging period, executing several hundred projects during the year, this involving the adjustment of plants for the production of product lines displaced due to the transfer of units, new distribution centers and the redesign of the logistics network. At the same time, we continued to focus on innovation, launching more than 454 products, underscoring our presence in the market and receiving the recognition of Forbes magazine as one of the hundred most innovative companies in the world. Emphasis was also given to our internationalization plan, most notably the start on construction of the Abu Dhabi plant to be concluded in 2013. We also consolidated the acquisitions made in Argentina with the merger of three companies, the purchase of the distributor, Federal Foods in the Middle East and the initiation of operations in China through the Dah Chong Hong Limited joint venture. We continue alert to opportunities for strategic acquisitions overseas so that we can evolve towards having our own local activities on the ground rather than being represented through the intermediary of exports only. The efforts to expand internationally have contributed – together with those made in the direction of ramping up organic growth in Brazil - towards building the BRF of our dreams, a world class company with unequaled competitiveness. We reiterate our commitment to sustainability, increasingly part of our culture and our brands, and to progress in all the facets of the business. As a result, we have improved occupational safety | indicators with a reduction of 35.6% in accidents involving time off work compared with 2011. Since the inception of the Health, Safety and Environmental Program (SSMA) in 2008, the Company has successfully reduced this accident rate by 77.1%. | |
STRATEGIC MANAGEMENT|GRI 1.2| | BRF 15 Objectives | ||
Domestic market | |||
The Company adopts a long-term strategic stance and begins 2013 aligned with the objectives and goals laid out in the BRF15 Strategic Plan to be one of the world’s premier food companies by 2015, admired for its world-class brands, innovation and results. On the cusp of the new cycle, internal discussions are to begin on the BRF 20 Strategic Plan, preparing the Company for the coming decade. All the work done in 2012 laid the foundations for a new cycle that now begins. After consolidating the agenda of obligations and Synergic gains are linked to increased productivity and efficiencyat a low cost, the result of distribution centers able to operate withthe full spectrum of brands, deliveries using the same trucks, andjoint bills-of-sale to invoice products from a single legal entity. The cornerstone of internationalization is based on four points:brand, portfolio, progress in distribution and local production,themes that are complementary and directed towards thedesired change in the overseas market. Long-term planning willchange BRF’s international profile and position it to focus less oncommodities and more on processed goods. To this end, strategicmoves will be based on acquisitions of processors and distributorsin the international market, the construction of factories and thedevelopment of products and marketing campaigns for differentcultures and tastes, consolidating Sadia as a premium brand.
| |||
• | Meatproducts –Consolidate position in active markets; growin categories capable of expansion; correctly position brands;add new categories/innovation to the business; focus on market share value; and promote service excellence. | ||
Foreign market | |||
Expand operations via acquisitions of processing and distribution units and local brands, using raw materials produced especially in Brazil due to competitive production costs; consolidate active markets, reaching retail and food-services customers and developing products according to each market’s demands, in order to reduce export margin volatility; and maintain a specific strategy for each area of operations: | |||
· | Middle East –Build a factory with capacity for 80 thousandtons of processed foods; consolidate lead; strengthenbrands; and increase retail and food-services penetration. | ||
· | Latin America – Expand processed foods production; makeprogress on the distribution chain and brands; add synergiesfrom newly acquired businesses; have enriched brands andportfolios with a production base in Argentina. | ||
· | Far East – Reposition the Sadia brand as premium; strengthen | ||
the value-added products mix for the transformation | |||
industry, particularly in China – maintain joint venture to | |||
improve product distribution and processing; focus on retail | |||
and food services. | |||
· | Europe –Improve the product mix; customers portfolio; | ||
footprint and progress along the distribution chain. | |||
· | Africa –Strengthen the Perdix and Sadia brands and enter | ||
new markets with significant consumer potential. | |||
Dairy Products | |||
· | Consolidate lead in the cheeses segment; capture synergies | ||
in the sales and distribution areas; pursue return with lower | |||
capital requirement; review dry goods positioning; and | |||
increase the brands’ competitive edge and the portfolio’s | |||
added value. | |||
Food Service | |||
· | Strengthen competitive position in the food-services | ||
market, building basic and distinctive competencies at BRF, | |||
generating growing profitability. | |||
CORPORATE | ||
GOVERNANCE | ||
With ethics, transparency and equitability as the pillars of itscorporate governance model, BRF was the first company in the food and beverages industry to adjust to the listing regulations ofBM&FBovespa’s Novo Mercado of which it has been a member since April 2006. The Company adheres to best practices: maintaining all its sharesas common stock; providing equality of rights; a premium in the event of public offerings of shares and mechanisms for investorprotection; relevant decisions must be approved by at least two thirds of the votes of collegiate bodies; shareholders andexecutives are forbidden to secure advantages arising from access to privileged information; securities trading and material factsdisclosure policies; and recognizing arbitration as the fastest and most specialized way to address conflicts of interest. In addition,to prevent stock concentration, any shareholder or group of shareholders who gains control over shares in excess of 20 percentof the total is required to hold a public tender for the acquisition of shares (OPA).|GRI 4.6| The company’s control is widely held and its stock is traded on theSão Paulo Stock Exchange (BM&FBovespa – BRFS3) and the New York Stock Exchange (Level III ADRs – BRFS). Governance bodiesinclude the General Shareholders Meeting, the Board of Directors, the Fiscal Council which serves as an Audit Committee, AdvisoryCommittees to the Board of Directors and the Executive Board. |GRI 4.1| A Governance, Sustainability and Strategy Committee in support ofthe Board of Directors and an Executive Sustainability Committee made up of Vice Presidents evaluate and monitor performance,as well as sustainability-related risks and opportunities. Every three months, results are submitted for approval by the Boardof Directors and then publicly disclosed in line with international accounting standards (IFRS).|GRI 4.9| Shareholders meeting –Meetings are the principal meansby which shareholders make recommendations to the Company’s management. Attendance is encouraged by directlyapproaching investors and providing a reference manual that contains general guidance on the process and details onthe reasons for the meeting. Shareholders approve financial statements, incorporations and other matters, elect the Boardof Administration and the Fiscal Council and set the managers’ compensation, among other topics.|GRI 4.4| Board of Directors – In December, the Board was made up often members, seven of whom independent. In line with best governance practices, the Chairman of the Board does not havean executive function. As set forth in the Bylaws, eligibility to Board membership includes aspects such as having anunblemished reputation, not holding positions with competitors or representing conflicting interests. Members of the Board, aswell as of the Committees and the Executive Board, are subject to a formal individual performance evaluation tool that includes a360-degree evaluation and addresses sustainability-related issues. |GRI 4.2, 4.3, 4.7, 4.10| | Committees – The Company has had Advisory Committeesaccountable to the Board of Directors since 2006. These committees are made up of members of the Board of Directors and the ExecutiveBoard. In 2012, the following committees were active: Governance; Sustainability and Strategies; Finance and Risk Management; BestPractices; and People.|GRI 4.1| The Company also has a Disclosure Committee as called for underSarbanes-Oxley Act legislation. Rating- The Company has been assigned an Investment Graderating by Fitch Ratings, Standard and Poor’s and Moody’s agencies. Novo Mercado –BRF signed up to BM&FBovespa’s Novo Mercadoon April12, 2006, agreeing to settle disputes through the Market Arbitration Panel pursuant to a commitment clause in its Bylaws andthe Novo Mercado’s regulations. Fiscal Council/Audit Committee –Made up of three members, oneof whom is a finance expert. The body also carries out the functions of an Audit Committee. It convenes monthly and meets with theBoard of Directors as required.Employees and shareholders are able to voice their opinions,complaints, recommendations and allegations (whistle blowing)through the in-house Ombudsman, the Audit Committee being activated if required. The Audit Committee has powers to actindependently, at its discretion being able to forward complaints/ allegations to the Internal Audit area to investigate or engagean independent company and if necessary activate the Board of Directors.|GRI 4.4| | |
Executive Board –Made up of ten members who answer directly to the Board of Directors and are responsible for running the business in full compliance with strategic guidelines as set forth by the Executive Board members and approved by the Board of Directors. Compensation-Members of the Board of Directors and Fiscal Council/Audit Committee receive fixed compensation contingent upon their attendance at meetings. Their compensation was R$ 3.7 million in 2012. Members of the Executive Board earn fixed and variable compensation associated with goals and performance indicators. The Executive Board’s total compensation in 2012 was R$ 29.3 million. Individual and collective goals are based on strategic and | budgetary plans and linked to the Company’s and/or the respective operational area’s general productivity indicators, in addition to those of resource and people management optimization, associated with the long-term outlook for the business.|GRI 4.5| | |
ETHICAL BEHAVIOR|GRI 4.8| Published at the beginning of 2012, the new BRF Ethics and Code of Conduct is a compendium of best practices inherited fromthe former Perdigão and Sadia companies clearly explainingthe behaviors and attitudes the Company expects from all of its employees. The Code sets forth guidelines for topics such asintegrity, ethics and relationships with coworkers, suppliers and customers, among others. Conduct under the Code is expected from all employees, whoare trained in anti-corruption practices in the New Employee Induction Program. In addition, whistle blowing policies and a channel for this purpose are available on the Intranet/Internet with Internal Audit in charge of establishing the facts. In 2012, Auditors evaluated 45 percent of the 211 locations (units) identified as showing the highest corruption-related risk. Over the course of the year, non-compliance with corporate policies led to the termination of 45 employees and the discontinuation of business with 13 service suppliers.|GRI SO3, SO2, SO4| HUMAN RIGHTS The Employee Induction Program addresses the subject of human rights as they relate to ethical behavior. In 2012, 36,092 people attended the program (31 percent of all employees), corresponding to a total 12,030 hours dedicated to the subject. Leaders training totaled 780 hours with human rights-related content, where 195 individuals (0.17 percent of the workforce)received instruction on the application of disciplinary measures; labor law; civil, criminal and labor liability of managers; moral and sexual harassment. With the updated Ethics and Conduct Code, the Company held orientation sessions on the newversion of the document for 11,186 participants (9 percent of all employees) summing a total of 11,186 hours devoted to the topic.|GRI HR3| RISKMANAGEMENT|GRI 1.2| The risk management policy is developed in a participativemanner that involves all of the Company’s areas, under the lead of a specialized unit. This unit is responsible for providing the entire Company with a risk dashboard to assist in understandingthe importance of the factors and the cost of their mitigation. Preventive action involves comprehensively and continuously monitoring factors capable of interfering with business or a ecting results. Following the strengthening of financial and operational aspects, risk management at BRF is now evolving towards a more business and strategy-oriented approach, in a gradual reformulation process, so that factors that are already managed at the sectorial level may be managed in an integrated manner. The objectiveis to reach the Expanded Corporate Risk Management stage by 2015, with maximum decision-making transparency. The aspectscurrently regarded as most relevant include:Financial –The Financial Risk Management Committee isresponsible for evaluating full compliance with the Financial Risk Management policy and proposing applicable alternatives.In addition, the Committee has the authority to veto proposedoperations that it may deem inappropriate to BRF at the time of their evaluation. Supplier chain –In 2012, the Company expanded its Supplier Chain Monitoring Program to identify and mitigate riskcontrolled by third parties that may influence the business. These factors include, for example, discontinuing relationships with suppliers in breach of human rights or suppliers contributing todeforestation in the Amazon region. | Operational –Operational risks at the manufacturing units and distribution centers have been mapped based on 144 risk inspections, complete with determination of impact and probability of occurrence. The Operational Risk Management Project (“Projeto de Gestão de Risco Operacional”– PGR) wasadopted in 2010, and focuses on preventing potential damage toassets, involving several areas. In 2012, the Company installed its Operational Control Center in Curitiba (PR) where employeesfrom di erent areas proactively manage potential issues a ecting operational continuity, productivity and eciency . BRF embraces the Precautionary Principle, according to which the absence of scientific certainty must not be used as justification for failing to prevent serious or irreversible damage to the environment or human health. The principle is observed in the product development, conception, manufacturing and distribution phases.|GRI 4.11| Sanitary control –Permanent updates on practices used in proprietary and integrated outgrowers’ operations, process improvements and a strict industrial operations system comprisethe set of steps taken to eliminate or minimize risk of this kind. Slaughtering units are strategically spread across di erent regionsin Brazil and abroad to reduce the impacts arising from sanitaryissues or eventual international embargoes against imports from any one region. Food safety –Items produced at any unit can be traced from the breeding stock to animal rearing farms through to products distributed to end consumers. This process includes controls on livestock feed and medication and the use of metal detectors andX-ray machines at the plants. All suppliers sign agreements withclauses guaranteeing the safety of the products we market. Commodities –The commodities risk policy is discussed monthly at meetings of the Executive Board meeting and the FinancialRisks Committee based on the monitoring of the entire productionchain in an attempt to anticipate shifts that may have a positive or negative impact on operation costs. Used to maximum e ect, these strategies mitigated the impact of the rising cost of grains in 2012 to a significant extent. Image and reputation –With a clear image and reputational risk policy adjusted to every business and segment, BRF seeks to maintain its image associated with sound corporate governance and values such as trust, ethics and transparency. Standards for commercial areas also cover relationships with strategicinternational partners. In addition, the Company acts in all cases where events may expose the Company’s image and itsrelationship with stakeholders. Environmental –Every manufacturing unit has technical teamsspecialized in environmental issues and capable of improvingprocedures as required, as well as to operate correctly and e ectively under emergency circumstances. Legal/Tax – Ethical standards attempt to safeguard the Companyfrom the risk of failure to comply with laws and regulations atthe federal, state and local levels. In this sense, the Committeepermanently monitors any aspects questioned by government authorities, thus reducing the potential for administrative and court claims. Climate change –BRF also takes the impact of climate change into consideration as part of the overall interaction with other business risks. One particular concern relates to the supply ofcommodities (grains, beef and milk); the availability of water and power; and logistics. To this end, the company adopts preventivepractices such as regional procurement, research into new ways of using water, reuse and treatment technologies, power generation,reduced emission of greenhouse gases, verticalization of thesupply chain, among others.|GRI EC2| |
FINANCIAL AND
SECTOR SCENARIO Deceleration was the hallmark of the food industry in 2012, a sector which represents 9% of the country’s GDP. Nominal salesgrew 11.3% in Reais, but discounting inflation, growth was 4.96%compared with 5.90% in 2011, according to the Brazilian Food Industries Association (Abia). The indices used to seasonallyadjust prices for inflation are the Fipe/USP for industrialized and semi-elaborated foods (70%) and the IPCA/IBGE for away-from-home foods (30%). In accordance with Abia data, nominal sales of meat products expanded by 9.8% and dairy products by 9.9%. Export marketsreported a decline – the effect of the international crisis. Exportsof processed foods (specialty meats and semi-elaborated) fellby 3.3% – from US$ 44.8 billion in 2011 to US$ 43.4 billion in 2012. Out of total exports, 24% corresponds to high added valueindustrialized foods.
|
Brazilian Exports The year 2012 reported a good year-on-year performance for Brazilian exports of beef and pork, albeit for both meats the percentage growth in volume exceeded sales revenue, an indication of the decline in average price. Chicken meat exports in turn recorded a decline in volume and principally revenue. Exports of chicken meat reached 3.92 million tons in 2012, 0.6% below 2011 (3.94 thousand tons). Sales revenue in 2012, US$ 7.70 billion, was 6.7% below the US$ 8.25 billion for 2011. Sales volumes to the African continent reported the strongest growth in 2012 (+20.1% or +100.1 thousand tons year-on-year), the importing countries posting a particularly robust performance being Egypt (+65.6% or +47.3 thousand tons), South Korea (+155.4% or +39.7 thousand tons), China (+16.1% or +31.6 thousand tons) and the United Arab Emirates (+11.4% or +24.4 thousand tons). Despite the good performance in exports to the Arab Emirates, total shipments to the Middle East reported a decline of 1.2% in the full year (-17.1 thousand tons), principally due to the decline in volumes of more than 20% to Kuwait, Iran and Iraq, which together amounted to a drop of 77.3 thousand tons (2012 vs 2011). A similar volume shortfall occurred with | Venezuela where Brazilian exports in 2012 recorded a drop of 43.7% (-77.3 thousand tons). Export business with Europe also contributed to a reduction of 8.2% or 40.0 thousand tons in the same period. Shipments of pork amounted to 581.5 thousand tons in 2012, 12.6% up on 2011 while sales revenue posted an increase of 4.2% in the period totaling US$ 1.5 billion. During 2012, the Ukraine became a major market for Brazilian exports with 138.7 thousand tons (+125% or +77.0 thousand tons vs 2011), while business with Russia remained largely stable at close to 127 thousand tons, a growth of 0.5% in the period. Other important destinations were Angola, Uruguay, Singapore, Georgia, China and Bolivia, which together imported an additional 26.0 thousand tons from Brazil in 2012. On the other hand, Argentina was the leading negative performer with a decline of 18.6 thousand tons (-44%) as well as Albania, Venezuela and Hong Kong, each of which registered a decline of 5 thousand tons. Beef exports reached 1.24 million tons in 2012, 13.3% or 146.3 thousand tons up on 2011. Sales revenues reached US$ 5.77 billion in the period, a growth of 7.3%. Egypt, Hong Kong and Chile were leading importers, ramping up volumes by more than 25 thousand tons each. Iran was the principal negative highlight in the year, reducing its imports of beef from Brazil by 48.7% a reduction equivalent to (63.5 thousand tons). | |
OPERATIONAL PERFORMANCE Production A total of 5.8 million tons of foodstu s was produced in the year, in volume terms, 0.3% less than reported in 2011. Adjustments were made in the meat production segment in the light of theimplementation of the Commitment Agreement Instrument (TCD) and a reduction in dry line dairy products (UHT milk) – a strategicdecision in view of the focus on profitability. Production by the Argentine companies Avex and Dánica has beenincorporated since January and Quickfood’s output in Argentina has been consolidated since July 2012, and recorded in the Company’s overall numbers for the meats and other processedproducts segments. A total of 454 new products were launched during the year as part of portfolio expansion, the repositioning of the brands andcategories and the creating of added value: Food Service – 82; domestic market – 99; exports – 219; and 54 in the dairy productsegment. The principal innovations were made in the lines andbrands for Ready-to-Eat Dishes, Pizzas,Meu Menu, Ouro, BreadedProducts, Processed Products, Dairy Products, Frozen Vegetablesand Margarines. | There were also some important launches of convenience foods, with the Assa Fácil line for example and new festive line products.Using spare capacity at the Dánica plant in Argentina, the Companylaunched Perdigão mayonnaise in the retail market. These options seek to track trends in convenience foods to meet the demand for health-related products with brands aligned to a balanced life style. Sales to the domestic market reached R$ 12.6 billion, a 8.5% increase, with a 1.1% decrease in volume and average prices 9.7% higher against an increase of 16.3% in average costs, reflecting operating profits of R$ 1.0 billion in this segment, 16.9% down, the operational margin recording 8.2% in 2012 compared with 10.7% in 2011. Three strategic initiatives have been established for domestic market business in 2013, the first full year as a completely unifiedoperation: identify the role and positioning of each category in the market; establish strategies for each brand; and effectively capturesynergies through the increase in productivity and eciency at lo w cost. This will be possible thanks to the seamless operation of a single company using distribution centers operating all the brandsand deliveries being realized in a single vehicle. | ||||
Production | 2012 | 2011 | % Ch. | ||
Poultry slaughter | |||||
(million heads) | 1,792 | 1,756 | 2 | ||
Hog/cattle slaughter | |||||
(thousand heads) | 10,874 | 10,848 | - | ||
Production (thousand tons) | |||||
Meats | 4,269 | 4,250 | 0 | ||
Dairy products | 989 | 1,102 | (10) | ||
Other processed | |||||
products | 522 | 445 | 17 | ||
Feed and premix | |||||
(thousand tons) | 11,832 | 11,239 | 5 | ||
|GRI FP9| | |||||
DOMESTIC MARKET The principal challenge to BRF’s domestic operation in 2012 was tomitigate or minimize the impact of asset sales and the suspensionof brands both from the operational point of view as well as from that of restoring the scale of the business. There were otherchallenges as well: the spike in grain prices with the impact on thecost of production, and the oversupply of finished product due to di erent problems in the export market, among them, Russian restrictions on imports of pork meat for protectionist reasons and excess inventory in Japan. Between asset sales and suspended brands, there was a reduction of a third by volume in the domestic market. The objective ofminimizing this impact was achieved: a growth of 9% on therevenues of the 4Q12 compared with 2011, despite taking into account the ceding of R$ 850 million in quarterly sales with respectto our commitment under the TCD agreement. The Companyadopted the strategy of using the Sadia brand to recover the scale lost as a result of the suspension of some of the categories under the Perdigão brand, the latter in turn innovating in other categories or in new ones where there was no restriction. A large part of the Company’s success is due precisely toinnovation, research and planning. In 2012, 58 innovation projects were developed leading to the launch of 99 new products in the domestic market and accounting for 8.5% of total domestic salesrevenue for the year. Among new product launches under the Sadiabrand were: pork sausage, pizzas, lasagnas, beef cuts, processed products and ready-to-eat dishes; under the Perdigão brand name: the Sanduba andMeu Menu line; specialty meat and frozen products; and margarines with the relaunch of the Claybon brand. |
EXPORTS Export operations reflected the international scenariocharacterized by excess inventory in the Middle East, Japan and Russia and by the sharp rise in grain prices creating worldwideoversupply and squeezing the Company’s margins – albeit withsome recovery in sales, prices and profitability in the last quarter of the year. Exports reached R$ 11.6 billion in the year, a growth of 15.2% in revenues with 9.6% higher volume, totaling 2.5 million tons. Average prices reported a gradual recovery as supply adjusted to demand in the leading markets, rising by 5.1% in local currency terms. However, this proved insucient f or a total recovery in operating margins which declined from 5.5% to 1.6%for the year due to the 8.8% hike in production costs – principallydriven by significant increases in the main raw materials and theprevailing conditions in the Company’s principal markets. In the year, BRF recorded progress in its international operations based on its four key pillars of brand, portfolio, advances in distribution logistics and local production. The followinginitiatives are of note: Argentina –Initiation of a process of consolidation and capture of synergies of five companies through concentration on BRF Argentina, with nine plants and 22 chilled and frozen distributioncenters. Work has been accelerated since June when the company took full control of Quickfood, leader in the hamburger market with the Paty brand, as part of the asset exchange agreement. Integrated operations in the Argentine market represented R$ 1.2 billion of sales/year. | Africa – Sadia-branded products, previously commercialized totrading companies and wholesalers, were substituted by the Perdix brand. The Sadia brand will be relaunched in 15 countries in Africa in 2013 with the focus on retailing and food services and a new portfolio to include breaded products, pastas, frankfurters and hamburgers. More than 210, products were launched on the international market during the year. In Europe, a novelty was the launch inAugust of the Chixxs line of breaded products with specific flavors(Indian, Mexican, Italian). A new international marketing strategy is designed to position Sadia as a premium brand. The new concept evaluated in 22 countries and by more than 7 thousand people presents asingle visual identity but with regionalization of packaging andcommunication through colors and images. During the year, the leading markets recorded the followingperformance in revenues and volumes comparing 2012 with 2011. | ||
Company | Activity | ||
Avex | Slaughter and sale of whole chicken and chicken parts. | ||
Dánica | Leader in margarines, vice leader insauces, manufacturer of pasta andcooking oil. Has two plants and 22 distribution centers. | ||
Levino Zaccardi | Exports cheeses to Brazil. Has a plant. | ||
Quickfood | Leader in hamburgers with the Paty brand. The company has four plants. | ||
Sadia Argentina | Imports foodstuffs from Brazil. | ||
Middle East –Start of work on the construction of a processedfoods plant in Abu Dhabi (United Arab Emirates) withinauguration scheduled for 2013. The first to be built outsideBrazil, the unit will have a capacity to produce approximately 80 thousand tons per year of breaded products, hamburgers, pizzasand specialty meats products. A 49% stake in Federal Foods was also acquired, a company which for more than 20 years has distributed products under the Sadia brand name in the region. The company has six branches in the United Arab Emirates and one in Qatar, serving two thousand points of sale. The company also distributes Hilal and Perdix brands. Europe –A new high productivity line was installed at Plusfood with technological improvements and a 75% expansion in production capacity to 20 thousand tons annually of breaded, cooked and grilled chicken products as well as hamburgers and other items. China –A company was constituted with Dah Chong Hong Limited (DCH) for the distribution of the Sadia brand to the retailingand food services segments in Hong Kong and Macau. The jointventure is responsible for BRF’s businesses in the Chinese market including the Perdix brand and all the Company’s operations - forwhich DCH’s existing storage, sales and distribution infrastructure will be used. During the year, feasibility studies were initiated for building a processing plant in China using raw material imported from Brazil or acquired locally. |
Main markets | Revenues | Volume | Plant remodeling has adopted these guidelines. In 2012, 11 units of the dairy products business underwent expansion andmodernization with an increase in the number of shifts and thehiring of additional labor. More than R$ 30 million was invested in the cheese plant in Itumbiara (GO) which is now producing a thousand tons per month. Building work began on a modern factory in Barra do Piraí in the state of Rio de Janeiro with a capacity of 15 million liters per month for ecientl y meetingdemand from one of the largest markets for fluid milk in Brazil atlower cost. The Company also signed a joint venture with Carbery to improvethe processing of whey protein ingredients, a byproduct of cheese manufacture, using the Irish group’s technology. The agreement involves a shared investment of US$ 50 million for the construction of a production unit which is scheduled to begin operations in 2014. FOOD SERVICES The focus during the year was in the harmonization ofcommercial models in a challenging period for the sector. The strong upward trend in the consumption of away-from-homeeating which has characterized the last few years suffered frominflation in the services segment driven by spiraling rental and labor costs. In meeting the challenge of these diculties, the f ood services unit expanded its commercial force, consolidated services provided to 62 thousand companies and gained market share with strategic clients. In spite of a less positive scenario, the business was able to report growth of 10%. Investments werealso made in a new category of product: sachets of ketchup,mustard and mayonnaise produced by the plant acquired in Argentina. This launch represents part of the strategy of increasing innovation for leveraging the growth and value of the business. Revenues from the food services segment rose 7.9% to R$ 1.6 billion with volumes 0.9% higher on an operational margin of 10.7% against 15.1% in 2011 and R$ 166,9 million in operationalresults – a 23.3% decline in relation to the year 2011. The segment’s growth has been driven principally by twoimportant factors: level of employment and income whichwill tend to maintain upward momentum. Another important element is the change in life style with the emergence of a new consumer profile with greater purchasing power and seeking practicality in eating. This sector of the population have their meals more frequently away from home being principally made up of retirees, small families or those living alone. Away-from-home meals should receive a further boost from tourism and services thanks to the major sporting eventsprogrammed for future years such as the Confederations Cup in 2013, the World Cup in 2014 and the Rio Olympics in 2016. Another growth catalyst is the international market with theopportunities that are opening up in China as a result of the joint venture with Dah Chong Hong Limited (DCH) for food services inthat country as well as meeting demand from the global fast food network accounts. | |
Middle East | +28.8% | +13.1% | ||
Far East | +4.4% | +11.2% | ||
Europe | +2.0% | +1.8% | ||
Eurasia | +38.7% | +32.8% | ||
South America | +29.5% | +37.2% | ||
Africa | +10.2% | (1.3)% | ||
DAIRY During the year, the Company repositioned the Batavo and Elegêbrands, investing in new packaging to communicate the new concepts of the product lines in a more ecient w ay. Anotherinitiative which gained traction was the ‘Cheese you ask bythe brand and it’s Sadia’(Queijo se pede pela marca, e é Sadia)marketing campaign. The objective is to reinforce BRF’s presence, expanding its market share of higher value-added products suchas processed and refrigerated items. The Company ended 2012 as the third largest dairy products manufacturer in Brazil with a 10.5%share of domestic business in the segment. In line with Mundo Batavo guidelines, the brand adopted the ‘Thinking about your nature’(Pensado para sua natureza)signature. This is printed on the packages and conveys the concept of a sustainable waste-free world with attributes of wellbeing, balance and nature, proposing solutions for the life of the modern man. The entire project is focused on innovation. The Pense Zero line added functional products to the yogurts line such as Bio Fibras. With the launch of thePedaçosline (with fruit chunks), a yogurt with up to ten times more fruit than similar products in the market, the brand reported a 3.3 percentage points growth by volume in the cups category between April and November (Nielsen data). With the Elegê brand, restyled packaging helps disseminatethe new brand slogan: One gesture, two smiles(Um gesto, dois sorrisos). On the back of the packages are stories of a ection and on the side, there is space where consumers can leave messages. Market leader in various categories in the states of Rio Grande do Sul and Rio de Janeiro, BRF is now seeking to expand and strengthen the brand’s footprint throughout the country. Forexample, the strategy includes the launch of products customizedto habits of the Northeast Region such as milk-based drinks in sachets. Revenue from milk products amounted to R$ 2.7 billion, a growth of 6.9% with volumes 0.7% down and average prices 7.7% higher while average costs rose 7.6%. The operating margin recovered from a 1% decline in profitability in 2011 to stability in 2012 The major challenge in 2012 was to fully integrate the dairy products business into BRF’s operational structure. The capture of synergies will benefit production and this process should becomplete by the end of 2014, involving: distribution centers, and sales, technical and management teams; definition of the optimum size of the business prioritizing results; improvingexecution and growth in a sustainable manner. | ||||
ECONOMIC-FINANCIAL PERFORMANCE Net Operating Sales BRF reported net operating sales of R$ 28.5 billion in the year, a growth of 10.9% the result of organic growth, the incorporation of companies acquired in Argentina, more especially Quickfood, and an expanded portfolio thanks to innovation with the launch of various products and categories designed to cushion the impact of asset transfers in 3Q12 in accordance with the agreement signedwith Cade (TCD). | Cost of Sales (CPV) Cost of sales rose 15.8% year-on-year to R$ 22.1 billion, reporting an increase proportionally greater than sales revenue, squeezingmargins during the year. The principal impacts on costs of productssold were: 1) the significant increase in the cost of the principal raw materials – corn and soybeans due to failure in the American grain crop; 2) readjustments in the industry as a whole as a result of collective wage bargaining; 3) an increase in items restated against the foreign exchange rate such as: packaging, freight, vitamins; 4)temporary spike in production costs due to the breakup of certainparts of the Company with the implementation of the TCD process. Gross Profit and Gross Margin Gross Profit amounted to R$ 6.5 billion, a 3.1% reduction in the year with a gross margin 3.3 percentage points lower than reported for 2011, declining from 25.9% to 22.6%. In spite of the positive commercial performance in sales, margins remained under pressure from rising costs. Operating Expenses Thanks to e orts to reduce overall expenses, BRF was able to maintain operating expenses at the same level as 2011 at 16.5%. Commercial expenses increased 12.5%, reflecting the growth of variable expenses due to: 1) investments in the developmentof new lines and products (innovation), product launchesand marketing campaigns; 2) an increase of operations in the logistics chain, which was also significantly impacted by the TCDprocess (transfer of assets and repositioning of the portfolio anddistribution channels); 3) port and truck driver strikes. Administrative expenses and fees fell 8.9% due to the simplification of the administrative structure of the relationship between BRF and its subsidiaries and the lower disbursements of consultancy fees in the quarter (in 2011, there were significantpayments to consultancies advising the Company in its negotiations with CADE for approving the merger). |
Debt profile|GRI EC1| | |||||
As of 12.31.12 | As of 12.31.11 | ||||
R$ million | Current | Non current | Total | Total | %Ch |
Local currency | (1,933) | (2,210) | (4,143) | (3,600) | 15 |
Foreign currency | (761) | (4,867) | (5,628) | (4,724) | 19 |
Gross debt | (2,694) | (7,078) | (9,772) | (8,324) | 17 |
Cash investments | |||||
Local currency | 1,106 | 61 | 1,242 | 1,227 | 1 |
Foreign currency | 1,480 | 107 | 1,512 | 1,690 | (11) |
Total cash investments | 2,586 | 167 | 2,753 | 2,916 | (6) |
Net accounting debt | (108) | (6,910) | (7,018) | (5,408) | 30 |
Exchange rate exposure | |||||
US$ million | (412) | (471) | (13) |
Value added distribution|GRI EC1| | |||
R$ million | 2012 | 2011 | %Ch |
Human resources | 4,035 | 3,608 | 12 |
Taxes | 3,542 | 3,743 | (5) |
Interest | 1,852 | 1,645 | 13 |
Interest of shareholder’s equity | 275 | 632 | (57) |
Retention | 538 | 735 | (27) |
Minority interests | 7 | (2) | - |
Total | 10,250 | 10,360 | (1) |
Other Operational Expenses Despite the pre-operational phase of the new industrial units,insurance claims, provisions for tax risks, results of TCD-relateddivestments, the other operational expenses item posted adecline of 5.4% in the year due to revenues from the reversal ofprovisions, recovery of expenses and leasing with third parties.Expenses with profit sharing are also booked under this item andrecorded a decline as a reflection of the operating results. Operating result before financial expenses andoperating margin In the light of the above explanations, the operating resultbefore net financial expenses reached R$ 1.4 billion in the year –30.6% down in relation to the operating margin of 4.9% of netsales against 7.8%. The 2.9 percentage point decrease is due to a combination of factors during the year of a one-off naturesuch as: inflated inventories in the Japanese market; pressure on variable commercial costs and expenses; and extraordinaryexpenses due to the transitory process of transferring assets in accordance with the provisions of the TCD. Financial result Net financial expenses totaled R$ 570.6 million, a 19.0% increase,especially due to higher debt levels as a result of the currency effect and the need to allocate cash to support investments inCapex and working capital, the result of reduced cash generation in the period. In the light of the high level of exports, the Company conductsoperations with the specific purpose of currency hedging. In accordance with hedge accounting standards (CPC 38 and IAS39), the Company uses financial derivatives (for example: NDF) and non-derivative financial instruments (for example: foreigncurrency debt) for hedge operations and concomitantly, to eliminate the respective unrealized foreign exchange ratevariations from the income statement (under the Financial Expenses line). The use of non-derivative financial instruments for foreignexchange cover, continues to permit a significant reduction in the net currency exposure in the balance sheet, resulting insubstantial benefits through the matching of currency liability flows with export shipments and therefore contributing to areduction in the volatility of the financial result. On December 31, 2012, the non-financial derivative instrumentsdesignated as hedge accounting for foreign exchange cover amounted to USD 614 million, and a proportional reduction | in book currency exposure of the same value. In addition, thefinancial derivative instruments designated as hedge accounting according to the concept of a cash flow hedge for coverage ofhighly probable exports, totaled USD 1,007 million + EUR 197 million + GBP 53.4 million and also contributed directly to thereduction in currency exposure. In both cases, the unrealized result for foreign exchange rate variation was booked toshareholders’ equity, thus avoiding the impact on the Financial Expenses. The Company’s net debt was R$ 7 billion, 29.7% more thanreported for December 31, 2011, resulting in a net debt to EBITDA ratio (last twelve months) of 2.6 times with a book currencyexposure of US$ 411.6 million, a 12.5% decline. Income Tax and Social Contribution Income tax and social contribution totaled a positive R$ 2.4million in the year against a negative R$ 156.5 million reported in 2011 due to the differences in tax rates on the results ofoverseas subsidiaries and foreign exchange variation on overseas investments. This deterioration is a combination of reductionsinterest due to the results of the overseas subsidiaries and payment of on equity before the provision for tax losses as a result ofthe incorporation of Sadia recorded in 2011. Participation of non-controlling shareholders The result of R$ 7.4 million negative against R$ 2.3 millionpositive in 2011 recorded for this item reflects the consolidation of results of the subsidiaries acquired in Argentina through Avexand, as from 3Q12, the incorporation of the results of Quickfood plus those of the Al Wafi and Plusfood subsidiaries, amongothers. Net Income and Net Margin In the light of the foregoing, the net income was R$813.2 millionin 2012 with a net margin of 2.9%, a decline of 40.5% compared with 2011 due to the squeeze on margins during the year fromproduction costs which reported a proportionally greater increase than revenues. EBITDA Adjusted EBITDA (operating cash generation) reached R$ 2.7billion, a 17.4% decline, recording an adjusted EBITDA margin of 9.4% against 12.6% in 2011, down by 3.2 percentage points.EBITDA reached R$ 2.3 billion in 2012 (18.7% lower than 2011), with EBITDA margin of 8.2% against 11.2% in 2011. | |
EBITDA (adjusted)|GRI EC1| | |||
R$ million | 2012 | 2011 | % Ch. |
Net income | 813 | 1,367 | (41) |
Income tax and social contribution | (2) | 157 | (102) |
Net financial income | 571 | 480 | 19 |
Depreciation, depletion and amortization | 967 | 886 | 9 |
= EBITDA | 2,348 | 2,890 | (19) |
Other operating results | 347 | 366 | (5) |
Equity income | (22) | (9) | 150 |
Non-controlling shareholders | 7 | (2) | - |
= adjusted EBITDA | 2,680 | 3,244 | (17) |
The expenses net of Operating Results are shown in explanatory note 33. The disclosure of adjusted EBITDA is in line with what the Company has already informed in the presentationsof previous quarterly and/or annual results or in other publications released to the market. | |||
SALES
Domestic market | Thousand tons | R$ million | ||||
2012 | 2011 | % Ch. | 2012 | 2011 | % Ch. | |
In natura | 463 | 379 | 22 | 2,263 | 1,887 | 20 |
Poultry | 329 | 251 | 31 | 1,351 | 1,112 | 21 |
Pork/beef | 134 | 128 | 5 | 911 | 774 | 18 |
Processed | 1,643 | 1,810 | (9) | 9,462 | 9,188 | 3 |
Other sales | 456 | 402 | 14 | 894 | 555 | 61 |
Total | 2,562 | 2,591 | (1) | 12,619 | 11,630 | 9 |
Exports | Thousand tons | R$ million | ||||
2012 | 2011 | % Ch. | 2012 | 2011 | % Ch. | |
In natura | 2,101 | 1,882 | 12 | 9,436 | 8,126 | 16 |
Poultry | 1,795 | 1,624 | 11 | 7,569 | 6,572 | 15 |
Pork / beef | 307 | 258 | 19 | 1,866 | 1,554 | 20 |
Processed | 372 | 342 | 9 | 2,182 | 1,925 | 13 |
Other sales | 9 | 40 | (78) | 8 | 42 | (82) |
Total | 2,482 | 2,264 | 10 | 11,626 | 10,093 | 15 |
Dairy | Thousand tons | R$ million | ||||
2012 | 2011 | % Ch. | 2012 | 2011 | % Ch. | |
Dry division | 762 | 834 | (9) | 1,636 | 1,706 | (4) |
Fresh and frozen division | 216 | 236 | (9) | 1,018 | 833 | 22 |
Other sales | 85 | - | 60 | - | ||
Total | 1,063 | 1,071 | (1) | 2,714 | 2,539 | 7 |
Food service | Thousand tons | R$ million | ||||
2012 | 2011 | % Ch. | 2012 | 2011 | % Ch. | |
Total | 230 | 228 | 1 | 1,558 | 1,444 | 8 |
Total | Thousand tons | R$ million | ||||
2012 | 2011 | % Ch. | 2012 | 2011 | % Ch. | |
Total | 6,337 | 6,153 | 3 | 28,157 | 25,706 | 11 |
Cash flow | INVESTMENTS In all investments, BRF ensures that its partners use business processes that respect human rights, including verification of any indication of child labor or inhumane working conditions. In the case of mergers and acquisitions, joint ventures, associations and joint operations with other companies, these procedures are evaluated by means of internal and external audits, visits, meetings andquestionnaires. During the feasibility assessment phase of investment projects, the Company also considers environmental impacts andendeavors to ensure the use of more environmentally ecient technologies.|GRI HR1| Investment in Capex during the year amounted to R$ 2.5 billion, 25%higher than the preceding year and directed to growth, eciency and support projects. Investments of R$ 494 million in biological assets (breeder stock) for supplying growth projects are also considered in this amount. Two joint ventures were created in 2012 – the Rising Star Food Company Limited (China) and the Carbery Group (Brazil) – and two companies were acquired – Quickfood (Argentina) and Federal Foods (United Arab Emirates). There were also investments inplants – new units for margarine, in Vitória do Santo Antão (PE), and for sausages, in Lucas do Rio Verde (MT); expansions to poultry slaughtering facilities in Lucas do Rio Verde (MT), Rio Verde (GO), Dois Vizinhos (PR), Toledo (PR), Dourados (MS) and Nova Mutum (MT); the alignment of the Rio de Janeiro (RJ) Distribution Center; and the construction of the new Technology Center in Jundiaí (SP). | |||
R$ million | 2012 | 2011 | ||
Cash flow from operating activities | ||||
Result of the fiscal year | 813 | 1,367 | ||
Ajustments to the result | 2,860 | 1,907 | ||
Changes in assets and liabilities | ||||
Accounts receivable from clients | 90 | (640) | ||
Inventory | (362) | (539) | ||
Interest on Shareholder’s Equityreceived | 9 | 6 | ||
Suppliers | 669 | 567 | ||
Payment of contingencies | (203) | (203) | ||
Interest payment | (495) | (466) | ||
Payment of income tax and socialcontribution | (98) | (38) | ||
Salaries, social obligations andothers | (841) | (809) | ||
Net cash provided by operatingactivities | 2,443 | 1,152 | ||
Investments activities | ||||
Financial investments | 46 | 29 | ||
Acquisition of companies | (11) | (230) | ||
Other investments | (52) | (9) | ||
Acquisition of fixed assets | (1,884) | (1,130) | ||
Acquisition of biological assets | (494) | (492) | ||
Revenue from the sale of fixedassets | 51 | 6 | ||
Intangible investments | (15) | (59) | ||
Cash from invested investmentactivities | (2,373) | (1,885) | ||
Financing activities | ||||
Loan and financing | 911 | 259 | ||
Interest on shareholders’ equity | (440) | (502) | ||
Acquisition of treasury shares | 13 | (72) | ||
Goodwill on acquisition of non-controling shareholders | (34) | (12) | ||
Cash from (invested) in financingactivities | 450 | (326) | ||
Currency variation on cash and cashequivalents | 43 | 116 | ||
Net increase (decrease) in cash | 564 | (944) | ||
Cash and equivalents at the beginningof the period | 1,367 | 2,311 | ||
Cash and equivalents at the end of theperiod | 1,931 | 1,367 |
Environmental investments (R$ million)|GRI EN30| | |||||
R$ million | 2010 | 2011 | 2012 | ||
Prevention andmanagement | 24.3 | 37.8 | 60.2 | ||
Allocation, treatment andmitigation | 74 | 80.2 | 61.2 | ||
Investment in forestryplantation(1) | 45.8 | 28.2 | 35.5 | ||
Total | 144.1 | 146.2 | 156.9 | ||
SHARES AS AN INVESTMENT BRF shares reported a year-end price of R$ 42.19 on the São PauloStock Exchange (BM&FBovespa) while the Company’s ADRs closedat US$ 21.11 on the New York Stock Exchange, appreciating 15.8percent and 8.0 percent, respectively. Performance exceeded theIbovespa, the stock index comprising the most liquid stockstradedDow Jones index (up 7.3%) on the Brazilian bourse, the latter increasing by 7.4 percent, and the . The Company’s market value reachedR$ 36.8 billion, up 15.7 percent from 2011. For the third consecutive year, and as part of the objective ofintensifying its relationship with the stock market, the Company held the BRF Day during the Apimec National and the São Paulo,Rio de Janeiro, Belo Horizonte and Porto Alegre regional chaptermeetings. In São Paulo, the public meeting was followed by | ringing the opening bell of the trading day at the invitation ofBM&FBovespa, with live transmission and simultaneous translation.In addition, BRF’s CEO and CFO also hosted BRF Days in New Yorkand London. Several conferences were also held together withone-on-one meetings, conference calls and visits with domesticand international investors, revealing expressive demand frominvestors and capital market analysts. Remuneration paid out to Shareholders The Board of Directors approved shareholder remuneration in theamount of R$274.7 million, corresponding to R$ 0.315855520 pershare with payouts on August 15, 2012 (R$ 0.11501051 per shareand on February 15, 2013 (R$ 0.20084501 per shares) as intereston equity with withholding tax at source as per the legislation ineffect. In Ordinary and Extraordinary Shareholders Meeting, will beproposed the amount of R$45.3 million. The amount distributed tothe shareholders during fiscal year 2012, represented 39.3% of thenet income reported in the period. | |
Performance on the BM&FBovespa | Performance on the NYSE | |||||
2012 | 2011 | 2012 | 2011 | |||
Closing prices (R$) | 42.19 | 36.42 | Closing prices (US$) | 21.11 | 19.55 | |
Stock trading volume (millions) | 584.0 | 593.7 | ADR trading volume (millions) | 480.6 | 488.8 | |
BRFS3 change | 15.8% | 33.2% | BRFS change | 8.0% | 15.8% | |
Bovespa index | 7.4% | (18.1%) | Dow Jones index | 7.3% | 5.5% | |
IGC | 19.0% | (12.5%) | ||||
ISE | 20.5% | (3.3%) | ||||
INTELLECTUAL CAPITAL COMPETITIVE ADVANTAGES BRF’s distinctive characteristics allow it to stand out from thecompetition and maximize growth opportunities. A portfolioof brands and products positioned to serve different consumer profiles, plus a robust physical structure, efficient operational capabilities and human capital make up a set of intangible assetsthat give the Company a competitive edge. Brands –As the owner of strong brands that enjoy widespreadpublic recognition and are benchmarks for quality – such as Sadia, Perdigão, Chester, Batavo, Elegê and Qualy, in Brazil; and Perdix, Sadia, Hilal, Paty and Dánica, in Argentina, to name a few –, BRFhas invested in the positioning of its corporate image and is nowmaking progress towards being recognized as a leading brand in its segment and also admired in all its chosen markets in Braziland overseas.(See page 27 for additional information) Portfolio –With a sound and diverse portfolio that includes over 3.3 thousand products, BRF reaches different consumer audiences and conveys a sense of trust to all of them. Over the year, around 300 products were launched on the domestic andinternational market among processed, frozen, industrialized, ready-to-consume, pizza and dairy lines. |
Innovation and technology –Acknowledged as one of the 100 most innovative companies in the world according to the 2012Forbes magazine ranking, the Company invested R$ 106 millionin a new technology center. Built in the city of Jundiaí (SP), in the same complex already occupied by a distribution center and a laboratory, the research facility houses the activitiespreviously carried out at the Vieira (SC) and Concórdia (SC) centers. Concentration in a single site will bring synergies toresearch and development activities as will the single team of 250, facilitating interaction with the marketing teams based at the São Paulo headquarters. The center has physical-chemical and microbiological laboratories as well as those for sensorial analysis, materials and packaging in addition to eight experimental kitchens. There are also facilities for developing and testing food service products. Another highlight in 2012 was the implementation of a unified Information Technology system at all units so that activities and processes may now operate under the same management and procedures model. Production structure –The operational structure is distinguished by the geographic location of its production units, which, inline with the agreement with Cade and the implementationof a unified manufacturing management model, mark thebeginning of a new phase of optimized production capacity.The new model was responsible for defining and implementing identical procedures and practices for all operations and will be replicated in the dairy products area during 2013. The high level of automation at our plants and our skilled labor force are additional competitive advantages, further improved in 2012 with the introduction of new technology intended to automate repetitive processes. | Logistics and distribution network –BRF’s supply chain is oneof the largest operations of its kind among Brazilian companies.Products are shipped from 52 units in 11 states and are distributedto 150 thousand points of sale across Brazil. The physicaldistribution matrix and the production system are synchronizedsuch that production is able to meet demand in terms of quantity, quality and range of orders. Logistics is responsible for making deliveries at the precise place and time agreed. BRF employs practically every mode of transportation to get its products to the points of sale. In the domestic market, most ofthe cargo is shipped by trucks of various sizes (an outsourced fleetof 8 thousand vehicles) and rail although there was an increasein the use of coastal shipping in 2012. Distribution will becomeeven more synergistic and ecient in 2013 with deliv eries of all segments and brands made possible from a single truck and also as a result of the integration of warehouses. Internationally, the development of the distribution network is a challenge. In2012, progress was made in distribution in Saudi Arabia: withthe incorporation of the joint venture partner responsible for importing and distributing our products in the local market, BRF gained more than 2 thousand points of sale. Again, in May 2012 the joint venture in Asia also helped boost retail and food servicedistribution in Hong Kong, Macao and Continental China. Human capital –All employees at BRF are critical to theCompany’s expansion and consolidation process and regarded asits most important intangible asset. With a team of experienced,professional executives, the Company maintains training coursesthat include a leadership program which serves as a forum for the exchange of experiences. Although employee profiles change from one job position to another, our human capital is made upof people who are aligned with the Company’s values, adaptableto a constantly changing arena and committed to the results and goals set out in the BRF 15 Plan. Management –BRF’s management model focuses on planning and is aligned with the best transparency practices in the market. Its main distinction lies in the ability to execute and maintain operations under complex scenarios. The major work done in2012 to comply with the conditions in the agreement with Cade is proof of the Company’s managerial efficiency. |
Awards|GRI 2.10| | ||
Awards and Recognitions | Reason | Institution |
Among the Best Companies in | Meeting with the investment analyst community | Investor Relations Magazine Awards |
Corporate Governance | Conference call | |
Company in socio-environment sustainability | ||
(7th placed ) | ||
Corporate IR Program in Latin America | ||
World’s 100 most innovative | Products and processes innovation | Forbes magazine (international) |
companies | ||
Best Companies to Shareholders | Best Companies to Shareholders | Capital AbertoMagazine |
Top of Mind 2012 Awards | Sadia and Qually brands | Folha de S.Paulonewspaper |
Large Agribusiness Company | Large Agribusiness Company and Exports Highlight | A Notícianewspaper and Instituto |
and Exports Highlight | Mapa | |
Best & Biggest | Best agribusiness company | Exame magazine |
Executive ofValor | CEO José Antonio do Prado Fay | Valor Econômiconewspaper |
Best ofDinheiro | Best company in the food industry and best in Social | IstoÉ Dinheiro magazine |
Responsibility and Corporate Governance management | ||
in food sector. | ||
Best in Agribusiness 2012 | Largest company in the meat industry | Globo Rural magazine |
Aberje 2012 Award | Integrated Communication (regional and national) | Brazilian Business Journalism |
Association(“Associação Brasileira de | ||
Jornalismo Empresarial” – Aberje) | ||
Sesi Award for Workplace | BRF’s Videira unit placed first in the Occupational | Serviço Social da Indústria(Sesi) |
Quality | Safety and Health category,with Automation of | |
Industrialization of Frankfurter Sausage Activity. | ||
500 Biggest in Southern Brazil | Food and Beverage industry | Amanhã magazine |
Abre Brazilian Packaging Award | Best Graphic Design in the Food and Beverage category, | Brazilian Packaging Association |
for the new Batavo visual identity | (“Associação Brasileira de Embalagens” | |
– Abre) | ||
Green Wave Trophy of the | Automation Project for the Monitoring of the Capinzal | Editora Expressão |
Expressão Award for Ecology | Reactor Aeration System Waste Water Treatment in the | |
Conservation of Production Inputs – Energy. | ||
HUMAN CAPITAL With its focus on the performance of people, BRF is constantlyanalyzing the market scenario, adapting to tendencies andimplementing improvements in programs and processes. In2012, the Company prioritized alignment and standardization toensure that employees at all levels are in harmony with the BRFCulture so that development can proceed in accordance with theBRF15 strategic plan. The Company is a major employer in the agro-industrial sector – more than 80% of its employees are located in small cities –,driving local economies and collaborating with the development of society. The corporate culture’s values and mission arebeginning to be disseminated outside Brazil in line with BRF’s internationalization thus preparing the Company’s executives tooperate in an intercultural environment. BRF’s human capital incorporates a universe of more than 120 thousand people, between direct and outsourced employees.The Company adopts a policy of internal recruiting and the selection process is decentralized through the individual units.The principal purpose is to attract, select and direct manpower in accordance with its profile and potential, hiring those alignedwith BRF’s values. The practice is to prioritize candidatesoriginating from the location where there is a vacancy. The targets for internal recruitment in 2012 for leadership posts were maintained, 84% of all vacancies being filled by candidates fromamong the Company’s employees – an advance in relation to the78% for 2011.|GRI EC7| |
Employees by labor contract and gender|GRI LA1| | |||||
2012 | |||||
Type of contract | 2010¹ | 2011¹ | Men | Women | Total |
No fixed duration | 113,059 | 116,889 | 65,571 | 43,902 | 109,473 |
Fixed duration | 647 | 1,237 | 299 | 132 | 431 |
Outsourced² | 13,267 | 12,301 | ND | ND | 10,166 |
Interns and apprentices | 454 | 299 | 731 | 768 | 1,499 |
Employees outside of Brazil | 555 | 1,970 | ND | ND | 4,087 |
Total employees³ | 127,982 | 132,696 | 66,601 | 44,802 | 125,656 |
¹ Data for 2009, 2010 and 2011 includes employees in Brazil, at Plusfood, Dánica, Avex and expatriates. ² BRF still does not monitor this information by gender. ³ Pursuant to the Performance Commitment Agreement (TCD) signed with CADE, 8,849 employees were transferred to the company which acquired BRF’s assets. | |||||
Workforce composition|GRI LA13| | ||||||
Aged up to | ||||||
Categories | Total | Men | Women | 30 | 30-50 | Over 50 |
Oc ers | 52 | 46 | 6 | 0 | 36 | 16 |
Managers | 519 | 418 | 101 | 8 | 454 | 57 |
Supervisors/coordinators | 2,110 | 1,746 | 364 | 246 | 1,741 | 123 |
Administrative2 | 10,903 | 5,830 | 5,073 | 4,913 | 5,581 | 409 |
Operational | 96,320 | 57,830 | 38,490 | 41,377 | 49,751 | 5,192 |
Interns and apprentices | 1,499 | 744 | 755 | 1,480 | 19 | 0 |
Total¹ | 111,403 | 66,614 | 44,789 | 48,024 | 57,582 | 5,797 |
Percentage | 100% | 60% | 40% | 43% | 52% | 5% |
1BRF does not monitor this information on the basis of gender. ² In accordance with the Performance Commitment Agreement (TCD) signed with Cade, 8,849 employees were transferred to the company which acquired BRF’s assets. | ||||||
Turnover (monthly average)¹|GRI LA2| | ||||
Turnover | 2010 | 2011 | 2012 | |
Employee terminations | 33,996 | 31,035 | 35,385 | |
Employees transferredin accordance with theTCD² | NA | NA | 8,849 | |
Turnover (%)³ | 2.33% | 2.07% | 2.34% | |
¹ Data relates to the operation in Brazil only. ² In accordance with the Performance Commitment Agreement (TCD) signed withCADE, 8,849 employees were transferred to the company which acquired BRF’sassets. ³ Turnover rate was calculated excluding transferred employees under the TCD. | ||||
OCCUPATIONAL HEALTH AND SAFETY Safety indicators|GRI LA7| | | BRF’s policy on occupational health and safety in 2012 was centered around discussions on a regulatory norm for the sector, the publication of which is scheduled for the first half of 2013. Negotiations have led to the conclusion that two years will be needed to readapt the manufacturing dynamics to the six parameters proposed in the legislation in view of the modifications required to allow production lines to operate with more employees as well as the time needed to hire and train personnel. Various programs are designed to achieve better conditions of health and quality of life, such as the New Being (Novo Ser) forpregnant women, BRF Smile (BRF Sorridente) – dental treatmentand oral health, Male Health, Female Health, Viva Saúde for the prevention and monitoring of chronic illnesses, Health Moment (Momento Saúde) supplying information by e-mail, banners orwall notices and other one-off initiatives – such as campaignsfor the prevention of HIV/Aids, combating smoking, narcotics and dengue fever. Other initiatives are the Quality of Life at Work, which prioritizes the monitoring of work breaks, rotationand muscular strengthening (fitness center), the ErgonomicsProgram and the Medical Control and Occupational HealthProgram.|GRI LA8| TRAINING AND EDUCATION In a year of major challenges, BRF sought to upgrade its teamthrough training and education. Development initiatives –such as the Performance Cycle, Feedback and the Individual Development Plan – were expanded to more areas. Advanceswere made in training parameters, an indication of the focus on preparing employees to better exercise their functions and to take advantage of future opportunities arising internally, thus contributing to the retention of these professionals. The Leaders Development Plan, which prepares individualsfor future vacancies in supervisory jobs, has been extended to the productive units. An e-learning program was launched for Integration of leaders with content covering from institutional aspects to essential information for the daily routine of the newmanager. The Company continues to run its programs for internsand trainees, directed towards candidates who are students or who have recently graduated from college. | |||
Indicators | 2010 | 2011 | 2012 | ||
Accident Frequency Rate- with time o work1 | 5.01 | 3.06 | 1.97 | ||
Frequency Rate -occupational diseases1 | 0.96 | 0.2 | 0.11 | ||
Severity Rate1 | 473 | 216 | 197 | ||
PercentageAbsenteeism2 | 3.38% | 3.25% | 3.38% | ||
Fatalities (absolutefigures) | 4 | 53 | 34 | ||
Accidents with time owork | 1,078 | 690 | 441 | ||
Accidents without timeo work | 2,693 | 2,266 | 2,176 | ||
¹ Frequency and severity rates per each one million man-hours of work, according to NBR 14.280. The dissemination of the Health, Safety and Environment (SSMA) culture is one of Human Resources’ priorities, the process being adapted to area characteristics, although sharing the basic premise that all personnel must be aware of the principles to be applied on an individual and corporate basis. The SSMA program shows significant progress from year to year. The accident Frequency Rate with time o w ork for example has shown a reduction of 77.1% since 2008. In 2012, the rate was 35.6% down on 2011, exceeding the target for an annual reduction of 10%. In 2013, the objective is to reduce the rate by a further 5% on the result for 2012.|GRI LA7| Since 2008, 60,116 employees have received SSMA training. Initiatives in this context include the weekly Health, Safety andEnvironment Dialog, a simple and systematized way of covering issues inherent to these themes; SSMA seminars, an annualevent held in various regions of the country with the purpose ofdisseminating good practices and realizing critical analyses ofthe indicators; and the Internal Accident Prevention Commission (Cipa), made up of management and employee representativesfor identifying potential occupational risks, among others. |
Hours of training|GRI LA10| | ||||||
Training | Hours of training | Average hours of training per employee | ||||
Position | Male | Female | Total | Male | Female | Total |
Oc ers /Managers | 932 | 221 | 1,153 | 2.21 | 2.21 | 2.21 |
Supervision/Coordination | 15,667 | 3,117 | 18,784 | 7.83 | 6.36 | 7.54 |
Administrative | 27,129 | 16,416 | 43,545 | 2.18 | 2.19 | 2.18 |
Operational | 337,721 | 227,828 | 565,549 | 6.62 | 6.34 | 6.51 |
Total | 381,449 | 247,582 | 629,031 | 5.79 | 5.62 | 5.72 |
SOCIAL CAPITAL BRF periodically engages its stakeholders for reviewing its sustainability programs and actions. In 2012, it ran panels with key stakeholder representatives (shareholders, clients, consumers, sector entities, specialists, suppliers, employees, media, academia and NGOs) to identify the principal interestsand concerns. A total of 81 people were involved – 28 companyleaders and 53 representatives of external stakeholder groups with a specific panel for suppliers. The purpose was to evaluate the relevance of themes involving changes that have taken place in the relationship and involvement for joint action inthe challenges of sustainability facing the Company, using itsSustainability Pillars as framework.|GRI 4.14, 4.15, 4.16| | ||
VALUE CHAIN In 2012, BRF expanded its initiatives under the Supply Chain Monitoring Program. The aim is to identify and minimize theprincipal social and environmental risks by reducing impacts, developing new operational opportunities, disseminating sustainability and improving the relationship with suppliers onsix fronts: beef, grains/meal/oil, logistics, ranching, supplies anddairy products. The Program’s focus was on the training and raising the awareness among negotiators and suppliers of the standards of sustainability. Participants are able to understand the details and targets for meeting the requirements of the Program,involving the signature to the Code of Conduct, the execution ofsocio-environmental evaluations and audits. These actions cover 50% of the negotiators in the supplies and grains, meal and oils departments, a total of 90 people, and should reach 100% of the group in 2013. The Company began disseminating the Code of Conductfor Suppliers in early 2012 to reiterate the commitment to responsible management and sustainability. The documentwas sent to 893 suppliers and, by the end of December, 209(10% of suppliers) had returned the Instrument of Awareness and Agreement. The self-evaluation questionnaire was sent to 232 suppliers of which 162 replied to the socio- environmental questions (such as the combat of child or forced labor, freedom of association and correct environmental management). The target for 2013 is to have a 60% acceptance rate among criticalsuppliers for the Code of Conduct As a practice, BRF does not enter relationships with suppliers that do not comply with the minimum standards of human rights (child or forced labor), labor rights (freedom of association) and respect for the environment. In 2012, none of these riskswas identified in the Company’s operations although there weresome cases where contracts were terminated with suppliers (integrated outgrowers, suppliers of grains, meal and oil and freight services) not in compliance with a given item of theProcurement Policy (example: absence of an environmentallicense).|HR5, HR6, HR7, GRI FP1| | The principal highlights on the labor front in 2012 were: Logistics –Expansion of the Occupational Health, Security and Environment Program for transportation companies. This initiative is developed through the Excellence in Logistics Program with the objective of promoting logistics chain sustainability. Standards are monitored using the Suppliers Integrated Management system, which classifies and awards partners on the basis of the criteria of quality, cost competitiveness, sustainability of the business and care with people and the environment. As part of the commitment underthe In the Right Direction Program against sexual exploitation of children and adolescents on Brazilian highways, 1,050 outsourceddrivers and assistants were trained to become protection agents and co-responsible in the elimination of the problem. Ranching –More than 800 agricultural extension agents periodically evaluate and guide conditions at the integrated outgrowers and at third parties on the care taken with animal production and slaughter of poultry. In 2012, the SuppliersCode of Conduct was included as an attachment to theintegrated outgrowers production contracts and implemented at all producers where hogs are reared through to the final slaughtering phase (approximately 4.5 thousand producers).The target is to extend the Code of Conduct to the other animal categories by December 2013. Beef Cattle –Technical personnel addressed and visited more than 300 producers in the state of Mato Grosso providing guidance on procedures for maintaining high levels of quality and compliance with all legal requirements. Grains, meal and oil –Given the use of family labor in agriculture, all contracts carry specific clauses on the requirement not to employ those under the age of 18 or maintain any working condition which does not comply with the prevailing legislation. Supplies –In 2012, two procurement negotiators training programs were o ered to 44 employees, for presenting BRF’s Sustainability Management strategy and the Suppliers Monitoring Program. In 2013, onsite audits of suppliers are scheduled. Dairy Products –Pilot project at 32 properties, the Good Practices on the Farm Program evaluates quality, sustainability and humanrights aspects such as child and forced labor. The Company plansto expand the program to its remaining milk producers. |
Suppliers submitted for human rights screening¹|GRI HR2| | |||
% that signed the Code | |||
Supplier group | Reply to questionnaires | Audit/technical visit | of Conduct |
Ranching (integrated outgrowers – poultryand hogs) | 100% | 100% | 30% |
Supplies² | 23% | 0% | 10% |
Grains, meal and oil | 63% | 30% | 82% |
Dairy product producers³ | 2% | 2% | N.A.5 |
Beef Cattle producers | 74% | 74% | N.A.5 |
Logistics suppliers – GIF Program (secondaryfleet) | 44% | 44% | 0% |
Logistics suppliers – SSMA Program | 8% | 8% | 66% |
¹ Percentages represent value expended with suppliers involved in the activity in relation to the total value spent with suppliers in the category.
² Considers only critical suppliers in accordance with the representativeness of expenditures with suppliers as a whole.
³ A pilot project was run at 32 properties in 2012.
4The “Contracts with human rights clauses” column reported in the Annual Report 2011 has been removed on the understanding the columns shown above best reflect BRF’s practices for disseminating human rights in its value chain.
5Dairy product and beef cattle purchases are conducted via spot contracts and given the one-o na ture of the relationship, signature of the Code of Conduct is not requested.
BRF recognizes the benefits to be had in purchasing from locally-based suppliers, such as reduction of transportation costs and greenhouse gas emissions as well as enhanced integration withthe community. Consequently, local purchasing is prioritizedalthough there is no specific policy to this end.|GRI EC6|
Participation of locally-based suppliers in overall procurement¹|GRI EC6|
Grains, meal and | Integrated | ||||
State1 | Supplies³ | oils | Dairy Products | Production | Beef cattle |
Alagoas | 89% | NA | NA | NA | NA |
Amazonas | 98% | NA | NA | NA | NA |
Bahia | 68% | 99% | 100% | 1% | NA |
Ceará | 78% | NA | NA | NA | NA |
Distrito Federal | 39% | 24% | 100% | 2% | NA |
Espirito Santo | 64% | NA | NA | NA | NA |
Goiás | 35% | 87% | 100% | 16% | NA |
Maranhão | 96% | NA | NA | NA | NA |
Mato Grosso | 37% | 100% | NA | 17% | 100% |
Mato Grosso do Sul | 28% | 100% | 100% | NA | NA |
Minas Gerais | 35% | 69% | 100% | 9% | NA |
Pará | 58% | NA | NA | NA | NA |
Paraná | 31% | 52% | 100% | 20% | NA |
Pernambuco | 25% | 1% | 100% | NA | NA |
Piauí | 92% | NA | NA | NA | NA |
Rio de Janeiro | 57% | NA | 100% | NA | NA |
Rio Grande do Sul | 48% | 64% | 100% | 13% | NA |
Santa Catarina | 37% | 10% | 100% | 23% | NA |
São Paulo | 79% | 80% | 100% | NA | NA |
¹Locally-based suppliers are those that invoice in the same state as the addresses for delivery of services and/or materials.
³ Supplies covers the purchase of packaging, investments and energy, inputs, partnerships, meats and sales, freight and logistical services.
RESPONSIBILITY FOR THE PRODUCT The Company understands its responsibility in offering safe andhealthy food and consequently conducts research, the latter continually responsible for adjusting the product portfolio to world tendencies in health and wellbeing. The assessment of the impact on consumer health and nutritional safety involves the conception of all products and extends through to the production phases, packaging and storage. Laboratory analyses are instrumental in ensuring products comply with prevailing legislation and internal standards.|GRI PR1| BRF works with the Brazilian Food Industries Association (Abia) indiscussing pertinent and strategic themes for the sector such as the amounts for reducing the content of sodium, saturated/trans fats, total fats and carbohydrates (total sugars) in processedfoods/industrialized meats and dairy products. The entity hasalready signed agreements and commitments with the Ministry of Health for reducing trans fats (in 2008) and salt/sodium (in 2010). Gradually, di erent sectors of the industry are preparing proposals for reducing sodium content, in the case of the margarine and vegetable cream category, this taking place in2012 – the theme was also the subject of discussion in the contextof meat- and milk-based products. The total fat and sodium content such as saturated and trans fats in several of BRF’s products has either been eliminated or reduced. Among the projects where sodium has been reduced are Sadia Smoked Bologna Sausage, Sadia Escondidinho (meat and chicken flavors) and Salami for the Subway chain (Food Services). Other products have also been developed with 0% trans fats anda reduced salt content – such as Perdigão Maionese (light andtraditional). In dairy products, in 2012, sucrose in the Batavo yogurt cups line was substituted by fructose.|GRI FP6|Labeling on all products carries complete information on nutritional values, composition, conservation instructions and traceability as well as citing ingredients classified as allergenic.|GRI PR3, FP8| The year was also one of product launches focused on consumersin the C and D social groupings with a popular line in frankfurtersunder the Perdigão label. In the milk products area, the highlight was the fermented Elegê Batmilk beverage in sachets of 900g(with a focus on the Northeast of Brazil).|GRI FP4| As for products with more nutritive ingredients, in 2012, theCompany launched new nutritionally balanced ready-to-eat andquick preparation dishes in addition to whole wheat lasagnas with less fat and more fiber. In the food services, a new type of bread was launched for the Subway network with the addition ofcereals – such as oatmeal, rye, barley, flaxseed – and honey. | Reduction of ingredients¹|GRI FP6 | | |||
% products with ingredient | Improvements / | |||
Category | reduction | reductions | ||
Domestic market | ||||
Breaded products | 4.80% | Sodium and fats | ||
Desserts | 96.17% | 0% trans fat | ||
Frankfurters | 14.12% | Sodium and fats | ||
Ready-to-eat | 6.96% | Total fats, saturated fats, sodium and calories | ||
Sausages | 4.31% | Fats | ||
Hamburgers | 1.37% | Sodium and fats | ||
Spreads | 2.08% | Fats, calories and absorption of cholesterol | ||
Cold cuts² | 12.05% | Sodium and fats. | ||
Dairy products | ||||
Chilled products | 6.52% | Fat and sucrose | ||
UHT milk | 23.65% | Fat and lactose | ||
Powdered milk | 4.39% | Fats | ||
Grocery products | 4.15% | Fats | ||
Export market | ||||
Margarines –Africa | 17.39% | 0% trans fat | ||
Food Services | ||||
Smoked items | 10.00% | Sodium (monosodium glutamate) | ||
Sausage | 3.00% | Sodium | ||
¹ Data for saturated fat, trans fats, sodium or sugar with respect to the products with sales in 2012. | ||||
² The Escolha Saudável Line was contemplated which due to the TCD agreement, is no longer owned by BRF. |
Increase of nutritive ingredients and additives¹ | ANIMAL WELLBEING The Company’s policy respects the five animal freedoms: freedom from hunger and thirst; freedom from discomfort; freedom from pain, injuries and disease; freedom to express their normal behavior; and freedom from fear and stress. The process, whichinvolves careful handling up to the pre-slaughter phase, complies with all technical, legal and religious principles and covers the full supply chain spectrum from confinement on the farm, shipment, transportation, unloading and holding in corrals, conducting to the slaughtering area and rendering unconscious (also known as stunning) to bleeding. BRF complies with all Brazilian and European regulations foranimal wellbeing duly certified by both European and Asian institutions. In addition, the more moderate temperaturesin Brazil and the longer periods of sunshine make the rearing process in Brazil a more natural environment for achieving thefive principles for animal wellbeing. The use of hormones in the rearing of beef cattle is prohibited inBrazil and in international markets and banned products are notused at any stage in the animal production process. Antibiotics, anti-inflammatory medications and vitamin complexes used are approved and liberated under domestic and international legislation required by consuming markets. Medications are only used in the event of need and are strictly controlled.|GRI FP12| All legal notifications that relate to animal wellbeing are sent for analysis by the Quality Guarantee team, responsible for verifying the origin of the problem, adopting corrective measures eventually necessary and taking action to avoid repetition of the event. In 2012, 3 cases of non-compliance with laws and regulations related to conditions of transportation, slaughter, irregular handling and death of animals were reported. Of this total, two cases resulted in fines amounting to R$ 6,259.40 and one incident awaits the decision of the regulatory body.|GRI FP13| | |||
|GRI FP7| | ||||
Category | % products with an increase in nutritive and functional ingredients | Improvements | ||
Domestic market | ||||
Breaded products | 4,39% | Addition of vitamins | ||
Hamburger | 0,04% | Addition of proteins | ||
Margarines | 5,65% | Addition of soluble fiber and omega 3 | ||
Dairy Products | ||||
Chilled | 32,02% | Addition of vitamins, | ||
UHT Milk | 0,23% | Addition of vitaminsand minerals | ||
Powdered milk | 74,27% | Addition of vitamins | ||
Food Services | ||||
Breaded products | 0,02% | Addition of carrots | ||
Milk | 50,55% | Addition of iron and vitamins | ||
¹ Fibers, vitamins, minerals, phytochemical and functional data applies only to products with sales in 2012. Recycling One of the principal challenges for Brazilian industry is to makeadjustments for the new National Solid Waste Policy (PNRS) which sets a 22% target for the country as the reduction in the percentage of recyclable dry waste sent for disposal in landfills by 2015. This is a critical issue for BRF due to the complexity of theactions required and the size of the supply and distribution chain. Having in mind the national target, in 2012, the Company tookpart in discussions on a proposal for a sector agreement on PNRS with the principal initiatives which should be contained in the final document. The text was prepared within the scope of theBusiness Coalition made up of 27 associations (of industries,commercial wholesalers and retailers as well as packagingmanufacturers) and coordinated by the Business Commitment for Recycling (Cempre). The Coalition aims to work jointlythrough synergies in the business sector to obtain the bestresults in relation to the increase in percentages recycled in Braziland to meet PNRS targets|GRI SO5| |
SOCIETY|GRI SO1| BRF’s social initiatives in 2012 focused on the development of thecommunities in which it is inserted – a reflection of the Company’sconcern for promoting transformational initiatives which have continuity. Key to this activity was the work of 33 SocialInvestment and Community Relations committees. Made up ofabout 400 employees, these committees mapped the priorities for each region to ensure that partners, investors and communityare fully integrated. In the Company’s view, this is a strategic process along which three types of resources are invested:volunteer workers, financial injections and training. BRF has invested approximately R$ 4.7 million in the BRF Institute, more than 50% being directed to the beneficiary communities. The year was marked by the consolidation of thestrategy for social investment, symbolized by the formal launchof the BRF Institute. This established a methodology for actiondivided into four fronts – Public Policies, Entrepreneurship &Employability, Inter-sector Networks and the Third Sector. Transversal to these work fronts is the support of the BRF Volunteers Program. Direct investment of more than R$ 2 million was expanded to37 municipalities, 10 more than 2011, benefiting more than 29 thousand people. For 2013, the target is to expand the Institute’s footprint in four new municipalities where BRF has operations and upgrade the instruments and methodology for the qualitative and quantitative measurement of the impacts. Inter-sector networks – The front involves two programs: Active Community with about 50 partners executing 29 developmentprojects in districts where there are BRF units, benefitingmore than 15 thousand people; and Protection Links (Laços de Proteção), which ran four training sessions on the prevention, identification and handling situations of domestic and sexual violence against children and adolescents for 300 educators and the Rights Guarantee System. This program is being o ered inVitória de Santo Antão and Bom Conselho (PE) in partnership with the Brazil Childhood Foundation. | Third sector –In 2012, BRF launched the Inspire Program following acommitment made by the Company in 2011. The aim is to underscore the strategic role of social organizations in the promotion of local development in 23 municipalities. Some 150 social organizationshave enrolled in the selection process and up to 75 will receive training in 2013 through five onsite workshops and systemic virtual monitoring in order to incorporate financial sustainability strategies. Public policies –In view of the importance of the role of the public-private partnership in the development of public policiesfor promoting sustainability, during 2012, the Company finalized two projects for upgrading public education: Concórdia Digitalfor the inclusion of computer skills in the curriculum of the publiceducational network of the city of Concórdia (SC) and responsible for the graduation of 18 teachers as multipliers; and Educate is to Care (Educar é Cuidar) in Buriti Alegre (GO) for upgrading infantteaching in the town. At the end of 2012, the Company also began a partnership with the Sustainable Cities Program for launchingan online platform in 2013 in support of signatory cities for implementing and upgrading sustainability indicators in public management. Entrepreneurship and employability –This focuses on two projects.The first is the Digital Station (Estação Digital) for basic computercourses for young people from Bom Conselho (PE), which hadits scope expanded in 2012 including intermediate information technology and IT for adults courses with a total of 278 students in 26 groups. The courses have the support of the Municipality, the Banco do Brasil Foundation and Oi Futuro. The second is Time for Entrepreneurship (Tempo de Empreender) which has been implemented (in its final phase) in Lucas do Rio Verde (MT) inpartnership with the Camargo Corrêa Institute, Sebrae and localpartners through the creation of business incubators for young people. BRF Volunteers – Central to the program’s methodology isa mapping process to identify the potential and needs ofmunicipalities as well as possible partners and organizations. In2012, the second year of the program, approximately 14 thousandpeople and 66 organizations in 35 municipalities benefited from theprogram. About 2.7 thousand volunteers took part in 160 initiatives, 80% of them related to the environment (focus on selectivecollection and solid waste), education, citizenship, social welfare and organizational management. |
Investments in Infrastructure|GRI EC8| | |||||
Location | Action | Start | Finish | Identification of need | Investment (R$) |
Concórdia (SC) 1 | Building of a public square in a district ofConcórdia | Mar/11 | Sept/11 | Participative | |
Várzea Grande (MT) | Modernization of the Praça Vista Alegre | Sep/12 | Jul/12 | Preliminary survey | R$ 17,552 |
Fontoura Xavier (RS) | My school Project, my future | Nov 11 | Feb/13 | Preliminary survey | R$ 14,996 |
Lucas do Rio Verde | Upgrading and expansion of the leisure area study of the institutional shelter | Jan/12 | Oct/12 | Community request; | R$ 5,000 |
¹ Without cost to BRF. The Company’s participation was through the CDC which identified the need, the space and entered with a request to the city government for the construction of the public square .
SPORTS PLATFORM BRF’s sports platform is based on two pillars: participation andhigh performance through sponsorships under the Sadia brand granted to confederations, athletes and events. Of Brazil’s 17 medal winners at the London Olympics, four wereto sportsman belonging to confederations which receive sponsorship money from Sadia such as judo and swimming. A further three were awarded to athletes sponsored directly by Sadia. The BRF Institute supports theLançar-se para o FuturoInstitute which fosters the practice of athletics as a way of promoting the development of children and young people. BRF also supports the development of high performance young athletes, part of theLançar-se para o FuturoInstitute. | Brazilian Medalists | |||
Athlete | Type of Sport | Medal | ||
Sarah Menezes | Judo | Gold | ||
Arthur Zanetti | Gymnastics | Gold | ||
Mayra Aguiar | Judo | Bronze | ||
Felipe Kitadai* | Judo* | Bronze | ||
Rafael Silva* | Judo* | Bronze | ||
Thiago Pereira* | Swimming* | Silver | ||
Cesar Cielo* | Swimming* | Bronze | ||
*Athletes indirectly sponsored by Sadia through the judo, gymnastics and aquaticsports confederations | ||||
ASSOCIATIONS|GRI 4.13| The associations of key importance to BRF are those more specifically related to the market segments in which it operatessuch as the Brazilian Poultry Union (Ubabef) and the BrazilianAssociation of Pork Producers and Exporters (Abipecs). TheCompany currently holds the board chairmanship of both entities. The Company is also represented on the Executive Board of The Brazilian Association of Listed Capital Companies (Abrasca), the Brazilian Institute of Finance Executives (Ibef), | the Brazilian Corporate Governance Institute (IBGC), the Brazilian Institute of Investor Relations Professionals (Ibri) and the Committee for Pronouncement of best Practices and sits on the Capital Markets Technical Commissions (Codim). BRF alsoparticipates in the following organisms and associations with afocus on sustainable development: Brazilian chapter of World Business Council for Sustainable Development (WBCSD); Ethos Institute for Companies and Social Responsibility; Institutes, Foundations and Companies Group (Gife); Comunitas andRedEAmerica. |
External commitments|GRI 4.12| | |
Initiative | Purpose |
Global Compact (UN) | Adopt the ten principles related to human rights, labor rights, environmentalprotection and anti-corruption. |
Millennium Development Goals (UN) | Collaborate with the global objectives for eradication of hunger and poverty; qualityeducation for all; non-discrimination; reduction in infant mortality; improvedmaternal health; combating disease; quality of life and respect for the environment;and decent work for all. |
Business Pact for Integrity and againstCorruption | Adopt ethical standards in the relationship with government. |
National Pact for the Eradication of SlaveLabor | Combat forced labor (or analogous to slavery) in the operations of BRF and at itssuppliers. |
Brazilian GHG Protocol Program | Lists atmospheric emissions inventory which cause the greenhouse gas e ect. |
Carbon Disclosure Project (CDP) | Includes the greenhouse gas emissions inventory in CDP global database. |
Sustainable Connections/Cattle ranching Pact | Collaborate with the conservation of the Amazon region through the non-associationwith suppliers that conduct illegal deforestation. |
Right Direction Program | Combating the sexual exploration of children and adolescents on Brazilian highways,principally through engaging contracted transportation companies. |
NATURAL CAPITAL The management of BRF’s natural capital is concentrated on issues related to the ecosystems and the healthy use of natural resources which include water, land, minerals and forests. During the course of the year, the Company was a party to the discussion of the sector agreement for the implementation of National Solid Waste Policy through its participation in the Business Coalition coordinated by the Business Commitment for Recycling (Cempre). (More information in Responsibility for the Product) The Company has structured a selective waste collection system for the new administrative building in Curitiba (PR) and at the head oc e in São Paulo (SP), further enhancing its operations in this area. The ‘Recycle your Ideas’ in-house campaign was another initiative in 2012 for raising the awareness of employees as to the importance of recycling and rational consumption.A recycling standard has been created for the administrative buildings with the purpose of raising awareness for the need to change habits both in and outside the home. Two new constructions finished during the year (the administrative building in Curitiba and the Jundiaí Technology Center) adopt the technical concepts and criteria of the Leadership in Energy and Environmental Design (LEED) system. Among the features of the new buildings, of particular note are the use of natural light, reuse of water and energy-saving technologies. Another important initiative is the Renewable Forests Program, which is designed to increase forest productivity reducing the need for the cultivated area to supply biomass as an energy source for the industrial area, with a consequent reduced impact on the ecosystem. | ||
GHG EMISSIONS Although it has published its GHG emissions since 2009, BRF now considers 2011 as the baseline year for its inventory. Based on the 2011 inventory, it has structured the indicator for evaluating the performance of its activities, setting out its commitmentsand reduction targets. The Company received the Brazilian Greenhouse Gas Program’s (GHG Protocol Brazil) Gold Sealfollowing verification by a third party. BRF used a more complete methodology in 2012 to compile its inventory based on an integrated database for operations inBrazil. As a result, the evaluation is more precise, permitting results and variations to be visualized by area, operationalunit, source of emissions, fuel types, etc. The measurement of agricultural waste was also refined. The incorporation of Sadiaand the sale of assets following the agreement with Cade havealso meant the need to recalculate the GHG inventory, justifying the lower volumes in 2011 in relation to 2010. The carbon intensity ratio for the year 2011 was 53.55 kg CO2e/ ton produced. The target is to reduce the intensity of BRF’s direct carbon emissions (scope 1) by 10% by 2015 using the 2011 inventory as a base. For this purpose, the following commitmentswere adopted:
| In addition to mapping scopes 1 and 2, BRF still has to refine the process for identifying and measuring other indirect emissions (scope 3) emissions. GHG emissions for 2011 were calculated for the terrestrial fleet (road and railway) and employee business airtravel, the total amounting to 521,651.77 tCO2e. These emissions are disclosed in the ICO2 (BM&FBovespa’s Carbon Efficient StockIndex) where BRF has been listed for the third consecutive year.|GRI EN17, EN29| The Company adopts various initiatives for reducing GHGemissions such as logistics projects (fleet synergies, greater useof light vehicles); development and application of technology for using enzymes to reduce the excretion of nutrients into the atmosphere by animals; recovery of methane gas from waste water treatment plant for use as fuel; biomass-fired instead of oil-fired boilers; processes for conserving energy and heat;and the Sustainable Hog Farming System, which provides the integrated outgrowers with support for the construction of biodigestors and systems for burning the gases generated from the treatment of animal manures, among others.|GRI EN18| | ||||
Greenhouse gas emissions|GRI EN16| | |||||
Emissions (tons of | |||||
CO2 equivalent) | 2009¹ | 2010² | 2011 | ||
Scope 1 (direct –proprietary sourcesor controlled by theCompany) | 410,507 | 300,668 | 288,322 | ||
Scope 2 (indirect – as aresult of the acquisitionof electric energy andsteam) | 53,858 | 112,760 | 64,060 | ||
¹ Emissions estimated according to the BM&FBovespa/BNDES ICO2 theoreticalportfolio. ² Data for 2010 emissions was recalculated following the introduction of improvedmethodology. | |||||
Initiatives and reductions achieved in GHG emissions|GRI EN18| | |||
Reductions in tons of CO2 | |||
Program | equivalent/2012 | ||
Sustainable Hog Farming | 300,000 | ||
Logistics projects | 6,559 |
CONSUMPTION OF RESOURCES | of 81,720 fewer units than in the preceding year; changes in thematerials used for powdered milk cans with 35% less weight(approximately equivalent to 83 thousand kilos of packaging/year), among others.|GRI EN26| | |||||
Materials resulting from recycling|GRI EN2| | ||||||
Bought materials | % recycled | |||||
Cardboard boxes | 40% | |||||
Paper for office use | 87% | |||||
Merchandising material – rigid plastic | 16% | |||||
Materials | Direct | Indirect | Renewable | 1Given the need for enhanced resistance of the cartons (frozen and chilled products with exposure to low temperatures), a good part of the material (carton lids) mustbe virgin, only internal parts being susceptible to the use of recycled material if theshelf life of the product is not to be impacted. Energy In 2012, BRF’s Energy Excellence Program was consolidated acrossall the industrial meat processing units responsible for 79% oftotal energy consumption and will be extended to encompassdairy products in 2013. The Company is successfully pursuing theobjective of seeking an increasingly renewable energy matrix andhas achieved 96.9% of direct energy from renewable sources,beating its target of 95.8%. The target for 2013 is 96.0%. There was an increase of 46.3% in consumption of direct energyin 2012 compared with 2011, basically because in addition tohigher production, data not previously measured has beenincluded, such as agricultural activities, receipt of grains andlogistics. As a result, 2012 direct energy consumption covered100% of the Company’s proprietary operations in Brazil.|GRI 3.10, EN3| Growth in indirect energy consumption was 5.3% compared to2011 and is principally due to the larger number of units makingup the database and to the increase in production. Indirectenergy consumption from renewable sources rose 3.71% whencompared with 2011 despite the reduction of 1.3% in the Brazilianenergy matrix according to the Brazilian Electrical SystemMonitoring Bulletin (August 2012).|GRI EN4| | ||
Inputs and raw materials | ||||||
Agricultural inputs | 408,488 | No | ||||
Ingredients/dairy products | 320,601 | No | ||||
Meat inputs (poultry, hogs and beef cattle) (1) | 73,106 | No | ||||
Grains (soybeans and corn) / soybean meal/ vegetable oils | 11,193,742 | Yes | ||||
Inputs for packaging and for administrative processes | ||||||
Cardboard | 165,837 | Yes | ||||
Cartridges | 16,820 | Yes | ||||
Glass | 2,143 | No | ||||
Polymers | 6,702 | No | ||||
Long-life | 19,587 | No | ||||
(1) Inputs and meat cuts that go directly into the products (example: beef cuts used in lasagna). The Company took various initiatives for reducing the consumption of packaging or materials. The most important of these was the optimization of pallets resulting in the acquisition |
Energy consumption1|GRI EN3| | ||||
2010 | 2011 | 2012 | (%) Ch | |
Renewable sources | ||||
Sugar-cane ethanol2 | 735.24 | 2.39 | 266.82 | 1425.73% |
Sugar-cane bagasse | - | 1.,566.73 | - | |
Rice husk briquettes | 9,635.33 | - | - | |
Wood briquettes | - | 94,807.97 | 74,880.47 | -21.02% |
Wood chips | 11,441,207.14 | 7,351,144,37 | 9,500,503.97 | 29.24% |
Firewood | 4,978,860.14 | 10,880,429.93 | 17,345,620.74 | 59.42% |
Vegetable or animal oil | 404,915.22 | 32,092.96 | 398,608.96 | 1142.04% |
Offcuts | - | 518,749.26 | 645,178.95 | 24,37% |
Sawdust | 2,247,976.38 | 25,339.35 | 24,058.74 | -5.05% |
Biodiesel3 | - | - | 7,469.15 | |
Subtotal | 19,083,329.47 | 18,904,132.96 | 27,996,587.80 | 48.1% |
Non-renewable sources | ||||
BPF | 478,347.06 | 395,329.99 | 68,440.14 | -82.69% |
Diesel3 | 77,472.64 | 79,355.45 | 141,913.89 | 78.83% |
Natural gas | 101,287.13 | 120,303.41 | 154,199.64 | 28.18% |
Gasoline2 | 2,571.67 | 232.66 | 921.38 | 296.02% |
LPG | 266,035.74 | 198,940.44 | 404,021.47 | 103,09% |
Kerosene | 334.28 | 66,63 | 7.99 | -88.01% |
Shale | 102,018,39 | 38.121,07 | 100,660.01 | 164.05% |
Subtotal | 1,028,066.91 | 832,349.65 | 870,164.52 | 4.54% |
GRAND TOTAL | 20,111,396.38 | 19,736,482.61 | 28,866,752.31 | 46.26% |
Percentage of | 94.89% | 95.78% | 96.99% | |
renewables | ||||
¹Data includes 100% of the factory units (meat processing, meat and dairy products industrialization plants, animal feed plants and meat collection depots) but does not encompass logistics installations; hatcheries and poultry farms, except when located in factory complexes. 2Gasoline acquired in Brazil is made up of about 20% ethanol. 3Diesel oil acquired in Brazil is made up of 5% biodiesel. |
Indirect energy consumption (GJ)1|GRI EN4| | ||||
2010 | 2011 | 2012 | (%) Ch | |
Renewable sources | ||||
Hydroelectric | 6,287,132.78 | 6,839,404.02 | 7,466,566.84 | 9.17% |
Biomass | 107,271.12 | 105,507.45 | 143,332.35 | 35.85% |
Wind | 21,623.09 | 25,140.89 | 19,845.15 | -21.06% |
Photovoltaic | 1.97 | 7.78 | 7.78 | |
Subtotal | 6,416,028.96 | 6,970,060.14 | 7,629,752.12 | 9.46% |
Non-renewable sources | ||||
Gas | 374,717.01 | 163,415.78 | 106,667.71 | -34.73% |
Oil | 137,861.90 | - | 12,403.22 | |
Nuclear | 213,204.85 | 201,127.11 | 69,458.04 | -65.47% |
Coal | - | 119,419.22 | 29,767.73 | |
Subtotal | 725,783.76 | 483,962.11 | 218,296.70 | -54.89% |
TOTAL | 7,141,812.72 | 7,454,022.25 | 7,848,048.83 | 5.29% |
Percentage of BRF renewables | 89.84% | 93.51% | 97.22% | |
¹Data includes 100% of the factory units (meat processing, meat and dairy products industrialization plants, animal feed plants and meat collection depots) but does not encompass logistics installations; hatcheries and poultry farms, except when located in factory complexes. | ||||
EFFLUENT AND WASTE | ||
Water | ||
During the year, water consumption fell by 1.7%, equivalent to more than 1 billion liters. These savings were due to the implementation of efficiency projects at several units for reducing consumption such as the substitution of equipment for others that are more productive as well as the development of new production technologies and reuse – which increased 1.5% compared with 2011. In 2013, the target is to keep the level of reuse above the 20% mark.|GRI EN8, EN10| | The Company uses 22 sources of surface withdrawal, 5 of them with a percentage withdrawal of more than 5%. In the majority of cases, almost 95% of water withdrawn is returned to the originating water sources after waste water treatment. The quality of the water which is disposed is better than the quality of river water from which it is extracted.|GRI EN9| |
Consumption of water (m³/year)|GRI EN8, EN10| | ||||
2010 | 2011 | 2012 | (%) Ch | |
Total | 61,212,306 | 62,299,437 | 61,238,582 | -1.70% |
Surface | 42,139,557 | 42,251,876 | 38,732,576 | -8.30% |
Underground | 17,486,230 | 18,143,816 | 20,597,104 | 13.50% |
Supply by Public Utility | 1,554,365 | 1,903,745 | 1,868,339 | -1.90% |
Rain | 32,154 | N.A. | 40,563 | N.A. |
Total reuse | 15,701,346 | 15,486,705 | 15,723,175 | 1.50% |
% of reuse | 20.40% | 19.90% | 20.43% |
In 2012, the Company began a corporate project for reducing the level of organic waste emanating from the plants. The aim is to achieve a minimum loss of products during the slaughtering and industrialization processes, thus reducing the generation of waste. The target for 2013 is to reduce by 2% (in weight) total generated waste.|GRI EN22| Innovation in animal husbandry department also works towardsthe reduction of effluent volume. The new technological standardfor raising hogs has diminished the generation of liquid manureby 35% not to mention the resulting potential for reducing waterconsumption. In 2012, 280 tons of Health Service Waste (RSS)was collected at the integrated properties and correctly sent fortreatment. In addition, based on the information raised during theLife Cycle Analysis project, it has been possible to diagnose wherethe impacts on the value chain are, identifying the actions neededfor expanding the efficiency of the processes and reducing thenegative impact on the environment.|GRI EN26| Effluent disposal (m3)|GRI EN21| | Waste by type and disposal method|GRI EN22| | ||||||||
2010 (%) | 2011 (%) | 2012 (%) | 2012 (t) | ||||||
Disposal | |||||||||
Incorporation in the soil | 1.55% | 1.67% | 3.74% | 20,089 | |||||
Landfill | 3.86% | 2.28% | 8.29% | 44,480 | |||||
Recycling | 8.80% | 12.84% | 12.76% | 68,467 | |||||
Incineration | 0.01% | 0.03% | 0.01% | 55 | |||||
Composting | 85.78% | 83.18% | 75.19% | 403,389 | |||||
Type | |||||||||
Class I (hazardous) | 0.20% | 0.10% | 0.08% | 427 | |||||
Class II (non-hazardous) | 99.80% | 99.90% | 99.92% | 536,053 | |||||
Destination | 2010 | 2011 | 2012 | Total | - | - | - | 536,479 | |
Surface source | 52,233,375 | 54,843,866 | 54,285,284 | CONFORMITY|GRI EN28| In 2012, ten cases of non-conformity relating to environmentalissues were reported. Notifications resulted in two warnings anda Conduct Adjustment Agreement with payment of a fine in theamount of R$ 555,991.31. Occurrences involved environmentalaccidents, non-conformities at waste water treatment plants,degradation of the environment and the absence of a license.There were two events in the judicial sphere, one of themresulting in an agreement with the payment of an insignificantamount (R$ 2,488.00). Over the years under review, BRF paidfines in the amount of R$ 12,909.76. | |||||
Ground | 862,317 | 846,238 | 1,402,034 | ||||||
Public network | - | - | 54,843 | ||||||
Total | 53,095,692 | 55,690,104 | 55,742,160 | ||||||
Kg of pollution load (DQO) | 5,744,631 | ||||||||
m³/t produced | 9 |
ABOUT THE REPORT | communities contiguous to the plants, representatives of government bodies and civil, social and environmentalorganizations.|GRI3.5| Financial statements are provided in accordance with Brazilianaccounting standards and the International Financial ReportingStandards – IFRS as required by CVM Instruction 457/07 and CVMInstruction 485/10. They have been audited by Ernst & YoungAuditores Independentes. BRF complies with the internationalprinciples for preserving the independence of the work of theauditors, who shall not exercise managerial functions in theCompany, shall not act on the Company’s behalf and shall not beresponsible for auditing its own work. Financial indicators coverall of the operational units and subsidiaries in Brazil, Argentina, The organization of the content is aligned with the parameters inthe Sustainability Integrated Guidelines for Management (Sigma),covering the aspects which determine the sustainable results of acompany: financial, constructed, intellectual, human, social andnatural. Questions on this document may be addressed by calling (55 11)2322-5052 / 5061 / 5048 or by e-mail acoes@brf-br.com|GRI 3.4| | |
This BRF Annual and Sustainability Report is a compendium ofthe company’s economic, financial, social and environmentalinformation for the period from January 1 to December 31, 2012,and adheres to Global Reporting Initiative (GRI) guidelines,for the second consecutive year reporting on the foodprocessing sector indicators. This printed version of the reportcontemplates highly material information for sustainability inline with the results of consultations with the stakeholders. Inthe complete version of the document , available on line (www.brf.br.com/ri), there is more information together with theconfirmation of BSD Consulting as to adherence to ApplicationLevel A of the GRI guidelines (Version G3).|GRI 3.1, 3.3| Priority was given to transparency in relation to thecommitments made in the preceding document for fiscal year2011 during the production of the report. The principal advancesand challenges on the work fronts established in accordancewith BRF’s six Pillars of Sustainability are also shown. The materiality of the items comprising BRF’s Pillars ofSustainability was reviewed by engaging the Company’sstakeholders which have also set out the items in order ofpriority. (For additional information, see the item, engagementwith stakeholders).|GRI 3.5| The document is directed to all stakeholders, principally thosewhich took part in the engagement process: the Company’semployees and leaders, suppliers, clients, consumers, | ||
MATERIALITY|GRI 4.17| | ||
The following topics deemed of critical significance for each Sustainability Pillar were noted as a result of the materiality review: |
Total commitment to sustainability | Enhancing the value of human capital | |
- Culture of sustainability. | - Disseminate among employees the meaning of sustainability initiatives taken by BRF with a focus on communication and commitment. | |
- Transparency in addition to economic aspects, including social and environmental information. | - Suitable working conditions and human rights. | |
- In-house and external communication of BRF’s sustainability objectives. | - Occupational health and safety. | |
- Product innovation and new technologies. | - Create and disseminate an internal culture of sustainability and awareness with respect to alignment, training and transparent communication. | |
To leverage sustainability in the supply chain | Engagement with stakeholders | |
- Policies and criteria for selection and evaluation of suppliers. | - Continuous process of engagement and relationship with anongoing agenda with stakeholders. | |
- Compliance with social and environmental legislation by the integrated outgrowers and suppliers. | - Alignment of culture, definition of concepts and constancy of purpose. | |
- Traceability along the supply chain. | Adaptation to climate change | |
- Expand the conduct of life cycle analysis along the entire value chain. | - Rational and efficient use of water, materials and energy | |
Promoting sustainable consumption | – Cleaner production, prevention of pollution, reduction of negative impacts, operational efficiency (effluent, emissions and waste). | |
- Health, nutrition and healthy eating. | - Socio-environmental impacts of transportation. | |
- Investment in the development of packaging with less environmental impact. | ||
- Responsible communication, labeling and product information. | ||
- Changes in the form of dialog and interaction with the consumer. To have greater transparency using clear language to ensure the understanding of this audience. |
GRI CONTENTS INDEX|GRI 3.12|
PROFILE | Global Compact Principle | Page / Comment | |
STRATEGY AND ANALYSIS | |||
1.1 | Statement on the significance of sustainability | 16 | |
1.2 | Description of key impacts, risks, and opportunities | 17, 21 | |
ORGANIZATIONAL PROFILE | |||
2.1 | Name of the organization | 10 | |
2.2 | Primary brands, products, and/or services | 10 | |
2.3 | Operational structure | 10, 13 | |
2.4 | Location of organization’s headquarters | 65 | |
2.5 | Countries and regions where the organization operates | 10, 14, 15 | |
2.6 | Nature of ownership and legal form | 12 | |
2.7 | Markets served | 10 | |
2.8 | Scale of the reporting organization | 6, 12 | |
2.9 | Significant changes during the reporting period | 12 | |
2.10 | Awards received | 41 | |
REPORT PARAMETERS | |||
3.1 | Reporting period for information provided | 60 | |
3.2 | Date of most recent previous report | 60 | |
3.3 | Reporting cycle | 60 | |
3.4 | Contact point for questions regarding the report or its contents | 60, 65 | |
3.5 | Process for defining report content | 60 | |
3.6 | Boundary of the report | 60 | |
3.7 | State any specific limitations on the scope or boundary of the report | 60 | |
3.8 | Basis for preparation of the report as concerns joint ventures, subsidiaries, etc. | 60 | |
3.9 | Data measurement techniques and the bases of calculations | 60 | |
3.10 | Explanation of the effect of any re-statements of information provided in earlier reports | 57, 60 | |
3.11 | Significant changes from previous reporting periods | 60 | |
3.12 | Table identifying the location of the Standard Disclosures in the report | 62, 64 | |
3.13 | Policy and current practice with regard to seeking external assurance for the report | 60 | |
4. GOVERNANCE, COMMITMENTS AND ENGAGEMENT | |||
GOVERNANCE | |||
4.1 | Governance structure | 1 a 10 | 18 |
4.2 | Chair of the top governance level | 1 a 10 | 18 |
4.3 | Independent or non-executive members | 1 a 10 | 18 |
4.4 | Mechanisms for recommendations from shareholders and employees | 1 a 10 | 18 |
4.5 | Relationship between compensation and performance | 1 a 10 | 20 |
4.6 | Processes in place to ensure avoidance of conflicts of interest | 1 a 10 | 18 |
4.7 | Process to determine Board Members’ qualifications | 1 a 10 | 18 |
4.8 | Statement of mission and values, codes of conduct and internal principles | 1 a 10 | 2, 21 |
4.9 | Procedures of the top governance level to supervise performance | 1 a 10 | 18 |
4.10 | Self-assessment processes for the top governance level | 1 a 10 | 18 |
COMMITMENTS TO EXTERNAL INITIATIVES | |||
4.11 | Precautionary principle | 7 | 21 |
4.12 | External statements, principles or other initiatives signed or endorsed | 53 | |
4.13 | Membership of associations and/or organizations | 53 | |
ENGAGEMENT OF STAKEHOLDERS | |||
4.14 | List of stakeholder groups engaged by the organization | 46 | |
4.15 | Basis for identification and selection of stakeholders with whom to engage | 46 | |
4.16 | Approaches to stakeholder engagement | 46 | |
4.17 | Key topics and concerns that have been raised through stakeholder engagement | 60 |
Global Compact Principle | Page / Comment | ||
ASPECTS OF SOURCING | |||
FP1 | Purchases from suppliers compliant with the sourcing policy | 48 | |
FP2 | Purchases in compliance with international standards and certifications | online | |
ECONOMIC PERFORMANCE | |||
ECONOMIC PERFORMANCE | |||
EC1 | Direct economic value generated and distributed | 7 | 31, 32 |
EC2 | Financial implications and other risks and opportunities for the organization’s activities due to climate change | 21 | |
EC3 | Coverage of the organization’s defined benefit plan obligations | online | |
EC4 | Significant financial assistance received from government | online | |
MARKET PRESENCE | 1 | ||
EC5 | Ratio of lowest wage to highest wage | not informed | |
EC6 | Policy, practices and proportion of spending on locally-based suppliers | 6 | 49 and online |
EC7 | Procedures for local hiring | 42 and online | |
INDIRECT ECONOMIC IMPACTS | |||
EC8 | Infrastructure investments and services provided for public benefit | 52 | |
EC9 | Significant indirect economic impacts | not informed | |
ENVIRONMENTAL PERFORMANCE | |||
MATERIALS | 8 | ||
EN1 | Materials used by weight or volume | 8, 9 | 57 e online |
EN2 | Percentage of materials used that are recycled input materials | 57 | |
ENERGY | 8 | ||
EN3 | Direct energy consumption | 8 | 57, 58 and online |
EN4 | Indirect energy consumption | 8, 9 | 57, 58 and online |
EN5 | Energy saved | 8, 9 | online |
EN6 | Initiatives to provide energy-efficient products and services | 8, 9 | not informed |
EN7 | Initiatives to reduce indirect energy consumption | “Monitoring of this indicator not executed” | |
WATER | 8 | ||
EN8 | Total water withdrawal by source | 8 | 59 and online |
EN9 | Water sources significantly affected | 8, 9 | 59 |
EN10 | Percentage and total volume of water recycled and reused | 59 and online | |
BIODIVERSITY | 8 | ||
EN11 | Location and size of land owned by the organization in protected or high biodiversity areas | 8 | online |
EN12 | Description of significant impacts on biodiversity | 8 | online |
EN13 | Habitats protected or restored | 8 | not informed |
EN14 | Strategies for managing impacts on biodiversity | 8 | not informed |
EN15 | Number of threatened species | not informed | |
EMISSIONS, EFFLUENT AND WASTE | 8 | ||
EN16 | Total direct and indirect greenhouse gas emissions | 8 | 56 and online |
EN17 | Other relevant indirect greenhouse gas emissions | 7, 8, 9 | 56 and online |
EN18 | Initiatives to reduce greenhouse gas emissions | 8 | 56 and online |
EN19 | Emissions of ozone-depleting substances | 8 | online |
EN20 | NOx, SOx, and other significant air emissions | 8 | online |
EN21 | Total water discharge | 8 | 59 and online |
EN22 | Total weight of waste | 8 | 59 and online |
EN23 | Total number and volume of significant spills | 8 | online |
EN24 | Hazardous waste by weight | 8 | not informed |
EN25 | Biodiversity value of water bodies and related habitats affected by water disposal and drainage | not informed | |
PRODUCTS AND SERVICES | 7, 8, 9 | ||
EN26 | Initiatives to mitigate environmental impacts of products and services | 8, 9 | 57, 59 and online |
EN27 | Products and packaging materials that are reclaimed | online | |
COMPLIANCE | 8 | ||
EN28 | Noncompliance with environmental laws and regulations | 59 | |
TRANSPORT | 8 | ||
EN29 | Environmental impacts of transport | 56 and online | |
OVERALL | 7, 8, 9 | ||
EN30 | Total environmental protection expenditures and investments | 36 | |
SOCIAL PERFORMANCE | |||
LABOR PRACTICES AND DECENT WORK | |||
EMPLOYMENT | |||
LA1 | Total number of employees | 6 | 44 and online |
LA2 | Turnover | 44 | |
LA3 | Benefits | not informed | |
LABOR / MANAGEMENT RELATIONS | 1, 3 | ||
LA4 | Employees covered by collective bargaining agreements | 3 | online |
LA5 | Operational changes notification period | online | |
FP3 | Working time lost due to labor conflicts and/or strikes | online | |
OCCUPATIONAL HEALTH AND SAFETY | 1 | ||
LA6 | Workers representation in formal safety committees | 1 | online |
LA7 | Rates of injury, occupational diseases, lost days, absenteeism and other | 1 | 45 |
LA8 | Education, training, counseling, prevention and risk-control programs | 1 | 45 and online |
LA9 | Safety topics covered in agreements with trade unions | online | |
TRAINING AND EDUCATION | 6 | ||
LA10 | Hours of training | 45 | |
LA11 | Programs for skills management and lifelong learning and career endings | online | |
LA12 | Employees receiving performance reviews | online |
Global Compact Principle | Page / Comment | ||
DIVERSITY AND EQUAL OPPORTUNITY | 1, 6 | ||
LA13 | Parties responsible for governance and employees according to gender, age group, minorities | 1, 6 | 44 |
LA14 | Ratio of salary of men to women | online | |
HUMAN RIGHTS | |||
INVESTMENT AND PROCUREMENT PRACTICES | 1 a 6 | ||
HR1 | Investment agreements with human rights clauses | 1 a 6 | 36 |
HR2 | Suppliers that have undergone human rights screening | 1 a 6 | 49 |
HR3 | Employee training on human rights | 21 | |
NON-DISCRIMINATION | 1, 2, 6 | ||
HR4 | Incidents of discrimination and actions taken | In 2012 there were no cases of discrimination | |
FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING | 1, 2, 3 | ||
HR5 | Risk to freedom of association | 48 and online | |
ABOLITION OF CHILD LABOR | 1, 2, 5 | ||
HR6 | Risk of child labor | 48 and online | |
PREVENTION OF FORCED OR COMPULSORY LABOR | 1, 2, 4 | ||
HR7 | Risk of forced labor | 48 and online | |
SECURITY PRACTICES | 1, 2 | ||
HR8 | Security personnel trained in human rights | online | |
INDIGENOUS RIGHTS | 1, 2 | ||
HR9 | Incidents of violation of the rights of indigenous peoples | “No occurrences were registered in 2012” | |
SOCIETY | |||
COMMUNITY | |||
SO1 | Impacts of operations on communities | 52 and online | |
ACCESS TO HEALTHY FOOD | |||
FP4 | Programs and practices that promote: access to healthy lifestyles; the prevention of chronic disease; etc. | 50 | |
CORRUPTION | 10 | ||
SO2 | Analysis of risks related to corruption | 10 | 21 |
SO3 | Employees trained in anti-corruption policies and procedures | 10 | 21 |
SO4 | Actions taken in response to incidents of corruption | 21 | |
PUBLIC POLICY | 1 a 10 | ||
SO5 | Public policies and lobbying | 10 | 51 |
SO6 | Contributions to political parties | online | |
ANTI-COMPETITIVE BEHAVIOR | |||
SO7 | Number of legal actions for anti-competitive behavior | “No events registered” | |
SO8 | NON-COMPLIANCE WITH LAWS AND REGULATIONS | ||
SO8 | Não-conformidade com leis e regulamentos. | online | |
PRODUCT RESPONSIBILITY | |||
CUSTOMER HEALTH AND SAFETY | 1 | ||
PR1 | Assessment of health and safety impacts | 1 | 50 and online |
PR2 | Compliance with health and safety regulations | online | |
FP5 | Production in sites certified by third parties | online | |
FP6 | Products lowered in saturated fat, trans fats, sodium and added sugars. | 50 | |
FP7 | Products containing increased nutritive ingredients and food additives | 51 | |
PRODUCT AND SERVICE LABELING | 8 | ||
PR3 | Labeling requirements | 50 and online | |
FP8 | Communication to consumers about ingredients and nutritional information | 8 | 50 |
PR4 | Non-compliance with information and labeling requirements | online | |
PR5 | Customer satisfaction | online | |
MARKETING COMMUNICATIONS | |||
PR6 | Marketing communications | online | |
PR7 | Cases of non-compliant marketing communications | “No events | |
registered” | |||
COMPLIANCE | 1 | ||
PR8 | Breaches of privacy and losses of customer data | not informed | |
PR9 | Non-compliant provision and use of products and services | online | |
ANIMAL WELL-BEING | |||
BREEDING AND GENETICS | |||
FP9 | Animals raised and/or processed | 27 | |
ANIMAL HUSBANDRY | |||
FP10 | Physical alterations and use of anesthetic. | online | |
FP11 | Animals raised by housing type. | online | |
FP12 | Use of antibiotics, anti-inflammatory, hormone and/or growth promotion treatments | 51 | |
TRANSPORTATION, HANDLING AND SLAUGHTER | |||
FP13 | Non-compliant animal transportation, handling and slaughter | 51 |
CORPORATE INFORMATION | |
Head Office |GRI 2.4| | Credits |
Rua Jorge Tzachel, 475 | Overall coordination |
88301-600 Itajaí – SC – Brazil | Finance, Administration and Investor Relations Department |
Collaboration | |
Corporate Headquarters | Domestic Market, Export Market, Food Services, Dairy Products, |
Rua Hungria, 1.400 – 5º andar | Operations, Corporate Affairs, Supply Chain, Strategy and New |
01455-000 São Paulo – SP – Brazil | Businesses and Human Resources departments. |
Tel.: (55 11) 2322-5000 | |
Fax: (55 11) 2322-5747 | Content and text |
Editora Contadino | |
Investor Relations |GRI 3.4| | BRF Investor Relations and Sustainability team |
Leopoldo Viriato Saboya –Vice President, Finance, | |
Administration and Investor Relations | GRI Consultancy |
Elcio Ito –Finance and Investor Relations Officer | BSD Consulting |
Edina Biava –IR Manager | |
Rua Hungria, 1.400 – 5º andar | Design and Layout |
01455-000 São Paulo – SP – Brazil | Dragon Rouge |
Tel.: (55 11) 2322-5052 / 5061 / 5048 | |
Fax: (55 11) 2322-5747 | Images |
E-mail: acoes@brf-br.com | BRF Collection and New Corporate Visual Identity Campaign |
– BRF Brand | |
Depositary Banks | |
In Brazil | Translation |
Banco Itaú S/A | Paul Steele – Tristar Traduções Ltda |
Av. Engenheiro Armando de Arruda Pereira, | |
707 – 9º andar | |
04344-902 São Paulo – SP – Brazil | The results of the fiscal year 2012 consolidate the BRF Companies- Brasil Foods S.A. and Sadia S.A. (wholly - owned subsidiary).All statements contained in this report with regard to theCompany’s business prospects, project results and potencialgrowth of its business constitute mere forecasts and were basedon management’s expectation in relation to the Company’sfuture performance. These expectations are heavily dependenton changes in the market and on the country’s general economicperformance, that of the sector and the international markets and,therefore, being subject to changes. On July 13, 2011, the plenarysession of the Administrative Council for Economic Defense - Cadeapproved the associoation between BRF and Sadia S.A., subjectto compliance with the provisions contained in the PerformanceCommitment Agreement - TCD signed between the partiesconcerned. These documents are available in the website:www.brf-br.com/ir |
Tel.: (55 11) 2797-4209 | |
Fax: (55 11) 5029-1917 | |
In the USA | |
The Bank of New York Mellon | |
Investor Services | |
P.O. Box 11258 | |
Church Street Station | |
New York NY 10286-1258 USA | |
Tel.: 1-888-269-2377 | |
E-mail: shareowners@bankofny.com | |
Stock Exchange Symbols | |
BM&FBovespa | |
BRFS3 – common – Novo Mercado | |
New York Stock Exchange – NYSE | |
BRFS – ADR level III | |
Official Newspapers | |
Diário Oficial do Estado de Santa Catarina | |
Diário Catarinense | |
Valor Econômico | |
Independent Auditors | |
Ernst Young Auditores Independentes |
CONSOLIDATED BALANCE SHEETS
December 31, 2012 and 2011
(Amounts expressed in thousands of Brazilian Reais)
BR GAAP | BR GAAP and IFRS | ||||||||
Parent company | Consolidated | ||||||||
ASSETS | Note | 12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | ||||
CURRENT ASSETS | |||||||||
Cash and cash equivalents | 7 | 907,919 | 68,755 | 1,930,693 | 1,366,843 | ||||
Marketable securities | 8 | 269,033 | 763,535 | 621,908 | 1,372,671 | ||||
Trade accounts receivable, net | 9 | 2,997,671 | 1,427,374 | 3,131,198 | 3,207,813 | ||||
Inventories | 10 | 2,490,329 | 1,166,150 | 3,018,576 | 2,679,211 | ||||
Biological assets | 11 | 1,358,115 | 554,483 | 1,370,999 | 1,156,081 | ||||
Recoverable taxes | 12 | 892,104 | 572,720 | 964,769 | 907,929 | ||||
Other financial assets | 21 | 32,804 | 22,944 | 33,200 | 23,459 | ||||
Other rights | 404,176 | 157,417 | 518,637 | 409,744 | |||||
Total current assets | 9,352,151 | 4,733,378 | 11,589,980 | 11,123,751 | |||||
NON-CURRENT ASSETS | |||||||||
Marketable securities | 8 | 51,752 | - | 74,458 | 83,368 | ||||
Trade accounts receivable, net | 9 | 11,128 | 2,419 | 11,128 | 2,419 | ||||
Credit notes | 9 | 78,033 | 75,547 | 152,303 | 147,322 | ||||
Recoverable taxes | 12 | 1,134,588 | 449,376 | 1,141,797 | 744,612 | ||||
Deferred income taxes | 13 | 825,998 | 935,607 | 724,942 | 2,628,750 | ||||
Judicial deposits | 14 | 363,875 | 110,582 | 365,301 | 228,261 | ||||
Biological assets | 11 | 428,190 | 179,188 | 428,190 | 387,383 | ||||
Receivables from related parties | 29 | 13,793 | 5,138 | - | - | ||||
Restricted cash | 15 | 83,877 | - | 93,014 | 70,020 | ||||
Other rights | 718,425 | 210,455 | 732,116 | 362,702 | |||||
Investments | 16 | 3,171,703 | 10,159,588 | 36,658 | 20,399 | ||||
Property, plant and equipment, net | 17 | 10,250,576 | 3,562,727 | 10,670,700 | 9,798,370 | ||||
Intangible | 18 | 4,096,664 | 1,631,903 | 4,751,661 | 4,386,099 | ||||
Total non-current assets | 21,228,602 | 17,322,530 | 19,182,268 | 18,859,705 |
TOTAL ASSETS | 30,580,753 | 22,055,908 | 30,772,248 | 29,983,456 |
BR GAAP | BR GAAP and IFRS | ||||||||
Parent company | Consolidated | ||||||||
LIABILITIES | Note | 12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | ||||
CURRENT LIABILITIES | |||||||||
Short-term debt | 19 | 2,111,007 | 1,445,779 | 2,440,782 | 3,452,477 | ||||
Trade accounts payable | 20 | 3,135,464 | 1,270,696 | 3,381,246 | 2,681,343 | ||||
Payroll and related charges | 386,077 | 208,233 | 426,241 | 434,249 | |||||
Tax payable | 186,614 | 91,838 | 227,995 | 224,761 | |||||
Interest on shareholders' equity | 26 | 159,915 | 312,624 | 160,020 | 312,624 | ||||
Employee and management profit sharing | 76,935 | 173,402 | 76,935 | 224,480 | |||||
Other financial liabilities | 21 | 198,524 | 227,891 | 253,420 | 270,693 | ||||
Provision for tax, civil and labor risks | 25 | 163,798 | 68,550 | 173,916 | 118,466 | ||||
Advances from related parties | 29 | 1,946,739 | 1,200,679 | - | |||||
Other obligations | 192,827 | 65,200 | 323,663 | 268,736 | |||||
Total current liabilities | 8,557,900 | 5,064,892 | 7,464,218 | 7,987,829 | |||||
NON-CURRENT LIABILITIES | |||||||||
Long-term debt | 19 | 4,593,942 | 1,597,342 | 7,077,539 | 4,601,053 | ||||
Social and tax payable | 12,462 | 9,096 | 13,457 | 29,472 | |||||
Provision for tax, civil and labor risks | 25 | 739,227 | 139,890 | 760,913 | 835,234 | ||||
Deferred income taxes | 13 | - | 340,606 | 27,792 | 1,791,897 | ||||
Liabilities with related parties | 29 | 8,280 | - | - | - | ||||
Advances from related parties | 29 | 1,317,649 | 562,740 | - | - | ||||
Employee benefit plan | 24 | 303,846 | 112,716 | 303,846 | 266,045 | ||||
Other obligations | 508,919 | 158,286 | 548,443 | 362,009 | |||||
Total non-current liabilities | 7,484,325 | 2,920,676 | 8,731,990 | 7,885,710 | |||||
SHAREHOLDERS' EQUITY | 26 | ||||||||
Capital | 12,460,471 | 12,460,471 | 12,460,471 | 12,460,471 | |||||
Capital reserves | 69,897 | 76,259 | 69,897 | 76,259 | |||||
Income reserves | 2,261,079 | 1,760,446 | 2,261,079 | 1,760,446 | |||||
Treasury shares | (51,907) | (65,320) | (51,907) | (65,320) | |||||
Other comprehensive loss | (201,012) | (161,516) | (201,012) | (161,516) | |||||
Attributed to interest of controlling shareholders | 14,538,528 | 14,070,340 | 14,538,528 | 14,070,340 | |||||
Non-controlling interest | - | - | 37,512 | 39,577 | |||||
Total shareholders’ equity | 14,538,528 | 14,070,340 | 14,576,040 | 14,109,917 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 30,580,753 | 22,055,908 | 30,772,248 | 29,983,456 |
CONSOLIDATED STATEMENTS OF INCOME
December 31, 2012 and 2011
(Amounts expressed in thousands of Brazilian Reais, except earnings per share and share data)
BR GAAP | BR GAAP and IFRS | ||||||||
Parent company | Consolidated | ||||||||
Note | 12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
NET SALES | 30 | 14,251,263 | 12,487,184 | 28,517,383 | 25,706,238 | ||||
Cost of sales | 35 | (12,114,773) | (10,008,750) | (22,063,563) | (19,046,963) | ||||
GROSS PROFIT | 2,136,490 | 2,478,434 | 6,453,820 | 6,659,275 | |||||
OPERATING INCOME (EXPENSES) | |||||||||
Selling | 35 | (1,746,618) | (1,572,164) | (4,317,304) | (3,837,537) | ||||
General and administrative | 35 | (236,293) | (233,772) | (388,930) | (426,872) | ||||
Other operating expenses, net | 33 | (284,495) | (465,973) | (381,109) | (402,715) | ||||
Equity interest in income of affiliates | 16 | 1,097,799 | 1,296,099 | 22,438 | 8,978 | ||||
OPERATING INCOME | 966,883 | 1,502,624 | 1,388,915 | 2,001,129 | |||||
Financial income | 34 | (630,195) | (1,180,504) | (1,556,506) | (1,325,320) | ||||
Financial expenses | 34 | 195,475 | 793,411 | 985,904 | 845,797 | ||||
INCOME BEFORE TAXES | 532,163 | 1,115,531 | 818,313 | 1,521,606 | |||||
Current | 13 | (716) | - | (18,967) | (39,874) | ||||
Deferred | 13 | 281,780 | 251,878 | 21,321 | (116,643) | ||||
NET INCOME | 813,227 | 1,367,409 | 820,667 | 1,365,089 | |||||
Attributable to: | |||||||||
BRF shareholders | 813,227 | 1,367,409 | 813,227 | 1,367,409 | |||||
Non-controlling interest | - | - | 7,440 | (2,320) | |||||
Earnings per share - basic | 869,534,940 | 870,507,468 | 869,534,940 | 870,507,468 | |||||
Weighted average shares outstanding (thousands) - basic | 28 | 0.93524 | 1.57082 | 0.94380 | 1.56815 | ||||
Earning per share - diluted | 869,703,606 | 870,546,236 | 869,703,606 | 870,546,236 | |||||
Weighted average shares outstanding (thousands) - diluted | 28 | 0.93506 | 1.57075 | 0.93506 | 1.57075 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
December 31, 2012 and 2011
(Amounts expressed in thousands of Brazilian Reais)
BR GAAP | BR GAAP and IFRS | ||||||||
Parent company | Consolidated | ||||||||
Note | 12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
Net Income | 813,227 | 1,367,409 | 820,667 | 1,365,089 | |||||
Gain(loss) in foreign currency translation adjustments | (3,578) | 1,101 | (3,578) | 1,101 | |||||
Gain in available for sale marketable securities, | |||||||||
net of income taxes of R$159 in 2012 and (R$49) in 2011 | 8 | 13,173 | 3,535 | 13,173 | 3,535 | ||||
Unrealized losses in cash flow hedge, | |||||||||
net of income taxes of (R$1,722) in 2012 and R$97,737 in 2011 | 4 | (8,599) | (229,371) | (8,599) | (229,371) | ||||
Actuarial gains (losses), | |||||||||
net of income taxes of R$20,861 in 2012 and (R$14,439) in 2011 | 24 | (40,492) | 28,025 | (40,492) | 28,025 | ||||
Net losses recorded directly in the shareholders' equity | (39,496) | (196,710) | (39,496) | (196,710) | |||||
Comprehensive Income | 773,731 | 1,170,699 | 781,171 | 1,168,379 | |||||
Attributable to: | |||||||||
BRF shareholders | 773,731 | 1,170,699 | 773,731 | 1,170,699 | |||||
Non-controlling interest | - | - | 7,440 | (2,320) |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
December 31, 2012 and 2011
(Amounts expressed in thousands of Brazilian Reais, except interest on own capital per share data)
Capital reserves | |||||||||||
Paid-in capital | Capital reserve | Treasury shares | Legal reserve | Reserve for expansion | Reserve for capital increases | ||||||
BALANCES AT DECEMBER 31, 2010 | 12,460,471 | 69,353 | (739) | 111,215 | 673,317 | 280,156 | |||||
Comprehensive income: | |||||||||||
Gain in foreign currency translation adjustments | - | - | - | - | - | - | |||||
Unrealized gain in available for sale | |||||||||||
marketable securities | - | - | - | - | - | - | |||||
Unrealized loss in cash flow hedge | - | - | - | - | - | - | |||||
Actuarial gain (loss) | - | - | - | - | - | - | |||||
Net income (loss) for the period | - | - | - | - | - | - | |||||
TOTAL COMPREHENSIVE INCOME | - | - | - | - | - | - | |||||
Appropriation of income (loss): | |||||||||||
Interest on shareholders’ equity -R$ 0.7270 per outstanding share at the | |||||||||||
end of exercise | - | - | - | - | - | - | |||||
Legal reserve | - | - | - | 68,370 | - | - | |||||
Reserve for expansion | - | - | - | - | 305,268 | - | |||||
Reserve for capital increases | - | - | - | - | - | 265,578 | |||||
Reserve for tax incentives | - | - | - | - | - | - | |||||
Share-based payments | - | 15,844 | - | - | - | - | |||||
Gains on disposal of shares | - | 3,286 | - | - | - | - | |||||
Goodwill on the acquisition of non-controlling entities | - | (12,224) | - | - | - | - | |||||
Non-controlling interest | - | - | - | - | - | - | |||||
Treasury shares acquired | - | - | (71,956) | - | - | - | |||||
Treasury shares disposed | - | - | 7,375 | - | - | - | |||||
BALANCES AT DECEMBER 31, 2011 | 12,460,471 | 76,259 | (65,320) | 179,585 | 978,585 | 545,734 | |||||
Comprehensive income: | |||||||||||
Gain in foreign currency translation adjustments | - | - | - | - | - | - | |||||
Unrealized gain in available for sale marketable securities | - | - | - | - | - | - | |||||
Unrealized loss in cash flow hedge | - | - | - | - | - | - | |||||
Actuarial gain (loss) | - | - | - | - | - | - | |||||
Net income for the period | - | - | - | - | - | - | |||||
TOTAL COMPREHENSIVE INCOME | - | - | - | - | - | - | |||||
Appropriation of income (loss): | |||||||||||
Interest on shareholders’ equity -R$ 0.3158 per outstanding share at the | |||||||||||
end of exercise | - | - | - | - | - | - | |||||
Legal reserve | - | - | - | 40,661 | - | - | |||||
Reserve for expansion | - | - | - | - | 237,464 | - | |||||
Reserve for capital increases | - | - | - | - | - | 155,077 | |||||
Reserve for tax incentives | - | - | - | - | - | - | |||||
Share-based payments | - | 23,034 | - | - | - | - | |||||
Gains on disposal of shares | - | 4,455 | - | - | - | - | |||||
Goodwill on the acquisition of non- | |||||||||||
controlling entities | - | (33,851) | - | - | - | - | |||||
Non-controlling interest | - | - | - | - | - | - | |||||
Treasury shares acquired | - | - | - | - | - | - | |||||
Treasury shares disposed | - | - | 13,413 | - | - | - | |||||
BALANCES AT DECEMBER 31, 2012 | 12,460,471 | 69,897 | (51,907) | 220,246 | 1,216,049 | 700,811 |
Attributed to interest of controlling shareholders | ||||||||||||||||
Profit reserves | Other comprehensive income (loss) | |||||||||||||||
Reserve for tax incentives | Acumulated foreign currency translation adjustments | Available for sale marketable securities | Gains (losses) on hedge accounting | Actuarial gains (losses) | Retained earnings (losses) | Total shareholders’ equity | Non- controlling interest | Total shareholders’ equity (consolidated) | ||||||||
- | 11,483 | 1,516 | 62,078 | (39,883) | 13,628,967 | 7,551 | 13,636,518 | |||||||||
- | 1,101 | - | - | - | - | 1,101 | - | 1,101 | ||||||||
- | - | 3,535 | - | - | - | 3,535 | - | 3,535 | ||||||||
- | - | - | (229,371) | - | - | (229,371) | - | (229,371) | ||||||||
- | - | - | - | 28,025 | (39,517) | (11,492) | - | (11,492) | ||||||||
- | - | - | - | - | 1,367,409 | 1,367,409 | (2,320) | 1,365,089 | ||||||||
- | 12,584 | 5,051 | (167,293) | (11,858) | 1,327,892 | 14,760,149 | 5,231 | 14,765,380 | ||||||||
- | - | - | - | - | (632,134) | (632,134) | - | (632,134) | ||||||||
- | - | - | - | - | (68,370) | - | - | - | ||||||||
- | - | - | - | - | (305,268) | - | - | - | ||||||||
- | - | - | - | - | (265,578) | - | - | - | ||||||||
56,542 | - | - | - | - | (56,542) | - | - | - | ||||||||
- | - | - | - | - | - | 15,844 | - | 15,844 | ||||||||
- | - | - | - | - | - | 3,286 | - | 3,286 | ||||||||
- | - | - | - | - | - | (12,224) | - | (12,224) | ||||||||
- | - | - | - | - | - | 34,346 | 34,346 | |||||||||
- | - | - | - | - | - | (71,956) | - | (71,956) | ||||||||
- | - | - | - | - | - | 7,375 | - | 7,375 | ||||||||
56,542 | 12,584 | 5,051 | (167,293) | (11,858) | - | 14,070,340 | 39,577 | 14,109,917 | ||||||||
- | (3,578) | - | - | - | - | (3,578) | - | (3,578) | ||||||||
- | - | 13,173 | - | - | - | 13,173 | - | 13,173 | ||||||||
- | - | - | (8,599) | - | - | (8,599) | - | (8,599) | ||||||||
- | - | - | - | (40,492) | (37,844) | (78,336) | - | (78,336) | ||||||||
- | - | - | - | - | 813,227 | 813,227 | 7,440 | 820,667 | ||||||||
- | 9,006 | 18,224 | (175,892) | (52,350) | 775,383 | 14,806,227 | 47,017 | 14,853,244 | ||||||||
- | - | - | - | - | (274,750) | (274,750) | - | (274,750) | ||||||||
- | - | - | - | - | (40,661) | - | - | - | ||||||||
- | - | - | - | - | (237,464) | - | - | - | ||||||||
- | - | - | - | - | (155,077) | - | - | - | ||||||||
67,431 | - | - | - | - | (67,431) | - | - | - | ||||||||
- | - | - | - | - | - | 23,034 | - | 23,034 | ||||||||
- | - | - | - | - | - | 4,455 | - | 4,455 | ||||||||
- | - | - | - | - | - | (33,851) | - | (33,851) | ||||||||
- | - | - | - | - | - | - | (9,505) | (9,505) | ||||||||
- | - | - | - | - | - | - | - | - | ||||||||
- | - | - | - | - | - | 13,413 | - | 13,413 | ||||||||
123,973 | 9,006 | 18,224 | (175,892) | (52,350) | - | 14,538,528 | 37,512 | 14,576,040 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
December 31, 2012 and 2011
(Amounts expressed in thousands of Brazilian Reais)
BR GAAP | BR GAAP and IFRS | ||||||
Parent company | Consolidated | ||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | ||||
OPERATING ACTIVITIES: | |||||||
Net income for the period | 813,227 | 1,367,409 | 813,227 | 1,367,409 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Non-controlling interest | - | - | 7,440 | (2,320) | |||
Depreciation, amortization and exhaustion | 473,413 | 392,609 | 966,666 | 886,338 | |||
Equity interest in income of affiliates | (1,097,799) | (1,296,099) | (22,438) | (8,978) | |||
Results on the execution of TCD | 102,512 | - | 108,880 | - | |||
Gains (losses) on disposal of property, plant and equipment | (8,472) | 42,727 | 13,256 | 158,685 | |||
Deferred income tax | (281,780) | (251,878) | (21,321) | 116,643 | |||
Provision (reversal) for tax, civil and labor risks | 66,677 | 94,033 | 132,457 | 78,927 | |||
Other provisions | (10,145) | 42,713 | (6,220) | 60,490 | |||
Exchange rate variations and interest | 416,389 | 257,603 | 885,153 | 741,280 | |||
Changes in Operating Assets and Liabilities: | |||||||
Investments in trading securities | (1,250,140) | (3,327,370) | (2,528,952) | (4,003,585) | |||
Redemptions of trading securities | 1,825,382 | 3,276,933 | 3,344,945 | 4,107,639 | |||
Investments in available for sale | - | - | (10,815) | (1,703,487) | |||
Redemptions of available for sale | - | - | 11,478 | 1,499,193 | |||
Other financial assets and liabilities | (34,165) | (75,554) | (20,882) | (23,836) | |||
Trade accounts receivable | 39,658 | (382,739) | 90,312 | (640,215) | |||
Inventories | (100,102) | (294,885) | (361,771) | (538,610) | |||
Trade accounts payable | 205,869 | 178,611 | 669,357 | 566,688 | |||
Payment of tax, civil and labor risks | (99,642) | (78,819) | (203,116) | (203,232) | |||
Interest paid | (205,336) | (163,578) | (494,680) | (466,175) | |||
Payroll and related charges | - | - | (97,537) | (37,775) | |||
Interest on shareholders' equity received | 8,988 | 5,601 | 8,988 | 5,601 | |||
Income tax payments | (225,537) | 1,254,762 | (840,996) | (809,045) | |||
Net cash provided by operating activities | 638,997 | 1,042,079 | 2,443,431 | 1,151,635 | |||
INVESTING ACTIVITIES: | |||||||
Marketable securities | - | - | (48,619) | - | |||
Redemptions of held to maturity | - | 27 | 94,194 | 29,320 | |||
Restricted cash | - | - | (14,170) | (9,043) | |||
Business combination | (10,609) | (55,000) | (10,609) | (230,242) | |||
Other investments, net | (7) | - | (52,018) | (4,686) | |||
Cash of merged company | 484,167 | - | - | - | |||
Additions to property, plant and equipment | (876,877) | (678,862) | (1,884,422) | (1,125,242) | |||
Additions to biological assets | (231,268) | (208,115) | (493,888) | (492,198) | |||
Proceeds from disposals of property, plant and equipment | 38,903 | 8,579 | 51,250 | 5,962 | |||
Additions to intangible assets | (4,282) | (49,904) | (14,641) | (58,780) | |||
Net cash used in investing activities | (599,973) | (983,275) | (2,372,923) | (1,884,909) | |||
FINANCING ACTIVITIES: | |||||||
Proceeds from debt issuance | 3,149,588 | 1,815,957 | 5,258,227 | 3,098,390 | |||
Repayment of debt | (1,908,720) | (1,115,193) | (4,347,569) | (2,838,898) | |||
Advance forfuturecapital increase | (23,000) | (329,712) | - | - | |||
Treasury shares disposal (acquisition) | 13,413 | (71,956) | 13,413 | (71,956) | |||
Goodwill in the acquisiton of non-controlling entities | - | - | (33,851) | (12,224) | |||
Payment of interest on shareholders' equity | (439,790) | (501,644) | (439,790) | (501,644) | |||
Net cash (used in) provided by financing activities | 791,491 | (202,548) | 450,430 | (326,332) | |||
EFFECT ON EXCHANGE RATE VARIATION ON CASH AND CASH EQUIVALENTS | 8,649 | 1,340 | 42,912 | 115,806 | |||
Net decrease in cash | 839,164 | (142,404) | 563,850 | (943,800) | |||
At the beginning of the period | 68,755 | 211,159 | 1,366,843 | 2,310,643 | |||
At the end of the period | 907,919 | 68,755 | 1,930,693 | 1,366,843 |
STATEMENT OF VALUE ADDED
December 31, 2012 and 2011
(Amounts expressed in thousands of Brazilian Reais)
BR GAAP | BR GAAP and IFRS | |||||||
Parent company | Consolidated | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
1 - REVENUES | 16,037,237 | 14,090,333 | 32,444,864 | 29,434,753 | ||||
Sales of Goods, Products and Services | 15,560,135 | 13,828,853 | 31,287,114 | 28,640,514 | ||||
Other Income | (293,661) | (300,939) | (331,478) | (151,819) | ||||
Revenue Related to Construction of Own Assets | 763,436 | 601,196 | 1,526,672 | 990,159 | ||||
Allowance for Doubtful Accounts Reversal (Provisions) | 7,327 | (38,777) | (37,444) | (44,101) | ||||
2 - RAW MATERIAL ACQUIRED FROM THIRD PARTIES | (12,039,303) | (9,983,459) | (22,326,362) | (19,043,331) | ||||
Costs of Products and Goods | (10,064,588) | (8,222,032) | (17,814,256) | (14,787,191) | ||||
Materials, Energy, Third Parties Services and Other | (1,981,090) | (1,753,531) | (4,531,838) | (4,228,283) | ||||
Recovery (loss) of Assets Values | 6,375 | (7,896) | 19,732 | (27,857) | ||||
3 - GROSS VALUE ADDED (1-2) | 3,997,934 | 4,106,874 | 10,118,502 | 10,391,422 | ||||
4 - DEPRECIATION, AMORTIZATION AND EXHAUSTION | (473,413) | (392,609) | (966,666) | (886,338) | ||||
5 - NET VALUE ADDED (3-4) | 3,524,521 | 3,714,265 | 9,151,836 | 9,505,084 | ||||
6 - RECEIVED FROM THIRD PARTIES | 1,381,930 | 2,089,861 | 1,097,784 | 855,134 | ||||
Equity Pick-Up | 1,097,799 | 1,296,099 | 22,438 | 8,978 | ||||
Financial Income | 195,475 | 793,411 | 985,904 | 845,797 | ||||
Other | 88,656 | 351 | 89,442 | 359 | ||||
7 - VALUE ADDED TO BE DISTRIBUTED (5+6) | 4,906,451 | 5,804,126 | 10,249,620 | 10,360,218 | ||||
8 - DISTRIBUTION OF VALUE ADDED | 4,906,451 | 5,804,126 | 10,249,620 | 10,360,218 | ||||
Payroll | 1,923,144 | 1,718,143 | 4,035,239 | 3,607,734 | ||||
Salaries | 1,493,966 | 1,401,959 | 3,138,811 | 2,952,920 | ||||
Benefits | 326,871 | 223,529 | 692,276 | 480,202 | ||||
Government Severance Indemnity Fund for Employees | ||||||||
Guarantee Fund for Lenght of Services - FGTS | 102,307 | 92,655 | 204,152 | 174,612 | ||||
Taxes, fees and Contributions | 1,415,967 | 1,436,859 | 3,541,924 | 3,742,561 | ||||
Federal | 550,579 | 674,291 | 1,983,362 | 2,341,196 | ||||
State | 850,728 | 751,600 | 1,523,741 | 1,389,869 | ||||
Municipal | 14,660 | 10,968 | 34,821 | 11,496 | ||||
Capital Remuneration from Third Parties | 754,113 | 1,281,715 | 1,851,790 | 1,644,834 | ||||
Interests | 649,733 | 1,186,621 | 1,609,222 | 1,345,257 | ||||
Rents | 104,380 | 95,094 | 242,568 | 299,577 | ||||
Interest on Own-Capital | 813,227 | 1,367,409 | 820,667 | 1,365,089 | ||||
Interest on Shareholders' Equity | 274,750 | 632,134 | 274,750 | 632,134 | ||||
Retained Earnings | 538,477 | 735,275 | 538,477 | 735,275 | ||||
Non-controlling Interest | - | - | 7,440 | (2,320) |
1. COMPANY’S OPERATIONS | margarine processing plants, 3 pasta processing plants, 1 dessertprocessing plant and 3 soybean crushing plant, all of them nearthe Company’s raw material suppliers or the main consumercenters. The Company has an advanced distribution system and uses 33distribution centers, to deliver its products to supermarkets, retailstores, wholesalers, food service stores and other institutionalcustomers in the domestic market and exports to more than 140countries. The name BRF deploys and adds value and reliability to severaltrademarks among which the most important are:Batavo, Claybon,Chester®, Elegê, Fazenda, Nabrasa, Perdigão, Perdix, Hot Pocket,Miss Daisy, Nuggets, Qualy, Sadiaand Speciale Sadia, in additionto licensed trademarks such asTurma da Mônica, Bob EsponjaandTrakinas. The trademarksRezende, Wilson, Texas, Tekitos, Patitas,Escolha Saudável, Light & Elegant, Fiesta, Freski, Confiança, DorianaandDelicatawere disposed on June 11, 2012, as disclosed in note 1.2 The table below summarizes the direct and indirect ownershipinterests of the Company, as well as the activities of eachsubsidiary:
| |
BRF – Brasil Foods S.A. (“BRF or parent company”) and itssubsidiaries (collectively “Company”) is one of Brazil’s largestcompanies in the food industry. BRF is a public company, listedon the New Market of Brazilian Securities, Commodities &Futures Exchange (“BM&FBOVESPA”), under the ticker BRFS3,and listed on the New York Stock Exchange (“NYSE”), under theticker BRFS. It´s headquarter is located at 475, Jorge TzachelStreet in the City of Itajaí, State of Santa Catarina. With afocus on raising, producing and slaughtering of poultry, porkand beef, processing and/or sale of fresh meat, processedproducts, milk and dairy products, pasta, frozen vegetablesand soybean derivatives, among which the following arehighlighted: The Company’s activities are segregated into 4 operatingsegments, being: domestic market, foreign market, foodservice and dairy products, as disclosed in note 5. In the domestic market, the Company operates 30 meatprocessing plants, 11 dairy products processing plants, 2 |
Subsidiary | Main activity | Country | 12.31.12 | 12.31.11 | |||||
PSA Laboratório Veterinário Ltda. | Veterinary activities | Brazil | 88.00% | 88.00% | |||||
Sino dos Alpes Alimentos Ltda. | (a) | Industrialization and commercializations of products | Brazil | 99.99% | 99.99% | ||||
PDF Participações Ltda. | Holding | Brazil | 1.00% | 1.00% | |||||
Sino dos Alpes Alimentos Ltda. | (a) | Industrialization and commercializations of products | Brazil | 0.01% | 0.01% | ||||
Vip S.A. Emp. Part. Imobiliárias | (k) | Commercialization of owned real state | Brazil | 100.00% | 65.49% | ||||
Establecimiento Levino Zaccardi y Cia. S.A. | Industrialization and commercializations of dairy products | Argentina | 10.00% | 10.00% | |||||
Avipal S.A. Construtora e Incorporadora | (a) | Construction and real estate marketing | Brazil | 100.00% | 100.00% | ||||
Avipal Centro-oeste S.A. | (a) | Industrialization and commercializations of milk | Brazil | 100.00% | 100.00% | ||||
Establecimiento Levino Zaccardi y Cia. S.A. | Industrialization and commercializations of dairy products | Argentina | 90.00% | 90.00% | |||||
UP! Alimentos Ltda. | Industrialization and commercializations of products | Brazil | 50.00% | 50.00% | |||||
Perdigão Trading S.A. | (a) | Holding | Brazil | 100.00% | 100.00% | ||||
PSA Laboratório Veterinário Ltda. | Veterinary activities | Brazil | 12.00% | 12.00% | |||||
PDF Participações Ltda. | Holding | Brazil | 99.00% | 99.00% | |||||
Heloísa Ind. e Com. de Produtos Lácteos Ltda. | (j) | Industrialization and commercializations of dairy products | Brazil | - | 100.00% | ||||
BRF GmbH | (i) | Holding and trading | Austria | 100.00% | 100.00% | ||||
Perdigão Europe Ltd. | Import and commercialization of products | Portugal | 100.00% | 100.00% | |||||
Perdigão International Ltd. | Import and commercialization of products | Cayman Island | 100.00% | 100.00% | |||||
BFF International Ltd. | Financial fundraising | Cayman Island | 100.00% | 100.00% | |||||
Highline International | (a) | Financial fundraising | Cayman Island | 100.00% | 100.00% | ||||
Plusfood Germany GmbH | Import and commercialization of products | Germany | 100.00% | 100.00% | |||||
Perdigão France SARL | Marketing and logistics services | France | 100.00% | 100.00% | |||||
Plusfood Holland B.V. | Administrative services | The Netherlands | 100.00% | 100.00% | |||||
Plusfood Groep B.V. | Holding | The Netherlands | 100.00% | 100.00% | |||||
Plusfood B.V. | Industrialization, import and commercializations of products | The Netherlands | 100.00% | 100.00% | |||||
Plusfood Wrexham | Industrialization, import and commercializations of products | United Kingdom | 100.00% | 100.00% | |||||
Plusfood Iberia SL | Marketing and logistics services | Spain | 100.00% | 100.00% | |||||
Plusfood Italy SRL | Import and commercialization of products | Italy | 67.00% | 67.00% |
Subsidiária | Atividade principal | País | 31.12.12 | 31.12.11 | |||||
BRF Brasil Foods Japan KK | Marketing and logistics services | Japan | 100.00% | 100.00% | |||||
BRF Brasil Foods PTE Ltd. | Marketing and logistics services | Singapore | 100.00% | 100.00% | |||||
Plusfood Hungary Trade and Service LLC | Import and commercialization of products | Hungary | 100.00% | 100.00% | |||||
Plusfood UK Ltd. | Import and commercialization of products | United Kingdom | 100.00% | 100.00% | |||||
Acheron Beteiligung-sverwaltung GmbH | (b) | Holding | Austria | 100.00% | 100.00% | ||||
Xamol Consultores Serviços Ltda. | Import and commercialization of products | Portugal | 100.00% | 100.00% | |||||
BRF Brasil Foods África Ltd. | Import and commercialization of products | South Africa | 100.00% | 100.00% | |||||
Sadia Chile S.A. | Import and commercialization of products | Chile | 40.00% | 40.00% | |||||
Rising Star Food Company Ltd. | (d) | Industralization, import and commercialization of products | China | 50.00% | - | ||||
Quickfood S.A. | (f) | Industrialization and commercialization of products | Argentina | 90.05% | - | ||||
Sadia S.A. | (j) | Industralization and commercialization of products | Brazil | - | 100.00% | ||||
Sadia International Ltd. | Import and commercialization of products | Cayman Island | 100.00% | 100.00% | |||||
Sadia Uruguay S.A. | Import and commercialization of products | Uruguay | 100.00% | 100.00% | |||||
Sadia Alimentos S.A. | (c) | Import and export of products | Argentina | 0.02% | - | ||||
Sadia Chile S.A. | Import and commercialization of products | Chile | 60.00% | 60.00% | |||||
Sadia U.K. Ltd. | Import and commercialization of products | United Kingdom | 100.00% | 100.00% | |||||
Vip S.A. Emp. Part. Imobiliárias | (c) | Commercialization of owned real estate | Brazil | - | 34.51% | ||||
Athena Alimentos S.A. | (g) | Industrialization and commercialization of products | Brazil | - | 99.99% | ||||
Sadia Overseas Ltd. | Financial fundraising | Cayman Island | 100.00% | 100.00% | |||||
Sadia GmbH | Holding | Austria | 100.00% | 100.00% | |||||
Wellax Food Logistics C.P.A.S.U. | |||||||||
Lda. | Import and commercialization of products | Portugal | 100.00% | 100.00% | |||||
Sadia Foods GmbH | Import and commercialization of products | Germany | 100.00% | 100.00% | |||||
BRF Foods LLC | Import and commercialization of products | Russia | 10.00% | 10.00% | |||||
Qualy B.V. | (b) | Import and commercialization of products | The Netherlands | 100.00% | 100.00% | ||||
Sadia Japan KK | (e) | Marketing and logistics services | Japan | - | 100.00% | ||||
Badi Ltd. | Import and commercialization of products | United Arab Emirates | 100.00% | 100.00% | |||||
Al-Wafi Al-Takamol Imp. | Import and commercialization of products | Saudi Arabia | 75.00% | 75.00% | |||||
BRF Foods LLC | Import and commercialization of products | Russia | 90.00% | 90.00% | |||||
Baumhardt Comércio e Participações Ltda. | (h) | Holding | Brazil | - | 73.94% | ||||
Excelsior Alimentos S.A. | (h) | Industralization and commercialization of products | Brazil | - | 25.10% | ||||
Excelsior Alimentos S.A. | (h) | Industralization and commercialization of products | Brazil | - | 46.01% | ||||
K&S Alimentos S.A. | Industrialization and commercialization of products | Brazil | 49.00% | 49.00% | |||||
Sadia Alimentos S.A. | (c) | Import and export of products | Argentina | 99.98% | 100.00% | ||||
Avex S.A. | (m) | Industrialization and commercialization of products | Argentina | 99.46% | 65.58% | ||||
Flora Dánica S.A. | (c) | Industrialization and commercialization of products | Argentina | 95.00% | 100.00% | ||||
GB Dan S.A. | (c) | Industrialization and commercialization of products | Argentina | 5.00% | - | ||||
Flora San Luis S.A. | (c) | Industrialization and commercialization of products | Argentina | 95.00% | 100.00% | ||||
Flora Dánica S.A. | (c) | Industrialization and commercialization of products | Argentina | 5.00% | - | ||||
GB Dan S.A. | (c) | Industrialization and commercialization of products | Argentina | 95.00% | 100.00% | ||||
Flora San Luis S.A. | (c) | Industrialization and commercialization of products | Argentina | 5.00% | - | ||||
BRF - Suínos do Sul Ltda. | (k) | Participation in other companies | Brazil | 99.00% | - | ||||
Nutrifont Alimentos S.A. | (l) | Industrialization and commercialization of products | Brazil | 50.00% | - | ||||
((a) Dormant subsidiaries. (b) The wholly-owned subsidiary Acheron Beteiligung-sverwaltung GmbH owns 100 direct subsidiaries in Madeira Island, Portugal, with an investment as of December 31, 2012 ofR$2,169 (R$1,588 as of December 31, 2011). The wholly-owned subsidiary Qualy B.V. owns 48 subsidiaries in The Netherlands, and the amount of this investment, as of December31, 2012, is represented by a net capital deficiency of R$10,597 (R$9,363 as of December 31, 2011). The purpose of these two subsidiaries is to operate in the European market toincrease the Company’s market share, which is regulated by a system of poultry and turkey meat import quotas. (c) Change in the equity interest occurred during the fiscal year ended December 31, 2012. (d) Establishment of joint venture in China in February 2012, see note 1.3. (e) Company’s activities were terminated in July 2012. (f) Equity interest acquired on June 11, 2012. (g) Disposal of equity interest on June 11, 2012. (h) Disposal of equity interest on July 3, 2012. (i) Change in the company’s name on October 3, 2012. (j) Merger of wholly-owned subsidiary on December 31, 2012. (k) Equity interest acquired on October 19, 2012. (l) Establishment of joint venture with Carbery Luxembourg Sàrl on November 5, 2012, see note 1.4. (m) Change in the equity interest on December 28, 2012, see note 1.6 | |||||||||
1.2. Performance Commitment Agreement | (i) | the entire equity interest held either directly or indirectly by Marfrig, equivalent to 90.05% of the capital of Quickfood S.A. (“Quickfood”), a company based in Argentina; and | |||||
(ii) | the right to receive an irrevocable and irreversible amount corresponding to R$350,000 to be paid as follows: | ||||||
On June 11, 2012, the Company and Marfrig Alimentos S.A.(“Marfrig”), in accordance to the terms and conditions establishedby the Administrative Council for Economic Defense (“CADE”) inthe Performance Commitment Agreement (“TCD”), signed theconclusion of the Asset Exchange and Other Agreements signed onMarch 20, 2012 which included the following measures: (i) the acquision, by Marfrig, of the entire equity interest of AthenaAlimentos S.A. (“Athena”), a company for | •R$25,000 due to June 11, 2012, which were properly paid by Marfrig; | ||||||
•R$25,000 due to July 1, 2012, adjusted by the variations of the General Market Price Index (“IGP-M”), which were properly paid by Marfrig; | |||||||
•R$250,000 to be paid by Marfrig to BRF in 72 monthly and successive installments, which are due from August 1, 2012, being the first installment in the amount of R$4,424 and other remaining installments in the amount of R$4,821, subject to the fixed rate of 12.11% p.a. | |||||||
Processing plant | State | Activity | As disclosed in the quarterly information for the nine month period ended September 30, 2012, BRF and Marfrig renegotiated thepayment terms of the amount correspondent to R$50,000 whichprevious settlement was expected to occur on October 1, 2012. As aconsequence, this amount will be received from January 2, 2013 in67 monthly and successive installments in the amount of R$964. All the installments due until December 31, 2012 were properly paidby Marfrig. On December 31, 2012, the total balance related to this rightis R$287,626, being R$41,172 recorded in current assets andR$246,454 recorded in non-current assets, both accounted for asother rights. Additionally, in order to comply with the TCD, it was agreed thetransfer of the Company’s pork slaughtering and processingmanufacturing facility, located in the City of Carambeí, State ofParaná, to Marfrig. On December 31, 2012, the receivable relatedto this transaction corresponds to R$81,542 and it is accountedfor as other rights, being R$17,936 recorded in current assetsand R$63,606 recorded in non-current assets. Such transferencegenerated a net gain of R$48,812, accounted for as other operatingincome. As a result of the conclusion of the Asset Exchange and OtherAgreements, Marfrig and BRF also signed other agreements mainlyrelated to the supply of raw material, processed products andutility services. In order to comply with the terms and conditions from CADE, and inaccordance with the agreements between BRF and Marfrig, as fromJuly 2, 2012, the following measures were taken: (i) temporary suspension of the use of the Perdigão trademark, for the following products and periods: | ||||
Três Passos | RS | Pork slaughtering, processing of finished goods, pork farms and hatcheries | |||||
Brasília | DF | Poultry slaughtering, processing of finished goods, manufacturing of animal feed, pork farms and hatcheries | |||||
São Gonçalo | BA | Poultry slaughtering, processing of finished goods, manufacturing of animal feed, pork farms and hatcheries | |||||
Salto Veloso | SC | Processing of finished goods | |||||
Bom Retiro do Sul | RS | Processing of finished goods | |||||
Lages | SC | Processing of finished goods | |||||
Duque de Caxias | RJ | Processing of finished goods | |||||
Várzea Grande | MS | Processing of finished goods | |||||
Valinhos | SP | Processing of finished goods | |||||
(b) all the assets and rights related to the following distribution centers: | |||||||
Location | State | ||||||
Salvador | BA | ||||||
Duque de Caxias | RJ | ||||||
Campinas | SP | ||||||
Bauru | SP | ||||||
Brasília | DF | ||||||
São José dos Pinhais | PR | ||||||
Ribeirão Preto | SP | ||||||
Cubatão | SP | Product | Period | ||||
Ham products | 3 years | ||||||
(ii) | the Company transferred to Marfrig the entire portfolio of contracts with poultry and pork outgrowers, in order to guarantee the supply to the specific processing plants listed in the item (i a) above; | Pork festive line | 3 years | ||||
Smoked sausage and pork sausage | 3 years | ||||||
(iii) | the acquisition, by Marfrig, of the trademarksRezende,Wilson, Texas, Tekitos, Patitas, Escolha Saudável, Light &Elegant, Fiesta, Freski, Confiança, DorianaandDelicata, aswell as the intellectual properties rights related to thesetrademarks; and | Salamis | 4 years | ||||
Lasagna | 5 years | ||||||
(iv) | the acquisition, by Marfrig, of the equity interest held either directly or indirectly by Sadia S.A., equivalent to 64.57% of the capital of Excelsior Alimentos S.A., transferred to Marfrig on July 2, 2012. | Frozen pizzas | 5 years | ||||
In exchange to the acquisition and/or disposal of assets and rights listed in the items (i) to (iv) above, the Company acquired: | Kibes and meat balls | 5 years | |||||
Turkey cold cuts light line | 5 years | ||||||
(ii) | temporary suspension of the use of the Batavo trademark, related to the products and periods listed in item (i) above. | ||||||
The accounting effects of the conclusion of the Asset Exchange and Other Agreements signed with Marfrig are presented in note 6.1. |
1.3. Establishment of joint venture inChina On February 14, 2012, the Company disclosed to the market theestablishment ofRising Star Food Company Limited, a joint venture(“JV”) with the participation ofDah Chong Hong Limited(“DCH”),which purpose is: | The Company’s management do not expect any significant impacton the future earnings and the assets offered by Doux are sufficientto cover the advances made by BRF. | ||
(i) | to access the distribution market in Continental China, Hong Kong and Macau including retail and food service channels; | ||
(ii) | local processing of products; and | ||
(iii) | developing the Sadia trademark in these markets. | ||
The Company owns 50% of equity interest in the JV and in April 2012made a capital investment amounting to approximately R$1,300,which is proportional to its participation in the JV. |
2. MANAGEMENT’S STATEMENTAND BASIS OF PREPARATION ANDPRESENTATION OF FINANCIALSTATEMENTS | where it operates. The foreign subsidiaries adopt the BrazilianReal as their functional currency, except for the subsidiaryPlusfood Groep B.V. which adopts the Euro (“EUR”) and AvexS.A., Dánica group and Quickfood S.A. wich adopt the ArgentinePeso (“ARS”), as their functional currency. | ||
(i) | derivative financial instruments measured at fair value; | ||
(ii) | derivative financial instruments measured at fair value through the statement of income; | ||
(iii) | financial assets available for sale measured at fair value; | ||
(iv) | assets and liabilities of acquired companies from January 1, 2009 recorded initially at fair value; and | ||
(v) | share-based payments and employee benefits measured at fair value. | ||
3. SUMMARY OF ACCOUNTINGPRACTICES In the preparation of the consolidated financial statements, theCompany applied CVM Deliberation No. 640/10, which approvedthe technical pronouncement CPC 02 (R2), addressing the Effectsof Changes in Foreign Exchange Rates and Translation of FinancialStatements. Pursuant to this deliberation, the Company must applythe following criteria for the consolidation of foreign subsidiaries: | |||
days or less, which are readily convertible into known amountsof cash and subject to immaterial risk of change in value. Theinvestments classified in this group, due to their nature, aremeasured at fair value through the statement of income and will be 3.5.1Financial investments are financial assets that comprisepublic and private fixed-income securities, classified andrecorded based on the purpose for which they were acquired,in accordance with the following categories: 3.5.2 Derivatives measured at fair value:derivatives that areactively traded on organized markets, and their fair valueis determined based on the amounts quoted in the marketat the balance sheet date. These financial instruments aredesignated at initial recognition, classified as other financialassets and/or liabilities, with a corresponding entry in thestatement of income within ‘Finance income or costs’ or‘Cash flow hedge’, which are recorded in equity net of taxes. 3.5.3 Hedge transactions:the Company utilizes derivative andnon-derivative financial instruments, as disclosed in note4, to hedge the exposure to exchange rate and interestvariations or to modify the characteristics of financial assetsand liabilities, transactions highly probable and whichare: (i) highly correlated to changes in the market value ofthe item being hedged, both at inception and throughoutthe term of the contract (effectiveness between 80%and 125%); (ii) supported by documents that identify thetransaction, the hedged risk, the risk management processand the methodology used to assess effectiveness; and(iii) are considered as effective in the mitigation of therisk associated with the hedged exposure. The accountingfollows the CVM Deliberation No. 604/09, which allows theapplication of the hedge accounting methodology withthe effects of the measurement at fair value recognized inequity and the realization in the statement of income undera caption corresponding to the hedged item. | The amounts registered as other comprehensive income areimmediately transferred to the statement of income whenthe hedged transaction affects the statement of income, forexample, when the forecasted revenue in foreign currencyoccurs. 3.5.4 Loans and receivables:these are financial assets with fixedor determinable payments which are not quoted on an activemarket. Such assets are initially recognized at fair value plusany attributable transaction costs. After initial recognition,loans and receivables are measured at amortized cost underthe effective interest rate method, less any impairmentlosses. 3.6. Adjustment to present value:theCompany and its subsidiaries measure the adjustment to presentvalue of outstanding balances of other non-current rights, tradepayables, social obligations and other non-current obligations. TheCompany adopts the weighted average of the cost of funding onthe domestic and foreign markets to determine the adjustment topresent value to the assets and liabilities previously mentioned,which corresponds to 6.06% p.a. (6.66% p.a. as of December 31,2011). | |
In Management’s opinion, the fair value of the biological assetsis substantially represented by formation cost, mainly due to theshort life cycle of the animals and the fact that a significant shareof the profits from our products arises from the manufacturingprocess rather than from obtaining in natura meat (raw materialsat slaughtering point). This opinion is supported by a fair valueappraisal report prepared by an independent expert, whichconcluded that the formation cost of these assets approximates totheir fair value (see note 11). | amortization period and method for an intangible asset with afinite useful life are reviewed at least at the end of each fiscal year.The amortization of intangible assets with a finite useful life isrecognized in the statement of income as an expense consistentlywith the use of the intangible asset. |
statute of limitation, conclusions of tax inspections or additionalexposures identified based on new matters or court decisions. As a result of the business combination with Sadia, Avex and Dánicagroup the Company recognized contingent liabilities related to tax,civil and labor matters. Costs incurred with disposal of assets must be accrued based on thepresent value of the costs expected to settle the obligation usingestimated cash flows, and are recognized as an integral part of thecorresponding asset, or as a production cost, when incurred. | 3.20. Treasury shares:when the capital recognized asequity is repurchased, the amount of compensation paid, whichincludes directly attributable costs, net of any tax effects, isrecognized as a deduction from equity. The repurchased shares areclassified as treasury shares and are disclosed as a deduction fromequity. When treasury shares are subsequently sold or reissued, thevalue received is recognized as an increase in shareholders’ equityand surplus or deficit arising is recorded to retained earnings. |
3.26. Financial income:include interest earnings on amounts invested (including available for sale financial assets), dividend income (except for dividends received from equity investees evaluated by the Company), gains on disposal of available for sale financial assets, changes in fair value of financial assets measured at fair value through income and gains on hedging instruments that are recognized in income. Interest income is recognized in earnings through the effective interest method. The dividend income is recognized in the statement of income on the date that the Company’s right to receive payment is established. The distributions received from investees that are recorded under equity income reduce the value of the investment, in the individual financial statements. 3.27. Subsidies and tax incentives:governmentsubsidies are recognized at fair value when there is reasonable assurance that the conditions established and related benefits will be received. The amounts are accounted for as follows: 3.28. Dividends and interest onshareholders’ equity:the proposal for payment of dividends and interest on shareholders’ equity made by the Company’s Management, which is within the portion equivalent to the mandatory minimum dividend, is recorded in current liabilities, for it is regarded as a legal obligation provided for in the bylaws; on the other hand, the dividends that exceed the mandatory minimum dividend, declared by Management before the end of the accounting period covered by the financial statements, not yet approved by the stockholders, is recorded as additional dividend proposed in shareholders’ equity. For financial statement presentation purposes, interest on shareholders’ equity is stated as an allocation of income directly in equity. 3.29. Translation of assets and liabilities denominated in foreign currency:asmentioned in item 3.1 above, the balances of assets and liabilities of foreign subsidiaries are translated into Brazilian Reais using the exchange rates in effect at the balance sheet date and statement of income accounts are translated at the average monthly rates in effect. The exchange rates in Brazilian Reais effective at the date of the balance sheets translated were as follows: | 3.30. Accounting judgments, estimatesand assumptions:as mentioned in note 2, in the process of applying the Company’s accounting policies, Management made the following judgments which have a material impact on the amounts recognized in the financial statements: The Company reviews estimates and underlying assumptions used in its accounting estimates at least on a quarterly basis. Revisions to accounting estimates are recognized in the financial statements in the period in each the estimates are revised. 3.31. Statement of added value:the Companyprepared individual and consolidated statements of added value (“DVA”) in accordance with CVM Deliberation No. 557/08, which are submitted as part of these financial statements in accordance with BR GAAP. It represents for IFRS additional financial information. 4. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT 4.1 Overview In the regular course of its business, the Company is exposed to market risks related mainly to the fluctuation of interest rates, variation of foreign exchange rates and changes in the commodities prices. The Company utilizes hedging instruments to mitigate its exposure to these risks, based on a Risk Policy under the management of the Financial Risk Management Committee, Board of Executive Officers and Board of Directors. Such policy includes the monitoring of the levels of exposure to each market risk and its measurement is performed based on the accounting exposure and forecast of future cash flows. The policy establishes limits for the decision making and adoption of hedging instruments with the purposes of: (i) protecting from the exposure to fluctuation of interest rates; (ii) protecting from the exposure to variation of foreign exchange rates on debt and cash flow; and (iii) protecting from the exposure to changes in the commodities prices. The Board of Directors plays a crucial role in the financial risk management structure as responsible for approving the Risk Policy. Moreover, the Board of Directors defines the limits of tolerance of the different risks identified as acceptable for the Company on behalf of its shareholders. The Board of Directors is in charge of the evaluation of the Company’s positioning for each identified risk, according to the guidelines enacted by the Board of Directors as well as for approving: (i) the action plans defined for aligning the risks within the defined limits of tolerance; (ii) the performance indicators to be used in risk management; (iii) the overall limits; and (iv) the evaluation of improvements to the Risk Policy. | |||
Final rate | 12.31.12 | 12.31.11 | ||
U.S. Dollar (US$) | 2.0435 | 1.8758 | ||
Euro (€) | 2.6954 | 2.4342 | ||
Pound Sterling (£) | 3.3031 | 2.9148 | ||
Argentine Peso (AR$) | 0.4160 | 0.4360 | ||
Average rates | ||||
U.S. Dollar (US$) | 1.9550 | 1.6746 | ||
Euro (€) | 2.5103 | 2.3278 | ||
Pound Sterling (£) | 3.0985 | 2.6835 | ||
Argentine Peso (AR$) | 0.4298 | 0.4056 |
The Financial Risk Management Committee is in charge of the execution of the Risk Policy, which comprises the supervision of the risk management process, planning and verification of the impacts of the decisions implemented, as well as the evaluation and approval of hedging alternatives and monitoring the exposure levels to risks in order to ensure the compliance of the Policy. The Risk Management area has as primary task the monitoring, evaluation and reporting of financial risk taken by the Company, and among these are: The tasks mentioned above are performed in order to highlight and give acknowledgement to Management on the magnitude of the risks and the related hedging instruments utilized presenting the potential impacts. The Risk Policy defines the strategies to be adopted, and Management contracts hedging instruments that are approved within the delegation of authority levels. The Board of Directors, Board of Executive Officers and Financial Risk Committee have different levels of authority where each one acts within the limits pre-established in this Policy. The Policy does not authorize the Company to contract leveraged transactions in derivative markets, as well as determines that individual hedge operations (notional) must be limited to 2.5% of the Company’s shareholders’ equity. The inclusion and updating of transactions are recorded in the Company’s operating systems, with proper segregation of duties, being validated by the back-office and daily monitored by the Risk Management area. Considering the objective of hedging transactions is to mitigate the risks and the uncertainties to which the Company is exposed, the results obtained in the current fiscal year met the established objectives. As permitted by CVM Deliberation No. 604/09, the Company applies hedge accounting rules to its derivative instruments classified as cash flow hedge, in accordance with its Risk Policy. The cash flow hedge consists of hedging the exposure to variations of the cash flow that: The Policy has also the purpose of determining parameters of use of financial instruments, including derivatives, which are designed to protect the operating and financial assets and liabilities, which are exposed to the variations of foreign exchange rates, the fluctuation of the interest rates and changes to the commodities prices. The Risk Management area is responsible for ensuring compliance to the requirements established by the Company’s Risk Policy. 4.2. Interest rate risk management The risk of interest rates is that one which the Company may suffer economic losses, arising from changes in these rates, which can be caused by factors related to economic crises or changes in monetary policy on domestic and foreign markets. This exhibition | refers primarily to changes in market interest rates, that affect assets and liabilities of the Company, indexed to the London Interbank Offered rate (“LIBOR”), Long Term Interest Rate (“TJLP”). Currency of the Bank National Economic and Social Development (“UMBNDES”) or Interbank Deposit Certificate (“CDI”) Certificate, and any transactions with pre-established positions in some of the indices mentioned above, which can lead to losses unrealized or realized through the calculation of fair market value (mark to market). The Company’s Risk Policy does not restrict exposure to different interest rates, neither establishes limits for fixed or floating rates. The Company continually monitors the market interest rates, in order to evaluate any potential need to enter in hedging contracts to protect from the exposure to fluctuation of such rates. These transactions are basically characterized by contracts that exchange floating rate for fixed rate. Such transactions were designated by the Company as cash flow hedge. The Company seeks a stable correlation between its current and non-current term indebtedness, maintaining a higher portion in the non-current term. The Company’s indebtedness is essentially tied to theLIBOR, fixed coupon (“R$ and USD”), TJLP and UMBNDES rates. In case of adverse changes in the market that result in LIBOR hikes, the cost of the floating indebtedness rises and on the other hand, the cost of the fixed indebtedness decreases in relative terms. The same consideration is also applicable to the TJLP and UMBNDES. With regards to the Company’s marketable securities, the main index is the CDI for investments in the domestic market and fixed coupon (“USD”) for investments in the foreign market. If CDI increases, impacts become favorable, while if CDI decreases, results become unfavorable. In August 2011, the Monetary Policy Committee (“COPOM”) initiated a cycle of monetary policy easing by reducing the basic interest rate from 12.5% p.a. to 7.25% p.a. in December 2012. Thus, interest income derived from investments subject to the CDI variations were reduced. Moreover, there is the maintenance of the expectation of low international interest rates. With LIBOR at historically low levels, there was a positive impact on financial costs linked to this indicator. Regarding the exposure to fluctuation of interest rates, the results obtained for the year ended December 31, 2012, met the established objectives. 4.3. Foreign exchange risk management Foreign exchange risk is the one related to variations of foreign exchange rates that may cause the Company to incur unexpected losses, leading to a reduction of the assets or an increase of the amounts of liabilities. The main exposures to which the Company is subject, as regards foreign exchange rates variations, refer to the fluctuation of the U.S. Dollar (“US$” or “USD”) and also of the Euro (“EUR”) , Pound Sterling (“GBP”) and the Argentine Peso (“ARS”) in relation to the Brazilian Real (“R$ or BRL”). The objective of the Company’s Risk Policy is the protection from excessive exposure to the risks of foreign exchange variations by balancing its assets not denominated in Brazilian Reais against its obligations not denominated in Brazilian Reais, thus protecting the Company’s balance sheet, through the use of over-the-counter transactions (“swap”) and transactions on the futures exchange. |
4.3.1 Breakdown of the balances of exposure in foreign currency
Foreign currency denominated assets and liabilities are as follows:
BR GAAP | BR GAAP and IFRS | ||||||
Parent company | Consolidated | ||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | ||||
Cash and cash equivalents and marketable securities | 120,671 | 40,469 | 1,502,407 | 1,689,551 | |||
Trade accounts receivable | 231,560 | 37,921 | 1,606,544 | 1,379,420 | |||
Accounts receivable from subsidiaries | 1,225,246 | 409,061 | - | - | |||
Restricted cash | - | - | 9,137 | - | |||
Dollar futures agreements | 204,350 | 65,801 | 204,350 | 65,801 | |||
Inventories | 1,973 | - | 543,030 | 112,267 | |||
Forward contracts (NDF)(1) | - | - | - | 11,255 | |||
Exchange rate contracts (Swap) | (31,652) | (359,369) | (31,652) | (359,369) | |||
Loans and financing | (2,815,029) | (1,268,830) | (5,628,401) | (4,723,824) | |||
Bond designated as cash-flow hedge | 306,525 | - | 306,525 | - | |||
Pre-payment exports designated as cash-flow hedge | 815,778 | 1,210,248 | 815,778 | 1,210,248 | |||
Trade accounts payable | (233,867) | (55,760) | (479,730) | (340,300) | |||
Advance for pre-payment export to subsidiaries | (3,258,361) | (1,763,378) | - | - | |||
Other assets and liabilities, net | 11,271 | - | 310,829 | 71,948 | |||
(3,421,535) | (1,683,837) | (841,183) | (883,003) | ||||
Foreign exchange exposure in US$ | (1,674,350) | (897,663) | (411,638) | (470,734) | |||
(1) Offshore non-deliverable forwards (NDF’s) not designated as hedge accounting, impacting financial result and not shareholders’ equity. |
The Company’s total net foreign exchange exposure as of December 31, 2012, is a liability of US$411,638 and is within the limit established by the Risk Policy. The Risk Policy aims to protect the operating revenues and costs that are related to the operations resulting from the business activity, such as estimates of exports and purchases of raw materials. For the purpose, the Company utilizes hedge instruments focusing mainly on the protection of its foreign currency denominated projected cash flow. | In order to conduct an active management and as required by the Risk Policy, the Company performs daily monitoring, through reports issued by the Risk Management area, on cash flow needs and foreign exchange exposure. 4.3.2 Breakdown of the balances of derivative financial instruments The positions of outstanding derivatives are as follows: |
BR GAAP and IFRS | ||||||||||||
Parent company and Consolidated | ||||||||||||
12.31.12 | ||||||||||||
Instrument | Subject to hedge | Maturity | Receivable | Payable | Reference value (notional) | | Market value(1) | |||||
Financial instruments designated as hedge accounting | ||||||||||||
NDF | From 01/2013 | |||||||||||
Exchange rate | to 11/2013 | R$ (Pre of 6.53%) | US$ | 2,057,804 | (20,044) | |||||||
NDF | From 01/2013 | |||||||||||
Exchange rate | to 11/2013 | R$ (Pre of 7.13%) | EUR | 530,994 | (11,268) | |||||||
NDF | From 01/2013 | |||||||||||
Exchange rate | to 11/2013 | R$ (Pre of 6.22%) | GBP | 176,385 | (6,425) | |||||||
Fixed exchange rate | From 01/2013 | |||||||||||
Exchange rate | to 04/2013 | R$ (Pre of 7.66%) | US$ | 132,828 | 2,080 | |||||||
Swap | Exchange rate | Up to 03/2014 | R$ (Pre of 9.75%) | US$ + 1.58% | 408,700 | (76,934) | ||||||
Swap | Exchange rate | Up to 07/2013 | US$ + 7% | R$ (76% do CDI) | 56,112 | 2,119 | ||||||
Swap | From 01/2013 | |||||||||||
Exchange rate | to 12/2013 | US$ + LIBOR 3M + 3.83% | R$ (97.50% do CDI) | 330,750 | (2,165) | |||||||
Swap | From 01/2013 | |||||||||||
Interest rate | to 06/2018 | US$ + LIBOR 3M + 2.48% | US$ + 4.27% | 408,700 | (23,033) | |||||||
Swap | From 01/2013 | |||||||||||
Interest rate | to 02/2019 | US$ + LIBOR 6M + 2.37% | US$ + 5.60% | 728,362 | (78,615) | |||||||
4,830,635 | (214,285) | |||||||||||
Financial instruments not designated as hedge accounting | ||||||||||||
NDF | Exchange rate | Up to 03/2013 | US$ (Pre de 0.28%) | EUR | 134,770 | 396 | ||||||
Swap | Exchange rate | Up to 03/2015 | R$ (Pre de 8.41%) | US$ - 0.20% | 31,652 | (5,609) | ||||||
Options | From 01/2013 | |||||||||||
Live cattle | to 07/2013 | R$ | R$ | 28,784 | 10 | |||||||
NDF | Live cattle | Up to 01/2013 | R$ | R$ | 854 | 57 | ||||||
Future contract | Exchange rate | Up to 02/2013 | US$ | R$ | 204,350 | (782) | ||||||
Future contract | Live cattle | Up to 10/2013 | R$ | R$ | 20,309 | (7) | ||||||
420,719 | (5,935) | |||||||||||
5,251,354 | (220,220) |
BR GAAP and IFRS | ||||||||||||
Parent company and Consolidated | ||||||||||||
12.31.11 | ||||||||||||
Instrument | Subject to hedge | Maturity | Receivable | Payable | Reference value (notional) | Market value(1) | ||||||
Financial instruments designated as hedge accounting |
| |||||||||||
NDF | From 01/2012 | |||||||||||
Exchange rate | to 11/2012 | R$ (Pre of 9.25%) | US$ | 2,551,088 | (88,150) | |||||||
NDF | From 01/2012 | |||||||||||
Exchange rate | to 11/2012 | R$ (Pre of 7.72%) | EUR | 769,207 | 6,637 | |||||||
NDF | From 01/2012 | |||||||||||
Exchange rate | to 11/2012 | R$ (Pre of 7.59%) | GBP | 201,996 | (5,270) | |||||||
Options | Exchange rate | Up to 01/2012 | R$ | US$ | 150,064 | (1,308) | ||||||
Swap | Exchange rate | Up to 07/2013 | US$ + 7% | R$ (76% from CDI) | 56,112 | 1,031 | ||||||
Swap | From 10/2011 | R$ (97.50% from | ||||||||||
Exchange rate | to 12/2013 | US$ + LIBOR 3M + 3.83% | CDI) | 330,750 | (16,702) | |||||||
Swap | From 08/2012 | |||||||||||
Interest rate | to 06/2018 | US$ + LIBOR 3M + 1.43% | US$ + 3.92% | 375,160 | (18,102) | |||||||
Swap | From 07/2012 | |||||||||||
Interest rate | to 02/2019 | US$ + LIBOR 6M + 1.77% | US$ + 4.80% | 1,095,199 | (74,176) | |||||||
Swap | US$ + LIBOR 12M + | |||||||||||
Interest rate | Up to 11/2012 | 0.71% | US$ + 3.70% | 187,580 | (3,593) | |||||||
5,717,156 | (199,633) | |||||||||||
Financial instruments not designated as hedge accounting | ||||||||||||
NDF | From 01/2012 | ARS (Pre- of | ||||||||||
Exchange rate | to 11/2012 | US$ | 13.45%) | 11,255 | (47) | |||||||
NDF | Exchange rate | Up to 03/2012 | US$ (Pre of 0.54%) | EUR | 60,855 | 515 | ||||||
Swap | Interest rate | Up to 05/2012 | US$ + LIBOR 3M + 3.85% | US$ + 5.78% | 56,274 | (356) | ||||||
Swap | Exchange rate | Up to 03/2015 | R$ (Pre of 9.62%) | US$ + 1.40% | 359,369 | (47,802) | ||||||
Options | From 01/2012 | |||||||||||
Live cattle | to 10/2012 | R$ | R$ | 33,635 | 348 | |||||||
NDF | Live cattle | Up to 09/2012 | R$ | R$ | 1,679 | 29 | ||||||
Future contract | Exchange rate | Up to 01/2012 | US$ | R$ | 65,801 | (292) | ||||||
Future contract | Live cattle | Up to 10/2012 | R$ | R$ | 10,967 | 4 | ||||||
599,835 | (47,601) | |||||||||||
6,316,991 | (247,234) | |||||||||||
(1) The market value determination method used by the Company consists of calculating the future value based on the contracted conditions and determining the present value based on market curves, extracted from the database of Bloomberg and BM&F. | ||||||||||||
The Company contracted swap operations, NDF and future contracts with the objective of minimize the effects of the variations in the foreign exchange rates and for protection from the fluctuations of interest rates. Management understands that the results obtained with these derivative operations are in compliance with the Risk Policy adopted by the Company and were satisfactory. 4.4. Breakdown of the balances of financial instruments designated for cash flow hedge accounting and export revenues The Company formally designated its operations for hedge accounting treatment for the derivative financial instruments to protect cash flows and export revenues, documenting: | (i) the relationship of the hedge; The transactions for which the Company has designated hedge accounting, are highly probable to present a variation in cash flow that could affect profit and loss are highly effective in achieving changes in fair value or cash flows attributable to hedged risk, consistent with the risk originally documented in the Risk Policy. The Company recorded the unrealized results of the designated derivatives for interest rates and exchange rates risks in shareholders’ equity, net of taxes. | |
| ||
4.4.1 Non-deliverable forwards - NDF
NDF | R$ x USD | ||||||
Maturities | Curve | MTM | Notional (R$) | Average USD | Curve | ||
January 2013 | (17,400) | (17,167) | 275,872 | 1.9181 | (2,412) | ||
February 2013 | (12,657) | (12,172) | 222,741 | 1.9436 | (2,279) | ||
March 2013 | (11,612) | (10,956) | 269,742 | 1.9798 | (1,384) | ||
April 2013 | (3,421) | (2,481) | 279,960 | 2.0551 | (872) | ||
May 2013 | 6,674 | 6,467 | 214,567 | 2.1466 | (940) | ||
June 2013 | 4,435 | 4,353 | 245,220 | 2.1304 | (1,503) | ||
July 2013 | 1,245 | 1,245 | 112,393 | 2.1260 | (1,163) | ||
August 2013 | 2,764 | 2,925 | 141,001 | 2.1574 | (266) | ||
September 2013 | 3,115 | 3,410 | 143,045 | 2.1747 | (351) | ||
October 2013 | 2,340 | 2,776 | 102,175 | 2.1917 | (399) | ||
November 2013 | 1,575 | 1,556 | 51,088 | 2.2105 | 433 | ||
(22,942) | (20,044) | 2,057,804 | 2.0631 | (11,136) |
4.4.2. Interest rate and currency swap
BR GAAP and IFRS | |||||
Parent company and Consolidated | |||||
12.31.12 | |||||
Assets (Hedged object) | Liabilities (Protected risk) | Notional | Maturity date | Balance (Contract curve) | Balance (MTM) |
LIBOR 6M | 4.06% p.a. | US$21,428 | 07.22.13 | (641) | (1,107) |
LIBOR 6M + 0.80% p.a. | 4.31% p.a. | US$12,000 | 08.23.13 | (240) | (513) |
LIBOR 6M + 0.80% p.a. | 4.36% p.a. | US$8,000 | 07.19.13 | (207) | (354) |
LIBOR 6M | 3.82% p.a. | US$4,000 | 03.20.13 | (73) | (129) |
LIBOR 6M | 3.79% p.a. | US$6,000 | 02.13.13 | (144) | (188) |
LIBOR 6M + 1.65% p.a. | 4.15% p.a. | US$5,000 | 05.10.13 | (28) | (100) |
LIBOR 6M + 2.82% p.a. | 5.86% p.a. | US$100,000 | 01.22.18 | (1,664) | (22,700) |
LIBOR 3M + 2.60% p.a. | 5.47% p.a. | US$100,000 | 06.18.18 | (291) | (21,661) |
LIBOR 6M + 2.70% p.a. | 5.90% p.a. | US$100,000 | 02.01.19 | (1,659) | (26,883) |
LIBOR 6M + 2.70% p.a. | 5.88% p.a. | US$100,000 | 02.01.19 | (1,646) | (26,641) |
LIBOR 3M + 2.35% p.a. | 3.07% p.a. | US$100,000 | 06.12.15 | (2) | (1,372) |
7.00% p.a. | 76.00% CDI | US$35,000 | 07.15,13 | 954 | 2,119 |
LIBOR 3M + 2.50% p.a. | 92.50% CDI | US$38,888 | 10.01.13 | (324) | (783) |
LIBOR 3M + 4.50% p.a. | 100.00% CDI | US$77,777 | 12.23.13 | (26) | (1,382) |
R$ + 9.80% | US$ + 1.71% | US$40,000 | 03.17.14 | (16,103) | (14,593) |
R$ + 9.70% | US$ + 1.53% | US$30,000 | 03.17.14 | (13,249) | (12,089) |
R$ + 9.70% | US$ + 1.45% | US$70,000 | 03.17.14 | (30,618) | (27,800) |
R$ + 9.80% | US$ + 1.68% | US$30,000 | 03.17.14 | (12,558) | (11,419) |
R$ + 9.80% | US$ + 1.65% | US$30,000 | 03.17.14 | (12,196) | (11,033) |
(90,715) | (178,628) |
4.4.3 Fixed exchange rate
Fixed Exchange rate is a non-derivative financial instrument hired from financial institutions and allows the definition of future rate to internalization of resources arising from foreign activities. By means of contract it is necessary the submission of export invoices to prove the nature of resources which will be internalized trough | closing exchange rate. Such contract has similar characteristics to a derivative contract non-deliverable forward since it determines, at the time of their hiring a future exchange rate. Nevertheless, the contract requires a physical settlement of the contracted positions. |
BR GAAP and IFRS | ||||
Parent company and Consolidated | ||||
12.31.12 | ||||
R$ x USD | ||||
Maturities | Curve | MTM | Notional(R$) | Average USD |
January 2013 | 502 | 537 | 30,653 | 2.0825 |
February 2013 | 432 | 533 | 20,435 | 2.1103 |
March 2013 | 348 | 592 | 40,870 | 2.0954 |
April 2013 | 320 | 418 | 40,870 | 2.0961 |
1,602 | 2,080 | 132,828 | 2.0949 |
BR GAAP and IFRS | ||||||||||||
Parent company and Consolidated | ||||||||||||
12.31.12 | ||||||||||||
R$ x EUR | R$ x GBP | |||||||||||
MTM | Notional (R$) | Average EUR | Curve | MTM | Notional (R$) | Average GBP | ||||||
(2,518) | 70,081 | 2.6079 | (2,068) | (2,166) | 21,470 | 2.9909 | ||||||
(2,237) | 68,733 | 2.6306 | (1,522) | (1,608) | 21,470 | 3.0911 | ||||||
(1,279) | 75,471 | 2.6833 | (1,193) | (1,270) | 23,452 | 3.1724 | ||||||
(895) | 53,908 | 2.6967 | (245) | (342) | 19,819 | 3.3111 | ||||||
(918) | 45,822 | 2.7017 | (259) | (367) | 18,167 | 3.3165 | ||||||
(1,549) | 49,865 | 2.6851 | (247) | (323) | 16,516 | 3.3334 | ||||||
(1,239) | 48,518 | 2.7132 | (198) | (298) | 15,855 | 3.3504 | ||||||
(382) | 29,649 | 2.7655 | (31) | (76) | 9,909 | 3.4061 | ||||||
(368) | 29,649 | 2.7796 | (33) | (59) | 9,909 | 3.4281 | ||||||
(380) | 29,649 | 2.7931 | (70) | (93) | 9,909 | 3.4331 | ||||||
497 | 29,649 | 2.8932 | 210 | 177 | 9,909 | 3.5438 | ||||||
(11,268) | 530,994 | 2.7002 | (5,656) | (6,425) | 176,385 | 3.2649 |
4.4.4. Exports pre-payments - PPEs As authorized by CVM Deliberation No. 604/09, the Company utilizes the exchange rates variation of export pre-payments contracts (“PPEs”) as a hedge instrument in order to mitigate the risk of the variation of exchange rate resulting from the highly probable future sales in foreign currency. | In order to test the effectiveness of this hedge category, the Company established a comparison between the exchange rate variation arising from the PPE agreement (variation of the fair value of the hedging instrument) and the variation of the fair value of highly probable future export revenues (Spot-to-Spot rate method). The position of the PPEs designated as hedge accounting is set forth below: |
BR GAAP and IFRS | ||||||||||||
Parent company and Consolidated | ||||||||||||
Fiscal year | Hedge | Subject to | Notional | |||||||||
ended | instrument | hedge | Type of risk hedged | Maturity | (US$) | MTM | ||||||
12.31.12 | PPE | Foreign Market Sales | US$ (E.R.) | From 10.2013 to 02.2019 | 399,206 | 815,778 | ||||||
12.31.11 | PPE | Foreign Market Sales | US$ (E.R.) | From 01.2012 to 02.2019 | 645,190 | 1,210,248 |
The unrealized gains and losses from PPEs designated as hedge accounting, recorded in the shareholders’ equity is represented by a loss of R$66,527 (R$30,507 as of December 31, 2011), net of income tax of R$ 34,271 (R$15,716 as of December 31, 2011). | 4.4.5. Senior Unsecured Notes – Bonds According to CVM Deliberation No. 604/09, the Company designated on June 30, 2012, part of the transaction hired as Senior Unsecured Notes (Bond BRF2022), as hedge accounting. In order to test the effectiveness of this hedge category, the Company established, a comparison between the exchange rate variation arising from contract of issuing bonds (variation of the fair value of the hedging instrument) and the variation of the fair value of highly probable future export revenues (Spot-to-Spot rate method). The position of the bonds designated as hedge accounting is set forth below: |
BR GAAP and IFRS | ||||||||||
Parent company and Consolidated | ||||||||||
31.12.12 | ||||||||||
Subject to | Notional | |||||||||
Hedge Instrument | hedge | Type of risk hedged | Maturity | (US$) | MTM | |||||
BRFSBZ 2022 | Foreign | |||||||||
Market Sales | US$ (E.R.) | 06.2022 | 150,000 | 306,525 |
The unrealized gains and losses from bonds designated as hedge accounting, recorded in the shareholders’ equity is represented by a loss of R$2,198, net of income tax of R$1,132. | 4.5. Gains and losses of derivative financial instruments designated as hedge accounting The gains and losses from derivative financial instruments designated for intended for protection, while unrealized were recognized in the shareholders’ equity and as financial income or expense, respectively, are set forth below: |
BR GAAP | ||||||||
Parent company | ||||||||
Shareholders’ equity | Statement of income | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
Derivatives for intended for protection | ||||||||
Foreign exchange risks | (40,746) | (101,129) | (71,890) | (2,634) | ||||
Interest rate risk | (43,465) | (46,050) | (3,288) | (7,065) | ||||
(84,211) | (147,179) | (75,178) | (9,699) | |||||
Non derivatives for intended for protection | ||||||||
Foreign exchange risks | (104,128) | (46,223) | - | - | ||||
(104,128) | (46,223) | - | - | |||||
Derivatives for intended for financial results | ||||||||
Interest rate risk | - | - | - | (356) | ||||
Foreign exchange risks | - | - | (6,392) | (48,094) | ||||
Market risk of live cattle | - | - | 61 | 381 | ||||
- | - | (6,331) | (48,069) | |||||
(188,339) | (193,402) | (81,509) | (57,768) | |||||
BR GAAP and IFRS | ||||||||
Consolidated | ||||||||
Shareholders’ equity | Statement of income | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
Derivatives for intended for protection | ||||||||
Foreign exchange risks | (40,746) | (101,129) | (71,890) | (2,634) | ||||
Interest rate risk | (95,053) | (85,698) | (6,596) | (10,172) | ||||
(135,799) | (186,827) | (78,486) | (12,806) | |||||
Non derivatives for intended for protection | ||||||||
Foreign exchange risks | (104,128) | (46,223) | - | - | ||||
(104,128) | (46,223) | - | - | |||||
Derivatives for intended for financial results | ||||||||
Interest rate risk | - | - | - | (356) | ||||
Foreign exchange risks | - | - | (5,996) | (47,626) | ||||
Market risk of live cattle | - | - | 61 | 381 | ||||
- | - | (5,935) | (47,601) | |||||
(239,927) | (233,050) | (84,421) | (60,407) | |||||
The gains and losses from derivative financial instrumentsintended for protection designated as hedge accounting, recordedin the shareholders’ equity, are represented by a loss of R$55,579in the parent company and R$107,167 in the consolidated (R$97,138in the parent company and R$136,786 in the consolidated as ofDecember 31, 2011), net of income tax of R$ 28,632 (R$50,041 as ofDecember 31, 2011). | ||||||||
4.5.1. Breakdown by category of the balances of financial instruments – except derivatives | ||||||
BR GAAP | ||||||
Parent company | ||||||
12.31.12 | ||||||
Loans and | Available for | Trading | Held to | Financial | ||
receivables | sale | securities | maturity | liabilities | Total | |
Assets | ||||||
Amortized cost | ||||||
Marketable securities | - | - | - | 51,752 | - | 51,752 |
Trade accounts receivable | 3,008,799 | - | - | - | - | 3,008,799 |
Credit notes | 109,431 | - | - | - | - | 109,431 |
Lease receivable | 81,542 | - | - | - | - | 81,542 |
Other receivables - TCD | 326,052 | - | - | - | - | 326,052 |
Fair value | ||||||
Marketable securities | - | 658 | 268,375 | - | - | 269,033 |
Restricted cash | - | - | - | 83,877 | - | 83,877 |
Liabilities | ||||||
Amortized cost | ||||||
Trade accounts payable | - | - | - | - | (3,135,464) | (3,135,464) |
Loans and financing | ||||||
Local currency | - | - | - | - | (3,889,920) | (3,889,920) |
Foreign currency | - | - | - | - | (2,815,029) | (2,815,029) |
3,525,824 | 658 | 268,375 | 135,629 | (9,840,413) | (5,909,927) |
BR GAAP | ||||||||||
Parent company | ||||||||||
12.31.11 | ||||||||||
Loans and receivables | Available for sale | Trading securities | Financial liabilities | Total | ||||||
Assets | ||||||||||
Amortized cost | ||||||||||
Trade accounts receivable | 1,429,793 | - | - | - | 1,429,793 | |||||
Credit notes | 100,783 | - | - | - | 100,783 | |||||
Fair value | ||||||||||
Marketable securities | - | 1,685 | 761,850 | - | 763,535 | |||||
Liabilities | ||||||||||
Amortized cost | ||||||||||
Trade accounts payable | - | - | - | (1,270,696) | (1,270,696) | |||||
Loans and financing | ||||||||||
Local currency | - | - | - | (1,774,291) | (1,774,291) | |||||
Foreign currency | - | - | - | (1,268,830) | (1,268,830) | |||||
1,530,576 | 1,685 | 761,850 | (4,313,817) | (2,019,706) |
BR GAAP and IFRS | ||||||||||||
Consolidated | ||||||||||||
12.31.12 | ||||||||||||
Loans and receivables | | Available for sale | Trading securities | | Held to maturity | Financial liabilities | | Total | ||||
Assets | ||||||||||||
Amortized cost | ||||||||||||
Marketable securities | - | - | - | 142,611 | - | 142,611 | ||||||
Trade accounts receivable | 3,142,326 | - | - | - | - | 3,142,326 | ||||||
Credit notes | 229,724 | - | - | - | - | 229,724 | ||||||
Lease receivable | 81,542 | - | - | - | - | 81,542 | ||||||
Other receivables - TCD | 326,052 | - | - | - | - | 326,052 | ||||||
Fair value | ||||||||||||
Marketable securities | - | 273,062 | 280,693 | - | - | 553,755 | ||||||
Restricted cash | - | - | - | 93,014 | - | 93,014 | ||||||
Liabilities | ||||||||||||
Amortized cost | ||||||||||||
Trade accounts payable | - | - | - | - | (3,381,246) | (3,381,246) | ||||||
Loans and financing | ||||||||||||
Local currency | - | - | - | - | (3,889,920) | (3,889,920) | ||||||
Foreign currency | - | - | - | - | (5,628,401) | (5,628,401) | ||||||
3,779,644 | 273,062 | 280,693 | 235,625 | (12,899,567) | (8,330,543) | |||||||
BR GAAP and IFRS | ||||||||||||
Consolidated | ||||||||||||
12.31.11 | ||||||||||||
Loans and receivables | Available for sale | Trading securities | Held to maturity | Financial liabilities | Total | |||||||
Assets | ||||||||||||
Amortized cost | ||||||||||||
Marketable securities | - | - | - | 166,784 | - | 166,784 | ||||||
Trade accounts receivable | 3,210,232 | - | - | - | - | 3,210,232 | ||||||
Credit notes | 204,257 | - | - | - | - | 204,257 | ||||||
Fair value | ||||||||||||
Marketable securities | - | 235,150 | 1,054,105 | - | - | 1,289,255 | ||||||
Restricted cash | - | - | - | 70,020 | - | 70,020 | ||||||
Liabilities | ||||||||||||
Amortized cost | ||||||||||||
Trade accounts payable | - | - | - | - | (2,681,343) | (2,681,343) | ||||||
Loans and financing | ||||||||||||
Local currency | - | - | - | - | (3,329,706) | (3,329,706) | ||||||
Foreign currency | - | - | - | - | (4,723,824) | (4,723,824) | ||||||
3,414,489 | 235,150 | 1,054,105 | 236,804 | (10,734,873) | (5,794,325) |
4.6. Determination of the fair value offinancial instruments The Company discloses its financial assets and liabilities at fairvalue, based on the appropriatte accounting pronouncements, The valuation established on 3 levels of hierarchy for measurementof the fair value is based on observable and non-observable inputs.Observable inputs reflect market data obtained from independent | markets and evaluation models for which inputs are observable;and •Level 3 - Instruments whose significant inputs are non-observable. Management concluded that balances of cash and cashequivalents, trade accounts receivable and trade accounts payable are close to their fair value recognition due to the short-term cycleof these operations. The book value of financing and loans in the financial statementsis close to the fair value due to the major portion of the total grossdebt bears interest based on the variation of TJLP, LIBOR and CDI,except the capital markets transactions (Bond). On December 31,2012, the fair value adjustment for Bond (“BRFSBZ”) is representedby a positive impacto f R$521,092, which R$80,463 is attributableto Sadia Bonds (“BRFSBZ6”), R$295,030 is attributable to BFFNotes (“BRFSBZ7”) and R$145,599 is attributable to BRF Notes(“BRFSBZ5”), this impact was measured only for disclosurepurposes not being recorded in the financial statements of theCompany. 4.6.1. Comparison between book value and fair value of financialinstruments The comparison between book value and fair value of financialinstruments is set forth below: | |
BR GAAP | ||||||||
Parent company | ||||||||
12.31.12 | 12.31.11 | |||||||
Book value | Fair value | Book value | Fair value | |||||
Cash and cash equivalents | 907,919 | 907,919 | 68,755 | 68,755 | ||||
Restricted cash | ||||||||
Held to maturity | 83,877 | 83,877 | - | - | ||||
Marketable securities | ||||||||
Available for sale | 658 | 658 | 1,685 | 1,685 | ||||
Trading securities | 268,375 | 268,375 | 761,850 | 761,850 | ||||
Held to maturity | 51,752 | 51,752 | - | - | ||||
Trade accounts receivable, net | 3,008,799 | 3,008,799 | 1,429,793 | 1,429,793 | ||||
Notes receivable | 109,431 | 109,431 | 100,783 | 100,783 | ||||
Lease receivable | 81,542 | 81,542 | - | - | ||||
Other receivables - TCD | 326,052 | 326,052 | - | - | ||||
Loans and financing | (5,173,913) | (5,173,913) | (3,043,121) | (3,043,121) | ||||
Bonds BRF | (1,531,036) | (1,676,635) | - | - | ||||
Trade accounts payable | (3,135,464) | (3,135,464) | (1,270,696) | (1,270,696) | ||||
Other financial assets | 32,804 | 32,804 | 22,944 | 22,944 | ||||
Other financial liabilities | (198,524) | (198,524) | (227,891) | (227,891) | ||||
(5,167,728) | (5,313,327) | (2,155,898) | (2,155,898) | |||||
BR GAAP and IFRS | ||||||||
Consolidated | ||||||||
12.31.12 | 12.31.11 | |||||||
Book value | Fair value | Book value | Fair value | |||||
Cash and cash equivalents | 1,930,693 | 1,930,693 | 1,366,843 | 1,366,843 | ||||
Restricted cash | ||||||||
Held to maturity | 93,014 | 93,014 | 70,020 | 70,020 | ||||
Marketable securities | ||||||||
Available for sale | 273,062 | 273,062 | 235,150 | 235,150 | ||||
Trading securities | 280,693 | 280,693 | 1,054,105 | 1,054,105 | ||||
Held to maturity | 142,611 | 144,013 | 166,784 | 166,784 | ||||
Trade accounts receivable, net | 3,142,326 | 3,142,326 | 3,210,232 | 3,210,232 | ||||
Notes receivable | 229,724 | 229,724 | 204,257 | 204,257 | ||||
Lease receivable | 81,542 | 81,542 | - | - | ||||
Other receivables - TCD | 326,052 | 326,052 | - | - | ||||
Loans and financing | (5,910,905) | (5,910,905) | (6,149,842) | (6,149,842) | ||||
Bonds BRF | (1,531,036) | (1,676,635) | - | - | ||||
Bonds BFF | (1,561,993) | (1,857,023) | (1,431,514) | (1,580,992) | ||||
Bonds Sadia | (514,387) | (594,850) | (472,174) | (509,399) | ||||
Trade accounts payable | (3,381,246) | (3,381,246) | (2,681,343) | (2,681,343) | ||||
Other financial assets | 33,200 | 33,200 | 23,459 | 23,459 | ||||
Other financial liabilities | (253,420) | (253,420) | (270,693) | (270,693) | ||||
(6,620,070) | (7,139,760) | (4,674,716) | (4,861,419) |
4.6.2. Fair value valuation hierarchy
The table below depicts the overall classification of financial assets and liabilities according to the valuation hierarchy.
BR GAAP | ||||||||
Parent company | ||||||||
12.31.12 | ||||||||
Level 1 | Level 2 | Level 3 | Total | |||||
Assets | ||||||||
Financial assets | ||||||||
Available for sale | ||||||||
Shares | 658 | - | - | 658 | ||||
Held for trading | ||||||||
Bank deposit certificates | - | 167,867 | - | 167,867 | ||||
Financial treasury bills | 100,508 | - | - | 100,508 | ||||
Other financial assets | ||||||||
Derivatives designed as hedge | - | 32,688 | - | 32,688 | ||||
Derivatives not designated as hedge | - | 116 | - | 116 | ||||
101,166 | 200,671 | - | 301,837 | |||||
Liabilities | ||||||||
Financial liabilities | ||||||||
Other financial liabilities | ||||||||
Derivatives designed as hedge | - | (192,077) | - | (192,077) | ||||
Derivatives not designated as hedge | - | (6,447) | - | (6,447) | ||||
- | (198,524) | - | (198,524) | |||||
BR GAAP | ||||||||
Parent company | ||||||||
12.31.11 | ||||||||
Level 1 | Level 2 | Level 3 | Total | |||||
Assets | ||||||||
Financial assets | ||||||||
Available for sale | ||||||||
Shares | 1,685 | - | - | 1,685 | ||||
Held for trading | ||||||||
Bank deposit certificates | - | 465,804 | - | 465,804 | ||||
Financial treasury bills | 296,046 | - | - | 296,046 | ||||
Other financial assets | ||||||||
Derivatives designed as hedge | - | 22,360 | - | 22,360 | ||||
Derivatives not designated as hedge | - | 584 | - | 584 | ||||
297,731 | 488,748 | - | 786,479 | |||||
Liabilities | ||||||||
Financial liabilities | ||||||||
Other financial liabilities | ||||||||
Derivatives designed as hedge | - | (179,238) | - | (179,238) | ||||
Derivatives not designated as hedge | - | (48,653) | - | (48,653) | ||||
- | (227,891) | - | (227,891) | |||||
BR GAAP and IFRS | ||||||||
Consolidated | ||||||||
12.31.12 | ||||||||
Level 1 | Level 2 | Level 3 | Total | |||||
Assets | ||||||||
Financial assets | ||||||||
Available for sale | ||||||||
Credit linked notes | 174,181 | - | - | 174,181 | ||||
Brazilian foreign debt securities | 89,004 | - | - | 89,004 | ||||
Exclusive investment funds | 9,219 | - | - | 9,219 | ||||
Shares | 658 | - | - | 658 | ||||
Held for trading | ||||||||
Bank deposit certificates | - | 180,185 | - | 180,185 | ||||
Financial treasury bills | 100,508 | - | - | 100,508 | ||||
Other financial assets | ||||||||
Derivatives designated as hedge | - | 32,688 | - | 32,688 | ||||
Derivatives not designated as hedge | - | 512 | - | 512 | ||||
373,570 | 213,385 | - | 586,955 | |||||
Liabilities | ||||||||
Financial liabilities | ||||||||
Other financial liabilities | ||||||||
Derivatives designated as hedge | - | (246,973) | - | (246,973) | ||||
Derivatives not designated as hedge | - | (6,447) | - | (6,447) | ||||
- | (253,420) | - | (253,420) |
BR GAAP and IFRS | ||||||||
Consolidated | ||||||||
12.31.11 | ||||||||
Level 1 | Level 2 | Level 3 | Total | |||||
Assets | ||||||||
Financial assets | ||||||||
Available for sale | ||||||||
Credit linked notes | 146,954 | - | - | 146,954 | ||||
Brazilian foreign debt securities | 86,511 | - | - | 86,511 | ||||
Shares | 1,685 | - | - | 1,685 | ||||
Held for trading | ||||||||
Bank deposit certificates | - | 698,968 | - | 698,968 | ||||
Financial treasury bills | 355,137 | - | - | 355,137 | ||||
Other financial assets | ||||||||
Derivatives designated as hedge | - | 22,360 | - | 22,360 | ||||
Derivatives not designated as hedge | - | 1,099 | - | 1,099 | ||||
590,287 | 722,427 | - | 1,312,714 | |||||
Liabilities | ||||||||
Financial liabilities | ||||||||
Other financial liabilities | ||||||||
Derivatives designated as hedge | - | (221,993) | - | (221,993) | ||||
Derivatives not designated as hedge | - | (48,700) | - | (48,700) | ||||
- | (270,693) | - | (270,693) |
Presented below is the description of the valuation methodologiesused by the Company for financial instruments measured at fairvalue: •The investments in financial assets in the categories of Brazilianforeign debt securities, National Treasury Certificates (“CTN”), Financial Treasury Notes (“LFT”), financial investment funds andshares are classified at Level 1 of the fair value hierarchy, as themarket prices are available in an active market; | •The investments in financial assets in the categories of Bank Deposit Certificates (“CDB”) and the repurchase agreements backed by debentures are classified at Level 2, since the determination of fair value is based on the price quotation of similar financial instruments in non-active markets; and • The derivatives are valued through existing pricing models widely accepted by financial market and described in appendix III of the Risk Policy. Readily observable market inputs are used, | |
Book value | Cash flow contracted | |||
Non derivatives financial liabilities | ||||
Loans and financing | 5,173,913 | 5,702,421 | ||
Bonds BRF | 1,531,036 | 2,388,023 | ||
Trade accounts payable | 3,135,464 | 3,135,464 | ||
Capital lease | 124,228 | 138,945 | ||
Operational lease | - | 364,573 | ||
Derivatives financial liabilities | ||||
Designated as hedge accounting | ||||
Interest rate and exchange rate derivatives | 125,851 | 44,048 | ||
Currency derivatives (NDF) | 66,226 | 56,350 | ||
Not designated as hedge accounting | ||||
Currency derivatives (Future) | 782 | 782 | ||
Interest rate and exchange rate derivatives | 5,609 | (2,228) | ||
Commodities derivatives | 56 | 56 | ||
Book value | Cash flow contracted | |||
Non derivatives financial liabilities | ||||
Loans and financing | 5,910,905 | 6,487,890 | ||
Bonds BRF | 1,531,036 | 2,388,023 | ||
Bonds BFF | 1,561,993 | 2,365,988 | ||
Bonds Sadia | 514,387 | 668,928 | ||
Trade accounts payable | 3,381,246 | 3,381,246 | ||
Capital lease | 124,228 | 138,945 | ||
Operational lease | - | 364,573 | ||
Derivatives financial liabilities | ||||
Designated as hedge accounting | ||||
Interest rate and exchange rate derivatives | 180,747 | 110,143 | ||
Currency derivatives (NDF) | 66,226 | 56,350 | ||
Not designated as hedge accounting | ||||
Currency derivatives (Future) | 782 | 782 | ||
Interest rate and exchange rate derivatives | 5,609 | (2,228) | ||
Commodities derivatives | 56 | 56 |
such as interest rate forecasts, volatility factors and foreigncurrency rates. These instruments are classified at Level 2 of thevaluation hierarchy, including interest rates swap and foreigncurrency derivatives. 4.7. Credit management | 4.8. Liquidity risk management Liquidity risk management aims to reduce the impacts caused byevents which may a ect the Company’s cash flow performance. The Company has identified market risk factors which areassociated to future cash flow that may jeopardize its liquidityand calculates the Cash Flow at Risk (“CFaR”) on a twelve-monthbasis aiming to verify potential cash flow forecast deviations. The Company determined that the minimum value of its cashavailability should consider mainly the average monthly revenueand EBITDA for the last twelve-month period. Derivatives transactions may demand payments of periodicbadjustments. Currently, the Company holds only BM&F operationswith daily adjustments. In order to control the adjustments,the Company utilizes Value at Risk methodology (“VaR”), whichstatistically measures potential maximum adjustments to be paidin a 1 to 21-day interval. The allocation of financial investments among counterparts isconservative and seek the liquidity and profitability of these assetsavoiding concentration. The Company maintains its leverage levels in a manner to notjeopardize the ability to honor commitments and obligations. Asa guideline, the majority of the debt should be in long term. OnDecember 31, 2012, the long term debt portion accounted for 59%of the total outstanding debt with an average term greater than 3.5years. The table below summarizes the commitments and contractualobligations that may impact the Company’s liquidity as ofDecember 31, 2012: | |
BR GAAP | ||||||||||
Parent company | ||||||||||
12.31.12 | ||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | After 5 years | |||||
2,287,502 | 1,047,268 | 668,039 | 464,817 | 362,376 | 872,419 | |||||
90,042 | 90,042 | 90,042 | 90,042 | 90,042 | 1,937,813 | |||||
3,135,464 | - | - | - | - | - | |||||
79,841 | 31,612 | 9,429 | 7,659 | 10,404 | - | |||||
84,785 | 71,153 | 48,118 | 34,946 | 30,964 | 94,607 | |||||
(26,301) | 36,519 | 10,235 | 10,292 | 10,480 | 2,823 | |||||
56,350 | - | - | - | - | - | |||||
782 | - | - | - | - | - | |||||
(1,693) | (749) | 214 | - | - | - | |||||
56 | ||||||||||
BR GAAP and IFRS | ||||||||||
Consolidated | ||||||||||
12.31.12 | ||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | After 5 years | |||||
2,580,808 | 1,172,268 | 815,636 | 470,897 | 368,390 | 1,079,891 | |||||
90,042 | 90,042 | 90,042 | 90,042 | 90,042 | 1,937,813 | |||||
111,115 | 111,115 | 111,115 | 111,115 | 111,115 | 1,810,413 | |||||
35,123 | 35,123 | 35,123 | 35,123 | 528,436 | - | |||||
3,381,246 | - | - | - | - | - | |||||
79,841 | 31,612 | 9,429 | 7,659 | 10,404 | - | |||||
84,785 | 71,153 | 48,118 | 34,946 | 30,964 | 94,607 | |||||
(15,003) | 47,792 | 20,969 | 20,710 | 20,957 | 14,718 | |||||
56,350 | - | - | - | - | - | |||||
782 | - | - | - | - | - | |||||
(1,693) | (749) | 214 | - | - | - | |||||
56 | - | - | - | - | - |
4.9. Commodity price risk management In the regular course of its operations, the Company purchasescommodities, mainly corn, soymeal and live hog, which are some ofthe individual components of production cost. Corn and soymeal prices are subject to volatility resulting fromweather conditions, crop yield, transportation and storage costs,government’s agricultural policy, foreign exchange rates and theprices of these commodities on the international market, amongothers factors. The prices of hog acquired from third partiesare subject to market conditions and are influenced by internalavailability and levels of demand in the international market, andother aspects. The Risk Policy establishes limits for hedging the corn andsoymeal purchase flow, aiming to reduce the impact resultingfrom a price increase of these raw materials, and may utilizederivative instruments or inventory management for this purpose.Currently, the Management of inventory levels is used as a hedginginstrument. During the 2012 fiscal year, the Company utilized derivativeinstruments to mitigate the exposure to live cattle price variation.The derivative instruments are entered into to protect thefollowing transactions: | On December 31, 2012, the Company held a short position in theBM&F of 636 future contracts (150 contracts as of December 31,2011) with maturity dates between January and October 2013. In the counter market, the Company has not held any contractswith maturity dates in 2013. Additionally, through the utilization ofoptions, the Company held a short position of 450 allotments (600allotments as of December 31, 2011). 4.10. Table of sensitivity analysis The Company has financing and loans and receivables denominatedin foreign currency and in order to mitigate the risks resultingfrom exchange rate exposure it contracts and derivative financialinstruments. The Company understands that the current interest ratefluctuations do not significantly affect its financial results sinceit opted to change to fixed rate a considerable part of its floatinginterest rates debts by using derivative transactions (interestrates swaps). The Company designates such derivatives as hedgeaccounting and, therefore, the effectiveness is monitored throughprospective and retrospective tests. In the table depicted below, five scenarios are considered forthe next twelve-month period, considering the variations of thequotations of the parity between the Brazilian Reais and U.S.Dollar, Brazilian Reais and Euro and Brazilian Reais and PoundsSterling, whereas the most likely scenario is that one adoptedby the Company. The total of export sales analyzed correspondsto the total of derivative financial instruments increased by theamortization flow of PPEs designated as hedge accounting. | ||
(i) | forward purchase of cattle; | ||
(ii) | contracting of own cattle confinement; | ||
(iii) | contracting of cattle confinement with partnership; and | ||
(iv) | spot purchase of cattle aiming to guarantee the off-season scale of slaughtering. | ||
The contracts are recorded at their fair value through thestatement of income, regardless of the contract expiration date. | |||
Parity - Brazilian Reais x U.S. | ||||||||||||
Dollar | 2.0435 | 1.8392 | 1.5326 | 2.5544 | 3.0653 | |||||||
Transaction/Instrument | Risk | Scenario I | Scenario II | Scenario III | Scenario IV | Scenario V | ||||||
(10% | (25% | (25% | (50% | |||||||||
(probable) | appreciation) | appreciation) | devaluation) | devaluation) | ||||||||
NDF and Fixed exchange rate | ||||||||||||
(hedge accounting) | Devaluation of R$ | 23,122 | 242,186 | 570,780 | (524,536) | (1,072,194) | ||||||
Pre payment export | Devaluation of R$ | (100,797) | (19,219) | 103,148 | (304,742) | (508,686) | ||||||
Bonds | Devaluation of R$ | (3,330) | 27,323 | 73,301 | (79,961) | (156,593) | ||||||
Swaps | Devaluation of R$ | (4,440) | 36,430 | 97,735 | (106,615) | (208,790) | ||||||
Exports | Appreciation of | |||||||||||
R$ | (1,495) | (240,831) | (599,835) | 596,845 | 1,195,185 | |||||||
Net of tax effect | (86,940) | 45,889 | 245,129 | (419,009) | (751,078) | |||||||
Statement of income | ||||||||||||
Shareholders' equity | (86,940) | 45,889 | 245,129 | (419,009) | (751,078) | |||||||
Parity - Brazilian Reais x Euro | 2.6954 | 2.4259 | 2.0216 | 3.3693 | 4.0431 | |||||||
Transaction/Instrument | Risk | Scenario I | Scenario II | Scenario III | Scenario IV | Scenario V | ||||||
(10% | (25% | (25% | (50% | |||||||||
(probable) | appreciation) | appreciation) | devaluation) | devaluation) | ||||||||
NDF (hedge accounting) | Devaluation of R$ | 946 | 54,045 | 133,694 | (131,802) | (264,551) | ||||||
Exports | Appreciation of | |||||||||||
R$ | (946) | (54,045) | (133,694) | 131,802 | 264,551 | |||||||
Net of tax effect | - | - | - | - | - | |||||||
Statement of income | - | - | - | - | - | |||||||
Shareholders' equity | - | - | - | - | - | |||||||
Parity - Brazilian Reais x | ||||||||||||
Pound Sterling | 3.3031 | 2.9728 | 2.4773 | 4.1289 | 4.9547 | |||||||
Transaction/Instrument | Risk | Scenario I | Scenario II | Scenario III | Scenario IV | Scenario V | ||||||
(10% | (25% | (25% | (50% | |||||||||
(probable) | appreciation) | appreciation) | devaluation) | devaluation) | ||||||||
NDF (hedge accounting) | Devaluation of R$ | (2,039) | 15,600 | 42,057 | (46,135) | (90,232) | ||||||
Exports | Appreciation of | |||||||||||
R$ | 2,039 | (15,600) | (42,057) | 46,135 | 90,232 | |||||||
Net of taxe effect | - | - | - | - | - | |||||||
Statement of income | - | - | - | - | - | |||||||
Shareholders' equity | - | - | - | - | - |
5. SEGMENT INFORMATION | BR GAAP and IFRS | ||||
Consolidated | |||||
The operating segments are reported consistently with themanagement reports provided to Board and Directors forassessment the performance of each segment and allocatingresources. | 12.31.12 | 12.31.11 | |||
Net sales | |||||
Domestic market: | |||||
Poultry | 1,351,356 | 1,112,291 | |||
Pork and Beef | 911,270 | 774,476 | |||
Processed products | 6,767,166 | 7,144,983 | |||
Other processed | 2,694,906 | 2,043,030 | |||
Other | 894,137 | 555,215 | |||
12,618,835 | 11,629,995 | ||||
Foreign market: | |||||
Poultry | 7,569,437 | 6,571,946 | |||
Pork and Beef | 1,866,736 | 1,554,086 | |||
Processed products | 2,002,169 | 1,750,059 | |||
Other processed | 179,978 | 175,160 | |||
Other | 7,722 | 41,859 | |||
11,626,042 | 10,093,110 | ||||
Dairy products: | |||||
Milk | 1,359,809 | 1,720,470 | |||
Dairy products and others | |||||
beverages | 1,354,262 | 818,328 | |||
2,714,071 | 2,538,798 | ||||
Food service: | |||||
Poultry | 343,055 | 301,272 | |||
Pork and Beef | 221,782 | 166,673 | |||
Processed products | 846,167 | 884,639 | |||
Other processed | 147,431 | 91,751 | |||
1,558,435 | 1,444,335 | ||||
28,517,383 | 25,706,238 | ||||
The operating results for each one of the reportable operating segments are presented below: | |||||
BR GAAP and IFRS | |||||
Consolidated | |||||
12.31.12 | 12.31.11 | ||||
Operating income: | |||||
Domestic market | 1,038,639 | 1,249,386 | |||
Foreign market | 189,949 | 558,783 | |||
Dairy products | (6,551) | (24,711) | |||
Food service | 166,878 | 217,671 | |||
1,388,915 | 2,001,129 | ||||
No customer was individually responsible for more than 5% of the total revenue earned in the twelve month period ended December 31, 2012. | |||||
Net revenues from exports were originated in the segments of the foreign market, dairy products and food service, as set for below: |
BR GAAP and IFRS | ||
Consolidated | ||
12.31.12 | 12.31.11 | |
Export net revenues per | ||
market: | ||
Foreign market | 11,626,042 | 10,093,110 |
Dairy products | 123 | 5,351 |
Food service | 223,299 | 188,419 |
11,849,464 | 10,286,880 | |
Export net revenue by region is presented below: | ||
BR GAAP and IFRS | The goodwill originated from the expectation of futureprofitability, as well as the intangible assets with indefinite usefullife (trademarks), were allocated to the reportable operatingsegments, taking into account the nature of the productsmanufactured in each segment (cash-generating unit). Theallocation of intangible assets is presented below: | |||
Consolidated | ||||
12.31.12 | 12.31.11 | |||
Export net revenues per | ||||
region: | ||||
Europe | 1,920,199 | 1,882,425 | ||
Far East | 2,402,902 | 2,301,806 | ||
Middle East | 3,976,600 | 3,087,331 | ||
Eurasia (including Russia) | 1,058,340 | 763,294 | ||
America / Africa / Other | 2,491,423 | 2,252,024 | ||
11,849,464 | 10,286,880 |
BR GAP and IFRS | ||||||||||||
Consolidated | ||||||||||||
Goodwill | Trademarks | Total | ||||||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||||
Domestic market(1) | 1,069,958 | 1,153,790 | 982,478 | 1,065,478 | 2,052,436 | 2,219,268 | ||||||
Foreign market | 1,260,368 | 1,074,384 | 323,459 | 190,522 | 1,583,827 | 1,264,906 | ||||||
Dairy products(2) | 671,398 | 664,102 | 671,398 | 664,102 | ||||||||
Food service | 81,539 | 81,539 | 81,539 | 81,539 | ||||||||
3,083,263 | 2,973,815 | 1,305,937 | 1,256,000 | 4,389,200 | 4,229,815 |
(1) Write-off of goodwill and trademarks due to the execution of TCD (note 12)
(2) During the year ended December 31, 2012, there was an increase in the goodwill allocated from Heloisa in the amount of R$7,296, due to an adjustment in the open balance fromacquired company
The Company performed the impairment test of the assetsallocated to the reportable segments as depicted in the tableabove using the model of discounted cash flow. The results andassumptions are presented in note 18. Information referring to the total assets by reportable segments isnot being presented, as it is not comprised in the set of informationmade available to the Company’s Management, which makeinvestment decisions on a consolidated basis. 6. BUSINESS COMBINATION ANDOTHER ACQUISITIONS 6.1. Business combination – QUICKFOOD As described in note 1.2, in order to comply the requirements ofTCD, the Company acquired the equity interest held by Marfrig of the capital of Quickfood.In the Extraordinary General Shareholder´s Meeting occurred onMay 23, 2012, the Company’s shareholders ratified the approvalof the acquisition, through assets exchange, of the entire equityinterest held by the Company in Athena by the interest held eitherdirectly or indirectly by Marfrig, equivalent to 90.05% of the capitalof Quickfood, according to the terms and conditions establishedin the Asset Exchange and Other Agreements, signed on March 20,2012 with the effective conclusion on June 11, 2012. Quickfood is a public company located in Buenos Aires, Argentina. The total equity interest acquired corresponds to 90.05%equivalent to 32,841,224 common shares. The Company utilized its subsidiary Athena to operationalize thedisposal of the assets listed in the TCD. Therefore, the followingcorporate acts were performed: (i)the wholly-owned subsidiary Sadia made a capital increasein Athena in the amount of R$333,061, which was paid with assets of its property included in the TCD; (ii)the subsidiary Sino dos Alpes made a capital increase inAthena in the amount of R$5,174, which was paid with assets of its property included in the TCD; (iii)BRF made a capital increase in Athena in the amount ofR$163,043, which was paid with assets of its property included in the TCD; and | (iv) on May 31, 2012, BRF acquired the book value of the equityinterest of the capital of Athena held by Sino dos Alpes and | |||
ASSETS | ||||
CURRENT | ||||
Cash and cash equivalents | 3,834 | |||
Trade accounts receivable | 7,240 | |||
Inventories | 118,152 | |||
Other credits | 1,708 | |||
130,934 | ||||
NON CURRENT | ||||
Deferred tax | 4,203 | |||
Judicial deposits | 746 | |||
Other assets | 802 | |||
Investments | 8 | |||
Property, plant and equipment, net | 506,652 | |||
512,411 | ||||
TOTAL ASSETS | 643,345 | |||
LIABILITIES | ||||
CURRENT | ||||
Short term debts | 7,847 | |||
Trade accounts payable | 4,891 | |||
Salary and social obligations | 31,040 | |||
Tax obligations | 1,462 | |||
Other obligations | 1,417 | |||
46,657 | ||||
NON CURRENT | ||||
Long term debts | 16 | |||
Tax obligations | 3,660 | |||
Other obligations | 1,439 | |||
5,115 | ||||
NET ASSETS | 591,573 | |||
TOTAL LIABILITIES | 643,345 | |||
The transaction with Marfrig was accounted for as a businesscombination in accordance with CVM Deliberation No. 665/11,mainly due to the fact that Athena is a business, including inputs,process and outputs, which when integrated into the acquirer’sbusiness, started to generate outputs as determined by it. The acquiree contributed with net revenue in the amount ofR$369,597 and net losses of R$334, since the date of acquisition toDecember 31, 2012 for the Company’s results. Management estimates that if the business combination withQuickfood had occurred on January 1, 2012, the consolidated netrevenue and net losses for the year ended December 31, 2012 wouldbe approximately R$978,252 and R$15,829, respectively. The business Athena was evaluated by independent experts andthe fair value attributed to this group of assets amounted toR$928,000. transactions The table below as well depicts asthethegoodwill detailsofgenerated thelossesingenerated thebusinessin thiscombination: | The accounting impacts in the statement of income deriving fromthe execution of TCD are accounted for in the other operatingresults and are summarized as follows: | |||
Fair value of Quickfood | 463,581 | |||
Consideration receivable | 350,000 | |||
Fair value of the consideration received | 813,581 | |||
Cost of goods sold | (115,853) | |||
Cost of the equity interest transferred | (504,731) | |||
Social obligations transferred | 29,011 | |||
Book value of Athena | (591,573) | |||
Adjustments of fair value of property, plant and | ||||
equipment transfered from Sadia | (102,793) | |||
Fair value of trademarks transferred from Sadia | (83,000) | |||
Fair value of outgrowers guarantees | 4,674 | |||
Goodwill originated from the expectation of | ||||
future profitability from Sadia | (83,832) | |||
Fair value of Athena | 928,000 | Total write-off | (264,951) | |
Book value of Athena | 591,573 | |||
Write-off of goodwill originated from the | Losses from tax credits related to property, | |||
expectation of future profitability, adjustments | plant and equipments transferred | (9,200) | ||
of fair value of property, plant and equipment | Losses from Instituto de Sustentabilidade Sadia | |||
and trademark related to the assets transfered | 264,951 | caused by BRF due to execution of TCD | (15,237) | |
Total book value | 856,524 | Write-off of inventories of packaging materials | (9,146) | |
Difference between the fair value and the | Other losses | (32,354) | ||
book value of Athena | 71,476 | Total of other losses | (65,937) | |
Total of results of TCD before taxes | (108,880) | |||
Fair value of Athena | 928,000 | |||
Consideration receivable | (350,000) | The identifiable assets acquired and liabilities assumed that wererecognized on the date of acquisition and the corresponding fairvalue, on the date of acquisition, are presented below: | ||
Remaining fair value | 578,000 | |||
Fair value of the equity interest acquired from | ||||
Quickfood | (463,581) | |||
Difference between the remaining fair value | ||||
and Quickfood’s fair value | 114,419 | |||
Net impact in statement of income | (42,943) | |||
Other losses deriving from the execution of TCD | (65,937) | |||
Total of results of TCD before taxes | (108,880) | |||
Fair value of the equity interest acquired from | ||||
Quickfood | 463,581 | |||
Payment for the working capital acquisition | 57,839 | |||
Value of the investment on Quickfood at the | ||||
acquisition date | 521,420 | |||
Net assets acquired(1) | 63,852 | |||
Preliminary Goodwill before allocation | 457,568 | |||
Goodwill allocations | ||||
Customer relationship | 146,217 | |||
Trademarks | 102,089 | |||
Property, plant and equipments | 70,067 | |||
Supplier relationship | 1,793 | |||
Deffered tax liabilities | (112,058) | |||
Goodwill for expected future profitability | 249,460 | |||
(1) The variation occurred in the net assets acquired in relation to the amount disclosedon June 30, 2012 is mainly related to the alignment between the accounting practicespreviously adopted by Quickfood and the accounting practices adopted by BRF. | ||||
Net assets acquired on May 31, 2012 | Adjustments CVM Deliberation No. 665/11 | Net assets acquired at fair value | ||||||
ASSETS | ||||||||
CURRENT | ||||||||
Cash and cash equivalents | 23,803 | - | 23,803 | |||||
Trade accounts receivable | 114,590 | - | 114,590 | |||||
Inventories | 50,084 | - | 50,084 | |||||
Other credits | 1,849 | - | 1,849 | |||||
190,326 | - | 190,326 | ||||||
NON CURRENT | ||||||||
Property, plant and equipment, net | 48,777 | 77,809 | (a) | 126,586 | ||||
Intangible | 255 | 277,734 | (b) | 277,989 | ||||
Other assets | 1,036 | - | 1,036 | |||||
50,068 | 355,543 | 405,611 | ||||||
TOTAL ASSETS | 240,394 | 355,543 | 595,937 | |||||
LIABILITIES | ||||||||
CURRENT | ||||||||
Trade accounts payable | 119,189 | - | 119,189 | |||||
Salary and social obligations | 14,904 | - | 14,904 | |||||
Tax obligations | 3,939 | - | 3,939 | |||||
Other obligations | 5,007 | - | 5,007 | |||||
143,039 | - | 143,039 | ||||||
NON CURRENT | ||||||||
Long term debts | 15,032 | - | 15,032 | |||||
Tax obligations | 369 | - | 369 | |||||
Deferred tax liabilities | - | 124,440 | (c) | 124,440 | ||||
Other obligations | 11,063 | - | 11,063 | |||||
26,464 | 124,440 | 150,904 | ||||||
NET ASSETS - BRF | 63,852 | 208,108 | 271,960 | |||||
Non-controlling shareholders’ equity | 7,039 | 22,995 | 30,034 | |||||
TOTAL LIABILITIES | 240,394 | 355,543 | 595,937 | |||||
(a) Refers to the adjustment to the fair value of the property, plant and equipments according to the appraisal report prepared by an external expert; (b) Refers to the fair value of the following intangible assets identified: customer relationship R$162,374, trademarks R$113,369 and supplier relationship R$1,991; and (c) Refers to the effect of the deferred taxes on the adjustments (a) and (b) presented above. | ||||||||
6.2.Business combination – AVEX According to the Company’s strategic plan to become a global player, on October 03, 2011, acting through its wholly-owned subsidiary, Sadia Alimentos S.A., in Argentina, the Company acquired 69.15% of the equity interest in Avex S.A. (“Avex”), which is located in the city of Rio Cuarto, in Córdoba province, engaged in the poultry production as well as chilled and frozen chicken, sold as a whole and in cuts. Avex is the sixth largest participant in the Argentine poultry domestic market, with 4% of participation and its productive capacity is presented below: |
Activity | Location | Productive capacity | ||
Poultry slaughtering | Rio Cuarto, Córdoba | 750,000 heads per week | ||
Animal feed industry | Juárez Celman, Córdoba | 40 ton per hour | ||
Hatcheries | General Deheza, Córdoba | 758,800 eggs per week | ||
Termination poultry farm | Rio Cuarto, Córdoba | - |
As disclosed in note 1.6, on December 28, 2012, aiming to acceleratethe integrating of its business in Argentina, the Company acquiredthe equity interest held by non-controlling shareholders in Avex,corresponding to 33.33% of the capital for the amount of R$82,776,and therefore holding 99.46% of the equity interest. Due to the fact that BRF already held the control of Avex prior tothe acquisition of the non-controlling interest mentioned above, such transaction is not accounted for as business combination. | Therefore, the amount of R$33,851 corresponds to the differencebetween the carrying amount and the effective amount paid for the shares. Such amount was recorded as a debt in theshareholders’ equity and does not compose the goodwill generated in the business combination. The amounts related to this business combination are set forthbelow: | |
Net assets acquired on October 3, 2011 | 63,184 | The identifiable assets acquired and liabilities assumed that wererecognized on the date of acquisition and the corresponding fairvalue, on the date of acquisition, are presented below: | |
Identification of non-realizable within the | |||
measurement period | (26,027) | ||
Others measurement adjustments | 4,483 | ||
Assets and labilities acquired, net adjusted | 41,640 | ||
Percentage of acquired participation | 69,15% | ||
Net assets acquired | 28,793 | ||
Value paid for the acquisation of Avex | 108,603 | ||
Net assets acquired | 28,793 | ||
Goodwill | 79,810 | ||
Goodwill allocation | |||
Property, plant and equipment, net | 40,126 | ||
Relationship with client | 11,115 | ||
Relationship with suppliors | 7,760 | ||
Adjustment to market value of the biological assets | 830 | ||
Adjustment to market value of the inventories | 280 | ||
Non-competition agreement | 205 | ||
Contingent liabilities | (425) | ||
Deferred tax liabilities | (20,890) | ||
Goodwill originated from the expectation of | |||
future profitability | 40,809 |
Net assets acquired on October 03, 2011 | Adjustments CVM Deliberation No. 665/11 | Net assets acquired at fair value | ||||||
ASSETS | ||||||||
CURRENT | ||||||||
Cash and cash equivalents | 9,391 | - | 9,391 | |||||
Trade accounts receivable | 15,578 | - | 15,578 | |||||
Inventories | 9,781 | 405 | (a) | 10,186 | ||||
Biological assets | 8,017 | 1,200 | (b) | 9,217 | ||||
Recoverable taxes | 7,740 | - | 7,740 | |||||
Other credits | 12,796 | - | 12,796 | |||||
63,303 | 1,605 | 64,908 | ||||||
NON CURRENT | ||||||||
Property, plant and equipment, net | 54,857 | 58,031 | (c) | 112,888 | ||||
Intangible | 124 | 27,593 | (d) | 27,717 | ||||
Other assets | 109 | - | 109 | |||||
55,090 | 85,624 | 140,714 | ||||||
TOTAL ASSETS | 118,393 | 87,229 | 205,622 | |||||
LIABILITIES | ||||||||
CURRENT | ||||||||
Short term debts | 42,111 | - | 42,111 | |||||
Trade accounts payable | 21,852 | - | 21,852 | |||||
Salary and social obligations | 2,789 | - | 2,789 | |||||
Tax obligations | 1,012 | - | 1,012 | |||||
Other obligations | 96 | - | 96 | |||||
67,860 | - | 67,860 | ||||||
NON CURRENT | ||||||||
Long term debts | 8,892 | - | 8,892 | |||||
Contingent liabilities | - | 615 | (e) | 615 | ||||
Deferred tax | - | 30,211 | (f) | 30,211 | ||||
8,892 | 30,826 | 39,718 | ||||||
NET ASSETS - BRF | 28,793 | 39,001 | 67,794 | |||||
Non-controlling shareholders’ equity | 12,848 | 17,402 | 30,250 | |||||
TOTAL LIABILITIES | 118,393 | 87,229 | 205,622 | |||||
(a) Refers to the adjustment to the fair value of the inventories; (b) Refers to the adjustment to the fair value of the biological assets; (c) Refers to the adjustment to the fair value of the property, plant and equipments according to the appraisal report prepared by an external expert; (d) Refers to the fair value of the following intangible assets identified: supplier relationship R$11,223, non-compete agreement R$296, customer relationship R$16,074; (e) Refers to the fair value of the contingent tax, civil and employment liabilities; and (f) Refers to the effect of the deferred taxes on the adjustments (a), (b), (c), (d) and (e) presented above, except for the amount of non-compete agreement which has itsamortization allowed for fiscal purposes. | ||||||||
In the year ended December 31, 2012, the portion related torealization of the amounts arising from the allocation of goodwill allocated of Avex was recorded in the statement of income of SadiaAlimentos S.A., such as R$1,597 in cost of goods sold, related to thedepreciation of the surplus in the value of the property, plant and | equipments, amortization of supplier relationship, adjustmentto the fair value of the inventories and biological assets, R$417 in selling expenses, related to amortization of customer relationshipand R$26 in other operating results, related to the non-competeagreement. | |
Fair value | Accumulated realization | Net fair value | ||||
Assets measured at fair value | ||||||
Property, plant and equipment, net | 40,126 | (513) | 39,613 | |||
Relationship with client | 11,115 | (417) | 10,698 | |||
Relationship with suppliors | 7,760 | (597) | 7,163 | |||
Adjustment to market value of the biological assets | 830 | (207) | 623 | |||
Adjustment to market value of the inventories | 280 | (280) | - | |||
Non-competition agreement | 205 | (26) | 179 | |||
Contingent liabilities | (425) | - | (425) | |||
Deferred tax liabilities | (20,890) | 705 | (20,185) | |||
Expectation of future profitability | 40,809 | - | 40,809 | |||
Total goodwill generated in the business combination | 79,810 | (1,335) | 78,475 |
6.3. Business combination – DÁNICA Acting through Avex, the Company acquired 100% of equityinterest of Flora Dánica S.A. and its subsidiaries, Flora San Luis S.A. and GB Dan S.A. (“Dánica group”). Dánica group has an extensivedistribution structure for dry and refrigerated goods, in addition tothe exportation of products to South Cone and to the developmentof products for the food service segment. The group is the marketleader in margarine (62%) and vice leader in the production ofsauces (20%) and its main trademarks are:Dánica, Manterina,Vegetalina, DanifestaandPrimor. Dánica’s productive capacity is presented below: | ||
Activity | Localization | Productive capacity | ||
Margarines and oils | Llavallol, Buenos Aires | 4,000 ton per month | ||
Sauces and mayonnaise | Villa Mercedes, San Luis | 6,000 ton per month | ||
Pasta and pastries | Avellaneda, Buenos Aires | 350 ton per month |
The amounts related to this business combination are presented below:
Net assets acquired on October 3, 2011 | 30,025 | |
Adjustments related to alignment between theaccounting practices within to measurementperiod | (2,286) | |
Assets and labilities acquired, net adjusted | 27,739 | |
Percentage of acquired participation | 100.00% | |
Net assets acquired | 27,739 | |
Value paid for the acquisation of Dánica group | 80,594 | |
Net assets acquired | (27,739) | |
Goodwill | 52,855 | |
Goodwill allocation | ||
Property, plant and equipment | 51,901 | |
Trademarks | 19,553 | |
Relationship with client | 5,016 | |
Exclusivity agreement | 610 | |
Adjustment to market value of the inventories | 490 | |
Non-competition agreement | 163 | |
Contingent liabilities | (12,673) | |
Deferred tax liabilities | (22,714) | |
Goodwill originated from the expectation of | ||
future profitability | 10,509 |
The identifiable assets acquired and liabilities assumed that were recognized on the date of acquisition and the corresponding fair value, on the date of acquisition, are presented below: |
Net assets acquired on October 03, 2011 | Adjustments CVM Deliberation No. 665/11 | Net assets acquired at fair value | ||||||
ASSETS | ||||||||
CURRENT | ||||||||
Cash and cash equivalents | 4,239 | 4,239 | ||||||
Trade accounts receivable | 27,335 | 27,335 | ||||||
Inventories | 22,292 | 490 | (a) | 22,782 | ||||
Recoverable Taxes | 3,495 | 3,495 | ||||||
Other credits | 1,143 | 1,143 | ||||||
58,504 | 490 | 58,994 | ||||||
NON CURRENT | ||||||||
Property, plant and equipment, net | 13,071 | 51,901 | (b) | 64,972 | ||||
Intangible | - | 25,342 | (c) | 25,342 | ||||
Other assets | 3,160 | 3,160 | ||||||
16,231 | 77,243 | 93,474 | ||||||
TOTAL ASSETS | 74,735 | 77,733 | 152,468 | |||||
LIABILITIES | ||||||||
CURRENT | ||||||||
Short term debts | 214 | - | 214 | |||||
Trade accounts payable | 29,716 | 29,716 | ||||||
Salary and social obligations | 3,674 | - | 3,674 | |||||
Tax obligations | 3,541 | - | 3,541 | |||||
Other obligations | 2,427 | - | 2,427 | |||||
39,572 | - | 39,572 | ||||||
NON CURRENT | ||||||||
Long term debts | 517 | - | 517 | |||||
Contingent liabilities | - | 12,673 | (d) | 12,673 | ||||
Deferred taxes | - | 22,714 | (e) | 22,714 | ||||
Other obligations | 6,907 | - | 6,907 | |||||
7,424 | 35,387 | 42,811 | ||||||
NET ASSETS | 27,739 | 42,346 | 70,085 | |||||
TOTAL LIABILITIES | 74,735 | 77,733 | 152,468 | |||||
(a) Refers to the adjustment to the fair value of the inventories; (b) Refers to the adjustment to the fair value of the property, plant and equipments according to the appraisal report prepared by an external expert; (c) Refers to the fair value of the following intangible assets identified: customer relationship R$5,016, non-compete agreement R$163, exclusivity agreement R$610 andtrademarks R$19,553; (d) Refers to the fair value of the contingent tax, civil and employment liabilities; and (e) Refers to the effect of the deferred taxes on the adjustments (a), (b), (c) and (d) presented above, except for the amount of non-compete agreement which has its amortizationallowed for fiscal purposes. | ||||||||
The acquisitions of Avex and Dánica group were made to reinforcethe Company’s trademarks in MERCOSUL, mainly through theexpansion of the products portfolio, access to the local market andthe expansion of export infrastructure. In the year ended December 31, 2012, the portion related torealization of the amounts arising from the allocation of goodwill | allocated of Dánica was recorded in the statement of income ofAvex S.A., such as R$1,404 in cost of goods sold, related to the depreciation of the surplus in the value of the property, plantand equipments, amortization of exclusivity agreement and adjustment to the fair value of the inventories, R$125 in sellingexpenses, related to amortization of customer relationship and R$14 in other operating results, related to the non-competeagreement. | |
Fair value | Accumulated realization | Net fair value | ||||
Assets measured at fair value | ||||||
Property, plant and equipment, net | 51,901 | (761) | 51,140 | |||
Relationship with client | 5,016 | (125) | 4,891 | |||
Exclusivity agreement | 610 | (153) | 457 | |||
Non-competition agreement | 163 | (14) | 149 | |||
Adjustment to market value of the inventories | 490 | (490) | - | |||
Trademarks | 19,553 | - | 19,553 | |||
Contingent liabilities | (12,673) | - | (12,673) | |||
Deferred tax liabilities | (22,714) | 535 | (22,179) | |||
Expectation of future profitability | 10,509 | - | 10,509 | |||
Total goodwill generated in the business combination | 52,855 | (1,008) | 51,847 |
7. CASH AND CASH EQUIVALENTS
BR GAAP | BR GAAP and IFRS | |||||||||
Average rate (% p.a.) | Parent company | Consolidated | ||||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||||
Cash and bank accounts: | ||||||||||
U.S. Dollar | - | 298 | 187 | 81,757 | 17,221 | |||||
Brazilian Reais | - | 147,448 | 16,973 | 147,629 | 65,174 | |||||
Euro | - | - | 240 | 17,046 | 43,746 | |||||
Other currencies | - | - | - | 8,964 | 3,928 | |||||
147,746 | 17,400 | 255,396 | 130,069 | |||||||
Highly liquid investments: | ||||||||||
In Brazilian Reais: | ||||||||||
Investment funds | 8.88% | 13,508 | 11,313 | 13,508 | 12,367 | |||||
Bank deposit certificates | 6.91% | 626,292 | - | 630,412 | - | |||||
639,800 | 11,313 | 643,920 | 12,367 | |||||||
In U.S. Dollar: | ||||||||||
Interest bearing account | 0.05% | 45,572 | - | 359,416 | 42,065 | |||||
Term deposit | 0.44% | - | - | 306,734 | 371,344 | |||||
Overnight | 0.12% | 59,537 | 28,001 | 180,292 | 458,236 | |||||
In Euro: | ||||||||||
Interest bearing account | 0.08% | 11,740 | 12,041 | 122,341 | 235,237 | |||||
Term deposit | 1.20% | - | - | 4,916 | 82,372 | |||||
Overnight | - | - | - | - | 17,815 | |||||
Other currencies: | ||||||||||
Interest bearing account | 0.02% | 3,524 | - | 54,206 | 17,338 | |||||
Fixed term deposit | 5.30% | - | - | 3,472 | - | |||||
120,373 | 40,042 | 1,031,377 | 1,224,407 | |||||||
907,919 | 68,755 | 1,930,693 | 1,366,843 |
Financial investments classified as cash and cash equivalentsare considered financial assets with the possibility of immediateredemption and are subject to an insignificant risk of change ofvalue. Financial investments in foreign currencies refer mainly toOvernight and Time Deposit, remunerated at the prefixed rate. | The increase in cash and cash equivalents is related to transfersfrom marketable securities, primarily in the modality of BankDeposit Certificates (“CDB”), due to the needs of immediateliquidity of the Company. | |
8. MARKETABLE SECURITIES | ||||||||||||||
Average interest rate (% p.a.) | BR GAAP | BR GAAP and IFRS | ||||||||||||
WATM(1) | Currency | Parent company | Consolidated | |||||||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||||||||
Available for sale | ||||||||||||||
Credit linked note | (a) | 6.19 | US$ | 4.79% | - | - | 174,181 | 146,954 | ||||||
Brazilian foreign debt securities | (b) | 1.45 | US$ | 2.92% | - | - | 89,004 | 86,511 | ||||||
Shares | - | R$ | - | 658 | 1,685 | 658 | 1,685 | |||||||
Exclusive investment funds | (c) | 1.00 | US$ | 0.22% | - | - | 9,219 | - | ||||||
658 | 1,685 | 273,062 | 235,150 | |||||||||||
Held for trading | ||||||||||||||
Bank deposit certificates | (d) | 1.82 | R$ | 7.01% | 167,867 | 465,804 | 180,185 | 698,968 | ||||||
Financial treasury bills | (e) | 1.07 | R$ | 7.29% | 100,508 | 296,046 | 100,508 | 355,137 | ||||||
268,375 | 761,850 | 280,693 | 1,054,105 | |||||||||||
Held to maturity | ||||||||||||||
Credit linked note | (a) | 0.62 | US$ | 4.81% | - | - | 90,859 | 166,784 | ||||||
Financial treasury bills | (e) | 5.00 | R$ | 7.29% | 51,752 | - | 51,752 | - | ||||||
51,752 | - | 142,611 | 166,784 | |||||||||||
320,785 | 763,535 | 696,366 | 1,456,039 | |||||||||||
Current | 269,033 | 763,535 | 621,908 | 1,372,671 | ||||||||||
Non-current | 51,752 | - | 74,458 | 83,368 | ||||||||||
(1) Weighted average maturity in years. |
(a) | The Credit Linked Note is a structured operation with a first-classfinancial institution abroad that pays periodic interest (LIBOR +spread) and corresponds to a credit note that contemplates theCompany’s risk. | (b) | Brazilian foreign debt securities are denominated in U.S. Dollarsand remunerated by pre- and post-fixed rates. | |
(c) | The exclusive fund in foreign currency is basically representedby money market. | |||
(d) | Bank Deposit Certificate (“CDB”) investments are denominated in Brazilian Reais and remunerated at rates varying from 90% to 103% of the Interbank Deposit Certificate (“CDI”). | On December 31, 2012, the maturities of the non-current marketable securities the consolidated balance sheet is as follow: | ||
(e) | Financial Treasury Bills (“LFT”) are remunerated at the rate of the Special System for Settlement and Custody (“SELIC”). | BR GAAP and IFRS | ||
Maturities | Consolidated | |||
The decrease in marketable securities is related to transfers to cashand cash equivalents due to the needs of immediate liquidity of theCompany. | 2014 | 22,706 | ||
2017 | 51,752 | |||
74,458 | ||||
The Company conducted an analysis of sensitivity to foreign exchange rate as presented in note 4.10. | ||||
9. TRADE ACCOUNTS RECEIVABLE AND OTHER |
BR GAAP | BR GAAP e IFRS | |||||||
Parent Company | Consolidated | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
Current | ||||||||
Domestic third parties | 1,567,225 | 949,489 | 1,568,370 | 1,863,996 | ||||
Domestic related parties | 898 | 44,959 | - | - | ||||
Foreign third parties | 229,025 | 37,422 | 1,603,902 | 1,375,472 | ||||
Foreign related parties | 1,225,246 | 409,061 | - | - | ||||
( - ) Estimated losses on doubtful accounts | (24,723) | (13,557) | (41,074) | (31,655) | ||||
2,997,671 | 1,427,374 | 3,131,198 | 3,207,813 | |||||
Credit notes | 31,398 | 25,236 | 77,421 | 56,935 | ||||
3,029,069 | 1,452,610 | 3,208,619 | 3,264,748 | |||||
Non-current | ||||||||
Domestic third parties | 90,476 | 51,802 | 90,619 | 53,060 | ||||
Foreign third parties | 2,535 | 499 | 2,642 | 3,948 | ||||
( - ) Adjustment to present value | (189) | (670) | (189) | (670) | ||||
( - ) Estimated losses on doubtful accounts | (81,694) | (49,212) | (81,944) | (53,919) | ||||
11,128 | 2,419 | 11,128 | 2,419 | |||||
Credit notes | 78,033 | 75,547 | 152,303 | 147,322 | ||||
89,161 | 77,966 | 163,431 | 149,741 |
On December 31 2012, the increase in the amount of the parentcompany arises from the merger of the subsidiaries Sadia and Heloisa. | The rollforward of estimated losses from doubtful accounts ispresented below: | |
BR GAAP | BR GAAP and IFRS | |||||||
Parent Company | Consolidated | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
Beginning balance | 62,769 | 38,613 | 85,574 | 62,839 | ||||
Additions | 37,427 | 73,712 | 183,026 | 112,406 | ||||
Business combination(1) | - | - | 7,482 | - | ||||
Merger of company(2) | 50,975 | - | - | - | ||||
Reversals | (29,445) | (34,935) | (126,739) | (65,279) | ||||
Write-offs | (15,354) | (14,677) | (26,889) | (24,596) | ||||
Exchange rate variation | 45 | 56 | 564 | 204 | ||||
Ending balance | 106,417 | 62,769 | 123,018 | 85,574 | ||||
(1) Business combination with Quickfood (nota 6.1). (2) Merging of Sadia and Heloísa on December 31, 2012 | ||||||||
The expense of the estimated losses on doubtful accounts wasrecorded under selling expenses in the statement of income. Whenefforts to recover accounts receivable prove unsuccessful, theamounts are written-off. | Breakdown by maturity of overdue amounts and not included inestimated losses on doubtful accounts: | |
BR GAAP | BR GAAP and IFRS | |||||||
Parent Company | Consolidated | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
61 to 90 days | - | - | - | 14,855 | ||||
91 to 120 days | 5,311 | 2,233 | 5,461 | 3,468 | ||||
121 to 180 days | 4,078 | 1,250 | 4,240 | 1,317 | ||||
181 to 360 days | 7,805 | 602 | 8,010 | 1,469 | ||||
More than 361 days | 490 | 1,397 | 665 | 15,466 | ||||
17,684 | 5,482 | 18,376 | 36,575 |
The receivables excluded from for estimated losses on doubtful accounts are secured by letters of credit issued by financial institutions and by credit insurance contracted with insurance companies. The breakdown of accounts receivable by maturity is as follows: |
BR GAAP | BR GAAP and IFRS | |||||||
Parent company | Consolidated | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
Current | 2,978,506 | 1,404,775 | 3,040,239 | 2,924,510 | ||||
Overdue: | ||||||||
01 to 60 days | 17,920 | 22,169 | 83,688 | 251,163 | ||||
61 to 90 days | 7,791 | 3,915 | 9,638 | 22,841 | ||||
91 to 120 days | 8,763 | 3,573 | 9,646 | 7,457 | ||||
121 to 180 days | 10,377 | 4,388 | 12,547 | 13,064 | ||||
181 to 360 days | 9,962 | 4,366 | 15,665 | 8,517 | ||||
More than 361 days | 82,086 | 50,046 | 94,110 | 68,924 | ||||
( - ) Adjustment to present value | (189) | (670) | (189) | (670) | ||||
( - ) Estimated losses on doubtful accounts | (106,417) | (62,769) | (123,018) | (85,574) | ||||
3,008,799 | 1,429,793 | 3,142,326 | 3,210,232 | |||||
10. INVENTORIES | ||||||||
BR GAAP | BR GAAP and IFRS | |||||||
Parent company | Consolidated | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
Finished goods | 1,443,923 | 708,162 | 1,799,515 | 1,633,492 | ||||
Goods for resale | 24,505 | 7,270 | 24,577 | 8,575 | ||||
Work in process | 147,012 | 85,700 | 147,012 | 316,875 | ||||
Raw materials | 410,469 | 112,490 | 427,931 | 214,630 | ||||
Packaging materials | 81,301 | 61,539 | 84,195 | 99,925 | ||||
Secondary materials | 202,933 | 71,341 | 204,489 | 153,898 | ||||
Warehouse | 110,764 | 71,972 | 110,764 | 112,001 | ||||
Goods in transit | 1,420 | 4,291 | 152,091 | 26,147 | ||||
Imports in transit | 57,864 | 13,357 | 57,864 | 83,640 | ||||
Advances to suppliers | 10,138 | 30,028 | 10,138 | 30,028 | ||||
2,490,329 | 1,166,150 | 3,018,576 | 2,679,211 |
On December 31 2012, the increase in the parent company arisesfrom the merger of the subsidiaries Sadia and Heloisa, while theincrease in consolidated is mainly related to the acquisition of theQuickfood and the increase in the prices of the main raw materialsutilized in production. | The write-offs of products sold from inventories to cost of salesduring the twelve month period ended on December 31, 2012,totaled R$12,114,733 at the parent company and R$22,063,563in the consolidated (on December 31, 2011, R$10,008,750 atthe parent company and R$19,046,963 in the consolidated).Such amounts include the additions and reversals of inventoryprovisions presented in the table below: |
BR GAAP | ||||||||||||
Parent company | ||||||||||||
12.31.11 | Additions | Merger of company(1) | Reversals | Write-offs | 12.31.12 | |||||||
Provision for losses to the disposable value | (19,899) | (21,510) | (5,784) | 38,106 | - | (9,087) | ||||||
Provision for deterioration | (3,404) | (14,299) | (6,397) | - | 4,122 | (19,978) | ||||||
Provision for obsolescence | (629) | (1,453) | (962) | - | 1,409 | (1,635) | ||||||
Provision for losses TCD | - | (3,289) | - | - | 3,289 | - | ||||||
(23,932) | (40,551) | (13,143) | 38,106 | 8,820 | (30,700) |
BR GAAP and IFRS | ||||||||||||||
Consolidated | ||||||||||||||
12.31.11 | Additions | Business combination(2) | Reversals | Write-offs | Exchange rate variation | 12.31.12 | ||||||||
Provision for losses to the disposable value | (41,963) | (6,,094) | - | 87,878 | - | 1,259 | (14,920) | |||||||
Provision for deterioration | (12,841) | (29,320) | - | - | 20,310 | 111 | (21,740) | |||||||
Provision for obsolescence | (3,223) | (3,451) | (1,539) | - | 6,578 | - | (1,635) | |||||||
Provision for losses TCD | - | (3,289) | - | - | 3,289 | - | - | |||||||
(58,027) | (98,154) | (1,539) | 87,878 | 30,177 | 1,370 | (38,295) | ||||||||
(1) Merging of Sadia and Heloísa on December 31, 2012. (2) Business combination with Quickfood (note 6.1). | ||||||||||||||
The additions presented in the provision for inventory losses aremainly related to the decrease in the foreign market sales prices ofgriller and the domestic market of whole poultry in-natura, whichoccurred during the first semester. The reversals recorded duringthe quarter are related to the decrease in the critical inventory ofgriller chicken and to the recovery of the foreign market sales priceas from the second semester of 2012. Management expects inventories to be recovered in a period of lessthan 12 months. On December 31, 2012, R$50,000 (R$67,079 as of December 31,2011) of the balance of inventories of the parent company andconsolidated was pledged as collateral for rural credit operations. | The animals classified in the subgroup for production (breedingstock) are those that have the function of producing otherbiological assets. And, while they do not reach the age ofreproduction they are classified as immature and when they areable to initiate the reproductive cycle, they are classified as mature. In the measurement of the biological assets at fair value, theCompany adopted the model of discounted cash flow. Firstly,the discount rate used was the Weighted Average Cost of Capital(“WACC”), which was then adjusted to reflect the specific risk ofthe asset in question, utilizing mathematical model of WeightedAverage Return on Assets (“WARA”), as follows: | |||
11. BIOLOGICAL ASSETS | ||||
31.12.12 | 31.12.11 | |||
The group of biological assets of the Company comprises livinganimals which are segregated by the categories: poultry, porkand cattle. In addition, these categories were separated intoconsumable and for production. The animals classified in the subgroup of consumables are thoseintended for slaughtering to produce unprocessed meat and/or manufactured and processed products, and while they do notreach the weight adequate for slaughtering, they are classifiedas immature. The slaughter and production process occurssequentially and in a very short time period, and as a consequence,only the living animals transferred for slaughtering in refrigeratorsare classified as mature. | Cost of nominal owners' equity | 9.59 | 10.31 | |
Projected inflation rate USA | 2.28 | 2.26 | ||
Cost of actual owners' equity | 7.15 | 7.88 | ||
ActualWACC | 5.06 | 5.80 | ||
WARAdiscount rate: | ||||
Animals for slaughtering | 4.29 | 5.50 | ||
Animals for production | 4.79 | 5.75 | ||
The quantities and accounting balances per category of biological assets are presented below: |
BR GAAP | ||||||||
Parent company | ||||||||
12.31.12 | 12.31.11 | |||||||
Quantity | Value | Quantity | Value | |||||
Consumable biological assets | ||||||||
Immature poultry | 203,420 | 583,677 | 103,087 | 207,615 | ||||
Immature pork | 3,461 | 627,790 | 1,646 | 257,692 | ||||
Immature cattle | 139 | 146,648 | 75 | 89,176 | ||||
Total current | 207,020 | 1,358,115 | 104,808 | 554,483 | ||||
Production biological assets | ||||||||
Immature poultry | 7,759 | 110,422 | 3,756 | 46,987 | ||||
Mature poultry | 11,022 | 139,428 | 5,569 | 62,632 | ||||
Immature pork | 162 | 32,441 | 5 | 945 | ||||
Mature pork | 374 | 145,899 | 165 | 68,624 | ||||
Total non-current | 19,317 | 428,190 | 9,495 | 179,188 | ||||
226,337 | 1,786,305 | 114,303 | 733,671 | |||||
On December 31 2012, the increase in the amount of the parent company arises from the merger of the subsidiaries Sadia. | ||||||||
BR GAAP and IFRS | ||||||||
Consolidated | ||||||||
12.31.12 | 12.31.11 | |||||||
Quantity | Value | Quantity | Value | |||||
Consumable biological assets | ||||||||
Immature poultry | 208,695 | 596,561 | 209,732 | 485,359 | ||||
Immature pork | 3,461 | 627,790 | 3,803 | 581,546 | ||||
Immature cattle | 139 | 146,648 | 75 | 89,176 | ||||
Total current | 212,295 | 1,370,999 | 213,610 | 1,156,081 | ||||
Production biological assets | ||||||||
Immature poultry | 7,759 | 110,422 | 7,643 | 97,458 | ||||
Mature poultry | 11,022 | 139,428 | 12,006 | 132,043 | ||||
Immature pork | 162 | 32,441 | 125 | 18,370 | ||||
Mature pork | 374 | 145,899 | 409 | 139,512 | ||||
Total non-current | 19,317 | 428,190 | 20,183 | 387,383 | ||||
231,612 | 1,799,189 | 233,793 | 1,543,464 |
The variation of the consolidated is mainly related to the increased cost of soybeans, corn and soybean
meal during the year ended December 31, 2012.
The rollforward of biological assets for the period is presented below:
Poultry | ||
Balance as of 12.31.11 | 207,615 | |
Incorporation of company(1) | 318,277 | |
Increase due to acquisition | 109,536 | |
Increase due to reproduction, consumption of ration, medication and remuneration of partnership | 2,943,234 | |
Depreciation | - | |
Transfer between current and non-current | 23,984 | |
Reduction due to slaughtering | (3,018,969) | |
Write-off TCD | - | |
Balance as of 12.31.12 | 583,677 | |
(1) Merging of Sadia and Heloísa on December 31, 2012. | ||
Poultry | ||
Balance as of 12.31.11 | 485,359 | |
Increase due to acquisition | 299,893 | |
Increase due to reproduction, consumption of ration, medication and remuneration of partnership | 6,094,566 | |
Depreciation | - | |
Transfer between current and non-current | 51,018 | |
Reduction due to slaughtering | (6,334,275) | |
Write-off TCD | - | |
Balance as of 12.31.12 | 596,561 |
The costs of the breeding animals are depreciated using thestraight-line method for a period from 15 to 30 months. | The acquisitions of biological assets for slaughtering (poultry andpork) are represented by poultry of one day old and pork of up to 22kilos, which are subject to the management of a substantial part ofthe agricultural activity by the Company. |
12. RECOVERABLE TAXES
BR GAAP | BR GAAP and IFRS | |||||||
Parent company | Consolidated | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
State ICMS ("VAT") | 944,808 | 254,809 | 966,892 | 754,329 | ||||
PIS and COFINS ("Federal Taxes to Social Fund Programs") | 890,441 | 608,880 | 890,642 | 755,270 | ||||
Withholding income and social contribution tax | 241,175 | 179,096 | 277,776 | 211,047 | ||||
IPI ("Federal VAT") | 58,689 | 1,552 | 58,689 | 57,241 | ||||
Other | 62,508 | 1,099 | 84,914 | 26,483 | ||||
( - ) Allowance for losses | (170,929) | (23,340) | (172,347) | (151,829) | ||||
2,026,692 | 1,022,096 | 2,106,566 | 1,652,541 | |||||
Current | 892,104 | 572,720 | 964,769 | 907,929 | ||||
Non-current | 1,134,588 | 449,376 | 1,141,797 | 744,612 |
On December 31 2012, the increase in the amount of the parent company arises from the merger of the subsidiaries Sadia and Heloisa.
The rollforward of the allowance for losses is presented below:
BR GAAP | ||||||||
Parent company | ||||||||
Merger of | ||||||||
12.31.11 | company(1) | Reversals | 12.31.12 | |||||
Allowance for losses - State ICMS (“VAT”) | (23,340) | (122,553) | 2 | (145,891) | ||||
Allowance for losses - PIS and COFINS (“Federal Taxes to Social Fund Programs”) | - | (10,298) | - | (10,298) | ||||
Allowance for losses - IPI (“Federal VAT”) | - | (14,740) | - | (14,740) | ||||
(23,340) | (147,591) | 2 | (170,929) | |||||
(1) Merging of Sadia and Heloísa on December 31, 2012. |
BR GAAP | ||||||||||
Parent company | ||||||||||
Current | Non-current | |||||||||
Pork | Cattle | Total | Poultry | Pork | Total | |||||
257,692 | 89,176 | 554,483 | 109,619 | 69,569 | 179,188 | |||||
352,366 | - | 670,643 | 133,063 | 105,092 | 238,155 | |||||
468,647 | 467,557 | 1,045,740 | 34,386 | 46,384 | 80,770 | |||||
714,258 | 74,522 | 3,732,014 | 143,073 | 7,425 | 150,498 | |||||
- | - | - | (144,802) | (21,967) | (166,769) | |||||
19,944 | - | 43,928 | (23,984) | (19,944) | (43,928) | |||||
(1,156,682) | (484,607) | (4,660,258) | - | - | - | |||||
(28,435) | - | (28,435) | (1,505) | (8,219) | (9,724) | |||||
627,790 | 146,648 | 1,358,115 | 249,850 | 178,340 | 428,190 | |||||
BR GAAP and IFRS | ||||||||||
Consolidated | ||||||||||
Current | Non-current | |||||||||
Pork | Cattle | Total | Poultry | Pork | Total | |||||
581,546 | 89,176 | 1,156,081 | 229,501 | 157,882 | 387,383 | |||||
1,052,696 | 467,557 | 1,820,146 | 57,057 | 61,027 | 118,084 | |||||
1,798,968 | 74,522 | 7,968,056 | 314,848 | 60,956 | 375,804 | |||||
- | - | - | (296,283) | (37,738) | (334,021) | |||||
55,569 | - | 106,587 | (51,018) | (55,568) | (106,586) | |||||
(2,832,554) | (484,607) | (9,651,436) | - | - | - | |||||
(28,435) | - | (28,435) | (4,255) | (8,219) | (12,474) | |||||
627,790 | 146,648 | 1,370,999 | 249,850 | 178,340 | 428,190 |
BR GAAP and IFRS | ||||||||
Consolidated | ||||||||
12.31.11 | Additions | Reversals | 12.31.12 | |||||
Allowance for losses - State ICMS ("VAT") | (126,792) | (20,718) | 1,618 | (145,892) | ||||
Allowance for losses - PIS and COFINS ("Federal Taxes to Social Fund Programs") | (12,865) | (3,994) | 6,561 | (10,298) | ||||
Allowance for losses - IPI ("Federal VAT") | (12,172) | (2,601) | 33 | (14,740) | ||||
Allowance for losses - Other | - | (3,482) | 2,065 | (1,417) | ||||
(151,829) | (30,795) | 10,277 | (172,347) |
The increase in the balance during the year ended December 31,2012 is mainly due to the tax credits arising from exports occurredthrough the States of Paraná and Santa Catarina. | 12.2. Income tax and social contribution | |
13. INCOME TAX AND SOCIAL CONTRIBUTION
13.1. Deferred income tax and social contribution composition
BR GAAP | BR GAAP and IFRS | |||||||
Parent company | Consolidated | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
Assets: | ||||||||
Tax loss carryforwards (corporate income tax) | 641,749 | 380,462 | 670,447 | 765,055 | ||||
Valuation allowance for tax losses | - | - | (274) | (166,762) | ||||
Negative calculation basis (social contribution tax) | 251,581 | 153,124 | 252,354 | 297,062 | ||||
Allowance for negative calculation basis losses | - | - | (104) | (48,443) | ||||
Assets temporary differences: | ||||||||
Provisions for tax, civil and labor risk | 109,899 | 63,934 | 115,473 | 121,763 | ||||
Suspended collection taxes | 51,340 | 36,499 | 51,340 | 36,499 | ||||
Provision for estimated losses with doubtful accounts | 10,237 | 9,471 | 10,665 | 12,681 | ||||
Provision for property, plant and equipment losses | 3,145 | 8,307 | 3,313 | 11,709 | ||||
Provision for tax credits realization | 55,539 | 7,936 | 60,935 | 47,571 | ||||
Provision for other obligations | 28,391 | 24,804 | 29,676 | 50,923 | ||||
Employees' profit sharing | 25,033 | 56,014 | 25,033 | 72,432 | ||||
Provision for inventories | 10,438 | 8,137 | 10,900 | 12,224 | ||||
Employees' benefits plan | 103,308 | 38,323 | 103,308 | 90,457 | ||||
Amortization on fair value of business combination | 5,372 | 4,130 | 5,372 | 8,753 | ||||
Business combination - Sadia | 817,858 | - | 817,858 | 1,139,668 | ||||
Unrealized losses on derivatives | 45,015 | 62,644 | 45,015 | 62,644 | ||||
Unrealized losses on inventories | - | - | 2,604 | 4,230 | ||||
Adjustments relating to the transition tax regime | 143,575 | 63,891 | 143,574 | 76,102 | ||||
Provision for losses | 14,672 | 9,098 | 14,671 | 10,488 | ||||
Other temporary differences | 51,589 | 8,833 | 53,370 | 23,694 | ||||
2,368,741 | 935,607 | 2,415,530 | 2,628,750 | |||||
Liabilities temporary differences: | ||||||||
Business combination - Sadia and Quickfood | (865,998) | - | (990,028) | (1,181,582) | ||||
Depreciation on rural activities | - | (409) | - | (68,832) | ||||
Adjustments relating to the transition tax regime | (675,127) | (337,804) | (677,137) | (531,056) | ||||
Other temporary differences | (1,618) | (2,393) | (23,423) | (10,427) | ||||
(1,542,743) | (340,606) | (1,690,588) | (1,791,897) | |||||
Total deferred tax legally enforceable | 825,998 | 595,001 | 724,942 | 836,853 | ||||
Business combination - Dánica and Avex | - | - | (27,792) | - | ||||
Total deferred tax | 825,998 | 595,001 | 697,150 | 836,853 |
Due to the merger of a wholly owned subsidiary Sadia on December31, 2012 from this date, the balances of tax assets and liabilitiesdeferred of the parent company are disclosed on a net basis, asthere is a legally enforceable right to offset such amounts. Deferred tax assets arising from temporary differences willbe realized as they are settled our realized. The period of thesettlement or realization of such differences is inaccurateand is tied to several factors that are not under control of theManagement. | BR GAAP | BR GAAP and IFRS | ||||
Parent company | Consolidated | |||||
Year | Value | Value | ||||
2013 | 36,068 | 41,625 | ||||
2014 | 48,321 | 54,331 | ||||
2015 | 60,869 | 65,960 | ||||
2016 | 74,012 | 77,491 | ||||
2017 | 88,022 | 91,817 | ||||
2018-2020 | 385,315 | 390,416 | ||||
2021-2022 | 200,723 | 200,783 | ||||
893,330 | 922,423 | |||||
When assessing the likelihood of the realization of deferred tax assets, Management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities, projected taxable income and tax-planning strategies when performing this assessment. Based on the level of historical taxable income and projections for future taxable income, Management believes that it is more likely than not that the Company will realize the benefits of these deductible differences. The amount of the deferred tax asset is considered realizable, however, could be impacted in the short term if estimates of future taxable income during the carryforward period are reduced. |
The rollforward of the deferred tax assets is set forth below: | ||||
BR GAAP and IFRS | ||||
Consolidated | ||||
12.31.12 | 12.31.11 | |||
Opening balance | ||||
Expense of deferred income tax and social contribution recognized on the statement of income | 836,853 | 851,935 | ||
Revenue of deferred income tax and social contribution recognized in other comprehensive income | 21,321 | (116,643) | ||
Deferred tax liabilities recognized in business combination - Dánica and Avex | 19,298 | 83,249 | ||
Deferred tax assets recognized in business combination - Quickfood | (52,925) | - | ||
Expense of deferred income tax and social contribution on actuarial gain (FAF) recognized in statement of income in counterpart of other comprehensive income. | (124,440) | - | ||
Others | - | 20,358 | ||
Ending balance | (2,957) | (2,046) | ||
697,150 | 836,853 |
13.3. Income and social contribution taxes reconciliation
BR GAAP | BR GAAP and IFRS | |||||||
Parent company | Consolidated | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
Income before taxes | 532,163 | 1,115,531 | 818,313 | 1,521,606 | ||||
Nominal tax rate | 34.0% | 34.0% | 34.0% | 34.0% | ||||
Tax expense at nominal rate | (180,935) | (379,281) | (278,226) | (517,346) | ||||
Adjustments of taxes and contributions on: | ||||||||
Equity interest in income of affiliates | 339,442 | 407,372 | 7,629 | 3,053 | ||||
Exchange rate variation on foreign investments | 41,207 | 33,301 | 62,416 | 68,686 | ||||
Difference of tax rates on earnings from foreign subsidiaries | - | - | 28,362 | 269,253 | ||||
Interest on shareholders' equity | 93,415 | 175,826 | 93,415 | 214,926 | ||||
Results from foreign subsidiaries | - | - | (549) | (4,403) | ||||
Transfer price | (591) | (41) | (3,099) | (1,962) | ||||
Profit sharing | (2,081) | (4,248) | (1,947) | (4,851) | ||||
Donations | (1,626) | (604) | (4,387) | (3,063) | ||||
Penalties | (5,472) | (1,365) | (3,825) | (3,819) | ||||
Gain (loss) of deffered income tax and social contribution | - | - | 84,246 | (215,205) | ||||
Investment grant | 22,926 | 19,224 | 22,926 | 35,640 | ||||
Other adjustments | (25,221) | 1,694 | (4,607) | 2,574 | ||||
281,064 | 251,878 | 2,354 | (156,517) | |||||
Current income tax | (716) | - | (18,967) | (39,874) | ||||
Deferred income tax | 281,780 | 251,878 | 21,321 | (116,643) | ||||
The taxable income, current and deferred income tax from foreign subsidiaries is set forth below: |
BR GAAP and IFRS | |||
Consolidated | |||
12.31.12 | 12.31.11 | ||
Taxable income from foreign subsidiaries | 54,150 | 749,012 | |
Current income taxes expense from foreign subsidiaries | (9,375) | (11,390) | |
Deferred income taxes benefit from foreign subsidiaries | 39,353 | 492 |
The Company determined that the total profit accounted for byholdings of their wholly-owned subsidiary will not be redistributed.Such resources will be used for investments in the subsidiaries,and thus no deferred income taxes were recognized. The total ofundistributed earnings corresponds to R$2,223,856 as of December31, 2012 (R$2,057,655 as of December 31, 2011). | The Brazilian income taxes are subject to review for a 5-yearperiod, during which the tax authorities might audit and assess thecompany for additional taxes and penalties, in case inconsistenciesare found. Subsidiaries located abroad are taxed in their respectivejurisdictions, according to local regulations. | |
14. JUDICIAL DEPOSITS | ||||||||||||||
The rollforward of the judicial deposits is set forth below: | ||||||||||||||
BR GAAP | ||||||||||||||
Parent company | ||||||||||||||
12.31.11 | Merger of company(1) | Additions | Reversals | Write-offs | Price index update | 12.31.12 | ||||||||
Tax | 29,286 | 133,512 | 68,222 | (128) | (742) | 10,300 | 240,450 | |||||||
Labor | 67,540 | 48,662 | 37,216 | (54,113) | (5,896) | - | 93,409 | |||||||
Civil, commercial and other | 13,756 | 15,193 | 7,067 | (382) | (6,343) | 725 | 30,016 | |||||||
110,582 | 197,367 | 112,505 | (54,623) | (12,981) | 11,025 | 363,875 | ||||||||
(1) Merger of Sadia and Heloísa on December 31, 2012. | ||||||||||||||
BR GAAP and IFRS | ||||||||||||||
Consolidated | ||||||||||||||
12.31.11 | Additions | Reversals | Write-offs | Price index update | 12.31.12 | |||||||||
Tax(1) | 92,993 | 110,769 | (14,291) | (1,407) | 52,518 | 240,582 | ||||||||
Labor | 115,880 | 61,011 | (71,826) | (11,562) | - | 93,503 | ||||||||
Civil, commercial and other | 19,388 | 24,861 | (521) | (13,644) | 1,132 | 31,216 | ||||||||
228,261 | 196,641 | (86,638) | (26,613) | 53,650 | 365,301 | |||||||||
(1) The additions are mainly represented by judicial deposits related to the incidence of the Provisional Contribution on Financial Transactions (“CPMF”) of R$ 34,078 and the incidence of VAT in the state of Minas Gerais differently in respect of products sold as the state of origin R$33,010. | ||||||||||||||
Sadia S.A.(1) | VIP S.A. Empr. e Particip. Imob. | Avipal Construtora S.A. | Avipal Centro Oeste S.A. | PSA Labor. Veter. Ltda. | Perdigão Trading S.A. | PDF Participações Ltda. | ||||||||
12.31.12 | 12.31.12 | 12.31.12 | 12.31.12 | 12.31.12 | 12.31.12 | 31.12.12 | ||||||||
Current assets | - | 60,212 | 121 | 85 | 467 | 119 | 1 | |||||||
Non-current assets | - | 89,158 | - | - | 8,022 | 997 | - | |||||||
Current liabilities | - | (142) | (5) | - | (84) | (1) | - | |||||||
Non-current liabilities | - | (4,185) | - | - | - | - | - | |||||||
Shareholders' equity | - | (145,043) | (116) | (85) | (8,405) | (1,115) | (1) | |||||||
Net revenues | 15,226,451 | 4,025 | - | - | 366 | - | - | |||||||
Net income (loss) | 1,039,680 | 11,859 | 62 | (180) | (3,028) | (873) | - | |||||||
12.31.11 | 12.31.11 | 12.31.11 | 12.31.11 | 12.31.11 | 12.31.11 | 12.31.11 | ||||||||
Current assets | 4,977,392 | 46,982 | 131 | 265 | 99 | 100 | 1 | |||||||
Non-current assets | 5,903,429 | 87,620 | - | - | 11,334 | 2,301 | - | |||||||
Current liabilities | (3,818,241) | (391) | (5) | - | - | (412) | - | |||||||
Non-current liabilities | (2,088,931) | (1,029) | (72) | - | - | - | - | |||||||
Shareholders' equity | (4,973,649) | (133,182) | (54) | (265) | (11,433) | (1,989) | (1) | |||||||
Net revenues | 13,407,814 | 104,996 | - | - | - | - | - | |||||||
Net income (loss) | 716,080 | 85,172 | 3 | 2 | 584 | 115 | - | |||||||
(1) Merger of wholly-owned subsidiaries on December 31, 2012. |
15. RESTRICTED CASH | ||||||||||||
BR GAAP | BR GAAP and IFRS | |||||||||||
WATM(1) | Currency | Average interest rate (% p.a.) | Parent company | Consolidated | ||||||||
12.31.12 | 12.31.12 | 12.31.11 | ||||||||||
Guarantee deposit | 2.00 | US$ | 0.22% | - | 9,137 | - | ||||||
National treasury certificates | 7.27 | R$ | 19.56% | 83,877 | 83,877 | 70,020 | ||||||
83,877 | 93,014 | 70,020 | ||||||||||
(1) Weighted average maturity term (in year) |
The deposit above mentioned guarantees a financial debt of the subsidiary Quickfood with Rabobank. The national treasure certificates classified as held to maturity are pledged as collateral for the loan obtained through the Special Program Asset Restructuring (“PESA”), see note 19 of these financial statements. |
16. INVESTMENTS | ||||||||
16.1. Investments breakdown | ||||||||
BR GAAP | BR GAAP and IFRS | |||||||
Parent company | Consolidated | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
Investment in associates | 2,713,155 | 5,922,132 | 34,711 | 19,505 | ||||
Fair value of assets acquired and liabilities assumed | - | 2,486,827 | - | - | ||||
Goodwill based on expectation of future profitability | - | 1,293,818 | - | - | ||||
Preliminary goodwill from business combination(1) | 457,568 | 26,165 | - | - | ||||
Advance for future capital increase | 100 | 429,812 | - | - | ||||
Other investments | 880 | 834 | 1,947 | 894 | ||||
3,171,703 | 10,159,588 | 36,658 | 20,399 | |||||
(1) Business combination with Quickfood (note 6.1) |
16.2. Summarized financial information of subsidiaries and affiliates
Heloísa Ind. Com. Produtos Lácteos Ltda(1) | Establec. Levino Zaccardi | BRF GmbH | Quickfood S.A. | Sadia Gmbh | Sadia International Ltd. | Sadia Alimentos S.A. | Sadia Overseas S.A. | |||||||
12.31.12 | 12.31.12 | 12.31.12 | 12.31.12 | 12.31.12 | 12.31.12 | 12.31.12 | 12.31.12 | |||||||
- | 5,953 | 184,901 | 145,221 | 741,488 | 6,737 | 36,776 | 2 | |||||||
- | 2,199 | 1,162,152 | 86,207 | 221,394 | 142,261 | 236,615 | 512,537 | |||||||
- | (1,451) | (717) | (122,999) | (282) | (1,197) | (115,892) | (3,512) | |||||||
- | (6,131) | - | (40,492) | (121,858) | - | (28,058) | (510,875) | |||||||
- | (570) | (1,346,336) | (67,937) | (840,742) | (147,801) | (129,441) | 1,848 | |||||||
63,917 | 8,950 | 739 | 391,875 | 739 | - | 38,735 | - | |||||||
(3,934) | (33) | (85,473) | (5) | 83,884 | 2,613 | 1,641 | (29) | |||||||
12.31.11 | 12.31.11 | 12.31.11 | 12.31.11 | 12.31.11 | 12.31.11 | 12.31.11 | 12.31.11 | |||||||
37,430 | 6,633 | 90,700 | - | - | - | - | - | |||||||
52,708 | 2,916 | 1,237,696 | - | - | - | - | - | |||||||
(8,011) | (6,859) | (2,721) | - | - | - | - | - | |||||||
(2,321) | (173) | (4,387) | - | - | - | - | - | |||||||
(79,806) | (2,517) | (1,321,288) | - | - | - | - | - | |||||||
3,138 | 10,275 | 583 | - | - | - | - | - | |||||||
(1,029) | 1,331 | 324,602 | - | - | - | - | - |
16.3 Rollforward of direct investments – Parent company | ||||
Sadia S.A.(1) | VIP S.A. Empr. e Particip. Imob | |||
a) Capital share as of December 31, 2012 | ||||
% of share | - | 100.00% | ||
Total number of shares and membership interests | - | 14,249,459 | ||
Number of shares and membership interest held | - | 14,249,459 | ||
b) Subsidiaries' information as of December 31, 2012 | ||||
Capital stock | - | 40,061 | ||
Shareholders' equity | - | 145,043 | ||
Preliminary goodwill from business combination | - | - | ||
Income (loss) for the period | 1,039,680 | 11,859 | ||
c) Balance of investments as of December 31, 2012 | ||||
Balance of the investment in the beginning of the year | 8,634,918 | 87,221 | ||
Equity pick up | 1,039,680 | 7,766 | ||
Unrealized profit in inventory | - | - | ||
Goodwill in the acquisition of non-controlling entities | (33,851) | - | ||
Exchange rate variation on goodwillin the acquisiton of non-controlling entities | - | - | ||
Goodwill | - | - | ||
Exchange rate variation on foreign investments | - | - | ||
Other comprehensive income | (51,210) | 2 | ||
Advance for future capital increase | - | - | ||
Dividends and interests on shareholders' equity | - | - | ||
Write-off plants from the execution of TCD(2) | (252,850) | - | ||
Net assets acquired | - | - | ||
Business combination | (9,336,687) | 50,054 | ||
Total | - | 145,043 |
BRF GmbH | ||
a) Capital share as of December 31, 2012 | ||
% of share | 100.00% | |
Total number of shares and membership interests | 1 | |
Number of shares and membership interest held | 1 | |
b) Subsidiaries' information as of December 31, 2012 | ||
Capital stock | 4,858 | |
Shareholders' equity | 1,346,336 | |
Preliminary goodwill from business combination | - | |
Income (loss) for the period | (85,473) | |
c) Balance of investments as of December 31, 2012 | ||
Balance of the investment in the beginning of the year | 1,308,304 | |
Equity pick up | (85,473) | |
Unrealized profit in inventory | - | |
Goodwill in the acquisition of non-controlling entities | - | |
Exchange rate variation on goodwillin the acquisiton of non-controlling entities | (1,280) | |
Goodwill | - | |
Exchange rate variation on foreign investments | 121,776 | |
Other comprehensive income | 3,009 | |
Advance for future capital increase | - | |
Dividends and interests on shareholders' equity | - | |
Write-off plants from the execution of TCD(2) | - | |
Net assets acquired | - | |
Business combination | - | |
Total | 1,346,336 | |
(1) Merger of wholly-owned subsidiaries on December 31, 2012. | ||
(2) The amount is composed by the attributable goodwill to the Sadia’s assets, trademarks R$83,000, fair value of property, plant and equipament R$102,793, goodwill based on expectation of future profitability R$71,731 and fair value of guarantees R$4,674 |
Avipal Centro Oeste S.A. | PSA Labor. Veter. Ltda | Avipal Construtora S.A. | Perdigão Trading S.A. | UP! Alimentos Ltda | PDF Participações Ltda | Heloísa Ind. Com.Produtos Lácteos Ltda.(1) | Establec. Levino Zaccardi | |||||||
100.00% | 88.00% | 100.00% | 100.00% | 50.00% | 1.00% | - | 90.00% | |||||||
6,963,854 | 5,463,850 | 445,362 | 100,000 | 1,000 | 1,000 | - | 100 | |||||||
6,963,854 | 4,808,188 | 445,362 | 100,000 | 500 | 10 | - | 90 | |||||||
5,972 | 5,564 | 445 | 100 | 1 | 1 | - | 41 | |||||||
85 | 8,405 | 116 | 1,115 | 44,574 | 1 | - | 570 | |||||||
- | - | - | - | - | - | - | - | |||||||
(180) | (3,028) | 62 | (873) | 44,573 | - | (3,934) | (33) | |||||||
265 | 10,072 | 54 | 1,988 | 8,988 | - | 105,973 | 973 | |||||||
(180) | (2,665) | 62 | (873) | 22,287 | - | (3,934) | (30) | |||||||
- | - | - | - | - | - | - | (34) | |||||||
- | - | - | - | - | - | - | - | |||||||
- | - | - | - | - | - | - | - | |||||||
- | - | - | - | - | - | - | - | |||||||
- | - | - | - | - | - | - | (547) | |||||||
- | - | - | - | - | - | - | 20 | |||||||
- | - | - | - | - | - | 23,000 | - | |||||||
- | - | - | - | (8,988) | - | - | - | |||||||
- | - | - | - | - | - | - | - | |||||||
- | - | - | - | - | - | - | - | |||||||
- | - | - | - | - | - | (125,039) | - | |||||||
85 | 7,407 | 116 | 1,115 | 22,287 | - | - | 382 | |||||||
Total | ||||||||||||||
Quickfood S.A. | Sadia Gmbh | Sadia International Ltd. | Sadia Alimentos S.A | K&S Alimentos S.A. | Sadia Overseas S.A. | 12.31.12 | 12.31.11 | |||||||
90.05% | 100.00% | 100.00% | 100.00% | 49.00% | 100.00% | |||||||||
36,469,606 | 35,000 | 900 | 33,717,308 | 27,664,086 | 50,000 | |||||||||
32,841,224 | 35,000 | 900 | 33,717,308 | 13,555,402 | 50,000 | |||||||||
16,291 | 94 | 1,839 | 142,661 | 27,664 | 2 | |||||||||
67,937 | 840,742 | 147,801 | 129,441 | 23,104 | (1,848) | |||||||||
457,568 | - | - | - | - | - | |||||||||
(5) | 83,884 | 2,613 | 1,641 | 1,640 | (29) | |||||||||
- | - | - | - | - | - | 10,158,756 | 8,673,372 | |||||||
(5) | - | - | - | - | - | 976,635 | 1,198,522 | |||||||
- | - | - | - | - | - | (34) | (368) | |||||||
- | - | - | - | - | - | (33,851) | (12,224) | |||||||
- | - | - | - | - | - | (1,280) | 292 | |||||||
457,568 | - | - | - | - | - | 457,568 | 26,167 | |||||||
(31) | - | - | - | - | - | 121,198 | 97,945 | |||||||
(2,638) | - | - | - | - | - | (50,817) | (62,995) | |||||||
- | - | - | - | - | - | 23,000 | 329,812 | |||||||
- | - | - | - | - | - | (8,988) | (120,602) | |||||||
- | - | - | - | - | - | (252,850) | - | |||||||
63,852 | - | - | - | - | - | 63,852 | 28,835 | |||||||
- | 840,742 | 147,801 | 129,441 | 11,322 | - | (8,282,366) | - | |||||||
518,746 | 840,742 | 147,801 | 129,441 | 11,322 | - | 3,170,823 | 10,158,756 |
The gains resulting from exchange rate variation on the investments in foreign subsidiaries, whose functional currency is Brazilian Reais, totaling R$183,576 on December 31, 2012 (R$211,846 as of December 31, 2011), are recognized as financial income or expenses in the statement of income of the year. The exchange rate variation resulting from the investment, whose functional currency is not Brazilian Reais, was recorded as equity pickup adjustments, in the subgroup of other comprehensive income. On December 31, 2012, the subsidiaries do not have any significant restriction to transfer dividends or repay their loans or advances to the parent company. |
Weighted average depreciation rate (% p.a.) | 12.31.11 | Additions | ||||
Cost | ||||||
Land | 151,896 | 853 | ||||
Buildings and improvements | 1,820,908 | 217 | ||||
Machinery and equipment | 2,507,100 | 18,745 | ||||
Facilities | 320,757 | - | ||||
Furniture | 51,629 | 949 | ||||
Vehicles and aircrafts | 48,247 | 266 | ||||
Others | 114,199 | - | ||||
Construction in progress | 231,222 | 763,436 | ||||
Advances to suppliers | 10,670 | 92,411 | ||||
5,256,628 | 876,877 | |||||
Depreciation | ||||||
Buildings and improvements | 3.45 | (518,985) | (51,729) | |||
Machinery and equipment | 5.99 | (996,119) | (138,330) | |||
Facilities | 3.57 | (92,596) | (14,584) | |||
Furniture | 6.25 | (20,687) | (2,631) | |||
Vehicles and aircrafts | 14.29 | (11,839) | (9,344) | |||
Others | 2.66 | (29,242) | (17,344) | |||
(1,669,468) | (233,962) | |||||
Provision for losses(2) | (24,433) | (8,815) | ||||
3,562,727 | 634,100 | |||||
(1) Net transfer to intangible assets (note 18). (2) Refers mainly to the provision for losses on assets due to a fire in Nova Mutum plant occurred in March 2011. The effective loss was lower than amount previously estimated. (3) Merger of wholly-owned subsidiaries Sadia and Heloísa on December 31, 2012. | ||||||
16.4 Summary financial information in joint venture and affiliates
Affiliate | Joint venture | |||||||||
UP! | K&S | Rising Star | ||||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | 12.31.12 | ||||||
Current assets | 32,395 | 12,941 | 11,304 | 7,712 | 68,619 | |||||
Non-current assets | 34 | 21 | 8,030 | 8,388 | 1,354 | |||||
Current liabilities | (10,142) | (3,974) | (7,523) | (5,204) | (68,750) | |||||
Non-current liabilities | - | - | (489) | (379) | (121) | |||||
22,287 | 8,988 | 11,322 | 10,517 | 1,102 | ||||||
UP! | K&S | Rising Star | ||||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | 12.31.12 | ||||||
Net revenues | 74,701 | 53,676 | 34,906 | 34,062 | 296,626 | |||||
Operational expenses | (17,782) | (14,182) | (9,163) | (10,715) | (2,127) | |||||
Net income (loss) | 22,286 | 8,988 | 803 | (251) | (651) | |||||
% Participation | 50% | - | 49% | 50% |
In April 2012, occurred the initial paid-in capital of Rising Star in the amount of R$1,300. There were no additional commitments by the companies for capital increases in joint ventures and affiliates. |
17. PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment rollforward is set forth below:
BR GAAP | ||||||||||||||
Parent company | ||||||||||||||
Merger of company | Write-off | Write-off TCD | Reversals | Transfers | Transfers to held for sale | Transfers from held for sale | 12.31.12 | |||||||
474,134 | (5,116) | (7,364) | - | 3,528 | (2,004) | - | 615,927 | |||||||
3,019,552 | (40,957) | (137,410) | - | 168,455 | (20,364) | - | 4,810,401 | |||||||
3,073,609 | (89,534) | (103,562) | - | 350,926 | (13,205) | 34 | 5,744,113 | |||||||
1,043,766 | (2,832) | - | - | 56,305 | (561) | - | 1,417,435 | |||||||
27,640 | (2,828) | (3,697) | - | 8,535 | (251) | - | 81,977 | |||||||
56,609 | (5,797) | (842) | - | 53,222 | (804) | 70 | 150,971 | |||||||
85,448 | (4,505) | (1,099) | - | 17,542 | - | - | 211,585 | |||||||
475,773 | (3) | (9,759) | - | (622,026) | - | - | 838,643 | |||||||
25,397 | - | - | - | (78,902) | - | - | 49,576 | |||||||
8,281,928 | (151,572) | (263,733) | - | (42,415) | (37,189) | 104 | 13,920,628 | |||||||
(675,987) | 15,566 | 44,729 | - | (12,916) | 15,531 | - | (1,183,791) | |||||||
(964,227) | 51,092 | 53,947 | - | 10,507 | 10,556 | - | (1,972,574) | |||||||
(262,865) | 1,314 | - | - | 2,144 | 487 | - | (366,100) | |||||||
(15,748) | 1,550 | 1,439 | - | 1,028 | 236 | - | (34,813) | |||||||
(24,490) | 2,761 | 535 | - | 1,229 | 612 | - | (40,536) | |||||||
(17,583) | 1,140 | 40 | - | - | - | - | (62,989) | |||||||
(1,960,900) | 73,423 | 100,690 | - | 1,992 | 27,422 | - | (3,660,803) | |||||||
(3,304) | 2,100 | - | 25,203 | - | - | - | (9,249) | |||||||
6,317,724(3) | (76,049) | (163,043) | 25,203 | (40,423)(1) | (9,767) | 104 | 10,250,576 |
Weighted average depreciation rate (% p.a.) | 12.31.11 | Additions | Business combination | |||||
Cost | ||||||||
Land | 634,667 | 853 | 27,343 | |||||
Buildings and improvements | 4,980,559 | 13,234 | 63,536 | |||||
Machinery and equipment | 5,603,340 | 74,602 | 112,011 | |||||
Facilities | 1,315,047 | 433 | 6,947 | |||||
Furniture | 87,472 | 2,959 | 956 | |||||
Vehicles and aircrafts | 78,328 | 1,186 | 212 | |||||
Others | 191,337 | 1,687 | 9,381 | |||||
Construction in progress | 620,209 | 1,561,816 | 74 | |||||
Advances to suppliers | 32,878 | 227,652 | 266 | |||||
13,543,837 | 1,884,422 | 220,726 | ||||||
Depreciation | ||||||||
Buildings and improvements | 3.23 | (1,168,298) | (138,312) | - | ||||
Machinery and equipment | 5.87 | (2,077,472) | (251,947) | - | ||||
Facilities | 3.57 | (376,121) | (46,494) | - | ||||
Furniture | 6.25 | (40,713) | (8,442) | - | ||||
Vehicles and aircrafts | 14.29 | (16,856) | (17,546) | - | ||||
Others | 2.87 | (31,568) | (25,555) | - | ||||
(3,711,028) | (488,296) | - | ||||||
Provision for losses(2) | (34,439) | (6,826) | - | |||||
9,798,370 | 1,389,300 | 220,726 | ||||||
(1) Net transfer to intangible assets (note 18). (2) Refers mainly to the provision for losses on assets due to a fire in Nova Mutum plant occurred in March 2011. The effective loss was lower than amount previously estimated. (3) Refers to the write-off due to the execution of TCD. |
The acquisitions during the year ended December 31, 2012 are substantially represented by construction in progress in the total amount of R$1,526,672 and advances to suppliers of R$227,652 which comprise mainly: |
BR GAAP and IFRS | ||
Consolidated | ||
Description | 12.31.12 | |
Expansion of productive capacity of industrial units(1) | 797,637 | |
Improvements in productive plants and poultry farm in Rio Verde (GO) | 95,356 | |
Car fleet renewal | 85,845 | |
Improvement of plants - TCD(2) | 76,028 | |
Transformation of turkey´s line into chicken's line in Carambeí (PR) | 55,223 | |
Construction of a new distribution center in Duque de Caxias (RJ) | 53,503 | |
Construction of a new sausage factory in Lucas do Rio Verde (MT) | 48,613 | |
Construction of a new technology center in Jundiaí (SP) | 40,598 | |
Poultry farm leasing in Campo Florido and Monte Alegre de Minas (MG) | 22,616 | |
Construction of employees’s house, being 500 units in Lucas do Rio Verde (MT), 400 units in Nova Mutum (MT) and 280 units in Mineiros (GO) | 22,315 | |
Expansion of the new line of pizza in Ponta Grossa (PR) | 20,393 | |
Improvement in “escondidinho” line and cooked pasta in Ponta Grossa (PR) | 12,104 | |
Construction of new head office in Curitiba (PR) | 7,706 | |
Automate palletizing products in Rio Verde (GO) | 7,047 | |
Construction of warehouse for breeding in Uberlândia (MG) | 5,694 | |
(1) Expansion of productive capacity of the plants of Mineiros, Rio Verde, Nova Mutum, Serafina Correa, Dourados, Itumbiara, Jataí and Marau. (2) Improvements in the plants of the Carambeí, Salto Veloso, Várzea Grande and Duque de Caxias. |
The disposals are mainly related to the write-off of assets due tothe execution of TCD in the amount of R$612,393, obsolete itemsin the total amount of R$20,114 and assets that were damagedin a fire amounting to R$2,290, recorded within other operatingresults. Also included the write-off of assets in Carambeí plant inthe amount of R$ 39,743. | The Company has fully depreciated items still in operation. These items are set forth below: |
BR GAAP and IFRS | ||||||||||||||
Consolidated | ||||||||||||||
Write-off | Write-off TCD | Reversals | Transfers | Transfers to held for sale | Transfers from held for sale | Exchange rate variation | 12.31.12 | |||||||
(5,177) | (17,901) | - | (18,943) | (2,004) | - | (98) | 618,740 | |||||||
(64,638) | (416,831) | - | 424,060 | (20,364) | - | (12,823) | 4,966,733 | |||||||
(132,161) | (374,270) | - | 744,553 | (17,860) | 38 | 23,586 | 6,033,839 | |||||||
(9,003) | (15,649) | - | 135,960 | (569) | - | 13,226 | 1,446,392 | |||||||
(4,410) | (7,223) | - | 13,684 | (251) | - | 2,237 | 95,424 | |||||||
(6,921) | (1,200) | - | 88,626 | (822) | 70 | 1,400 | 160,879 | |||||||
(5,221) | (3,957) | - | 33,392 | - | - | (3,407) | 223,212 | |||||||
(6,514) | (25,774) | - | (1,268,348) | - | - | (3,606) | 877,857 | |||||||
- | - | - | (200,852) | - | - | 534 | 60,478 | |||||||
(234,045) | (862,805) | - | (47,868) | (41,870) | 108 | 21,049 | 14,483,554 | |||||||
32,955 | 103,767 | - | (30,030) | 15,531 | - | 4,480 | (1,179,907) | |||||||
72,349 | 142,074 | - | 16,881 | 14,540 | - | (9,398) | (2,092,973) | |||||||
6,791 | 115 | - | 27,242 | 496 | - | (1,263) | (389,234) | |||||||
3,732 | 3,495 | - | 768 | 236 | - | (1,263) | (42,187) | |||||||
3,554 | 879 | - | (13,830) | 630 | - | (886) | (44,055) | |||||||
1,589 | 82 | - | 955 | - | - | (752) | (55,249) | |||||||
120,970 | 250,412 | - | 1,986 | 31,433 | - | (9,082) | (3,803,605) | |||||||
2,100 | - | 29,916 | - | - | - | - | (9,249) | |||||||
(110,975) | (612,393)(3) | 29,916 | (45,882)(1) | (10,437) | 108 | 11,967 | 10,670,700 |
BR GAAP | BR GAAP and IFRS | |||||||
Parent company | Consolidated | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
Cost | ||||||||
Buildings and improvements | 107,970 | 16,322 | 118,008 | 116,700 | ||||
Machinery and equipment | 525,052 | 294,400 | 555,336 | 613,800 | ||||
Facilities | 70,854 | 8,430 | 70,854 | 83,107 | ||||
Furniture | 12,265 | 5,455 | 15,959 | 16,656 | ||||
Vehicles and aircrafts | 3,450 | 1,171 | 3,450 | 3,173 | ||||
Others | 19,127 | 1,283 | 19,127 | 1,283 | ||||
738,718 | 327,061 | 782,734 | 834,719 |
During the twelve-month period ended December 31, 2012, theCompany capitalized interests in the amount of R$52,716 (R$19,937as of December 31, 2011). The interest rate utilized to determinethe capitalized amount was 8.15% p.a. | On December 31, 2012, the Company had no commitments assumedrelated to acquisition and/or construction of properties, exceptthose disclosed in note 19, item 19.8. |
BR GAAP | BR GAAP and IFRS | |||||||||
Parent company | Consolidated | |||||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||||
Type of collateral | Book value of the collateral | Book value of the collateral | Book value of the collateral | Book value of the collateral | ||||||
Land | Financial/Labor/Tax/Civil | 355,931 | 61,090 | 355,931 | 160,432 | |||||
Buildings and improvements | Financial/Labor/Tax/Civil | 1,735,376 | 946,898 | 1,735,376 | 1,966,168 | |||||
Machinery and equipment | Financial/Labor/Tax | 2,104,092 | 1,165,489 | 2,104,092 | 2,304,484 | |||||
Facilities | Financial/Labor/Tax | 638,450 | 264,105 | 638,450 | 687,453 | |||||
Furniture | Financial/Labor/Tax/Civil | 18,579 | 15,087 | 18,579 | 299,269 | |||||
Vehicles and aircrafts | Financial/Tax | 1,636 | 1,512 | 1,636 | 19,403 | |||||
Others | Financial/Labor/Tax/Civil | 73,640 | 260,034 | 73,640 | 307,456 | |||||
4,927,704 | 2,714,215 | 4,927,704 | 5,744,665 | |||||||
The Company is not allowed to assign these assets as security for other transactions or to sell them. | ||||||||||
18. INTANGIBLE | ||||||||||
Intangible assets are comprised of the following items: | ||||||||||
BR GAAP | ||||||||||
Parent company | ||||||||||
Weighted average amortization rate (% p.a.) | Cost | Accumulated amortization | 12.31.12 | 12.31.11 | ||||||
Goodwill | - | 2,767,985 | - | 2,767,985 | 1,520,488 | |||||
Outgrowers fidelization | 12.50 | 8,204 | (1,335) | 6,869 | 3,556 | |||||
Trademarks | - | 1,173,000 | - | 1,173,000 | - | |||||
Patents | 20.00 | 3,722 | (304) | 3,418 | 2,836 | |||||
Supplier relationship | 42.00 | 135,000 | (132,248) | 2,752 | - | |||||
Software | 20.00 | 323,157 | (180,517) | 142,640 | 105,023 | |||||
4,411,068 | (314,404) | 4,096,664 | 1,631,903 | |||||||
The variation in the amount occurred mainly due to merger of the wholly-owned subsidiary Sadia, being these values previously recorded in investments | ||||||||||
BR GAAP and IFRS | ||||||||||
Consolidated | ||||||||||
Weighted average amortization rate (% p.a.) | Cost | Accumulated amortization | 12.31.12 | 12.31.11 | ||||||
Non-compete agreement | 2.44 | 442 | (48) | 394 | - | |||||
Goodwill | - | 3,083,263 | - | 3,083,263 | 2,973,815 | |||||
Exclusivity agreement | 100.00 | 603 | (151) | 452 | - | |||||
Outgrowers fidelization | 12.50 | 18,791 | (2,149) | 16,642 | 3,556 | |||||
Trademarks | - | 1,305,937 | - | 1,305,937 | 1,256,000 | |||||
Patents | 16.92 | 5,107 | (1,212) | 3,895 | 4,894 | |||||
Customer relationship | 7.71 | 182,496 | (693) | 181,803 | - | |||||
Supplier relationship | 42.00 | 136,991 | (132,248) | 4,743 | 9,598 | |||||
Software | 20.00 | 336,956 | (182,424) | 154,532 | 138,236 | |||||
5,070,586 | (318,925) | 4,751,661 | 4,386,099 |
The increase is mainly related to the acquisition of Quickfood, as disclosed in note 6.1. | The intangible assets rollforward is set forth below: |
BR GAAP | ||||||||||||
Parent company | ||||||||||||
12.31.11 | Additions | Merger of companies | Write-offs | Transfers(1) | 12.31.12 | |||||||
Cost: | ||||||||||||
Goodwill: | 1,520,488 | - | 1,247,497 | - | - | 2,767,985 | ||||||
Ava | 49,368 | - | - | - | - | 49,368 | ||||||
Batavia | 133,163 | - | - | - | - | 133,163 | ||||||
Cotochés | 39,590 | - | - | - | - | 39,590 | ||||||
Eleva Alimentos | 1,273,324 | - | - | - | - | 1,273,324 | ||||||
Heloísa | - | - | 33,461 | - | - | 33,461 | ||||||
Incubatório Paraíso | 656 | - | - | - | - | 656 | ||||||
Paraiso Agroindustrial | 16,751 | - | - | - | - | 16,751 | ||||||
Perdigão Mato Grosso | 7,636 | - | - | - | - | 7,636 | ||||||
Sadia | - | - | 1,214,036 | - | - | 1,214,036 | ||||||
Outgrowers fidelization | 3,922 | 4,282 | - | - | - | 8,204 | ||||||
Trademarks | - | - | 1,173,000 | - | - | 1,173,000 | ||||||
Patents | 3,057 | - | 1,300 | (635) | - | 3,722 | ||||||
Supplier relationship | - | - | 135,000 | - | - | 135,000 | ||||||
Software | 126,118 | - | 160,277 | (5,653) | 42,415 | 323,157 | ||||||
1,653,585 | 4,282 | 2,717,074 | (6,288) | 42,415 | 4,411,068 | |||||||
Amortization: | ||||||||||||
Outgrowers fidelization | (366) | (969) | - | - | - | (1,335) | ||||||
Patents | (221) | (160) | - | 77 | - | (304) | ||||||
Supplier relationship | - | - | (132,248) | - | - | (132,248) | ||||||
Software | (21,095) | (27,449) | (135,099) | 5,118 | (1,992) | (180,517) | ||||||
(21,682) | (28,578) | (267,347) | 5,195 | (1,992) | (314,404) | |||||||
1,631,903 | (24,296) | 2,449,727 | (1,093) | 40,423 | 4,096,664 | |||||||
(1) Net transfer from property, plant and equipment (note 17). |
BR GAAP and IFRS | ||||||||||||||||
Consolidated | ||||||||||||||||
12.31.11 | Additions | Write-offs | Write-off TCD | Business combination(1) | Transfers | Exchange rate variation | 12.31.12 | |||||||||
Cost: | ||||||||||||||||
Goodwill: | 2,973,815 | - | - | (83,832) | 194,754 | - | (1,474) | 3,083,263 | ||||||||
Ava | 49,368 | - | - | - | - | - | - | 49,368 | ||||||||
Avex | 63,094 | - | - | - | (22,285) | - | (2,820) | 37,989 | ||||||||
Batavia | 133,163 | - | - | - | - | - | - | 133,163 | ||||||||
Cotochés | 39,590 | - | - | - | - | - | - | 39,590 | ||||||||
Dánica | 50,226 | - | - | - | (39,717) | - | (364) | 10,145 | ||||||||
Eleva Alimentos | 1,273,324 | - | - | - | - | - | - | 1,273,324 | ||||||||
Heloísa | 26,165 | - | - | - | 7,296 | - | - | 33,461 | ||||||||
Incubatório Paraiso | 656 | - | - | - | - | - | - | 656 | ||||||||
Paraíso | ||||||||||||||||
Agroindustrial | 16,751 | - | - | - | - | - | - | 16,751 | ||||||||
Perdigão Mato | ||||||||||||||||
Grosso | 7,636 | - | - | - | - | - | - | 7,636 | ||||||||
Plusfood | 15,974 | - | - | - | - | - | 1,710 | 17,684 | ||||||||
Quickfood | - | - | - | - | 249,460 | - | - | 249,460 | ||||||||
Sadia | 1,293,818 | - | - | (79,782) | - | - | - | 1,214,036 | ||||||||
Sino dos Alpes | 4,050 | - | - | (4,050) | - | - | - | - | ||||||||
Non-compete | ||||||||||||||||
agreement | - | - | - | - | 454 | - | (12) | 442 | ||||||||
Exclusivity agreement | - | - | - | - | 608 | - | (5) | 603 | ||||||||
Outgrowers fidelization | 3,922 | 4,282 | - | - | 11,012 | - | (425) | 18,791 | ||||||||
Trademarks | 1,256,000 | - | - | (83,000) | 133,111 | - | (174) | 1,305,937 | ||||||||
Patents | 5,687 | 121 | (635) | - | - | (121) | 55 | 5,107 | ||||||||
Customer relationship | - | - | - | - | 183,146 | - | (650) | 182,496 | ||||||||
Supplier relationship | 135,000 | - | - | - | 1,991 | - | - | 136,991 | ||||||||
Software | 289,311 | 10,238 | (10,914) | - | - | 47,989 | 332 | 336,956 | ||||||||
4,663,735 | 14,641 | (11,549) | (166,832) | 525,076 | 47,868 | (2,353) | 5,070,586 | |||||||||
Amortization: | ||||||||||||||||
Non-compete | ||||||||||||||||
agreement | - | (49) | - | - | - | - | 1 | (48) | ||||||||
Exclusivity agreement | - | (149) | - | - | - | - | (2) | (151) | ||||||||
Outgrowers | ||||||||||||||||
fidelization | (366) | (1,808) | - | - | - | - | 25 | (2,149) | ||||||||
Patents | (793) | (482) | 77 | - | - | - | (14) | (1,212) | ||||||||
Customer relationship | - | (709) | - | - | - | - | 16 | (693) | ||||||||
Supplier relationship | (125,402) | (6,846) | - | - | - | - | - | (132,248) | ||||||||
Software | (151,075) | (41,083) | 11,354 | - | - | (1,986) | 366 | (182,424) | ||||||||
(277,636) | (51,126) | 11,431 | - | - | (1,986) | 392 | (318,925) | |||||||||
4,386,099 | (36,485) | (118) | (166,832) | 525,076 | 45,882 | (1,961) | 4,751,661 | |||||||||
(1) See note 6. |
Amortizations of outgrowers loyalty and suppliers relationshipare recognized as a cost of sales in the statement of income, whilesoftware amortization is recorded according to its use, where thealternatives are cost of sales, administrative or sales expenses. Trademarks in intangible assets derive from the businesscombination with Sadia, Quickfood and Dánica group and areconsidered assets with indefinite useful life as they are expected tocontribute toward the Company’s cash flows indefinitely. The goodwill presented above is based on expected futureprofitability supported by valuation reports, after allocation ofidentified assets in use. The value of goodwill and the value of intangible assets withindefinite useful life (trademarks and patents) allocated by cash-generating unit, are presented in note 5. The Company performed the impairment tests of assets based | on the fair value, that was determined by a discounted cash flowmodel, in accordance with the level of goodwill and intangibleallocations to the group of cash generating units. Management adopted the WACC (11.2% p.a.) as the discount ratefor the development of discounted cash flows and also adopted theassumptions shown in the table below: | |
2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020-2022 | |||||||||
PIB Brazil-BACEN | 4.40% | 4.60% | 3.80% | 4.10% | 4.00% | 4.30% | 3.60% | 3.67% | ||||||||
PIB Worldwide - FMI | 4.00% | 4.40% | 4.50% | 4.30% | 4.20% | 4.20% | 4.20% | 4.13% | ||||||||
IPCA | 5.80% | 5.00% | 4.70% | 4.50% | 4.10% | 4.00% | 3.80% | 3.57% | ||||||||
CPI-FMI | 2.40% | 2.40% | 2.30% | 2.20% | 2.20% | 2.20% | 2.20% | 2.20% | ||||||||
SELIC | 7.60% | 8.90% | 8.30% | 7.80% | 7.50% | 7.30% | 7.00% | 6.53% |
The rates presented above do not consider any tax effect (pre-tax). Based on Management analyses performed during the fourthquarter of 2012, no adjustments for reduction in the balances ofthe assets to recoverable value were identified. | In addition to the above mentioned recovery analysis,Management prepared a sensitivity analysis considering thevariations in the EBITDA margin and in the nominal WACC aspresented below: |
Variations | ||||||||||
Apreciation (devaluation) | 3.0% | 1.5% | 0.0% | -1.5% | -3.0% | |||||
WACC | 14.2% | 12.7% | 11.2% | 9.7% | 8.2% | |||||
EBITDA margin | 16.5% | 15.0% | 13.5% | 12.0% | 10.5% |
In none of the scenarios above considered, the Company determined the need to recognized an
impairment provision to the intangible assets with indefinite useful life.
19. LOANS AND FINANCING | ||
Charges (% p.a.) | ||
Local currency | ||
BNDES, FINEM, development bank credit lines, other secured debts and financial lease | FIXED RATE / TJLP + 4.13% (TJLP + 4.52% on 12.31.11) | |
Export credit facility | 102,21% CDI / TJLP + 3.80% (TJLP + 4.10% on 12.31.11) | |
Working capital | 5.66% (6.74% on 12.31.11) | |
Foreign currency | FIXED RATE / IGPM + 1.22% (IGPM + 1.24% on 12.31.11) | |
PESA | IGPM + 4.90% | |
Foreign currency | ||
BNDES, FINEM, development bank credit lines, other secured debts and financial lease | UMBNDES + 2.22% (UMBNDES + 2.32% on 12.31.11) e.r. (US$ and other currencies) | |
Export credit facility | LIBOR / FIXED RATE / CDI + 2.20% (LIBOR / CDI + 2.73% on 12.31.11) e.r. (US$ and other currencies) | |
Export credit facility | 0.62% + e.r. US$ | |
Bonds | 5.88% + e.r. US$ | |
(1) Weighted average maturity term (years). |
The increase in the amount of the parent company arises from the merger of the wholly-owned subsidiaries Sadia and Heloisa, and the issuance of senior notes by the parent company as note 19.5. |
BR GAAP | ||||||||||
Parent company | ||||||||||
Weighted average interest rate (% p.a.) | WAMT(1) | Current | Non-current | Balance 12.31.12 | Balance 12.31.11 | |||||
7.28% (7.81% on 12.31.11) | 2.7 | 418,169 | 972,448 | 1,390,617 | 669,820 | |||||
7.91% (10.10% on 12.31.11) | 1.9 | 15,208 | 1,032,920 | 1,048,128 | 634,907 | |||||
5.66% (6.74% on 12.31.11) | 0.7 | 1,243,342 | 1,494 | 1,244,836 | 457,105 | |||||
1.89% (1.74% on 12.31.11) | 11.2 | 2 | 12,399 | 12,401 | 12,459 | |||||
12.46% | 7.3 | 2,891 | 191,047 | 193,938 | - | |||||
1,679,612 | 2,210,308 | 3,889,920 | 1,774,291 | |||||||
5.78% (5.91% on 12.31.11) | ||||||||||
e.r. (US$ and other currencies) | 1.4 | 49,442 | 56,457 | 105,899 | 50,594 | |||||
3.35% 3.20% on 12.31.11) | ||||||||||
e.r. (US$ and other currencies) | 3.5 | 271,906 | 803,976 | 1,075,882 | 1,218,236 | |||||
0.62% + v.c. US$ | 0.1 | 102,212 | - | 102,212 | - | |||||
5.88% + v.c. US$ | 9.7 | 7,835 | 1,523,201 | 1,531,036 | - | |||||
431,395 | 2,383,634 | 2,815,029 | 1,268,830 | |||||||
2,111,007 | 4,593,942 | 6,704,949 | 3,043,121 |
Charges (% p.a.) | ||
Local currency | ||
BNDES, FINEM, development bank credit lines, other secured debts and financial lease | FIXED RATE / TJLP + 4.13% (TJLP + 4.65% on 12.31.11) | |
Export credit facility | 102.21% CDI + TJLP + 3.80% (TJLP + 4.23% on 12.31.11) | |
Working capital | 5.66% (6.82% on 12.31.11) | |
Fiscal incentives | FIXED RATE / IGPM + 1.22% (IGPM + 1.20% on 12.31.11) | |
PESA | IGPM + 4.90% (IGPM + 4.93% on 12.31.11) | |
Foreign currency | ||
BNDES, FINEM, development bank credit lines, other secured debts and financial lease | UMBNDES + 2.15% (UMBNDES + 2.35% on 12.31.11) e.r. (US$ and other currencies) | |
Export credit facility | LIBOR / FIXED RATE / CDI + 2.36% (LIBOR / CDI + 2.26% on 12.31.11) e.r. (US$ and other currencies) | |
Advances for foreign exchange rate contracts | 0.62% (1.18% on 12.31.11) e.r. US$ | |
Working capital | 21.25% (8.25% on 12.31.11) e.r. ARS | |
Bonds | 7.20% (7.25% on 12.31.11) e.r. US$ | |
(1) Weighted average maturity term (years). |
The increase in the balance arises from the issuance of senior notesin the amount of US$750,000, as disclosed in note 19.5. 19.1. Working capital | basket, which is composed of the currencies in which BNDES obtainsits resources. The interest impact reflects the daily fluctuation ofthe currencies in the basket. The values of principal and interestare paid in monthly installments, with maturities between 2013and 2019 and are secured by pledge of equipment, facilities andmortgage on properties owned by the Company. |
BR GAAP and IFRS | ||||||||||
Consolidated | ||||||||||
“Weighted average interest rate (% p.a.)” | WAMT(1) | Current | Non-current | Balance 12.31.12 | Balance 12.31.11 | |||||
7.28% (8.42% on 12.31.11) | 2.7 | 418,169 | 972,448 | 1,390,617 | 1,441,355 | |||||
7.91% (10.23% on 12.31.11) | 1.9 | 15,208 | 1,032,920 | 1,048,128 | 737,115 | |||||
5.66% (6.82% on 12.31.11) | 0.7 | 1,243,342 | 1,494 | 1,244,836 | 954,947 | |||||
1.89% (1.08% on 12.31.11) | 11.2 | 2 | 12,399 | 12,401 | 14,900 | |||||
12.46% (9.92% on 12.31.11) | 7.3 | 2,891 | 191,047 | 193,938 | 181,389 | |||||
1,679,612 | 2,210,308 | 3,889,920 | 3,329,706 | |||||||
6.08% (5.93% on 12.31.11) | ||||||||||
e.r. (US$ and other currencies) | 1.4 | 51,312 | 58,100 | 109,412 | 160,038 | |||||
3.28% (2.81% on 12.31.11) | ||||||||||
e.r. (US$ and other currencies) | 3.3 | 445,763 | 1,245,790 | 1,691,553 | 2,506,056 | |||||
0.62% (1.18% on 12.31.11) e.r. US$ | 0.1 | 102,212 | - | 102,212 | 150,143 | |||||
21.25% (8.25% on 12.31.11) e.r. ARS | 0.7 | 103,046 | 14,762 | 117,808 | 3,899 | |||||
7.20% (7.25% on 12.31.11) e.r. US$ | 6.8 | 58,837 | 3,548,579 | 3,607,416 | 1,903,688 | |||||
761,170 | 4,867,231 | 5,628,401 | 4,723,824 | |||||||
2,440,782 | 7,077,539 | 9,518,321 | 8,053,530 |
credit lines are indexed by the LIBOR plus a spread with quarterly,semi-annual or annual payments and are utilized to purchaseimported raw materials and other working capital needs. | Sadia Bonds:In the total value of US$250,000, such bonds areguaranteed by BRF and by Sadia, with an interest rate of 6.88% p.a.and maturing on May 24, 2017. | |||||
19.6. Loans and financing maturity schedule | ||||||
The maturity schedule of the loans and financing balances is as follow: | ||||||
BR GAAP | BR GAAP and IFRS | |||||
Parent company | Consolidated | |||||
12.31.12 | 12.31.12 | |||||
2013 | 2,111,007 | 2,440,782 | ||||
2014 | 890,244 | 1,004,446 | ||||
2015 | 594,355 | 734,644 | ||||
2016 | 424,956 | 424,956 | ||||
2017 onwards | 2,684,387 | 4,913,493 | ||||
6,704,949 | 9,518,321 | |||||
19.7. Guarantees | ||||||||
BR GAAP | BR GAAP and IFRS | |||||||
Parent company | Consolidated | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
Total of loans and financing | 6,704,949 | 3,043,121 | 9,518,321 | 8,053,530 | ||||
Mortgage guarantees | 1,405,735 | 724,589 | 1,405,735 | 1,584,501 | ||||
Related to FINEM-BNDES | 900,226 | 490,835 | 900,226 | 1,134,809 | ||||
Related to FNE-BNB | 361,144 | 108,192 | 361,144 | 324,130 | ||||
Related to tax incentives and other | 144,365 | 125,562 | 144,365 | 125,562 | ||||
Statutory lien on assets acquired with financing | 91,079 | 36,046 | 91,079 | 38,454 | ||||
Related to FINEM-BNDES | 5,209 | 7,168 | 5,209 | 9,489 | ||||
Related to FINAME-BNDES | - | - | - | 87 | ||||
Related to leasing | 85,870 | 28,866 | 85,870 | 28,866 | ||||
Related to tax incentives and other | - | 12 | - | 12 |
The Company is the guarantor of a loan obtained by Instituto Sadiade Sustentabilidade from the BNDES. The loan was obtained withthe purpose of allowing the implementation of biodigesters inthe properties of the outgrowers which take part in the Sadia´sintegration system, targeting the reduction of the emission ofGreenhouse Gases. The value of these guarantees on December 21,2012, totaled R$72,123 (R$79,893 as of December 31, 2011). | BR GAAP | BR GAAP and IFRS | ||||
Parent company | Consolidated | |||||
12.31.12 | 12.31.12 | |||||
2013 | 613,150 | 613,223 | ||||
2014 | 258,040 | 258,040 | ||||
2015 | 234,755 | 234,755 | ||||
2016 | 226,552 | 226,552 | ||||
2017 onwards | 1,023,500 | 1,023,500 | ||||
2,355,997 | 2,356,070 | |||||
The Company entered into agreements denominated “built to suit”where office facilities will be build by third parties. The agreementsterms will be 10 years from the signing date as well as the charge ofrent expenses. If the Company defaults on its obligations, it will besubject to fines and/or acceleration of rent falling due, according tothe term of each contract. | ||||||
BR GAAP and IFRS | ||||||
Parent company and Consolidated | ||||||
12.31.12 | ||||||
2013 | 20,313 | |||||
2014 | 20,313 | |||||
2015 | 20,313 | |||||
2016 | 20,313 | |||||
2017 onwards | 121,876 | |||||
203,128 |
20. ACCOUNTS PAYABLE | ||||||||
BR GAAP | BR GAAP e IFRS | |||||||
Parent company | Consolidated | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
Domestic suppliers | ||||||||
Third parties | 2,890,875 | 1,184,004 | 2,890,879 | 2,335,113 | ||||
Related parties | 10,722 | 30,932 | 10,637 | 5,930 | ||||
2,901,597 | 1,214,936 | 2,901,516 | 2,341,043 | |||||
Foreign suppliers | ||||||||
Third parties | 231,065 | 53,592 | 479,730 | 340,300 | ||||
Related parties | 2,802 | 2,168 | - | - | ||||
233,867 | 55,760 | 479,730 | 340,300 | |||||
3,135,464 | 1,270,696 | 3,381,246 | 2,681,343 |
Accounts payable to suppliers are not subject to interest chargesand are generally settled in average within 43 days. | The information on accounts payable involving related partiesis presented in note 29 and in the consolidated statements referto transactions with the affiliated UP!. |
21. OTHER FINANCIAL ASSETS AND LIABILITIES | ||||||||
BR GAAP | BR GAAP and IFRS | |||||||
Parent company | Consolidated | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
Derivative financial instruments | ||||||||
Cash flow hedge | ||||||||
Assets | ||||||||
Non-deliverable forward (NDF) | 28,489 | 21,045 | 28,489 | 21,045 | ||||
Currency option contracts | - | 267 | - | 267 | ||||
Fixed exchange rate contracts | 2,080 | - | 2,080 | - | ||||
Exchange rate contracts (Swap) | 2,119 | 1,048 | 2,119 | 1,048 | ||||
32,688 | 22,360 | 32,688 | 22,360 | |||||
Liabilities | ||||||||
Non-deliverable forward (NDF) | (66,226) | (107,828) | (66,226) | (107,828) | ||||
Currency option contracts | - | (1,575) | - | (1,575) | ||||
Exchange rate contracts (Swap) | (125,851) | (69,835) | (180,747) | (112,590) | ||||
(192,077) | (179,238) | (246,973) | (221,993) | |||||
Derivatives not designated as hedge accounting | ||||||||
Assets | ||||||||
Non-deliverable forward (NDF) | - | - | 396 | 515 | ||||
Live cattle forward contracts | 57 | 29 | 57 | 29 | ||||
Live cattle option contracts | 59 | 551 | 59 | 551 | ||||
Live cattle future contracts | - | 4 | - | 4 | ||||
116 | 584 | 512 | 1,099 | |||||
Liabilities | ||||||||
Non-deliverable forward (NDF) | - | - | - | (47) | ||||
Live cattle option contracts | (49) | (203) | (49) | (203) | ||||
Exchange rate contracts (Swap) | (5,609) | (48,158) | (5,609) | (48,158) | ||||
Dollar future contracts | (782) | (292) | (782) | (292) | ||||
Live cattle future contracts | (7) | - | (7) | - | ||||
(6,447) | (48,653) | (6,447) | (48,700) | |||||
Current assets | 32,804 | 22,944 | 33,200 | 23,459 | ||||
Current liabilities | (198,524) | (227,891) | (253,420) | (270,693) |
The collateral given in the transactions presented above are disclosed in note 8. | During the year ended December 31, 2012, there was an increasein property, plant and equipment and loans and financing inthe amount of R$110,390 at the parent company and in theconsolidated. | |||||||||
22. LEASES The minimum future payments of non-cancellable operating lease,for each of the following years, are presented below: | The Company controls the leased assets which are presented below: | |||||||||
BR GAAP and IFRS | ||||||||||
Parent company and Consolidated | ||||||||||
Weighted average interest rate (% p.a.)(1) | 12.31.12 | 12.31.11 | ||||||||
Cost | ||||||||||
BR GAAP and IFRS | Machinery and | |||||||||
equipment | 21,098 | 24,999 | ||||||||
Parent company and Consolidated | Software | 22,108 | - | |||||||
12.31.12 | Vehicles | 135,660 | 51,498 | |||||||
2013 | 84,785 | Land | 389 | - | ||||||
2014 | 71,153 | Buildings | 14,999 | - | ||||||
2015 | 48,118 | 194,254 | 76,497 | |||||||
2016 | 34,946 | Accumulated | ||||||||
2017 onwards | 125,571 | depreciation | ||||||||
364,573 | Machinery and | |||||||||
equipment | 38.69 | (9,218) | (15,992) | |||||||
On December 31, 2012 the payments of operating lease agreementsrecognized as expense in the current year amounted to R$104,380(R$95,094 as of December 31, 2011) at the parent company andR$242,568 in the consolidated on December 31, 2012 (R$299,577 asof December 31, 2011). 22.2. Financial lease The Company contracts financial leases for acquisitions mainly of machinery, equipment, vehicles, software and buildings. | Software | 20.00 | (4,492) | - | ||||||
Vehicles | 14.24 | (16,969) | (2,094) | |||||||
Buildings | 11.84 | (154) | - | |||||||
(30,833) | (18,086) | |||||||||
163,421 | 58,411 | |||||||||
(1) The period of depreciation of leased assets corresponds to the lower amount between term of the contract and the life of the asset, as determined by CVM Deliberation 645/10. |
The future minimum payments required are segregated as follows, and were booked as current and non-current liabilities: | From May 2, 2012, this benefit was extended to the executivemanagement of the Company, observing the same conditions ofthe existing plan. | |||||||
BR GAAP and IFRS | ||||||||
Parent company and Consolidated | ||||||||
12.31.12 | ||||||||
Present value of minimum payments | Interest | Minimum future payments | ||||||
2013 | 74,578 | 5,263 | 79,841 | |||||
2014 | 28,862 | 2,750 | 31,612 | |||||
2015 | 7,848 | 1,581 | 9,429 | |||||
2016 | 6,448 | 1,211 | 7,659 | |||||
2017 onwards | 6,492 | 3,912 | 10,404 | |||||
124,228 | 14,717 | 138,945 | ||||||
The contract terms for both modalities, with respect to renewal,adjustment and purchase option, are according to marketpractices. In addition, there are no clauses of contingent paymentsrelating to restrictions on dividends, interest payments onshareholders ‘equity or additional debt funding. On March 31, 2010, the shareholders approved the stock optionplan for officers of the Company and of its subsidiaries, consistingof two instruments: (i) stock option plan, granted annually tothe beneficiary and (ii) additional stock option plan, optional forthe beneficiary, who may adhere with part of their profit-sharingmoney. The basis of the vesting conditions will be the attainmentof effective results and valuation of the Company’s business. |
Date | Quantity | Price of converted share | Share price | |||||||||||
Grant date | Beginning of the year | End of the year | Options granted | Outstanding options | Granting date | Updated IPCA | at 12.31.12 | |||||||
05/03/10 | 05/02/11 | 05/02/15 | 1,540,011 | 863,590 | 23.44 | 27.05 | 41.99 | |||||||
07/01/10 | 06/30/11 | 06/30/15 | 36,900 | 36,900 | 24.75 | 26.60 | 41.99 | |||||||
05/02/11 | 05/01/12 | 05/01/16 | 2,463,525 | 2,186,630 | 30.85 | 33.42 | 41.99 | |||||||
05/02/12 | 05/01/13 | 05/01/17 | 3,708,071 | 3,530,461 | 34.95 | 36.03 | 41.99 | |||||||
7,748,507 | 6,617,581 |
The rollforward of the outstanding granted options for the year ended December 31, 2012, is presented as follows: | The Company presented in shareholders’ equity the fair value ofthe options in the amount of R$45,464 (R$22,430 as of December31, 2011). In the statement of income the amount recognized asexpense was R$23,035 (R$15,844 expense as December 31, 2011). | |||||
BR GAAP and IFRS | ||||||
Consolidated | ||||||
Quantity of outstanding options as of December 31, 2011 | 4,277,946 | |||||
Issued - grant of 2012 | 3,708,071 | |||||
Exercised - grant fo 2012 | (17,610) | |||||
Exercised - grant fo 2011 | (169,887) | |||||
Exercised - grant fo 2010 | (432,610) | |||||
Termination plan - grant of 2007 | (425,600) | |||||
Canceled | ||||||
Grant of 2012 | (160,000) | 12.31.12 | ||||
Grant of 2011 | (85,608) | Expected maturity of the option: | ||||
Grant of 2010 | (15,941) | Exercise in the 1st year | 3.0 years | |||
Grant of 2007 | (61,180) | Exercise in the 2nd year | 3.5 years | |||
Quantity of outstanding options as of | Exercise in the 3rd year | 4.0 years | ||||
December 31, 2012 | 6,617,581 | Risk-free interest rate | 5.19% | |||
The weighted average strike prices of the outstanding options is R$33.94 (thirty three Brazilian Reais and ninety four cents), and the weighted average of the remaining contractual term is 45 months. | Volatility | 34.21% | ||||
Expected dividends over shares | 1.32% | |||||
Expected inflation rate | 5.31% |
23.1. Expected period | 23.4. Expected dividends The percentage of dividends used was obtained based on theaverage payment of dividends per share in relation to the marketvalue of the shares, for the past four years The expected average inflation rate is determined based onestimated IPCA by Central Bank of Brazil, weighted between theclosing date of financial statements and the exercise date of thevested options. 24. SUPPLEMENTARY RETIREMENTPLAN AND OTHER BENEFITS TOEMPLOYEES The Company offers supplementary retirement plans and otherbenefits to their employees. |
BR GAAP and IFRS | ||||||||
Consolidated | ||||||||
12.31.12 | 12.31.11 | |||||||
BFPP | FAF | BFPP | FAF | |||||
Reconciliation of assets and liabilities | ||||||||
Present value of actuarial liabilities | (14,145) | (1,916,445) | (10,261) | (1,377,828) | ||||
Fair value of assets | 11,182 | 2,138,585 | 10,844 | 1,897,731 | ||||
Superavit unrecognized | - | (222,140) | (583) | (519,903) | ||||
Net assets (liabilities) | (2,963) | - | - | - | ||||
Transfer of the net actuarial asset (liability) | ||||||||
Beginning balance of actuarial assets (liabilities), net | 583 | 519,903 | 2,173 | 604,069 | ||||
Revenue (expense) recognized in income | 349 | 85,382 | 468 | 79,918 | ||||
Service cost | - | (30,992) | - | (28,065) | ||||
Curtailment | - | 1,943 | - | - | ||||
Loss recognized | (3,895) | (354,096) | (2,058) | (136,019) | ||||
Ending balance of actuarial assets (liabilities), net | (2,963) | 222,140 | 583 | 519,903 | ||||
Changes in project actuarial obligation | ||||||||
Beginning balance of the present value of the actuarial obligation | (10,261) | (1,377,828) | (9,071) | (1,164,878) | ||||
Interest on actuarial obligations | (1,019) | (141,643) | (1,031) | (115,980) | ||||
Service cost | - | (30,992) | - | (28,065) | ||||
Beneficit paid | 797 | 91,284 | 695 | 58,718 | ||||
Curtailment | - | 1,943 | - | - | ||||
Loss actuarial | (3,662) | (459,209) | (854) | (127,623) | ||||
Ending balance of the fair value of actuarial obligation | (14,145) | (1,916,445) | (10,261) | (1,377,828) | ||||
Changes in plan assets | ||||||||
Beginning balance of the fair value of plan assets | 10,844 | 1,897,731 | 11,244 | 1,768,947 | ||||
Expected return | 1,367 | 227,025 | 1,499 | 195,898 | ||||
Beneficit paid | (797) | (91,284) | (695) | (58,718) | ||||
Gain (loss) actuarial | (232) | 105,113 | (1,204) | (8,396) | ||||
Ending balance of the fair value of plan assets | 11,182 | 2,138,585 | 10,844 | 1,897,731 | ||||
Revenue and expense recognized | ||||||||
Interest cost | (1,019) | (141,643) | (1,031) | (115,980) | ||||
Service cost | - | (30,992) | - | (28,065) | ||||
Expected return on plan assets | 1,367 | 227,025 | 1,499 | 195,898 | ||||
348 | 54,390 | 468 | 51,853 | |||||
Revenue and expense | ||||||||
Service cost | - | (72,443) | - | (32,547) | ||||
Interest cost | (1,171) | (307,533) | (1,019) | (137,741) | ||||
Expected return on plan assets | 918 | 414,325 | 1,367 | 220,144 | ||||
(253) | 34,349 | 348 | 49,856 | |||||
Actuarial premises | ||||||||
Economic hypothesis | ||||||||
Discount rate | 8.53% | 9.46% | 10.29% | 10.25% | ||||
Projected return on the assets | 8.53% | 10.25% | 13.04% | 11.81% | ||||
Inflation rate | 4.50% | 4.50% | 4.50% | 4.50% | ||||
Rate of wage growth | N/A | 6.59% | N/A | 6.59% | ||||
Demographic hypotheses | ||||||||
Mortality schedule | AT-2000 | AT-2000 | AT-2000 | AT-2000 | ||||
Schedule of mortality of the disabled | RRB-1983 | IAPC | RRB-1983 | IAPC |
24.1. Supplementary retirement plan | is made through a percentage actuarially defined for theparticipant and the sponsor. The actuarial calculations are made byindependent actuaries, on a yearly basis, according to the rules inforce. | |||||
Type of pain | Modality | |||||
Plan I | Variable contribution | CV | ||||
Plan II | Variable contribution | CV | ||||
Plan III | Defined contribution | CD | ||||
Plan FAF | Defined benefit | BD | ||||
The demographic data of the plan are presented below: |
Plan I | Plan II | Plan III | Plan FAF | Plan I | Plan II | Plan III | Plan FAF | |||||||||
12.31.12 | 12.31.11 | |||||||||||||||
Number of active participants | 1,630 | 9,613 | 6,989 | 10,144 | 1,983 | 11,193 | 615 | 10,781 | ||||||||
Number of self-sponsored participants | 12 | 121 | 21 | 1,060 | 13 | 109 | - | 968 | ||||||||
Number of participants in deferred proportional benefit | 4 | 37 | 3 | 73 | 8 | 30 | - | 50 | ||||||||
Number of beneficiary participants | 51 | 18 | - | 4,915 | 51 | 12 | - | 4,714 | ||||||||
Contributions of the sponsor | 206 | 8,645 | 3,196 | 1,995 | 236 | 8,084 | 72 | 1,533 | ||||||||
The composition of the investment portfolios of the BFPP plans is presented below: |
BFPP | ||||||||
12.31.12 | 12.31.11 | |||||||
Composition of the fund's portfolio: | ||||||||
Fixed income | 240,618 | 80.9% | 160,074 | 76.5% | ||||
Variable income | 56,919 | 19.1% | 49,287 | 23.5% | ||||
297,537 | 100.0% | 209,361 | 100.0% | |||||
Fixed income | ||||||||
Financial treasury bills | 50,211 | 20.9% | 20,025 | 12.5% | ||||
Nacional treasury notes | 87,497 | 36.2% | 73,718 | 46.1% | ||||
Bank deposit certificate | 3,316 | 1.4% | 9,457 | 5.9% | ||||
Interbank deposit certificate | 32,958 | 13.7% | 20,729 | 12.9% | ||||
Debentures | 16,747 | 7.0% | 8,127 | 5.1% | ||||
Commited transations | 10,750 | 4.5% | 4,531 | 2.8% | ||||
Nacional treasury bills | 27,452 | 11.4% | 21,698 | 13.6% | ||||
Others | 11,687 | 4.9% | 1,789 | 1.1% | ||||
240,618 | 100.0% | 160,074 | 100.0% | |||||
Variable income | ||||||||
Shares | 56,919 | 100.0% | 49,241 | 99.9% | ||||
Options | - | - | 46 | 0.1% | ||||
56,919 | 100.0% | 49,287 | 100.0% |
The real return on assets of the plans for the year ended December 31, 2012 was 11.52% p.a.(2.31% as of December 31, 2011). The composition of the investment portfolios of the FAF plans are presented below: |
12.31.12 | 12.31.11 | |||||||
Composition of the fund's portfolio: | ||||||||
Fixed income | 1,681,643 | 77.3% | 1,527,676 | 79.6% | ||||
Variable income | 290,527 | 13.3% | 224,459 | 11.7% | ||||
Structured investments | 61,403 | 2.8% | 20,301 | 1.1% | ||||
Real estate | 133,464 | 6.1% | 133,621 | 7.0% | ||||
Transactions with participants | 11,500 | 0.5% | 11,600 | 0.6% | ||||
2,178,537 | 100.0% | 1,917,657 | 100.0% | |||||
Fixed income | ||||||||
Brazilian treasury notes - Series F | - | - | 31,451 | 2.1% | ||||
Brazilian treasury notes - Series B | 922,660 | 54.9% | 729,992 | 47.6% | ||||
Brazilian treasury certificates | 24,162 | 1.4% | 47,234 | 3.1% | ||||
Financial bill | 96,903 | 5.8% | 65,578 | 4.3% | ||||
Time deposits | 22,140 | 1.3% | 30,039 | 2.0% | ||||
Investment funds | 32,546 | 1.9% | 43,601 | 2.9% | ||||
Exclusive fund | 583,232 | 34.7% | 579,781 | 38.0% | ||||
1,681,643 | 100.0% | 1,527,676 | 100.0% | |||||
Variable income | ||||||||
Shares | 94,676 | 32.6% | 82,605 | 36.8% | ||||
Investment funds | 63,863 | 22.0% | 9,403 | 4.2% | ||||
Exclusive fund | 131,988 | 45.4% | 132,451 | 59.0% | ||||
290,527 | 100.0% | 224,459 | 100.0% | |||||
Structured investments | ||||||||
Investment funds | 44,177 | 71.9% | 16,874 | 83.1% | ||||
Exclusive fund | 17,226 | 28.1% | 3,427 | 16.9% | ||||
61,403 | 100.0% | 20,301 | 100.0% | |||||
Real estate | ||||||||
Leased to sponsors | 61,741 | 46.3% | 85,881 | 64.2% | ||||
Leased to others | 8,042 | 6.0% | 8,097 | 6.1% | ||||
Rights on the sale of properties | 63,681 | 47.7% | 39,643 | 29.7% | ||||
133,464 | 100.0% | 133,621 | 100.0% | |||||
Transactions with participants | ||||||||
Simple loan | 11,500 | 100.0% | 11,600 | 100.0% | ||||
11,500 | 100.0% | 11,600 | 100.0% | |||||
The real return on assets of the plans in the fiscal year ended December 31, 2012 was 9.94% p.a. (5.16% p.a. as of December 31, 2011). | ||||||||
24.2. Other benefits
The transfers of the assets and actuarial liabilities related to other benefits, prepared according to the actuarial report, are presented below:
BR GAAP and IFRS | ||||||||
Consolidated | ||||||||
12.31.12 | ||||||||
Award for length of service | Medical plan | FGTS penalty | Others | |||||
Conciliation of assets and liabilities | ||||||||
Present value of actuarial obligations | (40,483) | (92,408) | (150,715) | (20,240) | ||||
Liability net | (40,483) | (92,408) | (150,715) | (20,240) | ||||
Transfer of the net actuarial liability | ||||||||
Beginning balance of actuarial assets (liabilities), net | (33,107) | (85,156) | (113,393) | (34,389) | ||||
Expense acknowledged in the income | (2,871) | (8,779) | (11,925) | (3,291) | ||||
Service cost | (1,939) | (3,815) | (6,523) | (1,867) | ||||
Past service cost | - | 18,224 | - | - | ||||
Curtailment | 1,955 | 1,756 | 5,851 | 26,525 | ||||
Contributions of the sponsor | 6,658 | 2,653 | 6,408 | 1,695 | ||||
Gain (loss) through DRA | (11,179) | (17,291) | (31,133) | (8,913) | ||||
Ending balance of actuarial assets (liabilities), net | (40,483) | (92,408) | (150,715) | (20,240) | ||||
Changes in project actuarial obligation | ||||||||
Beginning balance of the present value of the actuarial obligation | (33,107) | (85,156) | (113,393) | (34,389) | ||||
Interest on actuarial obligations | (2,871) | (8,779) | (11,925) | (3,291) | ||||
Service cost | (1,939) | (3,815) | (6,523) | (1,867) | ||||
Past service cost | - | 18,224 | - | - | ||||
Beneficit paid | 6,658 | 2,653 | 6,408 | 1,695 | ||||
Curtailment | 1,955 | 1,756 | 5,851 | 26,525 | ||||
Loss actuarial | (11,179) | (17,291) | (31,133) | (8,913) | ||||
Ending balance of the present value of plan assets | (40,483) | (92,408) | (150,715) | (20,240) | ||||
Changes in plan assets | ||||||||
Beneficit paid | (6,658) | (2,653) | (6,408) | (1,695) | ||||
Contributions of the sponsor | 6,658 | 2,653 | 6,408 | 1,695 | ||||
Ending balance of the fair value of actuarial obligation | - | - | - | - | ||||
Revenue and expense recognized | ||||||||
Interest cost | (2,871) | (8,779) | (11,925) | (3,291) | ||||
Service cost | (1,939) | (3,815) | (6,523) | (1,867) | ||||
(4,810) | (12,594) | (18,448) | (5,158) | |||||
Revenue and expense | ||||||||
Service cost | (4,637) | (2,760) | (12,900) | (2,682) | ||||
Interest cost | (5,532) | (9,591) | (18,575) | (4,843) | ||||
(10,169) | (12,351) | (31,475) | (7,525) | |||||
Actuarial premises | ||||||||
Economic hypothesis | ||||||||
Discount rate | 8.75% | 9.49% | 8.88% | 9.40% | ||||
Projected return on the assets | N/A | N/A | N/A | N/A | ||||
Inflation rate | 4.50% | 4.50% | 4.50% | 4.50% | ||||
Rate of wage growth | 6.51% | 6.49% | 6.51% | 6.51% | ||||
Demographic hypotheses | ||||||||
Mortality schedule | AT-2000 | AT-2000 | AT-2000 | AT-2000 | ||||
Schedule of mortality of the disabled | IAPC | IAPC | IAPC | IAPC |
BR GAAP and IFRS | ||||||||
Consolidated | ||||||||
12.31.11 | ||||||||
Award for length of service | Medical plan | FGTS penalty | Others | |||||
Conciliation of assets and liabilities | ||||||||
Present value of actuarial obligations | (33,107) | (85,156) | (113,393) | (34,389) | ||||
Liability net | (33,107) | (85,156) | (113,393) | (34,389) | ||||
Transfer of the net actuarial liability | ||||||||
Beginning balance of actuarial assets (liabilities), net | (47,374) | (67,205) | (137,878) | (22,041) | ||||
Expense acknowledged in the income | (4,615) | (6,783) | (13,720) | (2,162) | ||||
Service cost | (4,963) | (2,592) | (12,099) | (1,435) | ||||
Change in policy(1) | (13,245) | - | - | - | ||||
Contributions of the sponsor | 9,385 | 1,555 | 2,326 | 3,898 | ||||
Gain (loss) actuarial | 27,705 | (10,131) | 47,978 | (12,649) | ||||
Ending balance of actuarial assets (liabilities), net | (33,107) | (85,156) | (113,393) | (34,389) | ||||
Changes in project actuarial obligation | ||||||||
Beginning balance of the present value of the actuarial | ||||||||
obligation | (47,374) | (67,205) | (137,878) | (22,041) | ||||
Interest on actuarial obligations | (4,615) | (6,783) | (13,720) | (2,162) | ||||
Service cost | (4,963) | (2,592) | (12,099) | (1,435) | ||||
Beneficit paid | 9,385 | 1,555 | 2,326 | 3,898 | ||||
Change in policy(1) | (13,245) | - | - | - | ||||
Gain (loss) actuarial | 27,705 | (10,131) | 47,978 | (12,649) | ||||
Ending balance of the present value of actuarial obligation | (33,107) | (85,156) | (113,393) | (34,389) | ||||
Changes in plan assets | ||||||||
Beneficit paid | (9,385) | (1,555) | (2,326) | (3,898) | ||||
Contributions of the sponsor | 9,385 | 1,555 | 2,326 | 3,898 | ||||
Ending balance of the fair value of plan assets | - | - | - | - | ||||
Revenue and expense recognized | ||||||||
Interest cost | (4,615) | (6,783) | (13,720) | (2,162) | ||||
Service cost | (4,963) | (2,592) | (12,099) | (1,435) | ||||
(9,578) | (9,375) | (25,819) | (3,597) | |||||
Revenue and expense | ||||||||
Service cost | (1,910) | (3,739) | (6,388) | (1,858) | ||||
Interest cost | (2,901) | (8,591) | (11,501) | (3,234) | ||||
(4,811) | (12,330) | (17,889) | (5,092) | |||||
Actuarial premises | ||||||||
Economic hypothesis | ||||||||
Discount rate | 10.25% | 10.25% | 10.25% | 10.25% | ||||
Projected return on the assets | N/A | N/A | N/A | N/A | ||||
Inflation rate | 4.50% | 4.50% | 4.50% | 4.50% | ||||
Rate of wage growth | 6.59% | 6.59% | 6.59% | 6.59% | ||||
Demographic hypotheses | ||||||||
Mortality schedule | AT-2000 | AT-2000 | AT-2000 | AT-2000 | ||||
Schedule of mortality of the disabled | IAPC | IAPC | IAPC | IAPC | ||||
(1) See note 24.2.3. |
24.2.1. Medical Plan | 12.31.12 | |||
The Company registered the obligations resulting from Law No.9.656 and Deliberation of the Council of Supplementary Health No.21/99, which guarantees to the retired employee that contributedto the health plan by reason of employment relationship, for atleast 10 years, the right of maintenance as beneficiary, on the sameconditions of coverage enjoyed when the employment contractwas in force, provided that they assume full payment. | Parent companyand consolidated | |||
Percentage variation | 1.0% | -1.0% | ||
Variation of the actuarial liabilities | 86,807 | 61,393 | ||
24.2.2. F.G.T.S. fine at the time of retirement of the employee | ||||
24.2.3. Award for length of service The executive offices discharged on the initiative of the Company,in addition to full pay, are eligible to receive a compensationequivalent to 0.5 salary in force at the time of discharge, for eachyear or fraction of year worked for the Company. The grant of this benefit is subject to an assessment of the career,performance and length of service of the beneficiary, actuarialliability resulting from that practice was recorded in the balancesheet.By decision of the Company’s Management, this benefit wasdiscontinued from 2012, so, new employees are not eligible,keeping only the benefit for current employees. 24.2.5. Retirement compensation On retirement, managers with executive position in addition tothe legal funds, are unreadable to additional compensation of 0.5prevailing wage at the time of retirement for each year worked. The granting of this benefit is subject to an assessment of hiscareer, performance and length of service of the beneficiary, theactuarial liability resulting from this practice was recorded on thebalance sheet. The expenses incurred with all the benefits presented above wereacknowledged in the statement of income in the item ‘otheroperating revenues (expenses)’ and include: interest paid, actuarialgain (loss), cost of the service and revenue expected from the assetof the plan. The actuarial gains and losses acknowledged in othercomprehensive results are presented below: | BR GAAP and IFRS | |||||
Consolidated | ||||||
12.31.12 | 12.31.11 | |||||
At the beginning of the year | (11,858) | (39,883) | ||||
Rollforward | (40,492) | 28,025 | ||||
At the end of the year | (52,350) | (11,858) | ||||
25. PROVISION FOR TAX, CIVILAND LABOR RISK The Company classifies the risk of adverse decisions in the legalsuits as “probable”, “possible” or “remote”. The provisions recordedrelating to such proceedings is determined by the Company’sManagement, based on legal advice and reasonably reflect theestimated and probable losses. In case the Company is involved in judicial proceedings for whichthe amount is not known or cannot be reasonably estimated, butthe probability of losses is probable, the related amount will not berecorded, however, its nature will be disclosed. The Company’s Management believes that its provisions for tax,civil and labor contingencies, accounted for according to CVMDeliberation No. 594/09, is sufficient to cover eventual lossesrelated to its legal proceedings, as presented below: 25.1. Contingencies for probable losses | ||||||
BR GAAP | ||||||||||||||||
Parent company | ||||||||||||||||
12.31.11 | Merger of company(1) | Additions | Reversals | Transfers(3) | Payments | Price index update | 12.31.12 | |||||||||
Tax | 128,513 | 83,967 | 21,708 | (23,206) | (25,112) | (9,326) | 6,923 | 183,467 | ||||||||
Labor | 53,555 | 60,034 | 105,642 | (24,301) | - | (80,593) | 4,386 | 118,723 | ||||||||
Civil, commercial and | ||||||||||||||||
other | 26,372 | 20,301 | 16,725 | (4,779) | - | (9,723) | 1,458 | 50,354 | ||||||||
Contingent liabilities | - | 550,481 | - | - | - | - | - | 550,481 | ||||||||
208,440 | 714,783 | 144,075 | (52,286) | (25,112) | (99,642) | 12,767 | 903,025 | |||||||||
Current | 68,550 | 163,798 | ||||||||||||||
Non-current | 139,890 | 739,227 | ||||||||||||||
BR GAAP and IFRS | ||||||||||||||||
Consolidated | ||||||||||||||||
12.31.11 | Additions | Business combination(2) | Reversals | Transfers(3) | Payments | Price index update | 12.31.12 | |||||||||
Tax | 231,623 | 50,484 | - | (59,461) | (25,112) | (25,129) | 14,716 | 187,121 | ||||||||
Labor | 105,162 | 221,276 | 11,032 | (48,629) | - | (163,996) | 9,598 | 134,443 | ||||||||
Civil, commercial and | ||||||||||||||||
other | 45,174 | 23,718 | - | (8,043) | - | (13,991) | 3,513 | 50,371 | ||||||||
Contingent liabilities | 571,741 | - | 12,929 | (21,776) | - | - | - | 562,894 | ||||||||
953,700 | 295,478 | 23,961 | (137,909) | (25,112) | (203,116) | 27,827 | 934,829 | |||||||||
Current | 118,466 | 173,916 | ||||||||||||||
Non-current | 835,234 | 760,913 | ||||||||||||||
(1) Merging of Sadia and Heloísa on December 31, 2012. (2) Business combination with Quickfood, Avex and Dánica (note 6). (3) During the twelve-month period ended on December 31, 2012, the Company, for better presentation of the amounts related to tax contingencies, considered the reclassification of items that were not under litigation to other obligations, as well as certain lawyers’ fees. | ||||||||||||||||
25.1.1. Tax Income tax and social contribution:The Company recorded aprovision of R$9,908 (R$25,999 as of December 31, 2011) being:(i) R$7,775 (R$7,421 as of December 31, 2011) related to thedisallowance of claims from a subsidiary acquired in 2008 fromthe Tax Recovery Program (“REFIS”); (ii) R$2,133 (R$1,934 as ofDecember 31, 2011) related to other lawsuits. In December 2012,The Company reversed a provision of R$ 18,184 (R$ 16,644 asof December 31, 2011) regarding the tax assessment on taxableincome of the subsidiary Rezende which the Company obtained afavorable decision on the issue. ICMS:The Company is involved in administrative and judicial taxdisputes associated to the register and/or maintenance of ICMStax credits on certain transactions, such as exports, acquisition ofconsumption materials and monetary correction. The provisionamounts to R$63,848 (R$79,041 as of December 31, 2011). PIS and COFINS:The Company discusses the use of certain a creditsarising from the acquisition of inputs used to offset federal taxes,which amount is R$70,297 (R$66,336 as of December 31, 2011). Other tax contingencies:The Company recorded other provisionsfor lawsuits related to payment of social security contributions(SAT, INCRA, FUNRURAL, Education Salary), as well as to tax debtsarising from differences of accessory obligations, duties, paymentof legal fees and others, totaling a provision of R$39,663 (R$56,179as of December 31, 2011). 25.1.2. Labor The Company is defendant in several labor claims in progress,mainly related to overtime and salary inflation adjustments forperiods prior to the introduction of the Brazilian Real, illnessesallegedly contracted at work and work-related injuries and others.The labor suits are mainly in the lower courts, and for the majorityof the cases a decision for the dismissal of the pleadings has beengranted. None of these suits are individually significant. TheCompany recorded a provision based on past history of payments.Based on the opinion of the Company’s management and its legaladvisors, the provision is sufficient to cover probable losses. 25.1.3. Civil, commercial and others Civil contingencies are mainly related to lawsuits referring totraffic accidents, moral and property damage, physical casualtiesand others. The legal actions are mostly in the lower courts, in theevidentiary phase, depending on confirmation or absence of theCompany’s guilt. 25.2. Contingencies classified as a risk of possible loss The Company is involved in other tax, civil, labor and social securitycontingencies, for which losses have been assessed as possible. 25.2.1. Tax The most relevant tax cases are set forth below: | Profits earned abroad:The Company was assessed by the BrazilianInternal Revenue Service for alleged underpayment of incometax and social contribution on profits earned by its subsidiariesestablished abroad, in a total amount of R$712,851 (R$365,787 asof December 31, 2011). The Company’s legal defense is based on thefacts that the subsidiaries located abroad are subject exclusively tothe full taxation in the countries in which they are based as a resultof the treaties signed to avoid double taxation. The total profitsearned abroad is presented in note 13.3. Income Tax and Social Contribution:The Company is involved inadministrative disputes associated to the use of tax losses, refundsand offset of income tax and social contribution taxes creditsagainst other federal tax debits, including credits generated bythe Plano Verão legal dispute, in a total amount of R$344,932(R$222,486 as of December 31, 2011). ICMS:The Company is involved in the following disputes associatedto the ICMS tax: (i) alleged undue ICMS tax credits generated bytax incentives granted by the origin States (“guerra fiscal”) in atotal amount of R$1,505,578 (R$1,331,649 as of December 31,2011); (ii) maintenance of ICMS tax credits on the acquisition ofessencial products with a reduced tax burden (“cesta básica”) in atotal amount of R$483,935 (R$493,944 as of December 31, 2011);(iii) utilization of tax benefit deemed credits in a total amount ofR$122,344 (R$86,219 as of December 31, 2011); and (iv) R$859,744(R$563,464 as of December 31, 2011) related to other lawsuits. IPI:The Company discusses administratively the non-ratificationof compensation of IPI credits resulting from purchases of goodsnot taxed, sales to Manaus Free Zone and purchases of supplies ofnon-taxpayers with PIS and COFINS in the amount of R$238,989(R$124,963 as of December 31, 2011). IPI Premium Credits:The Company is involved in a judicial disputerelated to the alleged undue offset of IPI Premium Credits againstother federal taxes in a total amount of R$422,004 (R$399,708 asof December 31, 2011). The Company recorded these credits basedon a final judicial decision. PIS and COFINS:The Company is involved in administrativeproceedings regarding the offset of credits against other federal Normative Instruction 86:The Company discusses administrativelywith Brazilian Internal Revenue Service for a total amount ofR$169,987 (R$158,161 as of December 31, 2011) related to anisolated fine as a result of alleged non-compliance and delivery of2003-2005 magnetic files to the tax authorities. Social Security Taxes:The Company is involved in disputes relatedto social security taxes allegedly due on payments to serviceproviders as well as jointly responsible with civil constructionservice providers and others in a total amount of R$163,939 Other Contingencies:The Company is involved in other taxcontingencies including rural activity, transfer price, social Additionally, the Company’s Management judged proper to discloseinformation related to the lawsuit in which it was included as |
26.SHAREHOLDERS’ EQUITY | 26.2. Breakdown of capital stock by nature | |||||
26. Capital stock The Company is authorized to increase the capital stock,irrespective of amendment to the bylaws, up to the limit of1,000,000,000 shares of common stock, in book-entry form, andwithout par value. | BR GAAP and IFRS | |||||
Consolidated | ||||||
12.31.12 | 12.31.11 | |||||
Common shares | 872,473,246 | 872,473,246 | ||||
Treasury shares | (2,399,335) | (3,019,442) | ||||
Outstanding shares | 870,073,911 | 869,453,804 | ||||
26.3. Rollforward of outstanding shares | ||||||
BR GAAP and IFRS | ||||||
Consolidated | ||||||
Quantity of outstanding of shares | ||||||
12.31.12 | 12.31.11 | |||||
Shares at the beggining of the period | 869,453,804 | 871,692,074 | ||||
Purchase of shares | - | (2,630,100) | ||||
Sale of shares in treasury | 620,107 | 391,830 | ||||
Shares at the ending of the period | 870,073,911 | 869,453,804 | ||||
26.4. Shareholders’ remuneration |
12.31.12 | 12.31.11 | |||
Net income | 813,227 | 1,367,409 | ||
Legal reserve (5%) | (40,661) | (68,370) | ||
Dividends calculation base | 772,566 | 1,299,039 | ||
Shareholdres' remuneration in the form of interest on shareholders' equity: | ||||
Paid on August 15, 2012 (net income tax in the amount of R$9,053) | 90,947 | - | ||
Paid on February 15, 2013 (net income tax in the amount of R$15,743) | 159,007 | - | ||
Paid concerning the financial year 2011 (net income tax in the amount of R$54,550) | - | 577,584 | ||
Total of shareholders' equity | 249,954 | 577,584 | ||
Percentage of calculation base | 32.35% | 44.46% | ||
Earnings paid per share | 0.31578 | 0.72705 |
26.5. Profit distribution | ||||||||||
Income appropriation | Reserve balances | |||||||||
Limit on capital % | 12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | ||||||
Gain actuarial FAF | - | 37,844 | 39,517 | - | - | |||||
Interest on shareholdes' equity | - | 274,750 | 632,134 | - | - | |||||
Legal reserve | 20 | 40,661 | 68,370 | 220,246 | 179,585 | |||||
Capital increase reserve | 20 | 155,077 | 265,578 | 700,811 | 545,734 | |||||
Reserve for expansion | 80 | 237,464 | 305,268 | 1,216,049 | 978,585 | |||||
Reserve for tax incentives | - | 67,431 | 56,542 | 123,973 | 56,542 | |||||
813,227 | 1,367,409 | 2,261,079 | 1,760,446 |
Legal reserve:Five percent (5%) of net income raised in each fiscalyear as specified in article 193 of Law No 6404/76, modified by LawNo 11.638/07, which shall not exceed twenty percent (20%) of thecapital stock. On December 31, 2012, this reserve corresponds to1.77% of capital stock (1.44% as of December 31, 2011). | Reserve for capital increase:Twenty percent (20%) towards theestablishment of reserves for capital increase, which shall notexceed twenty percent (20%) of the capital stock. On December 31,2012, this reserve corresponds to 5.62% of capital stock (4.38% asof December 31, 2011). |
Reserve for expansion:up to 50% (fifty per cent) for theconstitution of the reserve for expansion, this reserve not exceed80% (eighty per cent) of the capital stock. On December 31, 2012,the balance of this reserve correspond to 9.76% of the capital stock(7.85% as of December 31, 2011). | 26.6. Treasury shares The Company has 2,399,335 shares in treasury, at a average costof R$21.63 (twenty one Brazilian Reais and sixty three cents) pershare with a market value of R$100,748. The reduction of 620,107in the number of the treasury shares occurred due to beneficiariesexercised their options. 26.7. Breakdown of the capital by owner The shareholding position of the largest shareholders,management, members of the Board of Directors and Fiscal Councilis presented below (not reviewed): |
12.31.12 | 12.31.11 | |||||||
Shareholders | Quantity | % | Quantity | % | ||||
Major shareholders | ||||||||
Fundação Petrobrás de Seguridade Social - Petros(1) | 106,616,230 | 12.22 | 89,866,382 | 10.30 | ||||
Caixa de Previd. dos Func. Do Banco do Brasil(1) | 106,355,822 | 12.19 | 111,364,918 | 12.77 | ||||
Tarpon | 69,988,490 | 8.02 | 69,988,490 | 8.02 | ||||
BlackRock, Inc | 44,776,961 | 5.13 | - | - | ||||
Fundação Vale do Rio Doce de Seg. Social - Valia(1) | 22,167,625 | 2.54 | 23,629,690 | 2.71 | ||||
Fundação Sistel de Seguridade Social(1) | 10,396,048 | 1.19 | 11,725,832 | 1.34 | ||||
FPRV1 Sabiá FIM Previdenciário(2) | 3,474,904 | 0.40 | 3,474,904 | 0.40 | ||||
Management | ||||||||
Board of Directors | 9,564,898 | 1.10 | 9,721,600 | 1.11 | ||||
Executives | 152,755 | 0.02 | 100,932 | 0.01 | ||||
Treasury shares | 2,399,335 | 0.28 | 3,019,442 | 0.35 | ||||
Other | 496,580,178 | 56.91 | 549,581,056 | 62.99 | ||||
872,473,246 | 100.00 | 872,473,246 | 100.00 | |||||
(1) The pension funds are controlled by employees that participate in the respective companies. |
The shareholding position of the shareholders holding more than 5% of the voting capital is presented below (not reviewed): | ||||||||
12.31.12 | 12.31.11 | |||||||
Shareholders | Quantity | % | Quantity | % | ||||
Fundação Petrobrás de Seguridade Social - Petros(1) | 106,616,230 | 12.22 | 89,866,382 | 10.30 | ||||
Caixa de Previd. dos Func. Do Banco do Brasil(1) | 106,355,822 | 12.19 | 111,364,918 | 12.76 | ||||
Tarpon | 69,988,490 | 8.02 | 69,988,490 | 8.02 | ||||
BlackRock, Inc | 44,776,961 | 5.13 | - | - | ||||
327,737,503 | 37.56 | 271,219,790 | 31.08 | |||||
Other | 544,735,743 | 62.44 | 601,253,456 | 68.92 | ||||
872,473,246 | 100.00 | 872,473,246 | 100.00 | |||||
(1) The pension funds are controlled by employees that participate in the respective companies. |
The Company is bound to arbitration in the Market ArbitrationChamber, as established by the arbitration clause in the by-laws. | 27. GOVERNMENT GRANTS The Company has tax benefits related to ICMS for investmentsgranted by states governments of Goiás, Pernambuco, MatoGrosso and Bahia. Such incentives are directly associated to themanufacturing facilities operations, job generation and to theeconomic and social development in the respective states, beingaccounted for as a reserve for tax incentives in the shareholders’equity. | |
On December 31, 2012, this incentive totaled R$67,431, which wasfully recorded in the reserve for tax incentives. The total amount of these tax benefits is related to the followingstate programs: •State of Bahia Industrial and Economic IntegrationDevelopment Program (“DESENVOLVE”):this program aims topromote and diversify the industrial and agricultural activity,with the formation of high density industrial areas in theeconomic regions and integration of productive chains thatare essential to the economic and social development as wellas job and income generation in the state. The total amount ofincentive recognized in the statement of income was R$3,664(R$3,927 as of December 31, 2011). •State of Pernambuco Development Program (“PRODEPE”)):this program intends to attract and promote investments inindustrial activity and wholesale trade of Pernambuco, bygranting tax and financial incentives, becoming effective inaccordance to the current legislation. The total amount of thisincentive was R$11,601 (R$42,542 as of December 31, 2011). •State of Mato Grosso Industrial and Commercial DevelopmentProgram (“PRODEIC”):the program has purpose of leveragingthe development of economic activities defined as strategicand designated to the priority production of goods and servicesin the State, considering social and environmental aspects,in order to improve the Human Development Index (“IDH”)and the social welfare. The total amount of this incentive wasR$24,690 (R$32,803 as of December 31, 2011). •State of Goiás Participation and Development forIndustrialization Fund (“FOMENTAR”):this program intendsto stimulate the implementation and expansion of industrialenterprises that promote the industrial development in theState. The total amount of this incentive was R$12,172 (R$18,154as of December 31, 2011). 27.2. Grants related to governmentassistance | 28. EARNINGS PER SHARE | |||||
12.31.12 | 12.31.11 | |||||
Basic numerator: | ||||||
Net income for the period attributable to BRF shareholders | 813,227 | 1,367,409 | ||||
Basic denominator: | ||||||
Shares of common stock | 872,473,246 | 872,473,246 | ||||
Weighted average number of outstanding shares - basic (except treasury shares) | 869,534,940 | 870,507,468 | ||||
Net earnings per share - basic - R$ | 0.93524 | 1.57082 | ||||
Diluted numerator: | ||||||
Net income for the period attributable to BRF shareholders | 813,227 | 1,367,409 | ||||
Diluted denominator: | ||||||
Weighted average number of outstanding shares - basic (except treasury shares) | 869,534,940 | 870,507,468 | ||||
Number of potential shares (stock options) | 168,666 | 38,768 | ||||
Weighted average number of outstanding shares - diluted | 869,703,606 | 870,546,236 | ||||
Net earnings per share - diluted - R$ | 0.93506 | 1.57075 | ||||
On December 31, 2012, from the total of 6,617,581 outstandingoptions granted to the Company’s executives (4,277,946 as ofDecember 31, 2011), 3,530,461 (2,928,905 as of December 31, 2011)were not considered in the calculation of the diluted earnings pershare due to the fact that the strike price (R$36,03) was higher thanthe average market price of the common shares during the period(R$33,98) and, therefore, the effect was anti-dilutive. The variationin the stock options granted refers to the increase in the number ofemployees eligible to the plan to 249 as of December 31, 2012 (55 asof December 31, 2011). During the Company’s operations, rights and obligations arecontracted between related parties, resulting from transactionsof purchase and sale of products, transactions of loans agreed onnormal conditions of market for similar transactions, based oncontract. All the relationships between the Company and its subsidiarieswere disclosed irrespective of the existence or not of transactionsbetween these parties. All the transactions and balances among the companies wereeliminated in the consolidation and refer to commercial and/orfinancial transactions. |
29.1. Transactions and balances
The balances of the assets and liabilities are demonstrated below:
Balance sheet | ||||
12.31.12 | 12.31.11 | |||
Accounts receivable | ||||
UP! Alimentos Ltda. | 898 | 2,935 | ||
Perdigão Europe Ltd. | 162,943 | 161,869 | ||
Perdigão International Ltd. | 329,714 | 247,000 | ||
Wellax Foods Logistics C.P.A.S.U. Lda. | 685,488 | - | ||
Sadia Uruguai | 4,188 | - | ||
Sadia Chile | 14,860 | - | ||
Avex S.A. | 5,059 | - | ||
Sadia | - | 41,905 | ||
Sadia Alimentos | 22,994 | - | ||
Heloísa | - | 311 | ||
1,226,144 | 454,020 | |||
Dividends and interest on the shareholders’ equity receivable | ||||
Avipal S.A. Construtora e Incorporadora | 5 | 5 | ||
5 | 5 | |||
Loan contracts | ||||
Perdigão Trading S.A. | - | (632) | ||
Perdigão International Ltd. | (4,553) | (1,815) | ||
Highline International Ltd. | (3,727) | (3,421) | ||
Establecimiento Levino Zaccardi y Cia. S.A. | 4,762 | 4,372 | ||
(3,518) | (1,496) | |||
Trade accounts payable | ||||
Sino dos Alpes Alimentos Ltda. | - | 85 | ||
Wellax Foods Logistics C.P.A.S.U. Lda. | 146 | - | ||
Sadia Uruguai | 154 | - | ||
Sadia Chile | 9 | - | ||
UP! Alimentos Ltda. | 10,722 | 5,930 | ||
Perdigão International Ltd. | 2,423 | 2,168 | ||
Sadia | - | 22,847 | ||
Sadia Alimentos | 70 | - | ||
Heloísa | - | 2,070 | ||
13,524 | 33,100 | |||
Advance for future capital increase | ||||
PSA Laboratório Veterinário Ltda. | 100 | 100 | ||
Sadia | - | 377,712 | ||
Heloísa | - | 52,000 | ||
100 | 429,812 | |||
Other rights and obligations | ||||
BFF International | 971 | 971 | ||
Avex | 11,133 | - | ||
UP! Alimentos Ltda. | 3,164 | - | ||
Perdigão Trading S.A. | - | 410 | ||
Establecimiento Levino Zaccardi y Cia S.A. | 1,294 | 1,181 | ||
Heloísa | - | 34 | ||
Sadia | - | 1,079 | ||
Sino dos Alpes Alimentos Ltda. | (5,174) | - | ||
Perdigão International Ltd.(1) | (1,924,823) | (1,763,378) | ||
Wellax Foods Logistics C.P.A.S.U. Lda.(1) | (1,333,538) | - | ||
Sadia Uruguai | (471) | - | ||
VIP S.A. Empreendimentos e Participações Imobiliárias | - | (3) | ||
PSA Laboratório Veterinário Ltda. | (344) | - | ||
Avipal Centro Oeste S.A. | (38) | (38) | ||
(3,247,826) | (1,759,744) | |||
(1) The amount corresponds to advances for export pre-payment |
Statement of income | ||||
12.31.12 | 12.31.11 | |||
Revenue | ||||
UP! Alimentos Ltda. | 2,656 | 4,199 | ||
Perdigão Europe Ltd. | 689,979 | 609,683 | ||
Perdigão International Ltd. | 3,471,251 | 2,670,097 | ||
Sadia | 1,764,068 | 549,074 | ||
Heloísa | 2,269 | - | ||
5,930,223 | 3,833,053 | |||
Financial income, net | ||||
Perdigão Trading S.A. | 209 | (70) | ||
Perdigão International Ltd. | (82,130) | (52,123) | ||
Sadia | (25,659) | - | ||
(107,580) | (52,193) | |||
Acquisitons of the period | ||||
12.31.12 | 12.31.11 | |||
UP! Alimentos Ltda. | (133,700) | (109,239) | ||
Establecimiento Levino Zaccardi y Cia. S.A. | (7,125) | (9,611) | ||
Sadia(1) | (1,324,469) | (311,328) | ||
Sino dos Alpes(1) | (5,174) | - | ||
Heloísa | (40,336) | (3,066) | ||
(1,510,804) | (433,244) | |||
(1) Corresponds to purchase of property, plant and equipment due to the execution of TCD, in which R$333,061 is related to Sadia and R$5,174 is related to Sino dos Alpes. |
All the companies listed above are controlled by BRF, except for UP!Alimentos Ltda. which is a affiliate. In order to ensure the maintenance of biodigesters required toobtain licenses in certain plants of the Company, the managementchose to purchase these assets for R$57,921 with a correspondingentry in the other accounts payable. | The Company also recorded a liability in the amount of R$16,018related to the fair value of the guarantees offered by BNDESconcerning a loan made by the Instituto Sadia de Sustentabilidade. The parent company and its subsidiaries carry out intercompanyloans. Below is a summary of the balances and rates charged for thetransactions in excess of R$10,000 on the date of closing of thesefinancial statements: |
Counterparty | ||||||
Creditor | Debtor | Balance 12.31.12 | Interest rate | |||
BFF International Ltd. | Perdigão International Ltd. | 878,402 | 8.0% p.a. | |||
BFF International Ltd. | Wellax Food Comércio | 597,448 | 8.0% p.a. | |||
Sadia Overseas Ltd. | Wellax Food Comércio | 512,537 | 7.0% p.a. | |||
Sadia International Ltd. | Wellax Food Comércio | 121,964 | LIBOR | |||
BRF GmbH | Plusfood Holland B.V. | 103,303 | 3.0% p.a. | |||
Plusfood Holland B.V. | Plusfood Groep B.V. | 79,260 | 3.0% p.a. | |||
Plusfood Groep B.V. | Plusfood B.V. | 62,789 | 3.0% p.a. | |||
Sadia GmbH | BRF GmbH | 45,168 | 3.0% p.a. | |||
Sadia GmbH | BRF Foods LLC | 36,100 | 7.0% p.a. | |||
Wellax Food Comércio | Sadia GmbH | 20,399 | 1.0% p.a. | |||
Plusfood Groep B.V. | Plusfood Wrexam | 16,901 | 3.0% p.a. | |||
Sadia GmbH | Qualy B.V. | 16,180 | 1.5% p.a. |
29.2. Other Related Parties The Company leased properties owned by FAF. For the period endedDecember 31, 2012, the total amount paid as rent was R$ 9,129 (R$11,451 on December 31, 2011). The amount of rent is set based onmarket rates. 29.3. Granted guarantees All the granted guarantees on behalf of its subsidiaries weredisclosed in note 19.7. | 29.4. Management remuneration The total remuneration and benefits paid to these professionals aredemonstrated below: | |
BR GAAP and IFRS | and to the assessment of the performance of the director duringthe fiscal year by the Board of Directors. The supplementary members of the Board of Directors and of theFiscal Council are compensated for each meeting that they attend.The members of the Board of Directors and Fiscal Council have noemployment connection with the Company and do not provideservices of any kind. When the management and employees attain the age of 61 years,retirement is mandatory. 30. SALES REVENUE | |||||
Consolidated | ||||||
12.31.12 | 12.31.11 | |||||
Salary and profit sharing | 36,443 | 37,099 | ||||
Short term benefits of employees(1) | 1,287 | 1,536 | ||||
Post-employment benefits | 124 | 1,125 | ||||
Termination benefits | 903 | 2,055 | ||||
Stock-based payment | 7,825 | 5,680 | ||||
46,582 | 47,495 | |||||
(1) Comprises: Medical assistance, educational expenses and others. | ||||||
The value of the profit sharing in the results paid to each director in any period is related especially to the net income of the Company |
BR GAAP | BR GAAP and IFRS | |||||||
Parent company | Consolidated | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
Gross sales | ||||||||
Domestic sales | 7,189,721 | 6,462,625 | 15,175,348 | 14,299,538 | ||||
Foreign sales | 5,014,710 | 4,190,349 | 11,977,600 | 10,363,656 | ||||
Dairy products | 3,072,755 | 3,037,027 | 3,206,790 | 2,999,229 | ||||
Food service | 697,303 | 535,134 | 1,775,885 | 1,698,261 | ||||
15,974,489 | 14,225,135 | 32,135,623 | 29,360,684 | |||||
Sales deductions | ||||||||
Domestic sales | (1,153,997) | (1,193,306) | (2,556,513) | (2,669,543) | ||||
Foreign sales | (665) | (354) | (351,558) | (270,546) | ||||
Dairy products | (477,275) | (465,866) | (492,719) | (460,431) | ||||
Food service | (91,289) | (78,425) | (217,450) | (253,926) | ||||
(1,723,226) | (1,737,951) | (3,618,240) | (3,654,446) | |||||
Net sales | ||||||||
Domestic sales | 6,035,724 | 5,269,319 | 12,618,835 | 11,629,995 | ||||
Foreign sales | 5,014,045 | 4,189,995 | 11,626,042 | 10,093,110 | ||||
Dairy products | 2,595,480 | 2,571,161 | 2,714,071 | 2,538,798 | ||||
Food service | 606,014 | 456,709 | 1,558,435 | 1,444,335 | ||||
14,251,263 | 12,487,184 | 28,517,383 | 25,706,238 |
31. RESEARCHAND DEVELOPMENT COST Consists of expenditures on internal research and development of new products, recognized when incurred in the income statement. The total expenditure on research and development in the fiscal year ended December 31, 2012, is R$26,737 at the parent company and R$33,053 in the consolidated (R$17,651 at the parent company and R$24,230 in the consolidated as of December 31, 2011). 32. EXPENSES WITH EMPLOYEE’SREMUNERATION |
BR GAAP | BR GAAP and IFRS | |||||||
Parent company | Consolidated | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
Salaries and social charges | 1,323,161 | 1,178,803 | 2,842,371 | 2,490,352 | ||||
Social security cost | 360,033 | 323,182 | 725,249 | 642,778 | ||||
Government severance indemnity fund for employees, guarantee fund for length of service | 101,237 | 90,798 | 203,085 | 177,929 | ||||
Medical assistance and ambulatory care | 41,761 | 31,862 | 118,176 | 101,380 | ||||
Retirement supplementary plan | 9,433 | 8,538 | 15,345 | 13,106 | ||||
Employees profit sharing | 49,449 | 136,056 | 111,368 | 222,305 | ||||
Other benefits | 276,990 | 249,693 | 560,752 | 519,907 | ||||
Provision for labor risks | 75,312 | 40,005 | 141,105 | 87,859 | ||||
2,237,376 | 2,058,937 | 4,717,451 | 4,255,616 |
33. OTHER OPERATING INCOME (EXPENSES), NET | ||||||||
BR GAAP | BR GAAP and IFRS | |||||||
Parent company | Consolidated | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
Income | ||||||||
Net income from the disposal of property, plant and equipment | - | - | - | 23,194 | ||||
Insurance indemnity | 1,908 | 27,512 | 18,005 | 46,882 | ||||
Employees benefits | - | - | 49,860 | 51,852 | ||||
Recovery of expenses | 14,374 | 18,016 | 18,702 | 84,931 | ||||
Provision reversal | 74,738 | - | 45,949 | 118,684 | ||||
Net income from the transfer of Carambeí plant(1) | 48,812 | - | 48,812 | - | ||||
Other | 3,561 | 497 | 20,300 | 17,561 | ||||
143,393 | 46,025 | 201,628 | 343,104 | |||||
Expenses | ||||||||
Net loss from the disposal of property, plant and equipment | (12,778) | (20,369) | (15,166) | - | ||||
Idleness costs(2) | (53,933) | (54,001) | (93,808) | (102,695) | ||||
Insurance claims costs | (20,525) | (34,072) | (38,998) | (56,839) | ||||
Employees profit sharing | (101,271) | (136,056) | (111,368) | (219,524) | ||||
Stock options plan | (23,035) | (15,844) | (23,035) | (15,844) | ||||
Management profit sharing | (7,006) | (13,486) | (7,006) | (15,887) | ||||
Contractual agreements | - | - | - | (9,776) | ||||
Other employees benefits | (26,682) | (26,857) | (41,662) | (26,857) | ||||
Provision for tax risks | (12,533) | (184,212) | (24,501) | (216,669) | ||||
Provision for civil/labor risks | (29,743) | - | (41,184) | (17,952) | ||||
Net loss from the execution of TCD(3) | (102,512) | - | (108,880) | - | ||||
Other | (37,870) | (27,101) | (77,129) | (63,776) | ||||
(427,888) | (511,998) | (582,737) | (745,819) | |||||
(284,495) | (465,973) | (381,109) | (402,715) | |||||
(1) See note 1.2. (2) Idleness cost includes depreciation expense in the amount of R$33,718 and R$36,816 for the years ended December 31, 2012 and December 31, 2011, respectively. (3) See note 6.1. |
34. FINANCIAL INCOME (EXPENSES), NET | ||||||||
BR GAAP | BR GAAP and IFRS | |||||||
Parent company | Consolidated | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
Financial income | ||||||||
Interest on marketable securities | 5,577 | 33,707 | 12,559 | 37,092 | ||||
Exchange rate variation on marketable securities | 8,649 | 1,336 | 2,139 | 18,665 | ||||
Interest on other assets | 79,273 | 37,953 | 159,481 | 49,837 | ||||
Exchange rate variation on other assets | 66,612 | 21,535 | 87,451 | 50,490 | ||||
Interests on financial assets classified as: | 23,359 | 59,209 | 75,110 | 143,300 | ||||
Available for sale | - | - | 14,823 | 54,003 | ||||
Held for trading | 23,359 | 59,209 | 38,143 | 72,912 | ||||
Held to maturity | - | - | 22,144 | 16,385 | ||||
Interest income on loans to related parties | - | 731 | 872 | - | ||||
Gains from the translation of foreign investments | - | - | 604,280 | 431,652 | ||||
Adjustment to present value | 6,794 | 7,291 | 12,705 | 5,198 | ||||
Exchange rate variation on loans and financing | - | 411,070 | - | 16,361 | ||||
Exchange rate variation on other liabilities | - | 218,400 | - | 46,096 | ||||
Other | 5,211 | 2,179 | 31,307 | 47,106 | ||||
195,475 | 793,411 | 985,904 | 845,797 | |||||
Financial expenses | ||||||||
Interest on loans and financing | (202,990) | (155,785) | (502,939) | (456,847) | ||||
Exchange rate variation on loans and financing | (48,378) | (413,949) | (94,178) | (14,870) | ||||
Interest on other liabilities | (29,109) | (17,418) | (59,679) | (18,466) | ||||
Exchange rate variation on other liabilities | (207,054) | (432,822) | (371,227) | (453,863) | ||||
Financial expenses from the acquisition of raw materials | (9,160) | (6,356) | (24,335) | (6,356) | ||||
Losses from derivative transactions | (8,862) | (87,908) | (21,208) | (82,463) | ||||
Interest expenses on loans to related parties | (106,708) | (52,193) | - | - | ||||
Losses from the translation of foreing investments | - | - | (420,704) | (219,806) | ||||
Adjustment to present value | - | (2,986) | - | (2,986) | ||||
Other | (17,934) | (11,087) | (62,236) | (69,663) | ||||
(630,195) | (1,180,504) | (1,556,506) | (1,325,320) | |||||
(434,720) | (387,093) | (570,602) | (479,523) |
35. STATEMENT OF INCOME BY NATURE | ||||||||
The Company has chosen to disclosure its statement of income by function and thus presents below the details by nature: | ||||||||
BR GAAP | BR GAAP and IFRS | |||||||
Parent company | Consolidated | |||||||
12.31.12 | 12.31.11 | 12.31.12 | 12.31.11 | |||||
Costs of sales | ||||||||
Costs of goods | 9,197,149 | 7,465,339 | 15,917,772 | 13,773,327 | ||||
Depreciation | 393,687 | 340,045 | 844,584 | 755,386 | ||||
Amortization | 1,417 | 1,015 | 11,677 | 47,497 | ||||
Salaries and employees benefits | 1,512,666 | 1,378,791 | 3,197,014 | 2,837,488 | ||||
Other | 1,009,854 | 823,560 | 2,092,516 | 1,633,265 | ||||
12,114,773 | 10,008,750 | 22,063,563 | 19,046,963 | |||||
Sales expenses | ||||||||
Depreciation | 20,497 | 16,132 | 34,293 | 26,021 | ||||
Amortization | 204 | 135 | 1,169 | 6,527 | ||||
Salaries and employees benefits | 419,616 | 364,095 | 989,025 | 881,713 | ||||
Direct logistics expenditures | 586,535 | 500,523 | 1,677,018 | 1,428,652 | ||||
Other | 719,766 | 691,279 | 1,615,799 | 1,494,624 | ||||
1,746,618 | 1,572,164 | 4,317,304 | 3,837,537 | |||||
Administrative expenses | ||||||||
Depreciation | 2,762 | 2,481 | 7,232 | 11,082 | ||||
Amortization | 26,957 | 8,370 | 38,280 | 15,382 | ||||
Salaries and employees benefits | 180,333 | 139,990 | 278,939 | 226,251 | ||||
Fees | 21,703 | 19,572 | 23,782 | 31,281 | ||||
Other | 4,538 | 63,359 | 40,697 | 142,876 | ||||
236,293 | 233,772 | 388,930 | 426,872 | |||||
Other operating expense(1) | ||||||||
Depreciation | 27,889 | 24,431 | 29,431 | 24,443 | ||||
Other | 384,250 | 487,567 | 537,557 | 721,376 | ||||
412,139 | 511,998 | 566,988 | 745,819 | |||||
(1) The composition of other operating expense is presented in note 33. |
36. INSURANCE COVERAGE – CONSOLIDATED | The Company adopts the policy of contracting insurance coverage for assets subject to risks in amounts sufficient to cover any claims, considering the nature of its activity |
12.31.12 | ||||||
Assets covered | Coverage | Insured amounts | Amount of coverage | |||
Inventories and property, plant and equipment | Fire, lightning, explosion, windstorm, deterioration of refrigerated products, breakdown of machinery, loss of profit and other | 26,871,805 | 2,165,587 | |||
Garantee | Judicial, traditional and customer garantees | 367,944 | 367,944 | |||
National transport | Road risk and civil liability of cargo carrier | 19,109,885 | 110,345 | |||
International transport | Transport risk during imports and exports | 10,854,078 | 129,005 | |||
General civil liability for directors and officers | Third party complaints | 27,097,985 | 1,337,890 | |||
Credit | Customer default | 394,120 | 366,602 |
37. NEW RULES ANDPRONOUNCEMENTS NOT ADOPTED The interpretations and amendments to the rules existent below,applicable to the following accounting periods, were published byIASB and apply to the financial statements of the Company to befiled with CVM (the Brazilian Securities Commission) only if there isa Deliberation by that agency, therefore, there was no anticipatedadoption of these rules. IAS 1 – Presentation of Items of Others Comprehensive Income | net income, such as gains and losses deferred cash flow hedge.The revised standard is effective for annual reporting periods beginningon or after January 1, 2012. The Company is assessing the impact ofadopting this standard on its consolidated financial statements. AS 19 – Employee Benefits IAS 27 – Separate Financial Statements | |
The Company does not prepare separate financial statementand, therefore does not expect any impact on its individual orconsolidated financial statements. IAS 28 – Investments in associates and joint ventures IFRS 7 – Financial Instruments - Disclosures: Offsetting ofFinancial Assets and Liabilities IFRS 9 – Financial Instruments IFRS 10 – Consolidated Financial Statements IFRS 11 – Joint Arrangements IFRS 12 – Disclosure of Interests in Other Entities IFRS 13 – Fair Value Measurement 38. SUBSEQUENT EVENTS 38.1. Acquisition of share equity of FederalFoods Limited (“Federal Foods”) | 16, 2013 BRF concretized, through its subsidiary in Austria,the acquisition of 49% of the share equity of Federal Foods.The remaining share equity will be maintained by Al NowaisInvestments, the current owner of Federal Foods. Federal Foods is a privately-held company headquartered in AbuDhabi, in the United Arab Emirates (“UAE”), and distributor of Sadia’sproducts for more than 20 years, as well as chilled, frozen and dryproducts from other trademarks and suppliers. Currently, BRF’sproducts represent approximately 65% of Federal Foods’ net revenue. The total investment for the acquisition of 49% of Federal Foodsshare equity was US$37,100. 38.2. Supplementary distribution ofdividends In the Extraordinary Meeting, occurred on February 21, 2013,the Company’s Board of Directors approved a supplementarydistribution of dividends in the amount of R$45,300. 39. APPROVAL OF THE FINANCIALSTATEMENTS The financial statements was approved and its disclosure authorizedby the Board of Directors on March 4, 2013. These financial statements and the profit distribution will subjectedto the shareholders approval in the Ordinary and ExtraordinaryMeeting that will take place on April 9, 2013. | ||
BOARD OF DIRECTORS | |||
Chairman | Nildemar Secches | ||
Vice-Chairman | Paulo Assunção de Sousa | ||
Member | Heloisa Helena Silva de Oliveira | ||
Independent Member | Décio da Silva | ||
Independent Member | José Carlos Reis de Magalhães Neto | ||
Board Member | Luis Carlos Fernandes Afonso | ||
Independent Member | Luiz Fernando Furlan | ||
Independent Member | Manoel Cordeiro Silva Filho | ||
Independent Member | Pedro de Andrade Faria | ||
Independent Member | Walter Fontana Filho | ||
FISCAL COUNCIL / AUDIT COMITTEE | |||
Chairman and Financial Specialist | Attílio Guaspari | ||
Members | Décio Magno Andrade Stochiero | ||
Members | Susana Hanna Stiphan Jabra | ||
BOARD OF EXECUTIVE OFFICERS | |||
Chief Executive Officer | José Antônio do Prado Fay | ||
Vice President of Finance, Administration and Investor Relations | Leopoldo Viriato Saboya | ||
Vice President of Strategy and M&A | Nelson Vas Hacklauer | ||
Vice President of Human Resources | Gilberto Antônio Orsato | ||
Vice President of Operations and Technology | Nilvo Mittanck | ||
Vice President of Foreign Market | Antônio Augusto de Toni | ||
Vice President of Local Market | José Eduardo Cabral Mauro | ||
Vice President of Food Service | Ely David Mizrahi | ||
Vice President of Supply Chain | Luiz Henrique Lissoni | ||
Vice President of Corporate Affairs | Wilson Newton de Mello Neto | ||
Marcos Roberto Badollato Controller | |||
Renata Bandeira Gomes do Nascimento Accountant – CRC 1SP215231/O-3 | |||
INDEPENDENT AUDITOR’S REPORT ON THE FINANCIAL STATEMENTS | ||
The Shareholders and Officers BRF - Brasil Foods S.A. Itajaí - SC | ||
We have audited the accompanying individual and consolidatedfinancial statements of BRF – Brasil Foods S.A., identified as ParentCompany and Consolidated, which comprise the balance sheet asat December 31, 2012, and the statement of income, statementof comprehensive income, statement of changes in equity andstatement of cash flows for the year then ended, and a summary ofsignificant accounting policies and other explanatory information. Management’s responsibility for the consolidated financialstatements Independent auditors’ responsibility An audit involves performing procedures to obtain audit evidenceabout the amounts and disclosures in the financial statements.The procedures selected depend on the auditor’s judgment,including the assessment of the risks of material misstatement ofthe financial statements, whether due to fraud or error. In makingthose risk assessments, the auditor considers internal controlrelevant to the entity’s preparation and fair presentation of thefinancial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the entity’s internalcontrol. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accountingestimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our audit opinion. Opinion on the individual financial statements | Opinion on the consolidated financial statements Emphasis of matter Other matters Audit of figures related to prior fiscal year São Paulo, Brazil, March 4, 2013. ERNST & YOUNG TERCO. |
OPINION OF THE FISCAL COUNCIL The Fiscal Council of BRF - Brasil Foods S.A., in fulfilling its statutoryand corporate functions, examined: (i) the opinion issued without restrictions by Ernst & Young TercoAuditores Independentes; Based on the documents examined and on the explanationsprovided, the members of the Fiscal Council, undersigned, issuedan opinion for the approval of the financial statements identifiedabove. São Paulo, March 4, 2013. Attílio Guaspari Suzana Hanna Stiphan Jabra | STATEMENT OF EXECUTIVE BOARDON THE CONSOLIDATED FINANCIALSTATEMENTS AND INDEPENDENTAUDITOR’S REPORT In compliance with the dispositions of sections V and VI of article25 of CVM Instruction No. 480/09, the executive board of BRF -Foods Brasil S.A., states: (i) reviewed, discussed and agreed with the Company’sconsolidated financial statements for the fiscal (ii) reviewed, discussed and agreed with opinions expressed by theErnst & Young Terco opinion of São Paulo, March 4, 2013. Leopoldo Viriato Saboya Nelson Vas Hacklauer Gilberto Antônio Orsatto Nilvo Mittanck Antônio Augusto de Toni José Eduardo Cabral Mauro Ely David Mizrahi Luiz Henrique Lissoni Wilson Newton de Mello Neto |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 20, 2013
| By: | /s/ Leopoldo Viriato Saboya | |
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| Name: | Leopoldo Viriato Saboya |
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| Title: | Financial and Investor Relations Director |