BRF Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 16, 2023

There are 2 speakers on the call.

Operator

Good morning, ladies and gentlemen. Welcome to BRF's conference call to discuss results regarding the 1st quarter of 2023. This conference is being recorded, and the replay can be accessed on the company's IR website fri.brf global.com. The presentation is also available for download. At this point, all participants are connected in listen only mode.

Operator

And later on, we'll start the Q and A session when instructions will then be provided. Before proceeding, we would like to clarify that any forward looking statements are based on the beliefs and assumptions of BRF's management and the current information available to the company. These statements may involve risks and uncertainties as they relate to future events and therefore event on circumstances that may or may not occur. Investors, analysts and journalists must understand that events related to the macroeconomic environment, industry and other factors could cause results to differ materially from those expressed in the respective forward looking statement. Here with us today in this conference call are Mr.

Operator

Michael Goulart, CEO and Fabio Mariano, CFO. I would now like to turn the floor over to Mr. Gularte, who will start the presentation. Mr. Gularte, you may proceed.

Operator

Good morning. I would like to thank everyone for attending our Q1 2023 earnings conference call. During this period, we remain focused on executing our efficiency plan, which advanced consistently, showing progress on all our work fronts. We have evolved in our operational indicators with emphasis on food conversion, mortality yield, daily costs and level of logistics service. We also have advanced in commercial execution and in the share of higher added value items in our portfolio.

Operator

I now invite our CFO, Fabio Mariano, to present the results for the quarter and then return afterwards to provide more detail of our progress and make the final remarks on this call.

Speaker 1

Good morning to everyone joining us. In the opening slide, I'd like to highlight our main financial indicators for the Q1, starting with net revenue, As for EBITDA, we reported BRL607 million in the quarter, an EBITDA margin of 4.6%. Our operating cash flow was BRL872 million, far outperforming our cash generation 1 year ago. In working capital, we continue to make substantial headway, reducing the financial cycle quarter. Call to 7.6 days, one of our shortest financial cycles on record.

Speaker 1

Inventory turnover reached 88 days, 14 days less than in 2022. Ending the slide with leverage, we reached 3 0.35 times our EBITDA for the last 12 months. Our focus is to strengthen our capital structure, Promote the reduction of our net debt and consequently our interest charges so that leverage historical evolution of our gross profit with profitability of close to 13% in the period. We're reporting gross profit of R1.7 billion dollars to the left, we also notice the performance of our EBITDA as we highlighted earlier. In the next slides, we present of the performance per market and business segment.

Speaker 1

Starting with Brazil on Slide 5, we noticed progressive development in our EBITDA margins, especially when we disregard seasonal sales of commemorative products. This performance is even more significant when we look only at the portfolio for processed products. I'd like to highlight for the Brazilian market new progress we've made in business fundamentals, which have allowed us to gain competitiveness. Within this progress, I'd like to mention the improvement in our commercial execution, ensuring greater capability with an increased number of active customers and greater adoption of the prices suggested for the retail market. This improved execution also allowed us to make progress in our service level metrics Going up by more than 10 percentage points.

Speaker 1

I'd also like to underscore the launch of Sadia's HOP bulls line, the result of our prioritization project With greater commercial impact, the market share of processed food and spreads ended the period unchanged at 40%. On the next slide, we see slightly more promising macroeconomic scenario and we see progress in indicators such as consumer confidence and income levels, which are closely related to the sales of processed foods in Brazil, which account for 75% of our sales volume. On the next slide, We bring you the international market outlook. In the chart on the left, we see an EBITDA that's been heavily impacted by the adverse scenario for European experts. Our EBITDA margin was negative by 1.7%, mirroring the persistent chicken oversupply pressuring our sales prices.

Speaker 1

However, we can already see significant price recovery early in the second quarter. We continue to expand our market alternatives with 3 new licenses, 13 suspended reversions and Reverse suspensions, I'm sorry, and many renewals for markets such as China, Malaysia, Chile, Mexico, Peru and others. On the following slide on qualitatively terms. We highlight the Halal market With the rebound results for Turkey nearing the increased supply of high value added products in the Turkish market and a production that's balanced as a way to reverse the price trend locally. We reached about 26% share in value added products seeing the region's turnover.

Speaker 1

We maintain our market share leadership with Saia and Benoit with 30 7% 22% market share rates in the respective markets. We also saw higher than 50% share in Brazilian exports to the GCC area. Next, I show you the highlights of our direct experts. On the left hand side, which benefit from greater product availability given the increased productivity and efficacy gains, especially and yield, which we will detail further. Our direct experts from our plants have grown, reducing logistics costs and unsold inventories which have declined, improving business execution and relieving the amount of capital we've employed.

Speaker 1

We've seen gains and participation in chicken exports to the Americas, Africa, Japan and South Korea. And I'd like to end by talking about the more favorable scenario in Asia, given the higher chicken sales in China. In Pork, we continue to gain market share in Brazilian exports to the Chinese market. And I'd like to conclude the presentation on business segments talking about our performance in Ingredients and Pet. The industry reported a 19% EBITDA margin or BRL118 1,000,000 in the quarter.

Speaker 1

We continue to realize synergies in pet, expanding our storage capacity, improving our level of service and increasing our presence in the direct to consumer channel. We've also started operations of a new product line in channel. In ingredients, we've made progress into new markets, broadening our business alternatives and increasing our line of hydrolysis for the domestic market and experts. We continue to add value to our byproducts in order to maximize business integration. Moving on to the following slide, I'd like to draw your attention to our business outlook for the company with highlights on the first chart on the left.

Speaker 1

The sharp price recovery for most chicken cuts in April compared to the average prices during the Q1 of 2023. We've seen double digit increases for high volume cuts. Data source or the prices charged by BRF itself. We also show you a price preference in the Brazilian market in the second chart. Lastly, we'd like to reinforce that we are experiencing the materialization of a scenario of decreasing grain prices, which we had already anticipated to some extent.

Speaker 1

Substantial drops have begun in March with results in our COGS expected to become more visible starting in the second half of the year. Next, I will share some progress in our efficiency program, which will be quantified in numbers by Miguel later on. I'd like to show you the comparison with the same period last year, even though the basis for comparison can be seen in our material. We noted a decrease in feed conversion for poultry and pigs by 4.3% and 1.8% respectively and the chicken mortality rate, which decreased by 1.4 percentage points. In manufacturing, we've increased our yields by 1.6 percentage points and halved process losses.

Speaker 1

In logistics, we reduced our per diem costs by more than a third and increased our service levels in Brazil by more than 10 points as we mentioned before. Over the quarter, we also saw highlights in sustainability with achievements such as reduced water consumption by 4% per tonne compared to the base year of 2020. We expect to deliver on our commitment to ensure 100% cage free birds in our integration system. We have made progress in the traceability and and direct grain suppliers in the Amazon and Serato Biomes from 45% to 75%, reinforcing our commitment to a deforestation free chain. And lastly, we've advanced in mapping and mitigating the reduction of Scope 3 greenhouse gas emissions moving forward with 20% reductions as we discussed for Scope 1 and Scope 2 in terms of absolute emissions.

Speaker 1

Now I would like to show you some information about the company's capital structure. The chart on the left show you the development of our net debt and leverage levels, indicators we have already underscored early in this conference. On the right, I'd like to point out the debt profile, which is still diversified and elongated with no concentration of repayments in the short term and a liquidity position that's still higher than but still over BRL12 1,000,000,000. There is cash available to face amortizations until 2027. The next slide, we show you our free cash flow and operating cash generation of BRL872 million and investment cash flow of BRL824 million and BRL958 million in free cash flow without exchange rate effects, leading to a free cash consumption of R9 BRL10 1,000,000.

Speaker 1

On Slide 13, the final slide, we can see the development of our net debt Between these quarters, we report a net debt of BRL15.3 billion. The execution of our demobilization plan is going forward as planned

Operator

I would like to highlight that as previously mentioned here that throughout this quarter, we made consistent progress on all fronts of our efficiency plan, the BRF plus capturing BRL418,000,000. We improved our key operating indicators compared to the Q1 of 2022 with events 4.3% in food conversion and reduced animal mortality by 1.4 percentage points. In industry we had advanced 1.6 percentage points in yield and also cut production waste by half. In Brazil. We continue to make progress in terms of commercial execution, increasing customer base and at the same time increasing the number of items sold.

Operator

The level of general logistics service has also improved significantly as already pointed out. Our demand and production planning, pricing strategy and more disciplined inventory management boosted the process category profitability gains in yet and other quarter. In International Market, we also advanced in our strategy of diversification for exports with the achievement of 3 new qualifications and 3 reverses of solutions expansions, one of which was for China, increase by 1.7 percentage points, the share of higher value added items in Gulf countries and Turkey, where we reached 45.9 percent of share of this type of products in sales. Our liquidity position remains comfortable and our debt is extended and diversified. We are carrying out the divestment plan announced in the last quarter head of plant base and with all fronts underway.

Operator

Looking at the market and at the variables that are not directly under all control, we can observe a recovery trend in chicken export prices compared to those in the beginning of the year. We are also experiencing a scenario of sharp drop in the cost of grains, which will boost together with the gains from efficiency plans, the company's profitability gains over the coming quarters. Last but not least, our leaders remain committed to boosting high performance management. We are dedicated to the search for greater efficiency, simplicity and agility 2 10 increasingly consistent results without neglecting our non negotiable commitment of safety, quality and integrity. We are all working hard and focused to face the challenges and capture the opportunities that the coming quarters will bring.

Operator

Thank you.

Speaker 1

Question and answer session for investors and analysts. First. The question comes from Mr. Gustavo Troiano from Itau BBA. Please you can activate your microphone.

Speaker 1

Good morning, Fabio. Good morning, Miguel. I have a couple of questions. First of all, I'd like to talk about the two cases of bird flu we saw in the news yesterday. I'd like to hear from you even if qualitatively, what's the probability you're working with internally That an embargo could be put on Brazilian meat.

Speaker 1

And if possible, I'd like to make an exercise to compare this with 2018, when we had the same case occur with Europe and we needed a reallocation for the domestic market here in the domestic market in terms of supply and demand. So if we could compare The situation with that of 2018, what has changed and what could be different if an embargo was created? And I'd also like to understand on the international side, we saw an improvement in prices, we saw double digit prices in April versus Q3, but I wanted to understand this improvement in your margins. If these wider margins quarter over quarter that we've seen in the last few quarters is only in terms of prices or should we expect also some decrease in unit costs That should be more significant in the second half. But I also wanted to understand what Q2 would look like if we should expect some improvement and how significant that would be In the near term, should we expect high single digit margins on the international side?

Speaker 1

I would like to know if that makes any sense. Thank you, guys. Good morning, Gustavo. I will take your first question and Fabio will take your second. We were informed by the Ministry of Agriculture in a technical note and then we say no from Hi, 3 wild birds that were If that occurred with migrating birds and not in production birds, the communication about the case was immediate, both from the Ministry of Agriculture and ABPA.

Speaker 1

So currently, There's been no communication in terms of closing the market As the article we've mentioned, 10.4.8 mentioned, evidently, Brazil's entire sanitary system is robust and the steps that have been taken In the last few years and even more intensely so in the last few quarters is still in effect. So that this status remains the same and so that Brazil doesn't lose its licenses, it's sanitary licenses. So I'd like to ensure that there's no evidence and there's no imminent embargo for the Brazilian bird export. There's no case of bird flu in industrial production animals. This was reported for wild animals.

Speaker 1

So, we do not expect Any news, any major news on this sense, the steps have been taken and the good practices and the robustness of the Brazilian market allows us to navigate this moment, a time all of us are ready for not only us companies, but also the control systems with our associations and regulating agencies. About a potential impact, I think it's important to understand that Brazil's current situation In terms of commercial alternatives, it's very different to the 18th group. Brazil has gained access to many access that were not available to us in 2018, which allows us a geographic diversification That also works as a sanitary hedging strategy and even timely or even temporarily allows us to not have such a great impact from embargoes of this kind. And here at BRF with The Perdigao and Sadio brands, we can navigate any type of scenario adverse as it may be. And so I'd now like to turn over to Fabio, who will add to my answer To your second question.

Speaker 1

Good morning, Gustavo. I'd like to address the exports issue. I think it's important to bear in mind that any protein expert platform have its performance affected by supply and demand cycles. You are right by saying that export prices are already rebounding significantly early in Q2. But I'd like to call your attention to the fact that this is not the only lever for capturing effectiveness.

Speaker 1

It may be an important one, but it's not the only one. I'd like to remind you that we are also capturing opportunities in the efficiency plan, Which will affect the sales cost and also the materialization of the price decrease in grains, whose results should become more clear as of the second half, but the inventory turnover It's already being affected by the average cost. So in Q2, we should already see some effect of that change. About our margins, as you know, We cannot offer you direct guidance. So I prefer not to address that issue.

Speaker 1

But I'd like to reinforce that starting in Q2, we expect to see a different market reality in terms of experts, especially Poultry Experts to All Destinations. That was perfect, everyone. Thank you for your answers.

Operator

Question. Our next question comes from Zabela Simonato with Bank of America. You may proceed, ma'am. Good morning, Miguel. Good morning, Fabio.

Operator

Thank you. I have two questions on my side. The first one is related to the cash flow and the working capital that you mentioned in the release. You mentioned the improvement in the cycle. Could you provide more detail what were the variables involved, session looking at inventory levels.

Operator

And still on the same topic, when we think about inventories of materials and inputs. And looking at the downward trend of current prices, could you tell us what would be the average time you have green storage so that we can have a better clarity on the capture of lower prices. This would be my first question. And the second one? Period that there were increases of exit of that down the road.

Operator

And so looking at CD, are there players considering the increased prices that you have practiced. Thank you. Good morning, Isabela. Now beginning from cash flow. As you notice we saw the inventory turnover.

Operator

And the main highlights in this sense, maybe the company has provoked results because we extended the inventory levels raw materials I referred to grains because we have anticipated this scenario of downturn and the cost of wheat and soy. So we are shortening the time between the commodities and consumption. And as a result, we can see the reflection of cost of products sold. As for the timing of this trend, TG, I understand this is a very sensitive information to provide you with, I'd rather not. And addressing the second part of your question related to the environment of the domestic market.

Operator

I would like to point out that we understand that as of the Q2, we are going to have a more attractive environment if we consider consumption. I showed you the confidence of consumer, of Brazilians that have to do with the de acceleration of inflation levels. And what I can also say from the strategic viewpoint is that BRF, the leader of the main categories of processed food will influence in a positive way the competitive world, by means of quarter. I would also like to say that in Brazil, price is not the only source of intensifying our results. During the presentation, we mentioned the halfway we made in the commercial execution.

Operator

So I would like you to look at that and pay attention to the number of clients we added to quarter basis more than 10,000 and the efforts we made at the point of sales to improve the diversity of our portfolio trading attempt by the pace book of suggested prices that are being observed by the If you allow me, Fabio, I will add to your answer in relation to the grades. In the past quarters, we have been discussing the excellence of information from the about the predictive models that we have. Those models pointed to this drop in the grain prices. So we use this model in order to project our strategy. And today, we see that this strategy is very successful and aligned with the drop that we are experiencing in grains.

Speaker 1

Our next question comes from Thiago Bertolucci with Good morning, everyone. Thank you for your presentation. Miguel and Fabio, thank you for taking my questions. I have 2. First of all, I'd like to follow On the Brazilian side, you mentioned a slightly more resilient pricing and granted when we look at the release excluding The Christmas prices, it seems that the portfolio saw a 1% increase quarter over quarter, 4% in processed foods.

Speaker 1

So Indeed, we are seeing a P and L statement that's very reliable. However, the consolidated saw a decrease year over year. And this is at a time when in theory you're still ramping up your capacity. So my first question is Moving forward, how should we think about the balancing of growth In product mix like for like sales considering that there is more capacity To be added to the industry? That's my first question.

Speaker 1

And the second, I think you changed your disclosure with shorter breakdown. And if you could talk even if qualitatively, how did your volume price and margins performed for Halal and other products. These are my questions, please. Well, I will turn over to Fabio. Good morning, Thiago.

Speaker 1

So starting with Brazil, your analysis is accurate When you compare our regular portfolio for the Q1 with the Q4 of last year, whether we disregard The holiday celebratory product portfolio. I think that also if we were to disregard the result of fresh products. This is also being hurt in Brazil because of A protein oversupply that's taking place worldwide affecting sales of cuts for essentially every destination we sell to. So, if we were to disregard that effect as well, we could say that the profitability for Fresh products in Brazil is already over 2 digits as well, especially when Compared to processed foods, which account for 75% of our domestic sales, this is a good question issue and we found ourselves Now what we see moving forward in that sense I'd also like to say that when we strategic plan out that all of that allow us to scenario, but also in the international scenario. Now, Thiago, I would like to take your second question and I will answer you qualitatively about the breakdown of our international market sales.

Speaker 1

And what I would like to point out in Halal is that we are still Increasing the representativeness of our high value added products in our sales in the area. In the presentation, we underscored that we increased this is an increment over 2 percentage points. The same can be said about Turkey. I remember that when transitioning Between 2021 2022, we opened a new line of processed products in the area, which has also allowed us In the GCC area, that's about 37% market share and in Turkey, about 26%. Now moving toward the sub area of Asia and indirect sales, Despite the more adverse scenario we have discussed earlier, we continue Experts from Brazil.

Speaker 1

Just to give you an example, we gained 7 points in exports to the Americas, 3 points in exports to Africa, 1.5 points in exports to Japan, and I'm talking about poultry exports. And for 4, we gained over 10 percentage points in our exports to China. The rehabilitation of our lupus de Rioverde plant, both to sales chicken cuts and also pork cuts, quarter. This is one of our most important plans in terms of production capacity and efficiency. So this is also Very representative for us when it comes to the experts who can breakdown for you about our international market operations.

Speaker 1

That was great. Thank you.

Operator

Question. I would like to ask 2 questions. The first one is related to an industry review in relation to offer. April when we look at prices. But when we see July.

Operator

We do not see any drop when we look at related to chicken. So I would like you to explain what explains this high prices? TC, this rationalization offered to some degree by other competitors. And for BRF specifically. Could you disclose numbers related to the smaller total production, if they are consistent with the figures in terms of sales volume or if there is any mismatch that we we look at?

Operator

That would be my first question. And the second one is related to what Miguel mentioned in his presentation about the sales of assets. The divestment plan, is it according to schedule? Is there any expectation? Would you have any detail to provide in terms of timing or even the amount of divestments method that we should consider in addition to what we have already seen in the results of the Q1.

Operator

Okay, thank you. Hello, Thiago, answering the first part of your question, and then I'll turn the floor over to Fabio. Obviously, when you EU's efficiency plan model such as the case of BRF, you made the perfect adjustment both for production, operation and sales. So you have an alignment considering the 3 segments, how you produce, how you convert and how you sell, you maximize all the logistics and the commercial execution as well. This is today, both in the domestic and of 2022, we said that BRF made adjustments of the inventory to be very well positioned for the beginning of the year with the perfect level of volume, good commercial June 28 due to the slaughter processes.

Operator

Our position in this regard has not changed in any significant manner. You can consider a share thinking about the cultural protein equivalent to 24% or 25%. And when we think about swine, the share quarter that happens in the market about 20% or 21%. And that who will probably help you quantify and reach a figure. When we think about the circumstances involved that had pressure on the imports prices and you consider the supply.

Operator

Data estimation in Brazil. That this is something that would involve the whole world. There is a downturn 2nd payment in production. There is a reduction of storage when we compare the quarter with the previous quarter. Yes, we need to consider those data, but web by China.

Operator

Interesting information about sales one with its opening up market favoring retail and conversion. And we can see that there is a recovery on Mexican price, which is very remarkable, very visible. And I would like to say that the company continues very focused in the diversification of what we do in the market. Whenever we see opportunities we see, we also have licenses and the community at Lucas, which is also very representative, something that is new today. We want to Amplify and Broaden the Exports Platform.

Operator

And I did not even mention the sanitary problem, is something that we have been monitoring very closely with China, which is something that can affect the swine population. This is something that we are going to monitor closely because this can cause a very positive results for the prices. Very clear. Thank you. Okay.

Operator

I'm going to make a follow-up on what Miguel said on the answers. When we look at the numbers of deduction on gross revenue, especially in Brazil suggesting that this season quarter. And as Fabio said, we have looked at facilities, which is one of the most important facilities. Now it's going to be taking great strategic teams and also from our marketing team, production team, quality. Meeting.

Operator

In other words, this is a number that does not come out quarter of initiatives when the company is going back to basics, simplify and go straight to the other point. So let me provide some context based on the question you have asked. Our scenario is very important in relation to Grains market. Call. It's not typical when we consider volumes and a significant drop.

Operator

It had happened for many years and with the company is an improvement and we have the humility to understand that we can refer and we will capture the opportunity opportunities in this challenges scenario. So we had lots of problems last semester, but we are working by

Speaker 1

question. Our next question comes from Leonardo Alacar with XP. Leonardo, you can open your microphone. Good morning, Miguel. Good morning, Flavio.

Speaker 1

Question. In fact, I'd like to maybe hear a little bit more color in terms of your operational improvements. You talked about the 418 quarter adding to the $180,000,000 that came last year. This is we're talking about over $600,000,000 in efficiency gains. And you Say you don't have any specific guidance for that, but at the same time as you dive into this operating fronts, production, operations, logistics, You can usually see more clearly precisely where the opportunities are.

Speaker 1

So if you could just Maybe update us on what's been done so far. Of course, you've reported on feed conversion and reduced mortality rates. But I wanted to hear if the level of efficiency or opportunities for value capturing is what you were expecting or if you can already see opportunities to continue to do that? And if you could also give us some prospect, we're talking about over $600,000,000 Is this even quicker than expected when you begin to address this Or tap into this since you've joined BRF. Leonardo, I will start This answering this from the generic perspective and then Leonardo will quantify and give you more detail.

Speaker 1

To answer you very Honestly, what I found here is really exceeding my expectations. I found a company that was Ready to reap the benefits that it could with all the information needed. And if we were to quantify these gains, I'd say that we established a 4.5% industry. I can't stop being pleasantly surprised by BRF. This situation that we faced in these 1st few months is a challenging one, but I still see BRF as highly qualified information system allows us to navigate Good morning, Alina.

Speaker 1

So quantitatively, BRL218 1,000,000. Just to remind you 1,000,000 of rice coming from. On the agribusiness side, we have R110,000,000 rice between mortality rates that have been reduced, you can expect a slightly positive impact of the cost of the living cattle. The cattle will be slaughtered and then its raw material will be processed and then it will be sold. So that will ultimately reflect on the cost of the product sold.

Speaker 1

So there is some turnover in the entire chain. And then thinking about manufacturing one step further, we are capturing RMB86 1,000,000 In profitability and then in logistics, by reducing our storage costs, per diem costs, we Another RMB87 1,000,000,000 and this is immediate. We can tell you that this is already reflecting in our Q3 2023 results and then we have reduced idle capacity and process losses, which account for about the BRL88 million that we have left. Just to finalize the answer to your question, I would remember this when I was at Marfrig, I was asked this question and when we compare quarter to quarter at Marfrig And now we have the opportunity to apply this efficiency plan here at BRF as well, Which has a huge impact on the company's operations at large. Yes, absolutely.

Speaker 1

And I'd like to thank you, Miguel and Fabio for the details, but if you could do an exercise to tell us about what is your company doing in terms of when we compare it to the industry and especially considering The strategies that you have on the commercial front, which I understand also include your international operations. You already break down The efficiency, but can you already see gains in efficiency on the commercial side for your international operations? Well, we usually say that the best practice for the company is to repeat the same performance in one The same performance that it had in one place and a different place, whether that's abroad or not. And our practice, If we have one practice in morale, we can adopt the state. Impact in different locations.

Operator

And what do you see as the best of the recent changes to the historical results? And maybe a follow-up to Fabio about prices. Fabio, what I understood? You have already started initiatives in April, but the opportunities of having some additional increase increase those prices that you did not increase, which will be those categories if so. And the domestic price of chicken is still a bit impacted.

Operator

Where do you see room for increasing prices? Thank you. Lucas, answer your question. Yes, you're right. 2019 was the Phase 0.

Operator

And what we see in practice is that this was the correct base to be used because there was a gap between 2019 2022. We understand that 2022 is going to be exceeded and we are going to work hard for that purpose. We are focused on that. We have all those indicators that are monitored daily, if not hourly. BRF system is an online nearly online system.

Operator

We understand how things are happening online so that we can make decisions in 2019. That was the top of our plan. So today, we're much closer to it. One. And of course, this is going to be a milestone that we are going to exceed.

Operator

I have no questions about it. Some KPIs considering the KPIs that we use as a basis considering 2019 have already been TID. And now answer your question, we see gains in all segments. If we go to the field, we and which are the ones that are going to have a better performance than in 2019. If we go to the commercial area, both considering exports and domestic markets.

Operator

We are sure that we are going to exceed the numbers, the KPIs that we use as phases. All our departments, PPEs, we are all working to that end. And it's not only a matter of willing to do. We have a plan and we are implementing this plan in a very dedicated and disciplined way. Good morning, Lucas.

Operator

Now addressing the second part of your question. I assume that when you mentioned prices, you referred to the domestic Brazilian market. If not, let me know. Yes, I said that we've been trying to impact the categories of which we are leaders by price pass through, and this is something that happened in April. And when you ask about opportunities of new increases of prices, I prefer to look at the capacity of the market to manage this.

Operator

This was something that was done recently. And sometimes the reaction can be felt immediately by the competition. In some cases, the response will be partially. And so what I need to say is that we have to understand the capacity of the market to absorb those cost pass throughs or price pass throughs and we also have to understand the competitive environment. When we increase prices, we do all the calculations in terms of elasticity of the categories.

Operator

What I can say is that this is a movement that is well accepted. If there will be future opportunities to increase prices, it's too early to say the market will tell whether or not this is going to materialize and we are going to monitor them very closely. Thank you.

Speaker 1

This concludes the question and answer session and BRF's conference. We'd like to thank everyone for joining and wish you a great day.

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Earnings Conference Call
BRF Q1 2023
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