Snapshot about the Beef sector in Argentina including its M&A outlook.

1. February 2016
By Mariano Gómez Quiroga
Strictly Private and Confidential
First Corporate Finance Advisors S.A.
Beef sector
Argentina - Market snapshot

2. © 2016. First Corporate Finance Advisors S.A. Strictly Private & Confidential2
3,300
3,150
3,380
2,620 2,530 2,620
2,850
2,700
2,850
345
266
419
195
157
239
135 135 128
0
50
100
150
200
250
300
350
400
450
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2007 2008 2009 2010 2011 2012 2013 2014 2015
Beef production & export (thousand metric tons)
Production Export (right axis)
Beef market
 Argentina is a key player in the beef international market,
holding solid competitive advantages for beef production.
 In recent years the industry was severely affected by a
noncompetitive exchange rate, exports withholding tax &
restrictions and steers supply shortage. However, the country
has remained within the Top-5 of beef producers
worldwide (5% of the global production).
 The new government (in office since dec-15) is boosting the
recovery of the beef industry, enhancing its development
perspectives by some of the following actions:
- Elimination of withholding tax & restrictions for beef
exports.
- Competitive position improvement through a 40%
currency devaluation (the price per kg diminished from
US$ 5.8 to US$ 3.2).
As a result of these measures, revenues in the industry
are expected to increase more than 50%.
 An increase in the production of heavier steers, with a keen
international demand, is expected during this year, which will
revitalize the export market.
Highlights
• Argentina’s beef is highly demanded worldwide, famous for
its quality and produced from excellent livestock (chiefly
Aberdeen Angus & Polled Hereford breeds).
• The present positive outlook for the cattle raising business
in the country, means an increase in the supply of animals
for slaughterhouses.
• Argentina’s beef industry holds a comprehensive and well-
developed infrastructure system with idle capacity ready to
facilitate a production growth.
Source: USDA 2015 Livestock report & SENASA 2015 Carnes report.
Beef production & export – Argentina (k tons)

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Slaughterhouses – Players
 Unfavorable agribusiness policies implemented by the previous
administration resulted in a 70% exports decrease and a 51%
shrink in the production of export steers in recent years, as
farmers commercialized lighter animals for the domestic market
trying to overcome the negative export situation.
 As a result, the market concentration increased and approx. 200
licensed slaughterhouses remain – 24 companies participate in
the Hilton quota (12 are responsible for 80% of the quota).
 Slaughterhouses have the opportunity to fulfill the Hilton quota,
30 k/tons of high quality beef exported to Europe at a preferential
tariff, after years of quotas not being met.
 Strong presence of Brazilian companies.
31%
17%
15%
13%
6%
18%
Exports destinations 2015 (tons)
China
Chile
Germany
Israel
Netherlands
Others
Main Players
 JBS (Brazil)
 Quickfood - BRF (Brazil)
 Friar
 Carnes Pampeanas
 Arre Beef
 Marfrig (Brazil)
Other Players
 Gorina
 Ciaber
 Ecocarnes
 Rioplatense
 La Anónima
 Río Segundo
Source: IPCVA – December 2015 Report.
Beef export destinations (2015) - Argentina

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Recent M&A deals in Beef/Poultry/Pork
# Year Target company Subsector
Bidder
company
Bidder
country
Deal description / rationale
Value
USD
1 2016 Frigorifico Arroyo Beef
Carnes
Rionegrinas
Argentina
Local company Carnes Rionegrinas acquired the slaughterhouse
Arroyo based in the province of Rio Negro which had declared
bankruptcy in early 2015.
-
2 2015 Frigorifico Sugarosa Beef Grupo Mattievich Argentina
Local group Mattievich acquired Frigorifico Sugarosa which is
based in the province of Santa Fe. Mattievich, who has a strong
presence in the local market, continues to expand its capacity.
-
3 2015
Campo Austral
(Pampa Capital)
Pork Brasil Foods Brazil
BRF acquired one of the largest integrated pork producers in
Argentina, which was owned by private equity firm Pampa
Capital.
85
4 2012
JBS
(San Jose
slaughterhouse)
Beef
Province of Entre
Rios
Argentina
The province of Entre Rios acquired the operation of a local
slaugtherhouse which had been closed by JBS, with the aim of
keeping in operation the only slaughterhouse in the province.
17
5 2012
Quickfood - Paty
Brand (Marfrig)
Beef Brasil Foods Brazil
As part of an asset swap deal, Marfrig sold Quickfood and its
leading brand Paty to BRF. Marfrig maintained certain operating
plants and the cattle business that were part of Quickfood.
-
6 2011/13 Avex / Danica Group
Poultry / Other
food products
Brasil Foods Brazil
By acquiring Danica Group, BRF added to its portfolio the
poultry producer Avex, and other consumer products such as
margarine, mayonnaise and sauces, among others.
190
7 2011 Finexcor (Cargill) Beef
1) JV of local
meat companies
2) Friar (Vicentin)
Argentina
Cargill decided to exit the meat business in Argentina and sold
its local operation, which included two plants, to local players.
-
 In recent years M&A activity has been sluggish due to uncertainty in the sector. However, in anticipation of
economic changes some Groups have already started to position themselves and activity is expected to rebound.
 While Brasil Foods has been expanding its presence in the country, JBS and Marfrig have reduced the size of
their operations.

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M&A outlook
 Under the former government the beef sector companies struggled to be profitable and in many
cases their financial strength has been undermined. Therefore, most firms need capital to increase
their production and grasp the new opportunities.
 Target companies should hold export licenses, participation in the Hilton quota and a strategic
location to guarantee a reliable and competitive supply chain.
 The industry characteristics make the due diligence process key, as some companies may hold
liabilities and contingencies.
 In a market that has become more concentrated, there are opportunities to grow across many
segments, specially for integrated players.
 Valuation multiples continue to be significantly below regional peers. As the economy gradually
opens, and the M&A deal flow increases, valuations are expected to soar.
 Entry of foreign players is expected in the medium and long term. Investors continue to look
closely but in many cases are still waiting until the new government consolidates its governance.
 Timing and the ability to anticipate changes is key in developing a successful market entry strategy.