Operator: Good morning, ladies and gentlemen, and welcome to BRF SA Conference Call to discuss Third Quarter 2016 Earnings. This conference call is being transmitted via webcast in our website www.brf-br.com/ir. At this time all participant are in a listen only mode. And after the presentation, we’ll open up to question-and-answer session. Instructions will be given at that time.

We would appreciate each participants make only one question. [Operator Instructions] Forward looking-statements related to the company’s businesses, perspectives, projections, results and the company’s growth potential our provisions based on expectations of the management as to the future of the company. These expectations are highly dependent on market changes, economic conditions of the country and the sector and international markets, thus are subject to changes. As a reminder, this conference is being recorded. This conference will be presented by Mr.

Pedro Faria, Chief Executive Officer; and Mr. Jose Alexandre Carneiro Borges, Chief Financial and Investor Relations Officer. We now hand the call over to Mr. Pedro Faria who will begin the conference call. Mr.

Pedro, you may begin. Pedro De

Andrade Faria: Good morning, ladies and gentlemen, thank you very much for standing in today’s conference call. In the second quarter call I told you that industry date at the time indicated that the worst of the cycle was already behind us. Since then as a matter of fact, the main indicators matched our expectations and improved. Corn prices declined 31% compared to the peak in May, even though they remain above historical levels.

The reduction in chicken production in Brazil accelerated and this was reflected on international U.S. dollar prices which continue to recover nicely, even though investors are still above normal levels in certain regions. However, the positive effects of these improvements in the third quarter were completely canceled out by the appreciation of the real in the water. This appreciation not only affected our results, but also prevented Brazil from improving its competitiveness in international markets. In the domestic market, the effect of the economic contractions continue to affect consumption and consequently our mix of products and channels.

Data from Nielsen shows a sequential reduction in the market of a foreign category such as ready-to-eat meals, which should decrease another 4 percentage points since the last survey. Despite our efforts to reinvent the category such as the launch of Jamie Oliver’s new line in order to improve the profitability of our operations. In September we have increased prices once again in Brazil. We implemented a 3.5% raise. All the work we did on execution and implementation of our categories and channel strategy help us improve our results.

In the quarterly comparison, we expanded volumes, revenues and operating margins in Brazil. We remain confident in our global expansion strategy, which has been providing very positive results. The integration of the acquisitions we made including Calchaqui of Argentina and BRF Thailand continues to provide results above our initial projections. In the third quarter 2016, we announced the acquisition of a processed food operation in Malaysia, an important consumer market of almost $2 billion, which we added to our Halal platform. We see great potential in this platform and I think we anticipate this will be a major driver of our global growth.

Moreover, we have committed to invest in the IPO of COFCO Meat, which will provide a significant exchange of knowledge and best practices helping us to accelerate our expansion in China, a market we believe has great potential. We believe that we emerge from this moment even stronger and much more confident in our long term strategy and are ability to mitigate cyclical effect. Through the events in the value chain and increasing productive and commercial efficiency, a reduction in expenses with our zero-based budgeting and a portfolio with average stronger brands. Looking for 2017, we feel industry scenario is a lot more positive in which the levels of chicken production in Brazil should get back to normal and corn prices should return to much healthier levels closer to the historical export parity. At the same time we continue to see room to increase international price in U.S.

dollars, especially with normalization of inventories and the return of Brazilian exports to more adequate levels. In Brazil, we expect that the economy should start reflecting the improvement in consumer confidence. In this scenario, we are very well positioned to capture gains in price and profitability, coming mainly from the improvement of volume, which will reduce the idleness of our land and above all from improving in our mix, which will allow us to have gains in price that we implemented throughout 2016. Our innovation program should intensify in 2017. It should be one of the main pillars of our strategy for brands and categories as we had the opportunity to show to you during the BRF SA and one of the main growth drivers for BRF in the medium and long term.

Finally, I'd like to reiterate we remain confident in our financial help and level cash even after all the acquisitions we made throughout the year. In the third quarter 2016 we have issued bonds in the amount of $500 million at one of the lowest rates among Brazilian companies, showing the continued confidence of the markets in BRF. I will now give the floor to Alex Borges who will provide more details about third quarter results. Thank you very much. Jose Alexandre

Carneiro Borges: Thank you, Pedro.

I will reinforce some three quarter 2016 financial data. The third quarter in general was marked by industry improvement such as corn price, a drop in Brazilian production and increasing prices in U. S. dollar term. However, we suffered a headwind from exchange rate.

Brazil results have a broader improvement but international market suffered more than expected especially here. Going to more details into our numbers, our net revenues increased by 2.7% year-over-year and was virtually stable compared to the second quarter, reaching R$8.5 billion. It's important to highlight that volume increased by 6.1% year-over-year and 3.4% compared to the second quarter, even if we were to exclude acquisition net revenues increased by 2.6% compared to the second quarter. Despite the volume increase, revenue remained stable in the quarterly comparison due to depreciation of the Brazilian currency, the real. The real appreciated 7.5% against the U.

S. dollar, 15.2% against the pound and 12% against the Argentine peso. In addition to the exchange rates two factors affected our results in Brazil. First, weak domestic demand, which affected our mix of products and channels and second, sales and promotional price due to the shelf life of product in the inventories mainly the default [ph] effect. Our gross profit reaches R$1.9 billion with the gross margin up 22.1%.

This result was strongly affected by the diverse business environment we are experiencing. Going to more details concerning the dynamics of the corn even though prices decreased by 31% compared to its peak in the second quarter 2016 the supply remained tight and prices were well above the export parity. This is story is typical considering Brazil is structurally a major exporter of corn. This dynamic maintain Brazil in an unfavorable competitive position in terms of its cost compared to other producing countries, a scenario that should return to normality throughout 2017. As to the supply of chicken, market data indicate an increase of 12% [ph] in the average placement in September compared to its peak reach into 2015.

As we had anticipated in our last earnings release the cycles current by the aim of the second quarter 2016 and the Brazilian Association of Animal Protein, ABPA, expects production to continue to decrease in the next month, which should provide a scenario of greater balance between supply and demand. Similar to the analogies we disclosed last quarter we tried to isolate the main markets variable to identify the potential impact of this cycle in our results. In the first nine months of the year, taking into account only the impact of grain price in U.S. dollars in the exchange rates, we estimated the negative cycle would have generated an impact of approximately R$2.5 billion in our results. We were able to mitigate approximately 40% of this total a reduction of approximately R$1 billion.

This is the result of better commercial strategies regarding the purchase of grains in the sale of products, hedge strategies and increase efficiency in the formulation of feed [ph] and a better conversion ratio. In addition to the impact of the cycle, [indiscernible] also negatively impacted our results. We had an impact of R$112 million in the third quarter of 2016, which was well above compared to the $50 million figure in the third quarter of 2015. We should gradually revert this impact in our results as volume start to recover and we optimize our production footprint. Given the industry scenario we continue to seek greater internal efficiency, primarily in terms of expenses.

If we were to exclude the R$37 million expenses related to the Olympic Games in the quarter, our SG&A as a percentage of revenues would have reached 15.9% the lowest level in recent years. Our EBITDA totaled R$886 million in the quarter with a 10.4% margin. To better understand this number let me go into more details in key markets. In Brazil, results were higher compared to the last quarter, indicating the beginning of a gradual recovery process. Volume started to show signs of improvement and profitability start to increase, despite the negative effects of [indiscernible] and the Olympic Games.

The price increases implemented in September should primarily effect the fourth quarter together with the seasonal improvements from festivity products. We look at 2017 with optimism and expect a gradual improvement in the Brazilian economy together with a reduction in cost and a better execution in service level. All of that together with our innovation program should ignite growth in Brazil. In the Middle East, volume decreased in the quarterly comparison basically affected by seasonality of the summer and vacation periods, which coincides with the post-Ramadan [ph] period this year. All of this resulted in a lower local consumption.

Moreover, markets such as Saudi Arabia have been important, a smaller volumes in the past month which are higher local inventories, which post an additional challenge in terms of volumes and prices. The first month of operation of recently integrated business showed higher operational expenses than initially expected. However, we expect a different dynamic in the fourth quarter with consumption returning to normal levels and better results coming from cost to serve. The great results challenge that we face in the quarter was Europe where the impact of exchange rate was even stronger given the depreciation of 15.2% of the pound against the real in a quarterly comparison. The local competition dynamics did not allow us to further increase prices.

To provide an idea of this impact United Kingdom represents approximately 40% of our business in Europe. Moreover, high inventory of local producers who are not subject to the import quarter restriction make price pass through even more challenging. As to our financial results, net expense totaled R$425 million in the quarter. From this amount, we highlight the increased of net interest due to the increase of net debt and the payment of $32 million premium related to the tender offer of bonds. The present value adjustment increased to R$105 million as a result of a bigger accounts payable due to the increasing purchase of grains and the payment policies with extended terms.

Once again, this quarter we did not have any significant net financial impacts regarding exchange rates. Finally, we had a strong cash generation in the amount of R$1.4 billion, which allowed us to fund CapEX of R$641 million and to pay dividends of $460 million. Our leverage increased to 2.36 times primarily due to the decrease in the past 12 months EBITDA. Net debt increased by R$410 million in the quarter essentially impacted by the payment of interest interim equity. We did not buy back any shares and we did not make any significant payments for acquisition in the quarter.

We remain focused on managing our cash generation to maintain our financial strength and current ratings, which for us is a strategic relevant for our global growth project. These are my initial comments regarding third quarter results. We will now proceed to Q&A session. Thank you.

Operator: Excuse me, ladies and gentlemen; we’ll now begin the question-and-answer session.

Each participants may ask only one question. [Operator Instructions]. Our first question comes from Lauren Torres, UBS.

Lauren Torres: Yes, hi good morning everyone. Your comments for next year on Brazil, you seemed quite positive with respect to the industry and the macro environment.

So curious just drill down expectations for that business next year, you've been backward pricing this year. Just curious if you feel similar price increases are possible for you in 2017, there was a competitive environment as a result of that if you think it will stay rational? Then just the other side of the coin on mix as you’ve focused on more value-added brands. Is it more of that impact to the top line or is it price story, just trying to get a better sense of the price set opportunity next year. Pedro De

Andrade Faria: Thank you very much Lauren, this is Pedro good morning to you. We are hopeful that a lot of the tough things we did in through 2016, they will have a very positive cumulative effect in 2017.

So this was a year in which basically every month we had to go back to our clients and the tough discussions around price increases and tough input cost scenario et cetera. We think that given the outlook on grains, given the outlook on inflation in Brazil, this would be a lot less in our agenda going forward. So we can focus on the things we should be focusing, more importantly execution, service level and making sure that traditional trade comes back. I think we're starting to see the initial positive signs from our modern trade. We are gaining share, we are gaining volumes, I think we have a star performer in terms of China, which is the wholesaler [indiscernible] and carry.

So we think that – this thing that we are slowly building into a very tough year 2016, they will have a cumulative effect. So we cannot anticipate market dislocations all other factors, we don’t control playing against us. But the way we are setting our strategy for 2017 as we mentioned in the [indiscernible] it should be a lot of about growth execution, service level and bringing innovations. Our innovation calendar for 2017 is really something that we are very proud of. We have launched 25 items, new items, new categories in 2016.

We have 75 launches in our pipeline; those have a gross margin that we anticipate being some 15% [ph] higher than the current portfolio. In terms of service level we’re seeing positive trends and keep saying very critical KPIs like a [indiscernible] and things of that nature and we just finished our go-to-market exercise. It took us 9 months to roll it out; I don't anticipate having any significant changes in the way we operate in the market. So that would be also a cumulative function as we ride the learning curve or much more segmented approach to the market. So these are the reasons for very cautious optimism for 2017, of course based on tailwind on our back would not hurt us because we need the clients and consumers to be more confident and trading up and becoming again more oriented towards value and brand and not so much concerned about their disposable income.

So these are the things that you know cautiously, we think 2017 can be a real good year for BRF.

Lauren Torres: Can I just quickly ask as a follow-up then, considering these new launches and the opportunities you have. So how do you see Brazil as an EBITDA margins, as you were, returning back to 13%, 14% or do you have higher aspirations on that front?
Pedro De

Andrade Faria: Well, I think we have to take a gradual approach here. We have the first confront the brutal facts where we are today, which is much of below the potential of the platform that we have. So that we look at 2017, it should be a transition period; to ours what we think is the full potential, so not quite there.

But they think it's just feels very good to be on a positive trajectory. So I don't know, I cannot provide specific guidance on 2017, but I just hope that we will be on our way back to what we think is the deserved margins for our industry. I think maybe the most important factor, I highlighted in my previous comment is I'm just very happy not to go back to my clients every month, talking about price increases. We still feel like we should do something this year, okay so there are price increases that we are implementing somewhere in the fourth quarter. But as we move forward in the next year if we are blessed with input costs coming down it may mean that we can focus on the things that matter most, which is execution in service level and not so much trying to push prices to clients and consumers.

Lauren Torres: That’s clear. Thank you.

Operator: The next question comes from Pedro Leduc, JPMorgan.

Pedro Leduc: Hi, good morning, everybody. Thank you for taking a question.

On regarding Brazil still we get the cyclical factors to help you. But maybe do Brazil guys Leonardo and Rafael, can you talk a bit about the growth market rollout, which you mentioned just finished the 3Q? In that sense, if the rollout itself was disruptive to your volumes and share losses and if now once concluded, it’s more streamlined and if you see opportunities to regain space. That would be the first question, thank you. Pedro De

Andrade Faria: So Pedro, Rafael and Leo they are not in the call any more, we had them here for the Portuguese call but I feel they have to be out in the fields, helping us in achieve our sales targets. But you are right in your comment about go-to-market.

We feel that in the last 18 months we have significantly changed the way we service our clients and there is a learning curve that we are waiting to benefit us. So of course, I think a lot of the positive signs were piled up in a lot of those things. But in reality if you are one of our sales guys and your approach to market has changed, you have new clients to serve, you have new routines and disciplines to do, it won’t take us. And as a matter of fact we have been really; really focused on training, development, bringing more capitalization [ph] we have a pretty strong rollout of our technological platform bring algorithms and more intelligence to the firm. So sales guys they can perform even better, so these are things that you know they are not the silver bullets but they compound each one on each other, and then I think of 2017 we can reap the benefits of a lot of the hard work we have been doing the last 18 months.

Pedro Leduc: Okay thank you, I’ll go back and will ask another question later. Thank you.

Operator: The next question comes from Alex Robarts, Citigroup.

Alexander Robarts: Yes, hi, sorry can you hear me? I wanted to go to Europe for my one question and I appreciated the color that you gave us on the Portuguese call about the factors you know that that aligned to make the margin get significantly impacted. I'm just thinking about going forward you mentioned that it didn't seem to be at this time appropriate to try to raise prices.

I guess we’ve got a lot of local production from very low and competitive grain costs. At the same time, I recall you know one of the factors of interests with BRF Thailand, Golden Foods was that was exporting into Europe using a different quota. How can we think about the potential margin recovery in the European business going forward? I appreciate the Brexit and the currency element, but if we think kind of, if you could strip out that currency element and kind of talk to a local demand competition and price increase flexibility. Thanks very much. Pedro De

Andrade Faria: Alex, thank you.

In Europe yes it was a highlight of this quarter unfortunately for not so positive outcome. So what I'd like to share with you that our performance in Europe for the third quarter it correlates very strongly with the pound depreciation and the cycle of Turkey okay, Turkey not the country, but the animal. Turkey has enjoyed a big way up in the last two to three years and now we really see this market especially in Europe being oversupplied. It's oversupply coming from local as well as all the sources. So once you take those two factors out, you’ll see that our product offering from Thailand is performing above expectations, our cooked items, we are having big success, we’re actually gaining territory in retail, not only in the U.K.

but in continental Europe. Our foodservice business remains quite healthy earnings new clients, getting even more market share. But the reality is the pound is a big thing, by the way Brexit, the way we are seeing this is more of a bad thing in the short run, perhaps a very good thing in the long run. We anticipate that we are really well positioned for an independent U.K. so we don't know what's going to happen with the quota system and if the U.K.

turns more liberal or not in terms of trade, I think it will. And I think we'll have a perhaps a lot of space to gain territory. So we remain you know cautiously confident in the game we are playing Europe, going downstream, earning more clients, customizing our offering, but all of those things they are just clouded by the two things I mentioned, the sharp depreciation of pound, which depreciates 80% against the dollar and the dollar depreciate 8% against the real, so it’s the double effect. And of course the Turkey, which you know will take the normal cyclical pattern to recover. So we’re seeing, still turkey prices in Europe on a downtrend, okay.

We haven’t seen the bottom for that specific protein, but we anticipate eventually in the next few months, we’ll see a turnaround. And I think also the matter of relative competitiveness of Brazil. We need Brazil input cost to come back to normalcy, so we can have you know our fair shot at winning business for turkey as well.

Alexander Robarts: Just a follow-up in understanding the Golden Foods Thailand angle, if the sales continue with that cooked chicken product into Europe, I mean, was that impacted, I mean, excluding currency, but from a kind of volume point of view did you feel that and are you seeing that the Thai product is making its way into Europe in the way that you have foreseen?
Pedro De

Andrade Faria: Yes, Thailand we are doing better than anticipated, earning business in Europe especially on items like steam food and honeycomb [ph] and all lines that we have. We are now full speed ahead in the process of doing reverse synergies meaning we are now bringing some of the items, more basic items back to Brazil lines, filling our lines in Brazil and we continue our journey of more customization innovation and balance.

But if you look just our volumes in Asia, which we show in the report outside. Our talent platform is doing much better and over there we didn't have nearly the same impact of input costs so I think we’re quite effective hedging input costs in Thailand and Thailand continues to gain ground in Europe. Jose Alexandre

Carneiro Borges: Its Alex Borges, just compliment just to clarify, right, sales from Thailand into Europe, are still being reported under the Asian region, okay, and honestly it's doing fairly well in the first nine months of 2016, Thailand had close to 15% EBITDA margins. So very healthy results, but those results are not – if you're not going to the European managerial numbers yet.

Alexander Robarts: Okay, okay got it.

Thanks very much.

Operator: Our next question comes from Luca Cipiccia, Goldman Sachs.

Luca Cipiccia: Hi, good morning, thanks for taking my question. Again I just wanted to may be ask you about the set up or how you’re preparing for the fourth quarter and some of this was addressed already in the Portuguese call, but I wanted to follow-up on the view that in the previous quarters I think there was always that things sequentially where improving and then they decelerated I guess in the fourth quarter that type of expectation is a bit more delicate given how important it is for size and seasonality. So I was just curious to understand how are you preparing, how are you adjusting the mix clearly trading down it's something that we're seeing across all consumer companies, even the one that reported just today not only, U.S.

sales so how do you think that will play into the fourth quarter into the Christmas period and how are you preparing your portfolio and your strategy for that. Pedro De

Andrade Faria: So Luca the main thing for us in the fourth quarter is to handle where our festivities line, our Christmas line. So I think Rafael was with us in the Portuguese call. I think we’re doing things quite well the festivities. Just last night we had the press release we are coming in the very strong campaign for the [indiscernible] which is the main part in our portfolio for Christmas.

We are donating one bird for every bird that is actually bought by our consumers to you know people who are in need; I think it’s a very neat campaign. It also brings some very positive commercial efforts because it kind of goes in the ways of preventing trade down, it will give a very clear argument to our salespeople and merchandisers to say for as little as [indiscernible] you can have the main brand, the one that you know represents 60% of the category and you can make you know the Christmas of some other family a much better Christmas. I think it’s quite well thought out, it also helps us to anticipate a lot, the selling, so that we gain more space in the and I think indeed we’re seeing October, we gave some numbers there. We’re seeing just a campaign that is performing quite well as early as October when usually November should be the stronger month. So I think its well taken care of.

We anticipate being quite bullish for the festivities, I think just because we turned from the third quarter to the fourth, it doesn't mean that things get better all of a sudden. So we continue to have the headwinds of a consumer, which is quite constrain in disposable income, making you know choices in terms of budgeting and value et cetera and I think we've been adjusting a lot of our business and operation to actually operate in that kind of environment. So the main thing for us is to continue to do on the execution rounds and to make sure that we have a pretty strong Christmas season here, which we’re quite optimistic. Jose Alexandre

Carneiro Borges: Yeah it's a compliment Luca, as Pedro was saying there is no silver bullet here, how things are going to change overnight. But things are improving gradually from the bottom that we saw in the second quarter, we've seen the sector key indicators showing gradual improvements, the placements and the productions are being reduced.

The U.S. dollar prices are coming up, the grain and feed costs have coming now. And as we look into the future, into the industry indicators, they show to us that the things will continue to gradually improve. In the third quarter we got the headwind of the foreign exchange, who knows what's going to happen with the foreign exchange going forward, that many reduce the speed of the recovery, it may help and accelerate the speed of recovery. But we are very confident and clear that we are in trajectory of gradual improvement of all the aspects of our business.

Despite the number of our headwinds, we’re getting, rating from ForEx ranging from a challenging still economic environment in Brazil. And some of the many other aspects that we have laid out you know, manager reports in our previous calls and so forth. But what I can make sure to you is that we are very confident that better quarters are ahead of us and we will continue to have you know a gradual improvement of our financial performance.

Luca Cipiccia: Perfect. Thank you.

Thank you both.

Operator: Our next question comes from Pedro Leduc, JPMorgan.

Pedro Leduc: Thank you for taking the follow up and it would be regarding the Halal effort if you can give us an updates on how it's going. You mentioned a little bit on the Investor Day about monetizing or not, and partners or not. Just to get a sense of where your latest mindset is on that regard? Thank you.

Pedro De

Andrade Faria: Thank you, Pedro. Sadia Halal project remains as one of the most exciting growth prospects that we have ahead of us. We really think that what we are building is to unleash the potential for the business to grow and to really accelerate the initiatives to take this to the next level. We continue to work internally, we are – own schedule in the sense of by year-end we expect to have complete the [indiscernible] of the assets. And Sadia Halal is expected to have as a legal independent entity, as it go live early 2017.

In parallel we continue to assess the alternatives to better potentialize this growth opportunity as we have mentioned, we are not in the path to monetize this asset, we are in the path of looking for the different routes, which could really maximize its potential for growth and really improve its profitability. I think we have made a very important step this last quarter with due in the partnership in Malaysia, builds mall, it’s a milestone one because opens up with the local operation in a high certificate and high extender Halal globally and goes exactly in the lines of what we say for the Sadia Halal. We have also opened offices in Egypt, we are looking the best ways to really start our local operations, going downstreams we really have significant sales to Egypt, but I would like to move it downstream similar to what we have done in other countries. And we’re also looking for opportunities in the nearby geographies to continue to accelerate growth. So Sadia Halal is as a project is on track.

We remain very excited about it and as more as we advance on the discussions and the opportunities to take this as a more independent, autonomous entity, more excited we are about the growth perspective in what we can do with this business and open Halal structure. So everything, it's very on track from what we have shared with the markets in our previous interactions.

Pedro Leduc: Great. Alex, thank you very much. So we can assume that if there were any further acquisitions or any sizeable ones in the Halal, real it would be then you have this vehicle.

And then in that respect, your guide at 2.5 net-to-EBITDA, is that comfortable for you to do more M&A or would then, just wonder strategic alternatives would then come in?
Pedro De

Andrade Faria: Yes, Sadia Halal is our vehicles for – to grow into the Halal global space as we see great opportunities to grow there. Regarding our leverage of 2.36 that we were in this last quarter, we have as a guidelines and the target to work around two times, to the extent that we pursue other rules for acquisition. Yes, the Sadia Halal vehicle could be a source of funding to make this happen. Obviously everything on their analysis and on their studies, but that would be one the ideas to go forward.

Pedro Leduc: Thank you very much.

Congrats again, well done in the quarter. And good luck for the next one. Thank you. Pedro De

Andrade Faria: Thank you, Pedro.

Operator: This concludes today’s question-and-answer session.

I would like to pass the floor again to Mr. Pedro Faria. Pedro De

Andrade Faria: I would like to thank you very much for participating our English conference call for this third quarter. As I mentioned the Portuguese quarter we are not pleased with our results, we see they have a meaningful gap to what we think is the full potential and the profitability of the platform. However we remain extremely confident going into 2017.

We’ve seen the normalization of a number of the cyclical factors that have impacted. And more importantly we are increasingly optimistic about the impact of the initiatives that we have throughout the your 2016. With that I'd like to invite you for the next conference call to be held for the fourth quarter early 2017. Thank you very much and thank you for joining today.

Operator: That's does conclude our BRF S.A.

conference call. Thank you very much for your participation. Have a good day.