Minerva SA
BOVESPA:BEEF3
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
5.39
7.95
|
Price Target |
|
We'll email you a reminder when the closing price reaches BRL.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Earnings Call Analysis
Q4-2023 Analysis
Minerva SA
Minerva Foods closed the year delivering robust operating and financial results in the face of market volatility. The company's disciplined strategy and operational execution, enhanced by commercial expertise and arbitrage capabilities, fortified its standing in the South American market. Q4 gross revenue touched BRL 6.5 billion with EBITDA at BRL 606 million, cumulating in a yearly gross revenue of about BRL 29 billion, adjusted EBITDA of BRL 2.6 billion, and net income of BRL 396 million.
The strategic cash management led to a steady capital structure with an adjusted net leverage remaining stable at 2.8 times net debt over EBITDA. Minerva's disciplined risk management has been pivotal in maintaining financial balance during market volatility.
Minerva's diverse geographical presence and arbitration across global markets have led to significant operational achievements. The company made notable strides in 2023 by securing market permits and began exporting to new destinations like Mexico, China, and Indonesia. With a slaughtering capacity now standing at 14,600 head per day, Minerva is well-positioned to optimize potential in the countries it operates while maintaining its lead in the South American beef market with a 20% market share.
Minerva has accomplished complete monitoring of direct suppliers in several regions. The company's sustainability initiative, MyCarbon, became the only Brazilian entity approved for the DFM/Nasdaq carbon credit trading project, evidencing Minerva's leadership in sustainability governance. Additionally, Minerva continued to be featured in major environmental and sustainability indices, reflecting its commitment to eco-friendly business practices.
The fourth quarter saw a positive free cash flow of BRL 149 million, contributing to an annual total of BRL 536 million after adjustments. The continued positive cash flow generation, alongside maintenance and organic expansion investments, maintains the company's optimism for future financial stability.
The company finalized the fourth quarter with a secure leverage ratio and BRL 12.7 billion in cash reserves. A recent debt issuance raising about BRL 2 billion demonstrates a preemptive approach to fostering a robust financial statement for the upcoming quarters.
Minerva is in the process of acquiring new assets, which hinges on approval from regulatory authorities. Once approvals are secured, the company expects to swiftly proceed with integration and market updates, potentially altering the business dynamics significantly.
The company anticipates a strong performance in 2024, especially within its Australian lamb operations, by leveraging niche market dynamics and favorable supply/demand conditions.
Minerva downplays the relevance of margins by individual regions, instead emphasizing its unique arbitrage capabilities as a means to mitigate risk and ensure profitability across its diverse platform. The company refrains from providing detailed regional margin breakdowns in favor of a holistic view of its operations. Margins are stated to be close to double digits and aligned with Q4 across all regions.
Despite a growing number of competitors with permits to export to China, Minerva remains confident due to the country's positive shift in market openness and local production challenges. The optimizations in the Chinese market and positive adjustments in Argentina after recent elections keep the company's outlook bullish.
Minerva eyes growth prospects in the US due to decreased local beef production, the smallest cow herd since 1952, and increasing import demands. These factors, coupled with the ability to explore markets like NAFTA, position the company to potentially benefit from expanded quotas and greater market access.
The company is recalibrating its strategies in the wake of its Marfrig acquisition. With plans to return to pre-acquisition leverage ratios within 18 to 24 months, transparent adjustments in Argentine revenue impacting EBITDA, and continued alignment with budgeted export volumes, Minerva remains on track for strategic fiscal management despite regulatory delays.
Good morning, ladies and gentlemen. Welcome to Minerva Foods Fourth Quarter 2023 Earnings Conference Call.
Joining us today are Mr. Fernando Galletti de Queiroz, CEO; and Mr. Edison Ticle, CFO and IRO.
We would like to inform you that this presentation is being recorded and translated simultaneously. The translation is available by clicking on the interpretation button. For those listening to the video conference in English, there is an option to mute the original audio in Portuguese by clicking on mute original audio.
We would also like to inform you that the presentation is available for download at ri.minervafoods.com in the Presentations section.
During the company's presentation, all participants will be in a listen-only mode. [Operator Instructions].
We'd like to clarify that any statements that may be made during this video conference regarding Minerva Foods business prospects, operational and financial goals are projections made by the company's management, which may or may not materialize. Investors should understand that political, macroeconomic and other operational factors may affect the company's future and lead to results, which differ materially from those expressed in such forward-looking statements.
I now turn the floor over to Mr. Fernando Queiroz, CEO, who will begin the presentation. Please, Mr. De Queiroz, you may proceed with the presentation.
Good morning, everyone, and thank you for joining us for Minerva Foods Fourth Quarter 2023 and Full Year 2023 Consolidated Results Conference Call.
Minerva ended the year delivering a solid set of operating and financial results, attesting to the consistency and discipline of our business strategy in spite of the volatility seen in the industry. We remain focused on operational execution, which combined with our commercial expertise and arbitrage capabilities have once again proven to be paramount to the performance we delivered, strengthening the corporate strategy and leadership of Minerva Foods in South America.
In Q4 2023, our gross revenue totaled around BRL 6.5 billion, with EBITDA reaching BRL 606 million, contributing to a net result of BRL 20 million. And the consolidated results, gross revenue continued of around BRL 29 billion and adjusted EBITDA totaling approximately BRL 2.6 billion, and accumulated net income of BRL 396 million.
It's worth noting that the financial performance of the fourth quarter of 2023 and the full year 2023 was impacted by accounting adjustments in Argentina, details of which will be given by Edison later.
Free cash flow generation continues to be a highlight, reaching BRL 149 million in the quarter and BRL 536 million in 2023 after excluding the impact of the acquisition of ALC and BPU.
Cash management continues to contribute to the balance of our capital structure, which ended the quarter with stable adjusted net leverage at 2.8x net debt over EBITDA.
As in the previous quarter, we would like to comment on the process of acquiring Marfrig’s selected assets in South America. As I mentioned in our last earnings call, in August 2023, Minerva Foods announced the acquisition of 16 industrial units in South America, located in Brazil, Argentina, Uruguay and Chile, which remain under review by the antitrust agencies. The focus of our management is on concluding this process with the antitrust agencies so that we can then move forward with integrating the new assets into Minerva Foods operational park. As soon as the regulatory approval process progresses, the company will provide an update to the market.
As usual, in our conference calls, before we move on to the highlights of the quarter, I'd like to share with you a little of our vision on the outlook for the global animal protein market. South America continues to have a positive outlook for the beef protein sector, offering great opportunities and growth potential for the region's players.
Brazil, in particular, remains a promising origin due to the good momentum of the livestock cycle, which we believe has not yet reached its peak and should remain positive throughout 2024 and 2025.
In addition to Brazil, Paraguay and Uruguay are also gaining prominence with a favorable momentum in the recomposition of their herds. In contrast to the large availability of animals ready for slaughter here in South America, the United States continued to present a negative livestock cycle scenario, which worsened throughout 2023 and is expected to deteriorate even further in the 2024, 2025 EMEA. This imbalance between supply and demand continues to provide new access to important markets.
And here, I would like to recap our achievements in the field of market permits and openings obtained in 2023. In January, the Janauba plant was licensed to export beef to Indonesia, making a total of 6 plants licensed for the country. In March, Brazil received the notification of the opening of the Mexican market. We currently have 6 plants licensed for this important destination.
In September, Colombia received approval for the health protocol to open the Chinese market, a fact that was ratified last week with the licensing of our 2 plants in that country. As I also mentioned, Paraguay also received approval for the U.S. market with the first shipments taking place in December last year.
And finally, at the beginning of 2024, our Minerva Foods plants were authorized in Brazil to access the Chinese market, thus adding up to a daily capacity of more than 14,000 head a day, considering our entire operational park.
As you can see, Minerva Foods benefits from its geographical diversification and arbitrage strategy in the global beef market, making the most of the potential in the countries where we operate. I would like to emphasize once again how essential these 2 pillars are to the stability and consistency of the company's results.
We also remain confident about the outlook for the domestic market, particularly in Brazil, where the market is going through a period of recovery boosted by the positive livestock cycle, in which together with a favorable economic scenario is encouraging local consumption.
Let's now turn to our performance in the fourth quarter of 2023 and full year of 2023. Starting on Slide 2. So now with growth revenue, which totaled BRL 6.5 billion in Q4 '23 and around BRL 29 billion in the consolidated result for 2023. Exports accounted for 67% of consolidated gross revenue in the quarter and 65% in the full year, continuing to be one of the company's main operating drivers, once again attesting to Minerva Foods' commercial expertise in serving the international market.
Turning now to our operational profitability. EBITDA in Q4 reached BRL 606 million with an EBITDA margin of 9.8%. In 2023, Minerva Foods adjusted EBITDA was BRL 2.6 billion with margins of 9.5%. Our net result reached BRL 20 million in Q4, totaling around BRL 400 million in 2023.
Our free cash flow generation in Q4 was positive at BRL 149 million. In 2023, free cash flow added up to BRL 536 million when adjusted for the impact of the ALC and BPU acquisitions.
Finally, our capital structure. We ended the fourth quarter of the year with a stable adjusted net leverage at 2.8x net EBITDA, net debt over EBITDA and comfortable liquidity levels with a cash position of BRL 12.7 billion.
Let's now move on to Slide 3 to shed some light on other highlights of the quarter. As I said on last quarter's conference call, we were waiting for the U.S. market to open up to Paraguay, which happened in November 2023. This opening represents an important opportunity for Minerva Foods since we have 5 slaughtering plants in the country with the capacity of approximately 8,000 head per day.
We also saw the opening of the Chinese market to Colombia, where we have 2 plants with a slaughtering capacity of approximately 1,500 head per day. And finally, in early 2024, we had 2 more Brazilian plants licensed for the Chinese market, increasing our exposure to this market and totally a consolidated capacity of 14,600 head per day.
Speaking briefly about our capital structure, we issued 2 debentures, which together totaled BRL 4 billion, one in October 2023 and another one in March, always with the aim of improving our capital structure. Edison will provide further details on these operations later on.
In the sustainability agenda, we achieved 100% monitoring of direct suppliers in Brazil, Paraguay and Colombia. In Argentina, around 90% of direct supplier farms are already being monitored. And in Uruguay, we have already achieved more than 60% monitoring. Our subsidiary, MyCarbon, was the only Brazilian company to be approved for the DFM/Nasdaq carbon credit trading pilot project. Such achievement was announced during COP28 in Dubai.
In addition, the Renove Program, which is part of MyCarbon's operation, submitted its carbon credit development project to Verra certifier in December 2023, representing a major step forward in the generation of carbon credits from good agricultural practices in Minerva Foods value chain. Other important milestones were our achievements in the field of corporate governance.
We were listed for the fourth consecutive year in the 2023-2024 portfolios of the Corporate Sustainability Index and the Carbon Efficient Index. We also recorded important progress in the rankings of the external evaluations of the Carbon Disclosure Project, CDP, and the Coller Fairr Producer Index.
Moving on to Slide 4 to talk a little bit about Minerva Food's export market in Q4 '23 and full year 2023. In Q4, we remain the leading exporter of beef from South America with approximately 20% of the continent to market share. Once again demonstrating the value of our strategy and the competitive advantages of geographic diversification, one of Minerva's main strategic pillars.
The upper quadrant of the slide, you can see the breakdown of gross revenue by destination for Q4. The Americas region was the main driver of gross revenue with a total of 41%, with Brazil standing out with 24% and Chile with 11%, followed by Asia with 24% of total gross revenue with China accounting for 15%. Unlike previous periods, Q4 '23 was marked by less exposure to the Chinese market largely due to less competitive prices.
However, it's worth highlighting the operation and commercial agility of Minerva Foods, which through its market arbitrage capability is able to access virtually 100% of international markets, giving us the ability to redirect supply from our origins to more attractive markets.
At the bottom of the slide, we have a more detailed breakdown of our export performance for both our beef operations here in South America and our lamb operations in Australia. Starting with the 2 charts on the left, that is our beef operations.
Asia continues to stand out in the quarter, accounting for 35% of exports revenue followed by the Americas with 18%. NAFTA and the Commonwealth of Independent States both have 15% and Europe 8%.
In the full year of 2023, Asia also remained the highlights followed by the Americas with 20%. The CIS was 11%, NAFTA with 10% and the Middle East with 8%.
It's worth mentioning here the increase in NAFTA's share of our revenue, which highlights our view that with the shortage of animals in the U.S., South America as a whole benefits from the supply imbalance, enabling us to arbitrage markets through our geographical diversification. The charts on the right show Australia's operations, the main destination of which is the NAFTA region, with a 31% share, followed by the Middle East with 25% of the country's exports. Asia with 24%, Europe with 12% and Oceania with 6% share in Q4 '23.
In the full year of 2023, NAFTA also remained the main destination with 37% share, Asia with 25% share, followed by the Middle East with 21%, Europe with 8% and Oceania with 7%.
Before handing the floor over to Edison, I'd like to restate our optimism about the global animal protein market. The recent permits give us signs that we have great opportunities ahead of us and the imbalance between supply and demand continues to provide good opportunities in the global market, largely as a result of the positive livestock cycle in Brazil and negative in the U.S.
Once again, I'd like to emphasize our ability to arbitrage in the international market, mitigating risks, maximizing operational efficiency and adding value to our operation. We continue strong with our strategy and focus on our business model, always attentive to our risk management, exploring more efficient solutions, investing in innovation and exploring promising markets.
I'll now hand over to Edison who will talk more about our financial and operational performance.
Thank you, Fernando. Let's move on to Slide 5. I'll start by talking about Minerva's operating performance and gross revenue in Q4 and full year '23.
In line with our focus on exports, the foreign market accounted for 67% of gross revenue, both in Q4 and full year '23. In the breakdown by region, exports in the Brazilian operations reached 62% in the quarter and 65% in the full year.
The LATAM operations ex-Brazil, exports accounted for 75% of gross revenue in Q4 and 68% for the full year.
In the lamb operations in Australia, exports accounted for 64% of gross revenue in Q4 and 68% in the full year.
On the right-hand side of the slide, we can see the breakdown of revenue by origin. Brazil continues to stand out, accounting for 50% of gross revenue in Q4 and 47% in the year, followed by Uruguay, which represented the second main origin in the quarter with 20% in the quarter and 13% in the year.
Paraguay had 19% in the quarter and 15% in the year. Australia accounted for 7% of revenue in the quarter and in the year, Colombia had 4% share of the revenue breakdown in Q4 and in the year.
Finally, the caption author refers to the former trainee division, which accounted for 5% of revenue in Q4 and full year '23. It's worth noting that the Argentina's performance was impacted by accounting standards, CPC 02 and CPC 42, which deal with the inflationary impact on changes in the exchange rates when translating financial statements.
Basically, the standards require that the financial information for the full year of 2023 of our subsidiaries located in Argentina, be updated to the closing exchange rate and corrected for the effect of the inflation index with all of this impact being recognized only in the last quarter of the year. As a result, the net revenue of the Argentina operation was negatively impacted by BRL 1.5 billion in the period with a consequent effect of the level of the numbers reported here. It should be noted that this is a purely accounting adjustment related to the entire year but that is reflected only on Q4 with no cash effect.
Moving on to Slide 6. Let's talk about net revenue and EBITDA. Net revenue reached BRL 6.2 billion in Q4 and approximately BRL 27 billion in the full year. As I just mentioned, if we adjust our Argentina operations, which were impacted by accounting standards, and if we adjust our revenue for this effect, our net revenue for the quarter would have totaled BRL 7.7 billion in Q4 and BRL 28.4 billion for the year.
Now profitability. EBITDA for the quarter was BRL 606 million with margin of 9.8%. And in the full year, BRL 2.6 billion with margins of 9.5%.
I would like to draw your attention on this slide to the consistency of our margin over the last few periods. This is a reflection of the focus and discipline of our risk management and the result of our strategy of geographical diversification, which enables us to arbitrage between beef protein markets, also with the aim of achieving the best profitability levels.
Now leverage on Slide 7. Our leverage ratio measured by the net debt over EBITDA indicator for the last 12 months and adjusted by the pro forma, BPU EBITDA of BRL 46 million for the 8 months prior to the incorporation into our financial statements ended Q4, stable at 2.8x. It's worth noting that this indicator as in the previous quarter does not take into account the down payment of BRL 1.5 billion related to the acquisition of Marfrig's assets in South America since the acquisition has not been finalized and does not yet bring any EBITDA benefits to the company.
Now next slide, let's talk about net profit and operating cash flow. In Q4, net profit reached around BRL 20 million. In the year as a whole, the company's net profit totaled around BRL 396 million. On the right-hand side, we can see the operating cash flow for the quarter, which was positive BRL 938 million, totaling a positive BRL 2.7 billion LTM.
Once again, I would like to highlight the commitment we made at the beginning of the year when we had the negative impact of working capital in Q1 related to the Americanas events, and we said that by the end of the year, our working capital would be at normalized metrics, as you can see now.
Looking at the full year, we had a release of working capital of BRL 120 million in spite of the volatility that marked the market last year, especially in the first half of 2023. Again, this was only possible due to the discipline and consistency of our risk management and financial strategy, always seeking to maintain Minerva Foods' financial balance.
Let's move on to Slide 9, now to talk about free cash flow generation. Building up the cash flow for the quarter, we start with an EBITDA of BRL 606 million with CapEx of around BRL 192 million, concentrated on maintenance investments and organic expansions of operations in plants in Brazil and Colombia.
Working capital released BRL 318 million in the quarter and the cash basis financial result was negative BRL 583 million, which gets us to a recurring cash generation of around BRL 150 million in Q4 '23. If we had the payment of the third installment of ALC, which totaled BRL 32 million in the quarter, we closed the quarter with a positive free cash flow of BRL 117 million. Looking at the year-to-date, free cash flow was positive by BRL 64 million, already taken into account the impact of the acquisitions of ALC and BPU over the period.
If we do the build up, we start with an EBITDA of BRL 2.6 billion, CapEx of BRL 707 million, then the positive working capital variation of BRL 120 million and the cash basis financial results, which was negative BRL 1.4 billion. It's worth pointing out that this change in our financial results is a reflection of the new debt issues that we have made recently, increasing gross debt, mainly to prepare the company's cash and capital structure for the payment for the acquisition of Marfrig, South America.
Adding up the variables, we achieved a recurring cash flow of BRL 536 million for the full year of 2023. Adding the acquisitions of ALC and BPU, our cash flow in 2023 totaled plus BRL 64 million.
Now Slide 10, let's talk about net debt. At the end of the previous quarter, net debt totaled BRL 7.5 billion. In Q4, we have a positive free cash flow of BRL 117 million. The exchange rate variation also had a positive impact, reducing our debt by BRL 209 million, but we also have a negative effect, which increased our debt of around BRL 241 million from noncash derivatives. These are FX derivatives and changes from inflation to post fixed indexes. When we add up the variables and assemble the bridge, we get to a net debt of BRL 7.4 billion, a slightly lower level than that of Q3.
Now let's move on to Slide 11, where I'll comment a little more on the capital structure. As I mentioned earlier, net leverage measured by net debt over adjusted EBITDA ratio that is adjusted for the pro forma performance of BPU and excluding the early payment of Marfrig's assets in South America ended the quarter stable at 2.8x. Following our cash policy, the position at the end of Q4 remains at a very comfortable level, approximately BRL 12.7 billion and includes the 13th CRA issue completed in October '23.
I would also like to highlight the 14th issuance, which took place in mid-March, which raised around BRL 2 billion with terms of 5 and 7 years, which will be incorporated into the 1Q '24 financial statement. It's worth mentioning that both are indexed to the CDI. Whatever is not indexed to the CDI will stop to become post-fixed debt.
Now our debt profile, around 65% of our debt is exposed to FX variations. And I would like to remind you that we have a hedging policy that is followed to the latter and which stipulates that our company must keep at least 40% of its long-term FX exposure protected, which is the level we currently have.
Our debt duration is around 4.8 years with approximately 82% of the debt maturing in the long term, as you can see in the amortization flow at the bottom of the slide. Our most recent issuance were carried out at timely moments in the credit market, aiming to maintain a solid and healthy capital structure and contribute to the company's liquidity level, especially now and in the next 12 to 18 months that the company is and should be experiencing strong expansion and growth.
Finally, I'd like to reinforce Fernando's comment about the process of acquiring the new assets. We are fully focused on completing the next steps awaiting approval from the regulatory authorities and preparing to start the integration process as soon as possible. As soon as the process moves forward, the company will update the market.
Now I turn the floor back to the operator to get the Q&A session started. Thank you very much.
[Operator Instructions] Our first question is by Thiago Duarte from BTG Pactual.
I have 2 questions. The first about working capital. Edison talked about the release of working capital throughout the year and how this helped your cash flow. But do you see any space from Q4 to Q1, '24? Do you see space for additional release of working capital? Because when we look at -- look back at Q4, your slaughtering volume and your sales volume in almost all geographies, your slaughtering volume grew more than your sales volume. It's like you're building up inventory when we think about product volume. So does it make sense to expect additional release from Q4 to Q1? Maybe there is some effect of sales displacement? That would be my first question.
Now the second question is, can you update us on the evolution of the approvals and your expectations today, as realistic as they can be, about the completion of Marfrig's assets acquisitions?
Thiago, your first question about working capital. Yes, we did build up inventory from Q4 '23 to Q1 '24, especially considering the quotas in the U.S. As the year started and the quotas opened up, we occupied over 50% of the U.S. quota with our products. So this was a tactical move. We wanted to occupate this quota space right at the beginning of the year. And this should release some working capital.
I'm not sure this is going to happen all in Q1 because there are other things happening at the company. China loss some share while other geographies gained share. So this is our arbitrage dynamic that can impact the slaughtering in other origins as compared to Brazil.
So there's this whole operational dynamic going on, which made us build up inventory in Q4. A part of that will be released in Q1 but I cannot guarantee that all the working capital used in this strategy will be given back in Q1, but most probably throughout the first half of the year.
About the antitrust agency, we're waiting for the approvals of CADE and all the other antitrust agencies to come by -- throughout the second quarter of the year.
Our next question is by Pedro Fonseca from XP.
My first question is about the strong rebound in Paraguay and Uruguay. In Paraguay, last quarter, there was some damped volume. So I want to understand more about this. Do you think that Paraguay has one-off effects there because of this volume that was holding back?
And now more accounting question. When we look at the financial results line, there was a great variation quarter-on-quarter in financial expenses and financial revenues. So can you shed some light into this?
Okay. Let's just start with the easiest question. You remember that we made a significant acquisition in Q3 last year. And we used up all the cash from that acquisition. So we increased cash and gross debt. As a consequence, the financial expenses go up. And as a curiosity, this also increases financial revenue because we are carrying a higher cash.
Now about Paraguay and Uruguay, this is part of our arbitrage strategy. Uruguay is coming strong in the markets that are not getting their supply met by the U.S., especially in NAFTA and the Far East. And in Paraguay, we have the normal cycle of occupying up space in the international market, especially with the new permits that Paraguay has obtained, especially to the U.S.
So what we see happening, Pedro, is that America -- South America is increasingly more opening up markets and with our arbitrage capabilities of origins and destinations, we're making the most of this.
Our next question is by Guilherme Palhares from Santander.
So we have finished a first full year with Australia's operations. Can you tell us a bit more about your prospects on the market there in Australia? And how do you assess the acquisition of this asset now, a year later as compared to what you expected? And we think this is going to be a highlight in 2024. So can you give us more details about what you expect for the rest of the year?
Well, we had a positive expectation, a positive surprise. We were estimating an EBITDA that has now been surpassed. Australia is a market that is subject to the climate. So we are always on the lookout the climate. Australia can suffer or benefit more from climatic operations than the rest of South America. So Australia was actually a pleasant surprise.
Another good thing about Australia was that, we put our international distributions and all of our sales structure where we, with the concept of one-stop shop with beef and lamb, we opened up markets that up until recently, our acquired companies did not have access to. So we focused on geographical diversification and arbitrage even more with our operations in Australia.
Okay. Just as a complement, we're very diligent when making acquisitions. When we did our evaluation in Australia, now, a bit after a year after the acquisition, the EBITDA levels are about 20% higher than expected when we made the acquisition.
If you remember the numbers that we shared with you in terms of evaluation and EBITDA. So the EBITDA generated today is about 20% higher than what it was projected at the time of the acquisition.
Perfect. Now can you comment on what you expect for 2024?
We continue to see a very positive dynamic, especially in our lamb operations. This is a job that focuses on niches. We look at the supply/demand, and what we see for Australia is that 2024 is also going to be a great year. The lamb cycles is dynamic, is doing great in Australia, that helps in costs and sales. So we're now able to improve pricing with those niche markets.
Our next question is by Gustavo Troyano from Itau IBA.
I have 2 questions on my side. The first is about profitability by region. Could you provide further details on the quarter-on-quarter performance, particularly in Brazil? Because when we look at the consolidated numbers, there might be some impact from Argentina on the quarter-over-quarter. So can you explain a bit more about the different regions, especially in Brazil?
And now about the permits to export to China. The permits from Brazilian plants, do they impact the economics for the assets acquisition? Because there is a plant -- a Marfrig plant that has a permit. So the value of the acquisition, does it change in the contract due to the permits that were obtained?
Well, Gustavo, the margins by country become less and less relevant. When you start looking at the company, as a company that has a higher and unique arbitrage capacity as compared to any other company in this industry all around the world. So if I give you margins by country, you'll be optimistic about one country and pessimistic about another without any reason for such.
So we created this diversified platform in order to have an increasingly higher arbitrage capacity. And so that we don't have to worry about specific country margins and so that we can look at the portfolio as a whole.
Having said that, that's why we don't give you a breakdown by country. We tell you about our revenue, our slaughtering capacity and sales volume by country so that you have an idea about our asset use, but the profitability comes from our arbitrage capability. This is increasingly relevant in our results.
Now Gustavo, let me give you an example. The Brazilian domestic market is a major destination of -- for our exports from Paraguay, Argentina and Uruguay. So our focus is on risk management, as Edison mentioned.
Having said that, we can say that the margins are close to 2 digits, which is close to the margins that we disclosed. In Q1, the margins are very much aligned with what we saw in Q4 for all regions.
Now about changing the economics, the contract. We have nothing to say about this contract until it is approved by the antitrust agencies. So let's wait for the approvals of all of the antitrust agencies and then take a deep dive as soon as we take over those plans.
Our next question is by Ricardo Alves from Morgan Stanley.
I have a question about the exports from Brazil to China. We have talked about this earlier and it's always great to get an update. You've got some permits to export to China. But in March, we saw 20 other plants getting those permits as well.
So the questions we get from investors is whether we could have a more competitive scenario in the Chinese market and this would affect the international price as well as the local arroba price? As far as I understand, based on our conversations in the past, that your view is more constructive. But can you give us an update on this? Are you still optimistic because of the attractive inventory levels? Or do you believe in a lower local production? Or do you have reasons to believe that Minerva is ahead of new and smaller competitors in Brazil? So can you share the reasons why you are optimistic about this?
And now a question about Argentina. Edison, I know that you cannot talk about individual margins or it doesn't make sense to talk about individual country margins, but quantitatively, are you seeing an improvement in Argentina after the elections, more flexibility in exports or anything else?
Ricardo, about your 2 questions. The main point affects China is the local production. What's happening in China is that local producers. China is the third largest beef producer in the world, but local farmers are losing money there in China. So there has been a massive slaughter of female cows. So farmers are now starting to focus on different sectors. So we'll probably see this rebound next year. When this excess of females slaughtered are absorbed by the market.
So we continue to be optimistic about China. The recent permits also show that the Chinese government is following up on this from up close. So we see this in a positive light. And China has 2 points that are positive with the new administration in the country. One is the drop of the prohibition for the export of certain cuts. So the market is much more open. And the second point that impacts us greatly is the straightening between the difference between the dollar [ dual ]and the official dollar.
A lot of competition from local players is eliminated as a result -- in Argentina, sorry. So we're bullish about Argentina because of these 2 main changes. So that was about Argentina.
Our next question is by Renata Cabral from Citi.
It's just a brief question here on my side about the opportunities to export to the U.S. You mentioned in some remarks about what's going on in the U.S. But I would like to understand your take on possible opportunities of increasing quotas in some countries where you operate, maybe Brazil and Paraguay since the USDA is pointing to a scenario of lower beef production in the U.S. than the demand, the production is lower than the demand. And the Brazilian quota to the U.S. is not that large. But I know that you also operate in other countries.
So what is your take on this? What can we expect for 2024?
Well, Renata, you said it well. Today the cow herd in the U.S. is the smallest since 1952. So today, you have a reduced production in the U.S., and this will hardly be reversed in the next 3 to 4 years. And the U.S. has been importing females and young livestock from Mexico and Canada, and they are not exporting to those countries. So we see traditional markets from the Far East and NAFTA as markets that are opening up to us directly or indirectly.
About the quotas. These are in the country's agenda. You see Biden's statement about the movement in Paraguay. Biden's administration said that Paraguay was a great ally and they would not restrict exports from Paraguay to the U.S. This happened this week. So this shows a positive environment, not only in the geopolitical area, but also when it comes to the scarcity faced by the U.S. that affects both the internal market in the U.S. and the markets to which they export.
Now our next question is going to be read by Edison. You know, the questions sent in writing are going to be read out loud by Edison.
The first question is by Luis Vasconcelos, the BRL 1.5 billion adjustment in the revenue due to Argentina represents how much in terms of EBITDA?
The revenue adjustment is an adjustment that is transparent and audited for EBITDA and profit. It's harder because these are nonaudited numbers. So we don't want to disclose non-audited numbers.
If you want to do the math, the profitability in Argentina in form of EBIT margin is around 8% to 9%. About adjustments, from now on, that depends on the macro economy. If the FX rate doubles than the adjustments. But if the scenario becomes more stable, which is what we expect, then there won't be any more adjustments in Argentina.
Now the second question is the volume of export in Q1 '24, what is it like? Have you been surprised by this?
No, the volumes that we are seeing in Q1 are aligned with our budget. There is an important market shift happening in our arbitrage capabilities, helping us keep profitability. Looking at regions that seemless advantageous for export. So we are now shifting and keeping good profitability in Q1 and good volumes.
Next question. After the acquisition of Marfrig, do you have a target for net leverage?
Well, I've talked about this often times. In a 18- to 24-month time horizon, we expect to go back to the leverage levels pre-acquisition from 2x to 2.5x net debt over EBITDA.
And the last question by Victor. Can you give us further details about CADE's decision about Marfrig?
We can't give you details about CADE's delay because it's not our delay, it's CADE. The answer is in the question.
However, what we can comment is on public news. At the end of the year, there were new Board members being nominated. One of them, we're about to analyze our operations and so they needed to get a new reporter and the analysis started from scratch. So we think that this can delay our analysis at CADE in up to 90 days. But this is based on the public news that we have been following.
That's all. Now I turn the floor over to Fernando for his closing remarks. Thank you.
Thank you all. I'd like to close this conference call by highlighting the commitment of the moment we're going through.
There are 3 key factors that we should be monitoring in the international beef market: the slaughtering in China, the reduction in slaughtering levels in the U.S. and the positive cycle experienced by South American countries, especially Brazil. The opening up of new markets are a reality. Recently, we saw Colombia being opened up to China and other markets being opened up to South America.
Never before in our history we have had so many options of markets to sell to. So this makes beef becomes an international commodity. And South America has unchallenged advantages in terms of production cost and now access to markets. This makes us very happy and confident about our strategy of expansion and especially of our risk management instruments that we developed.
Finally, I would like to thank Minerva's team who has been working really hard to arbitrate those arbitrage, those markets, and that is now working hard to prepare for the integration of the new assets as soon as they are in our hands as we mentioned in the presentation.
And finally, I would like to thank you all for joining us and we are available, should you have any question, doubts or suggestions, just get in touch. Thank you all very much and have a great day.
Minerva's earnings conference call is now closed. Should you have any questions, please send your questions to the Investor Relations team at ri@minervafoods.com. Thank you for joining, and have a great day.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]