BRF SA
BOVESPA:BRFS3
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BRF SA
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Good morning, and thank you for standing by. Welcome to the conference call of BRF to discuss the results related to the first quarter 2022. We'd like to inform you that this event is being recorded. [Operator Instructions] This event is also being broadcast simultaneously over the Internet via webcast and can be accessed at ri.brf/global.com. The replay of this event will be available soon after it's completed. We'd like to remind you that the attendees may post questions to BRF, which will be answered after the end of the conference by the IR team.
Before moving on, we'd like to clarify that any forward-looking statements that may be made during this conference call related to the business perspectives, projections, operating and financial targets and goals are based on assumptions of the company's management as well as information currently available to the company. Forward-looking statements are no guarantee of performance since they involve risks, uncertainties and assumptions because they refer to future events, and therefore depend on circumstances that may or may not occur. Investors and analysts must understand that general conditions, sector conditions and other operating factors may affect the future results of BRF, leading to results that may differ materially from those expressed in such forward-looking statements.
I would now like to turn the floor to Mr. Lorival Luz, global CEO of the company, who will begin the presentation. You may proceed, sir.
Good morning, everyone. Thank you once again to be here attending our conference to discuss the results of the first quarter 2022. Here with me, we have our CFO, Mr. Mariano, who will also address the presentation to you, and other members of the Executive Committee.
Something else I would like to mention. As you probably noticed, we are discussing the results in a different way from the way we were doing in the previous quarters. Now we are using the telephone from BRF, different from what we did in the previous times in a studio with images and a complete infrastructure. I would like to notice that this shows our focus, our plan, our objective to simplify the way we work, the way we operate. However, I would like to talk a little bit more about this as we complete this presentation as regards to this topic.
Now moving on to the next slide. I would like to show you the main indicators of BRF, the main indicators of this first quarter. As you can see, we really had some headway in our income. Our revenues with operating results, which were different from what we expected, much -- away from our capacity to generate results. I would like to make it clear that these results of the first quarter does not please us in any way, and the results do not reflect what BRF really is and our potential, the potential that the company has, and all our team. I would also like to show my confidence in the strength of BRF, in the capacity of our team to reverse these results in the next quarters. And I'm going to discuss this as we move on along the presentation.
Now talking about the first quarter. The results of BRF, as you can see, was strongly impacted by the performance of the Brazilian economy -- the Brazilian performance, especially in January. Our sales in January in the retail market were much lower than what we had planned. That generated a mismatch in our production chain. And a company living a long chain such as ours has to consider that these are all very relevant. And we made the decision to make those adjustments -- to make adjustments to this chain.
Additionally, I'm going to talk about it in the next slide. In addition to this, we also had the impact of the effects of the war that strongly impacted our results, our costs still in the first quarter, especially in terms of logistics, transportation, freight, in addition to the impact of grains that we felt.
Now moving on to the next slide. As you can see, I would like to show you the impact of our decisions, the decisions that we made. We made the decision to face the situation, face this moment and make the proper adjustments for our production and make adjustments to our inventories. And those 2 events in agile, quick accelerated manner so that this would not continue in the next quarters. And this quarter has been strongly affected. We made important decisions -- responsible decisions. We had to make those decisions so that those effects would be left behind so that we could look at the results and look at -- look ahead and capture all the opportunities and leave those BRL 400 million behind us.
We had an impact of about BRL 400 million -- BRL 406 million in relation to the recognition of hedge grains in our balance sheet. But I would like to make it clear to you that our objective is not to exclude those impacts from the EBITDA. EBITDA is this, BRL 121 million. What we really want is to show that we had extemporaneous effects that impacted our results, but this is not something current in our operations. But rather they are effective impacts that happened in this quarter, and those coming quarters will not have this order of magnitude. And the impact will not be as relevant in the future.
Now leaving the first quarter a little bit behind. I would like to start and discuss our perspectives for 2022, what to expect for 2022. And before anything, I would like to use this slide, and I would like you to look at the left side to show what was the impact of January and what the quarter represents to BRF. We had 2 blocks in the base of 100. We show what happened to our sales. So you can see that sales in January in base 100; in March, we can see that we had a very relevant recovery at 140. So we use this base 100 just for you to have an idea. The same can be applied in the gross profit. It shows a positive variation of about 5 percentage points from one month to the other. Even with some impact in March related to this adaptation that happened not only in January, it made influence to financial impact also in March. So we show exactly this recovery and what we have been doing.
Likewise, if we look at the central block, the central column, I would like to share the headway we've made in terms of price of the chicken and the price of the pork that has been materializing in Brazil. Likewise, we use base 100. We can see that the advance from 100 to 141 in April for a whole chicken price and a little less but still showing a recovery for our pork carcass, showing a new repositioning of our company that we have been seeing as a result of everything that has been happening in the global scenario.
And I would like to reassure our presence and positioning in 2 relevant proteins that continue growing in terms of per capita consumption year-after-year. And this is a result that we can see in the graph to the right. So the message is we have a new positioning of the proteins. So we can see this growing trend, and there has been a recovery of prices in those markets.
Now moving on to the next slide, talking about Halal. We had a quarter which showed excellent results, showing that our strategy to make headway in a portfolio of products with -- value-added product has been very assertive. In addition to the work that we have been doing, we can -- we have to consider the scarcity of offer of chicken from the most important exporters in the world brought us important opportunities that we managed to capture. So we have seen this excellent result in the first quarter. We made advances in the market share, both in GCC and other areas, showing that we -- the strategy is very adequate, and the performance has been very well implemented. This scenario ahead can be seen in a very positive way considering what has been happening in this market as we see the return of religious tourists, commercial tourists -- tourism and also for leisure, and we can see the positive results, especially at the end of the year.
Now moving on and talking about exports and the international scenario. Today, we are seeing, as you have been monitoring, we have seen that there has been a worsening in the offer of chicken in the international markets. And the impact comes from 2 exporters -- 2 of the major exporters of chicken in the world after Brazil: the United States and Ukraine.
Ukraine, needless to say, what impact the war has caused. And for the United States, we have to mention the avian flu that reached 31 American states. And those states as a whole represents about 60% of the American production of chicken. When we put those 2 factors together, the effect of Ukraine and the United States, that led to a price correction in the international market in such a way that it's so sharp, especially as of January. So the graph on the right, on the top part, we can see the advance of the chicken breast in the American market -- maybe prices that have never been seen before, especially in the past few years. And as a consequence, this has already started to bring some corrections here in terms of chicken breast in Brazil that we can see in the graph below. And we can also see a growth both in volumes of exports in Brazil and also in the export price in Brazil.
Here, I would like to remind you that we at BRF, we are the largest exporter of chicken. And we are well positioned -- our footprint is well positioned. Our plans are extremely well positioned from the commercial viewpoint. The relationship with clients and all that is associated with this. We have the capacity, and we are prepared to capture in a very efficient manner this new movement that the market shows with the increase of exports, the increase of international demand and also with this readaptation, readjustments of prices. I can say to you that I see that our company is better positioned to capture this. And no other company is better than us, considering our sales, the quality of products, our distribution chain. And this is a scenario that we are looking very attentively, and we are making decisions to direct our focus, direct our objective so that we can capture this market that is available to us.
And now I would like to talk about our capital structure. I'm going to turn the call to our CFO, Fabio Mariano, and he's going to address this topic, and then I'll be back for the final remarks.
Thank you, Lorival. Good morning, everyone, everyone who's attending our conference. In talking about our capital structure, I would like to highlight a point which has a lot to the reduction of the -- our indebtedness of BRL 4.7 billion. And as a natural reflect, there has been a reduction in the leverage from 3.12x to 2.83x in the current quarter. Obviously, we cannot fail to consider the inflow of capital, which was very relevant, after we finished the follow on that was in the beginning of the year -- that reduces the leverage. And this results to a lower performance than expectation. And this has to do with the performance of the quarter, as mentioned by Lorival. So we have a replacement of an important quarter, the first quarter 2021 with a weaker quarter in terms of results generation. And this puts a lot of pressure on our EBITDA in the past 12 years. And we can see the decline of the leverage could be lower, and it's not as representative as it could be.
Another thing that has to do with our indebtedness profile is the fact that the company has a very comfortable liquidity position yet in terms of availabilities and resources at BRL 10 billion. We would also like to mention that we have a credit line with Banco do Brasil in the amount of BRL 3 billion with an immediate liquidity amounting to close to BRL 13 billion. When we analyze the profile of indebtedness, we notice that there is no pressure in the short term related to refinancing activity, and this makes us very comfortable so that we can execute all the activities and make all the investments that we had planned up to the end of the year and the years to come.
Now a little bit of our debt profile. We can see that between currencies, we see some indexation still to strong currencies, especially the U.S. dollar. So about 70% of our current debt is denominated in foreign currency. And everyone knows a little bit of our hedging policy, and we'll be talking about some of the side effects and losses we've had in derivatives. But we invest in derivatives precisely so that we can prevent the company from suffering from these changes in foreign exchange.
The next slide shows the conciliation of our indebtedness already allowing for a starting point of the net capital that was invested of BRL 5.2 million (sic) [ BRL 5.2 billion ]. So pro forma, we start the year with about 3 point -- BRL 12 million (sic) [ BRL 12 billion ]. And we see that the operating cash flow was much below what we expected, and ultimately, insufficient to cover our investments, our CapEx as well as our capital burden.
Lastly, we try to combine both cash and noncash debt. And between the loss of derivative cash, which is part of our strategy to cover our balance sheet, plus the indebtedness that's connected with an appreciation of the Brazilian currency of nearly 15% between the last quarter of last year and the first quarter of this year, we see the -- about BRL 12.5 billion, which is what's reflected in our balance sheet. So we have an increase in debt of about BRL 0.5 billion, even though we've consumed about BRL 3.6 billion of our cash flow, which we'll be showing you in the next slide.
So just to understand our free cash flow a little bit better. We go from a corporate EBITDA -- reported corporate EBITDA of BRL 152 million and a negative working capital. We stress that our net working capital performed really well. We have about 10 days of capacity. So our inventory cycles is very -- doing very well. So 10 days is even below our record in this sense. And we see other effects from our liabilities and assets, which affect the ultimate performance of our working capital.
Then we have our investment cash flow of about BRL 900 million and the net interest and financials effect. Then we perform an exercise where if we disregard the effect of currency, we would have about BRL 1.6 billion in free cash flow. Excluding those effects -- and with that, we would have an effect with derivatives and availabilities of about BRL 2 billion. That includes the -- or excludes the foreign exchange effects and the free cash flow effects. So anytime the company loses money in derivatives, that is offset in the reduction of our indebtedness as we saw in the previous slide.
With that, I will interrupt my remarks and turn the floor back to Lorival for his final remarks.
Thank you, Fabio, for your excellent presentation. Now concluding our earnings presentation before we open for remarks -- for questions, I would like to, first of all, address the first quarter. You guys have seen the numbers. As was said, this was not on par with our abilities, but it is what it is. We've made the decisions we were supposed to make. And this quarter is now behind us. It's a time we are now looking on -- looking at on the rearview mirror.
As you've seen, our prospects are positive. We still have some challenges ahead of us in Brazil, but an extremely positive international market, which opens more opportunities for us. And as I said, BRF is extremely well positioned to seize these gains and make the best of this scenario that we currently have. That makes us extremely confident in the possibility of reversing these results.
Now another thing I'd like to stress, still addressing 2022, I wanted to tell you assertively that we are fully in line with our Board and have already put in place -- with communications to the company going off in the next few days -- a streamlining plan to make BRF more agile, efficient and dynamic. We will become more agile and seize all opportunities the market presents us such as the one we see right now in the international marketplace and focus even more on meeting the needs of our clients and adjusting our offerings properly, generating better results for our shareholders. That, in combination with our streamlining initiative, is a huge focus for us right now. In addition to that, we will reinforce and reinvigorate our sustainable growth strategy.
We will simplify the organization as a whole and our operation strategy across all our fronts. We will even stop some of our initiatives. That is to say that we will adjust our operations, becoming simpler and more streamlined, focusing on what provides higher returns for our shareholders and higher returns for the company.
I just wanted to make it clear, so there's no question. There will be no factories being closed or distribution centers being closed or assets being sold. Becoming simpler, more direct and more to the point is what we plan. And we are fully confident and fully in alignment with our Board, expecting this plan to be immediately introduced, added to what has already been done over the course of Q3 -- or Q1, actually. And the prospects we have for the rest of the year makes us fully confident and planning and focusing on reversing these results. And with this plan already bring robust and significant results over the course of 2022.
In closing, our Vision 2030 is very important. And I'd like to stress that as we said when we first introduced the vision, adjustments and adaptations
[Audio Gap]
As we said, we needed adjustments seeing as this was such a long-term plan. But looking at the global scenario that we have right now and all of the geopolitical and economic changes, a wide, broad and profound review is now necessary, prioritizing our current needs and avenues for growth as well as our focus. Our ambition remains the same.
Our long-term plan and our ultimate goal remains unchanged, but we need to adjust and adapt and review our priorities to meet those goals. So we plan to adjust some of our targets for our long-term view.
With that, I'd like to thank everyone for joining us and once again stress my confidence in the introduction and following of this streamlining plan as well as the results we expect them to bring to BRF and also stress that BRF is extremely well positioned to seize the opportunities that this scenario is now presenting us starting in Q2.
[Operator Instructions] Our first question comes from Isabella Simonato from Bank of America.
I have 2 questions. First of them, looking forward after such a challenging quarter, I feel like we sort of lose sight of how quickly you guys can recover your results. So looking at the real EBITDA rate that the company used to have for just over BRL 1 billion a quarter, how confident are you guys that you will be able to recover? You've had a number of quick initiatives over the course of this quarter to try to correct your planning and your production chain in general, but what initiatives do you plan in sort of cruise correction over the course of the year?
And my second question has more to do with your cost strategy. You guys stressed the losses with commodity derivatives over the quarter, and I understand that, that's part of the company's strategy. But if you could please offer some more detail as to why there were losses with derivatives? Was that because of a mismatch in short and long positions in corn? What exactly has caused this movement in your derivatives line specifically? And how can we see the upside of that?
And keeping with the raw material situation, we also saw that over the quarter, there was a decrease in your raw material inventories of about BRL 400 million. So if you could please detail your supplies position during this quarter, that would be great.
Thank you, Isabella. I will address your first question and then turn the floor over to Fabio so he can address the second part. I don't know if you remember, but when we had our Q4 earnings release, at that moment, I told you that the month of January was giving us bad signs -- that the year had started on a bad note. So right now, I can tell you that the month of April was a really positive one in Brazil. So within my limitations trying to answer your question as to how confident we are about our recovery, in light of the information we have so far, we expect that to be really quickly. As soon as Q2, we expect to be already on a completely different level. I obviously do not want to get ahead of myself. But in light of the information that we currently have and the data that we've been receiving for May and June, we expect to recover very quickly and in a very robust way in Q2 already.
Now with regard to the derivatives line, I will turn the floor over to Fabio. I think he'll be able to explain the situation to you a little bit better. And he'll even tell you what's in the balance sheet for the months to come. We always include -- or always included small values, but what happened during this quarter was that we saw a figure that was really off the chart. But I'll turn it over to him, and he'll be able to explain it to you a lot better.
I know you understand the company's grain strategy very well. But in the best interest of everyone else, I'll give you the explanation in a more comprehensive way. The derivatives strategy is mostly focused on grain, which accounts for about 47% of the company's long position. So the strategy is essentially to have the origin -- grain origin physically within the company. And the second part is to negotiate with purchasers at future prices. And the second [indiscernible] is the derivatives line as -- which is the subject of your question. Now looking back, what happened over the course of 2021 was on a few occasions, we source the grain with suppliers to ensure the corn supply in situations we understand that supply would be limited. But in those occasions, we understand that we may have better price opportunities. So whatever is fixed price, we use the Chicago market to unlock better opportunities whenever we expect them to occur. When we look back, we understand that, that was not the best decision in this case because grain prices continue to rise.
And as you know, here at the company, we use a hedge accounting strategy, which is a special treatment. If we did not use that, we would hedge, and that would be accounted in the bottom line. But it's very difficult to do that. So that special accounting regime allows you to acknowledge the derivative with the accounting, and consequently, also the cost acknowledgment. In this case, what happened was the derivative was settled between the last quarter of 2021 and the third quarter of 2021, but the fact is the company's position is very long in stocks. So the loss was materialized in Q1. So there was a mismatch.
Now looking ahead, you can see on the -- in the 24.4 note, 3 for commodities, you see our position in a virtually negligible position, which is why Lorival stresses that moving forward, we do not expect to have any major event in relation to the strategy -- occurring in relation to this strategy.
That was very clear, Fabio. I just wanted to follow up on 2 things. First of them is once corn prices go down, do you expect that to be reversed? And the second, once you unlock this long position with purchasers, doesn't your hedging position sort of strays away from your initial strategy?
Well, initially, that has to do with positioning of price, but we can't forget that it's essential to ensure supply. And when we unlock in the Chicago market, we also reduce a significant risk, which is our baseline. There's a price lag. Corn is not a commodity like corn -- like soybean bran, which is very much connected with the international market. So even though we have fixed prices, we also have a -- an anchored international price, which is also very important.
Our next question comes from Thiago Duarte with BTG Pactual.
In line with Isabella's question, I would really like to understand the comment that you make in terms of 5 percentage points of improvement in the gross margin along the quarter and understand the beginning of the presentation when we say that the gross profit from a base 100 goes up to 500 in March. So I understand that we are talking about 2 different pieces of information. So the gross margin improves according to the percentage. And the other one, we see multiples of 5. So I would like to understand how you see them as coincident and how they interact with the intention of understanding the margin -- the profitability from leaving the quarter and reaching April. That should be in line with the question that was asked.
And the second question, I would like to understand the impact that you mentioned in January, that generated all the rearrangement of the chain of -- at BRF. I would like to understand how you see the rest of the industry and how do they respond to the effect that I understand should be general. So I understand that this drop in demand should be felt generally.
When we see that the slaughter of chicken fell 70% year-on-year, if I'm not mistaken, in terms of placement, they dropped about 5% from January and February. So doing the math, it seems that all the placement of drop in -- happened at BRF. So I understand if we had a cycle of reduction of placement -- I would like to understand if this reading of mine makes sense and how would industry respond to this change in scenario that we saw in the past few months.
Thank you, Thiago. In relation to the first question, we try to show in an illustrative manner the effect that we had in the quarter, the impact of January and February and the recovery in March. So when we look at -- what we try to show is that we had levels that were very low of margin as we saw in January and February, and we see a recovery of the margin in March. This is the increase we are talking about. And of course, the trend, it's trend, and this is what we mentioned that would be happening in April and our expectation in the future -- for the future. So in fact, this was an attempt to illustrate and show the effect and how relevant the imbalance was in terms of impacts of January, February and March.
However, in relation to placement, what I can say to you about BRF in terms of effects and impact is that we felt considering our perspective and considering everything that's happened -- of course, this happens all the time. If you see BRF makes this adjustment and then it makes adjustment in the market. I would like to apologize because I'll get in touch with you later on because I do not have the information off hand so that we could provide accurate information in relation to the warehousing or the placement. And BRF makes the adjustments and not much comes from the other players, okay? I'll get back to you.
Our next question comes from Victor Saragiotto with Credit Suisse.
Let me make a question in relation to the mix. In the release, you say that the company may mix to different products, cheaper products. My question is how the margins would compare to the margins of the pigs -- which would be more ideal? Could we have a good level of margins, also considering those cheaper products? Are we talking about lower margin in the future?
The second point, you also mentioned the leverage -- net leverage that -- you had a recent follow-on. You said that the leverage level would be comfortable. But considering all this, do you still feel comfortable to work with this level? Or should we make some adjustments being made in the future? Mr. Lorival Luz mentioned some things related to the adaptations and how comfortable you are to work at this level? And what would be the adjustment and what would actually change? Thank you.
What we are doing in relation to the adjustments, in terms of mix and everything, are adjustments to meet the needs of the client. What can -- I can say to you is that we do not expect any loss in margin because we see at our mix -- let's say if the mix is not perfectly aligned with the demand, our loss will also be a little bit bigger. Because if the mix is not adequate, I have a higher level of inventory, and shelf life will be reached more quickly, and then we will -- make me force to offer discounts. So I -- what I need is to have an alignment of the chain in much more adequate, so as to say. That would prevent me from making corrections in the path or any other corrections to make adjustments to the mix that may be inadequate.
So in summary, [ that ] demand is a gain when we make this adjustment because I'm going to have a clear cycle.
In relation to EBITDA and net leverage, we will have to -- have to live with this EBITDA of the first quarter in the -- for the next 3 quarters. We are just going to get rid of it in the first quarter of next year. So what we are looking at now, answering your question, is that once we normalize this EBITDA, we will then have a pro forma net leverage, which is more ideal, but we have to face this EBITDA for the next 3 quarters. There's no way we can run away from this calculation. So we are managing the company in such a way that we will have the -- an EBITDA now supposed taking into consideration in the second quarter of this year. So without a doubt, that this will make us comfortable to look at the capital structure. But being austere, being very rigid, stringent when we make decisions in terms of new investments or CapEx and also being very assertive in the generation of results. So this austerity will be very strong along the year.
Our next question comes from Ricardo Alves with Morgan Stanley.
I would like to go back to the first questions asked by Thiago and Isa, and I would like to focus on the margins for the next quarter, specifically in Brazil. When you quantify in BRL 400 million and qualify those effects as being extraordinary, of course, we -- it implies that we are not likely to see any adjustments in the future quarters. So I would like to confirm that if in April, you actually manage to not resort to any other large adjustments. And I may ask a more direct question, which is your margin in the -- EBITDA margin in segment Brazil is going to be positive. I would like to understand this aspect.
And I think the word that you used, Lorival, was austerity. And this is related to my next question. You started the quarter with a tough time, and we are thinking about -- start thinking about CapEx. So what are decisions that need to be made in your austerity? Could you provide more details of the project that you are likely to cut? And we understand that some of them will have to continue. You have no choice. And you announced an investment in Saudi Arabia. Is it something that you're going to reconsider? Could you provide more information related to this in terms of tangibility? And what's the level of CapEx that you can reach for this year? This is a question both for Lorival and to Fabio.
Ricardo, let me be very objective when I answer the question. There were adjustments in April. There were no adjustments, in fact. And you ask that if we are running in positive margins now, the answer is yes. And now in relation to CapEx, I'm going to turn the call to Fabio. But in terms of Saudi Arabia, we have an agreement that we will have -- we are going to have control this share, and BRF is going to consolidate this company. We'll have the consolidation, and the cash continues in the company. And this investment will be implemented along a period according to the strategy. So we do not have a cash disbursement for the next quarters considering the scenario that we have today.
And I will now turn the call to Fabio to provide more detail.
Ricardo, in terms of CapEx, it's important to consider that today, the CapEx that we referred to as maintenance CapEx is more representative than in the previous year when we analyze, for example, the combination of the biological asset and the lease. The biological asset, if we see the impact of about BRL 300 million, and if you compare to the first quarter of the previous year, you see that the number of animals dropped about 3%, and the nominal investment increases 30%. So this is related to the inflation of grain, which is a balanced feed used for reproductive animals.
When you think of the year, you have to consider that part of the CapEx, something of about BRL 2 billion, BRL 2.4 billion is related to maintenance CapEx. So the margin is related to growth and efficiency projects in all our units of production in all distribution centers.
I can say to you that we had some projects that were being implemented, and it makes no sense to stop them. So maybe 2/3 of the projects were already underway. So we would rather continue with 1/3 and unlock the capacity. But for other projects, the company is more stringent in terms of the return rate, and we are very selective. Especially for the transition CapEx for this quarter and the next period, we are much more committed. So we are going to implement the strategy, as Lorival mentioned, with a lot of austerity and a lot of responsibility and -- because the company has to continue growing.
Our next question comes from Lucas Ferreira with JPMorgan Bank.
I have 2 questions related to international markets. Halal brought a very important contribution for this quarter, strong margins. And how you see the results for the next quarters for 2022 in general and the seasonality -- Ramadan? Do you expect strong margins as you saw in the first quarter?
And the second question is related to Asia. You mentioned the perspectives of higher prices, considering the avian flu in the United States. But what we can expect in relation to Asia for the next quarters? Do you think you can reverse the negative results? Do you expect higher demand, higher profitability for Asia?
Thank you, Lucas. Very quickly, in relation to Halal, from what we see today, I do not see any reversal of those results. And we also see some potential upsides that can happen in this line. In relation to Asia, I believe we have to mention 2 points. One is relation to chicken. So we have a very positive perspective in relation to chicken. And in relation to pork, we have always mentioned all the movement in China and the relevance of China considering the global market. So we see a very positive trend in terms of chicken, and we are going to watch closely. We're going to monitor all the impacts of China in relation to pork. So I would rather break down and divide those 2 topics in relation to Asia.
Our next question comes from Thiago Bortoluci with Goldman Sachs.
I would like to go back to hedge topics and commodities. Now think about the future. We discussed a lot the impact of hedge of past derivatives and whatever we saw in the first result. And we saw the grain scenario got worse. First was a result of the war in Europe, and there's also a concern in relation of this in Brazil. So I would like to understand what the hedge instruments that the company has been using. And how can we think about the cash covenant for the future?
Thank you for the questions. In relation to the size of the position, we -- there are 2 things to consider. One is the reality of corn. We believe we will have good opportunities, and we are going to wait for an opportunity to optimize the pricing when sourcing the grain. And when we compare the current position with the position of the previous year, we can see that it's a bit lower. And this is reflected in the raw material note.
In terms of soybeans, we -- the thing is a bit different. We try to define the prices, and we cannot place the bets for the future because the prospects are not so favorable. So we have been trying to balance this -- fix the price according to the amount to be consumed here a month over a month.
So when we look back in terms of derivative, we know that it's something that could not be considered for the future, but we maintain the hedge strategy, thinking about the dynamic to be -- the dynamic to be implemented. And we need to define the prices, and we have to source the supplies. And this is basic for us as an industry whose cost representativeness reach 45% associated to grain.
Our next question comes from Barbara Halberstadt with JPMorgan.
Most of my questions have already been answered, but I would like to follow up on your austerity strategy. You guys talked a little bit about expansion CapEx for the next few quarters. But if you could add a little bit more color and examples of what measures are being adopted and what initiatives do you plan to adopt moving forward to go back to higher levels in the next few months.
Barbara, thank you for your question. I just wanted to make something clear. With regard to our growth CapEx, we have no prospect or plan for any M&A or any type of acquisition that would represent some sort of investment in that sense. Another thing that Fabio well said, is that we assess these investments, especially the return on these investments when it comes to updating or expanding production lines. As you see, the scenario has changed. One thing is to run the -- a simple math with the money yielding 2%, 3%, 4%. And a completely different story is to calculate that with rates of 15% or 13%. So that adjustment naturally makes us more selective, so to speak, in our decisions. So I think that's what you can expect from us moving forward, that type of adjustment.
That was on CapEx. But in terms of operations, do you have anything to say in terms of what steps you guys have taken on the operational side when it comes to the more austere stance that you guys are now adopting?
Sure. Thank you, Barbara. Well, a little bit of what I said still stands. I think the when and the how we operate in every aspect of the company, we will keep our stance of simplifying and streamlining our processes. We want to be more dynamic and more to the point. And we want to work in an agile way with the purpose of growing in a sustainable and sustained way.
I will not go a lot into detail because this is something that's still being developed in-house. So as time goes on, we will be disclosing all the details to you.
At this time, we conclude our question-and-answer session. I'd like to turn the conference back to Mr. Lorival Luz for his final remarks. Please, Mr. Luz, you may proceed.
Once again, thank you for joining our presentation and the question-and-answer session. I'd like to once again stress our confidence in our performance over the next quarters when we expect to have material results as a result of our plan to streamline and simplify the way the company operates and also highlight that BRF is extremely well positioned and with the right strengths to seize the opportunities that will certainly present themselves over the course of 2022.
Thank you, everyone.
BRF's teleconference is now concluded. Thank you, everyone, for joining us, and have a great day.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]