Page 37 - Minerva Foods Sustainability Report 2016

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Cost of
raw material
Operating margins are de- ned by the ratio between the cost of acquiring raw materials and the sale price of products. To balance out this equation, units are main- tained at strategic points, with adoption of tools such as the Beef Desk.
Customers
An overhaul of the sales area in 2016 resulted in a large custom- er portfolio, with on-site service starting and with a higher num- ber of items per order, which add- ed a higher margin to the opera- tion. ere was also an increase in credit and payment terms. e Company works with the one- stop-shop concept, where the customer’s purchases are con- centrated in a single supplier that is responsible for delivering all products within 24 hours.
Exports
Exposed to impacts as a result of exchange rate variations; inter- national economic slowdowns; imposition or increase of tari s; health and non-health barriers; demand for exchange rate con- trols and restrictions on exchange rate operations; and strikes and other events, Minerva minimiz- es risks by distributing exports to one hundred countries, located in Europe, the Middle East, Africa, Asia and the Americas.
Environmental standards
To avoid administrative and criminal sanctions, as well as liability for damag- es, Minerva Foods adopts a strict proce- dure for cattle acquisitions. Current legal requirements, including environmental requirements, are respected and certi - cations are maintained that guarantee the standard of quality established by the Bra- zilian and international markets. Within this context it is worth noting operating licenses, approvals and authorizations for development of activities.
Management of liabilities
e Company’s consolidated nancial indebtedness makes it necessary for a substantial portion of its cash ow to be used to make payments on principal and related interest. In December 2016, 78% of all debt was exposed to exchange rate variation. While the leverage measured for the net debt/EBITDA ratio was at 3.4x, with a debt duration of 6.2 years. In 2016, Minerva Foods began a liability management operation to low- er the cost of its debts, in addition to buying back 2019 Bonds (which paid an annual coupon of 10.875%) and issuing US$1 billion in new Bonds due in 2026 (annual coupon of 6.5%) on the international mar- ket, aimed at elongating the pro le and reducing the cost of consolidat- ed debt, replacing Bonds due in 2023 (annual interest coupon of 7.75%).
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