BRF Brasil Foods : Management Report - 1Q19

MANAGEMENT REPORT

ON THE RESULTS OF THE

FIRST QUARTER OF 2019

Market Capitalization

R$24.98 bi - US$6.30 bi

Stock Prices

BRFS3 R$30.75 - BRFS US$7.75

Base: 05/09/2019

Shares Outstanding: 812,473,246 ordinary shares

1,057,017 treasury shares

Base: 03/31/2019

Conference Call Friday, 05/10/2019 10h00 BRT

9h00 EDT

Dial-in

Brazil:

[phone] or

[phone]

United States:

[phone] or

[phone]

IR Contacts:

Lorival Luz

Global COO, CFO and

CIRO

Eduardo Takeiti

IRO

Pedro Bueno

IR Manager

[phone] [e-mail]

São Paulo, May 10, 2019 - BRF S.A. (B3: BRFS3; NYSE: BRF) - "BRF" or "Company" today announced its results for the 1st quarter of 2019 (1Q19). The comments included in this report refer to the results in Brazilian Real, in accordance with the Brazilian Corporate Law and the accounting practices adopted in Brazil, already in compliance with the International Financial Reporting Standards (IFRS), all compared to the same periods of 2018, as indicated. The comments also include the adoption of IFRS 16, which changed the accounting treatment of leasing contracts, and the Company opted for a modified retrospective approach without restatement of comparative periods.

OPERATING HIGHLIGHTS (Continued Operations)

•CONSOLIDATED

•Net revenue of R$7,359 million (+4.7% y-o-y)

•Net loss of R$113 million in 1Q19 (vs. -R$133 million in 1Q18) for the continued operations and total net loss of R$1.0 billion in 1Q19 (vs. -R$62 million in 1Q18) ;

•Adjusted EBITDA of R$748 million (+9.3% y-o-y);

•Adjusted EBITDA Margin of 10.2% (+0.4 p.p. y-o-y);

•BRAZIL SEGMENT

•Net revenue of R$3,940 million (+5.1% y-o-y);

•Adjusted EBITDA of R$374 million (+6.4% y-o-y);

•Adjusted EBITDA margin of 9.5% (+0.1 p.p. y-o-y);

•INTERNATIONAL SEGMENT

•Net revenue of R$3,194 million (+3.6% y-o-y);

•Adjusted EBITDA of R$373 million (+30.2% y-o-y);

•Adjusted EBITDA Margin of 11.7% (+2.4 p.p. y-o-y).

FINANCIAL HIGHLIGHTS

•Pro forma net leverage 12 months of 5.64x1

•Operating cash generation of R$512 million

•Financial cycle of 17.0 days, a reduction of 11.6 days

1Including in 1Q19 the sale of assets in Europe and Thailand (R$1,163 million) and remaining amount receivable from sale of assets in Argentina (R$96 million).

1

Management Report on the Results of the 1Q19

Disclaimer

The statements included in this report concerning prospective businesses of the Company, projections, and results and the Company's potential growth are mere forecasts based on the expectations of management with regards to the future of the Company. These expectations rely heavily on market changes and the general economic performance of the country, industry, and international market, and are therefore subject to change.

MESSAGE FROM MANAGEMENT

Dear shareholders,

The results delivered in the first quarter of 2019 evidence our disciplined execution of our long-term strategy. Although grain prices increased by roughly 35%2 in the period, we continued to focus on recovering our historical profitability. As such, we adjusted our inventories of frozen raw material, reformulated our approach in tandem with large retailers, and launched new marketing campaigns to enhance the footprint of our major brands. We swiftly adjusted our production chain to serve the Saudi market, helping to increase the share of our processed products in the Halal market. Thus, we recorded roughly a 13% growth in average sales prices versus 1Q18.

We also saw a reduction in the volume sold due to restrictions imposed by Saudi Arabia early in the year, a reduction in direct investments and changes in the process of obtaining the International Sanitary Certificate in the port of Itajaí-SC. Overall, nearly 80,000 fewer tons were sold compared to 1Q18. Even so, higher average prices contributed to an increase of approximately 5% in our net revenue, boosting our gross margin by 1 p.p. and surpassing 20%.

When we analyze the evolution of our adjusted EBITDA from our continued operations and related margins, an upturn in our profitability emerges as an important trend:

	1Q18	2Q18	3Q18	4Q18	1Q19
Adjusted EBITDA (R$ million)	685	360	581	843	748
Adjusted EBITDA Margin	9.7%	5.1%	7.5%	10.2%	10.2%

We believe we are on the right track to achieve BRF's maximum profitability potential. We still have several areas of operation which will contribute to bolstering our margins. From an operational standpoint, we continue to focus our efforts on improving the efficiency of our production process. Our Operational Excellence System - OES has been installed and should comprise all the Company's plants by the year-end. We regularized our inventories of frozen raw material, attaining the historical average between 40,000 and 50,000 tons of products, thus cushioning the logistics management complexity, cutting cold storage rental and electricity costs, and reducing the need for obsolete inventory clearance.

Our +Excellence (+Excelência) program in the Brazil Division is in its final phase of maturation, poised to generate substantial gains in our commercial and service quality metrics, such as an increasing active client numbers, adding new items sold by clients, and reducing stockout indexes. Concerning the Halal Division, we were present in the

2Average price variation in the six months preceding 1Q18 and 1Q19 to compose 2/3 corn (average of the municipalities of Cascavel-PR,Chapecó-SC and Rio Verde-MT) and 1/3 soybean (average of the municipalities of Chapecó-SC,Rondonópolis-MT, West of Paraná and the Triângulo Mineiro area in Minas Gerais State).

2

Management Report on the Results of the 1Q19

region to deepen relations with our partners and authorities. We believe that our market leadership in the region may contribute to leveraging even more business opportunities, especially in the processed foods category.

Today, our major opportunities come from other markets, particularly from China. The impacts from African Swine Flu outbreaks have dramatically reduced the Chinese swine herd. As today China accounts for roughly 50% of the world's pork production and protein consumption, a drastic and sudden imbalance between supply and demand for such protein will result in a substantial rearrangement in the global meat market. In addition, poultry, which naturally replaces pork due to price elasticity, will benefit as well. These impacts should have long-lasting effects, since the substantial disposal of matrixes will drastically affect that country's replacement capacity.

Not only do we see gains in poultry and pork protein prices, but a reduction in China's swine herd will weaken demand for soybean, corn, and byproducts. In addition, the positive outlook for Brazilian and Argentinean grain crops coupled with a potential tariff agreement between the USA and China, which opens another purchase channel for the Chinese, will result in a significant price decrease in major inputs employed in our production chain. Since early this year, we have seen a 6.7%3 drop in grain costs. As BRF is a 100% verticalized company, it is well positioned to reap the benefits at the two ends of the equation: prices and costs.

Concerning financial leverage, our metrics increased modestly to 5.64x4 in 1T19 year-over-year. Besides the US dollar appreciation in the period, EBITDA of operations discontinued within the last 12 months was excluded. We currently maintain our target of reaching 3.65x at year-end.

Last, but not least, we have devoted most of our efforts towards fostering team engagement and building up BRF culture. As our employees, partners, and outgrowers are our most valuable asset, we have been tirelessly training them on BRF's non-negotiable values concerning Security, Quality, and Integrity. The payoff is already noticeable. For instance, there has been a 70% drop in the number of occupational accidents in 1Q19 compared to in 1Q18 in addition to a reduction in their severity. We are fully confident in the strategic plan outlined in 3Q18, and we remain extremely committed to executing it. We believe we are on the track of recovery and poised to tackle the challenges ahead as well as to seize opportunities as they arise in the global protein industry.

Pedro Parente

Global Chief Executive Officer

Lorival Nogueira Luz Jr.

Global Chief Operating Officer, Chief Financial and Investor Relations Officer (acting officer)

3Composition of 2/3 corn (average of the municipalities of Cascavel-PR,Chapecó-SC and Rio Verde-MT) and 1/3 soybean (average of the municipalities of Chapecó-SC,Rondonópolis-MT, West of Paraná and the Triângulo Mineiro area in Minas Gerais State).

4Net debt/proforma adjusted EBITDA: includes the sale of assets in Europe and Thailand (R$1,163 million) and remaining amount receivable from sale of assets in Argentina (R$96 million)

3

Management Report on the Results of the 1Q19

HIGHLIGHTS

Key Financial Indicators

The Company points out that as of 01/01/19, it adopted the CPC 06 (R2) / IFRS 16, which had a positive impact of R$158 million in the 1Q19 EBITDA. The IFRS 16 accounting standard changes the accounting treatment ofleasing, and the Company opted for a modified retrospective approach without comparative periods restatement. Further details can be found in Note 3.1 of the Interim Financial Information (ITR).

Highlights	1Q19	1Q18	Chg. y/y	4Q18	Chg. q/q
Volume (Thousand Tons)	1,006	1,085	(7.3%)	1,153	(12.8%)
Net Revenues	7,359	7,031	4.7%	8,289	(11.2%)
Average Price (R$/kg)	7.32	6.48	12.9%	7.19	1.8%
Net (Loss) Income	(113)	(133)	(14.7%)	313	(136.2%)
Continued Operations
Net Margin - Continued Op. (%)	(1.5%)	(1.9%)	0.4 p.p.	3.8%	(5.3) p.p.
Net (Loss) Income	(1,012)	(62)	n.m.	(2,125)	(52.4%)
Total Consolidated
Net Margin - Total Consolidated (%)	(13.8%)	(0.9%)	(12.9) p.p.	-25.6%	11.9 p.p.
Adjusted EBITDA	748	685	9.3%	843	(11.2%)
EBITDA Adjusted Margin (%)	10.2%	9.7%	0.4 p.p.	10.2%	(0.0) p.p.
Cash Generation (Consumption)	1,513¹	(238)	n.m.	(46)	n.m.
Net Debt	(14,238)¹	(14,019)	1.6%	(15,610)	(8.8%)
Leverage (Net Debt/Adj.EBITDA LTM)	5.64¹	5.39	4.6%	5.12²	10.2%

1Including the sale of assets in Europe and Thailand (R$1,163 million) and remaining amounts from the sale of assets in Argentina (R$96 million)

²Including pro forma adjustments from asset sale, the non-transferred portion to FIDC in 2018 and the exchange rate adjustment related to the projected R$/US$ level at the time of the announcement of the Operating and Financial Restructuring Plan, as detailed in the 4Q18 Management Report.

Highlights of the Quarter and Subsequent Events

•Completed the process of transitioning Mr. Lorival Nogueira Luz Jr., who was elected successor to Mr. Pedro Pullen Parente, into the position of Global Chief Executive Officer ("Global CEO"). Mr. Lorival will be vested in office on June 17, 2019. The position of Global Chief Operating Officer ("Global COO"), currently held by Mr. Lorival Nogueira Luz Jr., will cease to exist. Mr. Pedro Pullen Parente, elected as Chairman of the Board of Directors on April 26, 2018, will continue to serve in this role throughout the remainder of his two-year term.

•Sales of QuickFood S.A., plant in Várzea Grande-MT, Campo Austral, and Avex S.A. successfully concluded;

•Launched Qualy Vita, a margarine product designed to support a better cardiovascular health, diversifying the

Company's products portfolio;

•Launched the brfHUB portal, enhancing BRF integration with the innovation ecosystem and potentializing relationships with startups and foodtechs to develop new businesses.

•Resignation of Mr. Ivan de Souza Monteiro as Vice-President of Finance and Investor Relations, as announced in April 25th 2019. Mr. Lorival Nogueira Luz Jr., current Global COO, will take office on an interim basis, temporarily accumulating both functions until a new executive is nominated.

•Launched the new advertising campaign with the concept: "Fim de Semana tem S de Sadia".

4

Management Report on the Results of the 1Q19

OPERATING PERFORMANCE

BRAZIL SEGMENT

The most valuable food brands in the country

Brazil Segment	1Q19	1Q18	Chg. y/y	4Q18	Chg. q/q
Volume (Thousand Tons)	508	546	(6.9%)	621	(18.2%)
Poultry (In Natura)	127	138	(8.3%)	131	(3.1%)
Pork and Others (In Natura)	29	29	1.4%	30	(3.0%)
Processed foods	352	378	(7.0%)	460	(23.5%)
Net Operating Revenues (R$, Million)	3,940	3,748	5.1%	4,736	(16.8%)
Average price (R$/Kg)	7.76	6.87	12.9%	7.63	1.7%
COGS	(3,104)	(2,967)	4.6%	(3,747)	(17.2%)
Gross Profit (R$, Million)	836	781	7.1%	989	(15.5%)
Gross Margin (%)	21.2%	20.8%	0.4 p.p.	20.9%	0.3 p.p.
Adjusted EBITDA (R$, Million)	374	352	6.4%	556	(32.7%)
Adjusted EBITDAMargin (%)	9.5%	9.4%	0.1 p.p.	11.7%	(2.2) p.p.

1Q19 vs. 1Q18

During the first quarter of 2019, we continued executing our strategic plan on recovering our profitability. We concluded the adjustments needed in our frozen raw material inventories and redesigned our approach with retailers, thus reducing direct investments. We also launched new marketing campaigns in order to increase the outreach of the Sadia brand and emphasize the moments of union through the Perdigão brand. As a result of all these initiatives, the average sales price increased by 12.9% y-o-y, mainly reflecting (i) the price list adjustment of our processed food portfolio by nearly 10% in June 2018 and approximately 5% in February 2019; and (ii) the price recovery in the in natura product market: frozen whole chicken price recovered by approximately 28.0% while special pork carcass price went up by 9.3%5. On the other hand, volumes dropped 6.9% y-o-y, mainly due to reduced direct investment for retailers. Even so, net revenue grew 5.1% y-o-y in 1Q19 to R$3.9 billion.

This positive revenue performance was partially impacted by the average unit cost, which went up 12.4% y-o-y due to a 34.8%6 increase in the average price of grains, during production of products sold, lower dilution of fixed costs due to production idleness, as well as higher freight costs. Notwithstanding, gross margin grew 0.4 p.p. y-o-y and reached 21.2% in 1Q19.

Selling, general and administrative expenses increased by 9.5% y-o-y due to more significant investments in marketing in the period, mainly due to the adjustments in the market approach of the Sadia and Perdigão brands mentioned above. It is worth noting that these investments were postponed from 1Q18 to 2Q18 due to BRF's sponsorship for the world soccer championship. As a result, Adjusted EBITDA totaled R$374 million in 1Q19, with a margin of 11.5% and 0.1 p.p. growth y-o-y. In addition, the adoption of IRFS 16 had a positive accounting effect on EBITDA of the Brazil Segment, of R$87 million in 1Q19.

5Average price increase (R$/kg) 1Q19 vs. 1Q18 of CEPEA/ESALQ indexes for frozen whole chicken at wholesale and special pork carcass, both in the Greater São Paulo area.

6Average price variation in the six months preceding 1Q18 and 1Q19 to compose 2/3 corn (average of the municipalities of Cascavel-PR,Chapecó-SC, and Rio Verde-MT) and 1/3 soybean (average of the municipalities of Chapecó-SC, Rondonópolis- MT, West of Paraná and the Triângulo Mineiro area in Minas Gerais State).

5