Good morning. Welcome to Minerva. About the results of this 2020 results. We have present here Fernando Queiroz, Chief Executive Officer, and Edison Ticle, CFO and Investor Relations Officer. We wish to inform you that this event is being recorded, and all participants will be in listen-only mode during the company's presentation. If you need any assistance during the call, you will receive instructions later. Questions will be at the end. If you need, you dial hash tag zero, and it is simultaneously on www.minervafoods.com/ir. In this address, you will find the webcast platform for downloading. Before proceeding, we wish to mention that the forward-looking statements that may be made during this presentation relating to Minerva's business projects, operating and financial estimates, and goals, they are based on the beliefs and assumptions of the company management and on information currently available.
They involve risk uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors must understand that general economic conditions, the industry conditions, and other operating factors can also affect the future results of Minerva and could cause results to differ from those expressed in the forward-looking statements. I will now give the floor to Mr. Fernando Queiroz, CEO, who will begin his presentation. Mr. Queiroz, you may start the presentation.
Good morning, and thank you for participating at the Minerva second quarter 2020 earnings conference call. Like last quarter, before we delve into financials, I think it's important to address these unprecedented times and the situation in which we find ourselves on account of coronavirus pandemic.
Since the emergence of the pandemic, Minerva has followed all the official guidelines and taken preventive and protective measures to safeguard our primary and most important asset, our team, our people, and our employees. We have adopted a number of protective measures to prioritize the workers' health, such as leaves of absence for workers in at-risk groups and working from home for administrative and office personnel. Furthermore, we are enforcing greater control and prevention in the plants doing temperature checks when workers arrive and reinforcing distancing measures along the manufacturing lines, like slaughter and deboning, and in meeting areas like the cafeteria. I would like to point out that these initiatives are fully comply with the government authorities' instructions and protocols and are designed to ensure the safety not only of the workers, but also of our customers and partners.
We are actively contributing to a charitable initiatives in civil society. To date, we have given over BRL 42 million in contributions throughout the continent. We have donated over 180 tons of food, such as beef, meatballs, and others, and 140,000 hygiene and personal protection items like masks, gloves, hair caps, safety goggles, and have donated 20,000 liters of hand sanitizer and 13,000 medications and 5,000 devices to use in hospital. We did even more donating 3,500 rapid tests for COVID-19 to health secretaries from cities where we keep our units. Minerva has leased five mobile ICUs to eight city hospitals in some of the places we operate and donated BRL 250,000 to the general hospital run by the University of São Paulo School of Medicine in the city of Ribeirão Preto, São Paulo.
We also donated BRL 360,000 to lease a hospital ward on behalf of the city government of Palmeiras in the state of Goiás. In partnership with the Brazilian Development Bank Saving Lives project, we gave BRL 150,000 to purchase protection kits for frontline workers in the fight against coronavirus. We also actively support our partners, especially small and medium-sized business. Together with BTG Bank, we set up the first relief fund for the meat industry in Brazil. We put initial BRL 32 million in the emergency fund. These funds are intended to support our small and medium-sized customers and help them get through the crisis. We are offering working capital loans of BRL 30,000 for nearly 1,200 customers in the stage 1. By the end of the stage two of the project, we expect to have helped 2,000 customers.
Customers have 24 months to pay back the loans trace plus a one-year grace period. I would like to stress that this is not only for beef purchases, can be used for general business expenses as dictated by the particularities of the company. This will ensure the indirect and direct jobs and are not lost in the pandemic. Social responsibility is part of our DNA and a priority for us at Minerva Foods. This is why we're giving support to many different initiatives throughout Brazil. Our concern is with the impact of the novel coronavirus, not only in terms of health, but on other areas as well, including the economy. We set up the relief fund specifically to help our partners face these incredible difficult times. Everything we have done reinforces our commitment to society at large, our workers, partners, customers, and communities.
I cannot stress enough how critically important our industry, the food industry, is for the world. We shoulder great responsibility, and just as we did this first half of the year, we will continue to work tirelessly to produce food, to bring beef, such a basic need, to tables all over the world. Let us move on to earnings, starting with the second quarter highlights on slide two. Let's begin with the cash flow, one of our priorities. Operating cash flow totaled BRL 711 million in the second quarter 2020, and BRL 3.6 billion in the 12 months ending in June 2020. Free cash flow was positive for the 10th quarter running, totaling BRL 177 million. We generated BRL 1.2 billion in free cash flow in the first semester and BRL 1.9 billion in the last 12 months.
I'd like to point out how our solid operation and financial performance, as well as our risk management model, proved fundamental to our excellent quarterly performance. Consolidated gross revenue came to BRL 4.6 billion in the second quarter of 2020 and BRL 19 billion in the last 12 months, a company record. If we break down gross revenue for the quarter, we get 45% of our revenue or BRL 2.1 billion came from the Brazil division. Another 45% of our revenue came from Athena Foods, and the remaining 10%, or approximately BRL 472 million, came from the trading division. In the second quarter, Minerva's consolidated exports accounted for 72% of our gross revenue, up to 16% from the second quarter 2019. In the last 12 months, exports accounted for approximately 70% of our revenue.
In the second quarter, our EBITDA reached BRL 590 million in the second quarter 2020, a considerable 62% increase over the second quarter 2019, a record for the period. Well, the EBITDA margin was 13.4. Our operating performance in the second quarter 2020 reflects not only the upswing in exports and growing international demand for beef, but also Minerva's outstanding operations management. We posted a net profit of BRL 253 million this past quarter and BRL 525 million in the first half of the year. The net profit for the last 12 months came to BRL 686 million. In addition to the company's solid operation and financial performance, another highlight was our strong financial position.
As of the close of the second quarter, 2020, our leverage ratio, that is the net debt to EBITDA ratio over the previous 12 months, and right in line with our strategy to reduce leveraging and improve capital structure. Minerva ended with a cash position of BRL 6.8 billion, which gives us breathing room amidst the challenges of the times and is perfectly aligned with our conservative cash management strategy. I must mention that we must continue to follow our debt management schedule. We finalized the issuance of two local bonds linked to Agribusiness Receivables Certificates totaling BRL 1.2 billion, with the aim of improving capital structure and extending the duration of our debt. We also decided in early June to cancel BRL 97 million in 2026 and 2028 bonds, which, given the market volatility, were trading below face value and had been bought back over the previous six months.
We announced our new innovation area, whose scope includes three major initiatives. Advanced data analysis for decision-making. Second, developing an e-commerce and marketplace platform, expanding opportunities through our digital channels. Three, an investment arm focused on startups and technology companies that relate to our business. Setting up a dedicated innovation area is yet another Minerva initiative aimed at maximizing the market opportunities and making strides in our industry's value chain. At the end of the presentation, Edson will share more details about these segments. Let us now move to the next slide and talk a bit more about Minerva's operational performance this past quarter, starting with exports. Slide three. The second quarter of 2020, we strengthened our position as the largest beef exporter in South America with a market share of approximately 18%.
These numbers reflect our geographical diversification throughout the continent, which together with the help of our 15 international offices, gives us competitive advantage and favorable position in global beef exports. Let's dive down into regional export performance. For the Brazil division, Asia responded for 50% of export revenue, a tremendous increase of 25 percentage points over the same quarter last year. Asia was also the biggest market for Athena Foods, accounting for 42% of exports. These numbers remain steady compared to 2019. Export performance has made it abundantly clear that there is growing demand in Asia, especially in China, but also other markets like Indonesia and Malaysia for beef. We expected heavy growth in these markets in the forthcoming quarters. I believe that it's important to stress that market forecasts are quite positive.
We expect a number of very encouraging economic and market factors to positively affect our business in the upcoming quarters. The first is the African swine fever, which continues to impact Chinese pork. Bear in mind that the outbreak is not limited to China and has spread throughout Asian parts of Eastern Europe. We have seen that there in Asia, Southeast Asia, is a result of growing urbanization, higher incomes, expanding middle class, and a move towards Westernized consumer behavior. We've seen an increase in supply problems for some of the world's biggest beef suppliers, such as Australia, one of our primary competitors worldwide, the U.S., with pandemic heavily impacting U.S. meat production, and more recently, India, which is facing export problems for buffalo meat. This has opened more doors for us in markets in Asia and Middle East.
The current situation are inroads for South American exporting countries like Brazil, Argentina, Paraguay, and Colombia, new markets. Saudi Arabia allows imports from Uruguay, Paraguay, and Colombia more recently in the first part of this year. The Minerva strategy is to maximize our competitive advantage to invest in innovation, risk management, and market intelligence to ensure increasingly more efficient and profitable commercial and logistic solutions. We have aspired to and pursued all this while honoring our commitment to sustainability, one of our greatest competitive advantages and one that opens the doors to markets that value environmental concerns, animal wellbeing, and social practices. This sets us apart from the competition and increased business opportunities. I'd now like to turn it over to Edson. He will go into more details about Minerva's operational and financial highlights. Edson speaking.
Thank you, Fernando. Let's start with slide four.
Let's start with the operating performance and the breakdown of the company's gross revenue by division. The second quarter of 2020, the Brazil division, Athena Foods, accounted for 45% of the company's earnings and the trading division for the remaining 10%. Brazil's plants were impacted this quarter on account of COVID-19 measures. With this, the capacity decreased. The division operated decreased 63%. Athena Foods operated at 76% capacity, higher than the previous quarter, and a reflection of the growing export volume to China from our plants in Argentina and Uruguay. As a whole, the company's plants operated at approximately 70% capacity this quarter. As mentioned earlier, operating these rates barely close to the new normal and are expected to remain in these ranges as long as the pandemic persists.
Finally, now on the right-hand side of the slide, we've included consolidated exports by region in the second quarter 2020 and for the 12-month period in June. As Fernando already mentioned, Asia is our leading export destination. In the second quarter this year, Asia accounted for 50% of our exports, and China alone accounted for 37%, again, of total exports. In the last 12 months, the Asian continent accounted for 47%. Slide five. Moving on to Slide five, net revenue came to BRL 4.4 billion in the second quarter and a 9% increase over the second quarter. In LTM, two quarters 2020, net revenue totaled BRL 18 billion, a 7% increase year-to-year. Speaking of profitability, Minerva's posted an EBITDA at the second quarter of BRL 590 million, a solid 62% increase year-on-year. EBITDA margin was 13.4%, an increase of 440 basis points over the second quarter 2019.
In the last 12 months, EBITDA totaled BRL 2 billion, a record for Minerva. In the next slide, I want to talk about financial leveraging. Our leverage index, that is net debt to EBITDA ratio over the previous 12 months, was 2.6x , despite the nearly 5% appreciation of the U.S. dollar. In dollar, our leverage index at the close of the quarter was 2.2x . We've decided to start disclosing this leverage metric in U.S. dollars following some exporting companies that have been disclosing these numbers in this system. We've decided to publish the two metrics, but obviously we focused on net leverage in BRL terms since we disclose our financial statements in our local currency.
Just as illustration, it is worthwhile to also take a look at the net debt EBITDA in U.S. dollars, since most part of our revenues currently comes from exports. Minerva's leverage index today is the lowest in the last 12 months and reflects management's commitment to a more efficient, less costly, and lower risk capital structure. We reduced the financial risk of the company. I would also like to point out that we still have nearly BRL 770 million from the warrants. That will reinforce our cash position until the end of 2021. These warrants have a strike price at BRL 6.42. This means that they are keeping the money, which means that they'll be exercised with a huge certainty by 2021. As soon as they will be exercised, these proceeds come to our cash and our leverage in BRL. After the warrants, it should be 2.2x .
Let's move on to the next slide. We'll discuss net earnings and operational cash flow. Slide seven. In the second quarter 2020, the net revenue came to BRL 253 million after calculating for income and social taxes. Net revenue totaled BRL 525 million in 2020. These results reflect not only our solid operational performance, but also our strong risk management model, which has proven fundamental to safeguarding our balance sheet, reducing leveraging and contributing to this half of the year's stellar net revenue. Minerva's net profit over the last 12 months came to BRL 686 million. Let us move on to our cash position. Cash flow from operations came to BRL 711 million this past quarter, of which approximately BRL 659 million were adjustments to the net profit.
Working capital came to 202 million BRL due to the variation of 84 million BRL from the receivables, since we directed most of our sales to the export market. Also a consumption of 111 million BRL from inventories and biological asset lines. In the last 12 months, operational cash flow was positive in 3.6 billion BRL.
On slide eight, we wish to discuss two of the company's priorities, cash flow and free cash flow. The second quarter 2020 was posted in the 10th consecutive quarter of positive free cash flow, totaling 377 million BRL, including the income of 215 million BRL from a foreign exchange hedging strategy. EBITDA this quarter, not adjusted for non-recurring items, totaled 577 million BRL, and the investments to 50 million BRL. For the second quarter, cash basis income, not accounting for Forex hedging, came to 177 million BRL, excluding non-recurrent items.
Totally approximately BRL 13 million on account of social expenses on activities designed to address COVID-19. Recurring free cash flow for the quarter, BRL 162 million. Due to the high volatility of the exchange rate over the quarter and the benefits from our hedge policy, income from hedging came to BRL 215 million, bringing free cash flow of up to BRL 377 million at the quarter's close.
In the same vein, free cash flow in the last 12 months totaled BRL 1.9 billion. Building up, we started with an EBITDA of BRL 2.0 billion, with a total of BRL 271 million of CapEx. FX hedging cash basis loss came to BRL 206, and a variance in cash flow needs came to a positive BRL 330 million.
If we add these 25 million for non-recurring items, we reach a free cash flow of BRL 1.9 billion in the last 12 months, a reflection of Minerva's solid economic performance over the year. I'd like to highlight for these last 12 months' free cash flow result, comparing with the last 12 months' EBITDA. We generated BRL 1.9 billion of free cash flow, while BRL 2.0 billion of EBITDA. Which means an EBITDA conversion of more than 90%, or 93% to be exact. If the meaning of this metric as a proxy of free cash flow, the case of Minerva is quite valid. Because after all, in the last 12 months, 93% of our EBITDA was really translated in free cash flow for the company.
I might even say that in our industry, there's no other company that has this EBITDA cash conversion that Minerva was able to obtain, produce in the last 12 months. Let's move on to slide nine, which addresses net debt bridge. The total net debt at the close of the last quarter was BRL 5.4 billion. In the second quarter, free cash flow stood at BRL 377 million, which as I mentioned earlier, was impacted by BRL 13 million for non-recurring items.
BRL 55 million positive was the effect of the accounting of some hedge in this quarter and for financial liabilities over the quarter. The sum of these revenues in doing the forecast, we begin from a net debt of BRL 5.4 billion and go to the same net debt, even considering a dollar appreciation of about $0.28 in the period.
We ratify again the commitment of this management to keep reducing Minerva's leverage level, to reduce in an effective and concrete way, and mainly to gradually improve our capital structure. Our hedging policy continues to maintain, protected at least 50% of our long-term foreign currency exposure. We continue carrying a very protected FX exposure in our balance sheet, which gives us a comfort zone to keep generating excellent operational results.
Being certain that the financial part will not compromise, quite the opposite, it will give a strong contribution in the company's margin. Next slide. We're going to discuss a bit about our capital structure. As we already mentioned, our leverage ratio, that is the net debt to EBITDA ratio over the previous 12 months ending in the second quarter 2020, was 2.6, its lowest in the last 12 months.
The company's cash position was BRL 6.8 billion on June 30th, the highest ever recorded for Minerva, also as a result from our hedging policy, which obliges us to keep a relevant part of our cash position in U.S. dollars. When there is such a high Real depreciation, having this amount of cash in U.S. dollars implies in having a higher amount of reais at the end of the quarter.
This is highly reassuring in these extremely volatile times. While we're discussing debt profile, about 78% of our debt was exposed to the U.S. variation with approximately five years duration. Bear in mind that our hedge policy, which requires that we protect at least 50% of our long-term exposure, this has proven extremely efficient in the light of exchange rate variations.
The last point I would like to comment on this slide is our constant shift in liability management. We're constantly looking to our perfect capital structure by reducing the cost and extending the duration of our debt. During the second quarter, we issued certificates totaling BRL 1.2 billion that will mature in 2025 and 2026.
The income from these issues, in addition to helping us maintain a comfortable cash position, allowed us to buy back our 2026 and 2028 bonds on the secondary market, which partially was canceled and part is in our cash position. We bought back $100 million that were already canceled, and this represent half of our local bonds. The other half was directed to debt rollover or to reduce our short-term exposure. That's why our amortization profile was more favorable.
Currently, less than 17% of our debt maturity date is in the next 12 months. This was a one-time opportunity in light of the market volatility, but it could only happen because Minerva was and is highly liquid, which allows us to seize opportunities and use our cash more efficiently and to further improve our capital structure. Now we're going to slide 11. Just before we open for Q&A, we would like to talk about our innovation area. As announced last week, we created three main fronts. One, advanced data analysis for the developing and managing statistical data and AI tools to guide our operational, financial, and risk management decisions.
As everybody knows, Minerva, since 1992 when it was founded, has been keeping a huge public database with information about the worldwide beef industry, which means we now have a unique data lake to apply modern data analysis tools to both improve and accelerate our management model and decision-making.
These AI tools will be applied to our proprietary risk desk management and pricing models. We will also use this kind of tool in our proprietary credit model, supporting a more accurate and efficient approach based on quantitative models and to improve our decision-making. We are very confident that with these initiatives in doing internal backtesting, that profitability could be improved by 15%-20%. Just to explain, what is backtesting? We simulate previous decisions and considering the new quantitative models, and we evaluate which would be the result of our new tools.
Well, you see, I take the decisions that were taken. I make the new simulation with these algorithms and see what would have been the decision and what would have yielded as compared to the previous decision. We can therefore see that we can have a gain of about 15%-20% using more modern tools, but mainly capacity and speed of processing and interaction with the variables much, much better than what we used in the past.
The second front is tasked with identifying and fleshing out opportunities for online sales and will focus initially on Brazil, Argentina, and Paraguay, developing an e-commerce and marketplace platform, which will further strengthen our sales channels and populate our market intelligence database, and therefore allowing us to gain new entry to new commercial opportunities.
In Argentina, we are on the final stages of the development of these digital initiatives, while in Brazil and Paraguay, we still have a long road ahead. Finally, the third front involves setting up an investment arm, focusing on startups and technology companies related to or addressing needs in our industry.
That is, we're going to try to invest primarily in startups that are related to the core business, be related to Minerva's value chain like alternative proteins, logistics, animal husbandry, agritech and food tech, retail and more, and that show long-term potential to leverage synergies and help unlock unique opportunities for Minerva, which are emerging with new consumer habits. For instance, we've been noticing an important increase in digitalization services, not only financial services, but also e-commerce opportunities, a clear change on consumer behavior.
We know that there's several startups that are focused on capturing these changes, nothing better than using venture capital structures to give values for everyone. We expect a maximum investment of $30 million in order to support no more than 10 companies, with investments ranging from $1 million-$5 million per company. This tireless pursuit of innovation is part of Minerva Foods' DNA, this new department is yet another initiative through which we will continue to contribute to the food industries and technological changes, offer new products and new opportunities to the market, our shareholders, and our partners. Well, we conclude the quarterly earnings presentation. I will now give the floor to the operator to open the floor for your questions.
Thank you. We will now start the Q&A for investors and analysts.
Before proceeding, we wish to mention that the questions in English shall be put through the webcast. In English, only through webcast. Also, for you to ask a question, you have to click on number one. The first question is from BTG Pactual.
Good morning, Fernando and Edson. I would like to ask two questions. The first one has to do with volumes. It becomes very clear that using capacity, Edson mentioned that what would be the new normal while we have this coronavirus. I would like to ask about the drop in sales volume that dropped a lot more than the slaughter. Why did this happen? We read a lot of information in the second semester of difficulties. We saw some logistics and others. If you could explore this?
About the margin sustainability, when we look at the price of the arroba, which is already at a higher level, if we look to Brazil, we see a difference in the price of dollars. How do you see this margin, the gross margin? We have the impression that it's very high. I would like to see how you see this margin going forward. Thank you.
Fernando will answer the first question. I'll answer the second one.
I would like to remind you a few comments that I made about the first quarter. First of all, we have in our budget BRL 200 per arroba. We thought the prices would be below this, and then for one or two months, it would be close to this, and then it should go up by October, between the seasons. This is happening exactly what we forecasted in our budget.
According to our budget, we would have the possibility of have a two-digit margin this year. What do we see? The prices in USD and BRL are much higher. With the cost in the budget and the sales price much higher, this will imply in more expanded margins. This second quarter, the margin was about 350x better than what we expected in our budget. If we make a conservative account, if we are conservative with a margin of two low digits, about 11% for the last two quarters, we'll have the year EBIT of BRL 2 billion for BRL 2.2 billion, more or less. Now, this is already above what we talked to the market at the beginning of this year. All the accounts that I'm making is that if we repeat the performance of the second quarter, this does not happen.
Usually, the third and fourth quarters are much better. If we can produce the same result of EBITDA in monetary units, which will imply necessarily in a lower margin, much smaller than the second quarter, we will reach 2020, it's R$2 billion, it's a big increase as compared to the previous year. All this to say the following, we're very optimistic with the margin. It will surprise you upward direction because the cattle position was in our budget. We did not expect the prices in dollars to go up and the Brazilian currency very depreciated when we prepared our budget. Fernando will reply the second question.
Thiago, regarding volumes, you saw in this quarter an adjustment in the plants as well the adjustments in the sales channels. Undoubtedly, April was a very poor month.
It was a month in which physically we adjusted the plants and the new protocols that we have now. Channels had to be adjusted as well. We saw a valley in the month of April and a gradual recovery. Sales were lower, but I can state here that Minerva's priority was to take care of our people, take care of our collaborators because of the COVID-19. This caused a gap in sales. Regarding the markets, I would say that they're becoming more and more increasing. We have seasonal numbers. Australia and New Zealand are giving us new opportunities because the COVID has attacked India. India, therefore, has opened their doors for us in the Southeast Asia. We're very optimistic for the international market for the seventh semester.
The domestic market in Brazil, Uruguay, Argentina, Colombia have given strong signals of recovery, gradual recovery, but of recovery. The new normal is the reduction in capacities, but the new normal is to have a going back to consumption in all the markets. The domestic markets and South America will occupy a bigger share in the international market.
Thank you very much. Very clear. To say this, in other words, if what I think I understood from your answer is that this gap, the volume produced and sold, you believe it should be inverted in the second semester, let us say, and an adjustment in the channel. Is that what you said? Did I understand correctly?
Yes, that's correct, says Fernando. Thank you.
The next question comes from Isabella Simonato from Bank of America.
Thank you, Fernando and Edson.
Good morning to everyone. My first question has to do with capital allocation. Due to the deleverage that is happening, and the company focus has changed. Now, regarding payment of dividends, what we can expect? What does the company think about the timing and a change in politics? How can we think of capital allocation going forward? Giving a follow-up on what Thiago was questioned about slaughter. It shows more on Athena. Could you mention some country where there was a bigger mismatch to show us how things are evolving, to put more color in our charts with all the market?
Well, speaking of capital allocation and dividends, we approved a policy with the minimum dividend of 50% of net debt, and at the end of the exercise, the net leverage will be equal or smaller than 2.5x . We'll always consider the calendar year.
The first board meeting that is going to approve the annual accounts, we will discuss the dividend policy, and if it's equal or less than 2.5, we will propose to pay 50% of net profit. Well, the timing is that we hope that this will happen in the first quarter of next year, the payment referring to the year 2020.
We feel very confident due to the trends and the company's dedication this year that we believe we will attain a leverage level equal or less than what was in our dividend policy approved by the board. Looking at sort of in the medium and long term, we believe that the net debt, considering EBITDA, will not be below 2x . If it goes below 2x , we will have to be more aggressive with tools of capital distribution to the shareholders.
It can be through dividends, purchasing back some shares, but some of these tools so that we can maintain the leverage 2x because the ROI is above 20% and the capital of third parties now, it doesn't make sense to have a company under leverage. 2x seems very comfortable if we consider the debt profile we have.
It's very comfortable from the financial point of view and very efficient and worthwhile from the point of view of returns to the shareholders if we compare the capital invested with the marginal cost of a third party's capital. If the debt goes below this, we're going to return money to the shareholders, and we'll see what the best solution will be from the accounting point of view and from our company, like dividends or buyback of shares.
Fernando speaking.
Isabella, when I spoke to Thiago about Minerva, the Minerva and Athena Foods protocols are the same. We reformulated all the internal flow of the plants during our valley period and everything where we had to hold back. There is an upturning curve for slaughter, and obviously the sales curve is after the slaughter curve. The numbers that I said to Thiago are also valid in your question.
Okay, I understood. Thank you.
The next question is from Ricardo Alves from Morgan Stanley Bank.
Good morning, Fernando. Good morning, Edson. I have two questions regarding China. The first one is about Brazil's export to China. We have noticed that there has been an expressive gain of Brazil's market share regarding Australia in June. I believe that now Brazil has 40% of what they're importing in beef. Could you speak about the competitive moment in China?
We have to see that Australia is going to have to face higher tariffs in the second semester. I think Asia will import more Brazilian beef. Would you like to talk about Argentina and Uruguay as well? The second question is about local production for China. I would like to hear an update about the recovery of the local swine production and of poultry as well. On our side, we believe that the beef is always in the growing side. I would like to hear from you what you believe about what channel will recover quicker than what you imagined. If you can give us some information. Thank you.
Ricardo, thank you for your question. First of all, speaking in a more macro level, China became the enemy of the United States, and Australia is an ally. They are allied.
You have here a unique opportunity that South America is occupying this space. You had restrictions to Australian plants. There were restrictions also regarding Australian products in China. They were the main competitor in South America. This opens the very important gate with a favorable political aspect for us. I would like to praise the very good work that the Ministry of Agriculture has been doing, and with the approximation with the Ministry of Agriculture from China.
This environment is very positive for South America, Brazil, Argentina, all the countries are gaining share. The market in China gradually is going to become more normal. There is the second wave, there's a restriction, but what is important is that the habit of eating beef is sticking. It is becoming permanent in China, and with a lot of opportunities for us.
The data we have that are most recent of swine fever, we see that there is an increase of contamination. Some areas in China had floods, these floods spread the virus. There's no vaccine for the swine fever. There's no control. More than 50% of the swine production in China are traditional producers, the environment is still very vulnerable.
There was an attempt of recovery, but it dropped, so much so that the piglets price and swine and pork price went to the prices before the shutdown, the lockdown. With the decrease in Australia, the decrease of their herd, and also the issues in India that their products that were directed to China and are no more. This is an opportunity for South America. We, Minerva, we are the biggest exporter from Argentina and South America.
We are occupying this space in China. I'd like to say that it's not only China, it's all of Southeast Asia. For example, our exports to China, more than 25%, to Asia, more than 25%, or to other countries besides China. This share is increasing. That is, besides China, other Southeast countries.
Thank you for your answer.
The next question comes from Lucas from the J.P. Morgan Bank.
Good morning. The first question, could you talk about the profitability in the different countries? There seems to be a difference in Athena. I would like to hear from each country. The second question is to understand the following. What would you say is the cause to this drop in dollar in the second quarter? Do you think it has to do with local sort of stocking of beef?
In July, there's an indication of better prices. Do you think the exports are going to be more or less what we see today?
Well, I will answer the first question, and Fernando will ask the other. Well, about the profitability per country, we do not do this data for each country. They had two-digit instability. Last quarter, biggest profitability was Brazil and Uruguay, and then Paraguay. We have Colombia a bit worse. When I say profitability, I'm not talking about EBITDA, I'm talking about net profit, which is something that you don't even mention in your reports.
I think it's very important to be considered. I've never seen someone to pay your accounts with EBITDA at the bank. It's with net profit. Well says Fernando, your question about price, I would say that price is something very dynamic. The markets are very volatile.
Some companies are increasing their prices. For example, if you compare the last three months, China had a substantial increase in price. There were spikes in the U.S. Europe went through lockdown, and now they're going into a very good recovery. Other countries are suffering, such as the Middle East, Egypt, for example. They are having a price reduction. This is sort of, it's not something permanent. This is why we're investing more and more in analytics, so that we can obtain the best options. Now, regarding the mix of domestic market and how much we can grow, well, we can grow up to 5%. We were already at 72% the last quarter with an increase at the end of the quarter. It started a little bit weaker. No, not weaker, but more domestic market and then export.
We can see that the trend is to remain in this level until exports improve. Also, I would say that this answer is given by our of profitability. It is on a weekly analysis that we do in the analytics and the forecasts we have in each one of the markets.
The next question is from Luciana Carvalho from the Bank of Brazil.
Good morning, Fernando, Edson, and everybody else. Thank you for the opportunity. I would like to follow up on Ricardo's question about China. Could you talk about what you feel about the channels in China? A question about the capital structure. You have leveraged a lot with liability management. I would like to understand what we can expect going forward. Do we have space?
Well, the first question, JV is an option that we have to increase and also for information.
With the lockdown and the COVID-19, we delayed the part of the final conclusion of JV. It will have to wait for the second half of the year, the second semester. The food service recovery has been gradual. There was sort of a step back due to China, now we have already seen that China is coming back. What is interesting, Luciana, is that we think is going to be permanent is a change in channels. The online retail will be more important in food service. This is a scenario we're working on, and this is where we're making our partnerships. The other question, I'll ask Edinho.
Well, Luciana, I will give you a standard response. I think that we were able to make a very advantageous when we buy back our own bonds. If we consider the hedge, it's more than 10%.
It's 10%, 11%, and this was funded at 160% of the CDI. We look at the CDI, it's going to cost BRL 3.20. This kind of opportunity, we are open and we are ready to do. Besides this, I do not see many opportunities in the market. If there is something that makes sense in cost reduction, in keeping or increasing the duration of our debt, we are open to study this.
Thank you for your reply, Fernando and Edison.
The next question is from João Soares from Citibank.
Good morning, everyone. Thank you. I have two questions. The first one is that I'd like to talk about the equity market. It's in a very positive market. I'd like to go back to the M&A strategy. Also, I'd like to hear about the perspective in Paraguay.
I'm sorry, the sound is really bad here. Yesterday, there was something published about investments in a Brazilian company. What are the perspectives?
We have no plans, and we cannot consider any equity plan at this moment. I would like to thank all that contributed with an increase in capital and retribution. We gave it value zero, a warrant, which now is worth BRL 9, each warrant. These warrants will be until the end. I have another BRL 780 million for the company. Considering this, the leverage would go to 2.2, from 2.6-2.2. We have a follow-on with a commitment to reduce the leverage, and we are delivering everything that was promised and shared with the investors during the operation.
All this to say that it really doesn't make sense to go to the market and make an equity operation. Our focus in the next two years is to continue de-leveraging and paying dividends. I've been saying this several times, and I will continue always mentioning this. We have an outstanding opportunity of paying a dividend, which is very interesting in this year and next year.
Any new investment cycle that we will only bring up to discuss with the Board only next year and probably at the end of next year. Even in that case, we're going to be very cautious with the leverage. We hope that it will reach the level that I consider optimum, which is two times. This leverage will never pass beyond three times. I'm talking about medium-term, more than two, three years from now. No, we have no interest.
Doesn't make sense for us. We will not discuss an equity operation at this moment.
Well, João, regarding Frigo Norte, this is a company that was closed in Pedro Juan Caballero, and we signed a contract for providing services. This is now being analyzed by the antitrust in Paraguay, and we're waiting for a reply shortly so that we can begin our operations. We believe a lot in the Paraguay market. It's in development.
There are new areas and an increase in the acknowledgment of the Paraguayan beef. Regarding your second question, we believe that sustainability is going to be the differential edge after the pandemic period. Now, Minerva is the only company in our industry that had an investment from the World Bank through the IFC. As shareholders and giving us the funding, all of them tied to sustainability, improvement of the work.
Sustainability, not in the environment, which is the big topic in Brazil, but also well-being of animals, animal health, but also the economic and social aspect. This is something that has progressed a lot because of COVID-19. Besides everything I said in my initial speech, I would like to give you some data. We are increasing the hospital in the city of Belém in the north of Brazil because we have a plant there, and we're working with the poorer communities in Argentina, for example. Today, we made an announcement, and we made a donation to an institute in São Paulo called Butantan to give them equipment so that they can produce the vaccine against COVID-19. The state of São Paulo is importing Chinese technology to produce vaccines.
We believe that the future is to invest in companies that are really involved and have embraced well-being and the social aspects. We're also working with the government, the state government, so that everything that Brazil has been doing a positive way can be stronger and it can be the differential edge that this country has.
Well, Fernando, thank you very much. I'd like to ask you something very quickly. These new innovations, do you believe that you can have a better tracking?
The chain is very extensive. It's very difficult to have a general control. With the amount of data you have now, do you think you can improve the control?
Well, the situation is as follows. The Brazilian government, regarding traceability of animals coming from areas that have been illegally deforested, we have all the traceability, which is the government that does that with GTAs.
The GTAs, because of protection of their data, they do not disclose their information. What we're working with, who we're working with is so that the government can guarantee or at least give us an okay, saying, "Look, this farm here, we have been tracing it. They are working or not working with illegal wood deforestation." In this way, we can guarantee more safety to the whole chain. We are working through so that this may happen and can give more safety and guarantee to all the buyers and all those that value sustainability.
Thank you for your reply.
Ladies and gentlemen, if there are any further questions, you have to click on hashtag one. Well, we have received three questions that I will read and then answer. One from Eduardo about dividends. When is Minerva going to pay dividends?
I already said that the expectation is that confirming the results of this year, we'll be paying dividends in the first quarter of the next year. Monica asked if we have a target for EBITDA. As I said, we believe that the level of 2x is adequate for capital structure and the marginal cost of third-party capitals. It's 2x that we see as the objective. Marcelo from Santander asked, "How relevant can our sales channels of e-commerce in the long term?" Well, we don't know. We cannot say anything at the moment. We are looking to see what's happening in China, because even for perishable goods and beef is becoming a very important channel. If we look at the sales in China, beef online sales has gone beyond the conventional retail. It is becoming more and more important.
Our initiative is not only B2B, it's B2C, and it starts in B2B and then goes to B2C. We are very excited with this discovery, and we believe that this is going to bring us a new level for our customers in the medium term. We are going to close the Q&A session now. I will give the floor to Mr. Fernando Queiroz for his final comments.
Well, thank you. Thank you so much, everyone. I would like to close this conference restating our commitment with sustainability. The environmental protection, working with protection of health and the economy, and our commitment with the whole chain where we belong, where we are inserted, is what guides us in sustainability. With this, you may analyze all the actions that we have taken, all the movements that the company has made, and we guarantee these four pillars.
Finally, I would like to thank the Minerva team. This result that you saw, that you heard, and that you're analyzing, it's not something by chance. It is the result of a team that went to the front line when problems occurred. They showed their commitment and resilience and teamwork. Teamwork was fundamental. I would like to say that I really thank and I feel very honored to be part of this team with all of you that are listening, because all of you made a difference, and you made this result be possible, laying brick by brick. We are looking at the future during this time of this pandemic due to coronavirus. After guaranteeing the security of our team, of taking care of logistics and working capital, we started looking what is going to be the world like after COVID-19.
The things that Edison mentioned, the three fronts we're in, we are putting our company a step ahead in the future and guaranteeing that we are in the front line. We're not just watching things happening. No, we are on the front line and we are sort of guiding ourselves to the future. Thank you for your presence, and we are open to any questions you may have, and we will generate value for the Minerva shareholders.
Thank you very much.
The Minerva teleconference is now closed. Thank you very much for your participation, and have a pleasant day.