Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everybody to Minerva's third quarter of 2018 results conference call. Today with us, we have Fernando Queiroz, Chief Executive Officer, Edison Ticle, Chief Financial Officer, and Eduardo Puzziello, 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, please press star zero to reach an operator. The audio and slideshow of this presentation are available through a live webcast at www.minervafoods.com/ir and MZiQ platform. The slideshow can also be downloaded from the webcast platform in the investor relations section of this website. Before proceeding, we wish to mention that forward-looking statements may be made during the presentation relating to Minerva's business prospects, operating and financial estimates and goals.
They are based on the beliefs and assumptions of company management and on information currently available. They involve risks, uncertainties, and assumptions because they relate to future events, and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Minerva and could cause results to differ materially from those expressed in such forward-looking statements. I will now turn the conference call over to Mr. Fernando Queiroz, CEO, who will begin the presentation. Mr. Queiroz, you may start the presentation.
Thank you very much. Good morning, everyone, and thank you for participating in Minerva's conference call on the results for the third quarter of 2018. We will begin the presentation talking about the highlights for the quarter. Let's have a look on slide two, where you can see the main highlights. Minerva closed the third quarter of 2018 with positive operating cash flow of BRL 406.5 million and a positive free cash flow to equity of BRL 93.5 million. The company consolidated gross revenues totaled BRL 4.6 billion in the third quarter and BRL 16.6 billion in the last 12 months, which was once again a record revenue for the company. Therefore, the company keeps achieving revenue records.
The breakdown of gross revenue by division shows that Brazilian industry division contributed around BRL 2 billion or 43% of the total gross revenue in the quarter, while Athena Foods, formerly the international industry division, which correspond to our operating in Argentina, Paraguay, Uruguay, and Colombia. This division generated BRL 1.8 billion or 40% of the total, and the trading division contributed to BRL 782 million or 17% of the total. Minerva consolidated exports, which accounted for 61% of revenues in the third Q of 2018, recorded a revenue increase of 32.3% over the third quarter of the previous year and around 12% over the second Q 2018. Net revenues totaled BRL 4.3 billion, moving up a substantial 27% over third Q 2017. In the last 12 months ended September, net revenues came to BRL 15.6 billion, up 36% year-on-year.
Third quarter EBITDA reached BRL 449 million, 44% more than in the third Q of 2017. The EBITDA margin stood at 10.4% in the quarter. In the last 12 months, reached BRL 1.5 billion, up 40% year-over-year with an EBITDA margin of 9.3%. Regarding our capital structure, leverage measured by the net debt over LTM EBITDA ratio was below five times at the end of the quarter, despite the depreciation of the BRL in the period. Our cash position came to BRL 4.2 billion at the end of September. It is also important to mention our cash policy of having an amount sufficient to buy raw material for at least three months, current equivalent to BRL 3 billion.
Last week, we announced a tender offer for our perpetual bonds, which are currently our most expensive debt at an annual coupon of 8.75%, which shows Minerva's commitment to its strategy of accelerating deleveraging. Moreover, on September 30, the duration of our debt corresponded to an average of 5.4 years. It is important to mention that we accounted for 21% of the South American beef exports in the last 12 months ended September. This result maintained our position as the leading beef exporter in South America. Considering the USDA's latest beef exports estimated, which indicate that the region is responsible for around 34% of global exports, Minerva accounts for around 7% of the total beef exported worldwide. Finally, I would like to highlight that based on the results, we are maintaining our net revenues guidance for 2018 at between BRL 15 billion and BRL 16 billion.
We will now move on to slide three, where we will talk about Minerva performance, beginning with our exports. In Brazil, we accounted for 40% of exports in the third Q 2018, and our export revenue and volume climbed 16.5% and 12.8% over second Q 2018. In the last 12 months, ended September 30, revenues grew 13% and volume increased 8% over the same period in 2017. In Paraguay, our market share was 42%, maintaining our position as the country's leading exporter. In Uruguay and Argentina, our share of beef stood at 17% and 18% respectively. Finally, we were the leading beef exporter in Colombia with a market share of 82%. As I said, when I was talking about the highlights in the last 12 months ended, Minerva maintained its position as the leading South American exporter, with a market share of 21%.
Let's have a look on slide four, where we talk about exports by division. Slide four. In the Brazilian industry division, Asia and the Middle East were the main destinations in the last 12 months ended September. Together, these two regions accounted for 54% of the division's exports in this period. These figures corroborate the recent estimates that growing demand for beef has been concentrated in these two regions. This increase in consumption in Asia and the Middle East is closely related to the urbanization and development process, as well as the Westernization of habits of consumption patterns, and is fully aligned with our strategy of being present in the main markets of these regions. At Athena Foods, former International Industry division, the main export destinations were Asia, with 34% of the total exports, and Americas with 22%, with the highlight to Chile.
I also think it's important to mention growth in the Commonwealth of Independent States, the CIS, which accounted for 18% of the exports, 10% points more than in the same period of 2017. The result is a clear reflection of the great demand in Russia, which has been served by Athena Foods since December 2017. Let's move on to the next slide to talk about the domestic market performance. Regarding our focus on the domestic market, we have been working to route our product share to more resilient clients, such as small and medium-sized retailers, and mainly to the food service segment. That comprise snack bars, restaurants, buffets, steakhouses, which represents around 56% of the total domestic sales from January to September 2018 in the Brazilian division. It also shows the fragmentation and the spread of our sales in the domestic market.
As you can see, in the local sales from the Brazilian market, we gradually grew the beef premium sales, which are niche cuts, which are higher profitable. The resale of third party represents 37% from the Brazilian domestic market in the year to date. The one-stop shop strategy guaranteed to customers a wide option of products such as frozen fish, vegetables, cheese, pork, lamb, among others. Talking about Athena Foods, the domestic market positive performance during the nine months of 2018 was due to our strategy of repositioning the processed products under the brand of Swift in Argentina, and also through the sales of fresh beef to more than 60,000 points of sales, mainly in the physical distribution and in traditional retail. We also follow the same strategy in this division, focusing on small and medium-sized retailers and food service all across South America.
I'll now give the floor to Edison, who will discuss Minerva financial and operating highlights.
Thank you, Fernando. We present now Minerva's financial operating highlights, beginning on slide six. Gross revenue from the Brazilian industry division reached approximately BRL 2 billion in the third quarter, a growth of 8% when compared to the third quarter of 2017. Gross revenue from Athena Foods reached BRL 1.8 billion, up 63% over third quarter 2017, as is shown in the chart in the top-right corner. Gross revenue from the trading division reached BRL 782 million, 13% higher than the revenues in the same period of last year. As mentioned at the beginning of the presentation, breaking down the revenues, we can see that Brazilian industry division contributed for 43% of the company's gross revenues in the quarter, while Athena Foods and the trading division accounted for 40% and 17% respectively. Let's go to the next slide to talk about other financial results.
The company's consolidated net revenue reached BRL 4.3 billion in the third quarter 2018, up 27% over the third quarter of last year. On the top-right corner, we can see our third quarter EBITDA, which reached approximately BRL 450 million, 44% growth when compared to the third quarter of 2017, with an EBITDA margin of 10.4%, up 130 basis points over third quarter 2017. Talking about the capacity utilization in the third quarter 2018, the Brazilian industry division operated with utilization rate of 78%, while Athena Foods reached a capacity utilization rate of around 82%. As a result, the company's consolidated capacity utilization stood at around 80%, up almost five percentage points over the second quarter of 2018, and almost three percentage points more than when compared to the third quarter 2017.
These capacity utilization levels are considered ideal and have been gradually increasing since the acquisition of the plants in Paraguay, Argentina, and Uruguay in July last year. The net debt-to-EBITDA ratio in the last 12 months ended the quarter at 4.97 times, a slight decrease when compared to last quarter. It's important to highlight that the U.S. dollar appreciated more than $0.15 against the real between the end of the second quarter and the third quarter. This could have hampered our results since 80% of our debt is U.S. dollar-linked. Nevertheless, leverage did not increase in the quarter due to the strong operational cash flow generation recorded in the quarter, together with some measures that we took to hedge part of the long-term exposure. Let's move to slide eight to discuss net results. In the quarter, Minerva had a loss of BRL 132 million.
However, if we adjust these results for non-cash effects of the FX variation and for the hedged results, the company would have posted a positive profit in the period of around BRL 78 million. Moving to next slide, let's talk about the operating cash flow. In the third quarter, operating cash flow reached BRL 406 million. Working capital variation was negative by BRL 133 million, and this working capital consumption was mainly caused by two factors. The first one was the receivables line that increased due to a higher volume sold in the export that have longer payment terms. The second factor was the suppliers line. Have in mind that in the third quarter, we were still in the off-season, marked by a little lower cattle supply.
In order to keep the supply of cattle at a reasonable level and at reasonable prices, we used cash payment terms in order to benefit for discounts and to increase the cattle supply during the off-season. On the other hand, we had a positive result in the other payables line, in the customer advances account. As we have already explained, in accordance with our credit policy, we require from some customers and from some countries to have advanced prepayments to start production of the product. In this case, the advanced prepayment helps us to reduce the cash conversion cycle and allows us to reduce the working capital needs. In the last 12 months, operating cash flow was positive by around BRL 844 million, and the working capital requirements were positive by BRL 66 million. Let's now move to slide 10 to discuss free cash flow.
In the nine months of 2018, the EBITDA, including non-recurring items, reached BRL 1.1 billion. BRL 145 million was spent in CapEx. BRL 644 million negative was the financial cash result. The working capital contributed positively to the operations with more than BRL 100 million. In the nine months ended in September, the company was able to generate BRL 389 million of free cash flow in the period. In the quarter, the company generated BRL 450 million of EBITDA, and as a result, we generated a free cash flow of BRL 94 million just in the third quarter. Let's move now to slide 11 to talk about the company's capital structure. As we have already mentioned, our leverage measured by the net debt to EBITDA ratio stood at approximately five times at the end of the quarter.
It's worth pointing again that in spite of the appreciation of the U.S. dollar of more than 4% in the quarter, we were able to keep leverage virtually flat, thanks to cash generation, higher EBITDA, and the hedge strategy. Our cash position in the quarter came to BRL 4.2 billion, in line with our policy of keeping an amount in cash equivalent to at least three months of purchase of inputs, leaving us in a pretty comfortable situation to deal with volatile and adverse scenarios. Approximately 86% of our debt was exposed to the exchange rate variation. However, 50% of our long-term net exposure is hedged, and the duration of our debt today is around 5.4 years. As Fernando mentioned in the beginning of the presentation, last week we announced a tender offer to repurchase our perpetual bonds.
Those bonds, they have 8.75% of annual interest payment, and they are the most expensive bonds in our debt. We decided to launch an offer to repurchase the bonds using the proceeds of the capital increase that will be concluded next week. The current outstanding amount of the perpetual bonds is $291 million, and we expect to buy back all the bonds in the tender offer during November, or if there are remaining outstanding bonds, we're going to call all of them in April, so the perpetual notes will be 100% called until the beginning of April. On next slide, let's discuss Athena Foods results. As we announced in the second quarter of 2018, we structured a wholly-owned subsidiary called Athena Foods in Chile, and we're conducting this company's IPO on the Chilean market.
I would like to remind you that Athena is equivalent to our former international industry division and covers our operating activities in Paraguay, Argentina, Uruguay, Colombia, and our distribution activities in Chile. We included Athena Foods income stated on this slide to give you a broader view of our operations in this company. As you can see, we ended the third quarter with net income of approximately BRL 118 million, an EBITDA of around BRL 122 million, with a margin of approximately 6.7% in the quarter. In the first nine months of the year, net income reached BRL 240 million, a net margin of around 5%, and the EBITDA reached BRL 327 million, with a margin of 6.7%. Please note that some production units that make up Athena Foods were acquired in July 2017 and were operating with narrow margins.
This result reflects the hard work of turnarounds that we have been doing in the past 12 months and the successful integration of those new units into our company's framework. Let's now move to the next slide, where we will briefly talk about net revenue guidance. Last quarter, we announced our net revenue guidance for 2018 in a range between BRL 15 billion and BRL 16 billion, using an exchange rate of BRL 3.70 per USD and 27 Argentine pesos per USD. In the last 12 months, our net revenues reached BRL 15.6 billion. We are inside the range, and that's why we are keeping this guidance for next quarter. Let's move to the last slide of the presentation to talk about the current private capital increase transaction that is open until November 14th.
As we have already announced, the private capital increase was approved by the extraordinary shareholders meeting held on October 15, and the process was kicked off on the following day. We decided to add this slide to help some investors understand the full process flow until it is concluded. This slide is part of the subscription booklet that is available on our investor relations website and presents more detailed information, I believe it's worth reading this material. This slide shows an example of a shareholder who owned 100 shares on October 15. On October 16, immediately after the extraordinary shareholders meeting, this investor received 74 BEEF1, which are the subscription rights. The subscription rights give this investor, the shareholder, the right to participate in the capital increase on a proportional basis.
As the capital increase will be carried out through the issue of up to 165 million shares, the amount of shares of each shareholder will correspond to around 74% of his position on the day the capital increase was approved. The shareholders who participate in the capital increase will receive 74 BEEF9, which are the subscription receipts, after the end of the subscription period. As an additional advantage, also explained in the material fact dated September 12, for each subscribed share, the shareholder will be granted with a subscription warrant, which will be traded on the stock exchange under the code of BEEF11. This subscription warrant is valid for three years, can be converted into BEEF3 shares at any time during the maturity, it behaves like an American call option.
In approximately 10 days after the end of the subscription period, the 74 BEEF9 receipts will be converted into 74 BEEF3 shares, and the shareholder will be in their position with 174 BEEF3 shares and 74 BEEF11 warrants. Lastly, as this is the last slide for our presentation, I'd like to take the opportunity to invite you all to participate in our annual public meeting, Minerva Day. In New York, Minerva Day will take place at NASDAQ on November 19, and in São Paulo, it will take place at Grand Hyatt Hotel on November 26.
The IR department has already sent an invite through our distribution list, and we will also make it available on our website with link to subscribe. We look forward to seeing you all, and now let's begin the question-and-answer session. Thank you.
Thank you. We will now start the question-and-answer session for investors and analysts. If you would like to ask a question, please press star one. If you are using a speakerphone, please pick up your handset before pressing the key. If at any point your question has been answered, you may remove your question from the queue by pressing star two. At this time, we will pause momentarily to assemble our roster. The first question is from Alexander Robarts of Citi. Please go ahead.
Yes. Hi, good morning, everybody. Thanks for taking the question. Actually, I have two questions, and they both relate to Brazil beef. The exports, very robust here in the quarter, better than most of our estimates on The Street. You talk about incremental demand from Asia and the Americas. I guess those two regions together, about 40% of your Brazilian beef exports. Could you comment on the quality of that incremental demand? Is it seasonal? I mean, the Americas really, because of Chile, seems to have almost doubled the importance in your mix, and I'm wondering, is that perhaps coming from the new distribution that the JBS assets have given you there? If you could first of all, just give us a sense of the quality of this incremental demand in Asia and the Americas. Is it sustainable in the short term? Thanks very much.
What's the second question, Alex?
Okay. No, listen, I think in the end, it's the cattle cost trend. We've been really seeing pretty favorable arroba prices as we come into the rainy season. We're well off the 2016, BRL 155 peak levels. What is your view in the short term for the cattle price in Brazil? That's the second one.
Right. First, on the sustainability of the growth that South America is having, both on China, Southeast Asia, that's not only China. It's mainly driven by China, and in Americas, driven by Chile. I would add to that the growth that the Middle East and North Africa is having. Middle East and North Africa, it's also a growing area. There is a better distribution of income. There is more segmentation in the markets there, it's very sustainable. This area in this part of the world will never be producers in volume, there is a growing demand. The kind of product that they require, both on the premium products and on the commodity products, have South America as the main supplier. I would first up put a highlight on Middle East and North Africa.
Second, the biggest growth is coming from Asia, Southeast Asia, especially China. That they are changing their habits, the amount of fast food chains, the westernization of their habits is playing a very important role on the growth of further demand. There you're going to see as well a premium market in a commodity market that our products that will be used for further processing like burgers, sausages, and these things. This area, we are seeing a decrease on their size of their herd, therefore, they will be more importers. Overall, the only place or the only region in the world that is growing its supply, it's on South America, and there is a decrease in traditional suppliers like Europe, and especially in Australia. We are seeing a very sustainable demand for South America.
Talking about Chile, the last one, South America in general, Chile has a very small size of the herd, they are a very important market. They have the per capita income, the beef consumption is part of the habits of the Chileans. It's driven also a very sustainable demand. We are supplying all these countries, not only from one origin, but through all the origins that we can. Just like Chile is supplied by Brazil, by Argentina, by Paraguay, some things from Uruguay. Russia, that's another market that's important, is also supplied by the three or four countries that we are originating. We see the growth of the demand and the bridges between South America and the importing countries only being stronger.
The countries are getting more specialized in what they produce, producing cattle is linked to the availability of water that South America has plenty. In terms of cattle cost, what we are seeing, we are in the low season, therefore, the cattle traditionally goes up during this period of the year. What we are seeing is that in the last five years, Brazil broke records on birth of calves. The availability keeps increasing. Luckily and strategically, the demand keeps increasing as well. We don't see any surprise for cattle price. We see that during the high season that starts early next year, depends on the rain, it will be another very important and sustainable year for the production in Brazil and in South America in general.
Very helpful. That was clear. If I could just have the follow-up on Chile. Sorry, I know it's a relatively new market with the Athena Foods and such. It was the one market that you didn't really show us the market share number, at least as I could see on the press release. Could you comment a little bit about are you gaining share in Chile? Is the market growing in Chile faster than other markets, and is it a fair assumption to have that you would be seeking to get perhaps at least some double-digit share in that market? Thanks very much.
We are in double-digit share. All the meat that is imported into Chile, 40% is coming from Minerva or Athena operations. We are by far the most relevant exporter into the Chilean market. You don't have that there because Chile is a consuming and distribution market. It's not a producing market. What we showed on our slide was the share that we have of exports out of the origins that we produce.
Got it. Thank you.
The next question is from Andrew DeLuca of Barclays. Please go ahead.
Hi. Good morning. I wanted to go back to some comments you guys had in September when you mentioned that the Mercosur assets were requiring more working capital than you expected. Can you just give us an update in terms of the additional working capital investments, if any, that are required for the Mercosur business? Thanks.
Mercosur business required more working capital just after the acquisition. In the fourth quarter of last year, we invested almost BRL 400 million or more than BRL 400 million in working capital. The majority was in the Mercosur assets. Since then, we have been in the process of integration, the process of turning around those operations. For now, as you can see, the capacity utilization around 82%. We can see that the Mercosur assets are in a much more stable operation, and we don't expect additional requirements of working capital in the short term.
Great, thanks. My second question is with regard also to working capital and the reopening of Russia, and now you being able to export from Brazil. How do you see that market evolving as a percentage of Brazilian revenues?
It's hard to predict. There are only few plants that approve it. That depends on if there will be new plants approved. We hope it will, because Russia has always been a relevant market for Brazil. To predict how much % of the total Brazilian exports will go to Russia, it's practically impossible without knowing what's the number of plants that will be approved.
Okay, great. Thank you.
There are no additional questions at this time. This concludes the question and answer session. At this time, I would like to turn the floor back to Mr. Fernando Queiroz for any closing remarks.
I'd like to thank you for participating in our conference call about the outstanding results that we showed on the third Q. I'd like to highlight that this is a result of a very detailed strategy and a very efficient execution of this strategy of diversifying Minerva into South America. That is the area of the world that is occupying more space and more share in international trade. I would like to thank you all for supporting and for following us on this strategy. Finally, I would like to thank all the Minerva team for being aligned with this strategy and support in every day, in every hour, in every moment, of the strategy that we implemented. Thank you very much. We remain at your disposal for any further clarification or any further information that you may require. Thank you very much.
Thank you. This concludes today's presentation. You may disconnect your line at this time, and have a nice day.