Good afternoon, ladies and gentlemen, and thank you for waiting. At this time, we'd like to welcome everybody to Minerva's first quarter of 2018 results conference call. Today with us, we have Fernando Queiroz, Chief Executive Officer, Eduardo Puzziello , Investor Relations Officer, Francisco Assis, Comptroller, and Nathan Freire, Treasury Director. We wish to inform that this event is being recorded and all participants will be in listen-only mode during this company's presentations. If you need any assistance during this call, please press star zero to reach the operator. The audio and slideshow of this presentation are available through our live webcast at www.minervafoods.com/ir in 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 made during this presentation in relation to Minerva's business prospects, operations, and financial estimates and goals, they are based on beliefs and assumptions of 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 should understand that general economic conditions, industry conditions, and other operational 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.
Good afternoon, and thank you for participating in Minerva's conference call on the results for the first quarter of 2018. You must have noticed in our earnings release, we made two restructurings. The first was related to the disclosure of our results from now on. We developed a new layout that will increase the transparency of our results and improve the understanding of the operational dynamics in the different regions that we operate. We have thus divided consolidated gross revenue into three divisions. First, the Brazilian industry division, the international industry division, second, and then third, the trading division. In the Brazilian industry division, we will report the results of our Brazilian units, comprising sales of fresh beef, processed food, such as those produced by Minerva Fine Foods, and slaughter by-products, such as leather, offals, among others. The second one, the international industry division, will have the same scope, but with originating products from Paraguay, Uruguay, Argentina, and Colombia. Finally, we have the trading division, which concentrates revenues from livestock operations from the trading companies and the resale of third-party products in our distributions around the world. We hope these results will help you understand deeply the particularities of the different regions where Minerva is currently operating.
The second restructuring process was on the organizational side. Nowadays, the footprint of the company is more diversified. Therefore, we have different dynamics. We decided to implement a new management model that fits into this new reality, which has, as main pillars, the extraction of our greater operational synergies to give more agility for decision-making and, with no doubt, to carry out the activities applying the best practices.
We will comment this new structure at the end of this presentation after Puziello financial presentation. Let's begin the earnings conference call talking about the highlights for the quarter starting on slide two. The company consolidated gross revenues totaled BRL 3.8 billion in the first quarter, and BRL 14.4 billion in the last 12 months. 63% of first quarter revenues came from the export market. Of the total, the Brazilian industry division accounted for 46% of the total gross revenues, while international division represented 40%, and the trading division accounting for the remaining 14%. Talking about that again, 46% of Minerva revenues comes from Brazil, 40% from the other countries in South America, ex-Brazil, and 14% from trading operations among the world. First quarter net revenues reached BRL 3.5 billion, 65% more than in the same period last year.
In the last 12 months, net revenue, including pro forma figures of Mercosul assets, came to BRL 14.5 billion, 45% more than in the same period of 2017. In this context, the accumulated net revenues is in line with the guidance for 12-month period between July 2017 and June 2018, that we informed for the market ranging from BRL 13 billion-BRL 14.4 billion. Based on the first quarter results, we are maintaining this guidance. Yesterday, we disclosed our new guidance, but now for the period between January and December 2018, ranging from BRL 14.5 billion-BRL 15 billion. First quarter, adjusted EBITDA climbed 44% over the same period in 2017, totaling BRL 285 million, with an adjusted margin of 8.1%. In the last 12 months, adjusted EBITDA reached BRL 1.3 billion, up 39% year-on-year. The adjusted EBITDA margin for the period was 9%.
Given the operating results, Minerva recorded operating cash flow of a positive BRL 187.6 million and free cash flow of a positive BRL 51.6 million. In the first quarter of 2018, this was an achievement that is worth mentioning because it's normally the worst quarter of the year. This also shows our commitment with cash generation. We closed the first quarter of 2018 with a net loss of BRL 140.7 million. In the last 12 months, we recorded a negative net result of BRL 398 million, impacted by non-cash effect of foreign exchange revaluation. Just to emphasize, this was linked to the currency variation and have a non-cash impact. On the capital structure front, we closed the quarter with a leverage measure by the net debt to adjusted EBITDA for the last 12 months of 4.5 times, 0.1 less than in the last quarter of 2017.
This movement shows the beginning of our deleveraging process. We continue with a comfortable position in cash of BRL 3.9 billion in the first quarter. The duration of our debt was around six years on March 31st, 2018. Minerva continued to account for 22% of South American exports and remained the largest beef exporter in the continent. This is just to reemphasize how strong South America became in the world market of beef. Minerva is by far the largest and the most diversified producer in South America. Talking about the integration process, it's worth mentioning that we have concluded the period of setting the SAP, the basis platform for controlling and having always the same standards in all the countries. We will continue pursuing improvements in our operational and commercial efficiency programs through benchmarks, through best practices, and through exchange of positive experience.
It's worth mentioning the positive outlook for the opening of new markets in the coming months. As we have already mentioned, we expect the Japanese market to open for Uruguay. The Indonesian market just finished visits into Brazilian plants and shall be open still in the first half of the year. Also important to mention the possible reopening of United States for Brazilian and for Argentinian beef. Moving to slide three, we will talk about the sector. We will begin talking about the sector in Brazil, where we have 45% of our capacity. Its market has grown 4% between first Q17 and first Q18. In first Q18, beef exports came to 390,000 tons, 21% more than in the same period last year. Strong export demand came mainly from Asia, Chile, and the north of Africa. Also, with Middle East, it was an important destination for Brazil.
The domestic performance was in line with the seasonal trend for the period, while characterized by modest beef consumption. We also had the impact of the replacement of beef with other proteins, and the calendar effect of the Carnival in Easter that fell in the same quarter, compromising the beef consumption in the period. Nevertheless, with that, Minerva has maintained a stable share, a stable volume of product in the Brazilian local market. We are now going to discuss Paraguay, which concentrates 20% of our production capacity. You can see details on the top-right corner. Paraguayan slaughter fell 70% between first Q17 and first Q18. The decline was related to the rainy season, which made the logistics much more complicated in reducing the availability of cattle. There was a reduction of exports because of that.
Chile also had some suspensions during this period, but this already got back to normal. Chile, that important market, is fully normalizing for Paraguay nowadays. The main destination of Paraguayan exports was Russia, which accounted for 44% of the country's total exports in the first Q18, 12 percentage points more than in the same period last year, driven mainly by the ban of the Brazilian beef to Russia. Paraguay was able to occupy part of the space left by Brazil. In Uruguay, where we have 12% of our operation, the slaughter volume was 8% higher than in first Q17, and 7% over fourth Q of '17. The higher slaughter volume was due to the droughts in the country caused by La Niña, which encouraged cattle producers to bring forward the slaughter. In the first Q18, Uruguayan exports performed well, up 16% over first Q17.
The main destination of Uruguayan exports were China and United States, which accounted for more than half of the country exports. Finally, moving on to Argentina, which represents around 19% of our slaughter capacity, the slaughter volumes moved up 8% between first Q17 and first Q18. It's worth noting that like Uruguay, Argentina also went through a drought caused by La Niña. Argentina export volume, once again, performed exceptionally, climbed at 56% over first Q17. This was an outstanding performance showing that Argentina beef is back to the world market with a well-recognized brand. China was the main destination of Argentina exports in the period and accounted for 35% of the total exports, followed by Russia and Chile. I would like to draw your attention to the beauty of Minerva geographic diversification. An example, Russia closed its market for Brazilian beef.
We used it, we increased our production in Argentina, in Paraguay, and also in Uruguay to fulfill the gap. Therefore, we were exporting as Minerva more than when Brazil was open. To create value, when Chile reduced its Paraguay exports, Brazil replaced that origin, also helped by Argentina. This arbitrage capability is one of Minerva's most competitive advantages. Argentina domestic consumption was also strong in the first quarter. It is another point that is relevant to mention. The typical seasonal effect and the demand in the quarter was barely affected by the seasonality. I draw the attention that we have from time to time, sanitary events, we have currency events, we have different events that allows Minerva, with the geographic diversification, to mitigate the risks. There is no other tool that is as efficient as the one that we have to mitigate the risks on the beef sector.
Let's analyze Minerva performance, beginning with the exports on slide four. In the first quarter, Minerva continued to be one of the leading exporters in the country where we operate. In Brazil, we once again had a significant 19% market share of exports. In Paraguay, our market share of exports came to 40%, a total record that shall be broken again in the second Q. All-time highs consolidating our position as the largest exporter. Not only in the first quarter, but the second quarter, we consolidated our position as the most important and the most relevant exporter out of Paraguay. Meanwhile, in Uruguay, our market share consolidated to 21% of the total exports in the first Q. In Argentina, we were responsible for 16% with all the exports of the country.
Finally, in Colombia, that is a small basis, we are responsible for 71% of the total country's exports. Moving to slide five, we will show the breakdown of exports by region and by division. To show you the different dynamics, we divided the results of exports between Brazil, the international division, in two separate charts. In the Brazilian industrial division, the Middle East stood out in the last 12 months, ended March, accounting for 31% of the total exports, three percentage points more than in the same period last year. The second most important destination was Asia, which accounted for one-fourth of the division exports in the last 12 months. If you added Africa, that is mainly north of Africa, the Maghreb area, you see the importance of the Islamic slaughter for the company.
In the international industrial division, that includes all the South American countries, ex-Brazil, their main destination was Americas, followed by Asia, with 29% to Americas and 28% to Asia. Six percentage points more than in the last 12 months of first Q 2017. This proves what we have been showing to the market in the last few months about the constant growth in demand from Asia and Middle East, and the fact that South American exporters are consistently better prepared to meet that demand. I will now turn to Eduardo, our Investor Relations Officer, who will present the company's financial and operating highlights. Eduardo.
Thank you, Fernando. Good afternoon, everyone. We will present Minerva's financial and operating highlights as of slide number six. As Fernando mentioned in the beginning of the presentation, starting this quarter, we are dividing world revenue in three groups. We can see the evolution of each of these groups separately on this slide. Gross revenue from the Brazilian industry division came to BRL 1.7 billion in the first quarter, around 22% higher than in the first Q 2017. Gross revenue from the international industry division reached BRL 1.5 billion in the first Q 2018, around 165% more than the first Q 2017, as shown in the graph on the top-right corner. In addition to the organic growth of this operation, this performance was related to the addition of these new assets as of last August.
The capacity utilization rate of our Brazilian units is stood at 80.1% in first Q 2018, more than 10% higher than in the first Q 2017, while the capacity utilization rate of our units in Paraguay, Uruguay, Argentina, and Colombia stood at roughly 72%. In the next slide, we will continue talking about the financial and operational performance of the divisions. Now, we will talk about the trading division revenue, which stood around BRL 530 million in the first quarter of 2018, around 70% above what we saw in the first Q 2017. This increase was driven by the improved performance of the live cattle segment, combined with our strategy of reselling third-party products in the domestic market and our protein trading operations in the export market.
In the bottom-right graph, we also presented the share of each of the three divisions in the gross revenue breakdown, showing the importance of each division that makes up our consolidated operation, as Fernando mentioned in the beginning of this conference. The Brazilian industry division accounted for 46% of the gross revenue. The international industry division represented 40%, and the trading division accounted for the remaining 14% of the total gross revenue. Minerva's net revenue totaled BRL 3.5 billion in the first Q 2018, 65% more than the same period of last year. Adjusted EBITDA amounted to BRL 285 million in the first quarter, also 33% higher than the EBITDA of the same period of last year. The EBITDA margin reached 8.1%. Now turning to slide number eight, we're going to talk about the net revenue results for the first quarter of 2018 .
As you can see in this slide, the company record a net loss of BRL 114 million after income and social contribution taxes in the first quarter of 2018. In the last 12 months, and in March, company recorded a net loss of BRL 398 million. As Fernando also mentioned in the beginning of the presentation, all related to the non-cash impact of the currency variation. Moving to the next slide. We will talk about the operational cash flow of the company. In the first quarter of 2018, the operating cash flow was positive, BRL 187 million. Adjustments to the net income totaled BRL 269.5 million, while the working capital variation was positive by roughly BRL 33 million. In the first Q 2018, the positive working capital was a result of receivables line, which returned approximately BRL 341 million to our cash.
Also, another positive contribution came from other payables line. Please bear in mind that this line reflects the company's credit policy and contains the quick payment from some clients according to their credit risk. On the other hand, the supplier line consumed BRL 234 million because the company paid cash for the purchase of more raw material. In the last 12 months and in March, operating cash flow was positive by around BRL 596 million. Adjustment to net income totaled approximately BRL 1.5 billion, while the change in the working capital requirement was negative by BRL 460 million. Coming to slide 10, we will now touch on the free cash flow for the first quarter of 2018. As you can see, the Adjusted EBITDA reached BRL 285 million, while cash CapEx came to roughly BRL 48 million.
The financial results with cash effect is still around BRL 218 million, while the variation in the working capital, as I just mentioned in the previous slide, reached BRL 33 million. As a result, the free cash flow was positive by BRL 51.6 million in the first quarter of 2018 . Regarding the free cash flow of the last 12 months, the EBITDA reached BRL 1.2 billion, excluding the pro forma figures of the Mercosul assets. Net cash CapEx came to BRL 258 million. Cash financial results for the last 12 months reached BRL 795 million, and the variation of the working capital requirements was negative by BRL 460 million. The results of the last 12 months free cash flow of the company was a negative BRL 277 million. Going now to slide 11, we're going to talk about the capital structure of the company.
Our leverage measured by the ratio net debt to EBITDA of the last 12 months, which is 4.5 times at the end of March, 0.1 times lower than the first quarter of 2017. As also what was mentioned by Fernando in the beginning of the presentation, this is the beginning of the deleveraging process of the company. Our cash position was BRL 3.9 billion, sufficient to make us very comfortable to deal with the adverse scenario and settle our debt until 2024. At the close of the first quarter of 2018, roughly 80% of Minerva's debt was exposed to the FX variation with a duration of close to six years. I will now return the floor over to Fernando, who will talk about the new organization structure and then we're going to go to the Q&A.
Thank you, Eduardo. As I previously mentioned today, Minerva is part of a new reality with a much more relevant geographic diversification. We are in a sector that is becoming more and more global. We must be more apt to deal with the different dynamics and particularities of our company and on the locations and the geographic locations that we are. Aiming to extract the best synergies from the units to improve the integration between the management and to apply the best practice in the decision-making, we readopt the company organization structure. Thus, we establish a new role of a Global Chief Operational Officer, that is global, that will be played by our current COO, Mr. Iain Mars , who many of you already met. Ian is with us for 10 years.
He has participated in the growth plan and is fully aligned with the Minerva dynamics and he share our business plan from the very beginning. He will coordinate the operational management team in Brazil, in Argentina, Paraguay, Uruguay, and Colombia, and from the related business. Another changing that we made was the restructuring of the financial department. Eduardo de Toledo left the company, and we will have now three areas that are, first, risk and control under Francisco de Assis' supervision, who is with us for seven years. Treasury with Nathan Freire, that was with us for eight years. Third, investor relation with Eduardo Puziello, here at my side, who has been in the company for eight years. These areas are 100% integrated and fully aligned with me and with the company strategy.
Once again, I would like to highlight that Minerva's main focus is the deleveraging process through the value extraction from our units and working capital management. During the integration process, I was focused on the operational side. Now, with this step concluded, I will return to focus on the strategic level. This explain why we have decided to have a new structure to follow our principles: discipline, focus, and consistency. Finally, I would like to mention that the achievements and the results from Minerva are due to the work of not only one person, but more than 18,000 people with emphasize their commitment and their search for a consistent improvement. I will now hand over to the floor to start the Q&A session.
Thank you. We will now start the question and answer session for investors and analysts. If you'd like to ask a question, please press star one. If at any point your question has been answered, you may remove your question from the queue by pressing the pound key. Loren [Youngsters] from UBS would like to make a question.
Yes. Hi, thank you. Hi, everyone. Fernando, you were clear about the restructuring, I'm just curious to get a bit more of your perspective on what changed in the last few months. We had the appointment of the CFO just a few months ago. Curious, I understand the visibility, the clarity, having executives at the firm to fill these spots now. I think with some nervousness in the market with management changes at the high level, curious to get your perspective on what changed just in a few months' time to do this restructuring now.
Well, there is not much that has changed, Loren. Since we acquired the operations of Mercosul, we've been preparing the company for the structure of having a global COO that would consolidate the operational part. That was shared with our board. This has been discussed with our team. It was time to implement. What is different that is happening at the same time, that we had the non-election of Eduardo de Toledo. Once you have a new even though you can make a good search and a new hiring, you get to know the person and it comes to the day-to-day. There is always risks and uncertainties from both parts by having changing on the high level.
What we used was the common sense to recognize and to change the structure with a team that we feel very comfortable, that's a team that's been all with us for more than seven years, and it's a very senior team that have been conducting the operations and have been conducting the strategy of the company for all this time. It's not something that happened now. It's something that was planned, and it was adjusted with the new senior team on the financial side.
Okay. All right. That's helpful. If I could just ask some questions on results.
Sure.
Just first on the margins. There were some items affecting margins in the quarter. With the integration now more or less done, curious to get your perspective on directionally where margins could go for the remainder of this year. Also on leverage. I think you've given some general leverage targets for us to think about in the next 12 months or so. If you could talk about if you do have a public leverage target.
First on the margins. Normally, the first quarter of the year margins are lower. This is part of the seasonality. This year we had some good surprises and bad surprises. What was below our expectation was Brazil. The competition in Brazil had increased, therefore, there was a compression in margins in Brazil. The positive surprises came mainly from Argentina. That outperformed what we expected. Giving a view for the second Q, we see Brazil normalizing. We see Paraguay also taking a new increase on volumes. What happened is that in the first quarter, there was some rotation of cattle due to logistics. Now that it's normalized. Argentina keeps performing well, especially with the model that Minerva implemented by being focused on exports. exports, especially now that the peso has devaluated, makes us even more competitive.
Just to give you an idea, first Q, if we analyze Argentina individually, first Q 2017 versus first Q 2018, the increase on exports out of Argentina were at 135%. We don't give guidance of what would be the deleverage that we'll reach by the end of the year. Definitely our focus is to decrease the deleverage. We have our internal goals, we have our internal measures that we are taking that is leading to some small results in the first Q, and we shall continue on that path from now on.
Okay, thanks.
Remembering, if you have a question, please press star one. This concludes the question and answer session. At this time, I would like to turn the floor back to-
Sorry, there is another question there that we have not talked about.
Mr. Andrew De Luca from Berkowitz, would you like to make a question?
Hi. Yes. Thanks for the question. I just wanted to follow up on the prior question on the competitive environment in Brazil. Can you just give us a little bit of color on your outlook in terms of how you're expecting that margin to evolve? It sounds like obviously the Argentina side of the business is improving, what's your outlook for the competitive environment for Brazil for the rest of the year? Thank you.
What's happening in Brazil is that we are in a positive side of the cycle. The increase of supply, the increase of availability of cattle is shown, and you can see the prices that have go down. Not only that, with the Brazilian currency devaluating, this will have a further impact in dollar terms for the cattle that we are purchasing. This only consolidates South America in Brazil, in Argentina, in Paraguay as the main and the most competitive supplier of beef worldwide. We see the competitive environment more stable and now more healthy for the rest of the year in Brazil, mainly because there is more cattle and there is more rationality.
Thanks. On the back of the greater cattle availability and rationality, are there any concerns of additional capacity that's going to be coming online from JBS, for example? Thank you.
We are not seeing any movement. This is something that we don't control what is happening on our competitors. We don't see any major change on that.
Great. That's very helpful. Thank you.
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 would like to end this conference call first in saying that we are very confident with the changes that the company is going through. We believe that we will continue bringing positive results and consolidating our position of being the leaders of beef exports out of South America. I would like to thank, once again, Minerva entire team for doing the best for the company and for making us, through their effort and dedication, the leader of South America. It's a multicultural company. It's a company that's diversified. Lastly, I would like to thank you all for the interest in the company and remain at your disposal for any questions and clarifications. Thank you very much, and do not hesitate in contacting us.
Thank you. This does conclude today's presentation. You may disconnect your line at this time, and have a nice day.