Morning, ladies and gentlemen. Welcome to Minerva Foods' fourth quarter 2023 earnings conference call. Joining us today are Mr. Fernando Galletti de Queiroz, CEO, and Mr. Edison Ticle, CFO and IRO. We would like to inform you that this presentation is being recorded simultaneously. The translation is available by clicking on the interpretation button. For those listening to the video conference in English, there is an option to mute the original audio in Portuguese by clicking on "Mute Original Audio." We would also like to inform you that the presentation is available for download at ri.minervafoods.com in the presentation section. During the company's presentation, all participants will be in a listen-only mode. We will later begin the Q&A session. Should you wish to pose a question by audio, please click on the "Raise Your Hand" button or the Q&A icon and state your name and company to join the queue.
When your name is called, a prompt to unmute your mic will pop on your screen. Please unmute and ask your question. Questions in writing should be sent using the Q&A feature. We would like to clarify that any statements that may be made during this video conference regarding Minerva Foods' business prospects, operational, and financial goals are projections made by the company's management, which may or may not materialize. Investors should understand that political, macroeconomic, and other operational factors may affect the company's future and lead to results which differ materially from those expressed in such forward-looking statements. I now turn the floor over to Mr. Fernando Queiroz, CEO, who will begin the presentation. Please, Mr. de Queiroz, you may proceed with the presentation.
Good morning, everyone, and thank you for joining us for Minerva Foods' fourth quarter 2023 and full year 2023 consolidated results conference call. Minerva ended the year delivering a solid set of operating and financial results, attesting to the consistency and discipline of our business strategy in spite of the volatility seen in the industry. We remain focused on operational execution, which, combined with our commercial expertise and arbitrage capabilities, have once again proven to be paramount to the performance we delivered, strengthening the corporate strategy and leadership of Minerva Foods in South America. In Q4 2023, our gross revenue totaled around BRL 6.5 billion, with EBITDA reaching BRL 606 million, contributing to a net result of BRL 20 million. In the consolidated results, gross revenue continued at around BRL 29 billion and adjusted EBITDA, totaling approximately BRL 2.6 billion and accumulated net income of BRL 396 million.
It's worth noting that the financial performance of the fourth quarter of 2023 and the full year of 2023 was impacted by accounting adjustments in Argentina, details of which will be given by Edison later. Free cash flow generation continues to be a highlight, reaching BRL 149 million in the quarter and BRL 536 million in 2023, after excluding the impacts of the acquisition of ALC and BPU. Cash management continues to contribute to the balance of our capital structure, which ended the quarter with stable adjusted net leverage at 2.8x net debt over EBITDA. As in the previous quarter, we would like to comment on the process of acquiring Marfrig's selected assets in South America.
As I mentioned in our last earnings call, in August 2023, Minerva Foods announced the acquisition of 16 industrial units in South America, located in Brazil, Argentina, Uruguay, and Chile, which remain under review by the antitrust agencies. The focus of our management is on concluding this process with the antitrust agencies so that we can then move forward with integrating the new assets into Minerva Foods' operational park. As soon as the regulatory approval process progresses, the company will provide an update to the market. As usual in our conference calls, before we move on to the highlights of the quarter, I'd like to share with you a little of our vision on the outlook for the global animal protein market. South America continues to have a positive outlook for the beef protein sector, offering great opportunities and growth potential for the region's players.
Brazil, in particular, remains a promising origin due to the good momentum of the livestock cycle, which we believe has not yet reached its peak and should remain positive throughout 2024 and 2025. In addition to Brazil, Paraguay and Uruguay are also gaining prominence with a favorable momentum in the recomposition of their herds. In contrast to the large availability of animals ready for slaughter here in South America, the United States continued to present a negative livestock cycle scenario, which worsened throughout 2023 and is expected to deteriorate even further in the 2024-2025 biennium. This imbalance between supply and demand continues to provide new access to important markets, and here I would like to recap our achievements in the field of market permits and openings obtained in 2023.
In January, the Janaúba plant was licensed to export beef to Indonesia, making a total of six plants licensed for the country. In March, Brazil received the notification of the opening of the Mexican market. We currently have six plants licensed for this important destination. In September, Colombia received approval for the health protocol to open the Chinese market, a fact that was ratified last week with the licensing of our two plants in that country. As I also mentioned, Paraguay also received approval for the U.S. market, with the first shipments taking place in December last year. And finally, at the beginning of 2024, our Minerva Foods plants were authorized in Brazil to access the Chinese market, thus adding up to a daily capacity of more than 14,000 head a day, considering our entire operational park.
As you can see, Minerva Foods benefits from its geographical diversification and arbitrage strategy in the global beef market, making the most of the potential in the countries where we operate. I would like to emphasize once again how essential these two pillars are to the stability and consistency of the company's results. We also remain confident about the outlook for the domestic market, particularly in Brazil, where the market is going through a period of recovery boosted by the positive livestock cycle, in which, together with a favorable economic scenario, is encouraging local consumption. Let's now turn to our performance in the fourth quarter of 2023 and full year of 2023, starting on slide two.
So now, with gross revenue, which totaled BRL 6.5 billion in Q4 2023 and around BRL 29 billion in the consolidated results for 2023, exports accounted for 67% of consolidated gross revenue in the quarter and 65% in the full year, continuing to be one of the company's main operating drivers, once again attesting to Minerva Foods' commercial expertise in serving the international market. Turning now to our operational profitability, EBITDA in Q4 reached BRL 606 million, with an EBITDA margin of 9.8%. In 2023, Minerva Foods' adjusted EBITDA was BRL 2.6 billion, with margins of 9.5%. Our net result reached BRL 20 million in Q4, totaling around BRL 400 million in 2023. Our free cash flow generation in Q4 was positive at BRL 149 million. In 2023, free cash flow added up to BRL 536 million when adjusted for the impact of the ALC and BPU acquisitions.
Finally, our capital structure. We ended the fourth quarter of the year with a stable adjusted net leverage at 2.8 times net EBITDA, net debt over EBITDA, and comfortable liquidity levels with a cash position of BRL 12.7 billion. Let's now move on to slide three to shed some light on other highlights of the quarter. As I said, on last quarter's conference call, we were waiting for the U.S. market to open up to Paraguay, which happened in November 2023. This opening represents an important opportunity for Minerva Foods, since we have five slaughtering plants in the country with a capacity of approximately 8,000 head per day. We also saw the opening of the Chinese market to Colombia, where we have two plants with a slaughtering capacity of approximately 1,500 head per day.
Finally, in early 2024, we had 2 more Brazilian plants licensed for the Chinese market, increasing our exposure to this market and totaling a consolidated capacity of 14,600 head per day. Speaking briefly about our capital structure, we issued 2 debentures, which together totaled BRL 4 billion, one in October 2023 and another one in March, always with the aim of improving our capital structure. Edison will provide further details on these operations later on. In the sustainability agenda, we achieved 100% monitoring of direct suppliers in Brazil, Paraguay, and Colombia. In Argentina, around 90% of direct supplier farms are already being monitored, and in Uruguay, we have already achieved more than 60% monitoring. Our subsidiary, My Carbon, was the only Brazilian company to be approved for the DFM Nasdaq Carbon Credit Trading Pilot Project. Such achievement was announced during COP 28 in Dubai.
In addition, the Renova Program, which is part of My Carbon's operation, submitted its carbon credit development project to Verra Certifier in December 2023, representing a major step forward in the generation of carbon credits from good agricultural practices in Minerva Foods' value chain. Other important milestones were our achievements in the field of corporate governance. We were listed for the fourth consecutive year in the 2023-2024 portfolios of the Corporate Sustainability Index and the Carbon Efficient Index. We also recorded important progress in the rankings of the External Evaluations of the Carbon Disclosure Project, CDP, and the Coller FAIRR Protein Producer Index. Moving on to slide number four to talk a little bit about Minerva Foods' export market in Q4 2023 and full year 2023.
In Q4, we remain the leading exporter of beef from South America, with approximately 20% of the continent's market share, once again demonstrating the value of our strategy and the competitive advantages of geographic diversification, one of Minerva's main strategic pillars. In the upper quadrant of the slide, you can see the breakdown of gross revenue by destination for Q4. The Americas region was the main driver of gross revenue, with a total of 41%, with Brazil standing out with 24% and Chile with 11%, followed by Asia with 24% of total gross revenue, with China accounting for 15%. Unlike previous periods, Q4 2023 was marked by less exposure to the Chinese market, largely due to less competitive prices.
However, it's worth highlighting the operational and commercial agility of Minerva Foods, which, through its market arbitrage capability, is able to access virtually 100% of international markets, giving us the ability to redirect supply from our origins to more attractive markets. At the bottom of the slide, we have a more detailed breakdown of our export performance for both our beef operations here in South America and our lamb operations in Australia. Starting with the two charts on the left, that is, our beef operations. Asia continues to stand out in the quarter, accounting for 35% of exports revenue, followed by the Americas with 18%. NAFTA and the Commonwealth of Independent States both have 15% and Europe 8%. In the full year of 2023, Asia also remained the highlight, followed by the Americas with 20%, the CIS with 11%, NAFTA with 10%, and the Middle East with 8%.
It's worth mentioning here the increase in NAFTA's share of our revenue, which highlights our view that with the shortage of animals in the U.S., South America as a whole benefits from this supply imbalance, enabling us to arbitrage markets through our geographical diversification. The charts on the right show Australia's operations, the main destination of which is the NAFTA region with a 31% share, followed by the Middle East with 25% of the country's exports, Asia with 24%, Europe with 12%, and Oceania with 6% share in Q4 2023. In the full year of 2023, NAFTA also remained the main destination with 37% share, Asia with 25% share, followed by the Middle East with 21%, Europe with 8%, and Oceania with 7%. Before handing the floor over to Edison, I'd like to restate our optimism about the global animal protein market.
The recent permits give us signs that we have great opportunities ahead of us, and the imbalance between supply and demand continues to provide good opportunities in the global market, largely as a result of the positive livestock cycle in Brazil and negative in the U.S. Once again, I'd like to emphasize our ability to arbitrage the international market, mitigating risks, maximizing operational efficiency, and adding value to our operation. We continue strong with our strategy and focus on our business model, always attentive to our risk management, exploring more efficient solutions, investing in innovation, and exploring promising markets. I'll now hand over to Edison, who will talk more about our financial and operational performance.
Thank you, Fernando. Let's move on to slide five. I'll start by talking about Minerva's operating performance and gross revenue in Q4 and full year 2023. In line with our focus on exports, the foreign market accounted for 67% of gross revenue both in Q4 and full year 2023. In the breakdown by region, exports in the Brazilian operations reached 62% in the quarter and 65% in the full year. In the Latam operations, ex-Brazil, exports accounted for 75% of gross revenue in Q4 and 68% for the full year. In the lamb operations in Australia, exports accounted for 64% of gross revenue in Q4 and 68% in the full year.
On the right-hand side of the slide, we can see the breakdown of revenue by origin. Brazil continues to stand out, accounting for 50% of gross revenue in Q4 and 47% in the year, followed by Uruguay, which represented the second main origin in the quarter, with 20% in the quarter and 13% in the year.
Paraguay had 19% in the quarter and 15% in the year. Australia accounted for 7% of revenue in the quarter and in the year. Colombia had 4% share of the revenue breakdown in Q4 and in the year. Finally, the caption Other refers to the former Trading division, which accounted for 5% of revenue in Q4 and full year 2023. It's worth noting that Argentina's performance was impacted by accounting standards, CPC 02 and CPC 42, which deal with the inflationary impact on changes in exchange rates when translating financial statements. Basically, the standards require that the financial information for the full year of 2023 of our subsidiary located in Argentina be updated to the closing exchange rate and corrected for the effects of the inflation index, with all of this impact being recognized only in the last quarter of the year.
As a result, the net revenue of the Argentine operation was negatively impacted by BRL 1.5 billion in the period, with a consequent effect on the level of the numbers reported here. It should be noted that this is a purely accounting adjustment related to the entire year, but that is reflected only on Q4 with no cash effect. Moving on to slide 6, let's talk about net revenue and EBITDA. Net revenue reached BRL 6.2 billion in Q4 and approximately BRL 27 billion in the full year. As I just mentioned, if we adjust our Argentine operations, which were impacted by accounting standards, and if we adjust our revenue for this effect, our net revenue for the quarter would have totaled BRL 7.7 billion in Q4 and BRL 28.4 billion for the year.
Now, profitability, EBITDA for the quarter was BRL 606 million with a margin of 9.8% and in the full year, BRL 2.6 billion with margins of 9.5%. I'd like to draw your attention on the slide to the consistency of our margin over the last few periods. This is a reflection of the focus and discipline of our risk management and the result of our strategy of geographical diversification, which enables us to arbitrage between beef protein markets, always with the aim of achieving the best profitability levels. Now, leverage on slide seven, our leverage ratio measured by the net debt over EBITDA indicator for the last 12 months and adjusted by the pro forma BPU EBITDA of BRL 46 million for the eight months prior to the incorporation into our financial statements, and at Q4, stable at 2.8x.
It's worth noting that this indicator, as in the previous quarter, does not take into account the down payment of BRL 1.5 billion related to the acquisition of Marfrig's assets in South America, since the acquisition has not been finalized and does not yet bring any EBITDA benefits to the company. Now, next slide, let's talk about net profit and operating cash flow. In Q4, net profit reached around BRL 20 million. In the year as a whole, the company's net profit totaled around BRL 396 million. On the right-hand side, we can see the operating cash flow for the quarter, which was positive BRL 938 million, totally net positive BRL 2.7 billion LTM.
Once again, I would like to highlight the commitment we made at the beginning of the year when we had the negative impact of working capital in Q1 related to the Americanas events, and we said that by the end of the year, our working capital would be at normalized metrics, as you can see now. Looking at the full year, we had a release of working capital of BRL 120 million in spite of the volatility that marked the market last year, especially in the first half of 2023. Again, this was only possible due to the discipline and consistency of our risk management and financial strategy, always seeking to maintain Minerva Foods' financial balance. Let's move on to slide nine now to talk about free cash flow generation.
Building up the cash flow for the quarter, we start with an EBITDA of BRL 606 million, with CapEx of around BRL 192 million concentrated on maintenance investments and organic expansions of operations in plants in Brazil and Colombia. Working capital released BRL 318 million in the quarter, and the cash-based financial result was negative BRL 583 million, which gets us to a recurring cash generation of around BRL 150 million in Q4 2023. If we add the payment of the third installment of ALC, which totaled BRL 32 million in the quarter, we close the quarter with a positive free cash flow of BRL 117 million. Looking at the year to date, free cash flow was positive by BRL 64 million, already taking into account the impacts of the acquisitions of ALC and BPU over the period.
If we do the buildup, we start with an EBITDA of BRL 2.6 billion, CapEx of BRL 707 million, then the positive working capital variation of BRL 120 million, and the cash-based financial result, which was negative BRL 1.4 billion. It's worth pointing out that this change in our financial result is a reflection of the new debt issues that we have made recently, increasing gross debt, mainly to prepare the company's cash and capital structure for the payment for the acquisition of Marfrig South America. Adding up the variables, we achieve a recurring cash flow of BRL 536 million for the full year of 2023. Adding the acquisitions of ALC and BPU, our cash flow in 2023 totaled plus BRL 64 million. Now, slide 10, let's talk about net debt. At the end of the previous quarter, net debt totaled BRL 7.5 billion.
In Q4, we have a positive free cash flow of BRL 117 million. The exchange rate variation also had a positive impact, reducing our debt by BRL 209 million, but we also have a negative effect, which increased our debt of around BRL 241 million from non-cash derivatives. These are FX derivatives and changes from inflation to post-fixed indexes. When we add up the variables and assemble the bridge, we get to a net debt of BRL 7.4 billion, a slightly lower level than that of Q3. Now, let's move on to slide number 11, where I'll comment a little more on the capital structure. As I mentioned earlier, net leverage measured by net debt over adjusted EBITDA ratio, that is, adjusted for the pro forma performance of BPU and excluding the early payment of Marfrig's assets in South America, ended the quarter stable at 2.8 times.
Following our cash policy, the position at the end of Q4 remains at a very comfortable level, approximately BRL 12.7 billion, and includes the 13th CRA issue completed in October 2023. I would also like to highlight the 14th issue, which took place in mid-March, which raised around BRL 2 billion with terms of five and seven years, which will be incorporated into the first Q 2024 financial statement. It's worth mentioning that both are indexed to the CDI. Whatever is not indexed to the CDI, we sought to become post-fixed debt. Now, our debt profile, around 65% of our debt is exposed to FX variations, and I would like to remind you that we have a hedging policy that is followed to the letter and which stipulates that our company must keep at least 40% of its long-term FX exposure protected, which is the level we currently have.
Our debt duration is around 4.8 years, with approximately 82% of the debt maturing in the long term, as you can see in the amortization flow at the bottom of the slide. Our most recent issuance was carried out at timely moments in the credit market, aiming to maintain a solid and healthy capital structure and contribute to the company's liquidity level, especially now and in the next 12-18 months that the company is and should be experiencing strong expansion and growth. Finally, I'd like to reinforce Fernando's comment about the process of acquiring the new assets. We are fully focused on completing the next steps, awaiting approval from the regulatory authorities, and preparing to start the integration process as soon as possible. As soon as the process moves forward, the company will update the market.
Now, I turn the floor back to the operator to get the Q&A session started. Thank you very much.
Thank you. We'll now start the Q&A session. As a reminder, if you want to ask a question orally, please click on the "Raise Your Hand" button or the Q&A icon and enter your name and company. When you're announced, a prompt to activate your microphone will appear on your screen. You then must unmute your mic and ask your question. Please wait while we probe for questions. Our first question is by Thiago Duarte from BTG Pactual. Mr. Duarte, you have the floor.
Hello, thank you. Good morning, everyone. Hi, Fernando and Edison. It's a pleasure to talk to you. I have two questions. The first about working capital.
Edison talked about the release of working capital throughout the year and how this helped your cash flow, but do you see any space, you know, from Q4 to Q1 2024? Do you see space for additional release of working capital? Because when we look back at Q4, your slaughtering volume and your sales volume in almost all geographies, your slaughtering volume grew more than your sales volume. It's like you're building up inventory when we think about product volume. So, does it make sense to expect additional release from Q4 to Q1? Maybe there is some effect of sales displacement. That would be my first question. Now, the second question is, can you update us on the evolution of the approvals and your expectations today, as realistic as they can be, about the completion of Marfrig's assets acquisitions? Thank you very much.
Good morning. Tiago, your first question about working capital. Yes, we did build up inventory from Q4 2023 to Q1 2024, especially considering the quotas in the U.S. As the year started and the quotas opened up, we occupied over 50% of the U.S. quota with our products. So, this was a tactical move. We wanted to occupy this quota space right at the beginning of the year, and this should release some working capital. I'm not sure this is going to happen all in Q1 because there are other things happening at the company. China lost some share while other geographies gained share. So, this is our arbitrage dynamic that can impact the slaughtering in other origins as compared to Brazil. So, there's this whole operational dynamic going on, which made us build up inventory in Q4.
A part of that will be released in Q1, but I cannot guarantee that all the working capital used in this strategy will be given back in Q1. But most probably throughout the first half of the year. About the antitrust agency, we're waiting for the approvals of CADE and all the other antitrust agencies to come by throughout the second quarter of the year.
Thank you. Our next question is by Pedro Fonseca from XP. Mr. Fonseca, you have the floor.
Good morning, Fernando, Edson, and the whole Minerva team. My first question is about the strong rebound in Paraguay and Uruguay. In Paraguay, last quarter, there was some dampened volume, so I want to understand more about this. Do you think that Paraguay has one-off effects there because of this volume that was holding back? And now, a more accounting question. When we look at the financial results lines, there was a great variation quarter-over-quarter in financial expenses and financial revenues. So, can you shed some light into this? Thank you very much.
Okay, let's start with the easiest question. You remember that we made a significant acquisition in Q3 last year, and we used up all the cash from that acquisition. So, we increased cash and gross debt. As a consequence, the financial expenses go up. And as a curiosity, this also increases financial revenue because we're carrying a higher cash. Now, about Paraguay and Uruguay, this is part of our arbitrage strategy. Uruguay is coming strong in the markets that are not getting their supply met by the U.S., especially NAFTA and the Far East.
And in Paraguay, we have the normal cycle of occupying up space in the international markets, especially with the new permits that Paraguay has obtained, especially to the U.S. So, what we see happening, Pedro, is that South America is increasingly more opening up markets, and with our arbitrage capabilities of origins and destinations, we're making the most of this.
Excellent. Thank you, Fernando and Edison.
Our next question is by Guilherme Palhares from Santander. Mr. Palhares, you have the floor.
Good morning, everyone. Thank you for taking my question. So, we have finished a first full year with Australia's operations. Can you tell us a bit more about your prospects on the market there in Australia, and how do you assess the acquisition of this asset now, a year later, as compared to what you expected? And we think this is going to be a highlight in 2024.
So, can you give us more details about what you expect for the rest of the year?
Well, we had a positive expectation, a positive surprise. We were estimating an EBITDA that has now been surpassed. Australia is a market that is subject to the climate. So, we are always on the lookout on the climate. Australia can suffer or benefit more from climatic operations than the rest of South America. So, Australia was actually a pleasant surprise. Another good thing about Australia was that we put our international distributions and all of our sales structure where we, with the concept of one-stop shop with beef and lamb, we opened up markets that, up until recently, our acquired companies did not have access to. So, we focused on geographical diversification and arbitrage even more with our operations in Australia. Okay, just as a complement, we're very diligent when making acquisitions.
When we did our evaluation in Australia, now, a bit after a year after the acquisition, the EBITDA levels are about 20% higher than expected when we made the acquisition. If you remember the numbers that we shared with you in terms of evaluation and EBITDA, so the EBITDA generated today is about 20% higher than what it was projected at the time of the acquisition.
Perfect. Now, can you comment on what you expect for 2024?
We continue to see a very positive dynamic, especially in our lamb operations. This is a job that focuses on niches. We look at the supply-demand, and what we see for Australia is that 2024 is also going to be a great year. The lamb cycle's dynamic is doing great in Australia. That helps in costs and sales. So, we're now able to improve pricing with those niche markets.
Perfect, Fernando and Edison.
Thank you very much. Our next question is by Gustavo Troiano from Itaú BBA. Mr. Troiano, you have the floor.
Good morning, Fernando, Edson. Thank you for taking my question. I have two questions on my side. The first is about profitability by region. Can you provide further details on the quarter-over-quarter performance, particularly in Brazil? Because when we look at the consolidated numbers, there might be some impact from Argentina on the quarter-over-quarter. So, can you explain a bit more about the different regions, especially in Brazil? And now, about the permits to export to China. The permits from Brazilian plants, do they impact the economics for the assets acquisition? Because there is a Marfrig plant that has a permit. So, the value of the acquisition, does it change in the contract due to the permits that were obtained?
Well, Gustavo, the margins by country become less and less relevant when you start looking at the company as a company that has a higher and unique arbitrage capacity as compared to any other company in this industry all around the world. So, if I give you margins by country, you'll be optimistic about one country and pessimistic about another without any reason for such. So, we created this diversified platform in order to have an increasingly higher arbitrage capacity so that we don't have to worry about specific country margins and so that we can look at the portfolio as a whole. Having said that, that's why we don't give you a breakdown by country. We tell you about our revenue, our slaughtering capacity, and sales volume by country so that you have an idea about our asset use. But the profitability comes from our arbitrage capability.
This is increasingly relevant in our results. Now, Gustavo, let me give you an example. The Brazilian domestic market is a major destination for our exports from Paraguay, Argentina, and Uruguay. So, our focus is on risk management, as Edison mentioned. Having said that, we can say that the margins are close to two digits, which is close to the margins that we disclosed. In Q1, the margins are very much aligned with what we saw in Q4 for all regions. Now, about changing the economics of the contract, we have nothing to say about this contract until it is approved by the antitrust agencies. So, let's wait for the approvals of all of the antitrust agencies, and then we'll take a deep dive as soon as we take over those plants.
Okay, great. Thank you very much.
Our next question is by Ricardo Alves from Morgan Stanley. Mr. Alves, you have the floor.
Good morning, Fernando, Edson. Thank you so much for this great presentation, as usual. I have a question about the exports from Brazil to China. We have talked about this earlier, and it's always great to get an update. You got some permits to export to China, but in March, we saw 20 other plants getting those permits as well. So, the questions we get from investors are whether we could have a more competitive scenario in the Chinese market, and this would affect the international price as well as the local arroba price. As far as I understand, based on our conversations in the past, your view is more constructive. But can you give us an update on this?
Are you still optimistic because of the attractive inventory levels, or do you believe in a lower local production, or do you have reasons to believe that Minerva is ahead of new and smaller competitors in Brazil? So, can you share the reasons why you are optimistic about this? And now a question about Argentina. Edison, I know that you cannot talk about individual margins, or it doesn't make sense to talk about individual country margins, but quantitatively, are you seeing an improvement in Argentina after the elections? More flexibility in exports or anything else? Thank you very much.
Ricardo, about your two questions. The main point that affects China is the local production. What's happening in China is that local producers. China is the third largest beef producer in the world, but local farmers are losing money there in China. So, there has been a massive slaughter of female cows.
So, farmers are now starting to focus on different sectors. So, we'll probably see this rebound next year when this excess of females slaughtered are absorbed by the market. So, we continue to be optimistic about China. The recent permits also show that the Chinese government is following up on this from up close. So, we see this in a positive light. And China has two points that are positive with the new administration in the country. One is the drop of the prohibition for the export of certain cuts. So, the market is much more open. And the second point that impacts us greatly is the straightening between the difference between the dollar dual and the official dollar. A lot of competition from local players is eliminated as a result in Argentina. So, we're bullish about Argentina because of these two main changes. So, that was about Argentina.
Thank you, Fernando. Our next question is by Renata Cabral from Citi. Mrs. Cabral, you have the floor.
Pessoal, bom dia, Fernando, Edison. Good morning, everyone. Good morning, Fernando, Edison. Thank you for taking my question. It's just a brief question here on my side about the opportunities to export to the U.S. You mentioned in some remarks about what's going on in the U.S., but I would like to understand your take on possible opportunities of increasing quotas in some countries where you operate, maybe Brazil and Paraguay, since the USDA is pointing to a scenario of lower beef production in the U.S. than the demand. The production is lower than the demand, and the Brazilian quota to the U.S. is not that large. But I know that you also operate in other countries. So, what is your take on this? What can we expect for 2024?
Well, Renata, you said it well. Today, the cow herd in the U.S. is the smallest since 1952. So, today, you have a reduced production in the U.S., and this will hardly be reversed in the next 3-4 years. The U.S. has been importing females and young livestock from Mexico and Canada, and they are not exporting to those countries. So, we see traditional markets from the Far East and NAFTA as markets that are opening up to us directly or indirectly. About the quotas, these are in the country's agenda. You see Biden's statement about the movement in Paraguay. Biden's administration said that Paraguay was a great ally and they would not restrict exports from Paraguay to the U.S. This happened this week.
So, this shows a positive environment not only in the geopolitical area but also when it comes to the scarcity faced by the U.S. that affects both the internal market in the U.S. and the markets to which they export.
Thank you. Now, our next question is going to be read by Edison. You know, the questions sent in writing are going to be read out loud by Edison. The first question is by Luis Vasconcelos.
The BRL 1.5 billion adjustment in the revenue due to Argentina represents how much in terms of EBITDA? The revenue adjustment is an adjustment that is transparent and audited. For EBITDA and profit, it's harder because these are non-audited numbers. So, we don't want to disclose non-audited numbers. If you want to do the math, the profitability in Argentina in form of EBIT margin is around 8%-9%. About adjustments from now on, that depends on the macroeconomy. If the FX rate doubles, then there will be adjustments. But if the scenario becomes more stable, which is what we expect, then there won't be any more adjustments in Argentina. Now, the second question is the volume of export in Q1 2024. What is it like? Have you been surprised by this?
No, the volumes that we are seeing in Q1 are aligned with our budget. There is an important market shift happening in our arbitrage capabilities, helping us keep profitability. Looking at regions that seem less advantageous for exports. So, we are now shifting and keeping good profitability in Q1 and good volumes.
Next question.
After the acquisition of Marfrig, do you have a target for net leverage? Well, I've talked about this oftentimes.
In an 18- to 24-month time horizon, we expect to go back to the leverage levels pre-acquisition from 2-2.5 times net debt over EBITDA. The last question by Victor. Can you give us further details about CADE's decision about Marfrig? We can't give you details about CADE's delay because it's not our delay. It's CADE's. The answer is in the question. However, what we can comment is on public news. At the end of the year, there were new board members being nominated. One of them were about to analyze our operations, and so they needed to get a new reporter, and the analysis started from scratch. So, we think that this can delay our analysis at CADE in up to 90 days. But this is based on the public news that we have been following. That's all.
Now, I turn the floor over to Fernando for his closing remarks. Thank you.
Thank you all. I would like to close this conference call by highlighting the commitment of the moment we're going through. There are three key factors that we should be monitoring in the international beef market: the slaughtering in China, the reduction in slaughtering levels in the U.S., and the positive cycle experienced by South American countries, especially Brazil. The opening up of new markets is a reality. Recently, we saw Colombia being opened up to China and other markets being opened up to South America. Never before in our history, we have had so many options of markets to sell to. So, this makes beef become an international commodity, and South America has unchallenged advantages in terms of production cost and now access to markets.
This makes us very happy and confident about our strategy of expansion and especially of our risk management instruments that we developed. Finally, I would like to thank Minerva's team, who has been working really hard to arbitrate those markets and that is now working hard to prepare for the integration of the new assets as soon as they are in our hands, as we mentioned in the presentation. Finally, I would like to thank you all for joining us, and we are available. Should you have any questions, doubts, or suggestions, just get in touch. Thank you all very much, and have a great day.