Good morning. Welcome to Minerva's Earnings Conference Call for the Q1 of 2026. Joining us today are Mr. Fernando Galletti de Queiroz, Chief Executive Officer, and Mr. Edison Ticle, Chief Financial and Investor Relations Officer. Please note that this presentation is being recorded and translated simultaneously. Translation is available by clicking the Interpretation button. For those listening to the conference call in English, you can mute the original Portuguese audio by clicking Mute Original Audio. The presentation is also available for download at ri.minervafoods.com in the Presentation section. During the company's presentation, all attendees will have their microphones muted. We will move on to the Q&A session. To ask questions by audio, click the Q&A icon and type your name and company. Once announced, a request to unmute will appear on the screen, and you will be then able to unmute to ask your question.
Questions in English must be submitted in writing only. To submit a written question, type your question in the Q&A button. We would like to clarify that any statements that may be made during this conference call regarding Minerva's business outlook, operating and financial targets are forward-looking statements by the company's management, which may or may not materialize. Investors should understand that political, macroeconomic and other operating factors may affect the company's future and lead to the results that differ materially from those expressed in these forward-looking statements. To start our Q1 2026 earnings conference call, I will now turn it over to Mr. Fernando Queiroz, CEO, who will begin. Please go ahead.
Good morning. Thank you for joining us for our Q1 2026 earnings conference call. Minerva is starting 2026 with a solid set of operating and financial results, underscoring the consistency and discipline of our strategic execution. Once again, the company has shown that geographic diversification is a key pillar of our business model, helping to mitigate risks, expanding our arbitrage capability, and reinforce our position as the largest beef exporter in South America. In Q1 2026, we posted gross revenue of BRL 14.5 billion, with an EBITDA of BRL 1.1 billion and an EBITDA margin of 8.3%. Over the last 12 months, gross revenue totaled approximately BRL 61 billion and EBITDA reached BRL 5 billion, both at record levels for a 12-month period.
Since the beginning of the year, we've been operating in a highly challenging environment marked by high volatility across several variables, including tariff restrictions, geopolitical and macroeconomic tensions, as well as logistical and weather-related challenges. Nevertheless, we have managed to deliver consistent operating performance supported by our team's agility and execution capability in adapting to market shifts and capturing opportunities throughout the quarter. Let's now return to our Q1 2026 performance on slide 2. Starting with gross revenue, as mentioned, we reached BRL 14.5 billion in the Q1 and BRL 61 billion year to date, a new record for the annual period. Exports accounted for 55% of consolidated gross revenue in the quarter and 59% over the last 12 months, reinforcing their key role in our operations and confirming the attractiveness of the international market.
Meanwhile, the domestic market continues to play a relevant role in our results, contributing to margin optimization and greater operational stability. This performance is supported by our operational and commercial capabilities in South America, which through a geographically diversified footprint allows us to arbitrage markets and capture distribution opportunities across the continent, particularly in Brazil. This dynamic model, based on the reallocation of volumes across different origins, ensures greater agility in responding to changes in supply and demand, strengthening operational resilience and commercial efficiency across all regions in which we operate. Going back to the numbers, our net revenue in the Q1 of 2026 was BRL 13.4 billion. Over the last 12 months, we totaled approximately BRL 57 billion, which is yet another record on our annual basis.
Turning now to our operating profitability, our EBITDA in the Q1 was BRL 1.1 billion with a margin of 8.3%. Over the last 12 months, our EBITDA reached BRL 5 billion, the highest in the company's history, yielding a margin of 8.7%. Reflecting our operational and financial performance, net income in the Q1 of 2026 was BRL 87.3 million, totaling approximately BRL 751 million over the last 12 months. Finally, with respect to our capital structure, we closed the quarter with net leverage stable at 2.7x net debt to EBITDA, reinforcing our ongoing commitment to financial discipline. We also maintained a solid cash position of BRL 10.9 billion, in line with our liquidity policy, providing us with security and flexibility in face of market challenges.
Edison will go into more detail later on our financial performance. Let's now move to slide 3 to see some additional highlights. I'd like to start with one of our strategic priorities, improving our capital structure. Throughout the Q1, we consistently made progress with several liability management initiatives, including the redemption of the 2028 bond and the buyback and cancellation of approximately $63 million of the 2031 bonds. In 2026 alone, these initiatives totaled approximately $229 million or BRL 1.2 billion. This contributed to lowering financing costs, extending the maturity profile of our debt, and strengthening our balance sheet. Continuing our liability management strategy, it's worth highlighting recent initiatives in both the local and international capital markets.
In the local market, we completed a CRA issuance in the amount of BRL 117 million with a 10-year maturity. We also issued a debenture in the amount of BRL 1.5 billion in two series with three and five-year maturities, which enabled the early buyback of approximately BRL 500 million in commercial notes, helping to lengthen the debt maturity profile. Along the same lines, in the international market, we issued the 2036 bonds in the amount of $600 million with a 10-year maturity, with proceeds allocated to the repayment of short-term maturities. Together, these initiatives reinforce the execution of our liability management strategy, contributing to lengthening our debt profile, reducing financing costs, and strengthening our capital structure.
Another highlight at the start of the year was the approval by the Annual Shareholders’ Meeting of the additional payment of BRL 30.8 million in additional dividends to be paid next week on May 13th. Combined with the BRL 162 million in early dividends paid in December of last year, this brings the total to approximately BRL 193 million in dividends related to the fiscal year of 2025, representing a 25% payout. This distribution is in line with our value creation strategy, preserving the balance of our balance sheet and the company's financial discipline. Let's now turn to sustainability, one of our pillars. During this period, we made progress in strengthening traceability and the monitoring of indirect suppliers.
In Brazil, we reached an important milestone by achieving 100% monitoring of Tier 1 indirect suppliers in the Legal Amazon and Maranhão, reinforcing our commitment to transparency in supply chain management. For the Renove Program, we launched a new expansion cycle after completing certifications in Brazil, Paraguay, and Uruguay at the end of 2025. In this new phase, we're focused on identifying and preparing new eligible farms, as well as expanding our presence to Argentina. At the Minerva Ingredients division, we made progress in obtaining international certifications for the Pontevedra plant in Argentina, expanding our capacity to supply beef tallow for biofuel production in strategic markets such as the European Union. With MyCarbon, we made progress in validating projects aimed at generating carbon credits through regenerative agriculture practices, focusing on soil recovery, productivity gains, and the reduction of greenhouse gas emissions.
In our social initiatives, we joined the executive group of the Business Movement for Health, we held another edition of the Educate to Transform program, delivering more than 14,000 school kits to children of our employees in the communities where we operate, helping students in Brazil, Argentina, Australia, Chile, Paraguay, and Uruguay. Finally, for the sixth consecutive year, Minerva Foods was included in the Carbon Efficient Index, or ICO₂, and the Corporate Sustainability Index, ISE by B3, reinforcing our progress in ESG practices and their integration into our business model. Together, these advances reinforce the evolution of our ESG agenda, connecting productivity, risk management, and value creation across the entire production chain, showing the strengthening of our practices in climate management, transparency, governance, and human development. On slide 4, we'll discuss a bit of our commercial performance.
On the top of the slide, we see the breakdown of gross revenue by destination in Q1 2026. In Central and South America, they're leading with 36% share of the company's gross revenue, with Brazil standing out at roughly 20%. Next, North America accounts for 19% of the revenue in this period. The U.S. is the main destination at 15%. Asia contributes 17% of revenue, with China the leading market in the region at a 10% share. The Middle East accounts for 14% of revenue in this period. Finally, we have the European Union and Eastern European countries with similar shares of around 6% each. I'd like to take this opportunity to once again highlight the importance of our distribution operation, particularly in Brazil.
Our footprint in South America allows us to allocate volumes across different markets, capturing arbitrage opportunities and sustaining profitability levels, even in a highly volatile environment. In this sense, the domestic market plays an important role in our overall performance, contributing to greater operational stability and margin optimization. This operational flexibility strengthens our ability to adapt to supply and demand, increasing commercial efficiency across all regions. Continuing our commercial performance analysis, let's go into the details of how our export flows changed by region. In the charts on the left, we see beef export performance in Q1 2026. Asia remains the leading destination, accounting for 30% of exports in the quarter, with China standing out at 24%. Next, North America contributes 24%, driven mostly by the United States at an 18% share.
Following that, we have the Middle East and Central and South America at 13% and 12% respectively. The European Union accounts for 9%, followed by Eastern European countries at 8% and Africa at 4%. Looking at numbers year to date, this pattern remains consistent. Asia is still the main destination with 36% of exports, with China accounting for 29% of them. North America comes next at 21%, led by the United States at 15%. We have Central and South America at 11%, the Middle East at 10%, the European Union at 9%, Eastern Europe at 8%, and Africa at 5% of total export revenue. On the right-hand side of the slide, we highlight the export of our lamb operations in Australia and Chile.
In Q1 2026, North America remains the main destination at a 41% share, with the United States as the largest market at 38%. Asia accounts for 28%, Europe for 15%, and the Middle East for 11%. Over the last 12 months, the picture remains similar, with North America leading at 41%, followed by Asia at 28%, Europe at 16%, and the Middle East for 8%. Together, these results reinforce the strength of our exports and the consistency of our execution, sustaining profitability levels even in an environment of strong volatility and logistical constraints. Meanwhile, they also highlight the attractiveness of the international market, supported by structural supply constraints and consistent demand levels. This performance is directly reflected in the evolution of our revenue, which we will go into details on the next slide.
The export market continues to play a leading role in our performance, reflecting the relevance of exports in the composition of our revenue. In the Q1, exports accounted for 63% of gross revenue, reaching 66% over the last 12 months when we exclude the other segment. By operation, Brazil allocated 63% of its production to exports in the quarter, reaching 66% over the last 12 months. In our LatAm operations, excluding Brazil, we have something similar at 62% in the quarter and 66% for the year. On the right-hand side of the slide, we see the breakdown of revenue by origin. Brazil remains the main operational driver with 51% of gross revenue in the quarter and 57% over the last 12 months.
Uruguay and Paraguay contributed 13% and 12% in the quarter respectively, both at 11% over the 12-month period. Argentina accounted for 11% in Q1 2026 and 9% over the last 12 months. Australia accounted for approximately 5% both in the quarter and on an annual basis, while Colombia contributed 3% in both time frames. The others line related to the trading division accounted for 5% of revenue, both in the quarter and over the last 12 months. Before moving on to the financial highlights, I'd like to say a few words about the global animal protein landscape. We continue to operate in a highly volatile environment shaped by geopolitical factors and the patterns of the cattle cycle in key producing regions, such as the challenges in rebuilding the U.S. herd.
Even so, the sector's basics remain constructive, supported by a structurally tighter global supply and consistent food demand, which tends to intensify in moments of heightened geopolitical uncertainty, such as right now. Despite the onset of a new phase of the cattle cycle in Brazil, South America continues to strengthen its importance as the leading global producer of beef. This leading role is reinforced by supply constraints in key players such as the U.S., which is facing cattle shortages and is impacted by structurally elevated production costs. In the Asian market, China and the other Southeast Asian countries remain among the leading hubs for beef consumption, which has driven a strong price movement since the beginning of 2026.
We also see significant structural opportunities for the coming years, driven by progress on trade agreements such as the Mercosur-European Union deal and the early discussions of a trade agreement with Canada, initiatives that could meaningfully expand market access for South American beef exporters. Our competitiveness in this environment is underpinned by our geographic diversification strategy and our operational footprint spread across South America. This gives us a meaningful competitive advantage, a unique ability to arbitrage production and optimize commercial strategy in response to factors such as tariff barriers, logistical constraints, sanitary issues or health issues, weather conditions and others. Our operational footprint is key in executing this strategy. The global landscape continues to evolve rapidly, particularly amid rising geopolitical tensions and the potential inflationary impact associated with this. We see a more volatile environment ahead, with potentially meaningful effects on commodity markets, pricing trends and global supply chains.
At the same time, periods of heightened uncertainty tend to increase concerns about food security and food inflation, factors that have historically supported higher levels of strategic demand and stockpiling across various regions of the world. This new scenario requires greater production planning, pricing predictability and deeper long-term commercial relationships, while at the same time creating opportunities for a gradual migration from a more commoditized market toward more segmented, higher value-added demand. We see these transformations as significant opportunities for the sector in the coming years. In this scenario, we believe that Minerva Foods is particularly well-positioned to capture this potential, supported by its geographic diversification and operational flexibility. I'll now turn the floor over to Edison, so he can go into more details about the quarter's financial highlights.
Thank you, Fernando. Let's start on slide 6. Starting with net revenue, we reached BRL 13.4 billion in Q1 2026, a 20% increase year-on-year. In the last 12 months ending in March, revenue totaled BRL 57 billion, up 50% year-on-year and the highest ever recorded by the company. Turning now to profitability, EBITDA in Q1 2026 totaled BRL 1.1 billion, having grown 16% year-on-year with an EBITDA margin of 8.3%. Last 12 months consolidated EBITDA reached BRL 5 billion, a 44% increase year-on-year and a new record for the company. EBITDA margin over the last 12 months stood at 8.7%. This performance reiterates the discipline of our operational and financial execution over the last quarters, especially considering the highly volatile and challenging global environment.
Moving on to slide 7, we'll discuss our financial leverage. Quarter ended with net leverage, practically stable at 2.7x net debt to EBITDA, stable and compared to year-end 2025 and reflecting the company's consistent performance with EBITDA continuing to reach record levels on a trailing 12-month basis. This result has been driven not only by the favorable global beef market environment, but also the integration and contribution of the new assets which have been expanding both revenue and EBITDA scale, while also enabling the capture of synergies and efficiency gains. Operational improvements combined with a stronger profitability profile have contributed to consistent leverage reduction since the beginning of last year, reaffirming our commitment to financial discipline, long-term value creation and leverage reduction. I also want to point out the gross leverage reduction, which was considerable.
We brought cash down to our minimum policy levels, which is close to BRL 10 billion. That extra cash we had, we used this quarter to pay for more expensive debt. By doing that, we tried to reduce our gross leverage, so improving the financial position of the company for the next quarters. Let's now move on to the next slide to discuss net income and operating cash flow. Net income was positive at BRL 87.3 million in the quarter, reaching BRL 750.6 million over the last 12 months, a reflection of both our operational and financial execution, as well as the contribution from new assets which have increased our revenue base while operating with proportionally leaner costs and expense structure having allowed us to deliver healthier results.
Turning now to the right-hand side of the slide, operating cash flow for the quarter was negative BRL 324 million impacted by working capital. The main line that contributed to that was suppliers because of its positive contribution in the previous quarter. There is usually some seasonality at the end of the year. Cattle growers prefer not to receive cash at the end of the year. They wait for payments to take place in the Q1, so that displaces part of the working capital artificially. It is positive in Q4 and negative in Q1 at the suppliers line item, it is now adjusted. Looking at the last 12 months, operating cash flow was positive at approximately BRL 4.3 billion. Working capital is practically stable at about BRL 80 million positive.
When you stop focusing only on one quarter and you look at the bigger picture, when you look at a longer period of time, you can remove the seasonality effect and see that the company has gone into a steady state when it comes to working capital. Let's move on to slide 9 to discuss free cash flow now. Building up free cash flow in Q1, we started with BRL 1.1 billion EBITDA. Recorded working capital consumption was BRL 957 million, impacted by the supplier line item, as I said, which seasonally faces greater pressure at the beginning of the year due to the settlement of payments deferred from the prior fiscal year-end. Actually, the last quarter, especially those related to cattle suppliers. CapEx was approximately BRL 289 million, mainly going to maintenance investments and organic expansion projects.
Cash-based financial expenses totaled negative BRL 678 million, and we ended the quarter with cash burn of roughly BRL 806 million. Looking at the last 12 months, free cash flow was positive BRL 1.2 billion. We started from record EBITDA of BRL 5 billion, cash-based financial expenses of BRL 2.6 billion, CapEx of BRL 1.3 billion, and a working capital release of approximately BRL 82 million. Practically flat, as I said in the last slide. As a result, we achieved free cash flow generation of BRL 1.2 billion on an annual basis. It's important to highlight that since 2020, the company has accumulated approximately BRL 8.2 billion in free cash flow generation, which underpins the strength of our operational, commercial and financial performance, creating cash to deleverage the company. On slide 10, we'll discuss our net debt bridge.
We ended the previous quarter with BRL 12.8 billion net debt. The main movement in the debt bridge in Q1 was the BRL 806 million cash burn. As I said, most of it came from the working capital seasonality. On the other side, we have the positive FX impact of BRL 122 million, which reduced indebtedness. There were other non-cash items from hedging and other indices adding up to BRL 252 million, which contributed to the debt increase and the exercise of subscription warrants, which generated a cash inflow of BRL 1.2 million. We ended the period with a net debt of BRL 13.7 billion. Let's move on to the next slide to talk about capital structure.
As I mentioned, net leverage measured by net debt to EBITDA ratio ended the quarter at 2.7x , which is stable. We ended the Q with conservative cash management strategy and a comfortable cash position of approximately BRL 11 billion and an average debt duration of four years, which should further increase once the 2036 bond is included in next quarter's results. As you can see in the amortization schedule at the bottom of the slide, it's currently at 86% of our debt, which is long term. The reduction in our cash position, which still remains at a comfortable level, is in line with the strategy to strengthen our balance sheet, focusing both on reducing net leverage and lowering gross debt, thereby contributing to lower financial expenses and a lighter capital structure with a lower risk profile, which is more conservative.
Turning now to our debt profile. Approximately 64% of our debt is exposed to FX variation. We do have a strict hedging policy, which currently requires the company to maintain at least 50% of its long-term FX exposure hedged. I would also like to talk about some recent initiatives related to our capital structure management. Since the beginning of the year, the company has consistently pursued an active liability management strategy. In January, we exercised a call option and redeemed $166 million of the 2028 bond, which is roughly BRL 886 million. In early 2026, we repurchased and canceled approximately $63 million of the 2031 bond, which is roughly BRL 320 million.
In other words, only just over five months into the year, we have already repurchased and canceled approximately BRL 1.2 billion of its bonds outstanding international cash. That helps us decrease our interest debt and strengthens our capital structure. Looking at our balance sheet, we purchased a CRA issuance, a program that started last year and just ended. It was BRL 117 million. We also issued debentures at BRL 1.5 billion, two tranches with three and five-year maturities. Part of those proceeds allowed us to repurchase approximately BRL 500 million in commercial notes and helped extend our debt profile. All of those operations are in liability management, exchanging short-term debt to long-term debt and in some cases at lower cost.
In the international market, as I said a 10-year bond maturing in 2036, worth $600 million with a 10-year tenor, with proceeds allocated to the amortization of short-term maturities. The transaction was 2.5x oversubscribed, demonstrating strong investor appetite for our credit and marking the reopening of the international market for Brazilian issuers. Once again, I'd like to emphasize that our liability and management initiatives remain fully in line with our commitment to strengthen our balance sheet, pursuing a more efficient and less costly capital structure with a longer debt maturity profile. As Fernando already mentioned, at the end of April, the shareholders general meeting approved BRL 30.8 million additional dividends to be paid out on May 13th, combined with the BRL 162 million that were paid out in advance in December 2025.
Total shareholder distribution related to fiscal year 2025 reached BRL 193 million, which corresponds to the minimum payout ratio of 25%. Distribution is aligned with our value creation strategy while preserving the balance sheet strength, financial discipline, and showing the market that we believe the best way to create value is generating cash and using that to reduce our indebtedness. Therefore, paying only the minimum dividends at this point is the best way to create value for our shareholders because we use the cash instead of to pay out dividends to reduce indebtedness at a time when interest rates are still very high. To conclude, I'd like to thank the entire Minerva Foods team for their effort, dedication, and commitment in delivering consistent and sustainable results.
Even in face of a more challenging and volatile global environment, we remain confident in the execution of our strategy and business plan, which is totally supported by our geographic diversification and the solidity of our operating model. Thank you. I will now turn it back to the operator, we can begin the Q&A session.
Thank you. We will now begin the Q&A session. To ask questions via audio, please click on the Q&A icon and type in your name and affiliation. When your name is announced, a prompt to activate your microphone will appear on your screen. Please unmute your microphone and proceed with your question. The first question is from Thiago Duarte from BTG Pactual.
Hello. Good morning, Fernando, Edison. I have a couple of questions. The first one is to Edison. To your last point in the presentation about reducing your cash position and paying off the debt in the quarter. You ended the quarter with a lower cash position than you had largely last year and the previous year, if memory serves, and to our math, historically close to your cash minimum position to buy cattle. My question is, should we believe that this figure will be close to that minimum cash position looking forward? Seems to be the case based on your presentation. Are there any prospects to change that minimum cash position policy, given that the company is much more diversified now and runs a lot less risk than it has historically? That was the first question. The second one is about margins.
In the last conference call, you talked about a margin drop in 2026 compared to 2025, not necessarily a drop in EBITDA, but a reduction in margin. There's been an improvement compared to Q4 despite cattle prices in the quarter. My question is, i n your opinion, do you think those prospects might have changed because you've kept a very healthy margin this quarter? Thank you.
Good morning, Thiago. First question about the minimum cash position. The decision is based on risk/cost. We were in the middle of an integration process, it's only natural that we are more conservative in managing cash. As we become more confident that the integration has been completed and the scenario is looking up, operationally speaking, that allows me to be a bit less conservative. We look at the cost of that insurance.
Interest rates in Brazil are higher than we expected. I think everyone expected a bigger reduction in the interest rates, the carryover cost, therefore, is still very high. We have some relevant maturities coming up in the last 12 months. Actually, we had at the beginning of the year in the next 12 to 18 months. The rollover quotes, we thought it would make more sense to use the additional cash to take care of those rollovers instead of taking out new lines. Minerva's credit spread is down, the renewal rates are much higher if you compare that to lines that we took out two or three years ago. It would make sense, considering the risk cost ratio, to use the additional cash to reduce gross leverage.
We're probably at the lowest leverage level in the last 10 years, 2.7x net leverage and about 2x EBITDA in cash. 4.7x below five times gross leverage. Looking forward, we want to keep our cash position close to that policy. You asked about more flexible policies. Well, the board has discussed it. I suggested that policy 17 years ago to the board as a way to navigate a much more challenging scenario. The company was a lot smaller, a lot less diversified. There is a merit to that cash policy, but that is a more in-depth discussion because undoubtedly it's a key part of our financial management, and it has allowed us to navigate the last 15-17 years growing the company 40x-50x without having ever put the company at risk in terms of liquidity.
It is an ongoing discussion, but the idea is to keep our cash position close to the policy. As you put very well in your report, it's roughly BRL 10 billion currently. For the margin, we're still thinking the same way as Q4. In this Q1, our margin was better than we expected, but it did go down compared to Q1 last year by 30 basis points. Gross margin dropped by 40 basis points. That's the beauty of gaining scale, which we have been talking about, but not many people have been listening. The fact that you're bringing in assets without the respective fixed cost of that asset will lead to SG&A economies, which is happening as SG&A used to be 13%-14% of our gross revenue, and right now it's about 10.5%-11.5% looking forward.
That cost dilution will offset partially the drop in gross margin, which we do expect to take place this year due to cattle prices increase. Pricing dynamics in the international market is positive, not only in China but also in the U.S. I would rather have a more conservative approach. We're still saying that this year's margins will probably be lower than last year's, but our expected top line growth will more than offset that. We believe that last 12 months EBITDA is roughly the floor from now on until the end of the year.
Thank you. Next question is from Gustavo Troyano from Itaú BBA.
Good morning, Fernando and Edison. Thank you for taking my questions. Two points on our side. First is about your export mix. Based on your last answer about high global demand scenario. Looking at your export mix, ex-Brazil to South America and the world, it's going down this year, which is counterintuitive considering the high global demand. My question is, looking forward, when can we expect a mix that is more focused on domestic markets? I'd like to hear about your sales mix and global demand looking forward.
Gustavo, quick question. When you say it's going down, you're talking about revenue, right? Because the volume is flat. When you look at Brazil exports and South America exports, it's flat, but looking down. It's practically flat. 63% of volumes are still being exported. Carry on with your question. I just wanted to make sure I know exactly what you are asking.
Well, the question is, considering high global demand, how do you expect the global export mix to perform year-on-year for the next few quarters, considering that there's high global demand and considering other supply countries like Brazil and China and the pent-up production there? Also considering export mix comparing China and the U.S., it looks like you're focusing more on China compared to last year when you focused more on the U.S., right? I just want to hear a bit more about your priorities when it comes to China and the U.S. Does it make sense to think that the U.S. will account for less this year than it did last year? To understand what kind of an impact that will have on your working capital dynamics.
Last year, there was a lot of stockpiling in the U.S. at the beginning of the year, which was offloaded until the Q3. I'd like to hear more about China versus the U.S. and the impact that will have on your working capital curve this year compared to last year.
Hi, Gustavo. First of all, about our export mix. Well, it depends because domestic markets in Brazil, Argentina, Colombia, Paraguay, and Uruguay have also become export destinations. When we assess things, we look at where we sold to. For instance, if we brought in beef from Argentina to Brazil, that's an export from Argentina, but internally speaking, that counts as an internal market. The discussion on domestic market and export is not very relevant actually, because increasingly the world is becoming more globalized and internal markets also arbitrate among themselves.
I don't know if that's clear, when I brought in Argentinian beef and I sell that to Brazil. Local markets have become stronger. That's why we're focusing more on them, but not necessarily with beef that was produced in that country. You could have stronger sales from imported beef. Again, I'd like to highlight Minerva's ability to make price choices. That kind of arbitration offsets what a specific country is exporting if the internal market hasn't been supplied. As for China versus the U.S., there are new safeguards in China. They are using quotas, so it's true that in Q1 China will play a more important role because they're pricing products that go into China better. We do conduct that assessment every week, and obviously we always look for markets that create more value.
The trend is after the Chinese quotas are over, that we will see dilution in other markets, especially domestic markets, which should play a more important role. As to your point about working capital, you talked about China in Q1, but it is actually Q1 and Q2, the first half of the year. China should play a more important role than the U.S., and then obviously the U.S. becomes a more important player. Two key points. Despite the quotas in Brazil, because of our geographical diversification based on our budget, we expect to sell the same volume to China last year, this year. Because of quotas, there will be an increase coming from Argentina, Brazil and Colombia, the other countries that have access to China and where we have relevant operations. Chinese volumes will be the same.
Prices will be higher this year than they were last year. We have more gains in China this year compared to last year. That's the first key point. The second about working capital will be very similar to last year. Q1 and Q2, we should burn some cash because we'll need working capital, and we should release cash in Q3 and Q4 like we did last year. Looking at last year, despite all the debate and the fear in the market concerning working capital, we ended the year giving back working capital to the operation. If you look at the last 12 months, my working capital math is slightly positive. It's at about BRL 80 odd million. For this year, we believe that at the end of the year, there should be some need for working capital because of the increase in the price of the arroba.
About a 13% increase on average. We think it will be about that level for the whole year compared to last year, which should require an investment of about BRL 300 million-BRL 400 million in working capital this year. Despite the swings we'll see in different quarters and working capital volatility that is inherent to our business model, if you look at the whole year, we should deliver working capital practically at zero. We'll need that because we're paying more for our main input.
Great. Thank you.
Our next question is from Matheus Enfeldt, UBS.
Good morning, Fernando and Edison. Thank you for taking my question. I have a question regarding your CapEx. The company is operating at a level that is above what we would expect for the year, and we have high elevated interest rates. I'm thinking about the cash pressure for this year. Should we look at the Q1 as something that is going to happen throughout the year? Are there opportunities for efficiency gains in projects with more efficiency in 2026? My second question is related to the short-term scenario. We've heard from players and from advisory services that you have export prices coming from Brazil, and we have Secex's data.
I don't wanna think in the short term too much, but it seems like in April you have export potentials that were better than what we expect for the short term. Do you agree with that? Do you think there's a significant revenue tailwind for the Q2? Thank you.
Regarding our CapEx, it is going to be similar to what we had in the Q1, most likely below that for the next three quarters. Compared to last year, it is probably going to be less. It is going to go down by BRL 200 million most likely, which is the additional investment that we made to get the assets that we bought. To a minimum operational level. The CapEx for our cash flow for this year is going to contribute positively to our margin because we're going to have less CapEx than last year.
Regarding average prices, Fernando will answer this, but we've been saying for a long time that the Secex is no longer a good GPS for us. It is actually a compass that is stuck on a single mode. If you use analysis recommendations with the Secex of the first month, this is a point of concern for me.
Yes, Secex represents a share of our business, which is Brazil. The Secex has inertia to it. You sell it, and then it takes around two months for the shipping to happen. This reflects what happens in a market two months before shipping.
This means that April is going to be the first month where we're gonna see impact from regulations coming from China because of the safeguards. We should see some changes. China is the biggest player or maybe one of the biggest players as an export destination, even though this changes throughout the year, and this is going to cause impact, and this impact will be relayed onto other markets. Again, please take this into account. This has to do with the quota issues and the pricing changes in China from January and February, because this is what is shipped in April.
Great. Thank you.
Our next question is from Pedro Fonseca, XP.
Good morning, Fernando and Edison. Thank you for taking my question. I would like to delve into Mexico. You said in the release that you have 4% of beef exports to Mexico. I'd love to understand your strategy for this channel, I would love to understand this market a little bit better. Do you see any challenges on your radar to make this market more relevant in the very short term, logistics, tariffs, anything? Is there anything you would like to highlight? My second question is a follow-up. Fernando addressed this really well. Last year, at the middle of the year, before the quota changes, we were discussing arbitrage between Latin American countries.
At that point, we were highlighting the opportunity of bringing meat from other industries to supply Brazil. Of course, we have the quota changes, which harms Brazil, but it's very good for other countries. Would a reverse flow make sense? Could we have Brazilian beef supplying to other markets? I would love your take on the Mexico-Brazil channel, thinking about supply and demand. Thank you.
First, regarding Mexico, this is another market of ours. Mexico also changed its quota system, and we do have some restrictions. They had an auction for the rights of owning quotas. Mexico is just another destination. It's going to be placed among the 10 biggest destinations, but there's nothing special about it. Now, in the supply-demand business in Mexico used to be supplied by the U.S., and this changed dramatically. This is why Mexico is now considering other points of origin. There's no strategy here. There's nothing very specific regarding Mexico. Now, the arbitrage remains. It's always a matter of how much a country has access to exports, how much it's exporting, and of course, foreign exchange rates. We have lots of changes and lots of volatility.
Domestic markets react really quickly to that. Just like we do our analysis for internal markets, we analyze this. I don't think we should talk about domestic or international markets. Right now, every market is a potential destination. That's how we should see it. It's a matter of how much beef is being consumed and how much is being exported because this affects competitiveness compared to the domestic market. Our domestic market has proven to be resilient and good, not only in Brazil, but also in other countries in South America. They've been very good in their domestic operations.
Great. Very clear, Fernando. Thank you. Let me just have a quick follow-up, please. Edison, you were talking about a working capital between BRL 300 million-BRL 400 million. This has to do with the annual consumption. Is that right?
Well, this is the current scenario. Consumption is going to be at around BRL 300 million- BRL 400 million this year because we're paying 13% plus for the arroba compared to last year.
The next question is from Renata Cabral from Citi.
Good morning, Fernando and Edison. Thank you for taking my question. First one is a follow-up on the debate about China. I'd like to hear about what might happen to the price in the internal market. We understand that around two, three Chinese quotas on beef exports from Brazil will be filled out, and Brazil will have to redirect that to other markets. Minerva has the advantage of its geographical diversification. There is a concern when it comes potential excess beef supply in the internal market, putting pressure on prices. I'd like to hear more on that. Do you see any mitigating factors concerning that? Second question is about the new assets. We heard management's comments on EBITDA and the plan. My question is about the new phase. In other words, what kind of opportunity do you still see in terms of commercial synergy for the acquired plant? Thank you.
About China, I completely agree with the scenario you've posed. As the quotas are filled for beef coming from Brazil to China, it's very likely that there will be a bit more supply in Brazil. Many plants that are in China are not in other relevant markets, so that supply should be redirected, and that will also reflect on cattle prices and slaughter volumes. We agree with your scenario.
As for the integration, yeah, we're still fine-tuning things. Most of it has been done, but obviously our integration was extremely fast. There's still some fine-tuning to be done commercially, operationally, so that we can extract even more value. Right now, there's nothing specific about the plants. They're now part of the Minerva system. We have our own benchmarking systems per area, per plant. That will definitely bring in more synergies because we have a bigger universe of production units.
That's great. Very clear. Thank you, Fernando. Thank you, Edison.
Next question is from Guilherme Palhares from Santander.
Good morning, Fernando and Edison. I have a couple of quick questions. First, with the increase in the arroba, how do you see cattle growers' profitability, and what kind of an impact will that have on that flow you use in terms of risks to bring those receivables forward for cattle growers? Will that have an impact on your financial policy? Second point is, on the feedlot side, there's a lot going on on ethanol from corn. How are you getting ready for that increase in feedlots?
Improving cattle growers' profits have nothing to do with their cycle. If their profits are better, they just accumulate profits. It doesn't really change how they do things. In practice, those two things have nothing to do with one another. If you'd like us to provide you a better view in terms of that, if you do the math for feedlots, considering current arroba and diet prices, profits are very good. The cost of arroba used to be BRL 200-220 BRL. It's really good profit. We think that volumes will also be very good in terms of cattle coming from feedlots, and it might coincide with that Chinese scenario Fernando just mentioned, and it could put pressure on arroba prices even more as of Q3. Looking at the mid to the long term, Brazil will operate in different areas. Ethanol from corn is just one way to have efficient feedlots.
America will continue to play a very key role in global trade. As herds decrease in the northern hemisphere, our herds are going through improvement cycles and especially productivity gains. Ethanol from corn is just one more factor in terms of productivity gains and also buying time in production. Brazil and South America, because this applies to other countries as well, will become even more key players in the international market. Just as a segue, you asked us how we're getting ready. Well, we have a bartering program for cattle growers to encourage them to have animals that are ready to be slaughtered according to the specs we need.
For the markets we plan to sell to. This is a new initiative and pioneering initiative actually. They will provide funding via bartering and also provide technical support and supervision so that we have more animals ready for slaughter according to the specs we'll be selling to. We did some really interesting financial engineering to come up with this bartering program and to have it up and running as of Q3. Second of Q3.
Interesting comment, Edison. Now, on the operational side, will plant have to adapt to heavier animals or you can use the same equipment?
No, actually, there are more gains to come from earlier slaughters than weight. You have better products that are better adapted, but the plants are all practically adapted to any weight. You have a better asset cycle and better productivity.
Okay, great. Thank you.
Our next question is from Henrique Brustolin, Bradesco BBI.
Hi, good morning Fernando and Edison. Thank you for answering my two questions. First, let's go back to the conversation about the margin. Your gross margin was stable compared to the Q3, or actually to the Q4 of 2025, and you said the margin was a bit better than what you expected for the beginning of the year. I'd love to understand your rationale. Were there origins that were more competitive or were there destinations that were good surprises in the Q1? Seasonally speaking, there's lots of pressure on the Q1 margin-wise. If we know that this year is going to be uncertain, do you think this is also going to be applicable for 2026? My second question is also related to China.
We are nearing lots of uncertainty regarding when quotas will be filled and when what is in transit is gonna reach there. What's your plan for upcoming months? If there's uncertainty for the whole industry, do you see opportunities arising?
Okay. The margin was down in the Q1 because you had a reduction in the gross margin of 140 basis points. The EBITDA margin wasn't as big because we have a significant dilution in costs from the integration of our new assets, which were bought last year. As I was saying, in this market, our margins are tighter than last year because of the increase in our arroba prices. Do you have other risks?
Yes. You have the U.S., you have China, you have Argentina, which has a dedicated quota for the U.S. As you can see, we have strong results in the Q1, and we expect an acceleration on that. We do have some routes of margin leveraging. However, when you look at the big picture, we still believe that margins in 2026 will be worse than margins in 2025. You'll still see a decrease in the gross margin, and some of it will be offset with better cost dilution.
Let me talk about how we did this. This has to do with our agility and our diversified footprint. For China, let's go back to the question that Renata had. For the Q3, quotas should be fully filled. Domestic markets are going to be a little bit more important in the Q3 and Q4 quarters regarding new destinations for Brazil. For Minerva overall, as Edison was saying, we do not see a reduction in volume. We're changing origin points. We're going from point A to point B. We still see China as our main destination.
Thank you. Edison, regarding the margin, what drew our attention was stability in a sequence, the overall scenario for the year is really clear. Thank you.
This is the end of our Q&A session. I will now hand it over to Mr. Fernando for his final remarks.
Thank you for being here. Increasingly more, we'll be sharing how our diversified footprint, above all else, a good decision-making model that leads to agility and quickly adapting to new scenarios which are still volatile and will keep on being volatile, makes a difference. Minerva has prepared properly. We have stability, we have a winning formula, this is a long-term approach. Finally, I would like to really highlight and thank our team at Minerva for the integration that they performed. We really went for extracting value from this integration. In an increasingly more volatile scenario, we learn, we prepare, and we challenge ourselves regarding our next steps to keep on getting value from our operations. We're available should you have any questions or any comments. Please reach out to us if you need any clarifications.
Thank you. This is the end of this earnings release presentation. If you have any questions, please contact our team at ri@minervafoods.com. Thank you for being here, and enjoy your day.