Good morning, everyone, and t hank you for waiting. Welcome to Marfrig Global Foods S.A. Fourth Quarter and Full- Year of 2022 conference call. With us here today we have Mr. Marcos Molina, Founder and Chairman, Tim Klein, Chief Executive Officer of North America Operations, Mr. Rui Mendonca, Chief Executive Officer of South America, Mr. Tang David, Chief Financial and Investor Relations Officer, Mr. Paulo Pianez, Sustainability and Communications Director, and Mr. Eduardo Puzziello, Investor Relations Director. This event is being recorded and all participants will be in a listen-only mode during the company's presentation. After Marfrig's remarks, there will be a question and answer session. At that time, further instructions will be given. Should any participant need assistance during this call, please press star zero to reach the operator.
This event is also being broadcast live via webcast and may be accessed through Marfrig's website at https://ri.marfrig.com.br, where the presentation is also available. Participants may view the slides in any order they wish. The replay will be available shortly after the event is concluded. Those following the presentation via webcast may post the questions on our website. They will be answered by the IR team after the conference is finished. Before proceeding, let me mention that forward statements are based on the beliefs and assumptions of Marfrig Global Foods S.A. management and on information currently available to the company. They involve risks and uncertainties because they relate to future events and therefore depend on circumstances that may or may not occur.
Investors and analysts should understand that conditions related to macroeconomic conditions, industry, and other factors could also cause results to differ materially from those expressed in such forward-looking statements. Now, I will turn the conference over to Mr. Eduardo Puzziello. Mr. Puzziello, you may begin your presentation.
Thank you all for participating in Marfrig's earnings conference call. Let's start this conference call with the main highlights of 2022. Marfrig's consolidated net revenue for the year reached BRL 131 billion. Remembering that in accordance with technical accounting standards CPC 15 and CPC 36, which deal with business combinations and consolidated statements. As of April 1st, 2022, we started consolidating BRF's in Marfrig's results. The consolidated adjusted EBITDA was BRL 13 billion. That is a consolidated adjusted EBITDA margin of 10%. The consolidated net profit reached BRL 4 billion. The highlight was the operating cash flow. It was more than positive BRL 9 billion in the year. I'd like to underscore that with the effect of the consolidated results, we present a more diversified company from a geographical and protein point of view.
Therefore, the North American operation now accounts for 47% of the consolidated revenue for the year, while the South American operation accounted for 21% and BRF's results 32%. When we analyze the consolidated adjusted EBITDA, the North American operation accounted for 52% of the total, while the South American operation accounted for 18% and BRF's EBITDA 30%. With this greater diversification, we observe that the dollar continues to be the main currency of our results and accounted for 75% of the consolidated revenues in 2022. The North American operation reported a strong result for the year with net revenues of $12 billion and an adjusted EBITDA margin of more than 11%.
The South American operation reported a record result with net revenues of approximately BRL 28 billion and an EBITDA of BRL 2.3 billion or an EBITDA margin of 8.4%, more than 4 percentage points above the 2021 margin. Leverage ex-BRF was 2.72x when measured in Brazilian Reals and 2.69x when measured in U.S. Dollar. Given the strong results presented, we advanced dividend payments totaling BRL 1.1 billion during the year equivalent to a payout of about 25% of net income for the period. Finally, Marfrig led the main ESG rankings throughout 2022. It is worth mentioning that in the FAIRR Index, Marfrig is the best evaluated beef protein company. We also rose four positions in the world ranking to third place.
I now give the floor to Tim Klein, the CEO of the North America Operations. Tim, please go ahead.
Thank you, Eduardo. Let's begin on slide five, where I will talk about the cumulative results for Fiscal Year 2022. Starting on the left, sales volume was 2.3% higher than last year. It is important to highlight that Fiscal Year 2022 was a 53-week period, while Fiscal Year 2021 was a 52-week period. Net revenue was a new record and was 1.7% higher than the previous year, coming in at $11.9 billion. On the chart to the right, EBITDA was $1.3 billion for the year, down 48.6% compared to Fiscal Year 2021. As expected, the year started off with strong results and then trended lower through the rest of the year.
During Fiscal Year 2022, we experienced the impact of the continued drought-related liquidation in the cowherd and the anticipated cyclical decline in fed cattle supplies. By the end of the year, market dynamics had shifted in favor of the cattle producer leading to higher prices for fed cattle. At the same time, inflationary pressures reduced consumer confidence and worked to soften beef demand. As a result, packer margins declined as industry slaughter levels remained higher than expected. Please move now to slide six where I' ll comment on the results for the fourth quarter. Once again, starting on the left, sales volume was 7.6% higher than the same quarter of last year. Please note that the fourth quarter of Fiscal Year 2022 includes 14 weeks of activity versus 13 weeks in Fiscal Year 2021.
Net sales were $3.1 billion, down 4.7% versus last year. The EBITDA of $143 million was 80% lower than last year with an EBITDA margin of 4.7%. As expected, the margins in our beef plants were lower versus last year's exceptional results that were driven by ample cattle availability and the post-pandemic economic rebound. The start of lower fed cattle supplies and its associated impact on market sentiment led to significantly higher cattle prices versus last year. Beef demand was softer than last year, but industry throughput did not adjust lower to offset the reduced demand, driving cutout values lower. Now, move to slide seven, where I will talk about U.S. market data.
Starting on the left, cattle prices, as reported by the USDA, averaged $151 per hundredweight, up 14.9%, while the USDA comprehensive cutout averaged $253.36 per hundredweight, down 9.9%. Also, the drop credit declined 5.6% to an average of $14.62 per hundredweight, led by lower hide values, offset in part by higher tallow and meat mill prices. The cutout ratio was 1.69 versus 2.16 last year. As we look forward to 2023, lower fed cattle supplies will result in higher prices and reduced capacity utilization across the industry. While beef demand isn't as robust as it was the last two years, we expect it will be better than it was during the previous cattle cycle.
This should allow the industry to operate at margin levels that are stronger than they were during the previous cycle. Now I'll pass to Rui.
Thank you very much, Tim. We will now move on to slide number eight, where I will explain the performance of the South American operation in 2022. We can see in the graph on the left, the total sales volume reached 1.5 million tons in 2022, a growth of 7.4%, compared to the volume of the previous year. It is worth noting that part of the growth is explained by the reduction of exports to China in the last quarters of 2021 caused by the Brazilian self-imposed ban. In the central graph of this slide, that of net revenue, in 2022, we reached BRL BRL 27.6 billion, 22.6% above the revenue of 2021. This performance was explained by the combination of higher volume and the increase in the average price of exports.
I would like to highlight the great differential Marfrig has, th at is the largest number of units in South America certified to export to China. We are the largest exporter to that country in the region, which is currently the largest importer of beef in the world. Finally, in the graph on the right, EBITDA, we reached a record amount of BRL 2.3 billion in 2022, a growth of more than 157% over the EBITDA of 2021. We achieved an EBITDA margin of 8.4%, 4.4 percentage points above the 2021 margin. It is worth noting that Marfrig's business model is based on a continuous operational efficiency program, which combines the integrated platforms in the countries where we operate with a greater share of industrialized products.
The strong performance presented in this result confirms that we have the right business model. We now move on to slide nine, where I will make the same comparisons as in the topics above, but for the fourth quarter of 2022. In the graph on the left, the total sales volume reached 377,000 tons in the fourth quarter of 2022, a growth of 10.7% compared to the same quarter of 2021. It is worth remembering again that the volume growth in this quarter is partially explained by the lower volume sold to China in the same period of 2021. Moving now to the center of the slide, net revenue in the fourth quarter of 2022 reached BRL 6.6 billion with a growth of 9.5% compared to the same quarter of the previous year.
Finally, in the graph on the right of this slide, we will talk about EBITDA. We reached BRL 529 million in the fourth quarter of 2022, a growth of 148% compared to the same quarter of 2021. We reached an EBITDA margin of 8%, 4.5 percentage points above the margin of the same period in 2021. Moving now to slide 10, I will talk about the performance of exports in the results for the Year 2022. In the graphs on this slide, referring to the evolution of exports, as I mentioned in the previous slides, China had a greater weight in export this year, and now accounts for about 75% of the exports from the South American operation.
This higher volume of exports to China throughout practically the entire year reinforces our strategy and confirms our position as the largest exporter to that important market, where prices and export volumes rose strongly during the year, benefiting Marfrig's results. Finally, I'd like to point out that though China remains the largest importer of beef in the world, Marfrig has focused on preparing its units to export to other markets, always trying to capture the best opportunities, and doing that in line with our pricing system. As a result, we have recently certified plants in South America to export to markets such as the United States, the United Kingdom, Singapore, Japan, Canada, Indonesia and Malaysia, among others. I will now turn it over to Paulo Pianez who will comment on the highlights of the sustainability area. Thank you, Rui.
The sustainability results Marfrig achieved in 2022 are robust and show that the strategy adopted confirms its pioneering spirit and its real commitment to the development of innovative, low carbon and deforestation-free cattle farming. Once again, these results are confirmed by independent evaluations and rankings in which Marfrig is the best ranked company in its sector globally. Marfrig is among the companies that most protect children's rights worldwide. In 2022, the company's score in the Global Child Forum Benchmark went up 27 percentage points over the previous year. It is the highest scoring Brazilian company, surpassing the average score of the food, beverage and personal care industries. For the third consecutive year, Marfrig is the top-ranked beef protein company in the Coller FAIRR Protein Producer Index. The company rose four positions in the world ranking from seventh to third place, which is its best result since it joined the index.
Marfrig is also the only company classified as low risk among the 11 beef protein companies. In the CDP Disclosure Insight Action, Marfrig obtained the best classification in its segment in the three main criteria: forestry, climate change and water resources. In these three criteria, the company received the A score, results that are in line with the Marfrig Verde+ program. As for the management of farm animal welfare, for the third consecutive year, Marfrig is the best positioned company in the sector in the latest publication of the Business Benchmark on Farm Animal Welfare, ranking tier 2. Also, for the third consecutive year, Marfrig is listed on the Corporate Sustainability Index and the Carbon Efficient Index. One of the most significant initiatives was the launching of the Biomas project at COP27 in Egypt, in which Marfrig is co-creator in partnership with Itau, Santander, Rabobank, Vale and Suzano.
Biomas will be dedicated to forest restoration activities in Brazil and will be an important tool for environmental legalization, which will include its supply chain as part of our strategy to support and assist producers. The objective is, over a 20-year period, to reach a total restored area of 4 million hectares of native forest in different Brazilian biomes such as the Amazon, the Atlantic Forest, and the Cerrado. This area is equivalent to Switzerland or the state of Rio de Janeiro. Besides the environmental benefits of this initiative, this group, made up of major companies with global presence, expects to contribute and promote regional development and the strengthening of local communities involving them in the supply chain.
The first phase of the project will identify potential areas, promote nurseries for large-scale production of native trees, engagement of the community in the company's activities, discussions about the implementation of the project in public areas, partnership with carbon credit certification platforms, and the implementation of pilot projects. As of 2025, the idea is to expand and scale up until we achieve the target of 4 million hectares. Between removals and emissions avoided, the alliance expects to reduce approximately 900 million tons of carbon equivalent from the atmosphere over two decades. Besides, it is expected that the new company will contribute to protect over 4,000 species of animals and plants. On the traceability and legalization of the supply chain front, the Marfrig Verde+ program has been achieving its objectives as planned.
Based on the strategy to produce, conserve, and include, all initiatives focused on the social and environmental adjustments of the supply chain to be in line with the company's cattle procurement policy. I'd like to highlight that 100% of direct suppliers were monitored by satellite at the end of Q4 2022. The plan achieved 72% control of indirect suppliers in the Amazon and 71% in the Cerrado. On the producer adjustment and support front, 2,586 farms were legalized and re-included in its supply chain from 2021 to Q4 2022. These suppliers are once again operating in compliance with the criteria established. This is a clear example that the inclusion criteria is the most effective solution to reconcile production and conservation as all these producers now meet the highest standards of sustainable livestock production.
Finally, another important initiative was the conclusion of the low-carbon meat protocol in partnership with Embrapa aligned with the company's commitment to promote and develop low-emission livestock production. This innovative product with third-party certification will be launched this year. These efforts and results achieved with the Marfrig Verde+ plan, as well as international evaluations, prove our commitment to generate positive impacts, contributing to the development of a low-carbon economy and to the maintenance and recovery of biodiversity in the territories where we operate. I now turn it over to Tang who will present our financial results.
Thank you, Paulo. In the next slides, we will present Marfrig's consolidated financial results for the Year 2022 and those for Q4 2022. Here, we will once again show BRF's results consolidated with Marfrig's.
According to the technical accounting standard CPC 15 of Business Combinations and CPC 36, Consolidated s tatements. As such, the information I will comment on next, except where indicated otherwise includes BRF's figures. Starting with slide 14, in the graph on the left, in 2022, we generated a consolidated net revenue of approximately BRL 131 billion, an increase of 53% compared to the previous year. With a more diversified profile, we now generate 47% of net revenue in North America, 21% in South America, and 32% by BRF. In the graph on the right, we generated BRL 12.8 billion of adjusted EBITDA in 2022 with a margin of 9.8%. Diversification in EBITDA generation was 52% in North America, 18% in South America, and 30% at BRF.
On the next slide, number 15, I will comment on the revenue and adjusted EBITDA of Q4 2022. On the left chart, in Q4 2022, we generated a consolidated net revenue of BRL 37.3 billion, an increase of 56.2% compared to the last quarter of 2021. In this quarter, we generated 43% of net revenue in North America, 18% in South America, and 39% by BRF. In the graph on the right, we generated BRL 2.2 billion in adjusted EBITDA in 2022 with a margin of 6%. Diversification in the generation of adjusted EBITDA in Q4 2022 was 34% in North America, 22% in South America, and 44% in BRF.
On slide number 16, we'd like to highlight the importance of Marfrig's diversified consolidated net revenue profile with a balanced distribution, relevant participation of mature markets such as the United States and Europe, and a focus on the main emerging consumer markets such as China and the Middle East. Turning now to slide 17, consolidated net profit in 2022. Consolidated net income in 2022 was BRL 4.2 billion, of which BRL 4.7 billion generated by the beef segment, and BRL -549 million referring to Marfrig's 33.27% stake in BRF's capital stock. The excellent results generated during 2022 were the basis for advanced payment of BRL 1.1 billion in dividends paid to shareholders. On slide 18, we present cash generation.
In 2022, Marfrig's operating cash generation ex-BRF was BRL 5.8 billion as shown in the graph on the left. When discounting CapEx investments for growth and maintenance totaling BRL 2.6 billion plus interest paid of BRL 2.4 billion, their recurring free cash flow was positive BRL 746 million. In the graph on the right and in consolidated terms, the operating cash generation in 2022 considering BRF's performance since April was BRL 9.3 billion. Discounting the investments in CapEx plus interest paid in the period, the free cash flow was positive BRL 678 million. Slide 19, cash flow for the quarter. Marfrig's operating cash generation ex-BRF in Q4 2022 was BRL 2.2 billion, as shown in the graph on the left.
After discounting CapEx investments for organic growth plus maintenance totaling BRL 749 million plus interest paid of BRL 743 million, recurring free cash flow was BRL +757 million. In the graph on the right and in consolidated terms, operating cash generation in Q4 2022 was BRL 3.5 billion. Discounting CapEx investments plus interest paid in the period, free cash flow was positive BRL 936 million, also showing BRF's positive free cash flow generation for this quarter. Slide 20, net debt and leverage ex-BRF. At the end of Q4 2022, Marfrig's net debt, without considering the effects of the BRF consolidation, totaled $4.6 billion.
In this quarter, BRL 886 million were also paid in dividends, of which BRL 286 million went to National Beef's minority shareholders, and BRL 600 million to Marfrig's shareholders. Marfrig's leverage ex-BRF was 2.72x when measured in BRL and 2.69x when measured in dollars. Slide 21, the consolidated net debt according to CPC 16 and 36 totaled $7.4 billion at the end of Q4 2022. When measured in reals, consolidated net debt totaled BRL 38.6 billion in Q4 2022. Here considering BRL 14.4 billion of BRF's net indebtedness. BRF's consolidated leverage adjusted by EBITDA for the last 12 months was 2.99x when measured in reals and 2.95x measured in dollars. On slide 22, we present the details of the debt profile.
Starting with the graph on the left, Marfrig ex-BRF ended December 2022 with a cash of $2.6 billion. We have available a $900 million revolver line at National Beef. In the chart on the right and due to the consolidation according to CPC 15 and 36, the cash position at the end of Q4 in 2022 totaled $4.3 billion. I will now turn to Marcos Molina, who will make the closing remarks. Thank you.
Thank you very much and Tang. I'd like to thank everyone for attending one more of Marfrig's earnings conference call. On behalf of the board, I would like to close this presentation by congratulating Marfrig's team for the excellent results achieved in 2022. It was a year of big challenges and also of great achievements.
The strong operational performance, along with our strategic financial discipline, have been key for our purpose to create value for our shareholders. I'd like to underscore that over the past three years, since 2020, around BRL 7 billion were invested in the modernization, expansion, construction, and structural improvements of our units, as well as the expansion of our portfolio of industrialized and branded products, injecting more added value to Marfrig's margins. During the same period, we implemented an efficiency program that captured over BRL 650 million in operations, logistics, and sales. These investments made Marfrig one of the companies with the most efficient manufacturing complex in the world. Besides, in the last two years, we've returned to our shareholders more than BRL 3.4 billion as dividends.
Thinking about the long-term diversification strategy, between 2021 and 2022, we invested the equivalent of 33.27% of BRF's capital. These investments were made based on financial discipline and cash generation. Looking forward at 2023, we remain confident in the performance of our divisions. In North America, our business model is unique and resilient, and we expect it to continue performing better than the market. In South America, with an integrated and diversified platform, we will reap the fruit of the investments made focusing on the certification of our fresh beef plants to export to other countries, but also on the growth of our branded and industrialized products. On BRF, with the new management, we expect that the future results will display operational, commercial, and financial recovery.
Therefore, in the past few years, we created a solid foundation with the right levers to appropriately manage Marfrig's cash flow. With financial discipline, even in down cycles, capturing the advantages of the strategic investments made while controlling the company's leverage. I conclude this call by thanking our board members, our CEOs, customers, and mainly our employees. We remain confident in the performance of our company and its ability to keep on improving every day creating value for all. Thank you very much. We now move on to the Q&A session.
Thank you. The floor is now open for questions. If you have a question, please press star one on your touch tone phone at this time or any time. If at any point your question is answered, you may remove yourself from the queue by pressing star two. Questions will be taken in the order they are received. We do ask that when you pose your question that you pick up your headset to provide optimal sound quality. Please hold while we pull for questions. Our first question comes from Antonio Hernández with Barclays.
Hi. Good morning. Thanks for taking our questions. Well, actually two questions. The first one is on U.S. beef expectations and implications of the self-imposed ban to exports to China. What are the implications for the U.S. market? That will be the first question. The second question is regarding your expectations regarding cattle availability in 2023 and beyond. Thanks.
Yes. The first part of the question, we don't expect any significant impact from the self-imposed ban in Brazil shipping to China. We don't expect it to last more than a month. There may be some short-term impact. If there is any increased exports out of the U.S., it'll be short-lived. In terms of cattle supply, USDA is estimating cattle supplies in 2023 to be somewhere 3.5% to 4% lower than they were in 2022. The industry has responded to that by kill reductions, lower capacity utilization, particularly towards the end of the first quarter here.
In terms of the total cattle cycle, expectations are for cattle supplies to be down somewhere, around 8%, 8% to 9% from the peak in 2021.
Okay. Perfect. Thanks for the call.