BRF SA (BRFS) 2008 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. (Operator Instructions). I would now like to turn the conference over to Fabiana Lima from FIRB, Financial Investor Relations, Brazil. Please go ahead.

This call is the third quarter 2008 results. I would like to mention that a slide presentation is available on the Company's website at www.sadia.com under the Investor Relations section.

Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1995. Actual performance could differ materially from that anticipated in any forward-looking comments as a result of macroeconomic conditions, market risks and other factors.

With us today in Sao Paulo are Mr. Welson Teixeira, Investor Relations Director, and Miss Christiane Assis, Investor Relations Manager. First, they will comment on the Company's third quarter 2008 results. Afterwards, the executives will be available for the question-and-answer session. It is my pleasure to turn the call over to him. Mr. Teixeira, you may now begin.

Good morning. Sadia had a success story operating performance in the third quarter of 2008. Gross operating revenue grew 20% and the volumes sold increased by 16% over the same period in 2007. The strengthened cash, the head demand in domestic and international markets, the stability of the price of the grains and the operational start up of four exponentials, projects, and two new units show a promising outlook for the Company performance for the end of this year and the beginning of 2009.

Out of the total investments in 2008, 92% have already been invested. By the 2008 the Company will have invested BRL1.6 billion, the largest investment plan of its history. When fully operational, these investments shall generate an additional income [of gross margin] BRL4 billion per year as from 2010.

Pursuant to good corporate governance practice, the Company disclosed on a timely basis financial losses resulting from the settlement of certain transactions, which were the exchange derivatives. Eventually, due to changes in the world scenario, the Company will review carefully the investments foreseen for the oncoming years. We continue to be confident of your capacity role in a substainable way, delivering the best results and the best products to our customers.

And now we will start the presentation where we want to show you the tables of the recent financial losses and the current exposure, explain the cause of the losses and the correctional measures taken. And then at the next level the third quarter results and the confirmed 2008 guidance.

I'll ask Christiane to start the presentation and after that we will open the discussion for questions and answers. And we will be available for discussing the main thoughts that you could have.

Hello, good morning to everybody. Let's start at slide three where we break down our recent losses. We're looking at three losses here in currency, exchange, operations with non-deliverable forwards, target forwards and long-call options with two different institutions, which totaled approximately BRL543 million in losses, as well as the unwinding of certain offshore assets that I'm going to detail in further slides, which resulted in a loss of BRL108 million, which brought the total losses of the company on September 30 to BRL653 million in losses. And again, these are losses given the sell down and unwinding of these positions.

Next slide, the exposure and mark-to-market of our current currency transactions that are still in our books. We currently have $6.3 billion in short dollar exposure. We also have to offset this short position BRL4 billion in long dollar exposure, which brings the company to a net short dollar position of $2.3 billion in currency financial transactions exposure.

We can't forget that Sadia, as one of the largest Brazilian exporters, currently exports around $300 million of exports per month would bring us to almost $3 billion of exports per year. This number offsets the short dollar transactions number, which brings the company to a net-net long exposure to the dollar during the next 12 months.

Next slide, slide five, what about in relation to our offshore assets? So, we mentioned the derivatives part of the book, now we're going to get a little bit into our offshore fund. The offshore fund net asset value on June 30 was BRL926 million. The fund during that time had losses of BRL239 million of mark-to-market losses. Again, these are not sell downs, these are assets that, given the international scenario in the financial market, these assets have been reevaluated and have been marked down in BRL239 million and we're going to break those down.

Please click on the number one next to the 239 and we have the breakdown of that number, which is basically we're looking at credit-linked notes which are notes linked to some credit. And there is an explanation below on the same page, linked to Brazilian risk or Brazilian company risk or American and European banks.

The mark-to-market of those notes, including one note that was linked to Lehman, had mark-to-market of BRL91 million. We also had a bond from Lehman Brothers which was marked down 80%, which brings the mark-to-market to BRL117 million. And we also had other credit-linked notes which were BRL30 million, which brings us to a total of BRL239 million, again, of mark-to-market foreign assets in our fund.

Click on the one to return to the slide. We then have losses on unwinds, which is the BRL108 million. And again, these were sell downs. So, click on the number two, which takes you to what those were. And basically we're looking at two types of instruments, which were some range accruals and some credit-linked notes which were sold down to honor certain margin calls or other payments that we had at that time. The losses on those sell downs was BRL108 million.

Click again on the two to return to the slide. We also had withdrawals and there's also a foreign currency exchange variation in this number of BRL147 million, which brings us to the current net asset value on September 30 inside our offshore fund of BRL431 million.

Next slide, in terms of organizational chart, we were looking at the old structure on the left hand side of the page, where the risk management had a daily responsibility of sending charts and details on the operations to the Finance Manager and a monthly obligation towards the Finance Director of certain information.

The first rupture in terms of the information flow was between the Finance Manager and the Finance Director, which was not immediate. The information of the company being outside of the policy, this information did not immediately reach the Finance Director. The second rupture occurred between the Finance Director and the Finance Committee, of which the Finance Director as well did not immediately notice the Finance Committee and the Board of Directors of the position that was outside the policy.

What has the Company done to restructure this and to avoid that something like this might happen? The Risk Management now is subordinated to the CEO as well as the Finance Department. So, the Finance Department is no longer subordinated to the Board of Directors, it is now subordinated to the CEO. And the Risk Management also has a dual responsibility of advising the Audit Committee if something would to be out of the norms inside the Finance Department.

Our next slide, in terms of indebtedness on September 30, a total of BRL7.7 billion in gross debt, of which on September 30 the Company had BRL2.3 billion in cash and cash equivalents. And that is cash available. The Company also had 1.4 in non-available assets. And inside this number there is a variety of assets, including certain margin calls which are unavailable, which brings the Company to a total net debt of BRL3.9 billion on September 30.

Ratio-net-debt to EBITDA at this date, BRL3.4 billion, which is very much in line with other competitors worldwide. This is not a level which we would like to work in but, given the current scenario, is comfortable. The average tenure of our debt, 4.3 years.

A little bit of earnings, and I'm going to go through these very fast so we can open up for Q&A, just the main points. Slide nine, the Company continues to grow so we're looking at the 3Q of 28% growth in terms of gross revenues. Next slide, net operating revenue also grows almost 30%. And interesting here is EBITDA, BRL272 million in terms of EBITDA with a margin of 9.8%.

Next slide, slide 11, Processed Products continue to be the motor of the company in the domestic market with 81% of total revenues. Next slide, export market, we see here that the Process Product's importance has grown from 10% to 12%, in line with what we've mentioning of our strategy of the Process Products reaching 20% in the next three years. And we also have Poultry Cuts, which have a better margin than Whole Poultry, growing in terms of relative value from 35% to 40% in the accumulated of the year.

Next slide, the breakdown of our exports continue to be diversified in the five regions to where we export, over 100 countries. Next slide, in terms of growth in volumes and revenues, in the 3Q I'd like to point out the growth of 18% in Processed Products. And for the year the growth of Processed Products is 14% in terms of volumes. Export Market Poultry, 17.3% during the quarter and 12.9% for the nine months, which takes us, for Sadia as a whole for the nine months, an accumulated growth of 11.3% in terms of volumes, which is very close to our guidance of 12% to 14% volume growth for the Company.

Next slide, in terms of prices we continue to see growth in terms of prices. So, Processed Products up 10.4% and, again, Processed Products is 81% of our revenues in the domestic market. In terms of the export market, next slide, slide 16, we have an increase of Processed Products of almost 30% in real terms, which we consider the devaluation of the dollar during the period of 9.9 would bring us to almost 40% in dollar terms. In terms of Poultry, 12.6% in real is almost 24% in dollar terms.

Why do see this slight fall in relation to 2Q? Basically we saw a deceleration in terms of exports to Europe. And Europe being one of the highest average prices that we have, this market consuming less, the mix changed a little bit in the 3Q so that this average price has receded some. In terms of next slide, EBITDA, again we have a 9.8 for the 3Q and our accumulated for the year is 10.7, which gives us certain tranquility that the 11 to 12 in terms of our EBITDA margin guidance will be reached. And again, BRL821 million year-to-date.

Next slide, in terms of net income, net income we're looking at the quarter, due to the financial losses, we're looking at a bottom line of a negative 777 and for the a negative 443, BRL443 million. Next slide, capital expenditures, we're looking at total CapEx for the 3Q of BRL500 million and a total CapEx for the accumulated nine months, BRL1.5 million, which is already very close to the BRL1.6 million, as we had mentioned for our investments for 2008.

Next slide, in terms of financial indebtedness, what I'd like to point out here again is the net debt to EBITDA of 3.4 and our net debt of BRL3.9 million. Next slide, guidance, we've been through basically all these numbers here, EBITDA margin guidance 11% to 12%, the volumes 12% to 14% and the CapEx for 2008 1.6, while maintaining all these numbers for the year.

That's what I had to say, basically, in relation to the presentation. At this point we're opening up for question-and-answer session. Thank you.

(Operator Instructions). Our first question comes from Mr. Eduardo Vieira with Credit Suisse.

Hello, good afternoon, thanks for the call. Could you confirm that you do not book your mark-to-market exposure on a tax derivative? And can you also us with what would be the mark-to-market position as of today? Thank you.

Eduardo, in relation to your second question, what we're disclosing is a position on September 30. There is a full disclosure on note 22 of the currency contracts, both the short currency contract and the long currency contract, as well as the strike prices of those contracts. Unfortunately, at this time we do not have the mark-to-market at this date. We're giving the mark-to-market on the thirtieth and it's possible to do a sort of back of the envelope calculation in relation to the information that is presented here. In relation to your first question, I'm not sure I understood it.

Well, it's basically the exposure no on mark-to-market derivatives you mentioned on slide four. It looks like you're not booking that in your balance sheet, so if you could confirm that, as of September.

You are correct, by Brazilian GAAP we're not required to run this through our balance sheet. So, it is fully detailed and open, again, on note 22 of our quarterly interim information.

Okay, just one more question if I may. Have you received any margin call since September 30?

Yes we have. Again, the currency has moved from September 30 of 1.91 to 2.50, back to 2.30, currently at 2.10. So, right now we're actually receiving the margin calls from the banks.

Okay. Yes I might have some follow ups, I will ask again later. Thank you.

Thank you.

Our next question comes from Mr. Eric Ollom with ING.

Hi, good morning, everybody, congratulations on the good operational result. I just have a question regarding the term structure of the new short-term debt that you show on 930. Can you just outlay for us what is the payment schedule for that? And you did mention I guess you have cash available, the amount of cash that you're showing as available for that, could you update what that cash would be as of today?

Yes. Currently Sadia has, in terms of cash available, around BRL1 billion, which we find is a very comfortable level for any short-term or medium term obligations that the company might have.

In relation to the breakdown of the debt, we do have some information in relation to our notes. But I guess the most important thing and I guess what your question is getting at is, the short-term debt that we recently, or in September, raised from the market is basically one-year debt. Our average tenure back in early September was approximately 5.5 to six years and now it is approximately four years.

Okay. And the decline in the cash, was that used to bring down that short-term debt at all? Can you give me what is the balance of the short-term debt today?

Well there were a number of reasons. There were margin calls.

Okay.

CapEx.

CapEx, so investments during the last month --

Working captial.

--and working capital, as Welson is mentioning here, there was basically the three items. So, CapEx, margin calls and working capital.

Okay. So, the restricted cash was not used for those margin calls. For the restricted assets you mentioned 1.45.

Of the 1.4? The 1.4 there is a big number of margin calls in there. We also mentioned in our release that on September 30 the totality of margin calls with the banks was BRL700 million.

Okay. And then just an operational question if I may, in your export markets or even in your local markets, just given the tight liquidity situation everywhere, are you seeing a stretching out of payment terms from your customers? And conversely, are you stretching out some of your suppliers as well?

At this point in time we still have not received any request from our importers to extend any debt that they might have with us.

Okay.

In relation to our suppliers, we have been making an effort to extend those open payments with some of our longer-term suppliers. Okay?

Okay thank you.

Thank you.

Excuse me, our next question comes from Mr. Alex Robarts with Santander.

I guess I wanted to start on the operational side first. Can you give us a sense of the nature of the deceleration in the European exports in the 3Q versus 2Q? Is this a seasonal thing? Is it related and could it have an association with general lower demand levels going forward? If you could give a sense of what that was and how might we think about the 4Q vis-a-vis exports to Europe.

And I guess going to the domestic market question that we had, clearly the volumes that you got in the Processed Products in the 3Q were impressive and clearly a lot faster than the growth we've seen in the first two quarters. What do you think is behind this accelerating volume growth of the Processed Products? Have you been shifting your mix to the more affordable cuts? Have you just been gaining market share? Is it just a simple demand question? Maybe if you could give us some color about that growth rate.

Alex, in terms of Europe, we can see an accommodation of the market, we reduce some second demand of course in prices. But we cannot see the same happening in all the markets for us. And in Brazil we can see that the market continues to be very firm at this moment. Of course that we can observe one change in the mix of the products, but for us the last quarter is very strong because of the seasonality, normal seasonality of the market. And we are very confident that this market will be less affected than the other segments of the products in Brazil.

All right. Maybe then the last question just kind of goes to the 4Q expected cash loss. And I appreciate that there's a lot of moving parts here, but can we just generally take away from this conversation that, if the real continues to stay where it is at this 2.1 level, would it be safe to assume and, given your understanding of this today, that the potential cash related derivative loss in the 4Q would be lower than what you have showed for us in the third quarter?

Alex, much lower. We're looking at a net short position of 2.3 for the next 12 months. So, you have to look at what the outstanding contract amount would be for the 4Q and then do your assumptions based on the strike prices that we have given to you, okay?

You can't forget that, given these derivative contracts, we do have approximately BRL500 million of contracts coming due every month, so that the situation in two days' time, which would be on November 1, we're looking at almost BRL560 million of contracts below the levels where we are now. And if we look at the end of the 4Q, we're looking at almost BRL2 billion of these contracts below the levels we are now. So, this is something that's important to consider. We also have our exports to offset that. And these exports are, on a year basis, higher than our total outstanding contracts.

It's very important to know about the exchange rate in Brazil, that the research of the focus agents in Brazil that is forecasting for this rate for the end of the year around 1.95, that you can see less pressure in these contracts and the reduction, as mentioned by Christiane just now.

Okay good, that's helpful, thank you.

Thank you.

Our next question comes from Miss [Leeza Porsha] with [Laka Indismenko].

Hi, I just have a question. You said you were maintaining the guidance for 2008 in terms of capital expenditures.

Leeza, I'm sorry, can you speak up please?

Yes, can you hear me?

Yes.

Okay. You said you were maintaining the guidance for 2008 in terms of capital expenditures in 1.6 billion. Do you already have the guidance for 2009?

We don't have this guidance ready at this moment because we are making a lot of disclose regarding the crisis on a global basis. But we have a revision in our investments with these other plans and we continue to make the investment that were planned for this year.

And we believe that we will continue part of that in next year. We have estimated that these investments could continue to carry over after this year. And some investments normal in maintenance for the next year, we are thinking about the BRL500 million in the first idea for the next year in terms of reals.

Okay thank you.

Our next question comes from Miss Juliana Rozenbaum with Unibanco.

Hi, hello everybody, two questions. First, I'm looking at your footnotes and you added just less than a billion in credit export notes due to new debt, and it says here it's 121% of CTI payable in 2009 and 2010. Can you break down those due dates specifically when and how much in each year?

Juliana, we don't have that information here with us, but basically it's what I mentioned in the beginning of the call. This shorter-term debt relates to debt that we have raised in early September, so that's why it is more expensive. Early September we were already looking at different macro scenarios worldwide and this is basically short-term debt that was raised very recently.

But can you more or less break it down? I mean is it early 2009 most of that is due, late 2010? Just a timing idea if you could.

I'm sorry, I don't have that here for you right now okay?

Okay. And the other question would be on your tax reversion that you booked. If the derivative losses were booked offshore, where the big tax credit was generated.

Basically we have to back out from our net numbers. Give me one second here please. The 1 billion 14, we have to back that out and construct a new tax base. And that tax base is a smaller one due to, basically, two factors. Number one, the revenues of our offshore company in Wellax, they are not taxed, so we have to deduct that from this tax base.

And the second large item is we also have to put back into the formula the losses of the derivatives that were offshore. And the losses of the derivatives offshore are also not tax deductible. So, basically we're looking at a new tax base of around BRL700 million, which would bring us to the reversal in terms of taxes of the BRL237 million that you asked about.

So, it is correct that the losses booked offshore are not tax deductible, right?

Exactly, that is correct.

Yes.

Okay thank you.

Thank you.

Our next comes from Mr. [Ravison Bulting] with Miller Tabak Roberts Securities.

Hi. Good morning. I'm not sure if this question has been answered, but can we talk about your debt profile and get some more color or some more information --

I'm sorry, can you speak up please?

Sure. Can you hear me better now?

Yes.

Sorry about that. I just was hoping the company could give us better color on their debt profile as far as their short-term debt. Obviously your debt profile is picking up and short-term debt's going -- now being 49% of total debt versus 24 this time last year. Can you talk about exactly what the components of the short-term debt and what the company is doing in order to bring the overall profile back to kind of historical levels?

Okay. Just to give you guys some flavor about this, and again we don't have the exact numbers here, but we have currently in the short-term debt 30% coming due in the next six months and the remainder during the following six months.

So, -- and this 30%, is that pre-export financing facilities? Is it bank debt? What exactly is it?

It is export financing, which in short term, in terms of working capital loans, it's the demand points of this composition of this debt in the short term.

And can you also just kind of give everybody an overall view of what's going on as far as the credit markets and the company's ability to assess export financing? There's been a lot of talk about that market being either closed or very expensive for export companies to access. Can you give us some color on your experience trying to access that market and your expectation going forward?

Okay. We have an expectation that relatively this market will be better. Of course that is [normative]. We started to open this market for exporters, with the expense, with costs, with expense and costs. We have started to add in Brazil, but it is not enough for attending the needs of the market. And the prices are expensive for the exporters. But to [cover that] that's a gradually this line is -- will return for the export companies. Particularly for Sadia, we have a very good cash. We are in good condition to continue to operate to each level of cash that the company has in this moment.

Okay. Thank you.

Thank you.

Our next question comes from Ms. [Marcella Moraise] with Banco BBM.

Hi. I have one question. The laws that you put in your release, that is 6,637 million, is it off balance? Or have you already recognized this in your results?

Excuse me, just -- 600, the mark-to-market number? Is that what you're referring to?

Yes. Yes. Because --.

No, that is off balance.

It is not a loss. This is a potential loss. The fair value incurred at the end of September, as information for the -- for you, have the additional information regarding our balance sheet restatements. But it is not a loss. It's a potential -- it could be a potential loss if you use the actions related at the end of September compared to our notional.

Okay. Okay. Thank you.

Our next question comes from Miss Isabela Bacchi with JP Morgan.

Hi, Christiane. I just wanted to confirm if I've got the numbers right here. You mentioned today that you have around BRL1 billion in cash available. Is this in addition to all the restricted cash? And out of the short-term debt of BRL3.8 billion, 30% is mature in the next six months. Am I right?

Yes, you're correct.

Okay. Okay. Great. Thank you.

Yes, but we can't forget that we also have $250 million to $300 million of exports every month coming in as well.

Sure. For sure. Now I've got it. Okay. Perfect. Thank you.

Okay? Thank you.

Our next question comes from Miss [Zaira Miranda] with Banc of America.

Hi, Christiane. I have just a follow-up question on the cash and cash equivalents. So, you have as of today, 1 billion, is that correct, in cash and cash equivalents?

Yes.

And can you give us an idea what the non-US assets that you have as of today as well?

The 1 billion of reals is basically it's cash.

Okay.

Okay? And it's basically in Brazil, in reals, okay? And overnight transactions. Okay? So, it's totally available liquid assets.

Okay.

The second part of your question, I'm sorry?

I would like just to understand what is going to be your current non-available assets. You mentioned here in September, you have BRL1.4 billion, right?

Yes, it hasn't really changed from what it was. It's -- I mentioned before on a call before, the BRL700 million in margin calls with the banks, offshores. I've also been pointed out that there is currently 200 to 300 million in the similar transaction with the local BMF. So, currently we would have around 1 billion in terms of guarantees with the BMF and the offshore banks.

Okay. Okay. So, the difference between the cash and cash equivalents in September goes from 2.3 billion to 1 billion as of today. And this cash was basically used to fund CapEx and also working capital. Is that correct?

That's correct.

Okay. All right. Thank you very much.

Our next question comes from Mr. Eduardo Vieira with Credit Suisse.

All right. Thanks again for the great disclosure. I have some follow-up on the losses.

Can you -- could you reconcile the BRL760 million loss announced on September 25th with the September 30th results? Is it possible to make that -- to reconcile that?

Absolutely. You have to understand, Eduardo, that when we receive the information, late September, the full information had not been reviewed by the auditors and it had not been reviewed by the accounting -- our internal accounting, okay? And it had not been fully reviewed by either of these areas. Okay?

We had the BRL420 million loss in relation to one counterparty, with those instruments and the NDFs, the target forwards and the long co-options. We had 119.6 of additional losses with a second counterparty, okay? And we had the unwinding of some offshore assets of 108.7, which brings us to the 653.2. Okay?

At the time, again, the full disclosure had not been done by our internal accountants, okay? Or been reviewed by the auditors. We also had, by the end of the month, so this is the extension of the losses by Sadia on the 30th of September. BRL653 million, okay?

Okay.

In addition to that, we have a variety of mark-to-market potential losses that have been booked to reflect the new financial scenario worldwide. So, our offshore assets have been reevaluated, okay? And currently we have BRL239 million in mark-to-market losses. Again, those are accounting losses, most of these assets are long-term. So, there still is a potential reversal in relation to these mark-to-market losses. Again, these are accounting losses. Okay? But you're correct.

The total extension of the write-offs of sold assets on the 30th of September was BRL653 million.

Okay. And what was the cash effect, which was associated with that? Is that the same amount?

It's just the cash effect. BRL653 million.

Okay. And how you reconcile with the 700 million in margin calls you said you have received from banks? Is that like because you were rounding that number?

I'm not sure I understand your question.

You mentioned that you had received about BRL700 million of margin costs --

No. I'm sorry, Eduardo. On the 30th of September, we had deposited in certain banks BRL700 million of margin calls.

Okay. Ah. Okay. Okay. Okay.

(Operator Instructions) Our next question comes from Miss Juliana Rozenbaum with Unibanco.

Hi. I'm sorry to come back to this again, but I guess I didn't fully understand it. From your cash position in the end of the third quarter, you had BRL2.3 billion, which was cash available and BRL1.4 billion, which was cash not fully available, which I'm assuming already included the margin cost.

So, what you said, in regards to the 1 billion, which is available now is that your cash was reduced from BRL2.3 available to 1 billion available. So, you either spent it or had further losses from derivatives. Do you then consume another BRL1.3 billion in the month of October? Is that right? Or am I completely missing it?

Juliana, basically the reconciliation from the BRL2.3 cash on the 30th of September to our current 1 billion is three items, as we've mentioned, as I have mentioned. CapEx, okay? So, further investments in terms of some investments that we already had going forward. So, it's CapEx. It is further margin calls. Okay, we can't forget that the currency was BRL1.9 on the 30th of September. It is currently BRL2.10, okay? So, further margin calls. As well as working capital needs.

Can you break it down? Because the margin calls, and I am curious about the cash disbursement yet, right? Because, I don't know, depending on the contract --.

But it is cash. It leaves my cash available and I have to deposit this in the bank.

So, basically it goes from cash to the non-available assets, Juliana.

True. But can you give me exactly what is that number? Because in the period --.

No, I cannot. I'm sorry. I don't have that number right here.

Okay. But I mean, in the release, you considered the non-cash -- the non-available cash as cash in your net debt calculation, right? So, would you think this is a fair assumption? Because otherwise, your net debt would go from BRL4 billion to BRL7.7 billion total. That's BRL6.7 billion, if you're only considering --.

I'm not agreeing with that, that is unfair information. Because we are following the rules of the accountabilities for the rules of the accountability, auditors and the accounts in Brazil.

No -- yes, I agree with you.

(inaudible)

The only thing that I'm trying to avoid is consume the whole BRL1.3 billion in cash. So, I get an overstated number.

But, Juliana, we haven't disclosed about that.

Yes.

We are in the notes, we talk about that. I cannot understand it. You mentioned some unfair information.

No, no, I'm just saying to get a good sense of the position right now. I get a perfect set of information on the 30th of September. I'm just trying to figure out the same calculus for today.

That was not the proper information today. Because you're talking about the end of September.

I know.

You're talking about the information regarding the quarter.

Yes. Yes. Yes. So, the only thing we know for the 30th of October is that you have 1 billion in available cash?

Yes.

Right.

Yes. And that in three days, an additional 500 million comes due in terms of our derivatives.

But then you recognize a loss from those derivatives. Right.

Yes.

Yes.

And -- okay. Can you tell me how much that is? The one that --.

Juliana, come on.

Okay. Thank you. Bye-bye.

Our next question comes from Mr. [Louis Sefta] with [Best].

Hi. Good morning. I have a question regarding poultry price and exports, given that Europe is kind of reducing demand. What kind of price level do you think we could see in the next quarters?

We're expecting that the price will have different markets, but in general we believe that we continue almost at the same level that you are perhaps today.

(inaudible) stones?

Yes. Sorry?

In dollar terms?

Yes. In dollar terms.

Okay. Thank you.

Thanks.

This concludes today's question and answer session. Mr. Welson, at this time, you may proceed with your closing statements.

I would like to thanks for everybody to attended our conference. And we are available with our team in relations investor of Sadia to attend eventually some doubts you could have that are not totally clear. And we are very confident that it was an important market for us in terms of potential in the next few months, talk about the market, and I thank you for attendance.

Thank you.

That does conclude our Sadia Second Quarter 2008 Earnings Results Conference Call for today. Thank you very much for your participation and have a good day.