BRFS BRF SA

   The performance of BRF Brasil Foods was   marked by consistent advances during 2010   and characterized by efficiency, scale gains   and profitability in both domestic and overseas   markets. As a consequence, we have been   able to report an unprecedented result for a   Brazilian food company: its ranking as the third   largest exporter in the country with overseas   sales of R$ 9.2 billion. This position shows that   we are making good on the commitments we   assumed at the time the association between   Perdigão and Sadia was announced in 2009 for   creating a company able to compete globally   and recognized for the value of its brands and   the quality of its products.  
   Our sales volume grew 7% to 5.7 million   tons. We posted net sales of R$ 22.7 billion,   8.3% up on 2009. Cash generation according   to the EBITDA concept reached R$ 2.6 billion   and net income, R$ 804 million, a year on year   improvement on a pro-forma basis of 126%   and 125%, respectively. EBITDA margin was   11.6%, restoring the Company’s historic levels   of profitability and this in spite of currency   appreciation and spiraling commodity prices   in the second half of 2010.  
   Despite the year being a period of transition

while we await authorization to conclude the   merger, we continued to invest, allocating   R$ 1.1 billion to the expansion and moderniza tion of productive capacity and to efficiency   programs in all areas. Such a decision is indica tive of the Company’s soundness, commit ment to our stakeholders and to the execution   of our growth plans for both domestic and   international markets. Our net debt to EBITDA   ratio fell from 3.6 to 1.4 times given better   operating cash generation and substantial   optimization of investments. A successful   bond issue conducted during the year was   instrumental in raising R$ 750 million, at the   same time extending the debt maturity profile   from an average of two to three years.  
   An important part of our success is con tingent on getting closer to our clients and   consumers and improving logistics systems,   distribution, development and product inno vation. We monitor the dynamic of the mar kets and adjust our portfolio of products and   services to the specific needs of each segment   of consumption or region of the country and   the world. To grow and continue to be market   leaders, we shall invest in customized solu tions which add greater value and services,  

provide support to our clients in their day to   day activities and maintain an open relation ship channel. In this context, we have also   established the long-term internationalization   project focused on higher added value prod ucts and distribution in the principal regions   where we operate.  
   The expansion of the operations strength ens an important vocation and strategy of the   Company - the creation of jobs and income   in small and medium-size municipalities   throughout Brazil. In this context, the principal   inputs and raw materials we use – grains, hogs,   poultry, beef cattle and milk – are all acquired   from local producers. We ended the year with   more than 113 thousand employees, ranking   us among the five largest employers in Brazil.   We are also conscious that the impact of our   projects percolates down through the entire   community by encouraging the constitution   of new companies, services, projects for   infrastructure, healthcare and education.  
   Going forward, we face the challenge of   building a global culture, counting on a team   of talented and multifunctional people, alert   to the cultural plurality of our customers and   equipped to find solutions that meet their  

for enhancing brand penetration; an increase   in the channels for direct distribution to the   client; initiatives for attracting and retaining   professional manpower committed to the   Company’s long-term projects; and reinforcing   the concept of sustainability in all areas of the   business. Strategic management has among   its objectives, the adoption and strengthen ing of sustainable practices along the entire   production chain and in the relationship with   its principal stakeholders. |GRI 1.2|  
   BRF adopts a long-term view permanently   focused on the efficiency of the entire pro duction chain. This strategy contributes to   offsetting the impacts of factors affecting   the trading environment at any given time   (currency exchange rates for example) thus   helping to sustain the targets for market share   without sacrificing margins. ‘To do more with   less’ is the driving behind BRF’s entire busi ness, this having a positive spinoff in terms   of return and competitiveness. In the context   of integrating processes, in 2010, BRF began   the development of a robust technological   platform capable of sustaining its growth  

plans in Brazil as well as overseas with conclu sion expected before the end of 2011.  

Future vision  
   BRF wants to be the consumers’ first   choice in regions where it has a strong pres ence whether in Brazil or overseas, offering   products suited to local habits and customs   and with the support of a global distribution   platform. The Company invests in the forma tion of an international culture, alert to the   cultural diversity of its clients and consumers   to meet their needs and in line with their   consumption habits.  
   Estimates for the domestic market are that   36 million will migrate to the ABC classes   over the next five years, representing major   sales potential. In addition to an increase   in the number of consumers with greater   purchasing power, the change in habits tends   to favor the acquisition of ready-to-eat dishes   combining practicality, quality, healthiness   and price competitiveness. In just one year,   2.8 million homes have joined the consumer   category for ready-to-eat dishes while singles  

   The alignment of all areas of the Company   with this long-term objective is a priority in   the strategic plan for the new corporate con figuration once CADE authorization has been   received for the merger between Perdigão   and Sadia. The Company plans to double its   sales by 2015 and is preparing to begin a fresh   cycle of investments in order to sustain new   projects which will support this expansion.  
   The long-term internationalization project   for the overseas market has been structured to   focus on higher value-added products and on   distribution to the Company’s prime markets.  
   BRF’s principal strategic initiatives center   around: investments in innovation and in   products with health related attributes; actions  

and couples with no children already account   for 27% of total consumption in Brazil.  

Sustainability  
   Sustainability at BRF is a strategic element of   the Company. It means more than preserving   the environment or creating jobs. Rather it is to   operate in a unique manner in the market place,   managing the daily activities and the attitudes   of the organization on the basis of a series of   guidelines, practices and actions designed   to achieve positive results simultaneously on   economic, environmental and social fronts.  
   BRF believes that to contribute to the   development of society is compatible with   its own corporate progress. If it is successful   in disseminating this sustainability-related   culture, then this will bring gains in efficiency   for the business with opportunities for as sociating these improvements in corporate   management as a competitive differential of   the BRF brand. As a result of this vision, the   Company has selected six key pillars to per meate its business strategy, contributing to   the target of building a global food company.  

   Total commitment to sustainability –   To build sustainability criteria into the organiza tion’s investment decisions and new projects/   products; to link senior management’s variable   compensation/bonus to meeting sustainabil ity targets; to ensure management conformity   with the principal sustainability standards and   certifications; to undertake continual auditing   of the Company’s operations   and those of   its suppliers; to promote the   maintenance/   entry of the Company as a component of the   principal sustainability indices.  
   Increase the focus of sustainability in   the value chain – To consolidate the Com pany’s position as a catalyst for sustainability   in Brazilian agriculture; to identify and reduce   the principal social and environmental risks in   the value chain (from farm gate to the dining   room table); to develop new opportunities   along the value chain.  
   Engagement with stakeholders – To   involve stakeholders in making decisions; to   improve accountability in matters involving   sustainability, prioritizing transparency and   key stakeholders.  

   Promote sustainable consumption –   To make significant investment to ensure that   the Company’s products increasingly match   health criteria (reducing salt, sugar, trans and   saturated fats); to view social inclusion in the   consumer market as a business opportunity   for the Company.  
    Focus on human capital – To train and   enhance the importance of local labor; to im prove management practices for increasing   the levels of employee satisfaction; to include   education for sustainability in the strategy   for organizational development; to provide   guidance to the employees to act as agents   for sustainability.  
   Adaptation to climate change – To   control and reduce environmental impacts   (consumption and emissions) of the Com pany’s operations, transforming BRF into   an organization which makes a positive   contribution to combating climate change; to   participate in sector movements and public   commitments for offsetting climate change.  

demand using the potential in existing plants   or in those about to go into operation. The   larger part of the investment made in 2010   was allocated to programs for improvements,   productivity and new projects.  
   In early March 2011, a fire affected part   of the installations of the Nova Mutum (MT)   unit. This event was of minor proportions,   the unit’s production being temporarily   absorbed by other BRF plants in order not to   compromise supplies to clients and consum ers. The Company has fire insurance. The Nova   Mutum unit slaughters 230 thousand head of   chicken/day and its output (whole chicken   and chicken cuts)   supplies both domestic   and export markets.  
   Coopercampos – On April 29 2010, the   Company signed a services agreement with   Cooperativa Coopercampos, state of Santa   Catarina, which includes the use of future   industrial capacity of the plant currently   under construction   in the municipality of   Campos Novos for   hog slaughtering. The   unit is to be equipped for selling its produc tion to the leading world markets. The unit’s   slaughtering capacity will be seven thousand   head/day, enabling it to meet the needs of a   demanding export market. The cooperative   estimates total investments in the project at   R$ 145 million. Slaughtering operations are   expected to begin in the first half of 2011.  

   Information Technology – During the   year, an integrated systems platform was set   up to support the merger between Perdigão   and Sadia for capturing identified synergies,   these contingent on a unified system once   the merger is finalized. The project, which will   take approximately 18 months to conclude,   involves about 200 people in 4 stages: 1)   upgrading of the SAP system to increase   processing capacity; 2) construction of the   initial platform; 3) development of the Human   Resources SAP system; and 4) the roll-out of   SAP APO – Advance Planning Optimization.   All stages are integrated and critical to the   creation of a complete platform to support   the Company’s expected international expan sion as well as to ensure lower operating and   maintenance costs.  
   Internationalization Project – To   sustain its domestic and international   expansion plans, the Company is planning a   further investment cycle in 2012 for meeting   market demands as from 2013. BRF is to as sess the best opportunities for executing this   expansion, either through the construction of   greenfield units or the acquisition of overseas   companies. In addition, the company is   maintaining its plans for modernization and   improved productivity at all the production   units. Funding for these investments will   come principally from BRF’s own cash flow.  

   Of this total, 348.9 million was appropriated   for the acquisition of poultry and hog breeder   stock. In the past five years, investments   amounted to R$ 6,058 million, an annual   average of R$ 1,211 million in Capex.  
   The reduction in investments when   compared to previous years is due to the stra tegic option of optimizing installed capacity   through standardization and improvements,   resulting in more efficient production and   gradual maturation of investments in new   industrial units and in the expansion of pro cessing capacity.  
   Both Perdigão as well as Sadia are emerg ing from an intense round of investments   which have enabled BRF to meet market  

   In 2010, for the third consecutive year, BRF   was ranked as the Best Company in Corporate   Governance in the consumer goods sector   and Top 5 in Latin America by IR Global   Rankings Awards. The Company also received   Transparency in Sustainability in the Ibovespa   Companies, a recognition awarded by Man agement & Excellence (M&E), Razão Contábil   magazine and the Brazilian Investor Relations   Institute (IBRI). The Company was also rated   as the Best Company in Latin America in a   perception study conducted by the United   States magazine Institutional Investor , Food   & Beverages sector ( The 2010 Latin America   Investor Relations Perception Study ), as well as   recognition in the awards for Best CEO, Best   CFO, Best IR Program and Best IR Team.  
   Governance bodies include the General   Shareholders Meeting, Board of Directors, Fis cal Council which performs the functions of   an Audit Committee, advisory committees   to the Board of Directors and the Board of   Executive Officers. |GRI 4.1|  

Shareholders’ meeting  
   The meetings are the principal channel   for shareholders recommendations to the  

Company’s management. They are held with   quorums in excess of 70% of shareholders.   Participation is encouraged by a direct ap proach to the investors and by the dispatch   of the reference manual in which the reasons   for the meeting are listed, the importance of   shareholder participation as well as general   guidance on the process. The shareholders’   meetings approve   financial statements,   incorporations and other matters, elect the   Board of Directors and the Fiscal Council, set   management compensation, among other   issues. |GRI 4.4|  

Novo Mercado  
   BRF listed on   BM&FBovespa’s Novo   Mercado on April 12 2006, being bound to   settle disputesthrough the Arbitration Panel   in accordance with the commitment clause in   its bylaws and in the regulations.  

   Governance, Sustainability and Strat egies Committee – This has an advisory role   in relation to: Company practices of corporate   governance; strategies of the Company;   strategic guidelines and planning; annual and   multi-annual investment budgets; opportuni ties for investments and/or divestments into/   out of new businesses; mergers, spinoffs and   acquisitions; management system; institu tional and socio-environmental responsibility   policies and activities; monitoring of the work   of the Audit Committee and the Sarbanes   Oxley-mandated Internal Controls System   over Financial Reporting Committee pursuant   to US Securities Exchange Commission (SEC)   requirements.  
    Finance and Policy and Risks Commit tee – Accountable for advising on: corporate   and financial risk policies; funding policies; the   Company’s processes for internal financial and   accounting systems; investor remuneration;   and a suitable capital structure for the Company.  

   Management Compensation and   Executive Development – With the   advisory function for monitoring: execution   on the Company’s human resources policy;   criteria for compensating the Board of Execu tive Officers, including short- and long-term   incentive plans; targets and criteria for evalu ating performance of the Board of Executive   Officers; monitoring of the Board of Executive   Officers’succession plan.  

The Senior Advisory Board  
   Members of this board are ex-members   of the Board of Executive Officers. They are   professionals that provide specialized advice   to the Company reporting directly to the   CEO. The compensation of the members of   the Senior Advisory Board is provided for and   regulated in the internal organizational ruling   and is equal to 20% of the monthly fixed   income received when the executives were   active in the Company.  

   The committees play a fundamental role in   this structure, integrating the Board of Direc tors with the Board of Executive Officers.  
    The Company maintains three advisory   committees made up of members of the Board   of Directors and the Board of Executive Offi cers: Governance, Sustainability and Strategies;   Finance and Policy and Risks; Management   Compensation and Executive Development.   In addition, the Company has a Disclosure   committee as called for by the Sarbanes Oxley   regulations, and the Senior Advisory Board.  

   The Board is responsible for the manage ment of the day to day operations of the Com pany and for short-, medium- and long-term   strategies in line with the guidelines relative to   the management of the business, supported   and guided by the Board of Directors.  
   In 2010, the Board’s total compensation   amounted to R$ 18.4 million, including both   fixed and variable portions, linked to targets   and performance indicators to be reached   during the fiscal year. An executive officer’s   variable compensation is a reflection of per formance measured against individual and   collective targets in line with the Company’s   strategic plan and budget. The targets are   earmarked against general productivity   indicators for BRF and/or the respective area   of operations in addition to indicators for  

resource maximization and personnel man agement. The monitoring of these indicators   is carried out during the entire fiscal year by   the Financial Controller’s office and Human   Resources area and then formally validated by   the Board of Directors following the finaliza tion of the annual results. |GRI 4.5|  
   In March 2010, the shareholders approved   a long-term stock option plan for executive   officers supported by recently issued shares   or those held as treasury stock. The Executive   Compensation and Development Committee,   which supports the Board of Directors in its   decisions, analyzes the strategy for fixed and   variable compensation to be adopted, issuing   recommendations and policy changes for   subsequent submission for the appreciation,   deliberation and approval of the Board.  

Investor relations  
   Brasil Foods has an Investor Relations area   responsible for providing a personalized   service to investors and analysts through   the offer of comprehensive information on   the Company’s businesses and performance.   Through the IR site (www.brasilfoods.com/   ri) such interested parties have access to   information which is being constantly   updated, and through in depth contact via  

other mediums such as one-on-one meet ings, conference calls and video conferences,   public meetings – with the Association of   Capital Markets Analysts and Investment Pro fessionals (Apimec) and financial institutions   –, road shows and onsite meetings.   In 2010, the number of attendances grew   an average of 76%. Various conferences were   held in Brazil and overseas including the BRF   Day in São Paulo and New York.  

   Strategy and Finance Committee –   Performs an advisory role in relation to risk   policy and to the strategic guidelines for   management of financial risk and maintains   permanent monitoring of the activities of the   Financial Risk Management Committee.  
   Board of Executive Officers – Estab lishes the Company’s position for each identi fied risk according to Board guidelines, action   plans and risk monitoring.  
  Financial Risk Management Com mittee – Proposes improvements to the   financial risk management policy; supervises   risk management; evaluates and approves   hedging alternatives in line with Board of   Directors policy; evaluates stress scenarios to   be applied in operations.   Supporting its governance standards, the   risk policy is integral to the Company’s regular   publications as for example in the case of the   reference form, including the detailing of risk   positions, available for consultation on the   internet ( www.brasilfoods.com/ir ).  

Financial Risks  
    The financial risks policy clearly establishes   guidelines, situations, limits for authorization   and responsibility, with operators’ limits   for the Risk Committee and the Board of   Executive Officers. Any eventual irregularity   is quickly identified and reported with the   immediate adoption of corrective measures.   Financial markets and the Company’s posi tions are monitored on a daily basis with the   support of management tools.  
     In 2009, BRF set up an area specifically   dedicated to control and risk management   subordinated to the Vice President for Fi nance, Administration and Investor Relations.  
  Currency – BRF enjoys natural protection   from currency fluctuations thanks to the rev enue flow from export business in volumes   proportional to its currency-denominated   financial liabilities. Risk management policy   allows for the contracting of currency hedg ing instruments albeit with no financial gain   in mind.  
   Credit – A Credit Committee establishes   a credit ceiling each branch can extend to   clients. Positions are tracked in real time with   the support of a management system. In   addition the diffused client base restricts the   impact of eventual delinquencies.  

Operating risks  
   BRF now has an area dedicated exclu sively to the management of operating risks  

thus ensuring even greater security to its   operations. During 2010, risks were charted   and defined according to different levels of   severity. The Company identified risk-related   processes requiring adaptation and imple mented as a question of priority at all units,   irrespective of the latter being new, old or   acquired. The plan is to adjust all operational   risk management processes over four years.   Additionally, a contingency plan for the   logistics area is in place to ensure continuity   of operations along the entire product supply   and distribution chain to the end client.  
    In its activities, the Company considers the   Precautionary Principle, established at the   Rio de Janeiro Eco92 Conference, according   to which the absence of scientific consensus   should not be used as justification for not   taking action when there is a threat of seri ous or irreversible environmental damage to   the environment or to human health. This   principle is implicit at all phases of product   development, conception, manufacture and   distribution.  
   Nutritional safety – The Company is   equipped to trace all items produced at   its units from breeder stock to the product   delivered to the final consumer including   the control of feed and medications admin istered to livestock. All Company suppliers are   subject to contractual clauses guaranteeing   nutritional safety of all items manufactured at   any industrial unit.  
   Sanitary control – A continuous process   of improvements allows the company to   eliminate or minimize risks of this nature. This   also includes the monitoring of integrated   outgrowers practices. Strategically distributed   in different regions of Brazil, the slaughter ing units are geographically dispersed to   minimize the impact on performance of the   businesses in the event of trade bans due to   sanitary issues on products from a specific   region of the country.  
   Commodities – Inventory and hedging   policies are established to guarantee the sup ply of inputs and ameliorate the risk of major   grain price volatility. Markets are permanently   monitored in order to anticipate movements   which can have a positive or negative impact   on the costs of the operations. The Company   has upgraded mechanisms for acquisition of   raw materials which are now conducted on a   competitive bidding basis. Among the factors determining the geographical location of its   units is the supply of grain and the infrastruc ture for delivering production.  

   Insurance – Property insurance protects   all industrial units, product warehousing and   distribution centers with coverage for mate rial damage, loss of profits and civil liability.  

Environmental risks  
    BRF propagates a culture of respect for the   environment at all levels of the Company   in addition to complying with all environ mental legislation. The Occupational Health,   Safety and Environment program is one of   the principal mediums for disseminating and   strengthening environmental awareness in all   company activities.  

Technological risks  
    Through continual monitoring of all sys tems and the industrial complex as a whole,   BRF exercises a policy of risk management   based on the security of its production   and on increased productivity with the use   of equipment and processes aligned to   the most modern international standards.   Investments in innovation allows for ongoing   portfolio renovation reflecting demands and   tendencies of the different consumer profiles.  

Risks of image and reputation  
    The dissemination of the Code of Ethics and   Conduct is core to BRF’s efforts to propagate   good corporate governance practice and to   contribute to maintaining the Company’s   principles and values on the basis of confi dence, ethics and transparency. These prac tices emphasize respect for the human being,   repudiation of any form of discrimination, and   responsibility in relation to society and the   environment. The Vice President’s office for   Corporate Affairs is responsible for monitoring   these aspects and for action plans.  

domestic market rose 34% compared with   3Q10, but during the year posted a decline   of 1.2%. The spike in the final quarter of 2010   was in line with the trend in the international   price which was pushed up due to an in crease in the demand for animal feed and the   production of biofuels and not accompanied   proportionally by supply. The result was   a decline in world inventory, leading to a   relatively low inventory/consumption ratio.   Low productivity levels due to unfavorable   climatic conditions affected supplies from   exporting countries such as Argentina,   preventing the replenishment of inventory in   2011 and maintaining high level prices.  
   Meanwhile, average soybean prices in   4Q10 rose 15.8% against 3Q10, albeit 13.5%   down on a year on year basis  

   Perspectives – Social tensions affecting   the countries of North Africa and the Middle   East have led to an increase in international   oil prices although not to the point of threat ening global growth. However, in developed   countries, macroeconomic indicators are   positive especially those for the United States.  
   In Brazil, the basic Selic rate of interest is   expected to increase from 10.75% p.a. in   December 2010 to 12.25% p.a. by December   2011, with a consequent deceleration in   inflation rates. This hike in interest rates is   unlikely to choke off demand as consumer   confidence should remain very positive. An   Applied Economic Research Institute - IPEA   survey conducted in January 2011 shows that   64% of families polled expect the economic   situation in Brazil to improve over the next 12   months, indicating that domestic consump tion is likely to remain strong throughout the   period, especially in the case of non-durables.  

Production  
   Production volumes at BRF Brasil Foods   have recovered to levels prior to the   2008/2009 crisis with growth of 6 % against   the preceding year. A total of 1.6 billion head   of poultry and 10.5 million head of hogs/beef   cattle were slaughtered, a growth of 3.9% and   2.8%, respectively. Other processed products   reported growth of 57.4% on a pro-forma   basis, most notably in margarines, pastas and   pizzas as well as appetizers following their   launch by the Company.  
   Activities at the Cavalhada unit in the   Greater Porto Alegre (RS) region, were   transferred to the Lajeado(RS) unit. This   move reflects the ease of integrating the   processes of the two plants, in so doing   adding value to the product mix as well as   optimizing processes, industrial lines and   production costs. In addition, investments   were recently made at the Lajeado plant   in expanding capacity and modernization   of the installations. The unit’s slaughtering   capacity has been increased from 320 to 470   thousand head of chicken per day, while hog   slaughtering capacity has been raised from 2   to 4.8 thousand head/day.  

Domestic market  

BRF has successfully   maintained its market   share for the principal   product categories thanks   to innovative initiatives,   product launches and brand   sustainability campaigns in   addition to the continual   hands on management of   prices and costs.  

   In all segments, including dairy products,   BRF has prioritized commercialization margin   (value share) over its market share.  
   Sales to the domestic market totaled   R$ 13.5 billion, a growth of 11.3% against the   preceding year. The Company sold 3.8 million   tons of products, 4.9% higher than 2009 on   a pro-forma basis. Thanks to these results,   margins were restored to pre-crisis levels.  
    A buoyant domestic market and full   employment together with the inclusion of   emerging consumer classes, all stimulated   demand and sales of products to all segments,   more especially lines specific to the year-end   holiday period.  

   Meats - The segment posted an increase   of 10.5% in sales and 6.6% in volume. The   recovery in in natura meat exports helped   to bring back supply and demand for the   product to equilibrium in the domestic   market, sustaining prices and the sale of items   with greater added value. As a result, average   prices remained 3.6% above those registered   for 2009 on a pro-forma basis while processed   products registered an improvement of 6.9   percentage points for the year.  
    Dairy Products – Net sales for the dairy   product segment in 2010 recovered to 2008   levels, ending the period totaling R$ 2.3 bil lion. Margins were squeezed by high prices   paid to milk producers. Average prices were   stable in relation to 2009. The year was not   characterized by the usual on- and off-season   movements, a fact that rendered manage ment of costs and inventory even more   difficult. Since these problems prevented   margins returning to historical levels, BRF   pursued a policy of preserving profitability in   the segment which translated into a reduced   market share for chilled items and UHT milks.  
   Other processed products - Highlights   for the year in this segment were Meu Menu,   a line of ready-to-eat, frozen and individual   dishes for consumers that live alone, and   Escondidinho, inspired by traditional recipes   of Brazilian cuisine and directed towards the   family market. The Company ran campaigns   designed to consolidate the brands, taking  

full advantage of events with major popular   appeal such as the World Soccer Tournament.   Overall, market share remained stable – with   the exception of margarines where there   was growth. Total sales for the segment were   R$ 2.0 billion, a growth of 25.7% while   volume reached 454.9 thousand tons, a rise   of 13.1% and 79%, respectively on a pro-form   and Corporate Law (CL) basis.  
   Food Service – This segment is a strategic   one in BRF’s growth plans with the food service   market benefiting from a change in the habits   of the Brazilian population, growth in incomes   and a recovery in employment. According to   the IBGE’s Family Budgets Survey, the percent age of personal expenditure on food away   from home rose from 24.1% (2002/2003) to   31.1% (2008/2009). Thanks to this trend and   BRF’s investments in products and services,   the segment posted a year on year increase of   13.1% in sales and 15% in volume.  
   BRF is the leading player in the Brazilian   food service business, supplying the largest   food service chains and franchises in the   country and developing customized solu tions for enhancing its services and proximity   to the customer. This segment is present in all   the major urban centers, BRF using a propri etary and dedicated fleet of delivery trucks   in addition to maintaining high standards of   quality and reliability.  

Exports  

In accordance with   instructions from the anti-   trust authority CADE, the   merging of international sales   has allowed the Company to   achieve gains in synergies and   scale with better price and   portfolio management.  

   The Company has repositioned its brands,   benefiting from the segmentation of the   markets. Sadia has become a premium brand   focused on higher added value and innova tion. Perdix is positioned as a mainstream high   brand, dedicated to the commercialization of   large volumes and products catering for local   tastes. Borella, Halal, Fazenda and others have   been maintained as brands which compete   with indigenous food product industries.  
   BRF’s international division, Plusfood, with   units in The Netherlands and the United   Kingdom, is reinforcing its strategy with the   manufacture of items destined for the Euro pean market. Examples are Perfect Portions, a   standardized line of items for the food service   business as well as specific products geared   to satisfying European consumer demand.  

   In 2010, export revenue increased 4.3%   to R$ 9.2 billion on volumes of 2.3 million   tons (5.9% greater) – pro-forma basis and   a growth of 40.2% in sales revenue on a   Corporate Law basis.  
   Meats – During the first half, high invento ries in world markets depressed prices. In the   light of this scenario, the Company adjusted   its portfolio accordingly and by the second   half with supply and demand back in balance,   conditions had improved. The devaluation of   the US Dollar during the year reflected in a   reduction in sales revenue in Reals although   without sacrificing returns.  
   Meat exports amounted to R$ 9.0 billion,   5% higher with volumes 6.1% up for the year.   The average prices in US Dollars FOB were   14% up against 2009.The average foreign ex change rate impact resulted in price decline   in terms of Reals and an overall reduction in   export revenues in local currency terms.  
   Dairy Products - The scenario of weaker   international demand restricted sales volume   on the overseas market with shipments   recording a year on year decline of 28%. The   Company is shortly to expand its unit in Ar gentina – a cheese manufacturer – to make it   self-sustainable and to source of value-added   exports. Argentina offers a stable supply of   quality and competitively priced raw materials   in addition to enjoying sanitary agreements   with European countries making exports to   these markets a feasible proposition