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COMPANY’S OPERATIONS | 12 Months Ended
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Dec. 31, 2022
Companys Operations |
COMPANY’S OPERATIONS |
| 1. | COMPANY’S OPERATIONS
BRF S.A. (“BRF”) and its subsidiaries (collectively the “Company”) is a publicly traded company, listed on the segment Novo Mercado of Brasil, Bolsa, Balcão (“B3”), under the ticker BRFS3, and listed on the New York Stock Exchange (“NYSE”), under the ticker BRFS. The Company’s registered office is at Rua Jorge Tzachel, nº 475, Bairro Fazenda, Itajaí - Santa Catarina and the main business office is in the city of São Paulo. BRF is a Brazilian multinational company, with global presence, which owns a comprehensive portfolio of products, and it is one of the world’s largest companies of food products. The Company operates by raising, producing and slaughtering poultry and pork for processing, production and sale of fresh meat, processed products, pasta, margarine, pet food and others. The Company holds as main brands Sadia, Perdigão, Qualy, Chester®, Kidelli, Perdix, Banvit, Biofresh and Gran Plus, present mainly in Brazil, Turkey and Middle Eastern countries. 1.1. Equity interest
Schedule of equity interest |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  | % equity interest
Entity |  |  | Main activity |  | Country (1) |  | 12.31.22 |  | 12.31.21
BRF GmbH |  |  | Holding |  | Austria |  | 100.00 |  | 100.00
BRF Foods GmbH | (f) |  | Industrialization, import and commercialization of products |  | Austria |  | 100.00 |  | 100.00
Al Khan Foodstuff LLC ("AKF") | (b) |  | Import, commercialization and distribution of products |  | Oman |  | 70.00 |  | 70.00
TBQ Foods GmbH |  |  | Holding |  | Austria |  | 60.00 |  | 60.00
Banvit Bandirma Vitaminli |  |  | Import, industrialization and commercialization of products |  | Turkey |  | 91.71 |  | 91.71
Banvit Enerji ve Elektrik Üretim Ltd. Sti. |  |  | Generation and commercialization of electric energy |  | Turkey |  | 100.00 |  | 100.00
Nutrinvestments BV |  |  | Holding |  | The Netherlands |  | 100.00 |  | 100.00
Banvit ME FZE | (i) |  | Marketing and logistics services |  | UAE |  | 100.00 |  | 100.00
BRF Foods LLC | (a) |  | Import, industrialization and commercialization of products |  | Russia |  | 99.99 |  | 99.99
BRF Global Company Nigeria Ltd. |  |  | Marketing and logistics services |  | Nigeria |  | 99.00 |  | 99.00
BRF Global Company South Africa Proprietary Ltd. |  |  | Administrative, marketing and logistics services |  | South Africa |  | 100.00 |  | 100.00
BRF Global Company Nigeria Ltd. |  |  | Marketing and logistics services |  | Nigeria |  | 1.00 |  | 1.00
BRF Global GmbH |  |  | Holding and trading |  | Austria |  | 100.00 |  | 100.00
BRF Foods LLC | (a) |  | Import, industrialization and commercialization of products |  | Russia |  | 0.01 |  | 0.01
BRF Japan KK |  |  | Marketing and logistics services, import, export, industrialization and commercialization of products |  | Japan |  | 100.00 |  | 100.00
BRF Korea LLC |  |  | Marketing and logistics services |  | Korea |  | 100.00 |  | 100.00
BRF Shanghai Management Consulting Co. Ltd. |  |  | Provision of consultancy and marketing services |  | China |  | 100.00 |  | 100.00
BRF Shanghai Trading Co. Ltd. |  |  | Import, export and commercialization of products |  | China |  | 100.00 |  | 100.00
BRF Singapore Foods PTE Ltd. |  |  | Administrative, marketing and logistics services |  | Singapore |  | 100.00 |  | 100.00
Eclipse Holding Cöoperatief U.A. |  |  | Holding |  | The Netherlands |  | 99.99 |  | 99.99
Buenos Aires Fortune S.A. | (a) |  | Holding |  | Argentina |  | 4.36 |  | 4.36
Eclipse Latam Holdings |  |  | Holding |  | Spain |  | 100.00 |  | 100.00
Buenos Aires Fortune S.A. | (a) |  | Holding |  | Argentina |  | 95.64 |  | 95.64
Perdigão Europe Lda. |  |  | Import, export of products and administrative services |  | Portugal |  | 100.00 |  | 100.00
ProudFood Lda. |  |  | Import and commercialization of products |  | Angola |  | 90.00 |  | 90.00
Sadia Chile S.A. |  |  | Import, export and commercialization of products |  | Chile |  | 40.00 |  | 40.00
Wellax Food Logistics C.P.A.S.U. Lda. |  |  | Import, commercialization of products and administrative services |  | Portugal |  | 100.00 |  | 100.00
One Foods Holdings Ltd. |  |  | Holding |  | UAE |  | 100.00 |  | 100.00
Al-Wafi Food Products Factory LLC | (h) |  | Import, export, industrialization and commercialization of products |  | UAE |  | 100.00 |  | 49.00
Badi Ltd. |  |  | Holding |  | UAE |  | 100.00 |  | 100.00
Al-Wafi Al-Takamol International for Foods Products |  |  | Import and commercialization of products |  | Saudi Arabia |  | 100.00 |  | 100.00
Joody Al Sharqiya Food Production Factory LLC |  |  | Import and commercialization of products |  | Saudi Arabia |  | 100.00 |  | 100.00
BRF Kuwait Food Management Company WLL | (b) |  | Import, commercialization and distribution of products |  | Kuwait |  | 49.00 |  | 49.00
One Foods Malaysia SDN. BHD. | (a) |  | Marketing and logistics services |  | Malaysia |  | 100.00 |  | 100.00
Federal Foods LLC | (b) |  | Import, commercialization and distribution of products |  | UAE |  | 49.00 |  | 49.00
Federal Foods Qatar | (b) |  | Import, commercialization and distribution of products |  | Qatar |  | 49.00 |  | 49.00
BRF Hong Kong LLC | (g) |  | Import, commercialization and distribution of products |  | Hong Kong |  | - |  | 100.00
Eclipse Holding Cöoperatief U.A. |  |  | Holding |  | The Netherlands |  | 0.01 |  | 0.01
Establecimiento Levino Zaccardi y Cia. S.A. | (a) |  | Industrialization and commercialization of dairy products |  | Argentina |  | 99.99 |  | 99.99
BRF Energia S.A. |  |  | Commercialization of eletric energy |  | Brazil |  | 100.00 |  | 100.00
BRF Pet S.A. |  |  | Industrialization, commercialization and distribution of feed and nutrients for animals |  | Brazil |  | 100.00 |  | 100.00
Hercosul Alimentos Ltda. | (e) |  | Manufacturing and sale of animal feed |  | Brazil |  | 100.00 |  | 100.00
Hercosul Distribuição Ltda. | (e) |  | Import, export, wholesale and retail sale of food products for animals |  | Brazil |  | 100.00 |  | 100.00
Hercosul International S.R.L. | (e) |  | Manufacturing, export, import and sale of feed and nutrients for animals |  | Paraguay |  | 99.00 |  | 99.00
Hercosul Soluções em Transportes Ltda. | (e) |  | Road freight |  | Brazil |  | 100.00 |  | 100.00
Mogiana Alimentos S.A. |  |  | Manufacturing, distribution and sale of Pet Food products |  | Brazil |  | 100.00 |  | 100.00
Affinity Petcare Brasil Participações Ltda. | (e) |  | Holding |  | Brazil |  | - |  | 100.00
Gewinner Participações Ltda. | (e) |  | Industrialization, distribution and sale of feed and nutrients for animals |  | Brazil |  | - |  | 100.00
Paraguassu Participações S.A. | (e) |  | Holding |  | Brazil |  | - |  | 100.00
Hercosul International S.R.L. |  |  | Manufacturing, export, import and sale of feed and nutrients for animals |  | Paraguay |  | 1.00 |  | 1.00
Potengi Holdings S.A. | (c) |  | Holding |  | Brazil |  | 50.00 |  | -
PR-SAD Administração de bem próprio S.A. |  |  | Management of assets |  | Brazil |  | 33.33 |  | 33.33
ProudFood Lda. |  |  | Import and commercialization of products |  | Angola |  | 10.00 |  | 10.00
PSA Laboratório Veterinário Ltda. |  |  | Veterinary activities |  | Brazil |  | 99.99 |  | 99.99
BRF Investimentos Ltda. | (d) |  | Holding, management of companies and assets |  | Brazil |  | 99.99 |  | 99.99
Sadia Alimentos S.A. |  |  | Holding |  | Argentina |  | 43.10 |  | 43.10
Sadia Chile S.A. |  |  | Import, export and commercialization of products |  | Chile |  | 60.00 |  | 60.00
Sadia Uruguay S.A. |  |  | Import and commercialization of products |  | Uruguay |  | 100.00 |  | 100.00
Sadia Alimentos S.A. |  |  | Holding |  | Argentina |  | 56.90 |  | 56.90
Vip S.A. Empreendimentos e Participações Imobiliárias |  |  | Commercialization of owned real state |  | Brazil |  | 100.00 |  | 100.00
Establecimiento Levino Zaccardi y Cia. S.A. | (a) |  | Industrialization and commercialization of dairy products |  | Argentina |  | 0.01 |  | 0.01
PSA Laboratório Veterinário Ltda. |  |  | Veterinary activities |  | Brazil |  | 0.01 |  | 0.01
BRF Investimentos Ltda. | (d) |  | Holding, management of companies and assets |  | Brazil |  | 0.01 |  | 0.01
| (1) | UAE – United Arab Emirates.
| (a) | Dormant subsidiaries. The Company is evaluating the liquidation of these subsidiaries.
| (b) | For these entities, the Company has agreements that ensure full economic rights, except for AKF, in which the economic rights are of 99%.
| (c) | Affiliate with subsidiary of AES Brasil Energia S.A. (note 12).
| (d) | On February 11, 2022, the name of Sino dos Alpes Alimentos Ltda. was changed to BRF Investimentos Ltda.
| (e) | On July 31, 2022, BRF Pet S.A. merged the holding companies Affinity Petcare Brasil Participações Ltda., Gewinner Participações Ltda. and Paraguassu Participações S.A. which held interests in the operating companies Hercosul Alimentos Ltda., Hercosul Soluções em Transportes Ltda., Hercosul Distribuidora Ltda. e Mogiana Alimentos S.A. Therefore, as of this date, BRF Pet holds all the shares of these companies.
| (f) | As from September 28, 2022, BRF GMBH holds the entire capital stock of BRF Foods GMBH, with retroactive tax and accounting effects to January 1st, 2022.
| (g) | On October 7, 2022, the subsidiary BRF Hong Kong LLC was dissolved.
| (h) | On November 11, 2022, was acquired the remaining minority stake of Al-Wafi Food Products Factory LLC.
| (i) | On March 21, 2023, the subsidiary Banvit ME FZE was dissolved.
Except for the associates PR-SAD Administração de bem próprio S.A. and Potengi Holdings S.A., in which the Company recognizes the investments by the equity method, all other entities presented in the table above were consolidated. 1.2. Discontinued Operations In 2022, BRF S.A. and certain of its subsidiaries entered into an agreement with Tyson International Holding Co. and Tyson Foods, Inc., in connection with the sale of BRF’s operations in Europe and Thailand, closed on June 3, 2019. This agreement provides for the termination of certain disputes related to losses incurred by the disposed entities and terminates Tyson's license to use certain BRF trademarks. Additionally, certain tax claims related to the period prior to the sale of the operations were finalized. The settlement of such disputes resulted in the payment of the amount equivalent to R$50,948 (USD10,164) by BRF. These transactions resulted in an expense which is presented under Net Loss from Discontinued Operations, consistently with the practice adopted in the sale of the operations in 2019. 1.3. Investigations involving BRF The Company has been subject to two external investigations, denominated “Carne Fraca Operation” in 2017 and “Trapaça Operation” in 2018, as detailed below. The Company’s Audit and Integrity Committee conducted independent investigations, along with the Independent Investigation Committee, composed of external members and with external legal advisors in Brazil and abroad with respect to the allegations involving BRF employees and former employees. In 2021, the Division of Enforcement of the U.S. Securities and Exchange Commission (“SEC”) and the Department of Justice (“DOJ”) issued letters notifying the closure of the investigation against BRF, with no imposition of any sanctions or penalties against the Company. As a result of the independent investigations, on December 28, 2022, BRF has entered into a Leniency Agreement with the Brazilian authorities – Controladoria Geral da União (“CGU”) and the Advocacia Geral da União (“AGU”), addressing issues related to investigations conducted by Brazilian government entities. Through the Leniency Agreement, BRF assumed the following commitments: (a) to remediate the identified practices and to adopt preventive measures to prevent that such practices could happen again; (b) to pay the total amount of R$583,977, subject to the terms below; and (c) to continuously improve its integrity program with the support and monitoring of the CGU. This amount was recorded in Other Operating Expenses, and Other Current Liabilities. As a result of the Agreement, the signatory authorities will terminate administrative proceedings filed against BRF, in addition to undertaking not to file lawsuits against the Company as regards to the matters covered by the agreement. The amount mentioned above is to be paid by BRF to the Federal Government in 5 (five) annual installments, starting on June 30th, 2023, and may be paid (i) by offsetting the balance of tax losses carryforward and the negative basis of the contribution on profit (“CSLL”) in the determination of the income tax (“IRPJ”) and the (“CSLL”) up to the limit of 70% (seventy percent) of such amount; (ii) by offsetting against tax credits held by BRF against the Federal Government; (iii) by offsetting against credits contemplated in writs of payment (precatórios) held by BRF against the Federal Government; or (iv) in cash. BRF undertook to provide the Federal Government with a collateral in the form of a bank guarantee, deposit in an escrow account, collateral security, or insurance-guarantee, in an amount equivalent to one installment of the amount due. In addition to the amount above, the other impacts observed as result of the referred investigations were recorded in Other Operating Expenses, and Other Current Liabilities, in the amount of R$4,797 for the year ended December 31, 2022 (R$9,003 for the year ended December 31, 2021) mostly related to expenditures with lawyers, legal advisors and consultants. The Company, as from the negotiation phase of the Agreement until full compliance with obligations, undertook to make its best efforts to cooperate with the public authorities involved, and shall uphold its public commitment to pursue the process of continuous improvement of its corporate governance and compliance practices. 1.4. Agreement with the Public Investment Fund On October 24, 2022 the BRF GMBH, wholly-owned subsidiary of Company, has executed an agreement (“Agreement”) with Halal Products Development Company (“HPDC”), a wholly-owned subsidiary of the Public Investment Fund (“PIF”) that aims to support the development of the Halal industry in Saudi Arabia by fostering innovation and driving growth across the Halal ecosystem. The transaction is still subject to obtaining regulatory and internal approvals of parties. The agreement provides for the incorporation of a legal entity in Saudi Arabia with an ownership of up to 70% by BRF and up to 30% by HPDC. The entity will operate in the entire chicken production chain in Saudi Arabia and promote the sale of fresh, frozen and processed products. The entity will have a combined investment of R$2,608,850 (USD500,000), of which (i) R$652,212 (USD125,000) will be contributed by BRF GmbH and by HPDC upon the incorporation of the entity; and (ii) the remainder will be contributed pursuant to the investment plan to be prepared by the parties. The agreement also foresees the creation of Halal Headquarters, a Halal Food Innovation Center and a Center of Excellence in Saudi Arabia. 1.5. Business combinations
| 1.5.1. | Mogiana Group
On February 18, 2022, according to conditions established in the agreement, the Company, through its wholly-owned subsidiary BRF Pet, concluded the price adjustment of the consideration for the acquisition of Paraguassu Participações S.A. ("Paraguassu") and Affinity Petcare Brasil Participações Ltda. ("Affinity"), both owner of 100% of the capital stock of Mogiana Alimentos S.A. (together form the “Mogiana Group”). After the price adjustment, in the amount of R$4,026, the fair value of the consideration transferred was R$477,408, of which R$371,746 were paid in cash, R$60,000 will be paid in the next 5 years and R$45,662 refers to contingent consideration. The amount payable is subject to interest. Based on the price adjustment, there was a change in the determination of the value of the goodwill recognized (note 14) from R$118,930 to R$114,904, which consists mainly of the synergies expected with the combination of the operations of BRF Pet, Mogiana Group and Hercosul Group strengthening the Company’s presence in the pet food sector. A summary of the final amounts of the business combination are presented below:
The fair value of the acquired assets and assumed liabilities in the business combination is presented below: |  |
Mogiana Group Combined |  | Fair value at the acquisition date
Assets |  |
Cash and cash equivalents |  | 938
Marketable securities |  | 29,824
Trade and other receivables |  | 59,758
Inventories |  | 54,517
Recoverable taxes |  | 27,748
Property, plant and equipment |  | 139,042
Intangible assets |  | 206,553
Other current and non-current assets |  | 5,486
Total |  | 523,866
Liabilities |  |
Trade accounts payable |  | 55,919
Loans and borrowings |  | 22,688
Lease liability |  | 10,168
Taxes payable |  | 11,487
Payroll, related charges and employee profit sharing |  | 6,296
Provision for tax, civil and labor risks (1) |  | 34,976
Employee benefits |  | 2,081
Deferred income taxes |  | 815
Other current and non-current liabilities |  | 16,932
Total |  | 161,362
Net assets acquired |  | 362,504
Fair value of consideration transferred |  | 477,408
Goodwill |  | 114,904
| (1) | Includes R$28,853 related to contingent liabilities recognized in the business combination.

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