Economic viability and shared value

AMAGGI has important relationships with financial institutions that provide resources in the form of loans, and whose financing agreements include the company compliance with a series of legal, fiscal, labor, social and environmental commitments, among others, with the objective of ensuring that resources are employed correctly and responsibly. By the end of 2016 AMAGGI was associated with 54 financial institutions, public and private, Brazilian and foreign.

Over the last few years the demands placed by these institutions have been incorporated by AMAGGI, and today they are already integrated into the company's regular practice.

Although 2016 was a particularly challenging year in terms of access to credit for Brazilian companies, AMAGGI was successful in this area, a result of its good practices and the reputation built by the group since its establishment. The company has taken more than US$1 billion globally in working capital loans in a financing portfolio that reached the end of the year with a balance of US$1.82 billion (including working capital and financing for fixed assets).

Last year was also of intense competitiveness, with the emergence of new companies competing in the sector, which brought additional challenges to AMAGGI for remaining competitive, with a cost structure consistent with the market. Thus, the company's work with financial institutions mainly sought to defend adequate cost conditions of the financing lines made available. This has added to the many efforts in process reviews and staff restructuring to optimize corporate costs and gain efficiency.

In this sense, the implementation of AMAGGI project for the monitoring and control of foreign exchange exposures was highlighted. In 2016, after 2,5 years of work, the company finalized the implementation of a system that brings greater elucidation and control to the currency exposures arising from its regular commercial practice, besides allowing to identify good opportunities for optimization of processes and costs.

This type of initiative is also recognized by stakeholders as a practice of continuous improvement in AMAGGI business and administrative processes - a recognition taken by the company in the form of better and cheaper modes of operations and contracts.

In 2016 AMAGGI executed other initiatives that generated process value and efficiency:

Elaboration and successful implementation of the cash pooling1 model among AMAGGI international companies;

Modernization of the foreign exchange exposure monitoring of international companies with the implementation of the hedge2 policy in all companies;

Consolidation of cash flow management in AMAGGI international business matrix, such as AMAGGI Argentina;

Deployment of the Daily Cash Flow report entirely from the SAP system;

Implementation of the credit system in AMAGGI & LDC joint venture.

1 It is a cash management technique used by companies that have credits and debits in different current accounts, and that allows the combination of several accounts in a single one. Among the objectives it is the mitigation of impacts caused by the low balance or transaction rates.

2 It is an operation whose purpose is to protect the value of an asset against a possible reduction of its value in the future or, further, to assure the price of a debt to be paid in the future. This asset could be the dollar, a commodity, a government bond or a share.

Direct economic value generated and distributed EC1
2014 2015 2016
Direct economic value generated - revenues (In thousands of Reais) R$ 10.314.642,00 R$ 13.597.426,00 R$ 12.303.987,00
Distributed economic value R$ 1.308.855.000,00 R$ 1.842.420.893,78 R$ 2.287.321.902,90
Shareholders (compensation of shareholders' equity) 0,95% 2,15% 6,25%
Employees (remuneration, benefits,charges for employees) 28,97% 20,86% 20,26%
Government (taxes, fees, contributions) 14,69% 26,87% 33,65%
Retained earnings / loss for the year 4,06% 10,71% 7,43%
Interest and rents (remuneration of third-parties capital) 51,33% 39,41% 32,11%
Investing in the community - - 0,30%*
Total 100% 100% 100%
Economic value withheld (R$) ("direct economic value generated” minus "distributed economic value") ** R$ 0,00 R$ 0,00 R$ 0,00

* Since 2016 AMAGGI has been reporting the percentage allocated to André and Lucia Maggi Foundation.

** AMAGGI understands that all the generated value has been distributed, even if part of the profit or loss for the period has been allocated to the profit reserve for possible distribution in subsequent periods. Amounts allocated for retained earnings / loss for the year: 2016 - R$95,743,096.39; 2015 - R$167,889,000.00; 2014 - R$36,547,000.00.