In the ordinary course of business, the Company is exposed to credit, liquidity and market risks, which are actively managed in compliance with the Financial Risk Management Policy (“Risk Policy”) and internal guidelines and strategic documents subject to such policy. The Risk Policy was approved by the Board of Directors on December 7, 2023, valid for one year and is available at the Company’s website.

The Company’s risk management strategy, guided by the Risk Policy, has as main objectives:

The Risk Policy defines the governance of the bodies responsible for the execution, tracking and approval of the risk management strategies, as well as the limits and instruments that can be used.

Additionally, the Management of the Company approved the following policies on November 10, 2021, which are available at the Company’s website:

i) Indebtedness

The ideal capital structure definition at BRF is essentially associated with (i) strong cash position as a tolerance factor for liquidity shocks, which includes minimum cash analysis; (ii) net indebtedness; and (iii) minimization of the capital opportunity cost.

On December 31, 2024, the non-current gross debt, as presented below, represented 92.63% (87.65% as of December 31, 2023) of the total gross debt, which has an average term higher than 8.4 years.

The Company monitors the gross debt and net debt as set forth below:

ii) Derivative financial instruments

Summarized financial position of derivative financial instruments, that aim to protect the risks described below:

iii) Financial commitments

The table below summarizes the significant commitments and contractual obligations that may impact the Company’s liquidity:

The Company does not expect that the cash outflows to fulfill the obligations shown above will be significantly anticipated by factors unrelated to its best interests, or have its value substantially modified outside the normal course of business.

The risk is the one that may cause unexpected losses to the Company resulting from volatility of the FX rates, reducing its assets and revenues, or increasing its liabilities and costs. The Company’s exposure is managed in three dimensions: statement of financial position exposure, operating income exposure and investments exposure.

i) Statements of financial position exposure

The Risk Policy regarding statement of financial position exposure has the objective to balance assets and liabilities denominated in foreign currencies, hedging the Company’s statement of financial position by using natural hedges, over-the-counter derivatives and exchange traded futures.

Assets and liabilities denominated in foreign currency for which the exchange variations are recognized in the Financial Results are as follows, summarized in Brazilian Reais (R$):

The net exposure in Reais is mainly composed of the following currencies:

The Company holds more financial liabilities in foreign currencies than assets and, therefore, holds derivative financial instruments to reduce such exposure.

As a result of this protection strategy the Company recognized as Financial Expenses an expense of foreign exchange of derivatives of R$198,107 for the year ended on December 31, 2024 (expense of R$312,201 during the year ended on December 31, 2023). The foreign exchange of assets and liabilities was income of R$123,681 in the year ended on December 31, 2024 (income R$161,154 in the year ended on December 31, 2023).

The derivative financial instruments acquired to hedge the foreign currency statement of financial position exposure on December 31, 2024, and are set forth below:

ii) Operating income exposure

The Risk Policy regarding operating income exposure has the objective to hedge revenues and costs denominated in foreign currencies. The Company is supported by internal models to measure and monitor these risks, and uses financial instruments for hedging, designating the relations as cash flow hedges.

The Company has more sales in foreign currency than expenditures and, therefore, holds derivative financial instruments to reduce such exposure.

As a result of this protection strategy, the Company recognized Net Revenue an expense of R$236,988 for the year ended on December 31, 2024 (revenue of R$303,387 during the year ended on December 31, 2023). Additionally, in the second quarter of 2023, the loan of Bond BRF SA BRFSBZ 3.95, designated as an export protection instrument, was settled and the amount of R$(548,639) previously accumulated in Other Comprehensive Income was reclassified to income for the year under Net Revenue.

The derivative financial instruments designated as cash flow hedges for foreing exchange operating income exposure on December 31, 2024 are set forth below:

iii) Investments exposure

The Company holds both investments (net assets) and loans (financial liabilities) denominated in foreign currency. To balance the accounting effects of such exposures, some non-derivative financial liabilities are designated as hedging instruments for the investments exposure.

As a result of this strategy, the Company recognized expense of R$339,101, net of income tax, under Other comprehensive income in the year ended on December 31, 2024 (income of R$145,328 in the year ended on December 31, 2023).

The non-derivative financial instruments designated as net investment hedge instruments on December 31, 2024 are set forth below:

The Company uses commodities as production inputs and is exposed to commodities price risk arising from future purchases. The management of such risk is performed through physical inventories, future purchases at fixed price and through derivative financial instruments.

The Risk Policy establishes coverage limits to the flow of purchases of corn, meal and soy, soybeans and soybean oil with the purpose of reducing the impact due to a price increase of these raw materials. The hedge may be reached using derivatives or by inventory management.

As a result of this protection strategy the Company recognized Cost of goods sold an expense of R$121,873 for year ended on December 31, 2024 (expense of R$103,305 during the year ended on December 31, 2023).

The Company performs purchases at variable prices in future and spot markets and, to hedge such exposure, it holds derivative financial instruments in long position (buy) to fix these prices in advance.

The financial instruments designated as cash flow hedges for the variable commodities price exposure on December 31, 2024, are set forth below:

In certain cases, the Company performs futures purchases at fixed prices and, to hedge such exposure, it holds derivative financial instruments in short position (sell) to keep these prices at market value. The financial instruments designated as fair value hedges for the fixed commodities price exposure on December 31, 2024, are set forth below:

The Company assessed that part of its cost, future physical purchases of commodities in dollars, also generates exchange rate exposure and therefore contracted the following derivatives and designated them as fair value hedges:

The open and liquidated derivative financial instrument still generate impacts in the statement of financial position of: i) Inventory a debit in the amount of R$28,811 on December 31, 2024 (R$95,986 on December 31, 2023); ii) Other comprehensive income a credit amount of R$29,447 on December 31, 2024 (credit of R$322 on December 31, 2023).

The interest rate risk may cause economic losses to the Company resulting from volatility in interest rates that affect its assets and liabilities.

The Company’s Risk Policy does not restrict exposure to different interest rates, neither establishes limits for fixed or floating rates. However, the Company continually monitors the market interest rates in order to evaluate any need to enter into hedging transactions to protect from the volatility of such rates and manage the mismatch between its financial assets and liabilities.

As a result of this protection strategy the Company recognize Financial Income and Expenses an expense of R$705,006 for the year ended on December 31, 2024 (revenue of R$313,103 during the year ended on December 31, 2023).

The derivative financial instruments used to hedge the exposure to interest rates as of December 31, 2024, are presented in the table below:

The Company is exposed to the credit risk related to the financial assets held: trade and non-trade accounts receivable, marketable securities, derivative instruments and cash and equivalents. The Company’s credit risk exposure can be assessed in notes 4, 5 and 6.

The credit risk associated with trade accounts receivable is actively managed through specific systems and is supported by internal policies for credit analysis. The significant level of diversification and geographical dispersion of the customer portfolio significantly reduces the risk. However, the Company chooses to complement the risk management by contracting insurance policies for specific markets. The impairment of these financial assets is carried out based on expected credit losses.

The credit risk associated with marketable securities, cash and cash equivalents and derivative instruments in general is directed to counterparties with Investment Grade ratings. The maintenance of assets with counterparty risk is constantly assessed according to credit ratings and the Company’s portfolio concentration, aligned with the applicable impairment requisites.

The Company is exposed to liquidity risk as far as it needs cash or other financial assets to settle its obligations in the respective terms. The Company’s cash and liquidity strategy takes into consideration historical volatility scenarios of results as well as simulations of sectorial and systemic crisis. It is grounded on allowing resilience in scenarios of capital restriction.

Management believes that the most relevant risks that may affect the Company’s results, for which it uses derivative financial instruments to protect, are the volatility of commodities prices, foreign exchange rates and interest rates.

For the probable scenario of commodities, Management uses as a reference the future value of assets on December 31, 2024 and therefore understands that there will be no changes in the results of operations. As for the exchange rate, management uses the Focus report as a reference for the US dollar, interpolating the quotes for the current and subsequent years. The probable scenario for the other currencies is calculated based on the parity of the US dollar.

In the possible and remote scenarios, both positive and negative variations of 15% and 30% respectively were considered in both cases from the probable scenario. Such sensitivity scenarios originate from information and assumptions used by Management in monitoring the previously mentioned risks.

The information used in the preparation of the analysis is based on the position as of December 31, 2024, which has been described in the items above. The estimated values may differ significantly to numbers and results that will be effectively registered by the Company. Positive values indicate gains and negative values indicate losses.

The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Depending on the inputs used for measurement, the financial instruments at fair value may be classified into 3 hierarchy levels:

The table below presents the overall classification of financial instruments accounted at fair value by measurement hierarchy. For year ended December 31, 2023, there were no changes among the 3 levels of hierarchy.

The fair value of the financial instruments approximates the book value, with the exception of the cases presented below and for disclosure purposes only, the bonds are stated based on observable prices in active markets and the debentures are measured using discounted cash flows.

Financial instruments and risk management