Before taking an investment decision, the potential shareholders must consider carefully all information available on this website, especially the risks mentioned above. The business, financial situation and operational results of M. Dias Branco could be adverse and materially affected by any of these risks, and for this reason, affect negatively the securities issued by the Company. The risks described above are those know by M. Dias Branco and that the Company believes that may affect its business in a significant way. Additional risks unknown by M. Dias Branco or classified as insignificants can also affect its business.

a. Risks related to the customers

The Company is subject to consumer complaints and products recall, which may negatively affect its image, as well as having a material impact on its costs, business and results, having an adverse effect on the Company.

The Company produces and sells food for human consumption, which involves risks, such as
contamination, perishability, adulteration, among others. In the event that the Company is
involved in any civil liability proceedings related to its products or has a recall of its products, this may negatively impact its profitability for a certain period, depending on: (i) the volume of the product in the market; (ii) the reaction of competitors; and (iii) Even if the Company is not liable in a lawsuit, the negative publicity that could be generated in relation to its products and its quality may adversely affect its reputation towards current and potential consumers, as well as its corporate image and its brands, entailing an adverse effect on its business and results.

Changes in consumer preferences may affect the demand for the Company’s products

The overall food industry is subject to changes in consumer trends, demands and preferences, which often occur and, if the Company is unable to successfully anticipate, identify or react to such changes, there may be a reduction in demand and the prices of its products, entailing a material adverse effect on its business, financial condition, results from operations and the market price of its shares.

b. Risks related to the Company

Suspension, cancellation or failure to obtain new federal and state tax incentives owned by the Company may adversely affect its results.

Since the end of the 1980s, the Company has been awarded with state fiscal incentives, and on December 31, 2018, seven (7) of its plants were awarded with incentives granted by the states of Ceará (3 plants), Pernambuco, Bahia, Paraíba, Rio Grande do Norte and one (1) plant of its subsidiary Produtos Alimentícios Piraquê S.A, located in Rio de Janeiro Since the 1990s, the Company has been awarded with federal tax incentives, and presently, 8 (eight) if its plants, all based in the Northeast of Brazil, hold incentives granted by the Superintendence for the Northeast Development (“Superintendência de Desenvolvimento do Nordeste – SUDENE”). Such incentives consist of the transfer of resources as counterpart of the respective governments to the Company’s investments in the construction, installation and modernization of new industrial plants in the states and regions.

The granting of such incentives is made only upon evidence produced by the Company that it has concluded and put into operation the industrial plants resulting from investments forecasted in projects approved by the respective governments, pursuant to the laws that authorize the respective governments to grant subsidies for the performance of such investments.

Even in the case of tax incentives granted as a result of compliance with certain conditions and for a period of time preciously set – which, under Brazilian law, can not be unilaterally
extinguished by the granting governments before end of the concession period – the Company may be subject to suspension of the right to receive the incentives, or until its cancellation, if it fails to meet certain requirements that must be complied with during its term of enjoyment, such as: (i) do not distribute to its shareholders the amount of the tax incentive received; (ii) maintenance of its operations within fiscal regularity, especially by paying the taxes without dealy; (iii) annuayly submission of certain documents and reports to the authorities, proving the investments made and conditions. The non-compliance with such obligations may result in the suspension or cancellation of such tax incentives, and may even require the Company to refund the amount of the incentives received, plus charges, which may have a material adverse effect on the Company.

The Company can not assure that it will continue to obtain new investment subsidies after the current periods of receiving benefits have expired and, if it is able to, it can not ensure that such incentives shall be granted under the same conditions as those currently held. If new tax incentives are not effectively obtained, the Company’s cash generation may subject to a material adverse effect.

There are projects in progress in the Brazilian Congress aiming at a broad tax reform in Brazil. In the event such projects result in an amendment to the Brazilian Constitution or tax laws, increasing the tax burden and also preventing new tax incentives, at least similar to those currently enjoyed by the Company, the Company’s cash generation also may suffer a material adverse effect.

Unfavorable decisions in judicial or administrative proceedings may cause adverse effects to the Company.

The Company is a party to legal and administrative proceedings related to tax, civil and labor matters and may obtain unfavorable decision in some of these proceedings. Its provisioning for such contingencies may not be sufficient to satisfy the total amount that the Company may be required to pay, since such provisioning encompass estimated amounts related to the lawsuits with probable loss. Unfavorable decisions in relation to such proceedings may cause a material adverse effect on the Company.

Failures in information technology may jeopardize the Company’s operations.

The Company relies on information technology systems for processing, transmitting, storing
electronic information and maintaining communications with its affiliates, customers and
suppliers. As in any computerized environment, the Company’s information systems may be
vulnerable to disruptions in its operation due to events outside the Company’s control, such as natural disasters, telecommunications failures, computer viruses, hacking attacks, failures in segregation of functions and controls of access profiles, or other security issues. Disruptions in the operation of the Company’s computerized systems could have and adverse effect on the Company’s operations. Security breaches may lead to fraud and potential financial loss.

The Company’s growth strategy through acquisitions may cause an adverse effect on the
Company.

Part of the Company’s future growth strategy may involve the acquisition of companies or other assets, should opportunities emerge in the markets in which the Company operates or in new markets. Any acquisition of other companies or assets may involve risks such as:
• Operational difficulties for integrating new employees, information systems, products
and the customer base into their business. As a result of any acquisition, additional
demands may arise from its senior management, information systems and other areas of
the Company;
• The acquired companies may present obligations and contingencies not identified in the
audit or due diligence process carried out at the time of acquisition or for which the
Company may not obtain contractual indemnification from the seller;
• Any delay in the integration process may cause an unexpected increase in its operational
expenses;
• The issuance of shares or bonds as a source of funding for new acquisitions may dilute
the stake of its shareholders in its share capital or subject the Company to restrictions or
obligations that may affect its ability to implement other elements of its strategy;
• The acquisition process may be competitive and may raise the value of the intended
transaction or, also, make the materialization of the potential acquisition unfeasible;
• The result of the acquisition of other businesses may also adversely affect the Company’s
ability to pay dividends to its shareholders; and
• Complexities in the setting of the acquisition price or difficulties in obtaining authorizations from public antitrust authorities in a timely manner may lead the Company to withdraw from the acquisition or may result in the acquisition of less attractive companies.
If any of these factors arise when implementing its acquisition strategies, the Company may suffer a material adverse effect.

The Company may not pay dividends to the holders of its shares.

Pursuant to its bylaws, the Company must pay its shareholders at least 25.0% of its adjusted
annual net income, in compliance with Brazilian Corporate Law, as a mandatory dividend.
However, net income may be capitalized, used to offset losses or otherwise retained, as set forth in the Brazilian Corporate Law, and may not be made available for the payment of dividends. Accordingly, the Company may not pay dividends to its shareholders in any fiscal year if the management decide that such payment is inadvisable in view of its financial condition and such decision is approved by the shareholders’ meeting. In addition, the Company may change its dividend payment policy at any time, subject to legal limits. If any of these events occur, the holders of its shares may not receive dividends.

Losses not covered by the insurance policies contracted by the Company or that exceed the
indemnity limits contracted, may cause adverse effects on the Company’s business

The Company has contracted several insurance policies with major Brazilian insurance
companies, leaders in the markets it operates, covering part of its assets against potential existing risks. In this sense, the Company has contracted insurance policies covering damages encompassing industrial plants and other facilities occupied by it, cargo transportation, vehicle fleet, international transport of inputs, among others.

It can not be ensured that the coverage contracted by it are enough to guarantee all potential losses and damages resulting from incidents that may occur in the normal course of its daily activities. Therefore, if any events not covered or exceeding the maximum indemnification limits set forth in the insurance policies contracted, the Company may incur unexpected significant additional costs for the recomposition or refurbishing of its assets, which may impact its operational results, causing adverse effects on its business. In addition, the Company can not assure that it will be able to maintain insurance policies at reasonable commercial rates or in acceptable terms in the future, which may also generate a significant loss in the Company’s results. Additionally, the Company may be legally liable for the payment of indemnities to third parties related to claims that are not covered in the contracted insurance policies.

The Company may hold a fundraising process in the future by means of the issuance of shares or bonds or securities convertible into shares, which may result in dilution of the investor’s stake in shares issued by it.

The Company may need additional funds and may choose to obtain them through public or private placement of bonds or equity securities or other securities convertible into shares, particularly in the event that public or private financing is not available. If shareholders so decide, the additional funds to be obtained by means of an increase in the Company’s share capital may result in dilution of the investor’s stake in the Company’s shares.

c. Risks related to the controller, direct or indirect, or control group of the Company

The management, upon the influence of the controlling shareholder of the Company, may
make certain decisions in relation to its business that may conflict with the interest of the
minority shareholders and potential investors of the Company.

The controlling shareholder may adopt measures contrary to the interests of the Company’s
investors, including corporate reorganizations and dividend policy. The decision of its controlling shareholder regarding its routes may differ from the decision expected by the Company’s minority shareholders.

d. Risks related to its suppliers

The price of the raw materials and packaging used by the Company is volatile and a sudden or unexpected oscillation in such prices may have an adverse effect on the Company’s business.

The main Company’s raw materials are: wheat, wheat flour, vegetable oils, vegetable shortenings and sugar, which contributed approximately 55.9% of its costs of products sold in the fiscal year ended December 31, 2018.

Such raw materials and/or their components are commodities and, as such, their prices are
denominated in US Dollars or defined in Brazilian Reais in view of the international prices in US Dollars. The prices of these inputs vary according to their prices in the international commodities market, which is affected by the variation in global supply and demand. Historically, the quotation of such commodities in the international market has suffered fluctuations due to several factors. The Company does not have and will not have control over the factors that affect the fluctuation of the quotation of such commodities.

Packaging is also an important component of its production process, and in fiscal year ended December 31, 2018, it accounted for approximately 10.5% of its costs of goods sold. The price of packaging is influenced, directly or indirectly, by several factors, including international oil prices, which are denominated in US Dollars. Historically, the price of packaging has suffered fluctuations due to several factors. The Company does not have and will not have control over the factors that affect the fluctuation of packaging prices.

A sudden or unexpected variation in the prices of such commodities and packaging arising from changes caused by variations in the exchange rate between Brazilian Real and US Dollar, and/or changes in the supply or demand of these products may directly impact the price of their raw materials and packaging. In the event of an increase in the prices of said inputs, the Company may not be able to promptly and fully pass on such increase to their prices, which may decrease its margins and adversely affect the Company.

e. Risks related to the sectors of the economy in which the issuer operates

Inflation and certain Federal Government measures aiming to combat it may contribute
significantly to Brazil’s economic uncertainty, which may adversely affect the Company’s
activities and the trading of its shares

In the past, Brazil has recorded extremely high inflation rates. Such inflation and some measures taken by the Federal Government aimed to control it, combined with speculation on potential government measures to be adopted, have had a significant negative effect on the Brazilian economy, contributing to the economic uncertainty in the country and the higher volatility in the Brazilian securities market.

The Federal Government’s measures to control inflation many times included maintaining a tight monetary policy with high interest rates, thus restricting the availability of credit and reducing economic growth. As a result, interest rates showed a significant variation.

Brazil may undergo significant increases in the inflation rate in the future. Inflationary pressures can lead to government intervention on the economy, including the implementation of government policies that may have an adverse effect on the Company.

In addition, if Brazil experiences inflation rates that significantly reduce consumer purchasing power, the Company may not be able to readjust the prices of its products sufficiently to offset the effects of inflation on its cost structure, which may have an adverse effect on the Company.

The Federal Government has exercised and continues to exercise significant influence over the Brazilian economy. This influence, as well as the Brazilian economic and political situation, may have an adverse effect on the Company and the market value of its shares.

The Federal Government frequently intervenes in the country’s economy and occasionally makes significant changes to its policies, monetary, fiscal, credit and tariff rules and regulations. The measures taken by the Federal Government to control inflation, in addition to other policies, rules and regulations, often involve, among other measures, increases in interest rates, changes in fiscal policies, price controls, currency devaluations, capital controls and limitations on imports. The Company has no control over what measures or policies the Federal Government may adopt in the future and can not foresee them. Its business, financial condition and operational results, as well as the market price of its shares, may be adversely affected by changes in policies or regulations that involve or affect certain factors, such as:
• Monetary, exchange rate and interest rate policy;
• Exchange control policies and restrictions on remittances abroad;
• Inflation;
• Liquidity of financial and domestic capital markets;
• Fiscal policy and changes in tax laws;
• Expropriation of private properties;
• Laws and regulations applicable to the sector, including in relation to environment and health;

• Interpretation of labor and social security laws;
• Rationing of electricity and water; and
• Other political, diplomatic, social and economic factors that may occur in or affect
Brazil.

Uncertainty regarding the implementation of changes by the Federal Government in policies or regulations that may affect these or other factors in the future may contribute to economic uncertainty in Brazil and to increase the volatility of the Brazilian securities market and the securities issued abroad by Brazilian companies. Therefore, such uncertainties and other future events in the Brazilian economy may adversely affect the Company’s activities and its operational results and may adversely affect the trading of its shares.

The volatility of Brazilian Real against US Dollar may have an adverse effect on the Company and its shares.

The Brazilian currency has depreciated several times against the US Dollar over the last decades. During this period, the Federal Government implemented several economic plans and used various exchange rate policies, including sudden or periodic devaluations (during which the frequency of adjustments has varied from daily to monthly), exchange controls, black exchange markets and the floating exchange rate market. From time to time, there was significant volatility in the value of Brazilian Real against US Dollar and other currencies.

In 2016, Brazilian Real showed a new appreciation of 16.5% and ended the year at R$ 3.259 per US$ 1.00. In 2017, Brazilian Real showed a devaluation of 1.5% and ended the year at R$ 3.308 per US$ 1.00. In 2018, Brazilian Real showed a new devaluation of 17.1% and ended the year at R$ 3.8748 per US$ 1.00.

Such devaluations of Brazilian Real against US Dollar may create inflationary pressures in Brazil, through the increase in prices of imported products or whose price is linked to US Dollar, among which are wheat, vegetable oils, sugar and packaging, which represen the Company’s main raw materials and inputs, and may lead to the adoption of recessive policies by the Federal Government. On the other hand, the appreciation of Brazilian Real against US Dollar can lead to a deterioration of the country’s current accounts and the balance of payments, as well as a slowdown of export-based growth, thus adversely afffecting the Company’s business.

An increase in the retail market concentration may cause a reduction in the margins of the
companies in the industry and may have an adverse effect on the Company.

A substantial portion of the production of companies in the food sector is distributed through the retail market. The possibility of concentration of the retail market in a few large companies increases the bargaining power of these companies, which may use their market power to force down the prices of the companies operating in the sector. This price reduction may have an adverse effect on the Company. In addition, the phenomenon of concentration of the retail sectors may also cause a decrease in the Company’s customer base, increasing its reliance on large retail groups above historical levels, which may have an adverse effect on the Company.

The Company operates in a highly competitive segment, with competitors ranging from small companies to major multinationals, including manufacturers of alternative products to itsbproducts, which may have an adverse effect on its business.

The market segment in which the Company operates is highly competitive and has faced
competition from other solid companies for many years, with presence in the regional, national and international markets, enabling some of these companies to have access to capital. The Company also faces competition from small local producers that are well accepted in certain markets. In addition, new companies may also tap into these markets. The Company can not guarantee that this competitive dynamic will not result in a decrease in its sales volume or in the reduction of its prices and margins.

The Company is also subject to competition from other product lines in the food industry by some manufacturers of products that may be substitutes for some of its products, as is the case with rice in relation to the pasta, leading to an expansion of its competitive environment.

At differentiated levels, its current and future competitors can be successful in certain product lines or regions, as well as may have more financial resources and better marketing campaigns, so that competition against such competitors can lead the Company to reduce prices, increase its marketing expenses, lose market share, or even not be successful in the launching of new products; any of these events may have an adverse effect on its business.

Events and the risk perception in other countries, especially in emerging market countries, in the United States and the Euro Zone, may adversely affect the market price of Brazilian
securities, including the trading the Company’s shares, and cause a negative impact in its
operational results and financial condition.

The market value of securities issued by Brazilian companies is influenced, in different levels, by the economic and market conditions in other countries. The reaction of investors to events in these other countries may have an adverse effect on the market value of Brazilian companies’ securities, including the shares issued by the Company. Crises in other emerging market countries may decrease the investor interest in the securities of Brazilian companies, including the securities issued by the Company.

In the past, the occurence of adverse economic conditions in other emerging market countries has generally resulted in the outflow of investments and, consequently, in the decline of foreign resources invested in Brazil, causing a negative impact on the price of assets traded in the country. Additionally, financial institutions may not be willing to renew, extend or grant new credit lines at economically favorable contitions, or even be unable or unwilling to honor their commitments. Any of the aforementioned events may negatively impacts the trading of the Company’s shares, as well as hinder its access to the capital market and the financing of their operations in the future, in acceptable or absolute terms.

Political risk, trade sanctions and military intervention in the world may have an adverse effect on the Company, causing a negative impact on its operational results.

The regional political instability, decisions on trade sanctions and military intervention in certain regions around the world may cause instability in commodities prices and volatility in the exchange rate, thus affecting the price of the raw materials used by the Company in its production process and, therefore, putting pressure on its production costs. As an example, from 2012 to 2014, the Argentine Government has restricted wheat exports, thus causing restrictions in the grain supply in South American countries. Since the second half of 2013, Ukraine, a major wheatproducing country in the world, has experienced a political crisis that may affect its production, therefore generating price volatility in the commodity price. In 2014, tensions between Ukraine and Russia led the international community to impose sanctions on Russia as a form of retaliation, generating uncertainties as to the supply of wheat from that country. Still in 2014, the crisis in Greece with the risk of non-payment of its debt and the possibility of its exit from the Euro Zone generated doubts as to the future of the European Union and its member countries, causing an adverse effect on the global and Brazilian capital markets.

The Company’s competitors may misuse its trademarks, patents and industrial designs or the Company may be prevented from using its best-known brands, which may have an adverse effect on the Company

The trademarks, design and technique used in the manufactuing of the Company’s products are constantly subject to improper use and/or infringement by third parties of their intellectual property rights. The counterfeiting of products and improper use of the intellectual property rights owned by the Company may not only cause adverse effects on sales, but may also jeopardize the Company’s final results.

f. Risks related to the regulation of the sectors in which the issuer operates

The Company is subject to strict control and extensive environmental and sanitary legislation, which may imply an increase in its costs, causing a material adverse effect on its activities

The Company is subject to the regulation of Federal, State and Municipal health authorities and to the regulations of the Ministry of Agriculture regarding the manufacturing process of its products, as well as its hygiene, conservation, packaging, storage, distribution and transportation.

The non-compliance with the laws and regulations issued by health authorities may result, without prejudice to the obligation of repairing potential damages, in sanctions of criminal and administrative nature, such as fines, partial or total suspension of activities, and any such sanctions may have a material adverse effect on its operation.

Changes or amendments to current health regulations may entail the need of substantial investments to adapt its activities to the new legislation, which may have an adverse effect on the Company. Additionally, the imposition of any pecuniary or other sanctions as a result of non-compliance with health regulations may also have a material adverse effect on its activities.

Nonetheless, the existence of allergenic ingredients, or traces of these ingredients, in Company’s products may lead to a reduction in demand and a search for substitute products by consumers.

g. Risks related to socio-environmental issues

Environmental and climatic risks may adversely affect the Company’s activities and cause a negative impact on its operational results.

Environmental and climatic problems in regions producing the raw materials used in the production process may generate price volatility which may have an impact in Company’s production costs.

In addition, the shortage of water resources can affect not only the supply of the population and industrial plants but also the energy generated on hydroelectric power plants. The water scarcity can lead to a rationing of water and electricity resources, causing an impact on the costs of acquiring such resources.

Aiming to minimize some environmental risks, it was approved in early 2014 by the Company’s leadership, the Strategic Sustainability Agenda, which set priority to themes capable of generating and protecting value for all stakeholders over time.

The sustainability management takes place through Working Groups (WG) aiming to turn social and environmental aspects a part of the business culture. By using clear initiatives that generate tangible and intangible results, each WG has a defined long-term planning, whose goals are monitored by the GPD – Management by Guidelines (“Gerenciamento pelas Diretrizes”, in Portuguese), a performance monitoring system used by the Company.

Among them, the Water, Effluents and Solid Waste WG, Energy and Emissions WG. We highlight the main results achieved in 2018: Relative water consumption was 8.5% lower versus 2017. This reduction in water consumption (m³/ton produced) was mainly due to the installation of the reuse plant at the Special Shortening and Margarines unit in Fortaleza (CE) and the result of the awareness actions carried out throughout 2018.

The Company is subject to strict control and extensive environmental legislation, which may imply an increase in its costs, causing a material adverse effect on its activities.

The Company’s activities are subject to extensive federal, state and municipal legislation aimed at environmental preservation.

The non-compliance with the laws and regulations issued by environmental authorities may result, without prejudice to the obligation of repairing potential damages, on the imposition of sanctions of criminal and administrative nature, such as fines, partial or total suspension of activities, loss or restriction of tax incentives, and cancellation or suspension of financing lines with official credit institutions, as well as the prohibition of contracting with the public power, and any of these sanctions may have a material adverse effect on its activities.

Changes or amendments to current environmental regulations may entail the need of substantial investments to adapt its activities to the new legislation, which may have an adverse effect on the Company. Furthermore, any delay or refusal by environmental agencies on the issuance or renewal of environmental licenses, as well as their possible inability to meet the requirements established by such bodies in the course of the environmental licensing process, may prejudice or even prevent, as the case may be, the installation and operation of their enterprises. Additionally, the imposition of any pecuniary or other sanctions as a result of non-compliance with environmental regulations may also have a material adverse effect on its activities.

h. Risks related to its shareholders

Management does not envisage any material risks potentially arising from its shareholders that may materially influence the investment decision.

i. Risks related to its subsidiaries and affiliates

The risks related to the subsidiaries and affiliates are the same faced by the Company.

It is not possible to ensure that the Company will succeed in implementing its strategy and
achieving synergy with the integrations of its subsidiaries and affiliates, which may cause an
adverse effect on the Company’s results.

j.Riscos relacionados aos países estrangeiros onde o emissor atue

Not applicable, since the Company does not have units or branches operating in other countries.

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