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An investment in securities involves a high degree of risk. All investors should carefully consider the following factors in addition to the other information in this investor relations website before investing in São Martinho’s securities. In general, investing in the securities of issuers in emerging market countries, such as Brazil, involves a higher degree of risk than investing in the securities of U.S. issuers or issuers in other countries with highly developed capital markets. São Martinho’s business, financial condition, results of operations and prospects may be materially adversely affected by any of these risks.
The risks briefly described below are those that the Company currently believes most likely may materially affect its performance.
1. Risks Relating to Brazil
- The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian economy. Brazilian economic and political conditions have a direct impact on the Company’s business.
- Inflation, and the Brazilian government’s measures to combat inflation, may contribute significantly to economic uncertainty in Brazil and adversely affect the Company.
- Economic and market conditions in other emerging market countries may adversely affect the Brazilian economy and, therefore, the market price of São Martinho’s shares.
- Changes in Brazilian tax laws may have an adverse impact on the Company’s results of operations.
- Restrictions on the movement of capital out of Brazil may adversely affect your ability to receive dividends and distributions on, and the proceeds of any sale of, São Martinho’s shares.
2. Risks Relating to São Martinho’s Business
- Fluctuations in the price of the Company’s products, as well as Brazilian and global economic, political and financial uncertainties, may adversely affect São Martinho.
- A decline in the price of sugar may adversely affect both Company’s sugar and ethanol businesses.
- A reduction in the productivity of sugarcane crop may adversely affect the Company.
- Termination of the Company’s sugarcane supply contracts or land lease agreements or a decrease or an interruption in the sale of sugarcane by its suppliers may adversely affect us.
- The Company faces significant competition in the sugar and ethanol industries, which may adversely affect São Martinho’s market share and profitability.
- A reduction in market demand for ethanol as a clean fuel or a change in the Brazilian government’s policy requiring that ethanol be added to gasoline may adversely affect the Company.
- Government policies and regulations affecting the agricultural sector and related industries could adversely affect the Company.
- The Company is subject to extensive environmental regulation and may be exposed to liabilities as a result of its handling of hazardous materials and potential costs for environmental compliance, including the acquisition of conservation plots.
- Adverse conditions may create delays in the construction of Boa Vista mill and/or significantly increase the amount of its budgeted investments.
- The Company may not be able to successfully implement its growth strategy, which may adversely affect its results.
- The loss of certain members of the Company’s board of directors or executive officers may adversely affect São Martinho.
3. Risks Related to São Martinho’s Common Shares
- An active and liquid market for São Martinho’s shares may not develop, which would limit your ability to sell your shares at a price and at a time when you wish to do so.
- São Martinho’s by-laws contain a protective provision against hostile takeovers of the Company and may hinder or delay transactions that may be of interest to its shareholders.
- Holders of São Martinho’s shares may not receive any dividends or interest attributable to shareholders’ equity.
- The protections afforded to minority shareholders in Brazil are different, and may be more difficult to enforce, than those in the United States.