According to a study conducted by UNICA (Brazilian Sugarcane Industry Association), the São Martinho Group is one of the largest producers of sugar and ethanol in Brazil. We purchase, cultivate, harvest and crush sugarcane - the main raw material used in its sugar and ethanol operations. About the 2011/2012 harvest results, we highlight:
São Martinho currently conducts its sugar and ethanol operations through its two mills, Iracema and São Martinho.
Boa Vista mill is our Unit fully dedicated to the production of anhydrous ethanol, with crushing operations launched in July 2008.
São Martinho Mill is the largest sugarcane crushing mill in Brazil during the 2005/2006 harvest, having achieved the following world sugarcane-crushing records for a single sugarcane mill during that harvest: (1) crushing 14,560 tons of sugarcane in a single eight-hour shift; (2) crushing 46,5 tons of sugarcane in a single 24 hour period (2007/2008 harvest); (3) crushing 1.2 million tons of sugarcane in a single month; and (4) record crushing of 7.1 million tons of sugarcane in 2005/06 Harvest. In the 2008/09 crop year, the São Martinho Mill set a Brazilian record for crushing volume at a single unit of 8.0 million tons.
The Mill has an average capacity to produce 3,000 tons of sugar daily (assuming that 60% of the mill’s production capacity is used to produce sugar and the remaining production capacity is used to produce ethanol); and also produces a daily average of 2.0 thousand cubic meters of ethanol.
Boa Vista, in the city of Quirinópolis in the state of Goiás, started operations in the 2008/2009 harvest with initial annual sugarcane crushing capacity of 1.7 million tons. In 2011/12 crop year, the crushing capacity was 3.4 million tons of sugarcane; the unity crushed 2.2 million tons in the period, which was used to make 186.9 m³ of ethanol in the crop year.
Iracema mil crushed, during the 2011/2012 crop, an amount of 2.5 million tons of sugarcane, which was used to produce 229.4 thousand tons of sugar and 77.7 thousand m³ of ethanol.
The company plans to increase this plant’s annual capacity for sugarcane crushing and ethanol production to approximately 3.4 million tons and 321,600 m3, respectively, by the 2010/11 crop year, with the potential for furhter expansions in this capacity. The additional mill will initially produce only hydrous ethanol, which is used primarily as fuel for vehicles that exclusively run on ethanol, or for flex-fuel vehicles, which are vehicles that can operate using gasoline or ethanol (or any mixture of both), and for industrial purposes.
For the 2012/2013 crop year, São Martinho Group is expecting to crush 12 million of sugarcane. This amount is based on a conservative scenario of feedstock availability and follows the same perspective released by UNICA (Brazilian Sugarcane Industry Association). The production forecast is about 470 thousand m³ of ethanol and 900 thousand tons of sugar.
The group of companies that led to the formation of São Martinho as it currently exists began in 1938 with the acquisition of Usina Iracema Ltda., which owned the Company’s Iracema mill. In 1943, the Company transformed Usina Iracema Ltda. from a limited liability company to a corporation under Brazilian law and changed its name to Companhia Industrial e Agrícola Ometto (which was the name of the Company until September 28, 2006, when the name was changed to São Martinho S.A. in connection with the São Martinho Capital Contribution).
Seeking to expand its business, São Martinho and its controlling shareholders acquired Usina São Martinho S.A., which owned São Martinho mill, in 1950. As a result of the São Martinho Capital Contribution, the Company currently own all of the outstanding share capital of Usina São Martinho S.A.
On April 12, 2007, Etanol Participações S.A., a holding company composed of the subsidiary Usina São Martinho S.A., together with Cosan S.A. Indústria e Comércio and Santa Cruz S.A. Açúcar e Álcool, with interests of 41.67%, 33.33% and 25.00%, respectively, acquired Usina Santa Luiza S.A., whose management is shared by them, with a board of directors and an executive board composed of representatives of each shareholder. The acquisition value of Usina Santa Luiza S.A. was R$ 184,080. Etanol Participações S.A. also acquired Agropecuária Aquidaban S.A. from the shareholders of Usina Santa Luíza S.A., for R$ 61,360.
In order to achieve one of the objectives of said acquisition, related to gaining operating and administrative synergies, on December 10, 2007 the shareholders of Etanol Participações S.A. announced their decision to absorb the operations of the jointly-owned indirect subsidiaries Usina Santa Luiza S.A. and Agropecuária Aquidaban S.A., which activities have been developed directly by the shareholders, according to their interest in the capital of Etanol Participações S.A., beginning the 2008/2009 crop.
On December 21, 2007, the subsidiary Usina São Martinho S.A. and the other shareholders of Etanol Participações S.A. resolved to conduct a full spin-off of the assets and liabilities of Etanol Participações S.A., which were transferred to Usina Santa Luiza S.A. and Agropecuária Aquidaban S.A. Such spin-off followed by merger was approved by the Extraordinary Shareholders’ Meetings held on December 21, 2007. The spun-off and merged net assets, according to the book value appraisal report issued by independent experts, were R$ 226,948 as of October 31, 2007.
The Extraordinary Shareholders’ Meeting held on April 25, 2008 approved the merger of the indirect jointly-owned subsidiary Agropecuária Aquidaban S.A. by the indirect jointly-owned subsidiary Usina Santa Luiza S.A. On April 28, 2008, shareholders decided on the partial spin-off of Usina Santa Luiza S.A. whose net assets were merged by the subsidiary Usina São Martinho S.A. and other Usina Santa Luiza S.A.’s shareholders, based on their respective ownership interests. The spun-off net assets at book value, as determined by an independent appraisal report, totaled R$ 225,138 as of March 31, 2008.
WITHDRAWAL FROM COPERSUCAR
Up to March 31, 2008, the Company, its direct subsidiary Usina São Martinho S.A. and the jointly-owned indirect subsidiary Usina Santa Luíza S.A., were associated with the Cooperativa de Produtores de Cana, Açúcar e Álcool do Estado de São Paulo Ltda. - Copersucar [Cooperative of Sugarcane, Sugar and Alcohol Producers of the State of São Paulo] (also called the "Cooperative"), whose cooperative bylaws signed by the parties required the Companies to make available immediately and definitively to Copersucar their total production of sugar and alcohol.
On February 25, 2008, the Company, its direct subsidiary Usina São Martinho S.A. and the jointly-owned indirect subsidiary Usina Santa Luíza S.A. announced that their Boards of Directors approved a request for their withdrawal from the cooperative. The termination of membership occurred pursuant to Copersucar’s bylaws at the end of the 2007/2008 crop and is intended to focus the Companies’ production on higher value added products and is part of different commercial strategies.
The terms and conditions of the termination of membership were negotiated through the settlement or assumption of commitments to the Cooperative or to third parties for which the Cooperative is jointly liable, arising until the date of the termination, even if the conclusion of the commitments surpasses that date. The Company, its direct subsidiary Usina São Martinho S.A. and the jointly-owned indirect subsidiary Usina Santa Luíza S.A. have the right to a proportional share of the outcome of indemnification actions filed by Copersucar, even if they are concluded after the date of the termination.
The Company, its direct subsidiary Usina São Martinho S.A. and the jointly-owned indirect subsidiary Usina Santa Luíza S.A. assumed the liability for a share proportionate to their volume of operations during the period in which they were members of the cooperative in respect of tax lawsuits filed by Copersucar.
After the termination of membership, the sale of the sugar and alcohol production and the consequent management of credit risks are made by the Company and its subsidiaries.
The production made available to Copersucar remained physically at the Company’s and its subsidiaries’ warehouses, which were lent for use by Copersucar without paying for it. The Agribusiness Directors of the Companies remained as depositaries of the inventories stored in the warehouses. The production sold was removed by Coopersucar according to its logistics.
On April, 2010, São Martinho S.A. announced the definitive agreement with the U.S. company Amyris Biotechologies Inc. and its Brazilian subsidiary Amyris Brasil S.A.. The agreement defines the construction of a chemical plant in the Usina São Martinho unit which will begin producing farnesene for chemical products in 2012.
On June 2010, São Martinho S.A. and Petrobras Biocombustível S.A. (PBio) - Petróleo Brasileiro S.A. (Petrobrás) subsidiary - announced a strategic partnership to increase ethanol production in Goiás state through the São Martinho S.A. subsidiaries "Usina Boa Vista S.A." and "SMBJ Agroindustrial S.A.".
A new company will be incorporated under the name ‘Nova Fronteira Bioenergia S.A.’ which will control Usina Boa Vista S.A. and SMBJ Agroindustrial S.A.. PBio will control 49% of the new company and São Martinho S.A. will control 51%.
Currently, Boa Vista mill has a crushing capacity of 3.4 million tons of sugarcane per year. With the new investments, we expect to reach a crushing capacity of 8.0 million tons per year until 2016/2017 crop.
On August, 2010, São Martinho announced the first phase of the cogeneration project at São Martinho Mill. The initial investment was R$ 173 million. The forecast is to have a surplus of 244,000 MWh to be sold as of 2013/2014 crop.
On October, 2011, São Martinho announced the acquisition of 32.18% of Santa Cruz - Açúcar e Álcool (Santa Cruz Mill) and 17.97% of Agropecuária Boa Vista S.A. The synergy between São Martinho´s and Santa Cruz´s agricultural area was extremely relevant to this transaction, which should generate gains of scale and reduce the logistics costs.