Strategy and Competitive Advantages

Strategy

The main components of São Martinho’s strategy are:

Growth through Strategic Acquisitions, Partnerships and New Projects: São Martinho plans to expand its businesses through projects such as the Boa Vista mill, and also by closely monitoring the sugar and ethanol industries in Brazil to identify merger and acquisition opportunities that offer scale gains, operational synergies and productivity gains. In addition, the Group plans to sell the power generated by the Boa Vista mill. It also plans to sell the carbon credits resulting from this process to countries whose emissions are not within the limits determined by the Kyoto Protocol.

Continue Reducing Operating Costs and Increasing Operating Efficiency: São Martinho plans to continue concentrating efforts on improving the efficiency of its operations through additional investments in technology that includes all agricultural, industrial and logistics and its processes.

Expand its Share of the International Sugar and Ethanol Markets: São Martinho plans to expand its operations in the international market, drawing on its production flexibility and logistics potential to explore new export opportunities that it believes will emerge over the medium-to-long term due to the lifting of import barriers that currently limit access to certain major sugar and ethanol markets.

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Competitive Advantages

São Martinho’s competitive advantages include:

Technological Innovation and a Highly Mechanized Agroindustrial Complex: São Martinho is constantly seeking to implement technological innovations on its planting, harvesting and manufacturing processes, which have greatly improved its productivity as well as reduced its operating costs. São Martinho is Brazil’s most mechanized sugar and ethanol company and was the first major producer to develop and use mechanized planting.

Extensive Land Holdings Strategically Located in Brazil’s Center-South Region: São Martinho’s own or leased properties have the advantage of being located in Brazil’s Center-South region, which is naturally suited to sugarcane cultivation. The properties are strategically located within an average radius of 24 kilometers from its plants. This close proximity, coupled with the company’s high level of mechanization, reduces transportation costs and allows cane crushing to begin within an average of nine hours after harvesting (versus an estimated average of between 36 and 48 hours for the Center-South region as a whole), in turn maximizing the extraction of sugar from the harvested cane and increasing productivity.

Strategic Location of Plants Reduces Operating Costs: Due to the proximity of São Martinho’s mills to the terminals and warehouses of the Port of Santos and to the railroad siding maintained inside the São Martinho unit, the company is able to reduce its delivery time and logistics costs, while also increasing operational efficiency. The storage facilities at the São Martinho Mill were recently adapted to handle bulk sugar, which will substantially reduce storage costs and facilitate exports, since sugar is exported in bulk.

Experienced and Professional Management Team: São Martinho’s management has more than ten years of experience in production and operational processes, as well as an extensive knowledge of the sugar and ethanol industry. Furthermore, São Martinho’s controlling shareholders have more than 40 years of experience in the industry. São Martinho uses human resources management tools designed to strengthen management skills, focusing on integrating and motivating employees to maximize their effectiveness.

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