Sugarcane: Initiating Coverage Agribusiness

October 16, 2015

Challenges ahead Marcio Montes, CNPI

Analyst
[email protected]
We initiate the sugarcane industry coverage including two of the biggest players in Brazil:
Biosev (BSEV3) and São Martinho (SMTO3). There is no doubt that the current Victor Penna, CNPI
macroeconomic scenario is challenging for the sugarcane companies, especially for those Chief-Analyst
presenting high leverage levels. The decrease of sugar value traded, oil prices and the FX [email protected]
effects have pushed down all the perspectives related to the sector. The expected inflation,
the increasing unemployment rate, the rising interest rate and the tough economic
environment in Brazil are added to the challenges. However, we believe the most well-
structured companies should have a unique opportunity to consolidate its operations, market Target
share and brand. The current scenario, despite all the challenges, has been providing an Ticker Upside* Recommendation
Price 16
increase in demand for ethanol, allowing the companies of the sector to shift their production
BSEV3 8.00 62.9% Market Perform
mix in order to capture the benefits of this movement, and prepare themselves to face the
changes in the world sugar market, since the 2015/16 harvest presents signs of a higher SMTO3 46.00 10.4% Market Perform
demand than the supply for the first time in the last six years.
Source: Bloomberg and BB Investimentos; (*) Price Oct 13
Biosev. We have market perform recommendation for the company, with a YE16 target price
of BRL 8.00/share for BSEV3, representing an upside of 62.9% when compared to the price BSEV3 2016E 2017E 2018E
of Oct 13, 2015. Biosev is a member of Louis Dreyfus Commodities and an example of a
growth path supported by mergers and acquisitions with a differentiated products mix. Despite Net Revenue 4,870 5,174 5,425
being the 2nd largest sugarcane player in the world, the reduction in sugar and oil prices in
EBITDA 1,477 1,665 1,863
recent years affected the growth scenario developed earlier by the company. This change
has frustrated the company's growth expectations, leading to successive losses and hence Net Income -76 83 313
the cash needs. Nonetheless, once the sugarcane industry starts to recover, we believe that
Biosev has conditions to follow, and even exceed, the market growth rate. EV/EBITDA 4.7 4.2 3.8

P/E -23.1 21.4 5.6

BRL Million 2014/15 YoY 2013/14 YoY 2012/13
EPS -0.3 0.4 1.4
Net Revenues 4,513 5.7% 4,268 2.8% 4,152

Gross Profit 1,765 7.6% 1,641 -11.2% 1,848 SMTO3 2016E 2017E 2018E
Gros Margin (%) 39.1% 0.7p.p. 38.4% -6.1p.p. 44.5% Net Revenue 2,579 2.680 2.926
Adjusted EBITDA 1,335 16.3% 1,148 -10.7% 1,286 EBITDA 1,221 1,266 1,457
EBITDA Margin (%) 29.6% 2.7p.p. 26.9% -4.1p.p. 31.0% Net Income 145 122 269
Net Income -499 -66.0% -1,467 136.6% -620 EV/EBITDA 6.0 5.8 5.1
Net Margin (%) -11.1% 23.3p.p. -34.4% -19.5p.p. -14.9% P/E 6.0 7.0 3.2
Net Debt 4,140 25.4% 3,302 -9.8% 3,660 EPS 1.3 1.5 1.0
Net Debt/EBITDA 3.1x 0.2x 2.9x 0.1x 2.8x

Source: Biosev and BB Investimentos

120 BSEV3 SMTO3 IBOV
São Martinho. We have market perform recommendation for the company, with a YE16
target price of BRL 48.00/share for SMTO3, representing an upside of 15.2% when compared 100
to the price of Oct 13, 2015. Despite a consistent decrease in sugar and oil prices in recent
years and the increase in world sugar surplus, the company has shown resilience to the
80
challenges that the sector has undergone. São Martinho has shown positive results through
a strategy of organic growth, partnerships and new projects adopted by the administration,
which seems to be not only correct, but able to adapt to needs and challenges faced. São 60
Martinho processing capacity has been increasing y/y, as well as its revenues and net
income. However, the indebtness increase to sustain this growth and the Brazilian economy 40
downturn scenario may negatively affect the company's margins. On the other hand, a
possible world sugar inventories decrease and a production deficit might provide some
recovery in margins. Historically, São Martinho has achieved good trading margins on its
products, supporting good expectations for the company. Source: Bloomberg and BB Investimentos

BRL Million 2014/15 YoY 2013/14 YoY 2012/13

Net Revenues 2,294 16.4% 1,971 20.5% 1,636 Table of contents

Gross Profit 651 22.7% 530 31.9% 402
I. Industry overview ……………………… 2
Gros Margin (%) 28.4% 1.5 p.p. 26.9% 2.3 p.p. 24.6%
II. Investment thesis ……………………... 5
Adjusted EBITDA 1,146 42.4% 767 17.9% 652
III. Risks to the investment thesis ……… 6
EBITDA Margin (%) 48.8% 8.7 p.p. 38.9% -0.8 p.p. 39.8%
IV. Biosev …………………………………. 7
Net Income 286 111.9% 135 85.1% 73
V. São Martinho ………………………….. 13
Net Margin (%) 12.5% 5.6 p.p. 6.8% 2.4 p.p. 4.5%
VI. Relative analysis …………………….. 19
Net Debt 2,569 66.8% 1,549 7.7% 1,429

‘’Net Debt/EBITDA 2.2x 0.2x 2.0x -0.2x 2.2x

Source: São Martinho and BB Investimentos

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Sugarcane – Initiating Coverage

I. Industry Overview

I.1 International Sugar Market

Sugar is one of the main agricultural commodities traded in the international market, constituting a key ingredient
in the composition of various products. About 70% of the sugar produced in the world comes from sugarcane and
the remaining 30% come from beets. The main types of contracts for sugar traded are adjusted (without addition
of chemicals to pass through centrifugal and drying) and refined. Sugar VHP (Very High Polarization) is a type of
raw sugar with a globally recognized quality standard, and is the most exported by Brazil.

The main sugar producing countries are also its main consumers, particularly Brazil, India and China. The
Brazilian sugar market is deregulated and state control-free, while some key international players have regulated
markets with protectionist policies, quota systems, subsidies and import restrictions.

The global macroeconomic scenario as well as the drivers of the industry show signs that the global commodity
consumption should continue to grow. The increase in world population, growth in income and purchasing power,
along with the increased in consumption of processed products – as a result of migration to urban centers –
corroborate this view. The growth of sugar consumer market is expected to occur in greater intensity in Asia,
especially in China, where per capita consumption is still relatively low, opening expectations of a considerable
potential for expansion.

World’s Largest Producers World’s Largest Consumers

% %

India 15.8%
Brazil 20.6%

Other
Countries European
40.3% Union 11.0%
Other
Countries
50.1%
India 16.9%
China 10.2%

Brazil 6.6%
European Thailand 6.3%
Union 9.6% China 6.3% EUA 6.3%

Source: USDA Source: USDA

I.2 World Sugar Supply and Demand

As an intrinsic feature of many commodities, the price of sugar is volatile and depends on a dynamic that includes
weather conditions, productivity expectations, demand, supply, inventory levels, and also tax incentive policies
and protectionist barriers in many countries.

Sugar World Production Major Sugar Exporting Countries

Million tons %

Production Consuption Ending Stocks

Other
200
Countries
180 29.3%
160
140
120
Brazil 45.3%
100
80
60
40 Guatemala
20 4.1%
0
Australia 6.6%

Thailand 14.8%

Source: USDA Source: USDA

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Sugarcane – Initiating Coverage

I.3 International and local sugar prices

The main sugar reference prices in the international market are given by the most traded futures contracts on the
commodity: NY#11 and London#5. The NY#11 is traded on the New York Mercantile Exchange (NYBOT), the
primary reference prices of raw sugar in the world free market, while the London#5 is traded on the LIFFE (London
International Financial Futures and Options) and is the reference in prices of refined sugar. In Brazil, prices are
formed by the free market and the main index indicator is the Cepea/Esalq.

Sugar Prices
Base 100

Sugar (NY#11) Sugar (Cepea)

300

250

200

150

100

50

Source: Bloomberg; Cepea/ESALQ

I.4. Sugar and ethanol sector in Brazil

I.4.1 Sugarcane. The sugarcane was introduced in the country in 1532 and always had an outstanding importance
in the Brazilian economy. It is basically cultivated in the Center-South (CS) and North-Northeast (NNE) of Brazil,
the first of which accounts for approximately 90% of the national sugar and ethanol production. Overall, the country
counts on two harvest calendars, one for the North-Northeast Region, which runs from September to April, and
another for the rest of the country, from May to January.

Brazilian production has some advantages over other players like soil conditions and favorable climate, for
example, which allows the sugarcane to be harvested, on average, around seven to eight times without the need
for replanting (against two or three crops in India). The sugarcane fields have also higher productivity per hectare
and higher levels of sugar in processed sugarcane, beating the beet cycle that, as a root, requires annual
replanting and also crop rotation periods ranging from three to five years. In addition, the Center-South has higher
proximity to major consumer markets and the best logistics infrastructure and transport, resulting in lower costs.
These set of factors allowed Brazil to win the leadership in world production of sugar, accounting for over 50% of
the global market of this commodity.

In the season 2014/15, they were processed approximately 634.8 million tons of sugarcane, providing a
production of 35.6 million tons of sugar. For the 2015/16 crop, it is forecasted an expansion to about 663.1 million
tons and a production of 37.4 million tons of sugar in just over nine million hectares.

I.4.2 Ethanol. Another product obtained from sugarcane is the ethanol, which is used as one of the best
alternatives to fossil fuels, given that the CO2 emission from its burning is about 70% lower than gasoline. Brazil
is also the largest producer of ethanol from sugarcane in the world, with a production of 28.7 billion liters during
the season 2014/15 and a production forecast of 28.8 billion liters for the harvest 2015/16, being the second
largest in the country's energy supply, with about 18% in the Brazilian energy matrix. Considered a clean and
renewable fuel source, ethanol has a high positive index of energy efficiency (ratio of fossil energy used for
production and the energy contained in the fuel produced), generating nine units of energy for every unit of fossil
energy used in production, while gasoline and diesel have negative energy efficiency, generating about 0.8 units
of energy for every unit of fossil energy. The ethanol derived from sugarcane has also about five times more
energy units than the ethanol produced from corn.

I.4.3 Cogeneration. The bagasse from sugarcane is used by mills to produce heat to their boilers and generate
electricity to be used in the production of sugar and ethanol, ensuring not only the energy self-sufficiency of the
plants during the period of the harvest, but also the negotiation of surplus production in the Brazilian electricity
market, providing an alternative source of income to the mills and contributing to the generation of bioelectricity,
an alternative way to fossil fuels.

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Sugarcane – Initiating Coverage

Brazil – Planted Area Brazil – Share Production by State

K hectares %
4,687.2 NNE Others 7.9%
Pernambuco
NNE Alagoas 3.0%
4.3%

CS - Parana
6.8%

891.6 808.0 CS - MS 7.5% CS - SP 51.7%

682.3 620.1 718.9
386.0 276.3

CS - Minas
Gerais 8.9%

CS - Goias
9.8%

Source: Conab Source: Conab

Brazil – Sugarcane Production

Million tons

Center-South Region North - Northwest Region Total Production

700

600

500

400

300

200

100

Source: Conab

Brazil – Sugar and Ethanol Production

K ton and Million liters

Sugar (Millions of tons) Anhydrous ethanol (billions of liters) Hydrous ethanol (billions of liters)

40
35
30
25
20
15
10
5
-

Source: Unica

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Sugarcane – Initiating Coverage

Brazil – Car Fleet

Million cars

Flex fuel Gasoline Ethanol

1.0
1.1
1.2
1.4 11.8
1.5 12.4
1.7 13.0
1.8
2.0 13.5
14.0
14.6
15.1
15.5 20.8
17.9
14.9
12.2
9.5
6.9
4.6
2.6
2006 2007 2008 2009 2010 2011 2012 2013

Source: Unica

II. Investment Thesis

II.1 Spraying x Consolidations. With approximately 400 production mills in the sugar and ethanol industry, it is
a powerful industry in Brazil, where the player with the highest market share owns around 9% of the market. This
feature gives the sector more competitiveness and prices based on the balance between supply and demand, not
only in the external market (sugar), but also in the domestic market (mainly ethanol). All the same, product
differentiation, brand value and focus on higher value-added production are triggers used by the companies in
the industry to monetize their businesses. On the other hand, this aspect provides chances for consolidation in
the sector, aiming to improve operational efficiency and synergy gains without relevant negative impacts to the
industry, since the prices are mainly determined by the market.

Brazil – Crushing volume – Biggest players Brazil – Crushing volume – Market Share
(Million tons) %

Raízen 66.8 Raízen 9.0%

Biosev 36.4 Biosev 4.5%

Odebrecht 3.8%
Odebrecht 35.4
São Martinho 3.0%
Bunge 21.3
Guarani 2.9%
Usaçúcar 20.8
Usaçúcar 2.5%
Guarani 20.5
Lincoln Junqueira 2.5%
São Martinho 20.0
Bunge 2.1%
Lincoln Junqueira 18.0 Noble Agri 2.0%
Noble Agri 17.0 Usina Coruripe 1.6%
Usina Coruripe 13.8 Others 66.1%

Source: Biosev Source: Biosev, UNICA, MAPA

II.2 Production mix flexibility. Another feature of the Brazilian sugar and ethanol sector is related to the
production mix flexibility. Differently from that observed in other industries, most of the mills have conditions to
direct part of its production capacity for the production of sugar or ethanol. This choice is made from the basis of
international sugar prices, local ethanol prices and considering the installed power capacity at the mills, which
determine the mix attractiveness level to be developed. This intrinsic feature provided the industry some kind of
safety valve on falling prices situation and/or the possibility to increase the products supply developed by the mills.

II.3 The sugar market. Historically, the production of sugar provides good returns to market participants. The
increasing purchase power of consumers and processed foods around the world, migration of population from
rural to urban areas, the growth of per capita sugar consumption in regions such as Asia and the growth of food
industries contribute to the product consumption rise, allowing the growth of companies in the sector. In addition,
the deregulation of the sector' subsidy policy in Europe and the opening of the Asian market, especially China,
also support the increase in production.

II.4 The ethanol market. Concerns about the level of air pollution have increased public awareness with regard
to the reduction of fossil fuel consumption and to the increasing use of alternative and cleaner fuels. In this context,
ethanol market has been increasing because it is a clean, renewable fuel, less polluting than gasoline and it also
reduces the levels of carbon monoxide emissions by between 25% and 30% compared to fossil fuel. The main

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Sugarcane – Initiating Coverage

players of the ethanol market are USA and Brazil, producing primarily ethanol from corn and sugarcane,
respectively. About 80% of ethanol sold in the world comes from corn or sugarcane. Ethanol from sugarcane, as
well as greater productivity and efficiency, has a higher percentage of greenhouse gas emissions reduction.
Ethanol is basically classified into anhydrous (added to gasoline) or hydrous (ordinary, sold at gas stations). Under
the law, all gasoline sold in Brazil must have a maximum of 27% anhydrous ethanol - this percentage is amended
in accordance with the economic policies adopted by the government. The positive perspectives on ethanol
consumption apply for both the anhydrous and for the hydrous. As adaptation to trends in the energy sources
market, car manufacturers have developed flex fuel vehicles, of which the consumer has the freedom to choose
between gasoline and ethanol. The growth of this sector should occur not only from the outlook for sugar, but also
due to the use of ethanol from sugarcane as an alternative to fossil fuels around the world. In Brazil, ethanol is
used extensively in automotive vehicles, due to variations in oil prices. The Kyoto Protocol contributes
substantially to expectations that the Brazilian experience might be replicated globally in the use and consumption
of ethanol as a substitute for fossil fuels.

II.5 Perspectives of increase in income level and population consumption. The observed rise in income on
working population in Brazil in recent years and the prognosis for the future, the purchasing power of classes C,
D and E, and the GDP growth are key factors to maintain the increase in ethanol consumption in the domestic
market. Around the world, the consumption increase would be conditioned to governmental policies of each
country as regards the establishment of the energy mix, the concern for the environmental impact of agricultural
subsidy policy, and above all, the barriers imposed by each nation to the entry of the Brazilian ethanol. However,
the Brazilian know-how in the productive processes, the shortage of agricultural supplies for sugarcane cultivation
and/or corn, and deployment costs of a fuel sector as ethanol, presuppose that cost-benefit ratio to this fuel
demand is worth it in nations where production is effective.

II.6 Expansion of the flex-fuel vehicle fleet. Brazil is a pioneer in the research development and technology for
the production of alternative fuel sources, renewable and less polluting. The production of ethanol from sugarcane
has increased the production of vehicles powered by ethanol in the domestic market. A series of government
incentives - such as Proalcool – have subsidized this national pioneering. In the beginning of 2003, the advent of
flex-fuel concept has given new impetus to the ethanol market in Brazil because the vehicles started to be adapted
to run on either ethanol and gasoline, leaving the decision as to which fuel use over the consumers.

II.7 Encouraging the use of fuels and energy from clean and renewable sources. The increase of
industrialization, population, the purchasing power and the access to credit have provided a steady rise in fuel
consumption. The search for new solutions due to the shortage of energy sources is seen as a key to the continued
sustainable growth of the planet. In addition, it is worth noting that the environmental issue is even more important
since it has been the focus of important discussions in global meetings aiming to improve the research and the
development of alternative energy sources with lower emissions. Furthermore, the signatories of the Kyoto
Protocol will have to fit the greenhouse gas emission levels, opening more room for the global ethanol market.

III. Risks to the Investment Thesis

III.1 Company’s main activity is subject to the commodity volatility prices in the international market. The
mismatch between supply and world demand, variations in production levels, crop failure or super harvest,
stockpiling, financial speculation in futures contracts, among others.

III.2 Weather conditions can impact the performance of companies in the sector. By having as main raw
material an agricultural commodity, the sugar industry performance has a strong dependence on issues of climate
and meteorological order. Excessive rainfall, large temperature fluctuations, storms, monsoons, among other
climate hazards, are external factors over which the companies have no control. Moreover, they are able to wreak
havoc, as shocks in supply and demand worldwide.

III.3 Fierce competition. Despite the relevance of Brazil on the world stage, in terms of both sugar and ethanol,
major global players such as Thailand, India and China - without crop failure or weather problems - have
competitive production costs, which may put pressure on sugar prices.

III.4 Government subsidies and interventions and protectionist barriers can hinder the entry of Brazilian
products in the international market. The granting of subsidies to the domestic production, surcharges and
imposing quotas on foreign goods may affect exports and commodity prices, generating oversupply and high
inventories around the world, which may impact negatively Brazilian producers.

III.5 Competition and substitution. Both the sugar and the sugarcane ethanol suffer competition from other
products. For sugar, corn syrup, saccharin, cyclamate, etc., threat the market for the commodity. Sugarcane
ethanol suffers mainly competition from corn ethanol.

III.6 Ethanol consumption has a strong correlation with oil prices. The competitiveness of ethanol is highly
correlated to oil price. Historically, there is a preference for ethanol consumption while it represents up to 70% of
the price of gasoline. This parity has been established taking into account the yield difference obtained from one
fuel to another. Thus, when gasoline prices are competitive, hydrous ethanol (sold directly in the fuel pumps)
tends to lose market share.

III.7 Brazilian fuel policy and domestic flex fuel vehicles fleet. The evolution of the country's policy related to
fuel, level of industrialization, the growth of the population and their purchasing power and access to credit can
affect the increase in consumption of fuels and consequently the ethanol market in an adverse way.

III.8 Currency fluctuations. Parity of BRL against other currencies can negatively affect the sector from the point
of view of the sugar industry, since most of the production is directed to exports. The appreciation of the exchange
rate could affect prices in a market with big players and fierce competition. On the other hand, the depreciated
exchange rate could affect the raise of funding, since the industry is intensive use of capital and dependent on
foreign sources of funding, with a substantial portion of its debt denominated in USD.

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Sugarcane – Initiating Coverage

III.9 Agrarian policy. Considering the importance of agriculture in the global economy, agrarian policy in line with
the growth of the sector can determine the level of attractiveness of investors to the risks and challenges
presented.

III.10 Regulations. The activities developed by the industry is subject to extensive environmental, labor and social
regulations. Potential differences in interpretations of laws and regulations applicable to the activities may lead to
the issuance of notices of violation and establish judicial proceedings creating contingencies or additional
investment demands.

III.11 Taxes. Changes in Brazilian tax laws may have an adverse impact on the taxes applicable to the industry.

III.12 Suppliers and renewals. Sugarcane sales discontinuation from suppliers, non-renewal of sharecropping
or rental contracts, the decrease in activities in the sugarcane origination, or increase in costs may affect the
industry adversely.

III.13 Seasonality and fair value of the fields. Seasonality and changes in assessing the fair value of the
sugarcane fields may affect the capital structure of the company.

III.14 Logistic and infrastructure. The Companies operations may be affected by any logistical inefficiencies or
infrastructure failures in Brazil.

III.15 Economic and political environment. The Brazilian economic and political environment can cause direct
impacts on the activities, financial condition, prospects and results of the companies’ operations, influenced by
inflation, interest rates, exchange rates, etc., which may cause significant adverse effects on corporate earnings
and, consequently, the market price of the shares.

III.16 External risks and perception. The perception of risk in other countries, especially the United States,
European Union and emerging countries, may adversely affect the liquidity of the Brazilian securities market, with
consequent impact on companies stock prices and its negotiations, causing dilution the shareholders

IV. BIOSEV

We initiate the coverage of Biosev (BSEV3) with a target price of BRL 8.00 for March, 2016, representing an
upside of 62.9% from the price of October 13, 2015 and Market Perform recommendation. Due to a 2.8% lower
productivity presented by the company when compared to the market average, the high dependence on LDC
market intelligence in sales in the international market, and the low liquidity of its shares in the local market, our
fair value considers a higher implied risk and a market perform recommendation, despite the high upside potential
on the company’s shares.

Biosev is a member of Louis Dreyfus Commodities (LDC) and its main activity is the production and sales of sugar
and ethanol, as well as the sale of electric energy from biomass. The company is the second largest producer of
sugar and ethanol in the world and one of the biggest Brazilian producers of electric energy from biomass
(especially from sugarcane bagasse, straw and wood chips), with presence in five Brazilian states, four clusters,
eleven mills and it is also a 50% joint venture with Cargill in a storage company called TEAG – Terminal de
Exportação de Açúcar do Guarujá Ltda, located at port of Santos, improving the company’s export strategy.

Company has sugarcane crushing capacity of around 36.4 million tons/year, sugar production of 2.5 million
tons/year, ethanol production of 1.6 million/year of cubic meters and 1,346 GWh/year of renewable electric energy
surplus (after the consumption of the mills). TEAG has a capacity of receiving 3.2 million tons of sugar per year,
being used for the storage of its products, minimizing expenses and benefiting the company results.

Some of Biosev’s mills are located in Ribeirão Preto region, the most productive region in the country, nearby São
Paulo city and the port of Santos, which allows the reduction in logistics costs, increase in operational efficiency
and best timing of negotiations.

In the season 2014/15, Biosev crushed 28.3 million tons of sugarcane, producing 1.6 million tons of sugar, 1.2
million/m3 of ethanol, and traded 896 GWh in the Brazilian electricity market using an area of approximately
547,000 hectares of sugarcane (348,000 hectares under company’s control and 199,000 hectares from third-
parties land) on crops in nearby areas of the company's mills. Biosev has around 93% of harvest mechanization,
providing costs reduction during the planting and harvesting crops.

After a growth path supported by mergers and acquisitions, the company adopts nowadays a productivity and
profitability increase policy, with scale economy, adjusting its product mix in order to capture best trading
opportunities in the market, focusing on higher value-added products, profitable markets and trading timing.

Biosev uses market intelligence of LDC in its sugar trading, which has allowed Biosev to achieve selling prices
around 35% up than the average NY#11 in the last five years.

During the past three years, the company’s average productivity was 69.6 tons/hectare of sugarcane, while the
market average is 71.6 tons/hectare (2.8% below the market average). Thus, we believe there is room for Biosev
to reach the same productivity level as its main peers, which would increase its margins.

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Sugarcane – Initiating Coverage

Despite all the challenges faced by the sector, Biosev’s net revenues has shown a steady growth.

Net Revenues Net Revenues Breakdown

BRL Million %

Sugar Ethanol Others Sugar Ethanol Others

4,513
5.8%
4,268
4,152 2.8%
2.0%
3,403
247 5% 6%
381 759 9% 17%
180

1,502 1,669 40% 36%

39%
1,352 1,694
38%

2,403 2,217 55% 58% 52%

1,871 2,060 46%

2011/12 2012/13 2013/14 2014/15 2011/12 2012/13 2013/14 2014/15

Source: Biosev and BB Investimentos Source: Biosev and BB Investimentos

Net Revenues Breakdown Net Revenues Breakdown

BRL Million %

Sugar Ethanol Others Sugar Ethanol Others

7% 8%
7%
272
170 13% 14% 17% 17% 19%
70 186
85 56 176 30%
414 31% 25%
124
302 275 46% 35%
41%
488 364 678 54%
46%
378
464 62%
750 56% 59%
628 650 48% 45% 48%
507 491 510 39% 35%
333 409

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15

Source: Biosev and BB Investimentos Source: Biosev and BB Investimentos

Approximately 74% of the sugar produced by the company is sold in the international market, while 83% of the
ethanol and 100% of the electrical energy are distributed domestically.

In the international market, Biosev products are sold to China, Southeast Asia, Russia, European Union, North
and West Africa and the Middle East, mostly through international trading companies

In the domestic market, the company sells its products for wholesalers and retailers, food and beverage
manufacturers. In the retail sugar, one of the company's brands is the market leader in the Brazilian northeast.

Sugar Breakdown Hydrous Ethanol Breakdown

K ton Million m3

Local Market Exports Local Market Exports

640 54

517
455
405 386 106 40

271 45 73
282 139 88
33 433
212
256 284
224
167 165 197
127 140
107 116 125 128 133 148
95

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15

Source: Biosev and BB Investimentos Source: Biosev and BB Investimentos

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Sugarcane – Initiating Coverage

Electric Power Breakdown

Thousand MWh

Local Market

462
362 394
355 365
323

176
116

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15

Source: Biosev and BB Investimentos

Average Prices

Sugar (BRL/ton) Ethanol (BRL/m3) Electric Energy (BRL/MWh)

1.600
1.400
1.200
1.000
800
600
400
200
0
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15

Source: Biosev and BB Investimentos

Effective Crushing / Estimates Numbers / Estimates

Thousand tons BRL Million

Net Revenues Net Income EBIT Ebitda

30.959
30.500 30.653
30.009 5.174 5.425
4.513 4.870
29.533 4.152 4.268
28.315
27.514 1.665 1.863
1.286 1.148 1.499 1.477

455 523 527 578

(295) 83 313
(526) (76)
(620) (502)
(1.468)

Source: Biosev and BB Investimentos Source: Biosev and BB Investimentos

Specific risk

Biosev has achieved sugar selling prices around 35% up than the average NY#11 in the last five years using the
LDC market intelligence. If that success does not continue, revenues could be negatively affected.

The company has low liquidity of its shares at the stock exchange, which could generate additional discounts on
its trading values.

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Sugarcane – Initiating Coverage

VALUATION
Our analysis is based on the method of Discounted Cash Flow (DCF) in nominal terms. We forecasted the
company’s performance for the next 3 years, with a growth of 2.5% in perpetuity and WACC of 23.0% (BRL). We
have considered an increase in crushing and sales volumes according to the company guidance and our market
expectations, i.e. 2015/16 – 30.5 million tons, 2016/17 – 30.7 million tons and 2017/18 – 31.0 million tons.

As a sugar and ethanol pure-play, Biosev is vulnerable to changes in the sugar, ethanol and oil prices, as well as
the growth of the Brazilian economy and car fleet expansion.

Despite the challenging environment related to sugar and ethanol markets, Brazilian economy and Biosev
indebtedness level, the company has been showing resilience in its activities, demonstrating coexistence
capability with challenges and expertise in the market. Therefore, in our assessment we considered: (i) the growth
estimates of world sugar consumption pointed by the USDA; (ii) the expected reduction of world sugar inventories
highlighted by the USDA; (iii) the growth estimates of ethanol production indicated by Conab and Unica; (iv) a
growth for the Brazilian fleet vehicles indicated by Unica, and (v) the Brazilian GDP growth highlighted by the
IBGE (Brazilian Institute of Geography and Statistics).

Forecasts

Financial Statement (BRL Million) 2014/15 2015/16E 2016/17E 2017/18E

Revenues 4,513 4,870 5,174 5,425
COGS 3,578 3,843 4,135 4,308
DDA 1,044 909 966 1,013
Gross Profit 935 1,026 1,039 1,116
Gross Margin 20.7% 21.1% 20.1% 20.6%
Operating Expenses 480 503 512 539
Ebit 455 523 527 578
Ebit Margin 10.1% 10.7% 10.2% 10.6%
Ebitda 1,499 1,433 1,493 1,591
Ebitda Margin 33.2% 29.4% 28.9% 29.3%
Financial Result -1,124 -600 -424 -186
Financial Income 333 279 313 400
Financial Expense 1,457 879 737 586
Ebt -669 -76 103 392
Tax 170 0 -21 -78
Net Income -502 -76 83 313
Net Margin -11.1% -1.6% 1.6% 5.8%

Source: BB Investimentos

Balance Sheet (BRL Million) 2014/15 2015/16E 2016/17E 2017/18E

Cash 1,947 1,265 949 747
Securities 75 217 163 128
Receivables 274 280 280 276
Inventories 452 486 523 544
Investments 215 226 238 251
Fixed Assets 3,619 3,835 4,133 4,415
Intangibles 937 965 985 995
Other Assets 2,744 2,827 2,883 2,912
Total Assets 10,263 10,101 10,153 10,268
Duties 109 120 131 140
Payables 436 468 504 525
Total Debt 6,327 6,085 5,921 5,610
ST Debt 1,616 1,723 1,677 1,588
LT Debt 4,712 4,362 4,245 4,021
Other Liabilities 2,822 2,935 3,023 3,083
Equity 569 492 575 888
Total Liabilities 10,263 10,101 10,153 10,246

Source: BB Investimentos

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Sugarcane – Initiating Coverage

Cash Flow (BRL Million) 2014/15 2015/16E 2016/17E 2017/18E

Operating Cash Flow 1,462 754 842 1,207
Net Income -502 -76 83 313
DDA 1,044 909 966 1,013
Non Cash Adjustments 134 -830 -1,005 -955
Assets/ Liabilities Change 1,121 750 797 836
Investment Cash Flow -1,046 -1,051 -1,048 -1,132
Capex -1,084 -1,126 -1,265 -1,295
Financing Cash Flow -198 -242 -164 -312
Funding 2,563 1,373 928 1,766
Payments -2,888 -1,616 -1,092 -2,077
Dividends 0 0 0 0
Cash Change 217 (540) (370) (237)

Source: BB Investimentos

Valuation 2014/15 2015/16E 2016/17E 2017/18E

Ebitda (Adjusted) 1,335 1,477 1,665 1,863
Ebit 455 523 527 578
Tax -170 0 -21 -78
Noplat 285 523 506 499
DDA 909 966 1,013
Capex -1,084 -1,126 -1,265 -1,295
Working Capital 165 4 9 13
Free Cash Flow 410 311 217 230
ROA -4.9% -0.8% 0.8% 3.1%
ROE -88.2% -15.5% 14.4% 35.3%
EV/ Ebitda 4.7 4.9 4.7 4.4
PE -2.1 -31.2 28.9 7.6
PB 1.9 4.8 4.1 2.7
PS 0.2 0.5 0.5 0.4
EPS n/a n/a 0.38 1.43
ROIC 6.6% 8.0% 8.1% 8.9%
Net Debt/ Ebitda 3.2 3.1 2.9 2.5
D/E 91.8% 92.5% 91.1% 86.3%

Source: BB Investimentos

Sensitivity analysis

Target Price YE16

g / Wacc 22.0% 22.5% 23.0% 23.5% 24.0%

3.5% 10.53 9.85 9.20 8.59 8.00

3.0% 9.85 9.20 8.59 8.00 7.44

2.5% 9.20 8.59 8.00 7.44 6.91

2.0% 8.59 8.00 7.44 6.91 6.40

1.5% 8.00 7.44 6.91 6.40 5.92

Source: BB Investimentos

Target Price YE16

g / Wacc 22.0% 22.5% 23.0% 23.5% 24.0%

3.5% 7,743 7,539 7,346 7,162 6,987

3.0% 7,539 7,346 7,162 6,987 6,821

2.5% 7,346 7,162 6,987 6,821 6,663

2.0% 7,162 6,987 6,821 6,663 6,511

1.5% 6,987 6,821 6,663 6,511 6,366

Source: BB Investimentos

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Sugarcane – Initiating Coverage

Growth of crushing capacity

Santelisa
Vale São Carlos Jardest
(Merger) (Deactivation) (Hibernation)
Acqusitions
40,0 37,9
Rio Brilhante 36,4
(Greenfield)

Tavares
Lagoa da São Carlos de Melo 16,1
Cresciumal Prata 11,5
4,5
0,9 1,8

Source: Biosev and BB Investimentos

Mills localization

Source: Biosev

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Sugarcane – Initiating Coverage

Shareholders structure

Source: Biosev and BB Investimentos

V. SÃO MARTINHO
We initiate the coverage of São Martinho (SMTO3) with a target price of BRL 46.00 for March, 2016, representing
an upside of 10.4% from the price of October 13, 2015 and Market Perform recommendation.

São Martinho’s main activity is the sale of sugar and ethanol. The company is one of the largest producers of
sugar and ethanol in Brazil, with crushing capacity around of 20.3 million tons/year spread in four mills: São
Martinho (10.5 million tons), Iracema (3.0 million tons), Santa Cruz (4.5 million tons) and Boa Vista (2.3 million
tons – share of 50.95% of 4.5 million tons).The first three mills produce sugar and ethanol and the last is
exclusively dedicated to the ethanol production. All of the mills generate electricity from burning sugar cane
bagasse. Except for the Iracema mill, the others trade their surplus production in the Brazilian electricity market,
in addition to generation of electric power for its own consumption.

Company adopts a policy of organic growth, partnerships and new projects, analyzing growth opportunities in
scale, operating synergies and productivity gains, always aiming to reduce costs and increase operational
efficiency.

In the season 2014/15, São Martinho crushed 18.7 million tons of sugarcane, producing 1.2 million tons of sugar,
438 thousand/m3 of anhydrous ethanol and 353 thousand/m 3 of hydrous ethanol, and traded 720 thousand/MWh
in the Brazilian electricity market.

São Martinho mills are located in Ribeirão Preto region, the most productive region of the country, nearby São
Paulo city and the port of Santos, reducing the delivery time, logistics costs, increasing operational efficiency and
the ability to respond more quickly to fluctuations in market demand for sugar and ethanol.

The company is the owner of around 66% of the sugarcane used in its production, which provides lower costs,
rental and transportation expenses of its raw material. The company also cultivates sugarcane on third-parties
land and buys sugarcane from third parties crops in nearby areas of the company's mills, which also provides
lower transportation costs from these lands. São Martinho has a high level of harvest mechanization (97%)
compared to their peers, providing costs reduction during the planting and harvesting crops.

During the last three years, despite all the challenges faced by the sector, São Martinho’s net revenues showed
growth in double digit rates.

Net Revenues Net Revenues Breakdown

BRL Million %

Sugar Hydrous ethanol Anhydrous ethanol Others Sugar Hydrous ethanol Anhydrous ethanol Others
2,350
19.2%
1,971
20.5%
1,636 298
19.7% 22%
1,367 246 532 18% 39%
139 10%
95 530
343 7% 39%
431 25% 32%
250 18%
203 312 15% 23%
255 19%

950 1.089 80%

884 70% 65%
767 56%

2011/12 2012/13 2013/14 2014/15 2011/12 2012/13 2013/14 2014/15

Source: São Martinho and BB Investimentos Source: São Martinho and BB Investimentos

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Sugarcane – Initiating Coverage

Net Revenues Breakdown Net Revenues Breakdown

BRL Million %

Sugar Hydrous ethanol Anhydrous ethanol Others Sugar Hydrous Ethanol Anhydrous Ethanol Others

22
6% 3%

138 9% 15% 12%

20% 21% 18%
91 19%
108 30%
24 33% 24% 20%
44 61 108 21% 37% 17%
146 117 213 13% 14% 30%
162 87 87 12% 15%
82 133 190 85 21%
81 19% 11%
58 88
92 56
80
346 46% 48% 47% 48% 48%
296 285 40% 43% 40%
229 250
169 190 204

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15

Source: São Martinho and BB Investimentos Source: São Martinho and BB Investimentos

Approximately 93% of the sugar produced by the company is sold in the international market, while 86% of the
hydrous ethanol, 87% of the anhydrous ethanol and 100% of the electrical energy are distributed domestically.

Sugar Breakdown Hydrous Ethanol Breakdown

K ton Million m3

Local Market Exports Local Market Exports

20.0
310.9
307,4 288.8
266.2
241.1
203.3 214.1

168.7 7.0 9.8

18.0 139.9
3.1 35.2 18.2 -

61.7 59.0
44.5 49.3 42.4 49.9
32.2
15.6 17.5 16.9 20.6 19.8 21.3 28.0 28.0

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15

Source: São Martinho and BB Investimentos Source: São Martinho and BB Investimentos

Anhydrous Ethanol Breakdown Electric Power Breakdown

Million m3 Thousand MWh

Local Market Exports Local Market

42.4
52.6
-
54.3 - -

2.0 - 212.2
233.9
181.8 191.8
88.7 86.5 86.3 94.4 162.7
70.8
63.8 64.9
55.3
52.9 8.2 1.1

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15

Source: São Martinho and BB Investimentos Source: São Martinho and BB Investimentos

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Sugarcane – Initiating Coverage

Average Prices

Sugar (BRL/ton) Hydrous Ethanol (BRL/m3)

Anydrous Ethanol (BRL/m3) Electric Energy (BRL/MWh)

1.600
1.400
1.200
1.000
800
600
400
200
0
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15

Source: São Martinho and BB Investimentos

Effective Crushing / Estimates Numbers / Estimates

Million tons BRL Million

Net Revenues Net Income Ebit Ebitda

19.500 19.793 19.990
18.717
16.500 2.926
15.593 2.680
2.579
12.900 2.294
1.971

1.340 1.457
1.221 1.266
987
632 609
502 523 562 695
179 303
286 145 269
73 135 122

Source: São Martinho and BB Investimentos Source: São Martinho and BB Investimentos

VALUATION
Our analysis is based on the method of Discounted Cash Flow (DCF) in nominal terms. We forecasted the
company’s performance for the next 3 years, with a growth of 3.0% in perpetuity and WACC of 17.5% (BRL). We
have considered an increase in crushing and sales volumes according to the company guidance and our market
expectations, i.e. 2015/16 – 19.5 million tons, 2016/17 – 19.8 million tons and 2017/18 – 20.0 million tons.

As a sugar and ethanol pure-play, São Martinho is vulnerable to changes in the sugar, ethanol and oil prices, as
well as the growth of the Brazilian economy and car fleet expansion.

Despite the challenging environment related to sugar and ethanol markets and the Brazilian economy, São
Martinho has been showing consistent data and resilience in its activities, demonstrating coexistence capability
with challenges and expertise in the market where it operates. Therefore, in our assessment we considered: (i)
the growth estimates of world sugar consumption pointed by the USDA; (ii) the expected reduction of world sugar
inventories highlighted by the USDA; (iii) the growth estimates of ethanol production indicated by Conab and
Unica; (iv) a growth for the Brazilian fleet vehicles indicated by Unica, and (v) the Brazilian GDP growth highlighted
by the IBGE (Brazilian Institute of Geography and Statistics).

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Sugarcane – Initiating Coverage

Forecasts (Based on company’s Pro-Forma presentation)

Financial Statement (BRL Million) 2015 2016E 2017E 2018E

Revenues 2,294 2,579 2,680 2,926
COGS 1,643 1,887 1,926 2,013
DDA 485 544 565 617
Gross Profit 651 692 754 913
Gross Margin 28.4% 26.8% 28.1% 31.2%
Operating Expenses 149 170 192 218
Ebit 502 523 562 695
Ebit Margin 21.9% 20.3% 21.0% 23.7%
Ebitda 987 1,067 1,127 1,312
Ebitda Margin 43.0% 41.4% 42.1% 44.8%
Financial Result -181 -344 -410 -361
Financial Income 108 174 177 193
Financial Expense 290 517 588 555
Ebt 320 179 152 334
Tax -32 -34 -29 -64
Net Income 286 145 122 269
Net Margin 12.5% 5.6% 4.6% 9.2%

Source: BB Investimentos

Balance Sheet (BRL Million) 2015 2016E 2017E 2018E

Cash 1,127 1,570 1,984 2,456
Securities 222 310 391 485
Receivables 168 142 148 162
Inventories 213 221 226 236
Investments 21 21 21 21
Fixed Assets 3,797 4,054 4,322 4,613
Intangibles 501 581 674 782
Other Assets 1,571 1,332 1,130 958
Total Assets 7,619 8,231 8,895 9,714
Duties 96 103 114 122
Payables 116 133 189 206
Total Debt 3,846 4,057 4,217 4,363
ST Debt 1,212 1,117 1,161 1,202
LT Debt 2,635 2,940 3,056 3,162
Other Liabilities 945 1,214 1,559 2,003
Equity 2,616 2,725 2,816 3,019
Total Liabilities 7,619 8,231 8,895 9,714

Source: BB Investimentos

Cash Flow (BRL Million) 2015 2016E 2017E 2018E

Operating Cash Flow 807 1,157 1,199 1,396
Net Income 286 145 122 269
DDA 485 544 565 617
Non Cash Adjustments 252 593 640 650
Assets/ Liabilities Change -81 -124 -129 -141
Investment Cash Flow -690 -801 -833 -909
Capex -670 -801 -833 -909
Financing Cash Flow 352 174 130 79
Funding 1,381 1,600 1,150 1,400
Payments -991 -1,390 -990 -1,254
Dividends -43 -36 -31 -67
Cash Change 469 531 496 566

Source: BB Investimentos

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Sugarcane – Initiating Coverage

Valuation 2015 2016E 2017E 2018E

Ebitda (Adjusted) 1,092 1,221 1,266 1,457
Ebit 502 523 562 695
Tax -32 -34 -29 -64
Noplat 469 488 533 631
DDA 485 544 565 617
Capex -670 -801 -833 -909
Working Capital -96 42 57 2
Free Cash Flow 189 273 322 341
ROA 3.8% 1.8% 1.4% 2.8%
ROE 10.9% 5.3% 4.3% 8.9%
EV/ Ebitda 7.8 6.9 6.5 5.6
PE 3.0 6.0 7.0 3.2
PB 0.3 1.9 1.8 1.7
PS 0.4 2.0 1.9 1.8
EPS 2.53 1.28 1.08 2.39
ROIC 7.8% 7.7% 8.0% 9.4%

Net Debt/ Ebitda

2.2 1.8 1.5 1.0
D/E 59.5% 59.8% 60.0% 59.1%

Source: BB Investimentos

Sensitivity analysis

Target Price YE16

g / Wacc 16.5% 17.0% 17.5% 18.0% 18.5%
4.0% 56.47 53.55 50.85 48.34 46.00
3.5% 53.55 50.85 48.34 46.00 43.82
3.0% 50.85 48.34 46.00 43.82 41.78

2.5% 48.34 46.00 43.82 41.78 39.87

2.0% 46.00 43.82 41.78 39.87 38.07

Source: BB Investimentos

Equity Value YE16

g / Wacc 16.5% 17.0% 17.5% 18.0% 18.5%
4.0% 8,554 8,225 7,919 7,636 7,372
3.5% 8,225 7,919 7,636 7,372 7,126
3.0% 7,919 7,636 7,372 7,126 6,895

2.5% 7,636 7,372 7,126 6,895 6,679

2.0% 7,372 7,126 6,895 6,679 6,477

Source: BB Investimentos

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Sugarcane – Initiating Coverage

Growth of crushing capacity

25,0

7,0 20,5
20,0
CAGR: 9.7%
15,0
1,5
2,5
9,5
10,0 -

5,0

Source: São Martinho

Mills location

Source: São Martinho and BB Investimentos

Shareholders structure

Source: São Martinho

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Sugarcane – Initiating Coverage

VI. Relative analysis

EV M a rk e t C a p E V / E B IT D A P /E
N ame T ic k e r C o unt ry WA C C %
( US D m n) ( US D m n)
15 E 16 E 15 E 16 E

La t A m C o m pa nie s

B IOSEV SA B SEV3 B Z B RA ZIL 1,883 264 4.3 3.7 20.6

COSA N SA INDUSTRIA COM ERCIO CSA N3 B Z B RA ZIL 5,531 2,390 4.8 4.4 25.5 13.5 16.9

SA O M A RTINHO SA SM TO3 B Z B RA ZIL 1,965 1,235 5.7 5.1 13.1 10.1 18.8

TEREOS INTERNA CIONA L SA TERI3 B Z B RA ZIL 2,118 119 6.2 5.5 5.3 3.2 21.0

S uga r & E t ha no l P ro duc e rs - Wo rldwide

A B ENGOA SA -CL A A B G SM SP A IN 10,658 928 7.2 7.1 6.1 5.6 3.0

A SSOCIA TED B RITISH FOODS P LC A B F LN B RITA IN 41,667 39,954 18.4 17.3 33.6 32.2 9.4

B A LRA M P UR CHINI M ILLS LTD B RCM IN INDIA 497 241 21.8 17.9 11.5

COSUM A R CSR M C M OROCCO 810 728 5.2 5.0 8.7 8.4 3.0

COSA N LTD-CLA SS A SHA RES CZZ US B RA ZIL 9,116 920 6.4 5.6 20.4 7.4 22.2

ILLOVO SUGA R LTD ILV SJ SOUTH A FRICA 975 654 7.9 6.5 16.1 12.0 9.6

TA TE & LYLE P LC TA TE LN B RITA IN 4,886 4,054 10.0 9.3 16.5 15.2 6.2

TONGA A T HULETT LTD TON SJ SOUTH A FRICA 1,738 1,205 8.1 6.8 12.0 9.4 9.1

Source: Bloomberg and BB Investimentos

N et R evenues ( U SD mn) EB IT D A ( U SD mn) EB IT D A M ar g in

N ame T ic k e r C o unt ry
15 E 16 E 15 E 16 E 15 E 16 E
La t A m C o m pa nie s

B IOSEV SA B SEV3 B Z B RA ZIL 974 1,069 340 398 34.9% 37.3%

COSA N SA INDUSTRIA COM ERCIO CSA N3 B Z B RA ZIL 10,496 11,197 990 1,075 9.4% 9.6%

SA O M A RTINHO SA SM TO3 B Z B RA ZIL 685 775 313 357 45.7% 46.1%

TEREOS INTERNA CIONA L SA TERI3 B Z B RA ZIL 2,571 2,787 307 349 12.0% 12.5%

S uga r & E t ha no l P ro duc e rs - Wo rldwide

A B ENGOA SA -CL A A B G SM SP A IN 8,490 8,819 1,505 1,526 17.7% 17.3%

A SSOCIA TED B RITISH FOODS P LC A B F LN B RITA IN 19,912 21,043 2,271 2,412 11.4% 11.5%

B A LRA M P UR CHINI M ILLS LTD B RCM IN INDIA 443 477 22 27 5.0% 5.7%

COSUM A R CSR M C M OROCCO 811 999 154 161 19.0% 16.1%

COSA N LTD-CLA SS A SHA RES CZZ US B RA ZIL 9,693 10,395 1,147 1,308 11.8% 12.6%

ILLOVO SUGA R LTD ILV SJ SOUTH A FRICA 925 989 116 140 12.5% 14.1%

TA TE & LYLE P LC TA TE LN B RITA IN 3,878 3,935 494 528 12.7% 13.4%

TONGA A T HULETT LTD TON SJ SOUTH A FRICA 1,219 1,371 206 246 16.9% 17.9%

Source: Bloomberg and BB Investimentos

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Disclaimer

RELEVANT INFORMATION

For UK and EU distribution:

This report has been prepared by BB - Banco de Investimento S.A. to provide background information about the companies and industries
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The contents of this document have been prepared and are intended for general circulation to relevant clients of the Banco do Brasil
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was, is, or will be influenced, directly or indirectly, by the income arising from business and financial transactions carried out by BB - Banco
de Investimento S.A..

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Disclaimer

For US Distribution

The enclosed materials are neither an offer to sell nor the solicitation of an offer to buy a security. Information included is believed
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Required Third Party Disclosure Information

The attached research material has been produced by a non-member affiliate of Banco do Brasil Securities LLC, MEMBER:
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Within the past 12 months, BB Banco de Investimento S.A. or its affiliates may have managed or co-managed any offerings for
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the entities mentioned herein. All of the views expressed in this research report accurately reflect the research analyst’s personal
views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is, or will be, directly or
indirectly related to the specific recommendations or views expressed in this research report.

For distribution in Singapore:

This document is published by BB-Banco de Investimento S/A, which is regulated by the Comissão de Valores Mobiliários - CVM
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distributed in Singapore by BB Securities Asia Pte. Ltd. ("BBSA"), which is a holder of a capital markets services licence regulated
by the Monetary Authority of Singapore and an exempt financial adviser in Singapore. This document is meant only for accredited
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or completeness and disclaims any and all liability related thereto. The contents of this document have been prepared and are
intended for general circulation. The contents of this document do not take into account specific investment objectives of any
particular person. The products or transactions discussed in this document may not be suitable for all investors. You should
independently evaluate these products or transactions and seek independent advice regarding the suitability of such products or
transactions, taking into account your specific investment objectives, financial situation and particular needs, before making any
commitment to purchase any product or enter into any transaction. BBSA, or other legal entities within the Banco do Brasil Group,
its officers and employees, may at any time hold or have held positions in investments, or in derivative products thereof. BBSA,
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services to any of the companies mentioned in this document. Please contact BBSA in respect of any matters arising from, or in
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For Brazil distribution

This report was produced by BB - Banco de Investimento SA The information and opinions contained herein have been compiled
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represent or warrant, express or implied, that such information is impartial, accurate, complete or correct. All recommendations
and estimates presented are derived from the judgment of our analysts and can be switched at any time without notice, due to
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Pursuant to art. 18 of CVM Instruction 483, BB - Banco de Investimento SA declares that:

1 - The institution may be paid for services rendered or have business relationships with the company (ies) (s) analyzed (s) in
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(ies), the Conglomerate Banco do Brasil may be paid for services rendered or have business relationships with the company (ies)
(s) analyzed (s) in this report, or a natural person or legal entity, fund or universality of rights, which represents the same interest
that (s) of company (ies).

2 - The institution may own equity directly or indirectly, less than 1% of the capital stock (s) of company (ies) discussed (s), but
may purchase, sell or broker securities of company (ies) in the market , the Conglomerate Banco do Brasil may have direct or
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Disclaimer

Relevant Information – Analysts

The analyst (s) (s) investment or securities, (s) involved in the preparation of this report ("Investment Analysts") declares (m) that:

1 - The recommendations contained herein reflect only his personal views about the company and its securities and were prepared
independently and autonomously, even in relation to BB-Banco do Investimento SA and other Group companies.

2 - His compensation is entirely tied to salary policies of the Banco do Brasil SA and do not receive additional compensation for
services rendered to the sender object of the analysis report or persons connected with him.

Items
Analysts
3 4 5
Marcio de Carvalho Montes
Victor Penna

3 - The analyst (s) (s) of investments, their spouses or partners, hold, directly or indirectly, on behalf of himself or others, shares
and / or other securities issued by the companies object of his analysis.

4 - The investment analysts, their spouses or partners, own, directly or indirectly, any financial interest in relation to the company
issuing the securities discussed in this report.

5 - The analyst (s) (s) of investment has ties with individual who works for the sender object of the analysis report.

6 - The information, opinions, estimates and forecasts contained herein refer to the date hereof and are subject to change, not
necessarily implying the obligation of any communication in order to update or review with respect to such change.

RATING

"RATING" is an opinion of the economic and financial fundamentals and various risks to which a company, financial institution or
raising of third party funds might be subject within a specific context which can be modified as these risks change. "Investors
should not consider in any way the "RATING" as an investment recommendation."

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Disclaimer

Administration

Director Executive Manager

Sandro Kohler Marcondes Carlos Eduardo Omine
Research Team BB Securities
4th Floor, Pinners Hall – 105-108 Old Broad St.
Head - Nataniel Cezimbra [email protected] London EC2N 1ER - UK
+44 207 7960836 (facsimile)
Equity Managing Director
Vinicius Balbino Bouhid +44 (207) 3675801
Demand Supply Deputy Managing Director
Chief-Analyst – Mário Bernardes Junior Chief-Analyst – Victor Penna Selma da Silva +44 (207) 3675802
Banks and Financial Services Agribusiness Director of Sales Trading
Mário Bernardes Junior Márcio de Carvalho Montes Boris Skulczuk +44 (207) 3675831
[email protected] [email protected] Head of Sales
Carlos Daltozo Nick Demopoulos +44 (207) 3675832
[email protected] Food & Beverage Institutional Sales
Rafael Reis Luciana Carvalho Annabela Garcia +44 (207) 3675853
[email protected] [email protected] Melton Plumber +44 (207) 3675843
Renata Kreuzig +44 (207) 3675833
Retail Infrastructure and Concessions Trading
Maria Paula Cantusio Renato Hallgren Bruno Fantasia +44 (207) 3675852
[email protected] [email protected] Gianpaolo Rivas +44 (207) 3675842
Head of M&A
Real Estate Basic Materials Paul Hollingworth +44 (207) 3675851
Daniel Cobucci Victor Penna
[email protected] [email protected]
Gabriela Cortez
Industrials and Transportation [email protected]
Mário Bernardes Junior Banco do Brasil Securities LLC
[email protected] Oil & Gas 535 Madison Avenue 34th Floor
Kamila dos Santos Oliveira Wesley Bernabé New York City, NY 10022 - USA
[email protected] [email protected] (Member: FINRA/SIPC/NFA)
Managing Director
Education and Healthcare Utilities Daniel Alves Maria +1 (646) 845-3710
Mário Bernardes Junior Wesley Bernabé Deputy Managing Director
[email protected] [email protected] Carla Sarkis Teixeira +1 (646) 845-3710
Mariana Ruza Paulon Viviane da Cruz Silva Institutional Sales - Equity
[email protected] [email protected] Charles Langalis +1 (646) 845-3714
Institutional Sales - Fixed Income
Fixed Income and Market Strategy Cassandra Voss +1 (646) 845-3713
Chief-Analyst – Wesley Bernabé DCM
Fixed Income, Currency and Commodities Market Strategy Richard Dubbs +1 (646) 845-3719
Renato Odo Hamilton Moreira Alves Syndicate
[email protected] [email protected] Kristen Tredwell +1 (646) 845-3717
José Roberto dos Anjos Fabio Cardoso Sales
[email protected] [email protected] Michelle Malvezzi +1 (646) 845-3715
Myung Jin Baldini +1 (646) 845-3718
Sales Team

Institutional Investor: Retail: [email protected] BB Securities Asia Pte Ltd

[email protected] 6 Battery Road #11-02
Singapore, 049909
Head - Antonio Emilio Ruiz Head - Márcio Carvalho José Managing Director
Bianca Onuki Nakazato Mario D'Amico Marcelo Sobreira +65 6420-6577
Bruno Finotello Rodrigo Ataíde Roxo Director, Head of Sales
Denise Rédua de Oliveira José Carlos Reis +65 6420-6570
Edger Euber Rodrigues Institutional Sales
Elisangela Pires Chaves Paco Zayco +65 6420-6571
Henrique Reis
Marcela Andressa Pereira
Viviane Ferro Candelária
BB-Banco de Investimento S.A. • BB-BI
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