(Convenience Translation into English from the Original Previously Issued in Portuguese)

Transcription

1 (Convenience Translation into English from the Original Previously Issued in Portuguese) Individual and Interim Financial Statements For the Six-month Period Ended September 30, 2013

2 Interim Financial Statements September 30, 2013 CONTENTS COMMENTS ON PERFORMANCE.. 4 INDEPENDENT AUDITOR S REPORT. 27 BALANCE SHEET STATEMENT OF OPERATIONS STATEMENT OF COMPREHENSIVE INCOME (LOSS) STATEMENT OF CHANGES IN EQUITY STATEMENT OF CASH FLOWS STATEMENT OF VALUE ADDED OPINIOS AND STATEMENT GENERAL INFORMATION SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS SHORT-TERM INVESTMENTS TRADE RECEIVABLES INVENTORIES RECOVERABLE TAXES ASSETS HELD FOR SALE ESCROW DEPOSITS CURRENT AND DEFERRED INCOME TAX AND SOCIAL CONTRIBUTION INVESTMENTS PROPERTY, PLANT AND EQUIPMENT BIOLOGICAL ASSETS INTANGIBLE ASSETS BORROWINGS AND FINANCING TRADE PAYABLES TAXES AND CONTRIBUTIONS PAYABLE PROVISION FOR TAX, LABOR, CIVIL AND ENVIRONMENTAL CONTINGENCIES RELATED PARTIES EQUITY NET REVENUES AND COST OF SALES EXPENSES BY NATURE FINANCE INCOME (EXPENSES) OTHER OPERATING INCOME (EXPENSES) EARNINGS (LOSS) PER SHARE RISK MANAGEMENT AND FINANCIAL INSTRUMENTS COMMITMENTS INSURANCE...93

3 29. EMPLOYEES BENEFITS SEGMENT INFORMATION NON-CASH TRANSACTIONS APPROVAL OF INTERIM FINANCIAL STATEMENTS

4 GROWTH OF 8.7% IN REVENUE AND 188.4% IN EBIT IN 6M14 São Paulo, November 12, Biosev, a world leader in the sugar and ethanol industry and the second largest producer of renewable energy from biomass in Brazil, presents its results for the second quarter of the 2013/14 crop year. HIGHLIGHTS Financial Net Revenue of R$2.4 billion, increasing 8.7% in 6M14; Gross Profit of R$308.4 million, up 50.3% from 6M13, EBIT of R$143.9 million, up 188.4% on the year-on-year; Adjusted EBITDA of R$620.0 million, stable compared to 6M13; Sales volume growth of 6.2% from 6M13, driven by a rise in sugar and ethanol exports. Destaques (em R$ mil) 2T14 2T13 % 6M14 6M13 % Receita Líquida 1,333,940 1,310, % 2,399,148 2,208, % CPV (1,061,176) (1,126,400) -5.8% (2,090,743) (2,002,843) 4.4% Lucro Bruto 272, , % 308, , % Margem Bruta 20.4% 14.1% 630 bps 12.9% 9.3% 360 bps EBIT 336, , % 143,977 49, % Margem EBIT 25.2% 17.2% 800 bps 6.0% 2.3% 370 bps Resultado do Período 80,434 81, % (245,377) (270,395) -9.3% Margem Líquida 6.0% 6.2% -20 bps -10.2% -12.2% 200 bps EBITDA 568, , % 610, , % Margem EBITDA 42.6% 42.9% -30 bps 25.4% 27.3% -190 bps EBITDA Ajustado 399, , % 619, , % Margem EBITDA Ajustado 30.0% 33.7% -370 bps 25.8% 28.2% -240 bps Harvest/Production Crushing volume of 21.7 million metric tons, up 8.8% from 6M13; Growth of 31.7% in ethanol production and decrease of 9.8% in sugar production in the six-month period, reflecting the allocation of production to benefit from more favorable ethanol prices, particularly in export markets; Mechanization rate reached an all-time high of 93.2%, up 290 bps over the first six months of last year. 4

5 MESSAGE FROM THE MANAGEMENT Biosev posted a good performance in the first half of the 2013/14 crop: Boosted by a 7% rise in sugar and ethanol production and higher ethanol prices in the international market, Biosev grew its sales by 8.7% in the first half and sharply increased its EBIT. These good results reflect the strong start of this crop year, but also the continued consolidation of Biosev s business model, based on operating flexibility, increasing capacity utilization, agricultural efficiency and sound risk management. This strategy allowed us to increase our harvest mechanization rate to 93.2% in the first half vs. 90.3% in the same period last year, and improve out TCH-agricultural yield by 1.2%. Our ability to shift our production mix allowed us to increase ethanol production and benefit from higher prices in export markets. The company accounted for 15% of Brazil s ethanol exports during the first half. Despite these positive signs, as previously reported, our clusters in Mato Grosso do Sul and the Northeast were strongly hit by unusual weather conditions in the first half. This led to a decrease in crushing volume in the second quarter and a drop in TRS levels at theses clusters. However, the clusters in the state of São Paulo posted higher crushing volumes and improved yield, contributing to an increase in crushing volume in the six-month period and demonstrating that our fill-up strategy, which aims at increasing capacity utilization and optimizing our existing assets, is paying off. We are continuing our efforts to mitigate the impact of these weather events through cost savings and capex reduction programs, encapsulated in our Full Potential project, results of which already can be seen in the capex decrease in this quarter. It is with a great sense of enthusiasm that I join the Biosev team. In November, I became CEO, replacing Christophe Akli, to whom I would like to take this opportunity to extend my sincerest thanks for his excellent work at the helm of the company, which is a leader in its industry, listed on the BM&FBOVESPA and with solid projects. I arrive at Biosev to continue the excellent work being made on building and consolidating this company. We will work to pursue excellence in processes while focusing on maximizing profitability and strengthening our market position. With strong teams of dedicated employees, we will build on our solid first-half performance. By continuing to focus on optimizing our business model, while exercizing strict financial discipline, Biosev is well positioned to capture promising opportunities in its sector and deliver more value for its shareholders. Rui Chammas Chief Executive Officer 5

6 OPERATING PERFORMANCE PRODUCTION Processing and Yield In 6M14, sugarcane crushing volume amounted to 21.7 million metric tons, increasing 8.8% from 6M13, mainly due to the strong start to the harvest in the first quarter of the year. The investments in renovating our sugarcane plantations led to higher cane yields, with a 1.2% increase in TCH in the first six months to 76.1 ton/ha, compared to 75.2 ton/ha in 6M13.Of the total volume crushed, approximately 57.4% corresponds to own cane. Production in metric tons of TRS grew 7.0% from 6M13, reflecting the high crushing volume and improved operating efficiency. Around 50.5% of TRS was allocated to sugar production, reflecting a more balanced production mix in the period. This quarter, sugarcane crushing reached 12.5 million metric tons, down 10.3% from 2Q13, explained by the effects from the sale of the Biological assets of São Carlos Mill, which accounted for 60% of this drop. The delay in the start of harvesting in the Northeast cluster also had a negative impact on crushing compared to last year. Yield decreased 2.6% from 2Q13 to 72.8 ton/ha, impacted by the frosts that affected the state of Mato Grosso do Sul in the second half of July Quality The rate of harvest mechanization reached 93.2% in 6M14, up 290 bps from 6M13, reflecting the regular investments made in increasing agricultural efficiency. The TRS content of the sugarcane decreased 4.3% from 6M13 to end the first half of the crop year at 125.6kg/ton, which is explained by the frosts that affected Mato Grosso do Sul in late July. In the quarter, harvest mechanization reached 92.5% while cane TRS stood at 131.2kg/ton. Production 2Q14 2Q13 % 6M14 6M13 % Crushing ('000 tons) 12,492 13, % 21,716 19, % Own 6,560 7, % 12,466 12, % Third Parties 5,932 6, % 9,250 7, % Sugarcane TRS (kg/ton) % % Mechanization (%) 92.5% 90.0% 250 bps 93.2% 90.3% 290 bps TCH - Agricultural yield (ton/ha) % % Production ('000 tons)¹ 1,650 1, % 2,743 2, % Sugar ('000 tons) 855 1, % 1,324 1, % Ethanol ('000 m³) % % Cogeneration ('000 MWh) % % ¹Amounts in tons of TRS. It considers the conversion factors applied in São Paulo State, published in Consecana Manual. 6

7 Revenue Sales volume rose 6.2% to 2,485 thousand metric tons of TRS in the first half of the 2013/14 crop year, due to the higher crushing volume in the period and the resulting increase in production volume. Net revenue amounted to R$2.4 billion, increasing 8.7% from the first six months of last year, driven mainly by higher export volumes and ethanol prices in the period. In the quarter, net revenue amounted to R$1.3 billion, increasing 1.8% from 2Q13, driven by higher prices, while sales volume contracted by 7.0%. Volumes 2Q14 2Q13 % 6M14 6M13 % Sugar (`000 tons) % 1,279 1, % Domestic Market % % Export Market % 1, % Ethanol (`000 m3) % % Domestic Market % % Export Market % % Energy (thousand MWh) % % Total in TRS Product (`000 tons)¹ 1,309 1, % 2,485 2, % ¹Amounts in tons of TRS. It considers the conversion factors applied in São Paulo State, published in Consecana M anual. Receita Líquida (R$ mil) 2T14 2T13 % 6M14 6M13 % Açúcar 749, , % 1,256,466 1,236, % Mercado Interno 81, , % 202, , % Mercado Externo 668, , % 1,053,717 1,004, % Etanol 414, , % 902, , % Mercado Interno 216, , % 557, , % Mercado Externo 197, , % 344, , % Energia 60,368 90, % 123, , % Outros Produtos 109,559 12, % 117,208 20, % Total 1,333,940 1,310, % 2,399,148 2,208, % 6M14 5.1% 4.9% Net Revenue by Product (%) 6M14 vs. 6M13 6M14 5.1% 4.9% 6M13 5.9% 0.9% 37.6% 37.6% 37.2% 52.4% 52.4% 56.0% Sugar Ethanol Energy Other Products Sugar Ethanol Energy Other Products 7

8 Sugar Sales Net revenue from sugar sales was R$1.3 billion in 6M14, up 1.6% from 6M13, driven by the 7.4% increase in sales volume in the first half of the year, mainly allocated to the export market. The effect was partially offset by the 5.4% decline in the average sales price. The company directed higher volumes to the export market due to the premium offered in relation to the domestic market which remained below the export parity price in the period. In the quarter, sugar revenue amounted to R$749.9 million, virtually stable from the prior-year period. Sugar Sales Volume ( 000 metric tons) and Average Sales Price (R$/metric ton) 988 1,044 1,069 1, , Q13 2Q14 6M13 6M14 Volume DM Volume EM Prices DM Prices EM Sugar Change in Net Revenue 6M14 vs. 6M13 (R$ million) , ,256.5 Net Revenue 6M13 Volume Price Net Revenue 6M14 8

9 Ethanol Sales Net revenue from ethanol sales amounted to R$902.4 million in 6M14, increasing 9.9% from the same period of the previous crop year. The increase was driven by the growth in export volume and the 4.9% increase in the average sales price compared to 6M13. Ethanol sales volume grew by 4.8% from the first six months of last year to reach 668,000 m³. Ethanol export sales volume grew 19.5% compared to 6M13, reflecting the sales opportunities in the U.S. market, where prices offered premiums in relation to both sugar prices and ethanol prices in the domestic market. The depreciation of the Brazilian real against the U.S. dollar also contributed to the bulk of sales volume being directed to the export market. In the quarter, ethanol revenue amounted to R$414 million, down 8.0% from 2Q13. This reduction was partially offset by the average sales price, which increased 3.5% from the same period last year. Ethanol Sales Volume ( 000 m³) and Average Sales Price (R$/m³) 1,406 1,414 1,400 1,406 1,201 1,301 1,235 1, Q13 2Q14 6M13 6M14 Volume DM Volume EM Prices DM Prices EM Ethanol Change in Net Revenue 6M14 vs. 6M13 (R$ million) Net Revenue 6M13 Volume Price Net Revenue 6M14 9

10 Energy Our 12 industrial units currently in operation are energy self-sufficient during the harvest period, with nine of them also producing surplus energy for sale. In 6M14, revenue from energy sales amounted to R$123.0 million, down 5.0% from the year-ago period, reflecting the amounts transferred to the Electricity Trading Chamber in 2Q13, which are returned to distributors the following year. Excluding this effect, which is approximately R$12.7 million, we have an increase of 5.3% in net revenues in 6M14. The average prices increased 5% in comparison to 6M13. Total energy sales amounted to 757 thousand MWh in 6M14, an increase of 0.3% when compared to 6M13, excluding the compensation effect described above, which is approximately 68.5 thousand MWh. In the quarter, energy sales reached R$60.4 million, down 24.9% from 2Q13. This decrease is explained by the reduction of trading operations, partially offset by higher volumes of cogeneration. Energy Sales Volume ( 000MWh) and Average Sales Price (R$/MWh) Q13 2Q14 6M13 6M14 Volume Price Energy Change in Net Revenue 6M13 vs. 6M14 (R$ million) Net Revenue 6M13 Volume Price Net Revenue 6M14 10

11 Other Products We also sell sugarcane by-products, such as dry yeast, powdered molasses, raw and hydrolyzed bagasse for use in animal feed and other inputs. In the first six months of the year, revenue from other products amounted to R$117.2 million, accounting for 4.9% of net revenue for the period, up significantly from 6M13. The increase is explained by the spot sales of finished products to fulfill export performance contracts, in order to comply with foreign exchange obligations. Inventories Sugar inventories ended the quarter at 355 thousand metric tons, down 31.0% from 6M13, reflecting the more ethanol-oriented production mix in the first six months of the year and the reduction in sugarcane TRS from the previous crop year. Ethanol inventories were in line with 6M13, ending the period at 250 thousand m³. Inventories¹ Volumes R$ Thousands 6M14 6M13 % 6M14 6M13 % Sugar ('000 tons) % 237, , % Ethanol ('000 m³) % 281, , % ¹ Inventories at cost price (it considers provision for negative margin) 11

12 Cost of Goods Sold Unit cash cost, excluding the effects from goods for resales, increased 5.0% in 6M14 to R$491 per metric ton of TRS. The increase was due to the 4.3% loss in cane TRS content and also reflects the higher share of third-party sugarcane in the mix. This proportion in the mix should be lower by the end of the 2013/14 crop year, due to higher proportion of own cane to be harvest in the rest of the year. Total costs ended the first six months of the year at R$2.1 billion, up 4.4% on the same period last year. The main factors impacting costs in the period were: i) The 11% increase in personnel expenses to R$249.1 million, mainly explained by wage increases under the collective bargaining agreement, which were not accounted in 1T14 and retroactively reflected in this quarter. ii) The 13.5% increase in raw material costs, driven by the 16.3% growth in third-party sugarcane crushing volume combined with the higher share of third-party sugarcane in the mix (42.6% in 6M14 vs. 39.8% in 6M13); iii) The 30.8% increase in resale volume, which ended the first six months at R$450.4 million, compared to R$344.2 million in 6M13, mainly due to the higher volume of finished goods bought and sold in the market. In the quarter, costs amounted to R$1.1 billion, decreasing 5.8% from 2Q13, mainly due to the following factors: i) The lower volumes sold; ii) The 18.7% increase in personnel expenses due to the wage increases under the collective bargaining agreement, which were not accounted in 1T14 and retroactively reflected in this quarter; iii) The 13.2% increase in raw material costs, basically due to the higher share of third-party cane in the mix (47.5% in 2Q14 vs. 43.2% in 2Q13); iv) The lower amortization of planting and crop treatments, due to the 17.1% decrease in own sugarcane crushing compared to 2Q13. 12

13 COGS - Breakdown by Nature (R$ Thousand) 2Q14 2Q13 % 6M14 6M13 % Planting Amortization (64,937) (74,653) -13.0% (141,260) (137,083) 3.0% Treatment Amortization (64,783) (77,893) -16.8% (144,478) (143,178) 0.9% Personnel (123,040) (103,673) 18.7% (249,095) (224,380) 11.0% Depreciation and Amortization (158,796) (251,818) -36.9% (308,147) (396,633) -22.3% Raw material and inputs, Net (646,926) (594,552) 8.8% (1,245,570) (1,058,272) 17.7% Raw Materials (405,072) (357,830) 13.2% (712,828) (627,857) 13.5% Inputs (34,838) (42,510) -18.0% (82,347) (86,168) -4.4% Products for resale (207,016) (194,212) 6.6% (450,395) (344,247) 30.8% (1,058,482) (1,102,589) -4.0% (2,088,550) (1,959,546) 6.6% Fair Value Biological Assets (Realized) (2,694) (23,811) -88.7% (2,193) (43,297) -94.9% Total Costs (1,061,176) (1,126,400) -5.8% (2,090,743) (2,002,843) 4.4% Unit Cost (Cash)¹ R$/Ton (588) (496) 18.6% (601) (548) 9.7% Unit Cost (Cash)¹ w/o Cost and Volume of Products for resale (R$/Ton) ¹Personnel Cost + Raw material and Inputs Cost, net of taxes. (472) (408) 15.8% (491) (467) 5.0% 13

14 Selling, General and Administrative Expenses In 6M14, selling, general and administrative expenses (cash) amounted to R$303.0 million, up 14.5% from the same period last year. The main factors driving this variation were: i) The increase of 35.2% in freight expenses, which amounted to R$112.0 million in 6M14; driven by more volumes exported in the period and higher unit costs. ii) The 1.0% reduction in personnel expenses in the six-month period due to the reduction in headcount following the sale of the biological assets of Usina São Carlos, which was partially offset by the wage increases under the collective agreement, which took effect in 2Q14. In 2Q14, selling, general and administrative expenses (cash) amounted to R$175.7 million, increasing 18.5% from the same period last year. This increase is explained by the following factors: i) The increase of approximately 27.9% in unit freight expenses of exports; ii) The wage increase under the retroactive collective agreement; iii) The 19.5% increase in service expenses, due to the hiring of consulting services to support projects, such as Full Potential project, which focuses on operational excellence and cost reduction; iv) The 27.1% increase in shipping expenses, due to the higher storage and container volumes in the period. Selling, General and Administrative Expenses (R$ Thousand) 2Q14 2Q13 % 6M14 6M13 % Personnel (41,279) (38,957) 6.0% (73,472) (74,203) -1.0% Freight (66,941) (55,156) 21.4% (111,982) (82,802) 35.2% Services (40,733) (34,082) 19.5% (72,125) (63,402) 13.8% Shipping Charges (14,535) (11,434) 27.1% (21,749) (26,834) -18.9% Others (12,198) (8,601) 41.8% (23,645) (17,468) 35.4% Total Expenses (Cash) (175,686) (148,230) 18.5% (302,973) (264,709) 14.5% 14

15 EBITDA Our EBITDA corresponds to earnings before net financial income (expenses); depreciation, amortization and depletion, except amortization of crop treatments; and income and social contribution taxes on the profit or loss for the period. Among other metrics, our Management uses EBITDA as a measure of our operating and free cash flow performance. We adjusted the calculation of EBITDA 1 ( Adjusted EBITDA ) by eliminating the effects from amortization of crop treatments; gains (losses) on changes in fair value less the estimated cost of sales of realized and unrealized biological assets; fair value amortization of TEAG concession through Equity in subsidiary and non-recurring income (expenses) 2. Adjusted EBITDA In 6M14, Adjusted EBITDA was R$620.0 million, in line with the same period last year. Adjusted EBITDA Margin was 25.8%, contracting 240 bps from 6M13. The main factors that contributed to this result were: i) The increases of 8.8% in crushing volume and 6.2% in sales volume in 6M14. However the fixed cost dilution was negatively impacted by the lower TRS content; ii) The higher cash cost in the period, which was mainly due to the higher share of third-party cane in the crushing mix and to the higher costs with resale merchandise; iii) The 22.0% increase in selling expenses (freights + shipping), due to the higher export volume in the period and also by an increase in export unit freight expenses. iv) The income of R$15.5 million in the line Other Operating Income/Expenses in 6M14, which mainly reflects the gains from the reversal of provisions for labor claims and compares to the expense of R$41.3 million in the same period last year. In 2Q14, Adjusted EBITDA amounted to R$399.7 million, decreasing 9.6% from 2Q13. Adjusted EBITDA Margin was 30.0%, contracting 370 bps from the year-ago quarter. The performance mainly reflects the following: i) The higher share of third-party cane in the crushing mix; ii) The non-dilution of fixed costs, resulting from the lower crushing volumes and lower TRS, which led to an increase of 10.3% in cash COGS, this is mainly due to the frost in Mato Grosso do Sul and the delays in the Northeast; iii) An 18.5% increase in SG&A in 2Q14, mainly due to higher unit freight costs for exports. 1 EBITDA is not a measure for financial performance in accordance with accounting practices adopted in Brazil (BR GAAP, IFRS) and should not be considered singly as an alternative to net income, as an indicator of operating performance, as an alternative for operational cash flow or as a measure of liquidity. EBITDA does not consider certain costs, which could significantly affect our profits, such as financial expenses, taxes, depreciation and amortization, thus limiting its use as a measure of our profitability. 2 Nonrecurring items resulting from one-off events that do not tend to repeat in other periods and therefore do not reflect the typical results of the company s operation. 15

16 EBITDA Composition (R$ Thousand) 2Q14 2Q13 % 6M14 6M13 % Net Revenue 1,333,940 1,310, % 2,399,148 2,208, % Unit Net Revenue (R$/Ton) 1, % % Cash COGS² (769,966) (698,225) 10.3% (1,494,665) (1,282,652) 16.5% Unit Cash COGS (R$/ton) (588) (496) 18.6% (601) (548) 9.7% Cash SG&A (175,686) (148,230) 18.5% (302,973) (264,709) 14.5% Fair value amortization of TEAG concession through Equity in subsidiary 1, % 2,964 (2,043) - Others Operating Revenue/Expenses 9,725 (17,085) - 15,483 (41,270) - Non-recurring items - (5,322) - - 4,632 - Adjusted EBITDA 399, , % 619, , % Adjusted EBITDA Margin 30.0% 33.7% -370 bps 25.8% 28.2% -240 bps Unit Adj. EBITDA (R$/Ton) % % 1 Tons of ATR Product.²Considers personnel costs and costs with raw material and inputs, net EBITDA Conciliation (R$ Thousand) 2Q14 2Q13 % 6M14 6M13 % NET INCOME 80,434 81, % (245,377) (270,395) -9.3% Financial income 119, , % 360, , % Depreciation and Amortization 232, , % 466, , % Income Tax and Social Contribution 137,113 23, % 28,522 (130,194) - EBITDA 568, , % 610, , % EBITDA Margin 42.6% 42.9% -30 bps 25.4% 27.3% -190 bps Treatment Amortization 64,783 77, % 144, , % Earnings (Losses) decurring of fair value changes minus estimated costs for selling bio assets (235,892) (192,180) 22.7% (139,182) (127,705) 9.0% (Realized) Fair value amortization of TEAG concession through Equity in subsidiary 2, , Non-recurring items - (5,322) - - 4,632 - Adjusted EBITDA 399, , % 619, , % Adjusted EBITDA Margin 30.0% 33.7% -370 bps 25.8% 28.2% -240 bps 41.2% Evolution of Adjusted EBITDA (R$ million) 33.7% 26.3% 30.0% 20.7% Q13 3Q13 4Q13 1Q14 2Q14 Adjusted EBITDA Adjusted EBITDA Margin 16

17 FINANCIAL RESULT AND EXCHANGE VARIATION Our financial income (expense) derives from the interest expenses on our debt and the interest income on our financial investments. Income (expense) from transactions involving currency, commodity and interest rate (Libor swaps) derivative (hedge) instruments carried out in accordance with our risk management policy are also recorded as financial income (expense), except for the portion corresponding to the derivative instruments designated as hedge accounting. In 6M14, the financial result was an expense of R$360.8 million, improving 19.9% from the expense of R$450.5 million recorded in 6M13. This variation is mainly due to the following: (i) The reduction in interest expenses, which mainly reflects the lower balance of gross debt; (ii) The increase in interest income, which mainly reflects the higher balance of cash and equivalents and short-term investments in the semester (R$906.8 million in 6M14, compared to R$238.6 million in 6M13); (iii) Net derivative expenses of R$7.4 million, down 90.8% from the expense of R$81.0 million in 6M13, as a higher share of the derivatives portfolio is designated as hedge accounting in this crop year, reducing the volatility of this account line; (iv) The noncash exchange variation loss of R$ million, up 27.1% from the same period last year, due to U.S. dollar appreciation in the period. This noncash variation was offset by the positive exchange variation impact in the adjustment to fair value of Biological Assets in the period. In the quarter, the financial result was an expense of R$119.0 million, improving 1.7% from the expense of R$121.2 million recorded in 2Q13, mainly reflecting: i) The R$8.0 million gain in derivative operations, which increased by 546.9% from 2Q13; ii) The 24.9% reduction in net interest expenses (return on short-term investments + interest earned + interest paid), which is explained by the reduction in gross debt and the increase in cash and cash equivalents in 2Q14; iii) The noncash exchange variation loss of R$37.8 million, compared to the R$3.0 million loss in the same quarter last year. 17

18 Financial Result (R$ Thousand) 2Q14 2Q13 % 6M14 6M13 % Derivative transactions 8,047 1, % (7,435) (80,986) -90.8% Commodities (600) 11, % 3,456 15, % Currency 15,220 (4,454) - 3,626 (80,966) - Sw ap Libor (6,573) (6,127) 7.3% (14,517) (15,220) -4.6% Income from fixed-income investments 13,556 3, % 31,346 6, % Interests Earned 5, ,384 22, % Interests Paid (102,725) (125,402) -18.1% (210,421) (257,631) -18.3% Others Revenues/Expenses (5,822) 2, % (6,911) (3,234) 113.7% (81,276) (118,199) -31.2% (186,037) (312,987) -40.6% FX Variation (37,767) (2,962) % (174,795) (137,524) 27.1% Financial Result, Net (119,043) (121,161) -1.7% (360,832) (450,511) -19.9% NET INCOME (LOSS) FOR THE PERIOD We ended 6M14 with a net loss of R$245.4 million, which represents improvement of 9.3% from the net loss of R$270.4 million recorded in 6M13. The main factors influencing this result were: (i) Gross income growth of 50.3% to R$308.4 million in 6M14; (ii) The 19.9% reduction in the net financial result, which ended the quarter with an expense of R$360.8 million, compared to the expense of R$450.5 million in 6M13; (iii) The R$15.5 million gain in other operating income, compared to the expense of R$41.3 million in 6M13. In the quarter, net income was R$80.4 million, and EBIT grew 48.9% from 2Q13. The main factors contributing to this result were: i) The 5.8% reduction in cost of goods sold, due to the lower variable costs and the reductions in depreciation and amortization, both explained by the lower crushing volume; ii) The R$235.9 million gain from the adjustment to fair value of biological assets, compared to the gain of R$192.2 million in 2Q13; iii) Other operating income of R$9.7 million in 2Q14, compared to the expense of R$17.1 million in the same period last year. 18

19 CAPITAL EXPENDITURE In 6M14, total cash capex amounted to R$438.7 million, decreasing 28.4% from 6M13, mainly due to the following factors: Expansion Investments in expansion amounted to R$28.3 million in the period, down 72.9% from 6M13. The decline was partially due to the completion, in May of this year, of the Passa Tempo Thermal Power Plant, which has cogeneration capacity of 50MW of surplus energy. In the quarter, expansion investments totaled R$8.4 million, decreasing 78.8% from the prior-year period. Maintenance Maintenance investments amounted to R$410.5 million in the first six months of the year, decreasing 19.2% from 6M13. Planting and crop treatments continue to advance in line with our plan, ensuring the renovation of sugarcane fields and gains in agricultural yields. The greater investments in mechanization area, expansion and coogenaration are already finished. Our focus is now the maintenance Capex necessary to renew our canefields, reducing costs thanks to optimization programs, such as the Full Potential project. The main factors contributing to the variation in maintenance investments were: i) The 46.8% decrease in agricultural infrastructure capex to R$18.8 million in 6M14. The higher amounts in 6M13 are explained by the acquisition of harvesters, planters and agricultural transshipment equipment related to the mechanization process; ii) The 7.7% reduction in planting maintenance, with expansion of 10.1% in planted area and reduction of 15.5% in unit costs; iii) The 48.1% reduction in off-season maintenance, which amounted to R$55.3 million. This variation was due to the longer off-season period before 2011/12 crop year; iv) The 50.9% reduction in the item Other, due to certain SHE and IT projects being conducted in the 12/13 crop year; In the quarter, maintenance Capex amounted to R$192.3 million, down 10.1% from 2Q13. Capex 2Q14 2Q13 % 6M14 6M13 % Investment 8,424 39, % 28, , % Industrial 6,116 35, % 23,128 75, % Agriculture - 2, ,177 - IT % 1,345 1, % Planting 1,519 1, % 3,788 2, % Maintenance 192, , % 410, , % Industrial 10,511 7, % 31,496 26, % Agriculture 1,510 4, % 18,851 35, % Planting 64,116 72, % 132, , % Treatment 77,543 88, % 143, , % Intercrop maintenance costs 23,443 18, % 55, , % Others 15,213 22, % 28,568 58, % Capex Total (Cash) 200, , % 438, , % 19

20 DEBT At the end of 6M14, gross debt stood at R$4.7 billion, of which 70.2% was related to long-term borrowings and financing. The amount is 10.1% lower than the gross debt reported at the close of the 2012/13 crop year, due to the amortization of advances on foreign exchange contracts (ACC) and of other international financing facilities, both denominated in U.S. dollar. Our total cash (cash and cash equivalents and short-term investments) amounted to R$906.8 million at the end of 6M14, compared to R$1.4 billion at the end of the last fiscal year. Net debt ended the period at R$3.8 billion, down 1.9% from R$3.9 billion at the close of the 2012/13 crop year. Our dollar-denominated debt increased by R$345.5 million due to the exchange variation effects in the first six months of the year. Of this amount, 49.4% was recorded under equity to be later allocated to revenue. Of the total debt at the end of 6M14 and at the end of the last fiscal year, 64.8% and 66.4%, respectively, corresponded to borrowings and financing denominated in U.S. dollar. Of these amounts, 72.0% and 59.2%, respectively, were designated as hedge instruments for future exports ( Hedge Accounting Natural Hedge ). The Adjusted Debt Ratio 3 closed the first six months of the year at 2.5 times Adjusted EBITDA, which indicates a gradual improvement in this indicator from the last few quarters. Excluding the exchange variation effects in the quarter, the pro-forma Debt Ratio stood at 2.3 times Adjusted EBITDA. The improvement reflects the efforts made between February and April 2013 as part of the strategy to strengthen the Company s capital structure, which involved the private rights issue, the sale of the biological assets of the São Carlos Mill and the proceeds from the IPO. 3 Adjusted Net Debt (excludes inventories available for sale) over LTM Adjusted EBITDA 20

21 Debt - R$ Million 9/30/13 9/30/13 3/31/13 Short-Term Long-Term Total Total Local Currency (315) (1,339) (1,653) (1,757) -5.9% Foreign Currency (1,084) (1,955) (3,039) (3,465) -12.3% Gross Debt (1,398) (3,294) (4,692) (5,222) -10.1% Cash and Equivalents % Cash Investments % Net Debt (492) - (3,786) (3,858) -1.9% Readily Market Inventories (RMI)¹ % Adjusted Net Debt - - (3,267) (3,660) -10.7% ¹ Inventories at cost price (it considers provision for negative margin) Var. % Pro forma excluding FX variation ,890 3,835 3,660 3,430 3,267 2,921 2Q13 3Q13 4Q13 1Q14 2Q14 2Q14p Adjusted Net Debt Adjusted Net Debt/ Ajusted EBITDA 21

22 MARKET OVERVIEW Sugar Market In 2Q14, the price of the sugar NY#11 futures nearby contract increased US$1.10 c/lb from US$16.38 c/lb to US$ 17,48 c/lb, breaking its downward trend. In the period, the Brazilian real depreciated 0.6% against the US dollar from 2.22 R$/US$ to 2.23 R$/US$, contributing to sugar prices increasing in Brazilian real by 6.9% in the quarter, from R$ c/lb to R$ c/lb,. In the quarter, weather events in Brazil and Argentina, combined with strong Chinese demand, led to a slight recovery of sugar prices despite continued positive prospects for northern hemisphere crops. After a rainy June, which affected crushing and TRS, the second quarter experienced drier than normal weather, resulting in better crushing and allowing TRS to recover its levels. In Brazil, southern Mato Grosso do Sul and northern Paraná were hit by frosts, damaging ratoons, cane plantation and affecting the crushing and TRS expectation for 2013/14 in that region. Additionally, Argentina s cane belt was particularly hard hit by cold temperatures, and current estimates point to a reduction of up to 200,000 tons of sugar in the current crop there. While southern hemisphere production was impacted by climate events, China continued its strong pace in sugar purchases. In the quarter China imported 1,7 million tons of raw sugar, of which 87% from Center South Brazil, 600,000 tons more than in the previous quarter. Similarly, other countries increased their imports of raw sugar in the quarter, most notably Dubai (up 252,000 tons over the previous quarter), Iran (up 340,000 tons), Bangladesh (up 226,000 tons), South Korea (up 140,000 tons), Egypt (up 135,000 tons) and Canada (up 140,000 tons), helping to solve a good portion of the S&D surplus in the period. 22

23 Change in Average Sugar Prices VHP (c/lb) vs. Crystal (US$/Ton) vs. Refined (US$/Ton) VHP (#NY11) cus$lb Crystal (ESALQ) US$/Ton Refined (London) US$/Ton Source: Bloomberg, October Average VHP Prices (cus$/lb vs. cr$/lb) and Foreign Exchange Variation VHP (#NY11) cus$/lb VHP (#NY11) cr$/lb FX (US$/R$) Source: Bloomberg, October

24 Ethanol Market According to the ESALQ, prices for hydrous ethanol increased R$ 11/m³, settling at R$ 1,174/m³ net of taxes in the end of 2Q14. Hydrous prices decreased strongly at the start of the quarter, reaching R$1,080/m³ in the third week of August as production finally reached its normal harvest pace after a rainy start of crop. With weather stabilizing and demand picking up at the pumps, prices increased at the end of the quarter as rains resumed. The price of anhydrous ethanol fell R$21/m³, from R$1,310/m³ to R$1,285/m³ at the end of the 2Q14. In the 2Q14, mills produced near 6.3 million m³, approximately 37% above the same period one year earlier. The additional demand resulted from the increase of the anhydrous ethanol blend in gasoline from 20% to 25%, since May 1st and lower hydrous ethanol prices at the pump relative to gasoline. Pump prices for hydrous ethanol averaged 64.5% of the gasoline price in São Paulo state, down 2.4% from the same period one year before. At the end of the quarter, states such as Goiás, Mato Grosso, Paraná and São Paulo had hydrous ethanol prices at competitive levels (below 70% of the price of gasoline) representing 50% of the fuel consumption base. With regard to exports, in 2Q million m³ of Brazilian ethanol was exported according to SECEX (Secretaria do Comércio Exterior) data, decreasing 6.4% in relation to 2Q13, while exports to the United States were down 340 thousand m³ at 600 thousand m³ in the 2Q13 and exports to Asia were up 181,000m³ vs. the previous year at 389 thousand m³. Hydrous and Anhydrous Ethanol Prices (R$/m³) 1,500 1,400 1,300 1,200 1,100 1, Hydrous (ESALQ) Anhydrous (ESALQ) Source: Bloomberg, October

25 Market Outlook In 2Q14 sugar prices began to stabilize and eventually ended the month gaining, following nearly two straight years of declining prices. As flagged in our last outlook, weather and Brazilian currency volatility both played critical roles in the sugar market during the quarter. Crushing weather was excellent in much of Sao Paulo state, but a major freeze in Mato Grosso do Sul and Parana impacted a significant amount of cane in the area. The timing of this freeze ended up coinciding with the lows in world sugar prices. Following the freeze, the world experienced a period of substantial foreign exchange volatility that strongly impacted emerging market currencies. The depreciation and subsequent appreciation of these currencies were important price drivers for the quarter. We expect this sensitivity to foreign exchange variations to continue to play an important role in sugar price dynamics in the coming year. Looking ahead, fundamentally the market focus will initially remain on Brazilian weather before giving way to crop dynamics in the Northern Hemisphere. With plenty of cane available to be crushed, Brazil needs dry weather to deliver on market expectations for sugar production in order to compensate for disappointing sucrose content. Meanwhile, with high in-country stocks and an optimistic crop outlook, India appears poised to play a bigger role in the sugar export market once its harvest gets underway, competing with Thai and intercrop Brazil sugars for global export demand. Mexico may also increase its world market presence in an effort to clear the NAFTA market surplus following another year of high production, but this will depend on international / local price relationship. Government fuel policy continues to be a source of significant uncertainty for both the sugar and ethanol markets. Domestic gasoline prices in Brazil remain bellow in comparison to the world market. Considering this discount, current gasoline price policy does not seem sustainable in the long term given Brazil s fuel deficit. There is also considerable uncertainty surrounding US ethanol policy, as the future of the Renewable Fuel Standard is expected to be determined by US policymakers in the coming months. In the coming year ahead, we expect sugar and ethanol prices to remain correlated. Lower sugar prices have helped to incentivize the world to build inventories but actual consumption has not accelerated commensurately with the increase in supply. The market has shown that despite a significant S&D surplus prices did their job to maintain balance. Going forward we continue to believe that sugar / ethanol prices will need to converge to help clear next year s surplus. The price level at which this convergence happens will largely be determined by government gasoline and ethanol policy in Brazil and the US. 25

26 Guidance The frost that affected Mato Grosso do Sul, a state that accounts for 26.7% of our crushing capacity, combined with the drought in the Northeast region, led us to revise last quarter our guidance for crushing volume in the crop year from 33 million metric tons to between 28.7 and 30.1 million metric tons. We maintain this guidance at the end of this first six months of the fiscal year. We also kept our projection for cane TRS content in this semester, expecting to close the 2013/14 crop year with between 125 kg/ton and 131 kg/ton. Guidance 13/14 min max Crushing (million tons) Sugarcane TRS (Kg/Ton)

27 Deloitte Touche Tohmatsu (Convenience Translation into English from the Original Previously Issued in Portuguese) REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION To the Shareholders and Management of São Paulo - SP Introduction We have reviewed the accompanying individual and consolidated interim financial information of (the Company ), identified as Parent and, respectively, which comprises the balance sheet as of September 30, 2013 and the related statements of operations and comprehensive income (loss) for the three- and six-month periods ended and changes in equity and cash flows for the six-month period then ended, including the explanatory notes. The Company s Management is responsible for the preparation of the individual interim financial information in accordance with technical pronouncement CPC 21 (R1) - Interim Financial Information and the consolidated interim financial information in accordance with technical pronouncement CPC 21 (R1) and international standard IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board - IASB. Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of review We conducted our review in accordance with Brazilian and international standards on review of interim financial information (NBC TR 2410 and ISRE Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with standards on auditing and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion on the individual interim financial information Based on our review, nothing has come to our attention that causes us to believe that the accompanying individual interim financial information included referred to above was not prepared, in all material respects, in accordance with technical pronouncement CPC 21 (R1). Conclusion on the consolidated interim financial information Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated interim financial information referred to above was not prepared, in all material respects, in accordance with technical pronouncement CPC 21 (R1) and international standard IAS

28 Deloitte Touche Tohmatsu Other matters Statements of value added We have also reviewed the individual and consolidated interim statements of value added ( DVA ) for the six-month period ended September 30, 2013, prepared under the responsibility of the Company s Management, the presentation of which is required by the standards issued by the CVM, applicable to the preparation of Interim Financial Information (ITR), and considered as supplemental information for International Financial Reporting Standards - IFRS, which do not require the presentation of DVA. These statements were subject to the same review procedures described above, and, based on our review, nothing has come to our attention that causes us to believe that they were not prepared, in all material respects, consistently with the individual and consolidated interim financial information taken as a whole. The accompanying individual and consolidated interim financial information has been translated into English for the convenience of readers outside Brazil. São Paulo, November 11, 2013 DELOITTE TOUCHE TOHMATSU Auditores Independentes CRC nº 2 SP /O-8 Vagner Ricardo Alves Contador CRC nº 1 SP /O-9 28

29 (Convenience translation into English from the Original Previously Issued in Portuguese) BALANCE SHEET AS AT SEPTEMBER 30, 2013 (In thousands of Brazilian reais - R$) Note Company ASSETS LIABILITIES AND EQUITY CURRENT ASSETS CURRENT LIABILITIES Cash and cash equivalents 3 108, , , ,728 Borrow ings and financing ,123 1,324,115 1,398,445 1,254,433 Short-term investments 4 39, , , ,211 Advances from domestic customers 33,728 10,089 38,178 16,805 Derivative financial instruments 26 29,720 62,711 29,720 62,711 Advances from foreign customers 111, , , ,913 Trade receivables 5 304, , , ,586 Trade payables , , , ,044 Inventories 6 381, , , ,421 Accrued payroll and related taxes 69,795 71, , ,239 Recoverable taxes 7 77,961 53, , ,214 Taxes payable 17 8,507 31,165 70,633 90,405 Other receivables 25,807 15,430 62,847 67,836 Derivative financial instruments ,453 39, ,366 58, ,855 1,396,403 2,361,988 2,477,707 Other payables 59,062 78, , ,313 Assets held for sale 8 3,084 3,084 50,033 63,233 Total current liabilities 1,397,230 1,853,110 2,550,958 2,341,107 Total current assets 969,939 1,399,487 2,412,021 2,540,940 NON-CURRENT LIABILITIES NON-CURRENT ASSETS Borrow ings and financing 15 1,333,322 1,332,951 3,294,040 3,967,379 Long-term receivables: Deferred income tax and social contribution , ,738 Advances to suppliers 11,074 7,187 34,289 34,828 Derivative financial instruments ,037 35,582 58,744 Escrow deposits 9 70,915 64, , ,407 Provision for tax, labor, civil and enviromental contingencies , , , ,607 Recoverable taxes 7 64,809 60,103 69,413 68,291 Taxes payable 17 3,809 4,589 5,662 11,790 Deferred income tax and social contribution , , , ,393 Other payables 10,256 8,493 92, ,933 Other receivables 296, ,604 43,541 47,618 Total non-current liabilities 1,473,399 1,481,501 4,185,172 4,932,191 Biological assets , ,682 1,278,637 1,241,580 Investments 11 1,331,076 1,139, , ,209 EQUITY Property, plant and equipment 12 1,938,909 2,033,953 3,944,102 4,117,416 Capital 20 2,490,036 1,790,036 2,490,036 1,790,036 Intangible assets 14 18,452 21,757 1,028,971 1,036,721 Capital reserve 20 1,356,787 1,405,194 1,356,787 1,405,194 Total non-current assets 4,635,257 4,392,341 7,065,364 7,196,463 Accumulated losses (933,897) (688,720) (933,897) (688,720) Other comprehensive income (loss) (178,359) (49,293) (178,359) (49,293) Total equity attributable to the Company's owners 2,734,567 2,457,217 2,734,567 2,457,217 Note Company Non-controlling interests - - 6,688 6,888 Total equity 2,734,567 2,457,217 2,741,255 2,464,105 TOTAL ASSETS 5,605,196 5,791,828 9,477,385 9,737,403 TOTAL LIABILITIES AND EQUITY 5,605,196 5,791,828 9,477,385 9,737,403 The accompanying notes are an integral part of these interim financial statements. 29

30 (Convenience translation into English from the Original Previously Issued in Portuguese) STATEMENT OF OPERATIONS FOR THE THREE AND SIX-MONTH PERIOD ENDED SEPTEMBER 30, 2013 (In thousands of Brazilian reais - R$) Company Note Three-month period Three-month period ended Six-month period ended ended Six-month period ended NET REVENUE , , , ,058 1,333,940 1,310,683 2,399,148 2,208,104 Cost of sales and services 13, 21, 22 (359,243) (404,195) (791,964) (774,362) (1,061,176) (1,126,400) (2,090,743) (2,002,843) GROSS PROFIT 79,962 85,247 96, , , , , ,261 OPERATING INCOME (EXPENSES) 155,010 61,403 (118,601) (240,899) 63,826 41,749 (164,428) (155,339) General, administrative and selling 22 (79,788) (82,458) (151,132) (151,241) (184,059) (157,561) (320,050) (283,028) Gains (losses) on changes in fair value less estimated costs to sell biological assets - unrealized , ,658 (40,397) 67, , , , ,002 Equity in subsidiaries 11 81,382 34,827 57,174 (126,528) (426) 405 (1,236) (2,043) Other operating income 24 33,209 4,419 51,103 8,717 61,263 46, ,467 51,163 Other operating expenses 24 (19,795) (24,043) (35,349) (38,886) (51,538) (63,456) (115,984) (92,433) OPERATING INCOME (LOSS) BEFORE FINANCE INCOME (EXPENSES) 234, ,650 (22,150) (88,203) 336, , ,977 49,922 Finance income ,964 18, , , ,496 35, , ,003 Finance expenses 23 (168,594) (58,804) (300,400) (488,840) (273,772) (153,202) (500,715) (667,990) Exchange rate changes 23 (22,437) (3,420) (117,081) (95,111) (37,767) (2,962) (174,795) (137,524) ICOME (LOSS) BEFORE TAXES ON INCOME 207, ,134 (229,992) (348,180) 217, ,871 (216,855) (400,589) INCOME TAX AND SOCIAL CONTRIBUTION 10.2 (127,270) (21,917) (15,185) 78,194 (137,113) (23,687) (28,522) 130,194 PROFIT (LOSS) FOR THE PERIOD 80,635 81,217 (245,177) (269,986) 80,434 81,184 (245,377) (270,395) Attributable to: Company's ow ners ,635 81,217 (245,177) (269,986) Non-controlling interests (201) (32) (200) (409) EARNINGS (LOSS) PER SHARE - R$ Basic ( ) ( ) ( ) ( ) Diluted ( ) ( ) ( ) ( ) The accompanying notes are an integral part of these interim financial statements. 30