São Martinho S.A. (Convenience Translation into English from the Original Previously Issued in Portuguese)

Transcription

1 (Convenience Translation into English from the Original Previously Issued in Portuguese) São Martinho S.A. Interim Financial Statements for the Quarter and Six-month Period Ended September 30, 2007 and Independent Accountants Review Report - Restatement Deloitte Touche Tohmatsu Auditores Independentes

2 (Convenience Translation into English from the Original Previously Issued in Portuguese) INDEPENDENT ACCOUNTANTS SPECIAL REVIEW REPORT To the Shareholders and Management of São Martinho S.A. Pradópolis - SP 1. We have performed a special review of the accompanying interim financial statements of São Martinho S.A. and subsidiaries, consisting of the individual (Company) and consolidated balance sheets as of September 30, 2006, the related statements of operations for the quarter and six-month period then ended and the performance report, all expressed in Brazilian reais and prepared in accordance with Brazilian accounting practices under the responsibility of the Company s management. 2. Our review was conducted in accordance with specific standards established by the Brazilian Institute of Independent Auditors (IBRACON), together with the Federal Accounting Council, and consisted principally of: (a) inquiries of and discussions with certain officials of the Company and its subsidiaries who have responsibility for accounting, financial and operating matters about the criteria adopted in the preparation of the interim financial statements, and (b) review of the information and subsequent events that had or might have had material effects on the financial position and results of operations of the Company and its subsidiaries. 3. Based on our special review, we are not aware of any material modifications that should be made to the interim financial statements referred to in paragraph 1 for them to be in conformity with Brazilian accounting practices and standards established by the Brazilian Securities and Exchange Commission (CVM), specifically applicable to the preparation of mandatory interim financial statements. 4. As mentioned in note 2, since the Company changed its fiscal year end date to March 31 of each year and in order to allow comparison of the interim financial statements, the individual and consolidated statements of operations for the quarter of the previous year comprise a three-month period ended September 30, Previously, the Company filed its interim financial statements for the quarter ended October 31, 2006 with the Brazilian Securities Commission (CVM). The individual and consolidated statements of operations for the quarter ended September 30, 2006 were subjected to the same review procedures described in paragraph 2, and we are not aware of any material modifications that should be made to these statements of operations for them to be in conformity with Brazilian accounting practices and standards established by the Brazilian Securities and Exchange Commission (CVM), specifically applicable to the preparation of mandatory interim financial statements. 5. As mentioned in note 21, the Interim Financial Statements referred in paragraph 1 are being restated in order to include the Parent Company statement of cash flows.

3 6. The accompanying interim financial statements have been translated into English for the convenience of readers outside Brazil. Campinas, November 9, 2007, except for notes 21, 22 and 23, whose date is April 16, 2008 DELOITTE TOUCHE TOHMATSU Auditores Independentes José Carlos Amadi Engagement Partner

4 SÃO MARTINHO S.A. (FORMERLY COMPANHIA INDUSTRIAL E AGRÍCOLA OMETTO) BALANCE SHEETS AS OF SEPTEMBER 30 AND JUNE 30, 2007 (In thousands of Brazilian reais - R$) Company Consolidated Company Consolidated ASSETS Note 9/30/2007 6/30/2007 9/30/2007 6/30/2007 LIABILITIES AND SHAREHOLDERS' EQUITY Note 9/30/2007 6/30/2007 9/30/2007 6/30/2007 CURRENT ASSETS CURRENT LIABILITIES Cash and banks 4 3, ,740 28,628 Loans and financing 12 29,470 39, , ,267 Temporary cash investments 5 119, , , ,341 Trade accounts payable 13 17,877 16,431 88,669 77,034 Receivables from Copersucar 6 6,841 4,053 34,210 41,273 Payables to Copersucar 14 10,467 8,968 39,779 34,132 Inventories 7 80,101 51, , ,657 Payroll and related charges 8,984 7,677 36,604 32,135 Recoverable taxes 8 12,340 9,360 39,987 29,686 Taxes payable 3,887 2,168 8,355 7,154 Other assets 5,607 4,684 20,526 21,416 Related parties , , , ,001 Dividends payable 1 20, ,000 Other liabilities ,390 1,552 NONCURRENT ASSETS 71,046 94, , ,293 Long-term assets: Related parties 9 21,114 21, NONCURRENT LIABILITIES Deferred income and social contribution taxes 17 42,250 38,386 85,423 81,968 Long-term liabilities Other assets 3,949 4,408 13,522 12,261 Loans and financing 12 66,360 68, , ,651 Investments: Payables to Copersucar 14 63,112 59, , ,672 In subsidiaries and affiliates 10 1,041,177 1,035, Taxes in installments 8,959-8,959 - In subsidiaries and affiliates - goodwill ,945 50,574 Deferred income and social contribution taxes 17 64,770 66, , ,450 Other investments Provision for contingencies 18 4,671 7,273 71,187 75,574 Property, plant and equipment , ,133 2,072,213 2,037,793 Other liabilities - - 1,814 1,867 Deferred charges ,296 11, , , , ,214 1,680,117 1,689,708 2,237,557 2,194,027 MINORITY INTEREST - - 7,611 7,611 SHAREHOLDERS' EQUITY 15 Capital 360, , , ,000 Revaluation reserves 1,185,953 1,198,947 1,185,953 1,198,947 Legal reserve 5,079 5,079 5,079 5,079 Capital budget reserve 95,427 95,427 95,427 95,427 Retained earnings (accumulated deficit) (17,458) 1,457 (17,458) 1,457 1,629,001 1,660,910 1,629,001 1,660,910 TOTAL ASSETS 1,907,919 1,957,790 2,835,076 2,756,028 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,907,919 1,957,790 2,835,076 2,756,028 The accompanying notes are an integral part of these interim financial statements. 3

5 SÃO MARTINHO S.A. (FORMERLY COMPANHIA INDUSTRIAL E AGRÍCOLA OMETTO) STATEMENTS OF OPERATIONS FOR THE QUARTERS AND SIX-MONTH PERIODS ENDED SEPTEMBER 30, 2007 AND 2006 (In thousands of Brazilian reais - R$, except per share data) Company Consolidated 9/30/2007 9/30/2007 9/30/2006 9/30/2006 9/30/2007 9/30/2007 9/30/2006 9/30/2006 Note Quarter Six-month period Quarter Six-month period Quarter Six-month period Quarter Six-month period GROSS SALES ,261 81,284 74, , , , , ,268 DEDUCTIONS (2,857) (6,029) (5,292) (10,307) (16,148) (31,390) (31,219) (38,293) NET SALES 39,404 75,255 69, , , , , ,975 COST OF SALES (43,094) (84,742) (48,068) (80,585) (165,392) (323,818) (225,075) (267,576) GROSS PROFIT (LOSS) (3,690) (9,487) 21,355 28,024 13,679 29, , ,399 Operating (expenses) income: Selling expenses (1,539) (4,261) (4,138) (5,549) (12,289) (26,193) (24,080) (26,397) General and administrative expenses (6,037) (10,621) (5,690) (10,690) (24,596) (47,255) (16,011) (22,681) Management fees (1,553) (2,684) (693) (1,216) (2,679) (4,582) (2,401) (3,120) Equity in subsidiaries 10 (17,533) (22,437) 43,789 46, Other operating income (expenses), net 19 (10,240) (10,160) (45) (14) (17,777) (17,946) (36,902) (50,163) 33,223 28,740 (57,341) (95,976) (42,482) (52,161) Income (loss) from operations before financial income (expenses) (40,592) (59,650) 54,578 56,764 (43,662) (66,160) 79,332 83,238 Financial income (expenses) Financial income 6,663 17,727 4,594 11,018 16,377 42,058 27,669 36,152 Financial expenses (4,917) (10,719) (6,937) (15,626) (20,274) (40,020) (33,625) (44,799) Monetary and exchange gains 951 1, ,220 4,651 7,162 9,385 13,843 Monetary and exchange losses (1,153) (1,645) (506) (3,801) (5,028) (7,066) (8,670) (13,889) 1,544 6,809 (2,280) (5,189) (4,274) 2,134 (5,241) (8,693) Income (loss) from operations (39,048) (52,841) 52,298 51,575 (47,936) (64,026) 74,091 74,545 Nonoperating income (expenses) (1,682) ,144 (1,297) Income (loss) before income and social contribution taxes and loss from spun-off net assets (38,966) (52,422) 53,079 49,893 (47,836) (63,508) 75,235 73,248 Income and social contribution taxes - current - - (4,260) (2,500) - - (23,464) (22,807) Income and social contribution taxes - deferred 7,057 9,943 1,004 (1,037) 15,927 21,029 (1,948) (4,085) 17 7,057 9,943 (3,256) (3,537) 15,927 21,029 (25,412) (26,892) Net loss from spun-off assets and liabilities (276) (276) Net income (loss) (31,909) (42,479) 49,823 46,080 (31,909) (42,479) 49,823 46,080 Earnings (loss) per share at end of period (0.28) (0.38) The accompanying notes are an integral part of these interim financial statements. 4

6 (Convenience Translation into English from the Original Previously Issued in Portuguese) SÃO MARTINHO S.A. (FORMERLY COMPANHIA INDUSTRIAL E AGRÍCOLA OMETTO) NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE QUARTER AND SIX-MONTH PERIOD ENDED SEPTEMBER 30, 2007 (Amounts in thousands of Brazilian reais - R$, unless otherwise stated) 1. OPERATIONS 1.1. Operations São Martinho S.A. (the Company ) and its subsidiaries are primarily engaged in planting sugarcane and manufacturing and trading sugar, alcohol and other sugarcane by-products; cattle raising and agricultural production; import and export of goods, products and raw material; and holding equity interests in other companies. Approximately 70% (64% - Consolidated) of the sugarcane used in production derives from the Company s own plantations, shareholders, related parties and agricultural partnerships, and the remaining 30% (36% - Consolidated), from thirdparty suppliers. At the Extraordinary Shareholders Meeting held on September 28, 2006, shareholders approved the change of the Company s name from Companhia Industrial e Agrícola Ometto to São Martinho S.A. At the Extraordinary Shareholders Meeting held on November 24, 2006, the Company s shareholders approved the proposal to list the Company s shares on BOVESPA (São Paulo Stock Exchange) joining the BOVESPA New Market ( Novo Mercado ). The registration of Publicly-Traded Company was provided by the CVM (Brazilian Securities Commission) on February 7, The Company conducted an initial public offering of 13,000,000 common shares, which resulted in a capital increase of R$ 260, Association with COPERSUCAR The Company and its wholly-owned subsidiary Usina São Martinho S.A., and also the jointly-owned indirect subsidiary Usina Santa Luíza S.A., are associated with the Cooperativa de Produtores de Cana, Açúcar e Álcool do Estado de São Paulo Ltda. COPERSUCAR [Cooperative of Sugarcane, Sugar and Alcohol Producers of the State of São Paulo] (also called the Cooperative ), whose cooperative by-laws signed by the parties require the Company to make available immediately and definitely to COPERSUCAR the total production of sugar and alcohol of the Company, the subsidiary Usina São Martinho S.A., and the jointly-owned indirect subsidiary Usina Santa Luíza S.A. 5

7 As established in COPERSUCAR s by-laws, revenues from the sale of these products and expenses incurred due to the Cooperative s operations are allocated by COPERSUCAR to each cooperative member, proportionally to the products made available, regardless the physical amount removed from the cooperative members warehouses. As stated in its annual financial statements, COPERSUCAR uses the accrual basis to allocate revenues and expenses to its cooperative members in conformity with Brazilian accounting practices and Regulatory Opinion 66, issued by the CST (Coordination of the Tax System) on September 5, The amounts of revenues and expenses calculated by COPERSUCAR upon the apportionment to each cooperative member, including the inventory amounts to be allocated to cost of sales, are reported monthly by COPERSUCAR to its cooperative members in specific and detailed reports according to the nature of the event. The total amount is recorded in accounting books and presented in the Cooperative s financial statements, which are prepared in accordance with Brazilian accounting practices and audited by independent auditors, ending March 31 of each year (April 30, up to 2006) Partial spin-off of assets and liabilities On March 31, 2006, the Company and its subsidiary Usina São Martinho S.A. completed a spin-off of certain assets and liabilities not related to sugarcane plantation and sugar and alcohol production, which were transferred to affiliates. The spin-off was approved at the Extraordinary Shareholders Meetings of both companies, held on April 30, The balances of revenues, expenses and the related tax effects arising from spun off assets and liabilities for the six-month period ended September 30, 2006 are presented in specific lines of the individual and consolidated statements of operations, for purposes of segregation of other balances representing sugarcane plantation and sugar and alcohol production, allowing for a comparative analysis of the Company s operations for that six-month period without such effects. In the six-month period ended September 30, 2006, the main impact of the spun-off assets and liabilities (Company and Consolidated) on income derives from the equity gain in subsidiaries of R$

8 1.4. Ownership interest in the jointly-owned indirect subsidiary Mogi Agrícola S.A. On May 5, 2006, the wholly-owned subsidiary Usina São Martinho S.A. acquired 2,039,057 common shares from a Mogi Agrícola S.A. shareholder for R$ 7,233, increasing its ownership interest in that subsidiary to 30.86%. In addition to this acquisition, on May 17, 2006, Usina São Martinho, S.A. granted an intercompany loan of R$ 7,116, payable in 24 months, to the same shareholder, which still holds 2,039,056 common shares (corresponding to 15.16% of total capital) of Mogi Agrícola S.A. This loan is subject to monetary adjustment corresponding to the income distributed by Mogi Agrícola S.A. on any account during the period in which the loan is in effect. Usina São Martinho S.A. will also exercise the voting right arising from the shares held by this shareholder during the loan period. In view of the strategic interest of Usina São Martinho S.A. in Mogi Agrícola S.A. s operations and the possibility that this loan may be settled through the delivery of 2,039,056 shares of Mogi Agrícola S.A. to Usina São Martinho S.A., according to the agreement between the parties, Usina São Martinho S.A. recorded this transaction as an acquisition, increasing its ownership interest in Mogi Agrícola S.A. to 46.02%. There was no amendment to the shareholders agreement of Mogi Agrícola S.A. arising from these transactions, and Mogi Agrícola S.A. continued to be a jointly-owned subsidiary of Usina São Martinho S.A. These increases in ownership interest resulted in a negative good will of R$ 358, calculated based on Mogi Agrícola S.A. s financial statements as of April 30, 2006, conformed to the accounting practices of the parent company Merger of shares of Usina São Martinho S.A. into the Company At the Extraordinary Shareholders Meeting held on September 28, 2006, the shareholders of Usina São Martinho S.A. approved the merger of all its shares into the Company, based on Usina São Martinho S.A. s financial statements as of April 30, This operation was approved by the Company s shareholders at the Extraordinary Shareholders Meeting held on the same date. The ratio of exchange of Usina São Martinho s shares for the Company s shares was determined through a business valuation of both companies by an independent specialized firm. After this merger, Usina São Martinho S.A. became a wholly-owned subsidiary of the Company. As provided for in the share merger agreement, the Company recorded the income of Usina São Martinho S.A. as equity in subsidiaries, beginning May 1, The effects on income, resulting from the change in the consolidation percentage of the subsidiary Usina São Martinho S.A., related to May and June 2006, were recorded in the accounting books beginning on the date of the Extraordinary Shareholders Meeting that took place on September 28, The effects of this merger of shares are shown in note 21, comprising also April 2006, referring to the six-month period ended September 30, 2006, for purposes of comparability with the six-month period ended September 30, Sale of interest in Usina Boa Vista S.A. On March 26, 2007 the Company and its subsidiary Usina São Martinho S.A. sold to Mitsubishi Corporation, for R$ 7,890, a 10% interest (7,172,627 shares) in the jointly-owned subsidiary Usina Boa Vista S.A. ( Usina Boa Vista ), of which 2,151,788 shares (3% interest) were owned by the Company and 5,020,839 shares (7% interest) were owned by the subsidiary Usina São Martinho S.A. As a result, the Company s interest in in Usina Boa Vista is now 27% (90% - Consolidated) 7

9 1.7. Acquisition of companies by the jointly-owned subsidiary Etanol Participações S.A. On April 12, 2007, Etanol Participações S.A., a holding company composed of the subsidiary Usina São Martinho S.A., together with Cosan S.A. Indústria e Comércio and Santa Cruz S.A. Açúcar e Álcool, with interests of 41.67%, 33.33% and 25.00%, respectively, acquired Usina Santa Luiza S.A, whose management is shared by them, with a board of directors and an executive board composed of representatives of each shareholder. The acquisition value of Usina Santa Luiza S.A. was R$ 184,080. Etanol Participações S.A. also acquired Agropecuária Aquidaban S.A. from the shareholders of Usina Santa Luíza S.A., for R$ 61,360. Additional information on this investment is provided in note PRESENTATION OF INTERIM FINANCIAL STATEMENTS At the Extraordinary Shareholders Meeting held on September 28, 2006, the shareholders resolved to change the end of the Company s fiscal year to March 31 of every year, in line with the initiative of COPERSUCAR and the start and end of the sugarcane crop. Due to the change in the Company s fiscal year end date and in order to allow the comparability of the interim financial statements, the individual and consolidated statements of operations relating to the previous year, presented in the interim financial statements, comprise the three-month and six-month periods ended September 30, Previously, the Company filed interim financial statements for the quarter and six-month period ended October 31, 2006 with the Brazilian Securities and Exchange Commission (CVM). The statements of operations for the quarter and six-month period ended September 30, 2006, including the combined balances mentioned in note 23, comprise certain cost reallocations among periods of the respective year, related to depreciation, whose recognition method was modified in the current year for the crop period (previously the straight-line method was adopted) based on the annual rates defined in note 11 and production estimates during the crop months, in order to allow comparability with the statements of operations for the quarter and six-month period ended September 30, The individual and consolidated interim financial statements have been prepared in accordance with Brazilian accounting practices and consistently with the annual financial statements of the Company and its subsidiaries. The interim financial statements should be read together with such annual financial statements. 8

10 3. CONSOLIDATION CRITERIA The consolidated balance sheets as of September 30 and June 30, 2007, and the consolidated statements of operations for the quarters and six-month periods ended September 30, 2007 and 2006 consider the percentage of ownership interest in subsidiaries in effect on the respective dates and the applicable proportional consolidation criteria. The consolidated balances include the following subsidiaries: Company Main activities Usina São Martinho S.A. 100% interest as of September 30, 2007 and June 30, 2007 and 11.4% interest up to April 30, Usina Boa Vista S.A. - 27% interest as of September 30, 2007 and June 30, 2007 (90% including the interest of Usina São Martinho S.A.) and 30% up to March 26, 2007 (100% including the interest of Usina São Martinho S.A.). Sugarcane processing; own production and production acquired from third parties; manufacture and sale of sugar, alcohol and their by-products; agricultural production and cattle raising; import and export of goods, products and raw material; and holding of equity interests in other companies. Sugarcane processing; own production and production acquired from third parties; manufacture and sale of sugar, alcohol and their by-products; agricultural production and cattle raising; import and export of goods, products and raw material; and holding of equity interests in other companies. Usina Boa Vista S.A. is in the preoperating stage. Omtek Indústria e Comércio Ltda % interest for all reported periods. Sodium salt processing and sale in the foreign market. The operating cycle is the same as the parent company s, which is responsible for supplying (under specific conditions) sugarcane molasses, steam and electric power, inputs necessary for the company s production. Usina São Martinho S.A. was a jointly-owned subsidiary until September 28, 2006, since no shareholder individually had ownership control over the company until that date, as established in paragraph 1, article 32 of CVM Instruction No. 247, of March 27, Due to the event described in note 1.5, related to the increase in the Company s interest in Usina São Martinho S.A. with the merger of shares approved at the Extraordinary Shareholders Meeting on September 28, 2006, beginning in the second quarter of the year ended March 31, 2007 (i.e., October 31, 2006), the consolidation of the financial statements started being made considering a 100% interest in Usina São Martinho S.A. In compliance with the respective merger agreement, the Company recognized as equity in subsidiaries and consolidated Usina São Martinho S.A. s results of operations beginning May 1, This fact should be considered in the comparative analysis of the consolidated statements of operations for the quarters and six-month periods ended September 30, 2007 and The interim financial statements of Usina São Martinho S.A are consolidated prior to the consolidation by the Company, using accounting practices and consolidation criteria consistent with those used by the Company. 9

11 The consolidation of Usina São Martinho includes the following subsidiaries: Usina Boa Vista S.A. - 63% interest as of September 30, 2007 and June 30, 2007 (70% interest up to March 26, 2007). Usina São Martinho S.A. fully consolidates Usina Boa Vista S.A, stating in a separate caption of its consolidated interim financial statements the 37% minority interest (30% up to March 26, 2007). Mogi Agrícola 46.02% interest as of September 30 and June 30, 2007 (15.7% up to April 30, 2006) see note 14. Mogi Agrícola S.A. is engaged in agricultural production s and holding equity interests in other companies, as partner or shareholder. Usina São Martinho S.A. is the parent company of Mogi Agrícola S.A. jointly with other shareholders under an agreement between them. Etanol Participações S.A % interest as of September 30 and June 30, Etanol Participações S.A., established in February 2007, is engaged in holding equity interests in other companies, as partner or shareholder. Usina São Martinho S.A. is the parent company of Etanol Participações S.A. jointly with other shareholders under an agreement between them. The financial statements of Etanol Participações S.A. as of December of the calendar year are consolidated prior to the consolidation carried out by Usina São Martinho S.A., and the respective accounting practices and consolidation criteria are adjusted to conform to the practices adopted by the Company before the recognition of equity in subsidiaries and consolidation. Said adjustments refer basically to the goodwill amortization related to future earnings and appreciation of assets. The main captions of the consolidated financial statements of this jointly-owned indirect subsidiary are as follows: 09/30/ /30/2007 Current assets 63,051 52,389 Noncurrent assets: Long-term assets 8,395 6,820 Goodwill on purchases of investments future earnings 117, ,378 Goodwill on purchases of investments appreciation of assets 88,130 86,522 Permanent assets 51,060 59,837 Total assets 328, ,946 Current liabilities 49,730 39,585 Noncurrent liabilities 45,559 45,063 Shareholders equity 232, ,298 Total liabilities 328, ,946 09/30/2007 (quarter) 09/30/2007 (six-month period) Gross sales 30,315 58,232 Gross margin (834) 1,814 Operating expenses (10,082) (16,503) Loss from operations (12,164) (15,923) Net loss (8,362) (11,455) 10

12 As mentioned in note 1.7, Etanol Participações S.A. acquired Usina Santa Luiza S.A. and Agropecuária Aquidaban S.A. on April 12, Thus, Etanol Participações S.A. s consolidation includes the financial statements of the following jointly-owned indirect subsidiaries: Usina Santa Luiza S.A. - wholly-owned subsidiary. Usina Santa Luiza S.A. is engaged in the processing of sugarcane purchased from third parties, production of sugar and alcohol (all processes) traded through COPERSUCAR. It is also focused on fuel resale, import and export, cogeneration of electric power and other businessrelated services. The main captions of the financial statements of this jointly-owned indirect subsidiary as of April 30 of the calendar year are as follows: 09/30/ /30/2007 Current assets 45,303 31,372 Noncurrent assets: Long-term assets 32,930 27,512 Permanent assets 20,009 23,428 Total assets 98,242 82,312 Current liabilities 25,113 14,889 Noncurrent liabilities 38,761 36,291 Shareholders equity 34,368 31,132 Total liabilities 98,242 82,312 09/30/2007 (quarter) 09/30/2007 (six-month period) Gross sales 32,799 62,930 Gross margin 8,157 13,458 Operating expenses (6,573) (10,540) Income from operations 1,584 3,338 Net income 500 1,139 Agropecuária Aquidaban S.A. - wholly-owned subsidiary. Agropecuária Aquidaban S.A. is engaged in agricultural, livestock, and other directly related activities, mainly planting and trading of sugarcane exclusively for Usina Santa Luiza S.A. The main captions of the financial statements of this jointly-owned indirect subsidiary as of April 30 of the calendar year are as follows: 09/30/ /30/2007 Current assets 17,451 20,158 Noncurrent assets: Long-term assets 6,025 3,724 Permanent assets 34,127 36,410 Total assets 57,603 60,292 Current liabilities 55,167 49,524 Noncurrent liabilities 6,797 8,772 Shareholders equity (4,361) 1,996 Total liabilities 57,603 60,292 11

13 09/30/2007 (quarter) 09/30/2007 (six-month period) Gross sales 12,714 24,574 Gross margin (9,393) (2,653) Operating expenses (2,156) (4,226) Loss from operations (11,549) (16,678) Net loss (7,925) (11,289) As mentioned in note 1.3, the spin-off of assets and liabilities not related to sugarcane plantation and sugar and alcohol production operations, which occurred on March 31, 2006, refers to investments in other companies that were not consolidated into the Company s statements of operations for the year ended April 30, 2006 and subsequent periods. The equity in subsidiaries arising from these investments is summarized and presented in the specific account net loss from spun-off assets and liabilities in the individual and consolidated statements of operations for the six-month period ended September 30, In addition, the main consolidation procedures adopted were as follows: a) Elimination of interests in shareholders equity of subsidiaries; b) Elimination of investments and equity in subsidiaries; c) Elimination of intercompany balances and unrealized profits arising from intercompany transactions; d) Reclassification of negative goodwill in indirect subsidiaries to long-term liabilities other. 4. CASH AND BANKS Include deposits in bank accounts available for immediate use. These balances reflect amounts resulting from the normal flow of operations of the Company and its subsidiaries and the use of such cash to pay commitments at the beginning of the month subsequent to the closing of the interim financial statements. 5. TEMPORARY CASH INVESTMENTS Company Type Yield (weighted average rate) 09/30/ /30/2007 Fixed-income funds % of the CDI (interbank deposit rate) 119, ,343 Total 119, ,343 12

14 Consolidated Type Yield (weighted average rate) 09/30/ /30/2007 Repurchase agreements 100% of the CDI Debenture repurchase agreements % of the CDI 3,848 3,742 Debenture repurchase agreements % of the CDI 7,099 6,906 Overnight US dollar variation + floating rate of 2.68% to 2.75% p.a ,010 Fixed-income funds % of the CDI variation 144, ,999 Variable-income funds 100% of the CDI 628 2,198 Variable-income funds 80% of the CDI 2,395 3,517 Total 160, ,341 Repurchase and debenture repurchase agreements represent fixed-income investments backed by government securities, ensuring fixed rate yield as specified above, regardless of the change in the yield of the acquired securities. All investments may be redeemed within 30 days, without loss of yield, except for the amount of R$ 2,395 offered as a loan guarantee, whose redemption will occur when the related obligation is paid.. 6. RECEIVABLES FROM COPERSUCAR Receivables from COPERSUCAR are similar to a current account, including amounts receivable for apportionment of sales of products and amounts deductible for apportionment of expenses and advances. The advances received that exceed the cooperative members right arising from the apportionment of revenues and expenses are subject to interest equivalent to 100% of the daily DI (interbank deposit rate) disclosed by CETIP (Clearinghouse for the Custody and Financial Settlement of Securities), representing the average funding by COPERSUCAR. Other components of this account are not subject to interest. Average collection periods are as follows: 17 days for alcohol sales in the domestic market; 21 days for alcohol sales in the foreign market ; 30 days for sugar sales in the domestic market; 23 days for sugar sales in the foreign market. The above collection profile results in an expected average turnover of 22 days for these receivables as of September 30, 2007 (29 days as of June 30, 2007). The apportioned operating expenses are offset against amounts receivable on a monthly basis. COPERSUCAR passes on to the cooperative members any expenses arising from provisions for losses on end customers, in view of its management of the credit granting and collection processes. The Company identified no need to record an allowance for doubtful accounts in addition to the amounts passed on by COPERSUCAR. Historically, receivables from COPERSUCAR have not presented material losses. 13

15 7. INVENTORIES Company 09/30/ /30/2007 Finished products transferred to Copersucar: Sugar and Alcohol 48,057 18,578 Sugarcane crop treatment 23,603 26,058 Advances purchases of sugarcane 2,750 1,769 Inputs, indirect materials, maintenance materials and other 10,279 8,020 Provision for inventory write-down to net realizable value (4,588) (2,912) 80,101 51,513 Consolidated 09/30/ /30/2007 Finished products transferred to Copersucar: Sugar and Alcohol 173,140 69,155 Sodium salt 5,074 3,751 Sugarcane crop treatment 73,355 82,951 Advances purchases of sugarcane 38,868 35,822 Inputs, indirect materials, maintenance materials and other 31,628 28,116 Provision for inventory write-down to net realizable value (5,261) (4,138) 316, ,657 As the Company s and subsidiaries production is immediately made available to COPERSUCAR and the distribution to customers by the Cooperative is not necessarily linked to sales proportionally attributed to the Company and subsidiaries, the amount of sugar and alcohol inventory that is physically kept by the Company differs from the book balance of inventories. As of September 30, 2007, the Company, the subsidiary Usina São Martinho S.A. and the jointly-owned indirect subsidiary Usina Santa Luiza S.A. physically kept sugar and alcohol inventories in the amounts of R$ 64,859 (R$ 173,078 - Consolidated), and R$ 22,905 (R$ 58,527 - Consolidated) as of June 30, 2007, stated at average production cost. The Company and its subsidiaries are responsible for the physical safekeeping of inventories made available to COPERSUCAR that are stored in their facilities. The risk associated to the physical safekeeping of the alcohol made available to COPERSUCAR is mitigated through the purchase of insurance coverage, whose costs are charged to the Company and its subsidiaries. 8. RECOVERABLE TAXES Recoverable taxes as of September 30, 2007 and June 30, 2007 are as follow: Company 09/30/ /30/2007 COFINS (tax on revenue) 5,766 4,471 ICMS (state VAT) 1,668 1,713 IRPJ (corporate income tax) IRRF (withholding income tax) 1,980 1,439 CSLL (social contribution tax) PIS (tax on revenue) 1, Other ,340 9,360 14

16 Consolidated 09/30/ /30/2007 COFINS (tax on revenue) 10,071 6,712 ICMS (state VAT) 11,842 10,006 IRPJ (corporate income tax) 8,311 4,749 IRRF (withholding income tax) 3,226 2,546 CSLL (social contribution tax) 3,521 1,986 PIS (tax on revenue) 2,396 1,623 Other 620 2,064 39,987 29,686 The balances of recoverable taxes arise from commercial transactions and prepayments. These balances are considered realizable by Management in the normal course of the Company s and subsidiaries operations. The balances of ICMS, PIS and COFINS comprise credits derived from purchases of fixed assets. The variation in the balances of ICMS, PIS and COFINS between the reported quarters refers basically to the increase in purchases of assets and inputs used in operations. 9. RELATED-PARTY TRANSACTIONS a) Company and consolidated balances: Long-Term Assets Company 09/30/ /30/2007 Current Liabilities Long-Term Assets Current Liabilitie s Of subsidiaries: Usina São Martinho S.A Omtek Ind. e Com. Ltda. 4,488-6,574 - Usina Boa Vista S.A. 16,363-14,842 - Subtotal 21,114-21, Of shareholders, arising from purchase of sugarcane (suppliers) , , Consolidated 09/30/ /30/2007 Current Long-Term Liabilities Assets Long-Term Assets Current Liabilities Of subsidiary and indirect subsidiary: Mogi Agrícola S.A Of shareholders, arising from leased land (other noncurrent assets) Of shareholders, arising from purchase of sugarcane (suppliers) 2, , The balances with subsidiaries and indirect subsidiary refer to advance for future capital increase and other intercompany transactions. All long-term intercompany balances are estimated to be settled in a maximum of 24 months. Sugarcane purchases from shareholders are conducted under market conditions similar to those conducted with third parties. 15

17 b) Company s transactions 09/30/2007 (quarter) 09/30/2006 (quarter) Financial and administrative Financial and administrative expenses and cost Sales revenue expenses and cost Sales revenue Usina São Martinho S.A Omtek Ind. E Com. Ltda. - 1,822-2,210 Rental of properties from shareholders Purchase of sugarcane from shareholders , ,723 Intercompany transactions refer to revenues and expenses related to revenue from sale of molasses, electric power and steam to Omtek Indústria e Comércio Ltda., rental of properties and purchase of sugarcane from shareholders. The consolidated amounts of purchases of sugarcane from shareholders for the quarters ended September 30, 2007 and 2006 were R$ 1,184 and R$ 619, respectively. 10. INVESTMENTS The Company s investments in subsidiaries are as follows: In subsidiaries: Usina São Martinho S.A. Usina Boa Vista S.A. 09/30/2007 Omtek Indústria e Comércio Ltda. In subsidiaries: Shares held (thousands) 23,500 71,726 5,598 Ownership interest 100% 27% 99.99% Total Capital 48,905 71,726 10,238 Shareholders equity 1,005,228 76,111 20,793 Net loss for the quarter (16,735) - (798) Changes in investments: Balances as of June 30, ,690 20,550 16,951 1,022,034 Capital increase 18,884-4,640 36,676 Equity in subsidiaries (16,740) - (798) (17,533) Balances as of September 30, ,834 20,550 20,793 1,041,177 16

18 Usina São Martinho S.A. Usina Boa Vista S.A. 06/30/2007 Omtek Indústria e Comércio Ltda. In subsidiaries: Shares held (thousands) 23,500 71,726 5,598 Ownership interest 100% 27% 99.99% Total Capital 16,868 71,726 5,598 Shareholders equity 998,048 76,111 16,951 Net loss for the quarter (4,790) - (110) Changes in investments: Balances as of March 31, ,327 20,550 17,061 1,026,938 Capital increase 13, ,153 Equity in subsidiaries quarter (4,790) - (114) (4,904) Balances as of June 30, ,690 20,550 16,947 1,035,187 There are no reciprocal interests between the Company and the direct and indirect subsidiaries. As of September 30, 2007, the following plots of land were pledged as collateral for lawsuits and loans: 5,745 hectares of land used in sugarcane planting by the subsidiary Usina São Martinho S.A., in the revalued book value of R$ 117,341, of which 3,553 hectares of land worth R$ 72,931 for the Company and 2,193 hectares of land worth R$44,410 for the subsidiary Usina Boa Vista S.A Goodwill As mentioned in Note 1.7, the jointly-owned indirect subsidiary Etanol Participações S.A. acquired interest in Usina Santa Luiza S.A. and Agropecuária Aquidaban S.A. for R$ 184,080 and R$ 61,360, respectively, recording total goodwill in the amount of R$ 210,117, of which R$ 154,013 refers to the acquisition of Usina Santa Luiza S.A. and R$ 56,104 refers to the acquisition of Agropecuária Aquidaban S.A., based on their financial statements as of March 31, The goodwill paid by Etanol Participações S.A. on the acquisitions was segregated into future earnings (installment recorded in the consolidated noncurrent assets - investments) and appreciation of assets. The portion of goodwill attributable to the appreciation of assets was determined based on the appraisal report issued by independent experts and is classified in noncurrent assets property, plant and equipment, as described in note 11. This classification is intended to standardize the accounting for property, plant and equipment items at revalued amount. The portion of goodwill attributable to future earnings, in the amount of R$ 49,106, will be amortized over a period not in excess of ten years, according to the expected investment return provided for in the economic value report issued by independent experts. Based on the forecasted results for each acquired company - Agropecuária Aquidaban S.A. will incur loss in the first year following the acquisition, while Usina Santa Luzia S.A. will report profit - the amount of R$ 15,691 of goodwill related to Agropecuária Aquidaban S.A. will begin to be amortized in April 2008, with an amortization percentage estimated at 10.65% in the first year, and R$ 33,415 related to Usina Santa Luzia S.A. began to be amortized this year, based on the percentage of 2.40% per year. The accumulated amortization for the quarter ended September 30, 2007 is R$ 211 (R$ 352 for the six-month period ended September 30, 2007). 17

19 The process for review and standardization of accounting practices and procedures adopted to prepare the financial statements of the jointly-owned indirect subsidiaries Usina Santa Luiza S.A. and Agropecuária Aquidaban S.A., mentioned in note 10 to the interim financial statements as of June 30, 2007, was concluded and no adjustments to such statements have been identified. In the quarter ended September 30, 2007, R$ 1,418 of the goodwill attributable to future earnings was reclassified to appreciation of assets due to the review of the reports that gave rise to such amounts. Through the subsidiary Usina São Martinho S.A., the Company and other shareholders of Etanol Participações S.A. are currently analyzing actions to integrate the operations of Usina Santa Luíza S.A. and Agropecuária Aquidaban S.A. with its operations. Actions that may be implemented impacting the segregation assumptions and the goodwill amortization criteria mentioned above will be reflected when they are decided by the Management of Etanol Participações S.A. 11. PROPERTY, PLANT AND EQUIPMENT Cost Company 09/30/ /30/2007 Accumulated Revaluation depreciation Net Net Land 20, , , ,501 Buildings and premises 8,096 11,084 (4,011) 15,169 15,499 Industrial equipment and facilities 22,908 88,466 (29,610) 81,764 93,774 Vehicles 6,960 8,619 (2,624) 12,955 14,446 Agricultural machinery and implements 18,105 21,535 (7,770) 31,870 36,142 Sugarcane crops 96,852 - (29,939) 66,913 68,601 Other 12,626 - (5,509) 7,117 6,902 Construction in progress 42, ,276 41,268 Total 228, ,904 (79,463) 571, ,133 Cost Consolidated 09/30/ /30/2007 Accumulated Revaluation depreciation Net Net Land 92, , , ,798 Buildings and premises 25,766 50,189 (7,296) 68,659 70,202 Industrial equipment and facilities 100, ,251 (129,266) 339, ,768 Vehicles 25,673 31,976 (7,561) 50,088 52,003 Agricultural machinery and implements 76,370 76,495 (24,019) 128, ,271 Sugarcane crops 358,035 - (102,416) 255, ,642 Other 115,414 - (22,374) 93,040 76,953 Construction in progress 139, ,184 93,156 2,072,21 Total 932,972 1,432,173 (292,932) 3 2,037,793 In the quarter ended September 30, 2007, the Company invested R$ 2,823 (R$ 2,977 in the quarter ended September 30, 2006) in the development and/or renewal of sugarcane plantation, and R$ 28,824 (R$ 12,665 in the quarter ended September 30, 2006) in consolidated. 18

20 As of September 30, 2007, the Company s balance of construction in progress refers to boiler soot treatment system and the industrial structure optimizing process. In consolidated, the balance of construction in progress also includes improvements of the plant of the subsidiary Usina São Martinho S.A. related to the adjustment of the fermentation process, bulk storage in the sugar warehouse, improvements of the electricity self-sufficiency system, and improvements of the sugar granularity and temperature, in addition to construction works of the plant of the indirect subsidiary Usina Boa Vista S.A. The sugar warehouses and alcohol tanks of the Company and its subsidiary Usina São Martinho S.A. are granted on a commodatum basis to COPERSUCAR, free of charge, for storage of the production made available for sale by the Cooperative. As of September 30, 3007, R$ 171,013 of fixed asset items were pledged as collateral for certain loans and financing of the Company and its subsidiaries. These items are mostly represented by industrial equipment and facilities, and agricultural machinery and implements. In addition, the amount of R$ 201,439 (R$ 494,914 - consolidated) in land was pledged as collateral for securitized rural credits, recorded in current and long-term liabilities. As described in note 3, to update the revaluation recorded in April 2003, in conformity with the frequency established by the Pronouncement of the Brazilian Institute of Independent Auditors (IBRACON), as of March 31, 2007, the Company, its wholly-owned subsidiary Usina São Martinho S.A. (including respective subsidiaries) and the subsidiary Omtek Indústria e Comércio Ltda. recorded a revaluation of land, buildings, industrial equipment and facilities, based on appraisal reports issued by independent experts. The amount of goodwill mentioned in note 10.2, related to the appreciation of assets, is included in the column revaluation and distributed among the assets that gave rise to it, with impact only on the consolidated balances, in the amount of R$ 37,577 as of September 30 and June 30, 2007, gross of the respective depreciation. The consolidated balances of revaluation of property, plant and equipment, net of depreciation and gross of deferred charges, as of September 30 and June 30, 2007, were R$ 1,375,574 and R$ 1,407,628, respectively, of which R$ 966,993 and R$ 990,527, respectively, are derived from subsidiaries, already including the goodwill mentioned in the previous paragraph. Taxes levied on the revaluation depreciable portion are recorded in noncurrent liabilities, as deferred effects (note 17). Depreciation and write-offs of revaluation which impacted the results for the quarters ended September 30, 2007 and 2006 totaled R$ 19,689 and R$ 4,350, respectively, net of amounts allocated to inventories and gross of taxes, in consolidated. The variations in these amounts between the presented quarters are due to the effects of the revaluation recorded as of March 31,

21 As of March 31, 2007, revalued assets began to be depreciated based upon their estimated remaining useful life specified in the revaluation report at the following weighted average rates below, when applicable: Annual depreciation rates Property, plant and equipment Company Consolidated Land 7.91% 7.18% Industrial equipment and facilities 13.09% 12.90% Vehicles 16.69% 20.62% Agricultural machinery and implements 9.47% 10.64% 12. LOANS AND FINANCING Company Type Charges Maturity 09/30/ /30/2007 In local currency: Securitized rural credits Rural credit IGP-M (General market price index) paid annually Fixed-rate weighted average interest of 8.75% p.a. paid on final maturity of contracts Annual installments with final maturities between September 2018 and July ,395 40,892 Single installment with final maturities between October 2007 and February ,114 13,956 Finame / BNDES loan Finame / BNDES loan TJLP (long-term interest rate) + weighted average interest of 4.15% p.a. paid monthly Fixed-rate weighted average interest of 11.97% p.a. paid monthly Monthly installments with final maturities between October 2007 and December ,313 32,718 Monthly installments with final maturities between October 2007 and October ,052 13,593 Working capital Monthly TR + fixed-rate interest of 12.99% p.a. paid on final maturity of contract Single installment with final maturity in July ,855 Other securitized credits Fixed-rate interest of 3% p.a paid annually Annual installments with maturity in October In foreign currency: Finame / Currency basket (Dollar, Euro and Monthly installments with final BNDES loan Yen) + fixed-rate weighted average maturity between October 2008 interest of 14.71% p.a. paid monthly and March Total 95, ,033 Current liabilities 29,470 39,169 Long-term liabilities 66,360 68,864 20

22 Consolidated Type Charges Maturity 09/30/ /30/2007 In local currency: Securitized rural credits IGP-M (General market price index) paid annually Annual installments with final maturities between October 2018 and July , ,101 Rural credit Fixed-rate weighted average interest of 7.6% p.a. paid on final maturity of contract Single installment with final maturities between October 2007 and August ,179 50,304 Finame / BNDES loan Finame / BNDES loan Quarterly TJLP (long-term interest rate) + weighted average interest of 2.78% p.a. paid monthly Fixed-rate weighted average interest of 11.76% p.a. paid monthly Monthly installments with final maturities between October 2007 and March , ,658 Monthly installments with final maturities between October 2007 and October ,269 52,866 Working capital Other securitized credits TR+ Interest of 12.99% p.a. paid on final maturity of contract Fixed-rate interest from 1.5% to 3% p.a. paid annually Single installment with final maturity between July 2007 and October ,855 Single installment with maturity in October In foreign currency: Finame / BNDES loan Currency basket (Dollar, Euro and Yen) + fixed rate of 11.95% p.a. paid monthly Monthly installments with final maturities between July 2007 and March ,260 8,017 Commercial US Dollar variation + 9% p.a. paid Single installment with final papers semiannually maturity in July ,332 9,992 Total 476, ,918 Current liabilities 119, ,267 Long-term liabilities 356, ,651 Loans and financing are guaranteed by mortgages, liens on property, plant and equipment, including land, promissory notes, cash investments and liens on agricultural and industrial equipment. The land offered as collateral for loans and financing refer to sugarcane plantation areas. 21

23 Long-term loans (Company and Consolidated) have the following maturities: 09/30/2007 Company Consolidated From 10/01/08 to 09/30/09 17,155 47,962 From 10/01/09 to 09/30/10 11,514 57,177 From 10/01/10 to 09/30/11 7,940 49,474 From 10/01/11 to 09/30/12 4,102 50,028 From 10/01/12 to 09/30/13 3,245 35,761 From 10/01/13 to 09/30/26 22, ,196 66, ,598 Based on Central Bank of Brazil Resolution No. 2471/98 and other current legal provisions, in 1998, 1999 and 2000 the Company and its subsidiary Usina São Martinho S.A. securitized debts with financial institutions, by means of the acquisition of CTNs (National Treasury Certificates) in the secondary market, as collateral for the payment of the principal. The securitized financing will be automatically settled on their maturity dates upon the redemption of the CTNs, which are under the custody of the creditor financial institutions. Said certificates are non-negotiable and are exclusively intended for paying this debt. The Company s and its subsidiary Usina São Martinho s disbursement during the 20 years in which this securitization is effective is limited to the annual payment of amounts equivalent to variable percentages between 3.90% and 4.96% per year on the securitized amount monetarily adjusted based on the IGP-M (general market price index) through the annual payment date. This obligation was recorded in the individual and consolidated interim financial statements as of September 30, 2007 and June 30, 2007 according to the amount of these future disbursements. The balance of this obligation is subject to adjustment based on the IGP-M variation. 13. TRADE ACCOUNTS PAYABLE Company 09/30/ /30/2007 Sugarcane 7,703 3,609 Materials, services and other 10,174 12,822 17,877 16,431 Consolidated 09/30/ /30/2007 Sugarcane 49,087 37,636 Materials, services and other 39,582 39,398 88,669 77,034 The sugarcane crop period, between April and November of each year on average, has a direct impact on the balance payable to sugarcane suppliers and providers of cutting, loading and transportation services. 14. PAYABLES TO COPERSUCAR COPERSUCAR provides funds to its cooperative members through bills of exchange aimed at financing their operations. These funds come from the following sources: (a) Funds obtained by the Cooperative in the market and transferred to cooperative members with short-term maturity; 22