São Martinho "Pressured commodities interrupt momentum - Reiterate Neutral"

Research evidence excerpt

São Martinho "Pressured commodities interrupt momentum - Reiterate Neutral"

n tons of sugar from the market and now seems more likely

03/29E 2.45 2.06 -16 1.45

to materialize after NOAA confirmed El Niño conditions have formed and the event

could be strong or very strong under their definition. However, the near term trade Matheus Enfeldt

flow looks loose particularly considering Brazil sugar exports remain slow (-3% Analyst

YTD) suggesting stronger volumes could linger until longer in the season. Ethanol matheus.enfeldt@ubs.com

prices are also pressured having dropped ~20% since the beginning of the crop given +55-11-2767 6975

strong crushing volumes with max-ethanol mix at many mills, which has so far not Victor Modanese

seen a corresponding demand increase given, at the pump, prices are taking longer Associate Analyst

to react. While eventually prices should recover, our channel checks with the victor.modanese@ubs.com

industry suggest many players are carrying large stocks, which will eventually hit +55-11-2767 6008

the market and could slow down a recovery in prices. Tasso Vasconcellos

Analyst

...mean potential downside risk to UBS and consensus estimates tasso.vasconcellos@ubs.com

+55-11-2767 6683

The bottom line is that our base case is of higher prices for sugar and ethanol, but

there is a risk that this recovery takes longer to materialize than we expect. As a

sensitivity, we estimate that if spot sugar and ethanol prices persist throughout

2026/27, EBITDA would reach R$2.8bn, vs consensus of R$3.2bn and UBSe of R

$3.1bn.

Highlights (R$m) 03/24 03/25 03/26 03/27E 03/28E 03/29E 03/30E 03/31E

Revenues 6,892 7,162 7,432 7,310 8,470 8,935 9,437 9,591

EBIT (UBS) 713 1,043 1,132 687 1,056 1,105 1,241 1,212

Net earnings (UBS) 1,476 557 836 169 624 666 788 754