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Material Fact

São Martinho revises production guidance for the 2016/17 crop year

São Paulo, November 9, 2016 - São Martinho S.A. (BM&FBovespa: SMTO3; Reuters: SMTO3 SA and Bloomberg: SMTO3 BZ), one of Brazil’s largest sugar and ethanol producers, in compliance with CVM Instruction 358/02, announces to shareholders and the general market the revised crushing and production guidance for the 2016/17 crop year.

The following table provides the revised Operating Guidance and other related information:

Agricultural impacts:

The sugarcane plantations of the São Martinho Group were affected by three severe frosts in July, on an area of 39,237 hectares. The harvest of most of the hectares affected, which was scheduled for the end of the crop year, was brought forward to avoid losing the raw material.

The frosts and anticipation of the harvest altered the natural cycle of the cane, reducing both its yields (TCH) and quality (TRS). These impacts were recently assessed after concluding the processing of all the cane directly and indirectly affected.

For the next crop year, assuming that the summer precipitation is in line with historical levels, we will resume the Group’s crushing volume of over 20 million tons.

Financial impacts:

As detailed in the above table, the revised Guidance changes the production mix by increasing the share of sugar at the expense of hydrous ethanol in order to preserve higher-margin products.

The strategy to shift the mix, combined with the improvement in sugar and ethanol prices, should offset a large part of the production shortfall. Therefore, we believe that our Adjusted EBITDA for the 2016/17 crop year will amount to between R$1.4 and 1.5 billion and Operating Cash Generation (Adjusted EBITDA less Maintenance CAPEX) will amount to between R$650 and R$750 million.

Please note that forward-looking statements should not be construed as guarantee of future performance, as they involve risks, uncertainties and assumptions that may or may not occur. Industry conditions and other operational and weather conditions could affect the Company‘s future results, leading them to differ materially from those expressed in such forward-looking statements.


Felipe Vicchiato
Chief Financial and Investor Relations Officer

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