Sao Martinho SA

BOVESPA:SMTO3

Q1-2026 Earnings Call

[Operator]

Welcome to São Martinho S.A., conference call to discuss the results for the first quarter of the 25-26 crop year. With us today are Mr. Felipe Vicchiato, CFO and Head of IR; Alessandro Soares, IR a new business development manager and the Investor Relations team of São Martinho.

The audio and the slides of this conference call are being broadcast simultaneously over the Internet at www.saomartinho.com.br/ir. [Operator Instructions].

Please be advised that certain information contained in this conference call may contain forward-looking statements. Such information is subject to known and unknown risks and uncertainties that may cause such expectations not to be realized or to differ materially from what was anticipated.

I would now like to turn the floor to Mr. Felipe Vicchiato, who will initiate this conference call.

[Felipe Vicchiato, executive]

Good afternoon, everyone, and thank you for joining us in this conference call related to the first quarter of the crop year. Here, we have a list of the main topics and highlights of the quarter, starting with the production of crushing and corn processing.

Next, we will talk about the financial highlights and then product margins. The fourth topic is corn processing and our hedge position and the material facts. Yesterday, we issued a material backed on born and also another one on the biological asset of the company.

In terms of production, we crushed in the first quarter, 7.6% less than in the previous quarter. reaching 8.1 million tons of sugarcane. And due to lower yield and productivity in the sugar field due to water issues from January to March, and also TRS was 5% lower when compared to the same period of the year before, which in terms of TRS produced volumes were 11% lower.

In terms of the position itself with that, we produced 11% less sugar in a quarter-on-quarter comparison. Even though the quarter really favor the sugar mix -- but despite that, the volume was lower. When you compare the 11.3% to 10.9%, you see that there was an issue with sugar, which was quite difficult. And this is across the board in the entire industry.

When we talk about hedging, we will talk about sugarcane hedge, but you noticed that more frequently in the Southeast, ethanol production was down by 10% and Horn-based ethanol was up by 11.6%. A consolidated mix until now is approximately 50-50 when you look at the sugarcane business. The quarterly quarter result showed increase in ethanol sales, especially foreign-based ethanol. We are almost double the number, 36 cubic meters number went to 62 cubic meters in a quarter-on-quarter comparison due to production and a little bit of inventory that we carried over from 1 crop season to another, and that's why our net revenue was up by 12%. There was a 19.7% increase in EBITDA and also EBIT is now at 7.1%. EBIT of BRL 231 million, almost 1/3 of that EBIT comes from the corn plant.

Given the high return of this project, and this is 1 of the reasons why we announced -- it's increased yesterday. Margin was 17.8% in the period -- there was an increase vis-a-vis the previous quarter, but one -- the first quarter '25 was very strong in terms of yield, but less. I mean, crop year was very good, but it started to worsen throughout the quarters right especially because of the arsenic that happened in August of last year, almost a year ago.

Our net income is down quarter-on-quarter despite the operating enhanced performance. I mean, what contributed -- I mean, if you look at accounting net income is mark-to-mark of biologicals due to the taxation of lower productivity vis-a-vis the previous quarter.

And last quarter, we also accounted for interest on equity. That's why the accounting numbers were lower and so this jeopardizes the comparison. But when you look at these 2 items and the cash income, you see that there was some growth going from BRL 46 million last year. to BRL 157 million.

Here, we have the product highlights. One important highlights, as I mentioned, was corn-based ethanol DDGS is also a product that was up 22% and 17% in terms of volumes sold. Last year, we were still gaining market share and customers were testing the product. But today, the product is well accepted across the board by all of our clients, and that's why pricing is better. And in the case of sugar, the 8% drop when compared to the previous quarter is mainly attributed to the fact that last quarter, hedge was about $0.20, and it was the best in BRL terms in our results. That's why the comparison now seems slightly worse.

Now next slide, - now here, we talk to product margins, speaking about sugarcane. At the end, the margin was 14.4%, and for sugarcane. I mean, given the fact that there was lower price of products sold. And in the case of ethanol, of sugar-based ethanol, there was an improvement in average price, but cost increase was 4.7%. And this cost increase was because of Consecana transfer. And because of that, our margin in sugarcane ethanol is negative by minus 2%.

Another important factor is that when you look at this composition of cash cost for sugarcane, we were in a proxy of what our total CapEx will be. Total maintenance CapEx for the year. And then we do a split, which is proportional in terms of products sold. In the first quarter is the first quarter where we -- the volume of operating CapEx is low because there is no pressure of off-season. So the accounting number is a bit misleading, reaching about 6% margin.

But then if you look at the entire cycle, the entire here, we look at our possible maintenance CapEx. So we have a final number of minus 2. We started making the adjustment and without I mean if you want to look at more details and look at the release in terms of this guidance, the guidance will give you a bit more color and you can probably have a better reading of the market.

We hope that ethanol prices after the end of the crop year should recover, today is very close to 63% of the parity. The number is still quite low. We know that there is also an issue of ethanol volume because it is coming into the crop, but the lower number of process sugarcane will also impact and will improve the parity coming close to 60% or 70% by the end of the year.

Speaking about corn, EBITDA was BRL 95 million. EBIT was BRL 87 million. These numbers are quite robust when compared to the previous quarter. Last quarter, the plant was still ramping up. It was not operating at its full capacity. Moreover, we also saw a lower corn cost, given all of the pricing that were carried out. And today, we have something close to 90% approximately, 90% of the corn volume already purchased to conclude the crop year, reaching about almost bag.

And this should help our margin and it will be quite similar to what we saw in this first quarter also considering ethanol prices and DDG.

Next, we talk about the company's hedge position. In June, we had hedges of about 710,000 tons of sugar, which remained in the inventory discounting in the first quarter because I already realized and sold it at an average price of 2,229. So if you compare this sugar production to date of last year in percentage terms, the coverage is quite relevant.

The coverage rate especially if you look at the screens up to October, but in March, now we are not totally -- so there was almost nothing for the '26, '27 crop year. Today, market expectations for sugar production in the center south region are around 41.3, 41.5 million tonnes of sugar. This is a number that is not 100%. I mean, we do not agree with it 100% because if you look at the sugarcane fields, we believe that, that number should be below 39% or 39% in that range because we are already in August.

Next week will be the one before last week of August. And I will only have 3 remaining months in the crop year. Therefore, we think that the shortfall will be more apparent in the coming quarters, especially when you look at the context because of the fires happened in August of last year. So the fields there are being harvested after this month, it will be after the impact of last year's fire. But the market, on average, still working with that number of 41 million tonnes. Therefore, we believe that once the center south begins performing better and starts producing more sugar.

So sugar prices should converge to numbers way above what you see on the screen. So we haven't yet expedited sales for the 26, 27 crop year.

Next, we talk about the material fact that we disclosed yesterday. -- after 1.5 years of intense studies from our team, we arrived at a final board decision or CapEx of BRL 1.1 billion. And this CapEx contemplates industrial plant and also a warehouse with a capacity for 220,000 tons of corn, and this warehouse is quite important, given the fact that we have a crop year and an op season, -- and so this is very important for TRS.

We will have the opportunity to buy wet corn in the middle of the crop year. It's just a matter of drying the corn and also industrial plant in this adds up to almost BRL 1 billion. This project contemplates pushing in the 229,29/30 crop year, about 36 to 35 additional tons, producing 230,000 cubic meters of anhydrous ethanol. If we decide to do hydrous ethanol, the number should increase a bit more and DDGS, 170,000 tonnes. The plant is 100% integrated. We won't need to originate chips, and this is the equivalent to an edited cost of about 100 to BRL 120,000 depending of the prices of the chips, the although the provision is 420,000, and this gives competitiveness to the plan.

So we will sell 63,000 megawatts water hour of energy. If in the future or in years to come, if we make the decision to have a sugarcane plant in Goiás, we have enough energy to operate the sugar plant without needing to buy any wood chips. So the idea is to leave that option open because if in the future, we decide to produce sugar at Boa Vista, this could be possible. But this is something only for 2032 if there is a tax reform. This CapEx is being funded 65% by FINEP and by BNDES, the cost is about 8% to 9% prepaid.

The idea is that the swap that we do the swap of this funding. And the remainder is being used -- is being funded in the market. We are doing that in local currency with debentures long term, very close to CDI or sometimes even below CDI, and that's why the return of the project will be quite relevant considering today.

All of the assumptions, our operating and pricing assumptions that we already realized in this last quarter, since we had almost BRL 1.5 of EBITDA per liter, the return is over 30%. It's above 30%. Obviously, for the approval of the project, we look at more conservative assumptions like higher corn prices, I mean energy prices, considering consider higher competition. That's why the approved return is a bit lower.

But looking at current prices today, selling ethanol and selling DDG, their return for the project is quite robust, quite relevant. Now concluding the subject on the project, we talk about the biological asset acquisition at Santelisa. So we also disclose or publish a material fact, 10,600 factors relates to agricultural contracts with rights to produce. Raizen decided to terminate the activities of that unit, and they sold their biological assets. The that applies to 6 mills.

One of them is São Martinho. This biological asset accounts for approximately 80% of own cane and the remaining is from third parties. The medium range is 280 kilometers at 25 kilometers from some margin and the soil and climate predominantly is A and B, when you look at the productivity slope, there are some farms that produce over 80 tons per hectare. If they have the right management, if they adopt the right management in subsequent years.

The transaction value was BRL 242 million to be paid at closing and this should happen by the end of December at the most. We do not need any additional investments in industry or agriculture, we will dilute 100% of fixed costs. There is no need to add any additional labor. We will use the same structure we have at São Martinho because most of this can will be crushed at São Martinho mill. And if you look at all variable costs of that sugar can feel that involves planting variable cost of planting and harvest.

We -- I mean, if you look at what we realized in the past year in terms of cost and revenue, we are looking at margins of about BRL 100 per ton. Of course, this can vary depending on sugar prices and ethanol prices. But this is the order of magnitude predicted for this project. The decision to acquire that 10,600 hectares of contracts is due to something that we've been noticing for quite some time because of different climates in the region.

If you look back 10 years, 80% of this period, we refer to years with some climate issue being frost, a lot of heat or less rainfall. I mean it's scape normality when you look at historic portfolio of 40 years. If temperature was normal or within the average of the last 40 years, São Martinho would have within its plant crushing close to 24,000 tonnes.

But considering that 80% of these period of 10 years had some climate issue, we made the decision to make this transaction, very surgical with very little capital employed, but with very quick returns regardless of product price and cost, also given the fact that we still have some room once you are diluting 60% of your fixed costs. This is the rationale behind the asset.

So we can speak more about this deal, but I thought it was interesting to mention how relevant this deal São Martinho a few years ago, thought about acquiring 100% stake of this mill. The mill has a very good set of land neighbor to São Martinho mill. So we ensure that we have a good level of confidence that we're going to have a good return on this deal. Well, these are my initial comments, so we can open the floor now for questions.

[Operator]

[Operator Instructions]. First question from Lucas Ferreira with JPMorgan.

[Lucas Ferreira, analyst]

My question is about your strategy to sell sugar and the standard point to raise openly, the main trigger in your opinion and the crop year of Brazil I do think it's coming with a quality that is inferior than you expected and the industry as a whole expected -- so what do you think -- when do you think you will make a decision to continue to hedge regardless of the price level. So the main question in people's mind is the price is not expected 1 in Brazil. But why is this not being passed through to the price given that we are already in the month of August -- so that would be my first question.

Second question is about. The deposition of the biological assets that you've just commented on, I just want to understand what changes for the next 2 years, considering that there will be no major climatic event, nothing so relevant in terms of the performance of crushing of the company.

And I mean fixed cost, ROIC, how do you see the quality of the biological assets to get to 4.5 million tonnes.

[Felipe Vicchiato, executive]

Lucas, thank you for the question. As regards to pricing timing, -- we understand that in mid-September, October, things will be clearer in terms of what will be the total sugar volume in the center south of Brazil. Today we see some washouts of some mills that sold. Crystal sugar volume that they were expecting. And given the productivity they're having to wash out, and this could be a trigger for the price of sugar to improve. And indeed, we expect that by end of September, mid-October, that will be an important time for this market to actually see what the production will be.

Of course, we may get this wrong. There might be a substantial improvement. I think it's hard to get to 41.3 million tonnes of production, but it is possible that it will not be below 39.

Looking at the market and how it evolves, we will make a decision day by day. But -- what we have to lose here is actually very little because day today, we are monitoring the situation and crystallization of sugar.

As for your second question, it was about the Santa Elisa deal. And what our crushing will be? Well, if we assume normal weather. Considering the average of the last 30, 40 years, with the exception of the last 8 years that were very bad in Center South. Our sugarcane fields have an ability to get to 25 million tonnes with the additional Biological assets. The ramp-up of Santa Elisa it's not something that will lead us to 800,000 tonnes next year.

We will need products to use to get to that level of tonnage, and this is internal fact that we disclosed, but we expect that next year already considering that summer will not be as dramatic as it was as it was that we're going to have a ramp-up of crushing and crushing in could land with a mill that has a lower fixed cost at the lowest cost in the sector.

So this is an asset that will serve a mill that has a lower cost and a higher potential, and this would bring us a better return to our shareholders. That's the idea.

[Operator]

Next question from Henrique Brustolin with Bradesco BBI.

[Henrique Brustolin, analyst]

First point I'd like to address is about a point-based oil, considering what you are trading and selling we make a calculation of the coverage covering the cost of corn for the last 12 months, it's about 45% looks high considering the current scenario of one, which is with a low price. So what do you think is behind this? What are you seeing in the market? And how sustainable do you think this level of coverage is looking forward.

My second question. It's about the new corn-based ethanol plant. If you could comment on the assumptions -- what would be the most conservative assumption you're taking on for the project? Because the result was our planned and the way the new phase was structured Well, it makes a lot of sense. It's very clear. But I just want to get a sense of what you're thinking in a more conservative approach to think about the return.

[Fabio Venturelli, executive]

Good afternoon Henrique. Regarding DDG, this coverage of 45% is explained by 2 factors. The first factor is that in the last 9 months, the core plays.

Was very positive for us. We were able to buy in at a very low price level. which helps in this percentage and the second factor. Is our location where São Martinho is located, there is an important consuming market. So we have a lower shipping cost when we compare with competitors relocated or to the north. And our product has quality and specification. That meets the requirements for the whole year, so that attracts customers.

The comparison with meal we tie to a calculation like this engine the price of meal adjusted by the protein. But for some customers in addition to protein, there's always energy as part of DTG and its being very well accepted, very well received. It's a different type of sale than we normally do. The bulk of our revenue comes from the commodities in DDGs commodity like sales or like a specialty product.

The competition seems to be very much similar and the same, but the products are different, actually. And we have a sales team that is specialized to serve the customers and to get good results from our products. And that's why we have this cover of 45%.

And as regards to the assumptions, we work with some scenarios at the company in order to approve a even with corn at BRL 60 or BRL 65 into oil below BRL 60. This is a project that once leveraged will have a return above 20%. And this is the minimum internal rate of return that we require considering the current interest rates. If we want the support from FINEP and BNDES, this would unlikely be an approved project at this point in terms of the cost of credit and a very high CDI rate. So support from the BNDES and FINEP was fundamental for the Board of Directors to make this decision.

After all, it will be a 3-year investment. And we need to have a great period, and we need a funding rate a civilized country a level of 8% or 9%, so that we could make this decision. I think that the support from FINEP and BNDES was fundamental for us to make this decision. So it was a combination of the 2 things. And one detail in before I forget an important detail actually. When we talk about 5% coverage, I don't know how you do. The math with the other players. But we do have an advantage. We do not have.

The biomass cost in the plant of 500,000 tonnes that would have a biomass cost of about BRL 100 million, a little more, a little less. But we don't have that because of our integration. So this percentage is also a relevant one.

[Henrique Brustolin, analyst]

Yes, that's the math I was doing the calculation of the corn, but now it's super clear. Thank you very much for the explanation.

[Operator]

Our next question is from Matheus Enfeldt with UBS.

[Matheus Enfeldt, analyst]

Good afternoon, Felipe, and thank you for your time. My question is a follow-up from the previous question. I mean let's look at the future rather than the past. When you talk about or corn-based ethanol in the biodiesel project I think that we might not have an oversupply, but there will be a disparity between meal and DDG, which should increase in the next coming years if the U.S. market is any indication as it is happening now, we will see lower sales of DDG and real going forward.

On the other hand, in the south of Goiás, we also see some other projects for ethanol based. I mean, for ethanol-based plants that should increase the production -- what is your view about that? How do you see the competition performing in terms of that plan? And thinking about the 25, 26 crop year and the cost -- what is your mindset in terms of cost for this crop year and whether this is pretty much in keeping year-on-year or it is higher than expected would be your cost expectation once you factor in inflation, increase in input cost or dilution of fixed costs.

And I would just like a clarification if that BRL 1.1 billion of CapEx for the corn ethanol plant will need additional working capital or maybe BRL 200 million of working capital would be enough.

[Felipe Vicchiato, executive]

Thank you, Matheus. I will start with your last question. That $1.1 billion number does not include working capital. Working capital would be BRL 230 million, approximately. Now in terms of the DDG question, we understand and we see the issue of meal being an important thing considering that there will be a mandate for biodiesel. But this also has to do with the different regions where the mill will be produced and how much would it cost for it to reach the producing region. But according to the model of the project, the DTG we sell is based on the price of U.S. corn in the U.S., DDG is sold at or 90% or 100% of the -- based on the price of corn.

So this is the assumption that we consider when it comes to DDG. But the corn project, apparently has a very attractive return once we look at all price and cost indicators. But -- and when you also include some other not so favorable scenarios well, there will be another large corn taker in the region. There will be too much DDG and too much meal.

Obviously, this may discourage some of the announcements. But our big advantage is that we do not need to buy biomass. And in addition to pricing, we have to originate sometimes it's not a matter of pricing, but availability. And the second point, is funding a very large plant like BNDES and the climate fund has a limitation of BRL 500 million. So if you talk about a plant of 1 million tonnes, you already have some limitations because of the climate fund. And this is a market of 15% to 16%.

So whoever makes a decision to build a plant now with not so favorable conditions, maybe you will choose not to invest right now. So it's a bit like that. And I think I covered all your questions and all your points, right?

[Matheus Enfeldt, analyst]

You failure to talk about cost.

[Felipe Vicchiato, executive]

Okay, costs. We thought that this year, maybe we would be able to reduce our production cash cost. I mean I'm only speaking about sugarcane production. I'm not referring to corn, right? But if you look at sugarcane alone, we believe that we will be able to reduce our cash cost vis-a-vis what we had last year because the base last year was quite high. But since we are not seeing this reduction coming our way for many reasons, but one of the reasons is the conversion of cane into TRS, your conversion is very low, and this should impact sugar prices, as I said before.

And we believe that it will impact along the crop year. So cash costs should be pretty much in keeping with what we had last year. this is the best information I have today.

[Operator]

Now we proceed with Gabriel Barra with Citi.

[Gabriel Coelho Barra, analyst]

Felipe, I just have a few follow-ups. I think we were looking at the macro scenario. I think this is the question I get very frequently. I think the landscape is a bit more challenging from what we anticipated early on in the crop year. it's even surprising as we are seeing some mills trying to migrate towards ethanol. -- because the rainfall was not as expected. And so I just want to understand your strategy for the mix this year, given the pricing scenario for ethanol. I would just like to hear from you a bit more about the mix.

The second point, still talking about rising and the M&A you had I don't know whether you can disclose that, but can you talk about the age of the sugarcane fields. -- because this will allow us to talk about renewal CapEx for the fields for the sugarcane field, I would just like to get a little bit more detail and whether this would be enough or whether you anticipate a lack of industrial capacity to crush all this sugarcane. How come that I mean, how was that 800,000 tonnes would fit into the São Martinho plant capacity. So these are my 2 questions.

[Felipe Vicchiato, executive]

Barra, thank you for your question. The first question was about this crop years mix. So I'll start with something you said, which is true. I mean it is very true. We are seeing in the Midwest of Brazil, we see that the mills are favoring, producing more ethanol and less sugar. First of all, because price of sugars are down.

And secondly, because freight costs are really expensive to take the product to the port. And the conversion of TRS into sugar bags is very low. Prices are low. We see many meals favoring ethanol production rather than sugarcane rather than sugar because there is more liquidity with ethanol. There are some tax benefits, et cetera.

With time, this will show once again, I mean, still reinstating our position that sugarcane production of 41.5%, I mean, according to market incentives, it's very unlikely to happen. Our mix, we did not disclose the guidance, and we will not disclose it. Strategically speaking, we will only disclose that at the end of the crop year. But at the end of the day, this will be a mix that will privilege profitability, and this has happened all the time. But it will depend on every meal and how the conversion is for every sugar mill.

There is also an issue of cash flow because I have ICMS NPs and COFINS in my asset that in the last few years. I had some gains, about BRL 300 million that I don't have to realize because I produce ethanol and then I can realize that immediately, given the fact that the cost of money is high nowadays, it also has to make sense in our calculation to make more ethanol because even though sometimes the margin is lower in my P&L, but in terms of cash conversion, at the end of the day, maybe it's better to produce ethanol than sugar. So that's the main reason why we are not giving any guidance about our sugar production.

Now speaking about the average age of Santelisa and the fields sugar fields in Santelisa. The average age is within the same average age at São Martinho. What we have there is that there are 2,000 factors that need to be planted. They were impacted by the fire. So that the fields have to be planted, and this number is contemplated in the return of the project. So we should do that in the summer as soon as CADE approves the project -- and that's why I said that next year, we are saying that it will be 600,000. So 600,000, I mean -- this depends on our capacity, our industrial crushing capacity and in the following years, assuming that climate will be normalized, the level should go up to 800,000.

But certainly, if we have a very, very exceptional yield year like we experienced a few years back when we didn't encounter any climate issue, I will have more produced sugarcane. And then I will have to make a decision whether I will prioritize cheaper cane or whatever, but that will be a more tactical decision. But at the end of the day, that is I mean that means that we have a lower return in a year where my yield is very, very good.

And I will have less return in a very good year because I will have to put that came to be crushed at in -- at the like end of the crop season, April, November and December, in other years where yield is not so good, like this year, I would have a better return from the project because I can place that came in the middle of the crop season when I have a higher TRS and dilution of fixed costs, et cetera.

So what I'm saying is that I'm hedging against adverse climate as we had in the past few years.

[Operator]

Next question from Leonardo Alencar with XP.

[Leonardo Alencar, analyst]

I'd like to address the commodities. I understand you didn't give us guidance in terms of sugar mix. But if we could theoretical your opinion about the price of sugar this imbalance regarding sugar production expectations. Sugar is being pressed today. And what do you think. We should expect the market mix theoretically. Last year, we were very much frustrated. We spoke about more than 52% mix in the market. In the beginning of the year, it was about 49% delivered.

So what could be the sugar mix for this year? And thinking about F&O dynamics.

We talked about an expectation of favorable supply about 70% but there is a risk that Petrobrás might lower the price. So what would be the worst-case scenario for sugar mix in this scenario? So that we can have a reference.

And another point, Felipe, we can confirm the perception, the land that you acquired from Santelisa given the logistics, the cultural potential. I think demand is very attractive. And you spoke about a very strategic return on the investment. Should we conclude that this kind of profile of land continues to be M&A opportunistic, in other words, if there are more opportunities out there with favorable logistics you would be considering buying good quality land.

At this range, you would be buyers. Does it make sense to think about it that way?

[Felipe Vicchiato, executive]

Thank you Leonardo. I'll start with the second one, and the answer is no. Because now I already have sufficient land to fill my industrial capacity. So even if another similar opportunity rose the marginal return with that second acquisition would be a lot lower. And we do not intend to make an acquisition and increase the industrial piece of the equation because you won't do the trade Santelisa made a rational decision to sell the asset. And obviously, because that asset with the current structure of fixed cost.

The operation was not giving them a good return, so it made sense for them to sell named as 6 mills got the can. But if the mills get the cane and if we put more product in the market, in the long run, the project will not give us the expected return. I think that there might be more assets that would follow the same logic. And I believe that there might be mills willing to acquire them, but not São Martinho because now we got a kind of our limit in terms of amount of gain.

We have the project TPA 213, which is -- makes productivity in TRS. It's doing really well in terms of a variety of cane that we are planting in our sugarcane fields can that is more resilient to droughts and past. These new varieties are responding really well. So it would make any sense to have a similar deal to this one. And as for the sugar mix, we believe that the mix will be in the 39 million to low million tonnes.

I don't know in terms of percentage. But to us something close to 39% or even lower because today, the Midwest mills, the ones that do not have hedged sugar -- they have marginal sugar and there in the process of making less sugar and more ethanol. And that's the idea here.

[Operator]

Next question from Gustavo Troyano with Itau BBA.

[Gustavo Troyano, analyst]

There's one point that I would like to go back to. It's the -- about the corn-based ethanol. I'd like to have a comparison of margins comparing the new capacity of corn-based ethanol with currently the 1 that you currently have. So if the formulation of the CapEx and of the additional capacity will allow you to have a different level of margin. and what you currently have with your current operations, of course, assuming the same level of commodities in all operations. I just want to try to understand the comparison and still in this comparison of margins, current capacity versus new capacity. I would like to understand better improvements to the existing plant that you mentioned.

When you mentioned the ethanol plant CapEx? How will this impact your current margin in terms of corn-based ethanol I want to understand the synergy between the current capacity and the new capacity. Does this bring a game of scale in the future or the fact that you have perhaps a greater storage capability. I want to understand the relationship between the new assets and the old ones.

[Felipe Vicchiato, executive]

As regards to the additional margin in the new phase considering the same price levels. Theoretically, yes, we have a little more in scale. But the difference is actually minor. The volume of labor, the personnel in the new plant is on like labor will double, and the percentage of cost is very small. It's very small there. So there will be a little impacted, but nothing very relevant.

The coring business for us, well, it does entail a learning curve and this is already happening for the corn plant, which is the learning curve to extract more ethanol and DDG from the same amount of corn process. We know and we admire Imaz imposes the best in terms of ethanol extraction. And we are pursuing an efficiency improvement. And there's a lot of room for improvement if you compare, my extraction last year, my guidance for this year and how much I'm getting in already placed the improvement.

So we can improve even further at least 10%, and that's a combination of a learning curve, a blend of chemicals to produce ethanol -- when we add the enzymes, so it's a different blend of enzymes, -- and all of this is being considered studied and improved -- and we understand that 2 to 3 years when the plant -- when the new plant is up and running, that we're going to have a good possibility of posting in a better margin.

And as for the investments in the current plan, those are investments for steam generation basically, energy, power generation, so we'll consume the least energy possible. That's why you're assuming 63,000 megawatts hour of power and also investing to improve so we can have a shorter intercrop period of season. Today, my off-season is 15 to 20 days long, and we could have that we could have that down to about 10 days.

So we're going to be able to process more coin and crush more. So part of the increased crushing the second plant, it will come from the crushing for ethanol itself. But for that to happen, I had to invest BRL 1.1 billion in total or the margin to grow to 635.

[Operator]

Next question from Julia Zaniolo with Bank of America.

[Julia Zaniolo, analyst]

And since the last call, you've been talking a lot about this emitter production in the market. you're expecting less than other states that we've been talking to. And given that you statewide with a greater share of ethanol than in the mix. Why is it that other producers are seeing just recently than you are to get to 41% versus 49%.

[Felipe Vicchiato, executive]

Let me just 1 point. São Martinho is not seeing a number of worse than pain producers, okay, and cane growers. Again, grows with home. I'm talking have a similar number to hours or even lower than BRL 39 million. The BRL 41.5 million is actually numbers coming from consulting services. And these are by the whole world. But the grow is the ones that are working day-to-day with crystallization, how the sugarcane fields are performing. These growers they are very much in line with what São Martinho is saying. Okay? I just want to stress that point.

I think the tomorrow Raizen will be disclosing the results, and you'll have an opportunity to speak with them and hear about their numbers. And I believe that they will be kind of in keeping with ours. [ Charles ] will also be disclosing their results very soon. They are located in the region of Goiás region, which is suffering a lot this year, Boa Vista was a highlight last year in terms of productivity and they were not impacted by the fires, the wall tires. And this year, the Boa Vista crop year is very complicated because they got a mix of too much heat, too much rain, it rained in the wrong time.

So we have a combination of low productivity and low TRS. In August, I think it's almost 9,500 liters of ethanol per ton, and we are doing 8075 -- so the region of Goiás overall has this issue, which is an important issue. In my case, it impacts ethanol more. But if they have sugar in the same region, they will suffer. So that's the kind of divergence, but we'll have to wait and see.

We didn't see how the coming months will be like. We are not seeing something that other people are seeing. But -- when we look at our backyard, things are not looking that good. The number of 41 not be achieved.

[Operator]

Our next question is from Guilherme Guttilla with BTG Pactual.

[Guilherme Guttilla, analyst]

I'll try -- I would like to take a deeper dive into the crushing issue. I think productivity was a bit lower for the reasons you explained in the release. I would just like to understand if you anticipate any risk in terms of guidance estimates to the end of the year. If not, how do you -- what is your reading of that crushing for the end of the year? And how do you see productivity advancing from now to the next quarter.

And what would be the expectation of the unit cash cost since that crushing going forward should be better.

[Felipe Vicchiato, executive]

Thank you for your questions. I would like to start with the unit cost. I was -- as I was telling Barra, I think our unit cost is pretty much in line with what we had last year. It should have been lower. That was our initial estimate, but our unit cost will be slightly in keeping. It was supposed to absorb inflation, but at the end, this will not happen. The reason for that is that, in fact, productivity in our own game is worse than anticipated, and we are compensating that a bit with some cane coming from third parties. So this combination of higher origination of gain from suppliers and with lower yield in our own can.

For now, our crushing guidance is just as we were anticipating at the beginning. If there is any shortfall, it will be not very relevant. It will be at the most 2%. But there is still room to originate a little bit more can and that will be enough for crushing. But what we expected to see happening, which would be lower costs. I don't think that will happen. I think we will meet halfway.

[Operator]

Our next question is from Werner Roger, Trigono Capital.

[Werner Roger, analyst]

Congratulations on the results. I have 2 questions. One is about biomethane. How was the schedule progressing in supply of machinery, whether I could use or distribute through redistribution, using natural gas and about this important investment on the warehouses -- would this be a horizontal vertical storage place. We know that this is relevant because it has to do with pricing. So I would just like to understand your storage capacity and structure.

[Felipe Vicchiato, executive]

Thank you for your questions. Biomethane, we already concluded the investments. The plant is ready. We are just waiting for all of the pertinent licenses to start using the gas and start commissioning the plant, and then we could start selling that biomethane, 100% of the biomethane is injected in the network, in the grid because we have a contract with Compass in the investment, we already contemplated the connection to the plant in Araraquara.

We will process and sell 100% of that biomethane to compass. So all we have to do is comply with the agreement. The investment is in place this year alone. If everything goes well with all of the approvals, I think we will start generating revenue in the second half of September. So then we have September, October and November, and then we stop because this is a project for vinasse. And so once we have no more vinasse, we cannot generate any more bio method, so the cost or the revenue will not come in the coming season only in the next one.

So we expect to produce 16 million cubic meters. Speaking about the warehouse, the warehouse accounts for approximately 20% of the total CapEx. It's a horizontal warehouse for 240,000 tons of corn, it's very modern, state-of-the-art and it has a dry unit as well. And there are 4 or 5 companies that we are looking at now just to get the warehouse operational.

So speaking about biomethane. When you reach full capacity, what would be a level of revenue? I mean this 60 million, what would be I mean how relevant this revenue from biomethane will come. You mentioned 20% of the capacity revenue next year. Around BRL 45 million to BRL 50 million gross revenue, this is the order of magnitude. I mean cost is very low.

I know you're using the waste, which is vinasse or spillage. I mean the cost is very, very low. So we just have to -- the cost of our main input labor, almost nothing because the plant is totally automated. It's state-of-the-art facility. I mean the return of the new biomethane plants what the bulk of it is CapEx. I mean, the CapEx was lower by BRL 10 million to BRL 15 million, but that involves BRL 230 million of CapEx.

So -- and again, just with the corn DDG plant, we had the support from BNDES in the Climate fund. And so that helped us to conclude the plan. Otherwise, we can do it ourselves. I mean we have -- we are capable of putting a plant twice as big, at São Martinho because we have a lot of mines right there. But once the investment is done. Its cash flow is quite relevant when it comes to revenue because the bulk of the cost -- and I think you would have a bigger generation of CBIOs and biofertilizers, I don't know whether that factors into the account or the calculation.

So there is further cost reductions with biofertilizers Okay, we still have to certify it. It's not still contemplated in the calculation of the project. And biofertilizer, we still need to run the plant for a year. because the process where you do the biodigestion of vinasse. So once that product returns to the field. We have to see whether there hasn't been any loss of nutrients that should be replaced.

So in the project, we improve the return, i.e., even included that as a negative point as though I would have to invest more in fertilizer. To compensate for the nutrients that are caused by the biomass. But it's only next year that it will be more apparent towards whether this would be necessary or not, but we don't know it yet.

[Operator]

[Operator Instructions]. We now close the Q&A session. I would like to turn the floor to Mr. Felipe Vicchiato for the final remarks.

[Felipe Vicchiato, executive]

Thank you very much for participating in our call. Myself and my IR team will be available if you have any further questions, and I wish you a great end of week for everyone.

[Operator]

The São Martinho conference call is now closed. Thank you for your participation, and have a good afternoon.