SMTO3 shares were down 7.97% at 11:17 a.m. Brasília time on Tuesday, November 10. The previous night, São Martinho submitted its fiscal 2027 second-quarter results (2Q27) to Brazil's securities regulator, the CVM, showing a 71% drop in profit, alongside a material fact notice cutting its expected production for the 2026/27 crop due to rainfall. Trading was still underway at the time of reporting, and the closing price may vary.
Why Is SMTO3 Falling Today?
Because São Martinho lowered its production projections for the 2026/27 crop year. In a material fact notice filed with the CVM at 8:30 p.m. on November 9, the company updated its estimate to 3.016 million metric tons of TRS (Total Recoverable Sugar, the standard measure of sugar content in sugarcane). That is 10.5% below its May 25 guidance, which, by our calculation, stood at roughly 3.37 million tons. Less TRS means less sugar and ethanol available to sell through March 2027.
The earnings report, published 12 minutes later, revealed a weak quarter. Yet it did not come as a surprise: compared with analyst expectations, the numbers actually came in ahead of consensus.
| 2Q27 (Jul–Sep 2026) | Consensus (LSEG) | Reported | vs. 2Q26 |
|---|---|---|---|
| Net revenue | R$ 1.75 billion | R$ 1,872.9 million | +7.7% |
| Adjusted EBITDA | R$ 714 million | R$ 760.9 million | -6.9% |
| Net income | R$ 49 million | R$ 50.9 million | -71.1% |
According to Reuters, the market consensus pointed to a profit of R$ 49 million and EBITDA of R$ 714 million, based on LSEG data. The company beat estimates across all three lines. Reporting by SpaceMoney on the day's decline follows the same rationale: the cut to production guidance weighed on the valuation of the earnings and neutralized the positive impact of the quarterly figures, according to one of the cited banks. That is an analyst interpretation rather than an official company statement, though it aligns with the sequence of events.
The quarter passed the test. The entire crop shrank.Material Fact and 2Q27 Results, São Martinho, CVM, Nov 9, 2026
What Changed in São Martinho's Projections?
The downward revision stems from two fronts at once. Volume declined: sugarcane crushing fell to 22.8 million tons from a previous 23.7 million tons, a 3.5% drop. Quality dropped more sharply: average TRS fell to 132.2 kg per ton, 7.3% below May guidance (which sat near 142.6 kg by our calculation). Rain during the harvest wets the cane, slows down machinery, and dilutes the sugar content inside the plant. The company logged fewer harvesting days and extracted less from every ton.
There is a mitigating factor. Roughly 2.0 million tons of sugarcane were set aside as "deferred cane" for the 2027/28 crop, meaning they remain in the field for the next cycle. Part of the production was postponed rather than lost. Also according to the material fact, the corn ethanol plant is expected to contribute 365.1 thousand tons of TRS, processing 495 thousand tons of corn. Capital expenditures remained virtually unchanged: total capex stood at roughly R$ 2.9 billion (-1.4%), while maintenance capex came in at R$ 1.9 billion (-2.0%). In short, the company will produce less while spending nearly the same.
Chief Executive Officer Fábio Venturelli pointed to pricing as the primary driver behind the profit drop and noted that production costs did not translate into finished product due to harvest delays. According to the same account, the company adjusted its expected end-of-crushing date, which could stretch into December depending on the weather. That represents the next risk for the crop.
Is It São Martinho or the Entire Sector Falling?
It is specific to the company. The Ibovespa was up 2.42% at the time of reporting, and the median of the stocks we track moved 0.90% (up or down). Agribusiness peers also fell, but by much narrower margins:
Against a rising Ibovespa, SMTO3 lagged the benchmark index by roughly 10.4 percentage points. Jalles Machado, the other publicly traded miller on this list, dropped less than half that amount. This suggests the market interpreted the rains as a problem that may have affected other mills in São Paulo's interior, but which appears with hard numbers only at São Martinho. The decline of BrasilAgro, which released no news, is addressed in our coverage of AGRO3 falling without a new catalyst on the same day.
During the session, the stock reached a high of R$ 19.41, still 3.9% below its previous close of R$ 20.20. At no point during the trading day did the shares trade in positive territory. At the time of reporting, the stock traded at R$ 18.59, hitting a low of R$ 18.49 with R$ 20.0 million in volume.
Did Profit Fall 71% Solely Due to Rain?
No. Part of the decline did not impact cash flow. According to a summary of the financial statements published by Visno Invest, the results reflect operational impacts, the non-cash remeasurement of lease agreements and partnerships, the mark-to-market valuation of debt derivatives (swaps), and the recognition of tax credits on ethanol. Even excluding these effects, cash-generation profit, at R$ 39.9 million, dropped 80.9%. For comparison, profit in the same quarter of the previous crop year stood at R$ 176.1 million.
Lower sugar and ethanol prices also weighed on results. Revenue rose because the company sold higher volumes, particularly of ethanol, but the adjusted EBITDA margin contracted by 6.3 percentage points to 40.6%. That margin contraction connects the quarterly results directly to the company's debt profile.
Is SMTO3's Debt and Dividend a Cause for Concern?
Net debt reached R$ 5.7 billion on September 30, up 14.2% from March, or roughly R$ 700 million higher over six months by our calculation. The company attributes the increase to capital expenditures and working capital. Based on our calculations using the trailing 12 months, net debt already stood at 3.0 times EBITDA, above the five-year median of 2.2 times. With less TRS to sell during the crop year, EBITDA is poised to decline while capex remains virtually flat, potentially worsening the leverage ratio before it improves. Chief Financial Officer Felipe Vicchiato highlighted the need to normalize leverage next year as the processing of deferred cane and the expansion of corn ethanol advance.
Regarding dividends: São Martinho typically pays distributions once or twice a year based on earnings from the crop ending in March. The most recent payment was R$ 0.2166 per share, with an ex-dividend date of July 6, 2026. Prior to that, interest on equity (JCP) for 2025 totaled R$ 0.4565. Net income for the first half of the fiscal year totaled R$ 89.1 million, down 62.8% year-over-year, which serves as the basis for the next payout. The company has not announced any updates regarding distributions, but lower earnings for the crop point mathematically to a smaller payout in 2027. The complete history is available on the SMTO3 quotes and dividends page.
This drop wipes out a substantial portion of a recent rally. On October 30, the stock jumped more than 7% in a single session without any explanatory news, as detailed in our analysis of SMTO3's countertrend surge. For the year through November 9, the stock still held a 34% gain. Part of that advance stemmed from higher international sugar prices, a topic covered in our piece on sugar trading near US$ 0.20. This week's guidance cut directly impacts the volume that stood to benefit from those prices.
What Our Newsroom Verified
For this report, we reviewed the documents submitted by São Martinho to the CVM over the preceding 48 hours (five documents found, including the guidance material fact and the 2Q27 economic-financial data). We read nine headlines published over the previous 24 hours on Google News and the site's archive, six of which addressed the cause of the drop, all linking the decline to the earnings report and guidance revision. We also tracked the Ibovespa and sector peers at the same time of day. We found no other events explaining the sell-off.
According to SpaceMoney, BTG Pactual maintained its neutral rating and sees uncertainty surrounding the upcoming crop. Moving forward, these are the company metrics that will indicate whether the downward revisions have ended:
End of crushing: if the harvest extends past December, the projected volume of 22.8 million tons risks further revision.
3Q27 net debt: above R$ 5.7 billion, leverage continues to climb, contrary to management's goals.
Corn ethanol: delivering the projected 365.1 thousand tons of TRS is essential to offset part of the lost sugarcane volume.
This article explains the day's market movement and does not constitute a recommendation to buy or sell.
