SANTOS BRASIL REPORTS EBITDA OF R$32.8 MILLION IN 1Q2017, A 182.8% GROWTH COMPARED TO 1Q2016.

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1 SANTOS BRASIL REPORTS EBITDA OF R$32.8 MILLION IN 1Q2017, A 182.8% GROWTH COMPARED TO 1Q2016. São Paulo, May 10, 2017 The quarterly financial information (ITR) and standardized financial statements (DFP) are presented in accordance with the accounting practices adopted in Brazil, in compliance with the provisions of the Brazilian Corporations Law, the International Financial Reporting Standards (IFRS) and the standards issued by the Accounting Pronouncements Committee (CPC) of Brazil. IR Contact Daniel Pedreira Dorea Chief Financial and Investor Relations Officer Tel.: (0xx11) Fax: (0xx11) dri@santosbrasil.com.br 1Q17 Earnings Conference Call Date: May 11, Portuguese 10:00 a.m. (Brazil) 7:00 a.m. (New York) Tel.: Replay: English 12 p.m. (Brasília time) 9 a.m. (New York) Tel.: Replay: Live webcast: Stock Price Closing price on May 10, 2017 R$ 2,26 per share Market Cap: R$ billion HIGHLIGHTS OF THE PERIOD Volume of Quay Operations grew 10.3% in 1Q17 to 251,807 containers; Tecon Santos handled 226,973 containers in 1Q17, 8.6% more than in 1Q16. Tecon Vila do Conde handled 17,358 containers in 1Q17, 29.1% more than in 1Q16. The Vehicle Terminal in Santos transported 73,380 vehicles in 1Q17, 91.0% more than in 1Q16. The Company s full-empty container mix recovered, with full containers corresponding to 78.4% in 1Q17, compared to 75.7% in 1Q16; In 1Q17 the Company s market share in the Port of Santos was 41.0%, an increase of 260 bps from 1Q16 (38.4%); Bonded warehousing operations accounted for 34.8% of the growth in the container port terminals segment. Consolidated net revenue totaled R$ million in 1Q17, up 10.4% from R$ million in 1Q16; Consolidated EBITDA totaled R$ 32.8 million in 1Q17, representing an increase of 182.8% over the same period of the previous year; Net income jumps to R$1.9 million, in 1Q17 in comparison to a R$12.6 million loss in 1Q16. The Company ended 1Q17 with cash balance of R$ million and net debt of R$ 20.3 million, equivalent to 0.2x LTM EBITDA. 1

2 OPERATING INDICATORS (unidades) 1T17 1T16 Var. % TERMINAIS PORTUÁRIOS Operações de cais - contêineres ,3% Contêineres Cheios ,2% Contêineres Vazios ,7% Operações de cais - carga geral (ton) ,8% Operações de armazenagem ,8% LOGÍSTICA Operações de armazenagem ,4% TERMINAL DE VEÍCULOS Veículos movimentados ,0% PORT TERMINALS (unidades) 1T17 1T16 Var. % TERMINAIS PORTUÁRIOS Contêineres Cheios ,2% Tecon Santos ,5% Tecon Imbituba ,2% Tecon Vila do Conde ,3% Contêineres Vazios ,7% Tecon Santos ,9% Tecon Imbituba ,9% Tecon Vila do Conde ,2% Carga Geral (ton) ,8% Tecon Imbituba ,3% Tecon Vila do Conde Volume of containers handled by the Company reached 251,807 units in 1Q17, driven by the remarkable performance by Vila do Conde and Santos terminals, which registered growth of 29.1% and 8.6%, respectively. Due to the operating performance in 1Q17, the Company registered growth of 10.3% in comparison to 1Q16. Tecon Santos market share of the Port of Santos was 41.0% in 1Q17, compared to 38.4% in 1Q16. The Company s operation in Santos registered growth in long-haul container traffic, with import and export operations growing by 3.9% and 2.2%,in 1Q17, respectively. Full import containers totaled 53,387, 18.2% higher than 1Q16 (45,155 containers). In 1Q17, volume handled by Tecon Imbituba increased by 28.3%, with transport of long-haul containers increasing by 152.7% and cabotage operations growing by 23.3%. The consolidated growth in volume in 1Q17 was mainly driven by long-haul operations, with imports, exports and transshipment increasing 2.6%, 5.2% and 12.0%, respectively. Cabotage operations increased their share of total handling 2

3 volume by 210 bps (26.2% in 1Q17 vs. 24.1% in 1Q16), while transshipment operations increased their share of total handling volume by 90 bps (33.2% in 1Q17 vs. 32.3% in 1Q16). The share of transshipment and cabotage is shown below: 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2T14 3T14 4T14 1T15 2T15 3T15 4T15 1T16 2T16 3T16 4T16 1T17 Longo Curso Cabotagem 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2T14 3T14 4T14 1T15 2T15 3T15 4T15 1T16 2T16 3T16 4T16 1T17 Handling Transbordo The full-empty container mix improved in relation to the same period of the previous year, with full containers accounting for 78.4% of total volume handled in 1Q17 vs. 75.7% in 1Q16. As a result of the 18.2% growth in full import container operation at Tecon Santos, volume of billed stored containers grew 31.5% in 1Q17. In 1Q17, due to greater commercial efforts Tecon Santos retention rate of stored full import containers reached 51.6%. Dwell time in the quarter was 14.8 days, higher than the 12.6 days recorded in 1Q16. LOGISTICS The Company registered growth of 40 bps in the volume of containers stored in 1Q17 compared to 1Q16. VEHICLE TERMINAL The operating performance of the Vehicle Terminal (TEV) in 1Q17 reflects the combination of the 101.5% growth in vehicle exports and the 10.7% decline in imported vehicles. Vehicle exports corresponded to 95.6% of vehicles handled (vs. 90.6% in 1Q16). Light vehicles accounted for 93.5% of total vehicles handled in 1Q17 (vs. 91.1% in 1Q16). Dwell time was 9.7 days was 1Q17 vs. 5.4 days in 1Q16. 3

4 FINANCIAL RESULTS Gross revenue from services rendered (R$ milhões) 1T17 1T16 Var.% TERMINAIS PORTUÁRIOS 190,0 172,8 10,0% Operações de cais 99,5 100,2-0,7% Operações de armazenagem 90,5 72,6 24,7% LOGÍSTICA 45,6 47,4-3,8% TERMINAL DE VEÍCULOS 16,3 9,8 66,3% Eliminações -3,6-3,4 5,9% Consolidado 248,3 226,6 9,6% PORT TERMINALS Gross revenue from quay operations in 1Q17 was 0.7% lower than in the same period in 2016, mainly due to the price and competitive scenario at the Port of Santos as of 2H16. Tecon Santos accounted for 83.1% of the Company s billings in the Port Terminals segment in 1Q17 (compared to 90.9% in 1Q16). As a result of the increase in general cargo operations and the higher share of full containers in handling volume, billings at Tecon Imbituba increased 9.6% in 1Q17. Billings at the Vila do Conde terminal grew 131.0% in 1Q17, driven by its strong operating performance. Due to the stiff competition among the terminals located in the primary and secondary zones at the Port of Santos, the Company focused on leveraging synergies and thus concentrating customers in Tecon Santos. Greater competition in the primary zone and in the bonded terminals resulted in the R$ 2, decline in average billings in 1Q17 (vs. R$2, in 1Q16). LOGISTICS Revenue from logistics operations decreased 3.8% in 1Q17 in comparison to 1Q16, due to the deactivation of the Jaguaré Distribution Center and the operational reorganization of the Customs Industrial Logistics Center (CLIA) in Guarujá. VEHICLE TERMINAL The increase in total vehicles handled in 1Q17, combined with the higher average storage time (9.7 days), resulted in the 66.3% increase in gross revenue from vehicle operations compared to 1Q16. Net Service Revenue (R$ million) 1T17 1T16 Var.% TERMINAIS PORTUÁRIOS 168,1 152,1 10,5% Operações de cais 90,8 90,0 0,9% Operações de armazenagem 77,3 62,1 24,5% LOGÍSTICA 38,4 40,0-3,9% TERMINAL DE VEÍCULOS 14,2 8,3 71,1% Eliminações -3,2-3,2 0,0% Consolidado 217,6 197,2 10,3% Consolidated net revenue totaled R$ million in 1Q17, up 10.4% from 1Q16. 4

5 Cost of Services Rendered (R$ million) 1T17 1T16 Var. % TERMINAIS PORTUÁRIOS Custos com Movimentação 29,3 28,0 4,6% Custos com Pessoal 50,2 47,6 5,5% Arrendamento e Infraestrutura 18,7 17,2 8,7% Depreciação e Amortização 16,0 16,3-1,8% Outros Custos 18,7 19,4-3,6% Total 132,9 128,5 3,4% LOGÍSTICA Custos com Movimentação 9,8 8,0 22,5% Custos com Pessoal 11,8 14,7-19,7% Depreciação e Amortização 3,5 3,6-2,8% Outros Custos 7,7 10,6-27,4% Total 32,8 36,9-11,1% TERMINAL DE VEÍCULOS Custos com Movimentação 6,0 3,3 81,8% Arrendamento e Infraestrutura 1,3 1,7-23,5% Depreciação e Amortização 2,3 2,3 0,0% Outros Custos 1,1 1,3-15,4% Total 10,7 8,6 24,4% Eliminações -3,2-3,3-3,0% Consolidado 173,2 170,7 1,5% PORT TERMINALS Despite the increase in the volume of containers handled in port terminal units and the price adjustment vis-à-vis inflation during the period, average cost per container handled / stored (excluding depreciation and amortization) declined in comparison with the same period last year, totaling R$ in 1Q17 (compared to R$ in 1Q16). Handling Costs (individual labor, TUP channel rate and other variable costs): the increase in 1Q17 is mainly due to the higher volume of containers handled in port operations, except for the purchase price of electricity, which decreased in the period in relation to 1Q16. Personnel Costs: the increase in the quarter reflects the effect of inflation during the period. Leasing and Infrastructure: the increase in the quarter mainly reflects the adjustments of contractual amounts by the IGP-M inflation index. Other Costs: the decline registered in the quarter was positively impacted mainly by the renegotiation of equipment rental at Vila do Conde Terminal, totaling R$1 million. LOGISTICS Handling Costs (fuel, freight and other variable costs): the increase in the quarter was driven mainly by the increase of R$ 0.9 million in freight. The increased hiring of third-party freight reflects the operational reorganization of the Company, which prioritized low-cost third parties freight as opposed to use its own fleet. Personnel Costs: the decline in the quarter is due to the adjustment of the operational structure to the size of its present operation, which was affected by the reduction in demand for logistics services. 5

6 Other Costs: the decline in the quarter is mainly due to the deactivation of the distribution center in Jaguaré and the adjustment of the operational structure in order to provide more efficient integrated logistics services, which involves concentrating the operation in a single distribution center located in São Bernardo do Campo. VEHICLE TERMINAL With the increase in total vehicles handled by TEV in 1Q17, average unit cost (excluding depreciation and amortization) declined 29.9% to R$ in 1Q17 (vs. R$ no 1Q16). The decline in Leasing and Infrastructure expenses is due to the higher vehicle handling volume and, consequently, the reduction in the Minimum Contractual Operation (MMC) payment, despite the effect of inflation over the concession lease contract. Operating Expenses (R$ milhões) 1T17 1T16 Var. % TERMINAIS PORTUÁRIOS Vendas 11,0 15,2-27,6% Gerais, Administrativas e outras 3,6 2,9 24,1% Depreciação e Amortização 0,1 0,1 - Total 14,7 18,2-19,2% LOGÍSTICA Vendas 6,4 6,2 3,2% Gerais, Administrativas e outras 1,2 2,3-47,8% Depreciação e Amortização 0,0 0,0 - Total 7,6 8,5-10,6% TERMINAL DE VEÍCULOS Vendas 0,3 0,2 50,0% Gerais, Administrativas e outras 0,0 0,2 - Depreciação e Amortização 0,0 0,0 - Total 0,3 0,4-25,0% CORPORATIVO Gerais e Administrativas 10,7 9,9 8,1% Depreciação e Amortização 1,8 1,8 0,0% Total 12,5 11,7 6,8% Consolidado 35,1 38,8-9,5% PORT TERMINALS Sales: the change in selling expenses in the quarter includes R$ 5.3 million reduction in the allowance for loan losses, with nonrecurring effect, despite the growth in bonded warehousing operations. General, Administrative and other expenses: The change registered in the quarter is mainly related to the higher provision for labor lawsuits. LOGISTICS Sales: the increase in selling expenses in the quarter was driven by the increase in average billed volume of containers stored. General, Administrative and other expenses: Includes the booking of sundry revenues with the recognition of revenue from deposits / advances made by non-identified (up to 90 days), in the amount of R$ 1.1 million. 6

7 VEHICLE TERMINAL General, Administrative and other expenses: includes the booking of sundry revenues with deposits (recognition of revenue from deposits / advances from customers not cleared / identified for periods earlier than 90 days) in the amount of R$ 0.1 million. CORPORATE General and administrative expenses: the increase of R$ 0.8 million was mainly influenced by higher spending on consulting, advisory and audit services. EBITDA and EBITDA Margin Margem Margem (R$ milhões) 1T17 (%) 1T16 (%) Terminais Portuários 36,5 21,7% 21,7 14,3% Logística 1,5 3,8% -1,8 - Terminal de Veículos 5,6 39,0% 1,6 19,7% Corporativo -10,8 - -9,9 - Consolidado 32,8 15,1% 11,6 5,9% PORT TERMINALS EBITDA in the period was positively influenced by the increased general cargo and container at Tecon Vila do Conde. As a result, the increase of R$ 14.8 million in 1Q17 was driven by positive EBITDA from Tecon Vila do Conde in the amount of R$ 12.4 million in 1Q17, compared to negative EBITDA of R$ 2.3 million in 1Q16. The performance of other terminals remained similar to in the previous year, though Tecon Santos registered an increase of 3.13% year on year. LOGISTICS Despite facing stiff competition in the provision of bonded warehousing services and the decline in demand for logistics services via road transport, as well as the deactivation of a distribution center, the Logistics segment once again registered positive EBITDA in 1Q17, which did not happen in 1Q16, thanks to the operational restructuring and the policy of reducing fixed costs and operating expenses. VEHICLE TERMINAL The improved performance by the Vehicle Terminal is mainly due to: (i) the share of export vehicles in terminal operations; and (ii) the increase in dwell time. Net Income (R$ million) 1T17 1T16 Var. % EBITDA 32,8 11,6 182,8% Depreciação e Amortização 23,7 24,1-1,7% EBIT 9,1-12,5-172,8% Resultado Financeiro -4,8-2,3 107,1% IRPJ / CSLL -2,4 2,2-209,1% Lucro do Período 1,9-12,6-115,1% In 1Q17, the Company once again posted net income, reversing the loss reported in 1Q16. The main factors are: (i) increase in container handling volume; (ii) adjustment of the operating structure to the size of the operation, with continuous efforts to reduce fixed costs and operating expenses; and (iii) operational expansion at the Vehicle Terminal. 7

8 Debt and Cash and Cash Equivalents (R$ milhões) Moeda 31/03/ /03/2016 Var. % Curto Prazo Nacional 119,8 148,2-19,2% Estrangeira 12,1 29,4-58,8% Longo Prazo Nacional 30,3 101,1-70,0% Estrangeira 3,8 18,1-79,0% Endividamento Total 166,0 296,8-44,1% Disponibilidades 145,7 207,4-29,7% Dívida Líquida 20,3 89,4-77,3% The Company ended 1Q17 with net debt of R$ 20.3 million and leverage ratio of 0.2x Net Debt /EBITDA, having amortized R$ million (principal + interest) in the period. Investment Plan Capex (R$ Milhões) 1T17 1T16 Var. % TERMINAIS PORTUÁRIOS 0,2 0,7-71,4% Tecon Santos 0,2 0,5-60,0% Tecon Imbituba 0,0 0,2-100,0% Tecon Vila do Conde LOGÍSTICA - 0,1 - TERMINAL DE VEÍCULOS CORPORATIVO 2,8 - - BAIXAS DE ATIVO IMOBILIZADO/INTANGÍVEL Consolidado 3,0 0,8 275,0% The current economic recession, which still causes a strong imbalance between the capacity on offer and the demand for services, especially at the Port of Santos, forced the Company to reduce investments in order to preserve the cash generated by operating activities and to maintain its net debt at the current level. Future and more substantial volume of investment in Santos and Vila do Conde terminals should be linked to the early extensions of their lease agreements, which are still awaiting approval of the Executive Plan, in the case of the Santos Terminal, and the approval of the request for early extension, in the case of Tecon Vila do Conde. 8

9 Disclaimer We make statements on future events that are subject to risks and uncertainties. Such forward-looking statements are based on the Management s beliefs and assumptions and on information currently available to the Company. Forward-looking statements include information on our current plans, beliefs or expectations as well as those of the Board of Directors and the Executive Board. The reservations regarding forward-looking statements and information also include information on possible or presumed operating results, as well as any statements preceded, followed or including words such as believe, may, will, expect, intend, plan, estimate or similar expressions. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions because they refer to future events and, therefore, depend on circumstances that may or may not occur. Future results and the creation of value for shareholders may differ materially from those expressed or suggested by said forward-looking statements. Many of the factors that shall determine such results and values are beyond the capacity of control or prediction of Santos Brasil. UPCOMING EVENTS Conference Call Results of the 1 st Quarter of 2017 Date: May 11, 2017 Portuguese 10 a.m. (Brazil) 7 a.m. (New York) Telephone: Replay: Live webcast: English 12 p.m. (Brazil) 9 a.m. (New York) Telephone: Replay: Live webcast: ANNEXES 9

10 Consolidated income statement by operating segment 1Q17 R$ thousand Contas Terminais portuários de contêineres Logística Terminal de veículos Corporativo Eliminações Consolidado Receita operacional bruta (3.541) Deduções da receita (21.848) (7.132) (2.010) (30.662) Receita operacional líquida (3.213) Custo dos serviços ( ) (32.833) (10.667) ( ) Custos variáveis/fixos ( ) (29.351) (8.398) ( ) Depreciação/amortização (15.975) (3.482) (2.269) - - (21.727) Lucro bruto Despesas operacionais (14.723) (7.617) (286) (12.474) - (35.100) Despesas com Vendas (10.964) (6.432) (268) - - (17.664) Desp. Gerais, Adm., Outras (3.692) (1.172) (19) (10.708) - (15.591) Depreciação/amortização (67) (13) - (1.766) - (1.846) EBIT (2.016) (12.474) Depreciação/amortização EBITDA (10.708) Resultado financeiro - - (4.974) - (4.974) Equivalência patrimonial (9.941) - IRPJ / CSLL (2.356) - (2.356) LUCRO LÍQUIDO N/A N/A N/A N/A N/A Consolidated income statement by operating segment 1Q16 R$ thousand Contas Terminais portuários de contêineres Logística Terminal de veículos Corporativo Eliminações Consolidado Receita operacional bruta (3.514) Deduções da receita (20.783) (7.418) (1.539) (29.415) Receita operacional líquida (3.189) Custo dos serviços ( ) (36.881) (8.521) ( ) Custos variáveis/fixos ( ) (33.288) (6.270) ( ) Depreciação/amortização (16.274) (3.593) (2.251) - - (22.118) Lucro bruto (225) Despesas operacionais (18.216) (8.495) (390) (11.716) - (38.817) Despesas com Vendas (15.157) (6.195) (216) - - (21.568) Desp. Gerais, Adm., Outras (2.960) (2.283) (175) (9.907) - (15.325) Depreciação/amortização (98) (17) - (1.808) - (1.924) EBIT (5.364) (615) (11.716) - (12.393) Depreciação/amortização EBITDA (1.754) (9.907) Resultado financeiro (2.318) - (2.318) Equivalência patrimonial (6.499) IRPJ / CSLL LUCRO LÍQUIDO N/A N/A N/A N/A N/A (12.589) Consolidated Balance Sheet 03/31/17, 12/31/16, 09/30/16, 06/30/16 and 03/31/16 R$ thousand 10

11 ATIVO 31/03/ /12/ /09/ /06/ /03/2016 Ativo Total Ativo Circulante Disponibilidades Contas a Receber Estoques Outros Ativo Não Circulante Depósitos Judiciais Outros Imobilizado Intangível PASSIVO 31/03/ /12/ /09/ /06/ /03/2016 Passivo Total Passivo Circulante Obrigações Sociais e Trabalhistas Fornecedores Obrigações Fiscais Empréstimos e Financiamentos Outros Passivo Não Circulante Empréstimos e Financiamentos Tributos Diferidos Provisões Passivos atuariais Outros Patrimônio Líquido Capital Social Realizado Reservas de Capital Reservas de Lucros Outros Resultados Abrangentes Lucro/Prejuízos Acumulados