CTSA3

Santanense, issuer of the CTSA3 and CTSA4 shares traded on B3, is a publicly held company with a long track record in the Brazilian textile sector. Founded on October 23, 1891 by Manoel José de Sousa Moreira in what was then Arraial de Santana de São João Acima, now Itaúna (MG), it began operations in 1895 and has since gone through a continuous process of industrial expansion and modernization. In 1967, it became a public company, formalizing its access to the capital markets. Over the following decades, it carried out acquisitions and set up subsidiaries aimed both at expanding spinning and weaving capacity and at supporting its industrial and foreign trade activities, consolidating an integrated business profile within the textile chain.

Historically, Santanense invested in manufacturing units in different municipalities in Minas Gerais, such as São João del-Rei, Pitangui, Montes Claros and Pará de Minas, in addition to its headquarters in Itaúna. Some of these plants were later shut down as part of a capacity rationalization effort and a focus on more modern and efficient units. In 2001, the company carried out a significant corporate restructuring by merging Fiação e Tecelagem Santa Helena S.A., unifying operations and optimizing its capital structure. In 2004, it came to be indirectly controlled by Companhia de Tecidos Norte de Minas – Coteminas, which, according to its reference form, brought operational synergies and cost reductions, as well as strengthening its financial structure.

The corporate purpose of Santanense centers on the textile industry and related activities, with a focus on manufacturing and marketing apparel products. The company operates in an integrated manner, from spinning and weaving of woven fabrics (especially denim-twill and heavier fabrics) through finishing and the manufacturing of ready-made garments, including professional uniforms. It also produces and sells accessories and personal protective equipment (PPE) for workplace safety, in addition to exporting and importing products related to its activity. This model encompasses a complete production chain, in which three plants supply each other, forming an integrated spinning, weaving and finishing industry, with garment manufacturing adding value at the final stage.

From an operational standpoint, the company describes its production process in detail. The main raw material is cotton, sometimes blended with polyester fibers, which goes through spinning, where the fibers are combined to form yarn. Santanense uses different spinning technologies, such as ring, rotor and air-jet, each with specific characteristics in terms of productivity, cost and yarn quality. The yarn is then transformed into greige fabric using high-speed air-jet looms, considered faster and more efficient than traditional looms. The greige fabric is then subjected to scouring, bleaching, dyeing and/or printing processes, which make up the finishing stage and determine the colors, designs and final characteristics of the fabric destined for apparel and uniforms.

The company does not present formal operating segment reporting in its financial statements; management reports are consolidated, without breakdown by product lines or sales channels. Distribution is carried out mainly to the wholesale fabric market and to the fashion and industrial uniform manufacturing industry, reflecting a profile as a supplier to other businesses in the apparel sector. In 1999, after a significant investment cycle in modernization between 1995 and 1999, Santanense changed its product line, focusing on heavier fabrics and redirecting its customer base with a predominant focus on the garment industry. It also expanded its portfolio with the indigo line launched in 2003 in Montes Claros, aimed at apparel with differentiated wash and finishing effects, adding flexibility in meeting customer needs.

In the competitive context, Santanense operates in a Brazilian textile sector described as highly fragmented, with more than 30,000 companies at different stages of the production chain. The sector is characterized by a strong drive for competitiveness through technology, economies of scale and cost control. The removal of quotas on textile products in 2004 intensified international competition, especially from countries with lower production costs. In this environment, investment in machinery at all stages of the chain constitutes a barrier to vertical integration for new entrants, favoring larger, already established companies. Factors such as the price of cotton, labor, water and energy are cited as key determinants of competitiveness. Cotton, the main input, is sourced from multiple suppliers, generally through futures contracts with prices referenced on the Chicago Board of Trade (CBOT), which exposes the company to the typical volatility of commodities.

In terms of its customer base, Santanense reported having 2,597 active customers at the end of 2023, without significant concentration in a few buyers, since only two customers have historically accounted for more than 4% of sales revenue or accounts receivable balances. In terms of geographic footprint, the company derives most of its revenue from the domestic market: in 2023, Brazil accounted for 83% of net revenue of R$ 100 million. The foreign market, classified as “other countries,” accounted for the remaining 17% of net revenue, indicating an export presence, albeit a minority one. This international exposure entails additional risks, such as political and economic uncertainties, possible tax changes and barriers or restrictions on international trade that may hinder sales in certain markets.

On the environmental, social and governance (ESG) front, Santanense states that it does not publish a specific sustainability or integrated report, nor has it formally adopted materiality matrices or ESG key performance indicators structured in a dedicated document. Even so, the company says it follows good governance practices, with an emphasis on transparency with its stakeholders, and invests in improving the production chain with a focus on reducing environmental impacts. This orientation is reflected in certifications such as ISO 9001:2015 (quality management), ISO 14001:2015 (environmental management) and STANDARD 100 by OEKO-TEX®, in addition to the use of BCI sustainable cotton. The company also highlights initiatives to engage employees, their families and the community through social actions. Although it does not publish greenhouse gas emissions inventories or follow standards such as TCFD in formal reports, it associates its development with socio-environmental sustainability and with continuous improvement practices in its industrial processes.

From a regulatory standpoint, Santanense reports that its activities do not depend on specific government authorizations to operate in the textile industry, and there is no relevant history of interaction with public authorities in this regard, according to the reference form. With respect to patents, trademarks, licenses and royalty contracts, the company believes that these intangible assets are significant in value and are fundamental to maintaining and enhancing the competitive positioning of its products. The potential loss of important trademarks or licenses could materially affect its operations. The company also states that it does not make financial contributions to political candidates or parties, nor does it fund activities to influence public policy. For investors tracking CTSA3 and CTSA4 shares on B3, Santanense thus presents itself as a traditional player in the textile sector, with an integrated production chain in woven fabrics and a focus on apparel, professional uniforms and PPE, combining operations in the domestic market and exports in an intensely competitive environment that is highly sensitive to input costs and operational efficiency.