CTSA4 Santanense

Santanense, issuer of shares CTSA3 and CTSA4 traded on B3, is a publicly held company with a long track record in the Brazilian textile industry. 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 undergone a continuous process of expansion and industrial modernization. In 1967, it became a publicly traded company, formalizing its access to the capital markets. Over the following decades, it carried out acquisitions and established subsidiaries aimed both at expanding its spinning and weaving capacity and supporting its industrial and foreign trade activities, consolidating an integrated business profile within the textile chain.

Historically, Santanense has invested in manufacturing plants 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 deactivated as part of a move to streamline capacity and focus on more modern and efficient units. In 2001, the company implemented a significant corporate restructuring by merging Fiação e Tecelagem Santa Helena S.A., unifying operations and optimizing its capital structure. In 2004, it became indirectly controlled by Companhia de Tecidos Norte de Minas – Coteminas, which brought operational synergies and cost reductions, as well as strengthening its financial structure, according to its reference form.

Santanense’s corporate purpose is centered on the textile industry and related activities, focusing on the manufacture and commercialization of apparel products. The company operates in an integrated manner, from spinning and weaving of flat fabrics (especially denim and heavier fabrics) to finishing and garment manufacturing, including professional uniforms. It also produces and sells accessories and personal protective equipment (PPE) for occupational safety, in addition to exporting and importing products related to its core business. This model encompasses a complete production chain, in which three factories supply each other, forming an integrated spinning, weaving and finishing operation, 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 combined with polyester fibers, which goes through spinning, where 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, which make up the finishing process and determine the colors, designs and final characteristics of the fabric to be used in clothing and uniforms.

The company does not present formal operating segment reporting in its financial statements; management reports are consolidated, with no breakdown by product lines or sales channels. Distribution is mainly to the wholesale fabric market and to the fashion and industrial uniform manufacturing industries, reflecting a profile as a supplier to other businesses in the apparel sector. In 1999, after a significant modernization investment cycle between 1995 and 1999, Santanense changed its product line, focusing on heavier fabrics and redirecting its customer base, with predominant focus on the garment industry. It also expanded its portfolio with the indigo line launched in 2003 in Montes Claros, aimed at garments with differentiated washing and finishing, 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 throughout the chain constitutes a barrier to vertical integration for new entrants, benefiting large, established companies. Factors such as the prices of cotton, labor, water and energy are cited as determinants of competitiveness. Cotton supply, the main input, comes 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 customer base, Santanense reported having 2,597 active customers at the end of 2023, with no material concentration in a few buyers, since only two customers historically account for more than 4% of net sales revenue or accounts receivable balances. As for geographic presence, the company obtains most of its revenue in the domestic market: in 2023, Brazil accounted for 83% of net revenue of R$ 100 million. The foreign market, classified as “other countries,” represented the remaining 17% of net revenue, evidencing an export presence, albeit a minority one. This international exposure brings additional risks, such as political and economic uncertainties, potential tax changes and barriers or restrictions on international trade that may hinder sales in certain markets.

In the environmental, social and governance (ESG) field, Santanense states that it does not publish a specific sustainability or integrated report, nor does it formally adopt materiality matrices or ESG key performance indicators structured in its own document. Even so, the company claims to follow good governance practices, with an emphasis on transparency with its stakeholders, and to invest in improving its production chain with a focus on reducing environmental impacts. This stance is reflected in certifications such as ISO 9001:2015 (quality management), ISO 14001:2015 (environmental management) and STANDARD 100 by OEKO-TEX®, as well as 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 continuous improvement practices in its industrial processes.

From a regulatory standpoint, Santanense reports that its activities do not depend on specific government authorizations for operating in the textile industry, and that there is no relevant history of interaction with the public administration in this regard, according to the reference form. With respect to patents, trademarks, licenses and royalty agreements, the company considers these intangible assets to be significant and essential to maintaining and enhancing the competitive position of its products. The potential loss of important brands 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 aimed at influencing public policy. For investors tracking CTSA3 and CTSA4 shares on B3, Santanense thus presents itself as a traditional textile company with an integrated flat-fabrics production chain and a focus on apparel, professional uniforms and PPE, combining operations in the domestic market and exports within a highly competitive environment that is sensitive to input costs and operational efficiency.