1

MMAANNAAGGEEMMEENNTT RREEPPOORRTT

Dear Shareholders,

In compliance with legal provisions, Fertilizantes Heringer S.A. ("Heringer" or "Company") here

in presents the Management Report and financial statements for the period ended December

31, 2009, accompanied by the Independent Auditors' Report and corresponding notes.

Brief History

Fertilizantes Heringer S.A. is a pioneer in the production, marketing and distribution of

fertilizers and has a national presence and 42 years of experience in this industry. Heringer has

registered strong growth over its history, which is the result of its investments in production

units, differentiated quality and products, personalized service, extensive marketing and

distribution network, secure and stable access to raw materials, agile decision-making process

and opportune and strategic positioning in regional markets.

Heringer was incorporated in 1968 by the agricultural engineer Dalton Dias Heringer as a sole

proprietorship under the name Dalton Dias Heringer.

Today, Heringer sells basic fertilizers, NPK formulas and special fertilizers at 19 mixing units

located in Brazil’s primary consumption regions, with the capacity to mix 4.7 million metric

tons each year, taking into account the seasonal adjustments in production capacity.

Heringer distributes fertilizers to rural producers, agricultural companies, merchandising

businesses and cooperatives located nationwide. It has a technical team with extensive

capacity to develop new special fertilizers, as well as two research centers, which enables it to

meet the needs of a wide variety of agribusiness segments.

Representing an important development for its expansion and modernization, in April 2007,

Heringer carried out an initial public offering, listing its stock on the Novo Mercado Special

Corporate Governance segment of the São Paulo Stock Exchange (Bovespa), with its stock

trading under the ticker FHER3.

Lógica Transportes S.A., a wholly owned subsidiary of the Company, was incorporated in

March 2008 to operate rail freight services for the Company and for third parties.

In late 2008, Heringer started production at its sulfuric acid and single super phosphate (SSP)

plant located in Paranaguá, Paraná, with annual capacity of 200 thousand metric tons of

sulfuric acid and 300 thousand metric tons of SSP.

On the corporate governance front, Heringer installed its Audit Board for fiscal year 2008 and

later also for fiscal year 2009, which is composed of 3 members and 3 alternate members.

2

Brazilian Fertilizer Market

In 2009, fertilizer deliveries in Brazil totaled 22.5 million metric tons, which represents growth

of 0.2% from 2008. Fertilizer supply significantly exceeded demand in 2009, due to the high

ending stocks in 2008. In 4Q09, fertilizer deliveries in Brazil totaled 6.5 million metric tons, for

growth of 54.8% from the 4Q08, with the quarter's deliveries proving decisive for enabling the

country’s industry to achieve the slight growth it registered in the full year. Some of the factors

that contributed to this growth in varying degrees were:

• An atypical 4Q08, with consumption substantially lower than the historical trend, due

to the global financial crisis;

• Lower fertilizer prices in relation to 4Q08, as well as during 2009;

• The recovery in commodity prices during 2009;

• The increase in business confidence among producers;

• The higher profitability of producers, reflecting the higher revenue and lower

production costs;

• The higher supply of credit in the market;

• The return to historical seasonality in the sector, with deliveries in the first six months

of 2009 accounting for 37% of the total in the year, and the last six months of the year

accounting for 63%.

In 2009, Brazilian fertilizer production was practically stable in relation to 2008, declining by a

slight 5.7% to 8.4 million metric tons, from 8.8 million metric tons in 2008. Despite the strong

growth in 4Q09, production declined in 2009 because of the lower production in the previous

quarters due to the high level of stocks in the industry.

The strong growth in 4Q09 was due to the recovery in demand in the quarter in relation to

4Q08, which was severely impacted by the international economic crisis.

Following the same trend as domestic fertilizer production, Brazilian fertilizer imports in 4Q09

increased by 89.8% to 3.1 million metric tons, from 1.6 million metric tons in 4Q08. The higher

imports reflected the adjustment in inventories during the year, which increased the need for

imports in the sector.

As a result, In 2009, fertilizer import volume totaled 10.9 million metric tons, down 28.8% from

15.4 million metric tons in 2008.

The ending stocks in 2009 of 3.5 million metric tons were 45.3% lower than the ending stocks

in 2008 of 6.4 million metric tons, and consequently were in line with historical levels. The

lower domestic production and imports led to a destocking trend in the industry. The ending

stocks in 2009 were also down in relation to 2007.

The year 2008 was completely atypical, with the first half of the year accounting for 51% of

total deliveries in the year, and the second half responsible for 49%. In 2009, we observed a

return to historical seasonality, with 37% of deliveries in the first half and 63% in the second

half.

3

2006 2007 2008 2009

20,982

24,609

22,429 22,471

+17.3%

-8.8% +0.2%

Deliveries

(in

th

ou

san

d o

f m

etr

icto

ns)

Source: Anda

2006 2007 2008 2009

8,772

9,816

8,8768,373

Source: Anda

+11.9%

-9.6%

-5.7%

Local Production

(in

th

ou

san

d o

f m

etr

icto

ns)

2006 2007 2008 2009

12,102

17,53015,412

10,978

+44.9%

-28.8%

-12.1%

Imports(i

n th

ou

san

d o

f m

etr

icto

ns)

4.4

6.4

3.5

DEC/07 DEC/08 DEC/09

(in

mil

lio

n o

f me

tric

ton

s)- 45.3%

Inventories

Source: Anda Source: Anda

Source : Anda / 2009

2004 2005 2006 2007 2008 2009

65%71% 72%

62%

49%

63%

35%29% 28%

38%

51%

37%

1st Half 2nd Half

Seasonality

4

Heringer’s Sales and Breakdown by Crop

In 2009, delivery volume was 3,931 thousand metric tons, representing a 23% increase from

3,190 thousand metric tons in 2008, with this growth rate far surpassing the industry average

of 0.2%. In 4Q09, Heringer’s delivery volume was 1,402 thousand metric tons, up 81% from

774 thousand metric tons in 4Q08 and making an important contribution to growth in the full

year.

In addition to the factors that influenced the Brazilian fertilizer industry in 4Q09 and the year,

Heringer’s strong growth was also driven by expansion in its client base due to concerted sales

efforts, with a focus on direct sales to clients and excellent technical and commercial

preparation.

It is important to mention the increased share of deliveries for soybean cultivation, which

increased by 96% in 4Q09 and by 32% in 2009 from the same periods a year earlier. This

development was due to the fact that 4Q08 was severely affected by the international

financial crisis, to the expansion in the soybean planted area at the expense of the corn

planted area in relation to 2008, and to the favorable year for soybean cultivation, which

presented good profitability.

Nevertheless, fertilizer deliveries for corn cultivation increased by 856% in 4Q09, with this crop

also severely impacted in 4Q08, and by 15% in 2009 in relation to 2008. Another highlight was

the strong sales volume for the second corn crop in 4Q09.

Deliveries for coffee cultivation increased by 56% in 4Q09 from 4Q08 and by 48% in the year.

Deliveries for sugarcane cultivation also increased from the same periods in 2008, by 164% in

4Q09 and by 17% in 2009. Note that sugarcane cultivation was also heavily impacted in 4Q08.

In 2009, despite the unfavorable weather conditions, especially in the Center-South region,

sugarcane cultivation in the period was benefitted by the expansion in Brazil’s flex-fuel vehicle

fleet in 2009, the operational startup of new sugarcane crushing mills and the sugarcane crop

shortfalls experienced by international producers.

Fertilizer consumption for reforestation increased by 41% in relation to 4Q08, demonstrating

the return to historical consumption, reflecting the improved scenario in this sector. In the

year, fertilizer consumption in this sector decreased by 18%.

Fertilizer deliveries for other crops increased by a strong 23% in 2009. We currently provide

fertilizers for over 70 crops, which include fruits (including citrus), vegetables, flowers, etc.

These crops also generated a significant increase in sales volume to retailers.

Figures for Heringer’s sales mix by crop indicate stability in the share of total sales of each

crop.

These crops also generated a significant increase in sales volume to retailers.

Heringer’s national footprint also helps to mitigate any problems associated with weather,

pests and disease that can affect certain regions.

5

Specialty Products

Specialty products make important contributions to Heringer’s margins and also in terms of

customer loyalty.

The share of specialty products in total sales increased by 5 percentage points, from 22% in

2008 to 27% in 2009.

In 2009, this volume was 1,044 thousand metric tons, 47.9% higher than the 706 thousand

metric tons in 2008.

Specialty products are fertilizers that in large part are produced exclusively by Heringer and

which offer agronomic characteristics superior to standard products. Heringer has the largest

portfolio of specialty fertilizers on the market (27 products), which are suitable for all crops.

The development of this product line seeks to meet more effectively the nutritional needs of

crops in order to enhance yields and quality.

In addition, Heringer has an experienced technical team formed by agronomists and

agricultural specialists. This technical team works together with important researchers in the

field of soil fertility and plant nutrition in order to continually update their knowledge of new

techniques and parameters to achieve proper crop nutrition and fertilization.

2007 2008 2009

707 539 628

594681

835

204 243200

603 517

768

516 577

665 641 633

837

Σ 3,933

Market

+0.2%

+32%

+15%

+48%

- 18%

+23%

+17%

-2%

+23%

Σ 3,265Σ 3,190

Sales by Crop

(in

th

ou

san

d o

f m

etr

icto

ns)

Soybean Corn Coffee Reforest Others Sugarcane

6

Client Base and Market Share

Heringer’s client base registered strong growth to 45,653 clients in 2009. In 2009, the client

base expanded by 29.3% from the previous year.

Expanding the client base is important for supporting Heringer’s sustainable growth over the

coming years.

Heringer’s market share reached 17.5% in 2009, expanding by 3.3 percentage points from

2008.

2008 2009

2.484 2.889

706

1.044

Specialty

Conventional

27%

2008 2009

22%

73%78%

+ 47.9%

+16.3 %

Σ 3,190

Σ 3,933

Share of Specialty Products and

Conventional

Sales Volume

(in

mil

lio

n o

f m

etr

icto

ns)

+23.3%

2007 2008 2009

31,05735,306

45,653

+29.3%+13.7%

Number of Clients

2007

13.3%

2008

14.2%

2009

17.5%3.3 pp

Heringer's Market Share

7

Mixing Units and Production Capacity

Heringer currently has 19 mixing units, with the units in Anápolis, Goiás, in São João do

Manhuaçu, Minas Gerais and in Rio Grande, Rio Grande do Sul slated to start up operations in

2Q10. The Goiás unit was leased, while the other two units were outsourced.

In Paranaguá, Paraná, Heringer has a Sulfuric Acid Unit and a Single Super Phosphate (SSP)

Plant.

In the state of Mato Grosso do Sul, to replace the unit in the city of Rio Brilhante, which was

leased, construction was begun on a unit in the city of Dourados, which is slated to start up

operations in the second half of 2009.

Furthermore, production capacity is being expanded at the units in Rosário do Catete,

Iguatama, Catalão, Rio Verde and Ourinhos.

Heringer’s current annual production capacity is 4,700 thousand metric tons, which will

increase to 5,700 thousand metric tons after the conclusion of these new investments.

12.6%

30.2%

28.8%

28.4%

North/Northeast

Midwest

Southeast

South

Source: Anda

Brazilian Market Consumption Distribution

8

FINANCIAL RESULTS (amounts in R$ thousand)

2009 Income Statement

In 2009, net revenue was R$ 3,192.3 million, down 9.4% from 2008. The lower net revenue in

the period was due to the combination of the 27.6% increase in delivery volume and the 29.0%

drop in the average sales price in relation to 2008. The average sales price in 2009 was R$

765.92, down from R$ 1,078.64 in 2008.

NORTH

Rosário do Catete

Camaçari

NORTHEAST

Legend

Mixing Units

SSP Units

MIDWEST

Rondonópolis Anápolis

Rio Brilhante

Rio Verde

SOUTHPorto Alegre

Bebedouro

Ourinhos

Manhuaçu

Viana

SOUTHEAST

Rio Grande

São João do

Manhuaçu

Catalão

Mixing Units, SSP Production and Sulfuric Acid

9

Gross income was R$ 241.1 million in the period, representing gross margin of 7.6%. Gross

income was down 14.4% from the gross income of R$ 281.9 million in 2008.

In 4Q09, prices suffered heavy pressure in the market, which led to strong margin

compression. The main factors pressuring prices are listed below:

• Generalized concern in the market that delivery volumes in 2008 of 22.4 million metric

tons would not be achieved in 2009, leading to higher supply in the market, and

consequently lower prices;

• The decline in raw material prices, which continued during 4Q09;

• The perception that soybean planting peaked in October.

SG&A expenses as a percentage of net revenue in 2009 were 2 percentage points higher than

in 2008. This result was due to the lower revenue and higher selling expenses, this latter

primarily reflecting the expenses with delivery freight, given the sharp increase in delivery

volume, combined with the drop in the average sales price.

Bear in mind that delivery freight expenses form a portion of the composition of the sales

price. There was also R$ 2 million related to the provision for tax liabilities included in the

Federal Tax Renegotiation Program (REFIS) that were recognized in 4Q09.

Adjusted EBITDA in 2009 was R$ 36.9 million, for adjusted EBITDA margin of 1.2%, down from

2.6% in 2008. In line with our previous comments related to the factors that impacted the

4Q09 results, EBITDA in 2009 was also heavily impacted.

In 2009, net financial income/(expenses) was R$ 111.9 million, reflecting the appreciation in

the Brazilian real against the U.S. dollar in the period.

Heringer maintains a hedge policy to mitigate the foreign exchange risk on its USD-

denominated liabilities related to its raw material imports. On December 31, 2009, the

Company held a hedge position formed through swap contracts of US$ 295.8 million.

Adjusted net income in 2009 was R$ 68.4 million, for net margin of 2.1%, reflecting significant

improvement from the adjusted net loss of R$ 253.2 million in 2008.

2009 % NR 2008 % NR∆ %

09/08 4Q09 % NR 4T08 % NR ∆ % 09/08

Gross Revenue 3,260,988 3,611,131 994,549 935,391

Net Revenue 3,192,314 100.0% 3,524,559 100.0% -9.4% 972,812 100.0% 914,580 100.0% 6.4%

COGS (2,951,181) -92.4% (3,242,704) -92.0% -9.0% (911,313) -93.7% (991,351) -108.4% -8.1%

Gross Profit 241,133 7.6% 281,855 8.0% -14.4% 61,499 6.3% (76,771) -8.4% 180.1%

SG&A (266,697) -8.4% (224,255) -6.4% 18.9% (88,585) -9.1% (58,207) -6.4% 52.2%

EBITDA 5,009 0.2% 90,113 2.6% -94.4% (44,153) -4.5% (124,607) -13.6% 64.6%

Adjusted EBITDA 36,913 1.2% (12,249) -1.3%

Net Fin. Income/(Exp.) 111,965 3.5% (459,473) -13.0% 124.4% (12,058) -1.2% (289,167) -31.6% 95.8%

Net Income/(Loss) 59,508 1.9% (253,164) -7.2% 123.5% (35,200) -3.6% (277,865) -30.4% 87.3%

Adjusted Net Income/(Loss) 68,439 2.1% (26,269) -2.7%

10

As the following table shows, the adjusted EBITDA of R$ 31.9 million and the adjusted net

income of R$ 8.9 million reflect the reversal of the non-recurring impact from participating in

the Federal Tax Renegotiation Program (REFIS) introduced by Federal Law 11,641/09.

Participation in REFIS (Federal Law 11,941/09)

The Board of Directors meeting of March 1, 2010 approved the company’s participation in the

Federal Tax Renegotiation Program established by Federal Law 11,941/09 for the

administrative appeal that discusses the possibility of offsetting tax liabilities with tax credits

acquired from Agrovale - Agro Indústrias do Vale do São Francisco S.A., which involves

substituting the approved plaintiff, with the failure by Brazil’s Federal Revenue Service to ratify

this substitution challenged, generating administrative proceeding 11543001781200390. This

offset totaled R$ 71.5 million, which with monetary restatement and penalties totaled R$133.9

million on December 31, 2009. The company’s participation in the program reduced by R$ 21.9

million the balance of these liabilities, which now stands at R$ 112.0 million. This outstanding

balance will be partially settled by carrying forward tax losses in the amount of R$47.5 million

and the remaining balance of R$64.5 million will be paid in up to 180 monthly installments.

In addition, the company will seek to resume the use of its tax credits through a lawsuit, for

which the restated amount based on the criteria established by the court decision was R$127.5

million on December 31, 2009. The recognition on the accounting statements will be made

based on the acquisition cost of these credits plus the restatement determined by the court

decision, up to the market value limit, in accordance with the interpretation of the Securities

and Exchange Commission of Brazil (CVM) stated in its Official Letter 379/07 dated November

5, 2007, in response to the company’s consultation made on October 8, 2007, which on

December 31, 2009 totaled R$ 90.5 million. This had a negative impact on the company’s net

income in 4Q09 of approximately R$ 7.3 million and on its EBITDA in the period of R$ 29.9

million.

On December 31, 2009 the difference between the face value of the credits and their restated

acquisition cost was R$ 37.1 million, which will be recorded on the financial statements as the

credits are realized based on the receipt of the certificates of judgment debt of the

government.

The Company has also participated in the program for liabilities involving other lawsuits and

administrative proceedings in the amount of R$ 3.6 million, net of tax loss carryforward. As a

result, the total amount to be included in the federal tax renegotiation program is R$ 115.6

million.

Working Capital Days

Heringer’s working capital reflects the seasonality of its business. Therefore, comparisons

between same quarters of the year provide a clearer understanding of its working capital.

Heringer maintains a working capital policy to provide the capital needed for its operations,

while maintaining a cash position that is adequate for its needs.

11

Heringer maintains a strict credit policy aimed at keeping accounts receivable days at low

levels that seek sales with short terms and adequate credit analysis, thereby reducing default

risk and losses. Accounts receivable days stood at 28 days in 2009, down from 34 days in 2008.

Inventory days stood at 30 days in 2009, down from 43 days in 2008. Through synergies

between the commercial, supplies and logistics areas, Heringer seeks to maintain an ideal level

of inventories to meet its client’s needs in a timely manner and with quality.

Accounts payable days ended 2009 at 115 days, down from 135 days in 2008. Heringer

believes it is well positioned to continue its financing operations for the acquisition of fertilizer

raw materials.

Financial Highlights (amounts in R$ thousand)

Heringer maintained an adequate cash position in the period, ending 2009 with a cash balance

of R$ 153.0 million.

Low levels of accounts receivable and inventories, combined with supplier credit lines and

FINIMP operations, reflect the effective management of our working capital.

-22 2 1 10 0 -3 -21 -59 -110 -92 -55 -58

Working Capital Days

54 5239 34 44 34 35 34

4939

31 28

51

7660

59 60

110 106

4355

6748

30

127 126

9883

104

147162

135

214198

134115

1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09

Accounts Receivable Days Inventories Days Accounts Payable Days

12

Cash Flow (amounts in R$ thousand)

Heringer’s cash generation was negative R$ 97.8 million in 2009. Cash began the period

(December 31, 2008) at R$ 250.8 million and ended the period (December 31, 2009) at R$

153.0 million.

2009 2008 2007

Delivery Volumes (thousand/tons) 3,933 3,190 3,265

Cash and Cash Equivalents 153,040 250,810 118,145

Cash Flow Generation (97,770) 132,365 (58,603)

Accounts Receivable 307,320 352,375 315,345

Inventories 415,936 533,887 539,933

Local Suppliers 175,964 50,848 20,801

International Suppliers 424,981 795,802 370,012

Import Financing & others 567,387 644,823 282,336

Accounts Payable Total 1,168,332 1,491,473 673,149

Total suppliers + Finimp USD 569,933 616,442 368,288

4Q09 2009

Income before Taxes and Social Contribution (66,493) 77,375

Non cash flow impact expenses (revenues) 102,151 (299,100)

Assets reduction 275,330 209,043

Liabilities reduction (337,997) (44,688)

Operational Activities cash flow (27,009) (57,370)

Investing Activities cash flow (11,966) (38,825)

Financing Activities cash flow (379) (1,575)

Cash Generated (Used) (39,354) (97,770)

Net Increase (Decrease) In Cash

Initial Cash 192,394 250,810

Ending Cash 153,040 153,040

Net Increase (decrease) in Cash (39,354) (97,770)

Purchase of fixed assets using ICMS credits 7,682 12,282

Purchase of tax credits 71,524 71,524

Transactions not involving cash 79,206 83,806

13

Heringer Ownership Breakdown

Since 2007, Heringer stock (ticker symbol FHER3) has been listed on the Novo Mercado, the

special listing segment of the São Paulo Stock Exchange (Bovespa) with the highest standards

of corporate governance.

Heringer is one of the 100 most liquid stocks on the São Paulo Stock Exchange (Bovespa) and is

a component of the following stock indexes: Brazil Index (IBrX), Industrial Sector Index (INDX),

Special Corporate Governance Stock Index (IGC), Small Cap Index (SMLL) and Special Tag-Along

Stock Index (ITAG).

Foreign investors held 67.0% of the free-float in June 2008, with this figure declining to 49.0%

in December 2009, with the share of Brazilian investors in the free-float increasing from 33.0%

in June 2008 to 51.0% in December 2009. On December 31, 2009, Heringer’s free-float

registered 55 foreign investors and over 4,000 Brazilian investors.

Stock Performance in 2009

In 2009, Heringer stock (FHER3) registered a gain of 201%. Average daily trading volume was

R$ 2,073,044 and the average number of trades per day was 317.

In 2008, the impacts from the global crisis led to strong net outflows by foreign investors to

cover positions outside of Brazil, exerting strong pressure on Heringer’s stock price. However,

in view of the market’s good fundamentals, the latest results disclosed by Heringer, new

estimates for fertilizer sales and prices, and changes in the world economic scenario and in

country risk, Heringer stock posted an excellent recovery over the past 12 months.

Heringer continues to believe in the long term potential of Brazil’s fertilizer sector, given the

country’s excellent agriculture conditions and low rates of fertilizer use.

Ownership Breakdown and Free-Float Foreign and Brazilian Investors on Free-Float

Controlling

Group

67.8%

Free-Float

32.2%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

0%

20%

40%

60%

80%

100%

120%

dec/07 dec/08 jul/09 aug/09 sep/09 oct/09 nov/09 dec/09 jan/10

% Brazilian % Foreign

No. Foreign No. Brazilian

14

2010 Outlook

The outlook for Brazil’s agribusiness sector in 2010 was heavily correlated to developments in

the world economy, given its strong dependence on exports of orange juice, sugar, soybean,

corn, animal proteins, etc. The growth in international demand for agricultural commodities

and their prices is tied to the higher income levels in emerging economies in recent years and

to population growth.

Following the strong contraction in world economic growth in 2009, we expect a slight

recovery this year, driven primarily by emerging economies. Economic growth in developed

countries remains weak, due to the repercussions of the economic crisis on the economy in

general.

We expect Brazil’s GDP to grow by 4.5% to 5.5% in 2010, with agribusiness making an

important contribution to this growth.

Specifically in relation to Brazil’s fertilizer market, the outlook for 2010 suggests a better year

than in 2009, basically due to the level of ending stocks, which stood at 3.5 million metric tons

in 2009, compared with 6.4 million metric tons in 2008.

As a result, supply should be more in line with demand, which should support margin

expansion in the industry over the course of 2010.

International raw material prices should present lower volatility than in 2008 and 2009.

Accordingly, fertilizer prices should remain near current levels, resulting in lower costs for rural

producers.

JAN/09 MAR/09 MAY/09 JUL/09 SEP/09 NOV/09 DEC/09

R$ 3.61

R$ 4.85

R$ 8.04

R$ 2,66

R$ 6.84

R$ 3.23

R$ 9.40

R$ 11.95

R$ 12.26

R$ 11.00

R$ 10.70

Performance of FHER31 Performance of FHER3 vs. IBOV

Note 1: Values in Brazilian Reais

201%

83%

jan feb mar apr may jun jul aug sep oct nov dec

FHER3 IBOV

15

Brazil’s fertilizer production could increase in the medium term, in view of VALE’s launch of

phosphate- and nitrogen-based fertilizers in Brazil, through the acquisition of phosphate mines

and the acquisition of the Brazil’s largest producer of fertilizer raw materials. New investments

will most likely be made in fertilizer raw material production, thereby reducing Brazil’s

dependence on imports.

We expect better profitability in Brazil’s agribusiness sector in 2010, due to the lower

production costs and the better barter ratio for fertilizers versus agricultural products.

Grain production in the 2009/10 marketing year is estimated at 146.5 million metric tons,

which would represent growth of 7% on the 135.2 million metric tons in the 2008/09

marketing year.

Expectations point to fertilizer consumption in Brazil of approximately 23.5 million metric tons.

International Raw Material Prices

Prices in USD. Source: Specialized magazines in the FMB sector and The Market

CRF* = cost and fright

0

200

400

600

800

1000

1200

1400

Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10

MAP/DAP - CFR* TSP-CFR KCL in Bulk - CFR

Urea in Bulk - CFR Ammonium Nitrate - FOB Ammonium Sulphate - CFR

16

Agricultural Commodities - Prices

Source and Projection : Agroconsult / R$/bag = Bag Prices

Soybean R$/bag* (60kg/Parana) Corn R$/bag* (60kg/Sao Paulo)

Sugarcane R$/bag* (50kg/Sao Paulo) Arabica Coffee R$/bag* (60kg/Brazil)

15.3

25.0

18.9

33.8

27.8

21.3

19.4

26.5

31.9

38.8

50.6 49.2

49.7

34.9

23.2

27.2

46.4

44.0

59.2

224.6

291.3

252.7

238.6

283.8

267.2

PROJECTION

19.735.8

283.9

PROJECTION

PROJECTION

PROJECTION

77.3

Barter Ratio of Agricultural Products versus Fertilizers

Source: Agroconsult

Soybean Parana (bag/60kg) Corn Parana (bag/60kg)

Sugarcane Sao Paulo (tons) Coffee (Brazil)

30.4

22.016.7

36.3

71.1

42.9

24.1

55.061.0

45.5 51.0

77.6 65.3

107.2

50.7

20.8 21.818.1

23.9

20.1

47.2

21.8

17.1

2.32.6 2.8

4.2

6.3

4.1

2.5

5.0

3.83.7

5.9

8.2

5.9

4.2

17

Human Resources

On December 31, 2009, Heringer had 2,888 employees. The payroll, which includes salaries,

mandatory social charges and benefits, totaled R$ 97.2 million.

The salaries paid to employees is calculated in accordance with governing law and their

compensation is composed of the base salary (nominal) and a variable portion, which includes

overtime, additional for nighttime work, hazard pay, productivity and bonuses.

The benefit policy is managed as advantages for employees with the aim of increasing their

safety and wellbeing while at work as well as outside of work. Employees are offered a benefit

package that includes a healthcare plan, life insurance, daycare, food and transportation.

Heringer also has a profit sharing program through which it distributes to its employees 10% of

net income adjusted for any accrued losses from prior periods. Before the end of the fiscal

year, the Company distributes a nominal monthly salary as an advance, independent of the net

income in the period. Employees admitted during the fiscal year receive a share proportional

to their time of service.

Grain Production, Planted Area and Brazilian Fertilizer Market

Source: Agroconsult/ * Agroconsult's Projection and Company's Estimate

143,859

135,263

145,164 149,929

47,376 47,943 48,335 49,193

2007/2008 2008/2009 2009/2010* 2010/2011*

Grain Production Planted Area Brazilial Fertilizer Market

24,609

22,429 22,471

23,500

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Fixed Assets

On December 31, 2009, the Company had investments of R$ 344.7 million, basically

represented by the investments in its own properties.

The Company had 19 production units, of which 10 units are owned, 6 units are leased and 3

units are outsourced.

Research & Development

Heringer invests regularly in the research and development of new technologies that can be

applied in its fertilizer production line. As a result of this effort, today Heringer has the largest

portfolio of special products in the market, most of them developed with in-house technology.

These special products have superior agronomic characteristics than conventional products

and yield better results for client’s crops. These increases in productivity are documented

through experiments conducted by well known research institutions, as well as the

testimonials of countless farmers who have used these fertilizers.

In addition, Heringer has an experienced technical team formed by agronomists and zoologists

who are familiar with the latest trends in crop fertilization in Brazil. This technical team works

together with important researchers in the field of soil fertility and plant nutrition in order to

continually update their knowledge of new techniques and parameters to achieve proper crop

nutrition and fertilization.

With the objective of generating and disseminating technical data to farmers and livestock

producers, Heringer maintains two Research Centers, one dedicated to coffee cultivation and

the other to pasture management. The knowledge generated by these centers helps

strengthen relationships with rural producers and also provides technical support for the

Company’s special product sales.

The Eloy Carlos Heringer Experimental Extension and Research Center (CEPEC) is an initiative

of Heringer in partnership with the Ministry of Agriculture, Livestock and Supply (MAPA).

Located in Martins Soares, Minas Gerais, since 1994 it has been considered a national

reference in technological development for high-altitude coffee cultivation, receiving each

year some 1,000 rural producers and technicians at its meetings to present research results.

Located in Viana, Espírito Santo, the Pasture Management and Fertilization Center (CEMAP)

organizes visits and meetings with farmers, researchers, livestock producers and technicians to

disseminate its results and knowledge. The center has 31.0 hectares of pasture, of which 18

hectares are allocated to the production system, which simulates the reality of the field, where

different levels of fertilization are tested. On two of these hectares, various species of grasses

are planted to generate knowledge on the nutritional requirements of each. Under the

coordination of a Research Supervisor, since its creation CEMAP has received more than 1,500

visitors, who include researchers, university representatives, producers and the entire network

of Heringer representatives in Brazil. The center has also organized 180 lectures in various

Brazilian states, including Bahia, Espírito Santo, Rio de Janeiro, São Paulo, Minas Gerais, Goiás,

Mato Grosso, Mato Grosso do Sul and Paraná.

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The Agribusiness Research Center (CEAGRO) located in Vila Velha, Espírito Santo is one of the

pillars of Heringer’s operational excellence, providing a structure for researching and

developing new agricultural techniques. CEAGRO, which has hosted events since 2004, has

maintained a busy calendar of conferences and meetings in the past few months, attracting

professionals (directors, technicians and executives) from various agribusiness areas.

In 2006, the technology FH Micro Total was developed, which consists of a line of products

obtained from an innovative production process by which micronutrients are incorporated into

fertilizer granules, substantially increasing the fertilizer’s efficiency, since it increases the

application uniformity and solubility of micronutrients. Today, Micro Total technology is

available in all of Heringer’s product formulations, since the process results in higher yields for

consumers compared to conventional formulations. These yield gains were proven by

experiments conducted by renowned research institutions in Brazil. To guarantee the

maximum quality of the micronutrients used in this product line, the Company developed at its

Unit II located in Paulínea a micronutrient production process with the granulometry required

for perfect coverage of fertilizer granules, which produces products with superior physical and

agronomic characteristics.

In 2007, Heringer launched its FH Nitro Mais technology. This is an unprecedented product in

the Brazilian market, using special sources of micronutrients to minimize losses caused by the

volatilization of the urea. Through several experiments conducted with consultants, a mixture

was developed using micronutrient sources with characteristics that can inhibit the action of

urease (an enzyme that breaks down urea molecules). The technology consists of covering the

urea granules with this mixture, allowing for more efficient use of this important nitrogen

source. The product is enjoying excellent reception in the market, since it combines two

important benefits: lower nitrogen losses from volatilization and micronutrients with high

levels of availability for use by crops.

Environment

Heringer complies with all environmental laws and regulations, and environmental issues are

considered and observed in all phases of the design, construction and operation of its

industrial units.

All production units require authorization from regulatory agencies for their operation and are

subject to regular oversight.

In addition to the investments already made in Heringer’s production units to bring them in

line with environmental laws and regulations, many other additional investments have been

made in production units as preventive measures and measures to adapt to regulations before

they take effect. Heringer has an environmental management system that allows it to develop

and implement policies and objectives that take into account legal requirements and

information on relevant environmental aspects.

In February 2009, the Paraná State Public Prosecutors’ Office filed a civil action in the public

interest that questioned the conformity of the licensing process and alleged environmental

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damages at the plant in Paranaguá, Paraná. On November 20, 2009, an injunction paralyzed

the unit’s operations, and on December 15, 2009, the injunction was lifted by the 4th Region

Federal Court of Appeals, with the plant authorized to resume operations. Since then, the

Company has continued to defend its interests in the civil action.

Shareholder rights

In accordance with the Company’s bylaws, shareholders are assured the right to receive a

mandatory annual dividend of at minimum 25% of net income in the fiscal year, after being

offset by any accrued losses and with the deduction or addition of the following amounts: (i)

the amount destined for constituting the legal reserve; (ii) the amount destined for forming

the contingency reserves or the reversal of these reserves formed in prior periods; (iii) the

amount resulting from the reversal of the unearned profit reserve formed in prior periods, in

accordance with Article 202, Item II of Federal Law 6,404 of 1976, as amended (Brazilian

Corporation Law).

Adherence to the Market Arbitration Chamber

The Company, its shareholders, administrators and members of the Audit Board (when

installed) pledge to resolve through arbitration all and any disputes or controversies that could

arise between them that is related to or arises from, especially, the application, validity,

effectiveness, interpretation, violation and related effects of the provisions contained in

Brazilian Corporation Law, in the Company’s bylaws, in the rules issued by the National

Monetary Council (CMN), by the Central Bank of Brazil and by the Securities and Exchange

Commission of Brazil (CVM), in any other laws or regulations applicable to the general

functioning of the capital markets, as well as those contained in the Regulations of the Novo

Mercado, in the Regulations of the Market Arbitration Chamber and in the Novo Mercado

Listing Agreement.

Relationship with the external auditors

In accordance with CVM Instruction 381/03, in 2009 the Company did not receive from the

independent auditors or persons related to them any other service other than the external

audit. In addition, the policy adopted by the Company is in line with the principles that

preserve the auditor's independence when hiring auditing services, in accordance with

internationally accepted criteria, namely: the auditor must not audit his or her own work,

perform managerial tasks for his or her customer or promote the customer's interests.

Closing remarks

The Company’s management expresses its appreciation to shareholders, clients, suppliers and

employees for their confidence and support demonstrated over the course of another year.

We remain confident in the continued positive performance of Brazil’s agribusiness sector and

in its lasting importance to the country’s economy.

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In this context, Fertilizantes Heringer remains focused on the pursuit of excellence in all its

activities, through the efforts and dedication of its entire team, striving to always offer high-

quality products and services to its customers.

The Management,