Cosan S.A. ADS

Good morning, everyone. Thank you for waiting and welcome to COSAN's first quarter earnings release video conference call. Simultaneous translation will be available during the session by clicking on the interpretation button at the bottom of the screen and choosing your preferred language, Portuguese or English. Those listening to the video conference in English, you have the option to mute the original audio in Portuguese by clicking on Mute Original Audio. The video conference is being recorded and will be available on the company's IR website at cosan.com.br. You can also download the presentation through the chat icon, also in English. During the company's presentation, all participants will be on a listen-only mode. The question-and-answer session will start after the presentation. Please note that the information contained in this presentation and in the statements that may be made during the conference call regarding call zones, business prospects, projections, and operating and financial goals constitute the beliefs and assumptions of the company's management, as well as information currently available. Forward-looking considerations are not a guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events and therefore depend on circumstances that may or may not occur. Investors should know that overall economic conditions, market conditions and other operating factors may affect Cozen's future performance and lead to results that differ materially from those expressed in such forward-looking statements. I will now turn it over to Mr. Rodrigo Araújo.

Good afternoon, everyone. Welcome to Covenants.

Good morning, everyone. Welcome to our earnings call for the first quarter of 2024. I'm Rodrigo Araújo, CFO of Cozum, and I'm here to go over the main highlights of the quarter and some details in terms of strategy and management priorities. So, starting with our priorities for the year, as we've been constantly reinforcing, we were highly focused on discipline and capital allocation, being, of course, mindful of our leverage at the holdco level and the upcoast. and also with the high interest rate environment that makes our capital allocation decisions and discipline even more important. So we're focused on liability management and portfolio recycling throughout the portfolio. We've been of course highly focused on execution in our portfolio to make sure that we maintain our track record in terms of execution. We deliver what's been promised in terms of the different guidances and plans of the operating companies. Of course, making sure that we're always enjoying benefits of the talent pipeline of high-quality people that we have and maintaining continuously high safety standards in the group. And finally, we're focused also on supporting and making sure that we execute the contracted growth that's coming from the operational companies. So the structural projects of Lucas do Rio Verde to connect the Brazilian Midwest and agriculture area in Rumo, the second generation ethanol plants in Raizin, and the natural gas regasification terminal in Compass, for example. So, going through our highlights of the first quarter of 2024, our EBITDA under management finished in 7.1 billion highs in the quarter. The difference when we compare to the first quarter of 23 was mainly related to tax credits that were recognized in high easing in the first quarter of 23 and were not recognized in the first quarter of 24. In terms of net income, we had the negative result of 192 million reais compared to the first quarter of 23 that was negative 904 million reais. Mainly, the differences are the tax liabilities that we recognized in the first quarter of 23. And also, this was partially offset by the results of equity pickup, the negative equity pickup from Haize in the first quarter of 2024 and the negative impact of the market to market of our TRS in the first quarter of 2024. In terms of safety, our results in the first part of 24 are pretty well aligned with the acceptable limits that we have, even though it's slightly worse than 23. Fortunately, we had no fatality in this first part. We continue to be highly focused on maintaining a very high safety standards and improving Our results focused on zero fatalities and zero accidents. In terms of dividends and interest on capital received, it's pretty well aligned with the first quarter of 23. Our net debt, R$22.7 billion, pretty aligned with the fourth quarter as well. And finally, in terms of interest coverage, that is, of course, a metric that, as you guys know, we've been following closer since the fourth quarter of 2023. We evolved from one time to 1.1 times for the last 12 months. so focused on improving our interest coverage in terms of sustainability of our leverage at the whole level. Looking at the overall figures for the portfolio, in Homo we increased transported volumes and had an important increase in the average tariff. We are also advancing in our project of Lucas do Rio Verde to connect Mato Grosso in the north of the Midwest of Brazil. In Compass, we had an increase in industrial consumption that was partially offset by the higher temperatures that reduced the residential consumption of natural gas. We had a negative mix impact given the fact that we had higher industrial volumes and lower residential volumes. We also had the positive impact coming from Edge, the company of marketing and services that we started up in the fourth quarter of 23. And we also had the conclusion of our regas terminal in Santos in Brazil. MOVE had stable volumes of lubricant sales, but substantially higher EBITDA with much healthier margins, continuing its schedule and agenda to improve performance over time. In Hadar, our land business, the recurring EBITDA was pretty aligned with the first quarter of the last year with respect to the leases of the agricultural properties in the portfolio. And the fair market value of our properties was R$16.3 billion. Annually, we reassessed the fair market value. This was done in the fourth quarter of 2023. And Cozum's stake is around R$5 billion. In high easing, we had record sugarcane crushing levels, 84 million tons. with an important productivity recovery, especially in the first three cuts. So the sugarcane productivity, the investments that we did over the last couple of years are showing important results in terms of recovering productivity in the sugarcane. We also had healthier margins in the fuel distribution segment in mobility and also higher sugar prices. They were offset by lower, partially offset by lower ethanol prices. When we compared to the first quarter of 23, we had the negative impacts of tax credits that were recognized in the first quarter of 23 and were not recognized in 24 and also of lower ethanol prices. Finally, with respect to Vale, this was the first quarter that we consolidated the results, the equity pickup of Vale's results. We have also concluded the unwinding of our collar financing structure by the end of April. So we finished during the quarter the unwinding of part of the collar, and then in April we sold around .78% of our stake in Vale, mainly focused on reducing the leverage at the holdco, so reducing the gross debt at the holdco level. So, we concluded the unwinding of the entire structure. And we also, in May, unwound the first tranche of the call spread, the forward, synthetic forward structure that we had, around 0.25% of optionality in terms of additional value stake. So, overall, if you look at the figures in May, we have 4.15% of direct stake. and 1.43% of the synthetic forward to call spread that we still maintain as an optionality. So looking at the EBITDA under management, the overall figures, as I mentioned before, the main changes here are the better results in HOMO from higher margins and higher volumes, and the negative results from the lack of recognition of tax credits in the first quarter of 24 in Haizen, and the lower ethanol prices that were offset by sugar prices and volume. So we're getting to 7.1 billion HOMO. of EBITDA under management. Looking at our debt profile, as I mentioned, if you look at the green figures in the first part of 24, and then April we concluded the unwinding of the color structure that is pointed there as Cosano 8. And finishing the gross debt of 23.8 billion reais in April. Looking at the net debt to EBITDA, the pro forma, adjusted when we include the fair market value of Vale's share. It's pretty aligned with the fourth quarter, so coming down from 1.8 times to 1.7. The overall cost of our debt, CDI plus 1.54%. In terms of the amortization profile, if you look at the figures in the lower part of the slide, we increased the average duration of the portfolio from 5.8 years to 6.5, doing liability management and improving the profile. So, basically, we substantially reduced the amortizations between 2024 and 2027 to better navigate the capex cycle in the portfolio. And finally, looking at the cash flows in the period, we received 911 million reais in dividends. So debt payments of 3.8 billion reais. We issued a bond in January 24, 3 billion reais. So after interest and other expenses, we come down to an end balance of 2.6 billion reais. So we used part of the company's cash to reduce the overall gross debt. So those are the main highlights for the first quarter of 2024. Thank you for joining us today. And let's move on to our Q&A session. Thank you.