Cosan S.A. ADS

Good morning everyone and thank you for waiting.

Welcome to COSEN's third quarter 2024 earnings conference call. For those who need simultaneous interpretation, we have this feature available on the platform. To access it, simply click on the interpretation button via the globe icon at the bottom of the screen and choose your preferred language, English or Portuguese. For those listening to the conference in English, there is an option to mute the original Portuguese audio by clicking on Mute Original Audio. Please note that this conference call is being recorded and will be made available on the company's Investors Relations website at cosen.com.br. You can also download the presentation, including the English version in the chat icon. During the company's presentation, all participants will have their microphones disabled. Following the presentation, we will begin the Q&A session. We would like to highlight that the information provided in this presentation and any statements that may be made during the conference call regarding the business outlook, projections, and operational and financial targets of COSEN are based on the company's management beliefs and assumptions, as well as information currently available. Forward-looking statements are not performance guarantees. 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 understand that general economic conditions, market conditions, and other operational factors may affect Rosan's future performance and lead to outcomes that differ materially from those expressed in such forward-looking statements. I will now turn the call over to Mr. Rodrigo Araújo.

Hi, everyone. Good morning. Thank you for joining us in our earnings call for the third quarter of 2024. Starting here with management priorities, I think that's something that we've been reinforcing over time. The fact that we're focused on being quite disciplined in terms of capital allocation and looking at improving leveraged by doing liability management and portfolio management at Cozum, especially to navigate this higher interest rate scenario. We continue to be focused on the execution of what we have in the portfolio, continuing to deliver the expected results from the business plans of the different businesses. Of course, always with high safety standards and focused on developing our talent pipeline. And on this quarter specifically, it's relevant that we had a lot of different movements in management positions within the group, and they were clearly supported by the pipeline of executives that we have internally and have been developing over time. And I think that It shows the ability that we have to have people ready to occupy different positions within the group and to have management positions occupied by people that are being developed internally. And also, it's important to highlight that we continue to support the agenda of contracted growth. investing in the opportunities that we have in the different structural projects of the different businesses within the group. In terms of portfolio management and liability management this quarter, first I will highlight in Kazan the fact that we amortized the ventures, the Arlog ventures that we announced last quarter. So basically taking out all of the amortizations from 24 to 26. We also recently issued the ventures in the domestic market in Brazil to support the liability management of our 27 bonds that are still outstanding and become callable at par January 25. In terms of portfolio management, in Compass, we completed the acquisition of the control of Compagas, the natural gas distribution company in the state of Paraná in Brazil. We also concluded the sale of Norgas, basically relevant portfolio management with inflows that support the growth of Compass portfolio. In MOVE, we concluded the acquisition of Pax Group that brings important flexibility in terms of industrial operations for MOVE. And in Hadar, we concluded the sale of the Vista Alegre farm. Looking at the highlights of the Q3, 24. First, we look at EBITDA under management that is aligned with the Q3, 23. We also had positive net income of around 300 million reais, comparing to a little bit over 600 in 23. Basically, the main differences are the impact of the dividends from Vale that we received in 23, and we accounted for Vale back then at fair value. And now we have the equity pickup method. And also in this quarter, we have the impact, the negative impact of the TRS of Cossan shares in Cossan. In terms of safety metrics, we see a slight increase compared to the second quarter of 24. And basically, we had a quarter with a higher number of accidents in the third quarter. Of course, we continue to be very focused on having the highest safety standards and improving our safety metrics. We continue to be within the acceptable level, and even though we're focused on reducing any incidents or accidents, we still have our safety metrics within the acceptable levels. Looking at dividends received this quarter, slightly above 300 million reais, net debt basically flat compared to Q2, 21.7 billion reais, and our debt service coverage ratio of 1.2 times in the last 12 months, slightly below Q2 24. Looking at the portfolio and the results of the different businesses, starting with Humu, we had higher volumes transported in Humu with higher tariffs as well, which resulted in higher margins in the third quarter. We also gained market share in the Port of Santos, so we had an important quarter in terms of operational results in Humu. Compass increased the volume of natural gas distributed and we also have the progress of edge operations. We continue to connect new consumers in the open natural gas market in Brazil. So we had the recovery of volumes and the progress of edge operations result in a stable EBITDA Q1Q. We also have in MOVE, even though we had the lower volumes this quarter, we continue to have the product mix and commercial strategies supporting our EBITDA increase. We have 9% EBITDA increase Q&Q in MOVE. In Hadar, even though the results of the lease of agricultural properties were in line with last year, we had lower EBITDA, mainly because last year we did the appraisal of the land in the third quarter. This year, we expect to have the appraisal occurring in Q4-24. So that's the difference between quarries. In high easing, we had the impacts of drier weather and fires reducing the sugarcane crushing levels for this quarry. And we also had lower ethanol prices impacting the company's EBITDA for this quarry. This was partially offset by better results in the sugar business. And we also had the contribution of value to our EBITDA through the equity pickup method of around 500 million reais. So looking at the EBITDA under management, we came from 8.1 billion reais in 23 to slightly above that 8.2 billion reais in 24. Finally, looking at our debt profile and our financial metrics, as we mentioned, you see that net debt was slightly above Q2, 21.6 to 21.7. We also had valid shares appreciating slightly Q1 Q, 11.3 billion reais. And we also had our interest coverage ratio reducing slightly from 1.3 to 1.2 times for the last 12 months. In terms of the maturity profile, the amortization profile, you can see that we've already tackled all the amortizations that we had from 24 to 26. And we are currently doing a local debt capital market transaction in Brazil to do the liability management of the 27 bonds. They become callable at par January next year. So that's the next target in terms of liability management. Especially compared to last year, you see that we improved the maturity profile to 6.4 years. And the average cost, we've been able to reduce the average cost to CDI plus 1.37. So we've been able to navigate the favorable debt capital scenario in Brazil to not only lengthen the maturity, but reduce the spreads at the same time. Finally, looking at our cash flow for the period, the main highlight is the fact that we ended up the second quarter with a higher cash balance. That was mainly because we liquidated the debt, the venture transaction in Brazil in the end of the quarter, and we only prepaid the RLOG, the ventures, during the third quarter. So this 1.2 billion reais of liability management happened during the quarter. So basically that's the main reason for the cash balance to come down from 3.9 billion to somewhere around 2.5 billion reais. So thank you very much for joining our call for the third quarter. And we're going to move on to our Q&A session.