Cosan S.A. ADS

Good afternoon, everyone.

Thank you for waiting and welcome to COSAN's fourth quarter 2024 earnings release conference call with unaudited numbers, as well as for the year end. 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. If you are listening to the conference call in English, you have the option to mute the original audio in Portuguese by clicking on Mute Original Audio. This video conference is being recorded and will be available on the company's IR website at cosan.com.br. The presentation is also available for download in English through the chat. During the company's presentation, participants will be in listen-only mode. The question and answer session will begin after the presentation. Please note that the information contained in this presentation and in statements that may be made during the conference call regarding COSAN's 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 bear in mind that overall economic conditions, market conditions, and other operating factors may affect COSAN'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.

Hello everyone, good afternoon. We're here to announce our results for the fourth quarter and year end 2024. And first of all, I'd like to highlight alongside with our usual disclaimers that last night we filed our press release for Q4 24 and for the year end. with unaudited numbers. If we look at the whole portfolio, we had Rumo already disclosing its audited financial statements, Compass already disclosing its audited financial statements, Haizing with the reviewed financial statements by its auditors, and we also have a substantial portion of the audit work concluded. We don't expect any changes in the current numbers that we're going to present today. However, given the need of our independent auditors to conclude their working papers, we have postponed the filing of the audited numbers to March 10th. However, as I mentioned, we don't expect the numbers to change, so we decided to proceed with our earnings call and be here with you today at the date that we had agreed before. Next slide, starting with our portfolio and liability management. I think that when we look at the overall macro environment for 2024, we began the year with positive prospects and an expectation of interest rate reduction in the United States and Brazil, projections of inflation under control, an expectation of the appreciation of the hell against the US dollar, However, throughout the year, what we saw was not only a deterioration in inflation expectations, but also the Brazil's debt trajectory also worsening over the course of the year and therefore the start of a new interest rate hike cycle, which basically changed dramatically the way we look at capital allocation and the need to reinforce capital discipline and to be more assertive in terms of the capital movements that we do. So I think that when we look at what we've done in Kazan over the course of the year, we did a lot of transactions to extend the maturity of our debt portfolio. So basically improving the duration of our debt. But we already started 2025 by acting very diligently in terms of improving our capture structure. And that's why we announced the divestment of our valley stake and performed the divestment in the beginning of January this year. And for the rest of the year 2025, you can expect that we're going to be quite active in terms of improving our capital structure. And that's clearly the focus of the management team for this year. uh looking at the macro environment i think it's relevant also to uh comment that what we saw was portfolio recycling not only at kuzan as a very important uh movement but also at the operating companies in the portfolio we see that all of them are performing uh divestments and also strategic acquisitions uh to be able to better navigate this this more challenging macro environment but at the same time continue with the growth of the portfolio and the strategic advancements of the relevant parts of the portfolio. So you can see that we have transactions in virtually all of the companies and all of them with a very high degree of capital discipline and focus on being able to keep the quality or increase the quality of the portfolio, even though we're facing this more challenging macro environment. Next slide, please. When we look at our EBITDA under management, excluding non-recurring items, we had a year of about 30 billion reais. And you can see that we continue the trajectory of quality and resilience of the portfolio. So we have a very strong and resilient portfolio, and we continue to see that in terms of EBITDA under management for 2024. In terms of our earnings for 2024, excluding non-recurring events, we had negative 900 million reais result. And the main highlights are related to our financial results. Basically, we had the depreciation of the Brazilian real impacting our perpetual bonds. Uh, negatively, and we also had the impact of our March market of the total return swap that we have of cousin shares basically, uh, reflecting the devaluation of cousin shares, uh, over the course of the of the year of 2024. In terms of dividends and interest on capital received, you can see that we have a relevant increase compared to 2023. So 4.3 billion reais. That was mostly explained by Compass. If you remember, in 2023, we have a tax litigation issue that postponed the dividend payments from Compass. So basically, Compass paid more dividends in 2024. Organically, you can expect to return to levels similar to what we saw in 2023. uh in terms of uh our corporate net debt we finished the year with an at that of 23.4 billion reais and also looking at our safety metrics on q4 we saw an important evolution compared to q3 and the overall number for the year was continue to show the relevance of our safety culture and improvement in our safety culture over time. Unfortunately, we still had fatalities on the year of 2024, but we continue to work diligently to have zero accidents and zero fatalities. Also, looking at our debt service coverage ratio, as I mentioned over the last couple of quarters, We are organically closer to one time. We finished 2024 at 1.1, and that also reinforces the need to improve our capital structures to get to a healthier level that's either close or above one and a half times. Next slide, please. So looking at the performance of the portfolio, we see Homo with higher transported volumes and also growth in tariffs. We saw record level transports in several months of 24 at Homo and also record results. So very important year for Homo. proving the quality of the asset and our ability to execute on the plan. Compass also had growth in distributed natural gas volumes. And also we saw the ramp up of Edge Operations, the marketing and services company that operates the regas terminal in Santos. So we expect a lot of positive prospects coming from that new business that just started up over the course of 24. In move, even though we had lower volumes sold, we were able to increase our revenues and perform well in terms of supply management to have better results even though lower volumes and we also managed opex diligently to be able to deliver the expected results you see a lower EBITDA compared to 2023, and that's basically the impact of the appreciation of our portfolio of land. Even though the portfolio continued to appreciate in 2024, comparing to 2023, the change in the value of the portfolio in 2024 was smaller than 2023, and that's why you see a lower EBITDA, but the overall value of the portfolio continued to grow in 2024. At Haizen, we saw a very challenging year in terms of sugarcane crushing. So, given the dry weather and the fires, we had a relevant impact in terms of sugarcane crushing. We also saw lower EBITDA, not only in the renewable segment, but also in the trading business. So, Haizen had a year where there was a lot of challenging in meeting the expected results for the business. Finally, in Vale, overall, the 4% stake that we had resulted in roughly 5 billion reais of equity pickup. However, we had the negative contribution of the disposal, so we recorded the impairment of our Vale's shares in the fourth quarter of 2024 to market the value of the investment to the transaction that we did in January 25. Next slide, please. Looking at our debt profile. You see a higher gross debt at the end of 24, but that's basically because we did a domestic transaction in the end of 24 to take out the 27 bonds. They became callable at par in the beginning of 25, and that was already done. And you can see on the lower part of the chart that we are using the proceeds of the valid disposal to take out not only the 27 bonds, but also a tender of the 29, 30, and 31s. So basically the sale of our value shares are the focus of the use of proceeds is to reduce our debt at the whole co-level. And it's also relevant to mention that we have been able to, at the same time, we increase the maturity, the average maturity duration of our debt, but we have also been able to navigate the positive corporate spread scenario in Brazil and reduce the average cost at the same time. Next slide, please. So finally, looking at the cash flows for the fourth quarter, I think the most relevant part here is that you can see that the dividends that we received basically match the interest paid and the dividend to the preferred shareholders. So basically, the interest coverage close to one, as I mentioned. And we also have the 600 million reais of the acquisition installments of Hadar, Telus and Janus. So basically, as I mentioned, I'd like to reinforce that 2025 is going to be a very important year in terms of execution. And we reinforce our need to be more disciplined in terms of capital structure and to be more assertive in terms of capital allocation. So you can expect more transactions over the course of 2025 to improve our capital structure. Thank you very much for joining our earnings call. And let's move on to our Q&A session. Thank you.