Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cosan SA (CSAN, Financial) reported an increase in EBITDA from BRL6.2 billion last year to BRL7.1 billion in 2024.
- The company saw a slight decrease in corporate net debt and an increase in the debt service coverage ratio from 1.1 times to 1.3 times.
- Dividends and interest on capital received showed significant improvement compared to the previous year, with notable contributions from Compass and Moove.
- Operational startup of the Regas terminal in Santos, Sao Paulo, is already providing recurring results.
- Cosan SA (CSAN) successfully managed its liability by reducing the average cost of debt to CDI plus 1.4% and extending the average maturity to 6.4 years.
Negative Points
- Cosan SA (CSAN) reported a negative net result of BRL227 million for the quarter.
- Lower volumes in the residential segment for Compass due to higher temperatures, leading to a decrease in overall volumes and margins.
- Radar experienced a reduction in EBITDA due to the absence of a mark-to-market appraisal of land that occurred in the previous year.
- RaÃzen's sugarcane crushing did not translate into higher EBITDA due to delays in the commercialization of sugar and ethanol volumes.
- The company faces a challenging interest rate environment, which impacts capital discipline and leverage management.
Q & A Highlights
Q: Can you provide more details on the liability management at the HoldCo level and the potential IPO of Moove?
A: We are highly focused on capital allocation and leverage is a priority. We have been active in managing our liabilities, including unwinding Vale's collar financing and addressing amortization towers for '24 and '25. We are comfortable with our current profile and will consider strategic opportunities for further improvements. Regarding Moove, we are monitoring the situation closely but have no immediate plans for significant changes.
Q: How should we consider Cosan's investments in Vale moving forward? Is it still a core asset?
A: We have adjusted our position in Vale to focus on deleveraging. We do not expect significant changes in our portfolio mix, including our stake in Vale. We will continue to monitor relevant events closely but have no plans to increase our position in the short term.
Q: What are the main challenges in executing your CapEx plans given the current macro environment?
A: The main challenges are the higher required returns due to the complex interest rate scenario and the execution of CapEx projects in Brazil. We are focused on disciplined capital allocation and optimizing both growth and recurring CapEx across our portfolio.
Q: Can you comment on the current land market and the JV with Nuveen for Radar's land portfolio management?
A: We reassess the portfolio value annually, with significant returns seen in recent years due to high commodity prices. The JV with Nuveen opens opportunities for portfolio recycling and increasing returns, and we consistently assess opportunities to optimize the portfolio.
Q: How do you see the business scenario in Brazil and globally, and does it affect your risk appetite?
A: The current environment with higher interest rates requires more disciplined capital allocation. We need to coexist with this new environment and focus on disciplined execution of our projects to create value.
Q: What might trigger a change in your current focus on the existing portfolio and ongoing projects?
A: Achieving a sustainable interest coverage ratio of 1.5 times would make us more stable and allow for organic deleveraging. We have a lot to do in our current pipeline, and focusing on executing these projects well is crucial for maintaining or improving portfolio quality.
Q: How do you manage the instability in your coverage ratio due to FX and interest rates?
A: We swap our debt to floating CDI, which helps manage interest rate sensitivity. The potential interest rate increase makes the scenario more challenging, so we focus on good capital allocation and deleveraging to mitigate the impact.
Q: Could you consider restructuring preferred shares to speed up deleveraging?
A: Any changes to preferred shares can only happen after the fourth year of the structure. The current structure has a competitive cost, and we have no plans to make changes in the short term.
Q: Are there other mark-to-market options for addressing the discount at the HoldCo level?
A: We consider all options, including private placements and selling stakes in businesses. There are no short-term events planned, but we consistently assess opportunities to optimize our portfolio.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
