Cosan SA Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Portfolio and Liability Management: Addressed macro environment impacts (inflation, interest rates, Brazil debt trajectory), extended debt portfolio maturity, divested Vale stake in January 2025, and plans to improve capital structure in 2025.
• EBITDA and Earnings: EBITDA under management excluding nonrecurring items was ~R$30 billion. Earnings excluding non-recurring events were ~negative R$900 million, with dividends and interest on capital received increasing to R$4.3 billion (mostly from Compass).
• Debt Profile: Gross debt higher at end of 2024, used proceeds from Vale disposal to reduce Holdco debt, increased debt maturity duration, and reduced average cost of debt.
• Cash Flows: Dividends received matched interest paid and preferred shareholder dividends, interest coverage close to one, and had R$600 million acquisition installments of Radar telecoms.

Segment Performance

• Rumo: Had higher transported volumes and growth in tariffs, with record level transports in several months of 2024, proving the quality of the asset.
• Compass: Experienced growth in distributed natural gas volumes and ramp-up of Edge operations (regas terminal in Santos).
• Moove: Although lower volumes sold, managed to increase revenues and control OpEx effectively.
• Radar: Saw lower EBITDA compared to 2023 due to a smaller change in portfolio value appreciation in 2024, but the overall portfolio value continued to grow.
• Raizen: Faced a challenging year with dry weather and fires impacting sugarcane crushing, leading to lower EBITDA in both renewable and trading business.
• Vale: A 4% stake resulted in roughly R$5 billion of equity pickup, but there was a negative contribution from the disposal with an impairment of Vale's shares in Q4 2024 to mark-to-market the investment value.

Guidance

• 2025 is a critical year for execution, focusing on capital structure discipline and more assertive capital allocation, expecting more transactions to improve capital structure.
• Aim to improve debt service coverage ratio to closer to or above 1.5 times.

Risks

• Macro environment risks: Inflation, interest rate changes, Brazil debt trajectory.
• Operational risks: Fatalities in 2024, fire impact on Moove with no fatalities but operational challenges.

Question and Answer

Q: Question about debt profile, preferred shares terms.

A: Rodrigo Alves and Marcelo Martins discuss debt management, including use of proceeds from Vale disposal to reduce debt, and preferred shares dynamics (cost step-up over time, monitoring for optimization).

Q: Question about capital allocation, potential divestments, Moove fire impact.

A: Rodrigo Alves and Marcelo Martins talk about preserving portfolio quality, Moove fire response (no fatalities, effective contingency plans, insurance coverage), and ongoing consideration of divestments with focus on portfolio quality preservation.

Q: Question about deleveraging direction, DSCR target.

A: Rodrigo Alves and Marcelo Martins discuss partial monetization of assets, focus on preserving portfolio quality, and aim to reduce debt by at least 30% in coming months with DSCR improvement in mind.

Q: Question about land business monetization.

A: Rodrigo Alves talks about divestment alternatives in land business, with ongoing divestment activities at invested company level.

Q: Question about capital structure metrics, equity injection.

A: Rodrigo Alves and Marcelo Martins discuss debt service coverage ratio importance, equity injection possibilities at Raizen, and review of asset base including plant portfolio.

Q: Question about preferred shares, coal spread.

A: Rodrigo Alves answers about preferred shares dynamics (no requirement to rebuy, dividends tied to business payouts) and status of coal spread (still held with intention to divest).