Cosan S.A. (NYSE:CSAN) Q4 2024 Earnings Call Transcript

Cosan S.A. (NYSE:CSAN) Q4 2024 Earnings Call Transcript February 27, 2025

Operator: 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 your 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 call is being recorded and will be made 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 our 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 economic conditions, market conditions, and other operational 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 Araujo.

Rodrigo Araujo: 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. Last night, we filed our press release for Q4 2024 and for the year-end. We’ve unaudited numbers. If we look at the whole portfolio, we had Rumo already disclosing its audited financial statements. Compass already disclosed in its audited financial statements, Raizen [ph] with the review of 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 the working papers, we have postponed the filing of the audited numbers to March 10.

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, and expectation of the appreciation of the [indiscernible] against the U.S. dollar. However, throughout the year, what we saw was not only a deterioration in inflation expectations, but also the Brazil 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, right?

So I think that — when we look at what we’ve done in Cosan 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 capital structure. And that’s why we announced the divestment of our Vale stake and performed the divestment in the beginning of January this year. And for the rest of the year 2025, we 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. Looking at the macro environment, I think it’s relevant also to comment that what we saw was portfolio recycling, not only at Cosan as a very important movement, but also at the operating companies in the portfolio, we see that all of them are performing divestments and also strategic acquisitions to be able to better navigate 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 nonrecurring items, we had a year of about R$30 billion. 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 a negative R$900 million result. And the main highlights are related to our financial results. Basically, we had the depreciation of the Brazilian Real impacting our perpetual bonds negatively. And we also had the impact of our mark-to-market of the total return swap that we have of Cosan shares basically reflecting the devaluation of Cosan’s shares over the course 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 to R$4.3 billion. That was mostly explained by Compass. If you remember, in 2023, we have a tax litigation issue that postponed the dividend payment 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. In terms of our corporate net debt, we finished the year with a net debt of R$23.4 billion and also looking at our safety metrics, 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 0 accidents and 0 fatalities. Also, looking at our debt service coverage ratio. As I mentioned over the last couple of quarters, we are organically closer to 1 times. We finished 2024 at 1.1. And that also reinforces the need to improve our capital structure to get to a healthier level that’s either close or above 1.5 times.

Next slide, please. So looking at the performance of the portfolio, we see Rumo with higher transported volumes and also a growth in tariffs. We saw record level transports in several months of 2024 at Rumo and also record results. So a very important year for Rumo 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 2024. In Moove, 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. In Radar, you see a lower EBITDA compared to 2023, and that’s basically the impact of the appreciation of our portfolio plan. 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 Raizen, we saw a very challenging year in terms of sugarcane crushing. So the — 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 Raizen had a year where there was a lot a lot of challenge in meeting the expected results for the business.

Finally, in Vale, overall, the 4% stake that we had resulted in a roughly R$5 billion of equity pickup. However, we had a negative contribution of the disposal. So we recorded the impairment of our Vale’s shares in the fourth quarter of 2024 to mark-to-market the value of the investment to the transaction that we did in January 2025. Next slide, please. Looking at our debt profile, you see a higher gross debt at the end of 2024, but that’s basically because we did a domestic transaction in the end of 2024 to take out the 2027 bonds, they became callable at par at the beginning of 2025 and that was already done. And you can see on the lower part of the chart that we are using the proceeds of the Vale disposal to take out not only the 2027 bonds, but also a tender of the 2029, 3030 and 3031s.

So basically, the sale of our Vale shares are — the focus of the use of proceeds is to reduce our debt at the Holdco level. And it’s also relevant to mention that we have been able to — at the same time, we increased 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 reduced 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 is close to one, as I mentioned. And we also have the R$600 million of the acquisition installments of a Radar [ph] telecoms.

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.

Q&A Session

Operator: We will now begin the Q&A session with Mr. Marcelo Martins, Mr. Rodrigo Araujo and Mr. Fernando Tinel. [Operator Instructions] The first question is from Isabella Simonato, Bank of America. Please go ahead, Miss Simonato

Isabella Simonato: Hi, good afternoon Marcelo, Rodrigo. I have a question about your debt profile. And if you expect to reduce the flow and financial expenses after the repurchases and the liability management that you implemented in Q1 after disposing of the Vale shares. Could you provide some more color on the preferred shares and remind us of the terms and how we need to think about them now after the Vale share disposal. How are you thinking of treating them in your deleveraging process? Thank you.

Rodrigo Alves: Thank you, Isa, for the question. I’ll start with the debt profile. We showed you some of what we’re thinking in terms of liability management. Obviously, it’s a combination between what’s available, what’s callable right now at a low cost, like the 2027 bond takeout at par. We did that recently as well as what’s sizable and what we can do. Hence, our focus on the 2029, 2030 and 2031 for the tender because we have bigger checks there. We have relevant amortization for 2028. And in the first half of the year, it will allow us to take away part of that. So amortization in 2028 won’t be as high as you’re seeing there. But the key message here is that the funds are being used. They have — you know that these operations often have a number of working days before it’s substantially contracted.

So we’ll carry on with what’s in our pipeline. But it’s a combination, as I said, between having more spaced out bars without it leading to any relevant additional costs. That’s our mindset. If you look at the cost of the swap bonds is clearly higher than what’s in our portfolio. That’s one of the reasons why they might be undergoing takeout and potential sales over time. As for the preferred shares, a couple of points. First, they’re not directly associated to the Vale acquisition so much so that we’re using the funds to take away bond liabilities and debentures. So it’s a combination of the fact that we have the Vale proceeds, which is making us bringing forward payments for the preferred shares. Their dynamics is a service plus Compass and Raizen dividend payouts.

But these structures over time do have a cost step-up. So when we disclose the costs, those are an average cost of the curve of the accrual of the preferred shares. Average cost starts off low and goes up over time. So we’re constantly monitoring opportunities to optimize our structures. We didn’t announce anything to that end so far. It’s not time to do that yet, but we are monitoring them. And if anything compelling comes up, then there may be adjustments. But for the time being, we are focusing on the debt that we have announced the calls for. Thank you for your question.

Isabella Simonato: Thank you.

Operator: The next question is from Gabriel Barra, Citi. Please go ahead, Mr. Barra.

Gabriel Barra: Hi, Marcelo, hi Rodrigo. Thank you for taking my questions. I have a couple — the main one being about capital allocation, the Vale sale using proceeds from the sale to extend the debt seems to be looking more comfortable in the short term. I’d like to hear from you about potential divestments. There’s been a lot of news about potential secondary or primary in some of the group’s companies. So what’s your mindset after this Vale process? Are you still considering divestments considering a more challenging market scenario? So if you could provide me with some more color on that that would be great. The second question is about Moove. There was that fire, unfortunately. And you mentioned in the company release about the impact and you’re still looking into potential impact on the company’s operation.

Could you talk a bit more about that and also provide us with some more detail on the return time line from that operation? What kind of an impact it will have on the company and moves operation in Brazil insurance? Any color would be helpful. Those are my two questions. Thank you.

Rodrigo Alves: Thank you, Barra, for your questions. Yes, there are a couple of key points here. So I’ll start with your second question. Do we see the need to do anything else? Yes, definitely. The Vale process was important and it was timely in our opinion, so that we could be in a more comfortable position if we have to do anything else in terms of capital allocation in 2025. But it has not decreased our sense of urgency. So looking at our — that service coverage ratio, which is close to 1 now. That’s not something we consider to be comfortable. We really do need to work on other fronts and it’s important to make it clear that nothing is off the table. We see some assets in our portfolio because of the control we have over them or because of the potential to turn them into future platforms and having growth for the group coming from those.

We’re looking less at those assets, but nothing is off the table. We considering options with a sense of urgency. In terms of the challenging market scenario you mentioned, I think there is a positive externality coming from the Vale process. We were very pragmatic when it came to the Vale disposal. And that’s led to a lot of interest by other investors in our portfolio. As you know, the assets in our portfolio are resilient. They’re long-term. So even though there’s a challenging macro scenario, considering investors who look at the long-term, those assets are quite compelling. But obviously, on our side, there are two key assumptions: One, we don’t want to lose quality in our portfolio. That’s vital. And the other one is even though there are options on the table, we’re very clear on the value of these assets.

So when they do happen, it will be for the right price. So generally speaking, I don’t know if you want to jump in, Marcelo?

Marcelo Martins: Yes. You talked about the main points. Preserving the portfolio quality is key because we see an interesting future for Cosan after we deleverage. Our main priority right now is to reduce Cosan’s leveraging as much as possible. Obviously, not losing sight of maintaining a high-quality portfolio. We won’t sell assets that are strategic for the company’s future, and we’ll bring an unbalance to the portfolio’s quality. We’ve been reiterating that, and that’s the key point. We do have interesting options that can be executed in a timely fashion. We’re running against time because the cost of that debt carryover is not compatible with the quality of the company’s financial health. We have stressed those points a few times.

I just want to reiterate that, that is our utmost priority right now. The discipline to adjust the company’s capital allocation, both at Cosan and Raizen, those are the two companies that need to look at that urgently. We are sharing with you what we are going to do. And right now, we are putting that in place. I don’t think we need to be repetitive. The market should now look at the fact that we are seeking to reduce that and maintain quality in our portfolio. Let’s not forget that there is a clear limitation which is the dividends we will take from the operations. We’re not going to reduce our debt at Cosan by selling assets that will decrease the quality of the portfolio because that will limit the growth of the controlled companies. We want to have something continuous that will bring the right returns in the future.

There’s a lot of speculations around that topic, and I want to make it clear. We need to adapt to the limitation of the dividends that are possible within our system so that we can continue to grow the controlled companies. It’s not the companies that need to adapt to our need to keep the debt profile. As to your second question about Moove bar, let me start by the main one. There have been no fatalities and no one got hurt, I just want to make that very clear. The operation and the speed with which the company has reacted was extremely successful in a very challenging scenario. Our interactions with stakeholders have been constructive. There have been no environmental impact. The company is very close to commercial stakeholders, government stakeholders, the communities.

We’ve been very constructive and we’ve had a very solid interaction with all of them. The company has been able to be highly effective in contingency plans. You will have noticed that, obviously, part of the plant was affected the storage infrastructure, however, was not affected at all. The company was able to keep the fire under control and part of the plan. Another point is the company has done a couple of things over time. One of them was to increase its capacity. We had announced recently that we were going to acquire a Greece plant at the beginning of the year, and that gives the company operating flexibility, which is key right now. And another important thing the company has done over the year has to do with what you mentioned, which is risk management through insurance.

We have policies for environmental damage, civil liabilities and operating risks. So we had done our homework. The company had done our homework through the right kinds of insurance, which is going to be important now. Even if we haven’t disclosed financial information and it’s too soon for that, we will update you as soon as we have more precise information available, but it’s important to say that in addition to the partnership with ExxonMobil and other commercial partners, the company already has a plan in place to capture volumes alternatively for a reasonable part of the plant volume. Obviously, we’re not ready to disclose the guidance on impact, but we do have the insurance, and we were able to implement everything in a timely fashion, and that will be crucial to preserve the company’s financial health.

It’s also important to point out the relevance of our international operations. We have been expanding internationally and nothing has changed when it comes to our assets in the U.S. or Europe. The company already had an agenda to create value, especially with PetroChoice, our most recent acquisition. But the company’s international acquisitions will carry on and top management’s focus will continue to be on delivering the same level of results across geographies. So that’s what we can share with you, Laura, given that it’s all very recent, but we will update you as time goes by. Thank you for your questions.

Gabriel Barra: Very clear, Rodrigo. Thank you Marcelo.

Operator: Thank you. The next question is from Thiago Duarte from BTG Pactual. Please go ahead Mr. Duarte.

Thiago Duarte: Hi, good afternoon. Marcelo, Rodrigo everyone. Pleasure to talk to you. I have one question. And that’s possibly the hardest one to answer. Since the changes that were announced at the end of last year at the Holdco level and some of the subsidiaries especially Raizen, it’s very clear, and you have said it a few times, there’s been a change in your mindset. Now the priority is to deleverage. And in a way, it sounds like you have a good problem. You have too many options. You’ve addressed the Vale issue. You’ve addressed the duration, strong cost of the debt. But looking at the size of the portfolio, looking at the size of the companies and as a listed company, which you are, we’re wondering which direction is the company going to go to deal with the deleveraging, which is your key point right now.

So now that a few months have gone by, you have been talking to the market, could you perhaps tell us, considering the assumptions you’ve mentioned, you want to maintain the quality of your portfolio. You don’t want to shoot yourselves in the foot, as Marcelo said. Could you tell us what kind of the direction the company is going to be going towards increasing capital at the Holdco, increasing capital at subsidiaries selling a stake — part of the stake of subsidiaries selling subsidiaries? I don’t know. It’s — very hard to know in which direction you’re going to go right now because there are lots of options on the table. It’s a good problem to have. Anyway, if you have anything to share, that would be great. Thank you.

Rodrigo Alves: Thanks, Thiago, for your questions. Well, as you know, we’re very cautious about anything the company might do due to confidentiality, and it’s also strategic for the company. So let me share something more conceptual and not exactly what we’re going to do. In some cases, which you’re familiar with, for instance, San Luis port, we’re selling 100% of that. That’s a full sale of the assets, and you all know that. It’s an ongoing process as we speak. So that’s the first point. The second point is increased in capital is not being discussed right now. That’s not the main choice. But as I said, it’s not off the table, but it’s not the main avenue we’re considering. As I said earlier, and in answering Barra’s question, we have excess control of some assets, so to speak.

So partial monetization could take place there with the right partner for the right price at the right time. And what I would add to your question and to give you some more color on what’s to come, I would say that — there will be a change in our model, and Marcelo talked a lot about that when he talked about leveraging. But I think it’s important to reiterate it. The leveraging model at the Holdco level for new verticals is not a model we will be pursuing looking forward. In the future, we’ll be promoting the growth agenda in the invested companies for many regions because of the debt indebtedness of the Holdco is more inefficient financially. Often, we can’t get as compelling funding as the subsidiaries, they can get financial funding or for the structure.

The fact that many of these invested companies, and I showed you some of that in my presentation, can enter into partnerships with strategic partners, commercial partners and bring in more creative funding that don’t involve a stake at the level of the holdco, but further down the fact that we don’t control 100% of the business dividends when you have a relevant CapEx agenda. So that’s another point. As Marcelo said getting in the way of business growth to provide dividends to the Holdco is not the best model looking forward. So I’m not giving an objective answer in terms of which assets, but those would be the points I’d share with you.

Marcelo Martins: Thiago, let me just jump in. There’s an order of events. First and most importantly, we needed to change strategy. And to be clear on what the next strategic steps are both at Cosan and Raizen. I can speak for both because there’s a similar situation in terms of the direction of the strategy. So that’s the first point. And I think that’s clear. Cosan will have absolute discipline in its portfolio. A change and focus in terms of growing the portfolio, not for the portfolio, but through the invested company. So a gradual but constant reduction and desirable until we get to 0 at some point in terms of Cosan debt. It’s an operating company, we need to decrease leverage at Raizen, but it will keep a healthy leverage level.

Cosan has an asset pool that could be sold, but the priority is what we consider to be more or less strategic, and we will respect that. But that’s a clear step before considering any kind of capitalization, whether it be at Raisin or Cosan. We need to have a concrete effort to sell assets that are less relevant and that do not get in the way of the strategic rebalancing of the company. Now that said, and I’ll reiterate it, Cosan will not be putting money into Raizen. The clear priority is to reduce its own leveraging. I am committed to our creditors and to the market that Cosan’s focus will be on deleveraging. Raizen can sell very relevant assets that could have a high positive impact on it, leveraging. And after assessing that reduction, there may be a need to capitalize.

That will be considered at the right time. So I think both shareholders are well aware of that. It’s been the object of ongoing discussions. Regardless of we need to go over what needs to be done before we get to that point. So we’re not ignoring the fact that capitalization is needed, but that’s the second step because at the current price, no one wants to be diluted because the price situation is completely uncomfortable with the quality of the assets, if despite the challenging scenario that require some kind of discount. We have been penalized to consider the quality of our portfolio, the level of return of our business considering the competition. However, the price is being paid considering the macro scenario, which affects us, and our objective is to change the situation, so the market can assess our company’s adequately, those that are listed and those that are not listed, but have an implied price in our shares.

Thiago Duarte: Excellent. If I could go back to Rodrigo’s point. And obviously, I knew you couldn’t be too granular in our answer. But the best way of thinking about it Rodrigo right now, taking your net debt and your managerial debt that you’ve recorded that you have reported, we’re talking about R$14 billion, considering Vale’s R$9 billion and another R$1.5 billion from the preferred ones. Let’s treat as that. What kind of level, one way of thinking that would be the DSCR, the debt service coverage ratio? Obviously, you want that to increase. But in terms of reducing the debt immediately because I don’t think you’re going to get to the Holdco’s debt level to 0, that’s a longer-term thing. But right now, is there a number that you could share with us? Out of those R$14 billion plus the preferred shares?

Marcelo Martins: Thiago, I would like to reduce that as much as possible. I know we can’t reduce the debt, and it wouldn’t be realistic to assume we’re going to bring it down to 0 in the short or the midterm. We’re going to need time to do that. But I think it is possible to commit to reduce it, I’d say, by at least 30% in the coming months. That is our objective. We have an asset pool that will allow us to get to that. We have a set of priorities. We’ll start focusing on those. We know where we’re going to go to get to where we want to get to. In terms of execution, we’re starting off with assets that make more sense, considering the valuation for the time of those assets and liquidity. If we can’t do it that way, then we’ll go another way.

But I couldn’t tell you what we’re going to prioritized because we’re trying a strategy that may or may not work. We’re very optimistic with what we’re seeing right now, but we don’t have anything concrete that we can share with you for the time being.

Thiago Duarte: Excellent. Thank you, Marcelo.

Operator: Thank you. The next question is from Victor Modanese from UBS. Please go ahead.

Victor Modanese: Good morning, good afternoon. I have one question about how you’re seeing the share in the land business. In your opinion, does the current portfolio continue to make sense considering the macro scenario are the better options to monetize on those assets in the short term? First is selling land, considering your current leveraging. Thank you.

Rodrigo Alves: Thanks, Victor, for your question. Well, it’s along the same lines of what we said previously. We’re looking at different alternatives. Obviously, there are also different ways of divesting that is already happening in our land business, especially last year and this year won’t be any different, I don’t think. We have been increasing our divestment at the invested company level to capture this considerable appreciation of this height cycle that we’re facing that may not be as visible externally because as we sell it and the portfolio appraisal appreciate then you see a higher number than you saw in the previous year. But last year and this year tend to be the highest divestment years at Radar. So it’s important to say that, that is already happening at the invested company level. But obviously, anything more structural is on the table. As I said, we’re looking at different alternatives. Thank you.

Victor Modanese: Thank you. That was very clear.

Operator: The next question is from Regis Cardoso from XP. Please go ahead.

Regis Cardoso: Good afternoon, Marcelo, Rodrigo. Thank you for taking my questions. I have a couple. The first one is about the capital structure. I have a couple of questions. One, what is the relevant metric I know that the debt service coverage is one of them. I don’t know if you’re looking — I usually look at how the relative size of the debt within the total assets. So how much did that account for the asset EV in the market? I don’t know if you use that ratio if it makes sense for you? And if not, could you share what might be a regional target for the debt service coverage ratio or the EV share of the debt within the EV? I know that in the long-term, you want to get that to close to 0, but what would be healthy and to do away with the sense of urgency at the Holdco level?

So that’s the first one. The second one is about the equity. What do you think you might need to inject? From your previous answer, I think you’re thinking about exhausting the list of potential divestments, right? Please correct me if I’m wrong. And then after that, the second step would be to look into the size and the actual need to inject any capital. So if you consider injecting capital, then what kind of control are you talking about, especially at Raizen? – do you think it might be possible to separate part of the assets considering E2G or renewables that may be of higher value for specific players and maybe selling part of it or capitalizing it anyway, in general terms, what might you do considering capitalization? Thank you.

Rodrigo Alves: Thanks, Regis, for your questions. I’ll start with the first one about the capital structure. A couple of important points are: first, you talked about the IV and the pie chart. Obviously, we’re not happy with the current split, and that’s why we are deleveraging. We believe — and as Marcelo said, we are optimistic about the potential value transferred to the equity, given the underlying of the portfolio. Now a specific metric for that we don’t have one right now. We’re looking at being 1.5 times in terms of that service coverage ratio. But given the size of our leveraging, anything we do will trigger a clear value transfer from debt to equity that will reprice the company. And that’s why we don’t have a metric because there’s a discount level that’s implicit in the holding company, given the size of the leveraging.

That’s one way of looking at it. As for the second question, I think you’re talking more specifically about Raizen. Just to recap what happened and looking forward, there was a change in management in November that was quite relevant and a clear turnaround agenda, simplifying things, optimizing CapEx, divesting improving the company’s operation, and we’re very happy with what we’re seeing happen in this short time. As Marcelo mentioned, this is a key step. As you said, nothing can happen without that happening. As for the relationship with partners, well, along the same lines, you said, yes, we are looking into entry alternatives. Obviously, that has to be approved by our other partner potential partners coming into company business like electricity or renewals, we are looking into potential partners.

There’s nothing going on, but it is one of the things we do consider. And as for injecting capital at the company level, as Marcelo said, it’s important to reiterate that given the current leveraging level, everything Cosan is doing, it’s very clear that we are willing to be diluted. The company doesn’t have any capital to allocate. So I think that’s implicit. I don’t know if you want to jump in, Marcelo?

Marcelo Martins: No, I think you’ve mentioned everything. I’d just say that specifically about splitting risen assets that will depend on an agreement among the main partners, Nos [ph] and Shell, but both are aware that if there is a possibility to invest in a business that has more feasibility than another, we’ll consider that. So if we have to split the businesses, it will be considered. And another important point is that there is a clear need to review our plant portfolio. We are doing that right now. And there is also the possibility to, at some point, reduce that portfolio. We haven’t talked a lot about that, but it’s important to make it clear. We are reviewing our portfolio and specifically the plants in our portfolio. I couldn’t tell you how much we’re going to reduce it by, but we will be reassessing our asset base there as well.

Regis Cardoso: Great. That was very clear Marcelo and Rodrigo.

Operator: Thank you. The next question is from Deborah [ph] Borges from Safra. Please go ahead with your question.

Unidentified Analyst: Hi everyone. Good afternoon, Marcelo, Rodrigo. I have a couple of questions. The first one is about the preferred…

Operator: Sorry, we can’t really hear you, Deborah. Could you speak a bit louder or closer to the mic because we can hardly hear you?

Unidentified Analyst: Is that any better?

Operator: Yes. Okay.

Unidentified Analyst: I have a couple of questions. The first one is about the preferred shares until. There was a percentage —

Operator: Apologies, but it’s impossible to hear her. Sorry, Deborah. We can’t hear you. I just heard the beginning of the question. I don’t know if you could type in your question through the chat box, maybe?

Unidentified Analyst: Is that better?

Operator: Yes.

Unidentified Analyst: About the preferred shares, until 2025 you had a percentage of dividends payout, both at Compass and Raizen. We know what to expect for the next year’s Raizen. But looking forward, until 2032, should we expect the same dividend you paid out from 2023 to 2025. And I want to make it clear, in 2032, what will happen? Well, Cosan, does it have to rebuy those preferred shares? And what would be the options? That’s my first question. Second one is you entered 2024 with a coal spread at value of 1.43 million. So did you undo that call spread when you dispose of Vale? Or did you keep it?

Rodrigo Alves: Thank you, Deborah, for your questions. I’ll start with the first one. About the preferred shares. No. Cosan does not have to rebuy them. But that possibility does exist. Meanwhile, there was a question about that earlier. They do have a cost step-up over time. The dividends are not required. So the model is a percentage of the dividends paid out by the business. As for the dividend flow expectation, we don’t provide a guidance on future flows, but they will always be a percentage of the dividends that are paid out, whatever they are. They vary over the contract and the correction index also changes. So those are the variables that we monitor. As for the coal spread, we still have it, but the intention is to divest. It’s for a matter of timing than anything else. It’s much more about the financial timing. Thank you for your questions.

Unidentified Analyst: That’s great. Thank you.

Operator: The Q&A session is now concluded. I will now turn it over to Mr. Marcelo Martins for his closing remarks.

Marcelo Martins: Thank you so much for joining us. I think we’ve covered all the relevant topics for the company right now. I just want to reiterate once again that Cosan is completely focused and committed to improving the quality of our portfolio looking forward. So considering high-quality assets and less priority assets is our utmost priority right now. And what we’re going to do to get there is to have a leveraging level that will allow us to sustain this portfolio without having to drain the companies or making them pay out more dividends than they can, and therefore, compromising their growth over time. That is another key condition. So once again, Cosan will adapt and will reduce its leveraging level so that the dividends payout, which might increase given the quality of the assets and additional cash generation, but it will have to happen in time.

So our capital structure will respect that timing. And there’s a huge effort here by everyone at Cosan to reduce our leveraging level intelligently as quickly as possible. We know that the macro scenario is not looking very optimistic at the moment. So we have to do what it takes. Thank you for joining us, and see you soon.

Operator: The unaudited information Cosan’s fourth quarter 2024 video conference is now concluded. The IR department is available to answer any further questions. Thank you so much for joining us, and have a great day.