Earnings Call: Q4 2020

Feb 11, 2021

Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to Cozern's Fourth Quarter of twenty twenty Results Conference Call. Today, in buzz, we have Mr. Luis Enriquez de Marems, Cozern's CEO Mrs. Paulo Covarski, Head of IR and ESG Mr. Giovanni Castello, Head of Finance and Mr. Felipe Cavalli, IR Executive Manager. We would like to inform you that this event is being recorded and all participants will be in listen only mode during the company's presentation. After that, there will be a question and answer session for industry analysts. At that time, further instructions will be given. Today, we have a simultaneous webcast that may be accessed through the website, ri.cozan.com.br. The slide presentation may be downloaded from that website as well. There will be a replay facility for this call on the website for a week. Before proceeding, let me mention that forward looking statements are based on the beliefs and assumptions of Cozon management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Codex and could cause results to differ materially from those expressed in such forward looking statements. Now I'll turn the conference over to Mr. Felipe Cavalli, who will begin the presentation. Mr. Cavalli, you may begin your conference. Good morning, and welcome to Crozan SA's fourth quarter and twenty twenty results call. The fourth quarter was the closing of the year that will undoubtedly be noted as historic. It's common knowledge that the pandemic challenged companies and their teams to respond and adapt to a new reality quickly since the beginning of the year. For us at Cozon, the name of the game was agility and execution. We adapted quickly right on the onset of the crisis, while simultaneously preparing for an economic rebound. By focusing sharply on execution, safety and discipline, we delivered robust results in 2020. Let's begin presenting the results for Raizen. However, before that, I would like to provide more insight into the new reporting breakdown of Raizen's results. This new format provides a more precise distribution and organization of operations, while improves in large the understanding of Raizen's business model as well as the ability to capture value throughout the entire value chain. We are now placing each of the products sold and services provided by Raizen into their respective new reporting segments. Basically, we split the results from Raizen Energia into two new segments, sugar and renewables. The segment previously known as Raiz and Conducivos will remain downstream and proximity and will comprise the fuel distribution business and convenience stores, the Grupo Noz results in Brazil and also the downstream in Argentina. So now moving on to slide four, let's begin with Brazil operation. The recovery trend in demand shown during the 3Q twenty twenty was maintained over the last quarter of the year. The pandemic continues to affect the lives and routines of everyone. However, we could see successive improvements in sales for the auto cycle. For the Jet Fuel segment, we volumes also showed some improvement, but it is still the most affected product based on the reduced air traffic and on high cadence commercial discipline. In the digital segment, despite a slight reduction in sales over the third quarter, demand grew by 6% year over year. Good news is that despite impacts from the pandemic and the hacker attack we faced in March, diesel volumes grew 1% during the year. As a result, adjusted EBITDA was BRL619 million in the quarter and BRL1.9 billion for the year. As we have forecasted in the previous calls, the robust returns in the 2020 were based on our successive improvements in demand, which created a healthier business environment. During the year, the price volatility we experienced required an even sharper focus on the execution of our sales and supply strategies, which were key to this improvement in returns. It's worth mentioning here some impacts on 2020. Firstly, we no longer consolidate the results from convenience and proximity stores. Second, the lower contribution from the aviation segment, which as we previously discussed was negatively affected by the reduction in air traffic by routing and by our discipline in credit risk management. And finally, the cost is related to Renovabio. So speaking of CapEx now, the lower investments results from the postponement of some expenditures in infrastructure, while we kept the pace of renewing contracts and bringing the best quality stations into our network. An update from operations of Grupo Nos, Raizen's JV with Ensign in the Convenience and Proximity segment. This was a very important year for us. So we have the launch of the first four stores carrying our OXXO brand in Campinas area in the state of Sao Paulo in addition to our first distribution center. In 2021, the plan is to continue expanding our own stores and the franchises. Let's now move to the downstream operations in Argentina. The pandemic impact in Argentina during 2020 were more intense due to an even stricter lockdown that lasted up to November. Consequently, fuel sales faced a 25% reduction over the year. A measured improvement can be observed during the 4Q twenty twenty, which supports a gradual recovery of gasoline, diesel and aviation fuel demand. The adjusted EBITDA of Raisin Argentina was $57,000,000 This result reflects the increased demand, lower unit cost of inputs and products and also the gradual recovery of sales price, which contributed to a better return overall. Before discussing the results for sugar and renewables, I will present Raizen's agricultural and industrial results. This section reflects the dedicated segment set up within Raizen, which focus on agribusiness and productivity. The '21 harvest year was marked by the completion of the year's main crushing period, where we achieved 61,400,000 tons of cane crushed, a 3% increase in processed volumes compared to last year. Agricultural yields increased about 6% during the harvesting season and this expansion is a result of investments we have been making in recent years as well as the drier climate. The production mix included 53% weighting in sugar, which clearly reflects the increased profitability over ethanol. Talking about unit cash costs excluding the effects from Consecuna, the efficiency gains resulted in a drop of costs both in the quarter and in the crop year. On CapEx, the decrease both in the quarter and in the year is explained by the delay in expenditures with planting and land field renewal due to the drier climate season affecting somehow the scheduled planting period. It is still too early to assess the impact this delay may cause to the next crop as it can be partially offset by a rainier intercrop season, which we are experiencing right now. Moving on to the next slide, we will highlight the results from two new segments the two new segments that were previously reported within Raizen Energia. And let's begin with sugar. This new segment comprises the sale of our own and third party sugar, which we call the resale and trading. And this consists basically in originating sugar from third parties and applying Raizen's expertise and infrastructure to capture increased value through the value chain. We have been gradually increasing our direct sales to final customers, eliminating intermediaries to consistently improve returns from the sugar operation. The increased availability of our own products aligned with our sales strategy for the crop resulted in a volume of sales nearly three times as large than in the same period last year. Adjusted EBITDA was BRL $8.00 6,000,000 in the quarter, an increase that reflects not only the higher volumes, but also the better average price. On the hedging of sugar, we made progress in hedging for the next two crops, taking advantage from improved competitiveness of Brazilian sugar that resulted from the devaluation of the BRL. The price of the commodity in reais is at historic highs with an outlook of increasing returns for the coming years. For the current harvest that ends in this coming March, Raizen already hedged 100% of our exported sugar at an average price of BRL0.63 per pound weight. For the next crop, twenty twenty one, twenty twenty two, we have hedged over 80% of the sugar at an average price of R0.66 dollars per pound weight. And for the twenty twenty two, twenty twenty three harvest year, a little over half of the crop is hedged and applies price close to $0.75 Now moving on to the next slide, we will present the results from the renewables segment, which is the with the sales operations for ethanol, bioenergy and other products that comprise our renewable energy portfolio, such as biomass and other sub products such as Vinas, for example, which is originated from the sugarcane crushing process as well as solar power. Ethanol sales in the quarter were in line with the same period from last year. Despite the lower volumes produced, we accelerated the sale of ethanol this quarter to take advantage of better prices. We consistently priced our ethanol above market average, which reflects not only our diversified portfolio of products, which includes second generation ethanol, industrial and export ethanol, but also due to our financial hedging strategy over the sale of ethanol, which we call the proxy hedge. Moving on to Bioenergy. Our own volume of power sold was lower than the same period last year. The less favorable scenario for prices in the spot market along the 4Q twenty twenty created lower incentives to originate biomass and to generate more bioenergy. Having said that, the adjusted EBITDA for renewables was BRL751 million reflecting the increase from our own volume of ethanol sold at a higher average price. Now moving on to the next slide. Now on Compas, the results for the quarter reflect a strong recovery in the demand for natural gas seen at Comgas, which was partially offset by the non cash effect of the market to market on CONGAS trading contracts. Specifically at CONGAS, the demand for natural gas in the quarter experienced a good recovery in industrial and residential segments, with the commercial segment still being negatively affected by the pandemic. Total volumes were 6% lower in the year and the positive highlight for 2020 was the increase of 8% in residential volumes, mainly a result of adding new customers and an increase in average consumption. Together with the growth in volume, the efficient management of expenses at Comgas and margin adjustments made in May were the key factors influencing results in the period, leading to a 35% increase in the adjusted EBITDA to R684 million dollars For the year, annual growth was 6% and the EBITDA reached R2.4 billion dollars Conga's CapEx both for the quarter and for the year were in line with the expansion plan established in the tariff cycle by Arcepi. Lastly, an update on the Compass business plan. Construction permit was granted for the regasification terminal and we are now in the final stages of negotiating of the negotiation of the commercial, operational and construction contracts. As soon as this stage is completed, these contracts will be submitted for Board approval. Regarding Gazpetro, as already disclosed, we are back in the process with Petrobras, which is currently in the binding phase. We will keep the market informed as we progress in this process. So I will now move to the next page with the results from We had another quarter with robust results at Move anchored by the ongoing resumption of economic growth and consequently our sales volumes. Despite pandemics, we achieved record results in 2020, a 47% growth in the company's EBITDA. The assertiveness of our commercial and supply strategies in this business allowed us to capture the opportunities presented over the year. Moving to the right hand side of the slide to show to talk about Cusan's corporate expenses. During the quarter, the additional expenses related to the corporate reorganization process impacted the G and A. Over the year, our discipline in controlling expenditures reduced overall expenses. Other operating revenues and expenses were positively affected with the reversal of provisions. This is a non cash effect for legal expenses and contingencies in addition to the gains by the removal of the state tax from the PISCOFINS tax base both in the quarter and year over year. Now moving on to the next slide with the consolidated results. Let me now present to you the pro form a consolidated results for Cuzone. Even during a challenging year such as 2020, Cusan's EBITDA increased 5% compared with last year on a recurring basis. This reflects the robustness and complementary nature of our portfolio of business as well as the high execution capacity of our operations to perform well regardless of the economic scenario. This quarter specifically, the greatest contribution to our results came from the sugar segment, averaged by the increased volumes at a more favorable prices, which we previously explained. Adjusted net income grew 61% on the quarter. In the year, the net income were million, a reduction of a reduction over the previous year and this is mainly due to the impact of the pandemic on the results and the non cash impact from the depreciation of the BRL that affects the non hedged part of the Cousins' perpetual bond as well as the price action of Lumo shares held by the company. We are now moving forward to Cousins' financial highlights. Gross consolidated indebtedness of the group had a 3% reduction during the quarter due to the lower levels at High Easing and Compass. On the cash flow, the main effects in the quarter were in the increased operational cash generation where the Sugar and Renewables segments were the highlight. On the cash flow from financing, main impact was high easing and Pampa's debt amortization. As a result, free cash flow to shareholders was million in the quarter. And in the year, the lower operating cash flow is a direct result of the pandemic pressured the levels of sugar and ethanol inventory or plus the levels of sugar and ethanol inventories that are being carried by Raizen Energia also pressured the cash flows for the quarter. Moving on to the next slide and prior to addressing the guidance for 2021, I would like to give you a quick update on the progress and achievements on our ESG journey. 2020 was unquestionably a critical year for the ESG agenda. It is clear to everyone that financial performance is intrinsically tied to social environment, sustainability and governance. As you know, this is why at COSAN we talk about EESG with an additional E for economics as a four pillar of sustainability, reinforced by the consistent performance of our portfolio. Let me share the main achievements we have in this last cycle. COSNON was included in three main indexes of B3 for 2021: the EASI, ISE the ICO2 and the recently released S and P B3 ESG Brazil Index. We made significant progress in the CDP and Dow Jones Sustainability Index questionnaires in addition to being included in the Bloomberg's Diversity Index. In governance, the highlight is obviously the corporate reorganization or simplification if you will that is in its final stage. To give you an update on this process, we have completed the approvals phase and are now waiting for the closing of this operation, which is scheduled to take place in the March. This is a major step paving the way for the group to move forward, increasing further focus and energy to the long term sustainable capital allocation and value creation plan. Now let's move to the last slide and present our guidance for 2021. After twenty twenty's turbulence, we are back to usual disclosing of our guidance for the coming year. The uncertainty remains regarding pandemics and the pace of economic recovery, which means we have had a set of probabilities to consider. If on one hand, we see the growing number of COVID-nineteen cases, On the other, the expectation for an acceleration of the vaccination worldwide to control the pandemic might help this economic recovery. We cautiously believe on a positive trend leading to a gradual economic recovery, which would most likely contribute to EBITDA across all of group's lines of business. Please note that we are not offering Cousins consolidated guidance now since the cost reorganization process is not fully completed at this time. Shortly, we may present the consolidated projections for the new Cousan. Moving along to the numbers. So in the downstream Brazil and proximity, we project an EBITDA between BRL2.4 billion and BRL2.8 billion. The spread is wider than usual since there are uncertainties around steel demand growth, especially regarding the possible impacts of the pandemic. The expected volumes for 2021 may be above the year's GDP growth depending on that pace. It is probably fair to assume at this point mid to low single digit volume growth. It is worth highlighting that the demand from the aviation segment should remain greatly affected along 2021 with significantly lower levels of contribution compared to 2019 for example. Additionally, since the beginning of last year, the results from convenience stores are no longer consolidated in downstream business EBITDA and are now accounted as equity pickup at a 50% stake, which is a share of Raizin in this JV. CapEx on the other hand should remain at a similar levels compared to recent years, keeping the focus on capturing good opportunities for expansion and renewal of the network. And also as well here, we have investments in infrastructure when needed. In Argentina, EBITDA is expected to be between 130,000,000 and $160,000,000 which reflects the uncertainties related to the country's economic recovery. The CapEx includes usual maintenance investment as well as expenditures related to mandatory project quality adequacy of our refinery. At Compass, the projected EBITDA is between BRL2.5 billion and BRL2.8 billion with greater part of these results coming from CONGAS aligned with the regulatory plan. For the CapEx, we expand our disbursement between R1.5 billion and R1.7 billion dollars in 2021, mainly considering the investment plan at Congas as well as the construction of the regas terminal. At Move, the improved performance and acceleration of international operations should continue to improve the EBITDA this year and we expect to deliver an EBITDA between R400 million dollars and R480 million dollars In the Sugar and Renewables segment, we estimate the next twenty twenty one-twenty twenty two harvest to be similar to the current one closing that will close in March. Crushing should remain between 124,000,000 tons depending on weather during the winter crop. The EBITDA guidance follows the new reporting vision introduced this quarter And we expect growth both on the sugar and in renewables segment, reflecting a more favorable scenario for prices and efficiency gains. CapEx for the harvest should remain between R3 billion dollars and R3.3 billion dollars also incorporating strategic projects in renewables, safety and environmental investments as well as an increase in maintenance CapEx. Two important disclaimers on the projections for Raizen. So first, we are disclosing a preliminary guidance since Raizen's budgeting process follows the harvest year and has not been yet concluded. And the numbers do not include any operating or financial information of Biocept since this transaction was just signed on February 8 and still needs to be approved and concluded. I close my presentation here. Our CEO, Luisa Hicchi Paulo Kovarski, Head of IR and ESG Jerome Arthur, our Finance Director and myself will remain at your disposal for Q and A. Thank you. We would like to inform you that the question and answer session will begin in a few moments. Ladies and gentlemen, we will now initiate the questions and answer Our first question is coming from Ms. Isabella Simonato of Bank of America. Ms. Isabella, you may proceed. Good morning, Felipe, Paola, Luis and Nick, everyone. Do you hear me well? Yes. Issa, we can hear you well. Thank you. So I have two questions. First of all, on the guidance of CapEx in Argentina, we see a substantial increase in the next year compared to this one. Can you just elaborate a little bit more on the initiatives and what those investments should be this year? And on the sugar part of raising, is it possible to look at the price of sugar without the trading and the resale? How much if there's a how much both prices compare between one and another that's possible? Thank you. Sorry, I didn't understand the second question. Can you repeat please? When you look at ethanol, right, you break down the price for the volume that was traded right or on a consolidated basis and for your own volume right? Is it possible to do the same analysis on the sugar side? Okay. So let's start with the first question. In Argentina, I think you all remember when we made the acquisition that we have put on the business case investment on the refinery to take the refinery to the level of product quality that will be required in the future as well as to debottleneck certain areas of the cracking in the operation to be able to prepare the refinery to use light crude from Vaca Muerta as the production start to increase, which will give higher yields, better productivity and better quality products in the refinery as we implement this change. So we have been doing minimum investment on this program the last few years and now we are starting to pick up in 2021 with the part of these investments going forward. We have seen a reduction on the overall. Remember when we started the business there we announced that this would be a CapEx around $380,000,000 over the course of the project. We are now estimating that this will be between 300,000,000 and $320,000,000 over the life cycle of the project. So optimizations and other gains that have been sold. So it's getting the business back to the level. So this year we have saved CapEx because it was a tough year in terms of the lockdown of Argentina. Although as you have seen on the last quarter results have picked it up back and price have been increasing basically every month in Argentina for the last couple of months. We have achieved record market share increasing our network better and faster than the competition. So we feel that now is the time to continue the investment in order to prepare to be the refinery to higher volumes as we are growing there as well as the coming of the new regulations and the use of the Vaca Muerta crude. Regarding your second question, it's difficult because you have a if you look at you have a couple of baskets of prices and operations we do within the sugar. So we have the local market, right, which we service the industrial customers here as well as the local refiners. We have our exports to trading companies. We have our direct exports that new over the last eighteen to twenty four months have increasing our ability to reach the end destination. So the customers in Canada, the customers in certain parts of the globe. And this will be a continued increase. I think those of you who have been talking to us over the last few weeks on the business model of Raizen, we're talking about the business case also gets us closer to the customers with less intermediate and therefore capturing additional trading margins as we move there. And the other one is origination that we are doing. It's still much smaller than what we do in ethanol that's growing. We have grown this year our origination. So I don't think that it's good to break this down because it is all part of this mix of products because of this business. As we grow on the origination, I think it will make sense to look at it. But for the time being, I would say bulk of the result is export through tradings and direct to customers, which is new to us and local markets, which we have a very strong position. And thanks for your question. No. Thank you. Can you just confirm the CapEx for Argentina? Think I missed the numbers between what was estimated initially and now the forecast for the cycle. Yes. The original estimation we did the deal a couple of years ago was around $380,000,000 investment. We are seeing that probably getting to $320,000,000 and if things go very well can even be a little bit lower. Okay. Perfect. Thank you. Over the course of the project, right? I'm not talking about 2021, okay? So talk about over the course of the project, which we already did part of these investments, okay? So over 2019 to 2020, we already spent CapEx through this project, although in less intensive that we see over the next two years. Sure. Thank you. Our next question is coming from Mr. Thiago Duarte of BTG Pactual. Hello, everybody. Hello, Luis, Paulo, Felipe. Good morning. I have two quick questions on the results and then two quick questions on the guidance. Starting with the results, just focusing on the rising fuels Brazil. When you look at the number of gas stations that you ended last year, it's actually slightly lower than a year before, right? So it's steep deceleration in terms of the branding of new gas stations. So just as you talk a little bit about this and the strategy for converting gas stations and of course the environment for gas station conversions in the Shell brand that would be interesting. The second question on the results would be sort of a rephrasing of Isabella's question with regards to pricing in the sugar and the ethanol. It looks like in this quarter in particular your trading business the resale of third party products benefited immensely and recorded very good margins. So just if you could confirm if that was the case even though you don't disclose the number, but just give us a sense how trading contributed to rising energy margins that would be nice to hear. On the guidance, the first question would be on also on Raizen Fuels Brazil. If you could give us a little bit more color to the extent that you are allowed to on the assumptions that drove the EBITDA estimate? You mentioned, Felipe, during your initial remarks that you're working with a broader range there given the level of uncertainty than the business. But just if we could in terms of volume growth or in terms of margins, what sort of assumptions you're gathering? Because in the middle of the range, there are a sense that you're working with an assumption that is actually lower for margins in 2021 vis a vis the last February, so just to clarify that. And finally, on the sugarcane business guidance, You mentioned that you still don't have much clarity on whether the drought that affected last year's crop would have an effect on cane availability this year. But when we talk to industry participants everybody is talking about lower sugarcane availability across the board, right? So just to hear a little bit more from you whether you can escape from that trend and make a better year in terms of crushing and why would that be interesting? Thank you so much. Okay. Felipe, can you talk first about the assumptions and then I'll take the other questions, the assumptions on the guidance for fuels? Yes. So Thiago, in the fuel distribution, as we stated here, we have this broader range of guidance because there's a question mark here about the pace of recovery around 2021, right? So what we are expecting now is that definitely or most likely volumes will grow above GDP, right? And we can expect mid to high single digits of volumes growth. I think it's a good assumption. Of course, again, the range is quite large here, but that's probably the best assumption that we have for volumes growth on the fields. And your other question about yes about the sugarcane availability, right? Yes. Yes. So what we are expecting here is a range between 60,000,000 to 64,000,000 tons. Of course, this is this will depend as well of this inter crop season we are experiencing right now from January from December to March. So depending on the amount of rains we see, we're probably going to see a recovery or at least keeping the same amount of hurricane crushed. We did our part in terms of investments, right? So now let's hope the climate will behave better and improve agricultural yields for the next crop. Thiago, what we as you know over the last couple of years we have been putting a lot of effort in increasing the productivity of our crops, which we believe we are below our potential. So we continue to emphasize that and we believe that this will compensate the drought of last year as well as the good regime of rains we are seeing over the last couple of weeks, which is very important for the beginning of the crop. So we believe that in this case we have a chance to be better than the market in what we have been investing as well as you know the program that we have introduced as well over the last couple of years in terms which has accelerated on this crop about testing areas to third parties where we believe they could do better than us. So this has also been very important. And I think this will start to give results going forward, especially in the next crop and the following crop. Don't believe, of course, a lot of things can happen between now and the beginning of the crop and during the crop, but we don't believe that what has happened last year will have a major impact on our productivity this year on tracking the other way around. We're expecting a better productivity and more sugarcane than we have in the last crop. And this is the reason of the guidance. Regarding your first question related to the conversion of sites, so we continue on a good path this year in terms of overall volume. Of course, as an industry, there are some issues on credit and closure of smaller sites or sites that have not been performing given the reduction of volume. So we have although we have also signed our usual numbers of new sites, we have seen a reduction of sites on the other hand. So that I don't see what I can't reconcile the number that seem to have less sites than the year before. Perhaps it's later we can talk offline on that, but we have grown less sites than we have been growing over the last years in terms of net, but more on the closing side than on the new sites. So the quality of the pipeline is quite strong. You guys have seen yesterday the agreement with IMC and just one example of the several things that are happening on a day to day on the street. Of course, pandemic also doesn't help during the part of the year we couldn't see a lot of dealers face to face and have negotiations and people also were looking about their options for the future. But I can say to you over the last four to five months things are much better back to normal and Leo and the team are very enthusiastic about the pipeline going forward. Regarding your question about trading, yes, our trading business, I'm very happy to say that's performing quite well. I think we now have over the years we are improving our ability to price it and find new markets. So if you look at our program, majority of ethanol continue to be exported, continue to be high quality ethanol, direct to industrial, cosmetics and other types of customers that are not fuels customers. So I think you'll continue to see on our own production better price compared to majority of the market and on the trading of losing all the opportunities of the volatility, capacity derivatives and looking at the market on different ways that we have been growing our books and delivering good results both in ethanol and sugar. Thank you, Louise and Felipe. Very helpful. Our next question is coming from Mr. Andrea Chen of Banco Itau. Please continue to execute my question. I'd like to ask two questions. The first one basically on Compass. Could you guys provide a little bit more of the details? And I wouldn't say the M and A fund is going, but the other projects are going. So specifically here, the Rebas terminal, has that been developing as construction pressure has started or how is the licensing project? So if you could comment on that part that would be great. My second question is in regards to ethanol. You just did the BioCell acquisition, so your footprint in Sao Paulo has been growing very, very consolidated. When you look into other regions, so for example, with core ethanol now being within the center of West region, is this something you could consider to capture attractive or no? Is it not something you're looking into right now? Thanks, Andrea. I'll ask for help here. If someone has listened to the second question, it very difficult to understand. So let me answer the first one and then I'll ask you to please rephrase. And if you have I don't know if there's a chat on the Ana, there's a chat that you can send the question. But so we have all the license now for the regasification terminology in Sao Paulo. So A and P has issued the authorization for construction. So we are now mobilizing to start. So we'll start anytime over the course of the next months. It's a good undertaking. It's a project that there's no big challenge from engineer has been constructed several of these in other places, it's new in Brazil. We have done a lot of as you know, lot of studies, lot of discussions. So we are ready to go and this product will be market to fleet customers, other distribution companies, Comcast. So it will be open for the market to take products that we believe will be competitive and we'll establish a new paradigm in terms of price compared to the local availability of gas coming from presales. Andrea, if you could please repeat your second question, we weren't able to understand here. Is this better now? Can you hear me? Yes. Yes. Great. My second question was in regards to diversification on ethanol. Post the Bayer's sale acquisition, as you guys are a lot bigger now in Sao Paulo, you're a lot more consolidated, would you consider core ethanol in the Center West Region? Or is this something that is not attractive? And how do you see these projects? Do you understand Filipe? I couldn't. Sorry Andre. Yes. The question is about the corn ethanol and investments in corn ethanol on our side here. I can take yes. I'll take it and then you can complement if needed. So Andrea what we have been saying here is that we are focusing all of our efforts on increasing productivity of our sugarcane mills and sugarcane production here within Raizin. And now with this transaction that we just announced after the closing of that transaction, we're going to have a lot of homework there to integrate BioCell's assets and of course capture all the benefits and all the upsides we are expecting within this transaction. So the focus is also in sugarcane ethanol, right, trading with sale of ethanol. So this is where we're going to put our focus on. There is no plans as of now in discussing corn ethanol mills. Perfect. Andrea Thank just to complement I think and you talked that on the specific on ourselves. I think one of the great findings of the due diligence the quality of the field So productivity in certain areas is even higher than ours. Of course, we have different lands, different climate regimes, but quite good as well as on industrial. So I think as Philippe said, there's opportunities going forward. Of course, the team will, at the first phase, focus a lot on the integration and trade, integration on the coffees, integration on the drug counter side. As you know, we are very passionate about safety. So we have a big program about improving the safety. Their track record in safety is not as good as ours. But on the other hand, they have good practice on the industrial side. There's things for us to learn and incorporate on our meals. So we are very excited about bringing the manpower and the talents from BioCell, because I think they have done a good work on the areas especially on the field and on the industrial side and integrating of course on our trading machine that's quite powerful as we talked about given the results in terms of price capacity to achieve markets outside Brazil etcetera. So I think it's a very good journey that we are just starting. Of course we are waiting for the CAGI and the other authorities approval to start the program, but we have done a good homework in terms of establishing the integration teams and how we're going to go about it because it's a big entertainment with a lot of synergies and we are quite keen to get them quick and powerful and accelerate on that. There are also opportunities in the future for cogeneration. They have a higher sorry, a lower cogeneration ratio than we have on our mills. And I don't know if you guys noticed, but on the guidance for New Year, there's a little bit higher CapEx this year because we are starting to commit a new cogen on Univale, which we won auction a couple of months ago. So we again continue to increase our generation, cogeneration and renewables business as we go forward because we think this is the big part of the business that we're growing yet higher profitability as the world demand, cleaner fuels, carbon credits, etcetera. Perfect. Very clear. Thank you. Our next question is coming from Mr. Regis Santoso of Credit Suisse. Good morning, Luis. Good morning, Felipe. Thanks for taking the questions. I have maybe two questions and then just a very quick follow ups. The questions are about the reorganizations on Vale. So the project for Luis, do you why do you see as an appreciation within the guidance for the neo based insurer? Do you believe there will be any sort of confidence to our three different KPIs with managing teams instead of maximizing the output of the mix between the two? That's one of the questions. And then still on the reorganization that's on Series side. Is there any impact of those separation of the businesses, let's say, to what was previously the results of the Series, particularly from the trading perspective? And should this lead us to a higher result or lower result? And then just a few quick follow ups if I may. If you could discuss the effect in Compas both the legal positive result in Congaes as well as the loss in trading Compas and Compas. Also if you could explain why the trading ethanol price is higher that would also be helpful. And I also wanted to know if in the inventories how you're doing in the year if all of that is on sugar and ethanol if there is anything that is trading equal? Thanks. Okay. That's right. It's very tough to hear. I don't know what's happening in the line today, but I will try to address. In terms of Compass, basically what you have seen there is the position of market to market. It's not a cash result. So it's a position forward in the years to come including 2021. We made a cash profit on our trading and commercialization operation in Compass. Also, of course, we are always operating within our risk matrix and our risk mandate that the team have. Of course, it's a very strange market in 2020. Therefore, of the positions in the future that we still believe that are good positions have suffered on an NTM basis. So this is basically what has happened and the result reflects this in the market because we of course, we do free transpires on the cash results and the MTM added to the Comgas result. Regarding your first question on why you have segmented different taizen, because the way we believe that it's the right way to look at this business for the future. We have over the last few years, as you know, invest a lot of time, talent and money on creating new business under Energia with second generation biogas, cogeneration, electricity trading, electricity commercialization, clean energy sales, carbon credits, etcetera. So we believe this is the path for growth. We believe that this is where a lot of the time for the management, the team will be invested as the resources to this business. So let's first give full visibility to the market on how much money is generated on this business, how much CapEx this business will attract and how much growth over the next years will. And this, of course, will be linked to the KPIs and internal incentives to the management, raising both for short term and long term. So what you'll see over the years is a much bigger growth of this line than the other lines. But this is the line that we believe the market is ready for it. We have been preparing for it over the last ten years basically. And now we'll be able to capture the premium in terms of price for certain products like biogas and like second G ethanol as well as to increase our exposure to renewable energy and the sales of electricity. So this was captured that and we want to make sure that this is transparent to the market as well as a more traditional business and a business that is more volatile to the commodity cycle, which is the sugar business. So we think it's the right way to look at this market and we think the right way to incentivize the management is also the right way to look at the big two differences we have within one of the companies we manage. I think also talking about trading. And of course, a lot of our trading as I mentioned on the question before is done offshore. So we have a big position in markets in Asia. We also trade corn ethanol from The U. S. To other destinations in the globe. We have tankage, we have positions, we have shorts, etcetera, that we have constructed over the last few years. We have a lot of industrial volume with customers both on the beverage, cosmetics and industrial in general. So this has commanded higher price. So this is what when you look at our exposure to the local Brazilian fuels market, and I think you guys, of course, are thinking about this, there is any risk of the prices if Petrobras for for any reason we have a different pricing policy. I think our risk is much, much, much lower than any of our competitors because of the positions we have built outside. Only ethanol that we sell for fuels from our production is the ones that we still have on areas that have any local or state incentive from a tax that have been given when these plants were concerned, which basically Goais and Mato Gros. All the rest we have been upgrading and developing this more premium portfolio. That's the way to make it. So the prices are good because of this combination of quality of the portfolio and sales off shore. And I think I missed one of your questions and I couldn't hear. Thanks, Luis. With the inventories of sugar and ethanol because I'm asking this because inventories were very high at the end of fourth quarter. So I wanted to know if those inventories are all owned sugar and owned ethanol, therefore, with high margins? Or if that number includes in any way lower margins trading volumes? Regis, if I got your question you're talking about the inventories, right? Yes. I removed the statistics there. I wanted to know if the inventories are just on sugar and on ethanol or if there is any trading volume just because of the volumes in inventory were very high. I wanted to understand that next quarter will be as strong as this one. Yes. So this is basically based on our commercialization strategy. And as you could see in the results, we accelerated the sales of ethanol in this fourth quarter, but we still have some volumes of inventories to be sell or to be sold now in the first quarter of the twenty twenty one, which is the last quarter of the crop year. So usually, when we see when we set our commercialization strategy in this year, as we mentioned throughout the year, it's more balanced between these two last quarters of the year. A bulk of that inventory is of own products. So we will capture the value of that as well, right? So this is for the the ethanol and the sugar is the same case, right? We have the shipment of the sugar set to the crop with a concentration on the last quarter of the crop year, which is the first quarter of the calendar year 2021. Our next question is coming from Mr. Luis Camaglia of UBS. Hi, Luis, Paolo, Felipe. Thanks and hope you're well. Luis, have basically two questions here. The first one, I mean, I understand this reporting change that you just presented. But also you made two recent deals on the I would say on the fuel distribution segment, which are basically the IMC and the OXXO, Which I think that that shows how Raizen is understanding the changes of the business looking forward, right? The changes on the fuel distribution business. So just would like to understand if you can give a bit more color on these moves. And we're running some calculation and we see somehow a potential of something close to BRL500 million EBITDA looking forward when this business will be more mature. So just would like to understand if this number makes sense. And the second question, it's about the refineries, right? I mean Petrobras recently announced that one of your competitors is moving forward with Refaat. Repar is basically on hold for now. And yesterday there was some news about the time line for the other names, right? So with all the recent noises in terms of the pricing policy and so on and so forth, I just would like to understand if this would change your view in terms of the asset attractiveness or where Raizen stands right now in terms of these potential acquisitions? Thank you. Okay. Thanks, Maurice. Let me start with the second. I think you guys have heard me loud and clear over the last calls we have that this is the business we only would pursue a specific asset and at a specific price, right? So we always treat this business as separate from the distribution. They have to have their own merits, their own results and their own return. We think it's a very strong movement to the market. We like the market being open. We like to have other players in the market. And since the beginning, I think we have said to you guys that we would look at these as separate business because the distribution business need to find their own supply with the new owners continue to have a strong position at Petrobras and also have a strong position on imports when it makes sense. So we are in this business for the long run. We have strong relationships and long term contracts with our dealers, B2B customers and aviation customers. Having a position of supply that's competitive, secure and is able to supply our commitment is key. So we will engage with the owners of Helane, Hefapi and all the others to discuss terms. And in fact, we are already discussing for the ones that are more down the line in terms of closing their operations. And we believe that this market will change a lot because now players including Petrobras will be able to do different arrangements, different contracts, different clause, different flexibilities, different prices, different terms, which what's happening everywhere in the world. So it will be a lot about ability to the companies in our case of supply, logistics, investments in so which you know we have been doing over the last few years. This is why we create a strong position of investments in the North and Northeast. This is why we didn't invest in positions in the Southwest and the South in terms of import positions because we think these markets will be much covered by internal production than the ones there. So continue the same drill. So we are responsible to these investments. They are long term investments with quite significant ticket. So therefore, what we will only pursue and hopefully will be selected if they are in the conditions that we believe are the ones we can really make a good investment and allocate capital responsible as we have been doing over the last couple of years. So we're not going to do a refinery just to have a refinery. We will do it if it's the right refinery at the right price. And we are very happy that Petrobras continues their divestment program because it's good for the market. Regarding the changes in terms of reporting, you are completely right Luis, you're spot on. We did it because the way we are looking at this business as the market evolves, right? So I talked a lot about the sugar and the old sugar and ethanol business. Now the new renewables and sugar business and it's the same on the traditional fuels business, right? So in the future, we probably will be reporting refinery business, if we have a refinery in Brazil, a fuels and proximity business, because this is the way the market needs to look. They are separate business that they have separate drivers, separate competitors, separate capital requirements and separate returns and separate growth opportunities. We are very happy with our joint venture. Of course, it's still early stages just one year old. In November, just one year old. But I can say to you that our partner from Sensa Commercial knows the business, know how to operate stores outside retail stations, know to operate own stores with our own people. We have already opened several stores in Compinions and more to come. We should finish the crop year with close to 30 stores around Compinions, which is a quite advanced operation. And we will continue to grow next year. We'll be I think for the year 2020 and correct if I'm wrong, Giuliano, but we have been basically it was a very strong momentum of growth of new stores both on select and of course, auction was very new. This business will be significant in our view, but remember that it's a ramp up business, right? So it's a business that we have by design brought our partner with primary investments. So we have the cash for the growth because we need to put CapEx for the growth of our own stores and also the transformation of our delivery centers and all the other infrastructure required. So we have give up, if you will, 100,000,000 EBITDA short term for the long term incredible growth that this business is. And I think I don't always time horizon or talk about your number. You're not like I cannot give you so far forecast, but I think it's timid if you're talking about the long term. I think the number is it will be much higher if we have successful on our expansion in our proposition. What I can say to you, the initial stores are performing quite well despite the challenge of the time. The companies have had a lockdown, have gone to the red zone and have been forbidden night sales of alcohol. It's all back to normal now, but I can say to you customers are coming to the door. Customers are liking the offer. I think we are changing the way consumers are looking because it's a very unique offer, right? So there's no change in Brazil that has the type of offer they have. The ones from Carrefour, from Pond du Suca, they are bigger format, more complex formats. Of course, they can work and they will work, but we've been very, very, very focused on being quick, being fast, being easy and being competitive for the customers on every corner regarding proximity. Okay. Thank you and congrats to both of you. Thank you. Our next question is coming from Mr. Rodrigo Almeida of Santander. Good morning, Luis, Paula, Rafael, Felipe and all. I have two questions here from my side, mostly focused on distribution. But the first relates to Renovavir. If you could provide us some color on the pace in which you have been able to pass through this additional CBO expenses over the past, say, three to four months? I think it could be helpful for us to understand the impact there. And also on the renewable side, the new reporting segment, have you been able to make any significant sales of CBOs? Or could you expect that to accelerate in the coming quarters? What would be like a threshold for you to sell the CBOs if there's any? And the second question is about working capital fuels. I think more specifically, we saw significant positive variation in suppliers over the past year. If you could give us some color on this front, maybe some change to the sourcing strategy, maybe more imports. Maybe that could explain the higher days of payables outstanding there. But I just wanted to get some color on the working capital for fuels. You. Phil, can you help me? My line is very bad. Yes. Let me take the third one about the working capital on fuels. Okay. Regarding the fuels our supply strategy Rodrigo. So we have been focusing a lot in the previous years and you could see in our financial statements here on improving our working capital. So what we have done in some at the moment is operations we've confirming, which is anticipating at some point in time our payables with or our strategy with Petrobras, right, with our main suppliers. So there are some working capital efficiencies that we have been capturing within our operations here. The first question about the renomino the CBOs, right, the trading of the CBOs, we have been following the market here and there is a team dedicated on this trading within B3, right? So this has been we have been trading those certificates following the market trends here and of course trying to capture the best momentum to do so, right? And I think the first one the first question was I think those are the two right? Do you have another question? No. He asked about the stable adherence of the market incentives for cleaner fuels. But another point also Felipe, remember also that on this quarter prices have been going up, right? So it also has impact on our payables as prices have gone down after the big reduction on the second quarter of the year. In terms of the schedules, yes, I think the first year was a challenging year because of the pandemic, the target, the review of the target, etcetera. At the end, we have the numbers have been showing that the targets have been met, the issues the issuing of new sub deals and the purchase of sub deals. Very few, I would say, distributors have not complied with the market. The market took some time to understand the cost and incorporate on their pricing strategy or on the market strategy. But I would say that's now pretty much normalized right? That's part of the equation, right? It happened before when taxes changes, fiscal fees is higher. It's So these things are things our business is a business of passing through, right? So we pass through mortgages, pass through taxes and of course we add the services of logistics marketing commercialization products etcetera. So these are the things that when they come at the end of the day they will end up in the market and be done what they have done, which is incentivize, of course, the increase of renewables in the Brazilian matrix. With the increase of crude prices, of course, what's going to happen? Ethanol becomes more competitive by just the nature of the difference between gasoline and ethanol, right? So this program, if you think conceptually, they have been designed for Sebeers have a very high price when fuels prices are low, fossil fuel prices are low and to have a lower price when fossil fuels are high, because naturally ethanol prices will be higher when fossil fuels prices are high. And therefore, the need for the Seville to give you the additional incentive is not there and on the contrary. So depending where the rhythm of increases of gasoline price in Brazil by Petrobras and the international market by the international parity, this will of course make the price of Seville value around that. So in terms of our trading strategy, as I said to you before, we export a lot. So not necessarily we generate the severe here, but it's part of our pricing. So when we agree with a customer pricing, of course, there is the reference of the Brazilian price sometimes. Sometimes it's just a reference of international prices. But when we agree a reference on the Brazilian price, it includes the Seville cost within that. So Cecile benefits Raizenesia, of course, as a way that values more our ethanol. And if I may add one little comment here on the Cecile is that, I think it finally creates a decent level of predictability for ethanol pricing in Brazil, which is great. And by the way, by doing that, it makes Brazil less of a production swinger. So I think at the end of the day, it's constructive to sugar prices as well because if there's more stability and more predictability in ethanol pricing in Brazil and producers will be more willing to produce and sell ethanol that means Brazil will have less of a spare capacity to balance the global supply and demand, which again at the end of the day I think it's constructive to sugar prices as well globally. Very good point, Paolo. That's very clear. Thank you for the clear answers. This concludes the question and answer session. At this time, I would like to turn the floor back to Mr. Casale for any closing remarks. So first of all, I apologize about the quality of the sound here. I think some people have some trouble, but we are more than available here at the IR team to take your questions. So give us a call. And second, another remark here, we're going to hold our closing day, our Investor Day on March 16. We shortly will send the save the date. The event will be fully online. So shortly you will receive more details about our closing day again on March 16. So thank you all and see you in the next opportunity. Thank you. This does conclude today's presentation. You may disconnect your line at this time. You have a nice day.