Earnings Call: Q4 2019

Feb 14, 2020

Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to Cazone S. A. Fourth Quarter and Fiscal Year of twenty nineteen Results Conference Call. Today with us, we have Mr. Felipe Casale, Investor Relations Executive Manager and Mr. Juan Arthur Sosa, Head of Finance. We would like to inform you that this event is recorded and all participants will be in a listen only mode during the company's presentation. At that time, further instructions will be given. The audio and the slideshow of this presentation are available through live webcast at ir.cosan.com.br. The slides can also be downloaded from the webcast platform. Before proceeding, let me mention that forward looking statements are based on the beliefs and assumptions of Cosm's 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 Kazakhstan and could cause the results to differ materially from those expressed in such forward looking statements. Now I'll turn the conference over to Mr. Philippe Cazale. Mr. Cazale, you may begin the call. Good morning, and welcome to Cazale NSA's fourth quarter twenty nineteen and full year twenty nineteen earnings conference call. The year was an important one for Brazil. Pension reform was approved by Congress. Inflation remained under control, partially due to still slow economic growth, allowing real interest rates to reach record lows in recent history. Our businesses proved the year's strength against volatility, and we delivered solid results with 12% increase in pro form a adjusted EBITDA to BRL5.6 billion. Congas and move were the highlights, both slightly above the top end of our guidance range due to better performance, especially in the 4Q twenty nineteen. Guidance for Raizen Energia remains the same and follows the crop year, which will end in March 2020. Let's move to Slide four to discuss the results of each business unit, starting with Raizen in Combustive Es Brasil. As discussed in our last conference call, demand for fuels posted a gradual recovery in second half of twenty nineteen. Brazil's total volume grew by 4% last year, considering the A and P figures. Again, Raizen grew above the industry average. The total volume sold rose 5% both in the quarter and in the year. Sales measured in gasoline equivalent increased 6% in the Otto cycle and the gasoline sales were the highlight given the contraction in previous quarters. Ethanol sales also remained strong, yet the fuel was above 70% parity in most states, implying demand resilience. Regarding diesel sales, Raizen remained focused on increasing its customer base, always targeting the adequate profitability. Aviation sales dropped due to the winding up of one of our commercial clients. Raizen Combustive's adjusted EBITDA rose 16% to BRL $951,000,000 in the quarter, maintaining the usual seasonality with fourth quarter being the strongest one. In addition to the higher volumes sold this year or actually this quarter, we captured opportunities through Raizen's efficient supply strategy. This includes not only the inventory management, but imports, a structural component of that strategy. Adjusted EBITDA grew 3.5% to BRL 2,900,000,000.0 in 2019, in line with revised guidance. It's worth noting that we adjusted the positive effect of billion from the formation of Raizen Conveniencea's joint venture. Since November 2019, the segment results are no longer consolidated by Raiz and Combustive, being now recognized as equity pickup. Quick reminder here, Raiz and Convenience will focus on accelerating the implementation of the C store services on service station under the traditional select brand franchisee model, while also developing the proximity store model with the OXXO brand. During the first three years, we expect to add around 500 new stores in total, and these will require higher investments and expenses. Raising Combustive's CapEx this quarter totaled BRL250 million in maintenance, conversion, renewal of contracts with clients as well as infrastructure. Moving to Slide five to discuss Raizen's Argentina's result. Note that we report these results in U. S. Dollars, which is the functional currency of the downstream operation in Argentina. Our first year of operations was challenging amid worsening political and economic scenario and fuel and oil prices freezing. The refinery processed 79,000 barrels per day, resuming operations under scheduled maintenance in previous quarters. Despite the complex scenario, diesel and gasoline sales rose 10% year over year, reflecting the commercial efforts and expansion of the service stations network. The aviation sales performance reflects lower demand for flights in that period. Adjusted EBITDA totaled $80,000,000 in 4Q twenty nineteen. Besides higher volume of gasoline and diesel sold, a gradual unwinding of price freeze contributed to a nonrecurring gain of $13,000,000 in the quarter. In 2019, adjusted EBITDA reached 195,000,000 Investments totaled $15,000,000 in the quarter and $84,000,000 in the year end, most of which to maintaining and improving the refining operation. In the next slide, we present Raizen Energia's result. Since this is the '20 crop year, I'll focus on quarterly results. Crushing season ended around November and reached 16,000,000 tons, in line with the previous crop, but below expectations. Here, it's worth noting that despite improved agricultural productivity, Raizen faced lower sugarcane availability, mainly on those mills acquired over the last three years. Focus is to enhance their efficiency in agricultural yield through investments, which should increase sugarcane availability starting next crop year 2021. Raizen prioritized ethanol production in the mix this year and in the crushing season at 51% of the total. Speaking of sales, let's start with sugar. We accelerated sales in the quarter in line with sugar commercialization strategy, aiming at maximizing profitability. Shipments were relatively lower during the first two quarters of the crop year. Volumes will be even stronger in fourth quarter of the crop year as shown in the sugar graph. Average sales prices in reais were 20% higher in the quarter on the back of good hedging in reais terms. Moving to ethanol, sales volume came in 20% lower this quarter, also in line with the crop commercialization strategy. A relevant amount of the biofuel sales was left to the intercrop season, seeking higher profitability as demand remains strong. Average price came in 11% higher than previous crop, explained by favorable prices in the domestic market as well as higher export volume in the period. Hedging of part of the ethanol sales also contributed to higher average prices this quarter. Now moving to electricity. Note that results are impacted by WX, which is Raizen's electricity trading company. Our own volume sold came in 7% higher in the quarter. Average sales prices were positively affected by favorable prices in the spot market. Before discussing the EBITDA, I would like to highlight that the unit cash cost already normalized by the Consecuna effect increased at 2%, reflecting the product mix with higher production of white sugar and inflation, specifically this quarter. Adjusted EBITDA came in at BRL $628,000,000 in the 4Q twenty nineteen, 25% lower than 4Q twenty eighteen due to lower volume of ethanol sold. Higher average prices partially offset these effects. As for sugar hedging, export volumes are fixed at BRL0.55 per pound. And for the 2021 crop season, we already hedged around 55% with an average price of BRL0.61 per pound, almost 10% higher if you compare to this year. Recent improvement in sugar prices combined with the Brazilian real depreciation generated good opportunities to increase hedging. There is an increasing consensus that leading producing countries faced favorable or actually unfavorable climate affecting their production, especially in India and Thailand. In Brazil, the demand for ethanol remains strong, sustaining a good remuneration still. The outlook for 2021 crop year is that the mix will be slightly more balanced between sugar versus ethanol compared to the last two crop years. Raizen keeps close track of market dynamics, always capturing opportunities to improve sugar and ethanol profitability, optimizing its strategy and commercialization mix throughout the year. Lastly, CapEx totaled R656 million dollars in the quarter with higher inter crop maintenance figures as crushing period ending earlier this crop year compared to the previous one, but it's in line with the guidance. Now let's discuss Congas on Slide seven. Natural gas sales volume fell 3% in the 4Q twenty nineteen and one percent in the year on account of lower demand from specific industrial sectors served by Congas. On the other hand, commercial sales grew two percent in the quarter and 3% in the 2019. In the residential segment, sales came in line with the 4Q twenty eighteen and rose by 1% in the year, driven by the addition of 103,000 new clients. Normalized adjusted EBITDA totaled R507 million dollars in the quarter and R2.2 billion dollars in the 2019, driven by a more favorable sales mix with greater share of residential and commercial segments as well as margins adjusted by inflation. Regulatory current account recovered, ending the year with BRL5 million position in favor of Congas' clients. Congas invested BRL299 million in the quarter and BRL199 million in the year, in line with the CapEx plan, accelerating investments after the conclusion of the tariff review process. Now let's move to Slide eight. Improved finished product sales performance in Brazil and abroad bolstered our moves adjusted EBITDA totaling BRL83 million in the 4Q twenty nineteen and BRL321 million in 2019. Total sales volume grew 13% in the quarter and 15% in the year as a result of the company's consistent sales strategy and growth across all countries. Let's move to the right side of the slide and Cousins corporate segment reported G and A expense of BRL64 million in the 4Q twenty nineteen and BRL227 million in 2019, in line with additional communication and marketing expenses expected for the year and general expenses concentrated in the period. In addition, as highlighted in the 3Q twenty nineteen, the migration of the share based compensation plan to the stock grant plan resulted in an additional and non recurring expense of BRL36 million in the 3Q twenty nineteen. Other revenues and expenses composed mainly by legal expenses and contingencies printed BRL428 million in revenue due to the sale of credit rights and the recognition of a gain related to the exclusion of ISMS from the calculation basis of the PISCOFINS taxes. This is the state taxes in the federal taxes basis. Now let's move to Slide nine. Cosannes sales pro form a adjusted EBITDA reached BRL1.4 billion in the 4Q twenty nineteen and BRL5 billion in the year, reflecting growth across all lines of business. And the net income totaled BRL793 million in the 4Q twenty nineteen and BRL2.4 billion in 2019, including a non recurring gain from Raizen Convenience joint venture. But even excluding this effect, adjusted net income rose 24% to BRL1.6 billion. Free cash flow to equity totaled BRL2.4 billion in the quarter. Main effects were in operating cash flow, the cash generation increase at Congas and there was a cash inflow of BRL $410,000,000 in Cusan corporate, reflecting the sale of credit rights during the third and the fourth quarters. So the cash effect of the credit right sale of the third quarter was actually recognized this quarter. Cash flow from investments, expenditures increased at Congas and Cosan Corporate received BRL1.5 billion related to the Congas' capital reduction. Raizen Combustiris also paid the last installment related to the acquisition of the asset in Argentina, totaling R675 billion dollars that's considering the Cousins 50% stake in Raizen. In cash flow from financing, funds were raised by Raizen and Congas. The free cash flow to shareholders totaled billion dollars in 2019. Pro form a gross debt rose 14% in the 4Q from previous quarters due to the fundraising of R2.9 billion by Raizen and R2 billion dollars by Congas. The cost of debt stood at 111% of the CDI on a pro form a basis or 119% of the CDI if we exclude high easing. The pro form a leverage ratio after the usual current account adjustments at Congas and leasing liabilities ended 2019 in line at two times net debt to EBITDA. Now let's move to the next slide to discuss our expectations for 2020. Better performance of Brazil's economy supported by unprecedented levels of cost of capital, combined with our consistent strategy should contribute to another year of EBITDA growth in all business lines. For Raiz and Combucive Brasil, we estimate an EBITDA between BRL2.8 billion to BRL3 billion. This year's scenario should be similar to what we saw in 2019, meaning challenge and opportunities due to volatility. Demand should be in line with GDP, somewhat around 3% growth. As already mentioned, the convenience store result will no longer be consolidated in EBITDA, being now recognized under equity pickup in proportion to the 50% stake that Raizen Combosives has in the JV. CapEx should also come in line with last year. We focus on expansion and renewal of the services stations network as well as infrastructure investment. At Raizen Argentina, we expect an EBITDA between $160,000,000 to $200,000,000 reflecting the economic instability of the country. At Congas, EBITDA normalized EBITDA is estimated to range between R2.50 billion to R2.4 billion in line with the regulatory plan approved by RCESP, the regulatory agency. At Move, improved performance in Brazil and international operations should boost EBITDA in 2020 with a $330,000,000 to $350,000,000 range. At Raizen Energia, before discussing our projections for the next crop, we are reiterating the guidance for twenty nineteen-twenty twenty crop, which ends in March, targeting the lower end of the guidance range. Regarding the 2021 crop year, we are disclosing preliminary guidance since Raizen's budget process is still underway. Crushing should improve compared to the last two years. EBITDA should also post another year of growth since prices are pointing to better levels and CapEx should remain between R2.85 billion to R305 billion dollars That leads to Cossan's pro form a EBITDA between R5.8 and BRL6.4 billion. To conclude the presentation, a quick update on ESG efforts and disclosure. In 2019, we increased our engagement with several agencies answering the CDP questionnaires while applying to both B3 and Dow Jones Sustainability Indexes. We published our sustainability report in accordance with GRI guidelines, while crossing each material topic of our businesses with United Nations Sustainability Development guidelines. Regarding governance, we updated our code of conduct grounded on respect, ethics and transparency principles. This concludes our presentation. We'll now take any questions you may have. Thank you. Thank you. We will now begin the question and answer session for investors and you. And will now begin question for Our first question comes from Isabella Simonato, Bank of America. Thank you. Good morning, everyone. Good morning, Felipe. And my questions are related to the guidance for 2020 because as you said, I mean, I think despite the volatility, the environment seems to be better for most of the divisions, but especially for Raising, right? And when we look at the implied growth of EBITDA, especially for the fuel distribution part, in our view, it seems a little bit conservative. As I said, the growth could be volume growth could be in line with GDP, and we are seeing solid demand in fuel prices. So can you go over a little bit the premises, the assumptions you used in the guidance since the implied growth seems a little bit too low in our view? Thank you. Isabella, thank you for your question. Will start here just pointing one thing that we need the market to bear in mind. This year, in the EBITDA guidance, we do not consider the BRL 17,000,000 EBITDA coming from the convenience stores. That's the EBITDA of 2019 that impacted the results. And it's not going to be consolidated anymore in the Raizen Combusives as it was. So from now on or actually since the closing of the JV in November, results of the convenience store segment is now coming through equity pickup and the net income besides all the OpEx and the CapEx that this entity, this segment will do. So we are not considering around BRL70 million that impacted the EBITDA last year. So let me start with that. And talking about the guidance as a whole, we have consistently been building this guidance with the best assumptions we have at the moment, and that's not different now. So comparison base for 2019 growth was also weaker, if we bear in mind that the volume growth in Brazil, and this is using A and P figures, was 4%. But if we exclude or if adjust the base of 2018 with the truckers' strike, we're talking about a 1% volume growth. So this is one thing. In fact, the 2019 showed some organic growth, which helps volumes in the business environment. In 2020, we can expect a little better in terms of demand. So we are estimating what is embedded on our guidance is somewhere around GDP growth for volumes. And this is what basically we are looking for, for the volumes here. And we again, consistency delivery, another quite good year for Raizen Combustries. And when we think about margins for fuel distribution, because when we look at EBITDA growth, even excluding the BRL 70,000,000, the margin expansion implied is not significant. How are thinking about margins for this year? As we always say, the driver for margins growth is essentially the volumes growth and our ability to have a scale leverage that the volume growth brings to the table. So this is what we are focusing in terms of margins, right? We have to remember that inflation is at a different level than what we've seen in the past as well. And we have a commitment here to pass through inflation on the margins. So this is what in terms of the EBITDA. And one thing, just to do a quick analysis here. If we look at the midpoint of the guidance, considering this adjustment of the convenience stores EBITDA, we're talking about a 3.5% growth at the midpoint of the guidance and a 7% growth at the top range of the guidance, which is a scenario that we move. But this is just to bear in mind here these adjustments or these impact of the convenience stores. Thank you. Our next question comes from Luis Carvalho, UBS. Felipe. Thanks for the time. And I have basically two questions here. The first one, if you can comment about the new potential investments and more specifically about the refining strategy, how you're preparing Cocanza actually to participate in this deal and the color you could provide? And the second one, also in the pipelines, as you just required actually filed the requirements for a potential environmental license for one of the pipelines. So I would like to have a bit more visibility on the future investments. The second one, it's about CONGAS. If you can comment about the receivables that were confirmed late last year in terms of the timing and also the potential way of these receivables are going to be confirmed to the company. I understand that it's not going to be cash, but potentially the extension of the concession. So what are the latest on this front? Luis, thank you. Thanks for your question. Regarding the refinery, there's no news since our last conference call. And Marcos Lutz, CEO of CVD, disclosed a little bit what is our view. So the binding process, just an update here, the binding process has been postponed to May 2020 due to the complexity and the amount of information that needs to be analyzed. So really nothing really changed in terms of our view to this deal. We are reviewing and understanding here the processing, if we can have an angle to monetize and use our short and trading capacity and actively looking for good investments with the adequate return. So there is no big news on the refinery side. In terms of the pipes, specifically on Jota Cuauhtro, on Route 4, the project license is being licensed for almost four years now since we first started. And we are moving to have an approval project in the environmental license at some point in time, but there's no news regarding this project as of now as well. In terms of Congas, what we know from now is the same information we stated here the last conference call. So we know there is not going to be a it's a non tariff adjustment, but the agency needs to state by May how that's going to be deal. So there is no news on that front as well. Okay. No news. Thank you. Our next question comes from Regis Cardoso, Credit Suisse. Hi, everyone. Good morning, Felipe. A few questions on my side. Still on the Combustivis and looking forward, you commented you expect volume growth in line with GDP, but you've gained some market share throughout 2019, which means that if you were to maintain the same market share in the market growing line of the GDP, call it, percent, I would expect Raizen to grow faster or to grow more than just GDP. So if you could just comment on that, if you meant market growing GDP or just your volume growing GDP? And then in that guidance you've provided for the Combustive, you by any means expect any sort of difficulty in the competitive environment with lower margins and so on? Or do you say it's mostly an effect of the JV deconsolidation, maybe inventory loss in the first quarter now? So those two questions in regards to the guidance. And then on a different topic, I mean, if we look into what's been the dynamics in the market so far, it appears that the first quarter twenty twenty might be a quarter of inventory loss, right? So I mean, we've seen these very volatile results, fourth quarter very strong, maybe the other way around in 2020. Do you agree with that? Likewise, it appears there is still some arbitrage opportunity for imports in the first quarter twenty twenty. Do you see it the same way? And the dynamics for the replacement margin, so the competitive environment now in the first quarter, is it any better or any worse than fourth quarter? So just to summarize on the first topic, guidance, do you expect any market share loss? Do you expect any future competition? And then on the first quarter so far, inventory losses, gains on imports and if you've seen any changes in the replacement margins dynamics? You. Agnes, I'll try to get all of your questions here, and thank you for them. So first, in terms of market share, and this is something we have been saying consistently here, that market share is a consequence of the performance, and we have been pretty consistent on that. If you think about Cousins or Raizen's results or volume growth in the past few years, we have been outperforming the average volume growth of the industry. So our base of comparison is also different than the average of the industry again. So there is no target of market share here. And again, this is a consequence of the performance. In terms of the market environment, the competitiveness is still strongly non conventional players, right? I'm talking here about excavation, quality of products and so on. So the ethanol demand being higher at some point in time helps on these dynamics. And after three years of rejection, the fuel market reacted in the second half of twenty nineteen, which, as I mentioned before, helps to improve market environment. So this is the scenario that we saw in the second half. And probably, including GDP, slightly better than last year, we're going to see some volume growth as well in 2020. And in terms of inventory, volatility will keep bringing challenges and opportunities to our strategy, and we are ready to navigate in any scenario with the infrastructure and the efficiency that we have in our business. So this is what I can tell you. As you know, imports, inventory gains and lots are part of the game. And we have done the investments to be efficient on that front. Philippe, if I may, just a follow-up. So you mean 3% volume growth in rising, right, not the market as a whole? Yes, that's what's implied in our guidance here. Thanks. And if I may, just one last one on Energia. Can you comment on why is CapEx grown faster than EBITDA, particularly if you've hedged at such a high price in the next harvest? Regis, we are doing some catch up in terms of productivity in some of the areas. As we mentioned in the conference call, specifically those assets that we recently or those areas that we recently acquired, they suffered with lower productivity. So implied that the guidance, have an increase in the biological asset investments, so meaning renewal and planting of sugarcane in order to capture better productivity in the following years. That can be seen already for the next year where we have implied a growth on the total sugarcane crush. Okay. All right. Very clear. Thank you. Our next question comes from Thiago Duarte, BTG. Thank you. Good morning, everybody. Good morning, Philippe, Jerome. Actually, I have two follow ups on the guidances for each of the operating units. The first one is regarding the CapEx for the Raising Energia segment. You just commented on that, Philippe, a little bit. But if you could just provide us color on two things. Number one, can you break down the expansion CapEx in Raizen Energia in terms of sugarcane renewal? Because my understanding is that Raizen Energia's maintenance CapEx should be in the rounds of BRL1.9 billion to BRL2 billion per year. So there is a pretty big expansion in renewal CapEx embedded in the guidance that you guys provided. So if you just could give us a little bit more color on how much of that is really going into the renewing of the sugarcane fields? And aligned with that, is there a number you guys used to provide in the past the average age of the sugarcane fields. So if you could just help us with that number, it would help us understanding a little bit more the pace of the renewing and whether this higher CapEx could also be the case for the following years and the following crops as well. So that would be the first question. The second question on the guidance for Raizen Combustive, can you you mentioned your volume growth assumption. Can you talk a little bit of your pricing assumptions in whether you guys are using the spot price in terms of Brent and ethanol or how you see prices per cubic meter evolving on average for this business unit would be helpful as well. Thank you. Thiago, thank you for your question. Starting for the last one. Pricing and the price area at Raizen has been consolidated for a while, right? And it's not I'm not going to give you what is the main assumptions because we look this as an integrated supply and commercialization strategy. So this is part of Raizen's, let's say, food strategy for the fields. In terms of your first question, you're right, the average investment of maintenance, which is including renewal, planting and intercrop maintenance, is around BRL1.9 billion to BRL2 billion a year. So that's what you can consider for twenty nineteen-twenty twenty crop and also for the next one. That's what's embedded for the guidance. And the target here is to bring the average age of the sugarcane fields from 3.9 to somewhere around 3.5, which means that we're probably going to have one or two more years of a higher level of investment, which should gradually reduce throughout time. You just Felipe, can you just clarify? Because since we are seeing in 2019 and now in 2020, the pickup in the CapEx in Raizen Energia, can you just clarify whether you should we should still see a higher CapEx in the coming years as well? Because my understanding is that if you are speeding up the renewing the sugarcane renewing CapEx over this year and last year only, this higher number should also prevail in the coming years as well. So just for us to understand how fast we should be seeing the CapEx converging to maintenance? Thiago, yes, I think it's not a one year thing. Of course, that's not how it works in this industry. So I'll say a couple of years of this level of renewal and planting being more focused on improving the productivity of our fields. Thank you. Our next question comes from Robert Brown, Morgan Stanley. Hi, Felipe. Good morning. Thanks for the question. I just have a quick one on Argentina. Just trying to better understand what happened in the quarter. I know that there was a $13,000,000 gain. There was no recurring due to the change in the prices in Argentina. But still, if we take out that, the results are quite good, around 70,000,000 close to $70,000,000 in one quarter. And then considering this, it looks like that the guidance for the next year is very conservative. So just maybe trying to better understand the assumptions you have on that guidance and maybe how recurring the results we saw this quarter, how recurring it can be? Thank you. Roberto, thank you for your question. Argentina is still a tough economic environment. GDP points to a recession and inflation is still high. So 2019 confirmed that the quality of the asset and some resilience on the diesel and gasoline demand. But I mean, our guidance is using the best assumption we have nowadays, right? And this 160,000,000 to $200,000,000 EBITDA implies this assumption of a more tough economic environment. So at this point in time, this is the best assumption that we have for the Argentina downstream business. And Felipe, were there any other positive surprises in the results of the fourth quarter besides the inventory gains? No. So this was basically the, let's say, the one off. So there were two price adjustments between November and December, which helps us to recover part of the $55,000,000 loss of the 3Q, right? So this $13,000,000 gain that we have is just part of it's just a recovery of part of what we lost in the third Q. But there was no other, let's say, one off impact in Argentina. Also one thing that we can consider is that we have a slightly growth on our network there with new stations, which also helped on the growth of the volumes. Very clear. Thank you, Felipe. Our next question comes from Alex Falcon, HSBC. Hey, guys. Good morning. Thanks for the question. I have actually two. One is when you design the guidance and the budget, can you walk us through a little bit what's the vision for sugar and specifically for ethanol, this recent drop because of coronavirus in oil prices, how much is that a factor there in your guidance or not? And what do you think the mix is going to be for this year if these dynamics continue? So that's question number one. And second question number two is with the lower cost of debt in Brazil, do you guys plan to shift a little bit the debt structure more into local debt and a little bit away from U. S. Dollar denominated debt? Thank you. Hakan, thank you for the question. So the first, in terms of the sugar prices and the dynamics and what is implied in the guidance, I'll say what I said in the call. So there's an increasing consensus that India and Thailand, one of the leading producing countries, facing unfavorable climate conditions affecting their production, and that's probably part of what is impacting these better sugar prices lately. Brazil, when you see the demand for ethanol, it remains strong, sustaining a good remuneration still, including this intercrop season, where we're going to have more sales of ethanol including. And the outlook for 2021 is that the mix will probably be slightly more balanced due to the sugar price recover, even if especially if you compare with the past two crops, right, we will keep at raising close track of these market dynamics. We're probably going to decide a little bit better in terms of the mix throughout the crop, right? We already hedged about 50% to 60% of the sugar to be exported for next year at a pretty good level of prices, which is somewhat 10% higher than the price of this twenty nineteen-twenty twenty crop year. So we're probably going to be talking about some shift on the production, not only for Raizen, but probably at Brazil as well. But we're going to keep, again, a close track of these market dynamics, seeking always to improve the sugar and ethanol profitability and, of course, optimizing always our strategy of commercialization and mix throughout the crop year. In terms of your second question, it's about the lower cost of that in Brazil. Indeed, if you look at the OPCOs, we have already done a lot to reduce and to access local market, and we are constantly looking at our liability management within the group. So there is nothing we can share as of now, but we are looking very closely into the opportunities in the not only at the holdco, but at the holdco as well. Okay, perfect. Thank you. Our next question comes from Fernanda Cunha, Citibank. Good morning everyone. Felipe, I just have two follow ups on the energy business. The first one is, given that some of your competitors have already received the amount of cebios that they will be able to sell for next crop year, can you give us any preliminary guidance of how many cebios are you estimating that you will receive with your mills? And the second question is when we get the midpoint of your sugarcane crushing size for next crop year, you're more or less growing 5%. Can you break down how much of this growth is related to better climate conditions and how much is related to improvement in productivity given the investments you have made in the past? Thank you. Fernando, first in terms of the Renova bill and the fee bills, we actually are in the process of getting all mills with the registration, right, registered. The process is being conducted by A and P, and it should be concluded in the next following months or probably by May. So we don't have any news yet registered, but again, we are in the process for all of them. So it's not we are not ready to share or give any of the guidance or anything related to the CBO issues and trading. So this is one thing. And in terms of the growth of our sugarcane crushing, it's actually a mix of both things, right? Whether it's way too early to say how it's going to impact the intercrop, we're just in behalf of the intercrop season here. And in terms of the investments, what we have been doing last year in terms of improving the investments on agricultural yields is part also of this crushing growth for next year. So this is basically what is embedded based on the guidance. Okay. And then on the second question, just a follow-up. Given that you're investing more in planting and treatment, will you reduce the area of harvesting this year? Or you're just going to concentrate around 15% of the area? We're probably going to maintain it. It's too early to say, but we're probably going to maintain it. Okay. Thanks a lot. Our next question comes from Rodrigo Alemeda Santander. Hi, Felipe. Hi, everyone. Good morning. So I have one quick question on Combustivis. My question is pretty much related to the inventory gains, the commercialization strategy that you had this quarter. It seems like you had a strong inventory gain. So could you just please help us quantify these inventory gains and just so we can get a better feeling together with the guidance of what normalized EBITDA margin for the business? Rodrigo, we do not disclose this type of information. This is part of the supply, the sourcing and the commercialization strategy. So this is as we always mentioned, it's part of the game, and we cannot disclose these effects as of now. Okay, sure. Thanks. Thank you. With no further questions, I would like to turn the floor back over to Mr. Philippe Casale for final remarks. Mr. Casale, you may proceed. Thank you all. We hope to see you in our Investors Day, our closing day, which will be held in Sao Paulo on March 9 and in New York in March 13. So hope to see you all there, and thank you, everyone, for the call. Thank you. That concludes question that concludes Concern's audio conference for today.