Afternoon, ladies and gentlemen. Welcome to Jalles Machado S/A's conference call to discuss the results of the first quarter of crop year 2025-2026. This conference is being recorded and has simultaneous translation into English. The replay will be available in both languages at the company's website at ri.jalles.com. All participants are in a listen-only mode during the presentation. After the presentation, we will hold a question and answer session when further instructions will be given. As we have limited time in this conference, any questions that are not answered during the call will be answered later by the company's IR team. This is the first crop year 2025/2026, and the earnings release can be found on the company website.
Before proceeding, I'd like to mention that any statements that are made during the conference related to the company's business projects or forecasts, operating and financial targets relate to the company's beliefs at this time, and they are subject to changes due to macroeconomic conditions, market risks, and other factors. With us today, Rodrigo de Siqueira, our CFO and IRO.
[Foreign language]
Mr. Penna, please.
Good afternoon, everyone.
Good afternoon, everyone.
[Foreign language]
I'm very happy to be here on another conference call with our investors and analysts. Thank you all for joining.
[Foreign language]
Started with less yield. We will talk a little about that. We had given guidance about that already. There was a 4% failure in comparison to what we had expected at the beginning of the crop year. The guidance was published in June, at the start of June, and we expected some improvement after the third part of the crop had been covered. We published a material fact last night. We have 5.4% lower than the guidance in June and 10% lower than the average crop yield we would expect. We will go into more details.
[Foreign language]
There was an impact from organic sugar.
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We'll also talk about the tariffs and how we're mitigating this in Jalles .
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We'll look at the market perspectives, then we'll talk about the operating highlights.
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We will talk about the guidance and the tariffs from the United States.
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When we look at the world sugar balance...
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We have the latest figures from DATAGRO on the screen. One of our board members is part of, or is the President of DATAGRO, and we always take his opinion in consideration. There is a drop now, but we expect an increase for the coming crop. That's why we've seen a bit more pressure in prices this year. Why are we going from 5.5 million deficit to 0.8 million surplus in 2025/2026?
[Foreign language]
That is the increase in yield in India. They had a crop failure last year.
[Foreign language]
It's a 21% increase. Thailand is also increasing their yield. The European Union decreased it. Brazil expects to increase it in 1.1 million.
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We continue to see 6.6 million tons in crushing. TRS has reduced in the Central South.
[Foreign language]
If yield doesn't go back up, the Central South crushing figures should also go down. It's likely that that will happen. When I speak to our peers and consultants in the segment, we see that this is constant, that yields are lower.
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We have 55% of the crop already. We reviewed it at the end of last week, and that's what we published in the material fact. In Brazil, Central South, we understand that this sugar production of 41.3 million could reduce. It could go down.
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If I look at the historical figures from 2013 to 2014, we are at one of the lowest points.
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We believe it's likely that prices will increase from here.
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When we look at the ethanol supply balance sheet in the Central South region, we had 34.9 billion liters produced in the previous crop year. Sugar cane ethanol...
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Expected to have a 3.2 billion reduction. Some of this ethanol is being used to produce sugar. We have more sugar in our mix. Corn ethanol should add another two billion liters in the market.
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to maximize yield and profitability.
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is very similar to the GDP. 700 million liters. The mix with E30 started in August, and it goes from August to March. We expect this impact of 746 million. When you adjust it as per the auto cycle, we see a 2.6 million liters reduction.
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It's the same scenario as we had in the last call.
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Supply is tight.
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We expect...
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Better parity in the course of the crop year. We always look at the São Paulo market. It's the main price setter.
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We expect this parity to get to 71%.
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This is the curve published by SCA.
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This is a society that markets ethanol from many plants in the Central South. It's not our own forecast.
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The price is currently at about BRL 3.20. It should go above or close to BRL 3.50.
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There should be no increase or decrease from Petrobras.
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It's a positive scenario for ethanol in the course of this year.
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To conclude the market perspective section...
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We wanted to produce a benchmark produced by CTC. 175 plants in Central South, 19 in Goiás, and 22 in Minas Gerais. This really shows what's going on when it comes to productivity in the Central South.
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controls and dynamic hedging supporting liquidity and yield improvements.
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We see that the CTC sample is from April to June.
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The sample from CTC is April to June, which is the same as...
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Number.
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It's the...
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3.9% in TRS?
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The drop in Minas is smaller than in Goiás. Jalles and UOL are dropping 14%.
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One of the advantages that we have at Jalles is irrigation. Irrigation can always mitigate.
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The impact of weather events.
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Jalis...
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We see a bigger impact on yield because half of the sugar cane crop is organic. It was the perfect storm for organic last year.
[Foreign language]
We can't use anything chemical to fight any weeds. Last year, there was a drought and then a lot of rainfall in September and October. We didn't have the chance to weed the field, so there was a lot of weed competition. That impacted the development of the organic sugar cane crop.
[Foreign language]
mix and yield have been impacted by sector-specific conditions this quarter.
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We see that the TRS has gone down.
[Foreign language]
The TRS product.
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When you produce ethanol, it's normally privileged. It's the conversion of the ethanol product into TRS. It gets better when you produce TRS. The TRS field only went down a little bit here. We have the effect of the mix.
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And the...
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TCH has an impact here in this first quarter.
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We had 0.9% better than last year. When we look at our highlights in operations, harvested area is very close, only 2% down, but grinding or crushing is 10% down.
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fluctuations in the operational mix and yield.
[Foreign language]
Yield impact. We had to reduce our crushing speed. This also impacts the cost of sugar cane. Sorry, not the cost of the sugar cane, but the cost of the product because you're diluting, you're watering down the fixed costs. TCH dropped by 8.4% year on year. That's also an impact that we're having on cost. If the TRS is lower, you produce less sugar and ethanol from the same sugar cane. The speed of crushing with lower TCH and lower TRS all lead to a higher cost in the first quarter. We have TCH per plant. I'm not going to go into the details. When we look at the TRS per hectare, it dropped by almost 12%. The average TRS is almost 3% down.
When we look at the data from CTC for the Central South, from April to June, there was a TCH decrease of 11% and a 4% decrease in TRS. When I look at the production mix, we had an improvement here. Santa Vitória has had a sugar factory from the start of this crop year. It is producing as expected. It's running really well.
[Foreign language]
There's a mix that is going to be smaller now because at Jalles , when we're producing conventional sugar, anhydrous ethanol is paying better than sugar.
[Foreign language]
It pays off not to produce sugar, but to produce anhydrous ethanol.
[Foreign language]
At Jalles Machado, we're not going to have that mix of 6C that we had thought of originally because we are favoring anhydrous ethanol and the conventional sugar cane crushing. The average year, or the average age rather, is 2.6 years. I'll talk a little bit about the ethanol prices and sugar prices. Sugar price was slightly higher than last year. Conventional sugar has gone down, but we had more organic sugar in this quarter. The average price was better than what we had last year. When we look at ethanol, there's a rise of 15.9% in price. The volumes also climbed up.
[Foreign language]
We have sold 67% of the TRS produced in the quarter, combining sugar and ethanol. 40.4% of the mix was sugar.
[Foreign language]
The ethanol stock is low.
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The sugar stock is higher, also due to the fact that Santa Vitória now produces sugar and it didn't in the past. Adjusted EBITDA was 3.8% in comparison to 16.8%, and we have a hedge liquidated.
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This would be a bit higher if we adjusted that as per this factor, considering the liquidated commodity hedge.
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Adjusted EBITDA was 53.4%, and we had a loss of BRL 14 million this quarter.
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As for the financial highlights, when we look at hedge and derivatives to the right, we can see...
[Foreign language]
That sugar had a substantial impact. The market prices have gone down, and our prices set up here.
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When we look at the curves in June, we have IPCA, or the CPI, the Consumer Price Index. In the 10-year rate, it climbed down from 7.6% to 7.2%.
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In spite of this positive impact on the financial side...
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We...
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timing, but liquidity remains strong.
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A point that offsets it.
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Commodity derivatives may be negative in the market, but the biological is positive. When one is positive, the other is negative.
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Our biological product .
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Was BRL 177 million negative in the quarter.
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Because of the sugar and ethanol prices that have this impact.
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Indebtedness was BRL 1,850, 6% higher than the previous year.
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We have BRL 1.5 billion in cash, so it's a comfortable position. The average debt term is 4.7 years.
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This will cover amortization up to 2029/2030, crop year 2029/2030.
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The debt is well covered.
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outcomes for Jalles Machado S/A.
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90% of the crop is sold forward.
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The next one is 74% sold.
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The next one is 22%.
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We can see the prices here are BRL 2,431, BRL 2,475, and BRL 2,533. All of them are above the historical average.
[Foreign language]
From a sugar production capacity, conventional sugar...
[Foreign language]
We have 1.32 crops sold forward.
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I mentioned production costs when we talked about TCH and TRS.
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Sugar cane production per hectare, TRS, and lower crushing levels.
[Foreign language]
Has that had a direct impact?
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On the accounting cost.
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We see a rise here of 18.4%.
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When we look at the cash perspective, where you remove any depreciation and you add what you've invested in crop management and crop maintenance and planting, we had a 1% decrease.
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Because of the increase of the dollar against the real, we have a 9% change here.
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The exchange rate.
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We don't expect to have the rainfall now, and we see the increase that we had in the plants that impacted the shorter offseason.
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This is a trend to go down.
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Now, speaking about the tariffs...
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This is bad news for Jalles . The organic market is important to us. The United States accounted for 6% of our total sales last year.
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That makes Brazilian sugar less competitive in comparison to the main global players.
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Brazil is the largest global player in organic sugar, which has an impact on investments in long-term growth.
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When it comes to this product, where we are leaders.
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I hope that this changes, if not, this year or next year.
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You can see this chart at the bottom. Brazil accounts for 46% of the sugar imported from the United States, and they can't find it anywhere else.
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They would only not have a problem if soda pop and sweets stopped buying this sugar.
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The organic market has a trend to go up in pricing, different to conventional sugar.
[Foreign language]
The pricing of organic sugar and conventional sugar, they are completely independent from one another.
[Foreign language]
We have seen so far that customers continue to buy it, even though they have to pay these tariffs. Of course, in the long run, this is negative because the other players will have the incentive to produce more.
[Foreign language]
It may change in the future, right?
[Foreign language]
The impact we expect this year.
[Foreign language]
It's a drop from 15,000 tons- 20,000 tons. The U.S. is 6% of organic sugar.
[Foreign language]
That has an impact of BRL 20 million-BRL 25 million in our cash.
[Foreign language]
I'm talking about the guidance now. I already mentioned earlier, we're reduced by 5.4%. Our expectation in yield this year, in comparison to the previous guidance, is 10% lower than what we had expected for the original forecast. That was almost 870 if I'm not mistaken.
[Foreign language]
From the installed capacity, we'll only be using 83.5% with a productivity of 80 per plant, and our TRS would drop 1.6%.
[Foreign language]
Following the Central South trend, but not so intensely. The production mix, we have 54% for sugar because the anhydrous ethanol is more advantageous than conventional sugar. When we're not producing organic sugar cane, we're focusing on anhydrous ethanol that has been yielding better results than sugar.
[Foreign language]
Considering the...
[Foreign language]
We have some improvements in CTT, right? Harvest, transshipment, and transport. We have made changes in concept and other changes. This would lead to replacing harvesters less often, and we have reduced another BRL 51 million here in crop management and CAPEX.
[Foreign language]
From the guidance that we give...
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We have calculated some reductions that are not going to be enough to offset the whole loss, but that can mitigate it partially.
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The company has been having a number of meetings in all departments, agricultural, financial, all of them, to try and find more efficiency in every possibility. That was what we had for you. We have 30 minutes for the questions now.
[Foreign language]
Our COO, Joel Soares, is also next to me and available to answer your questions.
[Foreign language]
All right.
[Foreign language]
Thank you very much, everyone.
[Foreign language]
Let's start the Q&A. Ladies and gentlemen, we'll now start the question and answer session. To ask a question, please click the Q&A icon at the bottom of the screen.
[Foreign language]
You may send your question in writing, or you may send a message saying that you'd like to ask a question using your microphone, and then you'll have the chance to unmute your mic when your name is called out. It's also possible to ask questions if you've connected using your phone. Just press *9 if that is the case. When your name is called out, you press *6, and you'll be able to unmute.
[Foreign language]
This command needs to be carried out only once. Gabriel Barra from Citi would like to ask a question. Gabriel Barra, please. Hello Rodrigo. Thank you for taking my question.
[Foreign language]
I've got a couple of questions, actually.
[Foreign language]
You started talking about the macroeconomic scenario, and one of the points we've been discussing with investors is this sort of dual scenario, right? Some consultants speak about a stronger yield reproduction, and we see the companies at the same time struggling to even keep to the guidance levels, as you have just shown us. You're below the guidance levels. This also applies to other companies.
[Foreign language]
With the sugar cane also being harmed by the fires from last year.
[Foreign language]
This focus on ethanol in the mix, right? We didn't quite expect that to happen so early. That also puts more, has more pressure regarding the oil prices. How can we reconcile these aspects?
[Foreign language]
We see that companies are struggling with more ethanol-based mix, and the market wants sugar as well. A second question has to do with strategy. You mentioned that the scenario may be better for ethanol. Not only you, but other companies are focusing more on ethanol.
[Foreign language]
When I look at these stock levels, it's a bit tighter. There's not as much of a buffer.
[Foreign language]
Also, the interest rates are higher.
[Foreign language]
There is a bit more uncertainty. These are my questions. Thank you. Thank you, Gabriel. Thank you for joining our call.
[Foreign language]
Let's start with the mix.
[Foreign language]
Is my connection breaking up?
[Foreign language]
I can hear you well, Rodrigo. Yes, I can hear you well.
[Foreign language]
Just a moment, please.
[Foreign language]
Can you hear me, Gabriel?
[Foreign language]
Yes, I can hear you.
[Foreign language]
Okay.
[Foreign language]
All right, so...
[Foreign language]
Starting with the question about mix.
[Foreign language]
In Goiás, we have an advantage with anhydrous ethanol.
[Foreign language]
We do financial hedging. You can revert the hedge. If ethanol is doing better than sugar, you can just revert it without any extra costs. You can use this strategy better of shifting towards ethanol.
[Foreign language]
With the sugar going down and with the premium with the spot sugar, this is not general. I am saying this because this is not something that every plant can do.
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São Paulo, again, is a price setter.
[Foreign language]
It is better to do sugar than ethanol.
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Mato Grosso do Sul.
[Foreign language]
You may have an advantage there with ethanol for some plants, but it's not quite general. Santa Vitória continues to produce as much sugar as possible, and Otavio Lage also only does hydrated ethanol. It's better to make sugar.
[Foreign language]
It's just a disclaimer that this applies specifically to anhydrous ethanol, and we can maneuver our hedge if the situation favors us.
[Foreign language]
We are looking at market prices constantly, comparing to carry over sugar and ethanol in the future.
[Foreign language]
With the increase there was recently, we sold some.
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We had stopped selling ethanol for a while.
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To leave about 50% of the ethanol produced to be sold in the offseason. This is very dynamic, and it changes all the time.
[Foreign language]
We need to analyze it all the time. An important point.
[Foreign language]
Is that with this expectation of a lower crushing level in Brazil and lower ATR, pardon me, TRS.
[Foreign language]
With the exception of Mato Grosso.
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In Mato Grosso do Sul and Paraná, where you have less impact.
[Foreign language]
They're not the largest producers, right? The largest is São Paulo, then Minas and Goiás rank second.
[Foreign language]
Sort of vying for the second and third position.
[Foreign language]
We see an impact here, TCH and ATR, or TRS, pardon me. We believe that sugar is at the lowest price. We don't really expect that it will go down any further, and we expect it should start going up.
[Foreign language]
Following this trend here in the Brazilian market in the Central South. Did I answer your question satisfactorily? If I didn't, please let me know.
[Foreign language]
You can ask further questions, of course. That was quite clear, Rodrigo, thank you. Thank you, Gabriel.
[Foreign language]
Henrique Brustolin from Bradesco BBI will ask the next question.
[Foreign language]
Good afternoon, Rodrigo, Joel. My first question is for you, Joel.
[Foreign language]
The yield being lower is something that Rodrigo already explained to a certain extent. When you look forward, how comfortable are you regarding your recovery for the coming years?
[Foreign language]
Also, considering that the climate or weather isn't an issue, what would the expected curve be for the 9 million tons expected for the coming year and also for the next crop year? If there's any approach in the, or any situation rather, in any of the plants that would cause the recovery to be harder? If you think of, say, the organic sugar cane field, if it's going to be more impacted than something else, just for an example. Rodrigo, I wanted to understand the situation with the organic sugar a bit better. You mentioned the BRL 20 million- BRL 25 million difference.
[Foreign language]
Does that come from the 15,000 tons- 20,000 tons that are redirected, or is there anything here related to lower pricing for the rest of the crop year?
[Foreign language]
What have you seen when it comes to marketing organic sugar and what is expected in the pricing dynamics?
[Foreign language]
Hello everyone. Thank you for your question, Brucelin.
[Foreign language]
The whole sector was surprised by the weather issues, with excessive rainfall and less sunlight.
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February and March, there was an intense drought.
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We would like to say that the distribution of rainfall and balanced weather when it comes to humidity and temperature, this is what matters.
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We were all in a similar situation here for the next crop year.
[Foreign language]
We, of course, have been investing more and more in varied technologies. This applies to the medium to long term. We've also invested in irrigation to mitigate the climate issues, also when it comes to rainfall-related destruction.
[Foreign language]
On our premises, wherever we have irrigation, we see a more balanced yield.
[Foreign language]
With all of the measures we have taken, with all of the approaches, be it pivot or be it salvage irrigation.
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We have another project of 700 hectares that is already planted with different sorts for this management.
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This is irrigation-based management.
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We want to, of course, use the sorts that will respond best to water. Crop management is basically mechanical in these areas. Whenever there is rain or intense rain, and often that happens in October, we can't go into these areas.
[Foreign language]
As soon as we have the chance, at the end of the rain period, I mean, when that happens, we have better conditions to work. We believe for the next crop year, we'll see a substantial recovery in the three plants.
[Foreign language]
Thank you, Joel.
[Foreign language]
For that answer, Brustolin, if something is unclear, just let us know. Now, let's understand the impact on organic sugar. This range from BRL 20 million-BRL 25 million, it's only BRL 25 million tons fewer that are now going to be sold as sugar, and they're going to be redirected to ethanol and anhydrous ethanol, maximizing the level of anhydrous ethanol. The good news is, today we heard that customers are not going to change their contracts. They are not going to have more, but they're not reducing either. This is such a major change and such a sudden change. It is still unfolding. Maybe these 50% tariffs will change and it will go back. There is a lot to happen still.
[Foreign language]
It would have this volume from 15,000 tons- 20,000 tons.
[Foreign language]
The organic sugar cane, we're having the impact with lower yields. It's a shame that we're transferring it to a lower value-added product. That's why we see this impact.
[Foreign language]
Thank you, Rodrigo. Joel, if I may ask a follow-up question about the yield.
[Foreign language]
To get to the 9 million tons.
[Foreign language]
looks challenging for next year, so maybe we'll achieve it in two years.
[Foreign language]
Will this difference already come next year, and then 2027, 2028 would have an addition to the 9 million tons? Or should we consider something that will rise slowly but surely and get there in two years?
[Foreign language]
It's very early to tell. We depend on the weather.
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The company is ready for this production of sugar cane. We have well-nurtured sugar cane fields.
[Foreign language]
We have the right planted surface, and we really have everything we need to produce the sugar cane.
[Foreign language]
This period that's coming to an end with a month and a half, we're going to add 3,000 hectares in Santa Vitória and Otavio Lage.
[Foreign language]
In the coming years, we can ramp up growth again.
[Foreign language]
We have a chance to fill up these plants, right? This is what we're pursuing. Again, we have everything we need for it: activities, technology, the work to increase yield and productivity. We're doing it. Generally speaking, of course, we really depend on the weather balance, the whole of agriculture does, so that we can get there. Last year, we're considering something around the deadline that you mentioned. Thank you very much, Esther.
[Foreign language]
Pedro Fonseca from XP has a question.
[Foreign language]
Good afternoon, Rodrigo and Joel. It's a pleasure to talk to you again.
[Foreign language]
There is one slide where you compare the plants to the CTC data. That's a very interesting slide.
[Foreign language]
What is the cutover date? What exactly is the period that we're looking at?
[Foreign language]
That snapshot.
[Foreign language]
Just to be sure I understand correctly, when you review the guidance, the decrease in the sugar cane mix is 100% related to the better return on Jalles Machado's anhydrous ethanol, right? That being better than conventional sugar. Or is there?
[Foreign language]
Lower levels of crystal sugar production. My second question is around organic sugar. You mentioned that, Rodrigo.
[Foreign language]
That was a very interesting slide showing how the United States depends on organic sugar from Brazil. Maybe there's a chance for the tariffs to be negotiated.
[Foreign language]
You also mentioned that anhydrous ethanol is doing well. Organic sugar demands more CapEx. To what extent does it make sense?
[Foreign language]
To continue with our investments for organic sugar, or should we start shifting our strategy, reduce our expectations in organic sugar, considering the perennial profile of the culture of the crop?
[Foreign language]
To what extent could we take a step back, considering the organic sugar production and that focus? Thank you very much for your question, Pedro.
[Foreign language]
I think I mentioned that during the presentation, the slide. Everything is April to June. The data in the first quarter from Jalles and from CTC. This is the like-for-like comparison. As for the sugar mix...
[Foreign language]
No problem with the white sugar or organic sugar.
[Foreign language]
In Santa Vitória, we had the first full crop year from the sugar cane or the sugar plants.
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20, 200 sacks of sugar produced in a day. That's a record. This week was 20,400. 20,400.
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Santa Vitória has been working hard.
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The same applies to Otavio Lage.
[Foreign language]
Jalles Machado is also performing well.
[Foreign language]
When it comes to the United States' dependence on Brazil, if we should shift the production from organic to conventional, right? When we talk about the United States, generally speaking, Jalles Machado has 20% of our market being internal, domestic, and 80% is international. Out of that 80%, 70% is the United States. From our total organic markets, slightly above 50% is with the United States. We don't think this is the time to make any decision yet. If someone is unpredictable, then Trump is that guy. There's a lot that could happen. We know there's a political issue, different ideologies. There will be elections next year in Brazil as well.
[Foreign language]
In the short term, they can't get sugar from anywhere else.
[Foreign language]
Almost 50% of organic sugar is produced in Brazil.
[Foreign language]
explore alternative markets if necessary.
[Foreign language]
Almost half of what?
[Foreign language]
Of the sugar they use from Brazil?
[Foreign language]
Another important point.
[Foreign language]
When we look at sugar itself, it'll have a direct impact from the tariff.
[Foreign language]
There's logistics cost.
[Foreign language]
We go from 10% to 50%.
[Foreign language]
It will be, say, 30% more expensive for the end customer. When you look at, say, soda, soft drinks, or sweets, chocolates, these 30% may account for 10%, 15%, or less of the cost of the product. This is going to go up by 5% or 6%. The problem is that we may cease to be competitive in the course of time because the amount of tariff I'm paying, if they buy the product from Colombia, they're going to get these 40% extra in their price.
[Foreign language]
The rest of the world will really feel like they should increase production levels. When there was 10% for everyone, that applied to everyone, so it doesn't really make a difference. Now the 40% extra is a concern. In short, we're not changing our strategy. If, however...
[Foreign language]
You see, there are three organic groups. In the third stage, as we get confirmation from the customers, we could possibly...
[Foreign language]
Produce some of it, organic sugar, then anhydrous ethanol and conventional sugar. The whole of the infrastructure, commercial infrastructure, certifications, everything that we have would have sort of been wasted. Let's hope that reason will come back into this discussion. Thank you, Pedro. That was very clear. Thank you.
[Foreign language]
Question for Matheus Enfeldt from UBS. Matheus Enfeldt, please, you may ask your question. Thank you for your time. I have got two questions.
[Foreign language]
In SG&A, what is your strategy like for the future?
[Foreign language]
What is the net impact the operations will have, maybe on the EBITDA margin? Is there anything that will be offset in income?
[Foreign language]
When it comes to exports, what can we expect? Your cash position?
[Foreign language]
The cash position has been relatively high.
[Foreign language]
The leverage has been low. Do you understand that you have a healthy capital structure for the company right now, or should you reduce, say, cash or reduce the debt? What is your understanding for the moment?
[Foreign language]
Thank you, Mateus. As for SG&A, we had a decrease in G&A. If you look at it year on year, there was a drop in G&A in spite of inflation and the costs on personnel.
[Foreign language]
Now the S has gone up. Selling, right? Selling expenses have gone up. Why is that? Because we started exporting Very High Polarization (VHP) sugar from Santa Vitória . When we had only ethanol there, we didn't have to pay for shipping and transport because the distributors will come and collect it from the plant. Now, when you do VHP sugar, you have to deliver it at the port. We deliver it with trucks. We go to Iturama or Uberlândia and then to Santos with the railroad. This is the route our VHP sugar follows. I like your question.
[Foreign language]
Because we send this to the people, we spend it on logistics, and then it's exported. When I look at our quarter, we had BRL 12 million in logistics and shipping that had been accounted for and paid, and the product hasn't been exported yet.
[Foreign language]
We've already paid for shipping costs but haven't got the margin yet. We mentioned that in the release. It was a good question so that we can ask Rath actually make this comment.
[Foreign language]
Why have the selling expenses gone up, and why is part of the product that had logistics paid for already not acknowledged for, not recorded in revenue because it's at the port?
[Foreign language]
VHP.
[Foreign language]
We do a break book for organic.
[Foreign language]
That is a cost for the customer. We deliver it at the port, and then the customer will take care of it.
[Foreign language]
We had 10,000 tons in the first quarter. It's really efficient in the chain when the containers are at a more expensive price, especially because this also reduces costs in offloading and loading.
[Foreign language]
The sugar increases efficiency. Going back to cash, we were high in cash. That is true.
[Foreign language]
We had invested into an investment that was CDI base rate plus 0.3%. We have the reference of CDI plus 0.7%. We even put that in the release. The profitability has gone down a little.
[Foreign language]
We're paying CDI plus 7, so it's costing me 0.5% a year to carry over this cash. Our sector has cycles and there are peaks and troughs. We need to be robust when it comes to cash. We've always liked to have liquidity in cash so that we can adjust the debt, have a long-term well-negotiated debt, especially due to our business style, right?
[Foreign language]
The captation opportunities are very good. If we captured a debt today, we'll be all in with CDI plus 0.3%. It is cheap to carry over the debt because of the safety the company has from it. As for capital leverage...
[Foreign language]
I mentioned this in the previous call. We like to be on a leverage level that is as is or lower.
[Foreign language]
We would not invest further at this point.
[Foreign language]
Really having as much as possible in the plant.
[Foreign language]
We're in a comfortable level, but we like to be at this level or lower, especially when it comes to a country such as Brazil with so much uncertainty, all of these oscillations, these fluctuations.
[Foreign language]
Two years ago, everyone would expect the base interest rate to be at 8% now, and it's 15% at this point. We expect it to be at this level or lower, Mateus. Thank you. Thank you, Rodrigo.
[Foreign language]
Next question from Guilherme Guttilla from BTG.
[Foreign language]
Hello, Joel. Hello, Rodrigo. Good afternoon.
[Foreign language]
Quick question.
[Foreign language]
How do you expect the cash unit costs to develop? Now you've changed the guidance a bit. There's a bit less rushing. How do you expect this to perform year on year?
[Foreign language]
Thank you for your question, Gutilla.
[Foreign language]
We haven't given any guidance around costs, but let me give you an idea. Without the crop failure, there was some increase in inflation or inflation and a little bit when it comes to personnel. In most costs, we were reducing the levels, right? Say inputs and crop protection, right?
[Foreign language]
We were headed towards stability in the year-on-year costs, but 75% of our cost is sugar cane.
[Foreign language]
Speaking about CPV here, basically it comes all from the crop management and what happens before that. When I want to look at the cash cost, which is what I'm looking at this year, it is lower than it was last year. CPV means COGS.
[Foreign language]
We expect an increase in costs due to yield. If yield was stable, we would have a stability or maybe a reduction of the cost for the year. I'm not sure I answered the question, but I'm not sure how far I can go.
[Foreign language]
Yeah, that was clear. Thank you. Thank you, Rodrigo.
[Foreign language]
[Foreign language] .
Next question from Gustavo Troyano from Itaú BBA.
[Foreign language]
Rodrigo, thank you for your question. Just one point I'd like to go back to: organic sugar and the tariffs.
[Foreign language]
At the start of the call, you mentioned that if the situation stretches out, we're likely to see new entries in the market. I know this is very difficult to predict considering the whole unpredictability that we have with the United States.
[Foreign language]
would these newcomers be, and how much or how long should the situation last for this to start to happen? What is the barrier to entrance? That is the question, basically.
Because even though you can pass the price to the United States, to the buyers of your products, this should allow for newcomers to join the market.
How do you qualify this risk, and who would these people be? Thank you.
The main entrants would be those that already produce sugar: Colombia first, Argentina, and Paraguay. These three countries, they are major sugar kings. Those who can, it takes at least four years to convert from conventional to organic. It's a conversion to organic. It can't happen overnight. It would take a few years. It would be these countries. In the past, the European market is still important, but it used to be bigger. They started producing organic sugar beet.
Sugar, right? This is sugar made from beetroot.
[Foreign language]
We paid EUR 419 for one ton of sugar going into the European Union. Colombia has an agreement with the European Union where they pay virtually nothing.
They have a bigger share of the market than us in Europe. The United States, point.
The change would take a while, but a lot can change. We can increase our share in Europe and Asia. In the domestic market, we're growing in retail. I don't remember if I mentioned this in the call, but we are the second brand in Brazil. In the organic market in Brazil, Camille was the second brand in the past.
[Foreign language]
They are buying only native.
[Foreign language]
It's a smaller market, but it's growing.
[Foreign language]
The industry, the organic sugar product has also grown for organic acai, for example. We believe the situation with the United States is not going to last.
Okay, thank you very much. That was very clear.
[Foreign language]
Thank you, Juliana, for joining the call.
If there are no further questions, I'd like to give the floor to Mr. Penna for his final remarks. You may begin, sir.
Good afternoon again. Thank you, Amanda, for conducting the call. Thank you, everyone, for joining the call. Thank you to the investors. We wish we were telling you better news. Our business depends a lot on nature, on the climate. You may have positive surprises when weather lends a hand, or less pleasant surprises when it doesn't. The whole company is doing our homework so that we can reduce the impact on cash with a reduction in crushing. I'd like to thank our team, Nadel, Jacqueline, who worked tirelessly, as well as the financial team, to produce the quarter release of materials. Thank you, everyone. Have a good afternoon.
[Foreign language]
This is the end of the first.
Joel is going to say something.
I just wanted to underline what Rodrigo de Siqueira said. We stand firm working to improve our processes, be more efficient in OpEx and CapEx without impacting the performance of the company. Thank you all for joining. Should you have any questions, let us know.
[Foreign language]
The first quarter 2025/ 2026 is over. Thank you very much for joining. Have a good one.