Cosan S.A. Q1 FY2022 Earnings Call

Good afternoon, ladies and gentlemen, and thank you for waiting. Welcome to Cosan’s Conference Call to discuss the results of the First Quarter of 2022. Today with us, we have Mr. Luis Henrique Guimarães, CEO; Mr. Ricardo Lewin, CFO and IRO; and Ms. Ana Luisa Perina, IR Manager. We would like to inform you that this event is being recorded and it has simultaneous translation into English. Before proceeding, let me mention that forward-looking statements that may be made during this presentation regarding the company’s business prospects, and operating and financial projections and goals are based on Cosan’s beliefs and assumptions of management as well as on information currently available to the company. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions as they relate to future events, and therefore, depend on circumstances that may or may not occur. General economic conditions, industry conditions and other operating factors may affect the company’s future results and may lead to results that differ materially from those expressed in such forward-looking statements. Now, I would like to turn the conference over to Mr. Ricardo Lewin. Please, Mr. Ricardo, you may proceed.

Good afternoon and thank you for joining us on Cosan’s earnings conference call for the first quarter of 2022. With me today are Luis Henrique, our CEO, and Ana Luisa Perina, our IR manager. We'll begin today's presentation by reviewing financial and operational highlights from each business. Our presentation is concise since our listed subsidiaries already reported their results and conducted their calls with the market. Starting with slide number 4, I’ll focus on Raízen as we close the 21 to 22 crop year. We achieved a record in our adjusted EBITA due to significant improvements in Raízen's operational performance, aligning with the market guidance we shared. In renewables, better prices and maximized gains from sales led to strong results. We are progressing in our plan to increase the supply of clean and renewable energy, with the construction of a second biogas plant scheduled for 2023, along with three E2G plants expected to be ready in 2023 and 2024. In sugar, we experienced a notable increase in sales prices and continue to grow our share of direct sales. This helped offset lower volumes impacted by crop setbacks and inventory carryover aimed at maximizing profitability. In marketing and services, EBITDA increased over 50%, boosted by improved returns and higher volumes across all segments, taking advantage of expansion opportunities in Brazil and Latin America. Moving to slide number 5, we can see the results of Compass Gás & Energia. A slight decrease in Compass sales volume this quarter reflects reduced demand from the industrial segment due to scheduled maintenance shutdowns at clients. However, this was offset by growth in the commercial, residential, and automotive sectors and the additional volumes distributed by Sulgás since January. EBITDA growth was driven by improved margins adjusted for inflation and continued operational efficiency at Comgás, along with the incorporation of Sulgás. Now on slide number 6, we review Moove's results. The quarter saw a recovery in lubricant sales volume, even with a year-over-year decline. It’s important to note that last year's first quarter was a strong comparison base due to the economic recovery following critical pandemic months in Brazil. Meanwhile, EBITDA reflected ongoing improvements in profitability, showcasing Moove's effective cost control and strategic sourcing and pricing, despite a challenging demand environment in early 2022. On slide number 7, we discuss Rumo. Transported volumes showed significant growth primarily in the North Corporation. This was driven by the anticipation of the soybean season, operational efficiencies, and the ramp-up of central network operations. As a result, Rumo increased market share in green exports from port centers, aligning with our marketing strategy. However, EBITDA margins decreased compared to the first quarter of last year, and higher average tariffs weren't sufficient to counter the rise in variable costs, primarily driven by diesel prices. Nevertheless, fixed costs and expenses lagged inflation, reinforcing capital discipline. Moving to slide number 8, we look at Cosan's results. As previously mentioned, our portfolio showed solid performance this quarter despite some challenges. Corporate expenses aligned with expectations at Cosan, and EBITDA was primarily driven by revenues from leasing agricultural land. Other businesses, which are startups and in pre-operational stages, contributed negative EBITDA that impacted overall performance. Consequently, pro forma EBITDA increased due to better operational performance from Cosan and Compass. However, net income was impacted by rising financial expenses across all Cosan businesses, worsened by higher interest rates. Cosan's consolidated investments rose year-over-year mainly due to amounts from Biosev and Compass, partially offset by reduced CapEx at Rumo. Turning to slide number nine, we go over our group's financial highlights. We performed liability management actions across the group. Reductions in gross debt resulted from prepayment of 2025 bonds at Rumo and buy amortizations at higher rates. The net debt to EBITDA ratio stood at two times, within the ideal range for the group, reflecting substantial EBITDA growth over the past 12 months. Additionally, cash flow was nearly half of last year's first quarter, indicating substantial improvements driven by funding operations at Compass and increased operating cash in Raízen from inventory sales. These improvements were somewhat offset by expenditures related to the Sulgás acquisition and the second payment for the Port of Santos acquisition. Although not related to earnings, I want to highlight some subsequent events. In April, the shareholders meeting approved an R$800 million dividend distribution for 2021, scheduled for payment on May 20, which complements the R$700 million in interim dividends paid in December. We also completed Cosan's fourth debenture issuance, raising R$1.5 billion in two series, for six years and ten years. These proceeds will strengthen our cash position following recent acquisitions, including Sulgás. Additionally, a new stock buyback program was approved to replace the previous one, allowing for the repurchase of up to 110 million shares in the next 18 months, part of which has been contracted through total returns operations reported monthly. Before wrapping up, I want to address recent events in our ESG agenda on slide number 10. In April, we published our annual sustainability report, detailing progress in our ESG initiatives during 2021, available on our website. Compass also publishes its report, and similar reports from other businesses will be released soon. We celebrated that all companies in our portfolio are now signatories to the global compact, a UN initiative advocating for responsible corporate social and sustainability practices. Additionally, in April, Raízen issued its first sustainability-linked debentures tied to ESG targets, raising R$1.2 billion, while Rumo improved its ESG performance rating from Sustainalytics from high to medium. Lastly, I invite everyone to join our Cosan Day on May 26, which will be live streamed with simultaneous translation. This concludes my presentation. We are available to answer your questions. Thank you.

Thank you. We will now start our Q&A session. First question is from Ms. Isabella Simonato. Ms. Simonato, you may proceed.

Good morning, Luis. Good morning, Ricardo. Good afternoon, everyone. Thank you for the call. I have a question about Cosan Corporate, the holding company. It's interesting because when we look at the dividend payout compared to what you have in terms of debt service and potential investments, obviously, one quarter is not enough to give you a good reading of the whole year. So that's why I wanted to ask you could you let us know how you see that equation at the level of the holding company in terms of dividends flow that it can receive versus a more expensive debt service with higher interest rates? You also mentioned you'll be making more investments this year. But there's CapEx from investments and there are also buybacks as well as other things that you can do. So could you give us an overview of how you're seeing that and also, as a follow-up question there's a liquidity and float size issue at Raízen. Could you give us an update on how you are thinking about that structure? Thank you.

Thank you. Lewin, please help me out and add anything you might think is necessary. Thanks, everyone, for joining this call. As you know, the presentation was short so we're here to answer your questions myself and Lewin. We're keeping the same discipline as always. We've done everything to make sure that we can address the debt service and still have room for buybacks as well. As you will have noted, we have approved our buyback program at the level of the subsidiaries and the holding company. We can continue with the buybacks as soon as it's unblocked. In terms of investments, there are no major investments at the holding level with the exception of the radar payment installments. In terms of mining, we have concluded the ports and the next capitalization event is further down the line if and when the mining quality issues and everything else are sorted. So that's what we have ahead of us in 2022. The rest of the CapEx has been resolved with all the other companies with cash generation fundraising and growth at Moove, Compass, Raízen, and Rumo with very good liquidity levels. In terms of Raízen's liquidity, that's always something we look at very carefully. We want to get a 50% float at the company. And we're working with V3. When the time is right, we have some commitments. And there are also sales by shareholders that may have bought something via Biosev; we're also keeping an eye on that. That goes on, and partners like Shell and the company. So it's an opportunity that will be done at the right time. And we'll make sure that our receivables flow minus the debt service and radar's CapEx are all addressed with the opportunities we see in our portfolio companies and the holding company. Lewin, would you like to add anything?

Yes, just about the first point; obviously, we have the three pillars: new investments, share buyback, and dividends at the holding company. And as you said, we do have that new buyback program. We have 30 million in shares that are open. We have the commitment at the TRS and when we have any opportunities, we obviously buy back when good opportunities present themselves. And what we're monitoring is the company's leveraging. We have those three fronts, but we're looking at our leveraging, and we always keep it at 2.5, which is what we always set as our limit. Let's not forget that we concluded the quarter with very low leveraging of two times the EBITDA.

That's very clear. Just as a follow-up, can we think there will be a drop in Cosan corporate net debt? Or would that be marginal?

Now, well, let's think in terms of leveraging. Obviously, we're not disclosing guidance, but the objective is to keep it at the level I mentioned. What we did do recently was, and I talked about this in other events, was to issue some additional debt. But with that, we should do our liability management considering some of the debts we have. So we will be keeping a similar level of indebtedness.

That's great. Thank you.

Thank you. Next question is from Mr. Christian Audi from Banco Santander. Mr. Christian, you may proceed.

Thank you, Luis. Thank you, Ricardo. Thank you, Ana. Luis, I have a question about the market dynamics as a whole. We now see high inflation rate pressures going on. So I'd like to hear from you what your concerns are when it comes to this inflation pressure and what you have been doing to make sure your strategy can face this dynamic, which looks like will continue for the rest of the year.

That's a great question, Christian. It's almost like you've been attending our management team meetings because we've been discussing this for a long time. Marcelo talked about some of our capital allocation decisions, leaving some of the best ideas we were intending to do, which we really liked, and that had to do with capital increase and concerns about costs. Obviously, also, the ability to ensure that our management is prepared for cost management. This is a key topic for all companies, not only in Brazil but around the world. And our inflation number – we are concerned. We've been discussing what we're going to do; we're looking at costs and also looking at passing costs on to our clients. This is key for freight competitiveness in the case of Rumo and turnover in the case of Raízen. So sometimes, it takes a while to happen, but they end up happening in the market as a whole. Over the last three years, given our investments, our projects, and how we've been developing our procurements, always focusing on improving quality and our systems, we've been putting a lot of effort into increasing synergy among the companies that buy shared items. So services, ranging from IT to security services; we've been capturing significant savings. And there's been relevant cost avoidance as well. We've been reducing since the last pricing. So that's our number one priority, not just for me as the CEO but for everyone in the company in terms of resource allocation. The cost of opportunities is something we consider a competitive re-pricing to ensure we have the appropriate returns on investment for the industry we operate in. So that's our number one priority. It's not just in Brazil, it's around the world. We're here to stay; this is here to stay for a while. So I can tell you that both in our long-term projects and recurring cost activities, we will be doing our homework to mitigate these cost effects and to accelerate whenever possible, and wherever the competitive environment allows us to, pass on the margins to the business.

Right. Thank you, Luis. The second question is there is a risk that the administration might be changing. So I'd like to hear from you whether there are any industries that you're more concerned about if there is a change in government, and any ensuing regulatory changes that might make some businesses harder. So do you see any risk in that sense?

Well, once again, this looks like an election between two former presidents. So it's something we've seen before in terms of direction with the thinking. We're familiar with it. We've been through it before. And the reality is that we operate in industries that impact society as a whole. It's a structural industry that allows Brazil to be more competitive in various business areas. So we look at the glass half full. So despite the global challenges, Brazil is in a very relevant, competitive position considering the planet's de-carbonization. Nobody has any doubt that it is necessary, and it's already happening. There's also the war between Russia and Ukraine, which will take a while. And so, Brazil is very well-positioned because it is the main protein and food supplier. Rumo has a very good strategic position in renewables and oil, so we're in a great position. There is no risk from war polarization. Moving from A to B outside the internal situation, obviously, these industries, when commodity prices go up, they are affected. Since in most cases, our companies add value to the equation, so logistics and credit are not directly impacted. We don't own the land or specific assets; we have control over land leases. So that's a very relevant position. If there are no major interventions, which we don't think will happen, we are in a position that doesn't make us exposed in terms of import/export taxes or any other artificial pricing mechanisms because that's sometimes a temptation. We're well positioned in terms of regulatory issues regarding railways, authorizations, both local and federal, and gas policies as well. We also have our concessions in the gas network or with Comgás. So lots of things have happened over the last two or three years that have reduced our exposure to these risks. So I don't really think whether A wins or B wins will have a problem. I think there's a great opportunity for Brazil to consolidate its position as a great supplier of major commodities of the future in this new geopolitical design and configuration we see happening worldwide. But obviously, we're paying attention to all that. We have a close dialogue with different levels of the legislative and executive branches. And I'd say it's business as usual at the moment. It doesn't matter whether they're orthodox or heterodox ideas and from where they come from. If you look at what's happened over the last many years, these things tend to move towards a solution that makes sense. Along the way, sometimes it's not the most direct way, the tax on diesel, there are differing opinions. But I believe the world will converge towards something that makes sense. There will be a correction cycle with some instability. But the state and federal governments will strike a balance, I'm sure. But only the debate and the fact that things are evolving, it's very positive. It's like Brazil; two steps forward, one step back. But at least in the areas where we operate, things seem to be moving forward, and I believe they will continue to do so.

That's great. Thank you. Just as a follow up to Ricardo. In terms of buyback how do you see calls on buybacks? You said your mind by some Raízen shares? How do you see that dynamics between buying back Cosan shares versus Raízen shares? Could you give us some color on that please?

Well, the buyback decision is obviously we could do Cosan share buybacks, Rumo and Raízen. This is publicly held information. We did R$250 million worth of share buybacks by Rumo; this is a financial decision. We have our models, and we'll buy as we see opportunities to get attractive returns, obviously. So whenever we see attractive returns in a specific company, we buy back based on our models.

Thank you. Next question is from Mr. Marcelo from Credit Suisse. Mr. Marcelo, you may proceed.

Hello, good afternoon, everyone. Hi, Luis. Hi, Ricardo. Hi, Ana. Congratulations on the results, and thank you for answering my questions. I have a couple of questions. One is a follow up to Christian's question about gas, petro, and the Regas terminal. You've already mentioned that Compass adds value, so it's not necessarily linked to the price of the molecule. But given the level of volatility, international prices, do you see any challenges or difficulties for that terminal to be successful, to be installed and running according to what you had thought originally? And my other question is about Compass. In terms of the DOD gas petro, do you have any update on timing of the deal? Now it's with the competition authority, and obviously, you're moving forward and selling some of the gas petro subsidiary. So my question is about the strategy behind that. Do you see potential expansions of the network in some places? Or will you keep the distributing companies that already have an installed network, and therefore, it would make it easier to implement Comgás successful model? So those are my questions.

I'll start by the second because I think it's faster. The divestment in assets it has to do with consistency. We've always said that. We've always said that we weren't acquiring to keep 100% of the operations. It's a key operation, and it's very healthy to have other players to develop the distribution market because it's an underdeveloped market in Brazil, with the exception of Comgás and the other companies in Rio de Janeiro. It's an underdeveloped market. So there are lots of opportunities. But one single player cannot make it happen. So it's about consistency. So we selected the areas and regions that have the most synergy and ability to absorb our model. It makes sense for other players to acquire and will make sense to the negotiation deal that we have already concluded. And the negotiation is pending CADIS approval. So this should happen by the end of July. That's CADIS's deadline to assess this acquisition. It's not left the superintendence with a recommendation for unrestricted approval. So we're very optimistic about it. But obviously, CADIS's decision is sovereign in terms of the approval of the deal, but it's been approved by the superintendents. So we'll continue to work with the agency to clarify any questions and to provide them with anything they might need to help the Brazilian market develop and meet the rising demand. So as a segue to your first question, obviously, all of our plays have a key structural component. It's the same thing we've been doing for the last few years, the extension to look at the Rio Verde, Comgás extension, the network extension, and the natural gas terminal in Sao Paulo. These are key and unique assets in our portfolio. They have great cash generation and results generation for a long time. So we're very happy about the positions we've consolidated and which are so important to grow with good results in all of these areas. The terminal is being talked about in a six-month, a year timeframe. It's got a strategic position and will allow us flexibility, local price negotiation and let's not forget that all of these deals, the IFRS deal, the Regas unit, and the long-term gas supply agreements have been made with the commercial conditions of that time. So it's a long-term asset. But it's positive because right now we have costs that are much more competitive than they would be if we were starting now, for instance. But we want to maximize the returns of these assets during the cycle as a whole over the years. So I don't see any difficulties ahead. Quite the contrary that position was built before the crisis, and it's a winning position. So we just need to deliver a working terminal in the first half of next year. So we will continue to have good results and we're confident that we will do it within the deadline that we have agreed on with the market, our clients, and suppliers; and to have another unique position in terms of strategy will help Brazil develop and improve the supply of natural gas to the Brazilian energy matrix, which is key.

Thank you. Our next question is from Mr. Lucas Ferreira from JPMorgan. You may go ahead, Mr. Lucas.

Hi, everyone. Good afternoon. So as far as I understand it, you've decided to have another official guidance. In general terms and qualitative terms what can we expect for both standalone businesses Compass and Moove for 2022 in terms of both CapEx? As a CapEx acceleration in all businesses? Can we expect to see that acceleration in the other businesses as well? If you could comment on that in general terms, I’d be grateful. Thank you.

Well, Moove and Compass have had compound growth over the last few years that are quite relevant, and we don't see that slowing down. It will continue. For over a year looking forward, we will continue to grow. That's what we've been doing. That's how it's been performing. These are fantastic assets. We've been working together with resources that we've brought to both businesses whenever required, and there's great opportunity for growth. But it's no secret that we want to increase Moove's international share to grow in the Americas, in North America, and in Europe. We hope to have news soon for everyone. The company is ready for that step. We've had consistent deliveries in the last few years in our LATAM business, Europe, business, and our small business in the U.S. So we have won the rights of growth even more. We just need to match that with a market opportunity. So that's what you can expect from Moove, continued growth and continued expansion in our international presence. At Compass, we want to conclude the gas petrol acquisition, hopefully by the end of July, together with the divestments so making an acquisition and divesting from two assets at the same time. And so we'll start replicating Comgás's successful model, which is what we have already started to do with Sulgás in regard to do so. We're already seeing relevant results in terms of expanding our network, residential connections, and so on and so forth. And in 2023, we'll have the terminal which will provide our clients in Sao Paulo with more benefits as well as future thermal projects by third parties. Third-party thermal projects will have an opportunity to give us competitive projects in the southeast. So we continue to deliver growth, and the additional CapEx at Moove will be for potential acquisition. And then Compass there is no change in Congress regulatory CapEx. So we'll continue with the regulatory CapEx. And we'll also have the CapEx for the new companies when they are under our management coupled with the states that are part of the partnership in both businesses. So that's a summary. There's huge growth capacity; they've been delivering, and Compass is a good dividend payer and it delivers substantial growth as well.

Hi, thanks, Luis. This is Ana. I'd just like to add something even though Compass' shares are not listed on the stock exchange, we do disclose our results. So in February this year, we did disclose our EBITDA and CapEx projections for Compass, and the EBITDA we expect for 2022 is R$3 billion. It was R$3.3 billion EBITDA and CapEx R$1.6 to R$1.8 billion. As Luis said, these are the numbers for the ongoing operations but they exclude the results of potential acquisitions.

Okay, that's a great point, Ana. Let me just reiterate a couple of things that are very important, and we take into consideration, especially with regards to capital allocation it's the unique position of each of these assets because we consider competition the markets we supply and so on. So when I look at that, right now, myself, everyone at the holding company, it's the same, as I said about Compass and Moove. They have a clear avenue for growth. The same applies to what was built in regulatory terms at Rumo in the last few years and a stronger crop, and re-pricing of the cost of capital, the cost of businesses moving towards traditional freight. The same applies to Raízen with the expansion of 2G and Petrobras model to position itself and supply the market. So when we look at all this, obviously, there are concerns about the inflation rate and the country's growth, but our strategic positioning, considering everything that's going on around the world is very strong. We are in a very strong position.

Thank you. The next question is from Mr. Bruno Montanari. Mr. Montanari, you can go ahead.

Good afternoon. Thank you for answering my questions. I have a couple of follow-up questions, one about Compass and another one about capital allocation. You were very fortunate in the terminal timing at Compass. Do you think the commercial company in the short to mid-term might be better than you had expected because of this high natural gas volatility? And in terms of capital allocation, when might you think to start reinvesting again? Would it be when you see that inflation rates are going down or interest rates, or when you see improvements in the macro economy? Because that might be a long process. So I'd like to hear about timing; when the situation improves, at what point of the cycle do you think you'll start investing again? Thank you.

I'll start by your first question. Traders and commercial companies love volatility. Brazil and the world are not worried about price levels. It's about having different molecules and for the market to develop faster. The main accelerator or the accelerator for the short term is much better than we had thought because there are no other molecules available in the market. And there aren't enough clients to take on the risk that have potential benefits. But there are risks, as well as demand generation. Second instance, suppliers; it takes time for the market to develop. And in our opinion, we've been talking to the regulatory agencies and the ministry. Our focus in terms of market and industry is that issues that are blocking the expansion of the free market should be unblocked as Compass goes on. We're very favorable towards having as many free clients as possible as soon as the molecule issue is addressed. We're focused on distribution efficiency because that's our core business and a commercial company does hold a small share; where it makes sense, we'll have lots of others where it makes sense. It's not happening because it doesn't make sense at the moment, but the origin of the molecule with different pricing and access so that the market can develop is the limiting factor to me. Not price volatility because price volatility can be very productive. Before this crisis, we would be highly competitive, as we can see in Comgás due to having a share of the supply via the terminal, which is highly competitive. About your second question, since the end of last year, we've been seeing an acceleration of the cost curve and the cost of capital but there is an investment by the companies below that. So there's a return on investment investing as required. But there's enough capital allocated to projects that we do see, and that places in a key strategic position. So Raízen biogas, the Lucas Rio Verde extension at Rumo, Moove's entry into Europe, and the acceleration of the replication of Comgás's model at the other companies with gas petrol Sulgás. So we have allocated CapEx; it's relevant CapEx and will generate double-digit returns in all of these businesses and they will remain at that level. It's about being conservative where we can see that certain risks are not worthwhile taking out but we will continue to grow responsibly, and to acquire assets where we see competitive advantage and an ability to generate results and continue to grow.

That's very clear. Thank you.

Next question is from Mr. Indiscernible from UBS. You may proceed.

Hi, good afternoon, Luis, Ricardo, Ana. Thanks for taking my questions. I have a couple of follow-up questions. I might rephrase the question. First, I'd like to understand how you see Compass as a platform for natural gas. We had talked about natural gas price volatility, Petrobras' strong presence in the natural gas market with commercial companies falling short of what was expected. So what's changed in the mid to the long term, for contrast, considering a portfolio that was presented a couple of years ago, considering new opportunities in energy or other gas businesses? So that's my first question. The second question, considering the whole group, and I know there are a few different ways of looking at it. How does the company come to the holding discount? You've made it clear that there’s an expectation to buy back at the company or the subsidiaries. Does the company see this as a good moment to leverage buyback considering the discount levels we're seeing? How do you see that? Thank you.

I'll start by the second question because it's quite simple. The holding discount is determined by the market. We're not going to dispute whether it's right or wrong. But our portfolio should have this discount close to zero; that's part of our portfolio and risk considerations. There are lots of uncertainties around the world; the quality of our assets is all linked to Brazil's competitive advantage, which is independent of the administration. They are all very well-positioned considering the profitable de-carbonization agenda we see around the world. So we'll check market prices, and if they make sense or if they do make sense, and at current levels, we think the market is wrong in terms of pricing. But the market is sovereign. So we will do what we deem important to do; we'll do what we have to do. We have the authorization to buy all three papers; the blocking issues, silent periods, but we will continue to be active, as we have been in the last few years, to make the most of opportunities. Our view is that the current discount is what the market thinks is right. We're not going to argue about whether that's right or wrong.

Compass in the mid to the long term.

Yes, clear. Thank you. Well, if I look at Compass's main promises of the last few years, it was the Sao Paolo renewal and extension, which was done. The natural gas extension, it's ongoing and it will end within the deadline and to address geographical expansion to replicate Comgás model, we've taken the first steps and we hope to be successful with the conclusion of our investment and divestment, in gas petrol. Obviously, we also have important matches to address with a commercial company. Unfortunately, because of the market issues we've raised, it's not evolving, but we will be ready when market opportunities arise. We'll continue to look out for opportunities and energy generation projects. We've always thought about gas project pipeline projects. It's not our core business to be the main investor in other projects. That comes with our ability to generate the short that we require whenever we have new gas positions in the regions we operate. Our core business is distribution with high efficiency. The efficiency that Comgás offers is a great opportunity for Brazil, so focusing on clients focusing on efficiency and a balanced portfolio will be more balanced than the current portfolio we see in distribution companies. With an industrial component, but considering other types of consumption that makes our portfolio so robust. And whenever there is a natural gas opportunity that can be competitive, as we see in Sao Paulo with the current gas and ethanol prices, natural gas is very important for heavy users in terms of number of kilometers. So we have been focusing on the main deliverables. We have high-quality partners coming in at most. They're very happy; we're very happy with them. We've been able to capitalize the company to make relevant investments, and the divestment as well, which gives us a healthy balance sheet. Now we want to deliver these levers with these three components that the project will bring us over the next few years.

That's great, thank you.

Thank you. Our next question is from Mr. Gabriel Barra from Citigroup. You may proceed Mr. Gabriel.

Hi, Luis, hi Ana, Hi, Lewin. Thank you for taking my question. Most of the questions have been asked. You've been able to simplify your portfolio and looking forward one of the main steps to make the portfolio simpler will be to list Compass. As Luis said you've brought in some partners via price placement to Compass. So my question is, it's hard to say, but what are you missing to resume that plan? I think that will continue. Please correct me if I'm wrong, but I believe that will be advantageous to the company. So obviously, the economy is very volatile at the moment. You have delivered on some of the plans that you had mentioned in the IPO. So I'd like to hear from you how you're seeing the future. What would be the sweet spot to continue with your plan? Thank you.

Thanks for the question. Yes. Having Cosan open and listed companies below it is still our plan and continues to be so. That's why we listed Raízen. That's why it went public. And Compass has been delivering what it needs to ensure the market can see the value we had the terminal capacity and being part of successful privatizations such as the extension of the Sao Paulo concession to be able to continue investments and positions from Sao Paulo as a fantastic position with renewables and energy mix. So we want to have a market that makes sense, and these projects need to be mature. We have assets delivering good results that can be reported and will allow us at the market to have a better understanding. It will be down the line. But we haven't changed our plan for Compass or for Moove. The right time will be when the projects have delivered, and things have been happening concretely, and we're reporting growing results about this project. We need pricing to improve and for Moove; we're expanding internationally; that needs to become more mature. Then we'll be able to report results. Together with our partner, we will find the right time. But the plan is for all four companies to be listed. We haven’t changed that plan.

Thank you. This concludes the question and answer session. I will now turn the floor to Mr. Luis Henrique for his closing remarks.

Thanks, everyone. Thanks for joining us. Thanks for your questions. Excellent questions. Thanks for allowing us to talk about the future of the company. Bottom line, you've heard it in Raízen's call, Rumo's call. We talked a lot about Compass, we talked a lot about Moove. We continue to be very happy with our strategic position. We have a competitive advantage when compared to our main players, each in their own segment with unique opportunities and projects to be developed or which are being developed. We have two E2G plants being built. The biogas plant will be ready soon. We'll have our final licenses. Moove is doing its international expansion. So strong growth agenda, despite being conservative with regard to the cost of capital, we do allocate capital to projects and initiatives that can generate attractive returns to our shareholders. We are completely focused on people because our growth is all about people. We have people in nine different geographies now with Sulgás. We are present through Raízen but it used to be downstream, so we have a strong presence in our gas business. So we want to attract people, develop people, so that we can continue to grow our talent pipeline and completely focused on executing our projects. We will deliver these projects to you and to the market at the right time so that we can continue to lead in unique and non-replicable positions in the market. We're very excited in a very complex global scenario, but I think Brazil can come out stronger, and we have a very good strategic position in terms of commodities or clean energy mix, in terms of decarbonization, and with companies such as ours, and so many others in the country that know how to deal with inflation and volatility and can actually benefit from that, owing to our ability to know how to deal with that kind of risk. It's a complex year, but we're very excited with our results and to be able to deliver these results and continue on our growth journey. Thank you for your trust. Thank you for your support, and I'll see you next quarter.

Thank you. This concludes Cosan's conference call. Have a nice day.