Regis Cardoso

Regis Cardoso asked about the divestment strategy for Radar (selling properties vs. stake), Rumo, and Moove, including the minimum stake Cosan needs to maintain control. He also inquired about the maximum amount Cosan would contribute to Raizen's capitalization.

Answer

Marcelo Martins, VP of Finance, Cosan, explained that Radar's divestment could be a combination of selling properties or a stake, depending on value and speed. He noted that Rumo and Moove are considered relevant, with divestment decisions depending on strategy, buyers, and value. For Raizen's capitalization, he stated it's under discussion but within previously announced thresholds from the offerings.

Regis Cardoso sought clarification on the target for absolute debt reduction at the holding company level. He also asked for more detail on the cost variability of the preferred shares and requested a more specific timeline for Moove's operational recovery, whether it would be in weeks, months, or years.

Answer

Executive Rodrigo Alves indicated a mid-term leverage target of around 1.5x and stated that Moove is expected to be in a much better operational position by the end of the year. Executive Marcelo Martins added that the long-term goal is for the holding company's structural debt to be close to zero. Rodrigo Alves also clarified that preferred share costs become less competitive when their step-up rates make them more expensive than the company's average cost of debt.

Regis Cardoso of XP asked about the primary metric used to evaluate the capital structure, questioning whether it was the Debt Service Coverage Ratio (DSCR) or a debt-to-EV ratio, and what a healthy target would be. He also inquired about the potential for an equity injection at Raizen and whether it could involve separating assets like E2G or renewables.

Answer

Executives Rodrigo Alves and Marcelo Martins responded. Rodrigo Alves identified the DSCR target as 1.5x but noted there isn't a specific debt-to-EV target because deleveraging itself is expected to reprice the company's equity. Regarding Raizen, he confirmed they are open to partners in specific businesses like renewables and that Cosan has no capital to inject, implying a willingness to be diluted. Marcelo Martins added that splitting Raizen's assets is a possibility, pending partner agreement, and that Raizen's plant portfolio is also under review for potential reduction.

Asked about the inventory turnover effect and working capital in Q3, the reason for the lower utilization rate of Green PE, and for clarification on the negative EBITDA elimination in the consolidated results.

Answer

The company explained that the Q2 inventory effect was a result of a Q1 buildup and that Q3 should normalize. The negative inventory margin was due to falling naphtha prices. The Green PE utilization rate was lower in Q2 because they were selling off inventory built in Q1 when the rate was much higher. The EBITDA elimination was explained by standard inter-segment accounting and a reclassification of corporate costs to business units due to an organizational change.

Regis Cardoso asked what level of petrochemical spreads would be required for Braskem to achieve financial comfort, such as neutral cash flow or a target leverage ratio. He also requested an explanation of the REIQ and Presiq government programs and asked if the quarter's inventory burn was a reversal that might be rebuilt soon.

Answer

Executive Rosana Avolio clarified that the inventory build-up was a deliberate strategy to prepare for major planned maintenance shutdowns at its competitive assets in Rio de Janeiro and Mexico. She explained that REIQ/Presiq are crucial industry-wide initiatives to restore competitiveness to Brazil's chemical sector. Regarding financial targets, she stated that a normalized EBITDA of around $2 billion, a level seen in previous low-cycle years but with today's improved asset base, would allow the company to reach cash breakeven and a more comfortable leverage ratio of 3.0-3.5x.

Regis Cardoso asked what level of petrochemical spreads would be required for Braskem to reach a comfortable financial position, such as neutral cash flow after Alagoas payments. He also sought clarification on the dynamics between the Presiq and REIQ government programs and questioned the reason for the significant inventory burn during the quarter.

Answer

Executive Rosana Avolio explained that the inventory build was a strategic move to prepare for planned maintenance shutdowns at the competitive Rio de Janeiro and Mexico assets. She clarified that REIQ and Presiq are industry-wide programs to restore competitiveness to the Brazilian chemical sector. Regarding financial targets, she stated that a normalized low-cycle EBITDA of around $2 billion would allow the company to reach cash breakeven and a leverage ratio of 3.0-3.5x, with a full cycle recovery potentially taking 3-4 years.

Regis Cardoso asked for comments on the production ramp-up schedule for new platforms and sought examples of how the investment plan could be flexed in response to lower oil prices.

Answer

Sylvia dos Anjos, Executive Director of E&P, confirmed the 2025 production guidance of 2.8 million boe/d remains on track, incorporating all ramp-ups and scheduled maintenance. She clarified that project simplification efforts are focused on uncontracted projects, as those in execution are not altered. She also noted that all projects are already resilient to a $45/barrel Brent price, limiting the need for major changes.

Regis Cardoso asked about the potential re-acquisition of the Mataripe refinery (RLAM), questioning the strategic goals. He also sought details on the business models for renewables, asking which areas would be developed internally versus via partnerships, and inquired about the impact of the IBAMA strike.

Answer

CFO Sergio Leite stated the RLAM review is ongoing, with a decision expected by the end of H1 2024, emphasizing the goal is to find new value. Directors William da Silva and Mauricio Tolmasquim detailed the renewables strategy: biorefineries will be largely internal, while onshore wind/solar will involve partnerships. Exploration Director Joelson Mendes noted the IBAMA strike could have up to a 2% impact on annual production if it persists.

Regis Cardoso sought Ultrapar's perspective on the upcoming Hidrovias capital increase, asking about its expected size and primary purpose, such as CapEx or deleveraging. He also questioned why the amortization of Ipiranga's branding initiatives was running below expectations and whether this was related to contract terms or lower costs.

Answer

An executive explained that the Hidrovias capital increase, planned for March, is intended to unlock growth and reduce leverage below a 3.5x bond covenant, thereby improving the company's capital structure. Regarding Ipiranga, the executive clarified that lower-than-expected amortization is partly due to CapEx postponements, as the recognition of these branding bonuses is directly correlated with sales volumes, which are affected by the timing of investments.

Regis Cardoso asked about the origin and monetization timeline for tax credits on the balance sheet, Ipiranga's preferred model for service station branding, and the potential market impact from recent Petrobras price decreases.

Answer

Executive Rodrigo de Almeida Pizzinatto stated that existing tax credits are expected to be monetized within five years. Executive Leonardo Linden expressed a preference for a post-payment branding model for better alignment with resellers but noted decisions are made case-by-case. He viewed recent price shifts as part of the normal market dynamic.