Cosan S.A. (CSAN3) Earnings Call Transcript & Summary

Hi, everyone. Welcome to this webinar. Yes, there's still lots of uncertainties related to the impact of the new coronavirus on the economy. This event is meant to share with you our current views on how this pandemic has been affecting Cosan's businesses to date. More than ever, a disclaimer is needed as we'll be talking about estimates and forward-looking statements regarding our strategy and opportunities for future growth amid huge uncertainties and while scenarios are changing as we speak. All statements presented here are, therefore, based upon reasonable assumptions and information currently available for us, but certainly subject to corrections and adjustments depending on how the pandemic evolves. For further information, you may download the full disclaimer available in this platform. So Luis Henrique, the new CEO of Cosan, will give you an overview of COVID-19 impacts in our portfolio. A quick note here, all comparisons relate to the same period of last year unless otherwise stated. And then we'll open the floor for questions. You can send questions through the chat. And we'll also have Marcelo Martins, our CFO, here with us to answer any questions that you may have. So Luis, please, the floor is yours.

Thanks, Paula, and good morning, everyone, and welcome for this Cosan update on COVID, which Marcelo and myself will take you through what we have been seeing, our journey so far and our -- some views on the outlook, as Paula said, changing every day and every time. But first, I would like to start with saying to you all that, for us, probably the most important thing in the company that we have been done in preparation for COVID, during COVID and what we believe will be after COVID is about the people and about the team we have and the leadership. I think this is an ultimate test about leadership qualities, ultimate test of our team behavior and culture of the organization, the society. And therefore, we have spent a lot of time in terms of doing that over the last weeks, ensuring that our team are safe because we do essential operations for Brazil and other countries that we operate in terms of the energy and infrastructure we are in, in terms of the communities around us, so a lot of solidarity and participating in efforts, and about the safety of the operations itself, which always has been a trademark for our group and for our companies. So in keeping all the people together, we've been very close with our customers and with our suppliers. It's a time of -- communication is not enough. So we need to be in a distant way but being present and reinforcing the spirits of the team, make sure that everyone understand where we are going, assessing risks, which is a time of changing environment with some opportunities coming. But a lot of managing risks, and we've been very careful about managing that risk overall. Marcelo will take you through -- but we have also of course, attacked the liquidity issue in the first days of the pandemic and reinforce our cash position in all business and all direct in the business and running all the scenarios about our future and potential scenarios using a lot of experience we have been getting from our partners. And one of the shareholders in one of the companies is in Shell with the experience in China and all the countries that are a bit ahead of our operations in Brazil and in Latin America. Therefore, modeling the scenarios to see what this can come. So the first message I want to convey to you was about preparation of the organization, while spirit of the team being together and ability to motivate and keep our troops working in this very different environment. A lot of people are remote, but as our company, we have a lot of people on the ground. So we have the guys on the gas companies going to customers, we have people on the factories. We have the start of the crop at Raizen, factories, et cetera, railroad, and the people in ports with records in terms of movementation and flow of products in trains, therefore, keeping these people safe and working, motivating and understanding was very important. One of the first things we did, as you notice, was our commitment to maintain our staff in terms of the overall size at the beginning. Of course, we're going to be assessing this over time, and maintaining our meritocracy during that time. So it doesn't mean that people is guaranteed an employment, it's about the total size of the organization. But we continue to monitor and put the performance standards as high as always we have. So this was very important to keep people motivated to be outside the house when most of the population are inside the house. And this, I think, has worked very well. The second thing was about getting, in all the business, very close to suppliers and reviewing contracts, but always just the spirit of protecting, of course, our interest, but looking at we're going to have a day after, and we need to keep these good suppliers and people have been with us over the last few years engaged and work for us when the market is coming. And in this case, Petrobras, which a very important supplier of fuels and on the gas business and also on the lubricants business have been also very close and has worked very cooperative with us. So a lot of work on this front. And on the other front was about customers. So we have been working very close with customers, B2B customers, distributors, retailers, again, in order to ensure that what we have been building over the last 10, 12, 15 years of high-quality people, high-quality channels are maintained and well prepared from when the market comes. We are prepared to be the ones that will be the first to accelerate. Because we believe this will be about good preparation that we did what we believe was good, can always be better and a lot of lesson learned on that; ability to manage the crisis, what we are doing; and have the coolness, courage and ability to manage risk during this difficult times that nobody has done and lived through, so keeping the team together; but very important, to also have our light to the future and looking what do we do when the opportunity and the market is starting to open and the rules of isolation started to be relaxed. Before I go to the specifics to the business, I think other important thing was about working also with the institution, governments and society, in general. So we also have been, dividing between us and the management team, the CEOs and the Board members, working in order to make sure that the policies that are being done and the ideas that can be discussed are looking ahead in terms of how the market will come better than we come. Again, there's always a lot of opportunistic behavior for some part of the market, the society. So it's very important to be sensitive and vigilant to ensure that new laws or new regulations doesn't slip through this confusion and this noise that in the market and creates things that will be very damaging for the business, for the societies and for the countries we operate. So we're very active in participating in different forums and contributing with work, technical work. That's always has been our characteristic that we work on the technical side, provide arguments, providing view and provide support for decisions to be better made in the different areas of the government and society. So with that, I will just give a final hint before moving to the conference. We did a lot of social work, and most of the social work we tried to do in 3 areas. First was health, with all of dedication in terms of creating new beds and intensive care, support new intensive care units in the place we are operating, was using our ability to distribute ethanol for sanitary purpose and hygienic purpose. So we have done a massive operation with partners and our suppliers as well as our networks of distributors, railroad and retailers, to make sure that it gets to the people and the truck drivers and the people at the end. It's difficult times to get the products shipped. The other thing we'll do -- we've done a lot, was a lot to work for the people to multiply our investments. So we try to do everything very cooperative with other companies to make things that are bigger and we have a bigger impact rather than do small things. So good to see a lot of our workers, a lot of our team, a lot of our leaders participate on that on a voluntary base and influencing a lot of this work that has been done in thousands of places and hundreds of units and multiplying our efforts, again, with our retailers, our distributors and our customers and suppliers. So going now to the outlook of the specific business and what we've been doing. So Rumo, I think it's -- again, it's on the right side of the train. The markets demanding globally more food, more supplies. Brazil is having a very good crop. So we are operating, running very well in April and going forward. We have, of course, some challenges, especially in March due to weather and other operational issues. So we didn't have 100% of what we would have the opportunity to transport. But we came to the COVID time, we're very well prepared in our ports, terminals. And people and machines are working in food with good prospect because of the good quality of the crop. So our main challenge there and our main attention there for the management is to ensure that we don't have any contamination of our team. So we are doing all the procedures on the terminal, stores and every people that have more people working together to make sure that we don't have any spread of the disease. So controlling temperature, distance, hygiene, safety is being very well looked after, and we'll continue to do that. Because this is probably the most critical part of this operation because we have no change on demand. We have the team running and the operation is fully stable. Also I think good news on that, we have managed to continue our construction work, especially on the Rondonopolis on next month or so will be completed. The construction, that will increase 50% of our capacity there. So this will be very critical to be able to benefit from the big crop that we are seeing ahead in Brazil. As you see, when I talk about Raizen also we'll see 10 million tons increase on the sugar, given the prices of ethanol and the comparative sugar. So we see Brazil shifting to a max sugar environment. That was not planned initially for this crop, and of course, who will benefit from that. So probably the business, less affected in Brazil overall, not only in our portfolio with good prospects ahead and especially with the world demanding food and some concerns about food securities in countries anticipating or getting new destinations for the Brazilian supplier. If I move to Moove. Moove, as the lubricants business, of course, you have a very quick stop that the economy has happened in all the countries that we participate. And of course, postponement of change or delay of services on that. So our assumption there is that we are seeing a 50% reduction in volumes. So what we have -- mostly done there is reducing the speed or the production in order to make sure that we don't build inventories or have effects on our working capital. As I mentioned before, in all businesses we have done no different. In Moove, we're working with our suppliers in supporting our customers and distributors. One of the advantage I think with Moove, when the market comes back, is that, one, very strong brand, very high-quality products and our stocks are -- our own stocks different from other players where we have a lot of multibrand distributors and the stocks belong to the channel, our stocks belong to the company, distributors are now ready to distribute. We'll be very fast to come back and fill the space that the market will open because people have been destocking during these times of pandemic effect. So there, we'll be coming back with strong brand, strong distribution and readily available products for people to -- on the industrial side, transportation side, when you come back to work. If I move to Comgas. Comgas, of course -- the most affected sector has been the commercial bar and restaurants given the lockdown, followed by the industries where we're seeing between 30% and 40% reduction, depends on the sector, but of course, looking overall. But one of the big strengths that we've always been saying to you in the past, and I think now has proven is the investment and the number of connections the company has done over the last few years in terms of the residential. So as you know, residential and commercial together are over 50% of the overall margin of the company, with residential being over 35%. And therefore, on this time, what we see is growth of this sector. You see between 9% and 10% growth of the residential sales and with -- so our impact will be much higher on volume than on margins. And we are seeing also that -- we didn't forecast in the beginning. Customers also asking us to make new connections on the residential part, given all the challenge they have on the LPG side that they need to go out of the room, stock it, put working capital on that sector, also some price increase that we're seeing on the LPG. So what we see also is potentially when the market returns and open a favorable environment for customers on the residential side to connect because of experience they have during the pandemic times and not having natural gas piped on the residence. Especially as you know, we have a lot of quotation Comgas of people that have gas in front of their houses, but haven't yet been connected. So we see that. The major attention of the management on Comgas is about payments and receivables, given that -- especially, on the commercial side and on the small and medium enterprise, people have closed their business. It's not operated for a couple of weeks. So we have seen an increase on the accounts receivables. But we already have done a lot of work, and the management has been very proactive and we see a reduction on that, still, on a higher level than before the pandemic. But again, it is an area that the team is very focused. And we know that if someone takes that business or they come back to the business, they will need to settle the bills before they will be able to receive the supply. So gas is not a product that someone can take it, selling on the part, don't pay and disappear because we have a fix in place where they need to work on that. But this is an area that we are putting a lot of focus. Also the company has been very proactive, different than other regulated business, being very proactive with the Governor of Sao Paulo, and has come for a program of standing the time, 30 days for the cut, rather than being imposed some measures from the government. So the team has been proactive, saying that it's fair. And we can work with some new rules and extending a bit the time that we can cut the supply from the customers, but not extending or people not being allowed not to pay, et cetera. So it's very clear, the rules. Consumed the gas, need to be paid within 60 days. If you don't pay, your gas will be cut for certain types of customers, not all the types, on the small and medium customer, that has been more effective. So good work in terms of the team on Comgas and protecting the business and also preparing for the comeback, which we believe the residential side will be the one that can have some good upsides, given the new behavior that customers might have with the learning during the pandemic time. Going to Raizen now, the last company to talk about before we go to the questions. If you look at Raizen Fuels, we have seen a drop -- a strong drop in demand on Otto cycle, ethanol and gasoline because of the lockdown, with different variations depending on the state and the city, depends on the intensity of the isolation. So big cities like Sao Paulo and Rio have been more affected. We started to see some demand creeping up over the last few days, which I think is a bit of the states that have been relaxing, but also people getting more out of the house. Diesel has been much more resilient with a 25% decline. And you have seen the start of the crop on the sugarcane and all the crops that have also cropping up. Most affected sector is, of course, public transportation, which -- with the isolation has been reduced. And of course, aviation, we have seen a reduction of 80% with a lot of flights out of the route and international flights being seized for most of the destinations. Focus of the management that has been to be very close with the customers. As you know, we have a very strong network of dealers. So we have issued some programs, some support for them. We see not big takeup on the working capital support that we have put in place. I think clearly for 2 reasons, price have gone down, given the oil market and the reduction in price. So working capital, less pressure. And also the quality of the dealers and the way they have been operating the market, reducing expenses, looking at opportunity to position themselves during this difficult time. So the network seems to be very strong. But of course, they are using a lot of the programs that the government have released, program for support on the payroll and other debt. Given the size of their companies, the medium company or small companies, they'd be able to adhere to the programs. On the Raizen Energia side, as we entered the crop with over 80% of the sugar hedged and close to 50% of the ethanol hedged, so we had a good position in terms of price, of course, the remaining part of ethanol prices are suffering. But what we will do, as we've done every year, is look at the best time of the year to sell. Carry strategy at the moment seems to be the most adequate one as the one of using export markets that we have good access. And access has been built over the last several years in order to access and have a better price. So the quality of the fuels have been very good at the beginning. So productivity is coming very strong. So a lot of the plantation that we have completed last year, have been starting to pay -- over the last years, they're starting to pay in terms of yield. So we see good yield so far. It's too early days, but it seems that you have a combination of a good crop. We've hedged. And of course, the area of attention is the part of the ethanol that hasn't been priced. And look at the opportunity during the crop, you do that with a lot of attention, again, as the same as mentioned in Rumo with the people because we have factories, et cetera, what you have to control the isolation so we don't have any pandemic challenge with the people. We have, of course, isolated all the high-risk personnel by age or by diabetics or other problems. So we have taken that care in all the companies in the beginning. So we are managing the staff, a little bit reduced from what will be the normal. But so far, we've been quite successful in managing it. And just a word on Argentina. Fuels, Argentina Fuels have been more affected than Brazil because the lockdown in Argentina was really a lockdown. Brazil was a social horizontal isolation. So we're seeing volumes coming down to 20% of the usual number, so 80% reduction. But again, on the last few days, we have seen volumes coming up, given also transportation for the crop and the good quality crop that Argentina have. So we reduced and shut down most of the units on the refinery because we have sufficient stock to take us over the last weeks as the market start to recover. So Paula, back to you. This was a summary. I just want to mention one thing. When we look at also on the cash flow and the impact of the business and trying to model the scenarios that, as we said on our facts that we issued last week, is all very preliminary. And based on the assumptions we have today, we will continue to update you and the market and the company simulation. But we are very comfortable that in the case of Raizen that we will need to use the balance sheet for the carry and for other activities as the market has been affected by the reduction of sales. We don't -- we have done some simulation that we didn't. We don't need to count with the normal dividends of Raizen to go through this phase and with all the liquidity that we have built in the comp. So we will concentrate on the health of the company and make sure that the companies are as concerned and working for the shareholders is very attuned with the team, well placed and be prepared for the comeback after the COVID-19. Paula?

Okay. So let's get started with questions. We have more than 800 people on the line. We've received a bunch of questions, so I'm trying to combine here those that relate to the same subject. Let's start with fuel. So the question came from Isabella from Bank of America and Lucas from JP. So question is, how has been the dynamics of the market throughout the lockdown? How is it that imports -- the import window has been affecting the competitiveness of the various distribution companies in the market? And also how have you been dealing with the day to day with your retailers? And then if you could extend the comment to how do we see the situation unwinding as and when the lockdowns are taken away? And how do you see the competitiveness of branded versus nonbranded stations going forward? And then within the competitiveness question, maybe you can touch on the cost structure of the main group of competitors and who's better positioned to benefit from the rebound in the market as and when it happens?

Okay. Thank you, Paula. Long question. I will try to be short on the answer to give time to the other's points. But let me try to be specific on certainties. So first priority of Mussa and [ Joao ] and the team that are running Raizen and Raizen Fuels and the same in Argentina is to be close to the customers and dealers, right? So I will focus here on the retail, but there's also the B2B part and the aviation part that we have taken a lot of care with the relationships and the business we have been creating over the last several years. And we will be part of this business for the next 100 years, we'll be here to stay. It's one of the guarantees we are doing -- giving to the customers that Raizen will be around on the good times, bad times and difficult times and we'll be together. So -- but talking about retailer, so the first priority was strong communication proximity for retailers. And of course, treating each one with their own characteristics. Markets are different. Retailers are different. Circumstances are different. Of course, we have issued some general package that's for the whole network. But the first priority there is guarantee and support them on their health of their people, the way they would support the customers because still, customer is coming. So it's not about no customers, different from other business. People are coming. So having ethanol there, cleaning, masks, everything that we could help them and incentivize them to be even more friendly and even more service-oriented to the customers because this is the time that customers are selecting their places to refuel and to go to the Select stores and buy what they have for the proximity. So this was a priority for the team in using our Shell box to, again, giving the customer a touchless experience. So you don't need to touch anything when you go to a Shell station. So you don't have any possibility of contact with the disease, et cetera. So this was one priority. The other priority was to make sure that these retailers will be ready and will be surviving and be healthy during this time. So a lot of suggestions and support and sharing with them, what we were getting from the government in terms of policies or package that they could have there. So we have issued a lot of instructions and support for them to get to the programs, therefore, they could reduce their costs. Because the problem of this time, and you know a lot about the Brazilian environment, is over 40,000 sites with a not very high average throughput in the industry as a whole. So when you lose 50% of your sales or thereabout, you have serious problem about how you take your fixed costs, which about the people, the rent, et cetera. There's not much variable cost that you can cut on a service station unless you start to discharge people, which cost in Brazil quite a lot to discharge. So it's very important to work on these economics. And responding the rest of your questions about we believe that you're going to have some closures when the market come back because not only some people not to be able to survive during these times, but people have difficulty when the market come back. And if you look at the curve of China that we're talking to, it takes some time in the beginning, then accelerates to come back to close to the 100% of the market. Again, let's remember that this is an essential service that people, when they start, it's one of -- the fuel services that start to pick up before the orders can pick up both on transportation, mobility, et cetera. We have, of course, been doing what we have been doing over the last 10 years, which is doing our supply side very effectively. So we have been using all the opportunities that the market presents to balance our mix between import and local products, including different locations that have different economics, different dynamics and different capacities. So I think we have been playing this market quite well. But it's not new for us. We have been doing that for the last 10 years, and have a very strong team and a very strong process and ability to bring products quick and put in place with the infrastructure, again, that have been built. So there's some depot that was the last one, big investment we have done is completed. So it's operating, which, again, helps in this time of very big dislocation in the market. So we are seeing tremendous dislocation in the markets, and the team there is benefiting from that. Regarding the branded versus unbranded, I think it really depends on which competitor, which place. But we believe that, again, strong network that we have built with the right partners aligned, is the one that will drive on the comeback. Because they have higher throughput. So we have been always showing to you that the Raizen network in Brazil and Argentina has the higher throughput than the industry and the competitors. We have been always very selective with the type of sites that we invest together with the dealers. And therefore, we believe a tail -- we will accelerate the reduction of the tail in the comeback. Of course, it's always take time for people to close stuff. But the amount and the pressure of this crisis is unprecedented. So the pressure on working capital and the pressure on the ability to sustain the cost during this time is very big. So therefore, we believe that this will be a time where the most capitalized dealers, they're ones with the best sites, and the ones that have been weaker in terms of adjusting the team and the cost and with support in a company like Raizen will have very strong prospects going forward.

Okay. Next question, shifting to energy, and I'm combining here Rodrigo from Santander and a question from BTG from Thiago. So the first one talks about what we know is a top story for the sugar and ethanol sector over time and financial condition and leverage in the space. So how do you see -- is this an opportunity for consolidation for Cosan? And then the second part of the question is, what measures do you expect the Brazilian government to announce? They've been talking about CG, PIS, COFINS, temporary exemption, warranting for inventories, which ones do you believe are the most meaningful for the Cosan and for the sector as a whole?

Okay. Thank you, Paula. I think first, talking about the market outlook. Of course, this -- if you go 3 months or 4 months back, I think the whole industry was quite hopeful about a good year because we had a good crop, a best year on sugar. The price of sugar together with the exchange rate were beneficial to Brazil. And ethanol prices, because of the oil price, was in good position. And then suddenly, we have this completely change of environment with a big drop on demand. And what we have now on the oil industry and biofuels industries is not only a problem of supply, but there's enormous problem of demand, right? So less 25 million to 30 million barrels per day reduction globally. And in Brazil, the numbers already shared with you of reduction of 50% on Otto cycle, 25% in diesel, et cetera. So it's a massive reduction, which, of course, has impact on the supply and demand from both sides. So of course, it's a tough environment out there and especially for the companies and the groups that haven't had the discipline to manage risk with hedging and understanding it. And it's also a very difficult conversation, we're seeing the market going up at the back end of last year. And with Raizen, we are always -- have been disciplined of doing it. You have part of that time that our price hedges were lower than the spot price in the market. And we continue to do that because we believe that hedge is for hedging, it's not for making money in this time of very difficult volatility. So I think this has paid off. We have come up with the crop very well, hedged not only for '20/'21, but with '21/'22, and also using what we have been doing, the proxy hedge, on the ethanol side. So of course, the outlook will be -- increased difficult for a lot of players in the market. But at the moment, we are not looking for the consolidation. We are looking again to get our operations working very well, our teams safe. And using the opportunities that the market -- well, this volatility is very good for an AG that Raizen has built very, very well last few years, which are trading arm right? So we have a very strong position on that. And this volatility will benefit. And again, consolidation, not necessarily to be done by having asset. You can consolidate flows of products. You can consolidate opportunities. People get understand that you have better positioned in terms of infrastructure, in terms of people, in terms of players, and you can share some of the benefits along the chain. So we are looking at all these opportunities, and Mussa and the team is working very hard. But the foremost opportunity here and the most important is the discipline to continue to price our products well, making sure we benefit from volatility, but at the same time, looking very careful about the risk. In all our different desks, energy desk, ethanol desk, oil desk, and sugar desk, a lot of discipline on that and a lot of the standards that we have been doing. And being very careful in terms of the cost because don't forget that within that movement, as we're going to have more sugar than the market percentage-wise, as our pricing have been fixed on a higher level, we believe the market will be. And our trading will produce better results. The CONSECANA will be a potential upside because the average of the market will be a lower cost than we're going to have in terms of the price we have fixed. So this is what we're doing. So we're not going to be looking at the stage of disbursing cash. We'll be looking at how we will manage the operations on a clever way. And if the opportunities come, I always say to you guys, we will look, we will do the study, we will engage. And if it makes sense, we'll go ahead. But we will also be very creative on these new times that are coming forward.

Okay. Question from Falcao from HSBC on Comgas. Can you talk about Comgas volumes going down and the fact that you are not allowed to disconnect part of your users? So will it be compensated by the government for that? Are there any other rebalances that you expect from this period? Can you talk a little bit about it?

Okay. Falcao, first, I think our focus again has been and will be in taking care of the operation, engaging with the agency involvement. That's always been very professional in how we'll take Sao Paulo in this case, and the customer and the market out of the price, okay? This increase in 30 days for the cut, we don't believe that will be a major issue because we have -- and as I said, managing very close, and we'll be working with the customers and with the reconnection. We're going to have a higher debt on the accounts receivable that we used to have. But again, we don't believe, at this stage, that will be anything material. We need to focus on that. And when you look at the cycle, when you project forward and look at the cycle, again, with the data and what we're looking at, we believe that we'll be able to fulfill our investment program, our connection program and most likely the volume program. Of course, if there is an imbalance that will come from the consequence and what happened during some of the measures taken due to pandemic, we'll have a dialogue and a professional technical dialogue with the agencies and the government and to see what's the best way to tackle that. But at the moment, the government, the agency and us have been working very closely and very cooperative and very professional in order to ensure that the market is well supplied, the customers are well taken care, that the safety is prepared during the time that we can have very few people outside the house and ensuring that. So we are doing what we think we know how to do best at having essential supplier during these times. Okay.

One follow-up question from Regis from CS about fuels and about closures. So do you believe this pandemic will be a catalyst for station closures? And then combining with another one from the buy side, how do you see informality in this scenario?

Yes. So I think I'm just reinforcing my first answer. I think yes. I think the tail of the market, the most inefficient or not well located or not well capitalized, it will accelerate. We've seen some closure of sites last year, probably one of the few years that we see number of sites going down. And we think that will accelerate. Of course, informality is always a challenge. And this is why I make on my initial speech that we have -- with a lot of sensors and sensing what things can happen and what measures on the legislative or the regulatory or whatever other measures can be taken for people to use these crisis to put some things that will enable or facilitate informality. But on the other hand, if you look at the glass half full, half empty that we're looking all the time, there's a lot of bad news going, and we are managing that and being on top of that, but they're good news. When the prices go down as they are going, and apparently, at least on the short term, oil prices will continue to stay where it is or thereabout, therefore, you're going to have gasoline's price down and you're going to have ethanol price down. Tax is also going to go down. And therefore, the differential between players also will reduce. So we don't know how the recovery will come and how it will be the effect of price, lower price than you see last year on the consumer behavior. We have seen in parts of the last 2 years and price go above BRL 4 in certain place or BRL 5 in certain place, despite GDP growing or car sales going -- sales has not been strong as they should be normally. Perhaps when price will be much lower because of the base fuel is cheaper, consumer behavior will be different in terms of their use despite facing a recession. But taxes will go, at least in the first place, down, or the tax that are easier to be not paid will go down, and therefore, informality. But if informality will always be a part of our priorities. We can never rest on that, and we need to be on top of that. So it's a cause of concern. A lot of people are working on that on Raizen on the industry, et cetera. And -- but on the other side, don't forget, states will be fierce as ever to have money on the time that all the projects indicate big reduction on tax collection in every state in Brazil. So let's see.

Okay. Now a question from Andrea from Itau combined with another one from Thiago from BTG. So given the sharp drop in oil prices and, of course, in gas prices globally, how do you see the viability of new LNG projects? And in Brazil, is there a risk to the schedule of projects envisaged for Compass to explore, like thermal plants, [indiscernible] or the terminal itself. So can you comment about your gas-related plans in this new scenario, in this new environment?

Okay. First, I think the Compass team and all the work continues on that, I think it's important. We're not in this business for 3 months, 2 years or 3 years. So it's a long-term play, as you guys know and as Nelson has very well described during the Cosan Day. A couple of things are certain already. Of course, the delay on the thermal auctions, therefore, there will be no action on that space at the moment. So therefore, we will continue to look at the opportunities, talking to partners and investors, et cetera. But this part, of course, is not going to happen. On the LNG in [indiscernible], all the steps towards license and projects, et cetera, needs to continue to grow and will continue. And of course, cheap gas could be a very good use for the industrialization of things that can come to be produced in each of the countries. Again, we don't know what will be the behavior of countries post pandemic, how much countries will want from strategic or reasons will want to produce locally, we are seeing this issue on health. A lot of talk about this being concentrated only in 1 country. So what are the consequence of that. But having cheap energy, of course, will be an incentive for sectors in the industrial side to grow in Brazil, not only to fulfill the local market, but also to be potential, a source of new industries that are today done abroad and will be done locally. So for a distributor like us and a commercial arm like us, low price of gas is good news because you use the dislocation of other energies. And as you know, gas in Brazil is a replacement fuel. We always -- when you come to a customer, we need to take another source of energy that are there, being electricity, being diesel, being fuel oil, whatever. So if you get cheap price and if you get competitive prices for us as distributors and for us as in being Sao Paulo, I think is good news. The question will be, what will be the return of the demand, yes? Of course, if the demand in Brazil will be balanced, and if the gas from Petrobras and other players in Brazil and the bid that we see from Bolivia, will follow the international price and we go there. So we'll need to deal with that and look at the phasing of the projects. But assuming that Brazil will need more gas than it produce, at least on the short term and that gas is very competitive abroad, we will continue to look at the opportunity and the need for competitive gas for our customers in Sao Paulo. And of course, this is the duty from us to ensure that the pass-through for our customers is the most competitive one. So we'll be phasing, but we'll continue to look very, very determined to make the plan for Compass to work because we believe it's a very strong plan, which has a very strong team and a very strong prospects going ahead.

Okay. Question for Marcelo then, so that Luis can rest a little bit. Can you talk about the measures that have been taken to preserve liquidity and balance sheet resilience? That's one from BTG. And then another one from Bank of America. Can you talk about any changes in dividend policies and if the company intends to pay dividends this year?

Well, first, in terms of the liquidity, what we've done since the beginning of this crisis is to reinforce the cash position all across the board in every single business, except for Cosan S.A. because Cosan S.A. had already a very strong cash position since the beginning. We have raised until now roughly BRL 5 billion all across the board, roughly BRL 2.5 billion in Raizen, BRL 1.5 billion in Comgas and roughly BRL 1 billion for Rumo. But that is basically midterm -- short to midterm lines between 6 months and a year. One specific case, a 2 years line. But we are also raising money from the BNDES. So BNDES, as you know, is a longer-term credit line. So what we're going to have after we draw down from BNDES is roughly BRL 7 billion, being raised at this very moment. It is a very conservative approach to our cash management position. We had already a very strong cash position before the crisis. But the main purpose after those loans that we're raising in the market is to end the year of 2021 with the same cash position as we had in the beginning of the year, if not actually a little higher than that. What we're projecting now is to use the cash that we raised to refinance existing debt. As you know, there are some maturities that will happen this year. And we have basically approached this situation as further cash -- to reduce the leverage -- I mean reduce the need for refinancing existing leverage at this point in time. With the cash position at the end of the year, that would be a little stronger than the beginning of the year or end of 2019. I think we're going to accomplish that. Right now, the cash position -- the consolidated cash position in the group is over BRL 17 billion, which will give us enough comfort to move on. And then link that answer with the answer related to the dividends payment for the year of 2020. The idea is that we're going to basically follow what we had planned for in terms of dividend distribution coming from Comgas. And also dividends going up to Cosan Limited after we service the debt that we have sitting in Cosan S.A. But we should end the year -- even after the buyback of the shares, with a very strong cash position in Cosan S.A., I think that right now we have over BRL 3 billion of cash in Cosan S.A. We should end the year with over BRL 2 billion of cash, which will basically -- we're going to give it the option -- we're going to have the option not to get dividends from Raizen. And why is that? It's because we have a big focus on refinancing the debt in Raizen this year and getting a stronger cash position at the end of the fiscal year -- Cosan's fiscal year. Therefore, if it is required, we would not get dividends from Raizen. We're not counting actually on that dividend, and I think we're going to do well even without it. So I make a long story short, you should expect a very strong cash position moving forward. Rumo, because of its CapEx plans, should have more cash than the other businesses at year-end. It's reinforcing its cash position over time. After we get the money from BNDES, we expect Rumo to end its cash position with over BRL 5 billion, which is more than enough to finance its CapEx needs over time. And as Luis and Paula have been telling you guys, Rumo is the company or the business that has been affected the least in the whole portfolio so far.

So a couple of -- a follow-up question on Rumo that we got through the Rumo IR team. So Luis, can you comment a little bit on the latest of the policy renewal process?

Okay. I think -- I'm moved. Yes, I can. I think it's simple. We have done all the work required with the agency and regulator, and we have concluded that. And I think it has been a very thorough and technical and structure process. And now we need to deal with the governance inside the government. So now it's a matter of discussion between TCU and NTT to get to the final line. Again, over time, you guys have seen that. What I can say that today, we are closer than we were yesterday, and tomorrow, probably going to be closer than we are today. It's a process. It's about experience to be the first renewal. But we are very confident that all the good work that has been done by a very professional regulator, all the challenge have been done before and with the interactions we have, it's a very solid structure, which will yield billions of investment, thousands of jobs and more important, reduce the cost, logistic cost of Brazil in a time that Brazil is being very competitive, given the exchange rate and given the productivity of the producers in Brazil in the time that the world is clearly saying that Brazil needs to produce more and need to send more products abroad for the market to fulfill during this difficult times and the growth of the future. So we will continue to monitor and to work. But now it's best an internal issue with the government. It's like when you are hoping that you need to go through your governance to get the final ticks of the box and get it done. And again, we believe that with the competence of everyone involved, the executive, the regulator and the TCU, this will come to what is correct for the country, for the sector and for the company.

Okay. One more here from Bruno from Goldman, on Rumo, quickly. What has the company been doing to ensure there are no issues with the operations amid the COVID-19?

Okay. Good question. And I think this serves to a lot of the other things. A lot of work on that. For example, simple things, I'll give you some examples, like in the Rondonopolis terminal, we have marked on the floor, the position that the drivers need to be on the queue to wait to take documents with the correct distance. We have put alcogel and ethanol 70 available for all the drivers. We have organized different place for people to be able to collect their meals and to eat. So we not only have taken care of our employees and people that work with us, but also taking care of people that interface with us. In our case, a lot of the truck drivers that are very important to continue to be healthy and continue to be bringing to the products to our terminal. We have been -- we'll be testing. Unfortunately, Brazil didn't have a big chunk of test. So we have imported now 120,000 kits of IgM and IgG tests, that should be arriving by the end of the month, month of April. So it will be allowing us to test more heavily and more intelligent within our companies in our different locations. So far, we have -- I think the last update, if I'm not wrong from memory, was 13 or 14 cases overall in the group, being 5 at Rumo. So all recovered. We have a couple of we're monitoring yet. Thankfully, no fatalities or more difficult. We have 1 or 2 cases that were -- have more serious, but all have been recovered. So I think it's proving that we have been very diligent on that. Of course, we cannot underestimate what can happen over the next few weeks and months. So our plan will continue to be very diligent. We have invested a lot of time, work and best practice on protocols. So every operation has specific protocol for mobility of the employees, dining of the employees, changing of shifts, et cetera, et cetera. Isolation, if someone gets the virus, redeem the location and what people have been exposed to them. So all the companies and all the business and all the leaders have been working very well. And again, I think on this time of crisis, I think it proves the discipline and all the culture and the people and the leadership we have been building on this company and on the companies over the last few years. So all the discipline we have created for safety is paying off now because people are implementing the same methods, the same culture, the same intervention on these sanitary and hygienic measures. All the culture we have been as a one team working together, we are practicing more than ever. So just to give you guys an example. Every day at 9:30 a.m. myself, Marcelo, Marcos, the CEOs, we get together and have a call to update what has happened, what are the plans, what are the things we are listening, what are the contracts we have externally, and making sure that this is cascaded for the team. So we have very frequent updates with our Chairman of the Board that has a lot of experience in going through the crisis. So we are maximizing the learning as well as the experience of the business and outside the business in the connections to make sure that we are sticking as one team, guys, because this is the most difficult crisis I ever had, and I'm a Brazilian. So I have seen all the types of different crisis in this country, and in the times I have lived abroad of Brazil. But this is testing the ability of management, ability of individuals to stay the task. And I think it's a psychologic and economic and risk management humanitarian thing that we, as leaders, have been trying to do and, one, helping the orders because there's better days and worse days as we go through in our individual and personal journeys. And what I think, we have been very careful within Cosan and how our companies are operated, taking care of the people. We need to understand these are testing times and different times. And we're going to win that by maintaining what we have been doing best over the last years: strong culture of performance, a strong culture of partnership and being one team. And I think we are practicing that to the most, and we believe we're going to go through this crisis better than we came in.

Okay. A question from Luiz from UBS on -- if any, how does that whole pandemic situation affects the structure simplification plans that we have? And then I'm combining with another question, which came with no name, but that asks about what are the opportunities that the group sees that could be -- that could come to the table as the crisis gets out of the way. And if you could also comment on the plans to buy a refinery at Raizen within that context.

Okay. So for the first question, a simplification, no change of plans, exactly as we stated on the Cosan Day. So no change because of the crisis. But Marcelo already talked. We have -- within the Monday, we have to again announce another buyback shares. We have been exercising that previously because we thought the price of shares are even better than the ones we bought before the crisis. So basically, on this subject, no changes of plan. We will continue our journey of having a stronger company going forward. On the -- second question was about the opportunities. I think they will come, especially as stronger companies will be the ones that will survive during the crisis and stronger teams will be the one that survive during that. We don't know which bodies will appear, right? In term of companies that will not make it or be very fragile. So we think it's very early to take position. I think it's better to concentrate in our company, concentrate in our customers, concentrate on the return of the business. And whoever comes fast out of the gates, will be the ones better positioned. And we have seen in a lot of the previous crisis, people that were prepared well, are able to gain profitability and to gain market share at the same time. That's not always easy. So we are much more concentrated on the organic side. And we will wait for the inorganic part that will come. It sure will come. But as Marcelo said, we need to continue to reinforce our balance sheet and continue to take care of the business we have in hands that are in different positions as we take. Some business having a higher hits than others, so we need to make sure that we concentrate our energy and time on that. One thing that I think we have very strong, which I think a true characteristic of the group that I think we will pay off going forward as the opportunities are more clear, and they are not as clear now as we believe it will be in a few weeks or months, is the ability to partner in our commercial sense, meaning the trading ability in Raizen, in Compass now. So our ability to create business and opportunities and generate value without needing to have assets. And I think this will be, more than ever, a very strong feature of our future because we have developed, again, process systems, risk management, people and access to markets that very few or none of the competitors have done over the last few years. It's not something easy to be able to do during a crisis or just over the price. So opportunities will be there, and we'll pursue that. Regarding refinery. Of course, plans are -- time shift are delayed by Petrobras. As we always said to you guys, and Mussa and the team, we'll lead through that, we have the obligation and we look at the assets, but we only take position if we are convinced that the asset itself and what we can do around that get over the hurdle rate of return that we and the Raizen team and the shareholders establish. And of course, in times of uncertainty, the hurdle rate will most likely go up. And therefore, to make -- even to justify even further, we will not cross-subsidize any business. The business needs to stand by itself. And therefore, we'll do it if it makes sense. But at the time, it's a continued study and look at the consequence of the pandemic, not only on supply/demand in Brazil, but supply/demand globally, which we are seeing a big effect on that. What are the consequence? How many refineries will close around the globe? What will happen? And therefore, this will give light to our intentions and appetite to go forward or not. But we're not going to do anything that doesn't make sense, not financially sound and as well balanced in terms of the risk of the portfolio, the balance sheet and our ability to create other opportunities that could be competing off that and be more profitable.

Okay. A follow-up question from Falcao here regarding the buzz around force measures across the industry and conversations about reduce or increasing or changing supply contracts to adapt to the new reality. If you could make a comment about Raizen, but also about the other businesses and how do you see this situation? Is it a big risk? Is it not?

No. The way I see that is that was a major interruption of the normal course of business in several areas. And therefore, I think the publicity over the subject was well bigger than what has happened in reality. What has happened in reality was a tremendous effort from everyone no matter where we were in the supply chain to reassess the situation and to get in terms that would be able to be manageable, and we'll be able to ensure that the whole sector will be able to continue to fulfill its most important obligation, which to supply and to maintain the things going. And people would adjust to this big break that we have seen. So I think at the end, and I can tell you about Cosan and about Raizen, all our contracts, no matter if we were a customer or a large supplier, have already been settled. So by engaging, negotiating, discussing, people have been able to settle. No litigation on this part. So again, I think publicity was well outweighed what in reality was happening between the companies and the spirits, which I think has been built within the industry for solidarity. And that know that we're going to be here tomorrow. The supply is going to be here tomorrow. Petrobras will be here tomorrow. And dealers, a lot of the dealers will be here tomorrow. Our partners will be here tomorrow. And we need to leave with maturity and with good business sense, but also with understanding each other to go forward. So I think no major issues on that. Of course, there is always different opinions or different things that need to be adjusted. But once people sit on the table, understand each other's side and look at the film, not at the picture at the moment, we have been able to find solutions for every problem that was put in the table with our customers and with our suppliers.

Okay. So I think that's kind of the end of the time we settled for that conversation. So I'll -- thank you all for joining. And before we finish, Luis, I'm sure you want to make a final statement before we close.

Okay. Thank you, Paula, and thank you, everyone, for attending that. And thank you for the question. I'm sure we're going to have some questions that we're not have been able to tackle all here. But Paula and our IR team will get with you and will be available to clarify. We'll be working around the clock to maintain the operations, given our role in the society as essential service. So be sure that the Cosan team, with the companies, that we are together, are committed to that. We're also very committed to maintain the safety and the well-being of our team and the ones around us. We'll continue to participate with donation and solidarity because this will not going to be an 100 meters race, it will be a marathon. So we're going to see, we believe, different phases and different ways, especially on the social side and potentially on the health side. So we need to be sensitive to that and present and working to that. At the same time, we also believe that we need to work with people that are supporting the government to look at best way to come out of the isolation. And this is something that will happen. The question of time, it's a decision for the politicians and for the science to give. But we will continue to engage and to support with what I think we have best, which is brains and human resources that are capable to manage crisis and to manage the after-crisis. So we will participate on that and make sure that local governments, state governments and federal governments in the countries we are listening from us what we believe is good practices, things that can be done. And lastly, we will be very close to our customers and our suppliers because we believe, again, that the -- if you'll come, the question always will be what the intensity. And to be very frank with you, we don't know. We are modeling different scenarios from different business, from different implications, looking at the upsides and downsides and risks. And this is what we are doing every day and every time to make sure that we are on top of the ball. And more important than having answers for this thing is to act fast and to intervene and take action to correct if our scenarios or if the things we thought are going to happen not happen, so we can redirect the resource, the efforts to go forward. So challenging times, but I think I'm very comfortable that we have a tremendous team. The CEOs of each of the companies are on top of the ball with their teams, very engaging with every one, in very good health, thanks, and very good psychological mindset, and look at this as a learning experience and something that we -- I don't think anyone of us thought we're going to have in our careers, but it's here. So let's dealt with it with maturity, with sincerity and especially foresight on what are going to come. And be very prudent, very risk-conscious and especially be able to maintain the spirits of the team that's always been very good in Cosan, and making sure that we take care of our people, making sure that our people make the decision. So we have -- as you know, we are a company that have a lot of delegation. So I think this is good also because people are on the field, with the support of the management, are doing the right decision right on the spot. And I think this give us a tremendous competitive advantage, not only on the crisis, but going after the crisis because we trust on our people. We have created the system, the process and the good leadership for people to be able to make the decisions at the time that we need fast to response and very well-informed decision. And helping here from the top with Marcelo and myself and the other leaders here, to make sure that they have what they need to make it happen and serving the customers, working with suppliers and make sure that we continue to enhance our equity with stakeholders, shareholders, et cetera. So thanks for your confidence in the company. Thanks for your support. Please, anything you guys see as best practice or means that you saw in other companies or other countries, send to us. We are very eager to take it. Learn fast, incorporating our process and our decisions because everyone is learning together. There's no right answer or wrong answers. But I can assure you that we are well connected the most we can to learn fast, act fast and make sure we protect the businesses we have created over the last 10 years so we can maintain it during the very difficult time especially, accelerate as we go on. Thank you, and have a excellent day and take care of your health and your family.

Okay. I think Marcelo has one final statement as well, and then we finish.

Just very quickly. I want to welcome Luis. It's actually his first interaction with the market as the CEO of Cosan. It has been a very challenging time for all of us, for the company as well, as you know. But I'm very confident that we're stronger than ever, not only to go through this crisis, but to position all our businesses in a way that will reinforce the strength of the company in the future, but also continue to be a very relevant player for Brazil as we're an infrastructure energy player, which are certainly to very relevance -- very relevant sectors for the country in the future. One final remark. We are very keen to keep buying shares back, as we said. I just wanted to reinforce that point. We have been, as you know well, we've been trying to do it for some time. It got to a point when the price went up to a level that we reduced a little bit, the buyback. We see this as a unique opportunity to speed up the buyback again. As you know, we have a plan in place. We have already accomplished more than 50% of that plan. And the idea is that we're going to go all the way through it so that we keep doing what we planned and communicated for in the last Investors Day. Thanks, again, and we'll see you in the near future. Thank you.

Thank you.