Raízen S.A. (RAIZ4) Earnings Call Transcript & Summary

Good day. Thank you for waiting. Welcome to the Raízen second quarter of the crop year 2024, 2025 earnings presentation. This presentation is being recorded, and a replay will be available at the company's IR website, ri.raizen.com.br and at Raízen's official YouTube channel. [Operator Instructions]. Before we proceed, we would like to clarify that any forward-looking statements made during this conference call are based on prospects, operational and financial projections and goals and beliefs and assumptions of Raízen's Executive Board which may involve risks and uncertainties as they relate to future events and therefore, depend on circumstances that may or may not occur. Investors and analysts should be aware that events related to the macroeconomic scenario, to the industry and to other nonrelated factors may cause the results to differ materially from those expressed in the respective forward-looking statements. Today we have the presence of the company's executives, Ricardo Mussa, CEO; Carlos Moura, CFO; and Phillipe Casale, Investor Relations Officer. I would like to hand it over to Mr. Phillipe, who will start his presentation. Phillipe, take it away, please.

Good morning, everyone And welcome to Raízen's earnings presentation. My name is Phillipe Casale. I am the Investor Relations Director in the company. Now let's go to the main highlights of the second quarter of the '24, '25 crop year, starting with our consolidated results. The adjusted EBITDA for the quarter reflects 3 main effects. From a consumer perspective, we accelerated our shipments with better prices, capturing the benefits of our strategic positioning. In Renewables, we have a temporary reduction of our special ethanol mix due to lower [ import ] export volumes and a reduced demand for bioplastics. The volatility in electricity prices also affect our margins, but we are already seeing an improvement starting in October. In Mobility, the resilience of operations in Argentina and Paraguay ensured market expansion while maintaining profitability levels in a good pace. In Mobility Brazil, despite the improvement in the profitability of the auto and diesel cycle operations, the allocation of volumes and price volatility in the fuel oil market had an adverse effect on the B2B segment in this quarter. Now let's move on to the operational highlights of each segment, starting with Renewables and Sugar. We had sequential progress in the cane harvest, however, below the estimated for the quarter. This effect is due to the drier weather, which affected sugarcane yield and caused several fire outbreaks in the sugarcane fields in the center south region. By October, approximately 7% of the total sugarcane to be processed by Raízen this year was affected by fires. We are in the final stretch of the crop season, which should conclude in the first week of December with crushing at around 80 million tons, a 6% drop compared to the previous year's season. It is worth noting that the market estimates a 9% drop in national production, which highlights the benefits of our recovery journey. The impacts of the weather and the fires also reflected in the reduction of TCH and the sugar production mix, which naturally becomes more favorable for ethanol even with the ATR of sugarcane being higher in the previous season. Now speaking on the sugar market, we continued to expand profitability, benefiting from the price fixations made for this particular season. We maintain a constructive view for future fixations, taking advantage of opportunities to sustain this new level of return. From a renewables perspective, we have stock levels positioned to capture a scenario of better prices and parity until the end of this season. Also looking for a better sales mix within the portfolio, considering hydrated, anhydrous and special ethanol. In power, with lower crushing, cogeneration volumes were also lower. And at the same time, we advanced the commercialization of electricity. Finally, our second-generation ethanol, the volume produced in the accumulated crop year has been almost double last year. Once again, we highlight the evolution of the contribution margin of E2G, which represents net revenue minus variable cost. Going from 14% to 52% in the accumulated year. Now this demonstrates the adherence of our economic financial model to the reality. In August, a structural reinforcement was carried out in one of the tanks at the Bonfim plant and due to operational safety issues, we stopped production for 22 consecutive days. There is no adjustment or point of attention related to the plant's technology whatsoever, nor to its operational performance. The plant's operation has been fully resumed. Therefore, we emphasize our projection of 80 million liters of E2G produced for this current year. Moving on to Mobility. In the LatAm segment, Paraguay and Argentina, we continue to deliver a whole new level of profitability, even facing a challenging economic environment. The additional cash generation has been directed towards our debt reduction and also to support the completion of the Buenos Aires refinery modernization program. In Brazil, margins in the retail and B2B segments have improved in this quarter, maintaining our focus on the integrated Shell offering. Once again, we highlight the remarkable performance of our lubricant business. However -- due to the allocation with an evolution of 22%. However, due to the allocation of volumes and volatility of the fuel oil markets, the EBITDA margin of the operations in Brazil was negatively impacted at around BRL 22 per cubic meter, generating a slightly lower profitability this current quarter. We continue to aim for a margin conversion in levels that are -- at around BRL 150 per cubic meter as we estimated for the season. As you can see on this chart, the margin for the last 12 months, both in Brazil, as in LatAm remained at a healthy level. Now let's move over to the financial result highlights. As it is usual for this crop period, leverage reflects mainly the levels of sugar and ethanol stocks. Additionally, we continue with our initiatives of managing debts, looking at extending the medium term and also stabilizing our net financial [ expansions ]. Thus, the leverage ratio tends to normalize by the end of the current crop year, with an average debt term of over 6 years. Moving on to the cash flow. Our free cash flow to shareholders also follows our liability management and business seasonality, highlights to the stock positioning for its future sales with a better profitability, a reduction in our vendors' line, given our mobility supply strategy and a reduction of the customers' advanced payment line. Now we continue with our monetizing tax at its pace at the same level as in recent quarters, which is above BRL 1 billion. This quarter's financial results demonstrate our commitment with our financial discipline, even in an environment of higher interest rates and an exchange rate that is volatile. We are midway through the crop year. And despite our challenges, mainly related to the lower sugarcane availability, we have good prospects for the commercialization of sugar, ethanol and energy. The expansion of Mobility margins is a factor, which maintains our focus on expense management in line with what we have seen in the first semester, with a reduction to the tune of 13% compared between quarters. With that being said, we reiterate the adjusted EBITDA guidance for the year with a moderation of total CapEx, considering the macroeconomic environment we are facing at the moment. Thank you all so much for your presence. And now we move on to the Q&A session with the participation of our CEO, Ricardo Mussa and [ CFO, ] Carlos Moura.

Thank you. We will now begin the Q&A session for investors and analysts. [Operator Instructions]. Our first question is from Lucas Ferreira from JPMorgan.

My question is, what is your take on the sugarcane quality evolution with regards to the rainfall that has been happening from October to this moment? Are you seeing an improvement on the TCH levels? And I know it's early, but if it continues to rain in a way, do you have an estimation on the quality of the season next year? If the droughts that happened this year, will -- what impact they could have in the next crop year and some prospects for crush as well. My next question, if I may is with regards -- the selling of sugarcane you have made thus far. My question is, do you have other opportunities to make such divestments? And any comments on this investment agenda in other portfolios. Is still a project that you are focusing on?

This is Ricardo for your questions. First, with regards to crush, and we do welcome this fall. The period really calls for this rain that especially now in October and until February, this is where the sugarcane plants actually grow. So that was a major relief for us in terms of what we were experiencing thus far. So definitely well, we welcome this rain. We are really optimistic for the next season because it's raining at the right time when it was supposed to. As far as the resiliency of sugarcane, we have roughly [ 67 ] million hectares that were burned this year, and the quality of the sugarcane fields remains preserved despite that fact. We are not getting into the guidance for next year yet. We are still focusing on the current moment. We are struggling with crushing in the short term due to the high rainfall. So you have less sugar production. You have a lower ethanol production in the short term as well, which goes to show that we should have better prices. We should have some constructive prices for ethanol and sugar moving forward in the off-season, which is a major indication as far as this rainfall season, which is actually above what we expected. Now as far as the asset management, it's absolutely a priority. So you might wait for some other news in that regard. From a power perspective, we have some assets that are already -- their role in -- so to say. We are continuing forward within this divestment strategy. And from a sugarcane perspective, we are also channeling that production to other plants. So this is a hibernation, if you will, that will bring about a reduction of cost in 2 of our plants. And with that, we were able to monetize. We have some plants that are not as synergistic being that they are smaller, and they don't really have a second-generation ethanol plant. So they don't have enough volume for that. But we do keep an eye on everything with regards to our portfolio as far as lower profitability. Yes, we definitely pay attention to that to reduce our leveraging. So yes, this is a focus. And not only from the AB perspective, but also from a power perspective, we are definitely paying a close eye.

Next question is from Isabella Simonato from Bank of America.

Good morning, Mussa, Carlos, Phillipe. My first question is with regards to views. So you did mention 2 margin detractors for this clearing quarter. I know that oil fields and diesel are part of that picture. So I would like just if you could maybe give us some color as far as what really happened on the oil fields and why we should think of that as a one-off? And maybe if you can shed some light also on the diesel market and how that has been playing out? So that would be my first question. And then my second question if I may. Moving forward, when I think with this yield prospect for sugarcane being so positive, can we still look at crushing in the mid- to long-term as being above the 80 million tonnes for the company? Do you think that these are the numbers we'll be looking at? What is your take on the current sugarcane field crushing capacity in the current moment?

First, as far as the fuel oils, well, that's a new business that we were just venturing into. We didn't have a great quarter. We had reduced some contracts that were not victorious, but these are one-offs. So there's nothing extra down the road. That's why -- that was a new attempt. We were taking a stab at a new market, and it wasn't properly executed. I have to be honest, that happened with fuel oils and it's due to exportation issues more so than the local market. As far as the diesel market, we are looking at a market that is recently tighter, it had lower availability of products. And when you have a closed product arbitrage, you see a more positive market overall, you see better prices. We don't really see the availability that we used to have for product in the first quarter. So if you remove those effects including fuel oil, this is a positive quarter for us compared to the previous one. And we do not see a change in scenario moving forward. So even fighting illegality, it's a much better scenario now. We are now looking at a low parity scenario for ethanol, which make for a better price in the off season as well, which is really positive for Mobility. We are also looking at -- we are also fighting illegality and I think it's the best moment for that in the industry. The agencies are definitely doing their job. We also see greater alignment at the moment, even when it comes to RenovaBio, which had so many measures going around to try to compensate and those measures were just back and forth. We have had a change in process and we got great jurisprudence for that. So in other words, we do have some good news with regards to fighting irregular or illegal trade which should preserve our margins. And again, we are very constructive when it comes to our margins. And by the way, there's always volatility because here's a market where the readjustment that Petrobras has made has been less frequent, which definitely makes for more volatility in our supply. But as far as what we are seeing now, we are seeing a tighter market, and we are seeing in more margin constructive markets, especially with regards to regulatory. Now is focusing on diesel, we have many companies that are not making the mixture. Diesel is at a much higher price now. And this becomes all of a sudden, a focus of the industry, to fight that process of nonmixture. So again, I think that if you look at the last few months, if you look at the current situation, we still see a very positive trend for our margins here in Brazil. Speaking of yield, of course, you're always going to have some exceptional years as far as the climate. This year has been really tough due to the burns, to the fires. So when you look at regular years, more normal years, weather-wise, after we adjust for the fourth, fifth and sixth quarter, we are looking at over 90 million tonnes in our capacity even with this hibernation we are going through. So yes, we're definitely estimating more than 90 million with a year of regular climate. So we do hope to have better weather than last year. At this moment, we are not expecting to have an atypical year next year. We are estimating a more normal year.

Now we have a question from Leonardo Alencar from XP.

Hi, good morning. Hello, Mussa, Carlos, Phillipe. I would like to talk about E2G. It is a good evolution in the 6 months for the operations, we saw the contribution margin. Now given this expansion, what is the ramp-up that you expect here? What would be a large scale here? Did you have any stoppages? Does it have an impact on these numbers for good or for bad to have any gains because of enzymes? Because you did have a plan to have this production in facilities. So please talk about E2G, especially with facilities 3 and 4 going into operations. Given these results, should we expect an acceleration for the projects ahead of us? Any changes in this sense? So this is my first question. And I would love more details on ethanol. I understand that your mix was not as good as expected. And we can take into account special contracts, but can we really call it a one-off? Is there going to be a catch-up for this quarter? Is there an opportunity to recover some of the contracts from the previous quarter? Or is this something that we're not going to recover but that's going to be normalized from now on? I just wanted to understand ethanol a little bit better because it was a big driver of revenue and it created frustration when it came to results.

Great question, Leo. For E2G, we are starting facilities 3 and 4, Univalem and Barra. They're going to go into commissioning in the beginning of November, they actually started in the beginning of November. So if you look at this year, we had yield from the smaller plant. And we were focusing on bettering costs, but not better in production. So Costa Pinto is having a huge year, a great year in the reduction of enzymes. We had an almost 30% reduction in the use of enzymes, but we got the same yield as last year. Now Costa Pinto is testing new lines for cost reduction. For Bonfim, we are starting a plant up. We had a stoppage there. And this had nothing to do with what Casale was talking about. We had an intermediate tank and we had to stop it. But we saw very stable technology. But going beyond that, this year, the amount of liquid that we get from sugarcane bagasse is what scientists designed actually 15 years ago. It's the first time we were able to deliver on these forecasts by scientists. So from a technological standpoint, we're doing great. At Univalem and Barra, we are doing a few things differently. We had learnings at Bonfim when we ramped up their plant. So we are now implementing those learnings. So we expect to have better performance at Univalem and Barra because we learned some lessons. We are implementing all of these lessons in our new facilities. Now Leo, E2G has a minimum guaranteed price. So price is not a risk here. This is a product with a very high EBITDA margin. It is a big cash generator. Next year, we'll have plants that are basically going to be full. We're going to have 4 plants in operations next year, and they will be generating cash for the company. So our peak investment for E2G is behind us. We're going to have a big reduction in CapEx, and we're going to focus on cash generation so that we use these assets and these plants produce increasingly more. So think about production and productivity or yield in these plants, it's going to affect their profitability in upcoming months. This is major now for us to be able to prove that we are able to generate cash with what we have. We're very optimistic about the results with Bonfim and Costa Pinto with the reduction in costs. And we also learned lessons when we started up Bonfim, and we're now using that for Univalem and Barra. I think this is a very, very good scenario. I think instead of consuming cash, this is going to generate cash, and we're going to have better leveraging for the company. Now with ethanol, things are different this year. It was not as competitive for exports, and it's always been very competitive for exports. In the first half of the year, we didn't export as much ethanol. We had big clients in the south of Brazil who were affected by flooding. We had very good margins from them, and we didn't in this case. Now what we see is a second half of the year, which is going to be very fruitful. There's the rain and we have low parity. So we have high consumption, have a very strong consumption at the endpoint. When we compare prices to last year, we see a much more constructive, much more fruitful scenario for ethanol prices in the second half of the year. Of course, we're looking at our strategy. We're getting ready for that. But we don't have as many opportunities when it comes to exports. In the U.S., they had cheaper prices, too. So we didn't have as many opportunities to have good exports this year.

Our next question is from Gabriel Barra from Citi.

Thank you for answering my questions. I have 2 follow-up questions in 1 new question. Or maybe 2 questions and one follow-up. For capital allocation, we were talking about sugarcane. But something we may not have touched upon, it's something that I would like to pick your brains on. How do you see this business within Raízen's portfolio? Can we see divestments in the future? Do we have any possibilities for cash allocation here or capital allocation here? We were also talking about fuel reductions. Mussa was talking about this and lots of people talk about fuel regarding informal activity. I think we saw some relevant progress. We saw companies closing their doors, and they were noncompliant with market practices. Do you have any notes on that? Anything important that we should follow? Are there any conversations regarding this in the Congress? We've also been discussing carbon credits, and we have an important conversation going on about RenovaBio. So what is something that we should expect in the short term? Now finally, regarding leveraging, we saw debt for the business this quarter. Sometimes it's seasonal. But when we look year-on-year, there has been an increase. So even if we ignore seasonality, there is leveraging here, maybe because of higher investments in sugarcane, E2G and other things. You're now closing the cycle. It seems like you're getting close to the end of it. But I would like to hear from the company if you're worried about it. What do you think about it? When should we reach an optimal level here? I think it's important to understand that so that we get a gist of what you think about it.

Thank you, Gabriel. [ Convergent to RenovaBio ] with a big asset. And we are ending a cycle of investments here since the acquisition of Argentina, we had BRL 3.5 billion to BRL 4 billion in investments in Argentina. Now we are ending this investment cycle for this asset, and it's going to start generating cash. It's a very healthy business. I was looking at it yesterday, it's still really good. And the country is doing even better than what we anticipated. So this business is generating lots of cash. The country is headed towards improving its institutional environment, so it's healthy. We continue working with Argentina. This asset went through a big investment cycle that is going to be over by March of next year. We're going to finish all these investments in Argentina by March, and then it's going to start generating cash with lots of stability. And we're focusing on institutions. Now when we talk about capital allocation, of course, we're not going to talk about everything. We have developed leveraging right now. We will look at the assets that are not as strategic for the company. And of course, we consider the possibility of someone being interested in buying them. This is something that we talk about on a daily basis with our Board to understand how we can accelerate our deleveraging. So what I can tell you is that, yes, this is still a priority. I'm not going to mention which assets we're considering for that. We cherish our assets, and if one of them is not as strategic and somebody is interested and they are willing to pay more than what we think it's worth, then yes, we would be focused on making some divestments. And you mentioned some very important things. Our biggest Achilles' heel is still ethanol. It's the biggest product for which we have lots of informal activity in Brazil. We want to have a mono phase operation for ethanol. And we've been discussing how to make this happen earlier, maybe with the PIS tax, maybe with the COFINS tax. This is a conversation that our institutions and ourselves are always talking about. We talk about it with downstream. We talk about it with the Congress because we want to have a better, more competitive environment here. There are things that have been discussed by the Congress for many, many years. The government is talking about reducing expenditures as well. We need to get these measures approved. And you mentioned [ RenovaBill ] specifically over RenovaBio. I forget the bill that is related to this. It's to be approved by the Senate. According to this bill, not complying with RenovaBio would be an environmental crime. And since it is an environmental crime or if it becomes an environmental crime, then they won't be able to pay bail. It makes things much more serious. So there's lots going on in our Congress and in other agencies regarding this kind of activity, of informal activity. So we should take that into account. I think RenovaBio is our backdrop to fight illegality, to fight unlawful activity. Now when you talk about leveraging. What we see here, Gabriel, is that most of our investment was made on ethanol, second generation biogas and the Argentina plant. These are the biggest pockets where we were investing. We also had lubricants, which is an acquisition. So if we look at E2G and biogas, we're going to start generating cash from now on. And what's interesting is that there is no price risk and no volume risk entailed. So the future cash generation for these businesses depends on our ability to operate these plants, and we are confident. So we should see a reduction in the volume that is allocated to growth CapEx. And at the same time, we're going to have a better cash flow for these investments. These were big investments that are going to be concluded in this year, in this crop year. So we're going to reduce CapEx and increase cash generation from these investments. So this could accelerate and this should accelerate our deleveraging. We also have other investments in our portfolio. We see our G&A going down 13% year-on-year. And this is the kind of revenue that's going to deleverage us more quickly. I think now, it's no longer time to sow, we need to harvest what we sowed in the last few years. Everything should work, and we should bring deleveraging down very quickly.

Let me add something. Gabriel, during this crop year, we were working on stabilization and a later reduction of expenditures overall, whether that's related to our operational margin or to financial expenditures. This is why we headed towards liability management. We're working with the average term of our debt. If you look at the 6 months of this crop year, we had a significant allocation of capital in accounts receivables, especially from foreign operations because of sugarcane trading or sugar trading, [ BRL 3.5 billion ] in capital. We were also able to reduce advance payments at around BRL 3 billion. We also had the impact of stock allocation. It's around BRL 7.5 billion. What we see with the market, it's around BRL 10.5 billion. So if you realize what comes from stock and what comes from accounts receivable, we're actually looking at the end of the crop season, but has always been according to our commitments for our capital structure, 1.8x. After managing our debt, which is something for the end of October. So September is still a bit contaminated here, it doesn't take into account the settlement of these debts and the issuance of debentures in October, which is happening between October and November. So again, this reduces interest regarding our economic situation.

Now we have a question from Thiago Duarte, BTG Pactual.

Hi, Good morning. Hello, Mussa, Carlos and Phillipe. I have 2 questions. First, let's go back to talking about recycling portfolio, more specifically, the portfolio for sugarcane mills. Yesterday, you had an announcement. So you have 35 facilities. Of course, not all of them are active and one of them is going into hibernation. And I would love more information on how big the opportunity is to optimize your facilities and your crops? Because the truth is that you have a very heterogeneous portfolio when it comes to the plants, to an average radius for your crops especially in the Midwest and South. So when we compare productivity and costs between plants, sometimes I'm under the impression that some of these 35 plants are dragging your average down. And I think the one that's going into hibernation is most likely one of them. Am I right assuming that? First that you have heterogeneity in your cluster of plants and crops. And also how much could you optimize this? I would love to understand the size of this opportunity. Of course, one is not going to make a difference. But how much should we expect regarding optimization regarding this? That's my first question. Here's my second question. When we look at the release, we didn't see much information about your guidance for this year, both for EBITDA and CapEx. Of course, you changed the crushed sugarcane. And I want to understand the impact that we are going to have when we think about your range for EBITDA and also CapEx. In the last quarters, you were mentioning the possibility of being closer to the bottom of your CapEx range. Is this going to change now that we have wildfires, for instance? Because I can imagine that this could maybe have an impact on your crops. So please talk about your guidance for this year and also the volume changes.

Excellent question. First, you went straight to the point. I mean, when we look at our portfolio, it is absolutely heterogeneous. I'm actually looking at a spreadsheet where you have plants that are super profitable, some of them not as profitable, different sizes, different distances to the ports, different differences to the sugarcane fields. So the difference in profitability is always -- comes down to doing an analysis and also fixing the fuels. Because if you make a decision, if you made a decision in the past, you do away with some assets, I mean if you haven't done your homework in the first place, now with our fields with this level of profitability, with this level of yields, it becomes way more evident where the opportunity lies. So just to shed some light on that journey, it starts with recovering our fields. With that, you'll get a clear picture on where each plant is and how far they can come, whether it's potential for E2G plants or biogas plant, et cetera. And then it becomes very clear what we call tail meals, which don't make sense. In other words, we have a very active discussion at the moment. I can't really disclose the details, but it is a huge opportunity. We do have some strategic matters to discuss, but we are having this conversation and it does make sense. As long as the price is feasible. In this case of [ O&M ] I mean, I was crystal clear. We have the sugarcane field with a buyer. I mean, it would make much more sense from a buyer's perspective for the logistics. That's why we got it. I got a good price. So with that, you can even channel some of the sugarcane to other plants that will [ produce ] -- so the benefit is not only the BRL 380 million, you'll actually improve the profitability in a very significant way. So this is a project that will have an impact above BRL 500 million in cash generation. We'll see that because there will be a benefit on the selling from a plant perspective and also a reduction of cost from a field perspective. You'll actually adjust because some regions have excessive crushing with not a lot of sugarcane to go around it. So that's super important. Other regions are different. I mean, you have some regions that are more isolated, but I'm not going to get into the details. All I can say is that we do pay attention to that. There is a demand for it in the market. You've seen some transactions already. So we are paying a close eye. Now with regards to the guidance of the year, here's what we see. Out [ gain bagasse ] going to be closer to the bottom [ bagasse ], as far as what you see in the recovery on the sugarcane fields. We are being very rigid especially when it comes to the growth of the company and part of our recurrent CapEx. We are confident on delivering a CapEx that will be more close to bottom. Now when it comes to the EBITDA, you do have a risk. That's why we are going closer to the bottom today. You have available product and a worse mix of sugar. On the other hand, you have a better prospect on the electricity market, which is good for us, has been good in October. You also have a constructive scenario for the ethanol price and the sugar price alike, both being constructive at the moment. As far as the fuel margins, we are looking at a scenario that is not negative. We are not seeing an increase on tax evasion. We are not seeing negative effects on exportation and also the exchange rate puts some pressure on the arbitrage, which remain closed. But it's in -- we're right in the midst of the season. There's still a lot to happen, a lot of chips to fall and we have to wait and see. And by the way, just to give you [ a look at ] the LatAm business. The LatAm business has been performing way better than what we have expected, especially Paraguay after adjustment of the Argentinian [ ice ] with the new administration in there. We don't have burden some exports to Argentina and Paraguay that became more profitable already. So we're doing really well. We are starting to have a record year at LatAm to offset some of the losses that we experienced due to lower availability of sugarcane.

Our next question is from Vicente Falanga from Bradesco BBI.

Thank you, Mussa. Thank you, Carlos, Phillipe. I have 2 questions as well. My first if I may, I would like to get into a little bit of the details on the short term. We saw some licenses happening at [ Copape ]. It seems that the change in mixture has dropped a little bit. So I would like to hear from you folks with regards to naphtha in the mixture. [ And if it's ] not operational, what is the impact? And my second question, Mussa, I mean, you made it quite clear about the next milestones, about the next management, about reaping the benefits and leveraging cutting negative costs. And I do know that you will participate on the Cosan disclosure call. But if you can maybe make a comment about that, what is getting you excited for the next few steps? And what are some of the main goals with regards to your attributions

Thank you for the questions. With regards to the informality of fields, to corroborate what you said, we are seeing a reduction in the naphtha imports, which is great. So the gas market is healthier, which is great for the ethanol market. So we are optimistic in that regard. Now I've been in the company for roughly 8 years and I've been looking at this informality market for a while. At this point, I'm seeing great alignment in terms of fighting against these whole irregular activities. I see Congress being concerned with that, I see government focusing on that. I see state government doing something about it. I've seen great alignment between producers and distributors. In both entities, I'm seeing greater alignment in producers and distributors to fight against tax evasion, to make ethanol a healthier market to everyone involved because farmers lose with that. If you have informality, if you have tax evasion, the price of ethanol is below what it should be. I think the producing sector has united against that. I am optimistic. I know it's an uphill battle, but I am optimistic as far as I think this is going to change. And I think it's really going to change the profitability level, not only for distributors, but resellers as well. Our resellers, they benefit from this process, state benefits from it due to tax collection. So it's a win-win-win situation for all stakeholders, and I see it with very positive eyes. And the indicators do show that. I know it's hard to look at it on a monthly basis, given how volatile the market is, margins get tighter, product goes up or down. I think you always need to look at the average in the last 12 months and see what the trend is and the potential that is coming down the pike. What gets me the most excited now, I think the next step is having ethanol where it should be. We have to wage a tougher battle because there is an important tax issue to be faced here as far as [ mono facial ], but there is this new law, this new bill of RenovaBio, which it's going to definitely improve the tax situation in our view. So I think there are some good things coming, but it is pushing a boulder up the hill. It changes on a daily basis, but I'm seeing some great progress. And more than that, I see that a lot of people are in line with that, from the legal power all the way to the legislative branch. In all forums that I visit and interact with, everyone is talking about it and everyone is concerned, which is a good sign. As far as my new attributions, I'll leave that to the Cosan call. I'm not going to mix both companies. I am excited about it. I'm going to do my best. I'm concluding my integration with Nelson here. It's in great hands. I'm not getting into Cosan in the Raízen call. So when we get to the Cosan disclosure call, we'll get into it.

Our next question is from Matheus Enfeldt from UBS.

Mussa, Carlos, Casale, 3 follow-ups. First, going back to the impact of fuel oil. To [ this ] question, I understand that this might have one-off, but I would like to get an understanding on the process in the company itself. As far as if you set up an operation that maybe had a negative output, if this was an impact of negative hedge or if this is already undone, if the company has left the woods, so to say. Or if something in the process was altered to change the situation from now on. I just want to understand if this is a process from the company as far as those attempts and what the impact might have been. My second follow-up is about the maintenance of the sugarcane fields. The company has been at BRL 6.5 billion per season roughly. So how much of that can be seen as the new recurrent levels? Or how much of that is just the higher CapEx that you put into reforms of the company, which at the moment is close to a finish. My question is, is there room for lower CapEx in the maintenance of the sugarcane fields lower than those BRL 6 billion? And the last follow-up is about the E2G contribution margin. You showed the 6 months of the season, but perhaps what is implicit on this quarter is even higher than what we had in the first quarter. So how does that relate to the margin expectations that you have 50% of the E2G? And in your opinion, can we perhaps validate that premise, as far as what you are seeing? That was it.

Matheus, as far as the [ biofuel ]. we have a very active trading area, obviously, for a fuel imports, for ethanol reconciliation. And we dropped the ball. I mean, I have to say it. We really dropped the ball in our risk assessment, even to set up the process. So the failure was much more in the configuration of the process as opposed to the idea itself. So it is a one-off. I don't see this as a trend, this has been corrected. It took a while to get some licenses, which definitely affected us in the transaction. So that has been corrected. Don't expect to see this in the balance sheet from now on. Now the maintenance CapEx. Obviously, there's always pressure from inflation. What we are seeing overall in commodities around the world is that sugar is resilient, but other commodities like soybean and corn have dropped in price. So you're seeing a slight drop on inputs as well. What we have in the last few years, we had, for example, fights against pests, we had huge infestations in the level of ground protection application was not above normal. But there is a downward trend in our recurring. So you have to look at the inputs, especially fertilizers. But today, if you look at the last 4 years or 3.5 years, we did increase the amount of investment to recover our sugarcane fields. And one clear example is the application of herbicide to fights against some weeds. We used to have huge infestations, so you cannot stop applying the product until that infestation goes away. And from then on, you reduce your herbicide application. So this is an example that we saw, especially in the region of Piracicaba, where we are normalizing our applications for next year. So you do have to expect a little reduction, but it really depends on the cost of inputs moving forward. The entire planet has seen a change in the price levels for a lot of those products, not only in the ag market, but I do see a downward trend in our side with less application of some inputs. But globally, we are seeing better prices for inputs. So I do think there's going to be a normalization, but it's not that different from what is happening here. I think it's going to be a downward adjustment. As far as contribution margins, the main indicators for us is an indicator of how much you can run your plant because I mean, the gas is there. The amount of enzymes that we are -- that we have is there. So it's really the plant uptime. It's about running the plant for a longer period. At Bonfim, we have broken several records of production both daily and weekly, which give us the confidence that after this ramp-up, we are going to get there. So the main indicators as far as the gas conversion into ethanol, use of enzymes per cubic meter and sustained productivity for the plants in the long run do suggest that we are on the right track. So when you talk to the operational team, they are very confident. But again, it's a ramp-up, we did not expect to have a problem on the tank, in the [ single ] foundation of a tank, and that's our mistake that definitely affects productivity. So we've got to be sure that this will not happen and will not make the same mistakes as we have made with Bonfim. As far as the main indicators, Matheus, the ones that really ensure profitability and margin, we have attained them in different points in time that has to be sustained now, down the road. The price is there, right? So we have a due price to work with, and we have a good control level in our situation. So it's up to us to go ahead and deliver the contribution margin and generate cash. So confidence levels are at an all-time high.

Matheus, I just wanted to emphasize that the company will continue on this perspective to increase the level of financial information about this so that we can really materialize the benefits, whether it's going to EBITDA margin vision or whether it's focusing on stability, volumes and indicators. Again, we want to focus on primary cash generation. To your question as well, our spot market still has very elevated prices. Remember, we are contracting on 80%, and we have an excellent volume. So being able to produce above that gives you a huge benefit to really capture the opportunity at the spot market. For a global producer, there's still very interesting premiums to be had in the spot market, which to me, these are things that we haven't included in our model as a major upside. So the sooner we are able to produce, the quicker we will capture in the spot market -- capture the opportunity. And the profitability will be visible for everyone. So we can propagate that outside of Raízen even.

We now have one last question from Bruno Montanari from Morgan Stanley.

I have 1 follow-up, 1 question. Let's go back to the guidance issue. When we look at the midpoint of our EBITDA, we see that you would have to grow your results in a little bit above 50% to get to your midpoint, a little bit over 40% to be at the bottom range, which looks challenging to me. So I would like to pick your brains on how confident the business is that this is a possible level of growth for the second half of this crop year? Now my second question is, Mussa, I understand that we're going to be discussing Cosan during their earnings release presentation, but I would like to take us back into the past. In the past 8 years, what do you think were the best things that Raízen was able to deliver on? And what were the things that were frustrating to you and that could have happened earlier?

Thank you, Bruno. Regarding the guidance, as I was saying, this is really similar to the other question that we were answering. I can barely remember if Vicente or Thiago asked it. It's still mid-season. This is a very important point for the price of ethanol. This is why we're no longer looking at the mid guidance, we're looking at the low guidance. The question here is there product that we're going to have at the end of the year after what we've seen from the weather after the burnings? The upside is that we are still constructive in the ethanol market. If we compare the ethanol market at this point, compared to last year, prices are really different. And the traded volume are 1.9 billion liters a month. This is a very high volume, which indicates that we're going to have price building for the off-season. Around January, ethanol should also be more competitive. But if oil goes down, if gas goes down, if Petrobras changes things, then yes, we're going to be affected, and we can't control that. Fuel margins are going to depend a lot on illegality. I still believe that when we're talking about BRL 150 per cubic meter is in alignment with our plan. And Argentina will be above our plan, which will offset some of the product losses that we're going to have in the other operations. But we are still in the middle of the crop year. So it's hard to talk about this. I think there's still lots of things to happen. In our next earnings release presentation, I think we'll be able to give you better insights. But right now, we do believe that we may have a few upsides. [indiscernible] the total production is already now, but we're seeing better numbers from Latin America, from Argentina, which is going to offset some of these impacts. We can mention so many things that I was a part of. We had great acquisitions. We have this growth model for the journey of our cultural yield. We also changed our level for fuel. I don't regret much here, Bruno. I love this company. I've been working with it for a while. I'm rooting for it. And whenever we see new folks, there's always new things to be done. I do hope we keep on doing great work. We keep growing and make it being successful. So I have no regrets, Bruno. Thank you for your question.

Our Q&A is now over. Any written questions that may not have been answered during the earnings release presentation will be answered by our IR team. I am now going to hand it over to Mr. Carlos Moura for our closing remarks.

First I would like to thank our employees, from interns the Board members, executives, my fellow colleagues. Thank you so much for everything that we've learned together and done together during these years. I'd also like to thank everyone in the financial community for challenging us, for sending us questions, for talking to us. I believe that our business has made lots of progress on how we communicate with this market. We've also changed the way we collect our info internally, which makes decision-making easier. I wish Nelson Rafa and the whole Board lots of success and happiness. I hope we all thrive in this new cycle. Let me now hand it over to Mussa for his closing remarks.

Wow, such a beautiful speech, Carlos. I feel the same. Thank you, everyone. We've been talking to analysts since our IPO, and we know these analysts, we know you. You're always critical have to be, and you help us think. So thank you. Thank you for this interaction. I also hope to see you with Cosan, and I hope to build other stories with you all. I also want to thank the IR team at Raízen. You've done amazing work. We've been working together with Casale and the whole team for years. We've been very successful in these years of [ Raízen ] and it is with a sad heart that I changed things. And I wish Nelson all the best and Rafa, all the best. I am sure that they're going to take our business to the next level. They're going to do things that have not been done before. They're going to achieve great results. Thank you very much, and let's keep this going.

This is the end of our earnings release presentation for the second quarter of the crop year 2024, 2025 for Raízen S.A. Our IR team is available to you should you have any further questions. Thank you to every attendee and enjoy your day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]