Cosan S.A.'s 2024 Q4 Call: Divestments, Debt, and Investment Strategies Under Scrutiny

These are the key contradictions discussed in Cosan S.A.'s latest 2024Q4 earnings call, specifically including: Divestment Strategy, Debt Management, and Investment Priorities:



Portfolio Management and Capital Allocation:
- Cosan managed its capital structure by extending the duration of its debt portfolio and reducing interest costs through liability management.
- The company focused on capital discipline, divesting non-strategic assets, and improving debt ratios amid a challenging macroeconomic environment.
- These actions were driven by a deterioration in inflation expectations and increased interest rates, which changed Cosan's capital allocation strategy.

Financial Performance and Dividend Trends:
- Cosan reported a negative R$900 million result for 2024, with significant impacts from financial results and mark-to-market adjustments.
- Dividends and interest on capital received increased to R$4.3 billion, largely due to Compass's dividend payments.
- The negative performance was primarily due to a depreciation of the Brazilian Real and the devaluation of Cosan's shares.

Operational Performance of Business Segments:
- Rumo achieved record transportation volumes and growth in tariffs, while Compass saw increased natural gas volumes and positive prospects from new business operations.
- Radar's EBITDA decreased compared to 2023 due to a smaller change in portfolio value, and Raizen experienced challenges with sugarcane crushing and lower EBITDA.
- These variations were attributed to external factors such as weather and market conditions impacting operations.

Debt Profile and Service Coverage Ratio:
- Cosan's net debt at the end of 2024 was R$23.4 billion, with a debt service coverage ratio of 1.1.
- The company has focused on reducing debt through asset sales and extending debt maturities to improve financial health.
- The need to enhance financial stability was driven by external macroeconomic factors, particularly interest rate hikes and Brazil's debt trajectory.

Strategic Divestments and Future Focus:
- Cosan announced the divestment of its 4% stake in Vale, using proceeds to reduce debt at the Holdco level.
- The company aims to maintain the quality of its portfolio by considering strategic assets and focusing on capital discipline.
- These strategic moves are part of a broader effort to adapt to the macroeconomic environment and improve Cosan's financial health.