Investor and Analyst Presentation - APIMEC 2008

Transcription

1 Renewable Energy for a Better World Ethanol Sugar Cogeneration Investor and Analyst Presentation - APIMEC 2008 São Paulo - August 26,

2 Disclaimer Forward Looking Statements This presentation contains estimates and forward-looking statements regarding our strategy and opportunities for future growth. Such information is mainly based on our current expectations and estimates or projections of future events and trends, which affect or may affect our business and results of operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made in light of information currently available to us. Our estimates and forward-looking statements may be influenced by the following factors, among others: (1) general economic, political, demographic and business conditions in Brazil and particularly in the geographic markets we serve; (2) inflation, depreciation and devaluation of the real; (3) competitive developments in the ethanol and sugar industries; (4) our ability to implement our capital expenditure plan, including our ability to arrange financing when required and on reasonable terms; (5) our ability to compete and conduct our businesses in the future; (6) changes in customer demand; (7) changes in our businesses; (8) government interventions resulting in changes in the economy, taxes, rates or regulatory environment; and (9) other factors that may affect our financial condition, liquidity and results of our operations. The words believe, may, will, estimate, continue, anticipate, intend, expect and similar words are intended to identify estimates and forward-looking statements. Estimates and forward-looking statements speak only as of the date they were made and we undertake no obligation to update or to review any estimate and/or forward-looking statement because of new information, future events or other factors. Estimates and forward-looking statements involve risks and uncertainties and are not guarantees of future performance. Our future results may differ materially from those expressed in these estimates and forward-looking statements. In light of the risks and uncertainties described above the estimates and forward-looking statements discussed in this presentation might not occur and our future results and our performance may differ materially from those expressed in these forward-looking statements due to, inclusive, but not limited to the factors mentioned above. Because of these uncertainties you should not make any investment decision based on these estimates and forwardlooking statements. 2

3 Agenda 1. Introduction to Management 2. Cosan FY 08 Results 3. Enhanced Business Model 3

4 Introduction to Management Paulo Diniz - CFO and Investor Relations Officer Luiz Felipe Jansen - Investor Relations Manager Manuela Marquez - Investor Relations Analyst 4

5 Agenda 1. Introduction to Management 2. Cosan FY 08 Results 3. Enhanced Business Model 5

6 Cosan Group An Overview Overview Cosan S.A.: Long history as a leading ethanol and sugar high-growth company with low-cost, large-scale and integrated operations in Brazil Revenue Breakdown FY 07 FY 08 (US$1,679.1 (1) /R$3,605.1) (US$1,491.2 (1) /R$2,736.2) Largest grower and processor of sugarcane in the world Others; 5,7% Others; 6,9% Largest ethanol and sugar producer in Brazil and among the largest in the world Largest ethanol and sugar exporter in the world Sugar; 61,4% Sugar; 52,2% Share Performance IPO in Bovespa (Novo Mercado) in 2005: U$ 400MM Current Market Cap of approximately R$7.6 billions Ethanol; 32,9% Ethanol; 40,9% 200% R$ % IPO CZZ R$ 150 Exports; 60,4% Exports; 55,0% 100% R$ 100 M illions 50% 0% R$ 50 R$ - Local Market; 39,6% Local Market; 45,0% 17/8/07 17/12/07 17/4/08 17/8/08 Source: Reuters Volume CSAN3 IBOV Source: Bacen / (1) USGAAP 6

7 Cosan Group Growth Evolution Cosan achieved a new record in FY 08, crushing 40.3 million tones of sugar cane Ethanol sales reached 1.5 billion liters while ethanol exports grew more than 50%, totaling million liters Ethanol business sales breakdown: exports 26.5%, local market 73.5% Sugar business sales breakdown: exports 84,5%, local market 15.5% Sugar Sales (Thousand Tons) Sugarcane Crushed (MM Tons) 40,3 36,2 26,6 27,9 23,8 17,3 13,0 10,6 00&'01 01&'02 02&'03 03&'04 04&'05 05&'06 06&'07 07&'08 Ethanol Sales (MM Liters) &'01 01&'02 02&'03 03&'04 04&'05 05&'06 06&'07 07&' &'01 01&'02 02&'03 03&'04 04&'05 05&'06 06&'07 07&'08 Local Mkt Exports Local Mkt Exports 7

8 Cosan Group Financials Summary of Fiscal Year ended April 30, 2008 R$MM, unless otherwise mentioned FY'07 FY'08 Impact Net Operating Revenue 3, ,736.2 (868.9) (-) Cost of Goods Sold (2,481.1) (2,387.1) 94.0 of which Depreciation & Amortization (297.0) (341.3) (44.4) (=) Gross Profit 1, (774.9) Gross Margin 31.2% 12.8% (-) Selling Expenses (282.0) (301.3) (19.3) (-) G&A Expenses (246.2) (210.2) 36.0 Other Operating Income (Expenses) 35.3 (6.0) (41.3) (=) EBITDA (755.1) EBITDA Margin 25.7% 6.3% Hedge Gains (Losses) (74.3) (=) EBITDAH (Ajust. by Hedge) (455.9) EBITDAH Margin 24.2% 13.4% Financial Income, net Equity Income (0.1) Goodwill Amortization (223.7) (201.4) 22.3 Nonoperating Results (=) Profit (Loss) Before Taxes (69.0) (636.3) Income Taxes (203.9) Minority's Participation (6.2) (=) Net Profit (Loss) (47.8) (405.0) Profit Margin 9.9% -1.7% 8

9 Cosan Group Financials Breakdown of Net Operating Revenues 9

10 Cosan Group Financials Breakdown of COGS and EBITDAH Reconciliation EBITDA Reconciliation, R$MM (726.7) (3.4) (27.7) EBITDA FY'07 (322.1) Volume Price FX Rate Cost S&M G&A Other EBITDA FY'08 Hedge Gains EBITDAH 10

11 Cosan Group Historical Data & Guidance 11

12 Agenda 1. Introduction to Management 2. Cosan FY Enhanced Business Model 12

13 Cosan Group A History of Growth and Innovation Crushing Capacity (MM Tons) 70,0 2012E Greenfield & Brownfield Projects (+10MM tons) 60, IPO ($400MM) IFC loan 2007 CZZ $1.2Bn NYSE IPO 10Y Bonds ($400MM) Cogeneration (1GW) ,0 Alliance with Kuok Group 2006 Perpetual Bonds ($450MM) Ibovespa index 2008 Vertical integration ,0 30, Development of VHP sugar Cosan S.A. officially established Alliance with Tereos and Sucden 2002 Da Barra acquisition Inaugural Bonds ($200MM) , Foundation of Costa Pinto Partnership with Tate & Lyle Santos port concession , , E 13

14 An Environment with Dramatic Changes The Sugarcane Sector Faced Major Disruptions Major Changes & Opportunities Depressed Short-Term Outlook WTO highest court ruled against European subsidized sugar exports (gap of 4-to-5 million tons in the free market) Remarkable success of flex-fuel cars in Brazil (over 85% of new cars are flex-fuel after only two years since launch) United States build the largest ethanol market in the world in merely two years with further potential based on government targets In Feb 08, fuel ethanol sold surpassed the amount of gasoline sold in Brazil Potential energy shortages in Brazil in the near future invited bio-mass into the energy matrix Countries, producers and newcomers rushed to The El Dorado through a messy production expansion and new projects Global sugar production surplus, levered by subsidies & import restrictions, generated heavy inventories Excess supply compressed sugar prices in the free market (2/3 are protected markets) Ethanol production growing faster than new markets opening Ongoing ethanol import barriers by developed countries Misperception between food & fuel dilemma A Changing Environment implies New Changes for the Companies! 14

15 Innovation to Face a Changing Environment Selective Actions shall Imply in a Broader Business Model COMMERCIALIZATION (Retail da BARRA sugar) SUGAR & ETHANOL PRODUCTION Cosan S.A. Plantation Crushing Production 1. LAND DEVELOPMENT (Project Radar) 2. POWER CO-GENERATION (Ongoing Project) 3. BROWNFIELD (Gasa) 4. GREENFIELD (Jataí Module) 5. EPCM ENGINEERING (Promon) 6. DEHYDRATION PLANT (Caribbean) 7. ETHANOL TRADING (Vertical) 8. SUGAR LOGISTICS (Rumo) 9. ETHANOL PIPELINE (Uniduto) 10.FUEL DISTRIBUTION (Esso) 15

16 1. Radar - Land Development Project Levering Land Expertise to keep Value Creation Inside Cosan The Best Tool for Land Procurement Cosan manages ha (largest BR agric. producer) Profiting from Land Appreciation in the Future Potential Areas for Future Growth Leading edge in Geo processing Technology (GIS) Agricultural Potential maps Slope maps Rainfall maps Land Appreciation in Goiás Greenfields Area 36.8% (2) 38.1% (2) 5,800 5,200 4,200 3,800 A01: MT A02: MT A03: MT A04: GO(S) A05: MS(S) A06: MS(C) A07: MG A08: CE; PB; RN A09: BA; PI; MG A10: TO; MA A11: TO; GO A12: GO(C) Montevidiu Jataí April-07 July-07 Source: FNP (1) Greenfield projects announced in Apr-07 by Cosan (2) In nominal R$ 16

17 2. Co-generation of Energy Brazil has a Superior Environmental Friendly Energy Matrix 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Evolution of Energy Offer in Brazil VEGETAL COAL & WOOD SUGARCANE & RELATED MINERAL COAL HYDRO & ELECTRICITY OIL & RELATED OTHER RENEWABLE NUCLEAR NATURAL GAS Sugarcane as the 2nd Energy Source TYPE OF ENERGY % % NON-RENEWABLE ENERGY OIL & RELATED NATURAL GAS MINERAL COAL NUCLEAR RENEWABLE ENERGY HYDRO & ELETRICITY VEGETAL COAL & WOOD SUGARCANE & RELATED OTHER RENEWABLE BioMass TOTAL ENERGY ENERGY MATRIX BRAZIL'07 OCDE'05 WORLD'05 BIOMASS HYDRO & ELETRICITY URANIUM MINERAL COAL NATURAL GAS OIL & RELATED TOTAL ENERGY With an energy consumption in of 238,328 x 10 equivalent tons of oil, Brazil has built an environment friendly energy matrix, where sugarcane has become the 2nd energy source for the country (ethanol & cogeneration) 17

18 2. Co-generation of Energy Adding a Stable Cash Flow Stream of R$600M/yr to Cosan COSAN Energy Potential Through Co-generation At 60MM tons crushing capacity, potential of 1.3 MW, with an incremental EBITDA of R$ 600MM 60 MM tons R$ 3.5 bi 4.1 GWh 1.3 MW 27 MM tons 1.8 GWh R$ 1.3 bi R$630MM (already incurred) 547 MW 0.4 GWh (spot market) 1.4 GWh (already sold) R$ 560MM R$ 250MM CRUSHING COGEN INSTALLED SALEABLE EBITDA CAPACITY CAPEX POWER ENERGY CAPACITY Notes: - Estimates subject to changes - 1 MWh = tons of CO 2. Total of 754 tons of CO2/yr included in the EBITDA - Average days of 189 days per crop, with 83% of crushing time - Assumed bagasse and 50% of leaves, generating for 189 days (although additional bagasse/leaves could imply in 10 months of cogeneration) 18

19 3. Brownfield Expansions Over 10.0MM tons of Crushing Capacity at Attractive Multiples Cosan has the capability to expand its crushing power by 10.6 million tons of cane (approximately 920 million liters of ethanol or 1.48 million tons of sugar). Such expansion would imply in an estimated Capex of R$1.1 billion, or an interesting multiple of R$105/ton of crushing capacity. Seeing independently, such Brownfield would be one of the top producers in Brazil. 2.8 Crushing starts this crop 08/ Current Capacity Gasa Bonfim Univalem Destivale Mundial Junqueira Ipaussu Gasa II Future Capacity * Estimates; subject to changes 19

20 4. Greenfield Project Currency Appreciation Mitigated by Higher Crushing Output Project Profile Ethanol Output Timeframe Integrated greenfield project, fully dedicated to ethanol (MM Liters) State-of-the-art technology, with efficient industrial facilities and lower production costs Located in the State of Goiás, compound by 3 modules 370 Initial 10.0MM tons of crushing capacity enhanced to 12.0MM Total estimated capex of R$ 1.4 billion (R$470 mm/module) Jataí module coming on stream in FY 10 FY 11 FY 12 Jataí Mill FY 13 Paraúna Mill Montividíu Mill Total Project Output 20

21 5. EPCM Greenfield - PROMON Losses & Efficiencies Flows Revisited in a State of the Art Plant 21

22 6. Dehydration Plant The CBI Agreement Small Base being considered to Penetrate the U.S. Market Exports to the US Direct Anhydrous FOB Santos: U$2.09/gal Sea Freight: U$0.2 VAT (2.5%):U$0.05 Tariff: U$0.54/gal Final Price in the US: U$2.88/gal Exports to the US through CBI Hydrous FOB Santos: U$1.83/gal Sea Freight (Brazil/CBI): U$0.15 Dehydration Costs:U$0.30 Sea Freight (CBI/USA): U$0.15 VAT (2.5%):U$0.05 Final Price in the US: U$2.48/gal In 2007, the Caribbean countries exported 0.3 billion gallons to the USA, i.e. 70% of their quota. Considering the USA renewable fuel standards, by 2022 the exporting potential from the CBI can reach 2.5 billion gallons Note: Ethanol price at NY harbour as of August 25th: U$2.30/gallon 22

23 7. Ethanol Trading: Vertical UK LLP Commercial Platform to boost International Sales of Ethanol Acquisition of Vertical (50% stake) to enhance Cosan s commercial area - 53 people (Brazil, USA, London & Geneva) - 123,540 m 3 storage capacity (Santos, Rotterdam, Antwerp & Texas City) - 981,043 m 3 of ethanol sold in 2007 (97.3 Africa; Americas; Europe; Far East; 1.5 Middle East & 2.5 Oceania) HIGHLIGHTS (US$ mm): 2007FY 2008FCST Volume (m3) Sales 637 1,200 Gross Margin

24 8. Sugar Logistics Rumo Logística The Largest Sugar Port in the World is born and will grow further COSAN Portuária Teaçú Port Terminal (Nova América) Loading Capacity of 40,000 metric ton per day Largest sugar throughput port terminal in Brazil: 3.5M ton (23% of Brazilian exports) in 06/07 Static capacity 200K ton + Static capacity of 170K tons Annual shipment capacity of 4 million tons of grains Highly automated operating processes (from the moment the truck leaves the mill until it reaches the port) - Current loading capacity of 8.0M tons, and static capacity of 435K tons - R$119M investment made by Cosan to have 71.2% stake (28.8% Nova América) FURTHER GROWTH With a R$30MM investment postintegration, the port terminal will have 3 wharves and 5 ship loaders being the largest bulk terminal for agricultural products in the world, with total annual loading capacity of 17M tons 24

25 9. Ethanol Pipeline Uniduto CCC Consortium assures ethanol volume to the pipeline Ribeirão Preto (road-rail) m km Ø = 20 Output:11 bi liters Storage Base (location, type & capacity) Distribution base Pipes (length & diameter ) Monobóia (exports off-shore ) 114 km Ø = 24 Output:16 bi liters Conchas (river-rail) m 3 36 km Ø = 16 Juquiratiba (rail) m 3 Paulínia (road-rail) m 3 Campinas 127 km Ø = 30 Output:24.7 bi liters São Paulo 106 km Ø = 24 Taboão da Serra (road) m 3 Output:14.2 bi liters Serra do Mar Santos -CING (road) m 3 - Creation of of Uniduto Logística S.A., a JV among Cosan, Copersucar and Crystalsev - Uniduto to develop, construct and operate an ethanol pipeline network linking the port terminal on the coast of Santos, SP, and the city of Paulínia, with arms to the cities of Conchas & Ribeirão Preto - The ethanol pipeline shall reduce logistics costs by 35% to 40% (from R$95/m3 to R$57/m3, RP region) 25

26 9. Ethanol Pipeline Uniduto General Schedule of 4-yr divided into two parts: paper work & execution Stage or Activity st half 2 nd half 1 st half 2 nd half st half 2 nd half st half Decision-making Process Environmental Licenses Basic Engineering Project Support to Tender Bids Construction works Management of works Tests and Assisted Operations UNIDUTO s initial capital to be R$60 million, divided equally among the Shareholders The Shareholders intend to offer this opportunity to other ethanol producers in the Central-South region and some other interested parties (S. Martinho, N. América) In the short term, investments will be limited to items needed for its initial functioning, including detailed technical projects and feasibility study, as well as obtaining the environmental licenses and permits other applicable authorizations. Estimated total project capex is R$1.64 billion, including improvements in the port terminal. Item Total Administrative Expenses Pre Project and Feasibility Studies Expenses 2 2 Basic Project and Environmental Licensing Basic Project (Pipelines, Terminals and Port): Topography, drilling and basic engineering project services: data sheets and calculation worksheets, specifications of materials and services, budget worksheets, well detailed designs for hiring construction services Environmental Impact Assessment and Environmental Impact Report (EIA/RIMA): 650 km long, 5 terminals and port; passing through 35 municipalities, Protected Reserves and water sources Public Hearings/ Issue of Prior License 1 1 Installation License (Environmental Compensation) Total

27 10. Esso Fuel Distribution Acquisition brings unique base on Fuel Marketing, Lubes and Distribution 27

28 10. Esso Fuel Distribution Acquisition Allows Cosan to be the First Truly Vertically Integrated Co. Establish Vertically Integrated Platform Secure distribution channel for ethanol Diversify business and reduce cash flow volatility Hedge against any margin squeeze caused by further industry consolidation Take Advantage of Entry Opportunity Consolidated industry with limited entry alternatives Enter downstream with relevant position that mirrors well Cosan s own output capacity Strategic fit between Cosan and Essobras Operations (overlapping footprint) Rationalization of overlapping logistics, distribution and storage capacity Extract Significant Sources of Upside Better inventory management resulting in potential trading gains Leverage on ethanol to re-energize network and recapture historic market share Actively participate in the continuing consolidation of the sector 28

29 10. Esso Fuel Distribution Selected Financial Data for Essobrás R$ Million Net Revenues 8, , , ,219.9 % Growth (0.9%) 2.3% 4.3% (0.9)% Gross Profit % Gross Margin 7.2% 6.2% 5.6% 6.6% EBITDA % EBITDA Margin 1.4% 1.3% 1.8% 3.0% Net Income (7.6) (8.4) % Net Margin (0.1%) (0.1%) 0.4% 1.5% Source: Audited Financial Statements (unaudited for 2007) and Company's Information 29

30 Renewable Energy for a Better World Ethanol Sugar Cogeneration Which ethanol producer/renewable energy player should you bet? Thank you! 30 30