Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to Cosan S.A. Second Quarter of 2018 Results Conference Call. Today with us, we have Mr. Phillipe Casale, Investor Relations Executive Manager; and Mr. João Arthur Souza, Head of Finance. We would like to inform you that this event is recorded. [Operator Instructions]. The audio and slide show of this presentation are available through the live webcast at ir.cosan.com.br. The slides can also be downloaded from the webcast platform. Before proceeding, let me mention that forward-looking statements will be made under the safe harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Cosan’s management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and, therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Cosan and could cause results to differ materially from those expressed in such forward-looking statements. Now I’ll turn the conference over to Mr. Phillipe Casale. Mr. Casale, you may begin the call.

Good morning, everyone, and welcome to Cosan S.A. Second Quarter 2018 Earnings Conference Call. As usual, I’ll start with the presentation, talking about each of Cosan S.A. business lines and then address the consolidated results. It was a quite challenging quarter for the country as a whole. The truckers’ strike caused losses in several sectors of the economy, directly reflected in 2018 expectations for economic growth and inflation in Brazil. Once again, our businesses were tested, and the quick resumption of operations was essential to minimize the strike effects. Let’s move to Slide 4, starting with Raízen Combustíveis, where impacts were more severe. And first, I would like to further elaborate on that. The reduction of diesel prices, following the government request, resulted in a loss of BRL200 million at Raízen. Such loss reflects the pass-through of the discounts applied to existing diesel inventories at that time. As a result, our diesel commercialization margin was negatively impacted. In addition to that, Raízen incurred an unplanned operating and logistics expense. Also, we estimate a 4% loss of sales volume due to the truckers’ strike. Moving to the quarter figures. Sales volume came in 2% lower than the same period last year. The main impact was in motorcycle, where sales dropped 9% already adjusted for the energy parity or gasoline-equivalent alternative fuel. I would like to point out that the demand for ethanol remains high and grew 37%[ph] in the quarter. Diesel sales increased 3% even with the impact of lower traffic. As we mentioned in the previous quarters, the better diesel performance is a result of higher demand from agribusiness’ clients and new B2B contracts. Sales volumes in the aviation segment grew by 10%, in line with the sector’s upturn. Adjusted EBIT came to BRL377 million, 4% lower than the second…

Hi, good morning everyone, thank you very much. We had two questions basically. We noted that Raízen was a company that reported the best EBITDA per cubic meter when excluding the negative impacts of the truckers’ strike. To be more specific, Raízen reported around BRL120 per cubic meter, while your key competitor posted something closer to BRL95. We were just wondering what do you think explains such a positive gap. And what do you think are the sustainable margins for the remainder of the year and maybe next year? Then our second question, we noticed that there was a high consumption of working capital in the quarter. It seems to us that it’s basically inventory buildup for sugar and ethanol, but we were just wanting to check if we’re not missing anything else? Thank you.

, : We should keep the same pace in terms of our strategy for the long run, right. This is the strategy that was happening when this company was formed back in 2011, and we haven’t changed anything since then. So we’ve got to keep the focus, keep privileging the relationship with our network and keep always looking at our supply and commercialization strategy to help in improving our results. In terms of the consumption of the working capital, as we mentioned, yes, on the Raízen Energia, this is the worst quarter in terms of working capital due to the beginning of the crop. This, of course, is part. There’s also the dynamics on the – on Comgás due to the regulatory current account. So these two were the main impacts on the working capital in the quarter.

Just a follow-up. So we should expect this to normalize on the following quarters?

Yes. Depending and aligned with our commercialization strategy, the first and the second quarter of the crop usually are the ones that you have the highest pressure on the working capital, right, and then on the third and the fourth quarter, again, depending on the commercialization strategy, you have different dynamics.

Got it. Thank you very much, Phillipe.

Next question, Augusto Ensiki, HSBC.

Hi good morning, thanks for taking my question. I’m sure, if you could give me a little bit more information on the ethanol, and apologies, this was already addressed. Given you have a little bit of supply glut on the ethanol side as well now, what’s your current outlook for ethanol pricing? And is level for ethanol where you’d say, all right, maybe we need to go back to sugar, considering FX and then other positive effects on that side? Is there anything that would change your mind in terms of your sugar and ethanol mix and where you kind of see the dynamic going forward? Thank you.

Augusto, thanks for the question. Analyzing the profitability of each product is something that Raízen does on a daily basis here. This is basically what defines what’s going to be our production and where are the opportunities in terms of trading. And this is going to be something that we’ll be thinking for the year, be thinking for the year, okay. So right now, there is no doubt that the ethanol is elevating more than the sugar. That’s why we are shifting all the production to ethanol. This quarter, we have produced 52% of ethanol and 38% of sugar. And this should be the same pace, of course, limited to the setup of our mills and the flexibility that we have for the rest of the crop year. I think you asked about the higher demand as well, right, high demand of ethanol right now?

Yes.

Yes. So what we have been seeing since the beginning of the year is that the demand for ethanol is increasing a lot. When you look at the fuel distribution business, the ethanol volume, in spite of the truckers’ strike, grew 37%. Of course, apparently, it is below the 70%, right now more close to 60% actually. So this is, hence, why the consumption of ethanol in some states in Brazil. And this is what is driving the demand also for ethanol. And in terms of the supply, this is going to be a crop with much more ethanol. So the supply side is also important to this dynamic by the end of the year. So more ethanol in the beginning and the mid of the crop, and demand should still – for ethanol specifically should still higher if we look at the same process that we have in the market right now.

Thank you very much for that and I appreciate it.

Next question Lucas Ferreira, JP Morgan.

Hi Phillipe, just wanted to clarify two points. First, you mentioned in the Portuguese call that you expect net debt-to-EBITDA of the company to be closer to 2.5 times through the end of the year. Just wanted to understand if the main driver of this increase is acquisition in Argentina or if you guys planning maybe more dividends or any other cash outflows that could be impacting this increase from the 1.8 times you’re currently at. And the other question that I have is regarding the outlook for the crop now. Since we’re seeing rainfall in the state of São Paulo coming back, if you’re seeing any change in the outlook for – if you have heard any change in the outlook for ATR productivity and even costs for the business in the remainder of the crop? Thank you.

Lucas, thanks for the question. In terms of the leverage expectations we share on the call here in English as well, the normalized level that we look for the long run in Cosan are the range actually between 2 times and 2.5 times. We were last quarter 1.5 times and this quarter 1.8 times. And one of the main impacts was the credit-light sale that we did in the first quarter, which impacted the EBITDA. And for the rest of the year, we have a few that are going to happen. One of them is the obligation we have with CZZ in terms of the Comgás stake purchase that we did, which is around BRL150 million – BRL350 million, $100 million something. And also, with the conclusion of the Shell acquisition in Argentina, which is being done by Raízen Fuels and is expected for the fourth quarter of the year, should also impact on the leverage for 2018. But what we want the market to keep in mind is that the normalized level, there is a range there that should be between 2 times to 2.5 times. I think 1.5 times and 1.8 times that we’ve just delivered this quarter was specifically due to the credit-light sales that impacted the results in the first quarter.

[Operator Instructions] This concludes today’s question-and- answer session. I would like to invite Mr. Phillipe Casale to proceed with his closing statements. Please go ahead sir.

Just to correct myself here, the amount that we’ll – the obligation that we have with CZZ by the end of the year is BRL250 million, not BRL250 million as I mentioned. So this is the obligation we have by the end of the year. And thank you all for being here in this conference call, and I’ll see you on the next opportunity.

That does conclude the Cosan’s audio conference for today. Thank you very much for your participation. And have a good day.