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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Issuer
Pursuant To Rule 13a-16 Or 15d-16
of the Securities Exchange Act of 1934
For the month of June, 2020
Commission File Number: 1-33659
COSAN LIMITED
(Translation of registrant’s name into English)
Av. Brigadeiro Faria Lima, 4100, – 16th floor
São Paulo, SP 04538-132 Brazil
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F X | Form 40-F |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Yes | No X |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Yes | No X |
Table of Contents
Cosan Limited
Interim consolidated financial statements
March 31, 2020
Table of Contents
Cosan Limited
Interim consolidated financial statements
March 31, 2020
Independent Auditor’s Review Report on Interim Financial Information | 3 | |||
5 | ||||
Consolidated statement of profit or loss and other comprehensive income | 8 | |||
9 | ||||
11 | ||||
14 |
2
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São Paulo Corporate Towers Av. Presidente Juscelino Kubitschek, 1.909 Vila Nova Conceição 04543-011 - São Paulo – SP - Brasil
Tel: +55 11 2573-3000 ey.com.br |
Independent Auditor’s Review Report on Interim Financial Information
To
Shareholders, Board of Director and Officers of
Cosan Limited
Bermuda
Introduction
We have reviewed the accompanying consolidated interim financial information of Cosan Limited (the “Company”) for the quarter ended March 31, 2020, which comprises the consolidated statement of financial position as of March 31, 2020 and the related consolidated statements of profit or loss, of comprehensive income, of changes in equity and of cash flows for the three month period then ended, including the explanatory notes.
Management is responsible for the preparation and presentation of this consolidated interim financial information in accordance with IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB). Our responsibility is to express a conclusion on this consolidated interim financial information based on our review.
Scope of review
We conducted our review in accordance with International Standards on Review Engagements ISRE 2410 - Review of Interim Financial Information performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards of Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
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São Paulo Corporate Towers Av. Presidente Juscelino Kubitschek, 1.909 Vila Nova Conceição 04543-011 - São Paulo – SP - Brasil
Tel: +55 11 2573-3000 ey.com.br |
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated interim financial information, is not prepared, in all material respects, in accordance with IAS 34 – Interim Financial Reporting.
Other matters
Audit and review of the corresponding amounts
The audit of consolidated statement of financial position, as of December 31, 2019 and the review of consolidated interim financial information for the period ended March 31, 2019, presented for comparison purposes, originally prepared prior to the amendments as described in Note 24 regarding the period ended March 31, 2019, were conducted under the responsibility of another auditor, which issued audit and review reports without modification, dated May 28, 2020 and May 15, 2019, respectively.
São Paulo, June 04, 2020.
ERNST & YOUNG
Auditores Independentes S.S.
/s/ ERNST & YOUNG
Auditores Independentes S.S.
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Consolidated statements of financial position
(In thousands of Brazilian Reais – R$)
Note | March 31, 2020 | December 31, 2019 | ||||||||||
Assets | ||||||||||||
Cash and cash equivalents | 5.1 | 6,984,529 | 8,472,274 | |||||||||
Marketable securities | 5.2 | 2,169,425 | 3,115,503 | |||||||||
Trade receivables | 5.3 | 2,159,109 | 1,786,095 | |||||||||
Derivative financial instruments | 5.8 | 139,322 | 144,422 | |||||||||
Inventories | 7 | 872,990 | 787,322 | |||||||||
Receivables from related parties | 5.4 | 68,798 | 58,619 | |||||||||
Income tax receivable | 134,268 | 215,578 | ||||||||||
Other current tax receivable | 6 | 1,033,090 | 950,246 | |||||||||
Dividends receivable | 44,301 | 23,252 | ||||||||||
Other financial assets | 91,206 | 81,972 | ||||||||||
Other current assets | 542,956 | 356,554 | ||||||||||
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Total current assets | 14,239,994 | 15,991,837 | ||||||||||
Trade receivables | 5.3 | 24,387 | 28,299 | |||||||||
Restricted cash | 5.2 | 129,667 | 147,910 | |||||||||
Deferred tax assets | 13 | 1,669,363 | 1,607,566 | |||||||||
Receivables from related parties | 5.4 | 117,079 | 114,722 | |||||||||
Income taxes receivable | 225,945 | 168,089 | ||||||||||
Othernon-current tax receivable | 6 | 738,555 | 726,766 | |||||||||
Judicial deposits | 14 | 917,994 | 943,457 | |||||||||
Other financial assets | 2,771 | 69,791 | ||||||||||
Derivative financial instruments | 5.8 | 8,113,967 | 3,679,988 | |||||||||
Contract asset | 690,780 | 600,541 | ||||||||||
Othernon-current assets | 249,315 | 245,716 | ||||||||||
Investments in associates | 8.1 | 378,160 | 377,707 | |||||||||
Investments in joint ventures | 9 | 8,012,619 | 7,548,960 | |||||||||
Property, plant and equipment | 10.1 | 12,430,596 | 12,153,136 | |||||||||
Intangible assets and goodwill | 10.2 | 17,010,589 | 16,843,659 | |||||||||
Right-of-use assets | 10.3 | 4,439,867 | 4,469,730 | |||||||||
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Totalnon-current assets | 55,151,654 | 49,726,037 | ||||||||||
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Total assets | 69,391,648 | 65,717,874 | ||||||||||
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The accompanying notes are an integral part of these interim financial statements.
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Consolidated statements of financial position
(In thousands of Brazilian Reais – R$)
Note | March 31, 2020 | December 31, 2019 | ||||||||||
Liabilities | ||||||||||||
Loans, borrowings and debentures | 5.5 | 2,748,060 | 3,518,225 | |||||||||
Leases | 5.6 | 559,527 | 542,475 | |||||||||
Derivative financial instruments | 5.8 | 4,424 | 30,784 | |||||||||
Trade payables | 5.7 | 2,273,205 | 2,190,264 | |||||||||
Employee benefits payables | 260,677 | 381,337 | ||||||||||
Income tax payables | 132,539 | 424,138 | ||||||||||
Other taxes payable | 12 | 396,916 | 363,051 | |||||||||
Dividends payable | 203,105 | 214,104 | ||||||||||
Concessions payable | 11 | 9,945 | 9,847 | |||||||||
Payables to related parties | 5.4 | 402,978 | 392,458 | |||||||||
Deferred revenue | 6,358 | 7,300 | ||||||||||
Other financial liabilities | 430,860 | 543,879 | ||||||||||
Other current liabilities | 304,729 | 299,349 | ||||||||||
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Total current liabilities | 7,733,323 | 8,917,211 | ||||||||||
Loans, borrowings and debentures | 5.5 | 30,740,574 | 25,533,990 | |||||||||
Leases | 5.6 | 4,042,768 | 4,052,413 | |||||||||
Preferred shareholders payable in subsidiaries | 618,935 | 611,537 | ||||||||||
Derivative financial instruments | 5.8 | 147,447 | 50,267 | |||||||||
Other taxes payable | 12 | 149,912 | 155,070 | |||||||||
Provision for legal proceedings | 14 | 1,354,135 | 1,354,171 | |||||||||
Concessions payable | 11 | 3,507,576 | 3,445,033 | |||||||||
Post-employment benefits | 22 | 708,050 | 705,003 | |||||||||
Deferred tax liabilities | 13 | 3,667,341 | 3,883,564 | |||||||||
Deferred revenue | 47,689 | 48,036 | ||||||||||
Othernon-current liabilities | 707,634 | 721,098 | ||||||||||
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Totalnon-current liabilities | 45,692,061 | 40,560,182 | ||||||||||
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Total liabilities | 53,425,384 | 49,477,393 | ||||||||||
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Shareholders’ equity | 15 | |||||||||||
Share capital | 5,328 | 5,328 | ||||||||||
Additionalpaid-in capital | 639,939 | 887,165 | ||||||||||
Accumulated other comprehensive loss | (1,330,236 | ) | (805,471 | ) | ||||||||
Retained earnings | 5,314,843 | 5,314,843 | ||||||||||
Profit for the period | 646,653 | — | ||||||||||
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Equity attributable to: | ||||||||||||
Owners of the Company | 5,276,527 | 5,401,865 | ||||||||||
Non-controlling interests | 8.3 | 10,689,737 | 10,838,616 | |||||||||
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Total shareholders’ equity | 15,966,264 | 16,240,481 | ||||||||||
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Total shareholders’ equity and liabilities | 69,391,648 | 65,717,874 | ||||||||||
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The accompanying notes are an integral part of these interim financial statements.
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Consolidated statement of profit or loss and other comprehensive income
(In thousands of Brazilian Reais – R$)
Note | March 31, 2020 | March 31, 2019 (Restated) 1 | ||||||||||
Net sales | 17 | 4,922,505 | 4,719,906 | |||||||||
Cost of sales | 18 | (3,550,211 | ) | (3,469,327 | ) | |||||||
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Gross profit | 1,372,294 | 1,250,579 | ||||||||||
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Selling expenses | 18 | (288,605 | ) | (264,130 | ) | |||||||
General and administrative expenses | 18 | (295,319 | ) | (257,964 | ) | |||||||
Other expenses, net | 19 | (127,862 | ) | (1,288 | ) | |||||||
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Operating expenses | (711,786 | ) | (523,382 | ) | ||||||||
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Profit before equity in earnings of investees, finance results and taxes | 660,508 | 727,197 | ||||||||||
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Interest in earnings of associates | 8.1 | 3,241 | (28,116 | ) | ||||||||
Interest in earnings of joint ventures | 9 | 191,344 | 303,833 | |||||||||
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Equity in earnings of investees | 194,585 | 275,717 | ||||||||||
Finance expense | (2,227,634 | ) | (804,034 | ) | ||||||||
Finance income | 470,447 | 126,416 | ||||||||||
Foreign exchange, net | (3,201,440 | ) | (70,817 | ) | ||||||||
Derivatives | 4,574,228 | 229,045 | ||||||||||
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Finance results, net | 20 | (384,399 | ) | (519,390 | ) | |||||||
Profit before taxes | 470,694 | 483,524 | ||||||||||
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Income taxes | 13 | |||||||||||
Current | (162,014 | ) | (152,270 | ) | ||||||||
Deferred | 216,799 | 70,982 | ||||||||||
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54,785 | (81,288 | ) | ||||||||||
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Profit from continuing operations | 525,479 | 402,236 | ||||||||||
Profit (loss) from discontinued operation, net of tax | 24 | — | (5,807 | ) | ||||||||
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Profit for the period | 525,479 | 396,429 | ||||||||||
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Other comprehensive income | ||||||||||||
Items that will not be reclassified to profit or loss | ||||||||||||
Actuarial loss on defined benefit plan | 4 | — | ||||||||||
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4 | — | |||||||||||
Items that are or may be reclassified subsequently to profit or loss: | ||||||||||||
Foreign currency translation effect | (179,610 | ) | (33,094 | ) | ||||||||
Loss on cash flow hedge in joint ventures | (155,634 | ) | (179,877 | ) | ||||||||
Changes in fair value of financial assets | — | 10 | ||||||||||
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(335,244 | ) | (212,961 | ) | |||||||||
Other comprehensive loss, net of tax | (335,240 | ) | (212,961 | ) | ||||||||
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Comprehensive income | 190,239 | 189,275 | ||||||||||
Comprehensive loss - Discontinued operation | — | (5,807 | ) | |||||||||
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Total comprehensive income for the period | 190,239 | 183,468 | ||||||||||
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Profit attributable to: | ||||||||||||
Owners of the Company | 646,653 | 190,216 | ||||||||||
Non-controlling interests | (121,174 | ) | 206,213 | |||||||||
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525,479 | 396,429 |
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Consolidated statement of profit or loss and other comprehensive income
(In thousands of Brazilian Reais – R$, except earnings per share)
Note | March 31, 2020 | March 31, 2019 (Restated) 1 | ||||||||||
Total comprehensive income attributable to: | ||||||||||||
Owners of the Company | 121,888 | 53,976 | ||||||||||
Non-controlling interests | 68,351 | 129,492 | ||||||||||
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190,239 | 183,468 | |||||||||||
Earnings per share | ||||||||||||
Basic earnings per share | 16 | R$ | 2.9154 | R$ | 0.8254 | |||||||
Diluted earnings per share | 16 | R$ | 2.8112 | R$ | 0.7900 | |||||||
Earnings per share from continued operation | ||||||||||||
Basic earnings per share | 16 | R$ | 2.9154 | R$ | 0.8506 | |||||||
Diluted earnings per share | 16 | R$ | 2.8112 | R$ | 0.8142 |
The accompanying notes are an integral part of these consolidated interim financial statements.
¹ | For details on this restated, see Note 24. |
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Consolidated statement of changes in equity
(In thousands of Brazilian Reais – R$)
Share capital | Additional paid-in capital | Accumulated other comprehensive loss | Retained earnings | Equity attributable to owners of the Company | Non-controlling interest | Total equity | ||||||||||||||||||||||
At December 31, 2019 | 5,328 | 887,165 | (805,471 | ) | 5,314,843 | 5,401,865 | 10,838,616 | 16,240,481 | ||||||||||||||||||||
Net income for the period | — | — | — | 646,653 | 646,653 | (121,174 | ) | 525,479 | ||||||||||||||||||||
Other comprehensive income (Note 15): | ||||||||||||||||||||||||||||
Loss on cash flow hedge in joint ventures | — | — | (99,580 | ) | — | (99,580 | ) | (56,054 | ) | (155,634 | ) | |||||||||||||||||
Foreign currency translation effects | — | — | (425,185 | ) | — | (425,185 | ) | 245,575 | (179,610 | ) | ||||||||||||||||||
Actuarial gain on defined benefit plan | — | — | — | — | — | 4 | 4 | |||||||||||||||||||||
Total comprehensive income for the period | — | — | (524,765 | ) | 646,653 | 121,888 | 68,351 | 190,239 | ||||||||||||||||||||
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Contributions by and distributions to owners of the Company: | ||||||||||||||||||||||||||||
Capital increase in subsidiary | — | — | — | — | — | 6,666 | 6,666 | |||||||||||||||||||||
Dividends—non-controlling interests | — | (515 | ) | — | — | (515 | ) | (343 | ) | (858 | ) | |||||||||||||||||
Dividends | — | — | — | — | — | (1,974 | ) | (1,974 | ) | |||||||||||||||||||
Stock option exercised | — | 717 | — | — | 717 | 365 | 1,082 | |||||||||||||||||||||
Share-based payment transactions | — | 15,330 | — | — | 15,330 | 3,464 | 18,794 | |||||||||||||||||||||
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Total contributions by and distributions to owners of the Company | — | 15,532 | — | — | 15,532 | 8,178 | 23,710 | |||||||||||||||||||||
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Transactions with owners of the Company | ||||||||||||||||||||||||||||
Change of shareholding interest in subsidiary | — | (262,758 | ) | — | — | (262,758 | ) | (225,408 | ) | (488,166 | ) | |||||||||||||||||
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Total transactions with shareholders | — | (262,758 | ) | — | — | (262,758 | ) | (225,408 | ) | (488,166 | ) | |||||||||||||||||
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At March 31, 2020 | 5,328 | 639,939 | (1,330,236 | ) | 5,961,496 | 5,276,527 | 10,689,737 | 15,966,264 | ||||||||||||||||||||
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The accompanying notes are an integral part of these consolidated interim financial statements.
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Consolidated statement of changes in equity
(In thousands of Brazilian Reais – R$)
Share capital | Additional paid-in capital | Accumulated other comprehensive loss | Retained earnings | Equity attributable to owners of the Company | Non-controlling interest | Total equity | ||||||||||||||||||||||
At December 31, 2018 | 5,328 | 3,112,274 | (587,173 | ) | 4,083,974 | 6,614,403 | 11,354,953 | 17,969,356 | ||||||||||||||||||||
Adjustment on initial application of IFRS 16, net of tax | — | — | — | (109,888 | ) | (109,888 | ) | (422,462 | ) | (532,350 | ) | |||||||||||||||||
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At January 1, 2019 | 5,328 | 3,112,274 | (587,173 | ) | 3,974,086 | 6,504,515 | 10,932,491 | 17,437,006 | ||||||||||||||||||||
Net income for the period | — | — | — | 190,216 | 190,216 | 206,213 | 396,429 | |||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||
Loss on cash flow hedge in joint ventures | — | — | (108,387 | ) | — | (108,387 | ) | (71,490 | ) | (179,877 | ) | |||||||||||||||||
Foreign currency translation effects | — | — | (27,859 | ) | — | (27,859 | ) | (5,235 | ) | (33,094 | ) | |||||||||||||||||
Change in fair value of financial assets | — | — | 6 | — | 6 | 4 | 10 | |||||||||||||||||||||
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Total comprehensive income for the period | — | — | (136,240 | ) | 190,216 | 53,976 | 129,492 | 183,468 | ||||||||||||||||||||
Contributions by and distributions to owners of the Company: | ||||||||||||||||||||||||||||
Dividends—non-controlling interests | — | (243 | ) | — | — | (243 | ) | 243 | — | |||||||||||||||||||
Dividends | — | — | — | — | — | (1,762 | ) | (1,762 | ) | |||||||||||||||||||
Treasury shares acquired | — | (473,456 | ) | — | — | (473,456 | ) | — | (473,456 | ) | ||||||||||||||||||
Share-based payment transactions | — | 11,547 | — | — | 11,547 | 2,814 | 14,361 | |||||||||||||||||||||
Total contributions by and distributions to owners of the Company | — | (462,152 | ) | — | — | (462,152 | ) | 1,295 | (460,857 | ) | ||||||||||||||||||
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Transactions with owners of the Company | ||||||||||||||||||||||||||||
Change of shareholding interest in subsidiary | — | (440,989 | ) | — | — | (440,989 | ) | (624,849 | ) | (1,065,838 | ) | |||||||||||||||||
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At March 31, 2019 | 5,328 | 2,209,133 | (723,413 | ) | 4,164,302 | 5,655,350 | 10,438,429 | 16,093,779 | ||||||||||||||||||||
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The accompanying notes are an integral part of these consolidated interim financial statements.
10
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Consolidated statement of cash flows
(In thousands of Brazilian Reais – R$)
Note | March 31, 2020 | March 31, 2019 (Restated) 1 | ||||||||||
Cash flows from operating activities | ||||||||||||
Profit before taxes | 470,694 | 483,524 | ||||||||||
Adjustments for: | ||||||||||||
Depreciation and amortization | 563,126 | 561,972 | ||||||||||
Interest in earnings of associates | 8.1 | (3,241 | ) | 28,116 | ||||||||
Interest in earnings of joint ventures | 9 | (191,344 | ) | (303,833 | ) | |||||||
Loss on disposals assets | 552 | 6,363 | ||||||||||
Share-based payment | 19,314 | 14,831 | ||||||||||
Legal proceedings provision | 25,993 | 45,728 | ||||||||||
Indexation charges, interest and exchange, net | 395,257 | 563,856 | ||||||||||
Deferred revenue | (1,581 | ) | (3,505 | ) | ||||||||
Provisions for employee benefits | 38,963 | 49,808 | ||||||||||
Allowance for doubtful accounts | 8,879 | 2,124 | ||||||||||
Contractual obligations for sales of credit rights | 19 | 68,311 | — | |||||||||
Recovering tax credits | 19 | (11,676 | ) | — | ||||||||
Other | (14,285 | ) | (99,102 | ) | ||||||||
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1,368,962 | 1,349,882 | |||||||||||
Changes in: | ||||||||||||
Trade receivables | (146,290 | ) | (279,692 | ) | ||||||||
Inventories | (46,374 | ) | (24,815 | ) | ||||||||
Other current tax, net | (53,839 | ) | 105,479 | |||||||||
Income tax | (398,684 | ) | (57,205 | ) | ||||||||
Related parties, net | (35,873 | ) | (111 | ) | ||||||||
Trade payables | (50,169 | ) | 46,669 | |||||||||
Employee benefits | (155,337 | ) | (164,647 | ) | ||||||||
Provision for legal proceedings | (22,016 | ) | (20,292 | ) | ||||||||
Other financial assets | (187,137 | ) | (74,132 | ) | ||||||||
Judicial deposits | 15,333 | (20,107 | ) | |||||||||
Discontinued operation | 24 | — | 4,899 | |||||||||
Contractual obligations for sales of credit rights | 19 | (132,200 | ) | — | ||||||||
Post-employment benefits | (10,903 | ) | (8,893 | ) | ||||||||
Concessions payable | — | (3,505 | ) | |||||||||
Other assets and liabilities, net | (165,864 | ) | (98,934 | ) | ||||||||
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(1,389,353 | ) | (595,286 | ) | |||||||||
Net cash (used in) generated by operating activities | (20,391 | ) | 754,596 | |||||||||
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Cash flows from investing activities | ||||||||||||
Capital contribution in associates | 8.1 | (1,142 | ) | (26,045 | ) | |||||||
Acquisition of subsidiary, net of cash acquired | 8.2 | (90,247 | ) | — | ||||||||
Sales marketable securities, net | 969,535 | 1,469,860 | ||||||||||
Restricted cash | 24,854 | (10,900 | ) | |||||||||
Dividends received from associates | 300 | 1,949 | ||||||||||
Dividends received from joint ventures | — | 230,470 | ||||||||||
Other financial assets | 4 | — | ||||||||||
Acquisition of property, plant and equipment, intangible assets,right-of-use assets and contract assets | (820,364 | ) | (693,608 | ) | ||||||||
Net cash from sale of discontinued operations | 24 | — | 579 | |||||||||
Cash received on sale of fixed assets, and intangible assets | — | 28 | ||||||||||
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Net cash used in investing activities | 82,940 | 972,333 | ||||||||||
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11
Table of Contents
Consolidated statement of cash flows
(In thousands of Brazilian Reais – R$)
Note | March 31, 2020 | March 31, 2019 (Restated) 1 | ||||||||||
Cash flows from financing activities | ||||||||||||
Loans, borrowings and debentures raised | 5.5 | 1,008,903 | 3,027,460 | |||||||||
Repayment of principal on loans, borrowings and debentures | 5.5 | (2,174,247 | ) | (1,465,452 | ) | |||||||
Payment of interest on loans, borrowings and debentures | 5.5 | (631,123 | ) | (466,321 | ) | |||||||
Payment of derivative financial instruments | — | (107,215 | ) | |||||||||
Receipt of derivative financial instruments | 511,166 | 106,529 | ||||||||||
Payment of principal on leases | 5.6 | (53,993 | ) | (58,087 | ) | |||||||
Payment of interest on leases | 5.6 | (110,808 | ) | (39,917 | ) | |||||||
Equity contribution fromnon-controlling interest | 8.1 | 75,000 | 434,000 | |||||||||
Equity contribution from shareholders interest | 8.3 | 6,666 | — | |||||||||
Related parties | 8.2 | (17,063 | ) | — | ||||||||
Payments to redeem entity’s shares | (290,772 | ) | (473,456 | ) | ||||||||
Acquisition ofnon-controlling interests | 8.1 | (269,977 | ) | (1,627,773 | ) | |||||||
Dividends paid | (1,213 | ) | (2,668 | ) | ||||||||
Receipts of consideration assets | 8.1 | 65,478 | — | |||||||||
Discontinued operation | 24 | — | (6,249 | ) | ||||||||
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Net cash used in financing activities | (1,881,983 | ) | (679,149 | ) | ||||||||
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(Decrease) increase in cash and cash equivalents | (1,819,434 | ) | 1,047,780 | |||||||||
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Cash and cash equivalents at beginning of period | 8,472,274 | 3,621,798 | ||||||||||
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Effect of exchange rate fluctuations on cash held | 331,689 | (8,019 | ) | |||||||||
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Cash and cash equivalents at end of period | 6,984,529 | 4,661,559 | ||||||||||
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Additional information | ||||||||||||
Income tax paid | 385,821 | 46,037 |
The accompanying notes are an integral part of these interim financial statements.
1 | For details on this restated, see Note 24. |
Non-cash transaction
i. | At the Cosan Logística subsidiary, provision was made for social security tax assets related to the recovery of credits on the salary limit for contributions on behalf of third parties and taxation of theco-participation expenses of health plans, food vouchers and transportation vouchers, in the amount of R$12,874, of the of which R$11,676 (Note 19) are recorded under the heading “Recovering tax credits” and R$1,198 as “Interest, monetary and exchange variations, net.” |
In addition to the acquisition of assets with payment in installments in the amount of R$18,464 on March 31, 2020 (R$7,798 on March 31, 2019).
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Consolidated statement of cash flows
(In thousands of Brazilian Reais – R$)
ii. | Acquisition of assets for construction of the distribution network with payment in installments in the amount of R$28,517. |
iii. | Capital contribution in the subsidiary Payly Soluções de Payments S.A. (“Payly”) in the amount of R$10,000, through the capitalization of reimbursable expenses. |
iv. | Recognition of interest on equity decided by the Raízen Combustíveis S.A. in the amount of R$19,000. |
v. | Recognition of contractual obligations for sales of credit rights, in the amount of R$68,311 (Note 19). |
Disclosure of interest and dividends
The Company discloses the dividends and interest on shareholders’ equity received as cash flow from investing activities, with the purpose of avoiding distortions in its cash flows from operation activities.
Interest received or paid is classified as cash flow from financing activities, as it is considered to refer to the costs of obtaining financial resources.
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Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
1 | Operations |
Cosan Limited (“Cosan”) was incorporated in Bermuda on April 30, 2007. Cosan’s class A common shares are traded on the New York Stock Exchange, or “NYSE,” (ticker—CZZ). Mr. Rubens Ometto Silveira Mello is the ultimate controlling shareholder of Cosan. Cosan controls its subsidiaries Cosan S.A. and Cosan Logística S.A. (“Cosan Logística”) through a 66.28% and 73.49% interest, respectively. Cosan, Cosan S.A., Cosan Logística and its subsidiaries are collectively referred to as the “Company.”
On January 14, 2020, the subsidiary Cosan S.A. contributed to the share capital of our wholly owned subsidiary Compass Gás e Energia S.A. (“Compass Gás e Energia”), formerly known as Distribuidora de Gás Participações S.A., the totality of the shares we held in Companhia de Gás de São Paulo – COMGÁS, or “Comgás,” (i.e., 103,699,333 common shares and 27,682,044 preferred shares), equivalent to 99.15% of the total share capital of Comgás, for an amount of R$2,861,936. As the parties to the transaction are under common control transaction, there are no effects on the consolidated financial statements. The investment in Comgás was derecognized by Cosan S.A. and the investment in Compass Gás e Energia for the same amount was recognized.
On January 30, 2020, we acquired, through our subsidiary Comercializadora de Gás S.A., control of Compass Comercializadora de Energia Ltda., Compass Geração Ltda. and Compass Energia Ltda. for an amount equivalent to R$95,000 (Note 8.2). The purpose of the investment is to enter the electricity and natural gas trading business. On March 9, 2020, we announced the creation of “Compass Gás e Energia,” our new gas and power business segment. Compass Gás e Energia is the newest entity in our group. It was created to provide gas and energy solutions in Brazil. We believe that the natural gas and energy markets are undergoing transformation and integration globally, but that this process is still in its early stages in Brazil. Through Compass, we are endeavoring to meet the increasingly demanding needs of our customers for tailor-made solutions in gas and energy. In doing so, we are focusing on four pillars: (1) infrastructure which brings natural gas from thepre-salt offshore reserves and international markets into Brazil; (2) a distribution system relying on Brazil’s largest distributor of piped natural gas, i.e., Comgás; (3) energy generation by converting natural gas into electricity; and (4) trading of gas and electricity to power industries and businesses.
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Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
Cybersecurity Incident
On March 11, 2020, the Company, its subsidiaries, jointly controlled and affiliated companies were subject to a ransomware cyberattack that caused a partial and temporary interruption of its operations. The affected entities within our group implemented their contingency plans, continued operating partially during the cyberattack, and have been progressively reconnecting their operating systems since the attack.
Following the incident, we have taken certain additional preventative measures to reduce cyber risks, including engaging a company to carry out a forensic analysis of the cyberattack we suffered, which affected the data center located at our Shared Service Center as well as user desktops and laptops connected to our network. Based on the experience and tools of the company we engaged, interviews with our information technology personnel and technical evidence present in the environment, we identified a number of servers to be examined in more detail. Although the entrance vector of the cyber-attack could not be identified, the process and characteristics of the cyber-attack could be satisfactorily identified. We believe this will assist us in reviewing our information technology systems to prevent further cyber-attacks.
As of April 30, 2020, we have spent approximately R$7,000 in connection with the abovementioned cyber-attack, including with respect to prevention, detection, response and management costs, deployment of additional cyber-security technologies and engaging third-party experts.
Covid-19
On March 11, 2020, the World Health Organization officially declared thisCovid-19 outbreak a pandemic. Our business has been and will continue to be adversely affected by the coronavirus pandemic and, as a consequence, some of our businesses decided to suspend the guidance for 2020.
The Company implemented a contingency plan with the objective of preserving the health and integrity of its employees and partners, in addition to ensuring the safety and continuity of operations considered essential activities, as it is a strategic input in hospitals, safety, food and energy.
Despite the measures taken to curb the progress ofCovid-19 and the aid measures announced by governments worldwide, including the Brazilian government, to date, we cannot
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Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
predict the extent, duration and impacts of these containment measures or the results of aid measures in the countries where we operate and / or sell our products. Based on the information available, the main assessments and, where applicable, the main effects of theCovid-19 pandemic on our results of operations are:
a) | Government assistance measures |
Several measures of economic and financial assistance were introduced by the federal entities, with the objective of assisting companies in mitigating the effects of the pandemic, with emphasis on the following, which were adopted by the companies of the Group:
i. | Ordinance of the Ministry of Economy No. 139 and No. 150 postponed the term for collecting the following federal taxes, due to theCOVID-19 pandemic. The (a) Social contributions due by employers and domestic employers related to March and April, 2020 should be paid in August and October, 2020, respectively; and (b) PIS/PASEP and COFINS contributions regarding March and April, 2020 were also postponed to August and October, 2020, respectively. |
ii. | Provisional Measure No. 927. Provisional Measure No. 927 suspended the enforceability of the FGTS payments by employers concerning March, April and May of 2020, with maturity in April, May and June, respectively, which can be paid as from July in up to six installments. |
iii. | Provisional Measure No. 932. The Provisional Measure No. 932 reduces, until June 30, 2020, the rates of contributions to autonomous social services. The reductions were different for each entity that belongs to autonomous social services, varying from 0.05% to 1.25%. |
iv. | Federal Decree No. 10,305. The Federal Decree No. 10,305 reduces to zero the tax on financial transactions (Imposto sobre Operações Financeiras), or “IOF,” applicable to credit transactions contracted between April 3 and July 3, 2020. |
v. | Ordinance of the Ministry of Economy No. 201. Ordinance No. 201 extended the maturity date of the monthly installments related to the installment programs administered by the Special Secretariat of the Federal Revenue of Brazil (Receita Federal do Brasil), or “RFB,” and by the National Treasury Attorney’s Office (Procuradoria-Geral da Fazenda Nacional), or “PGFN.” As a result, the installments due in May, June and July 2020 are extended until the last business day of August, October and December 2020, respectively. |
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Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
vi. | Commitment signed between Comgás and the Government of the State of São Paulo to maintain the supply of gas to defaulting customers until May 31, 2020. |
b) | Impact on interim financial statements |
The Company ended the period ended March 31, 2020 with cash of R$6,984,529, positive net working capital of R$ 6,506,671 and a profit of R$ 525,479 million.
In order to preventively reinforce the liquidity level during this period of high volatility, in March and April 2020, financing lines were contracted and used with financial institutions in the amount of R$ 4,150,272, without any financial covenant clauses. Considering the current level of liquidity, the additional initiatives mentioned above, other lines of credit under negotiation and the prospects for the short and medium term, the Company does not foresee a material concern of its operational and financial capacity that could affect the Company’s continuity.
Our covenants are assessed monthly for our need to generate sufficient cash flows to meet indebtedness and our ability to meet the covenants contained in the contracts that govern our indebtedness. As of March 31, 2020, the Company’s leverage (gross debt / pro forma EBITDA) was 2.3x (2.3x as of December 31, 2019). As of March 31, 2020, the Company and its subsidiaries have been complying with all restrictive financial clauses.
Amid high market volatility, the Company believes that, at that moment, there will be a shift in cash flow between the months with circulation restrictions for the following months. Additionally, considering the low level of interest rates in Brazil and in the locations of our subsidiaries, we believe that despite the short-term fluctuations in some macroeconomic assumptions due to the impacts of theCovid-19 pandemic, our weighted average cost of capital should not change materials.
The Company assessed the circumstances that could indicate the impairment of itsnon-financial assets and concluded that there were no changes in the circumstances that would indicate an impairment loss. Therefore, the main long-term
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Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
assumptions applied in the preparation of the cash flow models remain unchanged for the assessment of the impairment analysis. As a conclusion, it was verified that the discounted cash flows when compared to the book value of each segment, would result in a recoverable value higher than the book value. Our tax recovery projections are based on the same scenarios and assumptions above.
Losses due to thenon-recoverability of financial assets were calculated based on the credit risk analysis, which includes the history of losses, the individual situation of customers, the situation of the economic group to which they belong, the real guarantees for debts and macroeconomic indicators, and is considered, on March 31, 2020, sufficient to cover possible losses on the amounts receivable, in addition to a prospective assessment that takes into account the change or expected change in economic factors that affect the expected credit losses, which will be determined based on weighted probabilities and measured at an amount equal to the expected credit loss for life.
The maximum exposure to the Company’s credit risk, net of losses due to thenon-recoverability of financial assets, is the value of accounts receivable. The credit quality of accounts receivable falling due is considered adequate, and the amount of the effective risk of possible losses in accounts receivable from customers is presented as losses due to thenon-recoverability of financial assets. Other counterparty credit risks for cash and cash equivalents, marketable securities, restricted cash and derivative financial instruments are determined by rating agencies widely accepted by the market. Balances are allocated to institutions with a minimum grade of “A.” As of March 31, 2020, there was no deterioration in credit risk in these counterparties.
The Company will continue, throughout 2020, its constant monitoring of the market seeking to identify any deterioration, significant drop in demand from the sectors in which we operate, relevant changes in the economy or financial market that lead to an increase in the perception of credit risk on accounts a receive from customers. Eventual changes that deteriorate the economic and business environment, if manifested at a greater intensity than anticipated in the scenarios evaluated by the Company, may result in an additional expected credit loss recognition.
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Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
Inventories are valued based on the loweer of the historical acquisition or production cost and the net realizable value. The Company uses the estimated sale price in the normal course of business to estimate the net realizable value, therefore, a decline in the level of activity in the domestic or international markets in which the Company operates, as a result of theCovid-19 pandemic and measures to contain it, can affect the demand and price of these products and have an adverse effect on the realizable value of inventories. As our inventories are substantially comprised of lubricants, basic oil and materials for the construction of gas pipelines that are products that are not valid or have a long duration, we have identified any additional indicators of impairment.
At Raízen, the decline in prices, mainly for ethanol in Brazil and Oil products in Argentina, impacted both by the drop in consumption caused by social isolation and by the reduction in international prices, resulted in the recognition of a provision for loss of R$99,623 in March 31, 2020.
To date, there have been no changes in the scope of the Company’s leases, no adjustments to the right of use, including adding or terminating the right to use one or more underlying assets, or extending or reducing the term of the contractual lease. We also believe that there has been no change in the consideration for the leases that we are both lessees and lessors.
2 | Statement of compliance |
The consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB). They do not include all the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Company’s financial position and performance since the last annual consolidated financial statements as at and for the period ended March 31, 2020.
These interim financial statements were prepared following the basis of preparation and accounting policies consistent with those adopted in the preparation of the financial statements of December 31, 2019 and should be read together.
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Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
The information in the explanatory notes that have not undergone significant changes compared to December 31, 2019 has not been fully presented in this quarterly information.
On December 2, 2019, Cosan S.A. sold its shares in Cosan Biomassa S.A. to Raízen Energia S.A. The comparative consolidated statement of profit or loss and statements of cash flows have been restated to show the discontinued operation separately from continuing operations (See Note 24).
These consolidated financial statements were authorized for issue by the Board of Directors on May 29, 2020.
3 | Accounting policies |
These interim consolidated financial statements were prepared based on the preparation basis and accounting policies consistent with those adopted in the preparation of the financial statements as of December 31, 2019.
4 | Segment information |
The following segment information is used by Cosan’s senior management (the “Chief Operating Decision Maker”) to assess the performance of the operating segments and to make decisions with regards to the allocation of resources. This information is prepared on a basis consistent with the accounting policies used in the preparation of the interim consolidated financial statements. Cosan evaluates the performance of its operating segments based on the measure of Earnings Before Interest Tax, Depreciation and Amortization (“EBITDA”).
Reported segments:
i. | Raízen Energia: production and marketing of a variety of products derived from sugar cane, including raw sugar (Very High Polarization, or “VHP”), anhydrous and hydrated ethanol, and activities related to energy cogeneration from sugarcane bagasse. In addition, this segment holds interests in companies engaged in research and development on new technology. |
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Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
ii. | Raízen Combustíveis: distribution and marketing of fuels, mainly through a franchised network of service stations under the “Shell” brand throughout Brazil, petroleum refining, the operation of fuel resellers, a convenience store business, the manufacture and sale of automotive and industrial lubricants, and the production and sale of liquefied petroleum gas throughout Argentina; |
iii. | Gas and Energy: its main activities are: (i) distribution of piped natural gas in part of the state of São Paulo to customers in the industrial, residential, commercial, automotive and cogeneration sectors; (ii) commercialization in electricity and natural gas; (iii) infrastructure in the regasification terminal and offshore gas pipeline; (iv) Thermal generation and natural gas. |
iv. | Logistics: logistics services for rail transportation, storage and port loading of commodities, mainly for grains and sugar, leasing of locomotives, wagons and another railway equipment; |
v. | Moove: production and distribution of lubricants under the Mobil brand in Brazil, Argentina, Bolivia, Uruguay, Paraguay, the United States of America and Europe, as well as in the European and Asian markets under the “Comma” trademark and corporate activities; and |
Reconciliation:
i. | Cosan Corporate: digital wallet platform and other investments, in addition to the corporate activities of the Company. The Cosan corporate segment includes the financing subsidiaries for the Cosan group. |
Although, Raízen Energia and Raízen Combustíveis are equity accounted joint ventures and are no longer proportionally consolidated, senior management continues to review segment information. A reconciliation of these segments is presented in the column “Deconsolidated effects.”
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Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
March 31, 2020 | ||||||||||||||||||||||||||||||||||||||||
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Reported segments | Reconciliation | Consolidated | ||||||||||||||||||||||||||||||||||||||
Raízen Energia | Raízen Combustíveis | Gas and Energy | Moove | Logistics | Cosan Corporate | Deconsolidated effects | Segment elimination | |||||||||||||||||||||||||||||||||
Brazil | Argentina | |||||||||||||||||||||||||||||||||||||||
Statement of profit or loss: | ||||||||||||||||||||||||||||||||||||||||
Gross sales | 9,455,018 | 21,610,931 | 4,187,768 | 3,098,875 | 1,313,842 | 1,498,350 | 98 | (35,253,717 | ) | (7,662 | ) | 5,903,503 | ||||||||||||||||||||||||||||
Domestic market(i) | 4,910,943 | 21,610,931 | 4,187,768 | 3,098,875 | 1,260,713 | 1,256,778 | 98 | (30,709,642 | ) | (7,662 | ) | 5,608,802 | ||||||||||||||||||||||||||||
External market(i) | 4,544,075 | — | — | — | 53,129 | 241,572 | — | (4,544,075 | ) | — | 294,701 | |||||||||||||||||||||||||||||
Net sales | 8,995,333 | 20,537,673 | 2,986,452 | 2,475,345 | 1,031,167 | 1,423,563 | 92 | (32,519,458 | ) | (7,662 | ) | 4,922,505 | ||||||||||||||||||||||||||||
Cost of sales | (8,179,782 | ) | (19,744,529 | ) | (2,732,934 | ) | (1,680,462 | ) | (804,738 | ) | (1,071,168 | ) | (1,505 | ) | 30,657,245 | 7,662 | (3,550,211 | ) | ||||||||||||||||||||||
Gross profit | 815,551 | 793,144 | 253,518 | 794,883 | 226,429 | 352,396 | (1,414 | ) | (1,862,213 | ) | — | 1,372,294 | ||||||||||||||||||||||||||||
Selling expenses | (209,245 | ) | (368,841 | ) | (190,759 | ) | (158,828 | ) | (119,623 | ) | (9,152 | ) | (1,002 | ) | 768,845 | — | (288,605 | ) | ||||||||||||||||||||||
General and administrative expenses | (144,462 | ) | (127,058 | ) | (37,248 | ) | (85,668 | ) | (46,670 | ) | (98,435 | ) | (64,546 | ) | 308,768 | — | (295,319 | ) | ||||||||||||||||||||||
Other income (expenses), net | 269,821 | 113,046 | 24,485 | 10,688 | 28,341 | (91,903 | ) | (74,988 | ) | (407,352 | ) | — | (127,862 | ) | ||||||||||||||||||||||||||
Interest in earnings of associates | — | (13,310 | ) | — | 4 | — | 2,420 | 468,721 | 13,310 | (467,904 | ) | 3,241 | ||||||||||||||||||||||||||||
Interest in earnings of joint ventures | (4,338 | ) | 449 | — | — | — | — | 191,344 | 3,889 | — | 191,344 | |||||||||||||||||||||||||||||
Finance results, net | (336,010 | ) | (165,145 | ) | (51,673 | ) | (595 | ) | (39,040 | ) | (530,666 | ) | 185,902 | 552,828 | — | (384,399 | ) | |||||||||||||||||||||||
Finance expense | (228,080 | ) | (278,501 | ) | (23,775 | ) | (89,481 | ) | (8,112 | ) | (1,340,112 | ) | (789,929 | ) | 530,356 | — | (2,227,634 | ) | ||||||||||||||||||||||
Finance income | 97,332 | 75,158 | 7,491 | 206,133 | 9,987 | 36,443 | 217,884 | (179,981 | ) | — | 470,447 | |||||||||||||||||||||||||||||
Foreign exchange, net | (608,211 | ) | (2,879,339 | ) | (30,724 | ) | (151,280 | ) | (74,013 | ) | (1,575,764 | ) | (1,400,383 | ) | 3,518,274 | — | (3,201,440 | ) | ||||||||||||||||||||||
Derivatives | 402,949 | 2,917,537 | (4,665 | ) | 34,033 | 33,098 | 2,348,767 | 2,158,330 | (3,315,821 | ) | — | 4,574,228 | ||||||||||||||||||||||||||||
Income tax (expense)benefit | (109,232 | ) | (96,560 | ) | (11,633 | ) | (182,896 | ) | (13,612 | ) | 98,831 | 152,462 | 217,425 | — | 54,785 | |||||||||||||||||||||||||
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Profit for the period | 282,085 | 135,725 | (13,310 | ) | 377,588 | 35,825 | (276,509 | ) | 856,479 | (404,500 | ) | (467,904 | ) | 525,479 | ||||||||||||||||||||||||||
Profit (loss) attributable to: | ||||||||||||||||||||||||||||||||||||||||
Owners of the Company | 244,384 | 137,284 | (13,310 | ) | 372,196 | 25,286 | (59,046 | ) | 865,602 | (368,358 | ) | (557,385 | ) | 646,653 | ||||||||||||||||||||||||||
Non-controlling interests | 37,701 | (1,559 | ) | — | 5,392 | 10,539 | (217,463 | ) | (9,123 | ) | (36,142 | ) | 89,481 | (121,174 | ) | |||||||||||||||||||||||||
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282,085 | 135,725 | (13,310 | ) | 377,588 | 35,825 | (276,509 | ) | 856,479 | (404,500 | ) | (467,904 | ) | 525,479 | |||||||||||||||||||||||||||
Other select data | ||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 1,197,519 | 78,221 | 142,584 | 116,762 | 23,468 | 419,184 | 3,712 | (1,418,324 | ) | — | 563,126 | |||||||||||||||||||||||||||||
EBITDA | 1,924,846 | 475,651 | 192,580 | 677,841 | 111,945 | 574,510 | 521,827 | (2,593,077 | ) | (467,904 | ) | 1,418,219 | ||||||||||||||||||||||||||||
Additions to PP&E, intangible and Contracts assets | 1,068,310 | 74,922 | 87,372 | 250,758 | 3,140 | 561,094 | 5,372 | (1,230,604 | ) | — | 820,364 | |||||||||||||||||||||||||||||
Reconciliation of EBITDA | ||||||||||||||||||||||||||||||||||||||||
Profit (loss) for the period | 282,085 | 135,725 | (13,310 | ) | 377,588 | 35,825 | (276,509 | ) | 856,479 | (404,500 | ) | (467,904 | ) | 525,479 | ||||||||||||||||||||||||||
Income tax and (expense) benefit | 109,232 | 96,560 | 11,633 | 182,896 | 13,612 | (98,831 | ) | (152,462 | ) | (217,425 | ) | — | (54,785 | ) | ||||||||||||||||||||||||||
Finance results, net | 336,010 | 165,145 | 51,673 | 595 | 39,040 | 530,666 | (185,902 | ) | (552,828 | ) | — | 384,399 | ||||||||||||||||||||||||||||
Depreciation and amortization | 1,197,519 | 78,221 | 142,584 | 116,762 | 23,468 | 419,184 | 3,712 | (1,418,324 | ) | — | 563,126 | |||||||||||||||||||||||||||||
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EBITDA | 1,924,846 | 475,651 | 192,580 | 677,841 | 111,945 | 574,510 | 521,827 | (2,593,077 | ) | (467,904 | ) | 1,418,219 | ||||||||||||||||||||||||||||
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(i) | Domestic markets: sales within the countries where each entity is located; external markets: sales export. |
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Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
March 31, 2019 (Restated) | ||||||||||||||||||||||||||||||||||||||||
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Reported segments | Reconciliation | Consolidated | ||||||||||||||||||||||||||||||||||||||
Raízen Energia | Raízen Combustíveis | Gas and Energy | Moove | Logistics | Cosan Corporate | Deconsolidated effects | Segment elimination | |||||||||||||||||||||||||||||||||
Brazil | Argentina | |||||||||||||||||||||||||||||||||||||||
Statement of profit or loss: | ||||||||||||||||||||||||||||||||||||||||
Gross sales | 7,560,998 | 21,073,405 | 4,390,694 | 2,607,433 | 1,282,348 | 1,722,438 | — | (33,025,097 | ) | (9,432 | ) | 5,602,787 | ||||||||||||||||||||||||||||
Domestic market (i) | 5,749,207 | 21,073,405 | 4,390,694 | 2,607,433 | 1,234,640 | 1,722,438 | — | (31,213,306 | ) | (9,432 | ) | 5,555,079 | ||||||||||||||||||||||||||||
External market (i) | 1,811,791 | — | — | — | 47,708 | — | — | (1,811,791 | ) | — | 47,708 | |||||||||||||||||||||||||||||
Net sales | 7,120,028 | 20,033,141 | 3,128,122 | 2,060,052 | 1,034,341 | 1,634,946 | (1 | ) | (30,281,291 | ) | (9,432 | ) | 4,719,906 | |||||||||||||||||||||||||||
Cost of sales | (6,651,275 | ) | (19,120,447 | ) | (2,779,020 | ) | (1,498,927 | ) | (826,358 | ) | (1,153,474 | ) | — | 28,550,742 | 9,432 | (3,469,327 | ) | |||||||||||||||||||||||
Gross profit | 468,753 | 912,694 | 349,102 | 561,125 | 207,983 | 481,472 | (1 | ) | (1,730,549 | ) | — | 1,250,579 | ||||||||||||||||||||||||||||
Selling expenses | (235,450 | ) | (342,945 | ) | (163,613 | ) | (149,238 | ) | (112,024 | ) | (2,843 | ) | (25 | ) | 742,008 | — | (264,130 | ) | ||||||||||||||||||||||
General and administrative expenses | (124,437 | ) | (130,697 | ) | (31,874 | ) | (83,607 | ) | (37,643 | ) | (83,226 | ) | (53,488 | ) | 287,008 | — | (257,964 | ) | ||||||||||||||||||||||
Other income (expenses), net | 48,030 | 260,632 | 20,006 | 3,469 | 1,038 | (21,527 | ) | 15,732 | (328,668 | ) | — | (1,288 | ) | |||||||||||||||||||||||||||
Interest in earnings of associates | — | 110,742 | — | — | 1,725 | 4,750 | 362,640 | (110,742 | ) | (397,231 | ) | (28,116 | ) | |||||||||||||||||||||||||||
Interest in earnings of joint ventures | 4,689 | 1 | — | — | — | — | 303,833 | (4,690 | ) | — | 303,833 | |||||||||||||||||||||||||||||
Finance results, net | (155,050 | ) | 33,868 | (104,908 | ) | (52,477 | ) | (3,118 | ) | (324,445 | ) | (139,350 | ) | 226,090 | — | (519,390 | ) | |||||||||||||||||||||||
Finance expense | (316,305 | ) | (176,802 | ) | (17,291 | ) | (99,040 | ) | (10,703 | ) | (435,118 | ) | (259,173 | ) | 510,398 | — | (804,034 | ) | ||||||||||||||||||||||
Finance income | 125,371 | 61,695 | 5,273 | 46,634 | 3,509 | 41,876 | 34,397 | (192,339 | ) | — | 126,416 | |||||||||||||||||||||||||||||
Foreign exchange, net | 26,488 | 58,706 | (92,890 | ) | (3,316 | ) | (9,252 | ) | (26,945 | ) | (31,304 | ) | 7,696 | — | (70,817 | ) | ||||||||||||||||||||||||
Derivatives | 9,396 | 90,269 | — | 3,245 | 13,328 | 95,742 | 116,730 | (99,665 | ) | — | 229,045 | |||||||||||||||||||||||||||||
Income tax (expense)benefit | 6,890 | (225,469 | ) | 42,029 | (99,332 | ) | (15,371 | ) | (27,811 | ) | 61,226 | 176,550 | — | (81,288 | ) | |||||||||||||||||||||||||
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Profit (loss) from continuing operations | 13,425 | 618,826 | 110,742 | 179,940 | 42,590 | 26,370 | 550,567 | (742,993 | ) | (397,231 | ) | 402,236 | ||||||||||||||||||||||||||||
Loss from discontinued operations | — | — | — | — | — | — | (5,807 | ) | — | — | (5,807 | ) | ||||||||||||||||||||||||||||
Profit (loss) attributable to: | ||||||||||||||||||||||||||||||||||||||||
Owners of the Company | 12,645 | 598,014 | 110,742 | 159,830 | 29,389 | 5,084 | 541,164 | (721,401 | ) | (545,252 | ) | 190,215 | ||||||||||||||||||||||||||||
Non-controlling interests | 780 | 20,812 | — | 20,110 | 13,201 | 21,286 | 3,596 | (21,592 | ) | 148,021 | 206,214 | |||||||||||||||||||||||||||||
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13,425 | 618,826 | 110,742 | 179,940 | 42,590 | 26,370 | 544,760 | (742,993 | ) | (397,231 | ) | 396,429 | |||||||||||||||||||||||||||||
Other select data | ||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 728,597 | 83,315 | 102,530 | 115,395 | 20,480 | 422,455 | 3,642 | (914,442 | ) | — | 561,972 | |||||||||||||||||||||||||||||
EBITDA | 890,182 | 893,742 | 276,151 | 447,144 | 81,559 | 801,081 | 626,526 | (2,060,075 | ) | (397,231 | ) | 1,559,079 | ||||||||||||||||||||||||||||
Additions to PP&E, intangible and Contracts assets | 1,078,021 | 72,995 | 18,480 | 146,182 | 3,282 | 542,608 | 1,536 | (1,169,496 | ) | — | 693,608 | |||||||||||||||||||||||||||||
Reconciliation of EBITDA | ||||||||||||||||||||||||||||||||||||||||
Profit (loss) for the period | 13,425 | 618,826 | 110,742 | 179,940 | 42,590 | 26,370 | 550,567 | (742,993 | ) | (397,231 | ) | 402,236 | ||||||||||||||||||||||||||||
Income tax and (expense) benefit | (6,890 | ) | 225,469 | (42,029 | ) | 99,332 | 15,371 | 27,811 | (61,226 | ) | (176,550 | ) | — | 81,288 | ||||||||||||||||||||||||||
Finance results, net | 155,050 | (33,868 | ) | 104,908 | 52,477 | 3,118 | 324,445 | 139,350 | (226,090 | ) | — | 519,390 | ||||||||||||||||||||||||||||
Depreciation and amortization | 728,597 | 83,315 | 102,530 | 115,395 | 20,480 | 422,455 | 3,642 | (914,442 | ) | — | 561,972 | |||||||||||||||||||||||||||||
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EBITDA | 890,182 | 893,742 | 276,151 | 447,144 | 81,559 | 801,081 | 632,333 | (2,060,075 | ) | (397,231 | ) | 1,564,886 | ||||||||||||||||||||||||||||
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(i) | Domestic markets: sales within the countries where each entity is located; external markets: sales export. |
23
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
March 31, 2020 | ||||||||||||||||||||||||||||||||||||||||
Reported segments | Reconciliation | Consolidated | ||||||||||||||||||||||||||||||||||||||
Raízen Energia | Raízen Combustíveis | Gas and Energy | Moove | Logístics | Cosan Corporate | Deconsolidated effects | Segment elimination | |||||||||||||||||||||||||||||||||
Brazil | Argentina | |||||||||||||||||||||||||||||||||||||||
Statement of financial position: | ||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | 6,473,747 | 1,490,528 | 676,530 | 817,312 | 754,271 | 3,176,949 | 2,235,997 | (8,640,805 | ) | — | 6,984,529 | |||||||||||||||||||||||||||||
Marketable securities | — | — | — | 293,584 | 73,758 | 336,239 | 1,465,844 | — | — | 2,169,425 | ||||||||||||||||||||||||||||||
Trade receivables | 1,166,380 | 1,790,591 | 340,366 | 1,156,515 | 511,918 | 515,036 | 27 | (3,297,337 | ) | — | 2,183,496 | |||||||||||||||||||||||||||||
Derivative financial instruments | 6,218,392 | 3,721,880 | — | 581,254 | 29,921 | 3,971,929 | 3,670,185 | (9,940,272 | ) | — | 8,253,289 | |||||||||||||||||||||||||||||
Inventories | 1,318,242 | 2,356,347 | 1,768,740 | 113,475 | 495,584 | 263,807 | 124 | (5,443,329 | ) | — | 872,990 | |||||||||||||||||||||||||||||
Other financial assets | 472,875 | — | — | — | 71,887 | — | 22,090 | (472,875 | ) | — | 93,977 | |||||||||||||||||||||||||||||
Other current assets | 4,843,335 | 2,851,807 | 1,322,784 | 163,837 | 210,816 | 570,220 | 1,663,011 | (9,017,926 | ) | (948,155 | ) | 1,659,729 | ||||||||||||||||||||||||||||
Othernon-current assets | 5,051,880 | 4,018,985 | 142,690 | 920,541 | 253,426 | 2,773,827 | 1,292,384 | (9,213,555 | ) | (337,797 | ) | 4,902,381 | ||||||||||||||||||||||||||||
Investments in associates | — | 3,364,405 | 356 | 28 | 214 | 49,245 | 13,667,642 | (3,364,761 | ) | (13,338,969 | ) | 378,160 | ||||||||||||||||||||||||||||
Investments in joint ventures | 586,202 | 739,008 | — | — | — | — | 8,012,619 | (1,325,210 | ) | — | 8,012,619 | |||||||||||||||||||||||||||||
Biological assets | 897,315 | — | — | — | — | — | — | (897,315 | ) | — | — | |||||||||||||||||||||||||||||
Property, plant and equipment | 12,672,041 | 2,544,606 | 4,121,641 | 63 | 327,606 | 12,027,768 | 75,159 | (19,338,288 | ) | — | 12,430,596 | |||||||||||||||||||||||||||||
Intangible assets and goodwill | 3,618,231 | 2,547,536 | 10,809 | 8,402,879 | 1,246,608 | 7,339,735 | 21,367 | (6,176,576 | ) | — | 17,010,589 | |||||||||||||||||||||||||||||
Right-of-use assets | 4,390,329 | 138,262 | 570,804 | 9,271 | 39,978 | 4,354,704 | 35,914 | (5,099,395 | ) | — | 4,439,867 | |||||||||||||||||||||||||||||
Loans, borrowings and debentures | (16,862,550 | ) | (7,149,708 | ) | (1,311,384 | ) | (5,351,535 | ) | (760,983 | ) | (14,838,285 | ) | (12,537,831 | ) | 25,323,642 | — | (33,488,634 | ) | ||||||||||||||||||||||
Derivative financial instruments | (5,342,135 | ) | (197,117 | ) | (5,105 | ) | (34,748 | ) | (4,424 | ) | — | (112,699 | ) | 5,544,357 | — | (151,871 | ) | |||||||||||||||||||||||
Trade payables | (6,110,835 | ) | (2,757,074 | ) | (1,359,106 | ) | (1,206,149 | ) | (611,233 | ) | (452,565 | ) | (3,258 | ) | 10,227,015 | — | (2,273,205 | ) | ||||||||||||||||||||||
Employee benefits payable | (446,377 | ) | (113,057 | ) | (68,068 | ) | (48,574 | ) | (44,423 | ) | (147,004 | ) | (20,676 | ) | 627,502 | — | (260,677 | ) | ||||||||||||||||||||||
Preferred shareholders payable in subsidiaries | — | — | — | — | — | — | (618,935 | ) | — | — | (618,935 | ) | ||||||||||||||||||||||||||||
Leases | (3,737,662 | ) | (145,492 | ) | (528,594 | ) | (10,061 | ) | (44,890 | ) | (4,508,791 | ) | (38,553 | ) | 4,411,748 | — | (4,602,295 | ) | ||||||||||||||||||||||
Other current liabilities | (2,756,105 | ) | (4,076,518 | ) | (1,408,754 | ) | (414,482 | ) | (264,151 | ) | (547,856 | ) | (1,128,631 | ) | 8,241,377 | 467,690 | (1,887,430 | ) | ||||||||||||||||||||||
Othernon-current liabilities | (1,931,963 | ) | (5,188,695 | ) | (908,948 | ) | (2,055,943 | ) | (512,093 | ) | (6,536,908 | ) | (1,855,651 | ) | 8,029,606 | 818,258 | (10,142,337 | ) | ||||||||||||||||||||||
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Total assets (net of liabilities) allocated by segment | 10,521,342 | 5,936,294 | 3,364,761 | 3,337,267 | 1,773,790 | 8,348,050 | 15,846,129 | (19,822,397 | ) | (13,338,973 | ) | 15,966,263 | ||||||||||||||||||||||||||||
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Total assets | 47,708,969 | 25,563,955 | 8,954,720 | 12,458,759 | 4,015,987 | 35,379,459 | 32,162,363 | (82,227,644 | ) | (14,624,921 | ) | 69,391,647 | ||||||||||||||||||||||||||||
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Shareholders’ equity attributable to: | ||||||||||||||||||||||||||||||||||||||||
Equity attributable to owners of the Company | 10,414,654 | 5,677,266 | 3,364,761 | 3,278,001 | 1,235,513 | 1,689,758 | 5,276,527 | (19,456,681 | ) | (6,203,273 | ) | 5,276,526 | ||||||||||||||||||||||||||||
Non-controlling interests | 106,688 | 259,028 | — | 59,266 | 538,277 | 6,658,292 | 10,569,602 | (365,716 | ) | (7,135,700 | ) | 10,689,737 | ||||||||||||||||||||||||||||
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Total shareholders’ equity | 10,521,342 | 5,936,294 | 3,364,761 | 3,337,267 | 1,773,790 | 8,348,050 | 15,846,129 | (19,822,397 | ) | (13,338,973 | ) | 15,966,263 |
24
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
December 31, 2019 | ||||||||||||||||||||||||||||||||||||||||
Reported segments | Reconciliation | |||||||||||||||||||||||||||||||||||||||
Raízen Energia | Raízen Combustíveis | Gas and Energy | Moove | Logistics | Cosan Corporate | Deconsolidated effects | Segment elimination | Consolidated | ||||||||||||||||||||||||||||||||
Brazil | Argentina | |||||||||||||||||||||||||||||||||||||||
Statement of financial position: | ||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | 2,715,055 | 1,036,151 | 266,309 | 1,083,410 | 610,605 | 1,963,018 | 4,815,241 | (4,017,515 | ) | — | 8,472,274 | |||||||||||||||||||||||||||||
Marketable securities | — | — | — | 200,233 | 43,856 | 1,751,853 | 1,119,561 | — | — | 3,115,503 | ||||||||||||||||||||||||||||||
Trade receivables | 1,135,079 | 2,455,365 | 442,204 | 987,397 | 427,714 | 399,249 | 34 | (4,032,648 | ) | — | 1,814,394 | |||||||||||||||||||||||||||||
Derivative financial instruments | 2,139,240 | 911,874 | 5,165 | 374,730 | 17,005 | 1,624,023 | 1,808,652 | (3,056,279 | ) | — | 3,824,410 | |||||||||||||||||||||||||||||
Inventories | 4,592,428 | 3,007,893 | 1,099,632 | 89,586 | 449,211 | 248,456 | 69 | (8,699,953 | ) | — | 787,322 | |||||||||||||||||||||||||||||
Other financial assets | 602,542 | — | — | — | 134,636 | — | 17,127 | (602,542 | ) | — | 151,763 | |||||||||||||||||||||||||||||
Other current assets | 7,125,332 | 4,026,776 | 882,624 | 315,744 | 165,070 | 604,988 | 1,307,714 | (12,034,732 | ) | (789,267 | ) | 1,604,249 | ||||||||||||||||||||||||||||
Othernon-current assets | 4,196,166 | 4,231,350 | 62,869 | 685,264 | 156,622 | 2,638,286 | 1,562,821 | (8,490,385 | ) | (488,227 | ) | 4,554,766 | ||||||||||||||||||||||||||||
Investments in associates | — | 2,612,576 | 276 | — | 365 | 52,012 | 12,760,443 | (2,612,852 | ) | (12,435,113 | ) | 377,707 | ||||||||||||||||||||||||||||
Investments in joint ventures | 577,008 | 727,936 | — | — | — | — | 7,548,960 | (1,304,944 | ) | — | 7,548,960 | |||||||||||||||||||||||||||||
Biological assets | 734,495 | — | — | — | — | — | — | (734,495 | ) | — | — | |||||||||||||||||||||||||||||
Property, plant and equipment | 11,342,326 | 2,595,878 | 3,304,040 | — | 310,007 | 11,770,168 | 72,961 | (17,242,244 | ) | — | 12,153,136 | |||||||||||||||||||||||||||||
Intangible assets and goodwill | 3,666,186 | 2,548,927 | 9,637 | 8,291,608 | 1,161,426 | 7,375,033 | 15,592 | (6,224,750 | ) | — | 16,843,659 | |||||||||||||||||||||||||||||
Right-of-use assets | 4,017,503 | 97,374 | 476,251 | 10,128 | 22,592 | 4,410,952 | 26,058 | (4,591,128 | ) | — | 4,469,730 | |||||||||||||||||||||||||||||
Loans, borrowings and debentures | (15,653,705 | ) | (5,745,735 | ) | (912,807 | ) | (5,244,942 | ) | (670,263 | ) | (11,720,477 | ) | (11,416,533 | ) | 22,312,247 | — | (29,052,215 | ) | ||||||||||||||||||||||
Derivative financial instruments | (1,422,923 | ) | (325,018 | ) | — | — | (1,801 | ) | (482 | ) | (78,768 | ) | 1,747,941 | — | (81,051 | ) | ||||||||||||||||||||||||
Trade payables | (5,101,474 | ) | (2,568,885 | ) | (943,789 | ) | (1,154,206 | ) | (515,759 | ) | (513,325 | ) | (6,974 | ) | 8,614,148 | — | (2,190,264 | ) | ||||||||||||||||||||||
Employee benefits payable | (360,414 | ) | (77,692 | ) | (48,752 | ) | (59,928 | ) | (70,068 | ) | (216,685 | ) | (34,656 | ) | 486,858 | — | (381,337 | ) | ||||||||||||||||||||||
Preferred shareholders payable in subsidiaries | — | — | — | — | — | — | (611,537 | ) | — | — | (611,537 | ) | ||||||||||||||||||||||||||||
Leases | (3,504,501 | ) | (103,807 | ) | (439,860 | ) | (10,843 | ) | (27,431 | ) | (4,529,139 | ) | (27,475 | ) | 4,048,168 | — | (4,594,888 | ) | ||||||||||||||||||||||
Other current liabilities | (4,317,609 | ) | (5,859,807 | ) | (856,185 | ) | (683,555 | ) | (217,706 | ) | (711,305 | ) | (1,113,182 | ) | 11,033,601 | 471,622 | (2,254,126 | ) | ||||||||||||||||||||||
Othernon-current liabilities | (2,046,961 | ) | (4,492,725 | ) | (734,762 | ) | (1,998,107 | ) | (408,385 | ) | (6,531,054 | ) | (2,180,300 | ) | 7,274,448 | 805,872 | (10,311,974 | ) | ||||||||||||||||||||||
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Total assets (net of liabilities) allocated by segment | 10,435,773 | 5,078,431 | 2,612,852 | 2,886,519 | 1,587,696 | 8,615,571 | 15,585,808 | (18,127,056 | ) | (12,435,113 | ) | 16,240,481 | ||||||||||||||||||||||||||||
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Total assets | 42,843,360 | 24,252,100 | 6,549,007 | 12,038,100 | 3,499,109 | 32,838,038 | 31,055,233 | (73,644,467 | ) | (13,712,607 | ) | 65,717,873 | ||||||||||||||||||||||||||||
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Equity attributable to owners of the Company | 10,358,052 | 4,808,076 | 2,612,852 | 2,861,954 | 1,107,137 | 1,746,668 | 5,401,865 | (17,778,980 | ) | (5,715,758 | ) | 5,401,866 | ||||||||||||||||||||||||||||
Non-controlling interests | 77,721 | 270,355 | — | 24,565 | 480,559 | 6,868,903 | 10,183,943 | (348,076 | ) | (6,719,355 | ) | 10,838,615 | ||||||||||||||||||||||||||||
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Total shareholders’ equity | 10,435,773 | 5,078,431 | 2,612,852 | 2,886,519 | 1,587,696 | 8,615,571 | 15,585,808 | (18,127,056 | ) | (12,435,113 | ) | 16,240,481 |
25
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
4.1 | Net sales by segment |
March 31, 2020 | March 31, 2019 (Restated) | |||||||
Reported segment | ||||||||
Raízen Energia | ||||||||
Ethanol | 3,669,801 | 2,950,545 | ||||||
Sugar | 2,302,881 | 1,581,597 | ||||||
Gas | 824,047 | 623,530 | ||||||
Diesel | 1,512,534 | 1,199,276 | ||||||
Cogeneration | 667,281 | 735,880 | ||||||
Other | 18,789 | 29,200 | ||||||
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8,995,333 | 7,120,028 | |||||||
Raízen Combustíveis | ||||||||
Fuels | 23,240,477 | 22,773,876 | ||||||
Other | 283,648 | 387,387 | ||||||
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23,524,125 | 23,161,263 | |||||||
Gas and Energy | ||||||||
Natural gas | ||||||||
Industrial | 1,487,813 | 1,388,407 | ||||||
Residential | 311,140 | 210,928 | ||||||
Cogeneration | 94,195 | 103,523 | ||||||
Automotive | 76,296 | 79,969 | ||||||
Commercial | 126,311 | 103,927 | ||||||
Construction revenue | 197,221 | 159,936 | ||||||
Other | 13,594 | 13,362 | ||||||
Electricity trading | 168,775 | — | ||||||
|
|
|
| |||||
2,475,345 | 2,060,052 | |||||||
Moove | ||||||||
Finished goods | 953,350 | 936,818 | ||||||
Basic oil | 51,394 | 90,757 | ||||||
Services | 26,423 | 6,766 | ||||||
|
|
|
| |||||
1,031,167 | 1,034,341 | |||||||
Logistics | ||||||||
North operations | 1,084,961 | 1,240,003 | ||||||
South operations | 267,879 | 328,422 | ||||||
Container operations | 70,723 | 66,521 | ||||||
|
|
|
| |||||
1,423,563 | 1,634,946 | |||||||
Reconciliation | ||||||||
Cosan Corporate | 92 | (1 | ) | |||||
|
|
|
| |||||
Deconsolidated effects and eliminations | (32,527,120 | ) | (30,290,723 | ) | ||||
|
|
|
| |||||
Total | 4,922,505 | 4,719,906 | ||||||
|
|
|
|
26
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
5 | Financial assets and liabilities |
The carrying amount of financial assets and financial liabilities are as follows:
Note | March 31, 2020 | December 31, 2019 | ||||||||||
Assets | ||||||||||||
Fair value through profit or loss | ||||||||||||
Cash and cash equivalents | 5.1 | 1,629,857 | 3,279,170 | |||||||||
Marketable securities | 5.2 | 2,169,425 | 3,115,503 | |||||||||
Other financial assets | 93,977 | 134,637 | ||||||||||
Derivate financial instruments | 5.8 | 8,253,289 | 3,824,410 | |||||||||
|
|
|
| |||||||||
12,146,548 | 10,353,720 | |||||||||||
Amortized cost | ||||||||||||
Cash and cash equivalents | 5.1 | 5,354,672 | 5,193,104 | |||||||||
Trade receivables | 5.3 | 2,183,496 | 1,814,394 | |||||||||
Restricted cash | 5.2 | 129,667 | 147,910 | |||||||||
Receivables from related parties | 5.4 | 185,877 | 173,341 | |||||||||
Dividends receivable | 44,301 | 23,252 | ||||||||||
|
|
|
| |||||||||
7,898,013 | 7,352,001 | |||||||||||
|
|
|
| |||||||||
Total assets | 20,044,561 | 17,705,721 | ||||||||||
|
|
|
|
Note | March 31, 2020 | December 31, 2019 | ||||||||||
Liabilities | ||||||||||||
Amortized cost | ||||||||||||
Loans, borrowings and debentures | 5.5 | 12,156,614 | 12,682,049 | |||||||||
Leases | 5.6 | 4,602,295 | 4,594,888 | |||||||||
Trade payables | 5.7 | 2,273,205 | 2,190,264 | |||||||||
Other financial liabilities | 430,860 | 543,879 | ||||||||||
Payables to related parties | 5.4 | 402,978 | 392,458 | |||||||||
Preferred shareholders payable in subsidiaries | 618,935 | 611,537 | ||||||||||
Dividends payable | 203,105 | 214,104 | ||||||||||
Tax installments—REFIS | 12 | 204,791 | 213,360 | |||||||||
|
|
|
| |||||||||
20,892,783 | 21,442,539 | |||||||||||
Fair value through profit or loss | ||||||||||||
Loans, borrowings and debentures | 5.5 | 21,332,020 | 16,370,166 | |||||||||
Contingent consideration payable | 202,261 | 184,370 | ||||||||||
Derivative financial instruments | 5.8 | 151,871 | 81,051 | |||||||||
|
|
|
| |||||||||
21,686,152 | 16,635,587 | |||||||||||
|
|
|
| |||||||||
Total liabilities | 42,578,935 | 38,078,126 | ||||||||||
|
|
|
|
5.1 | Cash and cash equivalents |
March 31, 2020 | December 31, 2019 | |||||||
Cash and bank accounts | 611,143 | 364,151 | ||||||
Savings account | 1,160,154 | 885,740 | ||||||
Financial investments | 5,213,232 | 7,222,383 | ||||||
|
|
|
| |||||
6,984,529 | 8,472,274 | |||||||
|
|
|
|
27
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
Financial investments are composed as follows:
March 31, 2020 | December 31, 2019 | |||||||
Investment fund | ||||||||
Repurchase agreements | 1,109,502 | 2,799,706 | ||||||
Bank certificate of deposits—CDB | 520,355 | 479,464 | ||||||
|
|
|
| |||||
1,629,857 | 3,279,170 | |||||||
Bank investments | ||||||||
Repurchase agreements | — | 1,400,735 | ||||||
Bank certificate of deposits—CDB | 3,560,757 | 2,339,058 | ||||||
Other | 22,618 | 203,420 | ||||||
|
|
|
| |||||
3,583,375 | 3,943,213 | |||||||
|
|
|
| |||||
5,213,232 | 7,222,383 | |||||||
|
|
|
|
The Company’s onshore financial investments are remunerated at rates around 97% of the Brazilian interbank offering rate (Certificado de Depósito Interbancário), or “CDI,” at March 31, 2020 (100% of CDI in 2019) and offshore financial investments are remunerated at rates around 100% of Fed Funds. The sensitivity analysis on interest rate risks is in Note 21.
5.2 | Marketable securities and restricted cash |
March 31, 2020 | December 31, 2019 | |||||||
Marketable securities | ||||||||
Government security(i) | 2,055,711 | 2,719,630 | ||||||
Bank certificate of deposit—CDB | 68,829 | 125,413 | ||||||
Repurchase agreements | 44,885 | 270,460 | ||||||
|
|
|
| |||||
2,169,425 | 3,115,503 | |||||||
|
|
|
| |||||
Restricted cash | ||||||||
Investments linked to loans | 68,649 | 86,681 | ||||||
Securities pledged as collateral | 61,018 | 61,229 | ||||||
|
|
|
| |||||
129,667 | 147,910 | |||||||
|
|
|
|
(i) | Government securities have stated interest connected to Special System for Settlement and Custody (Sistema Especial de Liquidação e de Custódia), or “SELIC”. |
5.3 | Trade receivables |
March 31, 2020 | December 31, 2019 | |||||||
Domestic – Local currency | 2,238,860 | 1,874,400 | ||||||
Export – Foreign currency | 74,234 | 60,401 | ||||||
|
|
|
| |||||
2,313,094 | 1,934,801 | |||||||
Expected credit losses | (129,598 | ) | (120,407 | ) | ||||
|
|
|
| |||||
2,183,496 | 1,814,394 | |||||||
|
|
|
| |||||
Current | 2,159,109 | 1,786,095 | ||||||
Non-current | 24,387 | 28,299 | ||||||
|
|
|
| |||||
2,183,496 | 1,814,394 | |||||||
|
|
|
|
28
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
5.4 | Related parties |
a) | Summary of balances to related parties |
March 31, 2020 | December 31, 2019 | |||||||
Current asset | ||||||||
Corporate operation / Agreements | ||||||||
Raízen Energia S.A.(i) | 61,022 | 50,296 | ||||||
Aguassanta Participações S.A. | 538 | 444 | ||||||
Raízen Combustíveis S.A.(i) | 6,782 | 7,588 | ||||||
Other | 456 | 291 | ||||||
|
|
|
| |||||
Total current assets | 68,798 | 58,619 | ||||||
Non-current assets | ||||||||
Corporate operation / Agreements | ||||||||
Raízen Combustíveis S.A.(i) | 38,767 | 36,410 | ||||||
|
|
|
| |||||
38,767 | 36,410 | |||||||
|
|
|
| |||||
Preferred shares | ||||||||
Raízen Energia S.A.(i) | 78,304 | 78,304 | ||||||
Janus Brasil Participações S.A | 8 | 8 | ||||||
|
|
|
| |||||
Totalnon-current assets | 78,312 | 78,312 | ||||||
|
|
|
| |||||
Total assets | 117,079 | 114,722 | ||||||
|
|
|
|
March 31, 2020 | December 31, 2019 | |||||||
Current liabilities | ||||||||
Corporate operations / agreements | ||||||||
Raízen Energia S.A.(i) | 282,643 | 262,612 | ||||||
Raízen Combustíveis S.A.(i) | 118,724 | 127,773 | ||||||
Radar Propriedades Agrícolas S.A. | — | 150 | ||||||
Other | 1,611 | 1,923 | ||||||
|
|
|
| |||||
Total liabilities | 402,978 | 392,458 | ||||||
|
|
|
|
(i) | Current andnon-current assets receivable from Raízen Energia and Raízen Combustíveis are, primarily, tax credits which will be reimbursed to the Company when realized. The preferred shares are used to Raízen reimburse Cosan, with preferential dividends, when the net operating loss is consumed in Raízen. |
Current liabilities represent reimburse to Raízen Energia and Raízen Combustíveis related to expenses regarding legal disputes and other liabilities, generated before the formation of joint ventures, which are responsibility of Cosan S.A.
29
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
b) Related party transactions
March 31, 2020 | March 31, 2019 (Restatement) | |||||||
Product sales | ||||||||
Raízen Energia S.A. | 110,833 | 107,803 | ||||||
Raízen Combustíveis S.A | 43,106 | 49,785 | ||||||
Other | 268 | 3,939 | ||||||
|
|
|
| |||||
154,207 | 161,527 | |||||||
Purchase of goods / inputs | ||||||||
Raízen Energia S.A. | (14 | ) | (31 | ) | ||||
Raízen Combustíveis S.A | (250,897 | ) | (278,333 | ) | ||||
|
|
|
| |||||
(250,911 | ) | (278,364 | ) | |||||
Discontinued operation | ||||||||
Raízen Energia S.A | — | (166 | ) | |||||
|
|
|
| |||||
— | (166 | ) | ||||||
Shared expense | ||||||||
Raízen Energia S.A. | (23,436 | ) | (19,034 | ) | ||||
|
|
|
| |||||
(23,436 | ) | (19,034 | ) | |||||
Financial result | ||||||||
Raízen Combustíveis S.A | 2,067 | 1,368 | ||||||
Other | — | (71 | ) | |||||
|
|
|
| |||||
2,067 | 1,297 | |||||||
|
|
|
| |||||
Total | (118,073 | ) | (134,740 | ) | ||||
|
|
|
|
c) Officers’ and directors’ compensation
The Company has a compensation policy approved by the Board of Directors. Compensation of the Company’s key management personnel includes salaries,non-cash benefits and contributions to a post-employment defined benefit plan.
March 31, 2020 | March 31, 2019 | |||||||
Short-term benefits to officers and directors | 18,108 | 23,273 | ||||||
Share-based payment transactions | 4,939 | 2,534 | ||||||
Post-employment benefits | 216 | 169 | ||||||
|
|
|
| |||||
23,263 | 25,976 |
30
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
5.5 | Loans, borrowings and debentures |
Interest | ||||||||||||||||||||||
Description | Index | Annual interest rate | March 31, 2020 | December 31, 2019 | Maturity | Objective | ||||||||||||||||
With guarantee | ||||||||||||||||||||||
BNDES | URTJLP | 7.42 | % | 2,048,571 | 2,213,704 | Dec-29 | Expansion project | |||||||||||||||
Fixed | 5.39 | % | 787,326 | 834,039 | Jan-25 | Expansion project | ||||||||||||||||
TJ462 | 7.89 | % | 101,188 | 144,573 | Oct-20 | Investment | ||||||||||||||||
Selic | 5.52 | % | 51,998 | 73,540 | Oct-20 | Investment | ||||||||||||||||
Selic | 5.68 | % | 48,819 | 52,031 | Jun-23 | Investment | ||||||||||||||||
TJLP | 7.09 | % | 77,224 | 83,174 | Jun-23 | Investment | ||||||||||||||||
TJLP | 5.09 | % | 1,549 | 1,667 | Jun-23 | Investment | ||||||||||||||||
Selic | 5.51 | % | 745 | 1,118 | Sep-20 | Expansion project | ||||||||||||||||
Fixed | 3.50 | % | 1,339 | 1,426 | Jan-24 | Expansion project | ||||||||||||||||
IPCA | 10.79 | % | 1,578 | 1,528 | Nov-21 | Expansion project | ||||||||||||||||
URTJLP | 7.35 | % | 3,476 | 4,952 | Mar-22 | Expansion project | ||||||||||||||||
Export credit agreement (ECA) | Euribor + 0.58% | 0.58 | % | 95,957 | 79,528 | Sep-26 | Investment | |||||||||||||||
EIB | U.S.$ | 3.88 | % | 41,451 | 31,770 | Jun-20 | Investment | |||||||||||||||
U.S.$ | 2.94 | % | 18,982 | 29,081 | Sep-20 | Investment | ||||||||||||||||
U.S.$ + LIBOR | 2.46 | % | 93,761 | 71,129 | May-21 | Investment | ||||||||||||||||
U.S.$ + LIBOR | 1.35 | % | 87,515 | 89,336 | Sep-21 | Investment | ||||||||||||||||
|
|
|
| |||||||||||||||||||
3,461,479 | 3,712,596 | |||||||||||||||||||||
|
|
|
| |||||||||||||||||||
Without guarantee | ||||||||||||||||||||||
Foreign loans | GBP + Libor | 1.61 | % | 129,572 | 106,643 | Dec-21 | Acquisition | |||||||||||||||
GBP + Libor | 2.36 | % | 228,116 | 186,604 | Dec-22 | Acquisition | ||||||||||||||||
GBP + Libor | 2.14 | % | 162,569 | 150,253 | Jul-21 | Acquisition | ||||||||||||||||
Fixed | 1.16 | % | 3,946 | 3,561 | Mar-22 | Investment | ||||||||||||||||
NCE | CDI + 0,80% | 4.48 | % | 503,293 | 512,078 | Dec-23 | Working capital | |||||||||||||||
CDI + 1,03% | 2.92 | % | 80,192 | — | Feb-23 | Working capital | ||||||||||||||||
CDI + 3,05% | 6.81 | % | 200,259 | — | Mar-21 | Working capital | ||||||||||||||||
CDI + 3,15% | 6.91 | % | 448,033 | — | Mar-21 | Working capital | ||||||||||||||||
Perpetual Notes | U.S.$ | 8.25 | % | 2,632,113 | 2,040,752 | Nov-40 | Acquisition | |||||||||||||||
Resolution 4131 | U.S.$ | 4.79 | % | 27,877 | 20,688 | Oct-20 | Working capital | |||||||||||||||
U.S.$ + Libor | 2.90 | % | — | 81,107 | Feb-20 | Working capital | ||||||||||||||||
U.S.$ | 3.67 | % | 430,045 | 313,493 | May-23 | Working capital | ||||||||||||||||
U.S.$ | 1.36 | % | 494,927 | 217,537 | Nov-22 | Working capital | ||||||||||||||||
Senior Notes Due 2023 | U.S.$ | 5.00 | % | 571,561 | 438,985 | Mar-23 | Acquisition | |||||||||||||||
Senior Notes Due 2027 | U.S.$ | 7.00 | % | 4,215,787 | 3,234,647 | Jan-27 | Acquisition | |||||||||||||||
Senior Notes Due 2024 | U.S.$ | 7.38 | % | 4,754,702 | 3,318,895 | Feb-24 | Acquisition | |||||||||||||||
Senior Notes Due 2024 | U.S.$ | 5.95 | % | 1,240,096 | 903,636 | Sep-24 | Acquisition | |||||||||||||||
Senior Notes Due 2025 | U.S.$ | 5.88 | % | 3,087,079 | 2,182,089 | Jan-25 | Acquisition | |||||||||||||||
Senior Notes Due 2029 | Fixed | 5.50 | % | 3,878,276 | 3,071,052 | Sep-29 | Acquisition | |||||||||||||||
Guaranteed account | 122% of CDI | 4.58 | % | 2,428 | — | Aug-20 | Working capital | |||||||||||||||
125.5% of CDI | 5.53 | % | — | 740 | Jan-20 | Working capital | ||||||||||||||||
Prepayment | U.S.$+Libor | 4.87 | % | 51,994 | — | Mar-21 | Working capital | |||||||||||||||
100% Libor | 2.71 | % | 104,350 | 80,932 | Nov-21 | Working capital | ||||||||||||||||
100% Libor 0,76% | 2.72 | % | 52,559 | 40,474 | Oct-20 | Working capital | ||||||||||||||||
Debentures | IGPM + 6,10% | 10.55 | % | 249,706 | 240,900 | May-28 | Working capital | |||||||||||||||
IPCA + 5.57% | 8.58 | % | 104,508 | 108,133 | Sep-20 | Working capital | ||||||||||||||||
IPCA + 7.14% | 10.19 | % | 327,828 | 318,412 | Dec-20 | Working capital | ||||||||||||||||
IPCA + 7.48% | 10.54 | % | 294,965 | 286,271 | Dec-22 | Working capital | ||||||||||||||||
IPCA + 7.36% | 10.42 | % | 97,205 | 94,367 | Dec-25 | Working capital | ||||||||||||||||
IPCA + 5.87% | 8.89 | % | 844,451 | 859,996 | Dec-23 | Working capital | ||||||||||||||||
IPCA + 4.33% | 7.30 | % | 441,795 | 431,817 | Oct-24 | Working capital | ||||||||||||||||
IPCA + 4.68% | 7.66 | % | 549,105 | 570,098 | Feb-26 | Working capital | ||||||||||||||||
IPCA + 4.50% | 7.48 | % | 639,596 | 668,034 | Feb-29 | Working capital | ||||||||||||||||
IPCA + 3,90% | 6.86 | % | 915,255 | 895,249 | Oct-29 | Working capital | ||||||||||||||||
IPCA + 4,00% | 6.96 | % | 224,423 | 219,466 | Oct-29 | Working capital | ||||||||||||||||
106 % of CDI | 4.67 | % | — | 1,727,459 | Feb-21 | Acquisition (i) | ||||||||||||||||
100% CDI + 0,50% | 4.17 | % | 2,038,546 | 2,015,251 | Oct-22 | Working capital | ||||||||||||||||
|
|
|
| |||||||||||||||||||
30,027,157 | 25,339,619 | |||||||||||||||||||||
|
|
|
| |||||||||||||||||||
Total | 33,488,636 | 29,052,215 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||
Current | 2,748,060 | 3,518,225 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||
Non-current | 30,740,574 | 25,533,990 | ||||||||||||||||||||
|
|
|
|
(i) | On December 20, 2019, Cosan S.A. announced a tender offer with an optional early redemption of the debentures from its second issuance ofnon-convertible, single series, unsecured debentures issued in February 28, 2019 and due on February 28, 2021. The optional early full redemption took place on January 16, 2020. Cosan S.A. redeemed debentures in aggregate amount of R$1,735,203. |
31
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
The Company used the annual average rate of the CDI of 3.75% and Brazilian long-term interest rate (taxa de juros de longo prazo), or “TJLP,” of 5.09%.
Non-current borrowings are scheduled to fall due as follows:
March 31, 2020 | December 31, 2019 | |||||||
13 to 24 months | 1,747,771 | 1,813,849 | ||||||
25 to 36 months | 3,894,674 | 3,240,861 | ||||||
37 to 48 months | 6,529,181 | 2,294,198 | ||||||
49 to 60 months | 5,034,888 | 5,032,388 | ||||||
61 to 72 months | 368,074 | 2,520,671 | ||||||
73 to 84 months | 4,710,040 | 456,983 | ||||||
85 to 96 months | 677,031 | 3,821,149 | ||||||
Thereafter | 7,778,915 | 6,353,891 | ||||||
|
|
|
| |||||
30,740,574 | 25,533,990 | |||||||
|
|
|
|
The carrying amounts of loans, borrowings and debentures are denominated in the following currencies:
March 31, 2020 | December 31, 2019 | |||||||
Brazilianreais (R$) | 11,085,402 | 12,360,022 | ||||||
U.S. dollar (U.S.$) | 21,783,072 | 16,165,604 | ||||||
British pound (GBP) | 520,257 | 443,500 | ||||||
Euro (EUR) | 99,903 | 83,089 | ||||||
|
|
|
| |||||
33,488,634 | 29,052,215 | |||||||
|
|
|
|
Below are the movements that occurred for the period ended March 31, 2020:
At December 31, 2019 | 29,052,215 | |||
Raised | 1,008,903 | |||
Amortization of principal | (2,174,247 | ) | ||
Payment of interest | (631,123 | ) | ||
Interest, exchange rate and fair value | 6,232,888 | |||
|
| |||
March 31, 2020 | 33,488,636 | |||
|
|
a) Guarantees
Some financing agreements with the Brazilian National Economic and Social Development Bank (Banco Nacional de Desenvolvimento Econômico e Social), or “BNDES,” of the subsidiaries Comgás and Rumo, are guaranteed by bank guarantee, or by real guarantees (assets) and escrow account. On March 31, 2020, the balance of bank guarantees contracted was R$475,764 and R$2,737,558 with an average cost of 0.99% p.a. and 0.87% p.a., respectively (R$532,558 and R$1,387,627 as of December 31, 2019).
32
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
b) Available credit line
As of March 31, 2020 and on December 31, 2019, the subsidiary Rumo S.A. had available credit lines from BNDES, which were not used, in the total amount of R$1,946,194.
At March 31, 2020 and on December 31, 2019, the subsidiary Cosan S.A. had available credit lines from financial institutions AA, which were not used, in the total amount of R$501,000.
The use of these credit lines is subject to certain contractual conditions.
c) Financial covenants
Under the terms of the major borrowing facilities, the Company and its subsidiaries are required to comply with the following financial covenants:
Debt | Triggers | Ratios | ||
Debenture 3rd Issue—Comgás | Net debt / EBITDA cannot exceed 4.00 | 1.39 | ||
Short-term indebtedness / Total indebtedness cannot exceed 0.6 | 0.17 | |||
Debenture 4th Issue—Comgás | Net debt / EBITDA cannot exceed 4.00 | 1.39 | ||
Short-term indebtedness / Total indebtedness cannot exceed 0.6 | 0.17 | |||
Debenture 5th Issue—Comgás | Net debt / EBITDA cannot exceed 4.00 | 1.39 | ||
Debenture 6th Issue—Comgás | Net debt / EBITDA cannot exceed 4.00 | 1.39 | ||
Debenture 7th Issue—Comgás | Net debt / EBITDA cannot exceed 4.00 | 1.39 | ||
Debenture 8th Issue—Comgás | Net debt / EBITDA cannot exceed 4.00 | 1.39 | ||
Senior Notes 2027—Cosan S.A. | Net debt (i) / EBITDA not higher than or equal to 3.5 | 1.73 | ||
Senior Notes Due 2024 – Cosan Limited | Net debt (i) / EBITDA not higher than or equal to 3.5 | 2.3 | ||
Senior Notes Due 2029 – Cosan Limited | Net debt (i) / EBITDA not higher than or equal to 3.5 | 2.3 | ||
Senior Notes Due 2024 – Rumo | Net debt / EBITDA not higher than or equal to 3.3 | 2.13 | ||
Senior Notes Due 2025—Rumo | Net debt / EBITDA not higher than or equal to 3.3 | 2.13 | ||
BNDES – Rumo | Net Debt / EBITDA not higher than or equal 3.3x in December 2020 | 2.13 | ||
BNDES – Rumo | EBITDA / Consolidated Financial Result not lower than or equal 2.0x in December 2020 | 12.11 |
(i) | Net debt and EBITDApro forma, including joint ventures numbers. |
(ii) | Net debt consists of current andnon-current debt (including preferred shareholders payable in subsidiaries), net of cash and cash equivalents, marketable securities and derivatives on debt recorded in our consolidated financial statements as othernon-current assets. Net debt is anon-GAAP measure. |
(iii) | The effects of initial recognition of IFRS 16 are not part of triggers measures for financial covenants purposes. |
33
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
For the other loans, borrowings and debentures of the Company there are no financial clauses.
As of March 31, 2020, the Company and its subsidiaries were in compliance with all restrictive financial clauses.
d) Fair value and exposure to financial risk
The fair value of the loans is based on the discounted cash flow using its implicit discount rate. They are classified as a level 2 fair value in the hierarchy (Note 5.9) due to the use of unobservable data, including own credit risk.
The details of the Company’s exposure to risks arising from loans are shown in Note 21.
5.6 | Leases |
The balance sheet shows the following amounts relating to leases:
Finance leases | Operating leases | Total | ||||||||||
At January 1, 2020 | 429,591 | 4,165,297 | 4,594,888 | |||||||||
Recognition of interest | 15,857 | 138,519 | 154,376 | |||||||||
Transfer of liabilities(i) | — | (29,894 | ) | (29,894 | ) | |||||||
Payment of principal | (25,336 | ) | (28,657 | ) | (53,993 | ) | ||||||
Payment of interest | (15,701 | ) | (95,107 | ) | (110,808 | ) | ||||||
Contracts monetary correction | — | 47,726 | 47,726 | |||||||||
|
|
|
|
|
| |||||||
At March 31, 2020 | 404,411 | 4,197,884 | 4,602,295 | |||||||||
|
|
|
|
|
| |||||||
Current | 94,284 | 465,243 | 559,527 | |||||||||
Non-current | 310,127 | 3,732,641 | 4,042,768 | |||||||||
|
|
|
|
|
| |||||||
404,411 | 4,197,884 | 4,602,295 | ||||||||||
|
|
|
|
|
|
(i) | Transfer of parcels under litigation to lease and concessions (Note 11). |
The lease agreements have varying expirations, with last due to expire in June 2043. The amounts are adjusted annually for inflation rates (General Market Price Index (Índice Geral de Preços – Mercado), or“IGP-M,” or Extended National Consumer Price Index (Índice Nacional de Preços ao Consumidor Amplo), or “IPCA”) or may incur interest based on the TJLP) or CDI and some contracts have renewal or purchase options that were considered in determining the classification as lease.
34
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
In addition to the amortization and appropriation of interest and exchange variation highlighted in the previous tables, the following impacts on income during the period ended March 31, 2020 were recorded for other lease agreements that were not included in the measurement of lease liabilities:
March 31, 2020 | ||||
Variable lease payments not included in the measurement of lease liabilities | 5,701 | |||
Expenses relating to short-term leases | 162 | |||
Expenses relating to leases oflow-value assets, excluding short-term leases oflow-value assets | 10,965 | |||
|
| |||
16,828 | ||||
|
|
Additional Information
The Company, in full compliance with the rules, in measuring and remeasuring its lease liabilities and the right to use, proceeded to discount the present value of future lease installments without projecting the projected future inflation in the installments to be discounted.
The incremental interest rate (nominal) used by the Company and its subsidiaries was determined based on the interest rates to which the Company has access, adjusted to the Brazilian market and the terms of its contracts. Rates between 10.9% and 14.2% were used, according to the term of each contract.
5.7 | Trade payables |
The carrying amounts of trade and other payables are the same as their fair values, due to their short-term nature.
March 31, 2020 | December 31, 2019 | |||||||
Materials and service suppliers | 1,422,313 | 1,356,978 | ||||||
Natural gas suppliers | 826,952 | 815,798 | ||||||
Other | 23,940 | 17,488 | ||||||
|
|
|
| |||||
2,273,205 | 2,190,264 | |||||||
|
|
|
|
35
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
5.8 | Derivative financial instruments |
To protect the Company’s exposure to risk were are using observable data such as quoted prices in active markets, or discounted cash flow based on market curves, and the consolidated data are presented below:
Notional | Fair value | |||||||||||||||
March 31, 2020 | December 31, 2019 | March 31, 2020 | December 31, 2019 | |||||||||||||
Fuel derivative agreements | ||||||||||||||||
Forward agreements | 13,422 | — | (4,424 | ) | — | |||||||||||
Energy derivative agreements | ||||||||||||||||
Forward agreements | 201,817 | — | 35,400 | — | ||||||||||||
Exchange rate derivatives | ||||||||||||||||
Forward agreements | — | 1,542,535 | — | (30,784 | ) | |||||||||||
Interest rate and exchange rate risk | ||||||||||||||||
Swap agreements (interest rate) | 1,296,459 | 2,633,796 | 570,816 | 692,642 | ||||||||||||
Swap agreements (exchange and interest rate) | 13,364,082 | 10,888,474 | 7,499,626 | 3,081,501 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
14,660,541 | 13,522,270 | 8,070,442 | 3,774,143 | |||||||||||||
Total financial instruments |
| 8,101,418 | 3,743,359 | |||||||||||||
|
|
|
| |||||||||||||
Assets | 8,253,289 | 3,824,410 | ||||||||||||||
|
|
|
| |||||||||||||
Liabilities | (151,871 | ) | (81,051 | ) | ||||||||||||
|
|
|
|
Debt derivative financial instruments are used only for economic hedge purposes and not as speculative investments.
Fair value hedge
Currently the Company has adopted the hedge accounting of fair value for some its operations that both the hedging instruments and the hedged items are accounted for at fair value through profit or loss.
36
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
The effects of the foreign currency-related hedging instruments and interest rate swaps on the Company’s financial position and performance are as follows:
Book value | Accumulated fair value adjustment | |||||||||||||||||||
Notional | March 31, 2020 | December 31, 2019 | March 31, 2020 | December 31, 2019 | ||||||||||||||||
Loans, financing and debentures | ||||||||||||||||||||
Designated items | ||||||||||||||||||||
Debenture 3rd issue—3rd series (Comgás) | 79,299 | (104,657 | ) | (108,356 | ) | (11,122 | ) | (14,822 | ) | |||||||||||
Debenture 5th issue—single series (Comgás) | 684,501 | (852,510 | ) | (868,618 | ) | (74,002 | ) | (90,110 | ) | |||||||||||
Senior notes 2023 (Cosan S.A.) | 519,870 | (571,561 | ) | (438,985 | ) | (169,187 | ) | (99,541 | ) | |||||||||||
Senior notes 2024 (Rumo S.A.) | 3,899,025 | (4,754,702 | ) | (3,318,895 | ) | (1,555,863 | ) | (471,159 | ) | |||||||||||
Senior notes 2025 (Rumo S.A.) | 2,599,350 | (3,087,079 | ) | (2,182,089 | ) | (965,774 | ) | (295,208 | ) | |||||||||||
Senior notes 2024 (Cosan Limited) | 1,039,740 | (1,240,096 | ) | (903,636 | ) | (24,850 | ) | (865,908 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total debt | 8,821,785 | (10,610,605 | ) | (7,820,579 | ) | (2,800,798 | ) | (1,836,748 | ) | |||||||||||
Derivative financial instruments | ||||||||||||||||||||
Hedge instruments | ||||||||||||||||||||
Debenture 3rd issue swaps—3rd series (Comgás) | (79,299 | ) | 22,114 | 24,842 | 2,781 | 5,510 | ||||||||||||||
Debenture 5th issue swaps—single series (Comgás) | (684,501 | ) | 153,529 | 175,262 | 66,850 | 88,583 | ||||||||||||||
Senior swaps notes 2023 (Cosan S.A.) | (519,870 | ) | 392,170 | 227,315 | 158,333 | 128,357 | ||||||||||||||
Senior swaps notes 2024 (Rumo S.A.) | (3,899,025 | ) | 2,359,865 | 989,022 | 1,398,777 | 340,264 | ||||||||||||||
Senior swaps notes 2025 (Rumo S.A.) | (2,599,350 | ) | 1,362,634 | 479,481 | 883,988 | 201,679 | ||||||||||||||
Senior swaps notes 2024 (Cosan Limited) | (1,039,740 | ) | 454,532 | 154,523 | 309,726 | 805,312 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Derivative total | (8,821,785 | ) | 4,744,844 | 2,050,445 | 2,820,455 | 1,569,705 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | — | (5,865,761 | ) | (5,770,134 | ) | 19,657 | (267,043 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
There is an economic relationship between the hedged item and the hedge instrument, since the terms of the interest rate and exchange rate swap correspond to the terms of the fixed rate loan, that is, notional amount, term and payment. The Company established a 1: 1 hedge ratio for hedging relationships, since the underlying risk of the interest rate and exchange rate swap is identical to the hedged risk component. To test the effectiveness of the hedge, the Company uses the discounted cash flow method and compares the changes in the fair value of the hedge instrument with the changes in the fair value of the hedged item attributable to the hedged risk.
5.9 | Recognized fair value measurements |
The market value of the Senior Notes are listed on the Luxembourg Stock Exchange (Note 5.5) is based on their quoted market price are as follows:
Company | March 31, 2020 | December 31, 2019 | ||||
Senior notes 2023 | Cosan S.A | 94.12% | 101.46% | |||
Senior notes 2024 | Rumo S.A | 99.74% | 107.90% | |||
Senior notes 2024 | Cosan Limited | 96.48% | 105.18% | |||
Senior notes 2025 | Rumo S.A | 93.90% | 107.27% | |||
Senior notes 2027 | Cosan S.A | 94.12% | 109.18% | |||
Senior notes 2029 | Cosan Limited | 80.15% | 104.48% | |||
Perpetual notes | Cosan S.A | 90.47% | 104.06% |
All of the resulting fair value estimates are included in level 2 except for a contingent consideration payable where the fair values have been determined based on present values and the discount rates used were adjusted for counterparty or own credit risk.
37
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
The carrying amounts and fair value of financial assets and financial liabilities are as follows:
Assets and liabilities measured at fair value | ||||||||||||||||||||||||||||||||||||
Carrying amount | March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||
Note | March 31, 2020 | December 31, 2019 | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||
Investment funds | 5.1 | 1,629,857 | 3,279,170 | — | 1,629,857 | — | — | 3,279,170 | — | |||||||||||||||||||||||||||
Marketable securities | 5.2 | 2,169,425 | 3,115,503 | — | 2,169,425 | — | — | 3,115,503 | — | |||||||||||||||||||||||||||
Other financial assets | 93,977 | 134,637 | 93,977 | — | — | 134,637 | — | — | ||||||||||||||||||||||||||||
Derivate financial instruments | 5.8 | 8,253,289 | 3,824,410 | — | 8,253,289 | — | — | 3,824,410 | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | 12,146,548 | 10,353,720 | 93,977 | 12,052,571 | — | 134,637 | 10,219,083 | — | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||
Loans, borrowings and debentures | 5.5 | (21,332,020 | ) | (16,370,166 | ) | — | (21,332,020 | ) | — | — | (16,370,166 | ) | — | |||||||||||||||||||||||
Consideration payable(i) | (202,261 | ) | (184,370 | ) | — | (193,290 | ) | (8,971 | ) | — | (158,275 | ) | (26,095 | ) | ||||||||||||||||||||||
Derivative financial instruments | 5.8 | (151,871 | ) | (81,051 | ) | — | (151,871 | ) | — | — | (81,051 | ) | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | (21,686,152 | ) | (16,635,587 | ) | — | (21,677,181 | ) | (8,971 | ) | — | (16,609,492 | ) | (26,095 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) | Composed of: (i) consideration payable related to the intangible asset of the contract with ExxonMobil in the amount of R$193,290 (level 2); and (ii) variable contingent consideration payable of R$8,971 (level 3), which considers the present value of the expected payment discounted, using a risk-adjusted discount rate. The expected payment is determined considering the most likely scenario of revenue and projected EBITDA, which, in turn, determine the cash generation capacity. Significant unobservable inputs are the expected annual growth rate of revenue, the expected EBITDA margin and the 9.41% risk-adjusted discount rate. |
6 | Other tax receivables |
March 31, 2020 | December 31, 2019 | |||||||
COFINS-Revenue tax | 721,109 | 706,165 | ||||||
ICMS-State VAT | 636,834 | 602,127 | ||||||
ICMS CIAP-State VAT | 135,137 | 141,514 | ||||||
PIS-Revenue tax | 180,768 | 150,099 | ||||||
Credit installment | 41,737 | 41,516 | ||||||
Other | 56,060 | 35,591 | ||||||
|
|
|
| |||||
1,771,645 | 1,677,012 | |||||||
Current | 1,033,090 | 950,246 | ||||||
|
|
|
| |||||
Non-current | 738,555 | 726,766 | ||||||
|
|
|
|
38
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
7 | Inventories |
March 31, 2020 | December 31, 2019 | |||||||
Finished goods | 499,810 | 457,447 | ||||||
Spare parts and accessories | 243,517 | 236,347 | ||||||
Raw material for construction process | 91,848 | 55,347 | ||||||
Warehouse and other | 33,992 | 31,287 | ||||||
Fuels and lubricants | 3,823 | 6,894 | ||||||
|
|
|
| |||||
872,990 | 787,322 | |||||||
|
|
|
|
8 | Investments in associates |
8.1 | Investments in subsidiaries and associates |
Cosan’s subsidiaries are listed below:
March 31, 2020 | December 31, 2019 | |||||||
Directly owned subsidiaries | ||||||||
Cosan Logística S.A. | 73.49% | 73.49% | ||||||
Cosan S.A. (i) | 66.28% | 64.59% | ||||||
Cosan Limited Partners Brasil Consultoria Ltda. | 60.00% | 60.00% | ||||||
Sinlog Tecnologia em Logística S.A.(ii) | 64.52% | 47.62% | ||||||
Interest of Cosan S.A. in its subsidiaries | ||||||||
Comgás | — | 99.15% | ||||||
Compass Gás e Energia (iii) | 99.14% | 100.00% | ||||||
Cosan Lubes Investments Limited (CLI)(iv) | 70.00% | 70.00% | ||||||
Cosan Cayman II Limited | 100.00% | 100.00% | ||||||
Cosan Global Limited | 100.00% | 100.00% | ||||||
Cosan Investimentos e Participações S.A. | 100.00% | 100.00% | ||||||
Cosan Luxembourg S.A. (v) | 100.00% | 100.00% | ||||||
Cosan Overseas Limited | 100.00% | 100.00% | ||||||
Pasadena Empreendimentos e Participações S.A. | 100.00% | 100.00% | ||||||
Payly Soluções de Pagamentos S.A. | 75.00% | 75.00% | ||||||
Rumo S.A. | 1.71% | 1.71% | ||||||
Cosan Logística S.A. | 0.10% | 0.10% | ||||||
Interest of Cosan Lubes Investments Limited in its subsidiaries | ||||||||
Cosan Cinco S.A. | 100.00% | 100.00% | ||||||
Cosan Lubrificantes e Especialidades S.A. | 100.00% | 100.00% | ||||||
Moove Lubricants Limited | 100.00% | 100.00% | ||||||
Stanbridge Group Limited | 100.00% | 100.00% | ||||||
Wessesx Petroleum Limited | 100.00% | 100.00% | ||||||
Airport Energy Limited | 100.00% | 100.00% | ||||||
Airport Energy Services Limited | 100.00% | 100.00% | ||||||
Cosan Lubrificantes S.R.L. | 100.00% | 100.00% | ||||||
Lubrigrupo II - Comércio e Distribuição de Lubrificantes S.A. | 100.00% | 100.00% | ||||||
Commercial Lubricants Moove Corp | 100.00% | 100.00% | ||||||
Cosan Paraguay S.A. | 100.00% | 100.00% | ||||||
Cosan US, Inc. | 100.00% | 100.00% | ||||||
Ilha Terminal Distribuição de Produtos Químicos | 100.00% | 100.00% |
39
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
March 31, 2020 | December 31, 2019 | |||||||
Zip Lube S.A. | 100.00% | 100.00% | ||||||
TTA – SAS Techniques et Technologie Appliquées | 75.00% | 75.00% | ||||||
|
|
|
| |||||
Interest of Cosan Logística S.A. in its subsidiaries | ||||||||
Rumo S.A. | 28.47% | 28.47% | ||||||
Rumo Malha Oeste S.A. | 28.47% | 28.47% | ||||||
Rumo Malha Paulista S.A. | 28.47% | 28.47% | ||||||
Rumo Malha Sul S.A. | 28.47% | 28.47% | ||||||
Rumo Malha Norte S.A. | 28.40% | 28.40% | ||||||
Rumo Malha Central S.A. | 28.47% | 28.47% | ||||||
Elevações Portuárias S.A. | 28.47% | 28.47% | ||||||
Logispot Armazéns Gerais S.A. | 14.52% | 14.52% | ||||||
Rumo Luxembourg Sarl | 28.47% | 28.47% | ||||||
Rumo Intermodal S.A. | 28.47% | 28.47% | ||||||
Boswells S.A. | 28.47% | 28.47% | ||||||
ALL Argentina S.A. | 28.47% | 28.47% | ||||||
Paranaguá S.A. | 28.47% | 28.47% | ||||||
ALL Armazéns Gerais Ltda. | 28.47% | 28.47% | ||||||
Portofer Ltda. | 28.47% | 28.47% | ||||||
ALL Mesopotâmica S.A. | 20.09% | 20.09% | ||||||
ALL Central S.A. | 20.94% | 20.94% | ||||||
Servicios de Inversión Logística Integrales S.A | 28.47% | 28.47% | ||||||
Brado Logística e Participações S.A. | 17.71% | 17.71% | ||||||
Brado Logística S.A. | 17.71% | 17.71% |
(i) | For the period ended March 31, 2020, the Company increased its interest in the subsidiary Cosan S.A. due to the acquisition of 3,827,200 shares in the amount of R$269,977. As a consequence, it generated a loss in equity recognized in the total amount of R$291,982. |
(ii) | On March 31, 2020 the Company increased its participation, generating a loss in equity recognized in the total amount of R$943. |
(iii) | On January 30, 2020, a capital increase was made at Compass Gás e Energia, through the subscription of 6,222,650 registered shares in favor ofnon-controlling shareholders, totaling a total amount of R$ 75,000 (equivalent to 0.86% of the share capital of Compass Gás e Energia). As a result, there was a gain of R$ 44,569 in the interest in the subsidiary Cosan S.A., and consequently a reflex effect on the Company’s equity of R$ 28,787. |
(iv) | On March 31, 2020, Cosan Lubes Investments Limited (“CLI”) received R$65,482 due to the satisfaction of conditions precedent on December 31, 2019, as a result and pursuant to the terms of the investment agreement between the CLI and CVC Fund VII (“CVC”). |
(v) | Management concluded that there are no material uncertainties that put the subsidiaries’ operational continuity in doubt. Despite presenting on March 31, 2020 |
40
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
a combined investment amount with an unsecured liability of R$342,119, as shown below, no events or conditions were identified that, individually or collectively, could raise significant doubts as to the ability to maintain their continuity operational. The subsidiaries have the financial support of the Company. |
Set out below are the associates as at March 31, 2020 which are material to the Company:
Shares issued by the associate | Shares held by Cosan | Cosan ownership interest | Economic benefit (%) | |||||||||||||
Radar II Propriedades Agrícolas S.A. | 81,440,222 | 24,920,708 | 51.00 | % | 3.00 | % | ||||||||||
Radar Propriedades Agrícolas S.A. | 1,735,703 | 531,125 | 51.00 | % | 2.51 | % | ||||||||||
Tellus Brasil Participações S.A. | 120,920,492 | 61,359,624 | 50.74 | % | 5.00 | % | ||||||||||
Janus Brasil Participações S.A. | 136,928,272 | 69,361,678 | 50.77 | % | 5.00 | % |
At January 1, 2020 | Interest in earnings of subsidiaries | Other comprehensive income | Dividends | Increase of capital | Other | At March 31, 2020 | ||||||||||||||||||||||
Tellus Brasil Participações S.A. | 102,342 | 701 | — | — | — | — | 103,043 | |||||||||||||||||||||
Janus Brasil Participações S.A. | 126,087 | (609 | ) | — | — | 1,132 | — | 126,610 | ||||||||||||||||||||
Radar Propriedades Agrícolas S.A | 59,861 | 286 | — | — | — | — | 60,147 | |||||||||||||||||||||
Radar II Propriedades Agrícolas S.A | 31,976 | 219 | — | — | — | — | 32,195 | |||||||||||||||||||||
Other | 57,441 | 2,644 | 1,301 | (5,189 | ) | 10 | (42 | ) | 56,165 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
377,707 | 3,241 | 1,301 | (5,189 | ) | 1,142 | (42 | ) | 378,160 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.2 | Acquisition of subsidiaries |
On January 30, 2020, the subsidiary Cosan completed the acquisition of 100% of the capital of the following companies:
Acquired name | Description of the operation | |
Compass Comercializadora de Energia Ltda | Commercialization of natural gas and electricity | |
Compass Geração Ltda | Commercialization of natural gas and electricity | |
Compass Energia Ltda | No operation | |
Black River Participações Ltda | No operation |
The acquisition aims to reinforce the strategy of expansion and consolidation of the gas and energy operation, which tends to grow significantly. Of the companies mentioned above, Black River was acquired only for its only asset, the investment in Compass Comercializadora.
41
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
The fair value on the acquisition date of the consideration transferred from the three combined businesses totaled R$ 95,000 with cash payment, without additional installments (fixed or variable).
The balances of the acquired entities are substantially composed of assets and liabilities measured at fair value and, therefore, no adjustment should be made.
a) Identifiable assets acquired and liabilities assumed
The fair value of the assets and liabilities acquired is shown below:
Compass Comercializadora | Compass Geração | Compass Energia | Total | |||||||||||||
Cash and cash equivalents | 48 | 5 | 1 | 54 | ||||||||||||
Marketable securities | 4,491 | 172 | 36 | 4,699 | ||||||||||||
Accounts receivable | 12,384 | 149,162 | — | 161,546 | ||||||||||||
Advances from suppliers | 15 | — | — | 15 | ||||||||||||
Other taxes recoverable | 134 | — | 31 | 165 | ||||||||||||
Derivative financial instruments | 1,377 | — | — | 1,377 | ||||||||||||
Investments in subsidiaries | 9 | 28 | — | 37 | ||||||||||||
Fixed assets | 69 | — | — | 69 | ||||||||||||
Trade accounts payable | (13,585 | ) | (83,670 | ) | — | (97,255 | ) | |||||||||
Other taxes payable | — | (55 | ) | — | (55 | ) | ||||||||||
Other payables | (97 | ) | (412 | ) | — | (509 | ) | |||||||||
Other financial liabilities | — | (47,735 | ) | — | (47,735 | ) | ||||||||||
Dividends payable | — | (508 | ) | — | (508 | ) | ||||||||||
Payable to related parties | — | (17,063 | ) | — | (17,063 | ) | ||||||||||
Deferred income tax and social contribution | (468 | ) | — | — | (468 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total identifiable assets, net | 4,377 | (76 | ) | 69 | 4,369 |
b) Preliminary goodwill
The fair value on the date of acquisition of goodwill consisted of the following:
Total | ||||
Total net assets acquired and liabilities assumed at fair value | 4,369 | |||
Consideration transferred(i) | 95,000 | |||
|
| |||
Preliminary goodwill | 90,631 |
(i) | Effect of consideration transferred net of acquired cash R$90,247. |
Information obtained about facts and circumstances existing on the acquisition date may result in adjustments to the allocation of goodwill. The goodwill of R$90,631 comprises the amount of future economic benefits from the acquisition.
If the acquired subsidiaries had been consolidated since January 1, 2020, the consolidated statement of income for the year ended March 31, 2020, would have net income of R$3,595,051 and profit of R$117,610.
42
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
8.3 | Non-controlling interests in subsidiaries |
Set out below is summarized financial information for each subsidiary that hasnon-controlling interests that are material to the group. The amounts disclosed for each subsidiary are before inter-company elimination.
Shares issued by the subsidiary | Shares held by non-controlling shareholders | Non-controlling interest | ||||||||||
Compass Gás e Energia | 628,487,690 | 5,402,779 | 0.85 | % | ||||||||
Comgás | 132,520,587 | 1,124,363 | 0.85 | % | ||||||||
Logispot | 2,040,816 | 1,000,000 | 49.00 | % | ||||||||
Rumo | 1,559,015,898 | 1,115,164,072 | 71.53 | % | ||||||||
Brado Participações | 12,962,963 | 4,897,407 | 37.78 | % | ||||||||
Rumo Malha Norte | 1,189,412,363 | 3,144,187 | 0.26 | % | ||||||||
Cosan Lubes | 34,963,764 | 10,489,129 | 30.00 | % | ||||||||
Cosan S.A. | 394,210,000 | 132,924,458 | 33.72 | % | ||||||||
Cosan Logística S.A. | 463,224,241 | 122,800,746 | 26.51 | % | ||||||||
Payly | 44,861,170 | 11,215,293 | 25.00 | % | ||||||||
Sinlog Tecnologia em Logística S.A. | 21,000 | 10,000 | 35.48 | % | ||||||||
TTA | 10,521 | 2,630 | 25.00 | % |
The following table summarizes the information relating to each of the Company’s subsidiaries that has materialnon-controlling interests, before any intra-group elimination.
At January 1, 2020 | Interest in earnings of subsidiaries | Sales or purchase of interests | Other comprehensive income | Dividends | Capital increase | Other | At March 31, 2020 | |||||||||||||||||||||||||
Cosan S.A. | 3,604,875 | 74,055 | (255,849 | ) | 137,527 | — | — | 1,735 | 3,558,462 | |||||||||||||||||||||||
Cosan Logística S.A. | 630,185 | (21,304 | ) | 10 | 472 | — | — | 303 | 609,666 | |||||||||||||||||||||||
Comgás | 24,569 | 3,056 | — | — | (1,145 | ) | — | 9 | 26,489 | |||||||||||||||||||||||
Compass Gás e Energia | — | 2,337 | 30,431 | — | — | — | 9 | 32,777 | ||||||||||||||||||||||||
Cosan Lubes | 470,497 | 10,836 | — | 44,531 | — | — | — | 525,864 | ||||||||||||||||||||||||
Rumo S.A. | 6,058,973 | (191,661 | ) | — | 4,470 | (529 | ) | — | 2,426 | 5,877,560 | ||||||||||||||||||||||
Logispot Armazéns | 34,218 | 92 | — | — | (300 | ) | — | — | 34,010 | |||||||||||||||||||||||
Other | 15,299 | 1,415 | — | 2,525 | — | 6,666 | (996 | ) | 24,909 | |||||||||||||||||||||||
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| |||||||||||||||||
10,838,616 | (121,174 | ) | (225,408 | ) | 189,525 | (1,974 | ) | 6,666 | 3,486 | 10,689,737 | ||||||||||||||||||||||
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43
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
9 | Investments in joint ventures |
Changes to investments in joint ventures were as follows:
Raízen Combustíveis S.A. | Raízen Energia S.A. | Total | ||||||||||
Shares issued by the joint venture | 1,661,418,472 | 7,243,283,198 | ||||||||||
Shares held by Cosan | 830,709,236 | 3,621,641,599 | ||||||||||
Cosan ownership interest | 50 | % | 50 | % | ||||||||
Interest in earnings of joint ventures as at March 31, 2019 | 298,258 | 5,575 | 303,833 | |||||||||
At January 1, 2020 | 3,212,601 | 4,336,359 | 7,548,960 | |||||||||
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| |||||||
Interest in earnings of joint ventures | 69,516 | 121,828 | 191,344 | |||||||||
Other comprehensive (losses) income | 385,320 | (93,588 | ) | 291,732 | ||||||||
Interest on capital (i) | (19,000 | ) | — | (19,000 | ) | |||||||
Dividends | — | (417 | ) | (417 | ) | |||||||
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| |||||||
At March 31, 2020 | 3,648,437 | 4,364,182 | 8,012,619 | |||||||||
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(i) | Amount proposed but not paid in the period. |
The statement of financial position and statement of profit or loss of the joint ventures are disclosed in Note 4 – Segment information.
As of March 31, 2020, the Company was in compliance with theconvenants of the contracts that govern the respectivejoint ventures.
10 | Property, plant and equipment, intangible assets, goodwill andright-of-use assets |
10.1 | Property, plant and equipment |
a) | Reconciliation of carrying amount |
Land, buildings and improvements | Machinery, equipment and facilities | Railcars and locomotives (i) | Permanent railways | Construction in progress | Other | Total | ||||||||||||||||||||||
Cost | ||||||||||||||||||||||||||||
At December 31, 2019 | 1,186,365 | 1,163,862 | 6,000,272 | 6,724,322 | 1,509,025 | 434,555 | 17,018,401 | |||||||||||||||||||||
Additions | 32 | 629 | 2,338 | 1,913 | 580,812 | 721 | 586,445 | |||||||||||||||||||||
Business combinations | — | 69 | — | — | — | — | 69 | |||||||||||||||||||||
Disposals | — | (328 | ) | (20,294 | ) | — | — | (1,937 | ) | (22,559 | ) | |||||||||||||||||
Transfers | 10,734 | 14,594 | 106,140 | 133,488 | (275,499 | ) | 7,113 | (3,430 | ) | |||||||||||||||||||
Effect of exchange rate fluctuations | 13,641 | 20,887 | — | — | 279 | 11,779 | 46,586 | |||||||||||||||||||||
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| |||||||||||||||
At March 31, 2020 | 1,210,772 | 1,199,713 | 6,088,456 | 6,859,723 | 1,814,617 | 452,231 | 17,625,512 | |||||||||||||||||||||
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| |||||||||||||||
Depreciation | ||||||||||||||||||||||||||||
At December 31, 2019 | (360,434 | ) | (532,019 | ) | (1,914,789 | ) | (2,020,767 | ) | (6,870 | ) | (30,386 | ) | (4,865,265 | ) | ||||||||||||||
Additions | (15,103 | ) | (35,589 | ) | (144,918 | ) | (125,050 | ) | — | (8,282 | ) | (328,942 | ) | |||||||||||||||
Disposals | — | 315 | 16,960 | — | — | 1,442 | 18,717 | |||||||||||||||||||||
Transfers | — | — | 142 | — | 1,859 | (7 | ) | 1,994 | ||||||||||||||||||||
Effect of exchange rate fluctuations | (4,878 | ) | (10,581 | ) | — | — | — | (5,961 | ) | (21,420 | ) | |||||||||||||||||
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| |||||||||||||||
At March 31, 2020 | (380,415 | ) | (577,874 | ) | (2,042,605 | ) | (2,145,817 | ) | (5,011 | ) | (43,194 | ) | (5,194,916 | ) | ||||||||||||||
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| |||||||||||||||
At December 31, 2019 | 825,931 | 631,843 | 4,085,483 | 4,703,555 | 1,502,155 | 404,169 | 12,153,136 | |||||||||||||||||||||
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| |||||||||||||||
At March 31, 2020 | 830,357 | 621,839 | 4,045,851 | 4,713,906 | 1,809,606 | 409,037 | 12,430,596 | |||||||||||||||||||||
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|
(i) | On March 31, 2020 and December 31, 2019, wagons and locomotives in the amount of R$ 745,203 were pledged to guarantee bank loans. (Note 5.5); |
44
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
10.2 | Intangible assets and goodwill |
Goodwill | Concession rights | Operating license | Trademarks | Customer relationships | Other | Total | ||||||||||||||||||||||
Cost | ||||||||||||||||||||||||||||
At December 31, 2019 | 904,977 | 18,024,518 | 435,795 | 46,170 | 829,091 | 387,278 | 20,627,829 | |||||||||||||||||||||
Additions | 3,778 | — | — | — | 25,019 | 3,624 | 32,421 | |||||||||||||||||||||
Business combination | 90,631 | — | — | — | — | — | 90,631 | |||||||||||||||||||||
Disposals | — | (4,352 | ) | — | — | (25 | ) | (6 | ) | (4,383 | ) | |||||||||||||||||
Transfers | — | 76,386 | — | — | (11,377 | ) | 40,983 | 105,992 | ||||||||||||||||||||
Effect of exchange rate fluctuations | 52,278 | — | — | 8,752 | 44,041 | �� | 10,661 | 115,732 | ||||||||||||||||||||
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| |||||||||||||||
At March 31, 2020 | 1,051,664 | 18,096,552 | 435,795 | 54,922 | 886,749 | 442,540 | 20,968,222 | |||||||||||||||||||||
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| |||||||||||||||
Amortization | ||||||||||||||||||||||||||||
At December 31, 2019 | — | (2,884,699 | ) | (236,122 | ) | (9,201 | ) | (410,449 | ) | (243,699 | ) | (3,784,170 | ) | |||||||||||||||
Additions | — | (126,128 | ) | — | — | (19,851 | ) | (20,101 | ) | (166,080 | ) | |||||||||||||||||
Disposals | — | 2,557 | — | — | 20 | — | 2,577 | |||||||||||||||||||||
Transfers | — | (10 | ) | — | — | 5,181 | 842 | 6,013 | ||||||||||||||||||||
Effect of exchange rate fluctuations | — | — | — | — | (10,849 | ) | (5,124 | ) | (15,973 | ) | ||||||||||||||||||
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| |||||||||||||||
At March 31, 2020 | — | (3,008,280 | ) | (236,122 | ) | (9,201 | ) | (435,948 | ) | (268,082 | ) | (3,957,633 | ) | |||||||||||||||
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| |||||||||||||||
At December 31, 2019 | 904,977 | 15,139,819 | 199,673 | 36,969 | 418,642 | 143,579 | 16,843,659 | |||||||||||||||||||||
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| |||||||||||||||
At March 31, 2020 | 1,051,664 | 15,088,272 | 199,673 | 45,721 | 450,801 | 174,458 | 17,010,589 | |||||||||||||||||||||
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a) | Capitalization of borrowing costs |
Capitalized borrowing costs for the period ended March 31, 2020, R$ 12,273 was capitalized at an average rate of 7.55% p.a. (R$3,202 and 8.60 % p.a. on December 31, 2019).
45
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
b) | Amortization methods and useful lives |
Intangible assets (excluding goodwill) | Annual rate of amortization | March 31, 2020 | December 31, 2019 | |||||||||
Comgás(i) | Concession term | 8,111,637 | 8,129,822 | |||||||||
Rumo(ii) | Concession term | 6,976,633 | 7,009,997 | |||||||||
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| |||||||||
15,088,270 | 15,139,819 | |||||||||||
Operating license for port terminal(iii) | 3.70% | 199,673 | 199,673 | |||||||||
Trademarks: | ||||||||||||
Comma | Undefined | 45,720 | 36,969 | |||||||||
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| |||||||||
45,720 | 36,969 | |||||||||||
Customers relationship: | ||||||||||||
Comgás | 20.00% | 170,490 | 161,786 | |||||||||
Moove | 6.00% | 280,311 | 256,856 | |||||||||
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| |||||||||
450,801 | 418,642 | |||||||||||
Other | ||||||||||||
Software license | 20.00% | 113,752 | 81,669 | |||||||||
Other | 60,709 | 61,910 | ||||||||||
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| |||||||||
174,461 | 143,579 | |||||||||||
Total | 15,958,925 | 15,938,682 | ||||||||||
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|
(i) | Refers to the intangible asset for the public gas distribution service concession, which represents the right to charge users for the supply of gas, comprised of: (i) the concession rights recognized in the business combination and (ii) concession assets; |
(ii) | Refers to the concession right agreement of Rumo Malha Norte S.A., which will be amortized until the end of the concession in 2079; |
(iii) | Port operating license and customer relationships of Rumo S.A., from the business combination. |
c) | Impairment testing of cash-generating units (“CGU”) goodwill |
The Company annually tests the recoverable amounts of goodwill arising from business combinations. Property, plant and equipment and intangible assets with finite lives that are subject to depreciation and amortization are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
For the purpose of impairment analysis, concession contracts were defined as cash generating units, each recorded on separated legal entities. The basis for annual assessment and testing on September 30, 2020.
During the period ended March 31, 2020, we did not identify any provisions for impairment to be recorded, so that no impairment test was necessary for property, plant and equipment and intangible assets with a defined useful life.
46
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
10.3 | Right-of-use assets |
Land, buildings and improvements | Machinery, equipment and facilities | Railcars and locomotives | Software | Vehicles | Port and rail infrastructure | Total | ||||||||||||||||||||||
Cost: | ||||||||||||||||||||||||||||
At December 31, 2019 | 247,430 | 10,718 | 1,038,641 | 66,931 | 14,259 | 3,803,954 | 5,181,933 | |||||||||||||||||||||
Additions | 22,664 | 4,249 | — | — | — | — | 26,913 | |||||||||||||||||||||
Contractual adjustments | 3 | — | 1,448 | — | (421 | ) | 22,479 | 23,509 | ||||||||||||||||||||
Disposals | (598 | ) | — | — | — | — | — | (598 | ) | |||||||||||||||||||
Currency translation adjustments | 4,189 | 333 | — | — | — | — | 4,522 | |||||||||||||||||||||
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| |||||||||||||||
At March 31, 2020 | 273,688 | 15,300 | 1,040,089 | 66,931 | 13,838 | 3,826,433 | 5,236,279 | |||||||||||||||||||||
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| |||||||||||||||
At December 31, 2019 | (78,965 | ) | (3,074 | ) | (365,657 | ) | (7,594 | ) | (6,457 | ) | (250,456 | ) | (712,203 | ) | ||||||||||||||
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|
|
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| |||||||||||||||
Additions | (6,018 | ) | (1,949 | ) | (2,472 | ) | (1,634 | ) | (1,626 | ) | (45,696 | ) | (59,395 | ) | ||||||||||||||
Transfers | (2,410 | ) | — | (12,519 | ) | — | — | — | (14,929 | ) | ||||||||||||||||||
Impairment | — | — | — | — | — | (9,579 | ) | (9,579 | ) | |||||||||||||||||||
Disposals | 198 | — | — | — | — | — | 198 | |||||||||||||||||||||
Currency translation adjustments | (474 | ) | (30 | ) | — | — | — | — | (504 | ) | ||||||||||||||||||
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|
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| |||||||||||||||
At March 31, 2020 | (87,669 | ) | (5,053 | ) | (380,648 | ) | (9,228 | ) | (8,083 | ) | (305,731 | ) | (796,412 | ) | ||||||||||||||
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|
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|
| |||||||||||||||
At December 31, 2019 | 168,465 | 7,644 | 672,984 | 59,337 | 7,802 | 3,553,498 | 4,469,730 | |||||||||||||||||||||
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|
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|
|
|
|
|
| |||||||||||||||
At March 31, 2020 | 186,019 | 10,247 | 659,441 | 57,703 | 5,755 | 3,520,702 | 4,439,867 | |||||||||||||||||||||
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11 | Concessions payable |
March 31, 2020 | December 31, 2019 | |||||||||||||||
Leases | Concessions | Total | Total | |||||||||||||
Payables | ||||||||||||||||
Rumo Malha Sul S.A. | — | 36,239 | 36,239 | 36,621 | ||||||||||||
Rumo Malha Paulista S.A. | — | 19,853 | 19,853 | 20,003 | ||||||||||||
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| |||||||||
— | 56,092 | 56,092 | 56,624 | |||||||||||||
Court discussion | ||||||||||||||||
Rumo Malha Paulista S.A. | 1,906,059 | — | 1,906,059 | 1,870,018 | ||||||||||||
Rumo Malha Oeste S.A. | 1,466,648 | 88,722 | 1,555,370 | 1,528,238 | ||||||||||||
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|
|
|
|
| |||||||||
3,372,707 | 88,722 | 3,461,429 | 3,398,256 | |||||||||||||
Total | 3,372,707 | 144,814 | 3,517,521 | 3,454,880 | ||||||||||||
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|
|
|
| |||||||||
Current | 9,945 | 9,847 | ||||||||||||||
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|
| |||||||||||||
Non-current | 3,507,576 | 3,445,033 | ||||||||||||||
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|
47
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
Judicial deposits at March 31, 2020 and December 31, 2019 concerning the above claims totaled:
March 31, 2020 | December 31, 2019 | |||||||
Rumo Malha Paulista S.A. | 119,806 | 119,806 | ||||||
Rumo Malha Oeste S.A. | 22,119 | 21,703 | ||||||
|
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|
| |||||
141,925 | 141,509 | |||||||
|
|
|
|
The judicial deposits are recorded in the “regulatory” group, as described in Note 14.
12 | Other taxes payable |
March 31, 2020 | December 31, 2019 | |||||||
Tax amnesty and refinancing program—REFIS | 206,621 | 213,360 | ||||||
ICMS – State VAT | 165,416 | 161,254 | ||||||
COFINS – Revenue tax | 79,722 | 84,953 | ||||||
PIS – Revenue tax | 21,015 | 19,426 | ||||||
Social Security Charges | 20,671 | 10,513 | ||||||
Withholding Income Tax | 13,344 | 4,941 | ||||||
ISS – Service tax | 641 | 578 | ||||||
IOF – Financial tax | 830 | 309 | ||||||
Other | 38,568 | 22,787 | ||||||
|
|
|
| |||||
546,828 | 518,121 | |||||||
|
|
|
| |||||
Current | 396,916 | 363,051 | ||||||
|
|
|
| |||||
Non-current | 149,912 | 155,070 |
13 | Income tax and social contribution |
a) | Reconciliation of income and social contribution tax expenses |
March 31, 2020 | March 31, 2019 (Restated) | |||||||
Profit before taxes | 470,694 | 483,524 | ||||||
Income tax and social contribution nominal rate (34%) | (160,036 | ) | (164,398 | ) | ||||
Adjustments to determine the effective rate | ||||||||
Interest in earnings of investees(non-taxable income) | 66,159 | 94,192 | ||||||
Differences in tax rates on earnings / losses of overseas companies | 174,430 | (11,497 | ) | |||||
Granted income tax incentive | — | 27,974 | ||||||
Share-based payment transactions | 859 | (277 | ) | |||||
Interest on shareholders’ equity | (6,460 | ) | (7,990 | ) | ||||
Non-deductible expenses (donations, gifts, etc.) | 4,280 | (4,657 | ) | |||||
Tax losses not recorded(i) | (34,363 | ) | (39,413 | ) | ||||
Goodwill amortization effect | 318 | 318 | ||||||
Other | 9,598 | 24,460 | ||||||
|
|
|
| |||||
Income tax and social contribution benefit (expense)—current and deferred | 54,785 | (81,288 | ) | |||||
|
|
|
| |||||
Effective rate—% | (11.64 | %) | 16.81 | % | ||||
|
|
|
|
(i) | Refers mainly to tax losses not recorded in subsidiaries of Rumo which under current conditions do not attend the requirements of future taxable profits that justify the recognition of the deferred tax assets. In accordance with Brazilian Federal Taxes rules those losses do not expire. |
48
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
b) | Deferred income tax assets and liabilities |
The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities are presented below:
March 31, 2020 | December 31, 2019 | |||||||
Assets credit of: | ||||||||
Income tax loss carry forwards | 2,570,263 | 2,136,077 | ||||||
Social contribution tax loss carry forwards | 940,267 | 779,252 | ||||||
Temporary differences | ||||||||
Foreign exchange—Loans and borrowings | 1,987,984 | 921,811 | ||||||
Legal proceedings provision | 304,750 | 305,473 | ||||||
Impairment provision | 197,206 | 203,057 | ||||||
Provisions for employee benefits | 217,701 | 214,496 | ||||||
Allowance for doubtful accounts | 28,515 | 26,969 | ||||||
Regulatory asset (liability) | — | 53,875 | ||||||
Impairment of tax credit | 80,275 | 79,928 | ||||||
Share-based payment transactions | 11,362 | 9,879 | ||||||
Profit sharing | 14,164 | 63,987 | ||||||
Interest on preferred shareholders payable in subsidiaries | 149,561 | 89,931 | ||||||
Property, plant and equipment—useful life review | 413,648 | 408,581 | ||||||
Miscellaneous provisions | 359,669 | 348,212 | ||||||
Other | 139,392 | 112,240 | ||||||
|
|
|
| |||||
Total | 7,414,757 | 5,753,768 | ||||||
(-) Deferred taxes assets net not recognized | (2,232,052 | ) | (2,198,164 | ) | ||||
Liabilities credit of: | ||||||||
Temporary differences | ||||||||
Business combination—property, plant and equipment | 20,175 | 27,666 | ||||||
Tax deductible goodwill | (390,249 | ) | (390,249 | ) | ||||
Leases | (35,133 | ) | (36,347 | ) | ||||
Unrealized gains on derivatives instruments (i) | (2,256,898 | ) | (923,672 | ) | ||||
Fair value option in loans | 485,548 | 174,596 | ||||||
Income on formation of joint ventures | (1,135,036 | ) | (1,135,036 | ) | ||||
Business combination—Intangible asset | (3,649,900 | ) | (3,663,085 | ) | ||||
Other | (219,190 | ) | 114,525 | |||||
|
|
|
| |||||
Total | (7,180,683 | ) | (5,831,602 | ) | ||||
|
|
|
| |||||
Total of deferred taxes recorded | (1,997,978 | ) | (2,275,998 | ) | ||||
|
|
|
| |||||
Deferred income tax—Assets | 1,669,363 | 1,607,566 | ||||||
|
|
|
| |||||
Deferred income tax—Liabilities | (3,667,341 | ) | 3,883,564 | |||||
|
|
|
|
(i) | In January 2020, Cosan subsidiary contributed to the capital of the subsidiary Compass Gás e Energia the investment it held in the subsidiary Comgás. As a result, the costs recorded in shareholders’ equity, derived from the goodwill paid on the acquisitions of Comgás shares in voluntary tender offer occurred during the year 2019, totaling R$ 1,321,000 capital loss. Associated with this amount, a deferred income tax loss of R$ 449,000 was recorded. On the other hand, deferred income tax liabilities were recorded, canceling the effect of the result in the accounting, to be reversed when the futurewrite-off of said goodwill. |
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Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
c) | Analytical movement in deferred tax |
Assets | Tax loss and negative basis | Post- employment obligations | Employee benefits | Provisions | Property | Other | Unregistered credits | Total | ||||||||||||||||||||||||
Balance on January 1, 2020 | 2,915,329 | 214,496 | 73,866 | 963,639 | 408,581 | 1,177,857 | (2,218,619 | ) | 3,535,149 | |||||||||||||||||||||||
Credited to the profit for period | 595,201 | 3,205 | (48,340 | ) | 6,776 | 5,067 | (28,559 | ) | (42,830 | ) | 490,520 | |||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | 61,466 | — | 61,466 | ||||||||||||||||||||||||
Exchange differences | — | — | — | — | — | 1,066,173 | (23,155 | ) | 1,043,018 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance on March 31, 2020 | 3,510,530 | 217,701 | 25,526 | 970,415 | 413,648 | 2,276,937 | (2,284,604 | ) | 5,130,153 |
Liabilities | Effects on the formation of jointly-owned subsidiaries | Intangible | Unrealized income from derivatives | Leases | Debt Fair Value Adjustment | Other | Unregistered credits | Total | ||||||||||||||||||||||||
Balance on January 1, 2020 | (1,135,036 | ) | (3,663,085 | ) | (923,672 | ) | (36,347 | ) | 174,596 | (248,058 | ) | 20,455 | (5,811,147 | ) | ||||||||||||||||||
Credited to the profit for period | — | 13,185 | (1,333,226 | ) | 1,325 | 310,952 | (341,072 | ) | 32,097 | (1,316,739 | ) | |||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | (111 | ) | — | 334 | — | 223 | |||||||||||||||||||||||
Business combination | — | — | — | — | — | (468 | ) | — | (468 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance on March 31, 2020 | (1,135,036 | ) | (3,649,900 | ) | (2,256,898 | ) | (35,133 | ) | 485,548 | (589,264 | ) | 52,552 | (7,128,131 | ) |
The Company expects to realize the full deferred tax on tax losses and social contribution.
50
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
14 | Provision for legal proceedings and judicial deposits |
The Company had provision for legal proceedings and judicial deposits recorded in the financial position at March 31, 2020 and December 31, 2019 in respect of:
Provision for legal proceedings | Judicial deposit | |||||||||||||||
March 31, 2020 | December 31, 2019 | March 31, 2020 | December 31, 2019 | |||||||||||||
Tax | 591,865 | 589,180 | 450,304 | 476,706 | ||||||||||||
Civil, environmental and regulatory | 336,395 | 332,527 | 216,428 | 220,933 | ||||||||||||
Labor | 425,875 | 432,464 | 251,262 | 245,818 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
1,354,135 | 1,354,171 | 917,994 | 943,457 | |||||||||||||
|
|
|
|
|
|
|
|
Changes in provision for legal proceedings:
Tax | Civil, environmental and regulatory | Labor | Total | |||||||||||||
At December 31, 2019 | 589,180 | 332,527 | 432,464 | 1,354,171 | ||||||||||||
Provisions | 204 | 2,687 | 14,662 | 17,553 | ||||||||||||
Settlement / Write-offs | (234 | ) | (6,856 | ) | (26,221 | ) | (33,311 | ) | ||||||||
Interest and exchange variation (i) | 2,715 | 8,037 | 4,970 | 15,722 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
At March 31, 2020 | 591,865 | 336,395 | 425,875 | 1,354,135 | ||||||||||||
|
|
|
|
|
|
|
|
(i) | Includes interest reversal. |
The Company’s debts with legal proceedings are secured by assets, cash deposit, bank guarantee or insurance guarantee.
The subsidiary Cosan S.A. has indemnity actions in addition to those mentioned, which, since they are considered probable, were not recorded because they represent contingent assets.
a) | Probable losses |
Tax: The principal tax proceedings for which the risk of loss is probable are described below:
March 31, 2020 | December 31, 2019 | |||||||
Compensation with FINSOCIAL | 294,411 | 293,291 | ||||||
INSS—Social security | 96,685 | 95,979 | ||||||
State VAT—ICMS credit | 98,060 | 97,534 | ||||||
PIS and COFINS | 2,902 | 2,889 | ||||||
IPI—Excise tax credit—NT | 53,950 | 53,693 | ||||||
Federal income taxes | 1,714 | 1,707 | ||||||
Other | 44,143 | 44,087 | ||||||
|
|
|
| |||||
591,865 | 589,180 | |||||||
|
|
|
|
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Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
Civil, regulatory, environmental and other claims: Company and its subsidiaries are parties to a number of civil legal claims related to (i) indemnity for material and moral damages; (ii) termination of different kinds of agreements (iii) public civil claims related to sugarcane stubble burning; and (iv) compliance with terms of conduct adjustment, among other issues.
Labor claims: Cosan and its subsidiaries are also parties to a number of labor claims filed by former employees and service providers challenging, among other matters, the payment of overtime, night shift premiums and risk premiums, the recognition of employment relationships and the reimbursement of discounts from payroll, such as social contribution and trade union charges. Additionally, we are involved in several labor administrative and judicial proceedings such as labor investigations and class actions filed by the labor prosecutor’s office regarding allegednon-compliance with certain labor regulations, including work and safety rules, labor conditions and work environment, and social assistance plans. Moreover, we entered into certain consent orders (Termos de Ajustamento de Conduta) with Brazilian authorities and in the event, we fail to comply with such consent orders, we could be subject to fines.
b) | Possible losses |
Theprincipal proceedings for which we deem the risk of loss as possible are described below:
March 31, 2020 | December 31, 2019 | |||||||
Civil | 3,611,219 | 3,493,260 | ||||||
Labor | 963,203 | 968,426 | ||||||
Tax | 12,889,500 | 11,382,113 | ||||||
Regulatory | 825,400 | 860,025 | ||||||
Environmental | 684,802 | 679,621 | ||||||
|
|
|
| |||||
18,974,124 | 17,383,445 | |||||||
|
|
|
|
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Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
Tax:
March 31, 2020 | December 31, 2019 | |||||||
ICMS—State VAT | 2,868,376 | 2,869,089 | ||||||
Federal income taxes (i) | 4,943,504 | 3,619,834 | ||||||
IRRF—Withholding tax | 1,214,190 | 1,030,981 | ||||||
PIS and COFINS—Revenue taxes | 1,536,896 | 1,529,885 | ||||||
INSS—Social security and other | 212,119 | 226,857 | ||||||
Goodwill Rumo | 84,167 | 83,734 | ||||||
IPI—Excise tax credit—NT | 453,373 | 451,781 | ||||||
Penalties related to tax positions | 486,924 | 483,577 | ||||||
MP 470—Tax installments | 228,630 | 304,961 | ||||||
Foreign financial operation | 28,855 | 28,701 | ||||||
Compensation with IPI—IN 67/98 | 182,340 | 181,655 | ||||||
Stock option | 70,438 | 70,072 | ||||||
Financial transactions tax on loan | 53,973 | 53,765 | ||||||
Other | 525,715 | 447,221 | ||||||
|
|
|
| |||||
12,889,500 | 11,382,113 | |||||||
|
|
|
|
(i) | Tax assessment notices drawn up by the Federal Revenue Service, for the collection of IRPJ and CSLL related to the calendar years 2015 and 2016, questioning the deductibility of goodwill amortization expenses. The tax assessment notices are being challenged / appealed at the administrative level. |
c) | Contingent assets |
The Company has indemnity claims whose realization of income is not virtually certain and, therefore represents contingent assets not recognized in financial statements. It is not yet possible to estimate of their financial effect.
15 | Shareholders’ equity |
a) | Share capital |
At March 31, 2020, Cosan Limited’s share capital is composed of the following:
Shareholders—Common shares | Class A common shares | % | Class B common shares | % | ||||||||||||
Controlling group | 20,390,736 | 14.35% | 96,332,044 | 100% | ||||||||||||
Renaissance Technologies LLC | 9,003,251 | 6.34% | — | — | ||||||||||||
M&G Investment Management Limited | 60,120 | 0.04% | — | — | ||||||||||||
Free Float | 96,023,152 | 67.57% | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total shares outstanding | 125,477,259 | 88.29% | 96,332,044 | 100% | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Treasury shares | 16,638,275 | 11.71% | — | — | ||||||||||||
Total | 142,115,534 | 100.00% | 96,332,044 | 100% | ||||||||||||
|
|
|
|
|
|
|
|
b) | Treasury shares |
The Company holds 16,638,275 Class A treasury shares on March 31, 2020 and December 31, 2019, with a market value of US$ 12.30 and US$ 22.84 respectively.
53
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
c) | Other comprehensive (loss) income |
December 31, 2019 | Comprehensive (loss) income | March 31, 2020 | ||||||||||
Loss on cash flow hedge in joint ventures | (790,403 | ) | (155,634 | ) | (946,037 | ) | ||||||
Foreign currency translation effects | 49,281 | (179,610 | ) | (130,329 | ) | |||||||
Actuarial loss on defined benefit plan | (180,958 | ) | 4 | (180,954 | ) | |||||||
Financial instruments with subsidiaries | 15,000 | — | 15,000 | |||||||||
Change in fair values of financial assets | 1,277 | — | 1,277 | |||||||||
|
|
|
|
|
| |||||||
Total | (905,803 | ) | (335,240 | ) | (1,241,043 | ) | ||||||
|
|
|
|
|
| |||||||
Attributable to: | ||||||||||||
Owners of the Company | (805,471 | ) | (524,765 | ) | (1,330,236 | ) | ||||||
Non-controlling interests | (100,332 | ) | 189,525 | 89,193 |
16 | Earnings per share |
The Company’s subsidiaries have two categories of potential dilutive effects: share options and put options. For the share options, a calculation is done to determine the effect of the dilution in the profit attributable to shareholders of the parent due the exercise of the share options at subsidiaries. For the put option, is assumed to have been converted into ordinary shares, and the profit attributable to shareholders of the parent is adjusted.
The following table sets forth the calculation of earnings per share (in thousands of Brazilianreais, except per share amounts):
March 31, 2020 | March 31, 2019 (Restated) | |||||||
Profit attributable from to ordinary equity holders for basic earnings—basic | 646,653 | 190,216 | ||||||
Profit attributable from to ordinary equity holders for basic earnings—continued operation—basic | 646,653 | 196,023 | ||||||
Effect of dilution: | ||||||||
Dilutive effect of subsidiary’s stock option plan | (1,046 | ) | (705 | ) | ||||
Profit attributable to ordinary equity holders adjusted for the effect of dilution | 645,607 | 189,511 | ||||||
|
|
|
| |||||
Profit attributable to ordinary equity holders adjusted for the effect of dilution—Continued operation | 645,607 | 195,318 | ||||||
|
|
|
| |||||
Weighted-average number of shares outstanding (In thousands of shares) | ||||||||
Basic | 221,809 | 230,448 | ||||||
Dilutive effect of stock option plan | 7,844 | 9,451 | ||||||
|
|
|
| |||||
Dilutive | 229,653 | 239,899 | ||||||
Earnings per share | ||||||||
Basic earnings per share | R$ 2.9154 | R$ 0.8254 | ||||||
Diluted earnings per share | R$ 2.8112 | R$ 0.7900 | ||||||
Earnings per share from continued operation | ||||||||
Basic earnings per share | R$ 2.9154 | R$ 0.8506 | ||||||
Diluted earnings per share | R$ 2.8112 | R$ 0.8142 |
54
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
17 | Net sales |
Accounting policy (new operations)
The Company recognizes revenue from the supply and supply of electricity at the fair value of the consideration, through the delivery of electricity in a given period. The volume of energy delivered to the buyer is determined on a monthly basis. Customers obtain control of electricity from the moment they consume it. Invoices are issued monthly and are usually paid within 30 days of being issued.
Revenue is recognized based on the energy sold and at prices specified under the terms of supply and supply contracts. The subsidiary will be able to sell the energy in two environments: (i) in the Free Contracting Environment (FCE), where the sale of electric energy occurs through the free negotiation of prices and conditions between the parties, through bilateral contracts; and (ii) at Regulated Contracting Environment (RCE), where electricity is sold to distribution agents.
(a) | Short-term market |
The Company recognizes revenue at the fair value of the consideration receivable when transactions in the short-term market occur. The price of energy in these operations is characterized by the link with the Differences Settlement Price – PLD (short-term price).
(b) | Trading operations |
Energy trading operations are traded on an active market and, for accounting measurement purposes, they meet the definition of financial instruments at fair value.
The subsidiary recognizes revenue when the energy is delivered to the customer at the fair value of the consideration. In addition, unrealized net gains resulting frommark-to-market—difference between contracted and market prices - from open net contracted operations on the date of the financial statements are recognized as revenue.
55
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
The following is an analysis of the Company’s revenue for the period from continuing operations:
March 31, 2020 | March 31, 2019 (Restated) | |||||||
Gross revenue from sales of products and services | 5,706,284 | 5,442,851 | ||||||
Construction revenue | 197,221 | 159,936 | ||||||
Indirect taxes and deductions | (981,000 | ) | (882,881 | ) | ||||
|
|
|
| |||||
Net sales | 4,922,505 | 4,719,906 | ||||||
|
|
|
|
In the following table, revenue is disaggregated by products and service lines and timing of revenue recognition:
March 31, 2020 | March 31, 2019 (Restated) | |||||||
At a point in time | ||||||||
Gas and Energy—Gas distribution | 2,095,755 | 1,886,754 | ||||||
Gas and Energy—Commercialization of energy | 182,369 | 13,362 | ||||||
Moove —Lubricants and basic oil | 1,004,744 | 1,027,575 | ||||||
|
|
|
| |||||
3,282,868 | 2,927,691 | |||||||
Over time | ||||||||
Logistic—Transportation | 1,360,404 | 1,568,425 | ||||||
Logistic—Port elevation | 63,159 | 66,521 | ||||||
Gas and Energy—Construction revenue | 197,221 | 159,936 | ||||||
Other services | 26,515 | 6,765 | ||||||
|
|
|
| |||||
1,647,299 | 1,801,647 | |||||||
Elimination | (7,662 | ) | (9,432 | ) | ||||
|
|
|
| |||||
Total of net sales | 4,922,505 | 4,719,906 | ||||||
|
|
|
|
18 | Costs and expenses by nature |
The costs and expenses are presented in the statement of profit and loss by function. The reconciliation of income by nature/purpose is as follows:
March 31, 2020 | March 31, 2019 (Restated) | |||||||
Raw materials | (2,070,069 | ) | (1,999,158 | ) | ||||
Transportation expenses | (567,344 | ) | (608,338 | ) | ||||
Depreciation and amortization | (538,920 | ) | (561,972 | ) | ||||
Salaries and wages | (399,279 | ) | (374,956 | ) | ||||
Construction cost | (197,221 | ) | (159,936 | ) | ||||
Expenses with third-party services | (159,761 | ) | (140,716 | ) | ||||
Selling expenses | (4,976 | ) | (8,874 | ) | ||||
Other | (196,565 | ) | (137,471 | ) | ||||
|
|
|
| |||||
(4,134,135 | ) | (3,991,421 | ) | |||||
Cost of sales | (3,550,211 | ) | (3,469,327 | ) | ||||
Selling expenses | (288,605 | ) | (264,130 | ) | ||||
General and administrative expenses | (295,319 | ) | (257,964 | ) | ||||
|
|
|
| |||||
(4,134,135 | ) | (3,991,421 | ) |
56
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
19 | Other income (expenses), net |
March 31, 2020 | March 31, 2019 (Restated) | |||||||
Contractual obligations for sales of credit rights (ii) | (68,311 | ) | — | |||||
Recovering tax credits | 11,676 | — | ||||||
Revenue from sale of scrap | 7,252 | 9,234 | ||||||
Gain on litigation indemnification | — | 50,284 | ||||||
Loss on disposal ofnon-current assets and intangibles | (552 | ) | (6,364 | ) | ||||
Depreciation ofright-of-use (i) | (24,206 | ) | — | |||||
Settlement of disputes in the renewal process(iii) | (63,509 | ) | — | |||||
Net effect of legal proceedings, recoverable and tax installments | (25,822 | ) | (45,724 | ) | ||||
Other | 35,610 | (8,718 | ) | |||||
|
|
|
| |||||
(127,862 | ) | (1,288 | ) | |||||
|
|
|
|
(i) | Depreciation cost of the grant of “Malha Central” (subsidiary inpre-operating phase). |
(ii) | On December 21, 2017, the subsidiary Cosa S.A. entered into a “Credit Rights Assignment and Other Covenants Agreement”. In return, it received R$ 1,340,000 (“acquisition price”), resulting from certain indemnity actions. In addition to the acquisition price, Cosan S.A. will be entitled to additional payments related to these credit rights, provided that its result is positive. The additional payment will be determined by applying 95% of the difference between the net amount received from the Union’s credit rights by the transferee, less the return of the transferees. Being recognized in the results only upon receipt. |
In September and December 2019, there was an assignment of the additional payment mentioned in the previous paragraph, plus credit related to the portion of the controversial share of the action of Açucareiro Corona S.A. |
In both contracts there are clauses of the Company’s obligations towards buyers, in the event of any discounts, retentions or compensations that may be promoted by Copersucar, higher than certain percentages, in which the Company will indemnify buyers. |
On January 2, 2020, the first installment of the second precatory and second installment of the first precatory was received, with Copersucar retaining the amount referring to taxes, expenses and other withholdings. The Company indemnified the Buyers at R$ 132,200 on February 11, 2020, as represented in the cash flow statement, comprising: (i) R$ 28,700 taxes and expenses; (ii) R$ 103,500 other retentions. Copersucar retained the credit for Corona’s share to cover the interest that will be incurred. |
In relation to the other retentions, accounts receivable were created against Copersucar, referring to the reimbursement of the installments received from the court orders, totaling R$ 134,903, consisting of: (i) the first installment of the first court order R$ 31,403 recorded in May 2019; and (ii) first installment of the second precatory and second installment of the first precatory in the total amount of R$ 103,500 recorded in February 2020. |
On March 31, 2020, the Company made a provision of R$ 68,311 related to the taxes and expenses of the installments falling due that the Company will have to indemnify the Fund for the remaining installments of the first precatory and the second precatory. |
(iii) | Administrative and judicial disputes involving the Concession Grantor and Malha Paulista, whose discussion the Company waived as a prerequisite for the conclusion of the concession’s early renewal process, one of the requirements imposed by the Federal Court of Audit (TCU). |
57
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
20 | Finance results |
Foreign currency gains and losses on financial assets and financial liabilities are reported on a net basis as either finance income or finance cost depending on whether the net foreign currency fluctuations result in a gain or loss position.
Details of finance income and costs are as follows:
March 31, 2020 | March 31, 2019 (Restated) | |||||||
Cost of gross debt | ||||||||
Interest on debt | (435,845 | ) | (362,284 | ) | ||||
Monetary and exchange rate variation | (3,157,849 | ) | (71,646 | ) | ||||
Derivatives and fair value measurement | 3,409,919 | 64,590 | ||||||
Amortization of borrowing costs | (15,342 | ) | (14,313 | ) | ||||
Finance and warranties on debt | (9,327 | ) | (19,792 | ) | ||||
|
|
|
| |||||
(208,444 | ) | (403,445 | ) | |||||
Income from financial investment and exchange rate in cash and cash equivalents | 79,229 | 88,127 | ||||||
|
|
|
| |||||
79,229 | 88,127 | |||||||
|
|
|
| |||||
Cost of debt, net | (129,215 | ) | (315,318 | ) | ||||
Other charges and monetary variations | ||||||||
Interest on other receivables | 37,363 | 22,019 | ||||||
Interest on other liabilities | (7,397 | ) | (15,416 | ) | ||||
Monetary variation on leases and concessions agreements | (34,792 | ) | (48,611 | ) | ||||
Monetary variation on leases | (135,664 | ) | (48,433 | ) | ||||
Interest on contingencies and contracts | (79,642 | ) | (89,006 | ) | ||||
Bank charges and other | (21,527 | ) | (24,710 | ) | ||||
Exchange variation | (13,525 | ) | 85 | |||||
|
|
|
| |||||
(255,184 | ) | (204,072 | ) | |||||
|
|
|
| |||||
Finance results, net | (384,399 | ) | (519,390 | ) | ||||
|
|
|
| |||||
Reconciliation | ||||||||
Finance expense | (2,227,634 | ) | (804,034 | ) | ||||
Finance income | 470,447 | 126,416 | ||||||
Foreign exchange, net | (3,201,440 | ) | (70,817 | ) | ||||
Derivatives | 4,574,228 | 229,045 | ||||||
|
|
|
| |||||
Finance results, net | (384,399 | ) | (519,390 | ) | ||||
|
|
|
|
58
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
21 | Financial risk management |
a) | Market risk |
The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
The Company uses derivatives to manage market risks. All such transactions are carried out within the guidelines set by the risk management committee. Generally, the Company seeks to apply hedge accounting to manage volatility in profit or loss.
i. | Foreign exchange risk |
At March 31, 2020 and December 31, 2019, the Company had the following net exposure to the exchange rate variations on assets and liabilities denominated in U.S.Dollar (U.S.$.) and Euro (EUR):
March 31, 2020 | December 31, 2019 | |||||||
Cash and cash equivalents | 1,678,916 | 901,718 | ||||||
Trade receivables | 35,649 | 22,771 | ||||||
Trade payables | (126,240 | ) | (86,732 | ) | ||||
Loans, borrowings and debentures | (21,905,736 | ) | (16,245,131 | ) | ||||
Leases | (73,639 | ) | (65,348 | ) | ||||
Contingent consideration payable | (202,261 | ) | (184,370 | ) | ||||
Derivative financial instruments (notional) | 18,281,530 | 13,621,791 | ||||||
|
|
|
| |||||
Foreign exchange exposure, net | (2,311,781 | ) | (2,035,301 | ) | ||||
|
|
|
|
59
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
The sensitivity of profit or loss to changes in the exchange rates arises mainly from U.S. Dollar denominated financial instruments and the impact on other components of equity arises from foreign forward exchange contracts designated as cash flow hedges though its joint ventures.
A reasonably possible strengthening (weakening) of the real to U.S. dollar and Euro at December 31, 2020 would have affected the measurement of financial instruments denominated in a foreign currency and affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases. Stressed scenarios (positive and negative effects, before tax effects) were defined based on changes of a 25% and 50% to the U.S. dollar and Euro exchange rates used in the probable scenario. The Company’s exposure to foreign currency changes for all other currencies is not material.
Variation scenario | ||||||||||||||||||||||||
Instrument | Risk factor | Probable | 25% | 50% | -25% | -50% | ||||||||||||||||||
Cash and cash equivalents | Currency fluctuation | (158,143 | ) | 167,821 | 319,260 | (396,844 | ) | (635,545 | ) | |||||||||||||||
Trade receivables | Currency fluctuation | 17,076 | 24,722 | 32,368 | 9,430 | 1,784 | ||||||||||||||||||
Trade payables | Currency fluctuation | (94,052 | ) | (121,127 | ) | (148,203 | ) | (66,977 | ) | (39,901 | ) | |||||||||||||
Exchange rate derivatives | Currency fluctuation | 850,549 | 4,299,574 | 7,726,586 | (2,554,447 | ) | (5,981,459 | ) | ||||||||||||||||
Loans, borrowings and debentures | Currency fluctuation | 3,113,540 | (1,679,961 | ) | (6,428,794 | ) | 7,563,786 | 12,312,619 | ||||||||||||||||
Leases | Currency fluctuation | 10,464 | (5,330 | ) | (21,124 | ) | 26,258 | 42,052 | ||||||||||||||||
Contingent consideration payable | Currency fluctuation | (173,521 | ) | (216,901 | ) | (260,281 | ) | (130,141 | ) | (86,761 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Impacts on profit or loss | 3,565,913 | 2,468,798 | 1,219,812 | 4,451,065 | 5,612,789 | |||||||||||||||||||
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|
|
|
|
|
|
|
|
|
The probable scenario considers the estimated exchange rates, made by a specialized third part, at the due date of the transactions for the companies with functional currency Real (positive and negative, before tax effects), as follows:
Exchange rate sensitivity analysis (R$/U.S.$) and (R$/Euro) | ||||||||||||||||||||||||
Scenario | ||||||||||||||||||||||||
March 31, 2020 | Probable | 25% | 50% | -25% | -50% | |||||||||||||||||||
U.S.$ | 5.1987 | 4.4600 | 5.5750 | 6.6900 | 3.3450 | 2.2300 | ||||||||||||||||||
Euro | 5.7264 | 4.8600 | 6.0750 | 7.2900 | 3.6450 | 2.4300 |
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Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
ii. | Interest rate risk |
The Company and its subsidiaries monitor the fluctuations in variable interest rates in connection with its borrowings, especially those that accrue interest using LIBOR, and uses derivative instruments in order to minimize variable interest rate fluctuation risks.
A sensitivity analysis on the interest rates on loans and borrowings in compensation for the CDI investments withpre-tax increases and decreases of 25% and 50% is presented below:
Variation scenario | ||||||||||||||||||||
Exposure interest rate | Probable | 25% | 50% | -25% | -50% | |||||||||||||||
Cash and cash equivalents | 200,319 | 317,296 | 367,329 | 83,311 | 33,236 | |||||||||||||||
Marketable securities | 79,184 | 106,041 | 118,757 | 52,287 | 39,572 | |||||||||||||||
Consideration asset | 57,882 | 72,352 | 86,823 | 43,412 | 28,941 | |||||||||||||||
Restricted cash | 4,733 | 5,916 | 7,099 | 3,550 | 2,366 | |||||||||||||||
Leases | (478,616 | ) | (480,790 | ) | (482,964 | ) | (476,443 | ) | (474,269 | ) | ||||||||||
Derivative financial instruments | 29,920 | 2,040,741 | 1,599,513 | 3,076,938 | 3,689,663 | |||||||||||||||
Loans, borrowings and debentures | (1,458,002 | ) | (724,865 | ) | (821,120 | ) | (532,362 | ) | (436,100 | ) | ||||||||||
Other financial liabilities | (138,963 | ) | (173,704 | ) | (208,445 | ) | (104,222 | ) | (69,482 | ) | ||||||||||
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|
|
|
|
|
|
| |||||||||||
Impacts on profit or loss | (1,703,543 | ) | 1,162,987 | 666,992 | 2,146,471 | 2,813,927 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
The probable scenario considers the estimated interest rate, made by a specialized third part and Central Bank of Brazil (Banco Central do Brasil), or BACEN, as follows:
Probable | 25% | 50% | -25% | -50% | ||||||||||||||||
SELIC | 3.65% | 4.56% | 5.48% | 2.74% | 1.83% | |||||||||||||||
CDI | 3.65% | 4.56% | 5.48% | 2.74% | 1.83% | |||||||||||||||
TJLP462 (TJLP + 1% p.a.) | 6.10% | 7.38% | 8.65% | 4.83% | 3.55% | |||||||||||||||
TJLP | 5.10% | 6.38% | 7.65% | 3.83% | 2.55% | |||||||||||||||
IGPM | 3.51% | 4.39% | 5.27% | 2.64% | 1.76% | |||||||||||||||
IPCA | 3.12% | 3.90% | 4.68% | 2.34% | 1.56% | |||||||||||||||
Fed Funds | 0.15% | 0.19% | 0.23% | 0.11% | 0.08% | |||||||||||||||
Libor | 0.54% | 0.68% | 0.81% | 0.41% | 0.27% |
iii. | Price risk |
As of January 2020, the Company entered the energy trading market, with the objective of obtaining results with variations in the price of energy, within the limits of risk andpre-established counterparties by Management, exposing the Company to risk price of this commodity.
Equity position and unrealized gains on energy trading operations, net. Trading operations are traded on an active market and recognized at fair value through profit or loss, based on the difference between the contracted price and the market price of the open contracts on the balance sheet date.
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Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
This fair value is estimated, in large part, in the price quotations used in the activeover-the-counter market, insofar as such observable market data exist, and, to a lesser extent, by the use of valuation techniques that consider prices established in operations of purchase and sale and market prices projected by specialized entities, in the period of availability of this information.
The equity balances referring to the open trading transactions are shown below.
March 31, 2020 | ||||||||||||
Assets | Liabilities | Net gain | ||||||||||
Trading operations | 70,148 | (34,748 | ) | 35,400 | ||||||||
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|
|
|
|
|
The change in balances related to open trading transactions is as follows:
The main risk factor that impacts the pricing of trading operations is exposure to energy market prices. The scenarios for sensitivity analysis for this factor are prepared using market data and specialized sources, considering future prices, applied to the market curves of March 31, 2020, as follows:
Variation scenario | ||||||||||||||||||||
Probable | 25% | 50% | -25% | -50% | ||||||||||||||||
Unrealized gains on trading operations | 35,400 | 25,077 | 14,753 | 45,658 | 55,699 | |||||||||||||||
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| |||||||||||
35,400 | 25,077 | 14,753 | 45,658 | 55,699 | ||||||||||||||||
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|
|
b) | Credit risk |
The Company’s regular operations expose it to potential defaults when customers, suppliers and counterparties are unable to comply with their financial or other commitments. The Company seeks to mitigate this risk by entering into transactions with a diverse pool of counterparties. However, the Company continues to remain subject to unexpected third party financial failures that could disrupt its operations. The exposure to credit risk was as follows:
March 31, 2020 | December 31, 2019 | |||||||
Cash and cash equivalents | 6,984,529 | 8,472,274 | ||||||
Trade receivables | 2,169,425 | 3,115,503 | ||||||
Marketable securities | 2,183,496 | 1,814,394 | ||||||
Derivative financial instruments | 8,253,289 | 3,824,410 | ||||||
Receivables from related parties | 185,877 | 173,341 | ||||||
Dividends receivable | 44,301 | 23,252 | ||||||
Restricted cash | 129,667 | 147,910 | ||||||
|
|
|
| |||||
19,950,584 | 17,571,084 | |||||||
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|
|
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Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
The Company is also exposed to risks in connection with its cash management activities and temporary investments.
Liquid assets are invested primarily in government security and other investments in Banks with a minimum grade of “A.” Credit risk from balances with banks and financial institutions is managed by the Company’s treasury department in accordance with the Company’s policy.
Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed on an annual basis and may be updated throughout the period. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through potential counterparty’s failure to make payments. The credit risk on cash and cash equivalents, marketable securities, restricted cash and derivative financial instruments are determined by rating instruments widely accepted by the market and are arranged as follows:
March 31, 2020 | December 31, 2019 | |||||||
AAA | 16,203,995 | 11,538,846 | ||||||
AA | 1,332,915 | 4,021,251 | ||||||
|
|
|
| |||||
17,536,910 | 15,560,097 | |||||||
|
|
|
|
c) | Liquidity risk |
The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
63
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
The financial liabilities of the Company sorted by due dates (based on undiscounted cash flows contracted) are as follows:
March 31, 2020 | December 31, 2019 | |||||||||||||||||||||||
Up to 1 year | 1—2 years | 3—5 years | More than 5 years | Total | Total | |||||||||||||||||||
Loans, borrowings and debentures | (4,559,755 | ) | (3,908,754 | ) | (19,713,879 | ) | (19,420,656 | ) | (47,603,044 | ) | (42,443,289 | ) | ||||||||||||
Trade payables | (2,273,205 | ) | — | — | — | (2,273,205 | ) | (2,190,264 | ) | |||||||||||||||
Other financial liabilities | (430,860 | ) | — | — | — | (430,860 | ) | (543,879 | ) | |||||||||||||||
Tax installments—REFIS | (8,634 | ) | (4,597 | ) | (9,274 | ) | (183,939 | ) | (206,444 | ) | (207,416 | ) | ||||||||||||
Leases | (748,514 | ) | (711,334 | ) | (2,055,128 | ) | (8,239,912 | ) | (11,754,888 | ) | (11,666,959 | ) | ||||||||||||
Payables to related parties | (402,978 | ) | — | — | — | (402,978 | ) | (392,458 | ) | |||||||||||||||
Dividends payable | (203,105 | ) | — | — | — | (203,105 | ) | (214,104 | ) | |||||||||||||||
Preferred shareholders payable | — | — | (650,819 | ) | — | (650,819 | ) | (611,537 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
(8,627,051 | ) | (4,624,685 | ) | (22,429,100 | ) | (27,844,507 | ) | (63,525,343 | ) | (58,269,906 | ) | |||||||||||||
|
|
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|
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|
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|
|
|
|
22 | Post-employment benefits |
March 31, 2020 | December 31, 2019 | |||||||
Defined contribution | ||||||||
Futura II | 362 | 361 | ||||||
Defined benefit | ||||||||
Futura | 74,799 | 74,093 | ||||||
Comgás | 632,889 | 630,549 | ||||||
|
|
|
| |||||
707,688 | 704,642 | |||||||
|
|
|
| |||||
708,050 | 705,003 | |||||||
|
|
|
|
During the period ended March 31, 2020, the amount of sponsor contributions to the plans was R$ 10,498 (R$ 8,462 on December 31, 2019).
23 | Share-based payment |
The plans have been administered by the Board of Directors, at its option, by a Committee, within the limits established in the guidelines for the elaboration and structuring of each plan and in the applicable legislation.
The detail of plans, including the quantity of granted shares and expected life in years is as follow:
a) | Description of share-based payment arrangements |
According to the plan, eligible employees can receive common shares annually without payment in cash. The number of shares issued to program participants is the value of the offer divided by the weighted average price at which the Company’s shares are traded on the Stock Exchange. For share-based compensation settled with shares, the expense is based on the date of granting the fair value of the premiums that must be
64
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
acquired during the grace period. For awards with graduated vesting, the fair value of each tranche is recognized during the respective grace period. At the end of each reporting period, the Company reassesses its estimates of the number of premiums that must be acquired and recognizes the impact of the revisions in the income statement.
The Black-Scholes methodology was used to calculate the fair value under the terms of the Share-Based Compensation Plan.
Type of award / Grant date | Company | Expected life (years) | Granted | Exercised / canceled / transferred | Available | |||||||||||||||
Stock grant programs | ||||||||||||||||||||
April 27, 2017 | Cosan S.A. | 5 | 274,000 | (76,900 | ) | 197,100 | ||||||||||||||
July 31, 2017 | Cosan S.A. | 5 | 298,107 | (78,948 | ) | 219,159 | ||||||||||||||
July 31, 2018 | Cosan S.A. | 5 | 210,602 | — | 210,602 | |||||||||||||||
July 31, 2019 | Cosan S.A. | 5 | 31,031 | — | 31,031 | |||||||||||||||
|
|
|
|
|
| |||||||||||||||
813,740 | (155,848 | ) | 657,892 | |||||||||||||||||
April 20, 2017 | Comgás | 5 | 61,300 | (4,725 | ) | 56,575 | ||||||||||||||
August 12, 2017 | Comgás | 5 | 97,780 | (6,000 | ) | 91,780 | ||||||||||||||
August 1, 2018 | Comgás | 5 | 96,787 | — | 96,787 | |||||||||||||||
July 31, 2019 | Comgás | 5 | 83,683 | — | 83,683 | |||||||||||||||
|
|
|
|
|
| |||||||||||||||
339,550 | (10,725 | ) | 328,825 | |||||||||||||||||
October 1, 2015 | Rumo S.A | 5 | 1,485,900 | (258,300 | ) | 1,227,600 | ||||||||||||||
January 2, 2017 | Rumo S.A | 5 | 1,476,000 | (226,900 | ) | 1,249,100 | ||||||||||||||
September 1, 2017 | Rumo S.A | 5 | 870,900 | (131,300 | ) | 739,600 | ||||||||||||||
August 1, 2018 | Rumo S.A | 5 | 1,149,544 | (155,621 | ) | 993,923 | ||||||||||||||
August 15, 2019 | Rumo S.A | 5 | 843,152 | (18,367 | ) | 824,785 | ||||||||||||||
|
|
|
|
|
| |||||||||||||||
5,825,496 | (790,488 | ) | 5,035,008 | |||||||||||||||||
August 18, 2017 | Cosan Limited | 5 | 3,530,163 | (3,530,163 | ) | — | ||||||||||||||
Stock grant—Modification | ||||||||||||||||||||
August 18, 2011—(B) | Cosan S.A. | 1 to 12 | 1,501,626 | (1,050,752 | ) | 450,874 | ||||||||||||||
December 12, 2012—(C) | Cosan S.A. | 1 to 7 | 24,647 | (24,647 | ) | — | ||||||||||||||
April 24, 2013(i) | Cosan S.A. | 5 to 7 | 122,123 | (116,802 | ) | 5,321 | ||||||||||||||
April 25, 2014(ii) | Cosan S.A. | 5 to 7 | 283,808 | (273,056 | ) | 10,752 | ||||||||||||||
August 31, 2015 | Cosan S.A. | 5 to 7 | 463,906 | (157,242 | ) | 306,664 | ||||||||||||||
|
|
|
|
|
| |||||||||||||||
2,396,110 | (1,622,499 | ) | 773,611 | |||||||||||||||||
August 18, 2011—(B) | Cosan Logística | 1 to 12 | 162,464 | (79,448 | ) | 83,016 | ||||||||||||||
December 12, 2012—(C) | Cosan Logística | 1 to 7 | 277 | (277 | ) | — | ||||||||||||||
April 24, 2013 | Cosan Logística | 5 to 7 | 1,926 | (1,806 | ) | 120 | ||||||||||||||
April 25, 2014 | Cosan Logística | 5 to 7 | 23,682 | (22,396 | ) | 1,286 | ||||||||||||||
|
|
|
|
|
| |||||||||||||||
188,349 | (103,927 | ) | 84,422 | |||||||||||||||||
Cash-settled transactions | ||||||||||||||||||||
September 21, 2017 | Cosan Limited | 5 | 255,000 | — | 255,000 | |||||||||||||||
July 31, 2019 | Moove | 5 | 132,670 | — | 132,670 | |||||||||||||||
|
|
|
|
|
| |||||||||||||||
Total | 13,481,078 | (6,213,650 | ) | 7,267,428 | ||||||||||||||||
|
|
|
|
|
|
(i) | On January 23, 2020, 9,579 shares were delivered, equivalent to the amount of R$ 333. |
(ii) | On March 5, 2020, 21,504 shares were delivered, equivalent to the amount of R$ 748. |
65
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
b) | Reconciliation of outstanding share options |
The movement in the number of awards outstanding and their related weighted-average exercise prices are as follows:
Stock option programs | Stock grant programs | Total | ||||||||||
At December 31, 2019 | 150,662 | 7,501,866 | 7,652,528 | |||||||||
Vested | — | (125,024 | ) | (125,024 | ) | |||||||
Cancelled | — | (109,414 | ) | (109,414 | ) | |||||||
|
|
|
|
|
| |||||||
At March 31, 2020 | 150,662 | 7,267,428 | 7,418,090 | |||||||||
|
|
|
|
|
|
c) | Expense recognized in profit or loss |
Share-based compensation expense included in the statement of profit and loss for the period ended March 31, 2020 and 2019 was as follows:
Stock option programs | Stock grant programs | Total | ||||||||||
March 31, 2019 | 814 | 14,424 | 15,238 | |||||||||
|
|
|
|
|
| |||||||
March 31, 2020 (i) | 474 | 18,250 | 18,724 | |||||||||
|
|
|
|
|
|
(i) | Incremental cost was recognized in income for the period. |
24 | Operation discontinued |
On December 2, 2019, the subsidiary Cosan S.A. sold its interest in Cosan Biomassa S.A. to the joint venture Raízen Energia S.A. for R$ 1 (One Real). Considering the unsecured liability of R$47,531, plus the11-month result of this entity of R$ 15,386 and other transaction expenses of R$21,124, generating a gain in the amount of R$11,021.
Accordingly, as presented below and also required by IFRS5—Non-current assets held for sale and discontinued operations -, the Company is changing the presentation of its income statements and cash flow statements for the period ended on March 2019.
66
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
March 31, 2019 (Published) | Discontinued operation | March 31, 2019 (Restated) | ||||||||||
Gross profit | 1,250,885 | (306 | ) | 1,250,579 | ||||||||
Selling, general and administrative expenses | (522,507 | ) | 413 | (522,094 | ) | |||||||
Other income (expenses), net | (5,069 | ) | 3,781 | (1,288 | ) | |||||||
|
|
|
|
|
| |||||||
Profit before equity in earnings of investees, finance results and taxes | 723,309 | 3,888 | 727,197 | |||||||||
|
|
|
|
|
| |||||||
Interest in earnings of associates | (26,798 | ) | (1,318 | ) | (28,116 | ) | ||||||
Interest in earnings of joint ventures | 303,833 | — | 303,833 | |||||||||
|
|
|
|
|
| |||||||
Equity in earnings of investees | 277,035 | (1,318 | ) | 275,717 | ||||||||
Finance results, net | (522,627 | ) | 3,237 | (519,390 | ) | |||||||
|
|
|
|
|
| |||||||
Profit before taxes | 477,717 | 5,807 | 483,524 | |||||||||
Income taxes | (81,288 | ) | — | (81,288 | ) | |||||||
|
|
|
|
|
| |||||||
Profit from continuing operations | 396,429 | 5,807 | 402,236 | |||||||||
|
|
|
|
|
| |||||||
Loss from discontinued operations, net of taxes | — | (5,807 | ) | (5,807 | ) | |||||||
|
|
|
|
|
| |||||||
Profit for the period | 396,429 | — | 396,429 | |||||||||
|
|
|
|
|
| |||||||
Profit attributable to: | ||||||||||||
Owners of the Company | 190,216 | — | 190,216 | |||||||||
Non-controlling interests | 206,213 | — | 206,213 | |||||||||
|
|
|
|
|
| |||||||
396,429 | — | 396,429 |
67
Table of Contents
Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
March 31, 2019 (Published) | Discontinued operation | March 31, 2019 (Restated) | ||||||||||
Cash flows from operating activities | ||||||||||||
Profit before taxes | 477,717 | 5,807 | 483,524 | |||||||||
Adjustments for: | ||||||||||||
Depreciation and amortization | 562,804 | (832 | ) | 561,972 | ||||||||
Interest in earnings of associates | 26,798 | 1,318 | 28,116 | |||||||||
Interest in earnings of joint ventures | (303,833 | ) | — | (303,833 | ) | |||||||
Indexation charges, interest and exchange, net | 567,385 | (3,529 | ) | 563,856 | ||||||||
Provisions for employee benefits | 49,707 | 101 | 49,808 | |||||||||
Other | (33,551 | ) | (10 | ) | (33,561 | ) | ||||||
|
|
|
|
|
| |||||||
1,347,027 | 2,855 | 1,349,882 | ||||||||||
Changes in: | ||||||||||||
Trade receivables | (271,634 | ) | (8,058 | ) | (279,692 | ) | ||||||
Inventories | (23,622 | ) | (1,193 | ) | (24,815 | ) | ||||||
Current tax, net | 48,017 | 257 | 48,274 | |||||||||
Related parties, net | 1,459 | (1,570 | ) | (111 | ) | |||||||
Trade payables | 45,153 | 1,516 | 46,669 | |||||||||
Employee benefits | (165,487 | ) | 840 | (164,647 | ) | |||||||
Other assets and liabilities, net | (99,398 | ) | 464 | (98,934 | ) | |||||||
Discontinued operation | — | 4,899 | 4,899 | |||||||||
Other | (126,919 | ) | (10 | ) | (126,929 | ) | ||||||
|
|
|
|
|
| |||||||
Net cash generated by operating activities | 754,596 | — | 754,596 | |||||||||
Marketable securities | 1,470,693 | (833 | ) | 1,469,860 | ||||||||
Additions to property, plant and equipment, intangible assets, contract assets and right to use | (693,862 | ) | 254 | (693,608 | ) | |||||||
Discontinued operation | — | 579 | 579 | |||||||||
Other | 195,502 | — | 195,502 | |||||||||
|
|
|
|
|
| |||||||
Net cash used in investing activities | 972,333 | — | 972,333 | |||||||||
Loans, borrowings and debentures raised | 3,027,460 | — | 3,027,460 | |||||||||
Amortization of principal on loans, financing and debentures | (1,527,277 | ) | 3,738 | (1,523,539 | ) | |||||||
Payment of interest on loans, borrowings and debentures | (508,685 | ) | 2,447 | (506,238 | ) | |||||||
Derivative financial instruments, net | (750 | ) | 64 | (686 | ) | |||||||
Discontinued operation | — | (6,249 | ) | (6,249 | ) | |||||||
Other | (1,669,897 | ) | — | (1,669,897 | ) | |||||||
|
|
|
|
|
| |||||||
Cash flow from financing activities | (679,149 | ) | — | (679,149 | ) | |||||||
Increase (decrease) in cash and cash equivalents | 1,047,780 | — | 1,047,780 | |||||||||
Cash and cash equivalents at beginning of period | 3,621,798 | — | 3,621,798 | |||||||||
|
|
|
|
|
| |||||||
Effect of exchange rate fluctuations on cash held | (8,019 | ) | — | (8,019 | ) | |||||||
|
|
|
|
|
| |||||||
Cash and cash equivalents at end of period | 4,661,559 | — | 4,661,559 |
25 | Subsequent events |
25.1 | Covid-19 |
Based on the information available, we present the below a summary of the main effects of theCovid-19 pandemic on our results of operations in March and April 2020:
• | Raízen Combustíveis. Gasoline and ethanol sales decreased by as much as 50% and diesel sales decreased by 25%. In the aviation segment, demand was adversely affected by the reduction of flights by Raízen Combustíveis’s main customers, and sales decreased by as much as 80%. |
• | Raízen Energia. Demand for ethanol decreased in line with the lower demand for fuels. Sales of sugar had already decreased for the 2020/21 harvest-year that recently began, with no significant impact on marketing strategy. |
• | Cosan Logística. Rumo experienced an increase in the volume of soybeans transported following an increase in Brazilian grain exports that became more competitive due to the devaluation of the Brazilianreal. |
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Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
• | Comgás. Demand for natural gas in the industrial segment has decreased by as much as 40%, concentrated in certain sectors that have suspended or reduced their activities. In the commercial segment, demand has decreased by as much as 60%, while in the residential segment, demand has increased by approximately 10% due to social distancing measures. |
• | Moove. Demand for lubricants has decreased by approximately 50% in recent weeks, both in Brazil and in other countries in which we operate |
In addition, in April 2020 we drew down a total amount of approximately R$4,430,200 from certain of our financing facilities, in order to strengthen our working capital and financial condition in the context of theCovid-19 pandemic. We assess liquidity needs in a timely and cautious manner and reinforce our cash position in operations. We reaffirm our commitment to society, acting actively in several regions with donations and initiatives to maintain the safety and health of our stakeholders, ensuring that our essential operations continue to supply the country, in addition to being pioneers in the movement of not firing at this team.
25.2 | Cosan Limited |
Shares purchase and derivatives negotiation plan
On April 9, 2020, the Company entered into a shares purchase and derivatives negotiation plan, or the Total Return Swap, with Banco Santander (Brasil) S.A. – Cayman Branch and Santander Fundo de Investimento Amazonas Multimercado Crédito Privado Investimento no Exterior. Pursuant to the Total Return Swap, the Santander Fund will be able to purchase, on its own behalf, common shares issued by Cosan S.A., and Santander Cayman will be able to enter into equity swap transactions on its own behalf and on our behalf in connection with such shares. The maximum aggregate amount of derivatives which may be negotiated pursuant to the Total Return Swap and the maximum aggregate number of underlying Cosan S.A. shares thereunder are R$600,000 and 19,500,000, respectively. On May 31, 2020, derivatives in an aggregate amount of R$515,955 involving the equivalent to 8,729,100 Cosan S.A. shares had been entered into pursuant to the total return swap.
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Notes to the interim consolidated financial statements
(In thousands of Brazilian Reais – R$, unless otherwise stated)
25.3 | Cosan S.A. |
Assignment of credit rights
On April 2, 2020, funds from the credit assignment agreement were released, according to note 18, by Copersucar to the subsidiary, in the amount of R$ 130,923. The additional amount of R$ 3,980 will be released until December 31, 2020.
Ordinary Tariff Review – Comgás
On December 6, 2019, the Sanitation and Energy Regulatory Agency for the state of São Paulo (Agência Reguladora de Energia de São Paulo), or “ARSESP,” published Resolution No. 933, which approved the amount of R$683,358plus monetary adjustment since April 2018, as a result of the Third Ordinary Tariff Review, to be applied to the value of the assets returned by Comgás, upon termination of the concession, or to any amounts payable by Comgás if the concession is renewed, or in connection with any renewal of the concession agreement, as it comes to be defined by ARSESP, according to Resolution No. 995 of May 27, 2020. With the publication of the aforementioned resolution, there are no more ongoing discussions regarding tariffs related to previous periods with ARSESP. The amount indicated in this resolution was not recognized in our financial statements because it does not comply with accounting standards.
25.4 | Cosan Logística |
Extension of the Malha Paulista concession agreement
On May 27, 2020, Rumo entered into an amendment to the concession agreement relating to Malha Paulista with the Brazilian Transportation Authority (Agência Nacional de Transporte Terrestre), or “ANTT.” The amendment was reviewed and authorized by the Federal Accounting Court (Tribunal de Contas da União), or “TCU,” pursuant to a decision issued on May 20, 2020. As a result, the term of the Malha Paulista concession is expected to be extended to 2058, provided that Rumo complies with certain obligations.
Furthermore, the new grant amount for the concession will be approximately R$2,911,965 (as of December 2017), to be paid in quarterly installments over the course of the agreement’s term, which is expected to expire in 2058, and investments to be made are estimated by the ANTT at R$6,100,000 (as of December 2017) over the same period.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: June 4, 2020
COSAN LIMITED | ||
By: | /s/ Marcelo Eduardo Martins | |
Name: Marcelo Eduardo Martins Title: Chief Financial Officer |