Cosan S.A. (CSAN) Q1 2022 Earnings Call Transcript

Cosan S.A. (CSAN)
Q1 2022 Earnings Call
May 16, 2022, 1:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen, and thank you for waiting. Welcome to Cosan's conference call to discuss the results of the first quarter of 2022. Today with us, we have Mr. Luis Henrique Guimaraes, CEO; Mr.

Ricardo Lewin, CFO and IRO; and Ms. Ana Luisa Perina, IR manager. We would like to inform you that this event is being recorded and it has simultaneous translation into English. [Operator instructions] Before proceeding, let me mention that forward-looking statements that may be made during this presentation regarding the company's business prospects and operating and financial projections and goals are based on Cosan's beliefs and assumptions of management as well as on information currently available to the company.

Forward-looking statements are not guaranteed performance. They involve risks, uncertainties, and assumptions as they relate to future events, and therefore, depend on circumstances that may or may not occur. General economic conditions, industry conditions, and other operating factors may affect the company's future results and may lead to results that differ materially from those expressed in such forward-looking statements. Now, I would like to turn the conference over to Mr.

Ricardo Lewin. Please Mr. Ricardo you may proceed.

Ricardo Lewin -- Chief Financial Officer and Investor Relations Officer

Good afternoon and thank you for joining us Cosan's earnings conference call for the first quarter of 2022. With me today we have Luis Henrique, our CEO and Ana Luisa Perina our IR manager. Let's start today's presentation with the financial and operating highlights of each business. Our presentation is very concise since our listed subsidiaries have already reported the year results and held their calls with the market.

Let's start on Slide number 4 with Raizen. Since this quality closes the 21 to 22 crop year I will focus on the highlights for the year. We set a new record for our adjusted EBITDA supported by significant improvement in the operational performance of Raizen within the guidance range share with the market. In renewables, the better prices and maximization of gains from sales boosted a strong result.

And as you all are aware, we are advancing in our plan to expand the supply of clean and renewable energy. With the recent announcements, our pipeline already closed the construction of a second biogas plant scheduled for 2023 as well another three E2G plants in addition to the one already operating on a commercial scale, which should be ready in 2023 and 2024. In sugar, we also had important rise in sales price and continue to increase our share of direct sales to destination. This partially offset the lowered volumes, which were affected by the crop setback and by the carryover of inventories to the coming month, seeking to maximize profitability.

In marketing and services EBITDA grew over 50% with better returns, and higher volumes across all segments, benefiting from the good opportunities to expand the network in Brazil and in the Latin America operations. Let's go to Slide number 5, which shows the results of Compass Gas & Energia. The slight reduction in Compass sales volume in the quarter reflects the weaker demand from the industrial segment caused by a red expected scheduled maintenance shutdown at clients. This impact was offset by growth in the commercial residential and automotive segments and by the addition of the volumes distributed by Sulgas consolidated from January on.

Meanwhile, EBITDA growth was driven by better margins adjusted by inflation and ongoing operating efficiency gains at Comgas as well as by the incorporation of Sulgas. Going now to Slide number 6, you can see the results of Moove. The period was marked by the recovery in lubricant sales volume, despite the decline on a year-over-year basis. Remember that the first quarter of last year represents a strong comparison base for lubricant sales volume since it's pharmacy was leveraged by the economic recovery after the most critical months of the pandemic, especially in Brazil.

Meanwhile, EBITDA captured the continuous improvement in profitability evidencing Moove's effective cost control, and sharp sourcing and pricing strategy, despite the more challenge demand scenario in early 2022. Let's go to Slide number 7 to talk about Rumo. Transported volumes registered strong growth in the quantity mainly the North operation. The result reflects the anticipation of the soybean season, operating efficiency gains, and the ramp up of the central network operation.

As a result, Rumo captured market share gains in the green export from the part of centers aligned with our marketing strategy. Meanwhile, EBITDA margins fell from the first quarter last year, the increase in average tariffs wasn't enough to offset their higher variable cost in the quarter which were pressured mainly by diesel. Even so, the higher fixed costs and expenses legged inflation reinforcing the company's capital discipline. Moving on is Slide number 8 shows the results of Cosan.

As discussed in each business, our portfolio delivered solid results in the quarter despite the challenges. In corporate, the expenses were in line with expectations at Cosan Investimentos. EBITDA was represented mainly by the revenues from the leasing of agricultural land by Radar. The other companies are start-ups and projects in the pre-operational stage and therefore, on a combined basis represent negative EBITDA which offset part of Radar.

As a result, pro forma EBITDA grew due the better operating performance of Cosan and Compass. Meanwhile, the net income was affected by higher financial expenses in all Cosan businesses, which are component the rise of interest rates. And Cosan's consolidating investments in the quarter increased year over year mainly due to the highest paid -- including now by Biosev and at Compass partially offset by lower capex at Rumo. Let's go to Slide number 9, which shows our group's financial highlights.

We conducted liability measured actions to follow the entire group. The sequential reductions in gross debt is explained by the prepayment of 2025 bonds at Rumo and the buy amortizations at high easing. The net debt EBITDA came to two times within their ideal range for the group reflecting the significantly EBITDA growth in the last 12 months. Meanwhile, cash flow registered nearly half the burn in the first quarter last year, representing important improvements supported by funding operations at Compass, and higher operating cash in Raizen from sales of inventory.

These effects were partially offset by the expenditures with the acquisition of Sulgas and with the second installment for the acquisition of Port of Sao Luis by Cosan Investimentos. Although not related to the quality, I'd like to reinforce subsequent events for the quarter. First, the shareholders' meeting in April approved the distribution of R$800 million in dividends for 2021. That will be paid on May 20th complementing the R$700 million in interim dividends paid in December.

We also concluded Cosan's fourth debenture issue, raising R$1.5 billion in two series one for six years and the other for 10 years. The proceeds will be used to replace and reinforce our cash position following the transactions carried out in recent moves, such as the acquisitions of Radar and the Port of Sao Luis. Also in May, a new stock buyback program was approved to replace the previous one, which provides for the maximum repurchase of 110 billion shares over the next 18 months. Remember, that part of this quantity of shares was contracted through total returns to operations as reported monthly.

Before closing, I want to go over some recent events in our ESG agenda on Slide number 10. In April, we published our annual sustainability report, which will keep readers up-to-date on the progress made in our ESG journey during 2021. I invite you to read the report, which is available on our website. In addition to Cosan, Compass also publishes its report, and soon the reports of other businesses will be made available.

We also celebrated all companies in our portfolio becoming signatories to the global compact, our UN initiative to encourage companies to adopt the responsible corporate social and sustainability policies. In April, Raizen carried out its first issue of sustainability linked debentures, linked to ESG targets, which raised R$1.2 billion and Rumo made important advance in the risk rating of ESG performance, assign it by sustainalytics, which improve it from high to medium. Lastly, I want to invite you all again, to participate in our Cosan Day on May 26th, which will be live streaming with simultaneous translation. And that concludes my presentation.

And we are all available to clarify your questions. Thank you.

Questions & Answers:

Operator

Thank you. [Operator instructions] First question is from Ms. Isabella Simonato. Ms.

Simonato you may proceed.

Isabella Simonato -- Bank of America Merrill Lynch

Good morning, Luis. Good morning, Ricardo. Good morning, actually. Good afternoon, everyone.

Thank you for the call. I have a question about Cosan Corporate, the holding company. It's interesting because when we look at the dividend payout, compared to what you have, in terms of debt service and potential investments, obviously, one quarter is not enough to give you a good reading of the whole year. So that's why I wanted to ask you could you let us know how you see that equation at the level of the holding company in terms of dividends flow that it can receive versus a more expensive debt service with higher interest rates.

You also mentioned you'll be making more investments this year. But there's capex from investments and there are also buybacks as well as other things that you can do. So could you give us an overview of how you're seeing that and also, as a follow-up question there's a liquidity and float size issue at Raizen. Could you give us an update on how you thinking about that structure? Thank you.

Ana Luisa Perina -- Investor Relations Manager

Thank you. Lewin Please help me out and add anything you might think is necessary. Thanks, everyone, for joining on this call. As you know, the presentation was short.

So we're here to answer your questions myself and Lewin. We're keeping the same discipline as always. We've done everything to make sure that we can address the debt service and there's room for buybacks as well. As you will have noted, we have approved our buyback program at the level of the subsidiaries and the holding company.

We can continue with the buybacks as soon as it's unblocked. In terms of investments, there are no major investments at the holding level with the exception of the Radar payment installments. In terms of mining, we have concluded the ports and the next capitalization event is further down the line if and when the mining quality issues and everything else is sorted. So that's what we have ahead of us in 2022.

The rest of the capex has been resolved with all the other companies with cash generation fundraising, and growth at move compacts Raizen and Rumo with very good liquidity level. In terms of Raizen's liquidity, that's always something, we look at very careful. We want to get a 50% float at the company. And we're working with V3.

When the time is right, we have some commitments. And they're also sales by shareholders that may have bought something via bio serve, we're also keeping an eye on that. That goes on, and partners a shell and the company. So it's an opportunity, it will be done at the right time.

And we'll make sure that our receivables flow minus the debt service and radars capex are all addressed with the opportunities we see in our portfolio companies and the holding company. Lewin would you like to add anything?

Ricardo Lewin -- Chief Financial Officer and Investor Relations Officer

Yes. Just about the first point was, obviously, we have the three pillars, new investments, share buyback and dividends at the holding company. And as you said, we do have that new buyback program. We have 30 million in shares, which are open.

We have the commitment at the TRS and if we have any opportunities, obviously, when these programs are open, we do buyback when good opportunities present themselves. And what we're missing is the fact that we're also looking at the company's leveraging. We have those three fronts, but we're looking at our leveraging. And we always keep it at 2.5, which is what we always set as our limit and let's not forget that we concluded the quarter with very low leveraging of two times the EBITDA.

Isabella Simonato -- Bank of America Merrill Lynch

That's very clear. Just as a follow-up, please, considering that equation, can we think there will be a drop in Cosan corporate net debt? Or would that be marginal?

Luis Henrique Guimaraes -- Chief Executive Officer

No. Well, let's think in terms of leveraging, obviously, we're not disclosing a guidance, but the objective is that to keep it at the level I mentioned, what we did do recently was and I talked about this in other events was to issue some additional depth but with that, we should do our liability management considering some of the debts we have. So we will be keeping a similar level of indebtedness.

Isabella Simonato -- Bank of America Merrill Lynch

That's great. Thank you.

Operator

Thank you. Next question is from Mr. Christian Audi from Banco Santander. Mr.

Christian, you may proceed.

Christian Audi -- Banco Santander -- Analyst

Thank you, Luis. Thank you, Ricardo. Thank you, Ana. Luis, I have a question about the market dynamics as a whole.

We now see high inflation rate pressure going on. So I'd like to hear from you what your concerns are when it comes to this inflation pressure, and what you have been doing to make sure your strategy can face these dynamics, which looks like will continue for the rest of the year.

Luis Henrique Guimaraes -- Chief Executive Officer

That's a great question, Christian. It's almost like you've been attending our management team meeting because we've been talking about that for a long time. Marcelo talked about some of our capital allocation decisions, leaving some of the businesses we were intending to do which we really liked, and that had to do with a capital increase and concerns about costs. Obviously, also, the ability to make sure that our management and that this is a key topic for all companies, not only in Brazil but around the world and our inflation number we're trained for the any manager who's younger than 40 doesn't know what inflation -- we've been discussing what we're going to do, we're looking at costs.

And we're also looking at passing this over. This is key freight competitiveness in the case of Rumo turnover in case of Raizen. So sometimes they take a while to happen, but they end up happening in the market as a whole. So over the last three years given our investments, our projects and how we've been developing our procurements, always focusing on improving quality on our competent systems, we've been putting a lot of effort into increasing synergy among the companies that buy shared items.

So services, ranging from IT security services, we've been capturing significant savings. And there's been relevant costs avoidance as well. We've been reducing since the last pricing. So that's our number one priority, not just for the CEO, but for everyone in the company, in terms of allocation of resources.

And the cost of opportunities is something we consider a competition repricing to make sure that we have the right thing that is compatible with the return on investment for the industry we operate in. So that's our number one priority. It's not just in Brazil, it's around the world. We're here to stay, this is here to stay for a while.

So I can tell you that both in our long-term projects, as well as recurring cost activities, we will be doing our homework to mitigate these cost effects and to accelerate whenever possible, and wherever the competitive environment allows us to pass on the margins to the business.

Christian Audi -- Banco Santander -- Analyst

Right. Thank you, Luis. The second question is there is a risk that the administration might be changing. So I'd like to hear from you whether there are any industries that you're more concerned about if there is a change in government, and any ensuing regulatory changes, that might make some businesses harder.

So do you see any risk in that sense?

Luis Henrique Guimaraes -- Chief Executive Officer

Well, once again, this looks like an election between two former presidents. So it's something we've seen before in terms of direction with the thinking. We're familiar with it. We've been through it before.

And the reality is that we operate in industries that have an impact on society as a whole. It's a structural industry that allows Brazil to be more competitive in different business areas. So we look at a glass half full. So despite the global challenges, Brazil is in a very relevant, competitive position considering the planet's de-carbonization.

Nobody has any doubt that it is necessary. It's already happening. There's also the war between Russia and Ukraine, which will take a while. And so Brazil is very well-positioned because it is the main protein and food additional supplier.

Rumo has a very good strategic position in renewables, in oil. So, we're in a great position, there's no risk of war polarization. Moving from A to B outside the internal situation, obviously, and these are industry that when commodity prices go up, that they are affected, obviously, but since in most cases, our companies add value to the equation. So logistics, credit, I'm not, direct, directly impacted.

We don't own the land. We don't own specific assets, we have control over the land lease. So that's a very relevant position. If there are no major interventions, which we don't think will happen, but we are in a position that doesn't make us that exposed in terms of import taxes, export taxes, or any other artificial pricing mechanisms because that's sometimes can be a temptation.

We're well-positioned in terms of regulatory issues, the railway, authorizations, both local and federal, and gas policies as well. We also have our concessions in the Paulista Network or with Comgas. So lots of things have happened over the last two or three years that have reduced our exposure to these risks. So I don't really think whether A wins or B wins, that will have a problem.

I think there's a great opportunity for Brazil to consolidate its position as a great supplier of major commodities of the future in this new geopolitical, design and configuration we see happening around the world. But obviously, we're paying attention to all that. We have a close dialogue with the different levels of the legislative and the executive branches. And I'd say it's business as usual at the moment.

It doesn't matter whether they're orthodox or heterodox ideas, and it doesn't matter where they come from. If you look at what's happened over the last many years, these things tend to move toward a solution that makes sense. Along the way, sometimes it's not the most direct way, the tax on diesel. There are different opinions on different sides.

But I believe world will converge toward something that makes sense. There will be a correction cycle with some instability. But the state and federal governments will strike a balance, I'm sure, but only the debate and the fact that things are evolving. It's very positive.

It's like Brazil, two steps forward, one step back, but at least in the areas where we operate things to be moving forward, and I believe they will continue to do so.

Christian Audi -- Banco Santander -- Analyst

That's great. Thank you. Just as a follow-up to Ricardo. In terms of buyback, how do you see calls on buybacks? You said your mind by some Raizen shares? How do you see that dynamics between buying back Cosan shares versus Raizen shares? Could you give us some color on that, please?

Ricardo Lewin -- Chief Financial Officer and Investor Relations Officer

Of course. Thank you. Well the buyback decision obviously we could do Cosan share buybacks, Rumo and Raizen. This is publicly held information.

We did R$250 million worth of share buybacks by Rumo, this is a financial decision. We have our models, and we'll buy as we see opportunities to get attractive returns obviously. So whenever we see attractive returns in a specific company, we buy back based on our models.

Christian Audi -- Banco Santander -- Analyst

OK. Great. Thank you, Luis. Thank you, Ricardo.

Ricardo Lewin -- Chief Financial Officer and Investor Relations Officer

Thank you.

Operator

Thank you. Next question is from Mr. Marcelo from Credit Suisse. Mr.

Marcelo, you may proceed.

Marcelo Telles -- Credit Suisse -- Analyst

Hello, good afternoon, everyone. Hi, Luis. Hi, Ricardo. Hi, Ana.

Congratulations on the results. And thank you for answering my questions. I have a couple of questions. One is a follow-up to Christian's question about Gaspetro and the Regas terminal.

You've already mentioned that Compass adds value. So it's not necessarily linked to the price of the molecule. But given the level of volatility, international prices, do you see any challenges or difficulties for that terminal to be successful, to be installed, and to be up and running according to what you had thought originally? And my other question is about Compass. In terms of the DOD Gaspetro.

Do you have any update in terms of timing of the deal? Now it's the competition authority and obviously, you're moving forward and selling some of Gaspetro subsidiaries. So my question, is the strategy behind that? Do you see potential expansion of the network in some places? Or will you keep the distributing companies that already have an installed network, and therefore, it would make it easier to implement Comgas successful model? So those are my questions.

Ana Luisa Perina -- Investor Relations Manager

Thank you, Marcelo. I'll start by the second because I think it's faster. The divestment in assets it has to do with consistence. We've always said that.

We've always said that we weren't acquiring our special to keep 100% of the operations. It's a key operation power. And it's very healthy to have other players to develop the distribution market, because it's an underdeveloped market in Brazil, with the exception of Comgas and the other company in Rio de Janeiro. It's an underdeveloped market.

So there are lots of opportunities. But one single player cannot make it happen. So it's about consistence. So we selected the areas and regions that have the most synergy and ability to absorb our model.

And also, that makes sense for other players to acquire and we'll make sense to the negotiation deal that we have already concluded. And the negotiation, obviously, the deal is pending CADE's approval. So this should happen by the end of July. That's CADE's deadline to assess this acquisition.

It's not left the superintendence with a recommendation with unrestricted approval. So we're very optimistic about it. But obviously, CADE's decision is sovereign, in terms of the approval of the deal, but it's been approved by the superintendents. So we'll continue to work with the agency to clarify any questions and to provide them with anything they might need to help the Brazilian market develop and meet the rising demand.

So as a segue to your first question, obviously, all of our plays have a key structural component. It's the same thing we've been doing the last few years, the extension to look at the Rio Verde, Comgas extension, the network extension, the natural gas terminal in Sao Paulo. These are key and unique assets in our portfolio. They have great cash generation and results generation for a very long time.

So we're very happy about the vitae generation in the last few years, because of the positions that we have consolidated and which are so important to grow with good results in all of these companies. The terminal we're talking about a six-month, a year trade. It's got a strategic position, and it will allow us flexibility, local price negotiation, and let's not forget that all of these deals, the IFRS deal, the Regas unit, and the long term gas supply agreements have done with the commercial conditions of that time. So it's a long-term asset.

But it's positive because right now we have costs that are much more competitive than they would be if we were starting now for instance. But we want to maximize the returns of these assets during the cycle as a whole over the years. So I don't see any difficulties ahead. Quite the contrary that position was built before the crisis, and it's a winning position.

So we just need to deliver a working terminal in the first half of next year. So we will continue to have good results and we're confident that we will do it within the deadline that we have agreed on with the market, our clients, suppliers, and to have another unique position in terms of strategy will help Brazil develop, will help Sao Paulo develop, we will improve the supply of natural gas to the Brazilian energy matrix, which is key.

Marcelo Telles -- Credit Suisse -- Analyst

Great. Thank you.

Operator

Thank you. Our next question is from Mr. Lucas Ferreira from J.P. Morgan.

You may go ahead, Mr. Lucas.

Lucas Ferreira -- J.P. Morgan -- Analyst

Hi, everyone. Good afternoon. So as far as I understand it, you've decided to have another official guidance. In general terms and qualitative terms what can we expect for both stand-alone businesses Compass and Moove for 2022 in terms of both capex? As a capex acceleration in all businesses? Can we expect to see that acceleration in the other businesses as well? If you could comment on that, in general terms, I'd be grateful.

Thank you.

Luis Henrique Guimaraes -- Chief Executive Officer

Well, Moove and Compass have had compound growth over the last few years that are quite relevant, and we don't see that slowing down. It will continue. So for over a year, looking forward, we will continue to grow. That's what we've been doing.

That's how it's been performing. These are fantastic assets. We've been working together with resources that we've brought to both businesses whenever required, and there's great opportunity for growth, but it's no secret that we want to increase Moove's international share to grow in the Americas, in North America and in Europe. And we hope to have news soon for everyone.

The company is ready for that step. We've had consistent deliveries in the last few years in our LATM business, Europe, business, and our small business in the U.S. So we have won the rights of growth even more. We just need to match that with a market opportunity.

So that's what you can expect from Moove; continued growth and continued expansion and our international presence. At Compass, we want to conclude gas metros acquisition, hopefully by the end of July, together with the divestments so, making an acquisition and divesting from two assets at the same time. And so we'll start replicating Comgas successful model, which is what we have already started to do with Sulgas in regard to do so. We're already seeing relevant results in terms of expanding our network, residential connections, and so on and so forth.

And in 2023 will have the terminal which will provide our clients in Sao Paulo with more benefits as well as future thermal projects by third parties. Third-party thermal projects will have an opportunity to give us competitive projects in the southeast. So we continue to deliver growth and the additional capex at Moove will be for potential acquisition. And then compass there is no change in Congress regulatory capex.

So we'll continue with the regulatory capex. And we'll also have the capex for the new companies when they are under our management coupled with the states that are part of the partnership in both businesses. So that's a summary. There's huge growth capacity they've been delivering, and Compass is a good dividend payer.

And it delivers substantial growth as well. I don't know if I answered your question.

Ana Luisa Perina -- Investor Relations Manager

Hi. Thanks, Louise. This is Ana. I just like to add something even though Compass' shares are not listed on the stock exchange, we do disclose our results.

So in February this year, we did disclose our EBITDA and capex projections for Compass, and the EBITDA we expect for 2022 is 3 billion. It was 3.3 EBITDA and capex 1.6 to 1.8. As Luis said, these are the numbers for the ongoing operations. But they exclude the results of potential acquisitions.

OK?

Luis Henrique Guimaraes -- Chief Executive Officer

That's a great point, Ana. Let me just reiterate a couple of things that are very important, and we take into consideration, especially with regards to capital allocation it's the unique position of each of these assets because we consider competition the markets we supply and so on. So when I look at that, right now, myself, everyone at the holding company, it's the same, as I said about Compass and Moove. They have a clear avenue for growth.

And the same applies to what was built in regulatory terms at Rumo in the last few years, and a stronger crop, and repricing of the cost of capital, the cost of businesses moving toward traditional freight. And the same applies to Raizen with the expansion of 2G and Petrobras model to position itself and supply the market. So when we look at all this, obviously, there are concerns about the inflation rate and the country's growth, but our strategic positioning, considering everything that's going on around the world is very strong. We are in a very strong position.

Lucas Ferreira -- J.P. Morgan -- Analyst

Thank you.

Operator

Thank you. The next question is from Mr. Bruno Montanari. Mr.

Montanari, you can go ahead.

Bruno Montanari -- Morgan Stanley -- Analyst

Good afternoon. Thank you for answering my questions. I have a couple of follow-up questions, one about Compass and another one about capital allocation. You were very fortunate in the terminal timing at Compass.

And do you think that the commercial company in the short to the midterm might be better than you had expected because of this high natural gas volatility and in terms of capital allocation? When might you think to start reinvesting? Again, would it be when you see that inflation rates are going down or interest rates or when you see improvements in the macroeconomy? Because that might be a long process. So I'd like to hear about timing when the situation improves. At what point of the cycle? Do you think you'll start investing again? Thank you.

Luis Henrique Guimaraes -- Chief Executive Officer

I'll start with your first question. Traders and commercial companies love volatility. Brazil and the world are not worried about the price and price levels. It's about having different molecules and for the market to develop faster.

The main accelerator or the accelerator for the short term it is much better than we had thought because there are no other molecules available in the market. And there aren't enough clients in the market despite the regulation in Sao Paulo, which is our main market. Allows it so, but I wouldn't attribute that to price volatility because price volatility means opportunity for the commercial companies. What's happening is that the market's ability to have three clients on the supply side, or on the other side to take on the risk that have potential benefits.

But there are risks as well as demand generation. Second instance, suppliers, it takes time for the market to develop. And in our opinion, we've been talking to the regulatory agencies and the ministry, our focus in terms of the market and the industry is that issues that are blocking the expansion of the free market should be unblocked, Compass goes on. We're very favorable toward having as many free clients as possible as soon as the molecule issue is addressed.

And we focus on distribution efficiency, because that's our core business and commercial company does have a small share, where it makes sense, we'll have lots of others where it makes sense. It's not happening because it's doesn't make sense at the moment, but the origin of the molecule with different pricing different interests and access so that that market can develop. That's the limiting factor to me. Not price volatility, because price volatility can be very productive.

And before this crisis, we would be highly competitive as we can see in Comgas's do to have a share of the supply via the terminal, which is highly competitive. About your second question, since the end of last year, we had been seeing an acceleration of the cost curve and curve of cost of capital, but there is an investment by the companies below that. So there's return to investment investing as required. But there's enough capital allocated to projects that we do see, and that places in a key strategic position.

So Raizen biogas, the Lucas Rio Verde extension at Rumo, Moove's entry into Europe and the acceleration of the replication of Comgas's model at the other companies with Gaspetro Sulgas. So we have allocated capex its relevant capex and will generate double-digit returns in all of these businesses. And they will remain at that level. It's about being conservative where we can see that certain risks are not worthwhile taking out but obviously we will continue to grow responsibly and to get assets where we see competitive advantage and an ability to generate results and continue to grow.

Bruno Montanari -- Morgan Stanley -- Analyst

That's very clear. Thank you.

Operator

Thank you. Next question is from Mr. [Inaudible] from UBS. You may proceed, Mr.

[Inaudible]

Unknown speaker

Hi, good afternoon Luis, Ricardo, Ana. Thanks for taking my questions. I have a couple of follow-up questions. I might rephrase the question.

First, I'd like to understand how you see Compass as a platform for natural gas. We had talked about natural gas, price volatility, Petrobras strong presence in natural gas market with commercial companies falling short of what was expected. So what's changed in the mid to the long term, for contrast, considering a portfolio that was presented a couple of years ago, considering new opportunities in energy or other gas businesses? So that's my first question. The second question is also a follow-up question to what has already been said, considering the whole group.

And I know there's a few different ways of looking at it. How does the company come to the holding discount? You've made it clear that there is an expectation to buy back at the company or the subsidiaries. Does the company see this as a good moment to leverage buyback considering the discount levels we're seeing? How do you see that? Thank you.

Luis Henrique Guimaraes -- Chief Executive Officer

I'll start by the second question because it's quite simple. The holding discount is determined by the market. We're not going to dispute whether it's right or wrong. But our portfolio -- this count should be close to zero, that's part of our portfolio and risk considerations.

There are lots of uncertainties around the world, the quality of our assets are all linked to Brazil's competitive advantage, which are independent from the administration. They are all very well-positioned considering the profitable de-carbonization agenda that we see around the world. So we'll check market prices. And if they make sense, or if they do make sense, and at current levels, we think the market is wrong in terms of pricing, but the market is sovereign.

So we will do what we deem important to do, we'll do what we have to do. We have the authorization to buy all three papers; the blocking issues, silent periods, but we will continue to be active as we have been in the last few years to make the most of opportunities. Our view is that the current discount is the discount that the market thinks is right. We're not going to argue about whether that's right or wrong.

And the arbitration, we'll see whether it's papers from the companies or the holding company. What was your second question again?

Unknown speaker

Compass in the mid to the long term.

Luis Henrique Guimaraes -- Chief Executive Officer

Yes, clear. Thank you. Well, if I look at Compass's main promises of last few years, it was the San Paolo renewal and extension, which was done. The natural gas extension, it's ongoing, and it will end within the deadline and to address geographical expansion to replicate Comgas model, we've taken the first steps and we hope to be successful with the conclusion of our investment and divestment, in Gaspetro.

Obviously, we also have important matches to address with a commercial company. Unfortunately, because of the market issues we have raised, it's not evolving, but we will be ready when market opportunities arise. We'll continue on the lookout for opportunities and energy generation projects. We've always thought about gas project pipeline projects.

It's not our core business to be the main investor in other projects. That comes with our ability to generate the short that we require whenever we have new gas positions in the regions where we operate. Our core business is distribution with high efficiency. The efficiency that Comgas offers, it's a great opportunity for Brazil, so focusing on clients focusing on efficiency and a balanced portfolio.

It will be more balanced than the current portfolio we see in distribution companies. With an industrial component, but considering other types of consumption that makes our portfolio so robust. And whenever there is an opportunity for natural gas which can be competitive, as we see in Sao Paulo with the current gas and ethanol prices natural gas is very important for heavy users in terms of number of kilometers. So we have been focusing on the main deliverables.

We have high-quality partners coming in at most. They're very happy. We're very happy with them. We've been able to capitalize the company to make relevant investments, and the divestment as well, which gives us a healthy balance sheet.

And now we want to deliver these levers with these three components that the project will bring us over the next few years.

Unknown speaker

That's great. Thank you.

Operator

Thank you. Next question is from Mr. Gabriel Barra from Citibank. You may proceed Mr.

Gabriel.

Gabriel Barra -- Citi -- Analyst

Hi, Luis. Hi Ana, Hi, Lewin. Thank you for taking my question. Most of the questions have been asked.

You've been able to simplify your portfolio and looking forward one of the main steps to make the portfolio simpler will be to list Compass. As Luis said you've brought in some partners via price placement to Compass. So my question is, it's hard to say, but what are you missing to resume that plan? I think that will continue. Please correct me if I'm wrong, but I believe that will be advantageous to the company.

So obviously, the economy is very volatile at the moment. You have delivered on some of the plans that you had mentioned in the IPO. So I'd like to hear from you. How you're seeing the future? What would be the sweet spot to continue with your plan? Thank you.

Ana Luisa Perina -- Investor Relations Manager

Thanks for the question. Yes. Having Cosan open and listed companies below it is our plan continues to be so that's why we listed Raizen. That's why it went public.

And Compass has been delivering what it needs to so that the market can see the value in September 2020 that we had the terminal capacity, and being part of successful privatizations such as the extension of the San Paolo concession to be able to continue investments and positions from San Paolo as a fantastic, in a fantastic position with renewables and energy mix. So we want to have a market that makes sense and these projects need to be mature. We have assets, delivering good results that can be reported and that will allow us at the market to have a better understanding. It will be down the line.

But we haven't changed our plan for Compass or for Moove. The right time will be when the projects have delivered, things have been happening concretely. And we're reporting growing results about this project. So we need pricing to improve and Moove we're expanding internationally that needs to become more mature.

And then we'll be able to report results. And together with our partner CVC we'll find the right time. But the plan is for all four companies to be listed. We haven't changed that plan.

Operator

Thank you. This concludes the question-and-answer session. I will now turn the floor to Mr. Luis Henrique for his closing remarks.

Luis Henrique Guimaraes -- Chief Executive Officer

Thanks, everyone. Thanks for joining us. Thanks for your questions. Excellent questions.

Thanks for allowing us to talk about the future of the company. Bottom line you've heard it Raizen's call, Rumo's call. We talked a lot about Compass, we talked a lot about Moove. We continue to be very happy with our strategic position.

We have a competitive advantage when compared to our main players, each in their own segment with unique opportunities and projects to be developed or which are being developed. We have two E2G plants being built. The biogas plant will be ready soon. We'll have our final licenses.

Moove it's doing its international expansion. So strong growth agenda, despite the fact that we are being conservative when it comes to cost of capital but we do allocate capital to projects and initiatives that can generate attractive return to our shareholders. We are completely focused on people because our growth is all about people. We have people in nine different geographies now with Sulgas.

We are present through Raizen but it used to be downstream, so strong presence in our gas business. So we want to attract people, develop people so that we can continue to grow our people and talent pipeline, and completely focused on executing our projects. We will deliver these projects to you and to the market at the right time so that we can continue to lead in unique and non-replicable positions in the market. We're very excited in a very complex, global scenario, but I think Brazil can come out stronger and we have a very good strategic position in terms of commodities or clean energy mix, in terms of de-carbonization, and with companies such as ours, and so many others in the country that know how to deal with inflation, know how to deal with volatility, and can actually benefit from that, owing to our ability to know how to deal with that kind of risk.

It's a complex year, but we're very excited with our results and to be able to deliver these results and continue on our growth journey. Thank you for your trust. Thank you for your support, and I'll see you next quarter.

Operator

[Operator signoff]

Duration: 63 minutes

Call participants:

Ricardo Lewin -- Chief Financial Officer and Investor Relations Officer

Isabella Simonato -- Bank of America Merrill Lynch

Ana Luisa Perina -- Investor Relations Manager

Luis Henrique Guimaraes -- Chief Executive Officer

Christian Audi -- Banco Santander -- Analyst

Marcelo Telles -- Credit Suisse -- Analyst

Lucas Ferreira -- J.P. Morgan -- Analyst

Bruno Montanari -- Morgan Stanley -- Analyst

Unknown speaker

Gabriel Barra -- Citi -- Analyst

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