Nelson Gomes - CEO & IR Officer.

Alexandre Falcao - HSBC Rodrigo Mugaburo - Morgan Stanley.

Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to Cosan S/A Third Quarter of 2015 Results Conference Call. Today, with us, we have Mr. Nelson Gomes, CEO and Investor Relations Officer; Mr. José Cezario, CFO and Mr. Phillipe Casale, Investor Relations Manager of Cosan S/A.

We would like to inform you that this event is recorded and all participants will be in a listen-only mode during the company's presentation. After Cosan's remarks, there will be a question-and-answer session for industry analysts. At that time, further instructions will be given. [Operator Instructions].

Before proceeding let me mention that forward-looking statements will be made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Cosan's management and on information currently available to the company.

They involve risks, uncertainties and assumptions because they relate to future events and, therefore, depend on circumstance that may or may not occur in the future.

Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Cosan and current results differ materially from those expressed in such forward-looking statements. Now, as to begin this conference call, I will turn the conference over to Mr. Nelson. Mr.

Nelson you may begin the presentation.

Good afternoon everyone. Welcome to the Cosan's third quarter 2015 earnings conference call. We will start on page number 3, today as we through the quarter, we will discuss each one of the business performance of our company.

Starting with Raízen Combustíveis, fuels distribution business, then go into Raízen Energia, the sugar , ethanol and cogeneration and then natural gas, Comgás; Lubrificantes and land management company Radar. We also discuss the other business which basically reflect our corporate structure.

Now turning the page 4, starting Raízen Combustíveis and just as a reminder starting last quarter the second quarter 2015 we start to report fuel volume sold based on the Sindicom methodology which excludes the volume sold for other associate distributors within Sindicom.

The objective of this change as we mentioned back then is really to make it easier to compare the results that we are reporting was the results that the market is reporting.

Now we go to the numbers, the volume on this quarter of our fuels distribution business continue to need to be affected by the slowdown in the economic and industrial production, but despite of this macroeconomic scenario once again Raízen Combustíveis managed to grow above the market.

If we compare with the A&B [ph] the National Petroleum Agency, their volumes were up 3% while Raízen total volume grew 1% mostly due to the 5% growth in the auto cycle supported by a strong demand on the ethanol. On the diesel sales we suffer a 1% drop reflecting the weaker demand as I just mentioned.

As an information the volume sold on the aviation segment went down slightly 1% impacted basically by the slight activity reduction [indiscernible]. The adjusted EBITDA excluding the asset sales effect was 572 million, 70% above same quarter last year.

This growth was supported mainly by higher ethanol unit margin and 59% of volume growth on ethanol [ph] sales. Important to remind once again that our contract model with the retail network is based on the rebate, instead of anticipating the whole CapEx when signing the contract this model assumes volume goals to be reach along the way.

So when the dealer did reach these goals he gets a benefit of a discount which is accounted internally as a revenue deduction. In this quarter the rebate reached 47 million according to the number that you can see in the graphic highlighted in grey.

Just as a reference the chart on the right hand corner shows the behavior of our unit margins in reais per cubic meter, quarter on quarter, we've an improvements when compared to the previous years.

Turning the page 5, Raízen Energia, as I mentioned last quarter we had increased the volume of retail on both sugar and ethanol as well as the off-shore trading of ethanol. So we are reporting to breakdown between our own volumes produced and sold and third party volumes resale and trading.

Those operations which is basically origination of sugar and ethanol from the market has the object to generate scale and dilute our fixed cost and of course leveraging our operational and logistics capability. On the order hand when we look specifically at this resale operations rating the EBITDA related to this, it's not relevant or marginal.

Now going to the numbers starting crushing, in this quarter which is the second quarter of the harvest season 2015-16 We increased crushing volumes despite the unexpected range in this period.

Our 23 mills in activity remembering that one of the mills [indiscernible] is still temporarily hibernating, we crushed 24.2 million tons, 1% less the same period of last year. Productivity remained at a higher level compared to the last crop year with 20% increase from 10.3 to 12.3 tons of total recall per hectare.

On average Raízen has been able to achieve high daily crushing volumes which lead us to believe that by the end of December the total production volume would be very close to the high end of our guide.

Now talking about volume and prices starting with sugar, the volume sold in this quarter was 18% higher than the third quarter of last year and the average price was 15% higher and reached R$165 per ton.

For your information that the average price is impacted by the head countering effect on the net revenue of 256 million this quarter compared with 1.8 million in the same quarter of last year. The ethanol, volume sold including trading and resale were 11% higher than the average price increase 7% when compared with the same quarter last year.

Basically supported by a higher demand in domestic market as well as some higher exports was. On energy cogeneration, the volume increased by 60% but on the other hand the average sales price fell 24% when compared to the third quarter last year specifically due to the sharp drop in the spot price.

The adjusted EBITDA which excludes the biological assets variation and the hedge accounting impact has an increase of 20% reaching 837 million this quarter impacted by the higher own sugar volume sold and better average unit prices on both sugar and ethanol. The reported EBITDA was 606 million, a 4% drop when compared with the same period last year.

CapEx reached 230 million in the quarter, a 41% reduction when compared to the same order of the last year. Part of it is seasonal due to the delay in the crushing volume but also is related with an optimization of investments in replanting [indiscernible] fields. The last graph on the lower right hand corner shows our hedge position.

For this quarter, the third quarter of 2015 we have seen an increase on the volumes hedge as well as the prices we had. So by the end of September over 93% of the sugar to be exported in 2015-16 was hedged with an average price of $0.44 of reais the per pound.

The values in cents per pound reflect one the devaluation of the reais in this period and also the improvement of the commodity price. For the next harvest season in 2016-17 by the end of September we had approximately 25% of the total export volume adds at an average price of R$0.53 per pound.

We will like to remind that our hedging policy includes the curve so the prices are hedged to reais without any exposure to U.S. dollars. Now turning the page 6, on Comgas, Comgas held its earnings conference call last Monday. The reason why I will briefly comment on the numbers.

So starting with volume the positive highlight is on the commercial segment which has increased 5% it's volume sold. On the residential segment we decreased 4% compared with the same quarter of last year.

We added in the last 12 months a 110,000 new customers to the network but this growth was offset by the reduction of the residential unit consumption which was down 8% due to the water crisis in the state of Sao Paulo. The Industrial segment remains impacted by the economic slowdown and went down 5.7% compared with the same quarter last year.

As presented in the previous quarters the chart on the right shows each segments relevance on total volume sold and their contribution margin. The expansion focus are obviously both on commercial and residential segment, the ones where we have higher unit margin. Now talking about normalized EBITDA, a combination of facts drove 6% growth.

The first one is the better sales mix on this quarter as shown in the previous chart. Second, the better expenses control and finally third a fair review rated by the regulator both in May this year and December of last year.

On the regulatory current account, this quarter there was basically no recover due to the real depreciation which also impacted the IFRS EBITDA.

Now turning page to page 7, lubricants business was impacted by the lower economic activity in Brazil, but a company managed to show higher EBITDA basically because of one better results for international operations and two a better sales mix both on finished lubes versus basic oil and synthetic lubricants versus mineral.

On Radar, we had a higher revenue from our own land sales in the quarter but the relevant effect on EBITDA was due to the zero effect on the variation on the current market value of our own portfolio in this quarter as you can see in the green area on the graph.

Now talking about the other business, there was no significant variation on the total expenses. Just remind that the main components of this costs are consulting services and fees as well as payroll expenses of the corporate structure.

Now turning to page 8, we will now pass over to the pro-forma consolidated results which includes 50% of high easing and a 100% of the controller business. Net revenue on the water increased 14% reaching R$11.4 billion. On year-to-date basis in 2015 the net revenue was up 9% reaching R$31.5 billion.

The pro forma EBITDA just 1.1 billion including all the adjustments been seen on the previous slide and it is 11% higher than the same quarter last year. The reported EBITDA was 992 million , 2% high than last year and if you look at the year-to-date adjusted EBITDA in 2015 there is a 6% increase versus a flat reported EBITDA year-on-year.

The CapEx on the quarter was nearly 380 million , a reduction off 25% compared with the same quarter last year. If you look at the year to date there is a 21% drop mostly due to the lower CapEx in Raízen Energia as I mentioned before and also Comgas.

Now talking to the free cash flow to the equity, on this quarter we started to show the cash flow reconciliation on our performance basis which also includes 50% of. So despite of the CapEx reduction this quarter we incurred some higher financial activities resulting in our cash burn of 136 million.

This reflects basically a higher working capital in Raízen Energia but it's worth to mention that we consolidate those figure also is impacted by the seasonality of the sugar and ethanol business that is facing a delay this quarter.

Looking at the year to date in 2015, the cash generation was R$1.2 billion, 76% higher than the same period of last two years and the main reason is the strong cash generation of Raízen Energia in the first quarter of 2015.

Turning to page 9, debt and leverage, Cosan's gross debt ended the quarter 3% higher than the previous quarter, the second quarter of 2015 mainly by of Raízen temporary working capital increase as I just mentioned.

The consolidated debt profile is mostly concentrated in mid and long-term and a cost equivalent remain at 94% of the CDI and that they are in dollars and are hedged the cost of those are already included in this 94% of the CDI.

The pro-forma cash and cash equivalents was 3.9 billion by the end of the quarter and the pro-forma net debt was 11.5 billion so the leverage on the quarter reached 3 times EBITDA.

Even with that number we maintain our goal by the end of the year 2015 to reach roughly 2.5 or 2.6 times net debt-to-EBITDA basically as a result of better operational results on each one of the business.

Now turning to Page 10, there is no changes in the guidance this quarter, as we have mentioned before the only thing that we included is the normalized EBITDA on the Comgas section. Now, once we are nine months through 2015 I wanted to share how we're seeing the performance of each one of our businesses towards the year-end.

So first starting by Raízen Combustíveis, of course the economic slowdown that we faced since the beginning year reflected in our volume but was partially compensated by better unit mark. So we expect that behavior to remain in the last quarter so we are expecting an EBITDA close to the midpoint of the guidance.

So volume partially compensated by better unit margins. On Comgas, even with the lower volumes in most of the segments also impacted by worst macroeconomics scenario we will manage to deliver somewhere in the center of the guidance. The IFRS EBITDA is pointing towards the low end of the guidance due to the reais depreciation.

Lubricants in Radar are both pointing to the center of the guidance and finally on Raízen Energia basically all the metrics, crushing volumes, ethanol and sugar production, energy cogeneration sales, NAV, they are all pointing from the mid to the high end of the guidance.

Given the higher productivity we’re having on those broad season, higher sales volumes and better price.

So overall even in a much worse than expected environment the results of Cosan stay consolidated for this year remains pointing to the center of the guidance at R$4.1 billion to R$4.2 billion EBITDA were 10% up when compared with the previous year. So with that I conclude the presentation and we all are here available to start the Q&A session.

Thank you..

[Operator Instructions]. Our first question comes from Alexandre Falcao with HSBC..

Just wanted to follow up and just pick, first one is just one an update on the spin off of the gas distribution company, I know you guys are quite serious because of the debenture -- I just wanted to know this idea is not going to go on right now, why is that something that eventually when we have the right conditions this is going to go through, there is still an idea within the company.

And the other question is regarding raising Energia, specifically on the impact for better rain for next year and then probably better productivity going forward. So your plan to change the mix sugar at this point or more into ethanol that’s because we're probably going to have more sugar cane [indiscernible].

And second one is can we expect [indiscernible] for next year? Thank you..

Let's start with the last one, I think it's too early to say how the next crop season will look like. We are in the middle of the crop season now. So depending on the rain that we going to have this quarter we will know if we’re going to have the kind of result for the next year or not.

If it does not rain potentially the volume that we will leave on the fields for next year will be very small but again it depends on the climate for this quarter. So at this point it's hard to predict what's going to be the volume or the crushing volume for the next crop season.

The other point that you asked it's about the mix, as I said on the Portuguese conference call we should not expect any changes on the mix. By definition we have a higher mix of sugar and we should remain that way for the next crop season.

On your first questions on the spinoff of Comgas, it's still on the radar we don't want to do at any cost but for now as you well made we are on the quite period so we cannot comment on any future changes on Comgas business..

[Operator Instructions]. Our next question comes from Rodrigo Mugaburo with Morgan Stanley..

I had a question on Raízen Energia, as of the end of the quarter you have a roughly R$2 billion in inventory, 1 billion in sugar and 1 billion in ethanol.

I wanted to know if we should expect those inventory to basically be sold doing this fiscal year fourth quarter or especially in case of ethanol you will try to carry a little bit into the inter-harvest?.

It's really little bit of both, we will have some of the volume being sold this quarter but some will be sold in the next quarter, in the following quarter which is the first quarter 2016, the last quarter for the crop season in their inter-crop season. So that's the plan. So I would assume that we’re going to have a little bit of both..

[Operator Instructions]. This concludes the Q&A session. I'd like to invite Mr. Nelson to proceed with his closing statements. Please go ahead sir..

Well thank you very much for attending the call and we'll talk again on the next one. Thank you..

That does concludes Cosan conference call for today. Thank you very much for your participation..