Paula Kovarsky – Investor Relations Officer Mario Augusto da Silva – Chief Executive Officer Joao Arthur Souza – Chief Financial Officer Phillipe Casale – Investor Relations Manager.

Analysts:.

Good morning ladies and gentlemen. At this time, we would like to welcome everyone to Cosan’s Second Quarter of 2017 Results Conference Call. Today with us we have Mr. Mario Silva, CEO; Mrs. Paula Kovarsky, IRO; Mr. Joao Arthur Souza, CFO and Mr. Phillipe Casale, Investor Relations Manager of Cosan SA.

We would like to inform you that this event is recorded. [Operator Instructions] The audio and slideshow of this presentation are available through live webcast at ir.cosan.com.br. The slides can also be downloaded from the webcast platform.

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

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

Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Cosan and could cause results to differ materially from those expressed in such forward-looking statements. Now, I’ll turn the conference over to Mrs. Paula. Mrs. Paula, you may begin your presentation..

Good morning everyone and welcome to go Cosan SA’s second quarter of 2017 results conference call. As usual I’ll start the presentation by talking about each business line and then the consolidated results.

This quarter however, we’ll go straight to slide number 4 to talk about Raízen Energia as the explanation on this crops dynamics and impact on ethanol prices will help us understand Raízen Combustíveis results. Let's go over to slide 4. Second quarter of 2017 set Raízen’s 2017/2018 crop year, that’s the startup of the crop year.

We crushed 19.2 million tons of sugarcane down 14% year-on-year. It is worth mentioning that the harvest was anticipated to March in the 2016/2017 crop year, due to the availability of cane less in the field during the intercrop. So, while we started the crop, back in April 2016 production was already at full steam, which is atypical.

This year instead a higher range for volume delayed crushing, especially if we compare to last year's strong basis of comparison. This delay will not compromise our target of reaching the high end of the guidance range in terms of crushing, which is nearly 63 million tons. Even if we have to crush again until Christmas and shorten the intercrop a bit.

But this year it was 81 tons of cane per hectare in the second quarter of 2017 versus $92 tons of cane per hectare in the second quarter of 2016. When cane was available, but not processed as I already mentioned. The average TRS in the water stood at 124 kilos per ton, up 2% year-on-year supported by investments in cane treatment.

Raízen remains focused in maximizing sugar and the mix in the early crop reached 57% of sugar versus 55% in the second quarter of 2016.

Raízen analyzes the profitability of these products on a daily basis and that means that current [indiscernible] ethanol price is more profitable than sugar in average producing state here in Brazil, as well as, [indiscernible] in some states, meaning that there might be opportunities to optimize the production mix.

Before talking about the performance by product, I'd like to get a little bit more into the details of the crop dynamic. Historically, sales of own products are more concentrated in the second half of the crop year when prices are usually more attractive. The previous crop, the 2016/2017 was atypical, not only because we anticipated crushing.

And this increases the availability of own products for sale, but also because sugar prices were very favorable in early crop as well as ethanol prices that had in atypical appreciation. Prices dropped in March, with the anticipating of the crushing, but quickly reversed the usual downward trend and went up during the crop’s first quarter last year.

If you recall our last conference as we mentioned that the previous crop had lower seasonality between the two half years of the year. This year, we saw a crushing delay in the beginning of the crop, resulting in lower availability of own products this quarter.

An expectation of a more stable price dynamics, in other words we are back to a more normal crop pattern of prioritizing origination and resale of third party’s products in the beginning of the crop and selling our own products in the second half of the crop year. Now sales performance by product, so let's start with sugar.

Super sales went up 7% this quarter with sales of own products and higher share of resale. Average sugar sales prices in real was adjusted by hedge accounting in fact, and currency hedge on sugar exports, which I'll explain in more detail later on, increases 13% year-on-year.

Ethanol sales grew 26% in the second quarter of 2017 with concentration of resale and trading even higher compared to sugar. Ethanol average sales price came in line with the same period of last year and with market prices based on the [indiscernible] number, but in the reverse direction during the quarter.

On cogeneration production and sales of energy grew 10% in the quarter, although crushing has decreased in this year, as there were higher resale and trading volumes of energy in the field as well. Average sales price sold was BRL220 per megawatt hour, 19% higher than in the second quarter of 2016.

Before discussing the EBITDA, I’d like to recall your attention again to evolution of unit cash cost of own products in sugar equivalents. This index grew 4% reaching BRL620 per ton in second quarter of 2017, impacted by higher consequent of reference price, which increased 5%.

Directly affect land lease agreements and the acquisition of third party sugarcane. When we exclude the higher CONSECANA price, unit cash cost came in line with the second quarter of 2016, thus absorbing inflation, reflecting continued focus on efficiency and agriculture and industrial operations.

Now referring to adjusted EBITDA, let me start by highlighting an important change we have made as from this quarter. In order to facilitate the understanding and comparison of results, we've incorporated the currency effect of hedging sugar exports on the adjusted Raízen Energia and accordingly in the pro forma consolidated adjusted EBITDA of Cosan.

The adjusted EBITDA now removes the effect of foreign exchange contracted to hedge sugar exports against effective foreign exchange on the shipment date.

It is important to mention that as of this quarter, which is Raízen’s first of the crop year, all net income derivative instruments designated to hedge sugar exports will be recorded in hedge accounting, so that in the future, all instruments related to hedging exports will be reflected in EBITDA.

To be very clear here, average foreign exchange rate was BRL3.88 to $1 in the second quarter of 2017. While shipment average foreign exchange rate was BRL3.20. The financial consideration of currency hedge gain was at approximately BRL179 million this quarter.

We use to highlight this information for you in our earnings release, but now it is effectively including in our adjusted EBITDA and we did the same for the figures of previous crop year in order to have a correct basis for comparison.

I also want to remind you that the basic assumption on the hedging policy of Raízen is to protect foreign exchange and commodities, looking at prices in Brazilian reals. Besides the adjustment I have just mentioned, we've excluded as usual the biologic asset variation and debt hedge accounting.

Adjusted EBITDA was down 4% to BRL804 million in the second quarter of 2017. The adjusted EBIT for TRS sold dropped at 14% in the quarter, again due to higher resale and trading volume. Referring to sugar hedge, the graph in the lower center part of the slide, is our last earnings release, not much was advanced in terms of sugar hedge.

We have 2.1 million tons of hedge at sugar, as an average price of BRL$0.70 per pound for the current crop year 2017/2018. The market continues pricing a surplus in the current crop, but we still see it as more of a short-term pressure on prices.

We’ll continue evolving in our cash flow hedging policies and it is always good to remember that we are talking about the hedge and not speculation.

And much more important, we remain focused on increasing our operational efficiency and reducing cost, managing invested capital, as well as, working capital, while seeking to improve the profitability of our business regardless of prices.

Raízen Energia CapEx totaled BRL421 million in the second quarter of 2017, up 18% year-on-year, typical to higher maintenance expenses regards impacted by lower longer off season in the year-on-year comparisons, acceleration of mandatory investments in health, safety and environment, as well as, sustaining projects, higher mechanization expenses due to anticipated renewal of agricultural equipment.

Before jumping to Raizen Combustíveis, I'd like to comment on the acquisition of two mills from Tonon announced at back in June. So, we are going to slide number 5. As already announced into sewer notice to market, Raízen offered BRL823 million to buy two mills from Tonon both under great bankruptcy.

These mills strategically located in the state of Sao Paulo have annual potential crushing capacity of approximately 5 billion tons. On August 8, we received the CADE’s approval with no restriction, this is the Antitrust body.

But all the figures and projections we are presenting today about Raízen Energia do not includes any Tonon investment or results. The acquisition process will now follow the legal procedure, under Tonon’s cost of provider’s reorganization. Anyhow I’d like to take this opportunity to do reinforce the reasoning behind this acquisition.

So when we reached the 5 million tons of production we’ll be increasing our portfolios of crushing capacity from current 68 million tons to 73 million tons of cane.

As you can see in the map and this is very important, the two mills are strategically located because they are close to other mills of Raízen, enabling quite significant synergies in logistics and cost savings, for example, by incorporating those meals of the pentagon projects, which is our centralizes operation center and this can be done relatively quickly.

So, we can now talk about Raizen Combustíveis on slide 6. Let's start with the market. Although, some of the members of the Brazilian economy have improved slightly, demand for fuels fell 0.5% in the second quarter of 2017 compared to the same period last year. And that quarter was in fact a week basis of comparison. We're using ANP data here.

These sales are still under pressure and drop at 2% in the second quarter of 2016. Otto-cycle sales gasoline with ethanol grew 1% and the number becomes 3% in gasoline equivalent as a result of high production and utilizing (theme of) light vehicles.

The aviation segment was again affected by 2% reduction in the number of departures in the second quarter of 2017 according to ANAC. Specifically referring to Raízen now. This was another quarter where the growth strategy insured our performance over the industry average.

We continue investing in the expansion and renewal of our distribution effort, focused on long-term relationship with our service stations network and improving the infrastructure and logistics in order to efficiently supplier network. Let's talk about the volumes.

The Otto-cycle sales grew 4% and then the number is 5% in gasoline equivalent in the second quarter of 2017 compared to second quarter of 2016. Raízen Energia sales were up 1% following the trend seen over the last quarters. In the aviation, segment we were again impacted by lower demand for our transportation and reduction in slight supply.

In the quarter, aviation sales has dropped by 6%. Financially, speaking our adjusted EBITDA came through BRL557 million down 7% year-on-year and adjusted EBIT sold to BRL394 million down 12% year-on-year. We had two relevant factors, which influenced Raizen Combustíveis performance, the basis of comparison and full price reduction.

As you can see on the graph on the upper right corner, Raizen Combustíveis has higher exposure to ethanol in its sales mix, makes second quarters to be seasonally weaker compared to other quarters of the year. Last year, however, ethanol price curve was atypical as I mentioned on the Raízen Energia slide.

In 2017 not only the price curve returned to usual downward trend in the second quarter, but the drop was worsened by gasoline price reductions, which since last October are correlated to international price. In addition and according to Petrobras’ new price policy, we also saw drop in diesel prices.

The price reductions in those three products led to higher inventory loss this quarter, which explains such variations. This effect was partially offset by the growth of volumes sold and continued gains the rising from our supply and trading strategy.

Looking ahead to the third quarter of 2017, the expectation so far is of a slight increase in EBITDA in low single digits, compared to the same quarter last year. But it is important to stress that since July we have been seeing adjustments to diesel and gasoline prices almost every day, which means higher volatility.

As a reminder, this expectation is within the guidance range provided for the year. Raizen Combustíveis CapEx totaled BRL202 million including investments in infrastructure, expansion of service stations network and conversion of new stations, as well as renewable current agreement.

Raizen ended the quarter with 6068 shell branded service station, a net addition of to 136 stations over the last 12 months and 25 in the quarter. The base in conversion was lower this quarter, as it was in the first half of the year.

But there's no change to our full year guidance in terms of CapEx or to the number of service stations that we expect to convert. Turning now to Comgás on slide 7. Since Comgás already reported results last Tuesday, we’ll go straight into the second quarter highlights.

From GAAP recorded sales volume growth across all segments totaling 5% ex-thermal power generation.

In industrial segment, higher demand in industry specific segments such a ceramics, chemicals and automotive and the gradual economy of churn sustains the 4% growth of volume and sold in the second quarter of 2017 compared to the same period last year, which is still a weak basis of comparison.

The commercial volume grew 9% and reflect the addition of new clients over the last 12 months in line with the strategy of flat network expansion and new user’s gas in the segment. The residential segments was 17% higher, sustained by customer base expansion, we're talking about 106,000 new clients that have added in 12 months.

Higher unit consumption due to lower average temperature in the period compared to the second quarter of 2016. Comgás has normalized EBITDA, grew 38% to BRL460 million in the second quarter of 2017, reflecting higher sales volumes and correction of margins by inflation as of the rises by the regulator in May 2016/2017.

It is important to highlight here that these adjustments include a decrease or an increase in the cost of gas, which is a factor [ph] and incorporation of annual inflation to unit margins has provided for by the concession contract [ph].

Following the trend of reducing the regulatory current account in favor of clients to the movement of gas costs, which was BRL86 million in the quarter. IFRS EBITDA dropped at 43% to BRL366 million.

At the end of second quarter of 2017, the balance of regulatory current account was of 268 million, slightly above the estimate due to the foreign exchange behavior in the period.

From now on the fate of reduction will very much depend on the foreign exchange rate and actual cost of gas volatile [ph] as well as two other parameters agreed with regulators for the amortization [ph].

Comgás’ CapEx remains focused on initiatives connected with the expansion of the distribution network and increase in the customer base, which totaled BRL107 million in the second quarter of 2017, down 2% year-on-year. Moving to slide number 8, we’ll talk about Moove, our lubricant business.

So, the second quarter of 2017, Moove recorded sales volume growth across all the markets in which it is present. Such performance is a result of the company's business strategy, focused on increasing both customer base and share in Brazil's automakers market, besides the launch of new product.

In terms of volumes, the highlight was sales of finished lubes in Brazil and in other South American countries, Bolivia, Uruguay and Paraguay boosting the 6% growth until the volume is sold.

Higher share in automakers market in Brazil, higher volume of international operations and better sales mix, contributed to the relevant increase in EBITDA, which totaled BRL53 million this quarter. Let’s now turn to Cosan corporate.

General and administrative expenses reached BRL35 million down 15% year-on-year, reflecting lower advisory services and personal expenses, as well as, the effect arising from the conditions. Other operating expenses composed of legal and consulting expenses totaled BRL36 million in the quarter due to a high concentration of consultancy expenses.

Moving on to slide 9, we present a consolidated results of Cosan SA on a pro forma basis, i.e. considering 50% of Raízen result. Adjusted EBITDA grew 11% to BRL1.1 billion.

Improved operating performance of Comgás and Moove was partially offset by lower EBITDA of Raizen Combustíveis impacted by the negative inventory effect previously mentioned and Raízen Energia affected by lower concentration of on product sales in the quarter. IFRS EBITDA excluding any adjustments totaled BRL804 million.

Cosan have has posted a net loss of BRL76 million versus a net income of BRL280 million in the second quarter of 2016, mainly affected by the biological asset variation of Raízen Energia related to the lower projection of the CONSECANA reference strike [ph] and to Comgás’ IFRS results, which included the reduction of regulatory current account.

When I adjusted by these non-recurring effects net income would have reached BRL24 million in the second quarter of 2017, compared to BRL163 million in the second quarter of 2016 now on a comparable basis.

Pro forma CapEx came to BRL427 million up 3% year-on-year affected by higher expenses at Raízen Energia, partially offset by a reduction in Raízen Combustíveis. Finally, free cash flow to equity totaled BRL613 million and I'll dig into that number in the next slide.

So moving to slide 10, Cosan’s pro forma consolidated gross debt went up 3% year-on-year in the second quarter of 2017. Mainly due to the issue of BRL970 million in CRAs Raízen Energia this is a certificate of the Agribusiness. Pro forma net debt recorded similar trends totaling BRL9.6 billion also impacted by the payment of Cosan SA’s dividend.

The company's leverage came in line at 2.1x pro forma debt to EBITDA considering both the figure reported and normalized by the current account effect of Comgás. It is worth mentioning that there is seasonality in the pro forma leverage since the working capital cycle of Raízen Energia fluctuates during their crop year.

Pro forma in debtness average cost including Raízen rose 102% percent of the CDI, 108% excluding Raízen. We know that the CDI dropped from approximately 12% in the first quarter of 2017 to 10% in the second quarter, making the cost of debt as a percentage of the CDI to increase due to prefixed [ph] debt which now are compared to a lower CDI.

Now talking about the free cash flow; to equity the main impact in the quarter were; the operating cash flow, which included 17% and came to BRL1 billion highlights our Raízen, partially offset by BRL86 million reduction in Comgás’ current account.

Cash flow from investing activities main variation between periods is due to the impact of BRL186 million payment for Rumo’s shares previously owned by Gávea in the second quarter of 2016 due to exercise of a put option owned by the fund since their investment in the logistics business back in 2009.

Cash flow from financing activities because the second quarter of 2016 was impacted by a negative net effect of BRL300 million referring to Cosan’s net debt restructuring process, which included the issue of the 2057 bond.

The buyback of the 2018 and – in 2023 bond, since the process was only concluded in July 2016 with an additional funding of $150 million and therefore after the closing of the second quarter of 2016, including all hedge effects.

This combined effects resulted in higher free cash flow to the cogeneration totaling 630 million in the second quarter of 2017. Let’s move to the next slide where we restate our guidance. So, once again we show our guidance for the full year. There has been no change whatsoever to the numbers presented last quarter.

As usual, a few comments on the business performance trend. At Raizen Combustíveis we remain confident to end the year within the guidance range and variation will depend on price volatility in the second half of the year.

At Raízen Energia we shall recover the base of harvest over the coming quarters and the crop year crushing is pointing towards the top range of the guidance.

With the downward trend scenario for sugar prices in the foreign markets and the ethanol prices still under pressure, adjusted EBITDA point towards the bottom of the guidance range, already considering the effect of sugar currency hedge build up in future.

As for Comgás, results up to-date point more to the top end of the guidance range for normalized EBITDA and same for Movee. So with that, I think you all and open the floor for the Q&A session..

Q - :.

[Operator Instructions] Thank you. This concludes today's question-and-answer session. I would like to invite Mrs. Paula Kovarsky to proceed with the closing statements. Please go ahead..

Well thank you all and see you next quarter..

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