BRAZILIAN SUGAR / ETHANOL MARKETS Tefla s India Sugar Summit

Transcription

1 BRAZILIAN SUGAR / ETHANOL MARKETS Tefla s India Sugar Summit Feb 2 nd 2018 Fabio Meneghin fabio@agroconsult.com.br

2 SUMMARY TOPICS Brazil s macroeconomic current situation Petrobras new fuel policy and the new federal taxation Basics scenarios for ethanol/sugar Costs and Margins The indebtedness and real value of sugar/ethanol Assets Forecast for brazilian season 18/19

3 Brazil Main Economic Indicators GDP Evolution and Forecast (%) Official Inflation Evolution and Forecast (%) 4,0% 10,7% 1,9% 3,0% 0,5% 1,1% 2,6% 3,0% 6,5% 5,8% 5,9% 6,4% 6,3% 2,9% 3,8% 4,3% -3,8% -3,6% Source: IBGE (GDP and IPCA Inflation index). Forecast: Focus Report from BACEN

4 Brazil Main Economic Indicators Interest Rate SELIC (%) Net of Jobs creation and forecast (million) 14,2% 1,94 1,15 1,49 0,40 0,50 7,0% -0,02-1,54-1, Source: IBGE (GDP and IPCA Inflation index). Forecast: Focus Report from BACEN

5 Brazil Main Economic Indicators Exchange Rate REAL x Dollar Main Questions for 2018: 4,0 Pension Reform 3,7 3,5 Congress Renewal 3,3 3,3 3,3 3,2 3,1 3,2 3,2 3,1 3,3 3,2 Presidential Election Privatization Agenda Tax Reform Dollar lost 20% value against Real in the last 24 months Source: BACEN

6 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 BRL / Liter Brazil New Policy and taxes for Wholesale Gasoline Prices Gasoline Prices at refiners and Federal Tax Petrobras Shares at B3 (PETR4) - BRL 19,0 1,60 1, ,5 CIDE Federal + PIS/COFINS Tax Gasoline BR Gasoline NY New taxes on gasoline are favoring ethanol consumption IPO of Petrobras subsidiary BR Distribuidora BRDT3 in December 2017 Source: EIA, Petrobras and B3 (PETR4)

7 US$ / Barril OIL/ETHANOL Brent prices and E100 Market Share in Brazil BRENT OIL Prices Ethanol E100 Market Share in Brazil ,0 23% 20% 22% 23% 30% 25% 26,0% 28,0% Source: ICE NY. ANP Brazil

8 Brazil Sales of New Cars and Total Fleet Million of Cars Sales of New Cars Fleet by type of Fuel 3,63 3,58 3,33 2,48 1,99 +9,4% +10% 2,17 2, Somente Gasolina Frota Total Leves Frota Flex Source: Anfavea and Denatran

9 Billion of liters Brazil Fuel Consumption 28,5 31,9 31,9 33,3 30,0 31,4 31,6 31,0 Gasoline A pure 17,9 18,0 15,8 14,6 13,0 11,3 10,1 9,9 10,4 11,0 11,1 11,6 11,7 11,5 8,2 8,0 20% 20% 25% 25% 27% 27% 27% 27% Ethanol Hydrous Ethanol Anhydrous Blend on Gasoline Fonte: ANP e Agroconsult.

10 14/15 15/16 16/17 17/18 18/19 Sugar/World Scenario for 2018/19 Supply and Demand (mmt) NY Prices (U.S. /pound) and Stock/Use Ratio ,5 16,6 38% 36% 17,5 33% 15,0 16,0 36% 36% Produção Output Consumo Consumption /15 15/16 16/17 17/18 18/19 Estoque/Uso Ratio NY (USD. /lb) Source: USDA. Forecast: Agroconsult. Calendar: Oct-Sep.

11 Center-South Cost of Production Sugar Costs São Paulo (US /pound) Ethanol Costs in Sugar Equivalent (US /pound) ,2 11,8 14,5 14,2 12,9 12,5 14,8 14,6 14,4 14, ,6 14,2 8 13, ,6 13,4 13, , / / /19 12,8 2016/ / /19 Cost at Mills FOB Costs Source: Agroconsult.. (Exchange Rate 18/19: BRL 3.20/USD)

12 Center-South Sugar Logistics Costs for Export Sugar Transportation Costs 17/18 (US /pound) Evolution of the Transportation Costs in São Paulo (US /pound) 2,0 1,9 1,8 +35% +18% 1,7 1,6 1,5 1,6 1,6 +38% +2% US$ cents 1.56/pound Santos Paranaguá 1,4 1,3 1,2 1,1 1, Source: Agroconsult..

13 USD cents / pound Brazil Sugar / Ethanol Price Parity in domestic market 18,0 17,0 17,5 16,0 15,0 14,0 14,4 13,0 12,0 Higher taxation over gasoline to consumer NY 11 Anidro SP Hidratado Hydrous SP VHP Sugar FOB Anhydrous Ethanol SP Ethanol SP Source: Ice Futures, Cepea.

14 12/13 13/14 14/15 15/16 16/17 17/18 18/19 12/13 13/14 14/15 15/16 16/17 17/18 18/19 Brazil Mix of Production and Ebit Margin Mix of Production Theoretic Ebit Margin 50% 50% 54% 46% 57% 43% 60% 40% 54% 55% 46% 45% 58% 42% Açúcar Sugar Etanol Ethanol 17% 14% 12% 7% 8% 25% 23% 21% 19% 24% 12% 16% 18% Sugar Ethanol -1% Source: Agroconsult.

15 12/13 13/14 14/15 15/16 16/17 17/18 18/19 12/13 13/14 14/15 15/16 16/17 17/18 18/19 Brazil Mills Net Revenues and EBIT Margin Sugar/Ethanol Net Revenues Sector s Average USD / t of cane crushed EBIT Sector s Average USD / t of cane crushed ,1 6,2 8,1 8,1 8,0 7,0 3,3 Source: Agroconsult. Margem Ebit: (Net Revenues / Operational Costs including depreciation) Admnistrative, Sales and General expenses are not included. Eletric energy not included.

16 Brazil Indebtness Evolution of the Companies Listed at B3 Exposure to foreign currency Debt Profile 48% 52% 68% 32% Dollar Short Real Long Total Gross Debt 2016/17 = USD 6.7 bi USD 61 / t of cane Source: Companies balances sheets.

17 Brazil Market Value of Sugar/Ethanol Producers Companies listed on B3 represents 20% of the sector Market Value Revenues (USD/t of cane) Value of Assets under recovery with more transparency on fuels market Source: Agroconsult. With data from listed companies on BM&FBovespa (CSAN3, SMTO3, BSEV3).

18 R$ / hectare Center-South Margins of Sugarcane Suppliers against competitors crops (R$/ha) Soja Soybean + Milho + Corn 2ª 2nd (MS) (MS) Soja Soybean + Milho + Corn 2ª 2nd (GO) (GO) Cana-de-açúcar Sugarcane (Center-South) (CS) Source: Agroconsult

19 Sugarcane Fields Average Age Age (nº of cuts): 5,4 6,4 5,2 5,4 5,0 5,2 4,8 5,0 2,9 4,8 n/a Source: Agrosatélite, based Canasat 2017/18 data. Microrregions with planted area higher than 1000 ha.

20 Center-South Sugarcane Yield, Expansion and Renewal Rates -12 t -14% % 6% 11% 12% 9% 9% 6% 7% 4% 4% 5% 0% 8% 4% 7% 2% 9% 10% 1% 1% 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 Produtividade (t/ha) Taxa de Expansão (%) Taxa de Renovação (%) Yield (t/ha) Expansion Rate (%) Renewal Rate (%) Source: Conab. Expanion and Renewal Rates: Agroconsult based Canasat data.

21 mmt bilhões Billion de of litros liters MMT Brazil Sugarcane Crushing. Sugar/Ethanol Output /13 13/14 14/15 15/16 16/17 17/18 18/19 CS N-NE 38,4 2,4 35,9 35,1 2,2 32,9 28,3 2,3 26,0 29,5 2,0 27,5 2017/ / / /19 Centro-Sul N-NE Centro-Sul N-NE Source: CONAB. Agroconsult. 18/19: Another 0.5 billion liters will come from corn (MT and GO states)

22 RENOVABIO Long-term plan (2030) to incentive the use of renewable energy in the light fuels market, with emphasis on ethanol. Brazilian commitment to the COP21 Climate Agreement, which aims to reduce CO2 emissions by 43% (on a 2005 basis) until The proposal predicts the need for 54 billion ethanol by Plan Guidelines: 1. Maintain the gasoline price policy in line with the international market 2. Recognition of the positive externalities of ethanol with clear environmental taxation on fossil fuels (CIDE) 3. Implementation of an emission certificate system (CDBios - Fuel Savings Credit - Similar to US RINs)

23 AGROCONSULT Agribusiness services for banks, investment funds, M&A operations. Market analysis and sizing Analysis of Investments Assets and Land Valuation Due Diligences (Agricultural and Industrial)

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