6-K 1 d751505d6k.htm 6-K 6-K

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 May, 2019

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            



 

Cosan Limited

Interim consolidated financial statements

March 31, 2019

 


KPMG Auditores Independentes

Rua Arquiteto Olavo Redig de Campos, 105, 6º andar – Torre A

Caixa Postal 79518 – CEP 04707-970 – São Paulo/SP – Brasil

Telefone +55 (11) 3940-1500, Fax +55 (11) 3940-1501

www.kpmg.com.br

Report on Review of the Interim Financial Information

To the Management, Board of Directors and Shareholders of

Cosan Limited

Bermuda

Introduction

We have reviewed the accompanying consolidated interim financial information of Cosan Limited (“Company”) contained in the Quarterly Information Form—ITR for the quarter ended March 31, 2019, which comprises the statement of financial position as of March 31, 2019, and the respective statements of profit and loss, comprehensive income, changes in equity and cash flows for the three-month period then ended, including the explanatory notes.

The Company’s management is responsible for the preparation and presentation of this 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 Brazilian and international standards on review engagements of interim financial information (NBC TR 2410—Revisão de Informações Intermediárias Executada pelo Auditor da Entidade and ISRE 2410—Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists of making inquiries, primarily of persons responsible for the 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 audit standards and, consequently, does not enabled 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.

Conclusion on the interim information

Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated interim financial information included in the Quarterly Information Form – ITR referred to above has not been prepared, in all material respects, in accordance with IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board – IASB.

São Paulo, May 15, 2019

KPMG Auditores Independentes

CRC 2SP014428/O-6

Rogério Hernandez Garcia

Accountant CRC 1SP213431/O-5

 

F-3


Cosan Limited

Consolidated statements of financial position

(In thousands of Brazilian Reais—R$)

 

 

 

     Note      March 31,
2019
     December 31,
2018
 

Assets

        

Cash and cash equivalents

     5.1        4,661,559        3,621,798  

Marketable securities

     5.2        2,769,792        4,202,835  

Trade receivables

     5.3        1,852,741        1,545,643  

Derivative financial instruments

     5.8        185,855        181,815  

Inventories

     7        735,604        716,290  

Receivables from related parties

     5.4        49,312        44,680  

Income tax receivable

        191,893        279,157  

Other current tax receivable

     6        821,955        796,199  

Dividends receivable

        14,797        27,320  

Other current assets

        562,921        543,853  
     

 

 

    

 

 

 

Total current assets

        11,846,429        11,959,590  

Trade non-current receivables

     5.3        39,565        42,549  

Restricted cash

     5.2        126,219        115,124  

Deferred tax assets

     13        1,614,897        1,540,693  

Receivables from related parties

     5.4        87,785        90,390  

Income taxes receivable

        260,330        260,330  

Other non-current tax receivable

     6        836,798        851,492  

Judicial deposits

     14        905,042        878,807  

Derivative financial instruments

     5.8        2,583,605        2,367,042  

Other non-current assets

        562,273        407,916  

Investments in associates

     8.1        373,857        378,519  

Investments in joint ventures

     9        7,987,127        8,077,907  

Right-of-use assets

     10.3        2,028,659        —    

Property, plant and equipment

     10.1        11,711,326        12,417,822  

Intangible assets and goodwill

     10.2        16,937,287        16,972,535  
     

 

 

    

 

 

 

Total non-current assets

        46,054,770        44,401,126  
     

 

 

    

 

 

 

Total assets

        57,901,199        56,360,716  
     

 

 

    

 

 

 

The accompanying notes are an integral part of these interim financial statements.

 

F-4


Cosan Limited

Consolidated statements of financial position

(In thousands of Brazilian Reais—R$)

 

 

     Note      March 31,
2019
    December 31,
2018
 

Liabilities

       

Loans, borrowings and debentures

     5.5        2,670,584       2,115,305  

Leases

     5.6        283,452       120,491  

Derivative financial instruments

     5.8        —         3,880  

Trade payables

     5.7        1,984,966       1,923,920  

Employee benefits payable

        227,553       339,968  

Income tax payables

        34,071       36,164  

Other taxes payable

     12        353,301       245,587  

Dividends payable

        184,917       187,415  

Concessions payable

     11        29,634       28,797  

Payables to related parties

     5.4        379,616       355,971  

Deferred revenue

        7,548       9,473  

Other financial liabilities

        358,644       455,702  

Other current liabilities

        328,541       418,145  
     

 

 

   

 

 

 

Total current liabilities

        6,842,827       6,240,818  

Loans, borrowings and debentures

     5.5        21,645,216       20,459,008  

Leases

     5.6        1,941,257       432,859  

Preferred shareholders payable in subsidiaries

        1,113,523       1,097,490  

Derivative financial instruments

     5.8        22,308       21,834  

Other taxes payable

     12        153,061       154,599  

Provision for legal proceedings

     14        1,449,088       1,363,168  

Concessions payable

     11        3,251,547       3,179,771  

Post-employment benefits

     22        585,512       579,870  

Deferred tax liabilities

     13        4,047,826       4,093,019  

Deferred revenue

        40,464       42,044  

Other non-current liabilities

        714,791       726,880  
     

 

 

   

 

 

 

Total non-current liabilities

        34,964,593       32,150,542  
     

 

 

   

 

 

 

Total liabilities

        41,807,420       38,391,360  
     

 

 

   

 

 

 

Shareholders’ equity

     15       

Share capital

        5,328       5,328  

Additional paid-in capital

        2,209,133       3,112,274  

Accumulated other comprehensive loss

        (723,413     (587,173

Retained earnings

        3,974,086       4,083,974  

Profit for the period

        190,216       —    
     

 

 

   

 

 

 

Equity attributable to:

       

Owners of the Company

        5,655,350       6,614,403  

Non-controlling interests

     8.2        10,438,429       11,354,953  
     

 

 

   

 

 

 

Total shareholders’ equity

        16,093,779       17,969,356  
     

 

 

   

 

 

 

Total shareholders’ equity and liabilities

        57,901,199       56,360,716  
     

 

 

   

 

 

 

The accompanying notes are an integral part of these interim financial statements.

 

F-5


Cosan Limited

Consolidated statement of profit or loss and other comprehensive income

(In thousands of Brazilian Reais—R$, except earnings per share)

 

 

 

     Note      March 31,
2019
    March 31,
2018
 

Net sales

     17        4,720,212       3,543,428  

Cost of sales

     18        (3,469,327     (2,512,680
     

 

 

   

 

 

 

Gross profit

        1,250,885       1,030,748  
     

 

 

   

 

 

 

Selling expenses

     18        (264,022     (245,069

General and administrative expenses

     18        (258,485     (213,350

Other income (expenses), net

     19        (5,069     (22,661
     

 

 

   

 

 

 

Operating expenses

        (527,576     (481,080
     

 

 

   

 

 

 

Income before equity in earnings of investees, financial results and taxes

        723,309       549,668  
     

 

 

   

 

 

 

Interest in earnings of associates

     8        (26,798     (2,807

Interest in earnings of joint ventures

     9        303,833       297,657  
     

 

 

   

 

 

 

Equity in earnings of investees

        277,035       294,850  

Finance expense

        (807,381     (499,883

Finance income

        126,796       188,848  

Foreign exchange, net

        (71,144     (75,957

Derivatives

        229,102       (133,688
     

 

 

   

 

 

 

Finance results, net

     20        (522,627     (520,680

Profit before taxes

        477,717       323,838  
     

 

 

   

 

 

 

Income tax (expenses), benefits

     13       

Current

        (152,270     52,385  

Deferred

        70,982       (135,436
     

 

 

   

 

 

 
        (81,288     (83,051

Profit for the period

        396,429       240,787  
     

 

 

   

 

 

 

Other comprehensive income (loss)

       

Items that will never be reclassified to profit or loss

       

Actuarial loss on defined benefit plan

        —         (54
     

 

 

   

 

 

 
        —         (54

Items that are or may subsequently be reclassified to profit or loss:

       

Foreign currency translation effect

        (33,094     (23,847

(Loss) / gain on cash flow hedge in joint ventures

        (179,877     3,317  

Changes in fair value of financial assets

        10       32  
     

 

 

   

 

 

 
        (212,961     (20,498

 

F-6


Cosan Limited

Consolidated statement of profit or loss and other comprehensive income

(In thousands of Brazilian Reais—R$, except earnings per share)

 

 

 

Total other comprehensive (loss) income, net of tax

        (212,961     (20,552
     

 

 

   

 

 

 

Total comprehensive income

        183,468       220,235  
     

 

 

   

 

 

 

Total net income attributable to:

       

Owners of the Company

        190,216       106,304  

Non-controlling interests

        206,213       134,483  
     

 

 

   

 

 

 
        396,429       240,787  

Total comprehensive income attributable to:

       

Owners of the Company

        53,976       129,578  

Non-controlling interests

        129,492       90,657  
     

 

 

   

 

 

 
        183,468       220,235  

Basic earnings (loss) per share from:

       

Continuing operations

     16      R$ 0.8254     R$ 0.4371  
     

 

 

   

 

 

 

Basic earnings (loss) per share from:

      R$ 0.8254     R$ 0.4371  

Diluted earnings (loss) per share from:

       

Continuing operations

     16      R$ 0.7900     R$ 0.4124  
     

 

 

   

 

 

 

Diluted earnings (loss) per share from:

      R$ 0.7900     R$ 0.4124  

The accompanying notes are an integral part of these interim financial statements.

 

F-7


Cosan Limited

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  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Initial adoption of IFRS 16, net of tax—Note 3.1

     —          —         —         (109,888     (109,888     (422,462     (532,350
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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: Note 15

               

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  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the year

     —          —         (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
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners of the Company

               

Change of shareholding interest in subsidiary

     —          (440,989     —         —         (440,989     (624,849     (1,065,839
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At March 31, 2019

     5,328        2,209,133       (723,413     4,164,302       5,655,350       10,438,429       16,093,779  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these interim financial statements.

 

F-8


Cosan Limited

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, 2017

     5,328        3,245,543       (394,212     3,182,098       6,038,757       11,020,656       17,059,413  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjustment on initial application of IFRS 9, net of tax

     —          —         —         (3,163     (3,163     (4,185     (7,348
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At January 1, 2018

     5,328        3,245,543       (394,212     3,178,935       6,035,594       11,016,471       17,052,065  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the year

     —          —         —         106,304       106,304       134,483       240,787  

Other comprehensive income: Note 15

               

Gain on cash flow hedge in joint ventures

     —          —         1,940       —         1,940       1,377       3,317  

Foreign currency translation effects

     —          —         (17,594     —         (17,594     (6,253     (23,847

Actuarial loss on defined benefit plan

     —          —         (11     —         (11     (43     (54

Change in fair value of financial assets

     —          —         18       —         18       14       32  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the year

     —          —         (15,647     106,304       90,657       129,578       220,235  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Contributions by and distributions to owners of the Company:

               

Dividends—non-controlling interests

     —          (270     —         —         (270     270       —    

Share options exercised—Subsidiaries

     —          9,035       —         —         9,035       6,096       15,131  

Dividends

     —          —         —         —         —         (960     (960

Share-based payment transactions

     —          9,909       —         —         9,909       2,294       12,203  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total contributions by and distributions to owners of the Company

     —          18,674       —         —         18,674       7,700       26,374  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners of the Company

               

Change of shareholding interest in subsidiary

     —          (10,764     —         —         (10,764     667       (10,097
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At March 31, 2018

     5,328        3,253,453       (409,859     3,285,239       6,134,161       11,154,416       17,288,577  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these interim financial statements.

 

F-9


Cosan Limited

Consolidated statement of cash flows

(In thousands of Brazilian Reais—R$)

 

 

     Note      March 31,
2019
    At March 31,
2018
 

Cash flows from operating activities

       

Profit before taxes

        477,717       323,838  

Adjustments for:

       

Depreciation and amortization

        562,804       473,293  

Lease and concession

        —         49,643  

Interest in earnings of associates

     8.1        26,798       2,807  

Interest in earnings of joint ventures

     9        (303,833     (297,657

Loss on disposals assets

        6,363       2,777  

Share-based payment

        14,831       12,679  

Legal proceedings provision

        45,734       30,762  

Indexation charges, interest and exchange, net

        567,385       549,394  

Deferred revenue

        (3,505     (2,437

Provisions for employee benefits

        49,707       39,578  

Allowance for doubtful accounts

        2,124       5,930  

Other

        (99,098     (4,317
     

 

 

   

 

 

 
        1,347,027       1,186,290  

Changes in:

       

Trade receivables

        (271,634     (31,035

Inventories

        (23,622     21,218  

Other current tax receivable

        105,359       (21,452

Income tax receivable

        (57,342     (74,861

Related parties, net

        1,469       (70,271

Trade payables

        45,153       (85,479

Employee benefits

        (165,487     (136,970

Provision for legal proceedings

        (20,292     (29,147

Other financial assets

        (74,132     (57,970

Judicial deposits

        (20,107     (22,065

Cash received on sale of credit rights

        —         1,340,000  

Post-employment benefits

        (8,893     (7,764

Concessions payable

        (3,505     (26,548

Other assets and liabilities, net

        (99,398     (122,530
     

 

 

   

 

 

 
        (592,431     675,126  

Net cash generated by operating activities

        754,596       1,861,416  
     

 

 

   

 

 

 

Cash flows from investing activities

       

Capital contribution in associates

        (26,045     —    

Acquisition of subsidiary, net of cash acquired

        —         (35,869

Marketable securities

        1,470,693       334,734  

Restricted cash

        (10,900     28,795  

Dividends received from associates

        1,949       347  

Dividends received from joint ventures

        230,470       408,151  

Acquisition of property, plant and equipment, intangible assets, right-of-use assets and contract assets

        (693,862     (623,479

Cash received on sale of fixed assets, and intangible assets

        28       1,123  
     

 

 

   

 

 

 

Net cash generated in investing activities

        972,333       113,802  
     

 

 

   

 

 

 

 

F-10


Cosan Limited

Consolidated statement of cash flows

(In thousands of Brazilian Reais—R$)

 

 

 

Cash flows from financing activities

       

Loans, borrowings and debentures raised

     5.5        3,027,460       2,176,875  

Amortization of principal on loans, borrowings and debentures

     5.5        (1,469,202     (1,837,194

Payment of interest on loans, borrowings and debentures

     5.5        (468,768     (428,324

Payment of derivative financial instruments

        (107,279     (595,404

Receipt of derivative financial instruments

        106,529       585,425  

Amortization of principal on leases

     5.6        (58,075     (262,602

Payment of interest on leases

     5.6        (39,917     (43,494

Real estate credit certificates

        —         (29,439

Capital contribution from non-controlling interest

     8.1        434,000       —    

Payments to redeem entity’s shares

     1        (473,456     (9,996

Acquisition of non-controlling interests

     8.1        (1,627,773     —    

Dividends paid

        (2,668     (37,721

Share options exercised

        —         15,131  
     

 

 

   

 

 

 

Net cash used in financing activities

        (679,149     (466,743
     

 

 

   

 

 

 

Increase in cash and cash equivalents

        1,047,780       1,508,475  
     

 

 

   

 

 

 

Cash and cash equivalents at beginning of period

        3,621,798       4,555,177  
     

 

 

   

 

 

 

Effect of exchange rate fluctuations on cash held

        (8,019     38,952  
     

 

 

   

 

 

 

Cash and cash equivalents at end of period

        4,661,559       6,102,604  
     

 

 

   

 

 

 

Additional information

       

Income tax paid

        46,037       44,024  

The accompanying notes are an integral part of these interim financial statements.

 

 

F-11


Cosan Limited

Consolidated statement of cash flows

(In thousands of Brazilian Reais—R$)

 

 

Non-cash transaction

During the period ended March 31, 2019, the Company carried out the following transactions that did not involve cash and are therefore not reflected in the statement of cash flows:

 

  i.

Acquisitions of construction assets for the distribution network with payment of term in the amount of R$35,035.

 

  ii.

Contingent consideration asset in the subsidiary Moove, with a down payment in the amount of R$128,000 (Note 8.2).

 

  iii.

Recognition of litigation indemnification in the amount of R$50,284 (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.

 

F-12


Cosan Limited

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 60.25% and 72.50% interest, respectively. Cosan, Cosan S.A., Cosan Logística and its subsidiaries are collectively referred to as the “Company.”

On December 21, 2018, the subsidiary Cosan Lubes Investments Limited (“CLI” or “Moove”) and CVC Fund VII (“CVC”) entered into an investment agreement pursuant to which CVC will subscribe for shares in CLI’s capital in a total amount of R$562 million (which is equivalent to approximately 30% of CLI’s capital). Considering all conditions precedent provided in the investment agreement were satisfied, the transaction was concluded on March 29, 2019. As a result and pursuant to the terms of the investment agreement, Moove received R$434 million at the closing of the transaction and may receive up to approximately R$128 million until 2021. Additional information see Note 8.2.

On January 3, 2019, the Company acquired 14,228,134 of our Class A common shares pursuant to a tender offer at a purchase price of U.S.$8.88 per share, for a total cost of approximately R$473,456 excluding fees and other related expenses. These shares represented 9.6% of the issued and outstanding Class A common stock of Cosan Limited as of December 31, 2018. The shares accepted for purchase included 2,966,873 additional shares that Cosan Limited elected to purchase pursuant to its right to purchase up to an additional 2% of its outstanding Class A common shares. After giving effect to the purchase, we had 134,115,534 outstanding Class A common shares remaining.

On March 8, 2019, Cosan S.A. announced the conclusion of the voluntary tender offer (“Voluntary TO”) held on the same date for acquisition of class A preferred shares issued by Comgás. A total of 19,496,165 preferred shares of Comgás were acquired by Cosan S.A. in the tender offer at a price of R$82.00 per preferred share, representing approximately 14.77% of Comgás’s capital stock. As a result, we increased our interest in Comgás from 80.12% prior to the tender offer to 94.88% following the conclusion of the tender offer. Additional information see Note 8.2.

On March 28, 2019, Rumo S.A. (“Rumo”) announced that it has won the tender (International Bidding No. 02/2018) organized by ANTT to operate the railway network located between the cities of Porto Nacional, in the state of Tocantis and Estrela d’Oeste, in the state of São Paulo. Rumos bid was of R$2,719,000. The final granting of the concession to Rumo is subject to the completion of the remaining stages of the tender detailed in the tender notice, including an analysis of Rumos licensing documents. Rumo will be required to pay (i) 5% of the value of its bid within 45 days of the publication of the ANTT’s final decision, and (ii) the remainder in 120 quarterly installments calculated pursuant to the terms of the concession agreement to be entered into in connection with the concession.

 

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 year ended December 31, 2018.

The significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended December 31, 2018, except for the adoption of IFRS 16 Leases, whose effects and changes are disclosed in Note 3.1, effective as of January 1, 2019. The Company has not early adopted any other standard, interpretation or amendment that has been issued.

All own relevant information of the interim financial statements, and only they, are being highlighted, and these correspond to those used by management in its management.

 

 

F-13


Cosan Limited

Notes to the interim consolidated financial statements

(In thousands of Brazilian Reais - R$, unless otherwise stated)

 

 

These interim consolidated financial statements were authorized for issue by the Board of Directors on May 10, 2019.

 

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, 2018, except for the adoption of IFRS 16—Leases, whose effects and changes are disclosed in Note 3.1 effective as of January 1, 2019. The Company has not adopted in advance any other standard or interpretation issued that is not yet in force.

 

3.1

New standards, interpretations and changes adopted by the Company

IFRS 16 Leases

IFRS 16 introduced a single model for the accounting of leases in the balance sheet of lessees. As a result, the Company, as a lessee, recognized the rights to use assets that represent its rights to use the underlying assets and the lease liabilities that represent its obligation to make lease payments. The lessor’s accounting remains similar to previous accounting policies.

The Company has chosen to use the modified retrospective approach in which the cumulative effect of the initial adoption is recognized as an adjustment to the opening balance of retained earnings on January 1, 2019. Therefore, the comparative information presented for the year ended December 31, 2018 has not been restated—or and is presented as previously reported in accordance with IAS 17 and related interpretations. The details of the changes in accounting policies are disclosed below:

 

(a)

In the definition of lease

Previously, the Company determined, at the inception of the agreement, whether it was or contained a lease under IFRIC 4—Complementary Aspects of Leasing Operations. The Company now assesses whether a lease is or contains a lease based on the new lease definition. According to IFRS 16, a contract is or contains a lease if it transfers the right to control the use of an identified asset for a period of time in exchange for consideration.

In the transition to IFRS 16, the Company opted to apply the practical case of maintaining the evaluation of which transactions are leases, to which IFRS 16 applied. The contracts that were not identified as leases in accordance with IAS 17 and IFRIC 4 were not revalued. Accordingly, the new lease definition in accordance with IFRS 16 was applied only to contracts entered into or amended on or after January 1, 2019.

At the inception or revaluation of a lease component, the Company allocates the lease consideration to each lease component rather than lease based on its individual lease price.

 

(b)

In the treatment as a lessee

The company leases assets, including real estate, rail infrastructure, port, rolling stock (locomotives and wagons), vehicles and IT equipment. As a lessee, the Company previously classified operating or financial leases based on its assessment as to whether the lease substantially transferred all the risks and benefits of the property. In accordance with IFRS 16, the Company recognizes the right to use assets and the lease liabilities for most leases—that is, these leases are recorded in the balance sheet.

However, the Company has elected not to recognize right-of-use assets and lease liabilities for some leases of low value assets (eg IT equipment). The Company recognizes the payments associated with these leases as an expense under the straight-line method over the lease term.

 

 

F-14


Cosan Limited

Notes to the interim consolidated financial statements

(In thousands of Brazilian Reais - R$, unless otherwise stated)

 

 

The Company presents the carrying amounts of the right-of-use assets (including assets previously classified as financial leases) in a specific balance sheet line called “Right-of-use assets”. Likewise, it records the liabilities in a separate account called “Leases”.

 

(i)

Accounting policy adopted as of January 1, 2019 meaning:

Previously, the Company determined at the inception of the agreement whether it was or contained a lease under IFRIC 4—Complementary Aspects of Leasing Operations. The company now assesses whether a lease is or contains a lease based on the new lease definition. According to IFRS 16, a contract is or contains a lease if it transfers the right to control the use of an identified asset for a period of time in exchange for consideration.

The Company recognizes a right-of-use assets and a lease liability at the date of commencement of the lease.

The right-of-use assets is initially measured at cost and subsequently at cost less any accumulated depreciation and impairment, and adjusted for certain measurements of lease liabilities.

The lease liability is initially measured at the present value of the lease payments that were not paid at the commencement date, discounted using the interest rate implied in the lease or, if that rate can not be determined immediately, the incremental loan rate of Company and its subsidiaries. Generally, the Company uses its incremental loan rate as the discount rate.

The Company has applied a judgment to determine the lease term of some contracts that include renewal options. The evaluation of whether the Company is reasonably certain to exercise these options has an impact on the term of the lease, which significantly affects the value of lease liabilities and recognized right-of-use assets. The extension and termination options are included in several lease agreements throughout the Company. These terms are used to maximize operational flexibility in terms of contract management. Most of the extension and termination options exercised are exercisable by both participants (lessor and lessee).

 

(ii)

Transition

Previously, the Company classified leases of railway infrastructure and rolling stock as operating leases in accordance with IAS 17. Some leases are adjusted by inflation indexes such as IGP-M or IPCA.

Lease liabilities were measured at the present value of the remaining payments, discounted by the incremental loan rate of the Company on January 1, 2019. The rights to use assets are measured:

 

  i.

At its book value as if IFRS 16 had been applied since the commencement date, discounted by the lessee’s incremental borrowing rate at the date of initial application—the company applied this approach to its larger property leases infrastructure , port and rolling stock; or

 

  ii.

At the amount equivalent to the lease liability, adjusted for the amount of any prepayment or accumulated rent—the Company applied this approach to all other leases.

The Company used the following practical arrangements when applying IFRS 16 to leases previously classified as operating leases in accordance with IAS 17:

 

  i.

It applied the exemption for not recognizing rights-of-use assets and liabilities for leases with terms less than 12 months.

 

  ii.

Excluded the initial direct costs of measuring the right to use asset at the date of initial application.

 

  iii.

It used late perception when determining the term of the lease if the contract contained options to extend or terminate the lease.

Leases classified and previously recorded as finance leases under IAS 17 had the book value of the right to use the asset and the lease liability on January 1, 2019 determined by the carrying amount of the lease and liability assets lease immediately prior to that date. Extension and termination options are included in various lease agreements throughout the Company. These terms are used to maximize operational flexibility in terms of contract management. Most of the extension and termination options exercised are exercisable by both participants (lessor and lessee).

 

F-15


Cosan Limited

Notes to the interim consolidated financial statements

(In thousands of Brazilian Reais - R$, unless otherwise stated)

 

 

(c)

Impact on statement of financial position on January 1, 2019:

 

     January 1,
2019
 

Current assets

  

Other current assets

     2,490  

Non-current assets

  

Other non-current assets

     8,030  

Deferred tax assets

     45,650  

Right-of-use assets

     1,137,061  
  

 

 

 

Total on non-current assets

     1,198,226  
  

 

 

 
  

 

 

 

Total on assets

     1,200,716  

Current liabilities

  

Leases

     (165,714

Non-current liabilities

  

Leases

     (1,567,352
  

 

 

 

Total on liabilities

     (1,733,066

Shareholders’ equity

  

Retained earnings

     (532,350
  

 

 

 

Total on shareholders’ equity

     (532,350

The joint ventures Raízen Energia S.A. and Raízen Combustíveis S.A. recognized the lease liability and the right to use asset at the date of the initial application for leases previously classified as operating leases, retrospectively, with cumulative effect. These joint ventures used as a practical expedient the use of a single discount rate on the lease portfolio with similar characteristics.

When measuring lease liabilities for those leases previously classified as operating leases, the Company discounted lease payments using its incremental loan rate on January 1, 2019. The weighted average rates applied follow a range from 4.00% to 8.11% per year.

 

3.2

Other standards and interpretations effective as of January 1, 2019, without effects on the financial statements

IFRIC Interpretation 23 Uncertainty over Income Tax Treatment

The Interpretation addresses the accounting of income taxes when tax treatment involves uncertainty that affects the application of IAS 12 and does not apply to taxes or charges outside the scope of IAS 12, nor does it specifically treatment of interest and penalties associated with uncertain taxes.

The Company is subject to examination by the tax authorities, with the five fiscal years open in general. The Company has audits in progress at various stages of completion, one of which may be completed within the next 12 months. However, at that time, the Company had no uncertainties regarding the treatment of income tax.

Have not been identified effects of interpretation adoption IFRIC 23 that could affect the Company accounting policies and its interim consolidated financial statements.

 

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 financial statements. Cosan evaluates the performance of its operating segments based on the measure of Earnings Before Interest Tax, Depreciation and Amortization (“EBITDA”).

 

 

F-16


Cosan Limited

Notes to the interim consolidated financial statements

(In thousands of Brazilian Reais - R$, unless otherwise stated)

 

 

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;

 

  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, the manufacture and sale of automotive and industrial lubricants, and the production and sale of liquefied petroleum gas throughout Argentina;

 

  iii.

Comgás: distribution of piped natural gas to part of the State of São Paulo to customers in the industrial, residential, commercial, automotive and cogeneration sectors;

 

  iv.

Logistic: logistics services for rail transportation, storage and port loading of commodities, mainly for grains and sugar, leasing of locomotives, wagons and another railway equipment; and

 

  v.

Moove: Production and distribution of lubricants licensed under the Mobil brand in Brazil, Bolivia, Uruguay, Paraguay, Argentina, the United States and European market through the subsidiaries CLE, Stanbridge, TTA, LubrigrupoII, Cosan Lubrificantes S.R.L (“Cosan S.R.L”) and Moove Lubricants under the Comma brand for the European and Asian market and corporate activities (“Moove”).

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 “Deconsolidation of joint ventures”.

 

F-17


Cosan Limited

Notes to the interim consolidated financial statements

(In thousands of Brazilian Reais - R$, unless otherwise stated)

 

 

     March 31, 2019  
     Reported segments     Reconciliation     Consolidated  
     Raízen
Energia
    Raízen Combustíveis     Comgás     Moove     Logistic     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       306       (33,025,097     (9,432     5,603,093  

Domestic market (i)

     2,353,942       21,073,405       4,390,694       2,607,433       1,143,979       1,722,438       306       (27,818,041     (9,432     5,464,724  

External market

     5,207,056       —         —         —         138,369       —         —         (5,207,056     —         138,369  

Net sales

     7,120,028       20,033,141       3,128,122       2,060,052       1,034,341       1,634,946       306       (30,281,291     (9,432     4,720,213  

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       306       (1,730,549     —         1,250,886  

Selling expenses

     (235,450     (342,945     (163,613     (149,238     (112,024     (2,843     83       742,008       —         (264,022

General and administrative expenses

     (124,437     (130,697     (31,874     (83,607     (37,643     (83,226     (54,009     287,008       —         (258,485

Other income (expenses), net

     48,030       260,632       20,006       3,469       1,038       (21,527     11,951       (328,668     —         (5,069

Interest in earnings of associates

     —         110,742       —         —         1,725       4,750       363,958       (110,742     (397,231     (26,798

Interest in earnings of joint ventures

     4,689       1       —         —         —         —         303,833       (4,690     —         303,833  

Financial results

     (155,050     33,868       (104,908     (52,477     (3,118     (324,445     (142,587     226,090       —         (522,627

Finance expense

     (316,305     (176,802     (17,291     (99,040     (10,703     (435,118     (262,520     510,398       —         (807,381

Finance Income

     125,371       61,695       5,273       46,634       3,509       41,876       34,777       (192,339     —         126,796  

Foreign exchange losses, net

     26,488       58,706       (92,890     (3,316     (9,252     (26,945     (31,631     7,696       —         (71,144

Derivatives

     9,396       90,269       —         3,245       13,328       95,742       116,787       (99,665     —         229,102  

Income tax (expense)benefit

     6,890       (225,469     42,029       (99,332     (15,371     (27,811     61,226       176,550       —         (81,288
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) from continuing operations

     13,425       618,826       110,742       179,940       42,590       26,370       544,761       (742,993     (397,231     396,430  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to:

                    

Owners of the Parent

     12,645       598,014       110,742       159,830       29,390       5,084       541,164       (721,401     (545,252     190,216  

Non-controlling interests

     780       20,812       —         20,110       13,200       21,286       3,597       (21,592     148,021       206,214  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     13,425       618,826       110,742       179,940       42,590       26,370       544,761       (742,993     (397,231     396,430  

Other select data:

                    

Depreciation and amortization

     728,597       83,315       102,530       115,395       20,480       422,455       4,474       (914,442     —         562,804  

EBITDA

     890,182       893,742       276,151       447,144       81,559       801,081       630,596       (2,060,075     (397,231     1,563,149  

Additions to PP&E, intangible and Contracts assets

     1,078,021       72,995       18,480       146,182       3,282       542,608       1,790       (1,169,496     —         693,862  

Reconciliation of EBITDA:

                    

Profit (loss) for the period

     13,425       618,826       110,742       179,940       42,590       26,370       544,761       (742,993     (397,231     396,430  

Income tax and social contribution

     (6,890     225,469       (42,029     99,332       15,371       27,811       (61,226     (176,550     —         81,288  

Financial results, net

     155,050       (33,868     104,908       52,477       3,118       324,445       142,587       (226,090     —         522,627  

Depreciation and amortization

     728,597       83,315       102,530       115,395       20,480       422,455       4,474       (914,442     —         562,804  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     890,182       893,742       276,151       447,144       81,559       801,081       630,596       (2,060,075     (397,231     1,563,149  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(i)

Domestic markets: sales within the countries where each entity is located; external markets: sales export.

 

F-18


Cosan Limited

Notes to the interim consolidated financial statements

(In thousands of Brazilian Reais - R$, unless otherwise stated)

 

 

 

     March 31, 2018  
  

 

 

 
     Reported segments     Reconciliation        
     Raízen
Energia
    Raízen
Combustíveis
    Comgás     Moove     Logistic     Cosan
Corporate
    Deconsolidated
effects
    Segment
eliminations /
adjustments
    Consolidated  

Statement of profit or loss:

                  

Gross sales

     4,512,938       19,494,972       1,430,876       724,572       1,396,683       400       (24,007,910     (9,103     3,543,428  

Domestic market

     2,926,654       19,494,972       1,430,876       710,294       1,350,752       400       (22,421,626     (9,103     3,483,219  

External market

     1,586,284       —         —         14,278       45,931       —         (1,586,284     —         60,209  

Cost of sales

     (3,945,052     (18,521,684     (942,432     (578,497     (1,000,714     (140     22,466,736       9,103       (2,512,680

Gross profit

     567,886       973,288       488,444       146,075       395,969       260       (1,541,174     —         1,030,748  

Selling expenses

     (155,094     (345,102     (154,465     (86,776     (3,828     —         500,196       —         (245,069

General and administrative expenses

     (173,414     (135,328     (76,772     (22,643     (69,615     (44,320     308,742       —         (213,350

Other income (expense), net

     108,456       99,384       (252     (1,109     (4,396     (16,904     (207,840     —         (22,661

Financial results

     (36,292     (72,366     (21,631     (9,032     (348,825     (141,192     108,658       —         (520,680

Finance expense

     (198,882     5,972       (96,864     (7,128     (342,905     (54,525     192,910       1,538       (499,884

Finance income

     138,776       48,796       73,331       2,967       75,599       38,490       (187,572     (1,538     188,849  

Foreign exchange losses, net

     6,344       (87,080     5,415       (1,833     (12,973     (66,566     80,736       —         (75,957

Derivatives

     17,470       (40,054     (3,513     (3,038     (68,546     (58,591     22,584       —         (133,688

Interest in earnings of associates

     (4,158     —         —         (5,059     1,380       326,998       4,158       (326,126     (2,807

Interest in earnings of joint ventures

     —         —         —         —         —         297,657       —         —         297,657  

Income tax expense benefit

     (72,394     (142,856     (76,348     (8,478     (28,385     30,160       215,250       —         (83,051
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) from continuing operations

     234,990       377,020       158,976       12,978       (57,700     452,659       (612,010     (326,126     240,787  

Total net income attributable to:

                  

Owners of the Company

     234,976       361,806       126,978       12,978       (16,225     448,101       (596,782     (465,528     106,304  

Non-controlling interests

     14       15,214       31,998       —         (41,475     4,558       (15,228     139,402       134,483  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     234,990       377,020       158,976       12,978       (57,700     452,659       (612,010     (326,126     240,787  

Other selected data:

                  

Depreciation and amortization

     611,588       70,203       117,416       20,853       331,120       3,904       (681,791     —         473,293  

EBITDA

     955,264       662,445       374,371       51,341       650,630       567,595       (1,617,709     (326,126     1,317,811  

Additions to PP&E, intangible and biological assets

     1,016,207       88,767       97,201       11,198       483,743       223       (1,104,974     —         592,365  

Reconciliation of EBITDA:

                  

Profit (loss) for the period

     234,990       377,020       158,976       12,978       (57,700     452,659       (612,010     (326,126     240,787  

Income tax and social contribution

     72,394       142,856       76,348       8,478       28,385       (30,160     (215,250     —         83,051  

Financial result, net

     36,292       72,366       21,631       9,032       348,825       141,192       (108,658     —         520,680  

Depreciation and amortization

     611,588       70,203       117,416       20,853       331,120       3,904       (681,791     —         473,293  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     955,264       662,445       374,371       51,341       650,630       567,595       (1,617,709     (326,126     1,317,811  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-19


Cosan Limited

Notes to the interim consolidated financial statements

(In thousands of Brazilian Reais - R$, unless otherwise stated)

 

 

 

     March 31, 2019  
     Reported segments     Reconciliation     Consolidated  
     Raízen
Energia
    Raízen Combustíveis     Comgás     Moove     Logistic     Cosan
Corporate
    Deconsolidated
effects
    Segment
elimination
 
    Brazil     Argentina  

Statement of financial position:

                    

Cash and cash equivalents

     3,189,859       2,316,713       501,878       864,906       601,175       959,794       2,235,684       (6,008,450     —         4,661,559  

Marketable securities

     —         —         —         931,854       11,682       1,600,457       225,799       —         —         2,769,792  

Trade receivables

     974,025       2,563,163       337,721       905,827       522,964       453,242       10,273       (3,874,909     —         1,892,306  

Derivative financial instruments

     1,350,963       786,149       9,017       374,796       38,491       1,013,182       1,342,991       (2,146,129     —         2,769,460  

Inventories

     797,083       2,168,125       1,110,063       63,452       402,428       267,471       2,253       (4,075,271     —         735,604  

Other current assets

     3,551,789       2,655,735       1,045,979       492,312       232,423       449,350       988,547       (7,253,503     (521,754     1,640,878  

Other non-current assets

     4,710,342       3,671,795       57,424       353,033       844,472       2,719,169       1,613,066       (8,439,561     (1,136,396     4,393,344  

Investments in associates

     —         3,202,864       —         —         15,647       39,277       13,767,917       (3,202,864     (13,448,984     373,857  

Investments in joint ventures

     572,918       —         268       —         —         —         7,987,127       (573,186     —         7,987,127  

Biological assets

     812,965       —         —         —         —         —         —         (812,965     —         —    

Property, plant and equipment

     11,834,699       2,609,988       3,252,383       —         311,198       11,226,530       173,598       (17,697,070     —         11,711,326  

Intangible assets and goodwill

     3,630,418       2,543,256       9,664       8,271,564       1,192,674       7,465,172       7,877       (6,183,338     —         16,937,287  

Right-of-use assets

     4,009,474       135,979       430,878       14,662       24,077       1,953,000       36,920       (4,576,331     —         2,028,659  

Loans, borrowings and debentures

     (12,161,698     (4,698,497     (392,614     (3,627,166     (796,741     (10,602,345     (9,289,548     17,252,809       —         (24,315,800

Derivative financial instruments

     (1,145,599     (88,624     —         —         —         (173     (22,135     1,234,223       —         (22,308

Trade payables

     (4,189,363     (2,563,631     (1,272,561     (1,052,190     (501,202     (428,632     (2,942     8,025,555       —         (1,984,966

Employee benefits payable

     (399,418     (104,768     (39,578     (35,699     (33,292     (139,578     (18,984     543,764       —         (227,553

Preferred shareholders payable in subsidiaries

     —         —         —         —         —         —         (1,113,523     —         —         (1,113,523

Lease

     (3,831,635     (136,794     (423,009     (14,842     (34,800     (2,137,573     (37,494     4,391,438       —         (2,224,709

Other current liabilities

     (1,033,667     (4,920,054     (623,303     (207,377     (480,268     (665,728     (874,860     6,577,024       551,961       (1,676,272

Other non-current liabilities

     (1,274,413     (5,223,068     (801,346     (1,991,773     (786,264     (6,376,559     (2,193,886     7,298,827       1,106,193       (10,242,289
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets (net of liabilities) allocated by segment

     11,398,742       4,918,331       3,202,864       5,343,359       1,564,664       7,796,056       14,838,680       (19,519,937     (13,448,980     16,093,779  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

     35,434,535       22,653,767       6,755,275       12,272,406       4,197,231       28,146,644       28,392,052       (64,843,577     (15,107,134     57,901,199  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity attributable to owners of the Company

     11,363,480       4,677,467       3,202,864       5,109,180       1,114,198       1,565,365       14,834,835       (19,243,811     (16,968,228     5,655,350  

Non-controlling interests

     35,262       240,864       —         234,179       450,466       6,230,691       3,845       (276,126     3,519,248       10,438,429  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     11,398,742       4,918,331       3,202,864       5,343,359       1,564,664       7,796,056       14,838,680       (19,519,937     (13,448,980     16,093,779  

 

 

F-20


Cosan Limited

Notes to the interim consolidated financial statements

(In thousands of Brazilian Reais - R$, unless otherwise stated)

 

 

     December 31, 2018  
  

 

 

 
     Reported segments     Reconciliation        
     Raízen
Energia
    Raízen Combustíveis     Comgás     Moove     Logistic     Cosan
Corporate
    Deconsolidated
effects
    Segment
elimination
    Consolidated  
    Brasil     Argentina  

Statement of financial position:

                    

Cash and cash equivalents

     2,437,571       864,105       490,960       602,618       206,702       143,710       2,668,768       (3,792,636     —         3,621,798  

Marketable securities

     —         —         —         1,124,723       13,033       2,843,435       221,644       —         —         4,202,835  

Trade receivables

     1,061,297       2,747,503       372,202       695,147       446,645       438,062       8,338       (4,181,002     —         1,588,192  

Derivative financial instruments

     1,956,616       639,976       —         368,928       29,976       892,461       1,257,492       (2,596,592     —         2,548,857  

Inventories

     3,618,573       2,078,003       1,284,087       65,259       385,901       263,386       1,744       (6,980,663     —         716,290  

Other financial assets

     516,519       —         —         —         —         —         —         (516,519     —         —    

Other current assets

     3,203,838       3,045,745       1,122,633       641,042       161,076       413,267       1,016,569       (7,372,216     (540,745     1,691,209  

Other non-current assets

     4,141,547       3,508,485       66,117       282,572       750,088       2,693,158       1,536,566       (7,716,149     (1,117,633     4,144,751  

Investments in associates

     —         3,056,025       266       —         13,799       44,001       13,111,569       (3,056,291     (12,790,850     378,519  

Investments in joint ventures

     567,785       —         —         —         —         —         8,077,907       (567,785     —         8,077,907  

Biological assets

     740,473       —         —         —         —         —         —         (740,473     —         —    

Property, plant and equipment

     10,912,819       2,292,355       3,182,272       —         321,746       11,916,818       179,258       (16,387,446     —         12,417,822  

Intangible assets and goodwill

     3,626,819       2,513,923       8,591       8,279,593       1,191,627       7,493,882       7,434       (6,149,333     —         16,972,536  

Loans, borrowings and debentures

     (12,702,418     (4,665,127     (971,268     (3,651,545     (759,169     (10,594,381     (7,569,218     18,338,813       —         (22,574,313

Derivative financial instruments

     (1,223,260     (31,469     —         —         (3,880     —         (21,834     1,254,729       —         (25,714

Trade payables

     (3,090,299     (1,603,481     (1,003,917     (1,012,895     (452,300     (451,637     (7,088     5,697,697       —         (1,923,920

Employee benefits payable

     (343,670     (73,481     (36,829     (63,520     (37,850     (207,397     (31,201     453,980       —         (339,968

Preferred shareholders payable in subsidiaries

     —         —         —         —         —         —         (1,097,490     —         —         (1,097,490

Lease

     —         —         —         —         —         (553,350     —         —         —         (553,350

Other current liabilities

     (2,448,741     (4,520,490     (624,633     (159,060     (499,759     (770,695     (849,832     7,593,864       542,092       (1,737,254

Other non-current liabilities

     (1,305,251     (5,028,754     (834,456     (2,009,997     (794,110     (6,263,836     (2,187,599     7,168,461       1,116,191       (10,139,351
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets (net of liabilities) allocated by segment

     11,670,218       4,823,318       3,056,025       5,162,865       973,525       8,300,884       16,323,027       (19,549,561     (12,790,945     17,969,356  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

     32,783,857       17,690,095       6,527,128       12,059,882       3,520,593       27,142,180       28,087,289       (57,001,080     (14,449,228     56,360,716  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity attributable to owners of the Company

     11,632,885       4,589,628       3,056,025       4,175,508       966,465       1,661,512       16,322,616       (19,278,538     (16,511,698     6,614,403  

Non-controlling interests

     37,333       233,690       —         987,357       7,060       6,639,372       411       (271,023     3,720,753       11,354,953  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     11,670,218       4,823,318       3,056,025       5,162,865       973,525       8,300,884       16,323,027       (19,549,561     (12,790,945     17,969,356  

 

F-21


Cosan Limited

Notes to the interim consolidated financial statements

(In thousands of Brazilian Reais - R$, unless otherwise stated)

 

 

4.1

Net sales by segment

 

     March 31,
2019
    March 31,
2018
 

Reported segment

    

Raízen Energia

    

Ethanol

     2,950,545       2,423,694  

Sugar

     1,581,597       1,350,250  

Gas

     623,530       121,722  

Diesel

     1,199,276       —    

Cogeneration

     735,880       108,995  

Other

     29,200       508,277  
  

 

 

   

 

 

 
     7,120,028     4,512,938  

Raízen Combustíveis

    

Fuels

     22,298,950       19,494,972  

Other

     862,313       —    
  

 

 

   

 

 

 
     23,161,263     19,494,972  

Comgás

    

Industrial

     1,388,407       941,881  

Residential

     210,928       190,196  

Cogeneration

     103,523       58,675  

Automotive

     79,969       55,194  

Commercial

     103,927       81,550  

Construction revenue

     159,936       89,493  

Other

     13,362       13,887  
  

 

 

   

 

 

 
     2,060,052     1,430,876  

Moove

    

Finished goods

     936,818       646,081  

Basic oil

     90,757       71,009  

Services

     6,766       7,482  
  

 

 

   

 

 

 
     1,034,341     724,572  

Logistic

    

North operations

     1,240,003       1,053,358  

South operations

     328,422       288,153  

Container operations

     66,521       55,172  
  

 

 

   

 

 

 
     1,634,946     1,396,683  

Reconciliation

    

Cosan Corporate

     306       400  
  

 

 

   

 

 

 

Deconsolidated of joint ventures and eliminations

     (30,290,723     (24,017,013
  

 

 

   

 

 

 

Total

     4,720,213       3,543,428  
  

 

 

   

 

 

 

 

F-22


Cosan Limited

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,
2019
     December 31,
2018
 

Assets

        

Fair value through profit or loss

        

Cash and cash equivalents

     5.1        1,729,318        1,600,590  

Marketable securities

     5.2        2,769,792        4,202,835  

Contingent consideration asset

     5.9        128,000        —    

Derivate financial instruments

     5.8        2,769,460        2,548,857  
     

 

 

    

 

 

 
            7,396,570      8,352,282  

Amortized cost

        

Cash and cash equivalents

     5.1        2,932,241        2,021,208  

Trade receivables

     5.3        1,892,306        1,588,192  

Restricted cash

     5.2        126,219        115,124  

Receivables from related parties

     5.4        137,097        135,070  

Dividends receivable

        14,797        27,320  
     

 

 

    

 

 

 
        5,102,660        3,886,914  
     

 

 

    

 

 

 

Total

        12,499,230        12,239,196  
     

 

 

    

 

 

 
        
     Note      March 31,
2019
     December 31,
2018
 

Liabilities

        

Amortized cost

        

Loans, borrowings and debentures

     5.5        13,748,672        10,005,187  

Leases

     5.6        2,224,709        553,350  

Trade payables

     5.7        1,984,966        1,923,920  

Other financial liabilities

        358,644        455,702  

Payables to related parties

     5.4        379,616        355,971  

Dividends payable

        184,917        187,415  

Tax installments—REFIS

     12        213,524        216,984  

Preferred shareholders payable in subsidiaries

        1,113,523        1,097,490  
     

 

 

    

 

 

 
        20,208,571        14,796,019  

Fair value through profit or loss

        

Loans, borrowings and debentures

     5.5        10,567,128        12,569,126  

Contingent consideration payable

     5.9        72,467        64,969  

Derivative financial instruments

     5.8        22,308        25,714  
     

 

 

    

 

 

 
        10,661,903        12,659,809  
     

 

 

    

 

 

 
        30,870,474        27,455,828  
     

 

 

    

 

 

 

 

(i)

Refers to contingent consideration assets related the investment agreement between CLI with CVC fund, as disclosed in Note 1.

 

 

F-23


Cosan Limited

Notes to the interim consolidated financial statements

(In thousands of Brazilian Reais - R$, unless otherwise stated)

 

 

5.1 Cash and cash equivalents

 

     March 31,
2019
     December 31,
2018
 

Cash and bank accounts

     654,141        111,410  

Savings account

     1,185,956        1,335,774  

Financial investments

     2,821,462        2,174,614  
  

 

 

    

 

 

 
     4,661,559        3,621,798  
  

 

 

    

 

 

 

Financial investments are composed as follows:

 

     March 31,
2019
     December 31,
2018
 

Investment fund

     

Repurchase agreements

     1,091,847        1,179,503  

Bank certificate of deposits—CDB

     637,471        421,087  
  

 

 

    

 

 

 
     1,729,318        1,600,590  
  

 

 

    

 

 

 

Bank investments

     

Repurchase agreements

     103,846        —    

Bank certificate of deposits—CDB

     981,258        571,840  

Other

     7,040        2,184  
  

 

 

    

 

 

 
     1,092,144        574,024  
  

 

 

    

 

 

 
     2,821,462        2,174,614  
  

 

 

    

 

 

 

The Company’s onshore financial investments are remunerated at rates around 100% of the interbank deposit certificate (“CDI”) in March 31, 2019 (100% of CDI in December 31, 2018) 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,
2019
     December 31,
2018
 

Marketable securities

     

Government security(i)

     2,769,792        4,144,797  

Bank certificate of deposit—CDB

     —          58,038  
  

 

 

    

 

 

 
     2,769,792        4,202,835  
  

 

 

    

 

 

 

Restricted cash

     

Investments linked to loans

     42,039        31,254  

Securities pledged as collateral

     84,180        83,870  
  

 

 

    

 

 

 
     126,219        115,124  
  

 

 

    

 

 

 

 

(i)

Government securities have stated interest connected to Special System for Settlement and Custody (Sistema Especial de Liquidação e de Custódia), or “SELIC”.

 

 

F-24


Cosan Limited

Notes to the interim consolidated financial statements

(In thousands of Brazilian Reais - R$, unless otherwise stated)

 

 

5.3 Trade receivables

 

     March 31,
2019
    December 31,
2018
 

Domestic – Brazilian Reais

     1,912,423       1,609,421  

Export – Foreign currency

     101,953       104,355  
  

 

 

   

 

 

 
     2,014,376       1,713,776  

Allowance for doubtful accounts

     (122,070     (125,584
  

 

 

   

 

 

 
     1,892,306       1,588,192  

Current

     1,852,741       1,545,643  
  

 

 

   

 

 

 

Non-current

     39,565       42,549  
  

 

 

   

 

 

 

5.4 Related parties

 

a)

Receivables from and payables to related parties

 

     March 31,
2019
     December 31,
2018
 

Current Asset

     

Corporate operation / Agreements

     

Raízen Energia S.A.(i)

     41,399        38,205  

Aguassanta Participações S.A.

     92        29  

Raízen Combustíveis S.A.(i)

     7,821        6,263  

Other

     —          183  
  

 

 

    

 

 

 
     49,312        44,680  
  

 

 

    

 

 

 

Non-current assets

     

Comercial operations

     

Raízen Combustíveis S.A. (i)

     28,899        27,523  
  

 

 

    

 

 

 
     28,899        27,523  
  

 

 

    

 

 

 

Preferred shares

     

Raízen Energia S.A.(i)

     37,592        37,470  
  

 

 

    

 

 

 
     37,592        37,470  
  

 

 

    

 

 

 

Financial operations

     

Rezende Barbosa(ii)

     21,144        23,144  

Other

     150        2,253  
  

 

 

    

 

 

 
     21,294        25,397  
  

 

 

    

 

 

 
     87,785        90,390  
  

 

 

    

 

 

 

 

 

F-25


Cosan Limited

Notes to the interim consolidated financial statements

(In thousands of Brazilian Reais - R$, unless otherwise stated)

 

 

     March 31,
2019
     December 31,
2018
 

Current liabilities

     

Corporate operations / agreements

     

Raízen Energia S.A.(i)

     229,272        215,582  

Raízen Combustíveis S.A.(i)

     149,579        136,779  

Other

     765        3,610  
  

 

 

    

 

 

 
     379,616        355,971  
  

 

 

    

 

 

 

 

(i)

Current and non-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.

(ii)

The Company has receivables with Rezende Barbosa for the repayment of loans taken prior to the acquisition of the subsidiaries in 2009. These receivables are secured by Cosan S.A. shares.

 

b)

Related party transactions

 

     March 31,
2019
    March 31,
2018
 

Product sales

    

Raízen Energia S.A.

     107,803       77,858  

Raízen Combustíveis S.A

     49,785       38,570  

Other

     3,939       7,439  
  

 

 

   

 

 

 
     161,527       123,867  

Purchase of goods / inputs

    

Raízen Energia S.A.

     (197     (14

Raízen Combustíveis S.A

     (278,333     (252,505
  

 

 

   

 

 

 
     (278,530     (252,519

Shared income (expense)

    

Raízen Energia S.A.

     (19,034     (18,525
  

 

 

   

 

 

 
     (19,034     (18,525

Financial result

    

Raízen Energia S.A.

     1,368       2,051  

Other

     (71     (59
  

 

 

   

 

 

 
     1,297       1,992  

 

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,
2019
     March 31,
2018
 

Short-term benefits to officers and directors

     23,273        16,149  

Post-employment benefits

     169        71  

Other long-term benefits

     —          35  

Stock option expense

     2,534        12,404  
  

 

 

    

 

 

 
     25,976        28,659  

 

F-26


Cosan Limited

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,
2019
     December 31,
2018
     Maturity      Objective  

With guarantee

                 

BNDES

     URTJLP        9.29%        2,616,967        2,584,347        Dec-29        Expansion project  
     Fixed        5.33%        999,081        1,055,281        Feb-25        Expansion project  
     TJ462        9.92%        274,476        316,854        Oct-20        Investment  
     Selic        8.32%        133,784        152,562        Oct-20        Investment  
     Selic        8.49%        61,220        63,852        Jun-23        Investment  
     TJLP        9.11%        102,039        107,731        Jun-23        Investment  
     Selic        13.65%        2,646        3,930        Sep-20        Expansion project  
     Fixed        4.75%        5,290        2,261        Jan-24        Expansion project  
     IPCA        11.91%        2,278        2,211        Nov-21        Expansion project  

Export credit agreement (ECA)

     Euribor + 0.58%        0.58%        72,253        —          Sep-26        Investment  

EIB

     U.S.$        3.88%        91,105        89,003        Jun-20        Investment  
     U.S.$        2.94%        42,769        54,508        Sep-20        Investment  
     U.S.$ + LIBOR        3.43%        116,642        115,581        May-21        Investment  
     U.S.$ + LIBOR        3.29%        108,462        130,402        Sep-21        Investment  

FINEP

     Fixed        5.00%        93,357        93,309        Nov-22        Investment  
        

 

 

    

 

 

       
           4,722,369        4,771,832        
        

 

 

    

 

 

       

Without guarantee

                 

Foreign loans

     GBP + Libor        4.22%        378,696        363,250        Dec-22        Acquisition  
     GBP + Libor        2.47%        219,760        199,794        Nov-20        Acquisition  
     126% of CDI        8.13%        —          514,817        Dec-23        Exportation  
     CDI + 0.80%        7.25%        497,925        —          Dec-23        Exportation  
     125% of CDI        8.06%        —          646,024        Dec-23        Exportation  

Perpetual Notes

     U.S.$        8.25%        1,972,907        1,961,819        Nov-40        Acquisition  

Resolution 4131

     U.S.$        4.79%        40,438        39,738        Oct-20        Working capital  
     U.S.$ + Libor        3.79%        157,847        156,387        Feb-20        Working capital  
     U.S.$        3.67%        298,988        292,172        May-23        Working capital  
     U.S.$        4.34%        41,184        41,033        Dec-20        Working capital  
     U.S.$        3.43%        210,627        209,987        Nov-22        Working capital  

Senior Notes Due 2023

     U.S.$        5.00%        410,958        409,590        Mar-23        Acquisition  

Senior Notes Due 2027

     U.S.$        7.00%        2,985,388        2,977,721        Jan-27        Acquisition  

Senior Notes Due 2024

     U.S.$        7.38%        3,067,536        3,061,566        Feb-24        Acquisition  

Senior Notes Due 2024

     U.S.$        5.95%        2,025,299        2,022,793        Sep-24        Acquisition  

Senior Notes Due 2025

     U.S.$        5.88%        2,011,579        1,997,394        Jan-25        Acquisition  

Commercial banks

     Fixed U.S.$        5.33%        7,793        15,499        Jun-19        Working capital  

Working capital

     120.25% of CDI        7.74%        31,389        30,828        Aug-20        Working capital  
     124.60% of CDI        8.04%        15,125        —          Feb-20        Working capital  
     125% of CDI        8.06%        5,114        5,018        Dec-19        Working capital  
     122% of CDI        7.86%        —          15,402        Feb-19        Working capital  

Prepayment

     U.S.$+Libor        4.10%        7,869        11,706        Apr-19        Working capital  

Debentures

     IGPM + 6,10%        11.64%        233,449        228,010        May-28        Working capital  
     IPCA + 5.57%        9.68%        208,376        203,613        Sep-20        Working capital  
     IPCA + 7.14%        11.31%        314,849        305,894        Dec-20        Working capital  
     IPCA + 7.48%        11.66%        283,281        275,014        Dec-22        Working capital  
     IPCA + 7.36%        11.54%        93,355        90,656        Dec-25        Working capital  
     IPCA + 5.87%        9.99%        797,528        767,638        Dec-23        Working capital  
     IPCA + 4.33%        8.39%        424,084        414,583        Oct-24        Working capital  
     IPCA + 4.68%        8.75%        512,798        —          Feb-26        Working capital  
     IPCA + 4.50%        8.57%        595,574        —          Feb-29        Working capital  
     106 % of CDI        6.80%        1,700,956        —          Feb-21        Acquisition  
     128 % of CDI        8.26%        —          501,064        Dec-25        Working capital  
     CDI + 0.90%        7.36%        42,759        43,471        Sep-19        Working capital  
        

 

 

    

 

 

       
           19,593,431        17,802,481        
        

 

 

    

 

 

       

Total

           24,315,800        22,574,313        
        

 

 

    

 

 

       

Current

           2,670,584        2,115,305        
        

 

 

    

 

 

       

Non-current

           21,645,216        20,459,008        
        

 

 

    

 

 

       

 

F-27


Cosan Limited

Notes to the interim consolidated financial statements

(In thousands of Brazilian Reais - R$, unless otherwise stated)

 

 

Non-current borrowings are scheduled to fall due as follows:

 

     March 31,
2019
     December 31,
2018
 

13 to 24 months

     2,936,091        2,113,502  

25 to 36 months

     1,191,420        1,310,790  

37 to 48 months

     1,440,957        1,201,227  

49 to 60 months

     4,751,565        2,429,146  

61 to 72 months

     4,917,816        5,783,465  

73 to 84 months

     346,164        2,332,961  

85 to 96 months

     3,331,725        475,964  

Thereafter

     2,729,478        4,811,953  
  

 

 

    

 

 

 
     21,645,216        20,459,008  
  

 

 

    

 

 

 

The carrying amounts of loans, borrowings and debentures are denominated in the following currencies:

 

     March 31,
2019
     December 31,
2018
 

Reais (R$)

     10,047,700        8,424,373  

Dollar (U.S.$)

     13,597,391        13,586,897  

Pound (GBP)

     598,456        563,043  

Euro (€)

     72,253        —    
  

 

 

    

 

 

 
     24,315,800        22,574,313  
  

 

 

    

 

 

 

At March 31, 2019, all dated debts denominated in U.S. Dollars, in the subsidiaries, have currency risk protection through derivatives (Note 5.9). For the 5th Issuance of debentures denominated in R$ of the Comgás subsidiary, a derivative operation was carried out in which its future cash flow was protected, and the IPCA interest rate risk was changed by percentage of the CDI.

Below are the movements that occurred for the period ended March 31, 2019:

 

At December 31, 2018

     22,574,313  

Raised

     3,027,460  

Repayment of principal on loans, borrowings and debentures

     (1,469,202

Payment of interest on loans, borrowings and debentures

     (468,768

Interest, exchange rate and fair value

     651,997  
  

 

 

 

At March 31, 2019

     24,315,800  
  

 

 

 

 

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, 2019, the balance of bank guarantees contracted was R$1,134,519 and R$2,327,308 with an average cost of 0.97% p.a. and 2.32% p.a., respectively (R$1,195,048 and R$2,475,175 as of December 31, 2018).

 

F-28


Cosan Limited

Notes to the interim consolidated financial statements

(In thousands of Brazilian Reais - R$, unless otherwise stated)

 

 

 

b)

Available credit line

As of March 31, 2019, the subsidiary Rumo had available credit lines from BNDES, which were not used, in the total amount of R$1,935,490 (R$ 2,108,824 on December 31, 2018).

As of March 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$501,000 (R$ 501,000 on December 31, 2018).

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 is required to comply with the following financial covenants:

 

Debit

  

Triggers

   Ratios  

Debenture 3rd issue – Comgás

  

Net onerous debt / EBITDA can not exceed 4.00

     0.71  
  

Short-term indebtedness / Total indebtedness can not exceed 0.6

     0.17  

Debenture 4th issue—Comgás

  

Net onerous debt / EBITDA can not exceed 4.00

     0.71  
  

Short-term indebtedness / Total indebtedness can not exceed 0.6

     0.17  

Debenture 5th issue—Comgás

  

Net onerous debt / EBITDA can not exceed 4.00

     0.71  

Debenture 6th issue—Comgás

  

Net onerous debt / EBITDA can not exceed 4.00

     0.71  

Debenture 7th Issue—Comgás

  

Net onerous debt / EBITDA can not exceed 4.00

     0.71  

Debenture 2nd issue—Cosan

  

Net debt / EBITDA not higher than or equal to 4.5

     2.2  

Senior Notes Due 2024 – Cosan Limited

  

Pro forma(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 4.0

     2.2  

Senior Notes Due 2025—Rumo

  

Net debt / EBITDA not higher than or equal to 4.0

     2.2  

Senior Notes Due 2027(ii) Cosan

  

Pro forma(i) / EBITDA not higher than or equal to 3.5

     2.1  

BNDES – Rumo

  

Net Financial Debt / EBITDA not higher than or equal 4.0x in December 2018

     2.06  

BNDES—Rumo

  

EBITDA / Consolidated Financial Result higher than or equal 1.40x in December 2018

     2.68  

 

(i)

Included joint ventures.

(ii)

The effects of initial recognition of IFRS 16 are not part of triggers measures for financial covenants purposes.

For the other loans, borrowings and debentures of the Company there are no financial clauses.

As at March 31, 2019, the Company and its subsidiaries were in compliance with all debt financial covenants.

 

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.

 

F-29


Cosan Limited

Notes to the interim consolidated financial statements

(In thousands of Brazilian Reais - R$, unless otherwise stated)

 

 

 

5.6

Leases

Leases liabilities are payable as follows:

 

     March 31, 2019     December 31,
2018
 
     Less than
one year
    Between
one and
five years
    More than
five years
    Total     Total  

Future value of minimum payments lease

     455,096       1,500,584       1,084,315       3,039,995       764,428  

Rolling stock

     154,356       359,995       101,418       615,769       600,142  

Concession

     231,980       924,516       845,490       2,001,986       161,085  

Land, buildings and improvements

     46,231       161,464       95,595       303,290       —    

Machinery, equipment and facilities

     3,019       6,155       —         9,174       —    

Software

     10,492       41,955       41,812       94,259       —    

Other

     9,018       6,499       —         15,517       3,201  

Interest

     (172,207     (472,062     (171,017     (815,286     (211,078

Rolling stock

     (45,258     (99,197     (16,668     (161,123     (159,648

Concession

     (104,145     (310,562     (134,928     (549,635     (51,143

Land, buildings and improvements

     (16,917     (47,818     (13,625     (78,360     —    

Machinery, equipment and facilities

     (636     (827     —         (1,463     —    

Software

     (4,447     (13,441     (5,796     (23,684     —    

Other

     (804     (217     —         (1,021     (287
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Present value of minimum lease payments

     282,889       1,028,522       913,298       2,224,709       553,350  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Current

           283,452       120,491  
        

 

 

   

 

 

 

Non-current

           1,941,257       432,859  
        

 

 

   

 

 

 

The lease agreements have varying expirations, with last due to expire in June 2043. The amounts are adjusted annually for inflation rates (as general market price index—IGP-M or Brazilian consumer price index—IPCA) or may incur interest based on the TJLP or CDI and some contracts have renewal or purchase options.

Below are the movements that occurred for the period ended March 31, 2019:

 

     March 31,
2019
 

At the beginning of the period

     553,350  

Initial recognition of IFRS 16

     1,715,061  

Recognition of interest

     54,290  

Payment of principal

     (58,075

Payment of interest

     (39,917
  

 

 

 

At the end of the period

     2,224,709  
  

 

 

 

 

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,
2019
     December 31,
2018
 

Natural gas suppliers

     854,288        838,105  

Materials and service suppliers

     1,118,088        1,073,227  

Other

     12,590        12,588  
  

 

 

    

 

 

 
     1,984,966      1,923,920  
  

 

 

    

 

 

 

 

F-30


Cosan Limited

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,
2019
     December 31,
2018
     March 31,
2019
    December 31,
2018
 

Exchange rate derivatives

          

Forward agreements

     501,670        907,832        10,431       1,719  

Interest rate and exchange rate risk

          

Swap agreements (interest rate)

     2,804,503        2,114,926        437,039       394,497  

Swap agreements (exchange and interest rate)

     12,300,892        11,896,908        2,299,682       2,126,927  
  

 

 

    

 

 

    

 

 

   

 

 

 
     15,105,395        14,011,834        2,736,721       2,521,424  

Total financial instruments

 

     2,747,152       2,523,143  
  

 

 

   

 

 

 

Assets

           2,769,460       2,548,857  
        

 

 

   

 

 

 

Liabilities

           (22,308     (25,714
        

 

 

   

 

 

 

Derivatives are only used for economic hedging purposes and not as speculative investments.

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. Operations and accounting effects of this adoption are as follows:

 

     Debt(i)     Derivative(ii)      Total  

At December 31, 2018

     (8,464,516     1,344,589        (7,119,927

Interest amortization

     232,392       11,675        244,067  

Fair value

     (273,969     150,511        (123,458
  

 

 

   

 

 

    

 

 

 

At March 31, 2019

     (8,506,093     1,506,775        (6,999,318
  

 

 

   

 

 

    

 

 

 

 

(i)

Loans, borrowings and debentures (Note 5.5)

(ii)

Derivate financial instruments

 

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,
2019
    December 31,
2018
 

Senior Notes 2023

   Cosan S.A.      99.02     96.86

Senior Notes 2024

   Rumo Luxembourg      106.39     104.27

Senior Notes 2024

   Cosan Limited      101.91     98.55

Senior Notes 2025

   Rumo Luxembourg      100.69     94.94

Senior Notes 2027

   Cosan S.A.      105.45     101.15

Perpetual Notes

   Cosan S.A.      102.42     101.21

 

F-31


Cosan Limited

Notes to the interim consolidated financial statements

(In thousands of Brazilian Reais - R$, unless otherwise stated)

 

 

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.

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, 2019     December 31, 2018  
     Note      March 31,
2019
    December 31,
2018
    Level 2     Level 3     Level 2     Level 3  

Assets

               

Investment funds

     5.1        1,729,318       1,600,590       1,729,318       —         1,600,590       —    

Marketable securities

     5.2        2,769,792       4,202,835       2,769,792       —         4,202,835       —    

Contingent consideration asset (i)

     5.9        128,000       —         —         128,000       —         —    

Derivate financial instruments

     5.8        2,769,460       2,548,857       2,769,460       —         2,548,857       —    
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

        7,396,570       8,352,282       7,268,570       128,000       8,352,282       —    
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities

               

Loans, borrowings and debentures

     5.5        (10,567,128     (12,569,126     (10,567,128     —         (12,569,126     —    

Contingent consideration payable (ii)

     5.9        (72,467     (64,969     —         (72,467     —         (64,969

Derivative financial instruments

     5.8        (22,308     (25,714     (22,308     —         (25,714     —    
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

        (10,661,903     (12,659,809     (10,589,436     (72,467     (12,594,840     (64,969
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(i)

The contingent consideration asset considers the Company ability to reach the Moove budget EBTIDA for the fiscal years of 2018 and 2019. Also, considering that EBTIDA of fiscal year 2018 was reached and the current fiscal year 2019 budget EBTIDA is expect to be reached, we determined the fair value as the fully contingent consideration receivable and recognized it as an asset.

(ii)

The valuation of the contingent consideration payable considers the present value of expected payment, discounted using a risk-adjusted discount rate. The expected payment is determined by considering the probable scenarios of forecast revenue and EBITDA, the amount to be paid under each scenario and the probability of each scenario. The significant unobservable inputs are the forecast of the annual growth rate of revenue, EBITDA margin forecast and the 13% discount rate adjusted for risk.

 

6

Other current tax receivables

 

     March 31,
2019
     December 31,
2018
 

COFINS—Revenue tax

     673,640        646,135  

ICMS—State VAT

     593,012        575,494  

ICMS CIAP—State VAT

     164,539        183,845  

PIS—Revenue tax

     147,476        169,460  

Credit installment

     40,261        40,261  

Other

     39,825        32,496  
  

 

 

    

 

 

 
     1,658,753      1,647,691  

Current

     821,955        796,199  
  

 

 

    

 

 

 

Non-Current

     836,798        851,492  
  

 

 

    

 

 

 

 

7

Inventories

 

     March 31,
2019
     December 31,
2018
 

Finished goods

     406,156        389,896  

Raw material for construction process

     45,513        45,397  

Fuels and lubricants

     6,917        6,224  

Spare parts and accessories

     226,866        224,005  

Warehouse and others

     50,152        50,768  
  

 

 

    

 

 

 
     735,604      716,290  
  

 

 

    

 

 

 

 

F-32


Cosan Limited

Notes to the interim consolidated financial statements

(In thousands of Brazilian Reais - R$, unless otherwise stated)

 

 

8

Investments in associates

 

8.1

Investments in subsidiaries and associates

Cosan’s subsidiaries are listed below:

 

     March 31,
2019
    December 31,
2018
 

Directly owned subsidiaries

    

Cosan Logística S.A.

     72.87     72.50

Cosan S.A.(i)

     60.25     60.25

Interest of Cosan S.A. in its subsidiaries

    

Comgás(ii)

     94.88     80.12

Cosan Lubes Investments Limited

     70.00     100.00

Cosan Biomassa S.A.(i)

     100.00     100.00

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.(i)

     100.00     100.00

Cosan Overseas Limited

     100.00     100.00

Pasadena Empreendimentos e Participações S.A.(i)

     100.00     100.00

Payly Soluções de Pagamentos S.A.

     100.00     100.00

Rumo S.A.

     1.71     1.71

Interest of Cosan Lubes Investments Limited in its subsidiaries

    

Moove Lubricants Limited

     100.00     100.00

Cosan Cinco S.A.

     100.00     100.00

Airport Energy Limited

     100.00     100.00

Airport Energy Services Limited

     100.00     100.00

Wessesx Petroleum Limited

     100.00     100.00

Stanbridge

     100.00     100.00

TTA(iii)

     75.00     75.00

Cosan Lubrificantes S.R.L.(iii)

     100.00     100.00

LubrigrupoII(iii)

     100.00     100.00

Commercial Lubricants Moove Corp(iii)

     100.00     100.00

Cosan Lubrificantes e Especialidades S.A.

     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

Zip Lube S.A.

     100.00     100.00

 

 

F-33


Cosan Limited

Notes to the interim consolidated financial statements

(In thousands of Brazilian Reais - R$, unless otherwise stated)

 

 

     March 31,
2019
    December 31,
2018
 

Interest of Cosan Logística S.A. in its subsidiaries

    

Rumo S.A.

     28.47     28.47

Logispot Armazéns Gerais S.A.

     14.52     14.52

Elevações Portuárias S.A.

     28.47     28.47

Rumo Luxembourg Sarl

     28.47     28.47

Rumo Intermodal 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

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

Brado Logística e Participações S.A.

     17.71     17.71

Brado Logística S.A.

     17.71     17.71

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

 

i.

Management has concluded that there are no material uncertainties that cast doubt on the continuity of the subsidiaries. Although they had a combined amount of uncovered liabilities of R$112,641 as of March 31, 2019, no events or conditions were identified that individually or collectively could raise significant doubts related to their ability to maintain their operational continuity. The subsidiaries have the financial support of the Company.

ii.

On March 8, 2019, Cosan S.A. performed a voluntary tender offer (Voluntary TO) acquiring 19,496,165 Class A preferred shares of its subsidiary Comgás, which represent 14.77% of its share capital. See detail of transaction below.

iii.

On March 29, 2019, Cosan S.A. conclude the investment agreement between Cosan Lubes and CVC Fund VII, which represent 30% of its share capital. See detail of transaction below.

Set out below are the associates as at March 31, 2019 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.

     81,440,221        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.

     207,712,545        105,461,644        50.77     5.00

Novvi Limited Liability Company

     1,011,000        202,200        17.82     17.82

 

 

F-34


Cosan Limited

Notes to the interim consolidated financial statements

(In thousands of Brazilian Reais - R$, unless otherwise stated)

 

 

     At
January 1,
2019
     Interest in
earnings
(losses) of
subsidiaries
    Other
comprehensive
income (losses)
     Increase/
reduction
of capital
     Other     At
March 31,
2019
     Interest
in earnings
(losses) of
associates in
March 31,
2018
 

Tellus Brasil Participações S.A.

     101,109        717       —          —          —         101,826        716  

Novvi Limited Liability Company

     13,449        1,826       124        —          —         15,399        (5,008

Janus Brasil Participações S.A.

     93,821        (163     —          26,045        —         119,703        933  

Radar Propriedades Agrícolas S.A

     59,584        263       9        —          —         59,856        329  

Radar II Propriedades Agrícolas S.A

     32,236        175       2        —          —         32,413        245  

Usina Santa Luiza S.A.

     29,209        (29,209     —          —          —         —          (1,411

Other

     49,111        (407     —          —          (4,044     44,660        1,389  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
     378,519        (26,798     135        26,045        (4,044     373,857        (2,807
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

8.2

Non-controlling interests in subsidiaries

Set out below is summarized financial information for each subsidiary that has non-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
 

Comgás

     132,023,251        26,243,394        19.88

Logispot

     2,040,816        1,000,000        49.00

Rumo

     1,559,015,898        1,088,431,798        69.82

Brado Participações

     12,962,963        4,897,407        37.78

Rumo Malha Norte

     1,189,412,363        5,709,179        0.48

Cosan Lubes Investment

     34,963,764        10,489,129        30.00

Cosan S.A.

     398,904,353        156,000,696        39.11

Cosan Logística S.A.

     463,224,241        125,570,897        27.11

 

F-35


Cosan Limited

Notes to the interim consolidated financial statements

(In thousands of Brazilian Reais - R$, unless otherwise stated)

 

 

The following table summarizes the information relating to each of the Company’s subsidiaries that has material non-controlling interests, before any intra-group elimination.

 

     At
January 1,
2019
     Interest in
earnings
(losses) of
subsidiaries
     Sales or
purchase
of interests
    Other
comprehensive
income (losses)
    Dividends     New standards
adopted by
Company-Note 3.1
    Other      At
March 31,
2019
     Interest
in earnings
(losses) of
associates in
March 31,
2018
 

Cosan S.A.

     3,765,964        148,073        (277,325     (73,228     —         —         956        3,564,458        143,862  

Cosan Logística S.A.

     630,333        1,841        (8,053     24       —         (41,670     174        582,631       <