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According to a survey by the Sugarcane Industry Union (UNICA), the Central-South region of Brazil ended the last crushing period of the 2018/2019 crop year with a total of 562 million tons of processed sugarcane and 78 million tons of sugar equivalent produced. The long drought in the middle of the year and the high temperatures reduced the agricultural yield of sugarcane, affecting the availability of the product.

The lower percentage of sugarcane for the production of—as well as the decline in prices of this input—results from an increase in international stocks given the record production in Asian countries. On the other hand, there was an increase in the percentage of sugarcane geared to the production of ethanol, a movement stimulated by the appreciation of the US dollar and the rise in oil prices, coupled with Petrobras's price readjustment policy.

Sales of fuels in the Brazilian market—according to the National Agency of Petroleum, Natural Gas and Biofuels (ANP - Agência Nacional do Petróleo, Gás Natural e Biocombustíveis)—totaled 136 billion liters in 2018, the baseline year for data consolidation. The highlight is the 42.1% increase in sales of hydrous ethanol, which was 13.642 billion liters in 2017 and increased to 19.385 billion liters in 2018. Gasoline, in turn, had a reduction in volume sold, down 13.1% over 2017, going from 44.150 billion liters to 38.352 billion liters. Anhydrous ethanol (mixed with gasoline) had a similar drop.

There was also a 7.6% increase in sales of aviation kerosene (QAV)—from 6.637 billion liters in 2017 to 7.144 billion liters in 2018—due to the recovery of the aviation sector; and a 1.4% increase in sales of diesel oil B over the same period, a result of the economic recovery, with the main indications being the increased sales of new vehicles (buses and trucks) and the sale of agricultural machinery.

Financial results

|GRI 102-7, 103-2, 103-3|

In 2018/2019, we recorded 59.7 million tons of crushed sugarcane, down 2% compared with the previous crop year (61.2 million tons). Drier weather impacted productivity, measured by the combination of TRS (Total Recoverable Sugar—per ton of crushed sugarcane in kilograms) and TSH (Tons of Sugarcane harvested per Hectare), which was 9.1 tons of TRS/hectare, down 7% compared with the previous crop year. Even so, the production of sugar equivalent was 1% higher than that obtained in 2017/2018, reflecting higher industrial efficiency.

In fuels, the crop year was also challenging, especially as a result of the truck drivers' strike and the high volatility of international prices. Further efforts were required to optimize the supply and marketing strategy, focusing on the sustainable relationship with the dealer network.

Raízen Energia

Adjusted net income reached BRL 22.4 billion, up 45% over the previous crop year due to the consolidation of the results of the energy trader WX, as of August 2018, and of the trading operations of byproducts.

Sugar sales totaled BRL 3,865.7 million, down 37.3% compared with 2017/2018. Total ethanol sales in the same ratio increased by 22.2%, totaling BRL 9,096.3 million. Sales of cogenerated energy, in turn, amounted to BRL 3,463.5 million (up 263.7%).

Adjusted EBITDA was BRL 2.9 billion, down 29.4% over 2017/2018, reflecting the lower realized sugar prices and the decrease in volume sold of this commodity—in line with our production and trading strategy for the harvest.

Cost of goods sold was BRL 20.7 billion, up 66% mainly due to the higher volume of trading of electricity and other products. Unit cost of own products sold9 was BRL 678/ton, impacted by the higher diesel cost, lower sugarcane productivity and inflation on costs.

Sales, general and administrative expenses totaled BRL 1.5 billion in 2018/2019, up 1% over the previous crop year due to the higher sales volume of sugar in the fourth quarter.

Investments totaled BRL 2.6 billion in the crop year, up 11%, due to higher expenditures for planting and crop handling.

9 Does not include depreciation and amortization of planting, crop handling, agricultural, industrial and maintenance in the off-season.

Raízen Energia - Value Added Distribution in the crop year |GRI 201-1|

Click here to view the full Value Added Statement for Raízen Energia.

Raízen Combustíveis

In October 2018, Raízen Combustíveis started operations in Argentina. Although the Global Reporting Initiative (GRI) has not yet been considered, due to the short time in operation, the financial result of these assets has been in line with the financial statements.

Raízen Combustíveis Brazil

The total volume sold10 in the crop year was 1.5% higher than in 2017/2018. Ethanol sales grew 37.8%, followed by jet fuel (9.2%) and diesel (3.7%)—which offset the reduction in sales of gasoline (-14.9%).

Net operating revenue reached BRL 20 billion in the year, a 3% increase due to higher sales volume and higher average price of products—affected by international fuel prices and foreign exchange rate.

Adjusted EBITDA was BRL 2.8 billion, down 8% over the previous crop year, impacted mainly by rising fuel prices in the international market and by the truck drivers' strike—in the first half of the crop year.

10 Does not include sales to other distributors according to Plural methodology.

Raízen Combustíveis Argentina

The economic instability, marked by the depreciation of the Argentine peso against the US dollar and by the high interest rates, directly affected demand for fuel, which ended the year with a 2% reduction in gasoline volumes. In this context—considering the period between October 2018 and March 2019 alone— Raízen Argentina recorded the following results:

Total volume processed was 88,000 barrels/day, with an 81% refinery utilization factor. The operation was affected by a scheduled shutdown at one of the refining plants.

Net revenue was USD 830 million, negatively impacted by the lower volume and average sales prices of the main products, partially offset by higher volume in the aviation segment.

EBITDA for the operations of refining and distribution of fuels and other byproducts was USD 83.5 million.

Raízen Combustíveis Total

Raízen Combustíveis's operations in Brazil and Argentina recorded a consolidated net income of BRL 1,708 million. Efforts to capture mapped synergies between the operations in both countries are underway, with an expected gain of approximately USD 50 million.

Raízen Combustíveis - Added Value Distribution in the crop year |GRI 201-1|

Click here to view the full Value Added Statement for Raízen Combustíveis.

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