Sao Martinho SA
BOVESPA:SMTO3
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Sao Martinho SA
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Good afternoon, ladies and gentlemen, and thank you for waiting. Welcome to São Martinho S.A. conference call to discuss the results of the fourth quarter of the 2018/'19 harvest.
Today with us, we have Mr. Felipe Vicchiato, CFO and Investor Relations Officer; and Mrs. Aline Reigada, Investor Relations Manager of São Martinho. The audio and the slides of this call are being broadcast simultaneously at saomartinho.com.br/IR. [Operator Instructions]
We would like to inform you that some remarks made during this call may constitute forward-looking statements. And as such, they are subject to known and unknown risks and uncertainties that could cause the company's actual results to differ materially from those expressed in these forward-looking statements.
Now we will turn the floor over to Mr. Felipe Vicchiato, who will start the call. Thank you.
Good afternoon, everyone, and thank you very much for participating in São Martinho's call about the fourth quarter results and the fiscal year of the '18/'19 crop year.
Let's go straight to Slide #3, where we have the agenda for today, the themes that I would like to touch upon. First, we will talk about the financial highlights for the year; then the margin by product, sugar and ethanol, explaining the cash cost for the full year; indebtedness; and the material information that we issued yesterday regarding the expectation for production of the '19/'20 crop year; the hedge position; ethanol market, looking ahead; the CapEx projects that we carried out in the last crop year and that we expect for this crop year; and ending with dividend and share buyback, material effect.
On Page #4, we have the financial highlights for the quarter. Our net revenue was practically stable, something close to BRL 1.1 billion, 0.6% change, and coming from an increase in the volume of ethanol sales, with an average price 7.7% lower than the same quarter last year, differently from the last year. This was an intercrop which was very difficult, very volatile in terms of ethanol prices.
In January, the price of ethanol dropped by 20% vis-à-vis the December close, which was not a reasonable price. In February, 25%; March, 20% drop. As you all know, São Martinho has an ethanol volume of about 45% of the overall production in inventories to be sold, and we followed the ESALQ prices, at the average of ESALQ, more or less. This was the main impact in the quarter from the viewpoint of margin loss because, first, we believe that the ethanol prices would be higher, even higher than the last crop year given the price of oil and the strong volume of ethanol that we will sell-in during the full year, and we will be talking a little bit about that in terms of sales volumes on the next few slides.
Besides ethanol, we sold 11% less sugar in the quarter, coming from the lower production of sugar in the crop year due to the change in mix, with an average price of about 8% lower than the same -- on a year-on-year basis. And the EBITDA drop, 13%; EBITDA margin -- adjusted EBITDA, 45% at the close; and earnings before income tax going from BRL 192 million, that was a record in the last crop, to BRL 87 million. And the positive fact in this quarter was the recognition of the first installment of the precatory of IAA. And we recognized BRL 106.5 million in other operating revenues, which is a Copersucar credit as Copersucar won the lawsuit, and there is an explanatory note with all the details in the release and the explanatory notes as well. And for the next 6 years, we expect that, on an annual basis, we will have about BRL 350 million in gross volume that we will be putting under other operating revenues, given the payment of this precatory [indiscernible], and basically due to the drop in the EBITDA when we compare on a year-on-year basis.
For the full year, the drop of the EBITDA -- adjusted EBITDA, was 15.7%, mainly due to the lower prices of sugar in the year on a year-on-year comparison and the flat volume of average prices of ethanol.
On the next page, we have the comparison of margins for product, 12 months of '18 [ comparing ] 12 months of '19. In the financial statement, we explained in detail the cost of -- the cash cost at the company, both for sugar and for ethanol. And the cash cost is our EBITDA cost less all the maintenance CapEx for the crop, which involves planting and treatment and the maintenance in the intercrop. And the cash cost of sugar went up from BRL 922 per ton to BRL 953 per ton, 3.3% increase only. Nevertheless, as the average price dropped by 14.8%, as you can see on Page 5, there was a variation in the margin of 15 percentage points for sugar.
I would like to remind you that last year, if you break down the average price of BRL 1,290 per ton between our own cane and third-party cane, you have the average price of owned cane of BRL 1,400, and the third-party cane, lower than BRL 1,200 per ton. At that time, we had a very major volume of hedge for sugar and ethanol at a very interesting price, and this is one of the explanations why we have such a drop in margin when you compare year-on-year ethanol. The cost of ethanol went up from BRL 1,398 per cubic meter to BRL 1,489 per cubic meter, 6.5% increase year-on-year. And the average price went up only 1.4%, BRL 1,729 going to BRL 1,753 per cubic meter. Ethanol, beside the intercrop issue, that was typical from the price viewpoint.
The premium of anhydrous in the last crop was about 2% lower than the premium of anhydrous in the '17/'18 crop year, and this also had an impact on the anhydrous price, and this is reported for São Martinho. Regarding the 6.5% increase in cost in the case of ethanol, the main reason for this increase higher than sugar was a matter of comparison because in the last crop year, most of the ethanol [ was ] production, while the percentage of 45% was Boa Vista. But now as the mix in São Paulo -- now the percentage dropped in Boa Vista, going to 65% in São Paulo of ethanol sales and 35% from Boa Vista, and as Boa Vista has a lower production cost than the average of the São Paulo mills. When you compare year-on-year, you see an increase in the cost of ethanol because the sales of ethanol have a higher cost than the Boa Vista.
And the point here is not the increase of the cost of ethanol. It is a comparison between different mills as -- because of the mix model, and we also had a reduction of fiscal benefits of Reintegra. It was 3% in the last crop year, and there was a reduction in cost in the production of sugar because of that.
And the '18/'19, Reintegra was practically 0, and this has an impact of about BRL 20 million in the cost of sugar production. And in spite of all these impacts, the shortfall and the lower benefit of Reintegra and inflation, 3% to 4%, despite of all that, we were able to have a lower increase in costs than the inflationary impact that I have just mentioned for the next year as we have this higher operating leverage, and we will be talking about that when we talk about our guidance. And because of that, we expect these costs to be maintained and not go up on a year-over-year comparison.
Going to Page 6. We talk about our indebtedness. We closed March '19 with net debt to BRL 2.4 billion, a net debt-to-EBITDA of 1.46x, 15% increase, basically because the EBITDA for the full year dropped, and this is still a very comfortable level from the net debt-to-EBITDA viewpoint. And if you look at the indicator of the market, that the market compares this net debt per ton, we are talking about something about close to BRL 100 per ton of net debt, and this is quite profitable, and this gives us room to continue with our shareholders' remuneration program.
From the liquidity viewpoint, we closed the year with almost BRL 2.1 billion cash. And I would like to stress that this cash, we only had half of the CRA settled, BRL 400 million in the total of BRL 800 million, and the remaining BRL 400 million came in [ acres ], so this should go to BRL 2.4 billion after the CRA is liquidated from the debt amortization schedule. It is quite long, 3 years of indebtedness. 60% is in reais and most of our debt in reais is in [ CDI ], and 32% in foreign currency. And the investment schedule, as you can see as of 24 months -- as you can see on Chart #4 in this table that you can see in green.
And now going to Page #7. We talk about the material fact that we issued yesterday and the guidance for '19, '20. We expect to process approximately 22 million tons of sugarcane in this quarter, 8% increase on a year-on-year basis with the TRS, 2% lower than the previous crop year. In the combined [ session ], we have something close to 6% increase in products. If we compare year-on-year investment that the company has been making [ in the year ], this ends up in a more normal situation that we had in the last crop year because we had a very long dry season last year, and have reached 74% to 75 tons per hectare in fields, which is much lower than our expectations and much lower than what we expect to achieve in the next few years.
For this year, our guidance for production of sugar and ethanol is within the range, the maximum and the minimum, and São Martinho will be deciding during the year which product it will be producing depending on the profitability coming from the product in the current situation. What I can tell you is that the price of ethanol in the first few months of the harvest in April and May was very interesting. São Martinho produced a lot of ethanol and sold ethanol as well in this beginning of harvest and thus, reducing our exposure to ethanol prices right from the start, which decreases our risk in terms for the full crop year as ethanol is a product that doesn't have a perfect hedge such as in the case of sugar.
And depending on the price dynamics for ethanol, oil, sugar, on a weekly basis, we will be deciding the mix. And we decided to give the range, and this is strategic from the commercial viewpoint just to sell the products at the best moment and not telling beforehand everybody what is the volume of inventory that we will be selling in this or that quarter.
And on Page #8, we have our hedge position for sugar and for dollar. For the '19/'20 harvest on March 31, we had the equivalent to 68% of own sugarcane hedged, and sugar close to BRL 1,190. And looking at the bottom of the range or at the minimum price of sugar, one [ site ] will be increasing the production of sugar should the price be acceptable then in the next few months. So this is the reason why we are putting around 68% of own sugarcane hedged, which is the minimum that I must do in order to comply with our contracts with our clients.
On the next slide, we have a summary of the ethanol market, and I have already said a few words about the dynamic for last year and what we expect for this year. But in summary, we saw an increase in the consumption of ethanol of about 20%, 18% year-on-year; 42% increase in hydrous ethanol consumption. And in spite of this increase in consumption, the parity at the pump was much lower than '17/'18, and you can see on this chart, mainly in the intercrop because it was 65% parity in March, for instance.
So this was one of the main reasons why the average price in the last quarter was hindered. And if you look at the last couple of months, that is to say April and May, year-on-year, we already see an increase of about 3% at the average price of ethanol. And as I said before, the production of São Martinho since April and May as well was fully shifted to ethanol and sold at this very attractive price. Our view is that ethanol production will remain the same or lower than it was in the last harvest, given the volume of sugarcane, we're not going to be going up in Brazil, and even with corn offsetting this a little bit, but it will depend on the prices of gasoline at the pump, to a great extent.
On the next slide, we talk about our projects, what we had in the last harvest and what we expect for this year. In the last 6 months of harvest, many interesting projects came into the pipeline and they were approved internally in order to reap the benefits in 3 years' time with an average return of 28%. And COA at the São Martinho unit starts this year, and we are rolling out the project to the other units in the next couple of years. And there was Furlan and we published the material fact. And Meiosis and PSS, we already have part of that in this intercrop period, and another project in which you improve the yield of your sugarcane plantation and you reduce the dependence or reliance on fertilizers because the prices are going up steeply in the market given the scarcity of the product worldwide, and also the devaluation in the exchange rate, and that has a direct impact on fertilizers.
So the company looked inside and decided to have a project underway with a fast return, 28%, even if you include the [ ENR ], and there's no financial return, but we have to do it for security reasons or safety reasons. And the major projects of the company from the decisions viewpoint, we addressed these in the last half year.
For the next year, [ net ] of corn ethanol, that we announced recently a protocol of intent. We have something close to BRL 80 million to be invested in the '19/'20 harvest. And basically, this is a combination, as I said, of the COA rollouts to the other units and also the Meiosis and the [ SSD ] and payback of 4 years in the other projects. And Boa Vista only produces ethanol, with the volume of yeast -- the potential to produce yeast in this unit is quite high. And we were able to sign a contract with a client last year, a long-term contract for many, many years, and this project was approved. And we have to remove even small bottlenecks in order to extract more sugar and ethanol in the industrial product, 30% average IRR. And the corn ethanol that we announced, it has not been approved by the Board yet. There was a protocol of intent that we signed with the state of Goiás. Should it be approved by the Board, it should be around September, October, BRL 350 million project, and the disbursement would be in the next [ 13 ] months.
And [ year-to-date ], together with the material information, while we disclosed the share buyback of 10 million shares to be realized in the next 18 months, and we believe that the buyback of our shares is one of the most profitable projects that we may have given the size that the company is to date and the IAA credit, which is a hidden value, and our potential improvement in ROIC once we reach the capacity of 24 million tons of sugarcane being crushed. And just to give you an idea, our ROIC reported was about 9%. And if I had crushed 34,000 more field by hectare, it would be around -- ROIC would be around 16%. So to start a share buyback today is one of the most obvious ways for us to go ahead.
And we lost the sound. Please stand by. We are waiting for the sound.
[Technical Difficulty]
There was a problem with the connection, so we are repairing this right now, and please stand by.
Okay. We're back. There was a problem, a technical problem, and I was about to finalize as I was talking about the share buyback. But anyway, we can open for questions now and thank you very much.
We have Antonio Barreto from Itau.
My first question has to do with corn ethanol. Could you give us some more details about the project? What you intend to do? And what are the competitive advantages that you see in this? And is there any tax benefits as well? Or a better utilization of your assets in terms of tankage? Or is there an advantage for you to split this with sugar ethanol? So could you explain?
And I have a second question. Looking at your projects, your investments are very clear as well as the IRR. And talking about 2021, what will be the impact regarding maintenance CapEx and cost for TRS?
I'm using my cellular phone as a backup, so let me know if you do understand it.
Well, there are some benefits, the location of Boa Vista, it is close to Rio Verde and we will be buying corn from the Rio Verde region and taking Boa Vista. The technology of this plant today, the technology that can produce 200,000 cubic meters of corn ethanol or 2.5 million tons of sugarcane, approximately CapEx of BRL 350 million, including working capital. So we are going to take advantage of the tankage of ethanol in Boa Vista for this project. Boa Vista, today, has close to 60% tankage in the unit.
And having corn ethanol, we will not have to invest more in tankage because we are going to use the same that we already have today. So this is a major benefit as well. And the 60% is much more for us to have the [ range ] supposing that we have more ethanol in the region. So -- and this is the reason why we do not need to invest in tankage for corn ethanol. And another important advantage of the project is the tax benefit, which is critical for the feasibility of the project. Otherwise, it will not [ take off ] in the Goiás state. We would have an equivalent volume of 700 million tons of sugarcane, and we are requesting an adjustment going from sugarcane ethanol and going to corn ethanol.
It's a small adjustment in our contract, and we believe that this is quite feasible given the expansion of sugarcane will probably not happen. Just to give an idea, to produce the same amount of ethanol, we would need 3x the initial investment because we would have to plant the sugarcane, besides the fact that it takes longer to start the operation because you have to plant the normal cycle of the sugarcane plantation or field. It would be around BRL 30 average price in Rio Verde plus BRL 3 of freight up to Goiás -- up to [indiscernible], not Goiás.
This is more or less where we stand in terms of corn. After the increase in the price of corn that has happened in the last 2 months -- and another thing that I can tell you about competitive advantages regarding corn ethanol is that difference in sugarcane ethanol. If you have a situation in which the price of corn is too high and makes it unfeasible to produce, you can simply not process corn that year and you just halt the plant differently from the sugarcane. As the sugarcane is standing in the field, you have to cut it and you have to process it, so it is a major difference if you consider the return.
Three, 4 years ago, the price of corn was about BRL 50. And in this scenario, the Boa Vista plant would not be working because of the price of corn, and this would be postponed for the next year, trying to buy corn at a more reasonable price. And another advantage is that the Boa Vista plants is integrated, and we are not going to -- and we will use the Boa Vista cogeneration, part of the cogeneration that we sell spot, and we will be using 75,000 megawatt-hour at the ethanol plant, corn ethanol.
If I were to build a plant that would not be close to the sugarcane ethanol plant, I would have to have a boiler, and I would have to look for [ boat ] ships around. And in the case of Boa Vista, we use the same energy that we already sell spot, the spot rates of corn tonnage.
These are the main advantages that we have. [ BRL 50 million ], approximately, are investments in working capital, about 1/4 of the need that we have in terms of supply, which is another important indicator. And this is quite conservative, in fact, because some people operate with a higher exposure with 10% reduction, and we want to be on the safe side, and we chose to have a CapEx that could contemplate this need with the necessary working capital over the years.
And regarding your second question, the internal rate of return that we expect -- anyway, I don't have everything here in my mind, but I can give you a few examples. For instance, COA, C-O-A, we expect to have BRL 2 to BRL 3 per ton in terms of cost reduction over the next 2 years once the project is implemented and running. The use of linseed in Santa Cruz is basically a reduction in the cost line of fertilizer application in cane yield. It goes up 1 to 2 tons per hectare as of the second year, and then you reduce the need to buy fertilizers for these areas.
And afterwards, we can talk about all the KPIs for you to be able to make your projections, but this is more along these lines.
Just a follow-up regarding the first question. I understood very clearly the synergy that you described with Boa Vista, the technology, the use of the asset that you already have in place. Would you consider to build a standalone mill for corn?
Not today, because a standalone corn ethanol mill, I would have to develop in the region. That's why -- first and foremost, the CapEx is higher because you need to place a boiler in order to burn the wood chips. And the great difference from corn to sugarcane is that the price dynamic of corn is completely different from the one of sugarcane. And the sugarcane price dynamics have some relation with the price of ethanol because of Consecana. However, in the case of corn, you don't have this factor, so you have this mismatch, and the company has to pay attention to that. And in case I decide to add an additional risk, which is the supply of wood chips, you have to find eucalyptus in order to burn. That is to say, you have to first plant the eucalyptus and co-generate energy so that the plant could be up and running. So we would not consider the possibility of a standalone corn ethanol mill.
However, we are not shutting this door completely. The difference to the price of corn being the south of Goiás. Mato Grosso for us is a major one, the corn ethanol plant, the standalone ones are located in Eldorado, Mato Grosso, and the price of corn is BRL 20 per bag, 30% difference vis-à-vis the price of corn in Rio Verde.
And maybe these plants may be feasible even with the additional burden of planting the eucalyptus and have the wood chips. But in the future, we might think about it. But the focus today is on this integrated project with the return more or less guaranteed over the cycle.
Thiago Duarte from BTG Pactual.
I have 3 questions. The first one has to do with the mix. I understand the strategic reasons that you mentioned, and you're no longer giving a guidance about the mix. But maybe you could give us some more color so that we may have a look at the sugar hedge of almost 1.2. So if we look at 2020, you're probably able to hedge at a price that's very similar for your own cane, almost 10% higher than the price last year. So I believe that this half year could be more shifted towards sugar than you did last year. So could you give us some guidelines about that qualitatively? How do you see this mix evolving if you take into account the price dynamics of sugar in your hedge and your ethanol prices?
And the second question is a follow-up on Antonio's question about the corn ethanol mill. With all that you said about corn ethanol and the price of corn, around BRL 30, how much do you believe -- considering the same metrics that you used in the other project, how much do you believe the internal rate of return of this project will be?
And the third question has to do with dividend payout for shareholders, dividends plus the buyback program. You're talking about 100% payout over the net income that you reported in the last crop year. So why are you choosing to do 2/3 buyback and 1/3 dividend? I would like to understand, why not more dividend? Why not 100% buyback? So when the company is deleveraging, that is the case, and there is room even to accelerate dividend payout in the next 2 years, how should we consider this proportion? Are you going to keep it at this proportion? Or do you have another rationale as the basis for that for the next few [ series ]?
[Technical Difficulty]
We are waiting for the company to reconnect. Please stand by.
In relation to the mix, it was the gist of your question. What I can tell you is that in the first few months or the first half of June, we did more ethanol because of the price of the product and because the [ interest ] was lower; and in the second part of June, because [ it's ] more on sugar and it improved because we have the full plant and we have contracts to be followed. And we will start the decision in September, in fact, whether we are going more towards sugar or ethanol. BRL 1,200 or BRL 1,250, well, you have to consider the average of the hydrous ethanol. And if the prices are kept at this level, we will probably be producing more sugar for one simple reason because sugar is the commodity that I can hedge, and ethanol, I cannot hedge ethanol. But it will depend on the oil prices as well. I don't know whether I answered your question or not, but around 1.2, 1.25, we will probably go more towards sugar more than in the last harvest. And we already have a considerable volume of sugar hedged in many of the shorter screen -- short-term screen. And now, we will do sugar only if the price is higher than what we said, net of taxes.
And the second question about the corn ethanol, what is the internal rate of return? It's something close to 20% a year. And it is important to remind you that it depends on the price dynamics in the next 2 years. If we consider BRL 30 every single year as the corn price, we will have this IRR. But if, for some reason, at the beginning of the project, corn stays at BRL 35 or BRL 40 for 2 years, the return changes completely. And this is why it's so important for us to have this room. Otherwise, the project would not be feasible at the prices of today, but it is around this -- it is within this range.
And the third question, why 1/3 dividends and 2/3 buyback? São Martinho's price is BRL 19.520 per share. And if you consider BRL 3 per share, which are the precatórios at present value, the precatórios is already issued at present value, then it drops to BRL 17 per share. And in my mind, the company is priced based on the ROIC of the last 2 years, which was quite low because of the yield. And as I said before, as soon as we get to the potential productivity of this company, I will be processing 24 million tons of cane, and the return will go to 16%. If the Board believes this will happen, I believe that the best investment for us will be share buybacks. It's not going to be 30% internal rate of return, but we can do everything because then we can do the projects and the investment [ fee ] that is not so high, and we can do the dividend payout and we can buy back shares. So this is the rationale. This is the reason why we put 1/3, 2/3, okay?
Isabella Simonato, Bank of America.
I have 2 questions. When we think about the cost curve, and crushing will be very important to dilute the fixed part, so how do you see the evolution of your cash cost for the '19/'20 harvest? And also, what about the maintenance CapEx for this next year?
Our estimate is a cash cost for sugar and ethanol to be flat year-on-year. And what if the -- first, you have the Consecana. The prices of sugar are improving and the ethanol prices as well, so we hope either we have an increase because of that. As a second point, as I mentioned, are the fertilizers and crop protection products that we use. And although we approved some projects in order to reduce the amount of fertilizers used at São Martinho, the volume is still high and we have an impact from the fertilizer line and the crop protection line. So the improvement in our operating leverage will be able to offset the increase of Consecana and the increase of fertilizers and crop protection. And year-on-year, this has increased the cash cost year-on-year at the same level approximately. So I have more products to sell once I will be producing 6% more in terms of TRS. Maintenance CapEx for the next crop year, our estimate is to have the amount that we announced already, plus 4% to 5% in [ place ].
Victor Saragiotto from Credit Suisse.
I have 2. The first one has to do with corn, and we were doing some math here. And as corn is very relevant, we were trying to estimate the price of corn that would make this [ close to 0 ]. And in our calculations, it will be BRL 37, BRL 38. And the second point, and maybe this is the reason why it's good for us to calculate the internal rates of return, it is the working capital. And we know that this -- how should we think about the working capital? Are you going to buy most of this corn in the second crop? And what about your capacity to -- are you willing to build silos in order to keep this corn? And could you explain this, please?
Victor, good afternoon. In order to have a NPV 0, what is the calculation that you're doing in order to get to the figure that you mentioned?
We were using 10%.
Okay. In order to give you an NPV, the price would be higher. In our calculation, the price has to be around BRL 42 per bag over the years, constantly, then you have an NPV close to 0. This is one point.
And the second question regarding working capital?
Working capital that we have in the fields is quite relevant. When you set up a mill, you have to invest in the sugarcane, and it's a huge volume, and then you start harvesting for 7 years. And in the case of corn, you buy it during the crop, and the second crop as well. You are correct, [ these are matching ]. We will be buying corn during the second crop and the price is better and our working capital is marginal, and it is more than enough to do that. We buy the second crop, and this would be around BRL 240 million and selling ethanol during the whole crop year, so this is not relevant.
If you compare March to the previous March, it would be about BRL 60 million invested there. But during the crop year, such as in the case of the production of ethanol and sugar, you have a peak of working capital and then it goes down again. Last year, if I'm not mistaken, São Martinho, the group, invested BRL 500 million in working capital and including sugar and ethanol. So this is not going to be much different in terms of corn because we will be buying it during the second crop of corn, but thank you very much.
Fernanda Cunha, Citibank.
It's all about corn. Do you have any estimates for -- including Renovabio, could you clarify this production of corn ethanol in terms of emissions? It's higher than ethanol, so the prices that you will be getting will be lower than when you produce ethanol from sugarcane. And in your view, in case you're not including Renovabio this 20% IRR, are you going to include some kind of credit from any government funds?
No. This level of return -- the rate of return does not consider Renovabio. We didn't factor this in. We wanted to have a conservative estimate because it's difficult today for you to measure exactly the results in reals per liter of ethanol sold. And the corn ethanol produced in Brazil has a [ c-value ] equivalent to the sugarcane ethanol produced in Brazil, more or less equivalent. When you compare one to the other, sugarcane, the amount of diesel spent during the harvest is quite high and this, more or less, offset this [ c-value ], and that the corn would be even a little bit higher because of the diesel that is used in the harvest of sugarcane. And when you look at the imported corn ethanol from the United States, here you will have the maritime freight and a lot of diesel being spent in the transportation and the [ c-value ] of the corn. This imported ethanol is lower than the one produced in Brazil.
I have 2 more questions. What about your strategy regarding ethanol sales? In comparing to your peers, I see that quarter-on-quarter, your peers were able to get a higher ethanol price, whereas yours went down. Maybe part of that is because of the hedge policy of ethanol [ or by float ]. And is there any kind of study to hedge ethanol? And the third question is about the request for reimbursement of the PIS/COFINS taxes on receivables. I understand that you have filed for them this week, but could you give us some milestones regarding your next steps? And what is the timing to have a final solution?
And then the sale of ethanol and the average price, the performance in the last quarter was good, mainly because we hedged oil when it was $80 per barrel. In the third quarter, we hedged, and all this hedge dropped on the average price of ethanol, and São Martinho did not hedge based on oil. This was a decision that we made. And if you compare, you have this loss, but the other one had a very successful hedge because oil went from $80 to $50 in 3 months' time. But when we look individually, when we look at the performance of ethanol sales during the harvest vis-à-vis ESALQ, just to give you some tickers. In the fourth quarter, hydrous ethanol sold in São Paulo, we were able to get a performance 3.9% higher than ESALQ. And as we had a large volume to be sold, we believe that this performance is quite good because São Martinho is able to have this high volume of ethanol, and we benefited very quickly from that. 4% higher than ESALQ is something important. And we age ourselves from the commercial viewpoint here internally to judge our performance based on ESALQ. So in the fourth quarter, 3.9% higher in hydrous São Paulo; the third quarter, 2.7% higher in the second quarter, which is where we had the truckers' strike and the price of ethanol went up, and we were able to get almost 12% higher than ESALQ; in the other quarter, 4%. So when you look at hydrous ethanol, São Paulo, we were talking about 6.4% on average higher than ESALQ. So this more than offset, and the price and the great advantage that has is the intelligence regarding the fuel prices performance. And I understand that our sales [ per ] ESALQ, and then the carryover cost as our funding is cheap. When we talk about the Goiás ethanol, the situation was different.
On average for the year, I had 1.3% higher than ESALQ. The market is slightly different there, so the spread was not as big as we had in São Paulo, but even so, it was higher than ESALQ. We expected the price to be higher because of the demand that was coming from consumers. But unfortunately, what happened here was the fact that many other companies that produced sugar, they shifted to ethanol, and there was a huge volume of ethanol in this intercrop period. But looking at the average of the market, São Martinho was higher than ESALQ, undoubtedly. And afterwards, I can share this in detail with you in terms of taxes, et cetera, and you can check if you want after the call. And your second question?
About PIS/COFINS and the IFS, the IAA.
São Martinho has a judicial deposit of IAA made in April -- April or May. And as soon as we get the [ funds up for the sugar ] -- so in our balance sheet, you will see a judicial deposit, that is restated by the [ seliki ] and we will be discussing this in the next few years. [indiscernible] in Copersucar, you have the PIS/COFINS and we receive the gross funds, and you send the money to the members of the cooperative. And São Martinho is a former member of Copersucar [ brought these funds ] before -- after the PIS and COFINS, and it withheld the IFS and file for that in order to discuss it further.
Gabriel Barra from UBS.
I have 3 questions, Renovabio is the first one. We have already seen some news from some mills looking for certification, and I understand you have already filed for that at Boa Vista. Do you have an update to give us? And do you think it is feasible for the program to start in 2020 or will it be postponed? And going back to ethanol, some people are skeptical regarding the government's initiative. And I would like to know from you about the impact on São Martinho. I don't think this is your case, but I would like to know if there could be a negative impact for São Martinho. And the third one is about the amount of the Copersucar.
Okay. I will start by the second question about the price of São Martinho mills for [ for CBU ]. We have already started. The first mill will probably be Iracema, and we expect to have the certification of all our units by the end of this year. And we expect our certification of [ c-value ] to be higher than the market average, given the quality of our assets and the whole process in terms of carbon sequestration. And we're very optimistic about the schedule. We had the ethanol summit last week, and everybody said that [ c-value ] is on track and at the beginning of 2020, it will start [ at Usina ] with no delay. And now the units or the mills have to be certified by the end of the current year in order to be able to offer a reasonable amount of [ c-value ] for the beginning of the operations. And about your first question -- the second question about direct sales.
São Martinho, well, I don't think we're going to benefit from direct sales. This is not quite what we do. And the high volume of production will continue to be sold by distributors. And regarding UNICA, you place all the taxes in the chain on the back of the producer, and this doesn't make any sense, and we were discussing this with the government. And we expect to achieve that benefit from PIS and COFINS [ on parts ]. So the debate is much more on this [ mono sales ] issue and not whether we are for or against direct sales. And regarding the other issue, the discussion, as soon as we have an answer, we will be publishing it, okay, albeit controversial.
Now the Q&A session is closed, and we would like to turn the floor over back to Mr. Felipe Vicchiato.
Thank you all very much for participating in this call. This year was very complex from the viewpoint of yield in the São Martinho sugarcane plant and the long dry season and also, an impact of a dry season also both from the previous year and during the summer. And beginning of April this year, rainfall came back and it was possible for us to have a better result, but far from what we can achieve. And in the first quarter, we will be reporting around August 15, and then we will come back to this. And in the meantime, we will be available to you if you still have any doubts. Thank you very much. Good afternoon.
São Martinho conference call is closed. Thank you for participating, and we wish you a good afternoon.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]