Cosan Reports Loss in Q2

Zacks Equity Research

Brazilian sugar and ethanol producer Cosan Limited's (CZZ) second quarter 2013 net loss came in at R$198.0 million (US$96.1 million), as compared with loss of just R$17.1 million (US$8.7 million) incurred in the year-ago quarter.

Effective the quarter ended Jun 30, 2013, Cosan’s fiscal year coincides with the calendar year.


Top-line result for Cosan was quite impressive. Net revenue in the second quarter 2013 was R$2,225.9 million (US$1,080.5 million), up 427.2% year over year. Raizen contribution has been effective the second quarter 2013, and will be considered under the equity pick-up method.

Pro forma revenues, including the Raizen contribution, was R$8,765.7 million (US$4,255.2 million).

Fuel sales in the quarter went up 14.5% year over year due primarily to higher sales volume of ethanol and diesel. Sugar sales in the quarter saw a 21.5% increase to R$759.1 million (US$368.5 million) in the quarter. Ethanol sales were up 8.4% to R$580.7 million (US$281.9 million).

All of the 24 mills operated during the quarter have a crushing capacity of 65.6 million tons of sugarcane per crop year. Sugar production in the quarter grew 85% year over year to 1.19 million tons while crushed sugar volume increased 67.5% to 18.5 million tons.

Energy cogeneration revenues in the quarter was R$97.2 million (US$47.2 million), up roughly 36.9%. Total gas sales volume jumped 6.2%. Rumo registered about 121.6% and 49.1% increase in revenues derived from its Transportation and Loading businesses, respectively.

Revenues derived from Lubrificantes e Especialidades segment decreased 5.8% year over year. Radar reported a 43.3% decline in its revenue due to higher asset sales in the year-ago quarter.


Cosan’s cost of goods, as a percentage of revenue, was down 60 basis points year over year to 71.9%, leading to a gross margin of 28.1% in the quarter. Operating margins in the quarter was 12.9%.

Balance Sheet/Cash Flow

Exiting the second quarter 2013, Cosan’s cash and cash equivalents was approximately R$1,490.6 million (US$668.4 million). Net cash generated from operations in the quarter was $356.1 million (US$172.9 million) while capital spending went up by 411.3% to R$298.2 million (US$144.8 million).

Management of Cosan provided its guidance for year 2013. Net revenue is expected to be within the R$35.0-R$38.0 billion range; EBITDA in the range of R$3.95-R$4.35 billion and capital expenditure within the R$2.95-R$3.2 billion range. Guidance for Cosan’s segments is discussed below:

Raizen Energia: Management expects crushed sugarcane volumes to be approximately within 59.0-62.0 million tons, sugar volume sold within 4.3-4.6 million tons, and ethanol volume sold within 2.1-2.3 billion litres. Volume of energy sold is expected to range within 1.9-2.1 million MW. EBITDA is likely to be within the R$2.4-R$2.7 billion range.

Raizen Combustiveis: Fuel volume sold is likely to be within the 22.5-24.0 billion litre range and EBITDA to be within the R$1.6-R$1.8 billion range.

Rumo: Volume of loading is expected to range within 8.5-10.5 million tons and EBITDA within the R$0.33-R$0.37 billion range.

Radar: EBITDA is expected to be within the R$0.14-R$0.16 billion range.

Cosan Lubrificantes e Especialidades: Volume of lubricants and base oil sold is likely to be within 0.27-0.31 billion litres. EBITDA is expected to be within the R$0.14-R$0.17 billion range.

Comgas: Volume of gas sold is likely to be within 5.2-5.7 million cbm while EBITDA is expected to be within R$1.35-R$1.55 billion range.

Cosan currently has a Zacks Rank #3 (Hold). Other players to watch out for in the industry are The Andersons, Inc. (ANDE), with a Zacks Rank #1 (Strong Buy) while Limoneira Company (LMNR) and MDU Resources Group Inc. (MDU), each carry a Zacks Rank #2 (Buy).

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