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Cosan Posts Weak 4Q13 Earnings

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Brazilian sugar and ethanol producer, Cosan Limited (CZZ) reported disappointing results for the fourth quarter of 2013 as its adjusted net income plummeted 86.2% year over year to R$29.7 million (US$14.9 million).

For the fiscal year 2013, Cosan’s adjusted net income came in at R$638.2 million (US$317.5 million), up 51.3% over the year-ago quarter’s earnings.


Top-line result for Cosan was quite impressive. Net revenue in the fourth quarter 2013 was R$8,461.5 million (US$4,230.8 million), up 46.0% year over year.

Fuel sales in the quarter went up 9.7% year over year while sugar sales saw a 76.8% increase to R$1,176.7 million (US$588.4 million) in the quarter. Ethanol sales were up 121.3% to R$1,109.9 million (US$555.0 million).

All of the 24 mills operated during the quarter have a crushing capacity of 66 million tons of sugarcane per crop year. Sugar production in fiscal 2013 grew 4.9% year over year to 4.162 million tons while crushed sugar volume increased 6.2% to 56.2 million tons.

Energy cogeneration revenues in the quarter were R$13.1 million (US$6.6 million), up roughly 910.7%. Total gas sales volume jumped 15.1%. Rumo registered about 139.8% and 109.6% increase in revenues derived from its Transportation and Loading businesses, respectively.

Radar reported a 23.5% decline in its revenues as no properties were sold in the quarter while a majority of the revenues came from leasing activities.  
For 2013, net revenue of Cosan was approximately R$30,016.5 million (US$14,933.6 million), representing a 28.3% year-over-year growth.


Cosan’s cost of goods, as a percentage of revenues, was down 100 basis points year over year to 87.8% and also registered a 49.6% year-over-year increase, leading to a gross margin of 12.2% in the quarter. Selling, general and administrative expenses, as a percentage of revenues, decreased 10 basis points to 8.1%. Operating margins in the quarter was 5.5%.
Balance Sheet/Cash Flow

Exiting the fiscal fourth quarter of 2013, cash and cash equivalents (including restricted cash) of Cosan was approximately R$2,585.8 million (US$1,280.1 million), up 6.8% sequentially. Long-term debt went down 3.6% to R$9,665.2 million (US$4,784.8 million).

Cash flow from operations in the quarter was $1,237.5 million (US$618.8 million) while capital spending went up by 43.9% to R$724.3 million (US$362.2 million).

Management of Cosan provided its guidance for the fiscal year 2014. 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$3.1-R$3.35 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.

Other Business: Volume of lubricants and base oil sold is likely to be within 0.27-0.31 billion litres.

Comgas: Volume of gas sold is likely to be within 5.2-5.7 million cbm while EBITDA is expected to be within R$1.4-R$1.6 billion range.

Cosan currently has a Zacks Rank #2 (Buy). Other players to watch out for in the industry are Gruma S.A.B. de CV (GMK), Monsanto Company (MON) and Syngenta AG (SYT).

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Read the Full Research Report on GMK

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