Brazil's sugar and ethanol producer,
Cosan (
CZZ
)
recently announced successful completion of the acquisition of
Comma Oil & Chemicals Limited for approximately $100 million.
The deal was initially announced in March 2012.
Comma Oil & Chemicals Limited is based in Kent, England, and
is a wholly-owned subsidiary of Esso Petroleum Company,
Limited. It will continue to operate under its existing brands
and will also supply some products in the UK and to ExxonMobil
companies.
The acquisition will enhance Cosan's presence in Europe, in
particular its lubricant and specialties market. The company will
be especially responsible for Comma's finished lubricants and
chemicals manufacturing and sales to third parties, in addition to
assets located at Comma's Gravesend site in Kent, England, along
with trademarks and brands.
We remain confident about Cosan's long-term growth prospects.
Strategic acquisitions like Comma's growing sugar and ethanol
demand, energy co-generation and transportation businesses seem to
be the prime growth driving catalysts. Also, the company's share
buyback activities are an added advantage.
For fiscal year 2013, management anticipates that consolidated
net revenue would be in the range of R$26.0-R$29.0 billion; EBITDA
in the range of R$2.2-R$2.5 billion and capital expenditure in the
range of R$2.1-R$2.4 billion.
However, near-term weakness keeps us on the sidelines. The
company reported about a 66% fall in net earnings in the fourth
quarter 2012 as higher cost of sales offset a 26% rise in revenue
in the quarter. Sugar and ethanol sales were soft and adverse
weather conditions caused nil crushed volumes from the 24 mills
operated by the company.
The Zacks Consensus Estimates for the fiscal years 2013 and 2014
stand at 90 cents and $1.61 per ADR, respectively. These estimates
reflect a year-over-year decline of 65.39% in 2013 and growth of
78.60% in 2014.
We currently maintain a Neutral recommendation on Cosan. The
stock also bears a Zacks #3 (Hold) Rank.
COSAN LTD-A (CZZ): Free Stock Analysis Report
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