Cosan's net results for the third quarter 2013, though improved
from the losses of the previous quarter, failed to gain momentum
and plummeted 26% year over year. Revenue grew 300% on the back of
solid fuel, sugar and ethanol sales. However, sugar production was
down 1% and crushed sugar volume decreased 2% due to unfavorable
weather conditions. Radar revenue was down 23% due to lack of
property sales during the quarter. Costs and expenses grew
significantly to erode many of the benefits from revenue increases.
Also, results were negatively impacted by foreign exchange
variations losses, unrecorded deferred fiscal credits and higher
financial expenses due to increase in debt levels. For 2013,
management guided net revenue in the R$35.0-R$38.0 billion range.
Besides the results, long-term growth prospects are bright on the
back of Cosan's strategic acquisitions, growing sugar and ethanol
demand, energy co-generation and transportation businesses.
Considering the above, we maintain a Neutral recommendation on the
S o Paulo, Brazil-based Cosan Limited (CZZ) was incorporated in
Bermuda in Aug 2007. The company was established as a result of a
corporate restructuring of the Cosan Group in Brazil as the
controlling shareholder of Cosan S.A., a Brazilian company. Cosan
Limited currently holds roughly 62.3% of the controlling shares of
Cosan S.A. is engaged in the cultivation, harvesting and
processing of sugarcane, which is the main raw material used to
produce sugar and ethanol. Cosan is the largest grower and
processor of sugarcane in the world, having crushed approximately
56.2 million tons of sugarcane during fiscal year 2012. It is not
only the largest sugar producer in Brazil, but also the
third-largest sugar producing company in the world. The company is
also the largest ethanol producer in Brazil and the fifth largest
in the world, besides being the largest exporter of ethanol.
Effective the quarter ended June 30, 2013, Cosan started
reporting its financial results on a calendar year basis
(accounting year ending Dec 31, 2013) and also adopted IFRS 11 to
recognize Ra zen under the equity pick-up method.
Also, effective this quarter, Cosan started reporting its
business under the following heads: Raizen Energia (Sugar, Ethanol
and Cogeneration), Raizen Combustiveis (Fuels Distribution), Comgas
(Distribution of Natural Gas), Rumo (Logistics Operations), Radar
(Investments in Agricultural Land), Lubrificantes e Especialidades
(Lubricants and Specialties) and Other Business (Corporate
Structure, Other Investments).
Cosan Limited (CZZ): Read the Full Research
COSAN LTD-A (CZZ): Free Stock Analysis Report
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