Cosan (CZZ) Posts Solid Q2 Earnings, Revenues Up Marginally - Analyst Blog

Cosan Limited ( CZZ ) reported impressive year-over-year results for second-quarter 2014. Net income came in at R$104.1 million (US$46.7 million), an improvement over the loss of R$201.5 million (US$97.8 million) reported in the year-ago quarter.


Cosan's net revenue inched up 0.9% year over year to R$2,246 million (US$1,007.2 million). Pro forma revenue, including the Raizen contribution, were R$9,595.7 million (US$4,303 million).

Fuel sales grew 16.2% year over year due to higher volumes of ethanol and gasoline sold in the quarter. Sugar sales fell 23.2% to R$582.8 million (US$261.3 million) while ethanol sales escalated by 51.4% to R$879.3 million (US$394.3 million).

Raizen Energia crushed nearly 20.9 million tons of sugarcane in the quarter, reflecting 13% increase over the year-ago quarter. Sugar production rose 13.7% to 1.4 million tons.

Energy cogeneration revenues were R$175 million (US$78.5 million), up 79.9% year over year. Total gas sales volume decreased 2.2% year over year. Revenues from Rumo's Transportation business were down 20%, while that from Loading business increased 19.1%.

Revenues from Cosan Lubrificantes increased 4.6% year over year. Radar's net revenues soared 77% to R$35.2 million (US$15.8 million).


Cosan recorded 3.4% year-over-year decline in cost of goods, representing 68.8% of net revenue versus 71.9% in the year-ago quarter. Gross margin grew by 310 basis points (bps) to 31.2%. Sales, general and administrative expenses went up 17% to R$380.1 million (US$170.4 million).

Earnings before interest, taxes, depreciation and amortization (EBITDA) were R$881.4 million (US$395.2 million), up 6.5% year over year while EBITDA margin inched down 20 bps to 9.2%.

Balance Sheet

Exiting second-quarter 2014, Cosan had cash and cash equivalents of approximately R$1,321.4 million (US$600.6 million), down 10.3% from R$1,472.5 million (US$651.5 million) recorded at the previous quarter-end. Loans and financing declined 19.6% sequentially to R$7,011.7 million (US$3,187.1 million).


Cosan maintained its guidance for 2014. Net revenues are expected in the range of R$37.5−R$40.5 billion. EBITDA is expected to be within R$4.15−R$4.65 billion and capital expenditure is predicted in the R$2.5−R$2.8 billion range. Guidance for the company's segments is discussed below:

Raizen Energia: Cosan expects crushed sugarcane volumes to be approximately 58−60 million tons versus 61−63 million tons forecasted earlier. Sugar volume sold will likely range in 4.2−4.5 million tons, down from 4.4−4.7 million tons.

Guidance for ethanol volume sold has been lowered to 2−2.2 billion litres versus 2.3−2.6 billion litres anticipated previously. Volume of energy sold is expected within 1.95−2.15 million MW, as against 2.0−2.2 million MW projected earlier. EBITDA is likely to be in the R$2.3−R$2.7 billion range, while capital spending is expected to range from R$2.0−$2.2 billion.

Raizen Combustiveis: EBITDA is anticipated to be in the R$2.0−R$2.2 billion range and capital expenditure in the R$750−R$850 million range.

Rumo: Volume of loading is expected within 10.5−12.5 million tons and capital expenditure in the R$250−R$300 million range.

Radar: EBITDA is expected in the range of R$170−R$200 million.

Cosan Lubrificantes: Volume of lubricants and base oil sold is likely to be within 270−310 million litres. EBITDA is expected to be in the R$140−R$170 million range.

Comgas: Volume of gas sold is likely to be within 5.2-5.7 million cbm while EBITDA is expected in the range of R$1.30-R$1.55 billion. Capital expenditure is likely to be within R$0.68-R$0.78 billion.

With a market capitalization of $3.1 billion, Cosan presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include The Andersons, Inc. ( ANDE ), Gruma S.A.B. de CV ( GMK ) and ALLETE, Inc. ( ALE ). While The Andersons and Gruma S.A.B. de CV sport a Zacks Rank #1 (Strong Buy), ALLETE holds a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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