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Cosan (CZZ) Q1 Earnings Fall Y/Y on Weak Sales, Margins

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Cosan Limited reported disappointing results for first-quarter 2017. Net income in the quarter was R$21.1 million ($6.7 million), down 83.8% from R$130.3 million ($33.3 million) in the year-ago quarter.

Revenues

Net revenue in the quarter totaled R$2,785.7 million ($887.2 million), down 10.7% year over year.

The company operates under two business segments: Cosan S.A. and Cosan Logistica S.A. While Cosan S.A includes Raizen Energia, Raizen Combustiveis, Comgas, Moove and Cosan Corporate, Cosan Logistica comprises the Rumo Logistica business.  

Fuel volumes sold improved 1.3% year over year on the back of 10.3% increase in gasoline sales volume and 3.4% growth in diesel volumes sold. These were partially offset by a fall in sales volume of ethanol, aviation and other products.

Sugar volume sold declined 28.2% year over year to 1.076 million tons. Of the total, roughly 77.8% was exported while the rest was sold domestically. Ethanol volume sold declined 19.4% year over year to 0.823 million cbm, including 21.6% of export volume and the rest was domestic volume.    

Total natural gas sales volume fell 4.8% year over year while lubricants sales volume decreased 1%.

Margins

In the quarter, Cosan’s cost of sales and services declined 5.2% year over year, representing 70.3% of net revenue compared with 66.2% in the year-ago quarter. Gross margin decreased 410 basis points (bps) year over year to 29.7%. Selling, general and administrative expenses were flat year over year at R$465 million ($148.1 million), representing 16.7% of net operating revenues. Financial expenses totaled R$618.4 million ($196.9 million).

Balance Sheet

Exiting the first quarter, Cosan’s cash and cash equivalents were R$6,544 million ($2,090.7 millon), up from R$4,500 million ($1,384.6 million) in the previous quarter. Loans and borrowings increased 11.5% sequentially to R$20,441 million ($6,530.7 million).

Outlook

For 2017, Cosan anticipates pro forma net revenue to be R$45–R$48 billion for Cosan S.A. while earnings before interest, tax, depreciation and amortization (“EBITDA”) are projected to be within R$4.75–R$5.25 billion. Guidance for Cosan S.A.’s and Rumo’s businesses is discussed below:

Raizen Energia (guidance for crop year Apr 2017–Mar 2018): Management expects crushed sugarcane volumes within approximately 59–63 million tons. Sugar volume produced will likely come in a range of 4.3–4.7 million tons.

Ethanol volume production is expected to be in the range of 2.0–2.3 billion liters while volume of energy sold is expected within 2.0–2.2 million MWh. EBITDA is likely to come within R$3.9–R$4.3 billion while capital spending is anticipated within R$2.1–R$2.4 billion.

Raizen Combustiveis: EBITDA is predicted in a range of R$2.7–R$3.0 billion and capital expenditure is likely to be within R$800–R$1,000 million.

Moove: EBITDA is expected in the R$140–R$160 million range.

Comgas: Volume of gas sold is likely to fall within 4–4.3 million cbm while EBITDA is projected in a range of R$1.55–R$1.65 billion. Capital expenditure is likely to come within R$450–R$500 million.

Rumo: EBITDA is predicted in a range of R$2.6–R$2.8 billion and capital expenditure is expected within R$2–R$2.2 billion.

Cosan Limited Price and Consensus

 

Cosan Limited Price and Consensus | Cosan Limited Quote

Zacks Rank & Key Picks

With a market capitalization of approximately $2.1 billion, Cosan presently sports a Zacks Rank #1 (Strong Buy). Other stocks worth considering in the agriculture industry include Syngenta AG (SYT - Free Report) , Monsanto Company and Adecoagro S.A. (AGRO - Free Report) . While Syngenta AG sports the same Zacks Rank as Cosan, both Monsanto and Adecoagro carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Syngenta AG’s earnings estimates for 2017 have been revised upward over the last 60 days.
 
Monsanto Company’s earnings expectations for fiscal 2017 and fiscal 2018 improved over the past 60 days. Average earnings surprise for the last four quarters was a positive 313.91%.

Adecoagro’s earnings estimates for 2017 have been revised upward in the last 60 days.

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