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Brazilian sugar and ethanol producer, Cosan Limited (CZZ - Analyst Report) released its fiscal first quarter of 2013 results on August 8. The company reported a loss of R$24.1 million (US$12.3 million) in the quarter compared with the earnings of R$985.5 million (US$619.8 million) in the year-ago comparable quarter.


Cosan’s net operating revenue jumped 18.1% year over year to R$6,125.6 million (US$3,125.3 million).

Sugar revenue in the quarter decreased 28.4% to R$626.0 million (US$319.4 million) in the quarter while Ethanol sales went down by 40.4% to R$383.9 million (US$195.9 million).

Sugar production in the quarter plummeted by 45.6% year over year to 0.643 million tons while crushed sugar volume declined 39.8% to 11.06 million tons. All of the 24 mills operated during the quarter with a crushing capacity of 65 million tons of sugarcane per crop year.


Cost of goods, as a percentage of revenue, soared 3.6 percentage points to 92.3% and also registered a 22.9% year-over-year increase, leading to gross margin of 7.7% in the quarter. Selling and general and administrative expenses, as a percentage of revenue, plummeted 180 basis points to 6.1%. Operating margins declined from 59.2% in the year-ago quarter to 2.7% in the reported quarter. Margins in the fiscal first quarter 2012 were affected by the formation of Raizen.

Balance Sheet/Cash Flow

Exiting the first quarter of 2013, Cosan’s cash and cash equivalents (including restricted cash) plummeted 10.7% sequentially to R$1,560.5 million (US$750.2 million) while long-term debt increased 0.5% to R$4,682.3 million (US$2,251.1 million).

Cash flow from operations in the quarter was $34.5 million (US$17.6 million), down 94.3% year over year. Capital spending went down by 42.8% to R$281.2 million (US$143.5 million).


Management reiterated its guidance for the fiscal year 2013. Net revenue is expected to be within the R$26.0-R$29.0 billion range; EBITDA in the range of R$2.2-R$2.5 billion and capital expenditure within the R$2.1-R$2.4 billion range. Guidance for the segments is discussed below:

Raizen Energia: Management expects crushed sugarcane volumes to range within 52-55 million tons, sugar volume sold within 3.9-4.2 million tons, and ethanol volume sold within 1.85-2.05 billion litres. Volume of energy sold is expected to range within 1.65-1.85 million MW. EBITDA is likely to be within the R$2.2-R$2.5 billion range.

Raizen Combustiveis: Fuel volume sold is likely to be within the 21.0-23.0 billion litre range and EBITDA to be within the R$1.3-R$1.5 billion range.

Rumo: Volume of loading is expected to range within 8.0-10.0 million tons and EBITDA within the R$0.26-R$0.30 billion range (versus R$0.28-R$0.31 billion expected earlier).

Other Business: Volume of lubricants and base oil sold is anticipated to be within 0.22-0.26 billion litres.

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