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Brazilian sugar and ethanol producer, Cosan Limited (CZZ - Analyst Report) released its fiscal second quarter of 2013 results (ended September 30) on November 7. The company reported net earnings of R$165.8 million (US$82.9 million) in the quarter compared with the earnings of R$37.2 million (US$18.6 million) in the year-ago comparable quarter.


Cosan’s net operating revenue jumped 3.4% year over year to R$7,032.3 million (US$3,516.2 million).

Sugar sales in the quarter plummeted by 12.4% to R$1,302.2 million (US$651.1 million) in the quarter while Ethanol sales went down by 27.0% to R$717.0 million (US$358.5 million).

Sugar production in the quarter inched up 1% year over year to 2.152 million tons while crushed sugar volume increased 3.6% to 27.3 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 20 basis points year over year to 89.0% and also registered a 3.6% year-over-year increase, leading to gross margin of 11.0% in the quarter. Selling and general and administrative expenses, as a percentage of revenue, plummeted 60 basis points to 6.1%. Operating margins increased from 4.3% in the year-ago quarter to 4.8% in the reported quarter.
Balance Sheet/Cash Flow

Exiting the second quarter of 2013, Cosan’s cash and cash equivalents (including restricted cash) increased 27.3% sequentially to R$1,986.2 million (US$993.1 million) while long-term debt plummeted 1.6% to R$4,607.9 million (US$2,304.0 million).

Cash flow from operations in the quarter was $513.5 million (US$256.8 million), down 13.1% year over year. Capital spending went up by 12.7% to R$274.1 million (US$137.1 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 54-56 million tons (prior forecast was 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$0.25-R$0.28 billion range (versus R$0.26-R$0.30 billion expected earlier).

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

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