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Cosan Reports Loss for Q4, Revenues Offset by Higher Costs

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Cosan Limited (CZZ - Free Report) reported disappointing results for fourth-quarter 2014. Net loss of R$29.1 million (US$11.5 million) came in way below earnings of R$132.7 million (US$58.5 million) in the year-ago quarter.

The poor bottom-line performance was due to higher cost of sales and operating expenses as well as adverse impact from foreign currency translations.  

For 2014, Cosan recorded earnings of R$171 million (US$72.8 million), down 19% year over year.

Cosan generated net operating revenue of R$2,296.9 million (US$904.3 million) in the quarter, up 3.6% year over year. Pro forma revenues, including the Raizen contribution, totaled R$10,526 million (US$4,479.1 million).

The company operates under two business segments: Cosan S.A. and Cosan Logistica S.A. While the former segment includes Raizen Energia e Raizen Combustiveis, Comgas, Lubrificantes, Radar and Ontros Negocios businesses, the latter comprises Rumo Logistica business.

Fuel sales expanded 12.5% year over year, primarily backed by higher sales volume of diesel and gasoline. Sugar sales in the quarter increased 34.2% year over year, while ethanol sales grew 17.4%.

Raizen Energia crushed nearly 11.7 million tons of sugarcane in the quarter, reflecting a decline of 27.5% over the year-ago quarter. Sugar production was down 27.9% to 0.84 million tons. Energy cogeneration revenues soared 47.2% year over year.

Total gas sales volume inched up 1.9% year over year. Revenues from Cosan Lubrificantes grew 2.1% year over year. Radar’s net revenue surged 68.2% over the year-ago tally.

Revenues from Cosan Logistica were up 23.8%, including 21.9% gain in Transportation and 32.3% growth in Loading businesses.


Cosan’s cost of sales increased 7.2% year over year in the quarter, representing 73.1% of net operating revenue versus 70.6% in the year-ago quarter. Sales growth was offset by higher cost of sales, leading to a reduction of 250 basis points (bps) in gross margin to 26.9%.

Sales, general and administrative expenses rose 12.6% to R$415.7 million (US$163.7 million), representing 18.1% of net operating revenue.

Balance Sheet

Exiting fourth-quarter 2014, Cosan had cash and cash equivalents of approximately R$1,649.3 million (US$615.4 million), up from R$1,306.5 million (US$537.7 million) in the preceding quarter. Loans and financing grew 15.8% sequentially to R$8,502.6 million (US$3,172.6 million).

Outlook: For 2015, Cosan expects proforma net revenue in the range of R$42−R$45 billion for Cosan S.A., while earnings before interest, tax, depreciation and amortization (“EBITDA”) are projected within R$4−R$4.3 billion. Guidance for Cosan S.A.’s businesses is discussed below:

Raizen Energia: Management expects crushed sugarcane volumes to be approximately 57−60 million tons. Sugar volume sold will likely range between 4.2−4.4 million tons.

Guidance for ethanol volume sold ranges within 1.9−2.1 billion liters, while volume of energy sold is expected within 2.1−2.3 million MWh. EBITDA is likely to range between R$2.6−R$2.8 billion, while capital spending is expected to come within R$1.6−$1.8 billion.

Raizen Combustiveis: EBITDA is predicted in the R$2.3−R$2.5 billion range and capital expenditure in the R$750−R$850 million range.

Radar: EBITDA is expected in the range of R$130−R$140 million.

Cosan Lubrificantes: Volume of lubricants and base oil sold is likely to come within 260−300 million liters. EBITDA is expected in the R$120−R$160 million range.

Comgas: Volume of gas sold is likely to range between 4.1–4.5 million cbm, while EBITDA is expected in the range of R$1.5–R$1.7 billion. Capital expenditure is likely to come in the R$0.5−R$0.56 billion range.

With a market capitalization of $1.8 billion, Cosan presently carries a Zacks Rank #2 (Buy). Other stocks worth considering in the industry include MGE Energy Inc. , Northwestern Corporation and Public Service Enterprise Group Inc. (PEG - Free Report) . All these stocks carry the same Zacks Rank as Cosan Limited.

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