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Cosan's (CZZ) Net Profit Expands Y/Y on Solid Sales in Q1

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Cosan Limited (CZZ - Free Report) recently reported impressive results for the first quarter of 2018.

The Brazilian company’s adjusted net income totaled R$154 million ($47.4 million), surging 218.8% from the year-ago tally of R$48.3 million ($15.4 million). However, the bottom line was down roughly 67.4% from R$326.6 million ($100.5 million) recorded in the previous quarter.

Revenues Increase Y/Y

In the reported quarter, Cosan’s net revenues were R$3,543.4 million ($1,090.3 million), reflecting year-over-year growth of 27.2%. On a sequential basis, the top line decreased 4.7%.

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 increased 3% year over year on the back of 55.1% growth in ethanol volume sold, 6.2% rise in diesel volume and 8.1% increase in aviation-fuel volumes. However, this was partially offset by 12.6% decline in gasoline volumes.

Sugar volume sold increased 11.4% year over year to 1.2 million tons. Of the total, roughly 76.4% was exported while the rest was sold domestically. Ethanol volume sold increased 60% to 1.3 million cbm, including 14% of export volume and the rest of domestic volume.

Total natural-gas sales volume grew 6.3% year over year while lubricants sales volume increased 8%. For Rumo, total volume transported expanded 18% year over year.

Rise in Cost of Sales Lowers Gross Margin

Cosan’s cost of sales and services sold in the reported quarter marked an increase of 28.2% year over year to R$2,512.7 million ($773.1 million). It represented 70.9% of net revenues versus 70.3% in the year-ago quarter. Gross profit increased 24.7% year over year to R$1,030.7 million ($317.1 million) while gross margin decreased 60 basis points (bps) year over year to 29.1%.

Selling, general and administrative expenses slipped 1.4% year over year to R$458.4 million ($141 million), representing 12.9% of net revenues. Financial expenses were R$520.7 million ($160.2 million), down 15.8% year over year.

Balance Sheet & Capital Expenditure

Exiting the first quarter, Cosan’s cash and cash equivalents were R$6,103 million ($1,849.4 million), up from R$4,555 million ($1,376.1 million) at the end of the previous quarter. Loans and borrowings increased 1.3% sequentially to R$21,977 million ($6,659.7 million).

In the reported quarter, the company’s capital expenditure totaled R$609.2 million ($187.4 million), reflecting growth of 10.9% over the year-ago quarter.

Outlook

For 2018, Cosan anticipates pro forma net revenues to be R$50-R$53 billion for Cosan S.A. Earnings before interest, tax, depreciation and amortization (EBITDA) are projected to be R$4.9-R$5.4 billion. The guidance for Cosan S.A.’s and Rumo’s businesses is discussed below:

Raizen Energia (guidance for crop-year April 2018-March 2019): Management expects crushed sugarcane volumes to be 62-66 million tons (down from 63-67 million tons expected earlier). Sugar volume produced is likely to be 4.2-4.6 million tons.

Ethanol volume production is expected to be 2.3-2.6 billion liters while the volume of energy sold is expected to be 2.5-2.7 million MWh. EBITDA is likely to be R$3.4-R$3.8 billion while capital spending is anticipated to be R$2.4-R$2.7 billion.

Raizen Combustiveis: EBITDA is predicted to be R$2.85-R$3.15 billion and capital expenditure is likely to be R$800-R$1,000 million.

Moove: EBITDA is expected to be R$200-R$230 million.

Comgas: Volume of gas sold is likely to be 4.4-4.6 million cbm while EBITDA is projected to be R$1.77-R$1.87 billion. Capital expenditure is likely to be R$450-R$500 million.

Rumo: EBITDA is predicted to be R$3.05-R$3.25 billion and capital expenditure is expected to be R$1.9-R$2.1 billion.

Cosan Limited Price and Consensus
 

Cosan Limited Price and Consensus | Cosan Limited Quote

Zacks Rank & Stocks to Consider

With a market capitalization of approximately $2.4 billion, Cosan currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the Zacks Basic Materials sector include Cal-Maine Foods, Inc. (CALM - Free Report) , FMC Corp. (FMC - Free Report) and Bunge Ltd. (BG - Free Report) . While both Cal-Maine Foods and FMC sport a Zacks Rank #1 (Strong Buy), Bunge carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cal-Maine Foods’ earnings estimates for fiscal 2018 (ending May 2018) and fiscal 2019 (ending May 2019) have improved over the past 60 days.

FMC's earnings estimates for 2018 and 2019 have improved over the past 60 days. Average earnings surprise for the last four quarters has been a positive 8.23%.

Bunge’s earnings estimates for 2018 and 2019 have been revised upward over the last 60 days. Also, the company pulled off an average positive earnings surprise of 18.18% in the last four quarters.

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