Zacks_Analysts' Blog : Cosan Reports Upbeat 3Q12 Results - Analyst Blog

Brazilian sugar and ethanol producer, Cosan Limited (CZZ) released its third quarter 2012 earnings results on February 8. The company's net income in the quarter increased more than 100% year over year to R$93.8 million (US$52.1 million) versus R$38.7 million (US$22.8 million) in the year-ago quarter.

Revenue

Cosan's net operating revenue jumped 33.2% year over year to R$6,310.7 million (US$3,505.9 million) but failed to gain momentum to surpass the Zacks Consensus Estimate of US$4,078 million.

Sugar revenue decreased 4.8% to R$887.6 million (US$493 million) while Ethanol sales soared 14.9% to R$744.5 million (US$413.6 million). Adverse weather conditions in the quarter negatively impacted sugar production that fell 18.9% year over year to .656 million tons in the quarter. Crushed volume amounted to 8.2 million tons of sugarcane, roughly 27.3% fall from the year-ago quarter.

Margins

Cost of goods, as a percentage of revenue, soared 210 basis points to 89.9% and also registered a 36.3% increase year over year, leading to gross margin of 10.1% in the quarter. Selling and general and administrative expenses, as a percentage of revenue, plummeted 170 basis points to 6.8%. Operating margins soared 20 basis points to 3.8% in the quarter.

Balance Sheet/Cash Flow

Exiting the third quarter of 2012, Cosan's cash and cash equivalents (including restricted cash) decreased 10.7% sequentially to R$1,371.6 million (US$737.4 million) while debt (loan and financing, net of current portion) increased 4.1% to R$4,589.9 million (US$2,550.0 million).

Cash flow from operations was $294.5 million (US$163.6 million), an increase of 31.3% year over year. Capital spending went down by 35.0% to R$346.3 million (US$192.4 million).

Outlook

For fiscal year 2012, management anticipates that consolidated net revenue would be in the range of R$25.0-R$27.5 billion; EBITDA in the range of R$1.8-R$2.2 billion and capital expenditure in the range of R$2.0-R$2.3 billion.

Raizen Energia: For the fiscal year 2012, management expects crushed sugarcane volumes to range within 56-60 million tons (versus prior expectation of 53-54 million tons), sugar volume sold within 4.2-4.6 million tons (versus previous expectation of 3.9-4.1 million tons), and ethanol volume sold within 2.1-2.3 billion litres (versus prior expectation of 1.9-2.0 billion litres). Volume of energy sold is expected to range within 1.4-1.6 million MW (versus prior expectation of 1.2-1.4 million MW). EBITDA is likely to be within R$1.9-R$2.3 billion range as compared with R$1.85-R$2.05 billion expected earlier.

Raizen Combustiveis: For the fiscal year 2012, management expects fuel volume sold to be within the 21.0-23.0 billion litre range (versus 21.0-22.0 billion litres expected earlier) and EBITDA to be within R$.0.85-R$1.05 billion range (versus R$1.0-R$1.2 billion expected earlier).

Rumo: For the fiscal year 2012, management feels that volume of loading would range within 9.0.5-11.0 million tons (versus 7.5-9.5 million tons expected earlier) and volume of transportation to be within 6-8 million tons (versus 5-7 million tons expected earlier).

Cosan Alimentos: For the fiscal year 2012, management anticipates that sugar volume sold would be within 0.55-0.65 million tons and EBITDA within R$65-R$85 million.

Other Business: For the fiscal year 2012, management estimates volume of lubricants sold to be within 0.17-0.19 billion litres.