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Cosan (CZZ) Posts Profit in Q2, Maintains ’17 Guidance

Zacks

Cosan Limited CZZ reported improved results for second-quarter 2017. Adjusted net income was R$55.8 million ($17.4 million) against a net loss of R$91.3 million ($26.1 million) in the year-ago quarter.

Revenues

Net revenue totaled R$3,368.5 million ($1,049.4 million), inching up 0.8% year over year.

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 improved 1.9% year over year on the back of 10.3% increase in gasoline sales volume and 1.4% growth in diesel volumes sold. These were partially offset by a fall in sales volume of ethanol, aviation and other products.

Sugar volume sold increased 7.4% year over year to 1.043 million tons. Of the total, roughly 77.2% was exported while the rest was sold domestically. Ethanol volume sold grew 25.6% year over year to 0.926 million cbm, including 26.7% of export volume and the rest was domestic volume.

Total natural gas sales volume grew 2.9% year over year while lubricants sales volume increased 6%. For Rumo, total volume transported grew 13.7% year over year.

Margins

In the quarter, Cosan’s cost of sales and services sold increased 10.3% year over year, representing 65.4% of net revenue compared with 59.7% in the year-ago quarter. Gross margin decreased 570 basis points year over year to 34.6%. Selling, general and administrative expenses declined 8.3% year over year to R$484.3 million ($150.9 million), representing 14.4% of net revenue. Financial expenses totaled R$684.5 million ($213.2 million).

Balance Sheet

Exiting the second quarter, Cosan had cash and cash equivalents of R$3,937 million ($1,193 million), down from R$6,544 million ($2,090.7 million) in the previous quarter. Loans and borrowings inched up 0.3% sequentially to R$20,500 million ($6,212.1 million).

Outlook

For 2017, Cosan anticipates pro forma net revenue to be R$45–R$48 billion for Cosan S.A. while earnings before interest, tax, depreciation and amortization (EBITDA) are projected to be within R$4.75–R$5.25 billion. Guidance for Cosan S.A.’s and Rumo’s businesses is discussed below:

Raizen Energia (guidance for crop year April 2017–March 2018): Management expects crushed sugarcane volumes within approximately 59–63 million tons. Sugar volume produced will likely come in a range of 4.3–4.7 million tons.

Ethanol volume production is expected to be in the range of 2.0–2.3 billion liters while volume of energy sold is expected within 2.0–2.2 million MWh. EBITDA is likely to come within R$3.9–R$4.3 billion while capital spending is anticipated within R$2.1–R$2.4 billion.

Raizen Combustiveis: EBITDA is predicted in a range of R$2.7–R$3.0 billion and capital expenditure is likely to be within R$800–R$1,000 million.

Moove: EBITDA is expected in the R$140–R$160 million range.

Comgas: Volume of gas sold is likely to fall within 4–4.3 million cbm while EBITDA is projected in a range of R$1.55–R$1.65 billion. Capital expenditure is likely to come within R$450–R$500 million.

Rumo: EBITDA is predicted in a range of R$2.6–R$2.8 billion and capital expenditure is expected within R$2–R$2.2 billion.

Cosan Limited Price and Consensus


Cosan Limited Price and Consensus | Cosan Limited Quote

Zacks Rank & Key Picks

With a market capitalization of approximately $1.9 billion, Cosan presently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the Basic Materials sector include Air Products and Chemicals, Inc. APD, Calavo Growers, Inc. CVGW and Limoneira Company LMNR. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Air Products and Chemicals’ earnings estimates for fiscal 2017 and fiscal 2018 improved over the past 60 days. Also, the company pulled off an average positive earnings surprise of 1.77% for the last four quarters.

Calavo Growers’ earnings estimates for fiscal 2017 have been revised upward over the last 60 days. Also, the company delivered an average positive earnings surprise of 4.73% for the last four quarters.

Limoneira Company’s earnings estimates for fiscal 2017 and fiscal 2018 improved over the past 60 days. Average earnings surprise for the last four quarters was a positive 14.74%.

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