Cosan USA : 3Q18 Earnings Release (PDF 0.6MB)

3Q18 Earnings Release

São Paulo, November 9, 2018 - COSAN LIMITED ("CZZ" or "Company") (NYSE: CZZ) announces today its results for the third quarter (July, August, and September) of 2018 (3Q18). The results are presented on a consolidated basis, in accordance with the accounting practices adopted in Brazil and with International Financial Reporting Standards (IFRS). Comparisons in this report take into consideration 3Q18 and 3Q17, except where indicated differently.

Summary of Financial Information

Executive Summary - Cosan Pro forma¹	3Q18	3Q17	Chg.%	2Q18	Chg.%
BRL mln	(Jul-Sep)	(Jul-Sep)	3Q18/3Q17	(Apr-Jun)	3Q18/2Q18

Net Revenue	17,219.3	14,483.9	18.9%	15,070.4	14.3%
Gross profit	1,983.1	2,322.3	-14.6%	1,692.7	17.2%
EBIT	1,046.3	1,403.2	-25.4%	868.1	20.5%
EBITDA²	1,872.6	2,231.3	-16.1%	1,630.9	14.8%
Adjusted EBITDA³	2,147.2	2,413.1	-11.0%	1,864.0	15.2%
Net Income (Loss)	63.0	248.1	-74.6%	22.7	n/a
Adjusted Net Income	191.9	267.5	-28.3%	113.7	68.8%

Note 1: Considering 50% of the results of Raízen Combustíveis and Raízen Energia.

Note 2: As of 1Q18, EBITDA excludes asset amortization arising from contracts with clients at Raízen Combustíveis.

Note 3: Adjusted EBITDA and Net Income does not include non-recurring effects in Cosan S/A, as detailed in its earnings release.

Message from the CEO

With elections now behind, one would be tempted to simply look forward. There are challenges ahead indeed: passing much awaited and needed reforms, reorganizing the country to move ahead; ensuring proper regulatory framework to foster investments; increasing productivity and competitiveness; and more. But we are optimistic and remain confident that Cosan will honor its track record of endeavoring Brazilian ups and downs. Our portfolio is prepared to continue growing on a sustainable and efficient way while levering upcoming opportunities.

This was yet another quarter where we performed despite adversities and we reiterate our consolidated guidance for this year. The trucker's strike of last May charged a toll on fuels distribution results and required an extra-mile from our team. Uncertainties related to definition of diesel subsidy mechanism and consequent delays in payment to distribution companies reduced attractiveness of import changing supply dynamics and requiring logistic reorganization. Otto-cycle volume growth lagged behind expectations. But again we outperformed the street delivering robust results. We managed to increase further ethanol production in our meals reaching record levels, to benefit from higher profitability versus sugar. Comgás delivered volume growth way above GDP, in all business segments. Moove's international expansion continues. Rumo's stellar operational turnaround combined with r esults of liability management continue to yield growing EBITDA and now consistent profits.

In attention to shareholders and investor's concerns related to the announcement of possible corporate restructuring,

Cosan decided to cancel the proposal. In line with long-term goal of simplifying corporate structure and reducing the number of listed vehicles, we announced the possible incorporation of RLOG3 by CSAN3. Additional details, however, were required for proper appreciation of the proposal. By cancelling the restructuring, we reiterate our commitment to best practice governance standards and value creation to shareholders.

We are prepared to look forward!

Marcos Marinho Lutz

CZZ's CEO

Investor Relarions

E-mail:[e-mail]: [phone] Website: ri.cosanlimited.com

Business Units

Cosan S/A (B3: CSAN3) and Cosan Logística S/A (B3: RLOG3), companies controlled by the Company, reported its results on November 7, 2018 and November 8, 2018, respectively. Its Earnings Releases containing the comments from the main financial and operational information, besides its Financial Statements, can be found at the websites below:

• Cosan S/A (CSAN3): http:/ir.cosan.com.br

•  Cosan Logística (RLOG3):http://ir.cosanlogistica.com.br

Cosan S/A and Cosan Logística S/A business units that compose Cosan Limited and interest in each reportable segment are shown below:

	Cosan S.A. (CSAN3) (60.3%)
Raízen Combustíveis (50%)	Fuel Distribution
Raízen Energia (50%)	Sugar, Ethanol and Cogeneration
Comgás (80.1%)	Natural Gas Distribution
Moove (100%)	Lubricants, Base Oils and Specialties
Cosan Corporativo (100%)	Corporate Structure and Other Investments
	Cosan Logística S.A. (RLOG3) (72.5%)
Rumo S.A. (RAIL3) (28.5%)	Logistics Operator

Executive Summary 3Q18

Cosan S.A. (CSAN3):

Cosan S/A Proforma: Cosan S/A presented adjusted pro forma EBITDA of R$1.2 billion (-25%) in the quarter, due to the impacts in Raízen's results, partially offset by EBITDA expansion in Comgás (normalized) and Moove. Net income came in at R$44 million (-91%), negatively affected by foreign exchange variation (non-cash) in the unhedged portion of the perpetual bond. The generation of pro forma free cash flow to equity (FCFE) totaled R$829 million in 3Q18, driven by higher debt raising at Raízen, versus a cash consumption of R$519 million in 3Q17, when two mills of Grupo Tonon were acquired by Raízen Energia. Leverage (net debt/pro forma EBITDA, normalized by Comgás' regulatory current account) came to 2.0x at the end of 3Q18.

Raízen Combustíveis: Adjusted EBITDA fell 24% to R$683 million in 3Q18, still affected by non-recurring effects as a result of truckers' strike, as well as lower demand in Otto cycle. Total volume sold in the period came in 1.5% higher than in 3Q17, sustained by diesel (+5%) and aviation (+9%) growth. Otto cycle fuel sales dropped (-3%), impacted by the World Cup in July, a high level of unemployment and increased fuel prices at the pump due to higher prices in the international market. In gasoline-equivalent, sales shrank 7%, with a strong increase of ethanol in replacement of gasoline. The adjustment to the supply mix following strike-related measures also raised additional logistics challenges.

Raízen Energia: Adjusted EBITDA in 3Q18, second quarter of 2018/19 crop was R$641 million (-54%), reflecting lower sugar prices, and mainly, lower volumes sold of this commodity, in line with crop commercialization strategy.

Crushing totaled 24.3 million tons (-14%), affected by higher rainfall volume in the period. Agricultural productivity, measured in kilos of TRS/hectare, came 7% lower than 3Q17, due to off-season drier weather, which increases sucrose concentration in the cane, but reduces density of the sugarcane. Sugar-equivalent production was 12% lower than the previous crop, in line with lower crushing in the period, with a mix of 51% for ethanol (versus 43% in 3Q17), on the back of higher ethanol profitability.

Comgás: EBITDA, normalized by regulatory current account effect, increased 14% to R$546 million, mainly boosted by higher sales volume (+9% versus 3Q17, ex-thermal power) and strict control of operating expenses. Industrial segment volume was 7% higher than the same period last year due to negotiations to increase volumes. New connections (110,000 in the last 12 months), bolstered residential segment consumption (+7%). In the commercial segment, volume was up 13% on the back of the uptake in economic activity and addition of 1,100 clients to the base in 2017.

Moove: 3Q18 EBITDA reached R$60 million (+34%), bolstered by expansion of international operations and improved mix of products sold.

Cosan Logística S.A. (RLOG3):

Rumo reached R$ 952 million (+19%) EBITDA in 3Q18. The largest volumes transported (+ 15%, 16 billion TKUs) reflect increased capacity following investment plan and continuous improvement in operational efficiency, allowing market share gains and significant growth in grain transportation. The record soybean crop extended the grain export period and attenuated the lower corn production in some states, causing the transported agricultural volume to grow by 14%, adding to the ramp-up of fertilizer volumes in Northern Operations. Variable cost grew below volume expansion, since the reduction in fuel consumption (liters/TKB:-4.5%) compensated for higher diesel prices. In turn, fixed costs remained stable, allowing an increase of 2.2 p.p. of EBITDA margin (50.7%). Strong EBITDA growth coupled with prepayment of expensive debt lines and reduction in cost of debt resulted in a net profit of R$229 million in the period.

Cosan Limited Proforma:

Adjusted EBITDA came to R$2.1 billion (-11%), impacted by the effects previously described in Raízen's results, partially offset by EBITDA expansion in Comgás (normalized), Moove and Rumo. CZZ posted net income of R$63 million in the quarter, dropping 75% compared to 3Q17, affected by negative foreign exchange variation in the perpetual bond at Cosan S/A, neutralized in part by higher net income at Cosan Logística S/A.

The following tables present the key operating and financial metrics of our businesses. Historical data for the information presented can be found on our Investor Relations website (ir.cosanlimited.com) in the Results Center.

Main Operational and Financial Metrics

Raízen Combustíveis

3Q18	3Q17	Chg.%	2Q18	Chg.%
(Jul-Sep)	(Jul-Sep)	3Q18/3Q17	(Apr-Jun)	3Q18/2Q18

Otto Cycle Volume (Gasoline+ Ethanol) ('000 cbm)	2,858	2,958	-3%	2,740	4%
Gasoline Equivalent4Volume ('000 cbm)	2,567	2,760	-7%	2,512	2%
Diesel Volume ('000 cbm)	3,185	3,028	5%	2,828	13%
Adjusted EBITDA Margin5 (BRL/cbm)	102	136	-25%	87	17%
Adjusted EBIT5 (BRL/cbm)	75	110	-31%	61	24%

Note 4: Sum of gasoline and ethanol volumes, adjusted by the energy coefficient of 0,7221.

Note 5: Excludes asset sale and other non-recurring items. From 2Q18 onwards includes asset amortization arising from contracts with clients.

Raízen Energia

Indicators	3Q18	3Q17	Chg.%
(Jul-Sep)	(Jul-Sep)	3Q18/3Q17

Sugarcane Crushed (mln mt)	24.3	28.3	-14%
TRS/ha	9.6	10.3	7%
Sugar/Ethanol Production Mix	49% x 51%	57% x 43%	n/a
Adjusted EBITDA6 (BRL mln)	641	1,394	-54%
Adjusted EBIT6/TRS sold (BRL/ton)	10	262	-96%

Note 6: Excludes effects from biological assets variation, debt hedge accounting effects, foreign exchange hedge on sugar exports and nonrecurring gains/losses where applicable.

Comgás

3Q18	3Q17	Chg.%	2Q18	Chg.%
(Jul-Sep)	(Jul-Sep)	3Q18/3Q17	(Apr-Jun)	3Q18/2Q18

Total Sales Volume (cbm) Ex-Thermal Power Normalized EBITDA7 (BRL mln)

IFRS EBITDA (BRL mln)

Note 7: Includes the effect from the regulatory Current Account.

Moove

3Q18	3Q17	Chg.%	2Q18	Chg.%
(Jul-Sep)	(Jul-Sep)	3Q18/3Q17	(Apr-Jun)	3Q18/2Q18

93 44

Total Sales Volume8 ('000 cbm)

EBITDA (BRL mln)

1,209 546 388

92 60

Note 8: Considering the volume sold of finished lubricants and base oil.

Rumo

1,114 477 463

9%	1,111	9%
14%	491	11%
-16%	331	17%
-2%	88	4%
34%	66	-9%

Operating and Financial Performance Index	3Q173Q18Chg. %

Consolidated Operating ratio

Diesel Consumption (liters/ '000 GTK) Rail accidents (Accidents /Km)

Personal Accidents (Accidents /MM MHW)

North Operation

Total volume transported (RTK million)

Cycle of railcars - Grains from Rondonópolis (MT) - Santos (SP)

South Operation

Total volume transported (RTK million)

Cycle of railcars - Grains from North PR - Ports PR/SC

70% 4.4 15.4

0.3

68% 4.2 15 0.3

-2.7% -4.5% -2.6% -3.2%

11.3 9.3

9.2 9.6

22.4% -3.1%

4.3 6.9

9M179M18Chg. %

74% 4.6 15.4 0.3

72% -3,1%

4.4 -4.3%

15 -2.6%

0.3 -3.2%

28.6 16.4%

24.6 9.8

10 2.0%

4.2 7.0

-1.9% 1.4%

10.4 7.1

11.1 6.4%

7.7 8.5%

Note 9: Operating Ratio calculation considers proportional allocation of part of 4Q16 depreciation in prior quarters from the same year.

COSAN LIMITED

Earnings Release

3rd Quarter of 2018

Cosan Corporate Results

The following table provides a breakdown of the 3Q18 results by business unit for all segments detailed previously. All information reflects 100% of their financial performance, regardless of the interest held by Cosan. For the purpose of reconciling EBITDA in the column "Cosan S/A Accounting", the "Adjustments & Eliminations" column reflects the eliminations from operations among all

Cosan subsidiaries for consolidation purposes.

Earnings by Business Unit

RaízenCombustíveis3Q18

Net Revenue

Cost of Goods and Services Sold Gross Profit

21,053.1 (20,183.8)

869.3

Gross Margin (%)

4.1%

Selling Expenses

(319.8)

General and Administrative Expenses Other Operating Income (Expenses) Equity Pick-up

(117.3)

84.9

0.0

Depreciation and Amortization EBITDA

45.2

EBITDA Margin (%)

Financial result

Income and Social Contribution Taxes Non-controlling Interest

562.3 2.7% (181.0) (48.2) (12.5)

-

Net Income

275.3

DesconsolidationRaízen EnergiaComgásMooveCosan Corporate

Raízen

AdjustmentsCosan Limited

and EliminationCosan S/A Accounting

Adjustments

and Elimination

5,452.1 (5,099.5)

352.5

1,901.0 (1,377.3)

523.7

1,011.5 (839.1) 172.4

0.4 (2.6) (2.2)

(26,505.2) 25,283.3 (1,221.9)

0.0(0.0)

-2,912.9(2,219.0)

694.0

1,877.1 (1,198.8)

678.3

- - -

(11.6)11.6

--

4,778.4(3,406.2)1,372.2

6.5%

27.5%

17.0%

n/a

4.6%

0.0%---

(255.6)

(155.3)

(97.7)

(0.2)

575.5

(253.2)

23.8%

36.1%

n/a -

28.7%

(2.0)

-(255.2)

(171.4)

(89.3)

(33.0)

(32.3)

288.7

(154.5)

(77.7)

(10.3)

-(242.6)

(9.5)

(7.8)

(0.1)

(32.3)

(75.4)

(40.2)

(4.5)

-

-(44.7)

(7.4)

-

(3.9)

238.6

7.4

(152.4)

82.2

3.3

66.3

(66.3)85.5

620.0

116.3

22.1

2.8

(665.2)

-(152.4)

141.2

354.7

0.1

-495.9

528.7 9.7% (114.7) 106.7

387.6 20.4% (55.4) (48.5)

59.8 5.9% (10.6)

174.4

(1,091.0)

469.416.1%(251.4)

952.0 50.7% (257.5) (111.8) (164.3)

56.0

(66.3)

1,411.2

n/a (185.3)

(7.9)

- -

(8.3) (0.4)

57.6

- -

4.1% 295.7 (58.5) 20.4

n/a--(33.3)

0.7(33.7)

n/a 7.6 (0.3) (0.3)

n/a

29.5%

(22.4)(523.7)

7.6(103.7)

(26.7)(224.9)

-(107.2)

-167.4

-18.3

-43.9

-(168.2)

(185.7)

-43.9

-63.8

63.0

(107.8)

-

-63.0

Earnings by Business Unit

RaízenCombustíveis9M18

Net Revenue

Cost of Goods and Services Sold Gross Profit

60,142.7 (57,530.4)

2,612.2

Gross Margin (%)

4.3%

Selling Expenses

(1,004.8)

General and Administrative Expenses Other Operating Income (Expenses) Equity Pick-up

(367.6)

281.7

0.0

Depreciation and Amortization EBITDA

146.0

1,667.5

EBITDA Margin (%)

Financial result

Income and Social Contribution Taxes Non-controlling Interest

2.8% (513.4) (213.4) (32.9)

-

Net Income

761.8

DesconsolidationRaízen EnergiaComgásMooveCosan Corporate

Raízen

AdjustmentsCosan Limited

and EliminationCosan S/A AccountingAdjustments

14,056.5 (12,834.9)

1,221.6

4,924.7 (3,460.1) 1,464.6

2,562.8 (2,083.7)

479.1

0.8 (2.7) (1.9)

(74,199.2) 70,365.4 (3,833.9)

-0.00.0

-7,488.3(5,546.4)1,941.8

4,938.3 (3,316.0) 1,622.4

- - -

(30.3)30.3

--

12,396.3(8,832.2)3,564.2

8.7%

29.7%

18.7%

n/a

5.2%

0.0%---

(595.7)

(461.9)

(277.5)

(0.2)

1,600.4

(739.6)

25.9%

32.9%

n/a -

28.8%

(8.2)

-(747.8)

(500.7)

(247.9)

(92.4)

(95.9)

868.4

(436.2)

(215.5)

(40.6)

-(692.3)

149.8

(12.1)

(4.2)

(58.8)

(431.5)

(75.2)

(13.0)

(0.0)

-(88.2)

(12.9)

-

0.2

842.5

12.9

(401.9)

440.8

8.4

195.5

(195.5)

449.2

1,661.7

350.1

71.4

10.4

(1,807.7)

-(401.9)

431.9

1,051.7

0.2

-1,483.9

1,923.8

1,092.8

176.6 6.9% (14.3) (24.7) (0.5)

696.0

(3,591.3)

1,563.6

2,445.8

155.1

(195.5)3,969.0

13.7% (266.6) 116.4

(7.9)

22.2% (143.0) (179.5)

- -

n/a (563.2) 202.9

- -

4.8% 780.0 97.0 40.8

n/a--(84.0)

20.9%(720.5)

(1.3)(84.6)

49.5% (1,065.8)

(192.8) (98.5)

n/a 49.4 (7.3) (5.0)n/a(51.2)

32.0%(1,788.2)

15.0(186.4)

(130.5)(318.6)

-104.0

-420.2

-65.7

-325.3

-(865.8)

(485.9)

-325.3

-36.9

192.0

(362.2)

-

-192.0

Note 10: As of 1Q18, the results of Cosan and its Business Units were impacted by the adoption of the new accounting standards (IFRS 15 and IFRS 9), as detailed in the quarterly financial statements as of September 30, 2018

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