COSAN LIMITED 3rd quarter of fiscal year 2015
São Paulo, November 11, 2015 - COSAN S/A INDÚSTRIA E COMÉRCIO (BM&FBovespa: CSAN3) announces today its results for the third quarter of 2015 (3Q15), comprising the months of July, August and September 2015. The results are presented on a consolidated basis, in accordance with the accounting practices adopted in Brazil and with International Financial Reporting Standards (IFRS).
Cosan posted pro forma EBITDA of R$1,090 million (+11% up YoY). Pro forma Use of Free Cash Flow to Equity (FCFE), including 50% from Raízen, was R$268 million, and the pro forma Net Debt/EBITDA ratio ended the period at 3.0x
Raízen Combustíveis' total sales volume advanced 1% over 3Q14 (+5% in the Otto cycle), supporting 7% growth in Adjusted EBITDA to R$573 million
Raízen Energia reported adjusted EBITDA of R$837 million, up 20% on 3Q14, driven by higher sales volumes
Comgás' normalized EBITDA grew 6% to R$380 million, reflecting better sales mix, operating expenses control and tariff increases
Summary of Financial Information - Cosan Pro forma¹ BRL mln | 3Q15 (Jul-Sep) | 3Q14 (Jul-Sep) | Chg. % 3Q15 / 3Q14 | 2Q15 (Apr-Jun) | Chg. % 3Q15 / 2Q15 |
Net Revenues | 11,440.6 | 10,022.3 | 14.2% | 10,105.5 | 13.2% |
Gross Profit | 1,229.1 | 1,155.1 | 6.4% | 1,125.6 | 9.2% |
EBITDA | 991.8 | 974.9 | 1.7% | 873.9 | 13.5% |
Adjusted EBITDA² | 1,090.4 | 982.9 | 10.9% | 815.5 | 33.7% |
Net Income (Loss) | (13.3) | 15.2 | n/a | 49.4 | n/a |
CAPEX | 379.0 | 503.3 | -24.7% | 398.7 | -4.9% |
Free Cash Flow to the Equity³ | (135.7) | (8.3) | n/a | 377.2 | n/a |
Net Debt⁴ | 11,462.5 | 10,858.2 | 5.6% | 10,748.8 | 6.6% |
Leverage (Net Debt/EBITDA LTM) | 3.0 | 3.0 | 2.7% | 2.9 | 6.2% |
Dividend Distribution | 150.0 | - | n/a | 125.0 | 20.0% |
Note 1: Considering 50% consolidation of the results of Raízen Combustíveis and Raízen Energia. Note 2: Adjusted EBITDA excludes nonrecurring effects in the quarters, as detailed on page 4 herein.
Note 3: Pro forma Generation (Use) of Free Cash Flow to Equity, before dividends, as detailed on page 11 herein. Note 4: Includes obligations with preferred shareholders at subsidiaries.
Earnings Conference Call
English - 11:00am (EST) / 2:00pm (Brasília)
November 12, 2015 (Thursday)
Tel (BR): + 55 11 3193 1001
+ 55 11 2820 4001
Tel (U.S.): +1 786 924 6977 Code: COSAN
Portuguese - 10:00am (Brasília)
November 12, 2015 (Thursday)
Tel: + 55 11 3193 1001
+ 55 11 2820 4001
Code: COSAN
Investor Relations Email: ri@cosan.com.br Telephone: +55 11 3897-9797 Website: ri.cosan.com.br
A. Cosan - Consolidated ResultsBusiness Units
Cosan's business units and interest in each reportable segment are shown below:
Raízen Combustíveis (50%) Fuel Distribution
Raízen Energia (50%) Sugar, Ethanol and Cogeneration
Comgás (61.3%) Natural Gas Distribution
Lubrificantes (100%) Lubricants, Basic Oils and Specialties
Radar (37.7%) Management of Agricultural Properties
Other Businesses (100%) Corporate Structure and Other Investments
Executive Summary 3Q15
The challenges posed by Brazil's macroeconomic slowdown since the start of the year continued into the third quarter of 2015. The period was also marked by high volatility in the U.S. dollar exchange rate and in international sugar, ethanol and crude oil prices. Despite this challenging environment, our businesses continued to perform in line with our expectations for the year and in line with our guidance.
Cosan S/A: Pro forma EBITDA was R$1,090 million, up 11% compared to 3Q14. Pro forma EBITDA amounted to R$992 million, increasing 2% from 3Q14. The seasonally weaker result at Raízen Energia in the quarter, which was partially offset by the higher net income at Raízen Combustíveis and Comgás, contributed to the net loss of R$13 million at Cosan. The third quarter of the year (the second of the crop year) is typically marked by cash burn at Raízen Energia due to the inventory building strategy, which resulted in the pro forma use R$136 million in 3Q15. In the year to date (9M15), Cosan generated R$1,190 million of cash, reflecting the strong focus on improving operating performance and on reducing CAPEX in the business units.
Raízen Combustíveis: Adjusted EBITDA, excluding the effects from asset divestments, advanced 7% on 3Q14 (+9% for reported EBITDA). Fuel sales continued to suffer from the country's weaker economic activity, especially diesel. Even so, sales volume growth outpaced the industry average (-3% source: ANP). Otto cycle (gasoline+ethanol) sales volume advanced 5% on 3Q14, especially in the retail segment, supported by the faster pace of service station conversions and the maturation of stations converted in recent years. Diesel sales contracted 1% from 3Q14, while diesel sales by the overall industry contracted 6%, which is explained by new contracts signed in the period and stronger demand from agribusiness consumers. EBITDA growth in the quarter was driven by the expansion in ethanol unit margin and by the product's higher share in the sales mix.
Raízen Energia: Adjusted EBITDA, excluding the effects from the variation in biological assets and hedge accounting, reached R$837 million, increasing 20% over 3Q14. The results in the quarter (second of the 2015/16 crop year) were driven a sequential increase in crushing volumes, despite the atypical rains in the period, supporting higher sales volumes of sugar (+18%) and ethanol (+11%). Agricultural yield in the quarter (measured in tons of TRS content per hectare) also improved, reaching 12.3 tons TRS/ha, compared to 10.3 tons TRS/ha in 3Q14. Unit cash cost increased compared to 3Q14, reflecting the late start of the crushing season, particularly for own cane, resulting in the higher crushing of cane from suppliers, for which the TRS price published by CONSECANA increased. CAPEX decreased 41% from 3Q14, which reflects the plan to optimize investments in the sugar and ethanol segment and is in line with our guidance.
Comgás: Normalized EBITDA, which includes the effect from the regulatory current account, totaled R$380 million, increasing 6% over 3Q14. Natural gas sales continued to suffer from the slower economic activity, especially in the industrial segment. Lower water consumption in the state of São Paulo, combined with abnormally high temperatures, adversely affected residential unit consumption. Excluding thermal power, sales volumes contracted 6% compared to 3Q14. On the other hand, 23 industrial clients, 335 commercial clients and 30,000 residential clients were connected in the quarter. EBITDA growth in the period is explained by the better sales mix, tariff increases and control of expenses.
Lubrificantes: EBITDA in 3Q15 continued to improve, growing 37% on the year-ago period to R$42 million. EBITDA growth and EBITDA margin expansion in the period were driven by the better sales mix and the results from the international operations.
Radar: EBITDA amounted to R$13 million in 3Q15, a period marked by a lower volume of property sales. There was also no variation in the market indicators used to adjust the value of the own land portfolio. Radar ended the quarter with 278,600 hectares of own and third-party land under management, with a market value of R$5.3 billion.
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.cosan.com.br) in the Results Center. Starting on page 13 of this report, we present statements with all financial and operational data for each segment.
Operating and Financial Metrics
Raízen Combustíveis
Note 5: Excludes extraordinary items, as detailed on page 4 herein.
3 Q 15 3 Q 14 C hg. % 2 Q 15 C hg. %
( Jul- Sep) ( Jul- Sep) 3 Q 15 / 3 Q 14 ( A pr- Jun) 3 Q 15 / 2 Q 15
Otto Cycle Vo lume (Gaso line+Ethano l) ('000 cbm) | 2,899 | 2,750 | 5.4% | 2,819 | 2.8% |
Diesel Vo lume ('000 cbm) | 2,927 | 2,959 | -1.1% | 2,653 | 10.3% |
Adjusted EBITDA M argin⁵ (BRL/cbm) | 87.9 | 83.2 | 5.7% | 82.9 | 6.0% |
Adjusted EBIT⁵ (BRL/cbm) | 65.2 | 60.5 | 7.6% | 58.3 | 11.7% |
Otto cycle sales volume grew 5.4% on 3Q14, while diesel sales volumes contracted 1.1%. Despite the higher share of ethanol in the sales mix, margins were in line with our expectations, supporting growth in absolute EBITDA.
Raízen Energia
3 Q 15 3 Q 14 C hg. %
( Jul- Sep) ( Jul- Sep) 3 Q 15 / 3 Q 14
Sugarcane Crushed ('000 mt) 24,251 24,475 -0.9%
A verage TRS (kg/to ns) 136.4 139.9 -2.5%
TRS/ha 12.3 10.3 19.6%
Sugar/Ethano l P ro ductio n M ix 57% x 43% 57% x 43% n/a
A djusted EB ITDA ⁶ (B R L m ln ) 837.0 696.9 20.1%
A djusted EB IT ⁶ / T R S s o ld (B R L/ t o n ) 132.5 112.5 17.8%
Note 6: Excludes nonrecurring effects, as detailed on page 4 herein.
Despite atypical rain in the period, crushing operations resumed in the quarter, accelerating sugar and ethanol sales, which were accompanied by an increase in the average price. Adjusted EBIT increased 89.7%, reflecting the higher yield and volumes.
Comgás
3 Q 15 3 Q 14 C hg. % 2 Q 15 C hg. %
( Jul- Sep) ( Jul- Sep) 3 Q 15 / 3 Q 14 ( A pr- Jun) 3 Q 15 / 2 Q 15
To tal Sales Vo lume (cbm) Ex-Thermal 1,084,848 1,150,251 -5.7% 1,103,979 -1.7%
No rmalized EB ITDA ⁷ (B R L m illio n) 380.3 357.6 6.3% 384.5 -1.1%
IFRS EB ITDA (B RL millio n) 387.1 377.4 2.6% 473.5 -18.3%
Note 7: Includes the effect from the regulatory Current Account.
Normalized EBITDA advanced due to the better sales mix, despite lower industrial sales and lower residential unit volume.
Lubrificantes
3 Q 15 3 Q 14 C hg. % 2 Q 15 C hg. %
( Jul- Sep) ( Jul- Sep) 3 Q 15 / 3 Q 14 ( A pr- Jun) 3 Q 15 / 2 Q 15
Total Sales Volume ('000 cbm) 89.3 88.5 1.0% 80.2 11.4%
EBITDA (BRL mln) 42.1 30.9 36.6% 39.1 7.9%
EBITDA growth reflects the better sales mix, the streamlining of expenses and the performance of the international businesses.
Cosan - Consolidated Results
Cosan S/A - Earnings ReleaseThird quarter of fiscal year 2015
The following table provides a breakdown of the 3Q15 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,' the 'Adjustments & Eliminations' column reflects the eliminations from operations among all Cosan subsidiaries for consolidation purposes.
Earnings by Business Unit 3Q15 | Comgás | Lubrificantes | Radar | Other Businesses | Adjustments and Elimnination | Cosan S/A Accounting | Raízen Combustíveis | Raízen Energia | 50% Raízen | Adjustments and Elimnination | Consolidated Pro forma |
Net Revenues | 1,743.1 | 484.2 | 31.9 | 0.0 | - | 2,259.2 | 15,638.9 | 2,637.5 | (9,138.2) | 43.2 | 11,440.6 |
Cost of Goods and Services Sold | (1,241.4) | (367.1) | (10.7) | (0.1) | - | (1,619.3) | (14,884.9) | (2,195.6) | 8,540.3 | (51.9) | (10,211.5) |
Gross Profit | 501.7 | 117.1 | 21.2 | (0.1) | - | 639.9 | 753.9 | 441.8 | (597.9) | (8.7) | 1,229.1 |
Gross Margin (%) | 28.8% | 24.2% | 66.4% | n/a | n/a | 28.3% | 4.8% | 16.8% | 6.5% | 0.0% | 10.7% |
Selling Expenses | (156.5) | (74.6) | - | - | - | (231.1) | (306.0) | (188.4) | 247.2 | - | (478.2) |
General and Administrative Expenses | (78.3) | (18.5) | (8.0) | (38.9) | - | (143.8) | (91.3) | (137.3) | 114.3 | - | (258.1) |
Other Operating Income (Expenses) | (0.7) | 0.4 | 0.0 | (12.1) | - | (12.4) | 88.0 | (5.4) | (41.3) | - | 28.9 |
Equity Income (Loss) | - | (2.4) | 0.0 | 147.7 | (116.1) | 29.2 | 3.5 | (14.8) | 5.6 | (23.0) | 0.5 |
Depreciation and Amortization | 120.9 | 20.1 | 0.1 | 1.1 | - | 142.3 | 144.8 | 509.8 | (327.3) | - | 469.6 |
EBITDA | 387.1 | 42.1 | 13.3 | 97.7 | (116.1) | 424.1 | 593.1 | 605.7 | (599.4) | (31.7) | 991.8 |
EBITDA Margin (%) | 22.2% | 8.7% | 41.6% | n/a | n/a | 18.8% | 3.8% | 23.0% | 6.6% | 0.0% | 8.7% |
Financial Expenses | (58.4) | (1.5) | (0.3) | (214.9) | 4.9 | (270.2) | (45.4) | (262.4) | 153.9 | 16.0 | (408.1) |
Financial Income | 105.1 | 2.0 | 3.5 | 35.3 | (4.9) | 140.8 | 39.4 | 181.9 | (110.6) | (16.0) | 235.5 |
Exchange Variation | 349.6 | (17.4) | - | (512.9) | - | (180.8) | (169.7) | (622.2) | 396.0 | - | (576.7) |
Derivatives | (395.4) | 3.4 | - | 498.0 | - | 106.0 | 81.1 | 239.9 | (160.5) | - | 266.5 |
Income and Social Contribution Taxes | (94.9) | (4.5) | (3.5) | 84.8 | - | (18.1) | (84.0) | 161.0 | (38.5) | 2.9 | 23.4 |
Non-controlling Interest | - | - | - | - | (73.0) | (73.0) | (6.1) | - | 3.1 | - | (76.0) |
Net Income | 172.2 | 4.0 | 12.9 | (13.3) | (189.0) | (13.3) | 263.5 | (206.0) | (28.8) | (28.8) | (13.3) |
Adjusted EBITDA and Net Income
A description follows of the adjustments made by business line, based on the following criteria:
Raízen Combustíveis: (i) effects from asset sales; and (ii) nonrecurring gains/losses, if applicable.
Raízen Energia: (i) variation in biological assets; (ii) hedge accounting impacts; and (iii) nonrecurring gains/losses, if applicable.
Comgás: (i) effect from the regulatory current account.
Other businesses: (i) relevant and nonrecurring effects.
Adjusted EBITDA BRL mln | 3Q15 (Jul-Sep) | 3Q14 (Jul-Sep) | Chg. % 3Q15 / 3Q14 | 2Q15 (Apr-Jun) | Chg. % 3Q15 / 2Q15 | Adjusted Net Income BRL mln | 3Q15 (Jul-Sep) | 3Q14 (Jul-Sep) | Chg. % 3Q15 / 3Q14 | 2Q15 (Apr-Jun) | Chg. % 3Q15 / 2Q15 |
Pro forma EBITDA | 991.8 | 974.9 | 1.7% | 873.9 | 13.5% | Pro forma Net Income | (13.3) | 15.2 | n/a | 49.4 | n/a |
Raízen Combustíveis (50%) | (10.2) | (5.5) | n/a | (3.3) | n/a | Raízen Combustíveis (50%) | (6.7) | (3.6) | n/a | (2.2) | n/a |
Asset Divestments | (10.2) | (5.5) | n/a | (3.3) | n/a | Asset Divestment | (6.7) | (3.6) | n/a | (2.2) | n/a |
Raízen Energia (50%) | 115.6 | 33.2 | n/a | 34.0 | n/a | Raízen Energia (50%) | (18.7) | 21.3 | n/a | (11.8) | n/a |
Change in Biological Assets | (12.8) | 32.3 | n/a | (17.9) | n/a | Change in Biological Assets | (8.5) | 21.3 | n/a | (11.8) | n/a |
Hedge Accounting | 128.5 | 0.9 | n/a | 51.9 | n/a | Comgás - Regulatory Current Account | (10.2) | (5.7) | n/a | (32.6) | n/a |
Comgás - Regulatory Current Account | (6.8) | (19.8) | n/a | (89.0) | n/a | Adjusted Net Income | (163.9) | 27.2 | n/a | 37.1 | n/a |
Adjusted Pro forma EBITDA | 1,090.4 | 982.9 | 10.9% | 815.5 | 33.7% |
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