Cosan Has First Loss in Three Years on Brazil Real Depreciation

Cosan SA Industria & Comercio, which controls the world’s largest sugar-cane processor with Royal Dutch Shell Plc (RDSA), posted its first quarterly loss in three years after a delay in sugar-cane harvesting and depreciation of Brazil’s real eroded margins.

Net loss was 17.1 million reais ($8.46 million) in the fiscal quarter ended June 30, the Sao Paulo-based company said in a regulatory filing today. That compares with a profit of 2.3 billion reais a year ago. Cosan was expected to post a loss of 13.7 million reais excluding some items, the average of three analysts’ estimates compiled by Bloomberg.

Delays in the sugar-cane harvest in Brazil, the world’s largest producer and exporter, “have negatively impacted the fiscal quarter results,” Christian Audi, an analyst with Banco Santander SA (SAN) said in an Aug. 3 note to clients. Harvest in Brazil’s Center South, the world’s largest producing region, was held back by rain from March through early July.

Sugar prices dropped 12 percent in the quarter as global output is expected to exceed demand for a third straight year, Morgan Stanley (MS) said in an e-mailed report Aug. 3. The surplus is estimated at 5.5 million metric tons in the 2012-2013 season that starts in October.

Sugar and ethanol units account for about 30 percent of Cosan’s revenue. The company attributed local currency depreciation as the main reason for its loss. Brazil’s real is the worst performer among the 16 major currencies tracked by Bloomberg this year.

Cosan’s earnings before interest, taxes, depreciation and amortization fell 89 percent to 426.7 million reais in the fiscal quarter from 3.82 billion reais a year ago.

To contact the reporter on this story: Lucia Kassai in Sao Paulo at lkassai@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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