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Cosan Jumps as Shell Studies $550 Million Early Payment

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May 31 (Bloomberg) -- Cosan SA Industria & Comercio, which controls the world’s largest sugar-cane processor with Royal Dutch Shell Plc, soared after saying the partner is considering an early $550 million payment for the joint venture and quarterly profit beat estimates.

Cosan jumped 2.9 percent to 29.88 reais at 12:12 p.m. in Sao Paulo, after rising as much as 3.7 percent, the most intraday since Nov. 30. The benchmark Bovespa index fell 0.9 percent.

Shell, which agreed to pay $1.6 billion in three years to share control of Cosan’s fuel assets, is considering paying the last installment due April 2013 earlier, Cosan Chief Financial Officer Marcelo Martins said on a conference call today.

Cosan posted net income of 149.6 million reais ($74.2 million) for the quarter ended March 31, higher than a expected 133 million-real profit excluding some items, the average of four analyst estimates compiled by Bloomberg. While beating expectations, profit fell 69 percent from 480.9 million reais a year earlier.

Shell and Cosan agreed to combine Brazilian assets including service stations and sugar and ethanol mills in 2010. Sao Paulo-based Cosan contributed assets worth $4.93 billion, including plants that have the capacity to crush a combined 60 million metric tons of sugar cane a year.

Sales climbed 26 percent to 5.79 billion reais in the quarter from a year earlier after fuel prices increased 7 percent on average, Cosan said today in a regulatory filing. Gasoline, ethanol and diesel represent about two-thirds of Cosan’s revenue.

Sugar Price

Earnings before interest, taxes, depreciation and amortization, or Ebitda, declined to 6.3 percent of sales, from 22 percent a year earlier, after sugar prices fell. The average price of sugar sold by Cosan in the quarter dropped 19 percent from a year earlier.

Cosan said it expects to process between 52 million and 55 million metric tons of sugar-cane in the year that started April 1. The company will produce as much as 4.2 million tons of sugar and 2.1 billion liters (554 million gallons) of ethanol. It expects to report sales of as much as 29 billion reais this fiscal year.

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

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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