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Cosan Profit Misses Estimates as Debt Costs, Taxes Jump

Cosan SA Industria & Comercio, which controls the world’s biggest sugar-cane processor with Royal Dutch Shell Plc, posted a quarterly profit that missed estimates after debt costs and tax expenses jumped. The shares slumped.

Net income shrank to 29.7 million reais ($14 million) in the fiscal fourth quarter ended March 31 from 149.6 million reais a year earlier, Sao Paulo-based Cosan said in a regulatory filing yesterday. The company was expected to post a profit of 127.8 million reais excluding some items, according to the average of four analysts’ estimates compiled by Bloomberg.

Debt costs at Cosan, the third-largest fuel distributor in Brazil, have soared after the company took over natural gas distributor Cia. de Gas de Sao Paulo, known as Comgas, in November. Net financial expenses including borrowing costs increased more than eight-fold to 170.1 million reais. Tax expenses jumped 28-fold to 173.8 million reais after rebates in previous quarters weren’t repeated.

“The bottom line disappointed and was below our estimate due to higher financial expenses and income tax,” Auro Rozenbaum, an equity analyst at Banco Bradesco SA in Sao Paulo, said in a note to clients today.

Cosan dropped 2.6 percent to 44.82 at 10:13 a.m. in Sao Paulo, leading losses on the benchmark Ibovespa index and heading to the lowest close since April 22.

The sugar and ethanol company founded by billionaire Rubens Ometto started distributing fuel and lubricants in Brazil after buying assets from Exxon Mobil Corp. in 2008 and partnering with Shell three years later. Cosan’s Raizen joint venture with Shell is Brazil’s largest sugar and ethanol maker.

Sales jumped 46 percent to 8.46 billion reais after gasoline and diesel prices rose in the quarter and the takeover of Comgas boosted revenue.

Brazil authorized state-run Petroleo Brasileiro SA, known as Petrobras, to raise prices for gasoline sold to distributors by 6.6 percent and those for diesel by 11 percent in the first quarter, leading gas stations to increase prices at the pump.

Petrobras and Ultrapar Participacoes SA are Brazil’s largest fuel distributors.

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