May 16, 2017 [OPIS] - Raizen Energia, the joint venture between Shell and Brazil's Cosan that focuses on sugar and ethanol production, recorded adjusted EBITDA of 751 million reals in the first quarter of 2017, representing a 36% drop versus the same period in 2016, Cosan reported last week.
Cosan said factors contributing to the earnings drop included lower sales volumes and a less favorable exchange rate, despite an improvement in the average sugar sales price.
Q1 17 represented the fourth quarter of the 2016/2017 sugarcane crop year in Brazil’s South Central region. The interharvest period — when regional mills suspend sugarcane milling — corresponds roughly with the calendar first quarter.
Cosan reported that, unlike in Q1 16 when Raizen Energia’s interharvest period was shortened because of 2016/2017 sugarcane crushing brought forward into March, the company did not engage in cane crushing in Q1 17.
Raizen Energia’s adjusted net revenue in Q1 2017 was R$3.0 billion, down 22% versus Q1 2016 and reflecting lower sales volumes and a lower average ethanol sales price, which offset a better average sugar price.
Cosan broke down Raizen Energia’s Q1 17 net revenue into three areas: sugar, ethanol and cogeneration.
Sugar: Adjusted net revenue dropped 24% to R$1.4 billion, due to a 28% reduction in volumes sold in Q1 17 compared to the same period last year. The volume reduction was partially offset by the better average price in reals, which was up 6% versus Q1 16 to R$1,303/ton.
Ethanol: Net revenue in Q1 17 was R$1.5 billion, down 21% from Q1 16. The drop stemmed from a 19% year-on-year drop in volume sold and a 2% drop in the average sales price to R$1,859/cubic meter, which Cosan noted was in line with ex-mill ethanol prices as assessed by the University of Sao Paulo’s CEPEA/ESALQ economic research center.
Cogeneration: Net revenue in Q1 17 totaled R$41 million and represented a 6% drop from Q1 16. Cosan said the drop reflected a 24% drop in energy sold to 222,000 MWh.
2016/2017 Crop Year
Cosan last week also provided Raizen Energia’s results for the 2016/2017 crop year that ended on March 31.
The 2016/2017 crop year ended with total crushing of 59.4 million tons of sugarcane, representing a 5% drop from the prior crop year. Cosan said the drop stemmed from lower productivity (tons of sugarcane per hectare) because of less rainfall, partially offset by Total Recoverable Sugars (TRS) per ton of sugarcane processed.
Sugar: Adjusted net revenue totaled R$5.4 billion in the 2016/2017 crop year, representing a 2% drop from 2015/2016. The drop reflected a 9% reduction in volume sold, partially offset by a better average sales price of R$1,252/ton (up 7% year on year).
Ethanol: In the 2016/2017 crop year, net revenue from ethanol totaled R$6.1 billion, representing a 4% increase from the prior crop year. The improvement reflected a better average selling price (up 4% year on year to R$1,778/cbm) and a sales volume in line with the previous crop year (down by just 1%).
Cogeneration: At the end of the 2016/2017 crop year, lower biomass availability resulted in a 2% reduction in sales volume versus the prior crop year to 2.8 million MWh. This resulted in net revenue dropping by 12% year on year to R$518 million. The average price of energy sold in 2016/2017 was down 10% versus the prior crop year to R$185/MWh because of a lower spot price, which affects nearly 20% of total energy sold.
