The Cosan group will define until the end of the year its entry into port operation in the fields of grain, fertilizer and pulp. The company, which wants to advance in the infrastructure sector of the country, has on the table greenfield (building from scratch) and brownfield (in operation) projects to expand its operations in the port of Santos (state of São Paulo), the largest port in Latin America.
We are analyzing these concessions and we should also define in the coming months our entry as independent rail operator, Júlio Fontana Neto, CEO of Cosan Logística, said to Estado de São Paulo.
These projects are part of Cosan’s plan B, since the group was negotiating its entry into the control block of América Latina Logística (ALL). However, talks with the railroad company, which began in February 2012, were interrupted once for all in August. The group had made an offer of almost $386.26 million for the purchase of 49.1% of the shares of the railroad company’s control block, corresponding to a total of 5.6% of the total capital of the company.
Cosan is in a hurry to put its plans into practice. Under the coordination of Fontana, Cosan Logística has ambitious goals to expand its operations in the infrastructure segment. The company already has two sugar port terminals in Santos, which are under Rumo, company that responds to Cosan Logística.
The group maintains negotiations with the pension fund Canada Pension Plan Investment Board to receive a contribution of about $429.2 million. The funds may be used to ensure the expansion projects of the company in this segment. The expansion plans of the group do not depend on this contribution, said Fontana.
The port operation projects in Santos analyzed by Cosan include a grain terminal, whose concession has expired and it is currently being operated by three companies; two fertilizer terminals and two greenfield terminals – one of them gathers warehouses 9, 10 and 11, and the other the warehouse 32, both to house a cellulose terminal, according to Fontana.
The auctions, according to the business executive, should occur by the end of the year. Let’s wait for the notice to bid to analyze the profitability of this business, he said. Fontana did not say how much the company can invest in port projects. Each terminal has a different capex, he said. The company did not rule out making investments in port terminals in the city of Paranaguá (state of Paraná), but still there is nothing defined about that.
Industry sources claim that an investment in greenfield projects in port terminals in the concession area of Santos would be around $128.75 million, and from $42.91 million to $85.83 million in brownfield operations.
Railroads. The group’s entry as an independent rail operator is still under a more careful analysis by the group on the notices to bid of the federal government. One thing (port project) will lead to another (rail operation), Fontana said. We do not want to depend on others. We will be a vertically integrated company (not just on sugar), which loads, transports and puts on the ship.
Largest processor of sugarcane in the country, through Raízen – a joint venture between Cosan and Shell –, the group, under the command of the entrepreneur Rubens Ometto Silveira Mello, decided to expand its business to not be exposed to commodity volatility. The first major step taken in this direction was the acquisition of the assets of Esso in Brazil in 2008, which belonged to ExxonMobil. Two years later, the company has partnered with Shell, creating Raízen, and becoming one of the giants in the field of fuel distribution in Brazil, after Petrobrás (BR Distribuidora) and Ultra (Ipiranga). The company also entered the lubricants segment, with heavy investments.
Last year, the company announced the purchase of 60.1% of Companhia de Gás de São Paulo (Comgás), which belonged to British Gas (BG). This operation marked the company’s entry in the country’s piped gas market – the company had looked past the assets of Gas Brasiliano Distribuidora, which belonged to the Italy’s Eni and were bought by Petrobrás). The acquisition of Comgás strengthened the group’s position in the energy sector and confirmed, once again, the DNA of the group to expand its business through heavy acquisitions. Owner of a concession area that includes 177 municipalities in the State of São Paulo, Comgás serves about 1.2 million people.
Yesterday, shares of Cosan closed at $19.05, with a slight decrease of 0.56%. During the year, the company’s shares recorded appreciation of 7.7%.
The company should return to profit in the third quarter, analysts say.
Cosan should close the third quarter of the year with net income of $104.72 million, according to the average of the projections of six financial institutions surveyed by Broadcast, real-time service of the Agência Estado. Among banks surveyed are Itaú BBA, Santander, Citi, BTG Pactual, Credit Suisse and JPMorgan. In the second quarter of this year, the company reported a loss of $84.97 million.
Also according to the analysts, the EBITDA (earnings before interest, taxes, depreciation and amortization) should reach $494.4 million in the period. For the net income, the average of the projections indicates a total of $4.14 billion.
In a report, JPMorgan said that the result of Cosan will be driven mainly by Raízen, a joint venture between the company and Shell. The bank reiterated its overweight rating (performance above average of the market) to Cosan and recommended the purchase of the company’s shares, with a target price of $23.52.
According to JPMorgan, after two disappointing quarters, the company’s investors seem undecided about the future. The bet of the bank is an investment strategy for the long term.
In a report, the analysts listed five reasons to purchase shares of Cosan. The first is the company’s strategy in the logistics industry, with the subsidiary Rumo. Investments in improving bottlenecks will allow Cosan to get value and extend the margin, reducing obstacles faced by carriers of grain in Brazil, and will provide interesting ways of gains for Rumo.
For Citi analysts, improved fuel demand, with a recovery in the aviation industry, will allow increased margins for Raízen Combustíveis. For Raízen Energia, the expectation is strong volumes of sugar and ethanol with the approach of the peak of harvest. The Citi analysts Felipe Koh and Juan Tavarez said that the recovery of fuel distribution margins and better operating leverage in cane sugar should restore the trust of guidance (target) for the year.
Regarding Rumo, Itaú BBA considered the highest sales of sugar and the fines paid by ALL (because of non-fulfillment of contractual obligations) as positive for the result of the logistics company controlled by Cosan.
In April, Cosan changed the fiscal year of the company, adopting the calendar year to replace the crop year (which runs from April to March of the following year).
In 2013, exceptionally, the current year will have nine months, starting on April 1 and ending on December 31.
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