Cosan Ltd. (CZZ) reported encouraging results for the fourth quarter and fiscal 2010. Net sales for fiscal 2010 grew a staggering 183% year over year with net income in the positive territory, compared with a loss in the comparable period a year ago.
 
Reported net income in the fourth quarter was US$124 million versus US$19.9 million in the year-ago period. For fiscal 2010, net earnings were a positive US$331.9 million versus a negative US$188.1 million in the fiscal 2009, largely fueled by higher sales volume and prices, exchange rate variation and benefits from the tax recovery program.
 
Considering the top line, net sales (excluding eliminations) in the fourth quarter grew 133% year over year to US$2,437.7 million and 183% to US$8,283.2 million in the fiscal year 2010 driven primarily by the merger of NovAmérica, higher sugar prices and the start-up of the co-generation projects.  Of the fiscal year’s gross sales, CAA contributed 34%, Rumo 1%, and CCL 65%.
 
Cost of goods sold increased manifold to US$7.2 billion in the fiscal year 2010, compared with US$2.6 billion in the year-ago period due primarily to a 12-month consolidation of fuel and lubricant distribution, higher sales volume, sugar sourcing activities, higher costs of third-party sugarcanes, poor harvest and reduction in total sugar recoverable (TSR).
 
Operating expenses (in dollar amounts) including selling and general and administrative expenses increased substantially, reflecting the merger of CCL and entry of NovAmérica. As a percentage of net sales, operating expenses decline from 12% in the fiscal year 2009 to 9% in the fiscal year 2010.
 
EBITDA in the quarter grew 420% year on year to US$315.8 million and represented 13.0% of net sales. For the fiscal year, EBITDA grew 311% to US$985.8 million and represented 11.9% of net sales. EBIT, in both fourth quarter and fiscal year, turned positive year over year with operating margins of 8.5% and 6.0%, respectively.
 
At the end of fiscal 2010, Cosan had cash and cash equivalents and restricted cash of roughly US$649 million, compared with US$615.5 million in the previous quarter. Long-term liability was US$2,845.7 million, compared with US$2,802.2 million in the previous quarter. Net cash flow from operating activities was US$811 million versus US$256.6 million in fiscal year 2009.  Capital expenditure increased 78% year over year to US$1,081.5 million compared with US$606.2 million in the fiscal year 2009.
 
In the fiscal year 2010, Cosan sold 4.1 million tons of sugar and 2.1 million litres of ethanol. Crushed cane volume was 50.3 million tons versus 43.1 million tons in the fiscal year 2009.
 
Outlook

For fiscal year 2011, management anticipates revenues to be in the range of R$16.5-R$18.5 billion (US$9.1-US$10.2 billion), EBITDA in the range of R$2.0-R$2.4 billion (US$1.1-US$1.3 billion), and capital expenditure in the range of R$1.9-R$2.3 billion (US$1.0-US$1.3 billion). Crushed cane volumes are expected to range within 58-62 million tons, sugar volume sold within 4.7-5.1 million tons, and ethanol volume sold within 2.0-2.2 million liters.
 
We believe Cosan is well-positioned to deliver good results yet again for fiscal 2011 with an expected increase in sugar and ethanol production, driven by favorable weather conditions (higher level of rains) and higher yield of sucrose in the cane.
 
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