E Presentation Day

London doesn't have presidents so it is open today. And the NYC post-delivery was so far behind that my local letter carrier delivered my Value Line and our magazines despite the holiday. The London news was good, as the market rose again, the main FTSE 100 index up 2.52%. Moreover sterling gained 1/2% against the dollar at $1.3916 presumably because of fear of excess in US markets and stimulus. Tokyo made a new high today for Fanuc FANUY, the share our India reporter loves, which I lowered our risk to by selling some, over his objections.

Business newspaper article

image source

The main reason for this blog is that on Friday, amidst lots of results, there was a presentation by Cosan CZZ, my stock for 2021, the Brazilian sugar cane, ethylene, and logistics company which grew via a takeover about 2 years ago. It is now in the process of consolidating its offshore subs in order to satisfy regulators. To satisfy shareholders it held a special Cosan Day presentation call in English and Portuguese which I tried to figure out. This was mostly fluff, in my opinion, because the agricultural year in Brazil and Argentina, its biggest foreign market is not over, and the biggest change before the current consolidation was its buy of the no. 2 sugar firm. So the fact that sales and cash flow in the sugar business rose 3% while the cane processed fell 2% left me hungry. 

Note that the renewables (ethylene made from cane bagasse or waste) is included in both of these numbers but not spelled out.

The other worry is about its gas and energy arm which gained from non-cash inputs from Compass Trading which were not spelled out yet but which seem to have grown as the Brazilian economy suffered lockdown from covid-19, however haphazardly. The Amazon port of Manaus which we visited on our last trip to Brazil has seen particularly lethal infections and lack of oxygen to treat it among the Indians who live up-river and head there for medical help. So the odds are that any numbers looking good now for Moove, only 70% controlled, the lubrifiants arm of Cosan, and its Raizen fuel arm which sells gasoline and ethanol in Latin America are unlikely to continue unless the virus ends. It only owns half of Raizen, with the rest owned by Rumo is not yet consolidated in these numbers. Moove reported EBITDA (cash flow) up 88% on sales volumes up 18%. This is ephemeral. The only good thing about the presentation is that it filled in the pre-consolidation financial results of formerly separate subsidiaries whose data was not incorporated clearly in Cosan results. The restructuring began in Jan. 2020 precisely because it would not affect the fiscal year results in 2020 because they didn't expect the coronavirus. The logistics and the control of Rumo are now a fact but their significance to the Cosan company is still hard to scan. This is now a unified corporation but simplification is not the only goal in the analysis of the changes. Beware les terribles simplificateurs.

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William K. 2 weeks ago Member's comment

Thanks for the very interest analysis of the presentation that I did not observe. It is quite educational.

And one point about ethanol as a gasoline additive is that it is a less than unity benefit when the energy to produce it is taken into account.

I was unable to access this article, and several others, a few hours ago, despite a number of tries. And yet this morning it arrived instantly. So there was some problem previously.