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UPDATE 1-Brazil's Cosan sees better ethanol returns as prices improve
August 10, 2017 / 4:05 PM / 4 months ago

UPDATE 1-Brazil's Cosan sees better ethanol returns as prices improve

(Adds comments from Cosan executives, details on Tonon acquisition)

By Marcelo Teixeira

SAO PAULO, Aug 10 (Reuters) - Cosan SA Indústria e Comércio expects ethanol sales to yield better returns than sugar across some Brazilian states, a factor that may prompt one of the country’s largest energy and infrastructure companies to fine-tune its current output mix.

Raízen Energia, a 50-50 joint venture between Cosan and Royal Dutch Shell Plc that is the world’s No. 1 sugar producer, could adjust the amount of sugar and ethanol it produces if price conditions for the biofuel improves, Cosan’s investor relations head Paula Kovarsky said on a conference call on Thursday.

Raízen earmarked 57 percent of cane to sugar production in the second quarter, higher than the 55 percent it did a year ago. Simultaneously, Raízen has reduced sugar hedging on an annual basis on hopes of a mid-term recovery in international prices, she added.

Raízen had 2.1 million tonnes of sugar hedged at the end of the second quarter, compared to 2.57 million tonnes last year.

“Since our last results, we made very little headway in terms of sugar price protection,” Kovarsky said. “Markets keep factoring in a sugar surplus in the current crop, but we believe the current price pressure will be short-lived.”

Raw sugar prices in New York fell from a peak of 22.53 cents per pound in September to 13.4 cents on Thursday, as the expectation for the first global sugar balance surplus in three years weighed on values.

Kovarsky’s remarks came after Cosan posted a net quarterly loss on Wednesday due to a slow start to the 2017/2018 cane harvest, which affected Raízen’s performance. Cosan Chief Executive Officer Mario Silva said Raízen continues to search for potential acquisitions following the purchase of two sugar and ethanol plants from Tonon Bioenergia SA.

However, Silva said Raízen will be very selective. He noted that the Tonon acquisition made sense considering logistics, since the two plants are very close to three other sites operated by Raízen - giving the venture the ability to extract cost savings from transportation and rising scale.

Shares of Cosan rose 0.5 percent on Thursday to 36.37 reais in Sao Paulo. (Reporting by Marcelo Teixeira; Editing by Guillermo Parra-Bernal and Tom Brown)

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